<PAGE> 1
As filed with the Securities and Exchange Commission on August__, 1995
REGISTRATION NO. 33-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------
COMERICA INCORPORATED
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 6711 38-1998421
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
COMERICA TOWER AT ONE DETROIT CENTER
500 WOODWARD AVENUE, SUITE 3100
DETROIT, MICHIGAN 48226
(313) 222-4000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------
JUDITH C. DART, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
COMERICA INCORPORATED
500 WOODWARD AVENUE, 33RD FLOOR
DETROIT, MICHIGAN 48226
(313) 222-7937
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------
COPIES TO:
DAVID D. JOSWICK, ESQ. ROBERT S. BARRY, JR., ESQ.
MILLER, CANFIELD, PADDOCK AND STONE, P.L.C LOEB AND LOEB
150 WEST JEFFERSON, SUITE 2500 1000 WILSHIRE BLVD., SUITE 1800
DETROIT, MICHIGAN 48226 LOS ANGELES, CALIFORNIA 90017
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this registration statement becomes effective.
<PAGE> 2
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: / /
CALCULATION OF REGISTRATION FEE
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==================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(2)
- ------------------------------ ------------- ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Common Stock...................... 4,806,710 Shares $29.93 $143,858,846 $49,606
==================================================================================================================
</TABLE>
(1) Also includes associated rights to purchase shares of registrant's Series C
Participating Preferred Stock which rights are (a) not currently separable
from the shares of Common Stock and (b) not currently exercisable. See
"DESCRIPTION OF COMERICA CAPITAL STOCK."
(2) The registration fee has been computed pursuant to Rule 457(f)(1) under the
Securities Act of 1933, as amended, based on average high and low sales
prices on the American Stock Exchange on July 28, 1995 equalling $26.250
per share of common stock of Metrobank. The proposed maximum offering price
per share has been determined by dividing the maximum aggregate offering
price by the number of shares being registered.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
===============================================================================
<PAGE> 3
COMERICA INCORPORATED
CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORM S-4 AND PROSPECTUS
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NO. FORM S-4 CAPTION HEADING IN PROSPECTUS
- -------- ---------------- ---------------------
A. INFORMATION ABOUT THE TRANSACTION
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Item 1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus........................... Cover Page of Registration Statement;
Cross Reference Sheet; Outside Front
Cover Page of Prospectus
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus............................................... Inside Front Cover Page of Prospectus;
Table of Contents; Available
Information; Incorporation of Certain
Documents by Reference
Item 3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............................ Summary; Introduction; The Companies; The
Merger
Item 4. Terms of the Transaction................................. Summary; Introduction; The Special
Meeting; The Merger; Description of
Comerica Capital Stock; Comparison of
Shareholder Rights; The Merger
Agreement; The Stock Option Agreement
Item 5. Pro Forma Financial Information.......................... *
Item 6. Material Contacts with the Company Being
Acquired................................................. Summary; The Merger
Item 7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be Underwriters........ *
Item 8. Interests of Named Experts and Counsel................... *
Item 9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................................. *
B. INFORMATION ABOUT THE REGISTRANT
Item 10. Information with Respect to S-3 Registrants.............. Available Information; Incorporation
of Certain Documents by Reference;
Summary; The Companies
Item 11. Incorporation of Certain Information by
Reference................................................ Incorporation of Certain Documents by
Reference
Item 12. Information with Respect to S-2 or S-3
Registrants.............................................. *
Item 13. Incorporation of Certain Information by
Reference................................................ *
Item 14. Information with Respect to Registrants Other
than S-2 or S-3 Registrants.............................. *
</TABLE>
<PAGE> 4
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
<TABLE>
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Item 15. Information with Respect to S-3 Companies................ *
Item 16. Information with Respect to S-2 or S-3
Companies................................................ Available Information; Incorporation
of Certain Documents by Reference;
Summary; The Companies
Item 17. Information with Respect to Companies Other
than S-2 or S-3 Companies................................ *
D. VOTING AND MANAGEMENT INFORMATION
Item 18. Information if Proxies, Consents or
Authorizations Are to be Solicited....................... Available Information; Incorporation
of Certain Documents by Reference;
Summary; Metrobank; Introduction; The
Companies; The Special Meeting; The
Merger
Item 19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited
or in an Exchange Offer.................................. *
</TABLE>
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* Omitted because inapplicable or answer is in the negative.
<PAGE> 5
[METROBANK LOGO]
_______ __, 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the
Shareholders of Metrobank which will be held at the offices of Metrobank located
at 10900 Wilshire Boulevard, Los Angeles, California 90024 at 4:00 p.m., local
time, on September 26, 1995 (the "Special Meeting").
At the Special Meeting, Metrobank shareholders will be asked to
consider and vote upon a proposal (the "Merger Proposal") to adopt and approve
(a) the Amended and Restated Agreement and Plan of Reorganization and Merger,
dated as of July 31, 1995 (the "Merger Agreement"), by and among Comerica
Incorporated, a Delaware corporation and a registered bank holding company
headquartered in Detroit, Michigan ("Comerica"), Comerica Holdings Incorporated,
a newly organized California corporation and wholly-owned subsidiary of Comerica
("Holdings"), and Metrobank, which amends and restates the Agreement and Plan of
Reorganization and Merger dated as of May 2, 1995 by and among Comerica,
Holdings and Metrobank (the "May Agreement"), and (b) the Agreement of Merger
(the "Subsidiary Merger Agreement"), providing for the merger (the "Merger") of
Holdings with and into Metrobank, and all of the transactions contemplated
thereby, including but not limited to, the conversion, subject to certain
provisions relating to fractional shares and dissenting shares, of each fully
diluted outstanding share of common stock, no par value per share, of Metrobank
("Metrobank Common Stock") into the right to receive approximately .7889 of a
share of common stock, $5.00 par value per share, of Comerica, subject to
certain possible downward adjustments described in the Merger Agreement.
The proposed Merger requires, among other conditions, certain
regulatory approvals, as well as the approval of the shareholders of Metrobank.
If all conditions to the Merger are either satisfied or waived, it is expected
that the Merger would be consummated during the first quarter of 1996.
Your Board of Directors has determined that the Merger Agreement and
the Merger are in the best interests of Metrobank and its shareholders. THE
BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF THE MERGER PROPOSAL AT THE SPECIAL MEETING.
The accompanying Notice and Proxy Statement/Prospectus describe the
matters to be acted upon at the Special Meeting. Shareholders are urged to
review carefully the attached Proxy Statement/Prospectus. This document contains
important information
<PAGE> 6
concerning Comerica, Holdings and Metrobank, a detailed description of the
Merger, its terms and conditions and the transactions contemplated thereby and
other matters. In addition, Metrobank's Annual Report on Form F-2 for the year
ended December 31, 1994 (the "Form F-2") has been enclosed, and Metrobank's
Quarterly Reports on Form F-4 for the quarterly periods ended March 31, and
June 30, 1995 (the "Form F-4's") are attached to the Proxy Statement/Prospectus.
Because of the significance to Metrobank of the proposed Merger, your
participation in the Special Meeting, in person or by proxy, is especially
important. We urge you to vote FOR approval and adoption of the Merger Proposal.
Your continuing interest in the business of Metrobank is appreciated,
and we hope you will attend the Special Meeting. It is important that your
shares be represented at the Special Meeting. Accordingly, whether or not you
plan to attend the Special Meeting, please sign, date and mail the enclosed
Proxy promptly in the postage-paid envelope that has been provided to you for
your convenience. If you wish to vote in accordance with the recommendations of
your Board of Directors, it is not necessary to specify your choices; you may
merely sign, date and return the enclosed Proxy.
Sincerely,
[SIG]
David L. Buell
Chief Executive Officer
and Chairman of the Board
<PAGE> 7
[METROBANK LOGO]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 26, 1995
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Metrobank will be held at Metrobank's offices located at 10900 Wilshire
Boulevard, Los Angeles, California on September 26, 1995 at 4:00 p.m., local
time (the "Special Meeting"), for the following purposes, all of which are more
fully described in the accompanying Proxy Statement/Prospectus:
To consider and vote upon a proposal (the "Merger Proposal")
to adopt and approve (a) the Amended and Restated Agreement and Plan of
Reorganization and Merger, dated as of July 31, 1995 (the "Merger
Agreement"), by and among Comerica Incorporated, a Delaware corporation
and a registered bank holding company headquartered in Detroit,
Michigan ("Comerica"), Comerica Holdings Incorporated, a newly
organized California corporation and wholly-owned subsidiary of
Comerica ("Holdings"), and Metrobank, which amends and restates the
Agreement and Plan of Reorganization and Merger dated as of May 2, 1995
by and among Comerica, Holdings and Metrobank (the "May Agreement") and
(b) the Agreement of Merger (the "Subsidiary Merger Agreement"),
providing for the merger (the "Merger") of Holdings with and into
Metrobank, and all of the transactions contemplated thereby, including
but not limited to, the conversion, subject to certain provisions
relating to fractional shares and dissenting shares, of each fully
diluted outstanding share of common stock, no par value per share, of
Metrobank ("Metrobank Common Stock") into the right to receive
approximately .7889 of a share of common stock, $5.00 par value per
share, of Comerica, subject to certain possible downward adjustments
described in the Merger Agreement.
The Merger Agreement and the Subsidiary Merger Agreement are set forth
in Annex A and Annex B, respectively, of the accompanying Proxy
Statement/Prospectus.
Shareholders of Metrobank Common Stock may have dissenter's rights
under California law if their shares of Metrobank Common Stock qualify as
"dissenting shares" under California law. These rights may require Metrobank to
purchase for cash at fair market
<PAGE> 8
value from Metrobank shareholders any such "dissenting shares." Metrobank
shareholders must comply strictly with applicable California law to exercise
their dissenter's rights. A copy of the pertinent statutory provisions is
attached to the accompanying Proxy Statement/Prospectus as Annex C.
The Metrobank Board of Directors has fixed the close of business on
August 1, 1995, as the record date for the determination of Metrobank
shareholders entitled to notice of and to vote at the Special Meeting. Only
Metrobank shareholders of record at the close of business on such date are
entitled to notice of, and to vote at, the Special Meeting.
The Metrobank Common Stock is the only security of Metrobank whose
holders are entitled to vote upon the proposals to be presented at the Special
Meeting. Approval of the Merger Proposal requires the affirmative vote of the
holders of not less than a majority of the outstanding shares of Metrobank
Common Stock.
Your vote is important regardless of the number of shares you own. Each
shareholder, whether or not he now plans to attend the Special Meeting, is
requested to sign, date and return the enclosed Proxy without delay in the
enclosed postage-paid envelope. You may revoke your Proxy at any time prior to
its exercise. Any shareholder present at the Special Meeting or at any
adjournments or postponements thereof may revoke his or her Proxy and vote
personally on each matter brought before the Special Meeting.
[SIG]
Sharon L. Canup
Corporate Secretary
August __, 1995
THE BOARD OF DIRECTORS OF METROBANK UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR THE MERGER PROPOSAL. PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID RETURN ENVELOPE.
<PAGE> 9
[METROBANK LOGO]
PROXY STATEMENT
------------------
COMERICA INCORPORATED
PROSPECTUS
------------------
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is
being furnished to shareholders of Metrobank in connection with the solicitation
of proxies by the Board of Directors of Metrobank for use at its Special
Meeting of Shareholders (including any adjournments or postponements thereof) to
be held on September 26, 1995, and relates to the proposed merger (the "Merger")
of Metrobank with Comerica Holdings Incorporated, a newly organized California
corporation ("Holdings") and a wholly-owned subsidiary of Comerica Incorporated,
a Delaware corporation ("Comerica"), pursuant to the Amended and Restated
Agreement and Plan of Reorganization and Merger, dated as of July 31, 1995 by
and among Metrobank, Holdings and Comerica(the "Merger Agreement"), which amends
and restates the Agreement and Plan of Reorganization and Merger dated as of May
2, 1995 by and among Comerica, Holdings and Metrobank (the "May Agreement"), and
all of the transactions contemplated thereby including the completio n of the
Merger pursuant to the terms of the Agreement of Merger (the "Subsidiary Merger
Agreement").
This Proxy Statement/Prospectus also constitutes a prospectus of
Comerica with respect to up to 4,806,710 shares of common stock, $5.00 par value
per share, of Comerica ("Comerica Common Stock") which may be issuable to
holders of common stock, no par value per share, of Metrobank ("Metrobank Common
Stock"), in the Merger. U pon consummation of the Merger, each outstanding share
of Metrobank Common Stock will, subject to certain p rovisions with respect to
fractional shares and dissenting shares, be converted into the right to receive
a pproximately .7889 of a share of Comerica Common Stock, subject to certain
possible downward adjustments described in the Merger Agreement.
Comerica Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "CMA." The last reported sales price of the Comerica
Common Stock on the NYSE Composite Tape on
<PAGE> 10
August __, 1995 was $__.__.
THE SHARES OF COMERICA COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS AUGUST __, 1995
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Metrobank on or about August __, 1995.
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
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Page
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AVAILABLE INFORMATION..................................................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................... 2
SUMMARY................................................................................................... 4
The Parties........................................................................................... 4
The Special Meeting................................................................................... 5
The Merger............................................................................................ 7
Selected Consolidated Financial Data of Comerica Incorporated......................................... 19
Selected Consolidated Financial Data of Metrobank..................................................... 20
Comparative Per Share Data............................................................................ 21
Comparative Stock Prices.............................................................................. 22
INTRODUCTION.............................................................................................. 24
THE COMPANIES............................................................................................. 25
Comerica Incorporated................................................................................. 25
Metrobank............................................................................................. 31
THE SPECIAL MEETING....................................................................................... 33
Matters to be Considered at the Special Meeting....................................................... 33
Vote Required......................................................................................... 33
Security Ownership of Certain Beneficial Owners....................................................... 33
Voting of Proxies..................................................................................... 34
Revocability of Proxies............................................................................... 34
Record Date; Shares Entitled to Vote; Quorum.......................................................... 34
Solicitation of Proxies............................................................................... 35
THE MERGER................................................................................................ 36
Form of the Merger.................................................................................... 36
Merger Consideration.................................................................................. 36
Background of the Merger.............................................................................. 39
Comerica Reasons for the Merger....................................................................... 39
Recommendation of the Board of Directors of Metrobank and Metrobank
Reasons for the Merger............................................................................... 40
Opinion of Metrobank's Financial Advisor.............................................................. 41
Effective Time of Merger.............................................................................. 46
Conversion of Shares; Procedures for Exchange of Certificates;
Fractional Shares.................................................................................... 47
Acquisition Proposals................................................................................. 49
Conditions to the Consummation of the Merger.......................................................... 50
Regulatory Approvals Required......................................................................... 51
Operations Pending the Merger......................................................................... 55
Operations After the Merger........................................................................... 56
Interests of Certain Persons in the Merger............................................................ 57
Stock Option Plan..................................................................................... 59
Stock Bonus Plan...................................................................................... 59
Cancellation Fee; Liquidated Damages.................................................................. 60
Anticipated Accounting Treatment...................................................................... 62
Certain Federal Income Tax Consequences............................................................... 62
Resale of Comerica Common Stock; Restrictions on Transfer............................................. 64
Stock Exchange Listing................................................................................ 64
</TABLE>
i
<PAGE> 12
<TABLE>
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Dissenter's Rights.................................................................................... 65
CERTAIN REGULATORY CONSIDERATIONS......................................................................... 69
General............................................................................................... 69
Interstate Banking and Branching...................................................................... 69
Payment of Dividends.................................................................................. 72
Certain Transactions by Comerica with its Affiliates.................................................. 74
Capital............................................................................................... 74
Comerica's Support of Subsidiary Banks................................................................ 77
FDIC Insurance Assessments............................................................................ 78
FDICIA................................................................................................ 78
Implications of Being a Savings and Loan Holding Company.............................................. 81
DESCRIPTION OF COMERICA CAPITAL STOCK..................................................................... 83
Comerica Preferred Stock.............................................................................. 84
Comerica Common Stock................................................................................. 86
DESCRIPTION OF METROBANK CAPITAL STOCK.................................................................... 87
COMPARISON OF SHAREHOLDER RIGHTS.......................................................................... 88
Classification, Removal and Nomination of Board of Directors.......................................... 88
Special Meetings of Shareholders...................................................................... 90
Limitation of Liability of Directors.................................................................. 90
Action by Written Consent............................................................................. 91
Certain Business Combinations......................................................................... 91
Amendment of Certificate of Incorporation............................................................. 93
Rights Plans.......................................................................................... 93
Dividends............................................................................................. 97
THE MERGER AGREEMENT...................................................................................... 98
Representations and Warranties........................................................................ 98
Conduct of Business Pending the Merger................................................................ 99
Conditions to the Merger.............................................................................. 102
Termination........................................................................................... 110
Liquidated Damages; Cancellation Fee.................................................................. 112
Expenses.............................................................................................. 114
Shareholder Agreements................................................................................ 115
Resales by Affiliates................................................................................. 116
Amendment and Waiver.................................................................................. 117
THE STOCK OPTION AGREEMENT................................................................................ 117
LEGAL MATTERS............................................................................................. 119
EXPERTS................................................................................................... 119
SHAREHOLDER PROPOSALS..................................................................................... 119
</TABLE>
ANNEXES
Annex A _ Amended and Restated Agreement and Plan of Reorganization
and Merger
Annex B _ Subsidiary Merger Agreement
Annex C _ Chapter 13 of the California General Corporation Law
relating to Dissenters Rights
Annex D _ Opinion of J.P. Morgan & Co., Incorporated
Annex E _ Stock Option Agreement
ii
<PAGE> 13
Annex F - Metrobank's Quarterly Report on Form F-4 for the quarterly
period ended March 31, 1995
Annex G - Metrobank's Quarterly Report on Form F-4 for the quarterly
period ended June 30, 1995
iii
<PAGE> 14
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY COMERICA, HOLDINGS OR METROBANK. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF COMERICA, HOLDINGS OR METROBANK SINCE THE DATE HEREOF
OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO SUCH
DATE. ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS RELATING TO
COMERICA AND ITS SUBSIDIARIES HAS BEEN SUPPLIED BY COMERICA AND ALL INFORMATION
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS RELATING TO METROBANK AND ITS
SUBSIDIARIES HAS BEEN SUPPLIED BY METROBANK.
AVAILABLE INFORMATION
Comerica is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith Comerica files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Metrobank is a
California state bank whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") and therefore files reports, proxy statements
and other information with the FDIC.
The reports, proxy statements and other information filed by Comerica
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661. Copies of such material also can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The reports, proxy
statements and other information filed by Metrobank with the FDIC can be
inspected and copied at the Public Reference Section of the offices of the FDIC
at 550 17th Street, N.W., Washington, D.C. 20249. In addition, material filed by
Comerica can be inspected at the offices of the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005, and materials filed by Metrobank can
be inspected at the offices of the
1
<PAGE> 15
American Stock Exchange at 86 Trinity Place, New York, New York 10006.
Comerica has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Comerica Common Stock to be issued pursuant to the Merger Agreement. This
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information may
be inspected and copied as set forth above. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated in this Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Comerica pursuant
to the Exchange Act (File No. 1-10706) or the FDIC by Metrobank (Certificate No.
22797-8) are incorporated by reference in this Proxy Statement/Prospectus:
1. Comerica's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 Comerica 10-K").
2. Comerica's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1995.
3. Comerica's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1995.
4. The description of the Comerica Common Stock, par value
$5.00 per share, incorporated by reference in the Registration
Statement on Form 8-A dated March 4, 1991.
5. Comerica's Registration Statement on Form 8-A dated March
4, 1991, as amended by an Amendment on Form 8 filed November 1, 1991.
2
<PAGE> 16
6. The portions of Comerica's Proxy Statement for the Annual
Meeting of Shareholders held May 19, 1995 that have been incorporated
by reference in the 1994 Comerica 10-K other than the Report of the
Compensation Committee on Executive Compensation and the Performance
Graph on pages 25-29 thereof.
7. Metrobank's Annual Report on Form F-2 for the year ended
December 31, 1994 (the "Metrobank Form F-2") filed with the FDIC.
8. Metrobank's Proxy Statement for the Annual Meeting of
Shareholders held on May 23, 1995, filed with the FDIC.
9. Metrobank's Quarterly Report on Form F-4 for the quarterly
period ended March 31, 1995 filed with the FDIC.
10. Metrobank's Quarterly Report on Form F-4 for the quarterly
period ended June 30, 1995 filed with the FDIC.
11. Metrobank's Current Report on Form F-3 dated May 7, 1995
filed with the FDIC.
12. Metrobank's Current Report on Form F-3 dated June 6, 1995
filed with the FDIC.
The documents listed above as items 6 through 12 above have been filed
as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part. In addition, a copy of the documents listed in
items 9 and 10 above are attached to this Proxy Statement/Prospectus and the
document listed in item 7 separately accompanies this Proxy
Statement/Prospectus.
All documents and reports filed by Comerica and Metrobank pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the date of the Special Meeting of
shareholders of Metrobank shall be deemed to be incorporated by reference in
this Proxy Statement/Prospectus and to be a part hereof from the dates of filing
of such documents or reports. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement/Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
3
<PAGE> 17
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, IF FOR COMERICA, TO JUDITH C. DART, EXECUTIVE VICE
PRESIDENT, GENERAL COUNSEL AND SECRETARY, COMERICA INCORPORATED, COMERICA TOWER
AT DETROIT CENTER, 500 WOODWARD AVENUE, DETROIT, MICHIGAN 48226, TELEPHONE (313)
222-7937; AND IF FOR METROBANK, TO SHARON L. CANUP, CORPORATE SECRETARY, 10900
WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024, TELEPHONE (310) 824-5700. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, REQUESTS SHOULD BE RECEIVED BY
SEPTEMBER 21, 1995 (5 BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING).
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement/Prospectus. As this summary is necessarily incomplete,
reference is made to, and this summary is qualified in its entirety by, the more
detailed information contained or incorporated by reference in this Proxy
Statement/Prospectus and the annexes hereto. Shareholders are urged to read this
Proxy Statement/Prospectus and the annexes hereto in their entirety. Certain
capitalized terms which are used but not defined in this summary are defined
elsewhere in this Proxy Statement/Prospectus.
THE PARTIES
Metrobank is a California state-chartered bank. Metrobank provides a
full range of commercial banking services to business enterprises located
primarily in the Los Angeles county area with additional offices in Orange and
San Diego counties. Metrobank offers traditional banking services, including the
making of commercial loans, accounts receivable loans, various types of consumer
loans, and real estate construction loans and commercial
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mortgage loans; the acceptance of checking, interest-bearing checking (NOW),
money market, savings and time deposits; and the provision of traveler's checks,
check guarantees, safe deposit and other customary non-deposit banking services.
As of June 30, 1995, Metrobank had total assets of approximately $1.3 billion,
total deposits of approximately $1.2 billion, total loans (net of unearned
income) of approximately $782 million, and shareholders' equity of approximately
$75 million. The main banking office of Metrobank and the principal executive
offices of Metrobank are both located at 10900 Wilshire Boulevard, Los Angeles,
California 90024. Its telephone number is (310) 824-5700.
Comerica Incorporated ("Comerica") is a Delaware corporation and a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "BHCA"), headquartered in Detroit, Michigan. As of June 30, 1995,
Comerica owned directly or indirectly 8 banking and 36 active non-banking
subsidiaries. As of June 30, 1995, Comerica had total assets of approximately
$35.5 billion, total deposits of approximately $21.9 billion, total loans (net
of unearned income) of approximately $24.0 billion, and shareholders' equity of
approximately $2.5 billion. Comerica's principal subsidiary, Comerica Bank, is a
commercial banking and trust institution that offers individuals, the business
community, and governmental agencies all services associated with a full-service
commercial banking institution. The principal executive offices of Comerica are
located at Comerica Tower at Detroit Center, 500 Woodward Avenue, Suite 3100,
Detroit, Michigan 48226. Its telephone number is (313) 222-4000.
Comerica Holdings Incorporated ("Holdings") is a newly organized
California corporation and a wholly-owned subsidiary of Comerica. Holdings is
being used specifically as a merger vehicle for the acquisition by Comerica of
Metrobank and currently has no assets or operations.
THE SPECIAL MEETING
Special Meeting of Shareholders. A special meeting of the shareholders
of Metrobank will be held at the offices of Metrobank, located at 10900 Wilshire
Boulevard, Los Angeles, California 90024 on September 26, 1995, at 4:00 p.m.,
local time (the "Special Meeting"). See "THE SPECIAL MEETING."
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Matters to Be Considered. At the Special Meeting, holders of Metrobank
Common Stock, no par value per share ("Metrobank Common Stock"), will be asked
to consider and vote upon a proposal (the "Merger Proposal") to adopt and
approve (a) the Amended and Restated Agreement and Plan of Reorganization and
Merger, dated as of July 31, 1995 (the "Merger Agreement"), by and among
Comerica Incorporated, a Delaware corporation and a registered bank holding
company headquartered in Detroit, Michigan ("Comerica"), Comerica Holdings
Incorporated, a newly organized California corporation and wholly-owned
subsidiary of Comerica ("Holdings"), and Metrobank, which amends and restates
the Agreement and Plan of Reorganization and Merger dated as of May 2, 1995 by
and among Comerica, Holdings and Metrobank (the "May Agreement"), by and among
Metrobank, Holdings and Comerica and (b) the Agreement of Merger (the
"Subsidiary Merger Agreement"), providing for the merger (the "Merger") of
Holdings with and into Metrobank, and all of the transactions contemplated
thereby, including but not limited to, the conversion, subject to certain
provisions relating to fractional shares and dissenting shares, of each fully
diluted outstanding share of common stock, no par value per share, of Metrobank
Common Stock into the right to receive approximately .7889 of a share of common
stock, $5.00 par value per share, of Comerica, subject to certain possible
downward adjustments described in the Merger Agreement. No other matters will be
brought before the Special Meeting. See "THE SPECIAL MEETING -- Matters to Be
Considered at the Special Meeting."
Votes Required. The affirmative vote of the holders of a majority of
the outstanding shares of Metrobank Common Stock entitled to vote thereon is
required to approve the Merger Proposal. See "THE SPECIAL MEETING -- Vote
Required."
Record Date. The record date for the Special Meeting is August 1, 1995
(the "Record Date"). Only Metrobank shareholders of record at the close of
business on the Record Date are entitled to notice of, and to vote at, the
Special Meeting.
As of the Record Date, there were _________ shares of Metrobank Common
Stock outstanding, and each such share is entitled to one vote at the Special
Meeting. As of the Record Date, there were ___ holders of record of Metrobank
Common Stock.
Security Ownership. As of June 30, 1995, directors and
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<PAGE> 20
executive officers of Metrobank and their affiliates may be deemed to be the
beneficial owners of approximately 44.05% of the outstanding shares of Metrobank
Common Stock, excluding options exercisable within 60 days. Such officers and
directors are entitled to exercise options within 60 days to acquire a total of
447,562 shares of Metrobank Common Stock, which would result in such persons
being deemed to be the beneficial owners of approximately 51.54% of the shares
of Metrobank Common Stock outstanding as of June 30, 1995. See "THE MERGER --
Stock Option Plans." Each Metrobank director who owns Metrobank Common Stock
(each a "director-shareholder") has executed an agreement which, among other
things, obligates each director-shareholder to vote the shares of Metrobank
Common Stock owned or controlled by them in favor of the Merger, subject to
fiduciary obligations. See "THE MERGER AGREEMENT -- Shareholder Agreements."
As of the Record Date, the director-shareholders of Metrobank owned or
controlled an aggregate of _______ shares of Metrobank Common Stock,
representing approximately _____% of the then outstanding shares of Metrobank
Common Stock.
As of the Record Date, no shares of Metrobank Common Stock were
beneficially owned by Comerica, Holdings or any of their subsidiaries, directors
or executive officers, or their affiliates.
THE MERGER
Form of the Merger. Pursuant to the Merger Agreement, which is hereby
incorporated by reference and is set forth in Annex A to this Proxy
Statement/Prospectus, at the Effective Time (see "THE MERGER -- Effective Time
of Merger") of the Merger, Holdings will merge with and into Metrobank, with
Metrobank being the surviving corporation (the "Surviving Corporation") in
accordance with the terms of the Subsidiary Merger Agreement. The Surviving
Corporation will have the articles of incorporation of Holdings and will be
named Metrobank. As a result of the Merger, Comerica will own the entire equity
interest in, and become the sole stockholder of, Metrobank. See "THE MERGER --
Form of the Merger."
Merger Consideration. Upon consummation of the Merger, each outstanding
share of Metrobank Common Stock will, subject to certain provisions with respect
to fractional shares and dissenting shares, be converted into the right to
receive approximately .7889 of a share of Comerica Common Stock (based upon an
assumed number of shares of Fully Diluted Metrobank Common Stock (as defined in
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<PAGE> 21
the Merger Agreement) of 6,092,817 as of the consummation of the Merger, subject
to certain possible downward adjustments described in the Merger Agreement (as
so adjusted, the "Metrobank Conversion Rate"). The Merger Agreement provides for
an adjustment to the Metrobank Conversion Rate in the event that Metrobank's
Consolidated Net Worth (as defined in the Merger Agreement) at the Effective
Time (as defined in the Merger Agreement) is less than the sum of $78,300,000
plus the Pre-Closing Income Amount (as defined in the Merger Agreement), or in
the event of certain changes in the capitalization of Comerica, including, but
not limited to, any recapitalization, reorganization, reclassification, merger,
stock split or stock dividend.
In addition, all existing rights with respect to Metrobank Common Stock
pursuant to outstanding Metrobank stock options (the "Metrobank Stock Options")
under the Metrobank Stock Option plans, shall be converted into and become
equivalent rights with respect to Comerica Common Stock at the applicable
conversion rate and Comerica will assume each Metrobank Stock Option in
accordance with the terms of the Metrobank Stock Option Plans and the stock
option agreements, if any, by which they are evidenced. In general, each
Metrobank Stock Option holder will receive stock options (subject to the terms
of the applicable stock option agreement), for the number of shares of Comerica
Common Stock such holder would have been entitled to receive had such holder
exercised his or her Metrobank Stock Options in full immediately prior to the
Effective Time, with appropriate adjustment of the exercise price. See "THE
MERGER -- Merger Consideration and -- Conditions to the Consummation of the
Merger."
Upon consummation of the Merger, each outstanding share of Holdings
will be converted into one share of the Surviving Corporation.
Effective Time of the Merger. It is expected that if the Merger
Proposal is approved by the Metrobank shareholders, and assuming that the other
conditions described in the Merger Agreement are satisfied, the Merger will
become effective during the first quarter of 1996. See "THE MERGER -- Effective
Time of Merger."
If the Merger does not become effective on or prior to March 10, 1996,
Comerica, Holdings or Metrobank may terminate the Merger
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<PAGE> 22
Agreement. See "THE MERGER AGREEMENT -- Termination."
Purpose of the Merger and Comerica's Reasons for the Merger. The
purpose of the Merger is for Comerica to acquire the entire equity interest in
Metrobank. It is part of Comerica's current business strategy to expand its
activities from Michigan into states such as California where management
believes there are long-term opportunities which will benefit Comerica and its
shareholders. Comerica California Incorporated, a Delaware corporation and
registered bank holding company, is Comerica's wholly-owned bank holding company
subsidiary operating the subsidiaries located in the State of California,
including Comerica Bank-California and University Bank & Trust Company. Comerica
Bank-California is a state chartered California bank, which focuses on middle
market banking, small business banking, private banking, high technology,
commercial real estate lending and mortgage banker financing, as well as trust
and treasury management services, in the San Francisco Bay and Los Angeles
areas. University Bank & Trust Company provides similar services in the Palo
Alto area. See "THE COMPANIES -- Comerica Incorporated." Comerica believes that
through the Merger Comerica will be able to increase its penetration of the
California commercial banking market in the communities served by Metrobank.
This transaction is also expected to enhance the competitiveness of the
companies currently in the deregulated banking environment and prospectively
after the full impact of the Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Act") is known. See "THE MERGER -- Comerica Reasons for
the Merger" and "CERTAIN REGULATORY CONSIDERATIONS -- Interstate Banking and
Branching."
Recommendations of the Metrobank Board of Directors and Reasons for the
Merger. The Board of Directors of Metrobank believes that the terms of the
Merger are fair to and in the best interests of Metrobank and its shareholders.
All of the members of the Metrobank Board were at the meeting approving the
Merger Agreement and they unanimously approved the Merger Agreement, the
Subsidiary Merger Agreement and the Merger. Accordingly, the Metrobank Board
recommends that Metrobank shareholders vote FOR the Merger Proposal. See "THE
MERGER -- Recommendation of the Board of Directors of Metrobank and Reasons for
the Merger."
The terms of the Merger Agreement, including the financial
consideration provided therein, were the result of arms' length
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<PAGE> 23
negotiations between Comerica, Holdings and Metrobank and their respective
representatives. In reaching a conclusion to approve the Merger, the Board of
Directors of Metrobank considered a number of factors, including, but not
limited to, the strength of Comerica and the substantially increased liquidity
of, and dividends payable on, Comerica Common Stock. See "THE MERGER --
Recommendation of the Board of Directors of Metrobank and Reasons for the
Merger" and "-- Background of the Merger."
Opinion of Financial Advisor to Metrobank. J.P. Morgan & Co.,
Incorporated ("J.P. Morgan") has served as financial advisor, and has delivered
its written opinion to the Metrobank Board, dated as of the date of this Proxy
Statement/Prospectus, to the effect that the Metrobank Conversion Rate is fair
to Metrobank's shareholders from a financial point of view. Metrobank has agreed
to pay J.P. Morgan a fee for their services which is in part contingent on the
consummation of the Merger. See "THE MERGER -- Opinion of Metrobank's Financial
Advisor." The full text of J.P. Morgans' written opinion, dated as of the date
of this Proxy Statement/Prospectus, which sets forth the assumptions made,
matters considered and limits on their review, is attached hereto as Annex D.
Metrobank shareholders are urged to and should read such opinion in its
entirety.
Metrobank Acquisition Proposals. The Merger Agreement provides that
Metrobank will not, except for sales of Metrobank Common Stock to meet any
applicable requirement of law, regulation or governmental entity, authorize or
knowingly permit any of its representatives, directly or indirectly, to solicit
or encourage any "Acquisition Proposal," or participate in any discussions or
negotiations with, or provide any nonpublic information to, any person or group
of persons (other than Comerica, Holdings or their representatives) concerning
any "Acquisition Proposal." An Acquisition Proposal is defined generally to mean
any proposal for the acquisition or participation in a merger or other business
combination involving Metrobank and any person other than Comerica or Holdings,
any proposal by which any person or group other than Comerica or Holdings would
acquire the right to vote 10% or more of the capital stock of Metrobank entitled
to vote for the election of directors, any acquisition of the assets of
Metrobank other than in the ordinary course of business, or any acquisition of
more than 10% of the outstanding capital stock of Metrobank other than as
contemplated by the Merger Agreement. However, Metrobank or its
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<PAGE> 24
Board of Directors are not prevented from (A) furnishing non-public information
to, or entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written Acquisition Proposal by such
person or entity or recommending an unsolicited bona fide written Acquisition
Proposal to the shareholders of Metrobank, if and to the extent that (1) the
Board of Directors of Metrobank believes in good faith (after consultation with
and the concurrence of its financial advisor) that such Acquisition Proposal
would, if consummated, result in a transaction materially more favorable to
Metrobank's shareholders from a financial point of view than the transaction
contemplated by the Merger Agreement and the Metrobank Board of Directors
determines in good faith after consultation with its outside legal counsel that
such action is necessary for Metrobank to comply with its fiduciary duties to
shareholders under applicable law, and (2) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such person
or entity, the Metrobank Board of Directors receives from such person or entity
an executed confidentiality agreement, with terms similar in scope to those
contained in the confidentiality agreement between Comerica and Metrobank, (B)
complying with Rule 14e-2 promulgated under the Exchange Act of 1934, as
amended, with regard to an Acquisition Proposal, or (C) effecting any agreed
upon sales of Metrobank Common Stock to meet any applicable requirement of law,
regulation or governmental entity, Metrobank is required to notify Comerica
immediately upon receipt of any inquiry regarding any Acquisition Proposal. See
"THE MERGER -- Acquisition Proposals."
Conditions to the Merger; Termination. The obligations of Comerica,
Holdings and Metrobank, as the case may be, to consummate the Merger are subject
to various conditions set forth in the Merger Agreement including, but not
limited to, obtaining the requisite shareholder and regulatory approvals; the
absence of any materially burdensome condition imposed for any regulatory
approval; the absence of any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Merger by any
governmental entity which makes the Merger illegal, requires any material
divestiture or imposes a materially burdensome condition; the accuracy in all
material respects of the representations and warranties of, and performance in
all material respects of the covenants required to be performed prior to the
Effective Time of the Merger by, the other parties to the Merger Agreement; the
absence of any materially adverse change to the
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other parties or their subsidiaries; receipt of an opinion of legal counsel in
respect of certain Federal income tax consequences (see "THE MERGER -- Certain
Federal Income Tax Consequences"); receipt of legal opinions and approval of
their respective legal counsel of the transactions contemplated by the Merger
Agreement; approval for listing of the shares of the Comerica Common Stock to be
issued in the Merger on the New York Stock Exchange; receipt from each of Ernst
& Young, LLP and Arthur Andersen, LLP of letters, in form and substance
satisfactory to Comerica and Metrobank and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement filed in
connection with the Merger; and the absence of any action, suit or proceeding
instituted or threatened before any court or governmental body seeking to
challenge or restrain the transactions contemplated by the Merger Agreement or
the Stock Option Agreement which presents a substantial risk that such
transactions will be restrained or that any party to the Merger Agreement may
suffer material damages as a result of consummating such transactions.
In addition, the obligations of Comerica and Holdings to consummate the
Merger are subject to the following further conditions, among others: the
requirements that Metrobank's reserve for possible loan losses on the last day
of the month immediately preceding the month in which the Closing Date occurs,
shall be at least the greater of $17,000,000 or 2.1% of the average of
Metrobank's total outstanding gross loans for the month ending on that date
(subject to certain adjustments) and that Metrobank's Non-Performing Assets (as
defined in the Merger Agreement) outstanding on the last day of the month
immediately preceding the Effective Time shall be no more than $30,000,000.
The obligation of Metrobank to consummate the Merger is subject to,
among other things, the receipt of the written opinion of J.P. Morgan prior to
the mailing of this Proxy Statement/Prospectus, dated the date of this Proxy
Statement/Prospectus to the effect that, as of such date, the Metrobank
Conversion Rate is fair to Metrobank's shareholders from a financial point of
view.
There can be no assurance that the conditions to the Merger will be
satisfied. See "THE MERGER AGREEMENT -- Conditions to the Merger."
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Under certain circumstances, Comerica, Holdings or Metrobank may
terminate the Merger Agreement, either prior to or after approval thereof by
Metrobank's shareholders. See "THE MERGER AGREEMENT -- Termination."
Liquidated Damages; Cancellation Fee. The Merger Agreement provides
that so long as Comerica has not exercised its stock option pursuant to the
Stock Option Agreement, (See "SUMMARY - The Merger - Stock Option Agreement),
Metrobank shall be required to pay to Comerica the sum of $3,000,000 as
reasonable and full liquidated damages and reasonable compensation for losses
sustained in the event that (i) Comerica terminates the Merger Agreement because
the Merger Agreement, the Subsidiary Merger Agreement and the Merger are not
ratified by Metrobank's shareholders, (ii) Comerica terminates the Merger
Agreement because the Metrobank Board of Directors withdraws, modifies or amends
its recommendation in this Proxy Statement/Prospectus that Metrobank
shareholders adopt and approve the Merger Agreement in any respect materially
adverse to Comerica or if the Metrobank Board of Directors does not call and
hold the Special Meeting, (iii) Comerica terminates the Merger Agreement because
there shall have been a material breach of any of the representations or
warranties set forth in the Merger Agreement on the part of Metrobank, or (iv)
Comerica terminates the Merger Agreement because there is a default by Metrobank
under the Merger Agreement which results in a Material Adverse Effect on
Metrobank and the continuance of such default for a period of 20 Business Days
after written notice thereof, which default, in the reasonable opinion of
Comerica and Holdings cannot be cured prior to the Closing.
In the event Comerica has exercised its stock option pursuant to the
Stock Option Agreement, the Merger Agreement has been terminated and an
Acquisition Event has occurred, Metrobank is required to pay to Comerica
$6,000,000 if the consummation of the transaction which is the result of the
Acquisition Event occurs within 270 days of the date of the occurrence of the
subject Acquisition Event.
An Acquisition Event is defined generally to mean (a) that prior to the
termination of the Merger Agreement, Metrobank has authorized, recommended,
publicly proposed or publicly announced an intention to authorize, recommend or
propose, or entered into an agreement with any person other than Comerica or any
subsidiary of
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Comerica to effect a merger, consolidation or similar transaction involving
Metrobank or any of its subsidiaries; the disposition of substantially all of
the assets of Metrobank; or the issuance, sale or other disposition of
securities representing 50% voting control of Metrobank other than securities
issued pursuant to the Stock Option Agreement or under existing Stock Option
Plans of Metrobank or to meet any applicable requirement of law, regulation or
governmental entity, (b) the acquisition of the beneficial ownership or the
right to acquire beneficial ownership by any person or group of persons other
than Comerica, a subsidiary of Comerica or certain directors of Metrobank who
are parties to Shareholder Agreements with Comerica (as the term "beneficial
ownership" is defined in Rule 13d-3 of the Securities Exchange Act of 1934) of
25% or more of the then outstanding Metrobank Common Stock except acquisitions
of shares to meet any applicable requirement of law, regulation or governmental
entity; or (c) the occurrence of certain events specified in the Merger
Agreement within 90 days after termination of the Merger Agreement by Comerica,
where such events were caused in whole or in part by any action or inaction
within the control of Metrobank, any subsidiary of Metrobank or the directors of
Metrobank or Metrobank's subsidiaries.
In addition, the Merger Agreement provides that, in the event of
termination by Metrobank of the Merger Agreement because (a) Holdings or
Comerica has breached any of their representations and warranties set forth in
the Merger Agreement and in the reasonable opinion of Metrobank such breach
cannot be cured prior to Closing and would have a Material Adverse Effect on
Holdings or Comerica, or (b) a default is committed by Comerica or Holdings
pursuant to the Merger Agreement and the default continues for a period of 20
business days after written notice of such default, and in the reasonable
opinion of Metrobank, such default cannot be cured prior to the Closing, then
Comerica shall pay to Metrobank as reasonable and full liquidated damages and
reasonable compensation for the loss sustained thereby and not as a penalty or
forfeiture, the sum of $3,000,000. See "THE MERGER AGREEMENT -- Liquidated
Damages; Cancellation Fee."
Regulatory Approvals Required. The Merger is subject to prior approval
by the Board of Governors of the Federal Reserve ("Federal Reserve"), the
Commissioner of the Michigan Financial Institutions Bureau (the "Michigan
Commissioner") and the State of California's
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Superintendent of Banks (the "California Superintendent"). Applications for
approval of the Merger have been filed with the Federal Reserve, the Michigan
Commissioner and the California Superintendent.
Although it is not a condition to consummation of the Merger, Comerica
may, at or sometime after such consummation, elect to merge the Surviving
Corporation of the merger between Metrobank and Holdings with and into Comerica
Bank-California, a wholly-owned subsidiary of Comerica California Incorporated,
Comerica's California bank holding company (the "Surviving Corporation Merger").
The Surviving Corporation Merger would be subject to prior approval of the FDIC,
and the California Superintendent.
There can be no assurance that any of these regulatory authorities will
approve the Merger or the Surviving Corporation Merger, or if approved, as to
the date of such approvals. There can also be no assurance that such approvals
will not contain a condition or requirement which causes such approvals to fail
to satisfy the conditions to the consummation of the Merger. There can also be
no assurance that the Department of Justice will not challenge the Merger or the
Surviving Corporation Merger, or as to the outcome of any such challenge if
made. See "THE MERGER -- Conditions to the Consummation of the Merger and --
Regulatory Approvals Required."
Operations Pending the Merger. In the Merger Agreement, Metrobank has
agreed to carry on its business and the business of its subsidiaries in
substantially the manner as conducted prior to the execution of the May
Agreement, to notify Comerica promptly of any changes that would have a material
adverse effect on Metrobank's capital structure, financial condition, assets,
results of operations, business or prospects of Metrobank, to take certain other
actions, and to provide Comerica with certain reports and information. Metrobank
has also agreed in the Merger Agreement that it will not take certain actions,
including by way of example and not of limitation, issue capital stock (other
than pursuant to outstanding stock options under its Stock Option Plans), issue
other securities convertible into capital stock, acquire or dispose of material
assets, incur indebtedness other than in the ordinary course of business or
declare or pay any dividend, other than regular quarterly cash dividends in an
amount not to exceed $.15 per share. See "THE MERGER AGREEMENT -- Conduct of
Business Pending
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the Merger" and "THE MERGER -- Operations Pending the Merger."
Operations After the Merger. If the Merger is consummated, Metrobank
will be the Surviving Corporation of the Merger, with the articles of
incorporation of Holdings and the name Metrobank. The separate existence of
Holdings will cease, and the Surviving Corporation will continue as a
wholly-owned subsidiary of Comerica. The Board of Directors of the Surviving
Corporation will be made up of certain directors of Comerica Bank-California
and Metrobank serving in those capacities at the Effective Time. Upon
consummation of the Merger, Comerica expects to contribute the stock of the
Surviving Corporation to Comerica California Incorporated, Comerica's
California bank holding company. At some point after the consummation of the
Merger the Surviving Corporation may merge into Comerica Bank-California.
Following the consummation of the Merger, David L. Buell, Chief
Executive Officer and Chairman of the Board of Metrobank, will serve Metrobank,
pursuant to a one year employment agreement, as either Chairman of Metrobank or
Vice Chairman of any successor to Metrobank. See "THE MERGER -- Interests of
Certain Persons in the Merger."
Banking policies and procedures of the Surviving Corporation and its
subsidiaries will continue in accordance with the policies of Comerica Bank -
California. See "THE MERGER -- Operations After the Merger."
Interests of Certain Persons in the Merger. Certain members of
Metrobank's management, including Mr. David L. Buell, may be deemed to have
certain interests in the Merger that are in addition to their interests as
shareholders of Metrobank generally. The Metrobank Board was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby. See "THE MERGER --
Interests of Certain Persons in the Merger" and -- "Operations After the
Merger.
Anticipated Accounting Treatment. The Merger is expected to be treated
as a purchase for accounting and financial reporting purposes. The shares of
Comerica Common Stock to be issued in the Merger will be authorized but unissued
shares, or shares held as treasury shares. Subject to the rules of the
Securities and Exchange Commission, Comerica may repurchase shares of Comerica
Common Stock in open market or other transactions to fund the
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Merger consideration. See "THE MERGER -- Anticipated Accounting Treatment."
Certain Federal Income Tax Consequences. The obligations of Comerica,
Holdings and Metrobank to effect the Merger are conditioned upon the receipt of
a legal opinion dated the Effective Time of the Merger from legal counsel
acceptable to Comerica, subject to exceptions and assumptions normally included,
and in form and substance reasonably satisfactory to Comerica and Metrobank, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "IRC"), and that Comerica and Metrobank will each be a
party to that reorganization within the meaning of Section 368(b) of the IRC.
There can be no assurance that this opinion will be received. See "THE MERGER
- -- Certain Federal Income Tax Consequences."
The material federal income tax consequences of the proposed
transactions to shareholders of Metrobank are summarized under "THE MERGER --
Certain Federal Income Tax Consequences."
Stock Exchange Listing. The Comerica Common Stock is listed on the New
York Stock Exchange ("NYSE"). Comerica has agreed to apply for the listing of
the shares of Comerica Common Stock to be issued in the Merger on the NYSE. The
obligations of the parties to the Merger Agreement to consummate the Merger are
subject to approval for listing by the NYSE of such shares. See "THE MERGER --
Stock Exchange Listing."
Dissenter's Rights. Holders of Metrobank Common Stock may have certain
dissenter's rights if their shares of Metrobank Common Stock qualify as
"dissenting shares" under California law. These rights may require Metrobank to
purchase for cash at fair market value from Metrobank shareholders any such
"dissenting shares." Metrobank shareholders must strictly comply with applicable
California law to exercise their dissenter's rights. A copy of the pertinent
statutory provisions are attached to this Proxy Statement/Prospectus as Annex C.
See "THE MERGER -- Dissenter's Rights."
For additional information with respect to dissenter's rights and a
description of the procedure to exercise those rights, see "THE MERGER --
Dissenter's Rights."
17
<PAGE> 31
Stock Option Agreement. As a condition to entering into the Merger
Agreement, Comerica insisted that it be granted an option to purchase up to
9.9% of the issued and outstanding shares of Metrobank Common Stock (after
giving effect to the shares issued pursuant to the option) at an exercise price
of $15.75 per share. Metrobank made such grant pursuant to a separate Stock
Option Agreement, dated May 2, 1995 (the "Stock Option Agreement"). The option
may be exercised only upon the occurrence of certain events and conditions. The
Stock Option Agreement is attached to this Proxy Statement/Prospectus as Annex
E. See "THE STOCK OPTION AGREEMENT."
The Stock Option Agreement is intended to increase the likelihood that
the Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreement may have
the effect of discouraging persons who might now or prior to the Effective Time
be interested in acquiring all of or a significant interest in Metrobank from
considering or proposing such an acquisition, even if such persons were prepared
to pay a higher price per share for Metrobank Common Stock than the price per
share implicit in the Metrobank Conversion Rate or a higher price per share for
Metrobank Common Stock than the then current market price of such shares.
Certain Regulatory Considerations. As financial institutions, Comerica
and its banking subsidiaries are subject to certain regulatory restrictions, and
examination and reporting requirements, of certain federal and state banking
authorities. Such restrictions impact, among other things, the payment of
dividends to Comerica by its bank subsidiaries and the extent to which Comerica
and its nonbank subsidiaries can borrow or otherwise obtain credit from its bank
subsidiaries. In addition, Comerica and its bank subsidiaries are subject to
certain capital requirements. Comerica is also expected to act as a source of
financial strength to each of its subsidiary banks and to commit resources to
support each of such subsidiaries. The regulatory structure applicable to banks
has been revised considerably by recent federal legislation. See "CERTAIN
REGULATORY CONSIDERATIONS."
18
<PAGE> 32
SELECTED CONSOLIDATED FINANCIAL DATA OF COMERICA INCORPORATED
(SHARE DATA IN THOUSANDS, EXCEPT PER SHARE DATA; INCOME STATEMENT AND
BALANCE SHEET AMOUNTS IN MILLIONS)
The following table sets forth certain selected consolidated financial
data of Comerica and is based on the consolidated financial statements of
Comerica, including the respective notes thereto, which are incorporated by
reference in this Proxy Statement/Prospectus from Comerica's Annual Report on
Form 10-K for the year ended December 31, 1994 and Quarterly Report on Form 10-Q
for the six month period ended June 30, 1995, and should be read in conjunction
therewith. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" above.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED(1)
---------------------------
JUNE 30, JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
-------- -------- -------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
CONDENSED STATEMENT OF INCOME
(IN MILLIONS):
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income ................................. $ 636 $ 605 $ 1,230 $ 1,134 $ 1,121 $ 1,050 $ 927
Provision for loan losses ........................... 28 30 56 69 111 105 100
Non-interest income ................................. 241 227 467 462 411 385 348
Non-interest expenses ............................... 544 516 1,059 1,038 1,092 945 848
Provision for income taxes .......................... 103 96 195 148 89 105 79
-------- -------- ------- ------ -------- -------- -------
Net income .......................................... $ 202 $ 190 $ 387 $ 341 $ 240 $ 280 $ 248
======== ======== ======== ======= ======== ======== =======
PER COMMON SHARE DATA:
Net income (primary) ................................ $ 1.71 $ 1.62 $ 3.28 $ 2.85 $ 1.99 $ 2.41 $ 2.25
Net income (fully diluted) .......................... 1.71 1.62 3.28 2.85 1.98 2.38 2.23
Cash dividends declared ............................. .67 .60 1.24 1.07 .96 .92 .87
Common stockholders' equity (period end) ........... 21.68 19.81 20.46 18.99 17.38 16.30 14.52
Average primary common shares outstanding
(in thousands) .................................... 117,865 117,497 118,160 119,569 119,113 114,713 108,742
CONSOLIDATED AVERAGE BALANCES
(IN MILLIONS):
Total loans ......................................... $ 22,938 $ 19,498 $ 20,211 $ 18,307 $ 17,447 $ 16,622 $ 15,477
Total assets ........................................ 33,628 30,868 31,451 27,236 26,510 26,365 24,332
Total deposits ...................................... 21,493 21,222 21,325 20,721 20,913 20,785 19,381
Medium- and long-term debt .......................... 4,197 1,847 2,708 1,087 414 323 348
Common stockholders' equity ......................... 2,477 2,256 2,313 2,136 1,957 1,741 1,485
Total stockholders' equity .......................... 2,477 2,256 2,313 2,136 1,995 1,779 1,523
PERFORMANCE RATIOS:(2)
Return on average assets ............................ 1.20% 1.23% 1.23% 1.25% 0.91% 1.06% 1.02%
Return on average common stockholders' equity ....... 16.28 16.85 16.74 15.94 12.10 15.90 16.47
Net interest margin -- taxable equivalent ........... 4.16 4.34 4.32 4.65 4.73 4.49 4.36
Non-interest expenses as % of average total assets .. 3.24 3.35 3.37 3.81 4.12 3.58 3.49
Non-performing assets as % of loans and other
real estate owned(3) .............................. .82 1.27 .92 1.09 1.50 1.48 1.54
Non-performing loans as % of loans(3) ............... .65 .99 .74 .83 1.23 1.22 1.19
Allowance for loan losses as % of loans(3) .......... 1.41 1.59 1.47 1.56 1.69 1.62 1.60
Allowance for loan losses as % of non-performing
assets(3) ......................................... 171 124 160 143 113 109 104
Net charge-offs as % of average loans ............... .17 .24 .24 .43 .57 .58 1.18
Total stockholders' equity as % of assets(3) ........ 7.01 7.42 7.15 7.2 7.61 6.68 6.05
Common stockholders' equity as % of assets(3) ....... 7.01 7.42 7.15 7.2 7.47 6.55 5.90
REGULATORY CAPITAL RATIOS:(2)
Tier I risk-based capital ........................... 7.61% 8.41% 8.13% 8.21% 8.83% 8.13% 7.23%
Total risk-based capital ............................ 10.85 11.58 11.68 11.58 11.82 10.69 9.99
Leverage ratio ...................................... 6.59 6.86 6.93 7.04 7.52 6.61 5.75
</TABLE>
- ---------------
(1) During the three months ended March 31, 1995, Comerica completed the
acquisition of University Bank & Trust Company in a purchase
transaction. See "THE COMPANIES
-- Comerica Incorporated -- Recently Completed Acquisitions."
(2) Ratios are annualized where appropriate.
(3) At period end.
19
<PAGE> 33
SELECTED CONSOLIDATED FINANCIAL DATA OF METROBANK
The following table sets forth certain selected consolidated financial
data of Metrobank and is based on the financial statements of Metrobank,
including the respective notes thereto, which are incorporated by reference in
this Proxy Statement/Prospectus from Metrobank's Annual Report on Form F-2 for
the year ended December 31, 1994 and Quarterly Reports on Form F-4 for the six
month period ended June 30, 1995, and should be read in conjunction therewith.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" above.
(INCOME STATEMENT AND BALANCE SHEET AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED(1)
---------------------------
JUNE 30, JUNE 30,
-------- --------
1995 1994
---- ----
<S> <C> <C>
STATEMENT OF OPERATIONS DATE:
Interest income ............................................ $ 42,825 $ 31,085
Interest expense ........................................... 10,723 6,130
---------- ----------
Net interest income ........................................ 32,102 24,955
Provision for possible loan losses ......................... 2,300 1,415
Noninterest income ......................................... 2,714 2,235
Noninterest expense ........................................ 24,709 20,866
---------- ----------
Earnings before income taxes ............................... 7,807 4,909
Provision for income taxes ................................. 2,754 1,429
---------- ----------
Net earnings ............................................... $ 5,053 $ 3,480
========== ==========
PER SHARE DATA:
Net earnings ............................................... $ 0.88 $ 0.64
Dividends per share ........................................ $ 0.30 $ 0.27
Stockholders' equity per share at period end ............... $ 13.66 $ 12.65
CONSOLIDATED BALANCES -
END OF PERIOD:
Assets ..................................................... $1,321,084 $ 996,948
Net Loans .................................................. 766,213 583,095
Deposits ................................................... 1,229,153 909,793
Shareholders' equity ....................................... 74,803 66,700
CONSOLIDATED AVERAGE BALANCES:
Assets ..................................................... $1,078,817 $ 926,421
Net loans .................................................. 700,013 563,543
STATEMENT OF OPERATIONS DATA
AVERAGE BALANCES:
Deposits ................................................... $ 984,457 $ 817,608
Stockholders' equity ....................................... 72,489 66,140
PERFORMANCE RATIOS (ANNUALIZED):
Return on average assets ................................... 0.94% 0.76%
Return on average equity ................................... 14.06% 10.61%
Net interest margin ........................................ 6.69% 6.12%
Non-interest expenses to average total assets .............. 4.62% 4.54%
Non-performing assets to total assets ...................... 1.71% 1.55%
Non-performing loans to total loans ........................ 2.75% 1.72%
Allowance for possible losses to total loans ............... 2.00% 2.28%
Allowance for possible losses to non-performing loans....... 72.79% 132.54%
STATEMENT OF OPERATIONS DATA:
Net charge-offs to average loans ........................... 1.34% 0.31%
REGULATORY CAPITAL RATIOS:
Tier 1 risk-based ratio .................................... 8.20% 9.90%
Total risk-based capital ratio ............................. 9.45% 11.20%
Leverage ratio ............................................. 6.11% 7.01%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATE:
Interest income ............................................ $ 66,602 $ 61,059 $ 61,764 $ 64,097 $ 64,433
Interest expense ........................................... 13,688 12,634 15,741 24,968 25,107
---------- ---------- ---------- ---------- ----------
Net interest income ........................................ 52,914 48,425 46,023 39,129 39,326
Provision for possible loan losses ......................... 3,565 8,820 5,200 2,130 5,619
Noninterest income ......................................... 4,581 9,583 5,661 6,238 5,983
Noninterest expense ........................................ 42,505 42,005 39,227 35,660 36,339
---------- ---------- ---------- ---------- ----------
Earnings before income taxes ............................... 11,425 7,183 7,257 7,577 3,351
Provision for income taxes ................................. 3,272 1,168 1,499 2,064 1,250
---------- ---------- ---------- ---------- ----------
Net earnings ............................................... $ 8,153 $ 6,015 $ 5,758 $ 5,513 $ 2,101
========== ========== ========== ========== ==========
PER SHARE DATA:
Net earnings ............................................... $ 1.47 $ 1.15 $ 1.10 $ 1.06 $ 0.40
Dividends per share ........................................ $ 0.55 $ 0.41 $ 0.55 $ 0.39 $ 0.28
Stockholders' equity per share at period end ............... $ 13.06 $ 12.18 $ 11.34 $ 10.67 $ 9.95
CONSOLIDATED BALANCES -
END OF PERIOD:
Assets ..................................................... $1,052,172 $ 955,858 $ 905,083 $ 824,774 $ 744,521
Net Loans .................................................. 601,466 553,125 517,850 475,474 412,277
Deposits ................................................... 959,160 885,386 801,863 740,824 672,765
Shareholders' equity ....................................... 70,215 63,752 59,279 55,761 52,002
CONSOLIDATED AVERAGE BALANCES:
Assets ..................................................... $ 946,257 $ 896,568 $ 857,565 $ 755,398 $ 748,549
Net loans .................................................. 575,637 530,706 499,628 442,084 380,466
STATEMENT OF OPERATIONS DATA
AVERAGE BALANCES:
Deposits ................................................... $ 843,349 $ 795,506 $ 746,962 $ 666,887 $ 659,249
Stockholders' equity ....................................... 67,234 61,540 57,518 53,679 53,458
PERFORMANCE RATIOS (ANNUALIZED):
Return on average assets ................................... 0.86% 0.67% 0.67% 0.72% 0.28%
Return on average equity ................................... 12.12% 9.77% 10.01% 10.27% 3.86%
Net interest margin ........................................ 6.31% 6.13% 6.17% 5.97% 6.19%
Non-interest expenses to average total assets .............. 4.49% 4.69% 4.57% 4.72% 4.85%
Non-performing assets to total assets ...................... 1.60% 1.29% 1.91% 0.99% 1.46%
Non-performing loans to total loans ........................ 2.17% 1.16% 1.23% 0.60% 2.59%
Allowance for possible losses to total loans ............... 2.08% 2.31% 1.91% 1.69% 1.59%
Allowance for possible losses to non-performing loans....... 96.02% 199.39% 155.56% 283.72% 62.94%
STATEMENT OF OPERATIONS DATA:
Net charge-offs to average loans ........................... 0.66% 1.07% 0.64% 0.16% 0.44%
REGULATORY CAPITAL RATIOS:
Tier 1 risk-based ratio .................................... 10.11% 9.99% 9.76% 9.57% 9.14%
Total risk-based capital ratio ............................. 11.37% 11.24% 11.01% 10.99% 10.31%
Leverage ratio ............................................. 7.24% 6.92% 6.57% 6.69% 6.97%
</TABLE>
20
<PAGE> 34
COMPARATIVE PER SHARE DATA (UNAUDITED)
The following table sets forth for the Comerica Common Stock and the Metrobank
Common Stock certain historical, pro forma and pro forma equivalent per share
financial information. The pro forma data does not purport to be indicative of
the results of future operations or the results that would have occurred had the
Merger been consummated at the beginning of the periods presented. The pro forma
data gives effect to the Merger and is based on numerous assumptions and
estimates. The pro forma financial data has been included as required by the
rules of the Commission and is provided for comparative purposes only. The
information presented below should be read in conjunction with the separate
financial statements of Comerica and Metrobank, including the applicable notes,
incorporated by reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
<TABLE>
<CAPTION>
Comerica Metrobank
---------------------- -------------------------
Equivalent
Historical Pro Forma Historical Pro Forma(2)
---------- --------- ---------- ------------
<S> <C> <C> <C> <C>
COMMON SHAREHOLDERS' EQUITY:
December 31, 1994.........................................$20.46 $20.46 $13.06 $16.14
June 30, 1995 ............................................ 21.68 21.68 13.43 17.50
CASH DIVIDENDS:(1)
Year ended December 31, 1994.............................. 1.24 1.24 .55 .98
Six months ended June 30, 1995............................ .67 .67 .30 .53
NET INCOME:
Year ended December 31, 1994:
Primary............................................... 3.28 3.35 1.47 2.64
Fully diluted........................................... 3.28 3.35 1.47 2.64
Six months ended June 30, 1995(3)
Primary................................................. 1.71 1.73 .42 1.36
Fully diluted........................................... 1.71 1.73 .42 1.36
</TABLE>
- ---------------
(1) The Comerica pro forma combined dividends per share amounts represent
historical dividends declared per share only on Comerica Common Stock.
(2) The Metrobank pro forma equivalent per share amounts are calculated
assuming a Metrobank Conversion Rate of .7889. The Metrobank Conversion
Rate is subject to adjustment. See "THE MERGER -- Merger
Consideration."
(3) Does not include the dilutive effect of the grant of an option to
Comerica to purchase up to approximately 590,827 shares of Metrobank
Common Stock pursuant to the Stock Option Agreement. See "THE STOCK
OPTION AGREEMENT."
21
<PAGE> 35
COMPARATIVE STOCK PRICES
Comerica Common Stock is listed on the New York Stock Exchange
("NYSE"). The table below sets forth, for the periods indicated, the high and
low sales prices per share of Comerica Common Stock as reported on the NYSE
Composite Transactions Tape. The per share information set forth below has been
adjusted to reflect the 100% stock dividend paid January 4, 1993 to Comerica
common shareholders of record as of December 15, 1992.
Metrobank Common Stock is listed on the American Stock Exchange
("AMEX"). The table below sets forth, for the periods indicated, the high and
low sales prices per share of Metrobank Common Stock as reported on the AMEX
Composite Transactions Tape.
<TABLE>
<CAPTION>
COMERICA METROBANK
COMMON STOCK COMMON STOCK
------------------- ------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
1993 First Quarter................................................. $33.375 $28.750 $12.88 $11.13
Second Quarter................................................ 35.250 27.625 13.00 10.00
Third Quarter................................................. 31.500 26.875 10.88 9.25
Fourth Quarter................................................ 29.000 25.125 12.38 9.75
1994 First Quarter................................................. $28.250 $25.250 $12.28 $10.47
Second Quarter................................................ 30.875 25.125 16.72 10.78
Third Quarter................................................. 31.250 27.750 15.69 13.28
Fourth Quarter................................................ 28.250 24.125 17.38 13.88
1995 First Quarter................................................. $28.375 $24.125 $17.50 $15.50
Second Quarter................................................ $33.125 $27.250 $24.38 $15.25
Third Quarter (through August __, 1995)
</TABLE>
On May 1, 1995 (the last trading day preceding the execution of the May
Agreement), the last sales price of Comerica Common Stock as reported on the
NYSE Composite Transactions Tape was $28.125 per share. On August __, 1995 (the
last practicable date prior to the mailing of this Proxy Statement/Prospectus),
the last sales price of Comerica Common Stock as reported on the NYSE Composite
Transactions Tape was $______ per share.
On May 1, 1995 (the last trading day preceding the execution of the May
Agreement), the last sales price of Metrobank Common Stock as reported on the
AMEX Composite Transactions Tape was $15.38 per share (or approximately $22.19
per share of Comerica
22
<PAGE> 36
Common Stock on an equivalent per share basis). On August __, 1995 (the last
practicable date prior to the mailing of this Proxy Statement/Prospectus), the
last sales price of Metrobank Common Stock as reported on the AMEX Composite
Transactions Tape was $____ per share (or approximately $_____ share of Comerica
Common Stock on an equivalent per share basis).(1)
METROBANK SHAREHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR COMERICA COMMON STOCK. NO ASSURANCE CAN BE GIVEN CONCERNING THE MARKET PRICE
OF COMERICA COMMON STOCK BEFORE OR AFTER THE DATE ON WHICH THE MERGER IS
CONSUMMATED. THE MARKET PRICE OF COMERICA COMMON STOCK WILL FLUCTUATE BETWEEN
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS AND THE DATE ON WHICH THE MERGER IS
CONSUMMATED AND THEREAFTER.
On June 30, 1995, there were 17,145 holders of record of Comerica
Common Stock, and 361 holders of record of Metrobank Common Stock.
- ---------------
(1) Equivalent per share prices of Metrobank Common Stock as compared to
Comerica Common Stock assume a Metrobank Conversion Rate of .7889. The
Metrobank Conversion Rate is subject to adjustment. See "THE MERGER --
Merger Consideration."
23
<PAGE> 37
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Metrobank in connection with the solicitation of proxies by the Board of
Directors of Metrobank (the "Metrobank Board") for use at the Special Meeting of
Shareholders of Metrobank (the "Special Meeting") to be held at the offices of
Metrobank located at 10900 Wilshire Boulevard, Los Angeles, California 90024 on
September 26, 1995 at 4:00 p.m., and at any adjournments or postponements
thereof.
At the Special Meeting, the shareholders of Metrobank will be asked to
consider and vote upon a proposal (the "Merger Proposal") to adopt and approve
(a) the Amended and Restated Agreement and Plan of Reorganization and Merger,
dated as of July 31, 1995 (the "Merger Agreement"), by and among Comerica
Incorporated, a Delaware corporation and a registered bank holding company
("Comerica"), Comerica Holdings Incorporated, a California corporation
("Holdings"), and Metrobank attached as Annex A hereto and more fully described
herein, which amends and restates the Agreement and Plan of Reorganization and
Merger dated as of May 2, 1995 by and among Comerica, Holdings and Metrobank
(the "May Agreement"), by and among Metrobank, Holdings and Comerica and (b) the
Agreement of Merger (the "Subsidiary Merger Agreement"), attached as Annex B
hereto, providing for the merger (the "Merger") of Holdings with and into
Metrobank. Metrobank will be the surviving corporation (the "Surviving
Corporation") following the Merger, and will become a wholly-owned subsidiary of
Comerica.
In the Merger, each outstanding share of common stock, no par value per
share, of Metrobank ("Metrobank Common Stock"), subject to certain provisions
with respect to fractional shares and dissenting shares, will be converted into
the right to receive approximately .7889 of a share of common stock, $5.00 par
value per share, of Comerica ("Comerica Common Stock") (based upon an assumed
number of shares of Fully Diluted Metrobank Common Stock (as defined in the
Merger Agreement) of 6,092,817 as of the consummation of the Merger), subject to
certain possible downward adjustments described in the Merger Agreement (the
"Metrobank Conversion Rate"). In addition, all existing rights with respect to
Metrobank Common Stock pursuant to Metrobank stock option plans (the "Stock
Options"), shall be converted into and become
24
<PAGE> 38
equivalent rights with respect to Comerica Common Stock. Each Metrobank Stock
Option holder will receive the number of stock options (subject to the terms of
the applicable stock option agreement), for Comerica Common Stock such holder
would have received according to the Metrobank Conversion Rate as if such holder
exercised his or her Metrobank Stock Options in full immediately prior to the
Effective Time. See "THE MERGER -- Merger Consideration."
The date on which this Proxy Statement/Prospectus is first being sent
to shareholders of Metrobank is on or about August __, 1995.
THE COMPANIES
COMERICA INCORPORATED
General. Comerica is a registered bank holding company incorporated
under the laws of the State of Delaware, headquartered in Detroit, Michigan and
was formed in 1973 to acquire the outstanding common stock of Comerica Bank
(formerly Comerica Bank-Detroit), a Michigan banking corporation ("Comerica
Bank"). On June 18, 1992, Manufacturers National Corporation, a registered bank
holding company incorporated under the laws of the State of Delaware
("Manufacturers"), was merged with and into Comerica. Comerica was the Surviving
Corporation. The merger was accounted for as a pooling-of-interests. As of June
30, 1995 , Comerica owned directly or indirectly all the outstanding common
stock (except for directors' qualifying shares, where applicable) of 8 banking
and 36 active nonbanking subsidiaries. At June 30, 1995 , Comerica had total
assets of approximately $35.5 billion, total deposits of approximately $21.9
billion, total loans (net of unearned income) of approximately $24.0 billion,
and shareholders' equity of approximately $2.5 billion. At June 30, 1995,
Comerica was the second largest bank holding company headquartered in Michigan
in terms of total assets.
Comerica's business strategy focuses on five core businesses in four
geographic markets. Those businesses are corporate banking, consumer banking,
private banking, institutional trust and investment management, and
international finance and trade services. Corporate banking incorporates highly
specialized units servicing a full range of company sizes with both credit and
25
<PAGE> 39
non-credit products. Consumer banking provides deposit, credit and fee-based
products to individuals needing financial services but whose income or wealth do
not make them prospects for private banking services. Private banking is
oriented to servicing the financial needs of the affluent market as defined by
individual net income or worth. Institutional trust and investment management
activities involve providing companies, municipalities and other entities a wide
spectrum of investment management products and trust products such as master
trust, master custody, and corporate trust services, as well as administering
and serving as trustee for employee benefit plans. International finance and
trade services offer importers and exporters trade financing, letters of credit,
foreign exchange and international customhouse brokerage and freight forwarding
products. The core businesses are tailored to each of Comerica's four primary
geographic markets: the Midwest (currently Michigan and Illinois), Texas,
California, and Florida. The Midwest is the only market in which all five core
businesses are currently pursued. In California and Texas, the primary focus is
on corporate banking and private banking activities. In Florida, the primary
focus is on private banking.
On September 14, 1992, Comerica Bank, Comerica's principal banking
subsidiary, and Manufacturers Bank, N.A. (the principal banking subsidiary of
Manufacturers prior to its merger into Comerica on June 18, 1992) were merged,
with Comerica Bank being the surviving institution. Such merger was accounted
for using the pooling-of-interests method. At June 30, 1995, Comerica Bank had
approximately 280 branch offices in Michigan and total assets of approximately
$27.5 billion. At June 30, 1995, Comerica Bank was the second largest commercial
bank in Michigan in terms of deposits.
In Illinois, Comerica owns Comerica Bank-Illinois. At June 30, 1995,
Comerica Bank-Illinois had 28 offices in Illinois and total assets of
approximately $1.5 billion.
In Texas, Comerica owns Comerica Bank-Texas, which focuses on middle
market banking, small business banking, private banking and trust services in
the Houston and Dallas/Fort Worth, Texas area. At June 30, 1995, Comerica
Bank-Texas had total assets of approximately $3.5 billion and 58 offices. See
"Recently Completed Acquisitions" for information regarding Lockwood National
Bank of Houston, which was acquired by Comerica on August 4, 1994 and
26
<PAGE> 40
merged into Comerica Bank-Texas on December 16, 1994.
In California, Comerica owns Comerica Bank-California, which focuses on
middle market banking, small business and private banking, as well as trust and
treasury management services, in the San Francisco Bay and Los Angeles areas,
and University which provides similar services in the Palo Alto area. At June
30, 1995, Comerica Bank-California and University Bank & Trust Company had total
assets of approximately $2.5 billion. They had 34 offices of which eleven are
located in the San Francisco Bay Area. Comerica Bank-California provides a wide
array of services focused in middle market banking, small business banking, high
technology, commercial real estate lending and mortgage banker financing.
Comerica Bank-California also provides treasury management and trade finance
services to corporate customers. It also targets affluent and professional
clients and provides customized solutions for their private banking needs.
Specialized banking services include lines of credit, equipment loans,
residential mortgage loans, equity lines of credit and consumer loans. Comerica
Bank-California offers fully managed trust accounts for individuals and
companies, and administration, record keeping, and investment services for
401(k) plans and pension and profit sharing plans. See "Recently Completed
Acquisitions" for information regarding University Bank & Trust Company which
was acquired by Comerica on March 31, 1995.
Comerica serves trust and banking customers in Florida through Comerica
Bank & Trust, F.S.B., a federally chartered savings bank, which operates six
offices and had approximately $157 million in assets at June 30, 1995.
Competitors of Comerica's banking subsidiaries include commercial
banks, savings and loan associations, consumer and commercial finance companies,
leasing companies, credit unions and other financial services companies. Based
on the recent passage of the Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Act") and on legislation passed during 1985 that allows
Michigan-based banks to acquire or be acquired by banks in states with similar
laws in effect, Comerica believes that the level of competition will increase in
the future.
Comerica's principal executive offices are located at Comerica Tower at
Detroit Center, 500 Woodward Avenue, Suite 3100, Detroit, Michigan 48226, and
its telephone number is (313) 222-4000.
27
<PAGE> 41
Recently Completed Acquisitions. On September 8, 1993, Comerica,
Pacific Western Bancshares, Inc., a Delaware corporation and a bank holding
company ("PAC WEST"), Pacific Western Bank, a California state-chartered bank
and a wholly-owned subsidiary of PAC WEST ("PWB") and Comerica California
Incorporated, a California registered bank holding company and wholly-owned
subsidiary of Comerica ("COM CAL") entered into an Agreement and Plan of
Reorganization and Merger providing for, among other things, the merger of COM
CAL into PAC WEST with PAC WEST being the Surviving Corporation under the
charter and bylaws of COM CAL and the name "Comerica California Incorporated."
The merger was completed on March 30, 1994 and was accounted for as a purchase.
PAC WEST shareholders received common stock of Comerica valued at approximately
$121 million. At December 31, 1993, PAC WEST had assets of approximately $1
billion. PWB merged into Comerica Bank-California on June 30, 1994.
On April 4, 1994, Comerica, Michigan National Corporation, a Michigan
corporation and a bank holding company ("MNC"), Lockwood Banc Group, Inc., a
Michigan corporation, wholly-owned subsidiary of MNC and a registered bank
holding company ("Lockwood") and Lockwood National Bank of Houston, a national
banking association and wholly-owned subsidiary of Lockwood ("LNB") entered into
a Stock Purchase Agreement whereby Comerica purchased from MNC all of the issued
and outstanding stock of Lockwood and LNB. The purchase was completed on August
4, 1994 for a purchase price of approximately $44 million in cash. At June 30,
1994 Lockwood had assets of approximately $318 million. Comerica contributed the
stock of LNB to Comerica Texas Incorporated, its wholly-owned bank holding
company in Texas. LNB merged into Comerica Bank-Texas on December 16, 1994.
On October 4, 1994, Comerica, University Bank & Trust Company, a
California Bank ("UBT") and Comerica Interim Incorporated, a California
corporation and wholly-owned subsidiary of Comerica ("Interim") entered into an
Agreement and Plan of Reorganization and Merger providing for, among other
things, the merger of UBT into Interim with UBT being the surviving corporation.
Subsequent to the merger of UBT into Interim, UBT may, at Comerica's election,
be merged into a subsidiary of Comerica. The merger of Interim into UBT was
completed on March 31, 1995 and was accounted for as a purchase. UBT
shareholders received Comerica Common Stock valued at approximately $69 million.
At March 31, 1995, UBT had assets of
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approximately $460 million.
On June 1, 1995, Comerica and the shareholders of W.Y. Campbell &
Company, a Michigan corporation and an investment banking firm based in Detroit,
Michigan ("Campbell"), entered into an Agreement and Plan of Reorganization that
provided for, among other things, the acquisition of all of the capital stock of
Campbell by Comerica's wholly-owned subsidiary, Comerica Bank-Ann Arbor, N.A.
The acquisition of Campbell was completed on June 23, 1995.
Pending Acquisition. On June 28, 1995, Comerica, QuestStar Bank, N.A.,
a national bank ("QuestStar"), Comerica Texas Incorporated, a Texas corporation,
bank holding company and wholly owned subsidiary of Comerica ("Comerica-Texas")
and Comerica Interim Incorporated, a Texas corporation and wholly owned
subsidiary of Comerica-Texas ("Interim") entered into an Agreement and Plan of
Reorganization and Merger providing for, among other things, the merger of
QuestStar into Interim with Interim being the surviving corporation. Subsequent
to the merger of QuestStar into Interim, Interim may, at Comerica's election, be
merged into a subsidiary of Comerica. The transaction is subject to regulatory
and QuestStar shareholder approval and is expected to be completed sometime in
the fourth quarter of 1995. Shareholders of QuestStar would receive cash in the
amount of approximately $25 million, subject to certain adjustments. At May 31,
1995, QuestStar had assets of approximately $196 million.
Joint Venture. On November 2, 1994 Comerica and Munder Capital
Management, Inc., a Delaware corporation and registered investment adviser
located in the Detroit, Michigan metropolitan area ("Munder"), entered into a
Joint Venture Agreement providing for the combination of the investment advisory
businesses of Munder and two investment advisory subsidiaries of Comerica:
Woodbridge Capital Management, Inc. ("Woodbridge") and World Asset Management,
Inc. ("World"). As of December 31, 1994, the joint venture became effective with
the formation of a partnership, Munder Capital Management, that succeeded to the
investment advisory businesses of Munder, Woodbridge, and World. Munder now
holds a majority interest in Munder Capital Management, and Comerica holds a
minority interest.
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Future Acquisitions. Comerica continues to review and evaluate
potential acquisitions in order to expand its core businesses in defined
markets. Comerica anticipates that from time to time in the future it will
acquire companies which complement and effectuate Comerica's business objectives
in both federally-assisted and negotiated transactions. Certain bank
acquisitions, including those by Comerica and others have typically involved the
payment of a premium over book and market values, which may sometimes result in
some dilution to the acquiring company's book value and net income per common
share. Comerica expects that future acquisitions may involve acquisition
premiums but management expects dilution to occur infrequently.
Michigan Environmental Complaint. Manufacturers Bank (which was merged
with and into Comerica Bank in September, 1992) was served on July 24, 1990 with
a complaint by the Attorney General of the State of Michigan ("Plaintiff") in
which the Plaintiff sought to impose strict, joint, and several liabilities upon
Manufacturers Bank pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), the Resource Conservation and
Recovery Act, and the Michigan Water Resources Commission Act. Plaintiff alleged
that Manufacturers Bank was an operator of certain facilities which have
environmental problems and that Manufacturers Bank had indicia of ownership
under CERCLA. The facilities involved were actually owned and operated by Auto
Specialties Manufacturing Company ("AUSCO"), now in bankruptcy. Plaintiff bases
the allegation upon the fact that two former Manufacturers Bank officers and
employees were members of the Board of Directors of AUSCO and that Manufacturers
Bank allegedly directed the installation of new management at AUSCO. Plaintiff
contends Manufacturers Bank had final and ultimate approval over AUSCO's
corporate strategies, policies and acquisitions.
Plaintiff seeks cleanup costs and damages and has expressed the opinion
that the claim will be well in excess of $30 million. Comerica's management
believes that this action will not have a materially adverse effect on
Comerica's consolidated financial position, although it may, depending upon the
amount of ultimate liability, if any, and the consolidated results of operations
in the year of final resolution, have a materially adverse effect on the
consolidated results of operation in that year. On January 12, 1993, the United
States District Court for the Western District of Michigan granted Manufacturers
Bank its motion for summary
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judgment. Plaintiff has filed an appeal to the Sixth Circuit Court of Appeals
which is still pending.
METROBANK
Metrobank is a California state chartered bank incorporated originally
as a national association on January 16, 1979. Metrobank converted from a
national association to a California state chartered institution on November 1,
1988. As a California state chartered bank which is also a member of the Federal
Reserve, Metrobank is governed by the California Financial Code and regulated by
the California Superintendent of Banks and the Federal Reserve Board. At June
30, 1995, Metrobank had total assets of approximately $1.3 billion, total
deposits of approximately $1.2 billion and total loans (net of unearned income)
of approximately $782 million, and shareholders' equity of approximately $75
million.
Metrobank's primary service area is the Los Angeles County area with
additional offices in Orange and San Diego counties. Metrobank provides banking
services primarily to entrepreneurs with companies that have sales volumes up to
$50 million per annum. To facilitate this line of business, Metrobank strives to
acquire high quality personnel and attractive and prominent facilities in
communities that are well-recognized centers of commerce. This is reflected in
the establishment of the Los Angeles Headquarters Office in the 17-story Murdock
Plaza in the heart of Westwood at Wilshire and Westwood Boulevards; the South
Bay Regional head Office in the Del Amo financial Center in Torrance; the Orange
County Regional Head Office located in Koll Center in Newport Beach; the San
Fernando Valley Regional head Office located in the Warner Center Plaza in the
West San Fernando Valley; and the San Diego Regional Head Office, located in the
Mission Valley area of San Diego. In addition, Metrobank maintains centralized
loan, finance and administrative facilities in Torrance.
Metrobank offers a full range of commercial banking services, including
the making of commercial loans, accounts receivable loans, various types of
consumer loans, and real estate construction loans and commercial mortgage
loans; the acceptance of checking, interest-bearing checking (NOW), money
market, savings and time deposits; and the provision of traveler's checks, check
guarantees, safe deposit and other customary non-deposit banking
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services. Metrobank does not issue VISA or MasterCard credit cards, but is a
merchant depository for cardholder drafts under both types of credit cards. At
the present time Metrobank does not have a trust department, however, Metrobank
makes arrangements with correspondent banks to provide trust services. Metrobank
also provides international banking services for its customers.
Although Metrobank offers certain consumer banking services as an
accommodation to its existing business banking customers, Metrobank does not
emphasize this "retail" portion of its business. Accordingly, Metrobank does not
offer free checking accounts, Saturday or extended banking hours, or
drive-through tellers. Management feels strongly that all banking services
should be offered only if they are profitable and, if offered, should be charged
for on a competitive basis unless the account relationship provides sufficient
earnings through its demand deposit balances to more than offset the cost of the
services provided. Metrobank has been offering certain mutual funds and other
non-deposit investments through an affiliation with Standard Chartered Bank.
This division of Standard Chartered Bank has recently been acquired by First
Interstate Bank which has given Metrobank notice of termination of the
affiliation.
On August 31, 1994, Metrobank entered into an agreement to acquire the
National Bank of Long Beach ("NBLB") from its Danish parent, Topdanmark Bank
A/S. According to the terms of the agreement, Metrobank purchased all
outstanding common and preferred NBLB stock for cash at the net book value on
December 31, 1994, subject to certain valuation adjustments. The acquisition was
completed on April 1, 1995.
Competitors of Metrobank include commercial banks, savings & and loan
associations, securities brokerage firms and credit unions.
Metrobank's principal executive offices are located at 10900 Wilshire
Boulevard, Los Angeles, California 90024, and its telephone number is (310)
824-5700.
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THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of Metrobank Common Stock will consider
and vote upon the Merger Proposal to approve and adopt the Merger Agreement, the
Subsidiary Merger Agreement and the Merger. No other matters will be brought
before the Special Meeting.
ALL THE MEMBERS OF THE METROBANK BOARD OF DIRECTORS WERE PRESENT AT THE
MEETING APPROVING THE MERGER AGREEMENT, AND THEY UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE SUBSIDIARY MERGER AGREEMENT AND THE MERGER. THE METROBANK BOARD
OF DIRECTORS RECOMMENDS THAT METROBANK SHAREHOLDERS VOTE FOR APPROVAL OF THE
MERGER PROPOSAL.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
outstanding shares of Metrobank Common Stock entitled to vote thereon is
required to approve the Merger Proposal. Each share of Metrobank Common Stock is
entitled to one vote. Thus, any shares of Metrobank Common Stock which for any
reason, including abstentions or broker non-votes, are not voted for approval of
the Merger Proposal will not count toward the required total and will have the
same effect, for purposes of approving the Merger Proposal, as shares voted
against the Merger Proposal. Approval of the Merger Proposal by the requisite
vote of Metrobank shareholders is a condition to, and required for, the
consummation of the Merger. See "THE SPECIAL MEETING -- Record Date; Shares
Entitled to Vote; Quorum."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At June 30, 1995, Metrobank directors, executive officers and their
affiliates may be deemed to be the beneficial owners of approximately 2,412,132
shares of Metrobank Common Stock excluding options exercisable within 60 days,
representing approximately 44.05% of the then outstanding shares of Metrobank
Common Stock. Such officers and directors are entitled to exercise options
within 60 days to acquire a total of 447,562 shares of Metrobank Common Stock,
which would result in such persons being deemed to be the beneficial owners of
approximately 51.54% of the shares of Metrobank Common Stock outstanding as of
June 30, 1995 . See "THE MERGER -- Stock Option Plans." Each
director-shareholder of Metrobank has executed an agreement with Comerica
which, among other things, obligates them to vote the shares of Metrobank
Common Stock owned or controlled by them in favor of the Merger, subject
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to fiduciary obligations. See "THE MERGER AGREEMENT -- Shareholder Agreements."
As of the Record Date, no shares of Metrobank Common Stock were
beneficially owned by Comerica, Holdings or any of their subsidiaries, directors
or executive officers, or their affiliates.
VOTING OF PROXIES
Shares of Metrobank Common Stock represented by properly executed
proxies received at or prior to the Special Meeting will be voted at the Special
Meeting in the manner specified by the holders of such shares. Properly executed
proxies which do not contain voting instructions will be voted FOR approval of
the Merger Proposal.
If any other matters are properly presented at the Special Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Special Meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons named
in the form of proxy enclosed herewith and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment.
Metrobank does not have any knowledge of any matters to be presented at
the Special Meeting other than those matters referred to and described herein.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
shareholder from voting in person or otherwise revoking a proxy. Attendance at
the Special Meeting will not in and of itself constitute revocation of a proxy.
A shareholder may revoke a proxy at any time prior to its exercise by filing
with Sharon L. Canup, Corporate Secretary of Metrobank, 10900 Wilshire
Boulevard, Los Angeles, California 90024, a duly executed revocation or a proxy
bearing a later date or by voting in person at the Special Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of Metrobank Common Stock at the close
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of business on August 1, 1995 (the "Record Date") will be entitled to receive
notice of, and to vote at, the Special Meeting. At the Record Date, Metrobank
had outstanding _________ shares of Metrobank Common Stock. Holders of a
majority of the outstanding shares of Metrobank Common Stock entitled to vote
must be represented in person or by proxy at the Special Meeting in order for a
quorum to be present at the Special Meeting. As of the Record Date, there were
___ holders of record of outstanding Metrobank Common Stock.
SOLICITATION OF PROXIES
Metrobank will bear the cost of the solicitation of proxies from its
shareholders. In addition to solicitation by mail, the directors, officers and
employees of Metrobank may solicit proxies from shareholders by telephone or
telegram or in person. Such persons will not be additionally compensated, but
will be reimbursed for reasonable out-of-pocket expenses incurred in connection
with such solicitation. Arrangements will also be made with brokerage firms,
nominees, fiduciaries and other custodians, for the forwarding of solicitation
materials to the beneficial owners of shares held of record by such persons, and
Metrobank will reimburse such persons for their reasonable out-of-pocket
expenses in connection therewith.
Metrobank has retained the services of its transfer agent, First
Interstate Bank of California, to facilitate the distribution of solicitation
materials and the solicitation of proxies from banks, brokerage houses,
fiduciaries and custodians holding shares of Metrobank Common Stock in their
names for beneficial holders.
Solicitation would be made by mail, telephone and personal contact.
Metrobank will pay First Interstate Bank of California an estimated fee of
$____________ for its services, plus reasonable out-of-pocket costs.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS
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THE MERGER
FORM OF THE MERGER
Pursuant to the Merger Agreement, at the Effective Time (as defined
below under "Effective Time") of the Merger, Holdings will merge with and into
Metrobank, pursuant to the terms of the Subsidiary Merger Agreement with
Metrobank being the Surviving Corporation. The Surviving Corporation will have
the articles of incorporation of Holdings and will be named Metrobank. As a
result of the Merger, Comerica will own the entire equity interest in, and
become the sole stockholder of, Metrobank.
MERGER CONSIDERATION
Metrobank Conversion Rate. Upon consummation of the Merger, each
outstanding share of Metrobank Common Stock will be converted (subject to the
provisions with respect to fractional shares and dissenting shares described
under "Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares" and "Dissenter's Rights" below) into the right to receive that number of
shares of duly authorized, validly issued, fully paid and nonassessable Comerica
Common Stock equal to the Metrobank Conversion Rate, determined at the Effective
Time and subject to adjustment as described in the Merger Agreement.
The Metrobank Conversion Rate is the result of a fraction (rounded to
four decimal places) determined by dividing:
(a) a fraction, the numerator which is $136,750,822, and the
denominator which is $28.45; provided, however that such numerator
shall be reduced by $1 for each $1 that the Metrobank Consolidated Net
Worth (as defined below) at the Effective Time is less than the sum of
(x) $78,300,000, and (y) the "Pre-Closing Income Amount" which is
defined as $1,000,000 for January 1996 and $700,000 for February, 1996
to the extent the whole month shall have been complete on or prior to
the Effective Time (there shall be no adjustment to the numerator of
this fraction or the Metrobank Conversion Rate attributable to any
non-competition or other payment made to directors or officers of
Metrobank, any environmental expense or any additional accruals unless
expressly
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contemplated by the Merger Agreement).
by
(b) the Fully Diluted Metrobank Common Stock (defined generally
to mean) the sum of the total number of shares of Metrobank Common
Stock outstanding as of the consummation of the Merger, assuming the
exercise of all of the Metrobank Stock Options granted on or prior to
the Effective Time pursuant to any Metrobank Stock Option Plan and any
other options or other rights in or for Metrobank Common Stock, other
than options contemplated by the Stock Option Agreement and including
any number of shares which have been redeemed or are entitled to
appraisal rights under California law.
ASSUMING 6,092,877 SHARES OF FULLY DILUTED METROBANK COMMON STOCK AND
NO ADJUSTMENTS BEING REQUIRED, THE METROBANK CONVERSION RATE WOULD BE .7889.
The Metrobank Consolidated Net Worth is the difference between:
(A) total shareholders' equity of Metrobank as of the last day of
the month immediately prior to the month in which the
Effective Time occurs, but not earlier than December 31,
1995, unless otherwise agreed by the parties (which shall
include an add back of all fees and costs of Metrobank
previously paid and charged to earnings which are
attributable to the consummation of the transactions
contemplated by the Merger Agreement up to the amount of
$1,400,000 on a tax effected basis), determined in accordance
with Generally Accepted Accounting Principles applied
consistently with prior periods (but not including (i) any
equity raised by Metrobank subsequent to the date of the May
Agreement from the capital or private markets or otherwise;
or (ii) any amount attributable to the actual exercise of any
Metrobank Stock Options between the date of the May Agreement
and the Closing);
and
(B) amounts attributable to the period from the date of the
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May Agreement to the fifth business day before the Effective
Date (the "Determination Date") or such earlier date as is
practicable for accounting purposes and arising from: (1)
gains or losses in excess of $250,000 on securities
transactions, including mark to market gains and losses; (2)
gains and income in excess of $1,000,000 on a pre-tax basis
attributable to real estate development activities, including
sales of other real estate owned ("OREO"); (3) gains from
the sale or other disposition of assets not in the ordinary
course of business; (4) gains attributable to non-recurring
extraordinary items, and changes related to new accounting
principles and changes in application of existing accounting
principles; and (5) any amount of goodwill and core deposit
intangibles in excess of $2,500,000. The amounts specified
in B(1) and (2) shall be calculated net of any tax benefit
determined at the applicable tax rate.
In addition, all existing rights with respect to Metrobank Common Stock
pursuant to the Metrobank stock option plans (the "Metrobank Stock Options"),
shall be converted into and become equivalent rights with respect to Comerica
Common Stock. Each Metrobank Stock Option holder will receive the number of
stock options (subject to the applicable stock option agreement), for Comerica
Common Stock such holder would have received according to the Metrobank
Conversion Rate as if such holder exercised his or her Metrobank Stock Options
in full immediately prior to the Effective Date.
It is a condition to Comerica's obligation to consummate the Merger
that the number of shares of Comerica Common Stock that shall be issuable
pursuant to the terms of the Merger Agreement shall not exceed 4,806,710 as of
the Effective Time.
The Merger Agreement also requires the Metrobank Conversion Rate to be
further appropriately adjusted to reflect any recapitalization, reorganization,
reclassification, split-up, merger, consolidation, exchange, stock or other
dividend or distribution (other than regular quarterly cash dividends) made,
declared or effective with respect to Comerica Common Stock between the date of
the Merger Agreement and the Effective Time of the Merger.
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There can be no assurance that an adjustment to the Metrobank
Conversion Rate will not occur.
BACKGROUND OF THE MERGER
David L. Buell, Chairman and Chief Executive Officer of Metrobank was
first introduced to members of Comerica management in late 1990 while Comerica
was in the process of completing its first acquisition in California. During the
four years that followed, Mr. Buell maintained an ongoing relationship with such
members of Comerica management, sharing business ideas and at times conducting
informal discussions regarding the possibility of the acquisition of Metrobank
by Comerica.
In 1994, Metrobank entered into an agreement to buy National Bank of
Long Beach ("NBLB") from its Danish parent, Topdanmark Bank A/S. This
acquisition was consummated on April 1, 1995. At the time Metrobank entered
into the agreement to acquire NBLB from Topdanmark Bank, A/S, it was anticipated
that Metrobank would be required to raise between $7 million and $10 million of
new capital to support the acquisition. In evaluating potential sources of new
capital, Metrobank contacted several banking organizations, including Comerica.
Discussions with Comerica commenced at the end of 1994 and culminated in the
execution of the May Agreement on May 2, 1995.
COMERICA REASONS FOR THE MERGER
It is part of Comerica's current business strategy to expand its
activities from Michigan into states such as California where management
believes there are long-term opportunities which will benefit Comerica and its
shareholders. Comerica California Incorporated is Comerica's wholly-owned bank
holding company subsidiary operating in the State of California, which through
its wholly-owned subsidiaries, Comerica Bank-California and University Bank &
Trust Company, focuses on middle market banking, small business banking, private
banking and trust services in the Los Angeles, San Francisco Bay and San Jose
areas. See "THE COMPANIES -- Comerica Incorporated -- General." Comerica
believes that through the Merger Comerica will be able to increase its
penetration of the California commercial and private banking markets in the
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communities served by Metrobank. This transaction is also expected to enhance
the competitiveness of the companies in a deregulated banking environment.
In addition, Comerica believes that in light of the acceleration in the
number and size of combinations currently occurring within the financial and
banking industries and its expectation that the further impetus to consolidation
of banking entities provided by the promulgation of the Interstate Act, it is
desirable for Comerica to expand its financial resources and markets.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF METROBANK AND METROBANK REASONS FOR
THE MERGER
The Metrobank Board has determined that the Merger Agreement is in the
best interests of Metrobank and its shareholders, and unanimously recommends
that the Metrobank Common Shareholders approve the Merger Proposal. In arriving
at its conclusion, the Metrobank Board considered a number of factors. The Board
did not assign any specific or relative weight to the factors considered and
considered among other things, the following:
(i) the fact that the due diligence examination conducted by
representatives of Metrobank indicated that Comerica is strong in
capital, earnings and management, and has good regulatory
relationships, and a compatible operating philosophy with Metrobank;
(ii) the opinion of J.P. Morgan that the Metrobank Conversion
Rate is fair to the shareholders of Metrobank;
(iii) the fact that the Merger will be tax-free for federal
income tax purposes for the shareholders of Metrobank Common Stock
(other than in respect to cash paid in lieu of fractional shares);
(iv) the likelihood that the Merger would result in receipt of
substantially increased dividends to shareholders of Metrobank Common
Stock who keep their shares of Comerica Common Stock after the Merger;
(v) the Board's review with its legal advisors and with
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J.P. Morgan of the provisions of the Merger Agreement; and
(vi) the probable impact of the Merger on employees and customers
of Metrobank.
OPINION OF METROBANK'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated April 28, 1995 (the "Engagement
Letter"), Metrobank retained J.P. Morgan Securities Inc. ("J.P. Morgan"), as
its financial advisor in connection with the Merger. As part of its investment
banking business, J.P. Morgan and its affiliates are continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, investments for passive and control purposes, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements, and valuation for estate, corporate, and other purposes.
The Metrobank Board of Directors selected J.P. Morgan to act as Metrobank's
exclusive financial advisor based on J.P. Morgan's substantial experience in
mergers and acquisitions and in securities valuation generally.
In connection with its services as financial advisor to Metrobank, J.P. Morgan
provided a written Opinion to the Board of Directors of Metrobank that the
Metrobank Conversion Rate was fair from a financial point of view to the
shareholders of Metrobank. The full text of the J.P. Morgan's Opinion (the
"Opinion") dated as of the date of this Proxy Statement/Prospectus, which sets
forth the assumptions made, matters considered and the limits on J.P. Morgan's
review, is attached hereto as Annex D. Holders of shares of Metrobank Common
Stock are urged to and should read such opinion in its entirety.
In connection with its Opinion, J.P. Morgan reviewed, among other things, the
Merger Agreement; the Registration Statement on Form S-4, including this Proxy
Statement/Prospectus relating to the Special Meeting to be held in connection
with the Merger Agreement; Annual Reports to Shareholders and Annual Reports on
Form F-2 of Metrobank for the five years ended December 31, 1994; Annual Reports
to Shareholders and Annual Reports on Form 10-K of Comerica for the five years
ended December 31, 1994; certain interim reports to shareholders and Quarterly
Reports on Form 10-Q of Metrobank and Comerica; certain other communications
from Metrobank to its shareholders; and certain internal financial analyses and
forecasts
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for Metrobank prepared by its management. J.P. Morgan also held discussions with
members of the senior managements of Metrobank [and Comerica] regarding the past
and current business operations, financial condition and future prospects of
their respective companies. In addition, J.P. Morgan has reviewed the reported
price and trading activity for Metrobank Common Stock, compared certain
financial and stock market information with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the banking industry
specifically and in other industries generally and performed such other studies
and analyses as J.P. Morgan considered appropriate.
J.P. Morgan relied, without independent verification, upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its Opinion. In that regard, J.P. Morgan assumed, with the consent
of the Metrobank Board of Directors, that the financial forecasts, including,
without limitation, projections regarding underperforming and nonperforming
assets and net chargeoffs were reasonably prepared on a basis reflecting the
best currently available judgments and estimates of Metrobank and that such
forecasts would be realized in the amounts and at the times contemplated
thereby. J.P. Morgan relied solely on publicly available information for its
analysis of Comerica. J.P. Morgan is not an expert in the evaluation of loan and
lease portfolios for purposes of assessing the adequacy of the allowances for
losses with respect thereto and has assumed, with the consent of the Metrobank
Board of Directors, that such loss allowances for each of Metrobank and Comerica
are in the aggregate adequate to cover all such losses. J.P. Morgan did not
review individual credit files nor did it make an independent evaluation or
appraisal of the assets and liabilities of Metrobank or Comerica or any of their
respective subsidiaries. J.P. Morgan also has assumed that Comerica will receive
all necessary regulatory approvals without undue delay.
SUMMARY OF FINANCIAL ANALYSES
The following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its Opinion to the Metrobank Board of
Directors but does not purport to be a complete description of the analyses
performed by J.P. Morgan.
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Pro forma Merger Analysis. J.P. Morgan analyzed certain pro forma effects for
1995 resulting from the Merger based on (i) financial forecasts for Metrobank
prepared by Metrobank management, (ii) projected earnings for Comerica based on
the median of institutional brokers' estimates ("IBES") and (iii) cost savings
estimated by management of Metrobank to be attainable in the Merger. This
analysis indicated that ...
Selected Transaction Analysis. J.P. Morgan analyzed certain information relating
to 7 bank acquisitions in California announced since January 1, 1992 in which
the aggregate consideration was greater than $50 million (the "California Bank
Acquisitions"), 23 bank acquisitions in the states of Arizona, California,
Colorado, Idaho, Oklahoma and Texas announced since January 1, 1992 in which the
aggregate consideration was greater than $50 million and less than $500 million
(the "Western U.S. Bank Acquisitions") and 8 non-western acquisitions and 4
western acquisitions by Comerica announced since January 1, 1988 (the "Comerica
Acquisitions"), compiled by SNL Securities, L.P. (SNL Securities, L.P. is a
data firm that monitors and publishes a compilation of earnings estimates
produced by selected research analysts). Such analysis indicated that, for the
California Bank Acquisitions, the Western U.S. Bank Acquisitions and the
Comerica Acquisitions, (i) the median values of the consideration paid as a
multiple of tangible book value were ___,___ and ___, respectively, as compared
to a corresponding value for the consideration payable pursuant to the Merger as
a multiple of Metrobank's tangible book value of ___; (ii) the median value of
the adjusted consideration paid as a multiple of adjusted tangible book value
(where both consideration and tangible book value are adjusted to eliminate
excess capital, defined as capital in excess of a 6.00% tangible common equity
to tangible assets) were ___,___ and ___, respectively, as compared to a
corresponding value for the adjusted consideration payable pursuant to the
Merger as a multiple of Metrobank's adjusted tangible book value of ___, and;
(iii) the median value of the consideration paid as a multiple of the acquired
banking organizations' latest twelve months' ("LTM") after-tax earnings were
___,___ and ___, respectively, as compared to the corresponding value for the
consideration paid pursuant to the Merger as a multiple of Metrobank's after-tax
LTM earnings of ___.
Selected Company Analysis. J.P. Morgan reviewed and compared actual and
estimated selected financial, operating and stock market
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information for Metrobank with corresponding information for selected
mid-capitalization banking organizations located in California, including
California Bancshares, Inc., City National Corporation, CVB Financial
Corporation, Imperial Bancorp, Vallicorp Holdings, Silicon Valley Bancshares and
Westamerica Bancorp (collectively, the "Selected Peer Group Banks"), and for
selected large-capitalization organizations headquartered in California,
including BankAmerica Corporation, First Interstate Bancorp and Wells Fargo &
Company (collectively, the "Selected Large Cap Banks"), based on publicly
available information, consensus analysts' estimates for the Selected Peer Group
Banks and the Selected Large Cap banks and financial forecasts for Metrobank
prepared by management. Such analysis indicated, among other things, that for
the Selected Peer Group Banks and the Selected Large Cap Banks, (i) the median
estimated 1995 price-earnings multiples were ___ and ___, respectively, as
compared to a corresponding value of ___ for Metrobank, (ii) the median values
of price as a multiple of tangible book value per share were ___ and ___,
respectively, as compared to a corresponding value of ___ for Metrobank, (iii)
the median ratios of nonperforming assets as a percentage of total loans and
other real estate owned were ___% and ___%, respectively, as compared to ___%
for Metrobank, (iv) the median ratios of loan loss reserves as a percentage of
nonperforming loans were ___% and ___%, respectively, as compared to ___% for
Metrobank, (v) the median after-tax returns on equity were ___% and ___%,
respectively, as compared to ___% for Metrobank, and (vi) the median ratios of
tangible common equity as a percentage of tangible assets were ___% and ___%,
respectively, as compared to ___% for Metrobank.
Discounted Dividend Stream Analysis. Using a discounted dividend stream
analysis, J.P. Morgan estimated the present value of the future streams of after
tax cash flows that Metrobank could produce through earnings and distribute to
shareholders ("dividendable net income"). In this analysis, J.P. Morgan assumed
that Metrobank would perform in accordance with the earnings forecasts provided
to J.P. Morgan by Metrobank management and that Metrobank could pay out up to
100% of its adjusted net income subject to the constraint that Metrobank's
common equity-asset ratio be maintained at a minimum level of __%. J.P. Morgan
estimated the terminal values for the Metrobank Common Stock using 2%, 3% and 4%
perpetual growth rates for 2002 estimated net income. The dividendable net
income streams and terminal values were then discounted to present values
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using different discount rates (ranging from 11% to 13%) chosen to reflect
different assumptions regarding the required rates of return of holders or
prospective buyers of Metrobank Common Stock. This discounted dividend stream
analysis indicated a reference range of values for Metrobank common stock of
between ___ and ___ per share.
Selected Comerica Information Analysis. J.P. Morgan reviewed and analyzed
certain financial and other information for Comerica, including (i) historical
and current loan portfolio by type of loan, (ii) deposit market share by state
in the United States and by county in California, (iii) a comparison of actual
and estimated selected financial, operating and stock market information for
Comerica with corresponding information for selected super-regional banking
organizations, including Banc One Corporation, Boatmen's Bancshares, Inc.,
Corestates Financial Corporation, First Bank System, Inc., First Interstate
Bancorp, Mellon Bank Corporation, NBD Bancorp, Inc., National City Corporation,
Norwest Corporation, PNC Bank Corporation, U.S. Bancorp and Wells Fargo &
Company (collectively, the "Selected Super-Regional Banks"), (iv) the daily
stock price performance of Comerica Common Stock, the Standard & Poor's 500
Stock Index and a composite of the Selected Super-Regional Banks, all indexed
daily from April 15, 1995 to July 10, 1995, weekly from July 8, 1994 to July 10,
1995 and monthly from June 30, 1992 to July 10, 1995, (v) historical trading
prices per share and trading volume of Comerica Common Stock, on a daily basis
from April 10, 1995 through July 10, 1995, on a weekly basis from July 8, 1994
through July 10, 1995 and on a monthly basis from June 30, 1992 to July 10,
1995, and (vi) summaries of selected research reports on, and earnings estimates
for, Comerica.
Other Analyses. J.P Morgan also analyzed available information regarding the
ownership and ownership profiles of shares of Metrobank Common Stock and
Comerica Common Stock, and certain other information and factors it deemed
relevant.
General. The foregoing is a summary of the material financial analyses performed
by J.P. Morgan, but does not purport to be a complete description of the
analyses performed by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analyses or of the summary set
forth above, without considering the analysis as a whole, could
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create an incomplete view of the processes underlying J.P. Morgan's opinion. In
arriving at its fairness determination, J.P. Morgan considered the results of
all such analyses. No Selected Peer Group Bank or Selected Large Cap Bank is
identical to Metrobank and none of the California Bank Acquisitions, Western
U.S. Bank Acquisitions or the Comerica Acquisitions, is identical to the Merger.
Accordingly, J.P. Morgan indicated to the Metrobank Board of Directors that
analyses of the results described above under Selected Transaction Analysis and
Selected Company Analysis are not mathematical, but rather involve complex
considerations and judgments concerning differences in operating and financial
characteristics including, among other things, differences in revenue
composition, asset and liability composition, asset and liability quality, and
earnings performance among Metrobank, Comerica and the selected companies and
transactions reviewed. The analyses were prepared solely for purposes of J.P.
Morgan providing its Opinion to the Metrobank Board of Directors as to the
fairness, from a financial point of view, of the Metrobank Conversion Rate, and
do not purport to be appraisals or necessarily reflect the prices at which
Metrobank or its securities actually may be sold at any time. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses.
Pursuant to the terms of the Engagement Letter, Metrobank has agreed to pay J.P.
Morgan a fee of $250,000. In addition, Metrobank has agreed to reimburse J.P.
Morgan for its reasonable out-of-pocket expenses, including the fees and
disbursements of its counsel, plus any sales, use or similar taxes arising in
connection with its engagement, and to indemnify J.P. Morgan against certain
liabilities relating to or arising out of its engagement, including liabilities
under the federal securities laws.
EFFECTIVE TIME OF MERGER
The Merger will become effective as to Metrobank at the time (the
"Effective Time") when an appropriate certificate of merger and the Subsidiary
Merger Agreement with respect to the Merger are filed with the Secretary of
State of the State of California and declared effective by the California
Superintendent. It is currently anticipated that if the Merger is approved by
Metrobank
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shareholders at the Special Meeting, and all the other conditions to the Merger
are satisfied, the Merger will become effective during the first quarter of
1996.
There can be no assurance, however, that the Effective Time will not be
delayed. In the event the Merger has not become effective by March 10, 1996, the
Board of Directors of Comerica, Metrobank or Holdings, as applicable, may
terminate the Merger Agreement notwithstanding any approvals previously given by
the shareholders of Metrobank. See "THE MERGER AGREEMENT - Termination."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of outstanding shares of Metrobank Common Stock into
shares of Comerica Common Stock will occur automatically at the Effective Time.
Outstanding shares of Metrobank Common Stock will be converted into the right to
receive that number of shares of Comerica Common Stock determined in accordance
with the Merger Agreement. See "Merger Consideration" above.
As soon as is practicable after the Effective Time, Norwest Bank
Minnesota, N.A., or another person chosen by Comerica, in its capacity as
Exchange Agent (the "Exchange Agent"), will send to each Metrobank shareholder a
form of letter of transmittal (which will specify that delivery will be
effected, and risk of loss and title to certificates for shares of Metrobank
Common Stock will pass, only upon proper delivery of such certificates to the
Exchange Agent) and instructions for use in effecting the exchange of the
certificates for shares of Comerica Common Stock and cash in lieu of fractional
shares.
METROBANK SHAREHOLDERS SHOULD NOT FORWARD METROBANK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS. METROBANK
SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED FORMS OF
PROXIES.
Until the certificates representing Metrobank Common Stock are
surrendered for exchange after the consummation of the Merger, holders of such
certificates will not be paid dividends or other distributions that are declared
on Comerica Common Stock, or have the right to vote or exercise rights with
respect to the shares of
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Comerica Common Stock to which they will be entitled. Upon surrender and
exchange of such certificates, any such unpaid dividends or other distributions,
declared or paid from and after the Effective Time, will be paid (without
interest) in accordance with the terms of such Comerica Common Stock.
No transfer taxes will be payable by any shareholder in respect of the
issuance of the new certificates, except that if any new certificate is to be
issued in a name other than that in which the Metrobank certificates surrendered
shall have been registered, it shall be a condition of such issuance that the
holder requesting such issuance shall properly endorse the certificate or
certificates and shall pay to Comerica or the Exchange Agent any transfer taxes
payable on the issuance, or on any prior transfer of such surrendered
certificate, or establish to the satisfaction of Comerica or the Exchange Agent
that such taxes have been paid or are not payable.
Any Comerica Common Stock or cash delivered to the Exchange Agent
(together with any interest or profits earned thereon) and not distributed at
the end of nine months from the Effective Time, will be returned to Comerica, in
which event the persons entitled to payment shall look only to Comerica for
reimbursement. If any holder of Metrobank Common Stock shall be unable to
surrender such holder's certificates for such stock because such certificates
have been lost or destroyed, such holder may deliver in lieu thereof an
affidavit and indemnity bond in form and substance with surety reasonably
satisfactory to the Exchange Agent and Comerica.
After the Effective Time, there will be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Metrobank Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates representing such
shares are presented to the Surviving Corporation, they will be canceled and
exchanged for Comerica Common Stock as provided in the Merger Agreement.
No fractional shares of Comerica Common Stock will be issued to any
Metrobank shareholder upon consummation of the Merger. In lieu of the issuance
of any fractional share of Comerica Common Stock, cash payments will be made to
Metrobank shareholders in respect of any fractional share in an amount equal to
the product
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(rounded to the nearest hundredth) obtained by multiplying (a) $28.45, by (b)
the fraction of the share of Comerica Common Stock to which the Metrobank
shareholder would otherwise be entitled. No such shareholder will be entitled to
dividends or other rights in respect of any such fraction. No interest on the
cash payments to be made in lieu of the issuance of fractional shares will
accrue pending surrender to the Exchange Agent of certificates representing
Metrobank Common Stock.
ACQUISITION PROPOSALS
For the period between the execution of the Merger Agreement and the
Effective Time, except in connection with the issuance of stock pursuant to the
Stock Option Agreement or Metrobank Stock Option Plans or to meet any applicable
requirement of law, regulatory or governmental entity, including any commitments
made by Metrobank in connection with its acquisition of National Bank of Long
Beach ("Regulatory Stock Sales"), Metrobank has agreed not to authorize or
knowingly permit any of its representatives, directly or indirectly, to solicit
or encourage any Acquisition Proposal (as defined below), or participate in any
discussion or negotiations with any person or group of persons other than
Comerica, Holdings or their representatives concerning any Acquisition Proposal.
An "Acquisition Proposal" is defined as any (i) proposal pursuant to
which any person other than Comerica or Holdings would acquire or participate in
a merger or other business combination involving Metrobank; (ii) proposal by
which any person or group other than Comerica or Holdings would acquire the
right to vote 10% or more of the capital stock of Metrobank entitled to vote
thereon for the election of directors; (iii) acquisition of the assets of
Metrobank other than in the ordinary course of business; or (iv) acquisition in
excess of 10% of the outstanding capital stock of Metrobank, other than as
contemplated by the Merger Agreement. However, Metrobank or its Board of
Directors will not be prevented from (A) furnishing non-public information to,
or entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written Acquisition Proposal by such
person or entity or recommending an unsolicited bona fide written Acquisition
Proposal to the shareholders of Metrobank, if and only to the extent that (1)
the Board of Directors of Metrobank believes in good faith (after consultation
with and the concurrence of its financial advisor) that such
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Acquisition Proposal would, if consummated, result in a transaction materially
more favorable to Metrobank's shareholders from a financial point of view than
the transaction contemplated by the Merger Agreement and the Metrobank Board of
Directors determines in good faith after consultation with its outside legal
counsel that such action is necessary for Metrobank to comply with its fiduciary
duties to shareholders under applicable law, and (2) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such person or entity, the Metrobank Board of Directors receives from such
person or entity an executed confidentiality agreement, with terms no more
favorable to such party than those contained in the confidentiality agreement
between Comerica and Metrobank, (B) complying with Rule 14e-2 promulgated under
the Exchange Act of 1934, as amended, with regard to an Acquisition Proposal, or
(C) effecting Regulatory Stock Sales. Metrobank is required to notify Comerica
immediately upon receipt of any such Acquisition Proposal.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of Comerica, Holdings and Metrobank under the Merger
Agreement to consummate the Merger are subject to various conditions, including
but not limited to, obtaining requisite shareholder and regulatory approvals;
the absence of any materially burdensome condition imposed in connection with
obtaining any such regulatory approvals; the absence of any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any governmental entity which makes the Merger
illegal, requires any material divestiture or imposes a materially burdensome
condition; receipt of opinion of legal counsel to Comerica in respect of certain
federal income tax consequences of the Merger (see " THE MERGER - Certain
Federal Income Tax Consequences" below); receipt of legal opinions and approval
of their respective legal counsel of the validity of the transactions
contemplated in the Merger Agreement; approval for listing of the shares of the
Comerica Common Stock to be issued in the Merger on the NYSE; and receipt of
letters from each of Ernst & Young, LLP and Arthur Andersen, LLP dated the
effective date of the Registration Statement to be filed in connection with the
Merger and the Effective Time, in form and substance satisfactory to Comerica,
Holdings and Metrobank and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the
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Registration Statement; and in the event the Closing shall not have occurred
prior to February 1, 1996, Metrobank shall have received a bring down opinion of
J.P.Morgan in form satisfactory to Metrobank's Board of Directors confirming the
fairness of the Metrobank Conversion Rate (see "Opinion of Metrobank's Financial
Advisor").
In addition, the obligations of Comerica and Holdings under the Merger
Agreement to consummate the Merger are subject to certain other conditions,
including, but not limited to, the requirements that Metrobank's reserve for
possible loan losses on the Determination Date shall be at least the greater of
$17,000,000 or 2.1% of the average of Metrobank's total outstanding gross loans
for the month ending on that date (subject to adjustment), and that Metrobank's
Non-Performing Assets (as defined in the Merger Agreement) outstanding on the
last day of the month immediately preceding the Effective Time shall be no more
than $30,000,000; the absence of any materially adverse change to Metrobank or
its subsidiaries; and receipt of shareholder agreements from each Metrobank
director who owns Metrobank Common Stock (which condition has been satisfied).
See "THE MERGER AGREEMENT - Shareholder Agreements."
Further, the obligation of Metrobank under the Merger Agreement to
consummate the Merger is subject to certain conditions, including but not
limited to, the receipt of a written opinion dated the date of this Proxy
Statement/Prospectus of J.P. Morgan concerning the fairness from a financial
point of view of the Metrobank Conversion Rate.
There can be no assurance that the conditions to the Merger will be
satisfied. See "THE MERGER AGREEMENT - Conditions to the Merger."
Under certain circumstances, the Merger Agreement may be terminated by
Comerica, Holdings or Metrobank, as applicable, at any time prior to the
Effective Time, whether before or after approval of the Merger by the
shareholders of Metrobank. See "THE MERGER AGREEMENT - Termination."
REGULATORY APPROVALS REQUIRED
The Merger is subject to prior approval by the Board of
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Governors of the Federal Reserve System (the "Federal Reserve Board") under
Section 3 of the Bank Holding Company Act of 1956, as amended (the "BHCA").
Although it is not a condition of the Merger, Comerica may elect, on or after
consummation of the Merger, to merge the Surviving Corporation with and into
Comerica Bank-California (the "Surviving Corporation Merger"). The Surviving
Corporation Merger (when and if it is initiated) would be subject to prior
approval by the Federal Deposit Insurance Corporation (the "FDIC") under the
Bank Merger Act, as amended (the "BMA"). Application for approval of the Merger
under the BHCA has been filed with the Federal Reserve Board. If the Surviving
Corporation Merger is initiated, an application for its approval will be filed
with the FDIC under the BMA. The BHCA and the BMA prohibit the Federal Reserve
Board and the FDIC from approving the Merger or the Surviving Corporation
Merger, as the case may be, (i) if it would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or (ii) if
its effect in any section of the country may be substantially to lessen
competition or to tend to create a monopoly, or if it would in any other manner
be in restraint of trade, unless the Federal Reserve Board or the FDIC finds
that the anticompetitive effects of the Merger or the Surviving Corporation
Merger, as the case may be, are clearly outweighed in the public interest by the
probable effects of the transaction in meeting the needs and convenience of the
communities to be served. Neither the Merger nor the Surviving Corporation
Merger may ordinarily be consummated until the thirtieth day following the date
of Federal Reserve Board and FDIC approval of each such transaction,
respectively, during which time the United States Department of Justice may
challenge the Merger or the Surviving Corporation Merger, as the case may be, on
antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of the Federal Reserve Board's approval unless a court
specifically orders otherwise. Under legislation enacted in September, 1994, the
post-approval waiting period may be shortened from 30 to 15 days, with the
consent of the Federal Reserve Board, as the case may be, so long as the United
States Department of Justice does not object.
It is possible that the Federal Reserve Board or the United States
Department of Justice may request that Comerica or Metrobank divest certain
operations in order to alleviate what such agency believes would otherwise be an
adverse competitive effect. Neither
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Comerica nor Metrobank can predict whether such divestitures will be required,
or if required, what the aggregate amount of any such divestitures may be, but
each believes that divestitures are unlikely to be required, and if required,
that the aggregate amount of any such divestitures will not be material, on a
pro forma basis, to the business, operations or financial condition of the
combined institution and its subsidiaries, taken as a whole. The application to
the Federal Reserve Board has not proposed any divestiture. Any application to
the FDIC relating to the Surviving Corporation Merger would not propose any
divestiture. If the level of any required divestitures is sufficiently large in
amount so as to render the consummation of the Merger inadvisable in the
reasonable judgment of either the Comerica Board or the Metrobank Board, one of
the conditions to the consummation of the Merger will not be satisfied and
either Comerica or Metrobank may terminate the Merger Agreement. See "THE MERGER
AGREEMENT - Conditions to the Merger" and - "Termination" below.
In addition, each of the BHCA and BMA require that the Federal Reserve
Board and the FDIC take into consideration, among other factors, the financial
and managerial resources and future prospects of the institutions and the
convenience and needs of the communities to be served. Each of the Federal
Reserve Board and the FDIC has the authority to deny an application if it
concludes that the combined organization would have an inadequate capital
position or if the requirements of the Community Reinvestment Act of 1977 are
not satisfied.
While Comerica already conducts operations in California, its banking
operations are principally conducted in Michigan with operations in Ohio,
Illinois, Texas and Florida. Although Section 3(d) of the BHCA generally
restricts interstate bank acquisitions, there is an exception to this
restriction provided the relevant states authorize such acquisitions.
The California Superintendent of Banks (the "California
Superintendent") must also approve the Merger, under provisions of California
law that require such approval in connection with the acquisition of a
California bank or bank holding company by an out-of-state bank holding company.
In order to approve the application, the California Superintendent must find (i)
that there is "substantial reciprocity" between the interstate banking laws of
the States of California and Michigan, meaning that a bank holding
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company whose operations are principally conducted in California could acquire a
Michigan bank or bank holding company on terms and conditions that are
substantially the same as those on which a Michigan banking organization may
acquire a California bank, and (ii) that Comerica's acquisition of Metrobank
will not have an adverse effect on the public convenience or advantage in
California. No assurances can be given that the California Superintendent will
approve the Merger, and the Merger will not be consummated unless such approval
is obtained. An application for this approval under these provisions has been
filed. In addition, the Surviving Corporation Merger would have to be reviewed
by the California Superintendent for approval under the California Banking Law.
The Merger will require the approval of the Commissioner of the
Michigan Financial Institutions Bureau (the "Michigan Commissioner"). Before
this approval may be granted, Comerica must agree to comply with certain
consumer laws applicable to Michigan residents. In addition, the Michigan
Commissioner must assess the composite record of the bank subsidiaries of
Comerica in meeting the credit needs of the communities in the states in which
these bank subsidiaries are located, including low and moderate income
neighborhoods, consistent with the safe and sound operation of these bank
subsidiaries. An application for this approval under these provisions has been
filed.
The Merger and the Surviving Corporation Merger (if and when it is
initiated) will not be consummated unless all of the requisite regulatory
approvals for such transactions are obtained. See "- Conditions to Consummation
of the Merger" above and "THE MERGER AGREEMENT - Amendment and Waiver" and "-
Termination" below.
THERE CAN BE NO ASSURANCE THAT THE REGULATORY AUTHORITIES DESCRIBED
ABOVE WILL APPROVE THE MERGER AND THE SURVIVING CORPORATION MERGER (IF AND WHEN
IT IS INITIATED), AND IF SUCH TRANSACTIONS ARE APPROVED, THERE CAN BE NO
ASSURANCE AS TO THE DATE OF SUCH APPROVALS. THERE CAN ALSO BE NO ASSURANCE THAT
ANY SUCH APPROVALS WILL NOT CONTAIN A MATERIALLY BURDENSOME CONDITION OR
REQUIREMENT WHICH CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS TO
CONSUMMATION OF THE MERGER SET FORTH IN THE MERGER AGREEMENT. THERE CAN LIKEWISE
BE NO ASSURANCE THAT THE DEPARTMENT OF JUSTICE WILL NOT CHALLENGE THE MERGER OR
THE SURVIVING CORPORATION MERGER, OR IF SUCH A CHALLENGE IS MADE, AS TO THE
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RESULT THEREOF.
OPERATIONS PENDING THE MERGER
In the Merger Agreement, Metrobank has agreed to carry on its business,
and to cause its subsidiaries to carry on their businesses in the ordinary
course, in substantially the manner as conducted prior to the execution of the
May Agreement and use commercially reasonable efforts to preserve intact its
business organizations, keep available the services of its officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it, to notify Comerica promptly of any change that
would have a material adverse effect on Metrobank's capital structure, financial
condition, assets, results of operations, business or prospects, and maintain
material permits, insurance and bonding coverage, perform contractual
obligations, observe legal requirements, and file governmental reports and
returns. In addition, Metrobank has agreed to maintain its assets and properties
in good condition and repair, advise Comerica of certain acquisitions of its
common stock, charge-off loans consistent with past practice (which amount shall
equal at least $5,100,000 (gross exclusive of recoveries) for the year ended
December 31, 1995, (subject to certain adjustments), maintain an adequate
allowance for loan losses and furnish certain reports and financial information
and statements to Comerica, maintain reserves for contingent liabilities, and
furnish certain information to Comerica with respect to litigation. Metrobank
also agreed that it will not take certain actions, including, by way of example
and not of limitation, declare or pay dividends other than regular quarterly
cash dividends in an amount not to exceed $.15 per share, issue capital stock
(other than pursuant to Stock Option Plans or the Stock Option Agreement), issue
other securities convertible into capital stock, acquire or dispose of material
assets, incur indebtedness other than in the ordinary course of business, make
credit policies less stringent, make any capital expenditures in excess of
certain amounts, renew or enter into any new employment agreements or terminate
any employment benefit plan or arrangement, except as contemplated by the Merger
Agreement, or take any action that would result in any of its representations
and warranties in the Merger Agreement becoming untrue or in any condition to
the Merger not being satisfied, or amend its Articles of Incorporation or
Bylaws. See "THE MERGER AGREEMENT - Conduct of Business Pending the Merger."
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OPERATIONS AFTER THE MERGER
If the Merger is consummated at the Effective Time, Metrobank will be
the Surviving Corporation with the Articles of Incorporation of Holdings and the
name Metrobank. The separate existence of Holdings will cease. Upon
consummation of the Merger, Comerica expects to transfer the stock of the
Surviving Corporation to Comerica California Incorporated. It is also
anticipated that at or subsequent to consummation of the Merger, the Surviving
Corporation will merge into Comerica Bank-California. At the Effective Time, the
Board of Directors and officers of the Surviving Corporation will be made up of
certain directors of Holdings and Metrobank serving in those capacities at the
Effective Time.
Following the consummation of the Merger, David L. Buell will serve
Metrobank, pursuant to a one year employment agreement, as either chairman of
Metrobank or vice chairman of any successor to Metrobank. See "THE MERGER -
Interests of Certain Persons in the Merger."
Banking policies and procedures of the Surviving Corporation and its
subsidiaries will continue in accordance with the policies of Comerica
Bank-California.
It is part of Comerica's current business strategy to expand its
business activities into states such as California where management believes
there are long-term opportunities which will benefit Comerica and its
shareholders. Comerica has a wholly-owned bank holding company
subsidiary which owns and operates Comerica Bank-California. See "THE COMPANIES
- - Comerica Incorporated - General."
Information about the directors, executive officers and principal
shareholders of Comerica is contained in Comerica's Proxy Statement for its 1995
Annual Meeting of Shareholders, relevant portions of which are incorporated by
reference in this Proxy Statement/Prospectus pursuant to Comerica's Annual
Report on Form 10-K for the year ended December 31, 1994. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE INFORMATION."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the management and Board of Directors of Metrobank
have certain interests in the Merger that are in addition to their general
interests as shareholders of Metrobank. The Metrobank Board of Directors was
aware of these interests and considered them, among other matters, in approving
the Merger Agreement and the transactions contemplated thereby.
David L. Buell has entered into a Non-Competition Agreement with
Metrobank effective on the Closing of the Merger (the "Effective Date") in
accordance with the Merger Agreement pursuant to which, among other things, Mr.
Buell agrees not to solicit, cause or induce any employee of Metrobank to leave
its employ; cause any customer or client of Metrobank to terminate or adversely
change any relationship with Metrobank; cause, induce or encourage any potential
supplier or customer to not enter into any business relationship with Metrobank;
or directly or indirectly, among other things, as an owner, employee or
director, engage in any business relating to a bank or other financial
institution in the counties of Los Angeles and Orange in the State of
California. The Non-Competition Agreement has a term of two years from the
Effective Date. Mr. Buell will receive the sum of $750,000 on the Effective Date
in consideration for entering into the Non-Competition Agreement. Mr. Buell has
also executed an employment agreement with Metrobank that becomes effective upon
the Closing of the Merger requiring Mr. Buell to act as either the chairman of
Metrobank or vice chairman of its successor. The term of such employment
agreement is one year with a compensation package including, among other
things, a base salary, medical coverage and vacation pay.
Certain officers of Metrobank have executed employment agreements
("Employment Agreement" or "Employment Agreements") with Metrobank continuing
their employment with Metrobank as executive officers of Metrobank or its
successor after the consummation of the Merger. Paul B. Alexander, David L.
Buell, Robert P. Bulseco, Scott T. Monson and Paul W. Stroube have each executed
Employment Agreements. All of the Employment Agreements become effective upon
the Closing of the Merger and, except for Mr. Buell's agreement which has a term
of one year, have a term of two years. Each Employment Agreement provides the
officer with a base salary and certain benefits. Messrs. Alexander, Bulseco,
Monson and Stroube receive compensation for covenant not to compete
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provisions in their Employment Agreements. Pursuant to these covenant not to
compete provisions, the officers agree during the longer period of either the
term of the Employment Agreement or one year after the Closing of the Merger not
to solicit, cause or induce any employee of Metrobank to leave its employ; cause
any customer or client of Metrobank to terminate or adversely change any
relationship with Metrobank; cause, induce or encourage any potential supplier
or customer to not enter into any business relationship with Metrobank; or
directly or indirectly, among other things, as an owner, employee or director,
engage in any business relating to a bank or other financial institution in the
county of Los Angeles in the State of California.
Each director-shareholder of Metrobank, including David L. Buell
and Robert P. Bulseco, as well non-directors Paul B. Alexander, David P. Malone
and Paul W. Stroube have entered into a Shareholder Agreement with Comerica, See
"THE MERGER AGREEMENT - Shareholder Agreements" and an Affiliate's Agreement
with Comerica. See "THE MERGER AGREEMENT - Resales by Affiliates."
Metrobank has agreements with each of its directors, under which
Metrobank will indemnify each of such persons, to the maximum amount permitted
by law, for certain liabilities incurred by such persons in their capacities as
directors of Metrobank. Comerica has agreed that all rights of indemnification
under such agreements and Metrobank's Charter and Bylaws shall survive the
Merger and continue in full force and effect, without any amendment thereto, for
a period of six years from the Effective Date.
Under the Merger Agreement, Comerica has agreed to use its commercially
reasonable efforts to cause to be maintained in effect, for a period of six
years after the Effective Time, policies of directors' and officers' liability
insurance (with such coverage, terms and conditions as are no less advantageous
than the insurance presently maintained by Comerica for its officers and
directors) with respect to all matters arising from facts or events which
occurred before the Effective Time for which Metrobank, or its subsidiaries
would have had an obligation to indemnify their directors and officers.
Comerica's obligation to do so, however, is limited to the extent that it need
not pay premiums in excess of 150% of the amount of the 1995 annual premiums
paid by Metrobank for such insurance.
As of June 30, 1995, the directors and executive officers of
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Metrobank beneficially owned 2,859,694 shares of Metrobank Common Stock,
including options exercisable within 60 days, representing approximately
51.54% of Metrobank Common Stock outstanding at that time. See "THE SPECIAL
MEETING - Security Ownership of Certain Beneficial Owners."
STOCK OPTION PLAN
The Metrobank 1988 Stock Option Plan (the "Option Plan") provides for
the granting of both incentive and non-incentive options to eligible employees
and directors of Metrobank and its subsidiaries. Options granted under the
Option Plan generally vest (i.e., become exercisable) one year after grant so
long as the recipient has remained in the employ of Metrobank during such time.
The table below shows, as to the executive officers and directors
named, the aggregate amount of Metrobank Common Stock subject to options
outstanding at June 30, 1995 under the Option Plan. All options under the Option
Plan, whether vested or unvested, will be converted into rights with respect to
Comerica Common Stock and Comerica shall assume each such stock option in
accordance with the Option Plan. See "THE MERGER - Merger Consideration."
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED WEIGHTED
OPTIONS AT JUNE 30, 1995 AVERAGE EXERCISE
NAME EXERCISABLE/UNEXERCISABLE PRICE PER SHARE
---- ------------------------- ----------------
<S> <C> <C> <C>
David L. Buell........................................... 302,500 0 $ 9.61
Paul B. Alexander........................................ 20,900 12,001 10.36
David P. Malone.......................................... 23,375 9,625 10.56
Robert P. Bulseco........................................ 59,675 22,825 9.81
Peter B. Caloyeras....................................... 3,300 0 9.09
Seymour J. Carr, D.M.D................................... 3,300 0 9.09
James W. Hobson.......................................... 3,300 0 9.09
Rudy B. Markmiller....................................... 3,300 0 9.09
Robert L. Mayerker....................................... 3,300 0 9.09
Paul W. Stroube.......................................... 21,312 11,688 10.31
Wallace Wong............................................. 3,300 0 9.09
------- ------ -----
</TABLE>
STOCK BONUS PLAN
The Stock Bonus Plan and Trust, as amended and restated November 22, 1994 (the
"Bonus Plan") is designed as an employee stock ownership plan. Contributions in
Metrobank Common Stock are made to a separate account for each Metrobank
employee based on
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Metrobank performance. A participant is completely vested in his or her account
after completing five years of credited service with Metrobank.
The table below shows, as to the executive officers named, the aggregate amount
of Metrobank Common Stock credited to the individual account of each executive
officer (named in the table) under the Bonus Plan as of December 31, 1994:
Shares Allocated
----------------
David L. Buell 23,088.50
Paul B. Alexander 5,066.15
David P. Malone 3,107.65
Robert P. Bulseco 12,827.92
Paul W. Stroube 5,037.00
CANCELLATION FEE; LIQUIDATED DAMAGES
The Merger Agreement provides that so long as Comerica has not
exercised its stock option pursuant to the Stock Option Agreement (See "THE
STOCK OPTION AGREEMENT"), Metrobank shall be required to pay to Comerica the sum
of $3,000,000 as reasonable and full liquidated damages and reasonable
compensation for losses sustained in the event that (i) Comerica terminates the
Merger Agreement because the Merger Agreement, the Subsidiary Merger Agreement
and the Merger are not ratified by Metrobank's shareholders, (ii) Comerica
terminates the Merger Agreement because the Metrobank Board did not publicly
recommend in this Proxy Statement/Prospectus that Metrobank shareholders adopt
and approve the Merger Agreement or shall withdraw, modify or amend such
recommendation in any respect materially adverse to Comerica or if the board of
directors does not call and hold the Special Meeting, (iii) Comerica terminates
the Merger Agreement because there shall have been a material breach of any of
the representations or warranties set forth in the Merger Agreement on the part
of Metrobank, or (iv) Comerica terminates the Merger Agreement because there is
a default by Metrobank under the Merger Agreement which results in a Material
Adverse Effect on Metrobank and the continuance of such default for a period of
20 Business Days after written notice thereof, which
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default, in the reasonable opinion of Comerica and Holdings cannot be cured
prior to the Closing; and such default shall have been caused in whole or in
material part by any action or inaction within the control of Metrobank, any
Subsidiary of Metrobank or the directors of Metrobank or Metrobank's
Subsidiaries.
An Acquisition Event is defined generally to mean (a) that prior to the
termination of the Merger Agreement, Metrobank has authorized, recommended,
publicly proposed or publicly announced an intention to authorize, recommend or
propose, or entered into an agreement with a person other than Comerica or any
subsidiary of Comerica to effect a merger, consolidation or similar transaction
involving Metrobank or any of its subsidiaries; the disposition of substantially
all of the assets of Metrobank; or the issuance, sale or other disposition of
securities representing 50% voting control of Metrobank other than securities
issued pursuant to the Stock Option Agreement or under existing Stock Option
Plans of Metrobank or other securities to meet any applicable requirement of
law, regulation or Governmental Entity (including commitments made by Metrobank
in connection with its acquisition of National Bank of Long Beach)(such stock
sales are referred to as "Regulatory Stock Sales"); (b) the acquisition of the
beneficial ownership or the right to acquire beneficial ownership by any person
or group of persons other than Comerica, a subsidiary of Comerica or certain
directors of Metrobank who are parties to Director-Shareholder Agreements with
Comerica, (as the term "beneficial ownership" is defined in Rule 13d-3 of the
Securities Exchange Act of 1934) of 25% or more of the then outstanding
Metrobank Common Stock except acquisitions of shares in connection with
Regulatory Stock Sales; or (c) upon the occurrence of certain events specified
in the Merger Agreement within 90 days after termination of the Merger Agreement
by Comerica, where such events were caused in whole or in part by any action or
inaction within the control of Metrobank, any subsidiary of Metrobank or the
directors of Metrobank or Metrobank's subsidiaries.
In the event Comerica has exercised its stock option pursuant to the
Stock Option Agreement, the Merger Agreement has been terminated and an
Acquisition Event has occurred, Metrobank is required to pay to Comerica
$6,000,000 if the consummation of the transaction which is the result of the
Acquisition Event occurs within 270 days of the date of the occurrence of the
subject Acquisition Event.
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In addition, the Merger Agreement provides that in the event of
termination by Metrobank of the Merger Agreement because (a) Holdings or
Comerica has breached any of their representations and warranties set forth in
the Merger Agreement and in the reasonable opinion of Metrobank such breach
cannot be cured prior to Closing and would have a Material Adverse Effect on
Holdings or Comerica, or (b) a default is committed by Comerica or Holdings
under the Merger Agreement and such default continues for a period of 20
business days after written notice of such default, in the reasonable opinion of
Metrobank, cannot be cured prior to the Closing, and in each case such breach or
default was caused in whole or material part by any action or inaction within
the control of Comerica or its Subsidiaries then Comerica shall pay to Metrobank
as reasonable and full liquidated damages and reasonable compensation for the
loss sustained thereby and not as a penalty or forfeiture, the sum of
$3,000,000. See "THE MERGER AGREEMENT - Cancellation Fee; Liquidated Damages."
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a purchase for accounting and
financial reporting purposes. Under this method of accounting, Comerica will
adjust the assets and liabilities of Metrobank to their fair values as of the
Effective Time. The shares of Comerica Common Stock to be issued in the Merger
will be authorized but unissued shares, or shares held as treasury shares.
Subject to the rules of the Commission, Comerica may repurchase shares of
Comerica Common Stock in open market or other transactions to fund the Merger
consideration.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Required Tax Opinion Regarding the Merger. The obligations of Comerica
and Metrobank to effect the Merger are conditioned upon the receipt of an
opinion of legal counsel satisfactory to Comerica subject to assumptions and
exceptions normally included, and in form and substance reasonably satisfactory
to Comerica and Metrobank, dated the Effective Time, to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "IRC"), and that Comerica, Holdings and Metrobank will each be a
party to that reorganization within the meaning of Section 368(b) of the IRC. It
is expected that Miller,
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Canfield, Paddock and Stone, P.L.C., counsel to Comerica, will deliver such an
opinion to Comerica and Metrobank.
Summary of Anticipated Federal Income Tax Consequences. The following
is a summary of the anticipated Federal income tax consequences of the Merger to
Metrobank shareholders. It is not intended as tax advice and is based upon the
parties' understanding of the Federal income tax laws as currently interpreted
and does not address issues of state or local taxation. It does not constitute a
representation by Metrobank, Holdings, Comerica, or their counsel. The following
discussion is included solely for purposes of general information only.
BECAUSE OF THE COMPLEXITIES OF FEDERAL, STATE, AND LOCAL INCOME TAX
LAWS, IT IS RECOMMENDED THAT METROBANK SHAREHOLDERS CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE MERGER.
This summary is limited to those persons who hold shares of Metrobank
Common Stock as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the IRC. (Any reference herein to a
"Section" is a reference to a section of the IRC unless otherwise specified.)
The tax consequences to any particular shareholder of Metrobank Common Stock may
be affected by matters not discussed below. For example, certain taxpayers, such
as life insurance companies, tax-exempt organizations, and foreign taxpayers may
be subject to special rules not addressed herein. In addition, the tax
consequences to Metrobank shareholders who acquired their shares of Metrobank
Common Stock pursuant to the exercise of employee stock options or otherwise as
compensation is not discussed below.
Assuming the Merger satisfies all requirements of Section 368(a), the
Merger will have the Federal income tax consequences described below.
Receipt Solely of Comerica Common Stock in Exchange for Metrobank
Common Stock. A shareholder who receives shares of Comerica Common Stock and no
other consideration in exchange for shares of Metrobank Common Stock in the
Merger will not recognize gain or loss on the exchange. The shareholder's tax
basis in the Comerica Common Stock received will be the same as the
shareholder's tax basis in the shares of Metrobank Common Stock exchanged in
the Merger, and the
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holding period of the Comerica Common Stock received will include the holding
period of the Metrobank Common Stock exchanged.
Receipt of Cash in Lieu of Fractional Shares. Pursuant to the Merger,
Metrobank shareholders will receive cash in lieu of fractional shares of
Comerica Common Stock. Since the payment to a shareholder of cash in lieu of a
fractional Comerica share in this transaction is undertaken solely for the
purpose of saving the expense and inconvenience of issuing and transferring
fractional shares, and is not separately bargained for consideration, these
payments generally will be treated as having been received as distributions in
full payment in exchange for the Comerica Common Stock redeemed as provided in
Section 302(a) and taxed as capital gain or loss.
RESALE OF COMERICA COMMON STOCK; RESTRICTIONS ON TRANSFER
The shares of Comerica Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any shareholder who may be deemed to
be an "affiliate" of Metrobank for purposes of Rule 145 under the Securities
Act. Affiliates may not sell their shares of Comerica Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such shares or in compliance with
Rule 145 or another applicable exemption from the registration requirements of
the Securities Act. Persons who may be deemed to be affiliates of Metrobank
generally include individuals or entities that control, are controlled by or
under common control with Metrobank, and may include certain officers and
directors of Metrobank, as well as principal shareholders of Metrobank.
Metrobank has delivered to Comerica a written agreement from each
person Metrobank believes to be an affiliate of Metrobank intended to ensure
compliance with the Securities Act. See "THE MERGER AGREEMENT -- Affiliates
Agreements".
STOCK EXCHANGE LISTING
The Comerica Common Stock is listed on the NYSE. Comerica has agreed to
apply for NYSE listing of the shares of Comerica Common Stock to be issued in
the Merger. The obligations of the parties to
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the Merger Agreement to consummate the Merger are subject to approval of that
application and the listing by the NYSE of such shares. See "THE MERGER --
Conditions to the Consummation of the Merger" above.
DISSENTER'S RIGHTS
The shareholders of Metrobank may have certain dissenter's rights under
Chapter 13 (Sections 1300-1312) of the California General Corporation Law (the
"CGCL") if said shareholders qualify as holders of "dissenting shares" under the
CGCL. The exercise of dissenter's rights may require Metrobank to purchase for
cash at fair market value from dissenting Metrobank shareholders Metrobank
Common Stock which qualifies as dissenting shares. The fair market value will be
determined as of May 1, 1995, the day before the first announcement of the terms
of the Merger; provided however, that fair market value will not be adjusted for
any appreciation or depreciation in value resulting from the Merger.
"Dissenting Shares" are defined under the CGCL as shares which come
within all of the following descriptions: 1) (A) shares not listed on a national
securities exchange certified by the California Commissioner of Corporations or
not listed on the list of OTC margin stocks issued by the Board of Governors of
the Federal Reserve System immediately prior to a reorganization ("Listed
Securities"), or (B) Listed Securities, if demands for payment are filed with
respect to 5% or more of the outstanding shares of that class of Listed
Securities; 2) shares which were outstanding on the date for determination of
shareholders entitled to vote on the reorganization and were not voted in favor
of the reorganization, or described in subpart (A) of clause 1) above which were
voted against the reorganization; 3) shares which the dissenting shareholder has
demanded that the corporation purchase at fair market value in accordance with
the CGCL; and 4) shares which the dissenting shareholder has submitted for
endorsement in accordance with the CGCL. Under the CGCL, Metrobank shareholders
will waive their shareholder dissenting rights if they do not vote against the
Merger.
Inasmuch as the Metrobank Common Stock is traded on the AMEX, a
national securities exchange certified by the California Commissioner of
Corporations, shares of Metrobank Common Stock will only qualify as Dissenting
Shares if demands for payment are filed
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with respect to 5% or more of the outstanding shares of Metrobank Common Stock.
Subject to this limitation, holders of Metrobank Common Stock desiring to
exercise dissenter's rights must comply with the requirements set forth in items
3 and 4 listed above.
Assuming the Merger Proposal is approved, Metrobank must mail to all of
its shareholders meeting the above requirements notice of such approval of the
Merger within 10 days of the Special Meeting, together with a copy of the
relevant sections of the CGCL, a statement of the price determined by Metrobank
to represent the fair market value of the Dissenting Shares, and a brief
description of the procedure to be followed if a shareholder desires to exercise
dissenter's rights. The statement of price constitutes an offer by Metrobank to
purchase the shares of the dissenting shareholder at such price, unless those
shares lose their status as Dissenting Shares under the CGCL.
Merely voting or delivering a proxy directing a vote against the
approval of the Merger, or failing to deliver a proxy or vote as to approval of
the Merger, does not constitute a demand for purchase. A written demand is
essential. Any shareholder of record who has the right to require Metrobank to
purchase such shareholders' shares of Metrobank Common Stock and has complied
with the requirements set forth in items 3 and 4 listed above, and who desires
that Metrobank purchase such shares of Metrobank Common Stock, shall make
written demand upon Metrobank for the purchase of such shares of Metrobank
Common Stock and payment to the shareholder in cash of their fair market value.
Notice must be received by Metrobank or any transfer agent thereof, not later
than the date of the Special Meeting. The demand must state the number and class
of shares of Metrobank Common Stock held of record by the shareholder which the
shareholder demands that Metrobank purchase and shall contain a statement of
what such shareholder claims to be the fair market value of those shares as of
the day before the announcement of the Merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such price.
A shareholder may not withdraw a demand for payment without the consent of
Metrobank.
Holders of Metrobank Common Stock desiring to exercise dissenter's
rights should send demand for payment to Metrobank in care of Sharon L. Canup,
Corporate Secretary, 10900 Wilshire Boulevard, Los Angeles, California 90024 by
registered or certified
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mail, return receipt requested. The demand should be signed by the shareholder
of record (or his or her duly authorized representative) exactly as his or her
name appears on the certificates evidencing ownership of the shares of Metrobank
Common Stock. A demand for the purchase of shares of Metrobank Common Stock
owned jointly by more than one person should identify and be signed by all such
holders. Any person signing a demand for purchase in any representative capacity
(such as attorney-in-fact, executor, administrator, trustee or guardian) should
indicate his or her title and, if Metrobank so requests, furnish written proof
of his or her capacity and authority to sign the demand.
Within 30 days after the date notice of approval of the Merger is
mailed to its shareholders by Metrobank, any shareholder exercising dissenter's
rights must deliver to Metrobank at its principal office or at the office of any
transfer agent therefor, the share certificates representing the shares of
Metrobank Common Stock the shareholder demands to be purchased, to be stamped or
endorsed with the statement that the shares are Dissenting Shares or to be
exchanged for certificates of appropriate denomination so stamped or endorsed.
Upon subsequent transfer of the Dissenting Shares on the corporate books, the
new certificate, initial transaction statement, and other written statements
issued thereof shall bear a like statement, together with the name of the
original dissenting holder of the shares.
If Metrobank and a dissenting shareholder agree that the shares are
Dissenting Shares and agree upon the price of the shares, the shareholder will
be entitled to that price plus interest at the legal rate on judgments from the
date of the agreement. The agreement fixing the fair market value of any
Dissenting Shares must be filed with the Secretary of Metrobank. Subject to
certain creditors' rights, Metrobank shall make payment at the later of 1)
within 30 days after the agreement is made, or 2) within 30 days after any
statutory or contractual conditions to the Merger are satisfied, subject to
surrender of the share certificates to Metrobank. Cash dividends, if any,
declared and paid by Metrobank on the Dissenting Shares after the date of
shareholder approval of the Merger and prior to payment for the Dissenting
Shares shall be credited against the total amount to be paid by Metrobank.
If Metrobank and a dissenting shareholder disagree that the
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shares are Dissenting Shares and/or disagree on the fair market value of the
shares, the shareholder may file within 6 months after the date on which the
notice of the approval of the Merger by the outstanding shares was mailed to the
shareholder, a complaint in the Superior Court for Los Angeles County requesting
that the court determine whether the shares are Dissenting Shares and/or the
fair market value of the shares. In addition, any other dissenting shareholder
may intervene in any action pending on such a complaint.
If the status of the shares is at issue, the court will determine
first whether the shares are Dissenting Shares. If the court finds that the
shares are Dissenting Shares, the court, or one or more impartial appraisers,
will at that time determine the fair market value of the shares if said amount
also is in issue. If judgement is rendered against Metrobank, Metrobank will
pay the amount equal to the fair market value of each Dissenting Share
multiplied by the number of Dissenting Shares which any dissenting shareholder
is entitled to require Metrobank to purchase, with interest thereon at the
legal rate from the date judgment was entered. Judgement is payable upon the
endorsement and delivery to Metrobank of the certificates of the shares
described in the judgement. Costs of the action will be assessed or apportioned
as the court considers equitable, but, if the appraisal exceeds the price
offered by Metrobank, Metrobank will be assessed all costs (including, in the
discretion of the court, attorneys' fees, fees of expert witnesses and interest
at the legal rate from the date of compliance with Metrobank's obligations
under Chapter 13 of the CGCL if the value for the Dissenting Shares is more
than 125% of the price originally offered by Metrobank).
No shareholder of Metrobank who has a right to demand payment of cash
for the shares of Metrobank Common Stock held by him or her shall have any right
at law or in equity to attack the validity of the Merger or to have the Merger
set aside or rescinded, except in an action to test whether the number or shares
required to authorize or approve the Merger have been legally voted in favor
thereof.
Metrobank Common Stock holders wishing to exercise dissenter's rights
should seek advice from their attorney in conjunction with the exercise of such
rights.
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CERTAIN REGULATORY CONSIDERATIONS
GENERAL
Bank holding companies and banks are extensively regulated under both
federal and state law. To the extent that the following information describes
statutory and regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. A change in
applicable law or regulation may have a material effect on the business of
Comerica.
As a bank holding company, Comerica is subject to regulation under the
BHCA and its examination and reporting requirements. Under the BHCA, bank
holding companies may not (subject to certain limited exceptions) directly or
indirectly acquire the ownership or control of more than 5% of any class of
voting shares or substantially all of the assets of any company, including a
bank, without the prior written approval of the Federal Reserve Board. In
addition, bank holding companies are generally prohibited under the BHCA from
engaging in nonbanking activities, subject to certain exceptions.
The BHCA prohibits the Federal Reserve Board from approving the
acquisition by a bank holding company of more than 5% of any class of the voting
shares of, or substantially all the assets of, any bank (or its holding company)
located outside of the state in which the operations of such acquiring bank
holding company's banking subsidiaries are principally conducted on the date
such company became a bank holding company unless such acquisition is
specifically authorized by the laws of the state in which the bank to be
acquired is located. Most states, including Michigan and California, have
adopted legislation that permits out-of-state bank holding companies throughout
the United States to acquire local banks and bank holding companies. Most states
that have enacted such nationwide interstate banking laws, including Michigan
and California, have a reciprocity requirement. In approving Comerica's
acquisition of the predecessors to Comerica Bank -- California, both the Federal
Reserve Board and the California Superintendent determined that the "substantial
reciprocity" requirement of California law was met in connection with such an
interstate acquisition.
INTERSTATE BANKING AND BRANCHING
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On September 29, 1994, the Riegle/Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") was signed into law. This
Interstate Act effectively permits nationwide banking. The Interstate Act
provides that one year after enactment, adequately capitalized and adequately
managed bank holding companies may acquire banks in any state, even in those
jurisdictions that currently bar acquisitions by out-of-state institutions,
subject to deposit concentration limits. The deposit concentration limits
provide that regulatory approval by the Federal Reserve Board may not be granted
for a proposed interstate acquisition if after the acquisition, the acquiror on
a consolidated basis would control more than 10% of the total deposits
nationwide or would control more than 30% of deposits in the state where the
acquiring institution is located. The state deposit concentration limit does not
apply to initial acquisitions in a state and in every case, may be waived by the
state regulatory authority. Interstate acquisitions are subject to compliance
with the Community Reinvestment Act ("CRA"). States are permitted to impose age
requirements not to exceed five years on target banks for interstate
acquisitions. States are not allowed to opt-out of interstate banking.
Branching between states may be accomplished either by merging separate
banks located in different states into one legal entity, or by establishing de
novo branches in another state. Consolidation of banks is not permitted until
June 1, 1997 provided that the state has not passed legislation "opting-out" of
interstate branching. If a state opts-out prior to June 1, 1997, then banks
located in that state may not participate in interstate branching. A state may
"opt-in" to interstate branching by bank consolidation or by de novo branching
by passing appropriate legislation earlier than June 1, 1997. Interstate
branching, when accomplished by merging banks located in different states, is
also subject to a 30% statewide deposit concentration limit on a consolidated
basis, and a 10% nationwide deposit concentration limit. The laws of the host
state regarding community reinvestment, fair lending, consumer protection
(including usury limits) and establishment of branches shall apply to the
interstate branches.
De novo branching by an out-of-state bank is not permitted unless
expressly permitted by the host state expressly permits de novo branching by
banks from out-of-state. The establishment of an
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initial de novo branch in a state is subject to the same conditions as apply to
initial acquisition of a bank in the host state other than the deposit
concentration limits.
Effective one year after enactment, the Interstate Act permits bank
subsidiaries of a bank holding company to act as agents for affiliated
depository institutions in receiving deposits, renewing time deposits, closing
loans, servicing loans and receiving payments on loans and other obligations. A
bank acting as agent for an affiliate shall not be considered a branch of the
affiliate. Any agency relationship between affiliates must be on terms that are
consistent with safe and sound banking practices. The authority of an agency
relationship for receiving deposits includes the taking of deposits for an
existing account but is not meant to include the opening or origination of new
deposit accounts. Subject to certain conditions, insured savings associations
which were affiliated with banks as of June 1, 1994, may act as agents for such
banks. An affiliate bank or savings association may not conduct any activity as
an agent which such institution is prohibited from conducting as principal.
If an interstate bank decides to close a branch located in a low- or
moderate-income area, it must comply with additional branch closing notice
requirements. The appropriate regulatory agency is authorized to consult with
community organizations to explore options to maintain banking services in the
affected community where the branch is to be closed.
To ensure that interstate branching does not result in taking deposits
without regard to a community's credit needs, the regulatory agencies are
directed to implement regulations prohibiting interstate branches from being
used as "deposit production offices." The regulations to implement its
provisions are due by June 1, 1997. The regulations must include a provision to
the effect that if loans made by an interstate branch are less than fifty
percent of the average of all depository institutions in the state, then the
regulator must review the loan portfolio of the branch. If the regulator
determines that the branch is not meeting the credit needs of the community, it
has the authority to close the branch and to prohibit the bank from opening new
branches in that state.
When the interstate banking provisions become effective in the
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next few months, Comerica will have enhanced opportunities to acquire banks in
any state subject to approval by the appropriate federal and state regulatory
agencies. When the interstate branching provisions become effective in June
1997, Comerica will have the opportunity to consolidate its affiliate banks to
create one legal entity with branches in more than one state should management
decide to do so, or to establish branches in different states, subject to the
existence of authorizing legislation in the host state and any state opt-out
provisions. The agency authority permitting Comerica affiliate banks to act as
agents for each other in accepting deposits or servicing loans should make it
more convenient for customers of one Comerica bank to transact their banking
business at a Comerica affiliate in another state provided that operating
systems are in place to facilitate these out of state transactions.
PAYMENT OF DIVIDENDS
Comerica is a legal entity separate and distinct from its banking and
other subsidiaries. Most of Comerica's revenues result from dividends paid to it
by its bank subsidiaries. There are statutory and regulatory requirements
applicable to the payment of dividends by subsidiary banks to Comerica as well
as by Comerica to its shareholders.
Federal law requires each state bank subsidiary that is a member of the
Federal Reserve System and each national banking association to obtain the
prior approval of the Federal Reserve Board or the Comptroller of the Currency
(the "Comptroller"), as the case may be, for the declaration and payment of
dividends if the total of all dividends declared by the board of directors of
such bank in any year will exceed the total of (i) such bank's net profits (as
defined and interpreted by regulation) for that year plus (ii) the retained net
profits (as defined and interpreted by regulation) for the preceding two years,
less any required transfers to surplus. In addition, these banks may only pay
dividends to the extent that retained net profits (including the portion
transferred to surplus) exceed bad debts (as defined by regulation).
Under the foregoing dividend restrictions, in 1995 Comerica's
subsidiary banks, without obtaining governmental approvals, can declare
aggregate dividends of approximately $153 million from
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retained net profits of the preceding two years, plus an amount approximately
equal to the net profits (as measured under current regulations), if any, earned
for the period from January 1, 1995 through the date of declaration. During
1994, Comerica's subsidiary banks paid $293 million in dividends.
The banking authorities in the states where Comerica owns
state-chartered banks also regulate the payment of dividends by banks organized
in such states. Generally, (i) California state banks such as Comerica
Bank-California may not declare or pay a dividend, without the prior written
approval of the California Superintendent, if the total of all dividends
declared by such bank in any calendar year would exceed the total of its net
profits, as defined, for that year combined with its retained net profits, as
defined, for the preceding two years, (ii) Michigan state banks such as Comerica
Bank may not pay a dividend if the amount of such dividend would exceed net
profits then on hand or surplus remaining after payment thereof would be less
than 20 percent of the bank's capital, and (iii) payment of dividends by Texas
state banks such as Comerica Bank-Texas is restricted by minimum capital
requirements. Generally, an Illinois state chartered bank, such as Comerica
Bank-Illinois, may pay dividends only out of net profits. If an Illinois bank's
surplus does not equal its capital, it may declare a dividend only after at
least one-tenth of its net profits since the declaration of the last dividend
has been added to its surplus. An Illinois bank may not pay dividends in an
amount greater than net profits then on hand, less deductions for losses and bad
debts, as defined by statute.
The payment of dividends by Comerica and its bank subsidiaries is also
affected by various regulatory requirements and policies, such as the
requirement to maintain capital at or above regulatory guidelines. In addition,
if, in the opinion of the applicable regulatory authority, a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve Board
and the Comptroller have each indicated that the payment of dividends that
deplete a bank's capital base to an inadequate level would be an unsafe and
unsound banking practice. The Federal Reserve Board, the Comptroller and the
FDIC have issued policy statements which provide that bank holding companies and
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insured banks should generally only pay dividends out of current operating
earnings.
CERTAIN TRANSACTIONS BY COMERICA WITH ITS AFFILIATES
There are also various legal restrictions on the extent to which
Comerica and most of its nondepository subsidiaries can borrow or otherwise
obtain credit from, or engage in certain other transactions with, their
depository institution affiliates. The "covered transactions" that an insured
depository institution and its subsidiaries are permitted to engage in with
their nondepository affiliates are limited to the following amounts: (i) in the
case of any one such affiliate, the aggregate amount of covered transactions of
the insured depository institution and its subsidiaries cannot exceed 10% of the
capital stock and the surplus of the insured depository institution; and (ii) in
the case of all affiliates, the aggregate amount of covered transactions of the
insured depository institution and its subsidiaries cannot exceed 20% of the
capital stock and surplus of the insured depository institution. In addition,
extensions of credit that constitute covered transactions must be collateralized
in prescribed amounts.
"Covered transactions" are defined by statute to include a loan or
extension of credit to the affiliate, a purchase of securities issued by an
affiliate, a purchase of assets from the affiliate (unless otherwise exempted by
the Federal Reserve Board), the acceptance of securities issued by the affiliate
as collateral for a loan and the issuance of a guarantee, acceptance, or letter
of credit for the benefit of an affiliate. Further, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.
CAPITAL
The Federal Reserve Board has adopted risk based capital guidelines for
bank holding companies. The minimum guideline for the ratio of total capital
("Total Capital") to risk weighted assets (including certain off-balance-sheet
activities, such as standby letters of credit) is 8%. At least half of the Total
Capital is to be composed of common shareholders' equity, minority interests in
the equity accounts of consolidated subsidiaries and a limited amount of
perpetual preferred stock, less disallowed
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intangibles including goodwill ("Tier 1 Capital"). The remainder may consist of
subordinated debt, other preferred stock and a limited amount of loan loss
reserves ("Tier 2 Capital").
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum Tier 1 Capital leverage ratio (Tier 1 Capital to total assets, less
goodwill) of 3% for bank holding companies that meet certain specified criteria,
including having the highest regulatory rating. All other bank holding companies
will generally be required to maintain a minimum Tier 1 Capital leverage ratio
of 3% plus an additional cushion of 100 to 200 basis points. The Federal Reserve
Board has not advised Comerica of any specific minimum Tier 1 Capital leverage
ratio applicable to it. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels
without significant reliance on intangible assets (e.g., goodwill, core deposit
intangibles and purchased mortgage servicing rights). Furthermore, the
guidelines indicate that the Federal Reserve Board will continue to consider a
"tangible Tier 1 Capital leverage ratio" (deducting all intangibles) in
evaluating proposals for expansion or new activities. As of June 30, 1995 , the
"tangible Tier 1 Capital leverage ratios" of Comerica and Metrobank individually
and pro forma (giving effect to the Merger) for Comerica and Metrobank combined
were 6.48%, 6.11% and 6.74%, respectively.
The following tables set forth the Tier 1 capital to risk-weighted
assets ratios, the total capital to risk-weighted assets ratios and the Tier 1
leverage ratios for Comerica and Metrobank individually and on a pro forma
combined basis as of certain dates and periods. Such pro forma combined data is
derived from the financial information of Comerica and Metrobank at June 30,
1995 and for each of the years presented below and gives effect to the Merger,
the issuance of shares to holders of Metrobank Common Stock as consideration for
the Merger, and adjustment to fair value of the assets and liabilities of
Metrobank as of the Effective Time.
TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS RATIO
(IN EACH CASE CALCULATED PURSUANT TO THE
RISK-BASED CAPITAL GUIDELINES)
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<TABLE>
<CAPTION>
PRO FORMA
AS OF: COMERICA METROBANK COMBINED
- ------ -------- --------- --------
<S> <C> <C> <C>
June 30, 1995 ........................................................... 7.61% 8.13% 7.92%
December 31, 1994........................................................ 8.13 10.11 --
December 31, 1993........................................................ 8.21 10.00 --
December 31, 1992........................................................ 8.83 9.80 --
</TABLE>
TOTAL CAPITAL TO RISK-WEIGHTED ASSETS RATIO
(IN EACH CASE CALCULATED PURSUANT TO THE
FINAL RISK-BASED CAPITAL GUIDELINES)
<TABLE>
<CAPTION>
PRO FORMA
AS OF: COMERICA METROBANK COMBINED
- ------ -------- --------- --------
<S> <C> <C> <C>
June 30, 1995 ........................................................... 10.85% 9.39% 11.13%
December 31, 1994........................................................ 11.68 11.37 --
December 31, 1993........................................................ 11.58 11.20 --
December 31, 1992........................................................ 11.82 11.00 --
</TABLE>
TIER 1 LEVERAGE RATIO
<TABLE>
<CAPTION>
PRO FORMA
AS OF: COMERICA METROBANK COMBINED
- ------ -------- --------- --------
<S> <C> <C> <C>
June 30, 1995 ........................................................... 6.59% 6.11% 6.85%
December 31, 1994........................................................ 6.93 7.24 --
December 31, 1993........................................................ 7.04 6.90 --
December 31, 1992........................................................ 7.52 N/A --
</TABLE>
Each of Comerica's banks is subject to similar capital requirements
adopted by the Federal Reserve Board, the Comptroller or the FDIC. At June 30,
1995, each of Comerica's subsidiary banks had a Tier 1 Capital ratio and a Total
Capital ratio (computed under the 1993 guidelines) in excess of the fully phased
in requirements and a Tier 1 Capital leverage ratio in excess of 6.00%. At June
30, 1995, Comerica Bank's Tier 1 Capital ratio and Total Capital ratio (computed
under the 1993 guidelines) was in excess of the fully phased in requirements and
its Tier 1 Capital leverage ratio was 6.15%. No regulatory agency has advised
any of Comerica's subsidiary banks of any specific applicable minimum Tier 1
Capital leverage ratio.
Failure to meet capital guidelines could subject an insured bank to a
variety of enforcement remedies, including the termination of deposit insurance
by the FDIC and a prohibition on the taking of brokered deposits. See "FDICIA"
below.
It is possible that bank regulators will raise capital requirements
applicable to banking organizations beyond their
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current levels. However, the management of Comerica is unable to predict whether
and when higher capital requirements might be imposed and, if they are imposed,
at what levels and on what schedule.
COMERICA'S SUPPORT OF SUBSIDIARY BANKS
Under a Federal Reserve Board policy, Comerica is expected to act as a
source of financial strength to each of its subsidiary banks and, if necessary,
to commit resources to support each of such subsidiaries. This support may be
required at times when, absent such Federal Reserve Board policy, Comerica would
not otherwise be required to provide it.
Under the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ("FIRREA"), a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989 in connection with (i) the default of a commonly
controlled FDIC-insured depository institution, or (ii) any assistance provided
by the FDIC to any commonly controlled FDIC-insured depository institution "in
danger of default." "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur in
the absence of regulatory assistance.
Under Michigan law, if the capital of a Michigan state chartered bank
is impaired by losses or otherwise, the Michigan Financial Institutions Bureau
is authorized to require payment of the deficiency by assessment upon the bank's
shareholders, pro rata, and to the extent necessary, if any such assessment is
not paid by any shareholder after three months' notice, to cause the sale of the
stock of such shareholder to make good the deficiency.
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the Comptroller is authorized to require
payment of the deficiency by assessment upon the bank's shareholders, pro rata,
and to the extent necessary, if any such assessment is not paid by any
shareholder after three months' notice, to sell the stock of such shareholder to
make good the deficiency.
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Any capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and is entitled to a priority of payment. This
priority would apparently apply to guarantees of capital plans under the Federal
Deposit Insurance Corporation Improvement Act of 1991 (discussed below)
("FDICIA").
FDIC INSURANCE ASSESSMENTS
Comerica's subsidiary banks are subject to FDIC deposit insurance
assessments. On January 1, 1994, a permanent risk-based deposit premium
assessment system became effective under which each depository institution is
placed in one of nine assessment categories based on certain capital and
supervisory measures. The assessment rates under the system range from 0.23
percent to 0.31 percent of domestic deposits depending upon the assessment
category into which the insured institution is placed. All of Comerica's
subsidiary banks' capital levels and supervisory standings qualify them for
favorable deposit insurance assessment costs. In February, 1995, the FDIC
proposed a significant decrease in the assessment rate to be effective in late
1995. This proposal is still under discussion and it is uncertain as to whether
it will take effect or not. At this time, management expects deposit insurance
assessments to decrease but is unable to determine when or to what extent they
will be reduced. A significant increase in the assessment rate or a special
additional assessment could have an adverse impact on Comerica's results of
operations.
FDICIA
In December 1991 FDICIA was enacted. This legislation substantially
revises the bank regulatory and funding provisions of the Federal Deposit
Insurance Act and makes revisions to several other federal banking statutes.
Among other things, FDICIA requires the federal banking agencies to
take "prompt corrective action" in respect of depository institutions that do
not meet minimum capital requirements. FDICIA establishes five capital tiers:
"well
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capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." A depository institution's
capital tier depends upon where its capital levels are in relation to various
relevant capital measures, which includes a risk-based capital measure and a
leverage ratio capital measure, and certain other factors.
A depository institution is well capitalized if it significantly
exceeds the minimum level required by regulation of each relevant capital
measure, adequately capitalized if it meets each such measure, undercapitalized
if it fails to meet any such measure, significantly undercapitalized if it is
significantly below any such measure and critically undercapitalized if it has a
ratio of tangible equity to total assets that is equal to or less than 2
percent. An institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if, among other things,
it receives an unsatisfactory examination rating.
Regulations establishing the specific capital tiers have been adopted.
Under these regulations, for an institution to be well capitalized it must have
a total risk-based capital ratio of at least 10 percent, a Tier 1 risk-based
capital ratio of at least 6 percent, and a Tier 1 leverage ratio of at least 5
percent, and not be subject to any specific capital order or directive. For an
institution to be adequately capitalized it must have a total risk-based capital
ratio of at least 8 percent, a Tier 1 risk-based capital ratio of at least 4
percent, and a leverage ratio of at least 4 percent (and in some cases 3
percent). Under these new regulations, the banking subsidiaries of Comerica
would be considered to be well capitalized as of September 30, 1994.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth
limitations and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's
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parent holding company must guarantee that the institution will comply with such
capital restoration plan. The aggregate liability of the parent holding company
is limited to the lesser of (i) an amount equal to 5 percent of the depository
institution's total assets at the time it became undercapitalized, and (ii) the
amount that is necessary (or would have been necessary) to bring the institution
into compliance with all capital standards applicable with respect to such
institution as of the time it fails to comply with the plan. If a depository
institution fails to submit an acceptable plan, it is treated as if it were
significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
the total assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
Under FDICIA, the FDIC is permitted to provide financial assistance to
an insured bank before appointment of a conservator or receiver only if (i) such
assistance would be the least costly method of meeting the FDIC's insurance
obligations, (ii) grounds for appointment of a conservator or a receiver exist
or are likely to exist, (iii) it is unlikely that the bank can meet all capital
standards without assistance, and (iv) the bank's management has been competent,
has complied with applicable laws, regulations, rules and supervisory directives
and has not engaged in any insider dealing, speculative practice or other
abusive activity.
FDICIA directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares and other standards as they deem appropriate. Such
standards were issued in July, 1995 in guideline form. Management does not
expect these standards to have a significant impact Comerica's operations.
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FDICIA also contains a variety of other provisions that may affect the
operations of depository institutions including new reporting requirements,
regulatory standards for real estate lending, "truth in savings" provisions, the
requirement that a depository institution give 90 days' prior notice to
customers and regulatory authorities before closing any branch and a prohibition
on the acceptance or renewal of brokered deposits by depository institutions
that are not well capitalized or are adequately capitalized and have not
received a waiver from the FDIC. Under regulations relating to the brokered
deposit prohibition, Comerica Bank is well capitalized and may accept brokered
deposits without restriction.
IMPLICATIONS OF BEING A SAVINGS AND LOAN HOLDING COMPANY
As a result of Comerica's control of all of the capital stock of
Comerica Bank & Trust, F.S.B. ("Comerica FSB"), Comerica FSB is a savings and
loan holding company under Section 10 of the Home Owners' Loan Act, as amended
("HOLA"). Comerica FSB is registered with the Office of Thrift Supervision (the
"OTS") and is subject to OTS regulations, supervision and reporting
requirements.
With certain exceptions, a savings and loan holding company must obtain
the prior written approval of the OTS before acquiring control of an insured
savings association or savings and loan holding company through the acquisition
of stock or through a merger or some other business combination. HOLA prohibits
the OTS from approving an acquisition by a savings and loan holding company
which would result in the holding company controlling savings associations in
more than one state unless (i) the holding company is authorized to do so by the
FDIC as an emergency acquisition, (ii) the holding company controls a savings
association which operated an office in the additional state or states on March
5, 1987, or (iii) the statutes of the state in which the savings association to
be acquired is located specifically permit a savings association chartered by
such state to be acquired by an out-of-state savings association or savings and
loan holding company.
As a subsidiary of a savings and loan holding company, Comerica FSB is
subject to certain restrictions in its dealings with Comerica and with other
companies affiliated with Comerica. In addition, savings association
subsidiaries of savings and loan
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holding companies are required to give the OTS thirty days' prior notice of any
proposed payment of dividends to the savings and loan holding company.
As a federal savings bank, Comerica FSB is subject to the capital
adequacy guidelines of the OTS. In general, a federal savings bank is required
to satisfy three capital requirements: (i) a leverage test under which core
capital must be at least three percent of adjusted total assets, (ii) a tangible
capital test under which tangible capital must be at least 1.5% of adjusted
total assets and (iii) a risk based capital test under which core capital must,
on a fully phased-in basis, be at least 4% of risk adjusted assets and total
capital must, on a fully phased-in basis, be at least 8% of risk adjusted
assets. The OTS has proposed a regulation that would increase the minimum
leverage ratio from 3% to at least 4% to 5% for savings associations not having
the highest supervisory rating. As of June 30, 1995, Comerica FSB had capital
well in excess of the foregoing requirements with a leverage ratio of 7.54%, a
tangible capital ratio of 7.54%, a core risk based capital ratio of 13.10%, and
a total risk based capital ratio of 14.36%.
In general, a savings and loan holding company such as Comerica that
has a federal savings bank subsidiary that fails to meet the "qualified thrift
lender" test is required to become a bank holding company. As Comerica is
already a bank holding company, Comerica FSB's failure to satisfy the "qualified
thrift lender" test would have no material effect on Comerica. In addition, if a
federal savings bank, such as Comerica FSB, does not satisfy the "qualified
thrift lender" test, then such federal savings bank (i) will be limited to
establishing new branches as if it were a national bank located in the same
state, (ii) will be barred from obtaining new Federal Home Loan Bank advances,
(iii) will be prohibited from making any new investment or engaging in any new
activity unless the investment or activity is permitted for a national bank and
(iv) will be subject to the dividend restrictions applicable to national banks.
Moreover, three years after it has failed to qualify as "qualified thrift
lender", a federal savings bank must (i) divest any investments and activities
not permitted for a national bank and (ii) repay any of its outstanding Federal
Home Loan Bank advances "as promptly as can prudently be done" consistent
with its safe and sound operation and must divest any investment and cease
any activity not permitted for
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a national bank. Even if Comerica FSB failed the "qualified thrift lender"
test, Comerica does not believe that it would have a significant effect
on its operations.
To be a "qualified thrift lender" a federal savings bank must maintain
"qualified thrift investments" of at least 65 percent of its "portfolio assets"
as measured on a monthly average basis in 9 out of the last 12 months. The
assets that qualify as "qualified thrift investments" include assets generally
related to the development of domestic residential real property. "Portfolio
assets" are defined as a federal savings bank's total assets, minus (i) goodwill
and other intangible assets, (ii) the value of property used by the savings
association to conduct its business and (iii) subject to a maximum of 20 percent
of total assets, liquid assets required to be maintained under Section 6 of
HOLA.
DESCRIPTION OF COMERICA CAPITAL STOCK
The following description contains a summary of all of the material
features of the capital stock of Comerica but does not purport to be complete
and is subject to and qualified in its entirety by reference to the Comerica
Restated Certificate of Incorporation, including the Certificate of Designation
for the Comerica Series C Preferred Stock (the "Comerica Charter"), all of which
are filed as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus forms a part and are incorporated herein by reference. See
also "COMPARISON OF SHAREHOLDER RIGHTS" below. The following description should
be read carefully by the Metrobank shareholders.
Comerica's total authorized capital stock currently consists of (i)
10,000,000 shares of preferred stock, without par value (the "Comerica Preferred
Stock"), and (ii) 250,000,000 shares of Comerica Common Stock, with a par value
of $5.00 per share.
With respect to the Comerica Preferred Stock, 500,000 shares with no
stated value have been designated as Series C Participating Preferred Stock (the
"Comerica Series C Preferred Stock"). All shares of two former series of
Comerica Preferred Stock, designated Adjustable Rate Cumulative Preferred Stock,
Series A and Series B Preferred Stock, have been redeemed and restored to the
status of authorized but unissued Comerica Preferred Stock. All shares
designated as Comerica Series C Preferred Stock have been reserved
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for issuance in connection with the Comerica Rights. The Comerica Rights are not
currently exercisable and no shares of Comerica Series C Preferred Stock are
outstanding. For a description of the Comerica Rights, see "COMPARISON OF
SHAREHOLDER RIGHTS -- Rights Plans" below.
With respect to the Comerica Common Stock, as of June 30, 1995
121,812,245 shares of Comerica Common Stock were issued and outstanding.
COMERICA PREFERRED STOCK
General. The Comerica Preferred Stock may be issued in one or more
series at such time or times and for such consideration or considerations as
Comerica's Board may determine. The Comerica Board is expressly authorized at
any time, and from time to time, to provide for the issuance of Comerica
Preferred Stock with such voting powers or without voting powers, and with such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the Comerica Board resolution providing for the issuance
thereof. The Comerica Board is authorized to designate the series and the number
of shares comprising such series, the dividend rate on the shares of such
series, the redemption rights, if any, any purchase, retirement or sinking fund
provisions, any conversion rights and any special voting rights.
Uncommitted authorized but unissued shares of Comerica Preferred Stock
may be issued from time to time to such persons and for such consideration as
the Comerica Board may determine and holders of the then outstanding shares of
Comerica Common Stock or Comerica Preferred Stock may or may not be given the
opportunity to vote thereon, depending upon the nature of any such transactions,
applicable law, the rules and policies of the NYSE and the judgment of the
Comerica Board regarding the submission of such issuance to Comerica's
shareholders. Comerica shareholders have no preemptive rights to subscribe to
newly issued shares.
Moreover, it is possible that shares of Comerica Preferred Stock would
be issued for the purpose of making an acquisition by an unwanted suitor of a
controlling interest in Comerica more difficult, time-consuming or costly or
otherwise to discourage an
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attempt to acquire control of Comerica. Under such circumstances the
availability of authorized and unissued shares of Comerica Common Stock and
Comerica Preferred Stock may make it more difficult for shareholders to obtain a
premium for their shares. Such authorized and unissued shares could be used to
create voting or other impediments or to frustrate a person seeking to obtain
control of Comerica by means of a merger, tender offer, proxy contest or other
means. Such shares could be privately placed with purchasers who might cooperate
with the Comerica Board in opposing such an attempt by a third party to gain
control of Comerica. The issuance of shares of Comerica Preferred Stock could
also be used to dilute ownership of a person or entity seeking to obtain control
of Comerica. Although Comerica does not currently contemplate taking such
action, shares of one or more series of Comerica Preferred Stock could be issued
for the purposes and effects described above and the Comerica Board reserves its
rights (if consistent with its fiduciary responsibilities) to issue such stock
for such purposes.
Shares of Comerica Preferred Stock redeemed or acquired by Comerica may
return to the status of authorized and unissued shares of Comerica Preferred
Stock, without designation as to series, and may be reissued by the Comerica
Board.
Comerica Series C Preferred Stock. The Comerica Series C Preferred
Stock is issuable upon exercise of the Comerica Rights. The Comerica Rights are
not currently exercisable and no shares of Comerica Series C Preferred Stock are
outstanding. For a description of the Comerica Rights, see "COMPARISON OF
SHAREHOLDER RIGHTS -- Rights Plan" below. The Comerica Series C Preferred Stock
carries a quarterly dividend rate equal (rounded to the nearest cent) to the
greater of (a) $10 or (b) a multiple (the "Comerica Multiple") times the
aggregate per share amount of all cash dividends and the Comerica Multiple times
the aggregate per share amount of all non-cash dividends or other distributions
other than a dividend payable in shares of Comerica Common Stock or a
subdivision of the outstanding shares of Comerica Common Stock, declared on the
Comerica Common Stock during the period specified. Dividends on the Comerica
Series C Preferred Stock are cumulative. The Comerica Multiple, which is subject
to adjustment upon the occurrence of stock dividends on, or splits or
combinations of, outstanding Comerica Common Stock is 450. Unless all dividends
on the Comerica Series C Preferred Stock have been paid in full, no
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dividend may be declared or paid on the Comerica Common Stock. If dividends
shall be in arrears in an amount equal to six quarterly dividends, the holders
of the Comerica Series C Preferred Stock shall have the right, voting as a
class, to elect two directors.
Each share of Comerica Series C Preferred Stock is entitled to vote on
all matters submitted to a vote of the shareholders of Comerica, the number of
votes being subject to adjustment under the same circumstances which require an
adjustment of the Comerica Multiple but may not have more than one vote per
share. Except as otherwise required by the Comerica Charter or bylaws, the
holders of shares of Comerica Series C Preferred Stock and the holders of
Comerica Common Stock vote together as one class.
Upon any liquidation, dissolution or winding up of Comerica, each share
of Comerica Series C Preferred Stock is entitled, prior to any payment or
distribution in respect of the Comerica Common Stock, to a liquidation
preference equal to $100 plus any accrued and unpaid dividends. If sufficient
assets of Comerica remain after payment of the liquidation preference in respect
of the Comerica Series C Preferred Stock and certain payments to the holders of
Comerica Common Stock, the Comerica Series C Preferred Stock participates with
the Comerica Common Stock in respect of the remaining assets of Comerica based
on a ratio.
If Comerica enters into any consolidation, merger, combination or other
transaction in which Comerica Common Stock is exchanged for other stock,
securities, cash or other property, then the shares of Comerica Series C
Preferred Stock will at the same time be similarly exchanged in an amount per
share, subject to certain adjustments, equal to the Comerica Multiple times the
aggregate amount of stock, security, cash or other property into which or for
which each share of Comerica Common Stock is changed or exchanged.
COMERICA COMMON STOCK
Subject to the rights of any outstanding shares of Comerica Preferred
Stock, the holders of Comerica Common Stock are entitled to receive such
dividends as may from time to time be declared by the Comerica Board. They are
entitled to one vote per share of Comerica Common Stock on every issue submitted
to them as Comerica shareholders at a meeting of shareholders or otherwise. In
the event of liquidation they are entitled, after payment in full of
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the liquidation preference of any outstanding Comerica Preferred Stock and
subject to the right of the holders of Comerica Series C Preferred Stock to
participate in certain distributions, to share ratably in all assets of Comerica
available for distribution to holders of Comerica Common Stock. Holders of
shares of Comerica Common Stock do not have preemptive or cumulative voting
rights. All shares of Comerica Common Stock now issued and outstanding are fully
paid and nonassessable.
The registrar and transfer agent for the Comerica Common Stock is
Norwest Bank, Minnesota, National Association.
DESCRIPTION OF METROBANK CAPITAL STOCK
Metrobank's total authorized capital stock currently consists of
25,000,000 shares of Common Stock, with no par value (the "Metrobank Common
Stock") and 15,000,000 shares of Preferred Stock, with no par value (the
"Metrobank Preferred Stock").
Holders of Metrobank Common Stock are entitled to one vote per share on
all matters to be voted upon by the shareholders of Metrobank, except that
shareholders have cumulative voting rights with respect to the election of
directors if a candidate's or candidates' name(s) have been properly placed in
nomination prior to the voting and a shareholder present at a meeting to elect
directors has given notice prior to the voting of his or her intention to vote
his or her shares cumulatively. If a shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. The holders
of Metrobank Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Metrobank Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
Metrobank, the holders of Metrobank Common Stock are entitled to share ratably
in all assets remaining after payment of liabilities. The Metrobank Common Stock
has no preemptive, redemption, conversion or other subscription rights. The
outstanding shares of Metrobank Common Stock are fully paid and nonassessable.
As of June 30, 1995, there were 5,475,387 shares of Metrobank Common
Stock outstanding held by 361 holders of record.
There are currently no issued or outstanding shares of Metrobank
Preferred Stock.
The transfer agent and registrar for the Metrobank Common
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Stock is First Interstate Bank of California.
COMPARISON OF SHAREHOLDER RIGHTS
In the event the proposed Merger is consummated, shareholders of
Metrobank whose shares of Metrobank Common Stock, are converted into shares of
Comerica Common Stock will become shareholders of Comerica. Their rights will be
governed by Delaware law and the Comerica Charter and the Comerica Bylaws (the
"Comerica Bylaws").
Certain differences between the rights of holders of Metrobank Common
Stock and the holders of Comerica Common Stock are set forth below. Metrobank is
organized under the laws of California and Comerica is organized under the laws
of Delaware, and there are differences arising from various provisions of the
Comerica Charter, the Comerica Bylaws, the Metrobank Articles of Incorporation
(the "Metrobank Charter"), the Metrobank Bylaws, the "Comerica Rights Agreement"
(See "Rights Plans" below) and state laws. This summary contains a description
of the material differences, but is not meant to be relied upon as an exhaustive
list or detailed description of the provisions discussed and is qualified in its
entirety by reference to the DGCL, California state law, the Comerica Charter,
the Comerica Bylaws, the Metrobank Charter, the Metrobank Bylaws and the
Comerica Rights Agreement.
CLASSIFICATION, REMOVAL AND NOMINATION OF BOARD OF DIRECTORS
The Comerica Charter provides for classification of the Comerica Board
into three classes of directors with each class as nearly equal in number as
possible and elected for a three-year term, and with only one class standing for
election each year. The total number of directors and the number of directors
constituting each class may be fixed or changed from time to time by the
Comerica Board without shareholder approval. The Comerica Board currently
consists of 14 members. The affirmative vote of the holders of at least 75% of
Comerica's then outstanding voting stock is required to amend, change, or repeal
this provision unless such amendment, change, or repeal is approved by
three-fourths of the Comerica Board, in which case such amendment, change, or
repeal will only require the affirmative vote of a majority of shares entitled
to vote thereon. The Comerica Charter contains no provisions concerning the
removal of directors. Under the DGCL, then, Comerica shareholders may remove a
Comerica director only for
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cause.
Nominations of candidates for election as directors of Comerica at any
election meeting may be made by the Board of Directors. A shareholder may
nominate directors provided such shareholder gives timely and proper notice to
the Secretary of Comerica, as outlined below, and such shareholder is a
shareholder of record on the date of the giving of the notice and on the record
date for the determination of shareholders entitled to vote at such meeting.
To be timely, notice must be delivered to or mailed and received at the
principal executive offices of Comerica (a) in the case of an annual meeting of
shareholders, not less than sixty (60) days nor more than ninety (90) days
prior to the anniversary date of the immediately preceding annual meeting of
shareholders; provided, however, that in the event that the annual meeting of
shareholders is called for a date that is not within thirty (30) days before or
after such anniversary date, notice by the shareholder in order to be timely
must be so received not later than the close of business on the tenth (10th)
day following the day on which notice of the date of the annual meeting of
shareholders was mailed or public disclosure of the date of the annual meeting
was made, whichever first occurs; and (b) in the case of a special meeting of
shareholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the special meeting of shareholders was mailed or public disclosure
of the date of the special meeting of shareholders was made, whichever first
occurs.
To be in proper written form, a shareholder's notice to the Secretary of
Comerica must set forth:
(a) as to each person whom the shareholder proposes to nominate
for election as a direcctor: (i) the name, age, business address and residence
address of the person; (ii) the principal occupation or employment of the
person; (iii) the class or series and number of shares of capital stock of the
Comerica which are owned beneficially or of record by the person as of the
record date for the meeting (if such date shall then have been made publicly
available and shall have occurred) and as of the date of such notice; and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
section 14 of the Exchange Act, and the rules and regulations promulgated
thereunder; and
(b) as to the shareholder giving the notice: (i) the name and
record address of such shareholder; (ii) the class or series and number of
shares of capital stock of the Comerica which are owned beneficially or of
record by such shareholder as of the record date for the meeting (if such date
shall then have been made publicly available and shall have occurred) and as of
the date of such notice; (iii) a description of all arrangements or
understandings between such shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nominations are
to be made by such shareholder; (iv) a representation that such shareholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice; and (v) any other information relating to such shareholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by the
written consent to such nomination of each person proposed as a nominee and
such person's written consent to serve as a director if elected.
The Metrobank Bylaws provide that the Metrobank Board of Directors
shall consist of not less than 7 nor more than 13 directors, until changed by
amendment of the Metrobank Charter or, if not prohibited by the Metrobank
Charter, by an amendment to the Bylaws adopted by the shareholders. The exact
number of directors within the range mentioned above is fixed by a resolution of
the Board of Directors and is currently set at 8.
Board of Director nominations may be made by the Board of Directors or
by any shareholder of any outstanding class of capital stock of the corporation
entitled to vote for the election of directors. Notice of intention to make any
nominations, other than by the Board of Directors, shall be made in writing and
shall be received by the President of Metrobank no more than 60 days prior to
any meeting of shareholders called for the election of directors, and no more
than 10 days after the date the notice of such meeting is sent to shareholders
in accordance with the bylaws. However, if only 10 days' notice of the meeting
is given to shareholders, such notice of intention to nominate shall be received
by the President of Metrobank not later than the time fixed in the notice of the
meeting for the opening of the meeting. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the number of shares of voting stock of Metrobank owned by
each proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of voting stock of Metrobank owned by
the notifying
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shareholder. Nominations not made in accordance herewith may be disregarded by
the chairman of the meeting, and the inspectors of election shall disregard all
votes cast for such nominee.
SPECIAL MEETINGS OF SHAREHOLDERS
The Comerica Bylaws provide that a special meeting of shareholders may
be called only by (i) the Chairman of the Board of Comerica or, during such
Chairman's absence or disability, by the President of Comerica, or (ii) by the
President or Secretary of Comerica at the request in writing of a majority of
the Comerica Board, or at the request in writing by shareholders owning at least
75% of the then outstanding Comerica voting stock entitled to vote at the
meeting. Pursuant to the Comerica Charter, any amendment, alteration, change,
addition to, or repeal of this Comerica Bylaw provision proposed by a Comerica
shareholder requires the affirmative vote of the holders of at least 75% of
Comerica's then outstanding voting stock, and the same super majority
shareholder vote is required to amend, change, or repeal this Comerica Charter
provision, except under the circumstances described above under
"Classification, Removal, and Nomination of Board of Directors."
The Metrobank Bylaws provide that special meetings of shareholders may
be called at any time by the Board of Directors, the Chairman of the Board or
the President or by the shareholders entitled to cast not less than 10% of the
votes at the meeting.
LIMITATION OF LIABILITY OF DIRECTORS
The DGCL permits, and the Comerica Charter provides, that a director
shall not be personally liable to Comerica or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability (a) for
any breach of the director's duty of loyalty to the corporation or its
shareholders, (b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (c) for the approval of an
illegal dividend, asset distribution, stock purchase, or certain other illegal
actions, or (d) for any transaction for which the director derived an improper
personal benefit.
The Metrobank Charter provides that, the liability of directors of
Metrobank for monetary damages shall be eliminated to
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the fullest extent permitted under California law.
ACTION BY WRITTEN CONSENT
The Comerica Charter permits shareholder action by written consent only
if such consent is taken by not less than 75% of the outstanding voting stock of
Comerica. The affirmative vote of the holders of at least 75% of Comerica's then
outstanding voting stock is required to amend, change, or repeal this Comerica
Charter provision.
The Metrobank Bylaws permit shareholder action by written consent only
if the consent is signed by the holders of outstanding shares having not less
than the minimum number of votes necessary to authorize such action at a meeting
at which all shares entitled to vote were present, except that unanimous written
consent is required for election of directors, other than elections to fill a
vacancy.
CERTAIN BUSINESS COMBINATIONS
Section 203 of the DGCL. Delaware has enacted a business combination
statute (Section 203 of the DGCL) pursuant to which a corporation having a class
of voting stock listed on a national securities exchange or authorized for
quotation on a national inter-dealer quotation system or held of record by more
than 2,000 shareholders, and whose charter or bylaws do not provide that the
corporation shall not be governed by the statute shall not engage in any
business combination (defined as any merger or consolidation of the corporation
or its subsidiary) with any interested shareholder (defined generally as any
person owning or recently owning 15% or more of the outstanding voting stock of
the corporation) for a period of 3 years following the date that such
shareholder became an interested shareholder, unless (a) prior to such date the
board of directors of the corporation approved either the business combination
or the transaction which resulted in the shareholder becoming an interested
shareholder, or (b) the interested shareholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned (i) by persons who are directors and also officers and (ii)
employee stock plans in which employee participants do not have the right to
determine confidentially
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whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (c) on or subsequent to such date the business combination is approved
by the board of directors and authorized at an annual or special meeting of
shareholders, and not by written consent, by the affirmative vote of at least 66
and 2/3% of the outstanding voting stock which is not owned by the interested
shareholder.
Comerica Charter Provisions With Respect to Certain Business
Combinations. The Comerica Charter provides that any "Business Combination"
(hereinafter referred to as a "Comerica Business Combination") involving
Comerica and a person who beneficially owns 10% or more of Comerica's capital
stock (a "Comerica Related Person") must be approved by (i) the holders of at
least 75% of the votes entitled to be cast by the holders of Comerica's voting
stock and (ii) a majority of the votes entitled to be cast by the holders of
such voting stock, excluding stock beneficially owned by such Comerica Related
Person (the "Comerica Voting Requirement"). The Comerica Voting Requirement does
not apply if the Comerica Business Combination is approved by three-fourths of
the Comerica Continuing Directors (defined generally to include each director
who either was a director immediately prior to the time the Comerica Related
Person in the Comerica Business Combination became such a person or was
designated as a Comerica Continuing Director by a majority of the then Comerica
Continuing Directors prior to initial election as a director), or complies with
certain minimum price and other requirements. As defined in the Comerica
Charter, a Comerica Business Combination includes, among other things, (i) any
merger or consolidation of Comerica with, into, or for the benefit of a Comerica
Related Person; (ii) the sale by Comerica of a Substantial Part (more than 10%
of the fair market value) of its assets to a Comerica Related Person; (iii) the
acquisition by Comerica of a Substantial Part of the assets of a Comerica
Related Person; (iv) the issuance by Comerica of any of its securities to a
Comerica Related Person (other than an issuance which is effected on a pro rata
basis to all Comerica shareholders); or (v) the acquisition by Comerica of any
securities of a Comerica Related Person. This provision of the Comerica Charter
cannot be amended, changed, or repealed except by a vote similar to the Comerica
Voting Requirement unless such amendment, change, or repeal is recommended by
three-fourths of the Comerica Continuing Directors, in which case such
amendment, change, or repeal will require such vote, if any, as otherwise is
required by Delaware law.
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The California Corporations Code does not have a business combination
statute. The Metrobank Charter does not have comparable business combination
provisions.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Comerica Charter provides that any amendment, change, or repeal of
such charter with respect to the provisions relating to (i) size and
classification of the Comerica Board, (ii) certain amendments to the provisions
of the Comerica Bylaws relating to calling special meetings of shareholders and
nominations of director candidates, (iii) Business Combinations, and (iv)
actions of shareholders permitted by written consent must be approved by a vote
of at least 75% of the then outstanding shares of capital stock entitled to
vote (and, with respect to amending provisions relating to Business
Combinations, a majority of the outstanding shares of capital stock entitled to
vote of which a Related Person is not a beneficial owner); provided, however,
that such voting requirements are not required by any proposed amendment,
change, or repeal recommended to shareholders by not less than three-fourths of
the Comerica Board (or, with respect to such proposals relating to Business
Combinations, three-fourths of the Comerica Continuing Directors (as defined
above)).
Pursuant to California law, the Charter of Metrobank may be amended by
the approval of the Metrobank Board of Directors and the affirmative vote or
written consent of a majority of the outstanding shares entitled to vote.
RIGHTS PLANS
Comerica Rights Plan. On January 26, 1988, the Comerica Board declared
a dividend distribution of one right (each, a "Comerica Right") for each
outstanding share of Comerica Common Stock to shareholders of record at the
close of business on February 8, 1988. Each Comerica Right entitles the
registered holder to purchase from Comerica a unit consisting of 1/100th of one
share (a "Unit") of Comerica Series C Preferred Stock at a Purchase Price (the
"Comerica Purchase Price") of $175 in cash per Unit, subject to adjustment. The
number of Comerica Rights per share of Comerica Common Stock is subject to
adjustment in certain events described below. Each share of Comerica Common
Stock currently carries 1/9th
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of one Comerica Right. The Comerica Common Stock to be issued in the Merger
will have attached thereto the associated number of Rights. The description and
terms of the Comerica Rights are set forth in a Rights Agreement (the "Comerica
Rights Agreement"), dated as of January 28, 1988, as amended, between Comerica
and Comerica Bank, as Rights Agent (the "Comerica Rights Agent").
At the present time, the Comerica Rights attach to all Comerica Common
Stock certificates representing outstanding shares, and no separate Comerica
Rights certificates have been distributed. The Comerica Rights will separate
from the Comerica Common Stock and a "Comerica Distribution Date" will occur
upon the earlier of (i) ten days following a public announcement that a person
or group of affiliated or associated persons (a "Comerica Acquiring Person")
has acquired, or obtained the right to acquire, beneficial ownership of 20
percent or more of the outstanding shares of Comerica Common Stock (the
"Comerica Stock Acquisition Date"), or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 25% or more of such outstanding shares of Comerica
Common Stock. Until a Comerica Distribution Date, (i) the Comerica Rights will
be evidenced by the Comerica Common Stock certificates and will be transferred
with and only with such Comerica Common Stock certificates, (ii) new Comerica
Common Stock certificates issued after February 8, 1988 will contain a notation
incorporating the Comerica Rights Agreement by reference, and (iii) the
surrender for transfer of any certificates for Comerica Common Stock
outstanding will also constitute the transfer of the Comerica Rights associated
with the Comerica Common Stock represented by such certificates.
The Comerica Rights are not exercisable until the Comerica Distribution
Date and will expire at the earlier of (i) the close of business on February 8,
1998, and (ii) the date which is 24 months after the first date upon which
Comerica can generally be acquired by bank holding companies, and Comerica is
generally permitted to acquire banks, principally located in at least 15 of the
20 states listed on Exhibit D to the Comerica Rights Agreement, unless earlier
redeemed by Comerica as described below. Pursuant to the Comerica Rights
Agreement, Comerica reserves the right to require prior to the occurrence of a
Comerica Triggering Event (as defined below) that, upon any exercise of
Comerica Rights, a number of Comerica Rights be exercised so that only whole
shares of
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Comerica Series C Preferred Stock will be issued.
As soon as practicable after a Comerica Distribution Date, Comerica
Rights certificates will be mailed to holders of record of the Comerica Common
Stock as of the close of business on the Comerica Distribution Date and,
thereafter, the separate Comerica Rights certificates alone will represent the
Comerica Rights. Except as otherwise determined by the Comerica Board and
except in connection with the shares of Comerica Common Stock issued upon the
exercise of employee stock options or the conversion of convertible securities,
only shares of Comerica Common Stock issued prior to the Comerica Distribution
Date will be issued with Comerica Rights. The number of Comerica Rights per
share of Comerica Common Stock is subject to adjustment upon the occurrence of
stock dividends on, or splits or combinations of, outstanding Comerica Common
Stock. Currently, each share of Comerica Common Stock currently carries 1/9th
of one Comerica Right.
In the event that, at any time following the Comerica Distribution
Date, (i) a person becomes the beneficial owner of more than 25 percent of the
then outstanding shares of Comerica Common Stock except pursuant to an offer
for all outstanding shares of Comerica Common Stock which the independent
directors serving on the Comerica Board determine to be fair to, and otherwise
in the best interests of, Comerica shareholders, or (ii) Comerica is the
Surviving Corporation in a merger with a Comerica Acquiring Person and the
Comerica Common Stock is not changed or exchanged, each holder of a Comerica
Right will thereafter have the right to receive, upon exercise, Comerica Common
Stock (or, in certain circumstances, cash, property, or other securities of
Comerica) having a value equal to two times the exercise price of the Comerica
Right. Notwithstanding the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Comerica Rights that are, or (under
certain circumstances specified in the Comerica Rights Agreement) were,
beneficially owned by any Comerica Acquiring Person will be null and void.
However, Comerica Rights are not exercisable following the occurrence of either
of the events set forth above until such time as the Comerica Rights are no
longer redeemable by Comerica as set forth below.
In the event that, at any time following the Comerica Stock Acquisition
Date, (i) Comerica is acquired in a merger or other business combination
transaction in which Comerica is not the
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Surviving Corporation or Comerica Common Stock is changed or exchanged (other
than a merger which follows an offer described in clause (i) of the preceding
paragraph), or (ii) 50 percent or more of Comerica's assets or earning power is
sold or transferred, each holder of a Comerica Right (except Comerica Rights
which previously have been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Comerica Right. Each of the
events set forth in this paragraph and in the preceding paragraph is referred
to as a "Comerica Triggering Event."
The Comerica Purchase Price payable, and the number of Units of
Comerica Series C Preferred Stock or other securities or property issuable,
upon exercise of the Comerica Rights are subject to adjustment in certain
events.
At any time until ten days following the Comerica Stock Acquisition
Date, Comerica may redeem the Comerica Rights in whole, but not in part, at a
price of $0.05 per Comerica Right, subject to adjustment where appropriate
(payable in cash, stock, or other consideration deemed appropriate by the
Comerica Board). After the redemption period has expired, Comerica's right of
redemption may be reinstated if a Comerica Acquiring Person reduces his or her
beneficial ownership to 10 percent or less of the outstanding shares of
Comerica Common Stock in a transaction or series of transactions not involving
Comerica. Immediately upon the action of the Comerica Board ordering redemption
of the Comerica Rights, the Comerica Rights will terminate and the only right
of the holders of Comerica Rights will be to receive the $0.05 redemption
price.
Until a Comerica Right is exercised, the holder thereof, as such, will
have no rights as a holder of Comerica shares, including, without limitation,
the right to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of
the Comerica Rights, any of the provisions of the Comerica Rights Agreement
(including the provisions relating to the termination of such agreement) may be
amended by the Comerica Board prior to the Comerica Distribution Date. After
the Comerica Distribution Date, the provisions of the Comerica Rights Agreement
may be amended by the Comerica Board in order to cure any
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ambiguity, to make changes which do not adversely affect the interests of
holders of Comerica Rights (excluding the interests of any Comerica Acquiring
Person), or to shorten or lengthen any time period under the Comerica Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Comerica Rights are not
redeemable.
The Comerica Rights have certain anti-takeover effects. The Comerica
Rights will cause substantial dilution to a person or group that attempts to
acquire Comerica on terms not approved by the Comerica Board, unless the offer
is conditional on a substantial number of Comerica Rights being acquired. The
Comerica Rights, however, should not affect any prospective offeror willing to
make an offer at a fair price and otherwise in the best interests of Comerica
and its shareholders as determined by a majority of the independent directors
on the Comerica Board, or willing to negotiate with the Comerica Board. The
Comerica Rights should not interfere with any merger or other business
combination approved by the Comerica Board since the Comerica Board may, at its
option, at any time until ten days following the Comerica Stock Acquisition
Date redeem all but not less than all of the then outstanding Comerica Rights
at the $0.05 redemption price.
The Comerica Rights Agreement is incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" above. The foregoing
description of the Comerica Rights does not purport to be complete and is
qualified in its entirety by reference to the Comerica Rights Agreement, as
amended.
Metrobank does not have a rights plan.
DIVIDENDS
Metrobank is a corporation organized under the laws of the State of
California and Comerica is a corporation organized under the laws of the State
of Delaware. Dividends upon the Metrobank Common Stock and the Comerica Common
Stock may be declared by the Board of Directors of Metrobank and Comerica,
respectively, pursuant to the applicable provisions of California and Delaware
law.
The payment of dividends by Comerica and its bank subsidiaries is
affected by various regulatory requirements and policies. See
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"CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
The payment of dividends by Metrobank is similarly affected by various
regulatory requirements and policies.
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the
Merger Agreement not otherwise described in this Proxy Statement/Prospectus and
is qualified in its entirety by reference to the Merger Agreement which is
attached as Annex A to this Proxy Statement/Prospectus. The Merger Agreement is
incorporated herein by reference. Metrobank shareholders are urged to read the
Merger Agreement carefully.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, each of Metrobank, Comerica and Holdings have
made certain customary representations relating to, among other things, (i)
each of their organization and similar corporate matters; (ii) certain
licenses, permits, and certificates necessary for each to conduct their
respective businesses; (iii) authorization, execution, delivery, performance,
and enforceability of the Merger Agreement and related matters; (iv) documents
filed by each party with any governmental or other regulatory authorities and
the accuracy of information contained therein; (v) the capital structure of
each party; (vi) in the case of Metrobank, the validity, payment, and
nonassessability of the outstanding capital stock of Metrobank; (vii) the
accuracy of information supplied by each party in connection with this Proxy
Statement/Prospectus and the Registration Statement on Form S-4 of which this
Proxy Statement/Prospectus forms a part; (viii) compliance with applicable
laws; (ix) the absence of material pending or threatened litigation except as
disclosed by the parties prior to the date of the Merger Agreement; (x) the
absence of restrictive agreements with banking regulators except as disclosed
by the parties on schedules attached to the Merger Agreement; (xi) in the case
of Metrobank, the existence of insurance policies; (xii) in the case of
Metrobank, good and marketable title to real and personal property; (xiii) in
the case of Metrobank, filing of tax returns and payment of taxes; (xiv) the
performance of all material obligations; (xv) in the case of Metrobank, the
validity of certain loans and investments; (xvi) the effective date of the
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representations; (xvii) the use of brokers and finders; (xviii) in the case of
Metrobank, material contracts; (xix) the absence of any material adverse
changes to the businesses of the parties; (xx) the absence of any undisclosed
liabilities of the parties; (xxi) in the case of Metrobank, retirement and
other employee plans and matters relating to the Employee Retirement Income
Security Act of 1974, as amended; (xxii) in the case of Metrobank, certain
intellectual property rights; (xxiii) in the case of Metrobank, certain
environmental matters; (xxiv) in the case of Metrobank, the absence of any
power of attorney; (xxv) disclosures made in the schedules to the Merger
Agreement; (xxvi) in the case of Metrobank, outstanding stock options; (xxvii)
in the case of Metrobank, subsidiaries; (xxviii) in the case of Metrobank,
interest rate risk management instruments; and (xxix) in the case of Comerica,
the formation of Holdings.
CONDUCT OF BUSINESS PENDING THE MERGER
In the Merger Agreement, Metrobank has agreed to carry on its business
in substantially the manner as conducted prior to the execution of the May
Agreement, and Metrobank has agreed to notify Comerica promptly in writing of
any change that would have a Material Adverse Effect on the capital structure,
financial condition, assets, results of operations, business or prospects of
Metrobank or of any matter which would make the representations and warranties
set forth in the Merger Agreement not true and correct in any material respects
as of the effective date of the Registration Statement and at the Effective
Time. All capitalized terms not defined in this paragraph have the meanings
given to them in the Merger Agreement.
In addition, Metrobank has agreed in the Merger Agreement that it will
(i) use commercially reasonable efforts to satisfy the conditions to the Merger
specified in the Merger Agreement, (ii) keep in full force all material permits
and licenses, (iii) use commercially reasonable efforts to maintain insurance
and bonding coverage in effect as of the date of the May Agreement, (iv)
perform its contractual obligations and not amend, modify, or terminate any
material agreement, understanding, commitment, or offer (each, an
"Understanding") or materially default under any Understanding, (v) observe
legal requirements applicable to its business, (vi) duly and timely file all
reports and returns required with any governmental entity, (vii) maintain
assets and
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properties in good condition and repair, (viii) promptly advise Comerica of the
acquisition by any person or group of ownership or control after the date of
the May Agreement of 5% or more of the outstanding shares of Metrobank Common
Stock, (ix) charge-off loans consistent with past practice (which amount shall
equal at least $5,100,000, (gross of recoveries), for the year ended December
31, 1995, subject to certain conditions), (x) furnish to Comerica copies of
reports and other filings with its Board of Directors and regulatory agencies
and copies of monthly and quarterly financial statements, (xi) maintain
reserves for contingent liabilities in accordance with generally accepted
accounting principles consistent with past practice, (xii) notify Comerica of
the filing of any litigation or governmental or regulatory action or
investigation, (xiii) inform Comerica of the amounts and categories of loans,
leases, and other extensions of credit that have been classified as "Specially
Mentioned," "Renegotiated," "Substandard," "Doubtful," "Loss," or any
comparable classification and furnish Comerica monthly schedules of certain
classified credits, (xiv) furnish Comerica upon request information with
respect to participating loans and leases, loans and leases (including
commitments) to any Metrobank director, officer at or above the vice president
level, or 5% shareholder, and standby letters of credit, (xv) furnish Comerica
copies of loan applications of $500,000 or more which are approved by Metrobank
after the date of the May Agreement and related financial information, and
(xvi) review within three months of the date of the May Agreement all loans in
excess of $25,000 originated by NBLB and advise Comerica of any defect or
environmental condition regarding such loans.
Metrobank has also agreed that it will not, without the written consent
of Comerica, among other things, (i) declare or pay any dividend or make any
other distribution in respect of its capital stock other than regular quarterly
cash dividends in an amount not to exceed $.15 per share, (ii) split, combine
or reclassify any of its capital stock, or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iii) repurchase or otherwise acquire any shares of its
capital stock, other than through customary repossession or to fund the
Metrobank Stock Bonus Plan and Trust, (iv) take any action that would or might
result in any of its representations and warranties contained in the Merger
Agreement being or becoming materially untrue or in any of the conditions
precedent to the Merger not being satisfied, (v) except
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as specifically contemplated by Metrobank Stock Options or the Stock Option
Agreement (See "THE MERGER -- Stock Option Plan") issue, deliver, or sell, or
authorize the issuance, delivery, or sale of any shares of its capital stock or
any class of securities convertible into capital stock, or rights, warrants, or
options including any options under any stock option plans, (vi) amend its
articles of incorporation or bylaws, except as required by law or the Merger
Agreement, (vii) except in connection with Regulatory Stock Sales (See "THE
MERGER -- Acquisition Proposals") authorize or knowingly permit any direct or
indirect solicitation of any Acquisition Proposal, unless such Acquisition
Proposal shall be in writing and shall have been received by the Metrobank
Board without solicitation after the date of the Merger Agreement, (viii) other
than in the ordinary course of business consistent with prior practice,
acquire, or agree to acquire, the assets of any business or person which would
be material to Metrobank, (ix) sell or lease any material assets, except in the
ordinary course of business, consistent with prior practice, (x) incur any
indebtedness for borrowed money or guarantee any such indebtedness other than
in the ordinary course of business consistent with prior practice, (xi) except
in connection with Regulatory Stock Sales, enter into any Understanding, except
relating to deposits incurred, and short-term debt securities issued in the
ordinary course of business and liabilities arising in connection with the
Merger Agreement, loan commitments made or other extensions of credit in the
ordinary course of business, and loan sales made in the ordinary course of
business or any Understanding that has a value of less than $100,000 and a term
of not more than one year, (xii) make, or commit to make, any loan or other
extension of credit to any Metrobank or Subsidiary director, officer or
employee, except in accordance with a practice or policy in effect as of the
date of the Merger Agreement, (xiii) subject to certain exceptions, grant any
general or uniform increase in pay and benefits for employees outside the
ordinary course of business consistent with prior practice, (xiv) sell,
transfer, mortgage, encumber or otherwise dispose of any assets or liabilities,
except in the ordinary course and consistent with prior practice or as required
by an existing contract, (xv) make its credit underwriting policies, standards
or practices relating to the making of loans and other extension of credit,
less stringent than those in effect on March 31, 1995, (xvi) make any capital
expenditures, or commitments with respect thereto, except those in the ordinary
course of business which do not exceed $50,000 individually or $300,000 in the
aggregate,
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(xvii) except as listed on a schedule to the Merger Agreement, renew or extend
any existing employment contract, enter into any new employment contract or
make special or extraordinary payments to any person, without the prior written
consent of Comerica, (xviii) make any material investments, by purchase of
stock or securities or by capital contribution, in any other individual,
corporation, or other entity, except in the ordinary course of business
consistent with prior practice, (xix) except as otherwise required to correct a
prior filing, compromise or settle any assertion or claim of a deficiency in
taxes or file any appeal from an asserted deficiency except in a form
previously approved by Comerica, or make any tax election or change any method
or period of accounting unless required by generally accepted accounting
principles or law, (xx) terminate any employee plan or benefit arrangement,
other than employee plans or benefit arrangements to be terminated in
connection with Metrobank's acquisition of National Bank of Long Beach, (xxi)
change its fiscal year or methods of accounting in effect at March 31, 1995,
except as required by changes in generally accepted accounting principles,
(xxi) take any action which would disqualify the Merger as a tax-free
"reorganization" for tax purposes, and (xxii) take or cause to be taken into
other real estate owned any property without an environmental report thereof
reporting no adverse environmental condition and the written consent of
Comerica and Holdings.
Comerica has agreed to use commercially reasonable efforts to satisfy
the conditions to the Merger specified in the Merger Agreement, refrain from
any action that would or might result in any of its representations and
warranties under the Merger Agreement becoming untrue, except to the extent
such actions are required by any applicable law, regulation, or at the
direction of any regulatory authority, and to refrain from any action that
would disqualify the Merger as a "reorganization" within the meaning of Section
368(a) of the IRC.
CONDITIONS TO THE MERGER
Conditions in favor of Comerica, Holdings, and Metrobank. Each of
Comerica's, Holdings's and Metrobank's obligation to effect the Merger is
subject to the following conditions:
(i) The Merger Agreement, the Subsidiary Merger
Agreement and the Merger shall have been validly ratified and
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confirmed or authorized by the holders of a majority of the outstanding
Metrobank Common Stock entitled to vote;
(ii) all permits, approvals, and consents required to be
obtained, and all waiting periods required to expire, prior to the
consummation of the Merger under applicable federal laws of the United
States or applicable laws of any state having jurisdiction over the
transactions contemplated by the Stock Option Agreement or the Merger
shall have been obtained or expired, as the case may be (all such
permits, approvals, and consents and the lapse of all such waiting
periods being referred to as the "Requisite Regulatory Approvals"),
without the imposition of any condition which is materially burdensome
upon Metrobank, Comerica, Holdings, their respective affiliates, or the
Surviving Corporation;
(iii) no action shall have been taken, nor any statute,
rule, regulation, or order enacted, entered, enforced or deemed
applicable to the Merger, by any governmental entity which: (a) makes
the consummation of the Merger illegal; (b) requires the divestiture by
Comerica of any material subsidiary or of a material portion of the
business of Comerica; or (c) imposes any condition upon Comerica,
Holdings or their subsidiaries (other than general provisions of law
applicable to all banks and bank holding companies) which in the
reasonable judgment of Comerica and Holdings would be materially
burdensome;
(iv) the Registration Statement on Form S-4 of which
this Proxy Statement/Prospectus forms a part shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
shall remain in effect and no legal, administrative, arbitration,
investigatory, or other proceeding by any governmental entity shall
have been instituted and, at what would otherwise have been the
Effective Time, remain pending by or before any governmental entity to
restrain or prohibit the transactions contemplated by the Merger
Agreement;
(v) the shares of Comerica Common Stock deliverable
pursuant to the Merger Agreement shall have been duly authorized for
listing, subject to notice of issuance, on the
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NYSE;
(vi) Comerica and Metrobank shall have received an
opinion from counsel to Comerica dated the Effective Time, subject to
assumptions and exceptions normally included and in form and substance
reasonably satisfactory to Comerica and Metrobank, to the effect that
the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the IRC and that
Comerica and Metrobank will each be a party to that reorganization
within the meaning of Section 368(b) of the IRC (See "THE MERGER --
Certain Federal Income Tax Consequences");
(vii) Comerica, Holdings and Metrobank shall have
received from each of Ernst & Young LLP and Arthur Andersen, LLP
letters, dated the effective date of the Registration Statement on Form
S-4 and the Effective Time, in form and substance satisfactory to
Comerica, Holdings and Metrobank and customary in scope and substance
for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement;
(viii) Comerica, Holdings, and Metrobank shall receive
opinions of their respective counsel addressed to the parties and dated
the date the Registration Statement becomes effective and the date of
the shareholders meeting to the effect that the Registration Statement
and this Proxy Statement/Prospectus and any amendments and supplements
thereto (except for the financial statements and notes thereto and
other financial, statistical and accounting data included in,
incorporated by reference in or which should have been included in or
incorporated by reference in the Registration Statement or this Proxy
Statement/Prospectus as to which they need express no opinion) in
substantially the forms previously agreed to by the parties;
(ix) no action, suit or proceeding shall have been
instituted or threatened before any court or governmental body seeking
to challenge or restrain the transactions contemplated by the Merger
Agreement or the Stock Option Agreement which presents a substantial
risk that such transactions will be restrained or that either party
hereto may suffer material damages or other relief as a result of
consummating such
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transactions;
(x) in the event that the Closing has not occurred
prior to February 1, 1996, Metrobank shall have received a bring-down
dated January 31, 1996 of the opinion of J.P. Morgan as required under
the Merger Agreement which bring-down shall be reasonably acceptable to
the Board of Directors of Metrobank and confirm that the Metrobank
Conversion Rate is fair to Metrobank's shareholders from a financial
point of view.
Conditions in favor of Comerica and Holdings. The obligations of
Comerica and Holdings to effect the Merger are subject to the fulfillment of
the conditions specified in the Merger Agreement, including, but not limited
to, the following:
(i) Except as otherwise provided in any of the other
listed conditions in favor of Comerica and Holdings, (a) the
representations and warranties of Metrobank contained in the Merger
Agreement shall be true in all material respects as of the Effective
Time as though made at and as of the Effective Time except to the
extent they expressly refer to an earlier time and, except where the
failure to be true, individually or in the aggregate, would not have or
would not be reasonably likely to have, a material adverse effect on
Metrobank or upon the consummation of the transactions contemplated by
the Merger Agreement; (b) Metrobank shall have duly performed and
complied in all material respects with all agreements and covenants
required by the Merger Agreement to be performed or complied with by
them prior to or at the Effective Time, except where the failure to so
perform and comply, individually or in the aggregate, would not have or
would not be reasonably likely to have, a material adverse effect on
Metrobank or upon the consummation of the transactions contemplated by
the Merger Agreement; (c) none of the events or conditions entitling
Comerica to terminate the Merger Agreement shall have occurred and be
continuing; and (d) Metrobank shall have delivered to Comerica a
certificate dated the date of the Effective Time and signed by its
Chief Executive Officer to the effect set forth in the clauses (a), (b)
and (c) of this paragraph (i);
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(ii) any consent required for the consummation of the
Merger under any agreement, contract, or license to which Metrobank is
a party or by or under which it is bound or licensed, the withholding
of which might have a material adverse effect on Comerica or Metrobank
or the transactions contemplated by the Merger Agreement, shall have
been obtained;
(iii) Comerica shall have received the closing schedules
to the Merger Agreement (the "Closing Schedules"), and the Closing
Schedules shall not reflect any item that was not on the schedules
delivered with the execution copy of the Merger Agreement that would
have, or would be reasonably likely to have, a material adverse effect
on Metrobank or upon the consummation of the Merger;
(iv) the consummation of the Merger shall not be
prohibited under Section 3(d) of the Bank Holding Company Act of 1956,
as amended, or other applicable law as a result of the relocation to or
establishment in a state other than California of any offices or
operations of Metrobank;
(v) Metrobank's reserve for possible loan losses on the
last day of the month immediately preceding the month in which the
Closing Date occurs, shall be at least the greater of $17,000,000 or
2.1% of the average of Metrobank's total outstanding gross loans for
the month ending on that date (the "Preliminary Loan Loss Reserve");
adjusted as follows:
(a) The following additions will be made to the
Preliminary Loan Loss Reserve:
(1) $.30 for each dollar of Non-Performing
Assets on the Determination Date in excess of $18,000,000, and
(2) if gross charge-offs are less than
$5,100,000, the difference between gross charge-offs and
$5,100,000 for the period January 1, 1995 through the earlier
of December 31, 1995 or the Closing Date.
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(b) The following deductions will be made to the
Preliminary Loan Loss Reserve:
(1) $.30 for each dollar of Non-Performing
Assets on the Determination Date under $18,000,000, and
(2) the amount of any specific reserve in
excess of $25,000 allocated to a classified loan in the April
1995 loan loss reserve allocation report identified in a
schedule to the Merger Agreement, to the extent such
classified loans are disposed of prior to the Determination
Date.
Notwithstanding the foregoing adjustments, in no event shall
Metrobank's reserve for possible loan losses be less than 1.5% of the
average of Metrobank's total loans for the month ended prior to the
Determination Date. Metrobank's reserve for OREO losses shall be
$1,000,000, except to the extent Metrobank writes down the portfolio of
OREO in existence as of the date of the Merger Agreement. The
calculation of all reserves pursuant to this Paragraph (v) shall not
include any additional reserves made at Comerica's request in
accordance with the Merger Agreement;
(vi) Metrobank's Non-Performing Assets outstanding on
the last day of the month immediately preceding the Effective Time
shall be no more than $30,000,000;
(vii) between the date of the Merger Agreement and the
Effective Time, no event or circumstance shall have occurred which had
a Material Adverse Effect on Metrobank or its Subsidiaries and Comerica
shall have received a certificate signed on behalf of Metrobank by the
President of Chief Executive Officer of Metrobank to such effect;
(viii) Comerica shall have received from Arthur Andersen,
LLP letters dated the Effective Time, after customary review but
without audit, in form and substance satisfactory to Comerica
containing the certifications required by the Merger Agreement (i)
certifying that the conditions set forth in paragraphs (v) and (vi)
above have been satisfied and (ii) setting forth, as of the Business
Day
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immediately prior to the Closing Date, (A) Metrobank Consolidated Net
Worth; (B) Fully Diluted Metrobank Common Stock; (C) Metrobank's
reserve for possible loan losses; and (D) the amount of Metrobank's Non
Performing Assets;
(ix) Comerica shall have received from its legal counsel
an opinion regarding securities matters in form and substance customary
for transactions of the type contemplated by the Merger Agreement and
reasonably satisfactory to Comerica;
(x) Comerica shall have received from legal counsel to
Metrobank, an opinion as to securities and corporate matters in form
and substance customary for transactions of this nature and reasonably
satisfactory to Comerica;
(xi) counsel for Comerica shall have approved, in the
exercise of counsel's reasonable discretion, the validity of all
transactions contemplated by the Merger Agreement, as well as the form
and substance of all opinions, certificates, instruments of transfer
and other documents to be delivered to Comerica under the Merger
Agreement or that are reasonably requested by such counsel;
(xii) the sale of the Comerica Common Stock resulting
from the Merger shall have been qualified or registered with the
appropriate State securities law or "blue sky" regulatory authorities
of all States in which qualification or registration is required under
the State securities laws, and such qualifications or registrations
shall not have been suspended or revoked;
(xiii) Metrobank shall have delivered to Comerica not
later than 10 days after the date of the Merger Agreement all of the
executed Affiliate Agreements in the form attached as an exhibit to the
Merger Agreement (see "Resales by Affiliates" below);
(xiv) None of Metrobank or any of its Subsidiaries shall
be subject to any memorandum of understanding, cease and desist order,
or other agreement with any governmental entity restricting the conduct
of Metrobank and its Subsidiaries' business, prospects and operations,
so as to have a Material
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Adverse Effect, other than respecting capital commitments related to
Metrobank's acquisition of National Bank of Long Beach;
(xv) Metrobank's director-shareholders shall have
delivered to Comerica on date of the Merger agreement the Shareholder's
Agreements in the form attached to the Merger Agreement;
(xvi) the total number of shares of Comerica Common Stock
that shall be issuable pursuant to the terms of the Merger Agreement
under any computation shall not be greater than 4,806,710 shares,
subject to adjustment as appropriate to reflect any recapitalization,
reorganization, reclassification, split-up, merger, consolidation,
exchange, stock or other dividend or distribution (other than regular
quarterly cash dividends) made, declared or effective with respect to
the Comerica Common Stock between the date of the Merger Agreement and
the Effective Time; and
(xvii) Comerica shall have received a fully executed
non-competition agreement from David L. Buell in substantially the form
attached to the Merger Agreement.
Conditions in favor of Metrobank. The obligation of Metrobank to effect
the Merger shall be subject to the fulfillment of the conditions specified in
the Merger Agreement, including, without limitation, the following:
(i) except as otherwise provided in any of the other
conditions in favor of Metrobank, (a) the representations and
warranties of Comerica and Holdings contained in the Merger Agreement
shall be true in all material respects as of the Effective Time as
though made at the Effective Time, except to the extent they expressly
refer to an earlier time and except where the failure to be true,
individually or in the aggregate, would not have or would not be
reasonably likely to have, a Material Adverse Effect on Comerica or
Holdings or upon the consummation of the transactions contemplated
hereby; (b) Comerica and Holdings shall have duly performed and
complied in all material respects with all agreements and covenants
required by the Merger Agreement to be performed or complied with by
them prior to or at the Effective Time,
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except where the failure to so perform and comply, individually or in
the aggregate, would not have or would not be reasonably likely to
have, a Material Adverse Effect on Comerica or Holdings or upon the
consummation of the transactions contemplated in the Merger Agreement;
(c) none of the events or conditions entitling Metrobank to terminate
the Merger Agreement shall have occurred and be continuing; and (d)
Comerica and Holdings shall have delivered to Metrobank a certificate
dated the date of the Effective Time and signed by a duly authorized
officer to the effect set forth in clauses (a), (b) and (c) of this
paragraph (i);
(ii) counsel for Metrobank shall have approved, in the
exercise of counsel's reasonable discretion, the validity of all
transactions contemplated by the Merger Agreement, as well as the form
and substance of all opinions, certificates, instruments of transfer
and other documents to be delivered to Metrobank under the Merger
Agreement or reasonably requested by such counsel;
(iii) prior to the mailing of this Proxy
Statement/Prospectus to the shareholders of Metrobank, Metrobank shall
have received an opinion of J.P. Morgan dated the date of this Proxy
Statement/Prospectus, to the effect that, as of such date, the
Metrobank Conversion Rate is fair to the Metrobank shareholders from a
financial point of view; and
(iv) there shall not have been any change in the
consolidated financial condition, aggregate net assets, shareholders'
equity, business, or operating results of Comerica and its subsidiaries
taken as a whole, from April 30, 1995 to the Effective Time that
results in a Material Adverse Effect as to Comerica and its
Subsidiaries.
TERMINATION
The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the shareholders of
Metrobank: (a) by mutual consent of the Boards of Directors of Metrobank,
Holdings and Comerica; (b) by any of Comerica, Metrobank or Holdings upon the
failure to satisfy any
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conditions to all parties' obligations to close specified in the Merger
Agreement if such failure is not caused by any action or inaction of the party
requesting termination of the Agreement; (c) by any of Metrobank, Holdings or
Comerica if the Effective Time shall not have occurred by the close of business
on March 10, 1996 provided such failure is not caused by a breach of the Merger
Agreement by the terminating party; (d) by Comerica if an Acquisition Event
shall have occurred; (e) by any of Metrobank, Holdings or Comerica if there
shall have been a material breach of any of the representations or warranties
set forth in the Merger Agreement on the part of the other party, which breach
in the reasonable opinion of the non-breaching party by its nature cannot be
cured prior to the Closing and which breach would, in the reasonable opinion of
the non-breaching party, individually or in the aggregate, have, or be
reasonably likely to have, a Material Adverse Effect on the breaching party or
upon the consummation of the transactions contemplated in the Merger Agreement;
(f) by Metrobank, Comerica or Holdings if the Merger Agreement, the Subsidiary
Merger Agreement and the Merger are not ratified and approved by Metrobank's
shareholders; (g) by Metrobank after the occurrence of a default by Comerica or
Holdings and the continuance of such failure for a period of 20 business days
after written notice of such default, which failure to perform, in the
reasonable opinion of Metrobank cannot be cured prior to Closing; (h) by
Comerica or Holdings after the occurrence of a default by Metrobank which
results in a Material Adverse Effect on Metrobank and the continuance of such
failure for a period of 20 business days after written notice of such default,
which failure to perform, in the reasonable opinion of Comerica and Holdings
cannot be cured prior to Closing; (i) by Comerica and Holdings if any
environmental site assessment provided for in the Merger Agreement discloses
any environmental condition which would be reasonably likely to have a Material
Adverse Effect on the property which is the subject thereof; (j) by Comerica if
the Metrobank Board of Directors does not publicly recommend in this Proxy
Statement/Prospectus that Metrobank's shareholders approve and adopt the Merger
Agreement, or if after recommending in this Proxy Statement/Prospectus that
shareholders ratify and confirm the Merger Agreement, the Metrobank Board of
Directors shall have withdrawn, modified or amended such recommendations in any
respect materially adverse to Comerica or the Board of Directors of Metrobank
does not call and hold a shareholders meeting; (k) by Metrobank upon the
failure of Comerica or Holdings to satisfy any conditions to Metrobank's
obligations to
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close specified in the Merger Agreement; (l) by Comerica and Holdings upon the
failure of Metrobank to satisfy any conditions to Comerica's obligation to
close specified in the Merger Agreement; (m) by Metrobank upon (i) the
occurrence of an event of force majeure that results or is reasonably expected
by Metrobank to result in an after-tax loss to Metrobank of more than
$5,000,000 on an after-tax basis (for purposes of the Merger Agreement, an event
of force majeure includes: earthquake, flood, riot, terrorism, war, tidal wave,
fire or explosion); or (ii) the recording of any expenditure, accrual or
reserve or other accounting entry of more than $5,000,000 on an after-tax
basis, required to account for a liability or loss attributable to National
Bank of Long Beach and Metrobank has rights of indemnity with respect thereto
under the Stock Purchase Agreement by and between Topdanmark Bank A/S, AKTIV
Bank Holding Company, National Bank of Long Beach and Metrobank dated as of
August 31, 1994; and (n) by Metrobank in the event Metrobank is required by a
governmental authority (including by reason of commitments made by Metrobank in
connection with its acquisition of National Bank of Long Beach) to effect
Regulatory Stock Sales, and Comerica does not provide such required capital to
Metrobank by purchasing Metrobank Common Stock within 30 days following
Comerica's receipt of written notification of the required Regulatory Stock
Sales from Metrobank.
LIQUIDATED DAMAGES; CANCELLATION FEE
The Merger Agreement provides that so long as Comerica has not
exercised its stock option pursuant to the Stock Option Agreement, Metrobank
shall be required to pay to Comerica the sum of $3,000,000 as reasonable and
full liquidated damages and reasonable compensation for losses sustained in the
event that (i) Comerica terminates the Merger Agreement because the Merger
Agreement, the Subsidiary Merger Agreement and the Merger are not ratified by
Metrobank's shareholders, (ii) Comerica terminates the Merger Agreement because
the Metrobank Board of Directors did not publicly recommend in this Proxy
Statement/Prospectus that Metrobank shareholders adopt and approve the Merger
Agreement or shall withdraw, modify or amend such recommendation in any respect
materially adverse to Comerica or if the board of directors does not call and
hold the Special Meeting, (iii) Comerica terminates the Merger Agreement because
there shall have been a material breach of any of the representations or
warranties set forth in the Merger Agreement on the part of Metrobank, (iv)
Comerica terminates the
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Merger Agreement because there is a default by Metrobank under the Agreement
which results in a Material Adverse Effect on Metrobank and the continuance of
such default for a period of 20 Business Days after written notice thereof,
which default, in the reasonable opinion of Comerica and Holdings cannot be
cured prior to the Closing; and such default shall have been caused in whole or
in material part by any action or inaction within the control of Metrobank, any
Subsidiary of Metrobank or the directors of Metrobank or Metrobank's
Subsidiaries.
An Acquisition Event is defined generally to mean (a) that prior to the
termination of the Merger Agreement, Metrobank has authorized, recommended,
publicly proposed or publicly announced an intention to authorize, recommend or
propose, or entered into an agreement to effect the following: a merger,
consolidation or similar transaction involving Metrobank or any of its
subsidiaries; the disposition of substantially all of the assets of Metrobank;
or the issuance, sale or other disposition of securities representing 50%
voting control of Metrobank other than securities issued pursuant to the Stock
Option Agreement or under existing Stock Option Plans of Metrobank or other
securities to meet any applicable requirement of law, regulation or
Governmental Entity (including commitments made by Metrobank in connection with
its acquisition of National Bank of Long Beach) (such stock sales are referred
to as "Regulatory Stock Sales"); (b) the acquisition of the beneficial ownership
or the right to acquire beneficial ownership by any person or group of persons
other than Comerica, a subsidiary of Comerica or certain directors of Metrobank
who are parties to Director-Shareholder Agreements with Comerica, (as the term
"beneficial ownership" is defined in Rule 13d-3 of the Securities Exchange Act
of 1934) of 25% or more of the then outstanding Metrobank Common Stock except
acquisitions of shares in connection with Regulatory Stock Sales; or (c) upon
the occurrence of certain events specified in the Merger Agreement within 90
days after termination of the Merger Agreement by Comerica, where such events
were caused in whole or in part by any action or inaction within the control of
Metrobank, any subsidiary of Metrobank or the directors of Metrobank or
Metrobank's subsidiaries.
In the event Comerica has exercised its stock option pursuant to the
Stock Option Agreement, the Merger Agreement has been terminated and an
Acquisition Event has occurred, Metrobank shall pay to Comerica $6,000,000 if
the consummation of the transaction
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which is the result of the Acquisition Event occurs within 270 days of the date
of the occurrence of the subject Acquisition Event.
In addition, the Merger Agreement provides that, in the event of
termination by Metrobank of the Merger Agreement because (a) Holdings or
Comerica has breached any of their representations and warranties set forth in
the Merger Agreement and in the reasonable opinion of Metrobank such breach
cannot be cured prior to Closing and would have a Material Adverse Effect on
Holdings or Comerica, or (b) a default is committed by Comerica or Holdings
under the Merger Agreement and such default continues for a period of 20
business days after written notice of such default, and in the reasonable
opinion of Metrobank, cannot be cured prior to the Closing, and in each case
such breach or default was caused in whole or material part by any action or
inaction within the control of Comerica or its Subsidiaries, then Comerica shall
pay to Metrobank as reasonable and full liquidated damages and reasonable
compensation for the loss sustained thereby and not as a penalty or forfeiture,
the sum of $3,000,000.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring the same, including
without limitation, all costs associated with any registration or filing
required for resales of Comerica Common Stock by affiliates of Metrobank;
provided, however, that Comerica will file on a timely basis the reports
required by Rule 144(c) of the Securities Act. In the event Metrobank's fees
and expenses incurred in connection with the Merger Agreement and the
transactions contemplated therein, including attorneys', accountants',
investment bankers' and any other fees, change of control payments, severance
and termination payments collectively exceed the sum of $1,400,000 in the
aggregate without the prior written consent of Comerica (such fees individually
shall not exceed the following amounts: (i) accounting and legal fees and
investment banking expenses: $330,000; (ii) change of control payments:
$525,000; (iii) investment banking fees: $250,000; (iv) severance and other
payments: $295,000), the excess shall be deducted from Metrobank Consolidated
Net Worth (as defined in the Merger Agreement). Metrobank shall use its best
efforts to ensure that its attorneys, accountants, investment
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bankers and other consultants engaged in connection with the transaction
contemplated by the Merger Agreement submit full and final bills on or before
the Closing and that all such expenses are paid or properly accrued prior to
the Closing.
SHAREHOLDER AGREEMENTS
As noted above in item (xvii) under the caption "Conditions to the
Merger -- Conditions in favor of Comerica and Holdings," the Merger is
conditioned upon delivery by each of the Metrobank director-shareholders of a
Shareholder Agreement, the form of which is prescribed by the Merger Agreement.
The Shareholder Agreement obligates each of the members of the Metrobank Board
of Directors who own shares of Metrobank Common Stock to vote those shares in
favor of the Merger at any shareholder meeting or in connection with any
solicitation of shareholder written consent occurring prior to March 10, 1996.
Pursuant to the Shareholder Agreement, each director-shareholder also agrees
not to sell, assign or otherwise dispose of, any of such director-shareholder
Metrobank Common Stock, or enter into any agreement to do any of the foregoing,
until the earlier of (i) adjournment of the special meeting of Metrobank
shareholders called to approve the Merger on the terms provided in the Merger
Agreement, (ii) termination of the Merger Agreement in accordance with its
terms, or (iii) March 10, 1996, except with (a) Comerica's prior written
consent; (b) pursuant to the Merger; or (c) involuntary transfers, including,
without limitation, any foreclosure of security interests granted by the
shareholder or otherwise. Notwithstanding the foregoing, nothing in the
Shareholder Agreement shall prohibit the shareholder from pledging, granting a
security interest in, or otherwise encumbering the shareholder's Metrobank
Common Stock or engaging in similar transactions, including, without
limitation, the replacement, renewal or modification of existing financing
arrangements; provided, however, that at least five business days prior to the
consummation of any transaction involving a lien or security interest in any of
the shareholder's Metrobank Common Stock, the shareholder shall give written
notice thereof to Comerica. Finally, the Shareholder Agreement obligates
each director-shareholder not to directly or indirectly solicit or initiate any
inquiries, proposals or offers from any person or entity other than Comerica or
an affiliate of Comerica, or vote in favor of, any proposal or transaction for
disposition of, the business or assets of Metrobank or any of its subsidiaries,
the
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acquisition of the securities of Metrobank or any such subsidiary, except
acquisition of securities in connection with Regulatory Stock Sales, or any
business combination other than with Comerica or one of its affiliates.
RESALES BY AFFILIATES
Pursuant to the terms of the Merger Agreement, certain persons believed
by Metrobank to be "affiliates" (as defined in Rule 144 of the Securities Act
of 1933) of Metrobank have entered into an "Affiliate's Agreement." The
Affiliate's Agreement generally provides that affiliates of Metrobank may not
sell or otherwise dispose of (a) any shares of Metrobank Common Stock currently
owned by them or any shares of Comerica Common Stock received pursuant to the
Merger, for a period beginning not less than thirty days prior to the
consummation of the Merger and ending on the date that Comerica publishes
financial results covering a period of at least thirty days of combined
operations of Metrobank and Comerica following the consummation of the Merger
(except that such affiliates may exchange their shares of Metrobank Common
Stock for shares of Comerica Common Stock in the Merger and may make bona fide
gifts or distributions without consideration), or (b) any shares of Comerica
Common Stock received pursuant to the Merger or any securities that may be
distributed with respect thereto or issued in exchange or substitution therefor
(collectively, the "Restricted Securities"), or any option, right or other
interest with respect to any Restricted Securities, unless such sale or other
disposition is effected (i) pursuant to an exemption from the registration
requirements of the Securities Act, or (ii) pursuant to an effective
registration statement under the Securities Act (except that such affiliates
may make bona fide gifts and distributions without consideration).
Notwithstanding the foregoing, affiliates may make bona fide gifts of such
shares of Comerica Common Stock so long as the recipients thereof agree not to
sell or otherwise dispose of the Comerica Common Stock except as provided in
the Affiliate's Agreement. Because the Merger is currently expected to qualify
as a purchase for accounting and financial reporting purposes, affiliates may
be relieved from certain restrictions in the Affiliate's Agreement which relate
to treatment of the Merger as a pooling of interests for accounting purposes.
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AMENDMENT AND WAIVER
Subject to applicable law, (i) the Merger Agreement may be amended by
action taken or authorized by the respective boards of directors of Comerica,
Holdings and Metrobank, as the case may be, or the duly authorized committees
thereof, at any time before or after approval by the shareholders of Metrobank;
provided, however, that after any such approval by the shareholders, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval; and (ii) any term or provision of
the Merger Agreement may be waived in writing at any time by the party which is
entitled to the benefits of the specific term or provision. Neither Comerica
nor Metrobank has determined under what circumstances it would waive any of the
terms and provisions of the Merger Agreement.
THE STOCK OPTION AGREEMENT
The following is a brief summary of certain provisions of the Stock
Option Agreement, dated as of May 2, 1995, between Metrobank and Comerica,
which is attached hereto as Annex E. The following summary is qualified in its
entirety by reference to the Stock Option Agreement.
Under the Stock Option Agreement, Metrobank has granted to Comerica an
irrevocable option (the "Option") to purchase up to 9.9% of all of the issued
and outstanding shares of Metrobank Common Stock outstanding on the date of
exercise (after giving effect to the shares issued pursuant to the Option) at an
exercise price equal to $15.75 per share.
The Option is exercisable in whole only and only upon the occurrence of
one of the following events (each a "Purchase Event"):
(a) prior to the termination of the Merger Agreement,
Metrobank shall have authorized, recommended, publicly proposed or
publicly announced an intention to authorize, recommend or propose, or
entered into an agreement with any person (other than Comerica or any
of its subsidiaries) to effect an Acquisition Transaction or failed to
publicly oppose a tender offer to purchase up to 15% or an exchange
offer to purchase up to 25% of the outstanding Metrobank Common Stock
or the filing by any person of a registration statement under
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the Securities Act with respect to a tender offer or exchange offer as
described above. The term Acquisition Transaction means (i) a merger,
consolidation or similar transaction involving Metrobank or any of its
subsidiaries (other than internal mergers, reorganizations,
consolidations or dissolutions involving only existing subsidiaries),
(ii) the disposition, by sale, lease, exchange or otherwise, of
substantially all of the assets of Metrobank, or (iii) the issuance,
sale or other disposition of (including by merger, consolidation, share
exchange or similar transaction) securities representing 50% of voting
control of Metrobank, other than securities issued pursuant to the
Stock Option Agreement or to meet any applicable requirement of law,
regulation or governmental agency (including commitments made by
Metrobank in connection with the acquisition of National Bank of Long
Beach); or
(b) prior to termination of the Merger Agreement, any
person (other than Comerica or its subsidiaries or a person who is a
party to a director-shareholder agreement with Comerica) shall have
acquired beneficial ownership (as defined under the Exchange Act) of or
the right to acquire beneficial ownership of, or any group (as defined
in the Exchange Act) shall have been formed which beneficially owns or
has the right to acquire beneficial ownership of 25% or more of the
then outstanding common stock of Metrobank, except acquisitions of
shares in connection with Regulatory Stock Sales.
The Option will terminate upon the earliest to occur of (i) the moment
in time which is immediately prior to the Effective Time, (ii) 5:00 p.m. on
March 9, 1996, (iii) payment by Metrobank to Comerica of liquidated damages
pursuant to the terms of the Merger Agreement, or (iv) termination of the
Merger Agreement. The closing of a purchase of shares pursuant to the Stock
Option Agreement is subject to the obtaining of all necessary governmental
approvals.
The purchase price for the shares subject to the Option will be
adjusted for any change in Metrobank's Common Stock by reason of a stock
dividend, stock split, split up, recapitalization, combination, exchange of
shares or similar transaction.
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As described above under "Stock Option Agreement", the Stock Option
Agreement may discourage competing offers for Metrobank and is intended to
increase the likelihood that the Merger is consummated in accordance with the
terms of the Merger Agreement.
LEGAL MATTERS
The legality of the Comerica Common Stock and associated rights to be
issued in connection with the Merger will be passed upon by Miller, Canfield,
Paddock and Stone, P.L.C., 150 West Jefferson, Suite 2500, Detroit, Michigan
48226.
EXPERTS
The consolidated financial statements of Comerica incorporated herein
by reference to the Comerica Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, have been audited by Ernst & Young, LLP, independent
accountants and have been so incorporated herein in reliance upon such reports,
given on the authority of such firm as an expert in auditing and accounting.
The consolidated financial statements of Metrobank incorporated in this
Proxy Statement/Prospectus by reference from the Metrobank Annual Report on
Form F-2 for the fiscal year ended December 31, 1994, have been audited by
Arthur Andersen, LLP, independent public accountants, as stated in their report
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of Arthur Andersen, LLP given upon their authority as
experts in accounting and auditing.
The Metrobank Board has appointed the firm of Arthur Andersen, LLP,
certified public accountants, as independent auditors for Metrobank for 1995.
Representatives of Arthur Andersen, LLP are expected to be present at the
Metrobank Special Meeting. These representatives will have an opportunity to
make statements if they so desire and will be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS
Metrobank will hold a 1996 Annual Shareholders Meeting only if the
Merger is not consummated prior to the time for such meeting
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designated by the Metrobank Board in accordance with the Bylaws of Metrobank.
Should such annual meeting occur, any Metrobank shareholder who wishes to
present a proposal for inclusion in the proxy statement for such annual meeting
must comply with the rules and regulations of the Commission then in effect. As
disclosed in the Metrobank Proxy Statement for its 1995 Annual Meeting of
Shareholders, any such proposal must have been received by Metrobank not later
than December 31, 1995.
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ANNEX A
FIRST AMENDMENT
AMENDED AND RESTATED
AGREEMENT
AND PLAN OF
REORGANIZATION
AND MERGER
BY AND AMONG
METROBANK
COMERICA HOLDINGS INCORPORATED
AND
COMERICA INCORPORATED
<PAGE> 135
FIRST AMENDMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.2 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.3 Articles of Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.4 Conversion of HOLDINGS Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.5 Conversion of METROBANK Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.6 Conversion of METROBANK Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.7 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.8 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF METROBANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.1 Organization; Corporate Power; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.2 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Authorization of Agreement; No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.5 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.6 METROBANK Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.7 Accuracy of Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.8 Compliance with Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.10 Agreements with Banking Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.11 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.12 Title to Assets other than Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.13 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.15 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.16 Loans and Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.17 [Intentionally Left Blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.18 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.19 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.20 Absence of Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.21 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.22 Employees; Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.23 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.24 [Intentionally Left Blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.25 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.26 Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.27 Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.28 Disclosure in Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE> 136
FIRST AMENDMENT
<TABLE>
<S> <C> <C>
Section 3.29 Effective Date of Representations, Warranties, Covenants and Agreements. . . . . . . . . . . 29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF COMERICA 29
Section 4.1 Organization; Corporate Power; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.2 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.3 Authorization of Agreement; No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.4 Capital Structure of COMERICA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.5 [Intentionally Left Blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.6 COMERICA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.7 Accuracy of Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.8 Compliance With Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.10 Agreements with Banking Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.11 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.12 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.13 Absence of Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.14 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.15 Effective Date of Representations, Warranties, Covenants and Agreements. . . . . . . . . . . 35
Section 4.16 Disclosure in Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 5 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.1 Access to Information, Due Diligence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.2 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.3 Taking of Necessary Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.4 Registration Statement and Applications. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.6 Notification of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.7 Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.8 Schedules/Closing Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.9 Intentionally Left Blank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 6 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1 Affirmative Conduct of METROBANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.2 Negative Covenants of METROBANK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.3 Conduct of COMERICA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 7 CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.1 Conditions to the Parties' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
<PAGE> 137
FIRST AMENDMENT
<TABLE>
<S> <C> <C>
Section 7.2 Conditions to COMERICA's and HOLDINGS's Obligations. . . . . . . . . . . . . . . . . . . . . 51
Section 7.3 Conditions to METROBANK's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 8 TERMINATION, AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.2 Effect of Termination; Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.5 Liquidated Damages; Cancellation Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 9 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.1 Non-Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.4 Entire Agreement/No Third Party Rights/Assignment. . . . . . . . . . . . . . . . . . . . . . 60
Section 9.5 Non-disclosure of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
<PAGE> 138
FIRST AMENDMENT
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
(the "Amended Agreement") is entered into as of July 31, 1995 by and among
METROBANK, a California state chartered bank ("METROBANK"), COMERICA HOLDINGS
INCORPORATED, a California corporation and wholly owned subsidiary of Comerica
("HOLDINGS"), and COMERICA INCORPORATED, a Delaware corporation and bank
holding company ("COMERICA").
W I T N E S S E T H:
WHEREAS METROBANK and COMERICA entered into an Agreement and Plan of
Reorganization and Merger dated May 2, 1995 (the "May Agreement") providing
for, among other things, the merger of METROBANK and HOLDINGS; and
WHEREAS each of METROBANK, COMERICA and HOLDINGS desire to make certain
amendments to the May Agreement and to restate it in its entirety;
NOW, THEREFORE, in consideration of these premises and the
representations, warranties and agreements herein contained, METROBANK,
COMERICA and HOLDINGS hereby amend and restate the May Agreement in its
entirety as follows:
ARTICLE 1 DEFINITIONS
As used in this Amended Agreement, the following terms shall have the meanings
set forth below:
"Acquisition Event" shall mean any of the following:
(a) prior to the termination of this Amended Agreement, METROBANK shall
have authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement with
any Person (other than COMERICA, any Subsidiary of COMERICA) to effect an
Acquisition Transaction or failed to publicly oppose a Tender Offer or an
Exchange Offer (as defined below). As used herein, the term Acquisition
Transaction shall mean (A) a merger, consolidation or similar transaction
involving METROBANK or any of its Subsidiaries (other than internal mergers,
reorganizations, consolidations or dissolutions involving only existing
Subsidiaries), (B) the disposition, by sale, lease, exchange or otherwise, of
substantially all of the assets of METROBANK; or (C) the issuance, sale or
other disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities
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representing 50% voting control of METROBANK, other than securities issued
pursuant to the Stock Option Agreement or the Stock Option Plans or to meet any
applicable requirement of law, regulation or Governmental Entity (including
commitments made by METROBANK in connection with its acquisition of National
Bank of Long Beach) (such stock sales are referred to as "Regulatory Stock
Sales"); or
(b) prior to termination of this Amended Agreement, any Person (other than
COMERICA, or any Subsidiary of COMERICA or a person who is a party to a
Director-Shareholder Agreement) shall have acquired beneficial ownership (as
such term is defined in Rule 13d-3 promulgated under the Exchange Act) of or
the right to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange Act) shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of 25% or more of the then
outstanding shares of METROBANK Common Stock, except acquisitions of shares in
connection with Regulatory Stock Sales; or
(c) the occurrence of any of the events described in subsection (a) of
this paragraph within a period of 90 days following the termination of this
Amended Agreement by COMERICA pursuant to Sections 8.1.1, 8.1.3, 8.1.4, 8.1.5,
8.1.6, 8.1.8 or 8.1.11 or by COMERICA pursuant to Section 8.1.13 solely by
reason of the failure of the conditions set forth in Sections 7.2.1, 7.2.3,
7.2.5, 7.2.7, 7.2.8 or 7.2.16 to be satisfied where such failure shall have
been caused in whole or in part by any action or inaction within the control of
METROBANK, any Subsidiary of METROBANK, or the directors of any of METROBANK,
or METROBANK's Subsidiaries (it being understood that any action or inaction
outside of the control of METROBANK or METROBANK's Subsidiaries, such as, by
way of example only, the filing of a lawsuit against them or any voting
decision by shareholders of METROBANK (including shareholders who are also
directors of METROBANK who have not executed director-shareholder agreements),
shall not come within this subsection (c) of this paragraph).
"Acquisition Proposal" shall have the meaning given such term in Section
6.2.5.
"Affiliate" or "affiliate" shall mean, with respect to any other Person,
any Person that, directly or indirectly, controls or is controlled by or is
under common control with such Person.
"Agreement Date Comerica Shares" shall mean the number of shares of
COMERICA Common Stock determined by dividing $136,750,882 by the Agreement Date
COMERICA Share Price; provided, however, that such numerator shall be reduced
by $1 for each $1 that the METROBANK Consolidated Net Worth at the Effective
Time is less than the sum of $78,300,000 plus the Pre-Closing Income Amount
(such calculation shall disregard any charge to earnings made pursuant to
Section 5.11). There shall be no adjustment to the Agreement Date COMERICA
Shares or the Conversion Rate attributable to any of the following: (a) any
non-competition or other payment made to directors or officers of METROBANK
pursuant to the transactions contemplated
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by this Amended Agreement, except as expressly contemplated by Section 5.5.2.;
(b) any expenditure, accrual or reserve respecting environmental matters as
contemplated by Section 5.7.4; or (c) any additional accruals as contemplated
by Section 5.11.1.
"Agreement Date COMERICA Share Price" shall mean $28.45 (being the lower
of the average of the closing prices for COMERICA Common Stock on the New York
Stock Exchange for either the five or ten trading days ending on the date of
execution of the May Agreement).
"Benefit Arrangement" shall have the meaning given such term in Section
3.22.4.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Business Day" shall mean any day, other than a Saturday, Sunday or legal
holiday on which California state banks are open for substantially all their
banking business in California.
"California Corporations Code" shall mean the General Corporation Law of
the State of California.
"California Financial Code" shall mean the Financial Code of the State of
California.
"Classified Credits" shall have the meaning given such term in Section
6.1.16.
"Closing" shall have the meaning given such term in Section 2.1.
"Closing Date" shall have the meaning given such term in Section 2.1.
"Closing Schedules" shall have the meaning given such term in Section 5.8.
"COMERICA" shall have the meaning set forth in the preamble to this
Amended Agreement.
"COMERICA Common Stock" shall mean the Common Stock, $5.00 par value per
share, of COMERICA.
"COMERICA Filings" shall have the meaning given such term in Section 4.6.
"COMERICA Financial Statements" shall mean the financial statements of
COMERICA that were filed on SEC Form 10-K for the year ended December 31, 1994
and the unaudited financial statements filed on SEC Form 10-Q for the quarter
ended March 31, 1995.
"COMERICA SEC Documents" shall have the meaning set forth in Section 4.6.2.
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"Conversion Rate" shall mean the result of a fraction (rounded to four
decimal places), the numerator of which is the Agreement Date COMERICA Shares,
as adjusted and determined at the Effective Time, and the denominator of which
is Fully Diluted METROBANK Common Stock at the Effective Time.
"Default" shall mean, as to any party to this Amended Agreement, a failure
by such party to perform, in any material respect, any of the agreements or
covenants provided by Articles 5 or 6.
"Determination Date" shall mean the fifth Business Day before the date on
which the Effective Time occurs.
"Disclosed Matters" shall have the meaning given such term in Section
5.7.1.
"Effective Time" shall have the meaning given such term in Section 2.1.
"Employee Plan" shall have the meaning given such term in Section 3.22.3.
"Environmental Laws" shall mean and include any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any Governmental
Entity pertaining to health or to the environment, including, without
limitation, the Clean Air Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Federal Water Pollution Control Act Amendments, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976, as amended ("RCRA"), the Hazardous Materials Transportation Act of 1975,
as amended, the Safe Drinking Water Act, as amended, and the Toxic Substances
Control Act, as amended.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall mean Norwest Bank, Minnesota, National Association,
or such other Person as COMERICA shall have appointed to perform the duties set
forth in Section 2.8.
"Exchange Offer" shall mean the commencement (as such term is defined in
Rule 14d-2 under the Exchange Act) of an exchange offer or the filing by any
Person of a registration statement under the Securities Act with respect to an
exchange offer to purchase any shares of METROBANK Common Stock such that, upon
consummation of such offer, such Person would own or control 25% or more of the
then outstanding shares of METROBANK Common Stock.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
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FIRST AMENDMENT
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"Fully Diluted METROBANK Common Stock" shall mean the sum of the total
number of shares of METROBANK Common Stock outstanding on the Closing Date
assuming the exercise of all of the METROBANK Stock Options and any other
options or other rights in or for METROBANK Common Stock then outstanding other
than the options contemplated by the Stock Option Agreement and including any
number of shares which have been redeemed or are entitled to appraisal rights
pursuant to Section 2.6.
"Generally Accepted Accounting Principles" shall mean generally accepted
accounting principles.
"Governmental Entity" shall mean any court, federal, state, local or
foreign government or any administrative agency or commission or other
governmental authority or instrumentality whatsoever.
"Hazardous Substances" shall have the meaning given such term in Section
3.26.5.
"Intellectual Property" shall have the meaning given such term in Section
3.25.
"HOLDINGS" shall have the meaning set forth in the preamble to this
Amended Agreement.
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"Knowledge" shall mean, with respect to any representation or warranty
contained in this Amended Agreement: (1) as to COMERICA or HOLDINGS, the actual
knowledge, after reasonable inquiry, of any executive officer or director of
either COMERICA or HOLDINGS; and (2) as to METROBANK, the actual knowledge,
after reasonable inquiry, of any: (i) director; (ii) executive officer; or
(iii) senior vice president, corporate; of METROBANK or any of its
Subsidiaries.
"Last Regulatory Approval" shall mean the final Requisite Regulatory
Approval required from any Governmental Entity under applicable federal laws of
the United States and laws of any state having jurisdiction over the Merger for
the Merger to be consummated.
"Material Adverse Effect" shall mean a material adverse effect: (i) on the
business, assets, results of operations, or financial condition of a Person and
its subsidiaries, if any, taken as a whole (unless specifically indicated
otherwise); or (ii) on the ability of a Person to perform its obligations under
this Amended Agreement or to consummate the transactions contemplated by this
Amended Agreement.
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FIRST AMENDMENT
"Maximum Amount" shall have the meaning set forth in Section 5.10.
"Merger" shall have the meaning set forth in Section 2.1.
"METROBANK" shall have the meaning set forth in the preamble of this
Amended Agreement.
"METROBANK Certificates" shall have the meaning given such term in Section
2.8.1.
"METROBANK Common Stock" shall mean the common stock, no par value, of
METROBANK and any Common Stock of METROBANK created pursuant to any
recapitalization, reorganization, or similar event or any subdivision or
combination of shares of common stock or similar event.
"METROBANK Consolidated Net Worth" shall mean the difference between:
(A) total shareholders' equity of METROBANK as of the last day of
the month immediately prior to the month in which the Effective
Time occurs, but not earlier than December 31, 1995, unless
otherwise agreed by the parties (which shall include an add back of
all fees and costs of METROBANK previously paid and charged to
earnings as contemplated by Section 5.5.2 attributable to the
consummation of the transaction contemplated by this Amended
Agreement up to the amount of $1,400,000 on a tax effected basis),
determined in accordance with Generally Accepted Accounting
Principles applied consistently with prior periods (but not
including (i) any equity raised by METROBANK subsequent to the date
of the May Agreement from the capital or private markets or
otherwise; or (ii) any amount attributable to the actual exercise
of the METROBANK Stock Options between the date of May Agreement
and the Closing Date);
and
(B) amounts attributable to the period from the date of the May
Agreement to the Determination Date or such earlier date as is
practicable for accounting purposes and arising from: (1) gains or
losses in excess of $250,000 on securities transactions, including
mark to market gains and losses; (2) gains and income in excess of
$1,000,000 on a pre-tax basis attributable to real estate
development activities, including sales of OREO; (3) gains from the
sale or other disposition of assets not in the ordinary course of
business; (4) gains attributable to non-recurring extraordinary
items, and changes related to new accounting principles and changes
in application of existing accounting principles; and (5) any
amount of goodwill and core deposit
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FIRST AMENDMENT
intangibles in excess of $2,500,000. The parties understand and
agree that those items specified in (B)(1) and (3) of this
paragraph shall be calculated net of any related Tax benefit
determined at the applicable Tax rate.
"METROBANK ESOP" shall mean the METROBANK Stock Bonus Plan and Trust as
described in METROBANK's 1995 proxy materials.
"METROBANK FDIC Documents" shall have the meaning given such term in
Section 3.6.2.
"METROBANK Filings" shall have the meaning given such term in Section
3.6.1.
"METROBANK Financial Statements" shall have the meaning given such term in
Section 3.7.3.
"METROBANK Preferred Stock" shall mean the Preferred Stock, no par value,
of METROBANK and any Preferred Stock of METROBANK created pursuant to any
recapitalization, reorganization, or similar event or any subdivision or
combination of shares of preferred stock or similar event.
"METROBANK Stock Options" shall mean any options granted on or prior to
the Effective Time pursuant to the METROBANK Stock Option Plans.
"METROBANK Stock Option Plans" shall mean METROBANK's written Stock Option
Plans as described in the METROBANK FDIC Documents.
"New Certificates" shall have the meaning given such term in Section 2.8.1.
"Non-Performing Assets" shall mean the sum of the book value of
METROBANK's (i) loans 90 days past due as to either principal or interest, (ii)
loans on which interest is recognized only upon receipt, (iii) loans on which
interest has been renegotiated to lower than prime rate floating or prime rate
fixed at the date of loan approval (compensatory balances adjusted) due to the
adverse financial condition of the borrower, (iv) other real estate owned
(OREO), and (v) troubled debt restructures as determined solely by METROBANK's
external auditors pursuant to FASB 15 unless waived by COMERICA, subject to the
following:
(a) Non-performing assets that are counted in two or more of the
classes listed in subsections (i), (ii), (iii), (iv) and (v) will be adjusted
and counted in only one class of the five.
(b) METROBANK's non-accruals cannot be restructured and placed
into subsections (iii) and (v).
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FIRST AMENDMENT
(c) Non-performing loans as described in subsections (iii) and (v)
in an amount not to exceed $8,000,000 will be excluded as non-performing
assets.
(d) Metrocorp's Monte Verde project shall be excluded.
"Person" or "person" shall mean an individual, corporation, partnership,
limited liability company, joint venture, trust or unincorporated organization,
Governmental Entity or any other legal entity whatsoever.
"Pre-Closing Income Amount" shall mean $1,000,000 for January, 1996 and
$700,000 for February, 1996, to the extent the whole month shall have been
complete on or prior to the Effective Time.
"Property" shall have the meaning given such term in Section 3.26.1.
"Proxy Statement" shall have the meaning given such term in Section 3.4.2.
"Registration Statement" shall have the meaning given such term in Section
3.7.2.
"Regulatory Authority" shall mean any Governmental Entity, the approval of
which is legally required for consummation of the Merger.
"Regulatory Stock Sales" shall have the meaning given such term in the
definition of Acquisition Event.
"Requisite Regulatory Approvals" shall have the meaning set forth in
Section 7.1.2.
"Returns" shall mean all returns, declarations, reports, statements, and
other documents required to be filed with respect to federal, state, local and
foreign Taxes, and the term "Return" means any one of the foregoing Returns.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Site Assessment" shall have the meaning given such term in Section 5.7.1.
"Stock Option Agreement" shall mean the agreement between METROBANK and
COMERICA dated the date of this Amended Agreement.
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FIRST AMENDMENT
"Subsidiary" shall mean, with respect to any corporation (the "parent"),
any other corporation, association or other business entity of which more than
50% of the shares of the Voting Stock are owned or controlled, directly or
indirectly, by the parent or by one or more Subsidiaries of the parent, or by
the parent and one or more of its Subsidiaries.
"Subsidiary Merger Agreement" shall have the meaning given such term in
Section 2.1.
"Superior Proposal" shall have the meaning given such term in Section
6.2.5.
"Surviving Corporation" shall have the meaning given such term in Section
2.1.
"Surviving Corporation Stock" shall have the meaning given such term in
Section 2.4.
"Taxes" shall mean all federal, state, local and foreign net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties, or other taxes, together with any interest and any penalties, additions
to tax, or additional amounts with respect thereto, and the term "Tax" means
any one of the foregoing Taxes.
"Tender Offer" shall mean the commencement (as such term is defined in
Rule 14d-2 under the Exchange Act) of a tender offer or the filing by any
person of a registration statement under the Securities Act with respect to, a
tender offer to purchase any shares of METROBANK Common Stock such that, upon
consummation of such offer, such person would own or control 15% or more of the
then outstanding shares of METROBANK Common Stock.
"Understanding" shall have the meaning set forth in Section 6.1.5.
"Voting Stock" shall mean the stock or other interest entitling the
holders thereof to vote in the election of the directors, trustees or Persons
performing similar functions of the Person in question, except that it shall
not include any stock or other interest so entitling the holders thereof to
vote only upon the happening of a contingency, whether or not such contingency
has occurred.
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ARTICLE 2 THE MERGER
2.1 The Merger. Subject to the terms and conditions of this
Amended Agreement, as promptly as practicable following the receipt of the Last
Regulatory Approval and the expiration of all applicable waiting periods, but
in no event prior to January 1, 1996, unless otherwise agreed by the parties,
HOLDINGS shall be merged into METROBANK (with METROBANK being the Surviving
Corporation of the merger) in accordance with the applicable provisions of the
California Financial Code and the California Corporations Code (the "Merger")
pursuant to the Agreement of Merger attached to the May Agreement as Exhibit
2.1 (the "Subsidiary Merger Agreement"). The closing of the Merger (the
"Closing") shall take place at a location, time and Business Day (but not later
than March 10, 1996), to be designated by COMERICA and reasonably concurred in
by METROBANK (the "Closing Date"). The Merger shall be effective when the
Subsidiary Merger Agreement (together with any other documents required by law
to effectuate the Merger) shall have been approved by the Superintendent of
Banks and filed with the Secretary of State of the State of California. When
used in this Amended Agreement, the term "Effective Time" shall mean the time
of filing of the Subsidiary Merger Agreement with the Secretary of State, and
"Surviving Corporation" shall mean METROBANK.
Section 2.2 Effect of Merger. By virtue of the Merger and at the
Effective Time, all of the rights, privileges, powers and franchises and all
property and assets of every kind and description of METROBANK and HOLDINGS
shall be vested in and be held and enjoyed by the Surviving Corporation,
without further act or deed, and all the estates and interests of every kind of
METROBANK and HOLDINGS, including all debts due to either of them, shall be as
effectively the property of the Surviving Corporation as they were of METROBANK
and HOLDINGS immediately prior to the Effective Time, and the title to any real
estate vested by deed or otherwise in either METROBANK or HOLDINGS shall not
revert or be in any way impaired by reason of the Merger; and all rights of
creditors and liens upon any property of METROBANK and HOLDINGS shall be
preserved unimpaired and all debts, liabilities and duties of METROBANK and
HOLDINGS shall be debts, liabilities and duties of the Surviving Corporation
and may be enforced against it to the same extent as if such debts, liabilities
and duties had been incurred or contracted by it, and none of such debts,
liabilities or duties shall be expanded, increased, broadened or enlarged by
reason of the Merger.
Section 2.3 Articles of Incorporation. The articles of incorporation
of HOLDINGS in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with the provisions thereof and the name of the Surviving
Corporation shall be "Metrobank."
Section 2.4 Conversion of HOLDINGS Stock. The authorized and issued
capital stock of HOLDINGS, all of which shall be owned by COMERICA, immediately
prior to the Effective Time,
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FIRST AMENDMENT
on and after the Effective Time, pursuant to the Subsidiary Merger Agreement
and without any further action on the part of COMERICA or HOLDINGS shall be
converted into one share of common stock of the Surviving Corporation (the
"Surviving Corporation Stock"). Each outstanding stock certificate which prior
to the Effective Time represented shares of capital stock of HOLDINGS
automatically and for all purposes shall be deemed to represent the number of
shares of Surviving Corporation Stock into which the shares of capital stock of
HOLDINGS represented by such certificate have been converted as provided in
this Section 2.4.
Section 2.5 Conversion of METROBANK Stock Options. At the Effective
Time, all outstanding rights with respect to METROBANK Common Stock pursuant to
stock options under the METROBANK Stock Option Plans shall be converted into
and become equivalent rights with respect to COMERICA Common Stock at the
applicable Conversion Rate, and COMERICA shall assume each METROBANK Stock
Option in accordance with the terms of the METROBANK Stock Option Plans and
the stock option agreement by which it is evidenced.
Section 2.6 Conversion of METROBANK Common Stock.
2.6.1 Except as provided in Section 2.7, each share of Fully
Diluted METROBANK Common Stock shall be converted at the Effective Time into
and become the right to receive that number of shares of duly authorized,
validly issued, fully paid and nonassessable shares of COMERICA Common Stock
equal to the Conversion Rate, as determined at the Effective Time, subject to
adjustment, if any, as provided in any other section of this Amended Agreement;
provided, however, that the shares held by any shareholder who requests
appraisal rights (within the meaning of the California Corporations Code) for
which proper notice is given in accordance with the California Corporations
Code for appraisal rights, shall not be so converted and in lieu of such
conversion shall be treated in accordance with the provisions of the California
Corporations Code regarding appraisal rights.
2.6.2 The Conversion Rate shall be further appropriately
adjusted to reflect any recapitalization, reorganization, reclassification,
split-up, merger, consolidation, exchange, stock or other dividend or
distribution (other than regular quarterly cash dividends), made, declared or
effective with respect to the COMERICA Common Stock between the date of this
Amended Agreement and the Effective Time.
Section 2.7 Fractional Shares. No fractional shares of COMERICA
Common Stock shall be issued in the Merger. In lieu thereof, each holder of
METROBANK Common Stock who would otherwise be entitled to receive a fractional
share shall receive an amount in cash equal to the product (rounded to the
nearest hundredth) obtained by multiplying (a) the Agreement Date COMERICA
Share Price by (b) the fraction of the share of COMERICA Common Stock to which
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FIRST AMENDMENT
such holder would otherwise be entitled. No such holder shall be entitled to
dividends or other rights in respect of any such fraction.
Section 2.8 Exchange Procedures. On or as soon as practicable after
the Effective Time, COMERICA will deliver to the Exchange Agent certificates
representing a sufficient number of shares of COMERICA Common Stock issuable in
the Merger and funds representing a sufficient amount of cash payable for
fractional shares in the Merger pursuant to Section 2.7 of this Amended
Agreement.
2.8.1 Upon surrender for cancellation to the Exchange Agent of
one or more certificates for shares of METROBANK Common Stock ("METROBANK
Certificates"), accompanied by a duly executed letter of transmittal in proper
form, the Exchange Agent shall, as promptly as practicable thereafter, deliver
to each holder of such surrendered METROBANK Certificates, certificates
representing the appropriate number of shares of COMERICA Common Stock ("New
Certificates") and/or checks for payment of cash in lieu of fractional shares,
in respect of the METROBANK Certificates. In no event shall the holders of
METROBANK Certificates entitled to receive cash in lieu of fractional shares be
entitled to receive interest on such amounts.
2.8.2 Until the METROBANK Certificates have been surrendered
and exchanged as herein provided, each outstanding METROBANK Certificate shall
represent, on and after the Effective Time, the right to receive the number of
shares of COMERICA Common Stock into which the number of shares of METROBANK
Common Stock shown thereon have been converted as provided by Section 2.6. No
dividends or other distributions that are declared on COMERICA Common Stock
shall be paid to holders thereof otherwise entitled to receive the same until
the METROBANK Certificates have been surrendered in exchange for New
Certificates in the manner herein provided, but upon such surrender, such
dividends or other distributions, from and after the Effective Time, will be
paid to such holders in accordance with the terms of such COMERICA Common
Stock. In no event shall the holders entitled to receive such dividends or
other distributions be entitled to receive interest on such dividends or other
distributions.
2.8.3 No transfer taxes shall be payable by any shareholder in
respect of the issuance of New Certificates, except that if any New Certificate
is to be issued in a name other than that in which the METROBANK Certificates
surrendered shall have been registered, it shall be a condition of such
issuance that the holder requesting such issuance shall properly endorse the
certificate or certificates and shall pay to COMERICA or the Exchange Agent any
transfer taxes payable by reason thereof, or of any prior transfer of such
surrendered certificate, or establish to the satisfaction of COMERICA or the
Exchange Agent that such taxes have been paid or are not payable.
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2.8.4 Any COMERICA Common Stock or cash delivered to the
Exchange Agent (together with any interest or profits earned thereon) and not
distributed pursuant to this Section 2.8 at the end of nine months from the
Effective Time, shall be returned to COMERICA, in which event the Persons
entitled thereto shall look only to COMERICA for payment thereof.
2.8.5 Notwithstanding anything to the contrary set forth in
Sections 2.8.2 and 2.8.3 hereof, if any holder of METROBANK Common Stock shall
be unable to surrender such holder's METROBANK Certificates because such
certificates have been lost or destroyed, such holder may deliver in lieu
thereof an affidavit and indemnity bond in form and substance and with surety
satisfactory to Exchange Agent and COMERICA.
2.8.6 The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the shares of COMERICA Common
Stock held by it from time to time hereunder, except that it shall receive and
hold all dividends or other distributions paid or distributed with respect to
such shares of COMERICA Common Stock for the account of the Persons entitled
thereto.
2.8.7 After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of METROBANK Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates representing such shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for COMERICA Common Stock as
provided in this Article 2.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF METROBANK.
METROBANK represents and warrants to COMERICA as follows (for purposes of
this Amended Agreement, all representations, warranties and schedules shall be
deemed to have been given as of the date of the May Agreement except where
another date is specified):
Section 3.1 Organization; Corporate Power; Etc. METROBANK is a bank
duly organized, validly existing and in good standing under the laws of the
State of California. METROBANK has all requisite corporate power and authority
to own, lease and operate its properties and assets and to carry on its
business substantially as it was being conducted on the date of the
MayAgreement, except where the failure to have such power or authority would
not have a Material Adverse Effect on METROBANK. METROBANK is authorized by
the California Superintendent of Banking to conduct a general banking business.
METROBANK is not a member of the Federal Reserve System. METROBANK'S deposits
are insured by the FDIC in the manner and to the full extent provided by law.
METROBANK maintains and operates branch offices only in the State of
California. Neither the scope of the business of METROBANK or any Subsidiary
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FIRST AMENDMENT
of METROBANK nor the location of any of their respective properties requires
that METROBANK or any of its Subsidiaries be licensed or qualified to conduct
business in any jurisdiction other than the State of California.
Section 3.2 Licenses and Permits. Except as disclosed on Schedule
3.2, METROBANK and its Subsidiaries have all material licenses, certificates,
franchises, rights and permits that are necessary for the conduct of their
respective businesses, and such licenses are in full force and effect, except
for any failure to be in full force and effect that would not, individually or
in the aggregate, have a Material Adverse Effect on METROBANK. The properties,
assets, operations and businesses of METROBANK and its Subsidiaries are and
have been maintained and conducted, in all material respects, in compliance
with all applicable licenses, certificates, franchises, rights and permits.
Section 3.3 Subsidiaries. Other than as set forth on Schedule 3.3,
the only corporation, partnership, joint venture or other entity in which
METROBANK owns, directly or indirectly (except as pledgee pursuant to loans or
stock or other interest held as the result of or in lieu of foreclosure
pursuant to pledge or other security arrangement), any equity position or other
voting interest is Metrocorp, Inc. Except as disclosed on Schedule 3.3,
Metrocorp, Inc. has all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as presently
conducted without limitation as to time.
Section 3.4 Authorization of Agreement; No Conflicts.
3.4.1 The execution and delivery of this Amended Agreement and
the Subsidiary Merger Agreement by METROBANK and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of METROBANK, subject only to the
approval of this Amended Agreement, the Subsidiary Merger Agreement and the
Merger by METROBANK's shareholders. This Amended Agreement has been duly
executed and delivered by METROBANK and constitutes a valid and binding
obligation of METROBANK enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of California state banks and in any
case, by general equitable principles, and the Subsidiary Merger Agreement,
upon due execution and filing thereof by METROBANK in accordance with the
applicable provisions of the California Financial Code and the California
Corporations Code, will constitute a valid and binding obligation of METROBANK,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of California banks generally and by general equitable
principles.
3.4.2 Except as disclosed on Schedule 3.4, the execution and
delivery of this Amended Agreement and the Subsidiary Merger Agreement and the
consummation of the
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transactions contemplated hereby and thereby do not and will not conflict with,
or result in any violation of or default or loss of a material benefit under,
any provision of the Articles of Incorporation or bylaws of METROBANK or,
except for the necessity of obtaining Requisite Regulatory Approvals and
approval of the shareholders of METROBANK, any material mortgage, indenture,
lease, agreement or other material instrument or any permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to METROBANK or its properties, other than any such
conflict, violation, default or loss which will not have a Material Adverse
Effect on METROBANK or which will be cured or waived prior to the Effective
Time. No material consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
in connection with the execution and delivery of this Amended Agreement, the
Subsidiary Merger Agreement by METROBANK and/or the consummation by it of the
transactions contemplated hereby or thereby, except for (a) filings required in
order to obtain the Requisite Regulatory Approvals, (b) the filing of a proxy
statement in definitive form relating to the meeting of shareholders of
METROBANK to be held in connection with this Amended Agreement and the
transactions contemplated hereby (the "Proxy Statement"); (c) the filing of the
Subsidiary Merger Agreement with the Superintendent of Banks of the State of
California and the Secretary of State of California; and (d) Tax filings.
Section 3.5 Capital Structure.
3.5.1 The authorized capital stock of METROBANK consists
solely of 25,000,000 shares of Common Stock, no par value per share and
15,000,000 shares of Preferred Stock, no par value per share. At the close of
business on the Business Day next preceding the date of the May Agreement,
5,377,124 shares of Common Stock were outstanding, no shares were held by
METROBANK in its treasury and no shares of Common Stock were reserved for
issuance for other purposes except that 880,000 shares of Common Stock were
reserved for issuance pursuant to the METROBANK Stock Option Plans of which
715,693 shares subject to METROBANK Stock Options were outstanding. There were
no shares of METROBANK Preferred Stock issued and outstanding. All outstanding
shares of METROBANK capital stock are validly issued, fully paid and
nonassessable (except for assessments made pursuant to Section 662 of the
California Financial Code) and do not possess any preemptive rights. There
are not on the date of this Amended Agreement any options, (other than the
METROBANK Stock Options described on Schedule 3.27 to the May Agreement and the
Stock Option Agreement), warrants, calls, rights, commitments, securities or
agreements of any character to which METROBANK is a party or by which it is
bound obligating METROBANK to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of METROBANK or
obligating METROBANK to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement.
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FIRST AMENDMENT
3.5.2 METROBANK is the direct owner, beneficially and of
record, of all of the issued and outstanding capital stock of Metrocorp, Inc.,
its only direct Subsidiary, free and clear of all liens, pledges, charges and
other encumbrances of any nature whatsoever.
Section 3.6 METROBANK Filings.
3.6.1 Since January 1, 1993, METROBANK and its Subsidiaries
have filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, copies of which have been
made available to COMERICA except to the extent prohibited by law, that were
required to be filed with (a) the Federal Reserve Board or any Federal Reserve
Bank; (b) the California Superintendent of Banks; (c) the Federal Deposit
Insurance Corporation; and (d) any other federal, state or local governmental
or regulatory authority. All such reports, registrations and filings are
collectively referred to as the "METROBANK Filings". As of their respective
filing dates, each of the past METROBANK Filings (a) was true and complete in
all material respects (or was amended so as to be so promptly following
discovery of any discrepancy); and (b) complied in all material respects with
all of the statutes, rules and regulations enforced or promulgated by the
governmental or regulatory authority with which it was filed (or was amended so
as to be so promptly following discovery of any such noncompliance) and none
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The METROBANK Financial Statements, in the case of audited
financial statements, have been prepared in accordance with Generally Accepted
Accounting Principles or applicable banking regulations applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Form F-4
of the FDIC) and fairly present (subject, in the case of the unaudited
statements, to recurring adjustments normal in nature and amount) the
consolidated financial position of METROBANK as of the dates thereof and the
consolidated results of its operations, cash flows and changes in shareholders'
equity for the periods then ended.
3.6.2 METROBANK has filed each report, schedule, registration
statement and definitive proxy statement and amendments to each of the
foregoing since January 1, 1993 that METROBANK was required to file with the
FDIC since such date (the "METROBANK FDIC Documents"), all of which have been
made available to COMERICA. As of their respective dates, the METROBANK FDIC
Documents complied in all material respects with the applicable requirements of
the Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such METROBANK FDIC Documents,
and none of the METROBANK FDIC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
METROBANK included in the METROBANK FDIC Documents comply in all material
respects
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FIRST AMENDMENT
with applicable accounting requirements and with the published rules and
regulations of the SEC and FDIC (as applicable) with respect thereto, and, in
the case of audited financial statements, have been prepared in accordance with
Generally Accepted Accounting Principles or applicable banking regulations
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form F-4 of the FDIC) and fairly present (subject, in the case of
the unaudited statements, to recurring adjustments normal in nature and amount)
the consolidated financial position of METROBANK as of the dates thereof and
the consolidated results of its operations, cash flows and changes in
shareholders' equity for the periods then ended.
Section 3.7 Accuracy of Information Supplied.
3.7.1 No representation or warranty of METROBANK contained in
this Amended Agreement or any statement, schedule, exhibit or certificate given
or to be given by or on behalf of METROBANK or its Subsidiaries to COMERICA in
connection herewith and none of the information supplied or to be supplied by
METROBANK or its Subsidiaries to COMERICA under this Amended Agreement contains
or will contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading.
3.7.2 None of the information supplied or to be supplied by
METROBANK for inclusion or incorporation by reference in, or relating to
METROBANK and included or incorporated by reference in, (i) the Registration
Statement on Form S-4 to be filed with the SEC by COMERICA in connection with
the issuance of shares of COMERICA Common Stock in the Merger (including the
Proxy Statement and prospectus constituting a part thereof, the "Registration
Statement") will, at the time the Registration Statement becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; (ii) the Proxy Statement and any amendment or
supplement thereto will, at all times from the date of mailing to shareholders
of METROBANK through the date of the meeting of shareholders of METROBANK to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and (iii) the statements, correspondence,
applications and forms to be filed with securities or "blue sky" authorities,
self regulatory authorities, the NYSE and AMEX or any Governmental Entity in
connection with the Merger, the issuance of any shares of COMERICA Common Stock
in connection with the Merger, or any Requisite Regulatory Approvals will, at
the time filed or at the time they become effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy
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FIRST AMENDMENT
Statement (except for such portions thereof that relate only to COMERICA and
its Subsidiaries) will comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
3.7.3 METROBANK has or will deliver to COMERICA copies of: (a)
the audited balance sheets of METROBANK and its consolidated Subsidiaries as of
December 31, 1994 and 1993 and the related statements of income, changes in
shareholders' equity and cash flows for the years then ended and the related
notes to such financial statements, all as audited by Arthur Andersen, L.L.P.,
independent auditors (the "METROBANK Financial Statements"), and METROBANK will
hereafter until the Closing Date deliver to COMERICA copies of additional
financial statements of METROBANK as provided in Sections 5.1.1(iii) and
6.1.11(iii). The METROBANK Financial Statements, in the case of audited
financial statements, have been prepared (and all of said additional financial
statements will be prepared) in accordance with Generally Accepted Accounting
Principles or applicable banking regulations applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form F-4 of the
FDIC) consistently followed throughout the periods covered by such statements,
and present (and will when prepared present) fairly the financial position of
METROBANK and its consolidated Subsidiaries as of the respective dates
indicated and the results of their operations, cash flows and changes in
shareholders' equity at the respective dates and for the respective periods
covered by such financial statements.
Section 3.8 Compliance with Applicable Laws. Except as disclosed in
the METROBANK FDIC Documents filed prior to the date of the May Agreement the
business of METROBANK and its Subsidiaries is not being conducted in violation
of any law, ordinance or regulation, including, without limitation, Regulation
Q, except for violations which individually or in the aggregate would not have
a Material Adverse Effect on METROBANK. Except as set forth in Schedule 3.8,
no investigation or review by any Governmental Entity with respect to METROBANK
is pending or, to the knowledge of METROBANK threatened, nor has any
Governmental Entity indicated to METROBANK an intention to conduct the same.
Section 3.9 Litigation. Except as set forth in Schedule 3.9, there
is no suit, action or proceeding pending or, to the knowledge of METROBANK,
threatened against METROBANK or any Subsidiary which, if adversely determined,
would have a Material Adverse Effect on METROBANK and its Subsidiaries; nor is
there any judgment, decree, consent order, injunction or order of any
Governmental Entity or arbitrator outstanding against METROBANK or any
Subsidiary having, or which, insofar as reasonably can be foreseen, in the
future would have, any such Material Adverse Effect. Schedule 3.9 contains a
true, correct and complete list, including identification of the applicable
insurance policy covering such litigation, if any, subject to reservation of
rights, if any, the applicable deductible and the amount of any reserve
therefor, of all pending litigation in which METROBANK or any Subsidiary is a
named party, and except as disclosed on Schedule 3.9,
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FIRST AMENDMENT
all of which is adequately covered by insurance in force, except for applicable
deductibles, or have been adequately reserved for in accordance with
METROBANK's prior business practices.
Section 3.10 Agreements with Banking Authorities. Except as set forth
on Schedule 3.10, none of METROBANK or any Subsidiary is a party to any written
agreement, memorandum of understanding, order or directive with any
Governmental Entity.
Section 3.11 Insurance. METROBANK and its Subsidiaries have in full
force and effect policies of insurance with respect to their assets and
businesses against such casualties and contingencies and in such amounts, types
and forms as are customarily appropriate for their businesses, operations,
properties and assets. Schedule 3.11 contains a list of all policies of
insurance and bonds carried and owned by METROBANK or any Subsidiary. None of
METROBANK or any Subsidiary is in default under any such policy of insurance or
bond such that it can be canceled and all material claims thereunder have been
filed in timely fashion. METROBANK and its Subsidiaries have filed claims with,
or given notice of claim, to their insurers or bonding companies in timely
fashion, with respect to all material matters and occurrences for which they
believe they have coverage.
Section 3.12 Title to Assets other than Real Property. METROBANK and
its Subsidiaries have good and marketable title to all their properties and
assets other than real property which is the subject of Section 3.13, owned or
leased by METROBANK or any Subsidiary, free and clear of all mortgages, liens,
encumbrances, pledges or charges of any kind or nature except as disclosed on
Schedule 3.12 and except for: (a) encumbrances as set forth in the METROBANK
Financial Statements; (b) liens for current Taxes not yet due which have been
fully reserved for and (c) encumbrances, if any, that are not substantial in
character, amount or extent or that do not materially detract from the value,
or interfere with present use of the property subject thereto or affected
thereby.
Section 3.13 Real Property. Schedule 3.13 is an accurate list and
general description of all real property owned or leased by METROBANK or any of
its Subsidiaries, including Other Real Estate Owned. METROBANK and its
Subsidiaries have good and marketable title to the real property they
respectively own, described in such schedule, free and clear of all mortgages,
covenants, conditions, restrictions, easements, liens, security interests,
charges, claims, assessments and encumbrances, except for (a) rights of
lessors, lessees or sublessees in such matters that are reflected in a written
lease; (b) current taxes (including assessments collected with taxes) not yet
due and payable; (c) encumbrances, if any, that are not substantial in
character, amount or extent or that do not materially detract from the value,
or interfere with present use of the property subject thereto of affected
thereby; and (d) other matters as described in Schedule 3.13. METROBANK and
its Subsidiaries have valid leasehold interests in the leaseholds they
respectively hold, free and clear of all mortgages, liens, security interest,
charges, claims, assessments and encumbrances, except for
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FIRST AMENDMENT
(a) claims of lessors, co-lessees or sublessees in such matters as are
reflected in a written lease; (b) title exceptions affecting the fee estate of
the lessor under such leases and (c) other matters as described in Schedule
3.13. The activities of METROBANK and its Subsidiaries with respect to all
real property owned or leased by them for use in connection with their
operations are in all material respects permitted and authorized by applicable
zoning laws, ordinances and regulations and all laws and regulations of any
Governmental Entity. Except as set forth in Schedule 3.13, METROBANK and its
Subsidiaries enjoy quiet possession under all material leases to which either
is the lessee and all of such leases are valid and in full force and effect.
Section 3.14 Taxes.
3.14.1 Filing of Returns. Except as set forth on
Schedule 3.14(a), METROBANK and its Subsidiaries have duly prepared and filed
federal, state, local and foreign Returns (for Tax or informational purposes)
which were required to be filed by or in respect of METROBANK and its
Subsidiaries, or any of their properties, income and/or operations on or prior
to the Closing Date. As of the time they were filed, the foregoing Returns
accurately reflected the material facts regarding the income, business, assets,
operations, activities, status, and any other information required to be shown
thereon. No extension of time within which Metrobank or any of its
Subsidiaries may file any Return is currently in force.
3.14.2 Payment of Taxes. Except as disclosed on Schedule
3.14(b) with respect to all amounts in respect of Taxes imposed on METROBANK or
any Subsidiary or for which METROBANK or any Subsidiary is or could be liable,
whether to taxing authorities (as, for example, under law) or to other Persons
(as, for example, under Tax allocation agreements), with respect to all taxable
periods or portions of periods ending on or before the Closing Date, all
applicable tax laws and agreements have been or will be fully complied with in
all material respects, and all such amounts required to be paid by or on behalf
of METROBANK or any Subsidiary to taxing authorities or others on or before the
date hereof have been paid.
3.14.3 Audit History. Except as disclosed on Schedule
3.14(c), there is no review or audit by any taxing authority of any Tax
liability of METROBANK or any Subsidiary currently in progress. Except as
disclosed on Schedule 3.14(c), METROBANK and its Subsidiaries have not received
any written notice within the three years preceding the Closing Date of any
pending or threatened audit by the Internal Revenue Service or any state, local
or foreign agency of METROBANK's and its Subsidiaries' Returns or Tax liability
for any period, which pending or threatened audit has not been resolved.
METROBANK and its Subsidiaries currently have no unpaid deficiencies assessed
by the Internal Revenue Service or any state, local or foreign taxing authority
arising out of any examination of any of METROBANK's and its Subsidiaries'
Returns filed for fiscal years ended on or after December 31, 1988 through the
Closing Date, nor, to the
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FIRST AMENDMENT
Knowledge of METROBANK is there reason to believe that any material deficiency
will be assessed.
3.14.4 Statute of Limitations. Except as disclosed on
Schedule 3.14(d), no agreements are in force or are currently being negotiated
by or on behalf of METROBANK or its Subsidiaries for any waiver or for the
extension of any statute of limitations governing the time of assessment or
collection of any Tax. No closing agreements or compromises concerning Taxes
of METROBANK or its Subsidiaries are currently pending.
3.14.5 Withholding Obligations. METROBANK and its
Subsidiaries have withheld from each payment made to any of its officers,
directors and employees, the amount of all applicable Taxes, including, but not
limited to, income tax, social security contributions, unemployment
contributions, backup withholding and other deductions required to be withheld
therefrom by any Tax law and have paid the same to the proper Taxing
authorities within the time required under any applicable legislation.
3.14.6 Tax Liens. There are no Tax liens, whether
imposed by any federal, state, local or foreign taxing authority, outstanding
against any assets owned by METROBANK or its Subsidiaries, except for liens for
Taxes that are not yet due and payable.
3.14.7 Safe Harbor Lease Property. None of the assets
owned by METROBANK or its Subsidiaries is property that is required to be
treated as being owned by any other Person pursuant to the so-called safe
harbor lease provisions of former Section 168 (f)(8) of the IRC.
3.14.8 Security for Tax-Exempt Obligations. None of the
assets owned by METROBANK or its Subsidiaries directly or indirectly secures
any debt, the interest on which is tax-exempt under Section 103(a) of the IRC.
3.14.9 Tax-Exempt Use Property. None of the assets owned
by METROBANK or its Subsidiaries is "tax-exempt use property" within the
meaning of Section 168(h) of the IRC.
3.14.10 Foreign Person. None of METROBANK or its
Subsidiaries is a person other than a United States person within the meaning
of the IRC.
3.14.11 No Withholding. The transaction contemplated
herein is not subject to the tax withholding provisions of Section 3406 of the
IRC, or of Subchapter A of Chapter 3 of the IRC.
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FIRST AMENDMENT
3.14.12 Tax Reserves. METROBANK and its Subsidiaries have
made full and adequate provision and reserve for all federal, state, local or
foreign Taxes (including, without limitation, all National Bank of Long Beach
Returns that have not been cleared by the appropriate taxing authority), for
the current period for which Tax and information returns are not yet required
to be filed. The METROBANK Financial Statements contain fair and sufficient
accruals for the payment of all Taxes for the periods covered by the METROBANK
Financial Statements (including, without limitation, all National Bank of Long
Beach Returns that have not been cleared by the appropriate taxing authority),
and all periods prior thereto.
3.14.13 Tax Elections. No new material elections with
respect to Taxes or any changes in current material elections with respect to
Taxes affecting the assets owned by METROBANK or its Subsidiaries shall be made
after the date of the May Agreement without the prior written consent of
COMERICA, which shall not be unreasonably withheld, except that METROBANK or
its Subsidiaries may make an election under FASB 109 without prior consent.
COMERICA shall be deemed to have consented in writing to any election METROBANK
or its Subsidiaries shall desire to make if: (i) the electing Person shall
have notified the director of Taxes, of COMERICA in writing of its desire to
make such election, including in such a reasonably complete summary of the
election it desires to make and its reasons for desiring to make such election
at least 15 Business Days prior to the due date (including extensions thereof)
for filing such election, and (ii) COMERICA shall not have responded in writing
to such notice prior to the fifth Business Day prior to the due date (including
extensions thereof) for filing such election.
3.14.14 IRC Section 382 Applicability. None of METROBANK
or any of its Subsidiaries, including any party joining in any consolidated
return to which METROBANK is a member, underwent an "ownership change" as
defined in IRC Section 382(g) within the "testing period" (as defined in IRC
Section 382) ending immediately before the Effective Time, and not taking into
account any transactions contemplated by this Amended Agreement.
3.14.15 Disclosure Information. Within 45 days of the
date of the May Agreement, METROBANK will deliver to COMERICA a schedule
setting forth the following information with respect to METROBANK and as of
the most recent practicable date (as well as on an estimated pro forma basis
(excluding charges contemplated by Section 5.11.1) as of the Closing giving
effect to the consummation of the transactions contemplated hereby): (a)
METROBANK's basis in its assets; (b) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to METROBANK; and (c) the amount of any
deferred gain or loss allocable to METROBANK and arising out of any deferred
intercompany transactions. This Section 3.14.15 shall not be deemed to be a
representation or warranty for purposes of this Amended Agreement.
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FIRST AMENDMENT
Section 3.15 Performance of Obligations. METROBANK and its
Subsidiaries have performed all material obligations required to be performed
by them to date and none of METROBANK nor any Subsidiary is in default under or
in breach of any term or provision of any covenant, contract, lease, indenture
or any other covenant to which any is a party, is subject or is otherwise
bound, and no event has occurred that, with the giving of notice or the passage
of time or both, would constitute such default or breach, where such default or
breach or failure to perform would have a Material Adverse Effect on METROBANK
and its Subsidiaries. To METROBANK's Knowledge, and except as disclosed on
Schedule 3.15, no party with whom METROBANK or its Subsidiaries has an
agreement that is of material importance to the businesses of METROBANK and its
Subsidiaries taken as a whole is in default thereunder.
Section 3.16 Loans and Investments. Except as set forth on Schedule
3.16, all loans, leases and other extensions of credit, and guaranties,
security agreements or other agreements supporting any loans or extensions of
credit, and investments of METROBANK and its Subsidiaries are, and constitute,
in all material respects, the legal, valid and binding obligations of the
parties thereto and are enforceable against such parties in accordance with
their terms, except as the enforceability thereof may be limited by applicable
law and otherwise by bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of California banks or creditors generally and by general
equitable principles. Except as described in Schedule 3.16, as of April 1995,
no loans or investments held by METROBANK or any Subsidiary are (i) more than
ninety days past due with respect to any scheduled payment of principal or
interest, other than loans on a non-accrual status; (ii) classified as "loss,"
"doubtful," "substandard" or "specially mentioned" by METROBANK or any federal
or state banking regulators; or (iii) on a non-accrual status in accordance
with METROBANK's loan review procedures. Except as set forth on Schedule 3.16,
none of such investments (other than loans) are subject to any restrictions,
contractual, statutory or other, that would materially impair the ability of
the entity holding such investment to dispose freely of any such investment at
any time, except restrictions on the public distribution or transfer of any
such investments under the Securities Act and the regulations thereunder or
state securities laws and pledges or security interests given in connection
with government deposits. All loans, leases or other extensions of credit
outstanding, or commitments to make any loans, leases or other extensions of
credit to any Affiliates of METROBANK are disclosed on Schedule 3.16. For
outstanding loans or extensions of credit or commitments to make loans or
extensions of credit where the original principal amounts are in excess of
$25,000 and which by their terms are either secured by collateral or supported
by a guaranty or similar obligation the security interests have been duly
perfected in all material respects and have the priority they purport to have
in all material respects, other than by operation of law, and, in the case of
each guaranty or similar obligation, each has been duly executed and delivered
to METROBANK or a Subsidiary, and to METROBANK's Knowledge is still in full
force and effect.
Section 3.17 [Intentionally Left Blank] .
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FIRST AMENDMENT
Section 3.18 Brokers and Finders. None of METROBANK or any
Subsidiary is a party to or obligated under any agreement with any broker or
finder relating to the transactions contemplated hereby, and neither the
execution of this Amended Agreement or the Subsidiary Merger Agreement nor the
consummation of the transactions provided for herein or therein will result in
any liability to any broker or finder. METROBANK agrees to indemnify and hold
harmless COMERICA and HOLDINGS and their respective affiliates, and to defend
with counsel selected by COMERICA and HOLDINGS and reasonably satisfactory to
METROBANK from and against any liability, cost or expense, including attorneys'
fees, incurred in connection with a breach of this Section 3.18.
Section 3.19 Material Contracts. Schedule 3.19 to this Amended
Agreement is a complete and accurate written list of all material agreements,
obligations or understandings, written and oral, to which METROBANK or any
Subsidiary is a party as of the date of this Amended Agreement, except for
agreements and loans and other extensions of credit made by METROBANK in the
ordinary course of business and those items disclosed in the METROBANK
Financial Statements.
Section 3.20 Absence of Material Adverse Effect. Since January 1,
1994 and except for METROBANK's acquisition of National Bank of Long Beach and
related transactions, the businesses of METROBANK and its Subsidiaries have
been conducted only in the ordinary course, in the same manner as theretofore
conducted, and no event or circumstance occurred or is expected to occur which,
with the passage of time or otherwise, is likely to have a Material Adverse
Effect on METROBANK.
Section 3.21 Undisclosed Liabilities. Except as disclosed on Schedule
3.21, to METROBANK's knowledge, METROBANK and its Subsidiaries have no
liabilities or obligations, either accrued, contingent or otherwise, that are
material to METROBANK and its Subsidiaries taken as a whole and that have not
been reflected or disclosed in the METROBANK Financial Statements, or incurred
subsequent thereto in the ordinary course of business consistent with past
practices. METROBANK has no knowledge of any basis for the assertion against
it or any Subsidiary of any liability, obligation or claim (including without
limitation that of any Governmental Entity) that is likely to result in or
cause a Material Adverse Effect as to METROBANK that is not fairly reflected in
the METROBANK Financial Statements.
Section 3.22 Employees; Employee Benefit Plans; ERISA.
3.22.1 All of METROBANK's and its Subsidiaries'
obligations for payment to trusts or other funds or to any Governmental Entity
or to any individual, director, officer, employee or agent (or his or her
heirs, legatees or legal representatives) with respect to
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unemployment compensation benefits, profit-sharing, pension or retirement
benefits or social security benefits, whether arising by operation of law, by
contract or by past custom, have been properly accrued for the periods covered
thereby on the METROBANK Financial Statements and paid when due. All of
METROBANK's and its Subsidiaries' obligations, whether arising by operation of
law, by contract or by past custom for vacation or holiday pay, bonuses and
other forms of compensation which are payable to METROBANK's and its
Subsidiaries' directors, officers, employees or agents have been properly
accrued on the METROBANK Financial Statements for the periods covered thereby
and paid when due. Except as set forth on Schedule 3.22(a), there are no
unfair labor practice complaints, strikes, slowdowns, stoppages or other
controversies pending or, to the knowledge of METROBANK attempts to unionize or
controversies threatened between METROBANK or any Subsidiary or Affiliate and,
or relating to, any of their employees that are likely to have a Material
Adverse Effect on METROBANK and its Subsidiaries taken as a whole. None of
METROBANK or any Subsidiary is a party to any collective bargaining agreement
with respect to any of their employees and, except as set forth on Schedule
3.22(a), none of METROBANK or any Subsidiary is a party to a written employment
contract with any of their employees and there are no understandings with
respect to the employment of any officer or employee of METROBANK or any
Subsidiary which are not terminable by METROBANK or such Subsidiary without
liability on not more than thirty (30) days' notice. Except as disclosed in
the METROBANK Financial Statements for the periods covered thereby, all sums
due for employee compensation have been paid and all employer contributions for
employee benefits, including deferred compensation obligations, and any
benefits under any Employee Plan (as defined in Section 3.22.3 hereof) or any
Benefit Arrangement (as defined in Section 3.22.4 hereof) have been duly and
adequately paid or provided for in accordance with plan documents. Except as
set forth on Schedule 3.22(a), no director, officer or employee of METROBANK or
any Subsidiary is entitled to receive any payment of any amount under any
existing agreement, severance plan or other benefit plan as a result of the
consummation of any transaction contemplated by this Amended Agreement or the
Certificate of Merger. METROBANK and its Subsidiaries have complied with all
applicable federal and state statutes and regulations which govern workers'
compensation, equal employment opportunity and equal pay, including, but not
limited to, all civil rights laws, Presidential Executive Order 1124, and the
Fair Labor Standards Act of 1938, as amended and the Americans with
Disabilities Act.
3.22.2 Prior to the execution of this Amended Agreement,
METROBANK has delivered as Schedule 3.22(b) a complete list of:
a. all current employees of METROBANK or any
Subsidiary together with each employee's age, tenure with METROBANK or
Subsidiary, title or job classification, and the current annual rate of
compensation anticipated to be paid to each such employee; and
25
<PAGE> 163
FIRST AMENDMENT
b. all Employee Plans and Benefit Arrangements,
including all plans or practices providing for current compensation or accruals
for active Employees, including, but not limited to, all employee benefit
plans, all pension, profit-sharing, retirement, bonus, stock option, incentive,
deferred compensation, severance, long-term disability, medical, dental,
health, hospitalization, life insurance or other insurance plans or related
benefits.
3.22.3 Except as disclosed on Schedule 3.22(b), none of
METROBANK or any Subsidiary maintains, administers or otherwise contributes to
any "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject
to any provisions of ERISA and covers any employee, whether active or retired,
of METROBANK or any Subsidiary (any such plan being herein referred to as an
"Employee Plan"). True and complete copies of each such Employee Plan,
including amendments thereto, have been previously delivered to COMERICA,
together with (i) all agreements regarding plan assets with respect to such
Employee Plans, (ii) a true and complete copy of the annual reports for the
most recent three years (Form 5500 Series including, if applicable, Schedules A
and B thereto) prepared in connection with any such Employee Plan, (iii) a true
and complete copy of the actuarial valuation reports for the most recent three
years, if any, prepared in connection with any such Employee Plan covering any
active employee of METROBANK, (iv) a copy of the most recent summary plan
description of each such Employee Plan, together with any modifications
thereto, and (v) a copy of the most recent favorable determination letter (if
applicable) from the Internal Revenue Service for each Employee Plan. None of
the Employee Plans is a "multiemployer plan" as defined in Section 3(37) of
ERISA or a "multiple employer plan" as covered in Section 412(c) of the IRC,
and none of METROBANK or any Subsidiary has been obligated to make a
contribution to any such multiemployer or multiple employer plan within the
past five years. None of the Employee Plans of METROBANK or any Subsidiary of
METROBANK is, or for the last five years has been, subject to Title IV of
ERISA. Each Employee Plan which is intended to be qualified under Section
401(a) of the IRC is so qualified and each trust maintained pursuant thereto is
exempt from income tax under Section 501(a) of the IRC, and none of METROBANK,
or any Subsidiary is aware of any fact which has occurred which would cause the
loss of such qualification or exemption.
3.22.4 Except as disclosed in Schedule 3.22(b), none of
METROBANK or any Subsidiary maintains (other than base-salary and base wages)
any form of current or deferred compensation, bonus, stock option, stock
appreciation right, severance pay, salary continuation, retirement or incentive
plan or arrangement for the benefit of any director, officer or employee,
whether active or retired, of METROBANK or any Subsidiary or for any class or
classes of such directors, officers or employees. Except as disclosed in
Schedule 3.22(b), none of METROBANK or any Subsidiary maintains any group or
individual health or insurance, welfare or similar plan or arrangement for the
benefit of any director, officer or employee of METROBANK or any Subsidiary
whether active or retired, or for any class or classes of such directors,
officers or employees. Any
26
<PAGE> 164
FIRST AMENDMENT
such plan or arrangement described in this Section 3.22.4, copies of which have
been delivered to COMERICA, shall be herein referred to as a "Benefit
Arrangement."
3.22.5 All Employee Plans and Benefit Arrangements are
operated in material compliance with the requirements prescribed by any and all
statutes, governmental or court orders, or governmental rules or regulations
currently in effect, including but not limited to ERISA and the IRC, applicable
to such plans or arrangements, and plan documents relating to any such plans or
arrangements, comply with or will be amended to comply with applicable legal
requirements. To METROBANK's Knowledge, none of METROBANK or any Subsidiary
nor any Employee Plan, nor any trusts created thereunder, nor any trustee,
administrator nor any other fiduciary thereof, has engaged in a "prohibited
transaction," as defined in Section 406 of ERISA and Section 4975 of the IRC,
that could subject any of them or COMERICA to liability under Section 409 or
502(i) of ERISA or Section 4975 of the IRC or that would adversely affect the
qualified status of such plans; each "plan official" within the meaning of
Section 412 of ERISA of each Employee Plan is bonded to the extent required by
such Section 412; with respect to each Employee Plan, to METROBANK's Knowledge,
no employee of METROBANK or any Subsidiary nor any fiduciary of any Employee
Plan has engaged in any breach of fiduciary duty as defined in Part 4 of
Subtitle B of Title I of ERISA which could subject METROBANK or any Subsidiary
to liability if METROBANK or any Subsidiary is obligated to indemnify such
Person against liability. Except as disclosed in Schedule 3.22(c), METROBANK
and its Subsidiaries have not failed to make any contribution or pay any amount
due and owing as required by law or the terms of any Employee Plan or Benefit
Arrangement.
3.22.6 Except as set forth on Schedule 3.22(d), to
METROBANK's Knowledge, no Employee Plan or Benefit Arrangement has any
liability of any nature, accrued or contingent, including, without limitation,
liabilities for federal, state, local or foreign taxes, interest or penalty
other than liability for claims arising in the course of the administration of
each such plan. Except as set forth on Schedule 3.22(d), there is no pending
or, to METROBANK's Knowledge, threatened legal action, proceeding or
investigation against any Employee Plan, other than routine claims for
benefits, which could result in liability to such plans and there is no basis
for any such legal action or proceeding.
3.22.7 Each Benefit Arrangement which is a group health plan
(within the meaning of such term under IRC Section 4980B(g)(2)) complies and
has complied with the requirements of Section 601 through 608 of ERISA or
Section 4980B of the IRC governing continuation coverage requirements for
employee-provided group health plans.
3.22.8 Except as disclosed in Schedule 3.22(e), none of
METROBANK or any Subsidiary maintains any Employee Plan or Benefit Arrangement
pursuant to which any benefit or other payment will be required to be made by
METROBANK or any Subsidiary or Affiliate or
27
<PAGE> 165
FIRST AMENDMENT
pursuant to which any other benefit will accrue or vest in any director,
officer or employee of METROBANK or any Subsidiary or Affiliate, in either case
as a result of the consummation of the transactions contemplated by this
Amended Agreement.
Section 3.23 Powers of Attorney. No power of attorney or similar
authorization given by METROBANK or any Subsidiary is presently in effect or
outstanding other than powers of attorney given in the ordinary course of
business with respect to routine matters.
Section 3.24 [Intentionally Left Blank].
Section 3.25 Intellectual Property Rights. Schedule 3.25 is a
complete and accurate list of all United States and foreign patents,
trademarks, service marks, copyrights and all pending applications therefor,
whether or not issued (the "Intellectual Property"), that relate to or are used
in the operation of the businesses of METROBANK and its Subsidiaries or the
rights of METROBANK and its Subsidiaries thereunder.
Section 3.26 Hazardous Materials. Except as set forth on Schedule
3.26:
3.26.1 Except for ordinary and necessary quantities
of cleaning, pest control and office supplies, and other small quantities of
Hazardous Substances used in the ordinary course of METROBANK's and its
Subsidiaries' businesses, used and stored in compliance with applicable
Environmental Laws, or ordinary rubbish, debris and nonhazardous solid waste
stored in garbage cans or bins for regular disposal off-site, or petroleum
contained in and de minimus quantities discharged from motor vehicles in their
ordinary operation on the Property (as defined below), METROBANK and its
Subsidiaries have not engaged in the generation, use, manufacture, treatment,
transportation, storage (in tanks or otherwise), or disposal of Hazardous
Substances other than as permitted by applicable law. To METROBANK's
Knowledge, no Hazardous Substances have been released, emitted or disposed of,
or otherwise deposited, on or in any real property which is now or has been
previously owned since May 1, 1993 or currently leased by METROBANK or any
Subsidiary, including Other Real Estate Owned (collectively, the "Property"),
or to METROBANK's Knowledge (without conducting a review of METROBANK's loan
documentation for loans originated by National Bank of Long Beach), on or in
any real property in which METROBANK or any Subsidiary now holds any security
interest, mortgage or other lien or interest, with an underlying obligation in
excess of $1,000,000, except for (i) Disclosed Matters; (ii) ordinary and
necessary quantities of cleaning, pest control and office supplies, and other
small quantities of Hazardous Substances used in the ordinary course of
METROBANK's and its Subsidiaries businesses, used and stored in compliance with
applicable Environmental Laws, or ordinary rubbish, debris and nonhazardous
solid waste stored in garbage cans or bins for regular disposal off-site, or
petroleum contained in and de minimus quantities discharged from motor vehicles
in their ordinary operation on the Property; and (iii) such releases,
emissions, disposals or deposits which constituted
28
<PAGE> 166
FIRST AMENDMENT
a violation of an Environmental Law but did not have a Material Adverse Effect
on the Property involved. To METROBANK's Knowledge, no activity has been
undertaken on the Property since May 1, 1993 that would cause or contribute to:
a. the Property becoming a treatment,
storage or disposal facility within the
meaning of RCRA or any similar state law or
local ordinance;
b. a release or threatened release of
any Hazardous Substances under circumstances
which would violate any Environmental Laws; or
c. the discharge of Hazardous
Substances into any soil, subsurface water or
ground water or into the air, or the dredging
or filling of any waters, that would require a
permit or any other approval under the Federal
Water Pollution Control Act, 33 U.S.C. Section
1251 et seq., the Clean Air Act, as amended,
42 U.S.C. Section 7401 et seq., or any
similar federal or state law or local
ordinance;
the cumulative effect of which would have a material adverse effect on the
Property involved.
3.26.2 To METROBANK's Knowledge, there are not, and
never have been, any underground storage tanks located in or under the
Property.
3.26.4 None of METROBANK or any Subsidiary has
received any written notice of, and to its Knowledge, any verbal notice of, any
pending or threatened claims, investigations, administrative proceedings,
litigation, regulatory hearings or requests or demands for remedial or response
actions or for compensation, with respect to the Property, alleging
noncompliance with or violation of any Environmental Law or seeking relief
under any Environmental Law and the Property is not listed on the United States
Environmental Protection Agency's National Priorities List of Hazardous Waste
Sites, or, to METROBANK's Knowledge, any other list, schedule, log, inventory
or record of hazardous waste sites maintained by any federal, state or local
agency.
3.26.4 [Intentionally Left Blank].
3.26.5 "Hazardous Substances" shall mean any
hazardous, toxic or infectious substance, material, gas or waste which is
regulated by any local, state or federal Governmental Entity, or any of their
agencies.
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FIRST AMENDMENT
Section 3.27 Stock Options. There are no stock appreciation
rights outstanding or available under the METROBANK Stock Option Plans.
Schedule 3.27 to this Amended Agreement contains a list of all METROBANK Stock
Options outstanding, indicating for each: (a) the grant date; (b) whether
vested or unvested; (c) exercise price; and (d) a vesting schedule by optionee.
Section 3.28 Disclosure in Schedules. Anything disclosed by
METROBANK or any of its Subsidiaries in the Schedules to the May Agreement
shall be considered to have been disclosed for purposes of all representations,
warranties and covenants of such party under this Amended Agreement.
Section 3.29 Effective Date of Representations, Warranties,
Covenants and Agreements. Each representation, warranty, covenant and
agreement of METROBANK set forth in this Amended Agreement shall be deemed to
be made on and as of the date hereof and as of the Effective Time.
Section 3.30 Interest Rate Risk Management Instruments.
All interest rate swaps, floors and option agreements and similar interest rate
risk management arrangements to which METROBANK or any of its Subsidiaries is a
party or by which any of their properties or assets may be bound were entered
into in the ordinary course of business, in accordance with commercially
reasonable banking practices and applicable rules, regulations and policies of
the California Superintendent of Banks and are legal, valid and binding
obligations enforceable in accordance with their terms against METROBANK and,
to METROBANK's Knowledge, against all other parties thereto (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of California banks or creditors and by general equitable
principles). To METROBANK's Knowledge, all counterparties to such arrangements
are financially responsible and are able to adequately perform their
obligations under such arrangements. METROBANK and its Subsidiaries have duly
performed their obligations under such arrangements to the extent that such
obligations to perform have accrued and to METROBANK's Knowledge, there are no
material breaches, violations or defaults or allegations or assertions of such
by any party to such arrangements.
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FIRST AMENDMENT
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF COMERICA
COMERICA represents and warrants to METROBANK that (for purposes of
this Amended Agreement, all representations, warranties and schedules shall be
deemed to have been given as of the date of the May Agreement except where
another date is specified):
Section 4.1 Organization; Corporate Power; Etc. COMERICA is a
bank holding company registered under the BHCA. COMERICA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business substantially as they are
being conducted on the date of the May Agreement. Each of COMERICA's
Subsidiaries has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business substantially as they are
being conducted on the date of the May Agreement, except where the failure to
have such power or authority would not have a Material Adverse Effect on
COMERICA or the ability to consummate the transactions contemplated by this
Amended Agreement. COMERICA has all requisite corporate power and authority to
enter into this Amended Agreement and, subject to the obtaining of all
Requisite Regulatory Approvals, (as to which COMERICA has no basis or grounds
to believe will not be granted prior to January 31, 1996) to consummate the
transactions contemplated hereby. Neither the scope of business of COMERICA or
any Subsidiary nor the location of any of their properties requires that
COMERICA be licensed to conduct business in any jurisdiction other than those
jurisdictions in which it is licensed or qualified to do business as a foreign
corporation where the failure to be so licensed or qualified would,
individually or in the aggregate, have a Material Adverse Effect on COMERICA.
Section 4.2 Licenses and Permits. COMERICA and its Subsidiaries
have all material licenses, certificates, franchises, rights and permits that
are necessary for the conduct of their businesses, and such licenses are in
full force and effect, except for any failure to be in full force and effect
that would not, individually or in the aggregate, have a Material Adverse
Effect on COMERICA. The properties, assets, operations and businesses of
COMERICA and its Subsidiaries are and have been maintained and conducted, in
all material respects, in compliance with all applicable licenses,
certificates, franchises and permits.
Section 4.3 Authorization of Agreement; No Conflicts.
4.3.1 The execution and delivery of this Amended
Agreement and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action on the
part of COMERICA. This Amended Agreement has been duly executed and delivered
by COMERICA and constitutes a legal, valid and binding obligation of COMERICA
enforceable against COMERICA in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws
31
<PAGE> 169
FIRST AMENDMENT
affecting the rights of Delaware corporations and bank holding companies
generally and by general equitable principles, and the Subsidiary Merger
Agreement, upon due execution and filing thereof in accordance with the
applicable provisions of the California Corporations Code and California
Financial Code, will constitute a valid and binding obligation of HOLDINGS
enforceable in accordance with its terms.
4.3.2 The execution and delivery of this Amended
Agreement and the consummation of the transactions contemplated hereby does not
and will not conflict with, or result in any violation of or default or loss of
a material benefit under, any provision of the certificate of incorporation or
bylaws of COMERICA or, except for the necessity of obtaining Requisite
Regulatory Approvals, any material mortgage, indenture, lease, agreement or
other material instrument, or any permit, concession, grant, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to COMERICA, its properties or any of its Subsidiaries, other than
any such conflict, violation, default or loss which (i) will not have a
Material Adverse Effect on COMERICA; or (ii) will be cured or waived prior to
the Effective Time. No material consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental authority is
required in connection with the execution and delivery of this Amended
Agreement by COMERICA or the consummation by COMERICA of the transactions
contemplated hereby, except for (a) filings required in order to obtain
Requisite Regulatory Approvals, (b) the filing of the Registration Statement
with the SEC relating to the Merger and the declaration by the SEC and any
applicable State securities law regulatory authorities that the Registration
Statement is effective, (c) the filing and approval of the Subsidiary Merger
Agreement with the California Superintendent of Banks and the Secretary of the
State of California; (d) any approvals required to be obtained pursuant to the
BHCA or any other required governmental approval for the execution and delivery
of this Amended Agreement by COMERICA or the consummation of the Merger; (e)
any consents, authorizations, approvals, filings or exemptions required to be
made or obtained under the securities or "blue sky" laws of various
jurisdictions in connection with the issuance of shares of COMERICA Common
Stock contemplated by this Amended Agreement; and (f) any consents,
authorizations, approvals, filings or exemptions in connection with compliance
with the rules of the NYSE and AMEX.
Section 4.4 Capital Structure of COMERICA. On the date of this
Amended Agreement, the authorized capital stock of COMERICA consists of
250,000,000 shares of COMERICA Common Stock and 10,000,000 shares of Preferred
Stock without par value. At the close of business on April 28, 1995,
121,812,212 shares of COMERICA Common Stock were outstanding, no shares of
COMERICA Common Stock were reserved for issuance upon the exercise of
outstanding employee stock options (including COMERICA's Long Term Incentive
Plan and COMERICA's dividend reinvestment plan), 3,118,362 shares of COMERICA
Common Stock were held by COMERICA in its treasury (in addition to shares held
directly or indirectly in trust accounts,
32
<PAGE> 170
FIRST AMENDMENT
managed accounts and the like or otherwise held in a fiduciary capacity that
are beneficially owned by third parties), not more than 500,000 shares of
COMERICA Series C Participating Preferred Stock were reserved for issuance upon
exercise of the rights distributed to the holders of COMERICA Common Stock
pursuant to the Rights Agreement, dated as of January 26, 1988, between
COMERICA and COMERICA Bank as Rights Agent. The issuance of the shares of
COMERICA Common Stock proposed to be issued pursuant to this Amended Agreement
at the Effective Time will have been duly authorized by all requisite corporate
action of COMERICA, and such shares, when issued as contemplated by this
Amended Agreement, will constitute duly authorized, validly issued, fully paid
and non-assessable shares of COMERICA Common Stock, and will not have been
issued in violation of the preemptive or similar rights of any Person. As of
the date of this Amended Agreement, and except for this Amended Agreement, the
COMERICA Stock Plans and the COMERICA Rights Agreement, COMERICA does not have
outstanding any options, warrants, calls, rights, commitments, securities or
agreements of any character to which COMERICA is a party or by which it is
bound obligating COMERICA to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of COMERICA or obligating
COMERICA to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement.
Section 4.5 [Intentionally Left Blank].
Section 4.6 COMERICA Filings.
4.6.1 Since January 1, 1993, COMERICA and its
Subsidiaries have filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, copies of which
have been made available to METROBANK except to the extent prohibited by law,
that were required to be filed with (a) the Federal Reserve Board or any
Federal Reserve Bank; (b) the OCC; (c) the Federal Deposit Insurance
Corporation; (d) the Michigan Banking Commissioner; (e) the SEC; and (f) any
other applicable federal, state or local governmental or regulatory authority.
All such reports, registrations and filings are collectively referred to as the
"COMERICA Filings". As of their respective filing dates, each of the past
COMERICA Filings (a) was true and complete in all material respects (or was
amended so as to be so promptly following discovery of any discrepancy); and
(b) complied in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the governmental or regulatory authority
with which it was filed (or was amended so as to be so promptly following
discovery of any such noncompliance) and none contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The COMERICA
Financial Statements, together with the financial statements contained in the
COMERICA Filings, have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods covered by
such statements, and present fairly the consolidated financial position of
COMERICA as of the
33
<PAGE> 171
FIRST AMENDMENT
respective dates indicated and the consolidated results of its operations and
changes in cash flows at the respective dates and for the respective periods
covered by such financial statements.
4.6.2 COMERICA has filed each report, schedule,
registration statement and definitive proxy statement and amendments to each of
the foregoing since January 1, 1993 that COMERICA was required to file with the
SEC since such date (the "COMERICA SEC Documents"), all of which have been made
available to METROBANK. As of their respective dates, the COMERICA SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such COMERICA SEC Documents,
and none of the COMERICA SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
COMERICA included in the COMERICA SEC Documents comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q of the
SEC) and fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount) the consolidated
financial position of COMERICA as at the dates thereof and the consolidated
results of its operations and cash flows or changes in financial position for
the periods then ended.
Section 4.7 Accuracy of Information Supplied.
4.7.1 No representation or warranty of COMERICA
contained in this Amended Agreement or any statement, schedule, exhibit or
certificate given or to be given by or on behalf of COMERICA to METROBANK in
connection herewith and none of the information supplied or to be supplied by
COMERICA to METROBANK under this Amended Agreement contains or will contain any
untrue statement of material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
4.7.2 None of the information supplied or to be
supplied by COMERICA for inclusion or incorporation by reference in, or
relating to COMERICA and included or incorporated by reference in, (i) the
Registration Statement on Form S-4 to be filed with the SEC by COMERICA in
connection with the issuance of shares of COMERICA Common Stock in the Merger
(including the Proxy Statement and prospectus constituting a part thereof, the
"Registration Statement") will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary
34
<PAGE> 172
FIRST AMENDMENT
to make the statements therein, in light of the circumstances under which they
were made, not misleading; (ii) the Proxy Statement and any amendment or
supplement thereto will, at all times from the date of mailing to shareholders
of METROBANK through the date of the meeting of shareholders of METROBANK to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and (iii) the statements, correspondence,
applications and forms to be filed with securities or "blue sky" authorities,
self regulatory authorities, the NYSE or AMEX or any Governmental Entity in
connection with the Merger, the issuance of any shares of COMERICA Common Stock
in connection with the Merger, or any Requisite Regulatory Approvals will, at
the time filed or at the time they become effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Registration
Statement (except for such portions thereof that relate only to METROBANK and
its Subsidiaries) will comply in all material respects with the provisions of
the Securities Act and the rules and regulations thereunder.
Section 4.8 Compliance With Applicable Laws. Except as disclosed
in the COMERICA SEC Documents filed prior to the date of this Amended
Agreement, the businesses of COMERICA and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation, except for
violations which individually or in the aggregate would not, have a Material
Adverse Effect on COMERICA and its Subsidiaries taken as a whole. No
investigation or review by any Governmental Entity with respect to COMERICA is
pending or, to the knowledge of COMERICA, threatened, nor has any Governmental
Entity indicated to COMERICA an intention to conduct the same, other than those
the outcome of which, as far as can be reasonably foreseen, will not have a
Material Adverse Effect on COMERICA or any Subsidiary.
Section 4.9 Litigation. Except as disclosed in the COMERICA SEC
Documents, there is no suit, action or proceeding pending or, to COMERICA's
Knowledge, threatened against or affecting COMERICA or any of its Subsidiaries
which, if adversely determined, would have a Material Adverse Effect on
COMERICA or any Subsidiary of COMERICA taken as a whole; nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against COMERICA or any Subsidiary of COMERICA having,
or which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
Section 4.10 Agreements with Banking Authorities. Except as set
forth on Schedule 4.10, neither COMERICA nor any subsidiary of COMERICA is a
party to any memorandum of understanding with any Governmental Entity.
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Section 4.11 Performance of Obligations. COMERICA and its
Subsidiaries have performed in all material respects all of the obligations
required to be performed by them to date and none of COMERICA nor any of its
Subsidiaries is in default under or in breach of any term or provision of any
covenant, contract, lease, indenture or any other covenant to which it is a
party, is subject or is otherwise bound, and no event has occurred that, with
the giving of notice or the passage of time or both, would constitute such
default or breach, where such default or breach would have a Material Adverse
Effect on COMERICA and its Subsidiaries, taken as a whole. To COMERICA's actual
knowledge, no party with whom COMERICA or its Subsidiaries has an agreement
that is of material importance to the business of COMERICA and its Subsidiaries
taken as a whole, is in default thereunder.
Section 4.12 Brokers and Finders. COMERICA is not a party to or
obligated under any agreement with any broker or finder relating to the
transactions contemplated hereby. COMERICA agrees to indemnify and hold
harmless METROBANK and its affiliates, and to defend with counsel selected by
METROBANK and reasonably satisfactory to COMERICA from and against any
liability, cost or expense, including attorneys' fees, incurred in connection
with a breach of this Section 4.12.
Section 4.13 Absence of Material Adverse Effect. Except as
disclosed in COMERICA SEC Documents, since January 1, 1994, the businesses of
COMERICA and its Subsidiaries have been conducted only in the ordinary course,
in the same manner as theretofore conducted, and no event or circumstance has
occurred or is expected to occur which, with the passage of time or otherwise,
had in or is likely to have a Material Adverse Effect on COMERICA.
Section 4.14 Undisclosed Liabilities. COMERICA and its
Subsidiaries have no liabilities or obligations, either accrued, contingent or
otherwise, that are material to COMERICA and its Subsidiaries taken as a whole
and that have not been: (a) reflected or disclosed in the COMERICA Financial
Statements; (b) incurred subsequent to January 1, 1994 in the ordinary course
of business; or (c) disclosed in writing to METROBANK prior to the date of this
Amended Agreement. COMERICA knows of no basis for the assertion against it or
any of its Subsidiaries of any liability, obligation or claim (including
without limitation that of any Governmental Entity) that is likely to result in
or cause a Material Adverse Effect on COMERICA and its Subsidiaries, taken as a
whole, that is not fairly reflected in the COMERICA Financial Statements.
Section 4.15 Effective Date of Representations, Warranties,
Covenants and Agreements. Each representation, warranty, covenant and
agreement of COMERICA set forth in this Amended Agreement shall be deemed to be
made on and as of the date hereof and as of the Effective Time.
Section 4.16 Disclosure in Schedules. Anything disclosed by
COMERICA or any of its Subsidiaries in the Schedules to the May Agreement shall
be considered to have been disclosed
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FIRST AMENDMENT
for purposes of all representations, warranties and covenants of such party
under this Amended Agreement.
ARTICLE 5 ADDITIONAL AGREEMENTS
Section 5.1 Access to Information, Due Diligence, etc.
5.1.1 Upon reasonable notice, METROBANK and its
subsidiaries shall allow COMERICA and HOLDINGS and their accountants, counsel
and other representatives reasonable access to its officers, employees,
properties, books, contracts, commitments and records and from the date hereof
through the Effective Time, shall furnish or provide access to COMERICA as soon
as practicable, (i) a copy of each METROBANK Filing filed since the date of
this Amended Agreement after such document has been filed with the appropriate
Governmental Entity; (ii) unless otherwise prohibited by law, a copy of each
report, schedule and other documents filed or received by it during such period
with any Regulatory Authority or the Internal Revenue Service, as to documents
other than those related to employees or customers and other than those
distributed to banks generally; (iii) as promptly as practicable following the
end of each calendar month after the date hereof, a consolidated balance sheet
of METROBANK as of the end of such month; and (iv) all other information
concerning its business, properties, assets, financial condition, results of
operations, liabilities, personnel and otherwise as COMERICA or HOLDINGS may
reasonably request.
5.1.2 Upon reasonable notice, COMERICA shall allow
to METROBANK and its accountants, counsel and other representatives such access
to its officers, employees, properties, books, contracts, commitments and
records as COMERICA provides to financial analysts in the normal course of
business and, from the date hereof through the Effective Time at METROBANK's
request, shall furnish to METROBANK as soon as practicable, a copy of each
COMERICA SEC Document filed since the date of this Amended Agreement.
5.1.3 METROBANK, HOLDINGS and COMERICA each agrees
to keep confidential and not divulge to any other party or Person (other than
to the employees, attorneys, accountants and consultants of each who have a
need to receive such information and other than as may be required by law or
the rules of the NYSE or the AMEX) any information received from the other,
unless and until such documents and other information otherwise becomes
publicly available. In the event of termination of this Amended Agreement for
any reason, the parties shall promptly return or at the election of the other
party destroy all non-public documents obtained from the other and any copies
or notes of such documents (except as otherwise required by law) and, upon the
request of the other party, confirm such destruction to the other in writing.
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Section 5.2 Shareholder Approval.
5.2.1 METROBANK shall promptly call a meeting of its
shareholders to be held at the earliest practicable date after the date on
which the initial Registration Statement is filed with the SEC, but in no event
later than October 31, 1995, for the purpose of ratifying and confirming this
Amended Agreement and authorizing the Subsidiary Merger Agreement and the
Merger. The METROBANK Board of Directors will recommend to the METROBANK
shareholders ratification and confirmation of this Amended Agreement, the
Subsidiary Merger Agreement and the Merger; provided, however, that the
METROBANK Board of Directors may withdraw such recommendation if such Board of
Directors believes in good faith that a Superior Proposal has been made and
shall have determined in good faith, after consultation with its outside legal
counsel, that the withdrawal of such recommendation is necessary for such Board
of Directors to comply with its fiduciary duties under applicable law.
5.2.2 Prior to the Effective Time of the Merger,
COMERICA, as the sole shareholder of HOLDINGS shall take all action necessary
for the consummation of the Merger by HOLDINGS.
Section 5.3 Taking of Necessary Action.
5.3.1 Subject to the terms and conditions of this
Amended Agreement, each of the parties hereto agrees, subject to applicable
laws and the fiduciary duties of METROBANK's, COMERICA's or HOLDINGS's Board of
Directors as advised in writing by counsel, to use all reasonable efforts
promptly to take or cause to be taken all action and promptly to do or cause to
be done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Amended Agreement and the Subsidiary Merger Agreement, including, without
limitation, the delivery of any certificate or other document reasonably
requested by counsel to a party to this Amended Agreement. Without limiting
the foregoing, COMERICA, METROBANK, and HOLDINGS will use their reasonable
efforts to obtain all consents of third parties and Government Entities
necessary or, in the reasonable opinion of COMERICA and HOLDINGS or METROBANK
advisable for the consummation of the transactions contemplated by this Amended
Agreement. Without limiting the foregoing, COMERICA shall cause HOLDINGS to
take all actions necessary to execute and file the Subsidiary Merger Agreement
and to effect all transactions contemplated of HOLDINGS by this Amended
Agreement. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Amended Agreement or
the Subsidiary Merger Agreement, or to vest the Surviving Corporation with full
title to all properties, assets, rights, approvals, immunities and franchises
of METROBANK and its Subsidiaries, the proper officers or directors of COMERICA
or METROBANK, as the case may be, shall take all such necessary action.
Notwithstanding the foregoing, nothing in this Amended Agreement shall be
construed to require
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FIRST AMENDMENT
METROBANK to take any action (or omit to take any action) which may affect the
Conversion Rate or the Agreement Date Comerica Shares, except as may be
specifically required by this Amended Agreement.
5.3.2 The obligations of METROBANK contained in
Section 6.2.5 of this Amended Agreement shall continue to be in full force and
effect despite any Default thereof by reason of receipt of a Superior Proposal
(defined below) and any Default thereof by the defaulting party shall entitle
COMERICA to such legal or equitable remedies as may be provided in this Amended
Agreement or by law notwithstanding that any action or inaction of the board of
directors or officers of the defaulting party which is required to enable such
party to fulfill such obligations may be excused based on the continuing
fiduciary obligations of such party's board of directors and officers to its
shareholders: it being understood that neither METROBANK's or HOLDINGS's
respective board of directors nor any member thereof nor any of their officers
shall be liable to COMERICA for any such action or inaction under any
circumstances whatsoever; provided further, however, that in the event of
actual payment of the liquidated damages provided for in Section 8.5 of this
Amended Agreement, METROBANK shall have no further obligations or liabilities
of any kind under this Amended Agreement and COMERICA and HOLDINGS shall have
no further obligations of any kind under this Amended Agreement.
Section 5.4 Registration Statement and Applications.
5.4.1 COMERICA and METROBANK will cooperate and
jointly prepare and file as promptly as practicable the Registration Statement,
(in which the Proxy Statement will be included as a prospectus), the
statements, applications, correspondence or forms to be filed with appropriate
State securities law regulatory authorities, and the statements, correspondence
or applications to be filed to obtain the Requisite Regulatory Approvals to
consummate the transactions contemplated by this Amended Agreement. COMERICA
will print and distribute the Proxy/Prospectus and amendments thereto at its
own expense. Each of COMERICA and METROBANK shall use all reasonable efforts
to have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing, and thereafter mail the Proxy Statement to the
stockholders of METROBANK. COMERICA shall prepare and file the listing
application to be filed with the New York Stock Exchange with respect to the
COMERICA Common Stock to be issued in the Merger. Each party will furnish all
financial or other information, including accountant comfort letters relating
thereto, certificates, consents and opinions of counsel concerning it and its
Subsidiaries received by such party.
5.4.2 Each party shall provide to the other at the
request of the other party: (i) immediately prior to the filing thereof, copies
of all material statements, applications, correspondence or forms to be filed
with state securities law regulatory authorities, the SEC and other appropriate
regulatory authorities to obtain the Requisite Regulatory Approvals to
consummate
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FIRST AMENDMENT
the transactions contemplated by this Amended Agreement; provided, however,
that no approval need be obtained from any party to which such materials are
provided; and (ii) promptly after delivery to, or receipt from, such regulatory
authorities all written communications, letters, reports or other documents
relating to the transactions contemplated by this Amended Agreement.
Section 5.5 Expenses.
5.5.1 Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Amended Agreement and the
transactions contemplated hereby shall be paid by the party incurring the same,
including, without limitation, all costs associated with any registration or
filing required for resales of COMERICA Common Stock by Affiliates of
METROBANK; provided, however, that COMERICA will file on a timely basis at its
own expense the reports required by Rule 144(c) of the Securities Act.
5.5.2 In the event METROBANK fees and expenses
incurred in connection with this Amended Agreement and the transactions
contemplated by this Amended Agreement, including attorneys', accountants',
investment bankers' and any other fees, change of control payments, severance
and termination payments collectively exceed the sum of $1,400,000 in the
aggregate without the prior written approval of COMERICA (such fees
individually shall not exceed the following amounts: (i) accounting and legal
fees and investment banking expenses: $330,000; (ii) change of control
payments: $525,000; (iii) investment banking fees: $250,000 (iv) severance and
other payments: $295,000), the excess shall be deducted from METROBANK
Consolidated Net Worth as provided in the definition of METROBANK Consolidated
Net Worth. METROBANK shall use its best efforts to ensure that its attorneys,
accountants, investment bankers and other consultants engaged in connection
with the transaction contemplated by this Amended Agreement submit full and
final bills on or before the Closing Date and that all such expenses are paid
or properly accrued prior to the Closing Date.
Section 5.6 Notification of Certain Events.
5.6.1 METROBANK shall provide to COMERICA and
HOLDINGS, as soon as practicable, written notice (sent via facsimile and
overnight mail or courier) of the occurrence or failure to occur of any of the
events, circumstances or conditions that are the subject of Sections 6.1 and
6.2, which notice shall provide reasonable detail as to the subject matter
thereof.
5.6.2 COMERICA shall provide to METROBANK as soon as
practicable, (sent via facsimile and overnight mail or courier) written notice
of the occurrence or failure to occur of any of the events, circumstances or
conditions that are the subject of Section 6.3, which notice shall provide
reasonable detail as to the subject matter thereof.
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5.6.3 The parties shall promptly advise each other
in writing of any change or event which could reasonably be expected to have a
Material Adverse Effect on the business, properties, assets, financial
condition, results of operations, liabilities or personnel of any such party.
5.6.4 METROBANK shall immediately notify COMERICA in
writing in the event that METROBANK becomes aware that the Registration
Statement or Proxy Statement at any time contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or that the
Registration Statement or the Proxy Statement otherwise is required to be
amended as supplemented, which notice shall specify, in reasonable detail, the
circumstances thereof. COMERICA shall promptly amend and supplement such
materials and disseminate the new or modified information so as to fully comply
with the Securities Act and applicable NYSE and AMEX rules and regulations.
Section 5.7 Environmental Assessment.
5.7.1 COMERICA and HOLDINGS shall have the right (to
the extent allowable by METROBANK, the current owner of such property or by
law) to conduct before the Closing Date, but to be commenced no later than 30
days and completed no later than 90 days after the date of the May Agreement,
at their sole expense, environmental site investigations and assessments ("Site
Assessments") covering any real property owned or leased by METROBANK
(including Other Real Estate Owned whether currently owned or previously owned
by METROBANK) or held in trust or otherwise managed by METROBANK, for the
purpose of determining whether there exists on such real property any
environmental condition which could result in any liability, cost or expense to
COMERICA, HOLDINGS, the Surviving Corporation or any other owner, user or
occupant of such property relating to Hazardous Substances or other adverse
environmental conditions. Such Site Assessment may include both above and
below the ground testing for environmental damage or the presence of Hazardous
Substances on such property as may be reasonably necessary to conduct the Site
Assessment in the opinion of the persons conducting such Site Assessment and
METROBANK shall allow such persons access to such property during normal
business hours and upon reasonable prior notice in order to permit them to
conduct the Site Assessment and shall otherwise cooperate with such persons in
connection therewith. In exercising its rights hereunder, COMERICA shall
coordinate with METROBANK to avoid unduly interfering with the conduct of
business by METROBANK and its Subsidiaries. For invasive testing (exclusive of
asbestos sampling)(e.g., soil and soil boring testing), COMERICA will first
present to METROBANK the plan of testing that is contemplated by COMERICA and
COMERICA may not conduct such testing without METROBANK's prior written
consent, which shall not be unreasonably withheld or delayed. In connection
with such inspection and testing, COMERICA shall obtain at its sole cost and
expense all permits and licenses required in connection with the performance of
such work. COMERICA shall repair any damages caused by its tests or
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FIRST AMENDMENT
inspections. COMERICA hereby agrees to defend and indemnify METROBANK for all
injuries and damages to persons or property caused by such surveys and testing
and for the cost of removing all mechanics' or materialmen's liens on the
inspected property resulting from such surveys and testing ordered by COMERICA.
As used herein, "Disclosed Matters" shall mean all information contained in the
Site Assessments obtained by COMERICA.
5.7.2 If any such Site Assessment discloses any
environmental condition which would be reasonably likely to have a Material
Adverse Effect on such real property of more than $1,000,000 in the aggregate,
COMERICA and HOLDINGS shall have the right and option to terminate this Amended
Agreement and declare it null and void pursuant to Section 8.1.9 by delivering
written notice of termination to METROBANK within thirty (30) days after the
receipt of the last such Site Assessment and including with such notice a copy
of such Site Assessment. In the event of any termination of this Amended
Agreement pursuant to this Section 5.7.2, neither party shall have any
liability to the other pursuant to Section 8.5.
5.7.3 COMERICA and HOLDINGS shall not provide any
such Site Assessment, or any non-public information contained therein, to any
third party, including any Governmental Entity, unless otherwise required to do
so by court order or order of a regulatory agency.
5.7.4 No expenditure, accrual or reserve made by
METROBANK respecting any Site Assessment, or any litigation or regulatory
proceeding arising in connection therewith or any effect on METROBANK resulting
from METROBANK's compliance with this Section 5.7, shall constitute or be
deemed to be breach, violation of or failure to satisfy any representation,
warranty, covenant, condition or other provision of this Amended Agreement or
otherwise be considered in determining whether any such breach, violation or
failure to satisfy shall have occurred. No such expenditure, accrual or
reserve made by METROBANK relating to any such Site Assessment shall be used by
the parties in the calculation of the Conversion Rate or the Agreement Date
Comerica Shares.
Section 5.8 Schedules/Closing Schedules. METROBANK has
separately delivered to COMERICA and HOLDINGS all of its Schedules to this
Amended Agreement. On the Closing Date, METROBANK shall prepare updates of the
schedules provided for in Articles 3 and 6 of this Amended Agreement and shall
deliver to COMERICA revised schedules containing the updated information (or a
certificate signed by METROBANK's Chief Executive Officer stating that there
have been no changes on the applicable schedules); and COMERICA shall prepare
and deliver to METROBANK an update of Schedule 4.10 containing updated
information (or a certificate signed by COMERICA's Vice President, Secretary or
Assistant Secretary stating that there has been no change on Schedule
4.10)(collectively, the "Closing Schedules"). The Closing Schedules shall be
dated as of the last Business Day prior to the Closing Date and shall contain
information as of the
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FIRST AMENDMENT
Last Business Day prior to the Closing Date or as of such earlier date as is
practicable in the circumstance.
Section 5.9 Intentionally Left Blank.
Section 5.10 Insurance. For a period of six years after the
Effective Time, COMERICA shall use its commercially reasonable efforts to cause
to be maintained in effect policies of directors' and officers' liability
insurance (with such coverage, terms and conditions as are no less advantageous
than the insurance presently maintained by COMERICA with respect to its
officers and directors) with respect to all matters arising from facts or
events which occurred before the Effective Time for which METROBANK or its
Subsidiaries would have had an obligation to indemnify their directors and
officers; provided, however, that in no event shall COMERICA be obligated to
expend, in order to maintain or provide insurance coverage pursuant to this
Section 5.10 any amount per annum in excess of 150% of the amount of the 1995
annual premiums paid by METROBANK for such insurance (the "Maximum Amount").
If the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, COMERICA shall use all
reasonable efforts to maintain the most advantageous policies of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Amount.
Section 5.11 Additional Accruals.
5.11.1 Immediately prior to the Closing Date,
METROBANK will take, upon receipt of a written request from COMERICA to do so,
a gross charge-off to earnings in the amounts previously agreed to by the
parties to conform to COMERICA's credit loss reserve practices. Further, at
COMERICA's or HOLDINGS's request, METROBANK shall, consistent with Generally
Accepted Accounting Principles, establish such additional accruals and reserves
immediately prior to the Effective Time as may be necessary to conform
METROBANK's accounting and credit loss reserve practices and methods to those
of COMERICA and HOLDINGS or its Subsidiaries; provided, however, that no
accrual or reserve made by METROBANK pursuant to this Section 5.11.1, or any
litigation or regulatory proceeding arising out of any such accrual or reserve,
or any other effect on METROBANK resulting from METROBANK's compliance with
this Section 5.11.1, shall constitute or be deemed to be a breach, violation of
or failure to satisfy any representation, warranty, covenant, condition or
other provision of this Amended Agreement or otherwise be considered in
determining whether any such breach, violation or failure to satisfy shall have
occurred; and provided further, however, that no accrual or reserve made by
METROBANK pursuant to this Section 5.11.1 shall be used by the parties in the
calculation of the Conversion Rate or Agreement Date Comerica Shares.
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FIRST AMENDMENT
5.11.2 METROBANK shall continue to accrue bonuses
and 401k amounts in a manner consistent with METROBANK's prior practice.
Funding of the METROBANK ESOP shall be at the discretion of METROBANK.
5.11.3 METROBANK shall take all actions and accruals
necessary to ensure that the METROBANK ESOP is fully funded by December 31,
1995 and continues to be fully funded through the Effective Time.
ARTICLE 6 CONDUCT OF BUSINESS
Section 6.1 Affirmative Conduct of METROBANK. During the period
from the date of execution of the May Agreement through the Effective Time,
METROBANK agrees to carry on its business, and to cause its Subsidiaries to
carry on their businesses, in the ordinary course in substantially the manner
in which heretofore conducted, subject to changes in law applicable to all
California banks and directives from regulators, and use all commercially
reasonable efforts to preserve intact its business organization, keep available
the services of its officers and employees, (other than terminations in the
ordinary course of business) and preserve its relationship with customers,
suppliers and others having business dealings with it; and, to these ends, will
fulfill each of the following:
6.1.1 Use its commercially reasonable efforts, or
cooperate with others, to expeditiously bring about the satisfaction of the
conditions specified in Article 7 hereof, including without limitation, taking
such additional loan and OREO reserves as are necessary to fulfill the
condition set forth in Section 7.2.5; provided, however, that in the event
METROBANK has not taken such action, the parties will compute the METROBANK
Consolidated Net Worth and the Conversion Rate on a pro forma basis to include
such necessary additional reserves;
6.1.2 Advise COMERICA promptly in writing of any
change that would have a Material Adverse Effect on METROBANK's capital
structure, financial condition, assets, results of operations, business or
prospects of METROBANK or of any matter which would make the representations
and warranties set forth in Article 3 hereof not true and correct in any
material respect as of the effective date of the Registration Statement and at
the Effective Time;
6.1.3 Keep in full force and effect all of the
existing material permits and licenses of METROBANK and its Subsidiaries;
6.1.4 Use its commercially reasonable efforts to
maintain insurance or bonding coverage on all material properties for which it
is responsible and on its business operations, and carry not less than the same
coverage for fidelity, public liability, personal injury, property damage and
other risks equal to that which is in effect as of the date of the May
Agreement; and
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FIRST AMENDMENT
notify COMERICA in writing promptly of any facts or circumstances which could
affect METROBANK and its Subsidiaries' ability to maintain such insurance or
bonding coverage;
6.1.5 Perform its contractual obligations and not
become in default on any of such obligations, and not amend, modify, or, except
as they may be terminated in accordance with their terms, terminate any
material contract, agreement, understanding, commitment, or offer, whether
written or oral, (collectively referred to as an "Understanding") or materially
default in the performance of any of its obligations under any Understanding
where such default would have a Material Adverse Effect on METROBANK;
6.1.6 Duly observe and conform to all legal
requirements applicable to its business, except for any failure to so observe
and conform, that would not, individually or in the aggregate, and, in the
future will not, have a Material Adverse Effect on METROBANK;
6.1.7 Duly and timely file as and when due all
reports and Returns required to be filed with any Governmental Entity;
6.1.8 Maintain its assets and properties in good
condition and repair, normal wear and tear excepted;
6.1.9 Promptly advise COMERICA in writing of any
event or any other transaction within METROBANK's Knowledge whereby any Person
or related group of Persons acquires, after the date of the May Agreement,
directly or indirectly, record or beneficial ownership (as defined in Rule
13d-3 promulgated by the SEC pursuant to the Exchange Act) control of 5% or
more of the outstanding shares of METROBANK Common Stock prior to the record
date fixed for the METROBANK shareholders' meeting or any adjourned meeting
thereof to approve the transactions contemplated herein;
6.1.10 Charge off, in a manner consistent with past
practices (which amount shall equal at least $5,100,000, (gross, exclusive of
recoveries), for the year ended on December 31, 1995, except to the extent the
amount otherwise not charged off is added to the minimum amount of reserves for
possible loan losses required by Section 7.2.5), all loans, receivables and
other assets, or portions thereof, deemed uncollectible in accordance or
consistent with Generally Accepted Accounting Principles, regulatory accounting
principles, applicable law or regulation, or classified as "loss" or as
directed by any regulatory authority, unless such classification or direction
has been disregarded in good faith and METROBANK has submitted in writing to
such regulatory authority the basis upon which it has so disregarded such
classification or direction; and maintain the allowance for loan losses of
METROBANK at a level which is adequate to provide for all known and reasonably
expected losses on assets outstanding and other inherent risks in METROBANK's
loan portfolio;
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FIRST AMENDMENT
6.1.11 Furnish to COMERICA, as soon as practicable,
and in any event within fifteen days after it is prepared; (i) a copy of any
report submitted to the board of directors of METROBANK and access to the
working papers related thereto, provided, however, that METROBANK need not
furnish COMERICA any materials relating to METROBANK's rights and obligations
under this Amended Agreement or any agreement or instrument delivered pursuant
to this Amended Agreement, including, without limitation, communications of
METROBANK's legal counsel regarding METROBANK's rights against and obligations
to COMERICA or its Affiliates under this Amended Agreement or books, records
and documents covered by the attorney-client privilege, or which are attorneys'
work product, (ii) copies of all material reports, renewals, filings,
certificates, statements, correspondence and other documents specific to
METROBANK or filed with or received from the SEC, Federal Reserve Board, any
Federal Reserve Bank, the FDIC, the California State Banking Department or any
Governmental Entity; (iii) monthly unaudited balance sheets, statements of
income and changes in shareholders' equity for METROBANK and its Subsidiaries
and quarterly unaudited consolidated and consolidating balance sheets,
statements of income and changes in shareholders' equity for METROBANK, in each
case prepared on a basis consistent with past practice, and (iv) such other
reports as COMERICA may reasonably request (which are otherwise deliverable
under this Section 6.1.11) relating to METROBANK. Each of the financial
statements of METROBANK and delivered pursuant to this subsection 6.1.11 shall
be accompanied by a certificate of the Chief Financial Officer of METROBANK to
the effect that such financial statements fairly present the financial
information presented therein of METROBANK, for the periods covered, subject to
recurring adjustments normal in nature and amount, necessary for a fair
presentation and are prepared on a basis consistent with past practice;
6.1.12 METROBANK agrees that through the Effective
Time, as of their respective dates, (i) each METROBANK Filing will be true and
complete in all material respects; and (ii) each METROBANK Filing will comply
in all material respects with all of the statutes, rules and regulations
enforced or promulgated by the Governmental Entity with which it will be filed
and none will contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they will be
made, not misleading. Any financial statement contained in any of such
METROBANK Filings that is intended to present the financial position of the
entities or entity during the periods involved to which it relates will fairly
present in all material respects the financial position of such entities or
entity and will be prepared in accordance with Generally Accepted Accounting
Principles or consistent with applicable banking regulations, except as stated
therein;
6.1.13 Maintain reserves for contingent liabilities
in accordance with Generally Accepted Accounting Principles and consistent with
past practices;
6.1.14 Promptly notify COMERICA of the filing of any
litigation, or the filing of any governmental or regulatory action, including
any investigation or notice of
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investigation, or similar proceeding or notice of any material claims against
METROBANK or any of its assets;
6.1.15 Review within three months of the date of the
May Agreement all files relating to loans in the principal amount of more than
$25,000 originated by National Bank of Long Beach and advise COMERICA promptly
in writing of the discovery of any defect in such loan files or any evidence in
such files relating to any environmental condition that could exist on any real
property securing any such loan;
6.1.16 Inform COMERICA of the amounts and
categories of any loans, leases or other extensions of credit that have been
classified by any bank regulatory authority or by any unit of METROBANK as
"Specially Mentioned," "Renegotiated," "Substandard," "Doubtful," "Loss" or any
comparable classification ("Classified Credits"). METROBANK will furnish to
COMERICA, as soon as practicable, and in any event within fifteen days after
the end of each calendar month, schedules including the following: (i)
Classified Credits by type (including each credit in an amount equal to or
greater than $25,000), and its classification category; (ii) nonaccrual credits
by type (including each credit in an amount equal to or greater than $25,000),
(iii) renegotiated loans (loans on which interest has been renegotiated to
lower than market rates because of the financial condition of the borrowers) by
type, (iv) delinquent credits by type (including each delinquent credit in an
amount equal to or greater than $25,000), including an aging into 30-89 and 90+
day categories; (v) loans or leases charged off, in whole or in part, during
the previous month by type (including each such loan or lease in an amount
equal to or greater than $25,000); and (vi) other real estate or assets owned
stating with respect to each its type;
6.1.17 Furnish to COMERICA, upon COMERICA's request,
schedules with respect to the following: (i) participating loans and leases,
stating, with respect to each, whether it is purchased or sold, the loan or
lease type; (ii) loans or leases (including any commitments) by METROBANK to
any METROBANK or any Subsidiary's director, officer at or above the Vice
President level, or shareholder holding 5% or more of the capital stock of
METROBANK, including with respect to each such loan or lease the identity and,
to the best knowledge of METROBANK the relation of the borrower to METROBANK,
the loan or lease type and the outstanding and undrawn amounts; and (iii)
standby letters of credit, by type, (including each letter of credit in a face
amount equal to or greater than $25,000); and
6.1.18 Furnish to COMERICA copies of each credit
authorization package, consisting of all applications for and financial
information regarding loans, renewals of loans or other extensions of credit of
$500,000 or more (on a non-cumulative basis), which are approved by METROBANK
after the date of the May Agreement, within ten Business Days of preparation of
such packages.
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FIRST AMENDMENT
Section 6.2 Negative Covenants of METROBANK. During the period
from the date of execution of the May Agreement through the Effective Time,
METROBANK agrees (except to the extent COMERICA agrees in writing) that it
shall not:
6.2.1 (i) declare or pay any dividend on or make any
other distribution in respect of any of its capital stock other than regular
quarterly dividends in an amount not to exceed $0.15 per share; (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or (iii) repurchase or otherwise acquire any
shares of its capital stock, other than through customary repossession or for
the purpose of funding the METROBANK ESOP.
6.2.2 take any action that would result in any of
the representations and warranties set forth in the Agreement becoming untrue
in any material respect or in any of the conditions to the Merger set forth in
Article 7 not being satisfied, except to the extent such actions are undertaken
in accordance with applicable law, regulation or at the direction of any
Regulatory Authority;
6.2.3 except as specifically contemplated by the
METROBANK Stock Options or the Stock Option Agreement or Regulatory Stock
Sales, issue, deliver or sell, authorize the issuance, delivery or sale of or
purchase any shares of its capital stock or any class of securities convertible
into capital stock, or rights, warrants or options, including options under any
stock option plans;
6.2.4 amend its Certificate of Incorporation or
bylaws, except as required by applicable law or by the terms of this Amended
Agreement;
6.2.5 except in connection with Regulatory Stock
Sales, authorize or knowingly permit any of its representatives, directly or
indirectly, to solicit or encourage any Acquisition Proposal (as hereinafter
defined) or participate in any discussions or negotiations with, or provide any
nonpublic information to, any Person or group of Persons (other than COMERICA,
HOLDINGS and their representatives) concerning any such solicited Acquisition
Proposal. METROBANK shall notify COMERICA immediately if an inquiry regarding
an Acquisition Proposal is received by METROBANK, including the terms thereof.
For purposes of this Section 6.2.5, "Acquisition Proposal" shall mean any (i)
proposal pursuant to which any Person other than COMERICA or HOLDINGS would
acquire or participate in a merger or other business combination involving
METROBANK; (ii) proposal by which any Person or group, other than COMERICA or
HOLDINGS, would acquire the right to vote ten percent (10%) or more of the
capital stock of METROBANK entitled to vote thereon for the election of
directors; (iii) acquisition of the assets of METROBANK other than in the
ordinary course of business; or (iv) acquisition in excess of ten percent (10%)
of the outstanding capital stock of METROBANK, other than as contemplated by
this
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FIRST AMENDMENT
Amended Agreement. Notwithstanding the foregoing, nothing contained in this
Amended Agreement shall prevent METROBANK or its Board of Directors from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity or recommending an
unsolicited bona fide written Acquisition Proposal to the shareholders of
METROBANK, if and only to the extent that (1) the Board of Directors of
METROBANK believes in good faith (after consultation with and the concurrence
of its financial advisor) that such Acquisition Proposal would, if consummated,
result in a transaction materially more favorable to METROBANK's shareholders
from a financial point of view than the transaction contemplated by this
Amended Agreement (any such more favorable Acquisition Proposal being referred
to in this Amended Agreement as a "Superior Proposal") and the METROBANK Board
of Directors determined in good faith after consultation with its outside legal
counsel that such action is necessary for METROBANK to comply with its
fiduciary duties to shareholders under applicable law and (2) prior to
furnishing such non-public information to, or entering into discussions or
negotiations with, such person or entity, the METROBANK Board of Directors
received from such person or entity an executed confidentiality agreement, with
terms no more favorable to such party than those contained in the
Confidentiality Agreement between METROBANK and COMERICA, (B) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal, or (C) effecting Regulatory Stock Sales;
6.2.6 acquire or agree to acquire by merging,
consolidating with, or by purchasing a substantial portion of the assets of, or
in any other manner, any business or any Person or otherwise acquire or agree
to acquire any assets which are material, on a consolidated basis, to
METROBANK, other than in the ordinary course of business consistent with prior
practice;
6.2.7 sell, lease or otherwise dispose of any of its
assets which are material, individually or in the aggregate, to METROBANK,
except in the ordinary course of business consistent with prior practice;
6.2.8 incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of
METROBANK or any subsidiary thereof or guarantee any debt securities of others
other than in the ordinary course of business consistent with prior practice
and other than in connection with Regulatory Stock Sales, provided, however,
that METROBANK will provide COMERICA with the opportunity of exploring the
possibility of providing such capital to METROBANK concurrently with accessing
the markets for such additional capital.
6.2.9 except in connection with Regulatory Stock
Sales, enter into any Understanding, except (A) deposits incurred, and
short-term debt securities (obligations maturing within one year) issued, in
the ordinary course of business and consistent with prior practice, and
49
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FIRST AMENDMENT
liabilities arising out of, incurred in connection with, or related to the
consummation of this Amended Agreement, (B) commitments to make loans or other
extensions of credit in the ordinary course of business and consistent with
prior practice; (C) commitments to act as trustee or agent in the ordinary
course of business and consistent with prior practice; and (D) loan sales in
the ordinary course of business, without any recourse, provided that no
commitment to sell loans shall extend beyond the Effective Time; and (E) any
Understanding that has a value of less than $100,000 and a term of not more
than one year;
6.2.10 make or enter into a commitment to make any
loan or other extension of credit, or enter into any commitment to make any
loan or other extension of credit, to any METROBANK or Subsidiary director,
officer or employee except in accordance with practice or policy in existence
on the date of this Amended Agreement;
6.2.11 except in the ordinary course of business and
consistent with prior practice or as required by an existing contract or
disclosed in Schedule 6.2.11, grant any general or uniform increase in the
rates of pay of employees or employee benefits or any increase in salary or
employee benefits of any officer, employee or agent or pay any bonus to any
Person (except that METROBANK may pay up to 75% of the accrual for compensation
in the year in which the liability therefore is accrued);
6.2.12 sell, transfer, mortgage, encumber or
otherwise dispose of any assets or other liabilities except in the ordinary
course of business and consistent with prior practice or as required by any
existing contract;
6.2.13 make its credit underwriting policies,
standards or practices relating to the making of loans and other extensions of
credit, or commitments to make loans and other extensions of credit, less
stringent than those in effect on March 31, 1995;
6.2.14 make any capital expenditures, or commitments
with respect thereto, except those in the ordinary course of business which do
not exceed $50,000 individually or $300,000 in the aggregate;
6.2.15 except as provided in Schedule 6.2.15, renew
or extend any existing employment contract or agreement, enter into any new
employment contract or agreement or make special or extraordinary payments to
any Person without the prior written consent of COMERICA;
6.2.16 except in the ordinary course of business
consistent with prior practice, make any material investments, by purchase of
stock or securities, contributions of capital, property transfers, purchases of
any property or assets or otherwise, in any other individual, corporation or
other entity;
50
<PAGE> 188
FIRST AMENDMENT
6.2.17 except as otherwise required to correct a
prior filing, compromise or otherwise settle or adjust any assertion or claim
of a deficiency in taxes (or interest thereon or penalties in connection
therewith) or file any appeal from an asserted deficiency except in a form
previously approved by COMERICA in writing or file or amend any federal,
foreign or state tax return or report or make any tax election or change any
method or period of accounting unless required by generally accepted accounting
principles or applicable law;
6.2.18 except as contemplated in this Amended
Agreement, terminate any Employee Plan or Benefit Arrangement, other than
Employee Plans or Benefit Arrangements to be terminated in connection with
METROBANK's acquisition of National Bank of Long Beach;
6.2.19 change its fiscal year or methods of
accounting in effect at March 31, 1995, except as required by changes in
Generally Accepted Accounting Principles as concurred to by METROBANK's
independent auditors;
6.2.20 take or cause to be taken any action which
would disqualify the Merger as a "reorganization" within the meaning of Section
368(a) of the IRC.
6.2.21 take or cause to be taken into other real
estate owned any property without (i) an environmental report reporting no
adverse environmental condition on such property, with a copy of such report
delivered to COMERICA and HOLDINGS prior to taking such property into other
real estate owned; and (ii) the written consent of COMERICA or HOLDINGS, which
shall not be unreasonably withheld.
Section 6.3 Conduct of COMERICA. During the period from the date
of execution of the May Agreement through the Effective Time, COMERICA agrees
(except to the extent METROBANK shall otherwise consent in writing) to do the
following:
6.3.1 Use its commercially reasonable efforts, or
cooperate with others, to expeditiously bring about the satisfaction of the
conditions specified in Article 7 hereof;
6.3.2 Not take any action that would or might result
in any of the representations and warranties set forth in the Agreement
becoming untrue or in any of the conditions to the Merger set forth in Article
7 not being satisfied, except to the extent such actions are undertaken in
accordance with applicable law, regulation or at the direction of any
regulatory authority; and
6.3.3 Not take or cause to be taken any action which
would disqualify the Merger as a "reorganization" within the meaning of Section
368(a) of the IRC as a tax free reorganization.
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FIRST AMENDMENT
ARTICLE 7 CONDITIONS PRECEDENT TO CLOSING
Section 7.1 Conditions to the Parties' Obligations. The
obligations of all the parties to this Amended Agreement to effect the Merger
shall be subject to the fulfillment of the following conditions:
7.1.1 This Amended Agreement, the Subsidiary Merger
Agreement and the Merger shall have been validly ratified and confirmed or
authorized by the holders of a majority of the outstanding METROBANK Common
Stock entitled to vote.
7.1.2 All permits, approvals and consents required
to be obtained, and all waiting periods required to expire, prior to the
consummation of the Merger under applicable federal laws of the United States
or applicable laws of any state having jurisdiction over the transactions
contemplated by the Stock Option Agreement or the Merger shall have been
obtained or expired, as the case may be (all such permits, approvals and
consents and the lapse of all such waiting periods being referred to as the
"Requisite Regulatory Approvals"), without the imposition of any condition
which in the reasonable judgment of any party is materially burdensome upon
METROBANK COMERICA, HOLDINGS, their respective Affiliates or the Surviving
Corporation.
7.1.3 There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which: (i) makes the
consummation of the Merger illegal; (ii) requires the divestiture by COMERICA
of any material Subsidiary or of a material portion of the business of
COMERICA; or (iii) imposes any condition upon COMERICA, HOLDINGS or their
Subsidiaries (other than general provisions of law applicable to all banks and
bank holding companies) which in the judgment of COMERICA or HOLDINGS would be
materially burdensome.
7.1.4 The Registration Statement shall become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and shall
remain in effect. No legal, administrative, arbitration, investigatory or
other proceeding by any Governmental Entity shall have been instituted and, at
what would otherwise have been the Effective Time, remain pending by or before
any Governmental Entity to restrain or prohibit the transactions contemplated
hereby.
7.1.5 The shares of COMERICA Common Stock
deliverable pursuant to this Amended Agreement shall have been duly authorized
for listing, subject to notice of issuance, on the New York Stock Exchange.
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<PAGE> 190
FIRST AMENDMENT
7.1.6 COMERICA and METROBANK shall have received an
opinion from counsel to COMERICA dated the Effective Time, subject to
assumptions and exceptions normally included, and in form and substance
reasonably satisfactory to COMERICA and METROBANK to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the IRC and that COMERICA and METROBANK will each
be a party to that reorganization within the meaning of Section 368(b) of the
IRC.
7.1.7 COMERICA, HOLDINGS and METROBANK shall have
received from each of Ernst & Young, L.L.P. and Arthur Andersen, L.L.P.,
letters, dated the effective date of the Registration Statement and the
Effective Time, in form and substance satisfactory to COMERICA, HOLDINGS and
METROBANK and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
7.1.8 COMERICA, HOLDINGS, and METROBANK shall
receive opinions of their respective counsel addressed to the parties and dated
the date the Registration Statement becomes effective and the date of the
shareholders meeting to the effect that the Registration Statement and the
Proxy Statement and any amendments and supplements thereto (except for the
financial statements and notes thereto and other financial, statistical and
accounting data included in, incorporated by reference in or which should have
been included in or incorporated by reference in the Registration Statement or
the Proxy Statement as to which they need express no opinion) in substantially
the forms previously agreed to by the parties.
7.1.9 No action, suit or proceeding shall have been
instituted or threatened before any court or governmental body seeking to
challenge or restrain the transactions contemplated by this Amended Agreement
or the Stock Option Agreement which presents a substantial risk that such
transactions will be restrained or that either party hereto may suffer material
damages or other relief as a result of consummating such transactions.
7.1.10 In the event the Closing has not occurred
prior to February 1, 1996, METROBANK shall have received a bring-down dated
January 31, 1996 of the opinion of J.P. Morgan & Co., Incorporated delivered
pursuant to Section 7.3.3, which bring-down shall be reasonably acceptable to
the Board of Directors of METROBANK and confirm that the Conversion Rate is
fair to METROBANK's shareholders from a financial point of view.
Section 7.2 Conditions to COMERICA's and HOLDINGS's Obligations.
The obligations of COMERICA and HOLDINGS to effect the Merger shall be subject
to the fulfillment (or waiver by COMERICA and HOLDINGS) of the following
conditions:
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FIRST AMENDMENT
7.2.1 Except as otherwise provided in this Section
7.2, (a) the representations and warranties of METROBANK contained in Article 3
shall be true in all material respects as of the Effective Time as though made
at the Effective Time, except to the extent they expressly refer to an earlier
time and except where the failure to be true, individually or in the aggregate,
would not have or would not be reasonably likely to have, a Material Adverse
Effect on METROBANK or upon the consummation of the transactions contemplated
hereby; (b) METROBANK shall have duly performed and complied in all material
respects with all agreements and covenants required by this Amended Agreement
to be performed or complied with by it prior to or at the Effective Time,
except where the failure to so perform and comply, individually or in the
aggregate, would not have or would not be reasonably likely to have, a Material
Adverse Effect on METROBANK or upon the consummation of the transactions
contemplated hereby; (c) none of the events or conditions entitling COMERICA to
terminate this Amended Agreement under Article 8 shall have occurred and be
continuing; and (d) METROBANK shall have delivered to COMERICA a certificate
dated the date of the Effective Time and signed by its Chief Executive Officer
to the effect set forth in subsections 7.2.1 (a), (b) and (c).
7.2.2 Any consent required for the consummation of
the Merger under any agreement, contract or license to which METROBANK is a
party or by or under which it is bound or licensed, the withholding of which
might have a Material Adverse Effect on COMERICA or METROBANK or the
transactions contemplated by this Amended Agreement shall have been obtained.
7.2.3 COMERICA shall have received the Closing
Schedules and such Closing Schedules shall not reflect any item that was not on
the schedules delivered pursuant to the May Agreement that would have or would
be reasonably likely to have, a Material Adverse Effect on METROBANK or upon
the consummation of the transactions contemplated hereby.
7.2.4 The consummation of the Merger shall not be
prohibited under Section 3(d) of the BHCA or other applicable law as a result
of the relocation to or establishment in a state other than California of any
offices or operations of METROBANK.
7.2.5 METROBANK'S reserve for possible loan losses
on the last day of the month immediately preceding the month in which the
Closing Date occurs, shall be at least the greater of $17,000,000 or 2.1% of
the average of METROBANK's total outstanding gross loans for the month ending
on that date (the "Preliminary Loan Loss Reserve"); adjusted as follows:
(a) The following additions will be made
to the Preliminary Loan Loss Reserve:
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FIRST AMENDMENT
(i) $.30 for each dollar of
Non-Performing Assets on the Determination Date in excess of $18,000,000, and
(ii) if gross charge-offs are less
than $5,100,000, the difference between gross charge-offs and $5,100,000 for
the period January 1, 1995 through the earlier of December 31, 1995 or the
Closing Date.
(b) The following deductions will be
made to the Preliminary Loan Loss Reserve:
(i) $.30 for each dollar of Non-
Performing Assets on the Determination Date under $18,000,000, and
(ii) the amount of any specific reserve
in excess of $25,000 allocated to a classified loan in the April 1995 loan loss
reserve allocation report identified in Schedule 7.2.5, to the extent such
classified loans are disposed of prior to the Determination Date.
Notwithstanding the foregoing adjustments, in no event shall METROBANK's
reserve for possible loan losses be less than 1.5% of the average of
METROBANK's total loans for the month ended prior to the Determination Date.
METROBANK's reserve for OREO losses shall be $1,000,000, except to the extent
METROBANK writes down the portfolio of OREO in existence as of the date of this
Amended Agreement. The calculation of all reserves pursuant to this Section
7.2.5 shall not include any additional reserves made at COMERICA's request
pursuant to Section 5.11.
7.2.6 METROBANK's Non-Performing Assets outstanding
on the last day of the month immediately preceding the Effective Time shall be
no more than $30,000,000.
7.2.7 Between the date of the May Agreement and the
Effective Time, no event or circumstance shall have occurred which had a
Material Adverse Effect on METROBANK or its Subsidiaries, and COMERICA shall
have received a certificate signed on behalf of METROBANK by the President or
Chief Executive Officer of METROBANK to such effect.
7.2.8 COMERICA shall have received from Arthur
Andersen, L.L.P., letters dated the Effective Time, after customary review but
without audit in form and substance satisfactory to COMERICA, (i) certifying
that the conditions set forth in subsections 7.2.5 and 7.2.6 have been
satisfied and (ii) setting forth, as of the Business Day immediately prior to
the Closing Date, (A) METROBANK Consolidated Net Worth; (B) Fully Diluted
METROBANK Common Stock; (C) METROBANK's reserve for possible loan losses; and
(D) the amount of METROBANK's Non-Performing Assets.
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FIRST AMENDMENT
7.2.9 COMERICA shall have received from its legal
counsel an opinion regarding securities matters in form and substance customary
for transactions of the type contemplated by this Amended Agreement and
reasonably satisfactory to COMERICA.
7.2.10 COMERICA shall have received from legal
counsel to METROBANK an opinion as to securities and corporate matters in form
and substance customary for transactions of this nature and reasonably
satisfactory to COMERICA.
7.2.11 [Intentionally Left Blank].
7.2.12 Counsel for COMERICA shall have approved, in
the exercise of counsel's reasonable discretion, the validity of all
transactions herein contemplated, as well as the form and substance of all
opinions, certificates, instruments of transfer and other documents to be
delivered to COMERICA hereunder or that are reasonably requested by such
counsel.
7.2.13 [Intentionally Left Blank].
7.2.14 The sale of the COMERICA Common Stock
resulting from the Merger shall have been qualified or registered with the
appropriate State securities law or "blue sky" regulatory authorities of all
States in which qualification or registration is required under the State
securities laws, and such qualifications or registrations shall not have been
suspended or revoked.
7.2.15 [Intentionally Left Blank].
7.2.16 None of METROBANK or any of its Subsidiaries
shall be subject to any memorandum of understanding, cease and desist order, or
other agreement with any Governmental Entity restricting the conduct of
METROBANK's and its Subsidiaries' business, prospects and operations, so as to
have a Material Adverse Effect, other than respecting capital commitments
related to METROBANK's acquisition of National Bank of Long Beach.
7.2.17 [Intentionally Left Blank].
7.2.18 [Intentionally Left Blank].
7.2.19 [Intentionally Left Blank].
7.2.20 [Intentionally Left Blank].
7.2.21 [Intentionally Left Blank].
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FIRST AMENDMENT
7.2.22 The total number of shares of COMERICA Common
Stock that shall be issuable pursuant to the terms of this Amended Agreement
under any computation shall not be greater than 4,806,710 shares, subject to
adjustment as appropriate to reflect any recapitalization, reorganization,
reclassification, split-up, merger, consolidation, exchange, stock or other
dividend or distribution (other than regular quarterly cash dividends) made,
declared or effective with respect to the COMERICA Common Stock between the
date of the May Agreement and the Effective Time.
7.2.23 COMERICA shall have received a fully executed
non-competition agreement in substantially the form attached as Exhibit 7.2.23
to this Amended Agreement.
Section 7.3 Conditions to METROBANK's Obligations. The obligation
of METROBANK to effect the Merger shall be subject to the fulfillment of the
following conditions:
7.3.1 Except as otherwise provided in this Section
7.3, (a) the representations and warranties of COMERICA and HOLDINGS contained
in Article 4 shall be true in all material respects as of the Effective Time as
though made at the Effective Time, except to the extent they expressly refer to
an earlier time and except where the failure to be true, individually or in the
aggregate, would not have or would not be reasonably likely to have, a Material
Adverse Effect on COMERICA or HOLDINGS or upon the consummation of the
transactions contemplated hereby; (b) COMERICA and HOLDINGS shall have duly
performed and complied in all material respects with all agreements and
covenants required by this Amended Agreement to be performed or complied with
by them prior to or at the Effective Time, except where the failure to so
perform and comply, individually or in the aggregate, would not have or would
not be reasonably likely to have, a Material Adverse Effect on COMERICA or
HOLDINGS or upon the consummation of the transactions contemplated hereby; (c)
none of the events or conditions entitling METROBANK to terminate this Amended
Agreement under Article 8 shall have occurred and be continuing; and (d)
COMERICA and HOLDINGS shall each have delivered to METROBANK certificates dated
the date of the Effective Time and signed by a duly authorized officer to the
effect set forth in subsections 7.3.1 (a), (b) and (c).
7.3.2 Counsel for METROBANK shall have approved, in
the exercise of counsel's reasonable discretion, the validity of all
transactions herein contemplated, as well as the form and substance of all
opinions, certificates, instruments of transfer and other documents to be
delivered to METROBANK hereunder or reasonably requested by such counsel.
7.3.3 Prior to the mailing of the Prospectus/Proxy
Statement to the shareholders of METROBANK, METROBANK shall have received an
opinion of J.P. Morgan & Co., Incorporated dated the date of the
Prospectus/Proxy Statement, to the effect that, as of such date, the Conversion
Rate is fair to METROBANK's shareholders from a financial point of view.
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FIRST AMENDMENT
7.3.4 There shall not have been any change in the
consolidated financial condition, aggregate net assets, shareholders' equity,
business, or operating results of COMERICA and its Subsidiaries taken as a
whole, from April 30, 1995 to the Effective Time that results in a Material
Adverse Effect as to COMERICA and its Subsidiaries.
ARTICLE 8 TERMINATION, AMENDMENTS AND WAIVERS
Section 8.1 Termination. This Amended Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval by
the shareholders of METROBANK:
8.1.1 by mutual consent of the Boards of Directors
of METROBANK, HOLDINGS and COMERICA;
8.1.2 by any of COMERICA, METROBANK or HOLDINGS upon
the failure to satisfy any conditions specified in Section 7.1 if such failure
is not caused by any action or inaction of the party requesting termination of
this Amended Agreement;
8.1.3 by any of METROBANK, HOLDINGS or COMERICA if
the Effective Time shall not have occurred by the close of business on March
10, 1996, provided such failure to close shall not have been caused by the
breach of this Amended Agreement by the terminating party;
8.1.4 by COMERICA if an Acquisition Event shall have
occurred;
8.1.5 by any of METROBANK, HOLDINGS or COMERICA if
there shall have been a material breach of any of the representations or
warranties set forth in this Amended Agreement on the part of the other party,
which breach, in the reasonable opinion of the non-breaching party, by its
nature cannot be cured prior to the Closing and which breach would, in the
reasonable opinion of the non- breaching party, individually or in the
aggregate, have, or be reasonably likely to have, a Material Adverse Effect on
the breaching party or upon the consummation of the transactions contemplated
hereby;
8.1.6 by any of METROBANK, HOLDINGS or COMERICA if
this Amended Agreement, the Subsidiary Agreement and the Merger are not
ratified and approved by METROBANK's shareholders;
8.1.7 by METROBANK after the occurrence of a Default
by COMERICA or HOLDINGS and the continuance of such failure for a period of 20
Business Days after written notice of such Default, which failure to perform,
in the reasonable opinion of METROBANK and cannot be cured prior to the
Closing.
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FIRST AMENDMENT
8.1.8 by COMERICA or HOLDINGS after the occurrence
of a Default by METROBANK which results in a Material Adverse Effect on
METROBANK and the continuance of such failure for a period of 20 Business Days
after written notice of such Default, which failure to perform, in the
reasonable opinion of COMERICA and HOLDINGS cannot be cured prior to the
Closing.
8.1.9 by COMERICA in accordance with the provisions
of 5.7.2 of this Amended Agreement;
8.1.10 by COMERICA if METROBANK shall have breached
Section 5.9.
8.1.11 by COMERICA if the METROBANK Board of
Directors does not publicly recommend in the Proxy Statement that METROBANK's
shareholders approve and adopt this Amended Agreement, or if after recommending
in the Proxy Statement that shareholders ratify and confirm this Amended
Agreement, the METROBANK Board of Directors shall have withdrawn, modified or
amended such recommendation in any respect materially adverse to COMERICA or if
the Board of Directors does not call and hold the shareholders' meeting as
provided in Section 5.2.1;
8.1.12 by METROBANK upon the failure to satisfy any
conditions specified in Section 7.3;
8.1.13 by COMERICA and HOLDINGS upon the failure to
satisfy any conditions specified in Section 7.2.
8.1.14 [Intentionally Left Blank].
8.1.15 [Intentionally Left Blank].
8.1.16 by METROBANK upon (i) the occurrence of an
event of force majeure that results or is reasonably expected by METROBANK to
result in an after-tax loss to METROBANK of more than $5,000,000 on an after
tax basis (for purposes of this Amended Agreement, an event of force majeure
shall include only the following: earthquake, flood, riot, terrorism, war,
tidal wave, fire or explosion); or (ii) the recording of any expenditure,
accrual or reserve or other accounting entry of more than $5,000,000 on an
after tax basis, required to account for a liability or loss attributable to
National Bank of Long Beach and METROBANK has rights of indemnity with respect
thereto under the Stock Purchase Agreement by and between Topdanmark Bank A/S,
AKTIV Bank Holding Company, National Bank of Long Beach and METROBANK dated as
of August 31, 1994, as amended.
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FIRST AMENDMENT
8.1.17 By METROBANK in the event METROBANK is
required by a Governmental Authority (including by reason of commitments made
by METROBANK in connection with its acquisition of National Bank of Long Beach)
to effect Regulatory Stock Sales, and COMERICA does not provide such required
capital to METROBANK by purchasing METROBANK Common stock within 30 days
following COMERICA's receipt of written notification of the required Regulatory
Stock Sales from METROBANK. The purchase price of the METROBANK Common Stock
shall be determined in the same manner as under the Stock Option Agreement.
Section 8.2 Effect of Termination; Survival. Except as provided
in Section 8.5, no termination of this Amended Agreement as provided in Section
8.1 for any reason or in any manner shall release, or be construed as so
releasing, any party hereto from its obligations pursuant to Sections 5.1.3,
5.5, 5.7, 8.5 or 9.5 hereof or from any liability or damage to any other party
hereto arising out of, in connection with or otherwise relating to, directly or
indirectly, said party's material breach, Default or failure in performance of
any of its covenants, agreements, duties or obligations arising hereunder, or
any breaches of any representation or warranty contained herein arising prior
to the date of termination of this Amended Agreement.
Section 8.3 Amendment. This Amended Agreement may be amended by
the parties hereto, by action taken by METROBANK's board of directors or the
duly authorized committees thereof, and the duly authorized officers or boards
of directors of COMERICA and HOLDINGS at any time before or after approval
hereof by the shareholders of METROBANK; provided, however, that after any such
approval by the shareholders, no amendment shall be made which by law requires
further approval by such shareholders without such further approval.
Section 8.4 Waiver. Any term or provision of this Amended
Agreement may be waived in writing at any time by the party which is, or whose
shareholders are, entitled to the benefits thereof.
Section 8.5 Liquidated Damages; Cancellation Fee.
8.5.1 Provided COMERICA has not exercised its stock
option pursuant to the Stock Option Agreement:
(a) in the event of the termination of
this Amended Agreement by COMERICA and the occurrence of an Acquisition Event,
then METROBANK shall pay to COMERICA $6,000,000;
(b) [Intentionally Left Blank].
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FIRST AMENDMENT
(c) in the event of the termination of
this Amended Agreement by COMERICA pursuant to (A) Section 8.1.6 (No
Shareholder Approval), or (B) 8.1.11 (no METROBANK board recommendation or
withdrawal, modification or amendment of such recommendation in a manner
materially adverse to COMERICA), or (C) pursuant to Section 8.1.5 (breach of
representations or warranties other than for breach of warranties and
representations set forth in Section 3.26) or Section 8.1.8 (Default) where
such breach or Default shall have been caused in whole or in material part by
any action or inaction within the control of METROBANK, any Subsidiary of
METROBANK, or the directors of METROBANK or METROBANK Subsidiaries (it being
understood that any action or inaction outside of the control of METROBANK or
METROBANK Subsidiaries such as, by way of example only, the filing of a lawsuit
against them, shall not come within clause (c) of this Section 8.5.1), then
METROBANK shall pay to COMERICA the sum of $3,000,000.
Upon payment to COMERICA of any amount specified in any of clauses (a) through
(c) above, the Stock Option Agreement shall become null and void.
8.5.2 In the event COMERICA has exercised its stock
option pursuant to the Stock Option Agreement, this Amended Agreement has been
terminated and an Acquisition Event has occurred, METROBANK shall pay to
COMERICA $6,000,000 if the consummation of the Acquisition Transaction which is
the subject of the Acquisition Event occurs within 270 days of the date of the
occurrence of the subject Acquisition Event.
8.5.3 In the event of the termination of this
Amended Agreement by METROBANK pursuant to Section 8.1.5 (breach of
representations or warranties) or Section 8.1.7 (Default) and in each case such
breach or Default shall have been caused in whole or in material part by any
action or inaction within the control of COMERICA, any Subsidiary of COMERICA,
or the directors of COMERICA, or COMERICA Subsidiaries (it being understood
that any action or inaction outside of the control of COMERICA or COMERICA
Subsidiaries such as, by way of example only, the filing of a lawsuit against
them, shall not come within this Section 8.5.3), then COMERICA shall pay to
METROBANK the sum of $3,000,000.
8.5.4 The payments contemplated by Sections 8.5.1,
8.5.2 and 8.5.3 above shall be deemed reasonable and full liquidated damages
and reasonable compensation for the loss sustained by a party hereto and not as
a penalty or forfeiture. Such payments will be made within 10 Business Days
following the later to occur of the termination of the Agreement or the
Acquisition Event (as applicable). In the event METROBANK makes a payment to
COMERICA pursuant to any subsection of Section 8.5.1 and an additional payment
becomes due under any subsection of Section 8.5.1, then the amount of the
previous payment shall be credited toward any additional payment which may be
due. Upon the making and receipt of payments due under this Section 8.5,
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FIRST AMENDMENT
neither party shall have any further obligation or liability of any kind under
this Amended Agreement to the other party, except pursuant to Section 5.1.3,
5.5, 5.7 and 9.5.
8.5.5 In the event of the termination of this
Amended Agreement by either party and for any reason other than as specified in
Sections 8.5.1, 8.5.2 and 8.5.3 above, neither party shall have any further
obligation or liability of any kind to the other party, except pursuant to
Sections 5.1.3, 5.5, 5.7 and 9.5.
ARTICLE 9 GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties. None
of the representations, warranties, covenants and agreements in this Amended
Agreement or in any instrument delivered pursuant to this Amended Agreement
shall survive the Effective Time, except for those covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time or to a termination of this Amended Agreement.
Section 9.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt requested),
sent by confirmed overnight courier or telecopied (with electronic confirmation
and verbal confirmation of the person to whom such telecopy is addressed), on
the date such notice is so delivered, mailed or sent, as the case may be, to
the parties at the following addresses or (or any such other address for a
party as shall be specified by like notice):
If to METROBANK at:
Metrobank
10900 Wilshire Boulevard
Los Angeles, California 90024
Attention: David Buell, Chief Executive Officer
and Chairman of the Board
with a copy to:
Loeb and Loeb
1000 Wilshire Boulevard, Suite 1800
Los Angeles, California 90017
Attention: Robert S. Barry, Jr., Esq.
62
<PAGE> 200
FIRST AMENDMENT
If to COMERICA or HOLDINGS at:
COMERICA INCORPORATED
Corporate Secretary - Corporate Legal Department
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
Attention: Mark W. Yonkman
Section 9.3 Counterparts. This Amended Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 9.4 Entire Agreement/No Third Party Rights/Assignment.
This Amended Agreement (including the documents and instruments referred to
herein): (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) except as expressly set forth herein,
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder other than pursuant to Section 5.10 hereof; (c)
shall not be assigned by a party, by operation of law or otherwise, without the
consent of the other parties; and (d) subject to the foregoing, shall be
binding upon and shall inure to the benefit of the parties hereto and their
permitted successors and assigns.
Section 9.5 Non-disclosure of Agreement. COMERICA, METROBANK and
HOLDINGS agree, except as required by law or the rules of the NYSE or AMEX, so
long as this Amended Agreement is in effect, not to issue any public notice,
disclosure or press release with respect to the transactions contemplated by
this Amended Agreement without seeking the consent of the other party, which
consent shall not be unreasonably withheld.
Section 9.6 Governing Law. This Amended Agreement shall be
governed and construed in accordance with the laws of the State of California,
without regard to any applicable conflicts of law.
Section 9.7 Headings/Table of Contents. The table of contents
and headings contained in this Amended Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Amended Agreement.
Section 9.8 Enforcement of Agreement. The parties hereto agree
that irreparable damage will occur in the event that any of the provisions of
this Amended Agreement or the Subsidiary Merger Agreement is not performed in
accordance with its specific terms or is otherwise breached.
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<PAGE> 201
FIRST AMENDMENT
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Amended Agreement and to enforce
specifically the terms and provision hereof in any court of the United States
or any state having jurisdiction, this being in addition to any remedy to which
they are entitled at law or in equity.
Section 9.9 Severability. Any term or provision of this Amended
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Amended Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Amended Agreement in
any other jurisdiction. If any provision of this Amended Agreement is so broad
as to be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
IN WITNESS WHEREOF, METROBANK, COMERICA and HOLDINGS have caused this
Amended Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first above written.
METROBANK COMERICA INCORPORATED
By: /S/ David Buell By: /S/ Mark W. Yonkman
-------------------------------- ------------------------------
Name: David Buell Name: Mark W. Yonkman
Its: Chief Executive Officer and Its: Vice President and
Chairman of the Board Assistant Secretary
COMERICA HOLDINGS INCORPORATED
By: /S/ Mark W. Yonkman
----------------------------------
Name: Mark W. Yonkman
Its: President
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<PAGE> 202
ANNEX B
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of ____________, 1995 between Comerica
Holdings Incorporated ("Holdings"), a corporation organized under the laws of
the state of California, the headquarters of which is located in the city of
San Jose, county of Santa Clara, state of California, with capital divided into
100 shares of common stock, each of no par value, all of which is owned by
Comerica Incorporated, a bank holding company organized in the state of
Delaware ("Comerica") and Metrobank ("Metrobank"), a state bank organized under
the laws of the state of California, the headquarters of which is located in
the city of Los Angeles, county of Los Angeles, state of California, with
capital divided into 25,000,000 shares of common stock and 15,000,000 shares of
preferred stock, has been adopted pursuant to resolutions of the board of
directors of each of Metrobank, Comerica and Holdings, and adopted by the
majority vote of the shareholders of Metrobank and the consent resolution of
the sole shareholder of Holdings, pursuant to the authority given by and in
accordance with the applicable provisions of law and subject to the approval of
the applicable regulatory agency.
WITNESSETH:
WHEREAS, the Boards of Directors of Metrobank and Holdings deem it in the best
interests of Metrobank and Holdings, the public which they serve and the
shareholders of each of Holdings and Metrobank, to consolidate and merge
Metrobank with Holdings under the provisions of applicable law.
NOW THEREFORE, in consideration of the agreements contained herein, the Boards
of Directors of Metrobank and Holdings hereby adopt this Agreement of Merger,
and agree that the plan for the consummation of their merger shall be as
follows:
SECTION 1. Upon the Effective Date, as defined below, of the merger,
Metrobank and Holdings (the "Merging Parties") shall be consolidated under the
charter of Metrobank and Metrobank shall be the surviving entity and the
separate corporate existence of Holdings shall cease.
<PAGE> 203
SECTION 2. The name of the surviving institution (the "Surviving
Institution") shall be Metrobank, which shall be a California chartered bank.
SECTION 3. The Surviving Institution shall engage in the business of
banking and providing trust services and any business related or incidental
thereto, with all of the powers, and subject to all of the limitations and
restrictions, conferred or imposed by applicable laws of the State of
California and the United States of America. The corporate term of the
Surviving Institution shall be the corporate term of Metrobank. This business
shall be conducted by the Surviving Institution at its main office, which shall
be located at 10900 Wilshire Boulevard, Los Angeles, California, and at the
following legally established branches:
JOINT BRANCHES:
1. 10900 Wilshire Boulevard
Los Angeles, CA
2.
3.
4.
5.
All of the branches of Holdings and Metrobank which were in lawful operation at
the Effective Date shall continue as branches and trust representative offices
of the Surviving Institution, and the principal office of 10900 Wilshire
Boulevard, Los Angeles, California shall continue as the main office of the
Surviving Institution.
SECTION 4. The amount of capital stock of the Surviving Institution shall
be divided into 3,000 shares of common stock, each of no par value, which
shares shall be vested equally, share for share, with the voting rights and all
other rights, powers and privileges, without qualification, limitation or
restriction, of one share over another.
SECTION 5. The persons listed below shall be the directors of the
Surviving Institution until the next annual meeting of the shareholders of the
Surviving Institution or until their successors are duly elected and qualified:
Jack W. Connor
J. Michael Fulton
Walter T. Kaczmarek
[Metrobank board members]
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SECTION 6. The persons listed below shall be the senior officers of the
Surviving Institution, holding the positions listed next to their respective
names, until such persons resign or are removed from such positions:
David Buell Chairman of the Board
J. Michael Fulton Chief Executive Officer
Walter T. Kaczmarek Executive Vice President and Chief Operating
Officer
Paul Alexander
Robert Bulseco
Paul Stroube
Dan Kawamoto Executive Vice President and Chief Financial
Officer
Michael R. Ong Executive Vice President
SECTION 7. The Articles of Incorporation of Holdings shall be the
Articles of Incorporation of the Surviving Institution.
SECTION 8. The Bylaws of Metrobank in effect immediately prior to the
Effective Date of the merger, as amended, shall be and constitute the Bylaws of
the Surviving Institution until the same shall thereafter be altered, amended
or repealed.
SECTION 9. The merger shall be consummated and become effective, subject
to the terms and conditions of this Agreement of Merger and in accordance with
Section 2072 of the California Financial Code, when the Agreement of Merger,
having been filed with the Secretary of State with the approval of the
Superintendent of Banks endorsed thereon, shall have been certified by the
Secretary of State and filed with the Superintendent of Banks; provided,
however, that the date must follow, among other things, the approval of the
merger by the shareholders of Metrobank and Holdings and by the Superintendent
of the California State Banking Department. The close of business on the day
on which the merger shall become effective is herein referred to as the
"Effective Date."
SECTION 10. At the Effective Date of the merger, the corporate existence
of the Merging Parties shall be consolidated into and continued in the
Surviving Institution, which shall be deemed to be the same corporation as each
of the Merging Parties, possessing all the rights, privileges, powers and
franchises, and subject to all the restrictions, disabilities and duties of the
Merging Parties, except as such rights, privileges, powers and franchises may
be limited by law. Upon the merger becoming effective, all the provisions of
law regarding the effects of merger shall be effective with respect to the
merger and the Surviving Institution, including, without limitation, the
following:
A. All of the rights, interests, privileges, powers, and
franchises of the Merging Parties, both of a public and private nature, shall
vest in the Surviving Institution without further act or deed as effectively as
the same were vested in the Merging Parties prior to the merger.
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<PAGE> 205
B. All property, real, personal and mixed, including, without
limitation, all debts due, chooses in action of every description, licenses,
registrations, and other assets of every kind and description of the Merging
Parties shall, without further act or deed, be transferred to, vested in and
devolve upon the Surviving Institution, and shall be as effectively the
property of the Surviving Institution as they were of the Merging Parties prior
to the merger without any deed or other transfer and without any order or other
action on the part of any court or otherwise.
C. Title to any real estate, whether vested by deed or otherwise,
in the Merging Parties shall not revert or be in any way impaired by reason of
the merger or otherwise.
D. The Surviving Institution shall thenceforth be subject to all
of the restrictions, disabilities, duties, liabilities and obligations of the
Merging Parties and the same may thereafter be enforced against it to the same
extent as if the same had been incurred or contracted by the Surviving
Institution.
E. The Surviving Institution, by virtue of the merger, and
without any order or other action on the part of any court or otherwise, shall
hold and enjoy the same and all rights of property, franchises and interests,
including appointments, designations, and nominations and all other rights and
interest as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, guardian of mentally incompetent
persons and in every other fiduciary capacity, in the same manner and to the
same extent as such rights, franchises and interests were held or enjoyed by
the Merging Parties, or either of them, at the time of the merger.
F. Any action or proceeding pending by or against the Merging
Parties may be prosecuted to judgment to the same extent as if the merger had
not taken place, which judgment shall bind the Surviving Institution, or,
alternatively, the Surviving Institution may be proceeded against or
substituted in place of the Merging Parties in any such action or proceeding.
The officers and directors of the Merging Parties shall, from time to time, as
and when requested by the Surviving Institution or its successors or assigns,
execute and deliver or cause to be executed and delivered, such deeds,
instruments, assignments, or assurances as the Surviving Institution may deem
necessary, desirable, or convenient in order to vest in and confirm to the
Surviving Institution title to or possession of any property or rights of the
Merging Parties acquired or to be acquired by reason of or as a result of the
merger, or otherwise to carry out the purposes of this Merger Agreement. Any
person who, immediately before the merger became effective, was an officer or
director of the Merging Parties is hereby fully authorized, in the name of such
institution, to execute any and all such deeds, instruments, assignments, or
assurances, or to take any and all such action as may be requested by the
Surviving Institution.
SECTION 11. The manner of converting the shares of the Merging Parties
into shares of the Surviving Institution shall be as follows:
Upon the Effective Date of merger, each share of common stock of Metrobank then
issued and outstanding shall be, and hereby is, by virtue of the merger and
without any action on the part of the
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<PAGE> 206
holder thereof, converted into the right to receive _____ shares of the
common stock of Comerica Incorporated. Each option to purchase a share of
common stock of Metrobank then issued and outstanding shall be, and hereby is,
by virtue of the merger and without any action on the part of the holder
thereof, converted into a corresponding right to receive an option for _____
shares of the common stock of Comerica Incorporated on the same terms and
conditions of the Metrobank option. Each share of common stock of Holdings
then issued and outstanding shall be, and hereby is, by virtue of the merger
and without any action on the part of the holder thereof, converted into and
constitutes the shares of the common stock, no par value, of the Surviving
Institution, and all the shares of the Surviving Institution shall be owned by
Comerica Incorporated, a Delaware corporation.
SECTION 12. This Agreement of Merger may be terminated by the unilateral
action of the board of directors of either of the Merging Parties prior to the
approval of the sole shareholder of either of the Merging Parties or by the
mutual consent of the boards of both of the Merging Parties after the sole
shareholder of either of the Merging Parties has taken affirmative action.
SECTION 13. This Agreement shall be ratified and confirmed by written
consent resolution of the sole shareholder of Holdings in lieu of a
shareholders' meeting.
SECTION 14. This Agreement may be executed in one or more counterparts,
all of which shall be taken together to constitute one and the same instrument
and shall be binding upon each party who may sign a counterpart of this
instrument.
IN WITNESS WHEREOF, Metrobank and Holdings, pursuant to the approval and
authority duly given by resolution of their respective Boards of Directors,
have caused this Merger Agreement to be signed by their respective Presidents
and Secretaries on this day and year first above written.
COMERICA HOLDINGS METROBANK
INCORPORATED
By:_______________________ By:_____________________________
Name: Mark W. Yonkman Name:
Its: President Its:
By:_______________________ By:_____________________________
Name: Robert C. Shrosbree Name:
Its: Secretary Its: Secretary
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ANNEX C
CHAPTER 13
DISSENTER'S RIGHTS
Section 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES;
CORPORATE PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) of Section 1201, each shareholder of such corporation entitled to vote on
the transaction and each shareholder of a disappearing corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as
defined in subdivision (b). The fair market value shall be determined as of
the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split,
reverse stock split or share dividend which become effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by the
Commissioner of Corporations under subdivision (o) of Section 25100 or (B)
listed on the list of OTC margin stocks issued by the Board of Governors of the
Federal Reserve System, and the notice of meeting of shareholders to act upon
the reorganization summarizes this section and Sections 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any shares with
respect to which there exists any restriction on transfer imposed by the
corporation or by any law or regulation; and provided, further, that this
provision does not apply to any class of shares described in subparagraph (A)
or (B) if demands for payment are filed with respect to 5 percent or more of
the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short- form merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
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(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
Section 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS;
DEMAND FOR PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision
(b) of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such price.
Section 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting shares or to be exchanged for certificates of
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<PAGE> 209
appropriate denomination so stamped or endorsed or (b) if the shares are
uncertificated securities, written notice of the number of shares which the
shareholder demands that the corporation purchase. Upon subsequent transfers
of the dissenting shares on the books of the corporation, the new certificates,
initial transaction statement, and other written statements issued therefor
shall bear a like statement, together with the name of the original dissenting
holder of the shares.
Section 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR
MARKET VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
Section 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION
OF ISSUES; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares
is in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
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Section 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed
by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of
any party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time
as may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which
any dissenting shareholder who is a party, or who has intervened, is entitled
to require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for
the shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of
Section 1301).
Section 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
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Section 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting shares
after the date of approval of the reorganization by the outstanding shares
(Section 152) and prior to payment for the shares by the corporation shall be
credited against the total amount to be paid by the corporation therefor.
Section 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL
OF DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
Section 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
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<PAGE> 212
Section 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the votes
of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
Section 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
Section 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION;
CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-
form merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short- form merger set aside or rescinded, (1) a party to a
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reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
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ANNEX E
STOCK OPTION AGREEMENT
This Stock Option Agreement, dated as of May 2, 1995 (the
"Agreement"), is made by and between Metrobank, a California state chartered
bank ("Issuer"), and Comerica Incorporated, a Delaware corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan
of Reorganization and Merger dated as of May 2, 1995 (the "Merger Agreement"),
providing for, among other things, the merger of a subsidiary of Grantee with
and into Issuer, with Issuer as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to that number of shares (the "Option Shares") of Common Stock, no
par value ("Issuer Common Stock"), of Issuer constituting 9.9% of all issued
and outstanding Issuer Common Stock on the date of exercise of the Option
(after giving effect to the shares issued pursuant to the Option) at a purchase
price per Option Share of $15.75 (the "Purchase Price").
3. Exercise of Option. (a) If not in material breach of the Merger
Agreement, Grantee may exercise the Option, in whole only, at any time
following the occurrence of a Purchase Event (as defined below); provided that
the Option shall terminate and be of no further force and effect upon the
earliest to occur of (i) immediately prior to the Effective Time, (ii) 5:00
p.m. on March 9, 1996, (iii) payment by Issuer to Grantee of any amounts
pursuant to Section 8.5 of the Merger Agreement, or (iv) the termination of the
Merger Agreement; and provided further, that any purchase of shares upon
exercise of the Option shall be subject to compliance with applicable law,
including, without limitation, the California Financial Code.
<PAGE> 215
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) prior to the termination of the Merger
Agreement, Issuer shall have authorized, recommended,
publicly proposed or publicly announced an intention to
authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any
Subsidiary of Grantee) to effect an Acquisition
Transaction or failed to publicly oppose a Tender Offer
or an Exchange Offer (as defined below). As used herein,
the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or
any of its Subsidiaries (other than internal mergers,
reorganizations, consolidations or dissolutions involving
only existing Subsidiaries), (B) the disposition, by
sale, lease, exchange or otherwise, of substantially all
of the assets of Issuer, or (C) the issuance, sale or
other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction)
securities representing 50% of voting control of Issuer,
other than securities issued pursuant to this Agreement
or the Stock Option Plans or to meet any applicable
requirement of law, regulation or Governmental Entity
(including commitments made by Issuer in connection with
its acquisition of National Bank of Long Beach); or
(ii) prior to termination of the Merger
Agreement, any person (other than Grantee or any
Subsidiary of Grantee or a person who is a party to a
Director-Shareholder Agreement) shall have acquired
beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of or the right to
acquire beneficial ownership of, or any "group" (as such
term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to
acquire beneficial ownership of 25% or more of the then
outstanding shares of Issuer Common Stock, except
acquisitions of shares in connection with Regulatory
Stock Sales.
(c) In the event Grantee wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which is referred to as the "Notice
Date") specifying a place and date not earlier than three business days nor
later than 15 business days from the Notice Date for the closing (the
"Closing") of such purchase (the "Closing Date"). If prior notification to or
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), the California State Banking Department or any other
regulatory authority is required in connection with such purchase, Issuer shall
cooperate with Grantee in the filing of the required notice or application for
approval and the obtaining of any such approval.
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<PAGE> 216
4. Payment and Delivery of Certificates. (a) On the Closing Date,
Grantee shall (i) pay to Issuer, in immediately available funds by wire
transfer to a bank account designated by Issuer, an amount equal to the
Purchase Price multiplied by the number of Option Shares to be purchased on the
Closing Date and (ii) present and surrender this Agreement to the Issuer at the
address of the Issuer specified in Section 12(f) hereof.
(b) At the Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a),
(i) Issuer shall deliver to Grantee a certificate or certificates representing
the Option Shares to be purchased at the Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever, except for restrictions, if any, imposed by any Regulatory
Authority or under any law, and (ii) Grantee shall deliver to Issuer a letter
agreeing that Grantee shall not offer to sell or otherwise dispose of such
Option Shares in violation of the provisions of this Agreement.
(c) Certificates for the Option Shares delivered at the Closing shall
be endorsed with a restrictive legend indicating any restrictions on transfer
imposed by any Regulatory Authority.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Grantee shall have
delivered to Issuer a copy of a letter from the staff of the California State
Banking Department, or an opinion of counsel in form and substance reasonably
satisfactory to Issuer and its counsel, to the effect that such legend is not
required to comply with applicable law or regulation.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals referred
to herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Issuer. This Agreement has been duly executed and delivered by
Issuer.
(b) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, shares of Issuer Common Stock necessary for
Grantee to exercise the Option, and Issuer will
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<PAGE> 217
take all necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The shares of Issuer
Common Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock or other securities which may be
issuable pursuant to Section 7, upon issuance pursuant hereto, shall be duly
and validly issued, fully paid and nonassessable (except for assessments made
pursuant to Section 662 of the California Financial Code), and shall be
delivered free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever, including any preemptive rights of any stockholder
of Issuer, except if and to the extent imposed by law.
(c) Board Action. The performance by Issuer of this Agreement and the
transactions contemplated hereby (including the exercise of the Option) do not
require any approval of the stockholders of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite corporate power
and authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly executed
and delivered by Grantee.
(b) Purchase Not for Distribution. This Option is not being, and any
Option Shares or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public distribution thereof.
7. Adjustment Upon Changes in Capitalization, etc. In the event of
any change in Issuer Common Stock by reason of a stock dividend, stock split,
split up, recapitalization, combination, exchange of shares or similar
transaction, the Purchase Price for the Option Shares; shall be adjusted
appropriately.
8. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then authorized for quotation on the
American Stock Exchange, NASDAQ, the New York Stock Exchange (NYSE) or any
securities exchange, Issuer, upon the request of Grantee, will promptly file an
application to authorize for quotation the shares of Issuer Common Stock or
other securities to be acquired upon exercise of the Option on the American
Stock Exchange, NASDAQ, NYSE or such other securities exchange and will use its
best efforts to obtain approval of such listing as soon as practicable.
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<PAGE> 218
9. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for an Option of a different denomination
entitling the holder thereof to purchase in the aggregate the same or some
lesser number of shares of Issuer Common Stock purchasable hereunder; provided,
however, that in no event shall any Option be exercisable except in whole. The
terms "Agreement" and "Option" as used herein include any other Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
10. Miscellaneous. (a) Expenses. Except as otherwise provided in
Section 8, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the grant or exercise of
this Option, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein (i) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (ii) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3 and
8 (as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Grantee to
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<PAGE> 219
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of California without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by personal delivery,
by telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) to the parties as follows:
If to Issuer:
METROBANK
10900 Wilshire Boulevard
Los Angeles, California 90024
Attention: David Buell, Chief Executive
Officer
with a copy to:
LOEB AND LOEB
1000 Wilshire Boulevard
Suite 1800
Los Angeles, California 90017
Attention: Robert S. Barry, Esq.
If to Grantee:
COMERICA INCORPORATED
Corporate Secretary - Corporate Legal
Department
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
Attention: Mark W. Yonkman
6
<PAGE> 220
or to such other address as a party may have furnished to the others in writing
in accordance with this paragraph, except that notices of change of address
shall only be effective upon receipt. Any notice, demand or other
communication given pursuant to the provisions of this Section 11(f) shall be
deemed to have been given on the date actually delivered or three days
following the date mailed, as the case may be.
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event,
subject to approval of the California State Banking Department. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
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<PAGE> 221
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
METROBANK
By: /s/ David Buell
---------------------
Name: David Buell
Title: Chief Executive Officer
COMERICA INCORPORATED
By: /s/ Mark W. Yonkman
---------------------
Name: Mark W. Yonkman
Title: Vice President and
Assistant Secretary
8
<PAGE> 222
ANNEX F
- --------------------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED MARCH 31, 1995
METROBANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
95-3271474
(IRS EMPLOYER IDENTIFICATION NO.)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
90024
(ZIP CODE)
(310) 824-5700
(BANK'S TELEPHONE NUMBER INCLUDING AREA CODE)
INDICATE BY CHECK-MARK WHETHER THE BANK (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIODS THAT THE BANK WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST NINETY DAYS.
YES XX NO
------------ ----------
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 1995: 5,377,124
- --------------------------------------------------------------------------------
<PAGE> 223
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1995, DECEMBER 31, 1994 AND MARCH 31 1994
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
<PAGE> 224
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated statements of the financial condition of
Metrobank at March 31, 1995 and 1994, and the consolidated statements
of earnings, consolidated statements of changes in shareholders'
equity and consolidated statements of cash flows for the periods
presented, have been prepared by the Bank without an audit. In the
opinion of Management, all adjustments necessary to present fairly the
financial position, results of operations and statements of cash flows
at March 31, 1995 and 1994 and for all periods presented have been
made. Management has elected to omit substantially all of the
disclosures required by generally accepted accounting principles, and,
accordingly, these financial statements do not purport to present the
Bank's financial position in accordance with generally accepted
accounting principles.
These financial statements should be read in conjunction with the
consolidated financial statements contained in the Bank's Annual
Report (Form F-2).
Note 2. Investments
Investment securities are stated at cost, with any discount or premium
accreted or amortized to maturity using the effective interest method.
Adjustments to the lower of cost or market value are made if
Management does not intend to or is financially unable to hold the
security to maturity, or if a decline in value indicates a possible
impairment of the ability to recover principal. Realized gains and
losses are determined on a specific identification basis.
The Bank adopted the Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" on January 1, 1994. SFAS No. 115 requires that an entity
classify and account for its investments in equity securities that
have readily determinable fair values and for all of its investments
in debt securities as either trading, available for sale, or held to
maturity, and report these investments at fair value or amortized cost
as stipulated by SFAS No. 115. Investments in debt securities shall
be classified as held to maturity and recorded at amortized cost only
if the Bank has a positive intent and ability to hold those securities
to maturity. Securities that are purchased and held principally for
the purpose of selling them in the near term (thus held for only a
short period of time) shall be classified as trading securities.
Securities classified as trading shall be carried at fair value with
any unrealized gains or losses, net of tax, reflected in current
earnings. At this time, the Bank does not have a trading portfolio.
Investments not classified as either held to maturity or trading shall
be classified as available for sale securities. Securities classified
as available for sale shall be carried
<PAGE> 225
at fair value with any unrealized gains or losses, net of tax,
reflected as an addition or reduction of shareholders' equity.
Note 3. Earnings Per Share
Earnings per common share are based on the weighted-average number of
shares outstanding during the period. Stock options have been
included as common stock equivalents. On December 20, 1994, the Bank
declared a 10% stock dividend, payable on January 20, 1995. This is a
noncash dividend and has been excluded from the consolidated statement
of cash flows. The earnings per common share for 1994 has been
restated for the effect of the stock dividend.
Note 4. Letters of Credit
The Bank had outstanding letters of credit of $26.1 million as of
March 31, 1995, $16.3 million as of December 31, 1994, and $11.0
million as of March 31, 1994.
<PAGE> 226
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of its financial
condition and results of operations should be read in conjunction with the
consolidated financial statements and related notes to the financial statements
of the Bank that appear elsewhere in this report.
Net Earnings
For the three month period ending March 31, 1995, the Bank reported net
earnings of $2.4 million, or $0.42 per share, respectively, compared to $1.8
million, or $0.34 per share, respectively, for the same period in the prior
year.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other borrowings). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$14.3 million for the quarter ended March 31, 1995, as compared to $12.0
million for the quarter ended March 31, 1994. A majority of this increase in
net interest income was caused by an increase in interest income.
Interest and fee income was $18.9 million for the first quarter of 1995
compared to $14.9 million for the first quarter of 1994. Total interest income
increased by approximately $4.0 million for the quarter ended March 31, 1995,
as compared to the quarter ended March 31, 1994. Average earning assets for
the quarter ended March 31, 1995 was $867.4 million, as compared to $804.2
million in the prior year. This increase in earning assets resulted in an
increase in interest income of approximately $1.6 million. Additionally, the
average interest rate on earning assets increased 1.35% to 8.84% in the first
quarter of 1995 as compared to the first quarter of 1994. This increase
resulted in an additional $2.4 million in interest income.
Total interest expense was $4.6 million for the quarter ended March 31, 1995,
compared to $2.9 million in the prior year. The Bank's average cost of funds
increased 1.26% to 3.95%. This
<PAGE> 227
increase resulted in an additional expense of $1.2 million. The Bank also
increased its level of interest-bearing funds by $43.0 million which increased
interest expense by approximately $500,000.
Total loan interest and fee income for the first quarter of 1995 was $15.6
million, compared to $11.5 million for the first quarter of 1994. This
increase of approximately $4.1 million resulted from an increase in average
loans of $72.1 million over the prior year, which increased interest income by
approximately $1.8 million. The average rate on loans for the quarter ended
March 31, 1995 was 9.90%, which is a 1.69% increase from 8.21% for the prior
year. This increase resulted in an additional $2.3 million in interest income.
Interest on investment securities was $3.1 million for the first quarter of
1995, compared to $3.3 million in the prior year. This decrease of
approximately $200,000 is due to the decrease in average investment securities
of $20.0 million. This decrease in average balances reduced interest income by
$300,000 from the prior year.
Interest expense on time deposits was $2.2 million for the quarter ended March
31, 1995, compared to $900,000 for the quarter ended March 31, 1994. This
increase of $1.3 million is due to a $54.6 million increase in the average
balance of time deposits. This increase in time deposits resulted in an
additional expense of approximately $800,000. The average cost of time
deposits also increased 2.04% to 5.51% for the first quarter of 1995. This
increase resulted in an increase in interest expense of approximately $500,000.
The interest expense on other interest-bearing deposits increased to $2.2
million for the first quarter of 1995 from $1.7 million in the same period of
1994. This increase is due to the average cost of funds increasing 0.67% to
3.00% for the first quarter of 1995. The increase resulted in an additional
$500,000 of interest expense.
Average borrowings for the first quarter of 1995 were $18.2 million, or $17.9
million below the prior year. This decrease in the average borrowings
decreased interest expense by approximately $200,000. The average rate
increased 2.37% from the first quarter of 1994 to 5.73% in 1995, resulting in
an additional $200,000 in interest expense.
<PAGE> 228
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest
rates and average balances:
<TABLE>
<CAPTION>
Quarter ended March 31, 1995
over Quarter ended March 31, 1994
-----------------------------------------------
Total
Increase Change Due To:
In thousands (Decrease) Rate Volume
----------- --------- ----------
<S> <C> <C> <C>
INTEREST INCOME:
Loans and bankers' acceptances $ 4,118 $ 2,358 $ 1,760
Investment securities (226) 62 (288)
Other interest income 162 16 146
-------- -------- --------
Total $ 4,054 $ 2,436 $ 1,618
-------- -------- --------
INTEREST EXPENSE:
NOW and money market deposits 528 487 41
Savings deposits 3 0 3
Time deposits 1,278 535 743
Funds purchased and securities sold
under agreements to repurchase (43) 211 (254)
-------- -------- --------
Total $ 1,766 $ 1,233 $ 533
-------- -------- --------
Net interest income $ 2,288 $ 1,203 $ 1,085
======== ======== ========
</TABLE>
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited back
to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
earnings as a provision for possible loan losses. The balance of the allowance
for possible loan losses reflects the amount which, in management's judgement,
is adequate to provide for potential loan losses after weighing the mix of the
loan portfolio, current economic conditions, past loan loss experience and
other factors relevant to estimating loan losses. The adequacy of the
allowance for possible loan losses is also evaluated relative to the level of
non-performing loans (those for which principal or interest is past due more
than 90 days and those on nonaccrual status).
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured. Such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk as property acquired through
foreclosure ("OREO") may not be saleable for an amount sufficient to offset the
entire loan amount and
<PAGE> 229
costs associated with foreclosure. Although management believes that the
allowance for possible loan losses is adequate, future provisions will be
subject to continuing evaluation of risks inherent in the loan portfolio.
The Bank adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan" on January 1, 1995. SFAS No. 114 requires that the Bank determine the
allowance for possible loan losses for an impaired loan by estimating the
present value of the expected cash flows using the contractual interest rate of
the loan as a discount rate. Alternatively, the fair value of the collateral
may be used if the loan is collateral dependent. A loan is considered impaired
when it becomes probable that a borrower will not be able to pay all amounts
due according to the contractual terms of the loan agreement. The Bank
considers any loan that is placed on nonaccrual status as impaired, and
evaluates each credit per the guidelines outlined in SFAS No. 114. This
accounting pronouncement has not had a material impact on the financial
position of the Bank or on the consolidated statements of earnings.
The provision for possible loan losses of $1.1 million was $700,000 more than
the provision in the first quarter of the prior year. Management's intention
is to maintain the allowance for possible loan losses at a level sufficient to
provide for its loss expectations. The Bank's ratio of the allowance to total
loans was 2.08% and 2.34% as of March 31, 1995 and March 31, 1994,
respectively.
Loan charge-offs (net of recoveries) for the three months ended March 31, 1995
totalled approximately $201,000. This compares to net charge-offs of $53,000
for the three months ended March 31, 1994. This increase during the first
quarter is primarily attributable to the charge-off of real estate credits.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as real estate values in
Southern California. As of December 31, 1994, the Bank had approximately $16.8
million in nonperforming assets which consisted primarily of $3.5 million in
other real estate owned, $11.3 million of nonaccrual loans and $2.0 million in
loans which were over ninety days delinquent with respect to principal or
interest. As of March 31, 1995, the Bank had approximately $15.9 million in
nonperforming assets of which consisted of $300,000 in other real estate owned,
$14.2 million of nonaccrual loans and $1.4 million in loans which were over
ninety days delinquent with respect to either principal or interest. Total
nonperforming assets expressed as a percentage of total assets as of December
31, 1994 and March 31, 1995 was approximately 1.60% and 1.47%, respectively.
Noninterest Income
Noninterest income totalled $1.1 million for the quarters ended March 31, 1995
and March 31, 1994. There was no significant change in noninterest income from
the prior year's period.
Noninterest Expense
Noninterest expense totalled $10.6 million for the first quarter of 1995 as
compared to $10.1 million for the first quarter of 1994. This increase of
$500,000 was primarily the result of
<PAGE> 230
an increase of $1.0 million in data processing and other services paid on
behalf of certain depository relationships. This is directly attributable to
an increase in the costs of servicing noninterest-bearing deposits. Average
noninterest-bearing deposits totalled $410.9 million for the first quarter of
1995 compared to $398.0 million for the first quarter of 1994. In addition,
other real estate owned provisions and expenses increased $200,000 compared to
the first quarter of 1994. These increases were offset by a $400,000 decrease
in professional services and a $300,000 decrease in all other noninterest
expenses.
Income Taxes
The Bank's effective tax rate for the three months ended March 31, 1995 was
approximately 34.97%, compared to 30.14% for the three months ended March 31,
1994. The Bank's effective tax rate is less than the statutory rate primarily
as a result of the utilization of income tax credits generated by its low
income housing project. The utilization of these credits, however, is subject
to certain alternative minimum tax limitations.
Capital Resources
As of March 31, 1995, shareholders' equity totalled $72.2 million, an increase
of approximately $6.2 million from March 31, 1994. This increase in equity was
caused by net income of $8.7 million for the twelve months ended March 31, 1995
and $1.3 million in additional capital as a result of the exercise of stock
options. This was offset by the declaration of cash dividends totalling $3.0
million during the past twelve months and a $800,000 decrease in the unrealized
gain on securities classified as available for sale. As of March 31, 1995, the
Bank's risk-based capital ratio and tier one capital ratio were 10.9% and 9.7%,
respectively. Both ratios exceed the regulatory requirements of 8.0% and 4.0%,
respectively. As of March 31, 1994, the Bank's risk-based capital and tier one
capital ratios were 11.3% and 10.3%, respectively. Additionally, on July 6,
1993 the Bank entered into a Memorandum of Understanding (MOU) with the Federal
Deposit Insurance Corporation (FDIC). The FDIC mandated that the Bank must
maintain a tier 1 leverage capital ratio of at least 6.5%. The Bank's tier 1
leverage capital ratio as of March 31, 1995 and March 31, 1994 was 7.4% and
7.2%, respectively. Based upon the results of its most recent examination, the
Bank was notified in the first quarter of 1995 that the FDIC was removing the
Bank from its MOU.
Investments and Liquidity
Beginning January 1, 1994, Metrobank was required to implement Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This statement requires that
institutions classify investment securities as either held to maturity,
available for sale, or trading. Investments classified as held to maturity
will be carried at amortized cost. Investments classified as available for
sale must be marked to market with unrealized gains or losses, net of the
taxes, included in equity. Trading securities must also be marked to market,
however, unrealized gains or losses must be reflected in current earnings.
During the second quarter of 1993, prior to the adoption of SFAS No. 115,
Metrobank had classified its investment securities as either held to maturity
or held for sale. The Bank does not
<PAGE> 231
anticipate holding any securities in a trading account. As of March 31, 1995,
the Bank had approximately $206.4 million in investment securities, consisting
of $168.1 million in U.S. Treasury securities, $35.1 million in mortgage-backed
securities and $3.2 million in FHLB stock and other securities. $60.6 million
of the U.S. Treasury securities and the FHLB stock have been classified as
available for sale, while the remainder of the Treasury securities, as well as
the mortgage-backed securities have been classified as held to maturity. As of
March 31, 1995, the Bank had a $29,000 pre-tax unrealized gain in the available
for sale portion of the U.S. Treasury securities portfolio, and a $3.2 million
pre-tax unrealized loss in the held to maturity portion of the portfolio.
The liquidity levels of the Bank are managed by its Asset/Liability Management
Committee. This committee is charged with the responsibility of ensuring that
reserve balances are maintained and to ensure that the Bank obtains funds
necessary to meet existing deposit outflow requirements, as well as asset
growth. The Bank's primary source of funds is derived from principal and
interest payments on loans, principal and interest payments on its investment
portfolio, generation of noninterest-bearing and interest-bearing deposits,
and, to a lesser extent, borrowings.
Inasmuch as a significant portion of the Bank's deposit base is concentrated in
specialized niche industries (for example, escrow and title insurance
companies), which closely parallel the real estate economy in Southern
California, the Bank is subject to fluctuations in demand deposits. To
mitigate this exposure, the Bank operates a money desk as a means of
supplementing funding activities. Additionally, the Bank has established
unsecured credit facilities of approximately $100.0 million, or 9.99% of total
deposits, and secured credit facilities of $135.4 million, or 13.52% of total
deposits. The combination of these facilities provides the Bank with a
secondary source of liquidity of approximately $235.4 million, or 23.51% of
total deposits.
Definitive Agreement to Acquire National Bank of Long Beach
On September 1, 1994, Metrobank entered into a definitive agreement to purchase
National Bank of Long Beach from its Danish parent, Topdanmark Bank A/S.
According to the terms of the agreement, Metrobank will purchase all
outstanding common and preferred National Bank of Long Beach stock for cash at
book value subject to certain valuation adjustments. The transaction, approved
by the regulatory agencies during the first quarter of 1995, closed during
April 1995.
As of March 31, 1995, National Bank of Long Beach had approximately $127.2
million in gross loans and $189.3 million in total deposits. Shareholder's
equity at March 31, 1995 totalled approximately $26.4 million. Additionally,
Metrobank has agreed to acquire certain nonclassified performing loans which
are currently participated from National Bank of Long Beach to its parent.
These loans total approximately $11.4 million.
<PAGE> 232
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 10, 1995 Metrobank
---------------------------
(Bank)
By: /s/ David P. Malone
----------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank in
the capacities indicated on the date set forth above.
Signature
/s/ Eugene Louie
- -------------------------------
Eugene Louie
First Vice President/Controller
(Principal Accounting Officer)
<PAGE> 233
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The General Corporation Law of the State of Delaware ("DGCL") provides
that a Delaware corporation, such as Comerica Incorporated ("Comerica"), may
indemnify a director or officer against his or her expenses and judgments,
fines and amounts paid in settlement actually and reasonably incurred in
connection with any action, suit or proceeding (other than an action by or in
the right of the corporation) involving such person by reason of the fact that
such person is or was a director or officer, concerning actions taken in good
faith and in a manner reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
DGCL also provides that in derivative actions, Comerica may indemnify its
directors and officers against expenses actually and reasonably incurred to the
extent that such directors or officers have been successful on the merits or
otherwise in any such action, suit or proceeding or in the defense of any
claim, issue or matter therein. Under the DGCL, no indemnification shall be
made with respect to any claim, issue or matter as to which such director or
officer shall have been adjudged to be liable to the corporation unless and
only to the extent that the court shall determine upon application that,
despite the adjudication of liability but in view of all of the circumstances
of the case, such director or officer is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. The DGCL also
generally permits the advancement of a director's or officer's expenses,
including by means of mandatory charter or Bylaw provision to that effect, in
lieu of requiring the authorization of such advancement by the Board of
Directors in specific cases. Section 12 of Article V of Comerica's Bylaws
implements such provisions and provides as follows:
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<PAGE> 234
INDEMNIFICATION AND INSURANCE
(a) Comerica shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of Comerica) by reason
of the fact that he or she is or was a Director, officer, employee of Comerica
or is or was serving at the request of Comerica as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interest of Comerica, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Any person who is or was an agent of Comerica may be indemnified to the same
extent as hereinabove provided. In addition, in the event any such action,
suit or proceeding is threatened or instituted against a spouse to whom a
director or officer is legally married at the time such director or officer is
covered under the indemnification provided herein which action, suit or
proceeding arises solely out of his or her status as the spouse of a director
or officer, including, without limitation, an action, suit or proceeding that
seeks damages recoverable from marital community property of the director or
officer and his or her spouse, property owned jointly by them or property
purported to have been transferred from the director or officer to his or her
spouse, the spouse of the director or officer shall be indemnified to the same
extent as hereinabove provided. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of Comerica, and, with
respect to any criminal action or proceeding, raise any inference that he or
she had reasonable cause to believe that his or her conduct was unlawful.
(b) Comerica shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of Comerica to procure a judgment in its
favor by reason of the fact that he or she is or was a Director, officer, or
employee of Comerica, or is or was
II-2
<PAGE> 235
serving at the request of Comerica as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of Comerica, and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to Comerica
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application, that despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Any person who is or was an agent of Comerica may be
indemnified to the same extent hereinabove provided. In addition, in the event
any such action or suit is threatened or instituted against a spouse to whom a
director or officer is legally married at the time such director or officer is
covered under the indemnification provided herein which action or suit arises
solely out of his or her status as the spouse of a director or officer,
including, without limitation, an action or suit that seeks damages recoverable
from marital community property of the director or officer and his or her
spouse, property owned jointly by them or property purported to have been
transferred from the director or officer to his or her spouse, the spouse of
the director or officer shall be indemnified to the same extent as hereinabove
provided.
(c) To the extent that a Director, officer, spouse of a Director
or officer, employee or agent of Comerica has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this Section, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of this
Section (unless ordered by a court) shall be made by Comerica only as
authorized in the specific case upon a determination that indemnification of
the Director, officer, spouse of a Director or officer, employee or agent is
proper in the circumstances because
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<PAGE> 236
such person has met the applicable standard of conduct set forth in subsections
(a) and (b) of this Section. Such determination shall be made (1) by the Board
of Directors by a majority vote of the quorum consisting of Directors who were
not parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (3) by the
shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
Director, or spouse of an officer or Director, in defending a civil or criminal
action, suit or proceeding may be paid by Comerica in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the Director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
Comerica as authorized in this Section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this Section shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.
(g) Comerica may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, spouse of a Director or officer,
employee or agent of Comerica, or is or was serving at the request of Comerica
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his or her
status as such, whether or not Comerica would have the power to indemnify such
person against such liability under the provisions of this Section.
(h) For the purpose of this Section, references to "Comerica"
include all constituent corporations absorbed in a consolidation or
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<PAGE> 237
merger as well as the resulting or Surviving Corporation so that any person who
is or was a director, officer, spouse of a director or officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Section with
respect to the resulting or Surviving Corporation as he or she would if he or
she had served the resulting or Surviving Corporation in the same capacity.
(i) For the purposes of this Section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan, and reference to "serving at the request of Comerica" shall
include any service as a Director, officer, employee or agent of Comerica which
imposes duties on, or involves services by, such Director, officer, employee or
agent of Comerica with respect to an employee benefit plan, its participants,
or beneficiaries; and a person who acted in good faith and in a manner he or
she reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of Comerica" as referred to in this
Section.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Director, officer, employee or agent, and with respect to any spouse of a
director or officer, shall continue following the time the director or officer
spouse ceases to be a director or officer even if the marriage of the
individuals terminates prior to the end of the period of coverage, and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
shareholders,
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<PAGE> 238
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 (relating to
liability for unauthorized acquisitions or redemptions of, or dividends on,
capital stock) of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. At the 1987 Annual Meeting of Comerica's
shareholders, the shareholders approved an amendment to Comerica's Restated
Certificate of Incorporation to include such a provision.
Comerica has entered into Indemnification Agreements (the "Agreements")
with each of its directors pursuant to which Comerica agrees (i) to indemnify
each such director to the fullest extent permitted by any combination of (a)
the benefits provided by the indemnification provisions of Comerica's Bylaws as
in effect on the date of such Agreement, (b) the benefits provided by the
indemnification provisions of Comerica's Bylaws in effect at the time such
indemnified costs are incurred by such director, (c) the benefits allowable
under the DGCL in effect at the date of such Agreement or as the same may be
amended (but in the case of any such amendment, only to the extent that such
amendment permits Comerica to provide broader indemnification than such law
permits Comerica to provide prior to such amendment), (d) the benefits
allowable under the law of the jurisdiction under which Comerica is organized
at the time such indemnified costs are incurred by such director, (e) the
benefits available under any Directors' and Officers' Insurance or other
liability insurance obtained by Comerica and (f) the benefits available to the
fullest extent authorized to be provided to such director by Comerica under the
non-exclusivity provisions of the Bylaws of Comerica and the DGCL, against
liabilities and expenses incurred by reason of such person serving as a
director or officer of Comerica or, at Comerica's request, as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise or with respect to employee benefit plans; (ii) to
advance certain expenses to such persons; and (iii) except under certain
circumstances to purchase and maintain in effect one or more Directors' and
Officers' insurance policies.
No indemnification, reimbursement, or payments are required of Comerica
under the Agreements (except to the extent it is provided from policies of
insurance carried by Comerica): (1) with respect to any claim as to which such
director shall have been finally adjudged by a court of competent jurisdiction
to (a) have acted in
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<PAGE> 239
bad faith, (b) be liable for acts or omissions which involve intentional
misconduct, a knowing violation of law or of such director's duty of loyalty to
Comerica or its shareholders, (c) have authorized a redemption or dividend on
Comerica's stock which is prohibited by Delaware law or (d) has effected any
transaction from which such director has derived an improper personal benefit
within the meaning of 102(b)(7) of the DGCL, except to the extent that such
court, or another court having jurisdiction, shall determine upon application
that, despite the adjudication of liability, but in view of all the
circumstances of the case, such director is fairly and reasonably entitled to
indemnity for such indemnified costs as the court shall deem proper; (2) with
respect to any payment determined by final judgment of a court, or other
tribunal having jurisdiction over the question, to be unlawful; and (3) with
respect to any obligation of such director under Section 16(b) of the
Securities Exchange Act of 1934, as amended.
Insurance is maintained on a regular basis (and not specifically in
connection with this offering) against liabilities arising on the part of
directors and officers out of their performance in such capacities or arising on
the part of Comerica out of its foregoing indemnification provisions, subject
to certain exclusions and to the policy limits.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits. The following exhibits are filed as part of this
Registration Statement.
Item 601
Regulation S-K
Exhibit Reference
Number
- ----------------------------
Description
-----------
(2)(a) Amended and Restated Agreement and Plan of
Reorganization and Merger, dated as of July
31, 1995, by and among Metrobank, Comerica
Holdings Incorporated and Comerica
Incorporated, included as part of Annex A
to
II-7
<PAGE> 240
the Proxy Statement/Prospectus which is
part of this Registration Statement.
(2)(b) Form of Agreement of Merger between
Comerica Holdings Incorporated and Company,
included as part of Annex B to the Proxy
Statement/Prospectus which is part of this
Registration Statement.
(3)(i) Restated Certificate of Incorporation of
Comerica Incorporated (incorporated by
reference to Exhibit 3(a) to the
Registrant's Registration Statement on Form
S-4 dated December 11, 1992, Registration
No. 33-556682).
(3)(ii) Bylaws of Comerica Incorporated
(4)(a) Specimen certificate for Comerica Common
Stock (incorporated by reference to Exhibit
4(a) to the Registrant's Registration
Statement on Form S-4 dated December 11,
1992, Registration No. 33- 556682).
(4)(b) Restated Certificate of Incorporation of
Comerica Incorporated (incorporated by
reference to Exhibit 3(a) to the
Registrant's Registration Statement on Form
S-4 dated December 11, 1992, Registration
No. 33-556682).
(4)(c) Rights Agreement between Comerica
Incorporated and Comerica Bank-Detroit, as
Rights Agent (incorporated by reference to
Exhibits 1 and 2 of the Registrant's
Registration Statement on Form 8-A dated
January 26, 1988, Commission File No. 0-
7269).
II-8
<PAGE> 241
(4)(d) First Amendment to the Rights Agreement
between Comerica Incorporated and Comerica
Bank-Detroit, as Rights Agent (incorporated
by reference to Exhibit 1.1 of the
Registrant's Registration Report on Form 8
filed November 1, 1991, Commission File No.
0-7269).
(5)(a) Opinion and consent of Miller, Canfield,
Paddock and Stone, P.L.C. *
(8) Opinion and consent of Miller, Canfield,
Paddock and Stone, P.L.C. (Federal Tax
Matters). *
(23)(a) Consent of Miller, Canfield, Paddock and
Stone, P.L.C. (included in Exhibit 5(a)).
(23)(b) Consent of Miller, Canfield, Paddock and
Stone, P.L.C. (Federal Tax Matters)
(included in Exhibit 8). *
(23)(c) Consent of Ernst & Young, LLP, independent
public accountants (auditors for Comerica
Incorporated).
(23)(d) Consent of Arthur Andersen, LLP,
independent auditors (auditors for
Metrobank).
(23)(e) Consent of J.P. Morgan & Co.,
Incorporated.*
(24) Powers of Attorney (see signature page
to this Form S-4 Registration Statement).
(27) Financial Data Schedule. Schedule has
been omitted because it is not required.
(99)(a) Opinion of J.P. Morgan & Co., Incorporated
is set forth in full as Annex D to the
Proxy
II-9
<PAGE> 242
Statement/Prospectus which is part of this
Registration Statement.*
(99)(b) Form of Proxy Card for Metrobank.
(99)(c) Shareholder Agreements.
(99)(d) Stock Option Agreement, dated May 2, 1995,
between Metrobank and Comerica
Incorporated, included as Annex E to the
Proxy Statement/Prospectus which is part of
this Registration Statement.
(99)(e) Section 1300 of the California General
Corporation Law relating to Dissenters
Rights as set forth in full on Annex C to
the Proxy Statement/Prospectus which is
part of this Registration Statement.
(99)(f) Affiliate's Agreements.
(99)(g) Employment Agreements between Metrobank and
Paul B. Alexander, David L. Buell, Robert
P. Bulseco, Scott T. Monson and Paul W.
Stroube and the Non-Competition Agreement
between David L. Buell and Metrobank.
(99)(h) Metrobank's Annual Report on Form F-2 for
the year ended December 31, 1994.
(99)(i) Metrobank's Quarterly Reports on Form F-4
for the quarterly periods ended March 31,
June 30, and September 30, 1994.
(99)(j) Metrobank's Proxy Statement for the Annual
Meeting of Shareholders held on May 23,
1995.
(99)(k) Metrobank's Quarterly Reports on Form F-4
for the quarterly periods ended March 31,
and June 30, 1995 which are included on
Annex F and G, respectively, to the Proxy
Statement/Prospectus which is part of this
Registration Statement.
II-10
<PAGE> 243
(99)(l) Metrobank's Current Report on Form F-3
dated May 9, 1995.
(99)(m) Metrobank's Current Report on Form F-3
dated June 6, 1995.
(99)(n) Metrobank's Annual Report on Form F-2 for
the year ended December 31, 1993.
(99)(o) Metrobank's Quarterly Reports on Form F-4
for the quarterly periods ended March 31,
June 30 and September 30, 1993.
(99)(p) Metrobank's Proxy Statement for the Annual
Meeting of Shareholders held on May 24,
1994.
(99)(q) Metrobank's Annual Report on Form F-2 for
the year ended December 31, 1992.
(99)(r) Metrobank's Quarterly Reports on Form F-4
for the quarterly periods ended June 30,
and September 30, 1992.
(99)(s) Metrobank's Proxy Statement for the Annual
Meeting of Shareholders held on May 25,
1993.
(b) Financial Statement Schedules.
Schedules have been omitted because they
are not required.
(c) Not applicable.
___________________________________
* to be filed by amendment
II-11
<PAGE> 244
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 as amended (the "Securities Act") may be permitted to
directors, officers and controlling persons of Comerica pursuant to the
provisions described in Item 20 or otherwise, Comerica has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Comerica of expenses
incurred or paid by a director, officer or controlling person of Comerica in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Comerica will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters,
II-12
<PAGE> 245
in addition to the information called for by the other items of the applicable
form.
The undersigned registrant undertakes that every prospectus (i) that
is filed pursuant to the foregoing paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment
II-13
<PAGE> 246
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That for the purpose of determining any liability under
the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement
relating to the securities offered therein, and the
offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
II-14
<PAGE> 247
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Detroit,
State of Michigan, on the 21st day of July, 1995.
COMERICA INCORPORATED
By: /s/ Eugene A. Miller
--------------------
Eugene A. Miller
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the dates indicated below. By so signing each of the
undersigned, in his or her capacity as a director of officer, or both, as the
case may be, of the registrant, does hereby appoint Eugene A. Miller, Arthur W.
Hermann, Judith C. Dart and Robert C. Shrosbree, and each of them severally,
his or her true and lawful attorney to execute in his or her name, place and
stead, in his or her capacity as a director or officer, or both, as the case
may be, of the registrant, any and all amendments to this Registration
Statement and post-effective amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as each of the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
II-15
<PAGE> 248
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer:
Chairman and Chief July 21, 1995
/s/ Eugene A. Miller Executive Officer
- ---------------------------------
Eugene A. Miller
(2) Principal Financial Officer:
Executive Vice July 21, 1995
President and Chief
/s/ Ralph W. Babb Financial Officer
- ---------------------------------
Ralph W. Babb
(3) Controller and Principal
Accounting Officer:
Senior Vice July 21, 1995
/s/ Arthur W. Hermann President
- ---------------------------------
Arthur W. Hermann
(4) Directors:
/s/ E. Paul Casey Director July 21, 1995
- ---------------------------------
E. Paul Casey
/s/ James F. Cordes Director July 21, 1995
- ---------------------------------
James F. Cordes
/s/ J. Phillip DiNapoli Director July 21, 1995
- ---------------------------------
J. Philip DiNapoli
/s/ Max M. Fisher Director July 21, 1995
- ---------------------------------
Max M. Fisher
</TABLE>
II-16
<PAGE> 249
<TABLE>
<S> <C> <C>
/s/ John D. Lewis Director July 21, 1995
- ---------------------------------
John D. Lewis
/s/ Patricia Shontz Longe Director July 21, 1995
- ---------------------------------
Patricia Shontz Longe, Ph.D.
/s/ Wayne B. Lyon Director July 21, 1995
- ---------------------------------
Wayne B. Lyon
/s/ Gerald V. MacDonald Director July 21, 1995
- ---------------------------------
Gerald V. MacDonald
/s/ Eugene A. Miller Director July 21, 1995
- ---------------------------------
Eugene A. Miller
/s/ Michael T. Monahan Director July 21, 1995
- ---------------------------------
Michael T. Monahan
/s/ Alfred A. Piergallini Director July 21, 1995
- ----------------------------------
Alfred A. Piergallini
/s/ Alan E. Schwartz Director July 21, 1995
- ----------------------------------
Alan E. Schwartz
/s/ Howard F. Sims Director July 21, 1995
- ----------------------------------
Howard F. Sims
</TABLE>
II-17
<PAGE> 250
EXHIBIT INDEX
Item 601
Regulation S-K
Exhibit Reference
Number Description
- ----------------- -----------
(2)(a) Amended and Restated and Plan of
Reorganization and Merger, dated
as of July 31, 1995, by and among
Metrobank, Comerica Holdings
Incorporated and Comerica
Incorporated, included as part of
Annex A to the Proxy
Statement/Prospectus which is
part of this Registration
Statement.
(2)(b) Form of Agreement of Merger
between Comerica Holdings
Incorporated and Company,
included as part of Annex B to
the Proxy Statement/Prospectus
which is part of this
Registration Statement.
(3)(i) Restated Certificate of
Incorporation of Comerica
Incorporated (incorporated by
reference to Exhibit 3(a) to the
Registrant's Registration
Statement on Form S-4 dated
December 11, 1992, Registration
No. 33-556682).
(3)(ii) Bylaws of Comerica Incorporated
(4)(a) Specimen certificate for Comerica
Common Stock (incorporated by
reference to Exhibit 4(a) to the
Registrant's Registration
Statement on Form S-4 dated
December 11, 1992, Registration
No. 33- 556682).
II-18
<PAGE> 251
(4)(b) Restated Certificate of
Incorporation of Comerica
Incorporated (incorporated by
reference to Exhibit 3(a) to the
Registrant's Registration
Statement on Form S-4 dated
December 11, 1992, Registration
No. 33-556682).
(4)(c) Rights Agreement between Comerica
Incorporated and Comerica
Bank-Detroit, as Rights Agent
(incorporated by reference to
Exhibits 1 and 2 of the
Registrant's Registration
Statement on Form 8-A dated
January 26, 1988, Commission File
No. 0-7269).
(4)(d) First Amendment to the Rights
Agreement between Comerica
Incorporated and Comerica
Bank-Detroit, as Rights Agent
(incorporated by reference to
Exhibit 1.1 of the Registrant's
Registration Report on Form 8
filed November 1, 1991,
Commission File No. 0-7269).
(5)(a) Opinion and consent of Miller,
Canfield, Paddock and Stone,
P.L.C. *
(8) Opinion and consent of Miller,
Canfield, Paddock and Stone,
P.L.C. (Federal Tax Matters). *
(23)(a) Consent of Miller, Canfield,
Paddock and Stone, P.L.C.
(included in Exhibit 5(a)).
(23)(b) Consent of Miller, Canfield,
Paddock and Stone, P.L.C. (Federal
Tax Matters) (included in Exhibit
8). *
(23)(c) Consent of Ernst & Young, LLP,
independent public accountants
(auditors for Comerica
Incorporated).
II-19
<PAGE> 252
(23)(d) Consent of Arthur Andersen, LLP,
independent auditors (auditors
for Metrobank).
(23)(e) Consent of J.P. Morgan & Co.,
Incorporated. *
(24) Powers of Attorney (see signature
page to this Form S-4
Registration Statement).
(27) Financial Data Schedule.
Schedule has been omitted because
it is not required.
(99)(a) Opinion of J.P. Morgan & Co.,
Incorporated is set forth in full
as Annex D to the Proxy
Statement/Prospectus which is
part of this Registration
Statement. *
(99)(b) Form of Proxy Card for Metrobank.
(99)(c) Shareholder Agreement.
(99)(d) Stock Option Agreement, dated May
2, 1995, between Metrobank and
Comerica Incorporated, included
as Annex E to the Proxy
Statement/Prospectus which is
part of this Registration
Statement.
(99)(e) Section 1300 of the California
General Corporation Law
relating to Dissenters Rights as
set forth in full on Annex C to
the Proxy Statement/Prospectus
which is part of this
Registration Statement.
(99)(f) Affiliate's Agreements.
II-20
<PAGE> 253
(99)(g) Employment Agreements between
Metrobank and Paul B. Alexander,
David L. Buell, Robert P.
Bulseco, Scott T. Monson and Paul
W. Stroube and the
Non-Competition Agreement between
David L. Buell and Metrobank.
(99)(h) Metrobank's Annual Report on Form
F-2 for the year ended December
31, 1994.
(99)(i) Metrobank's Quarterly Reports on
Form F-4 for the quarterly
periods ended March 31, June 30,
and September 30, 1994.
(99)(j) Metrobank's Proxy Statement for
the Annual Meeting of
Shareholders held on May 23,
1995.
(99)(k) Metrobank's Quarterly Reports on
Form F-4 for the quarterly
periods ended March 31, and June
30, 1995 which are included on
Annex F and G, respectively, to
the Proxy Statement/Prospectus
which is part of this
Registration Statement.
(99)(l) Metrobank's Current Report on
Form F-3 dated May 9, 1995.
(99)(m) Metrobank's Current Report on
Form F-3 dated June 6, 1995.
(99)(n) Metrobank's Annual Report on Form
F-2 for the year ended December
31, 1993.
(99)(o) Metrobank's Quarterly Reports on
Form F-4 for the quarterly
periods ended March 31, June 30
and September 30, 1993.
(99)(p) Metrobank's Proxy Statement for
the Annual Meeting of
Shareholders held on May 24,
1994.
II-21
<PAGE> 254
(99)(q) Metrobank's Annual Report on Form
F-2 for the year ended December
31, 1992.
(99)(r) Metrobank's Quarterly Reports on
Form F-4 for the quarterly
periods ended June 30 and
September 30, 1992.
(99)(s) Metrobank's Proxy Statement for
the Annual Meeting of
Shareholders held on May 25,
1993.
___________________________
* to be filed by amendment
II-22
<PAGE> 1
EXHIBIT 3(ii)
As Amended on
July 21, 1995
BYLAWS
OF
COMERICA INCORPORATED
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS
SECTION 1. PLACE OF MEETING. All meetings of the shareholders
of this Corporation shall be held at such time and place, either within or
without the State of Delaware, as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting.
SECTION 2. ANNUAL MEETING OF SHAREHOLDERS. The annual meeting
of shareholders shall be held on the third Friday of May, if not a legal
holiday, and if a legal holiday then the next secular day following, at 10:00
a.m., or at such other date and time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting. At said
meeting, shareholders shall elect by a plurality vote the Directors to be
elected at such meeting, and shall transact such other business as may properly
be brought before the meeting.
SECTION 3. NOTICE OF MEETING OF SHAREHOLDERS. Written notice
of every meeting of shareholders stating the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given to each shareholder entitled to
vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
<PAGE> 2
SECTION 4. LIST OF SHAREHOLDERS ENTITLED TO VOTE. The officer
who has charge of the stock ledger of the Corporation shall prepare and make,
at least ten (10) days before every meeting of shareholders, a complete list of
the shareholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each shareholder and the number of shares
registered in the name of each shareholder. Such list shall be open to the
examination of any shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
SECTION 5. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings
of the shareholders, for any purpose or purposes, unless otherwise prescribed
by statute or by the Certificate of Incorporation, may be called by the
Chairman of the Board of Directors or, during the absence or disability of the
Chairman or while that office is vacant, by the President and shall be called
by the President or Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of shareholders owning, in the
aggregate, at least seventy-five percent (75%) in amount of the entire capital
stock of the Corporation issued and outstanding and entitled to vote at such
special meeting. Such request shall state the purpose or purposes of the
proposed meeting.
SECTION 6. QUORUM OF SHAREHOLDERS. The holders of a majority
of the stock issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings of
the shareholders for the transaction of business except as otherwise provided
by statute or by the Certificate of Incorporation. If, however, such quorum
shall not be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented any business may be transacted which might have been transacted
at the meeting as originally notified. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
SECTION 7. REQUIRED VOTE. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting
power, present in person or represented by proxy, shall decide any question
brought before such meeting, unless the question is one upon which a different
vote is required by statute or by the Certificate of Incorporation.
SECTION 8. VOTING. Unless otherwise provided in the
Certificate of Incorporation or in a certificate filed pursuant to Section
151(g) of the General Corporation Law of Delaware, as amended, each shareholder
shall at every meeting of the shareholders be entitled to one vote, in person
or by proxy, for each share of the capital stock having voting power held by
such shareholder,
2
<PAGE> 3
but no proxy shall be voted on after three (3) years from its date, unless the
proxy provides for a longer period.
SECTION 9. NATURE OF BUSINESS. At any meeting of
shareholders, only such business shall be conducted as shall have been brought
before the meeting by or at the direction of the Board of Directors or by any
shareholder who complies with the procedures set forth in this Section 9. No
business may be transacted at any meeting of shareholders, other than business
that is either:
(a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors (or any duly
authorized committee thereof);
(b) otherwise properly brought before such meeting of
shareholders by or at the direction of the Board of Directors (or any duly
authorized committee thereof); or
(c) in the case of an annual meeting of shareholders,
otherwise properly brought before such meeting by any shareholder (i) who is a
shareholder of record on the date of the giving of the notice provided for in
this Section 9 and on the record date for the determination of shareholders
entitled to vote at such annual meeting of shareholders; and (ii) who complies
with the notice procedures set forth in this Section 9.
In addition to any other applicable requirements, for business to be properly
brought before an annual meeting of shareholders by a shareholder, such
shareholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation. To be timely, a shareholder's notice to the
Secretary of the Corporation must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, however, that in the event
that the annual meeting of shareholders is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the
shareholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which notice of the
date of the annual meeting of shareholders was mailed or public disclosure of
the date of the annual meeting of shareholders was made, whichever first
occurs.
To be in proper written form, a shareholder's notice to the Secretary of the
Corporation must set forth as to each matter such shareholder proposes to bring
before the annual meeting of shareholders: (i) a brief description of the
business desired to be brought before the annual meeting of shareholders and
the reasons for conducting such business at the annual meeting of shareholders;
(ii) the name and record address of such shareholder; (iii) the class or series
and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such shareholder as of the record date for the
meeting (if such date shall then have been made publicly available and shall
have occurred); (iv) as of the date of such notice, a description of all
arrangements or understandings between such shareholder an any other person or
persons (including their names) in connection with the proposal of such
business by such shareholder and any material interest of such shareholder in
such business;
3
<PAGE> 4
(v) any other information which would be required to be disclosed in a proxy
statement or other filings required to be made in connection with the
solicitation of proxies for the proposal pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder if such shareholder were engaged in
such a solicitation; and (vi) a representation that such shareholder intends
to appear in person or by proxy at the annual meeting of shareholders to bring
such business before the meeting.
No business shall be conducted at the annual meeting of shareholders except
business brought before the annual meeting of shareholders in accordance with
the procedures set forth in this Section 9, provided however, that once
business has been properly brought before the annual meeting of shareholders in
accordance with such procedures, nothing in this Section 9 shall be deemed to
preclude discussion by any shareholder of any such business. If the Chairman
of an annual meeting of shareholders determines that business was not properly
brought before the annual meeting of shareholders in accordance with the
foregoing procedures, the Chairman shall declare to the meeting that the
business was not properly brought before the meeting and such business shall
not be transacted. When a meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken, unless the
adjournment is for more than 30 days, or unless after the adjournment a new
record date is fixed for the adjourned meeting, in which case notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote
at the meeting. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the original meeting as originally notified.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. The business of the Corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the shareholders.
SECTION 2. LOCATION OF MEETINGS. The Board of Directors of
the Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
SECTION 3. ORGANIZATION MEETING OF BOARD. The first meeting
of each newly elected Board of Directors shall be held at the place of holding
the annual meeting of shareholders, and immediately following the same, for the
purpose of electing officers and transacting any other business properly
brought before it, provided that the organization meeting in any year may be
held at a different time and place than that herein provided by a consent of a
majority of the Directors of such new Board. No notice of such meeting shall
be necessary to the newly elected Directors in order legally to constitute the
meeting, provided a quorum shall be present, unless said
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meeting is not held at the place of holding and immediately following the
annual meeting of shareholders.
SECTION 4. REGULAR MEETINGS OF BOARD. Regular meetings of the
Board of Directors may be held without notice at such time and at such place as
shall from time to time be determined by the Board.
SECTION 5. SPECIAL MEETINGS OF BOARD. Special meetings of the
Board of Directors may be called by the Chairman of the Board of Directors or,
during the absence or disability of the Chairman or while that office is vacant
by the President on one (1) day's notice to each director; and special meetings
shall be called by the President or Secretary on like notice on the written
request of five or more Directors.
SECTION 6. QUORUM AND REQUIRED VOTE. At all meetings of the
Board of Directors a majority of the total number of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors the Directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 7. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless
otherwise restricted by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any Committee thereof may be taken without a meeting if all
members of the Board or Committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or Committee.
SECTION 8. COMMITTEES OF DIRECTORS.
(a) General Authority. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
Committees, each Committee to consist of one or more of the Directors of the
Corporation. The Board may designate one or more Directors as alternate
members of any Committee, who may replace any absent or disqualified member of
any meeting of the Committee. In the absence or disqualification of a member
of a Committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
Committee, to the extent provided in the resolution of the Board of Directors,
or in these Bylaws shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such Committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or
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consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the Bylaws of the Corporation; and, unless the
resolution of the Board of Directors or the Certificate of Incorporation
expressly so provide, no such Committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
(b) Directors' Committee. The Board of Directors may
establish a Directors' Committee of the Board of Directors. The Directors'
Committee may: (i) nominate candidates for election as Directors of the
Corporation at any meeting of shareholders called for election of Directors (an
"Election Meeting"); (ii) nominate candidates to fill any vacancies on the
Board of Directors which may exist from time to time; and (iii) have such other
powers and authority as the Board of Directors may delegate to it from time to
time.
(c) MNC Indemnification Committee. Until June 18,
1998, there shall be an MNC Indemnification Committee consisting of all of the
directors of Manufacturers National Corporation ("MNC"). The MNC
Indemnification Committee shall make all determinations necessary with respect
to the Corporation's indemnification obligations pursuant to Section 5.13 of
the Agreement and Plan of Merger, dated as of October 27, 1991, between the
Corporation and MNC (the "Merger Agreement").
(d) Comerica Indemnification Committee. Until June 18,
1998, there shall be a Comerica Indemnification Committee consisting of all of
the directors of the Corporation immediately prior to June 18, 1992. The
Comerica Indemnification Committee shall make all determinations necessary with
respect to the Corporation's indemnification obligations pursuant to the
Corporation's Bylaws prior to June 18, 1992.
SECTION 9. COMMITTEE MINUTES. Each Committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
SECTION 10. COMPENSATION OF DIRECTORS. Unless otherwise
restricted by the Certificate of Incorporation, the Board of Directors shall
have authority to fix the compensation of Directors. The Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as Director. No such payment shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending Committee meetings.
SECTION 11. PARTICIPATION IN MEETING BY TELEPHONE. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors or any Committee designated by the Board of Directors may
participate in a meeting of the Board of Directors or Committee by means of
conference telephone or similar communications equipment by
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means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
SECTION 12. NOMINATIONS OF DIRECTOR CANDIDATES. Only persons who
are nominated in accordance with the following procedures shall be eligible for
election as directors of the Corporation, except as may be otherwise provided
in the Certificate of Incorporation with respect to the right of holders of
preferred stock of the Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for election to the
Board of Directors may be made at any annual meeting of shareholders, or at any
special meeting of shareholders called for the purpose of electing directors,
shall be made:
(a) by or at the direction of the Board of Directors (or any
duly authorized committee thereof, including the Directors' Committee); or
(b) by any shareholder of the Corporation: (i) who is a
shareholder of record on the date of the giving of the notice provided for in
this Section 12 and on the record date for the determination of shareholders
entitled to vote at such meeting; and (ii) who complies with the notice
procedures set forth in this Section 12.
In addition to any other applicable requirements, for a nomination to be made
by a shareholder, such shareholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation. To be timely, a
shareholder's notice to the Secretary of the Corporation must be delivered to
or mailed and received at the principal executive offices of the Corporation
(a) in the case of an annual meeting of shareholders, not less than sixty (60)
days nor more than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of shareholders; provided, however, that
in the event that the annual meeting of shareholders is called for a date that
is not within thirty (30) days before or after such anniversary date, notice by
the shareholder in order to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the annual meeting of shareholders was mailed or public disclosure
of the date of the annual meeting was made, whichever first occurs; and (b) in
the case of a special meeting of shareholders called for the purpose of
electing directors, not later than the close of business on the tenth (10th)
day following the day on which notice of the date of the special meeting of
shareholders was mailed or public disclosure of the date of the special meeting
of shareholders was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary of the
Corporation must set forth:
(a) as to each person whom the shareholder proposes to
nominate for election as a director: (i) the name, age, business address and
residence address of the person; (ii) the principal occupation or employment of
the person; (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person as of
the record date for the meeting (if such date shall then have been made
publicly available and shall have occurred) and
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as of the date of such notice; and (iv) any other information relating to the
person that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of proxies for
election of directors pursuant to section 14 of the Exchange Act, and the rules
and regulations promulgated thereunder; and
(b) as to the shareholder giving the notice: (i) the name and
record address of such shareholder; (ii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially or of
record by such shareholder as of the record date for the meeting (if such date
shall then have been made publicly available and shall have occurred) and as of
the date of such notice; (iii) a description of all arrangements or
understandings between such shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nominations are
to be made by such shareholder; (iv) a representation that such shareholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice; and (v) any other information relating to such shareholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by the
written consent to such nomination of each person proposed as a nominee and
such person's written consent to serve as a director if elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section
12. If the Chairman of the meeting determines that a nomination was not made
in accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall
be disregarded.
ARTICLE IV
NOTICES
SECTION 1. NOTICE. Whenever any notice is required to be given to
any director or shareholder under any provision of statute or of the
Certificate of Incorporation or of these Bylaws, it shall not be construed to
mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or shareholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to Directors may also be given orally in person or
by telegram, telex, radiogram or cablegram, and such notice shall be deemed to
be given when the recipient receives the notice personally, by telephone or
when the notice, addressed as provided above, has been delivered to the
company, or to the equipment transmitting such notice.
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under any provision of statute or of the Certificate of Incorporation or
of these Bylaws, a written waiver thereof, signed by the person or persons
entitled to said notice, whether before or after the time stated
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therein, shall be deemed equivalent to notice. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, Directors, or members of a Committee of Directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these Bylaws. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.
ARTICLE V
OFFICERS
SECTION 1. SELECTION. The Board of Directors may appoint such
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board. The officers so appointed may
include a Chairman of the Board, President, one or more Vice Chairmen, one or
more Vice Presidents (including Executive, Senior, First, regular and Assistant
Vice Presidents), a Secretary and a Treasurer, and one or more lesser officers
as may be deemed appropriate. The Chief Executive Officer may also appoint
officers of the level of Senior Vice President and below as he shall deem
necessary, at any time, which officers shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board or the Chief Executive Officer. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
otherwise provides.
SECTION 2. COMPENSATION. The salaries of all executive
officers of the Corporation shall be fixed by the Board of Directors.
SECTION 3. TERM, REMOVAL AND VACANCIES. Each officer of the
Corporation shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any officer
elected or appointed by the Board of Directors may be removed at any time by
the affirmative vote of a majority of the Board of Directors. Additionally,
any officer of the level of regular Vice President or below may also be removed
at any time by the Chief Executive Officer. Any vacancy occurring in any
office of the Corporation may be filled by the Board of Directors. Any vacancy
occurring in any office of the Corporation of the level of regular Vice
President or below may also be filled by the Chief Executive Officer.
SECTION 4. CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER.
(a) Chief Executive Officer. At the first meeting of
each newly-elected Board of Directors, the Board shall designate the Chairman
of the Board or President as the chief executive officer of the Corporation;
provided, however, that if a motion is not made and carried to change the
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designation, the designation shall be same as the designation for the preceding
year; provided, further, that the designation of the chief executive officer
may be changed at any regular or special meeting of the Board of Directors.
The chief executive officer shall be responsible to the Board of Directors for
the general supervision and management of the business and affairs of the
Corporation. The Chairman of the Board or President who is not the chief
executive officer shall be subject to the authority of the chief executive
officer, but shall exercise all of the powers and discharge all of the duties
of the chief executive officer, during the absence or disability of the chief
executive officer.
(b) Chief Operating Officer. At any meeting of the
Board of Directors, the Board may designate a chief operating officer of the
Corporation. The chief operating officer shall perform such duties as may be
delegated to him or her by the Board of Directors, the Executive Committee of
the Board or the Chairman of the Board.
SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors shall be selected by, and from among the membership
of, the Board of Directors. He shall preside at all meetings of the
shareholders and of the Board of Directors. He shall perform such other duties
and functions as shall be assigned to him from time to time by the Board of
Directors. He shall be, ex officio, a member of all standing committees except
the Select Compensation Committee and the Audit and Legal Committee. Except
where by law the signature of the President of this Corporation is required,
the Chairman of the Board of Directors shall possess the same power and
authority as the President to sign all certificates, contracts, instruments,
papers and documents of every conceivable kind and character whatsoever, in the
name of and on behalf of this Corporation, which may be authorized by the Board
of Directors. During the absence or disability of the President, the Chairman
of the Board of Directors shall exercise all of the powers and discharge all of
the duties of the President.
SECTION 6. PRESIDENT. The President shall be selected by, and
from among the membership of, the Board of Directors. During the absence or
disability of the Chairman of the Board of Directors, or while such office is
vacant, the President shall perform all duties and functions, and while so
acting shall have all of the powers and authority, of the Chairman of the Board
of Directors. The President shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors.
The President shall be, ex officio, a member of all standing committees except
the Select Compensation Committee and the Audit and Legal Committee.
SECTION 7. VICE CHAIRMEN. One or more Vice Chairmen may be
chosen from the membership of the Board. Unless the Board of Directors shall
otherwise provide by resolution duly adopted by it, such of the Vice Chairmen
who are members of the Board of Directors in the order specified by the Board
of Directors shall perform the duties and exercise the powers of the President
during the absence or disability of the President. The Vice Chairmen shall
perform such other duties as may be delegated to them by the Board of
Directors, any executive committee, or the President.
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SECTION 8. SECRETARY. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the stockholders and shall record
all the proceedings thereof in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, all notices required by statute, Bylaw or
resolution, and shall perform such other duties as may be prescribed by the
Board of Directors or President. The Secretary shall have custody of the
corporate seal of the Corporation and the Secretary and Assistant Secretaries
shall have authority to affix the same to any instrument when its use is
required or appropriate.
SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretary or
Assistant Secretaries shall, in the absence of the Secretary or in the event of
his or her inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
SECTION 10. TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an account
of all his or her transactions as Treasurer and of the financial condition of
the Corporation. If required by the Board of Directors, the Treasurer shall
deliver to the Corporation, and shall keep in force, a bond, in such form,
amount, and with such surety or sureties as shall be satisfactory to the Board
of Directors, for the faithful performance of the duties of his or her office
and for the restoration to the Corporation, in case of his or her death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his
control belonging to the Corporation.
SECTION 11. ASSISTANT TREASURERS. The Assistant Treasurer or
Assistant Treasurers shall, in the absence of the Treasurer or in the event of
his or her inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
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SECTION 12. INDEMNIFICATION AND INSURANCE.
(a) The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending,
or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he or she is or was a director,
officer or employee of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit, or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Any person who is or was an agent of the Corporation may be indemnified to the
same extent as hereinabove provided. In addition, in the event any such
action, suit or proceeding is threatened or instituted against a spouse to whom
a director or officer is legally married at the time such director or officer
is covered under the indemnification provided herein which action, suit or
proceeding arises solely out of his or her status as the spouse of a director
or officer, including, without limitation, an action, suit or proceeding that
seeks damages recoverable from marital community property of the director or
officer and his or her spouse, property owned jointly by them or property
purported to have been transferred from the director or officer to his or her
spouse, the spouse of the director or officer shall be indemnified to the same
extent as hereinabove provided. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, raise any inference that he
or she had reasonable cause to believe that his or her conduct was unlawful.
(b) The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending,
or completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a
director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
he or she acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Corporation, and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Any person who is or was an agent of the Corporation may be
indemnified to the same extent as hereinabove provided. In addition, in the
event any such action or
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suit is threatened or instituted against a spouse to whom a director or officer
is legally married at the time such director or officer is covered under the
indemnification provided herein which action or suit arises solely out of his
or her status as the spouse of a director or officer, including, without
limitation, an action or suit that seeks damages recoverable from marital
community property of the director or officer and his or her spouse, property
owned jointly by them or property purported to have been transferred from the
director or officer to his or her spouse, the spouse of the director or
officer shall be indemnified to the same extent as hereinabove provided.
(c) To the extent that a director, officer, spouse of
the director or officer, employee, or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this Section, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b)
of this Section (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, spouse of the director or officer,
employee, or agent is proper in the circumstances because such person has met
the applicable standard of conduct set forth in subsections (a) and (b) of this
Section. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to the
action, suit or proceeding, or (2) if such a quorum is not obtainable, or even
if obtainable a quorum of disinterested Directors so directs, by independent
legal counsel chosen by the entire Board of Directors, subject to the
reasonable satisfaction of the party seeking indemnification, in a written
opinion, or (3) by the shareholders.
(e) Expenses (including attorney's fees) incurred by an
officer, director, or spouse of an officer or director, in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director, officer or spouse to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation
as authorized in this Section. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of this Section
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office.
(g) The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, spouse of a director
or officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee
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or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Section.
(h) For the purposes of this Section, references to
"the Corporation" include, in addition to the resulting or surviving
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had the power and authority to indemnify
its directors, officers, spouses of directors or officers, and employees or
agents, so that any person who is or was a director, officer, spouse of a
director or officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Section with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interests of the Corporation" as referred to
in this Section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent, and with respect to any spouse of a
director or officer, shall continue following the time the director or officer
spouse ceases to be a director or officer even if the marriage of the
individuals terminates prior to the end of the period of coverage, and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 13. OFFICERS APPOINTED PURSUANT TO MERGER AGREEMENT. During
the period in which the Employment Agreement, dated as of February 20, 1992,
between the Corporation and Mr. Gerald V. MacDonald, and the Employment
Agreement, entered into as of February 20, 1992, between the Corporation and
Mr. Eugene A. Miller (the "Employment Agreements") are in effect, any
modification, amendment or failure to honor the terms of either of such
Employment Agreements shall require the affirmative vote of 75% of the members
of the entire Board of Directors.
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ARTICLE VI
STOCK AND TRANSFERS
SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in
the Corporation shall be entitled to have a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board of Directors, or the
President or a Vice President and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation. If the Corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the Certificate
which the Corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Any of or all
of the signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
SECTION 2. LOST CERTIFICATES. The Board of Directors may
direct a new certificate to be issued in the place of any certificate
theretofore issued by the Corporation, alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate the Board of Directors may, in its discretion and
as a condition present to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as it shall require and/or to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against it with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 3. TRANSFERS OF STOCK. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
15
<PAGE> 16
SECTION 4. FIXING RECORD DATE. In order that the Corporation
may determine the shareholders entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
SECTION 5. REGISTERED SHAREHOLDERS. The Corporation shall
have the right to treat the person registered on its books as the owner of
shares as the absolute owner thereof, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. The Board of Directors, subject to any
restrictions contained in its Certificate of Incorporation, may declare and pay
any dividends upon the shares of its capital stock either (1) out of surplus as
defined in and computed in accordance with the provisions of the governing
statute, or (2) in case there shall be no such surplus, out of its net profits
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year. Dividends may be paid in cash, in property, or in shares of the
Corporation's capital stock, subject to the provisions of the statute and of
the Certificate of Incorporation.
SECTION 2. RESERVES. The Board of Directors shall have power
and authority to set apart, out of any funds available for dividends, such
reserve or reserves, for any proper purpose, as the Board in its discretion
shall approve, and the Board shall have the power and authority to abolish any
reserve created by the Board.
SECTION 3. VOTING SECURITIES. Unless otherwise directed by
the Board, the Chairman of the Board or President, or, in the case of their
absence or inability to act, the Vice Presidents, in order of their seniority,
shall have full power and authority on behalf of the Corporation to attend and
to act and to vote, or to execute in the name or on behalf of the Corporation
a proxy authorizing an agent or attorney-in-fact for the Corporation to attend
and vote at any meetings of security holders of Corporations in which the
Corporation may hold securities, and at such meetings he or his duly authorized
agent or attorney-in-fact shall possess and may exercise any and all rights and
powers incident to the ownership of such securities and which, as the owner
thereof, the
16
<PAGE> 17
Corporation might have possessed and exercised if present. The Board by
resolution from time to time may confer like power upon any other person or
persons.
SECTION 4. CHECKS. All checks, drafts and orders for the
payment of money shall be signed in the name of the Corporation in such manner
and by such officer or officers or such other person or persons as the Board of
Directors shall from time to time designate for that purpose.
SECTION 5. CONTRACTS, CONVEYANCES, ETC. When the execution of
any contract, conveyance or other instruments has been authorized without
specification of the executing officers, the Chairman of the Board, President
or any Vice President, and the Secretary or Assistant Secretary, may execute
the same in the name and on behalf of this Corporation and may affix the
corporate seal thereto. The Board of Directors shall have power to designate
the officers and agents who shall have authority to execute any instrument in
behalf of this Corporation.
SECTION 6. FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
SECTION 7. SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal" and
"Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
SECTION 8. MICHIGAN CONTROL SHARE STATUTE. Pursuant to
Section 794 of the Michigan Business Corporation Act ("MBCA"), Chapter 7B of
the MBCA shall not apply to the Corporation or control share acquisitions (as
such term is defined in Section 791 of the MBCA) of the shares of the
Corporation's capital stock.
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENT BY REGULAR VOTE. These bylaws may be
altered, amended or repealed or new Bylaws may be adopted by the shareholders
or by the Board of Directors, when such power is conferred upon the Board of
Directors by the Certificate of Incorporation, at any regular meeting of the
shareholders or of the Board of Directors or at any special meeting of the
shareholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new Bylaws be contained in the notice of such
special meeting.
SECTION 2. AMENDMENT BY 75% VOTE. The affirmative vote of 75%
of the total Board of Directors is required to alter, amend, repeal, add to or
otherwise change the effects of Article III, Sections 8(b), (c) or (d); Article
V, Section 13; or this Article VIII, Section 2 of the Corporation's Bylaws.
17
<PAGE> 1
Exhibit 23(c)
[ERNST & YOUNG LLP Letterhead]
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement on Form S-4 and related prospectus of Comerica
Incorporated for the registration of approximately 4,806,710 shares of its
common stock and the incorporation by reference therein of our report dated
January 17, 1995 with respect to the consolidated financial statements of
Comerica Incorporated included in the Company's Annual Report on Form 10-K, for
the year ended December 31, 1994, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
July 31, 1995
<PAGE> 1
Exhibit 23(d)
[ARTHUR ANDERSEN LLP Letterhead]
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use in this
registration statement of our report dated January 17, 1995 and to the
references to our Firm included in the "Experts," "Conditions to the
Consummation of the Merger" and "Conditions to the Merger" sections of this
registration statement.
Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
August 1, 1995
<PAGE> 1
EXHIBIT 99(b)
METROBANK
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
P The undersigned hereby appoints David L. Buell and Robert L. Mayer, and
either of them, as proxies, each with the power to appoint his
R substitute, and hereby authorizes either of them to represent and
to vote all of the shares of common stock of Metrobank (the "Bank") held
O of record by the undersigned on August 1, 1995 at the special meeting of
shareholders to be held on September 26, 1995, at 4:00p.m.,
X local time, and at any adjournment or adjournments thereof (1) as
specified below upon the proposal listed below and as described in the
Y Proxy Statement/Prospectus of the Bank dated August
__, 1995, receipt of which is hereby acknowledged, and (2) in their
discretion upon such other matters as may properly come before the
meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THESE SHARES SHALL BE VOTED FOR THE PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
To approve (a) the Amended and Restated Agreement and Plan of
Reorganization and Merger, dated as of July 31, 1995, by and among
Comerica Incorporated, a Delaware corporation ("Comerica"), Comerica
Holdings Incorporated, a California corporation ("Holdings"), and the
Bank, which amends and restates the Agreement and Plan of
Reorganization and Merger dated as of May 2, 1995 by and among
Comerica, Holdings and the Bank and (b) the Agreement of Merger by and
between Holdings and the Bank, and all of the transactions contemplated
thereby, including, but not limited to, providing for the merger of
Holdings with and into the Bank, as set forth in full in the Proxy
Statement/Prospectus.
<PAGE> 2
0 / / FOR / / AGAINST / / ABSTAIN
Continued and to be Signed on Reverse Side
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON YOUR STOCK CERTIFICATES.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING
AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE
AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
/ / Please mark here for address change and note at left.
/ / Please mark here if you plan to attend the Meeting.
Dated:
-------------------------------,
1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Signature of Shareholder(s)
<PAGE> 1
99(c)
SHAREHOLDER AGREEMENT
This Shareholder Agreement ("Agreement") is made as of May 2, 1995,
by Comerica Incorporated, a Delaware corporation ("Comerica") and the other
person executing the last page of this Agreement (a "Shareholder"). All terms
not otherwise defined in this Agreement shall have the meanings ascribed to
them in the Merger Agreement (as that term is defined below).
A. Comerica and Metrobank, a California state chartered bank
("Metrobank") have entered into an Agreement and Plan of Reorganization and
Merger (the "Merger Agreement"), dated as of May 2, 1995 pursuant to which a
wholly-owned subsidiary of Comerica will be merged with and into Metrobank (the
"Merger").
B. In order to induce Comerica to enter into the Merger
Agreement, the Shareholder, solely in the Shareholder's capacity as a
shareholder, desires to undertake to take certain actions and to refrain from
taking other actions in connection with the Merger.
NOW, THEREFORE, in consideration of these premises and of the
representations, warranties, covenants, and agreements contained in this
Agreement and in the Merger Agreement, the parties agree as follows:
1. Agreements of the Shareholder
1.1 Agreement to Vote. At any meeting of
shareholders of Metrobank held prior to March 10, 1996, or in
connection with any solicitation of the written consent of
shareholders of Metrobank considered prior to March 10, 1996 to
approve the Merger on the terms provided in the Merger Agreement, the
Shareholder shall vote or cause to be voted all shares of common
stock of Metrobank ("Metrobank Stock") the Shareholder owns or
hereafter acquires (excluding any shares of Metrobank Stock over
which the Shareholder has voting power as a trustee or comparable
capacity, other than grantor trusts) (the "Shareholder's Metrobank
Stock"), in favor of, and to approve, the Merger on the terms
provided in the Merger Agreement and any other matters provided in
the Merger Agreement that require the approval of shareholders of
Metrobank.
1.2 Restrictions on Dispositions. The
Shareholder agrees that until the earlier of (i) the adjournment of
the meeting of shareholders called to
<PAGE> 2
approve the Merger on the terms provided in the Merger Agreement,
(ii) the termination of the Merger Agreement, or (iii) March 10,
1996, the Shareholder will not sell, assign or otherwise dispose of
(except as provided below), any shares of the Shareholder's Metrobank
Stock or enter into any agreement to do the foregoing other than with
Comerica or an affiliate of Comerica (unless the Shareholder shall
have retained full voting power with respect to such shares or the
person to whom such shares shall have been sold, assigned or
otherwise disposed of shall have agreed to be bound by the provisions
of this Agreement), except (a) with the prior written consent of
Comerica, which shall not be unreasonably withheld; (b) pursuant to
the Merger; or (c) involuntary transfers, including, without
limitation, any foreclosure of security interests granted by the
Shareholder, or otherwise. Notwithstanding anything to the contrary
set forth herein, nothing in this Agreement shall prohibit the
Shareholder from pledging, granting a security interest in, or
otherwise encumbering the Shareholder's Metrobank Stock or engaging
in similar transactions, including, without limitation, the
replacement, renewal or modification of existing financing
arrangements; provided, however, that at least five (5) business days
prior to the consummation of any transaction involving a lien or
security interest in any of the Shareholder's Metrobank Stock, the
Shareholder shall give written notice thereof to Comerica.
1.3 Cooperation. At any time during which the
Shareholder's agreements contained in Section 1.2 above are in
effect, the Shareholder agrees not to directly or indirectly solicit
or initiate any inquiries, proposals or offers from any person or
entity other than Comerica or any affiliate of Comerica relating to,
any proposal or transaction for disposition of, the business or
assets of Metrobank or any of its Subsidiaries, the acquisition of
securities of Metrobank or any Subsidiary of Metrobank, except
acquisitions of securities in connection with Regulatory Stock Sales,
or any business combination with any person other than Comerica or
any affiliate of Comerica.
2. Representations and Warranties of the Shareholder
The Shareholder represents and warrants to Comerica as follows:
2.1 Capacity. The Shareholder has the requisite
capacity and authority to enter into and perform the Shareholder's
obligations under this Agreement.
2.2 Binding Agreement. This Agreement
constitutes the valid and legally binding obligation of the
Shareholder.
2.3 Noncontravention. Subject to rights in favor
of any secured party, the execution and delivery of this Agreement by
the Shareholder does
2
<PAGE> 3
not, and the performance by the Shareholder of the Shareholder's
obligations under this Agreement and the consummation by the
Shareholder of the transactions contemplated by this Agreement will
not in any material respect, violate or conflict with or constitute a
material default under any agreement, instrument, contract or other
obligation, any order, arbitration award, judgment or decree to which
the Shareholder is a party or by which the Shareholder is bound, or
any statute, rule or regulation to which the Shareholder or any of
the Shareholder's property is subject.
2.4 Ownership of Shares. Metrobank's proxy
materials for its 1995 annual shareholders meeting correctly set
forth the number of shares of Metrobank Stock owned by the
Shareholder, as of the date of this Agreement. The Shareholder has
full power to vote all such shares of Metrobank Stock.
3. Enforcement
3.1 Damages Inadequate; Specific Performance. In
the event of a threatened or actual breach of this Agreement by the
Shareholder, it is agreed that damages would not be an adequate
remedy to compensate Comerica. Accordingly, each party agrees that
the Shareholder's obligations will be enforceable by court order
requiring specific performance without proof of damages or posting of
any bond. In the event of a threatened or actual breach of this
Agreement by the Shareholder, Comerica will be entitled to a
temporary restraining order and to temporary and permanent injunctive
relief to prevent or terminate such threatened or actual breach,
provided that nothing in this Agreement shall be construed to limit
the non-consequential damages otherwise recoverable by Comerica in
any such event.
3.2 Limitation on Liability. The Shareholder
shall not have liability to Comerica for any incidental, special,
consequential or other indirect loss, damage or cost, howsoever
caused, including without limitation, any loss, damage or cost
arising from the failure of the Merger, on the terms and conditions
contained in the Merger Agreement and the Subsidiary Merger
Agreement, to be treated for accounting purposes as a pooling of
interests.
3.3 Notice to Third Parties. In addition, after
notice to the Shareholder, Comerica will have the right to inform any
person or entity that Comerica reasonably believes to be, or to be
contemplating, participating with
3
<PAGE> 4
the Shareholder (or receiving assistance from the Shareholder) in
violation of this Agreement, and that participation by any such
entity or person with the Shareholder in activities in violation of
this Agreement may give rise to claims by Comerica against such
entity or person.
4. Miscellaneous
4.1 Expenses. Each party will pay that party's
costs and expenses, including attorney and accountant fees, in
connection with this Agreement and the transactions contemplated by
this Agreement.
4.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, mailed by registered or certified mail
(return receipt requested), sent by confirmed overnight courier or
telecopied (with electronic confirmation and verbal confirmation of
the person to whom such telecopy is addressed), on the date such
notice is so delivered, mailed or sent, as the case may be, to the
parties at the following addresses or (or any such other address for
a party as shall be specified by like notice):
If to Comerica:
COMERICA INCORPORATED
Corporate Secretary - Corporate Legal
Department
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
Attention: Mark W. Yonkman
4
<PAGE> 5
If to the Shareholder:
To such person's address as maintained on the
books and records of Metrobank.
or to such other address as a party may have furnished to the others
in writing in accordance with this paragraph, except that notices of
change of address shall only be effective upon receipt. Any notice,
demand or other communication given pursuant to the provisions of
this paragraph 4.2 shall be deemed to have been given on the date
actually delivered or three days following the date mailed, as the
case may be.
4.3 Successors and Assigns. All terms and
provisions of this Agreement shall be binding upon and inure to the
benefit of the parties and their permitted transferees, successors
and permitted assigns. This Agreement and the rights, privileges,
duties and obligations of the parties may not be assigned or
delegated by any party without the prior written consent of the other
party. Any purported assignment in violation of this paragraph 4.3
shall be null and void.
4.4 Third Party Beneficiaries. Each party
intends that this Agreement shall not benefit, or create any right or
cause of action in or on behalf of, any person other than the
parties. As used in this Agreement, the term party or parties shall
refer only to Comerica and the Shareholder.
4.5 Counterparts. This Agreement may be executed
in one or more counterparts, all of which taken together shall
constitute one instrument. An executed counterpart received by
telecopy shall have the same effect as an originally-executed
counterpart.
4.6 Governing Law. This Agreement will be
governed by California law, without regard to any applicable
principles of conflicts of law.
4.7 Captions. The captions contained in this
Agreement are for convenience of reference only and do not form a
part of this Agreement.
4.8 Waiver and Modification. No waiver of any
term, provision or condition of this Agreement, whether by conduct or
otherwise, shall be deemed
5
<PAGE> 6
to be a further or continuing waiver of any such term, provision or
condition. This Agreement may be modified or amended only by an
instrument signed by the parties.
4.9 Attorney Fees. If any of the parties brings
an action or suit against any other party by reason of any breach of
any covenant, agreement, representation, warranty or other provision
of this Agreement, or any breach of any duty or obligation created
under this Agreement by such other party, the prevailing party in
whose favor final judgment is entered shall be entitled to recover
from the losing party all reasonable costs and expenses incurred by
the prevailing party in connection with such suit or action,
including legal fees and court costs (whether or not taxable as
such).
4.10 Entire Agreement. This Agreement embodies
the entire understanding of the parties with respect to its subject
matter, and there are no other agreements or understandings, written
or oral, in effect between the parties relating to the subject matter
of this Agreement, unless expressly referred to in this Agreement.
4.11 Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to
be valid under applicable law. However, if any provision shall be
invalid or unenforceable, it shall be construed and limited to
effectuate its purpose to the maximum legally permissible extent. If
it cannot be so construed so as to be valid under such law, such
provision shall be ineffective to the extent of such invalidity or
prohibition without invalidating the remainder of such provision or
the remain-
6
<PAGE> 7
ing provisions of this Agreement, and this Agreement shall be
construed to the maximum extent possible to carry out its terms
without such invalid or unenforceable provision or portion.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
COMERICA INCORPORATED
By: /s/ Mark W. Yonkman
Name: Mark W. Yonkman
Title: Vice President and
Assistant Secretary
SHAREHOLDER:
/s/ Paul B. Alexander
/s/ David L. Buell
/s/ Robert P. Bulesco
/s/ Peter B. Caloyeras
/s/ Seymour J. Carr, DMD
/s/ James W. Hobson
/s/ David P. Malone
/s/ Rudy B. Markmiller
/s/ Robert L. Mayer
/s/ Paul W. Stroube
/s/ Wallace Wong
7
<PAGE> 1
99(f)
AFFILIATE'S AGREEMENT
May 2, 1995
Comerica Incorporated
211 West Fort Street
Detroit, Michigan 48275-1041
Gentlemen:
Reference is made to the Agreement and Plan of Reorganization and Merger, dated
as of May 2, 1995 (the "Merger Agreement"), by and among Comerica Incorporated
("Comerica"), Comerica Holdings Incorporated ("Holdings") and Metrobank
("Metrobank"), which Merger Agreement provides for the merger (the "Merger") of
Holdings, a wholly-owned subsidiary of Comerica, and Metrobank, in a
transaction in which, among other things, shares of the common stock of
Metrobank ("Metrobank Common Stock") will be converted into the right to
receive shares of common stock, $5.00 par value, of Comerica ("Comerica Common
Stock"), as more fully provided therein.
The undersigned has been informed that the Merger constitutes a transaction
covered by Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"); that the undersigned may be deemed to be an "affiliate" of
Metrobank within the meaning of Rule 145; and that, accordingly, the shares of
Comerica Common Stock which the undersigned may acquire in connection with the
Merger may be disposed of only in conformity with the provisions hereof. In
addition, the undersigned has been informed that the treatment of the Merger as
a pooling-of-interests for financial accounting purposes is dependent upon the
accuracy of certain of the representations and the compliance with certain of
the agreements set forth herein.
The capitalized terms used and not defined herein shall have the meaning set
forth in the Merger Agreement.
1. The undersigned, after inquiry of any agent with
discretionary power to transfer the undersigned's shares of Metrobank Common
Stock, represents, warrants and agrees as follows:
(a) The undersigned has full power to execute
this Affiliate's Agreement and to make the representations, warranties and
agreements herein, and to perform his, her or its obligations hereunder.
<PAGE> 2
(b) Metrobank's proxy materials for its 1995
annual shareholders meeting correctly set forth the number of shares of
Metrobank Common Stock currently owned by the undersigned (the "Metrobank
Shares") and the undersigned has held the Metrobank Shares at all times since
May 1, 1995, unless otherwise set forth in Schedule 1.
(c) The undersigned currently owns no shares of
Comerica Common Stock and has not owned any shares of Comerica Common Stock
since January 1, 1995, except as otherwise disclosed on Schedule 1 to this
Agreement.
(d) The undersigned shall not sell, transfer or
otherwise dispose of, or reduce the undersigned's risk of ownership or
investment in, any of the Metrobank Shares or any of the shares of Comerica
Common Stock received by the undersigned pursuant to the Merger, for a period
beginning not less than thirty days prior to the Effective Time of the Merger
(the "Effective Time") and ending on the date Comerica publishes financial
results covering a period of at least thirty days of combined operations of
Metrobank and Comerica following the Effective Time; provided, however, that
the undersigned may (i) exchange the Metrobank Shares for shares of Comerica
Common Stock in the Merger, and (ii) may make bona fide gifts or distributions
without consideration so long as the recipients thereof agree not to sell,
transfer or otherwise dispose of the Comerica Common Stock except as provided
herein.
(e) The undersigned will not sell, transfer or
dispose of any shares of Comerica Common Stock which the undersigned may
acquire in connection with the Merger or any securities which may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor (all such shares and other
securities are sometimes collectively referred to herein as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities, unless such sale, transfer or disposition is effected
(i) pursuant to an exemption from the registration requirements of the
Securities Act as provided in Section 3 hereof, or (ii) pursuant to an
effective registration statement under, and in compliance with, the Securities
Act; provided, however, that the undersigned may make bona-fide gifts or
distributions without consideration so long as the recipients thereof agree not
to sell, transfer or otherwise dispose of the Comerica Common Stock except as
provided herein.
(f) The undersigned has no present plan or intent
to engage in a sale, exchange, transfer, redemption or reduction in any way of
the undersigned's risk of ownership by short sale or otherwise, or other
disposition, directly or indirectly (such actions being collectively referred
to as a "Sale") of the Metrobank Shares or any of the
2
<PAGE> 3
shares of Comerica Common Stock to be received by the undersigned pursuant to
the Merger.
(g) The undersigned has not engaged in a Sale of
any shares of Metrobank Common Stock at any time since March 31, 1995 unless
otherwise set forth in Schedule 1.
(h) The undersigned is not aware of or
participating in any plan or intention on the part of the Metrobank
shareholders (a "Plan") to engage in a Sale of Comerica Common Stock to be
received by such Metrobank shareholders pursuant to the Merger that will reduce
such Metrobank shareholders' ownership of Comerica Common Stock to a number of
shares having, in the aggregate, a value at the Effective Time of less than 50%
of the total fair market value of the Metrobank Shares/or Common Stock
outstanding immediately prior to the Merger. For purposes of this
representation, shares of the Metrobank Stock disposed of in a Sale (including
through the exercise of dissenters' rights) will be considered to be
outstanding stock of Metrobank immediately prior to the Merger that was
exchanged for Comerica Common Stock in the Merger, and then disposed of
pursuant to a Plan.
(i) The undersigned has no present plan or intent
to (i) engage in a Sale of the Metrobank Shares (other than in exchange for
Comerica Common Stock pursuant to the Merger), or (ii) exercise dissenters'
rights in connection with the Merger.
(j) The representations contained herein shall be
true and correct at all times from the date hereof through the Effective Time.
(k) The undersigned has consulted such legal and
financial counsel as the undersigned deems appropriate in connection with the
execution of this Affiliate's Agreement.
2. Comerica agrees to use its best efforts to file all
reports and data with the Securities and Exchange Commission ("SEC") necessary
to permit the undersigned to sell Restricted Securities pursuant to and
otherwise in conformity with Rule 145(d) under the Securities Act.
3. Comerica acknowledges that the provisions of Section 1(e)
of this Affiliate's Agreement will be satisfied as to any sale by the
undersigned of Restricted Securities pursuant to Rule 145(d) under the
Securities Act, as evidenced by a broker's letter stating that the requirements
of Rule 145 have been met; provided, however, that if counsel for Comerica
reasonably believes that the provisions of Rule 145 have not been complied
with, or if requested by Comerica in connection with a proposed
3
<PAGE> 4
disposition, the undersigned shall furnish to Comerica a copy of a "no action"
letter or other communication from the staff of the SEC or an opinion of
counsel in form and substance reasonably satisfactory to Comerica and its
counsel, to the effect that the applicable provisions of Paragraphs (c), (e),
(f) and (g) of Rule 144 under the Securities Act have been complied with or
that the disposition may be otherwise effected in the manner requested in
compliance with the Securities Act.
4. The undersigned also understands that stop transfer
instructions will be given to Comerica's transfer agent with respect to the
Restricted Securities and that there will be placed on the certificates
evidencing the Restricted Securities, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), APPLIES AND MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF
AND COMERICA INCORPORATED, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF COMERICA INCORPORATED."
Comerica agrees that such stop transfer instructions and legend will be
promptly removed if the provisions of Section 3 are complied with.
5. This Affiliate's Agreement shall be binding upon and
enforceable against administrators, executors, representatives, heirs, legatees
and divisees of the undersigned and any pledgee holding the Restricted
Securities of the undersigned as collateral.
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned has executed the
foregoing Affiliate's Agreement as of the date first above written.
Very truly yours
By: /s/ David L. Buell
---------------------------------
AGREED TO AND ACCEPTED:
COMERICA INCORPORATED
By: /s/ Mark W. Yonkman
---------------------------------
Name: Mark W. Yonkman
Title: Vice President and Assistant Secretary
5
<PAGE> 6
/s/ Paul B. Alexander
/s/ Robert P. Bulesco
/s/ Peter B. Caloyeras
/s/ Seymour J. Carr, DMD
/s/ James W. Hobson
/s/ David P. Malone
/s/ Rudy B. Markmiller
/s/ Robert L. Mayer
/s/ Paul W. Stroube
/s/ Wallace Wong
SCHEDULE 1
None.
6
<PAGE> 1
EXHIBIT 99(g)
EMPLOYMENT AGREEMENT
This Agreement is entered into as of May 2, 1995 by and between
Metrobank ("METROBANK") and Paul Alexander ("Executive").
WITNESSETH:
WHEREAS, METROBANK believes that it is in the best interests of
METROBANK to continue the employment of the Executive on and after the
consummation of the transactions contemplated in the May 2, 1995 Agreement and
Plan of Reorganization and Merger by and among METROBANK, Comerica Holdings
Incorporated and Comerica Incorporated ("Merger Agreement") in accordance with
the terms and conditions of this Agreement, and the Executive wishes to accept
employment under such terms;
NOW, THEREFORE, in consideration of the mutual promises, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement,
certain words and phrases are defined as follows:
(A) "Agreement" shall mean this employment
agreement between the Executive and METROBANK, including any written amendments
thereto.
(B) "Cause" shall mean an act of misconduct
involving METROBANK or the Executive's failure to substantially perform his
duties with METROBANK (other than such failure resulting from his incapacity
due to physical or mental illness) which failure to substantially perform
continues for any period after a written demand has been delivered to the
Executive by the Chief Executive Officer of METROBANK (CEO) which specifically
identifies the manner in which said official reasonably believes that the
Executive has not substantially performed his duties. Examples of misconduct
include, but are not limited to: (I) any act of embezzlement, fraud,
dishonesty, breach of fiduciary duty to METROBANK or any applicable parent,
subsidiary or affiliate of METROBANK; (II) the deliberate disregard of the
rules, regulations, policies, procedures, or codes of ethical conduct of
METROBANK or any applicable parent, subsidiary or affiliate of METROBANK; (III)
the unauthorized disclosure of trade secrets or confidential information of
METROBANK or any applicable parent, subsidiary or affiliate of METROBANK; (IV)
removal of the Executive by any regulatory agency from an office of METROBANK
or any applicable parent, subsidiary or affiliate; (V) conviction for any
felony or criminal offense involving dishonesty; or (VI) breach of Executive's
covenant not to compete contained in Section 7.
(C) "Commencement Date" shall be the "Closing
Date" as defined in the Merger Agreement.
(D) "METROBANK" shall mean METROBANK and any
successor thereto.
<PAGE> 2
(E) "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination has been given (provided that the Executive has not
returned to the performance of his duties during such thirty (30) day period);
(ii) if the Executive's employment is terminated for any reason other than in
accordance with Subsections 3(i) or 3(ii) hereof, thirty (30) days after a
Notice of Termination has been given; and (iii) if the Executive's employment
is terminated due to an event described in Subsections 3(i) or 3(ii) hereof, on
the date of the occurrence of such event.
(F) "Disability" for purposes of this Agreement
shall be defined as it is defined in METROBANK's or any successor's Long-Term
Disability Policy applicable to the Executive from time to time.
(G) "Executive" shall mean Paul Alexander.
(H) "Expiration Date" shall mean the date two (2)
years after the Commencement Date.
(I) "Notice of Termination" shall mean a written
notice issued by the Executive or by METROBANK specifying the termination
provision of this Agreement that is being relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
the Executive's termination of employment under the indicated provision.
SECTION 2. OPERATION OF AGREEMENT. This Agreement shall be
effective as of the date set forth in Section 3, below. The Executive shall be
required to comply with all policies and procedures of METROBANK applicable to
officers; provided, however, that the provisions of this Agreement shall
supersede any conflicting written or oral policies, promises, representations,
procedures or handbook provisions of METROBANK or any applicable parent,
subsidiaries, or affiliates.
SECTION 3. TERM OF AGREEMENT. This Agreement shall be
effective as of the Commencement Date and, subject to Section 6 hereof, shall
terminate upon the earlier of: (I) The Expiration Date; or (II) the
termination of Executive's employment due to death, retirement, Disability or
Cause; or (III) the Executive's voluntary termination of his employment; or
(IV) the involuntary termination of Executive's employment by METROBANK for any
other reason. Any purported termination of the Executive's employment by
METROBANK or by the Executive (except a termination pursuant to Subsections
3(i) and (ii) of this Agreement) shall be pursuant to a written Notice of
Termination.
SECTION 4. SERVICES. During the term of this Agreement, the
Executive shall devote his full time services to METROBANK as an executive
officer of METROBANK or any successor to METROBANK in positions consistent with
his existing responsibilities, as may be determined by the CEO of METROBANK.
The Executive shall serve METROBANK faithfully and diligently and shall devote
his best efforts, energies and skills to the discharge of his duties and
responsibilities under this Agreement.
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<PAGE> 3
SECTION 5. SALARY AND BENEFITS. On and after the Commencement
Date:
(A) METROBANK shall pay the Executive an
annualized base salary of $145,000 ("Base Salary") as compensation for his
services hereunder, payable in equal installments in accordance with
METROBANK's then applicable payroll practices for Senior Officers.
(B) In addition to the Base Salary payable to the
Executive pursuant to Section 5(a), METROBANK Executive shall be entitled to
the following benefits during the term of this Agreement: (I) participation in
METROBANK's then existing vacation, medical, dental, disability, automobile and
sick leave programs and any other benefit programs (except as excluded by
Section 5(c) below), provided by METROBANK or any successor from time to time
to executive officers. All sick leave accrued as of the Commencement Date
shall continue through the term of this Agreement or until used; (II) continued
reimbursement of the club dues and business related expenses being reimbursed
by METROBANK on the date hereof, consistent with the reimbursement practices
currently in effect; (III) payment of a bonus of $24,650 on the date that is
one year from the Commencement Date; and (IV) grant of options to purchase no
less than 3,000 shares of Comerica Incorporated stock pursuant to Comerica
Incorporated's then existing stock option plan.
(C) Other than as specifically provided in this
Agreement, the Executive shall not be eligible to participate in or receive
benefits pursuant to any other plan, program, policy or agreement of METROBANK
or any applicable parent, subsidiaries or affiliates, including but not limited
to any bonus, severance or salary continuation pay or benefits plan; provided,
however, that nothing in this Section 5(c) shall have any effect upon any right
in any plan of METROBANK which vested prior to the Commencement Date (including
any right to METROBANK's 1995 bonus prior to the Commencement Date,
indemnification granted to the Executive by METROBANK and any stock options
from METROBANK or its affiliates, including Comerica).
(D) As consideration for Executive's covenant not
to compete contained in Subsection 7(c), on the date that is one year from the
Commencement Date (provided there has been no breach by Executive of Subsection
7(c)): (i) METROBANK shall convey to Executive the North Ranch Country Club
membership being utilized by Executive; and (ii) METROBANK shall pay Executive
the sum of $24,650; provided, however, that in the event this Agreement is
terminated at any time during the one year period beginning on the Commencement
Date for any reason other than Executive's breach of Subsection 7(c), and if
Executive is not then in breach of Subsection 7(c), METROBANK shall then begin
monthly payments of $2,054.17 (to begin on the first day of the month
immediately following such termination) through the remainder of such one year
period, and shall pay the balance of said sum of $24,650 not then already paid
in one lump sum at the expiration of such one year period.
SECTION 6. TERMINATION DURING THE TERM OF THE AGREEMENT. During
the term of this Agreement, the Executive may be terminated by METROBANK for
Cause, Disability, death or without Cause and the Executive may voluntarily
terminate his employment with METROBANK.
3
<PAGE> 4
(A) In the event of his termination by METROBANK
for Cause, or upon his voluntary termination during the term of this Agreement,
the Executive shall receive any unpaid Base Salary accrued through his date of
termination, any benefits he is entitled to receive under Section 5 through the
date of termination and the payments provided by Subsection 5(d), which shall
be paid in accordance with the terms thereof.
(B) In the event of his termination for
Disability or death during the term of this Agreement, the Executive, or his
estate, if applicable, shall receive any unpaid Base Salary accrued through his
date of termination and the benefits that he or his estate is eligible to
receive under the then applicable employee benefit plans outlined in Section
5(b).
(C) In the event of his termination without Cause
in the first year after the Commencement Date, the Executive shall receive the
Base Salary under Section 5(a) of this Agreement for a period of one year from
the date of termination and the payments provided by Subsection 5(d), which
shall be paid in accordance with the terms thereof.
(D) In the event of his termination without Cause
in the second year after the Commencement Date, the Executive shall receive no
less than the Base Salary under Section 5(a) of this Agreement for a period of
six months from the date of termination.
SECTION 7. DISCLOSURE OF INFORMATION/COVENANT NOT TO COMPETE.
(A) The Executive agrees that, during his term of
employment or at any time thereafter, he will not divulge to any other person
or entity, any details of the confidential business or affairs of METROBANK or
its parents, subsidiaries or affiliates (including without limitation,
financial information, organizational structure, strategic planning, sales,
marketing strategies, distribution methods, data processing and other systems,
personnel policies and compensation plans and arrangements); any customer or
advertising lists; any confidential information, knowledge or data of a
technical nature (including, without limitation, methods, know-how, processes,
discoveries, or research projects); any confidential information, knowledge or
data relating to future developments (including, without limitation, research
and development, future marketing or merchandising); or any and all other trade
secrets.
(B) When requested by the CEO, the Executive will
deliver to METROBANK any and all documents, manuals, letters, memoranda, lists,
papers, notes, reports, computer software, computer printouts, and similar
materials, and all copies thereof, relating in any way to the confidential
trade secrets referenced in Section 7(a), and will deliver to METROBANK any and
all other property of METROBANK in the possession of or under the control of
the Executive.
(C) During the longer period of either the term
of his employment or one year from the Commencement Date the Officer shall not:
(i) solicit, cause, induce or encourage, directly or indirectly, any employee
of METROBANK to leave its employ, or any independent contractor to terminate
any independent contractor relationship with METROBANK; (ii) cause, induce or
encourage, directly or indirectly, any customer or client of METROBANK to
terminate
4
<PAGE> 5
or adversely change any relationship with METROBANK; (iii) cause, induce or
encourage any potential supplier or customer to not enter into any business
relationship with the Company; (d) directly or indirectly, including but not by
way of limitation, as an owner, employee, employer, operator, investor,
independent contractor, agent, stockholder, partner (general or limited), joint
venturer, officer, director, consultant, franchisee, franchiser or co-worker,
enter into, conduct, participate or engage in any form of business in the
county of Los Angeles in the State of California, which are related to banking
or operate a bank, bank holding company, savings and loan association, savings
bank or other financial institution in said counties. Nothing in this Section
7(c) shall prevent Executive from owning as a passive investor less than 5% of
the outstanding stock of any publicly traded company, including, without
limitation, Comerica Incorporated.
(D) Executive and METROBANK expressly agree and
understand that the provisions of this Section 7 shall survive without
limitation any termination of this Agreement for any reason.
SECTION 8. NOTICE. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
METROBANK at its headquarters and to the Executive at his address as on file
with METROBANK provided that all notices to METROBANK shall be directed to the
attention of the CEO of METROBANK, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of a change of address shall be effective only upon receipt.
SECTION 9. TAX WITHHOLDING. METROBANK may withhold from
any amounts payable under this Agreement, or shall require the Executive to
remit to METROBANK, all applicable Federal, State, local or other withholding
taxes.
SECTION 10. BINDING EFFECT.
(A) This Agreement shall be binding upon the successors and
assigns of METROBANK. METROBANK shall take whatever actions are necessary to
ensure that any successor to its operations (whether by purchase, merger,
consolidation, sale of substantially all assets or otherwise) assumes the
obligations under this Agreement and shall cause such successor to evidence the
assumption of such obligations in a written agreement satisfactory to the
Executive.
(B) This Agreement shall be binding upon the Executive and shall
inure to the benefit of and be enforceable by his legal representatives and
heirs. However, except as specified herein, the rights of the Executive under
this Agreement shall not be assigned, transferred, pledged or otherwise
encumbered.
5
<PAGE> 6
SECTION 11. AMENDMENT OR MODIFICATION OF AGREEMENT. This
Agreement may not be modified or amended except by instrument in writing signed
by the Executive and the CEO of METROBANK.
SECTION 12. VALIDITY.
(A) It is expressly understood and agreed that
although Executive and METROBANK consider the restrictions contained in Section
7 of this Agreement reasonable for the purpose of preserving for the Company
goodwill, proprietary rights and going concern value, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in these paragraphs is an unenforceable
restriction on the activities of Executive, the provisions of Section 7 shall
not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such other extent as such court may judicially
determine or indicate to be reasonable. Alternatively, if the court referred
to above finds that any restriction contained in Section 7 unenforceable, and
such restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions contained
herein.
(B) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall continue in full force and
effect. If any portion of this Agreement is held to be excessively broad it
shall not be rendered void but shall be construed by limiting or reducing the
provision as required so that the provision as limited or reduced is reasonable
and enforceable under applicable law.
SECTION 13. LIMITATION ON RIGHTS. Subject to the terms and
conditions set forth herein, this Agreement shall create no right in the
Executive to continue in METROBANK's employment for any specific period of
time, or to create any other rights in the Executive or obligations on the part
of METROBANK.
SECTION 14. MISCELLANEOUS. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
subsequent breach of the same or any other term or condition. This Agreement
is intended to be performed in accordance with, and only to the extent
permitted by, all applicable laws, ordinances, rules and regulations. The
headings in this Agreement are inserted for convenience of reference only and
shall not be a part of or control or affect the meaning of any provision
hereof.
SECTION 15. CONDITION. This Agreement is contingent upon
the consummation of the merger contemplated in the Merger Agreement. Should
the merger not occur for whatever reason, this entire Employment Agreement
shall be null and void.
SECTION 16. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without
taking into account principles of conflicts of laws.
6
<PAGE> 7
SECTION 17. ENTIRE AGREEMENT. This Agreement, the Merger
Agreement and the documents and agreements delivered pursuant to the Merger
Agreement represent the entire agreement and understanding of the parties with
respect to the subject matter of the Agreement and it may not be altered or
amended except by an agreement in writing.
SECTION 18. ATTORNEYS' FEES. If Executive or METROBANK
shall bring an action against the other by reason of any alleged breach of any
covenant, provision or condition hereof, the unsuccessful party shall pay to the
prevailing party all reasonable attorneys' fees and costs incurred by the
prevailing party, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
Executive METROBANK
/s/ Paul Alexander By: /s/ David L. Buell
- ------------------ -----------------------------
Name: David Buell
Its: Chief Executive Officer
7
<PAGE> 8
EMPLOYMENT AGREEMENT
This Agreement is entered into as of May 2, 1995 by and between
Metrobank ("METROBANK") and David Buell ("Executive").
WITNESSETH:
WHEREAS, METROBANK believes that it is in the best interests of
METROBANK to continue the employment of the Executive in accordance with the
terms and conditions of this Agreement, and the Executive wishes to accept
employment under such terms;
NOW, THEREFORE, in consideration of the mutual promises, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement,
certain words and phrases are defined as follows:
(A) "Agreement" shall mean this employment
agreement between the Executive and METROBANK, including any written amendments
thereto.
(B) "Cause" shall mean an act of misconduct
involving METROBANK or the Executive's failure to substantially perform his
duties with METROBANK (other than such failure resulting from his incapacity
due to physical or mental illness) which failure to substantially perform
continues for any period after a written demand has been delivered to the
Executive by the Chief Executive Officer of METROBANK (CEO) which specifically
identifies the manner in which said official reasonably believes that the
Executive has not substantially performed his duties. Examples of misconduct
include, but are not limited to:
(I) any act of embezzlement, fraud,
dishonesty, breach of fiduciary duty to METROBANK or any applicable parent,
subsidiary or affiliate of METROBANK;
(II) the deliberate disregard of the
rules, regulations, policies, procedures, or codes of ethical conduct of
METROBANK or any applicable parent, subsidiary or affiliate of METROBANK;
(III) the unauthorized disclosure of trade
secrets or confidential information of METROBANK or any applicable parent,
subsidiary or affiliate of METROBANK;
(IV) removal of the Executive by any
regulatory agency from an office of METROBANK or any applicable parent,
subsidiary or affiliate;
(V) conviction for any felony or
criminal offense involving dishonesty; or
<PAGE> 9
(VI) breach of Executive's Agreement Not
to Compete with METROBANK of even date herewith.
(C) "Commencement Date" shall be the "Closing
Date" as defined in the May 3, 1995 Agreement and Plan of Reorganization and
Merger by and among METROBANK, Comerica Holdings Incorporated and Comerica
Incorporated ("Merger Agreement").
(D) "METROBANK" shall mean METROBANK and any
successor thereto.
(E) "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination has been given (provided that the Executive has not
returned to the performance of his duties during such thirty (30) day period),
and (ii) if the Executive's employment is terminated for any reason other than
in accordance with Sections 3(a)(i) or 3(a)(ii) hereof, thirty (30) days after
a Notice of Termination has been given.
(F) "Disability" for purposes of this Agreement
shall be defined as it is defined in the underlying Long-Term Disability Policy
applicable to the Executive pursuant to Section 5(b) of this Agreement.
(G) "Executive" shall mean David Buell.
(H) "Expiration Date" shall mean the date one (1)
year after the Commencement Date.
(I) "Notice of Termination" shall mean a written
notice issued by the Executive or by METROBANK specifying the termination
provision of this Agreement that is being relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
the Executive's termination of employment under the indicated provision.
SECTION 2. OPERATION OF AGREEMENT. This Agreement shall be
effective as of the date set forth in Section 3, below. The Executive shall be
required to comply with all policies and procedures of METROBANK applicable to
officers; provided, however, that the provisions of this Agreement shall
supersede any conflicting written or oral policies, promises, representations,
procedures or handbook provisions of METROBANK or any applicable parent,
subsidiaries, or affiliates.
SECTION 3. TERM OF AGREEMENT.
(A) This Agreement shall be effective as of the
Commencement Date and, subject to Section 6 hereof, shall terminate upon the
earlier of:
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<PAGE> 10
(I) The Expiration Date; or
(II) the termination of Executive's
employment due to death, retirement, Disability or Cause; or
(III) the Executive's voluntary
termination of his employment; or
(IV) the involuntary termination of
Executive's employment by METROBANK for any other reason.
Any purported termination of the Executive's
employment by METROBANK or by the Executive (except a termination pursuant to
Section 3(a)(i) of this Agreement) shall be pursuant to a written Notice of
Termination.
SECTION 4. SERVICES. During the term of this Agreement, the
Executive shall serve METROBANK three days per week as either Chairman of
METROBANK or Vice Chairman of any successor to METROBANK in positions relating
to executive administration, general business development and customer
retention, all as may be determined by the CEO of METROBANK. The Executive
shall serve METROBANK faithfully and diligently. Executive's location of
employment shall be in Los Angeles County.
SECTION 5. SALARY AND BENEFITS. At the Commencement Date:
(A) METROBANK shall pay the Executive an
annualized base salary of $120,000 ("Base Salary") as compensation for his
services hereunder, payable in equal installments in accordance with
METROBANK's then applicable payroll practices for Senior Officers.
(B) METROBANK hereby conveys to Executive the Bel
Air Country Club membership currently being utilized by Executive.
(C) In addition to the Base Salary payable to the
Executive pursuant to Section 5(a), METROBANK will pay to Executive on the
Commencement Date all accrued vacation pay and the Executive shall be entitled
to only the following benefits during the term of this Agreement:
(I) participation in METROBANK's then
existing medical, dental, disability, automobile and sick leave programs. All
sick leave accrued as of the Commencement Date shall continue through the term
of this Agreement or until used.
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<PAGE> 11
(II) continued reimbursement of the club
dues and costs not to exceed $1,000 and business related expenses being
reimbursed by METROBANK on the date hereof, consistent with the reimbursement
practices currently in effect;
(III) 12 days of paid vacation during the
term of this Agreement.
(IV) continued use of Executive's current
office space, or if METROBANK vacates the Metrobank Plaza building, comparable
space in one of METROBANK's premises in the Los Angeles area, and continued use
of Executive's current executive assistant (Sharon Canup) on the basis of three
days per week, for so long as such assistant remains employed by METROBANK
during the term of this Agreement. METROBANK shall offer to employ Ms. Canup
upon the terms set forth in Exhibit A hereto in a contract with termination and
other provisions substantially similar to this Agreement. Ms. Canup shall be
an intended third party beneficiary of the foregoing, with the full right to
enforce such provisions against METROBANK.
(D) Other than as specifically provided in this
Agreement, the Executive shall not be eligible to participate in or receive
benefits pursuant to any other plan, program, policy or agreement of METROBANK
or any applicable parent, subsidiaries or affiliates, including but not limited
to any bonus, severance or salary continuation pay or benefits plan. Provided,
however, that nothing in this Section 5(c) shall have any effect upon any right
in any plan of METROBANK which vested prior to the Commencement Date (including
any right to indemnification granted to the Executive by METROBANK and any
stock options from METROBANK or its affiliates, including Comerica).
SECTION 6. TERMINATION DURING THE TERM OF THE AGREEMENT. During
the term of this Agreement, the Executive may be terminated by METROBANK for
Cause, Disability, death or without Cause and the Executive may voluntarily
terminate his employment with METROBANK.
(A) In the event of his termination by METROBANK
for Cause, or upon his voluntary termination during the term of this Agreement,
the Executive shall receive any unpaid Base Salary accrued through his date of
termination and any benefits he is entitled to receive under Section 5 through
the date of termination.
(B) In the event of his termination for
Disability or death during the term of this Agreement, the Executive, or his
estate, if applicable, shall receive any unpaid Base Salary accrued through his
date of termination and the benefits that he or his estate is eligible to
receive under the then applicable employee benefit plans outlined in Section
5(b).
(C) In the event of his termination without
Cause, the Executive shall receive the Base Salary under Section 5(a) of this
Agreement from the date of termination until the Expiration Date and any
benefits he is entitled to receive under the then applicable employee benefit
plans outlined in Sections 5(b) through the Expiration Date.
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<PAGE> 12
SECTION 7. DISCLOSURE OF INFORMATION.
(A) The Executive agrees that, during his term of
employment or at any time thereafter, he will not divulge to any other person
or entity, any details of the confidential business or affairs of METROBANK or
its parents, subsidiaries or affiliates (including without limitation,
financial information, organizational structure, strategic planning, sales,
marketing strategies, distribution methods, data processing and other systems,
personnel policies and compensation plans and arrangements); any customer or
advertising lists; any confidential information, knowledge or data of a
technical nature (including, without limitation, methods, know-how, processes,
discoveries, or research projects); any confidential information, knowledge or
data relating to future developments (including, without limitation, research
and development, future marketing or merchandising); or any and all other trade
secrets.
(B) When requested by the CEO, the Executive will
deliver to METROBANK any and all documents, manuals, letters, memoranda, lists,
papers, notes, reports, computer software, computer printouts, and similar
materials, and all copies thereof, relating in any way to the confidential
trade secrets referenced in Section 7(a), and will deliver to METROBANK any and
all other property of METROBANK in the possession of or under the control of
the Executive.
SECTION 8. NOTICE. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
METROBANK at its headquarters and to the Executive at his address as on file
with METROBANK provided that all notices to METROBANK shall be directed to the
attention of the CEO of METROBANK, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of a change of address shall be effective only upon receipt.
SECTION 9. TAX WITHHOLDING. METROBANK may withhold from
any amounts payable under this Agreement, or shall require the Executive to
remit to METROBANK, all applicable Federal, State, local or other withholding
taxes.
SECTION 10. BINDING EFFECT.
(A) This Agreement shall be binding upon the successors and
assigns of METROBANK. METROBANK shall take whatever actions are necessary to
ensure that any successor to its operations (whether by purchase, merger,
consolidation, sale of substantially all assets or otherwise) assumes the
obligations under this Agreement and shall cause such successor to evidence the
assumption of such obligations in a written agreement satisfactory to the
Executive.
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<PAGE> 13
(B) This Agreement shall be binding upon the Executive and shall
inure to the benefit of and be enforceable by his legal representatives and
heirs. However, except as specified herein, the rights of the Executive under
this Agreement shall not be assigned, transferred, pledged or otherwise
encumbered.
SECTION 11. AMENDMENT OR MODIFICATION OF AGREEMENT. This
Agreement may not be modified or amended except by instrument in writing signed
by the Executive and the CEO of METROBANK.
SECTION 12. VALIDITY. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall continue
in full force and effect. If any portion of this Agreement is held to be
excessively broad it shall not be rendered void but shall be construed by
limiting or reducing the provision as required so that the provision as limited
or reduced is reasonable and enforceable under applicable law.
SECTION 13. LIMITATION ON RIGHTS. Subject to the terms and
conditions set forth herein, this Agreement shall create no right in the
Executive to continue in METROBANK's employment for any specific period of
time, or to create any other rights in the Executive or obligations on the part
of METROBANK.
SECTION 14. MISCELLANEOUS. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
subsequent breach of the same or any other term or condition. This Agreement
is intended to be performed in accordance with, and only to the extent
permitted by, all applicable laws, ordinances, rules and regulations. The
headings in this Agreement are inserted for convenience of reference only and
shall not be a part of or control or affect the meaning of any provision
hereof.
SECTION 15. CONDITION. This Agreement is contingent upon
the consummation of the merger contemplated in the Merger Agreement. Should
the merger not occur for whatever reason, this entire Employment Agreement
shall be null and void.
SECTION 16. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without
taking into account principles of conflicts of laws.
SECTION 17. ENTIRE AGREEMENT. This Agreement, the Merger
Agreement and the documents and agreements delivered pursuant to the Merger
Agreement represent the entire agreement and understanding of the parties with
respect to the subject matter of the Agreement and it may not be altered or
amended except by an agreement in writing.
SECTION 18. ATTORNEYS' FEES. If Executive or METROBANK
shall bring an action against the other by reason of any alleged breach of any
covenant, provision or condition hereof,
6
<PAGE> 14
the unsuccessful party shall pay to the prevailing party all reasonable
attorneys' fees and costs incurred by the prevailing party, in addition to any
other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
Executive METROBANK
/s/ David Buell By: /s/ Douglas Krause
- --------------- ----------------------------
Name:Douglas Krause
Its: General Counsel
7
<PAGE> 15
Exhibit A
1. Title Senior Vice President
2. Responsibility Administrative support and banking liaison to
former Metrobank directors and chairman
3. Reporting Metrobank's chairman
4. Salary $60,000 annually; $5,000 monthly
5. Bonus/Options None
6. Company Auto None
7. Benefits Standard Metrobank medical and dental plan for
full-time employees; 12 days annual paid
vacation, with accrued sick time to be
carried over. Metrobank accrued vacation to
be paid to employee in full at acquisition
close.
8. Schedule Three days per week.
9. Contract One year
10. Severance Payment $160,000 upon close of
acquisition
11. Clubs None
12. Office Employee will retain existing Westwood office
or comparable space in one of METROBANK's
premises in the Los Angeles area during the
contract period.
8
<PAGE> 16
EMPLOYMENT AGREEMENT
This Agreement is entered into as of May 2, 1995 by and between
Metrobank ("METROBANK") and Robert Bulseco ("Executive").
WITNESSETH:
WHEREAS, METROBANK believes that it is in the best interests of
METROBANK to continue the employment of the Executive on and after the
consummation of the transactions contemplated in the May 2, 1995 Agreement and
Plan of Reorganization and Merger by and among METROBANK, Comerica Holdings
Incorporated and Comerica Incorporated ("Merger Agreement") in accordance with
the terms and conditions of this Agreement, and the Executive wishes to accept
employment under such terms;
NOW, THEREFORE, in consideration of the mutual promises, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement,
certain words and phrases are defined as follows:
(A) "Agreement" shall mean this employment
agreement between the Executive and METROBANK, including any written amendments
thereto.
(B) "Cause" shall mean an act of misconduct
involving METROBANK or the Executive's failure to substantially perform his
duties with METROBANK (other than such failure resulting from his incapacity
due to physical or mental illness) which failure to substantially perform
continues for any period after a written demand has been delivered to the
Executive by the Chief Executive Officer of METROBANK (CEO) which specifically
identifies the manner in which said official reasonably believes that the
Executive has not substantially performed his duties. Examples of misconduct
include, but are not limited to: (I) any act of embezzlement, fraud,
dishonesty, breach of fiduciary duty to METROBANK or any applicable parent,
subsidiary or affiliate of METROBANK; (II) the deliberate disregard of the
rules, regulations, policies, procedures, or codes of ethical conduct of
METROBANK or any applicable parent, subsidiary or affiliate of METROBANK; (III)
the unauthorized disclosure of trade secrets or confidential information of
METROBANK or any applicable parent, subsidiary or affiliate of METROBANK; (IV)
removal of the Executive by any regulatory agency from an office of METROBANK
or any applicable parent, subsidiary or affiliate; (V) conviction for any
felony or criminal offense involving dishonesty; or (VI) breach of Executive's
covenant not to compete contained in Section 7.
(C) "Commencement Date" shall be the "Closing
Date" as defined in the Merger Agreement.
(D) "METROBANK" shall mean METROBANK and any
successor thereto.
<PAGE> 17
(E) "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination has been given (provided that the Executive has not
returned to the performance of his duties during such thirty (30) day period);
(ii) if the Executive's employment is terminated for any reason other than in
accordance with Subsections 3(i) or 3(ii) hereof, thirty (30) days after a
Notice of Termination has been given; and (iii) if the Executive's employment
is terminated due to an event described in Subsections 3(i) or 3(ii) hereof, on
the date of the occurrence of such event.
(F) "Disability" for purposes of this Agreement
shall be defined as it is defined in METROBANK's or any successor's Long-Term
Disability Policy applicable to the Executive from time to time.
(G) "Executive" shall mean Robert Bulseco
(H) "Expiration Date" shall mean the date two (2)
years after the Commencement Date.
(I) "Notice of Termination" shall mean a written
notice issued by the Executive or by METROBANK specifying the termination
provision of this Agreement that is being relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
the Executive's termination of employment under the indicated provision.
SECTION 2. OPERATION OF AGREEMENT. This Agreement shall be
effective as of the date set forth in Section 3, below. The Executive shall be
required to comply with all policies and procedures of METROBANK applicable to
officers; provided, however, that the provisions of this Agreement shall
supersede any conflicting written or oral policies, promises, representations,
procedures or handbook provisions of METROBANK or any applicable parent,
subsidiaries, or affiliates.
SECTION 3. TERM OF AGREEMENT. This Agreement shall be
effective as of the Commencement Date and, subject to Section 6 hereof, shall
terminate upon the earlier of: (I) The Expiration Date; or (II) the
termination of Executive's employment due to death, retirement, Disability or
Cause; or (III) the Executive's voluntary termination of his employment; or
(IV) the involuntary termination of Executive's employment by METROBANK for any
other reason. Any purported termination of the Executive's employment by
METROBANK or by the Executive (except a termination pursuant to Subsections
3(i) and (ii) of this Agreement) shall be pursuant to a written Notice of
Termination.
SECTION 4. SERVICES. During the term of this Agreement, the
Executive shall devote his full time services to METROBANK as an executive
officer of METROBANK or any successor to METROBANK in positions consistent with
his existing responsibilities, as may be determined by the CEO of METROBANK.
The Executive shall serve METROBANK faithfully and diligently and shall devote
his best efforts, energies and skills to the discharge of his duties and
responsibilities under this Agreement.
2
<PAGE> 18
SECTION 5. SALARY AND BENEFITS. On and after the Commencement
Date:
(A) METROBANK shall pay the Executive an
annualized base salary of $145,000 ("Base Salary") as compensation for his
services hereunder, payable in equal installments in accordance with
METROBANK's then applicable payroll practices for Senior Officers.
(B) In addition to the Base Salary payable to the
Executive pursuant to Section 5(a), METROBANK Executive shall be entitled to
the following benefits during the term of this Agreement: (I) participation in
METROBANK's then existing vacation, medical, dental, disability, automobile and
sick leave programs and any other benefit programs (except as excluded by
Section 5(c) below), provided by METROBANK or any successor from time to time
to executive officers. All sick leave accrued as of the Commencement Date
shall continue through the term of this Agreement or until used; (II) continued
reimbursement of the club dues and business related expenses being reimbursed
by METROBANK on the date hereof, consistent with the reimbursement practices
currently in effect; (III) payment of a bonus of $22,950 on the date that is
one year from the Commencement Date; and (IV) grant of options to purchase no
less than 3,000 shares of Comerica Incorporated stock pursuant to Comerica
Incorporated's then existing stock option plan.
(C) Other than as specifically provided in this
Agreement, the Executive shall not be eligible to participate in or receive
benefits pursuant to any other plan, program, policy or agreement of METROBANK
or any applicable parent, subsidiaries or affiliates, including but not limited
to any bonus, severance or salary continuation pay or benefits plan; provided,
however, that nothing in this Section 5(c) shall have any effect upon any right
in any plan of METROBANK which vested prior to the Commencement Date (including
any right to METROBANK's 1995 bonus prior to the Commencement Date,
indemnification granted to the Executive by METROBANK and any stock options
from METROBANK or its affiliates, including Comerica).
(D) As consideration for Executive's covenant not
to compete contained in Subsection 7(c), on the date that is one year from the
Commencement Date (provided there has been no breach by Executive of Subsection
7(c)): (i) METROBANK shall make a cash lump sum payment of $20,000 to
Executive; and (ii) METROBANK shall pay Executive the sum of $22,900; provided,
however, that in the event this Agreement is terminated at any time during the
one year period beginning on the Commencement Date for any reason other than
Executive's breach of Subsection 7(c), and if Executive is not then in breach
of Subsection 7(c), METROBANK shall then begin monthly payments of $1,912.50(to
begin on the first day of the month immediately following such termination)
through the remainder of such one year period, and shall pay the balance of
said sum of $22,900 not then already paid in one lump sum at the expiration of
such one year period.
SECTION 6. TERMINATION DURING THE TERM OF THE AGREEMENT. During
the term of this Agreement, the Executive may be terminated by METROBANK for
Cause, Disability, death or without Cause and the Executive may voluntarily
terminate his employment with METROBANK.
3
<PAGE> 19
(A) In the event of his termination by METROBANK
for Cause, or upon his voluntary termination during the term of this Agreement,
the Executive shall receive any unpaid Base Salary accrued through his date of
termination, any benefits he is entitled to receive under Section 5 through the
date of termination and the payments provided by Subsection 5(d), which shall
be paid in accordance with the terms thereof.
(B) In the event of his termination for
Disability or death during the term of this Agreement, the Executive, or his
estate, if applicable, shall receive any unpaid Base Salary accrued through his
date of termination and the benefits that he or his estate is eligible to
receive under the then applicable employee benefit plans outlined in Section
5(b).
(C) In the event of his termination without Cause
in the first year after the Commencement Date, the Executive shall receive the
Base Salary under Section 5(a) of this Agreement for a period of one year from
the date of termination and the payments provided by Subsection 5(d), which
shall be paid in accordance with the terms thereof.
(D) In the event of his termination without Cause
in the second year after the Commencement Date, the Executive shall receive no
less the Base Salary under Section 5(a) of this Agreement for a period of six
months from the date of termination.
SECTION 7. DISCLOSURE OF INFORMATION/COVENANT NOT TO COMPETE.
(A) The Executive agrees that, during his term of
employment or at any time thereafter, he will not divulge to any other person
or entity, any details of the confidential business or affairs of METROBANK or
its parents, subsidiaries or affiliates (including without limitation,
financial information, organizational structure, strategic planning, sales,
marketing strategies, distribution methods, data processing and other systems,
personnel policies and compensation plans and arrangements); any customer or
advertising lists; any confidential information, knowledge or data of a
technical nature (including, without limitation, methods, know-how, processes,
discoveries, or research projects); any confidential information, knowledge or
data relating to future developments (including, without limitation, research
and development, future marketing or merchandising); or any and all other trade
secrets.
(B) When requested by the CEO, the Executive will
deliver to METROBANK any and all documents, manuals, letters, memoranda, lists,
papers, notes, reports, computer software, computer printouts, and similar
materials, and all copies thereof, relating in any way to the confidential
trade secrets referenced in Section 7(a), and will deliver to METROBANK any and
all other property of METROBANK in the possession of or under the control of
the Executive.
(C) During the longer period of either the term
of his employment or one year from the Commencement Date the Officer shall not:
(i) solicit, cause, induce or encourage, directly or indirectly, any employee
of METROBANK to leave its employ, or any independent contractor to terminate
any independent contractor relationship with METROBANK; (ii) cause, induce or
encourage, directly or indirectly, any customer or client of METROBANK to
terminate
4
<PAGE> 20
or adversely change any relationship with METROBANK; (iii) cause, induce or
encourage any potential supplier or customer to not enter into any business
relationship with the Company; (d) directly or indirectly, including but not by
way of limitation, as an owner, employee, employer, operator, investor,
independent contractor, agent, stockholder, partner (general or limited), joint
venturer, officer, director, consultant, franchisee, franchiser or co-worker,
enter into, conduct, participate or engage in any form of business in the
county of Los Angeles in the State of California, which are related to banking
or operate a bank, bank holding company, savings and loan association, savings
bank or other financial institution in said counties. Nothing in this Section
7(c) shall prevent Executive from owning as a passive investor less than 5% of
the outstanding stock of any publicly traded company, including, without
limitation, Comerica Incorporated.
(D) Executive and METROBANK expressly agree and
understand that the provisions of this Section 7 shall survive without
limitation any termination of this Agreement for any reason.
SECTION 8. NOTICE. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
METROBANK at its headquarters and to the Executive at his address as on file
with METROBANK provided that all notices to METROBANK shall be directed to the
attention of the CEO of METROBANK, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of a change of address shall be effective only upon receipt.
SECTION 9. TAX WITHHOLDING. METROBANK may withhold from
any amounts payable under this Agreement, or shall require the Executive to
remit to METROBANK, all applicable Federal, State, local or other withholding
taxes.
SECTION 10. BINDING EFFECT.
(A) This Agreement shall be binding upon the successors and
assigns of METROBANK. METROBANK shall take whatever actions are necessary to
ensure that any successor to its operations (whether by purchase, merger,
consolidation, sale of substantially all assets or otherwise) assumes the
obligations under this Agreement and shall cause such successor to evidence the
assumption of such obligations in a written agreement satisfactory to the
Executive.
(B) This Agreement shall be binding upon the Executive and shall
inure to the benefit of and be enforceable by his legal representatives and
heirs. However, except as specified herein, the rights of the Executive under
this Agreement shall not be assigned, transferred, pledged or otherwise
encumbered.
5
<PAGE> 21
SECTION 11. AMENDMENT OR MODIFICATION OF AGREEMENT. This
Agreement may not be modified or amended except by instrument in writing signed
by the Executive and the CEO of METROBANK.
SECTION 12. VALIDITY.
(A) It is expressly understood and agreed that
although Executive and METROBANK consider the restrictions contained in Section
7 of this Agreement reasonable for the purpose of preserving for the Company
goodwill, proprietary rights and going concern value, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in these paragraphs is an unenforceable
restriction on the activities of Executive, the provisions of Section 7 shall
not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such other extent as such court may judicially
determine or indicate to be reasonable. Alternatively, if the court referred
to above finds that any restriction contained in Section 7 unenforceable, and
such restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions contained
herein.
(B) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall continue in full force and
effect. If any portion of this Agreement is held to be excessively broad it
shall not be rendered void but shall be construed by limiting or reducing the
provision as required so that the provision as limited or reduced is reasonable
and enforceable under applicable law.
SECTION 13. LIMITATION ON RIGHTS. Subject to the terms and
conditions set forth herein, this Agreement shall create no right in the
Executive to continue in METROBANK's employment for any specific period of
time, or to create any other rights in the Executive or obligations on the part
of METROBANK.
SECTION 14. MISCELLANEOUS. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
subsequent breach of the same or any other term or condition. This Agreement
is intended to be performed in accordance with, and only to the extent
permitted by, all applicable laws, ordinances, rules and regulations. The
headings in this Agreement are inserted for convenience of reference only and
shall not be a part of or control or affect the meaning of any provision
hereof.
SECTION 15. CONDITION. This Agreement is contingent upon
the consummation of the merger contemplated in the Merger Agreement. Should
the merger not occur for whatever reason, this entire Employment Agreement
shall be null and void.
SECTION 16. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without
taking into account principles of conflicts of laws.
6
<PAGE> 22
SECTION 17. ENTIRE AGREEMENT. This Agreement, the Merger
Agreement and the documents and agreements delivered pursuant to the Merger
Agreement represent the entire agreement and understanding of the parties with
respect to the subject matter of the Agreement and it may not be altered or
amended except by an agreement in writing.
SECTION 18. ATTORNEYS' FEES. If Executive or METROBANK
shall bring an action against the other by reason of any alleged breach of any
covenant, provision or condition hereof, the unsuccessful party shall pay to the
prevailing party all reasonable attorneys' fees and costs incurred by the
prevailing party, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
Executive METROBANK
/s/ Robert Bulseco By: /s/ David Buell
- ------------------ -------------------------
Name: David Buell
Its: Chief Executive Officer
7
<PAGE> 23
EMPLOYMENT AGREEMENT
This Agreement is entered into as of June 9, 1995 by and between Metrobank
("METROBANK") and Scott T. Monson ("Executive").
WITNESSETH:
WHEREAS, METROBANK believes that it is in the best interests of METROBANK to
continue the employment of the Executive on and after the consummation of the
transactions contemplated in the May 2, 1995 Agreement and Plan of
Reorganization and Merger by and among METROBANK, Comerica Holdings
Incorporated and Comerica Incorporated ("Merger Agreement") in accordance with
the terms and conditions of this Agreement, and the Executive wishes to accept
employment under such terms;
NOW, THEREFORE, in consideration of the mutual promises, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, certain words and
phrases are defined as follows:
(A) "Agreement" shall mean this employment agreement between the
Executive and METROBANK, including any written amendments thereto.
(B) "Cause" shall mean an act of misconduct involving METROBANK or the
Executive's failure to substantially perform his duties with METROBANK (other
than such failure resulting from his incapacity due to physical or mental
illness) which failure to substantially perform continues for any period after
a written demand has been delivered to the Executive by the Chief Executive
Officer of METROBANK (CEO) which specifically identifies the manner in which
said official reasonably believes that the Executive has not substantially
performed his duties. Examples of misconduct include, but are not limited to:
(I) any act of embezzlement, fraud, dishonesty, breach of fiduciary duty to
METROBANK or any applicable parent, subsidiary or affiliate of METROBANK; (II)
the deliberate disregard of the rules, regulations, policies, procedures, or
codes of ethical conduct of METROBANK or any applicable parent, subsidiary or
affiliate of METROBANK; (III) the unauthorized disclosure of trade secrets or
confidential information of METROBANK or any applicable parent, subsidiary or
affiliate of METROBANK; (IV) removal of the Executive by any regulatory agency
from an office of METROBANK or any applicable parent, subsidiary or affiliate;
(V) conviction for any felony or criminal offense involving dishonesty; or (VI)
breach of Executive's covenant not to compete contained in Section 7.
(C) "Commencement Date" shall be the "Closing Date" as defined in the
Merger Agreement.
(D) "METROBANK" shall mean METROBANK and any successor thereto.
<PAGE> 24
(E) "Date of Termination" shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination has
been given (provided that the Executive has not returned to the performance of
his duties during such thirty (30) day period); (ii) if the Executive's
employment is terminated for any reason other than in accordance with
Subsections 3(i) or 3(ii) hereof, thirty (30) days after a Notice of
Termination has been given; and (iii) if the Executive's employment is
terminated due to an event described in Subsections 3(i) or 3(ii) hereof, on
the date of the occurrence of such event.
(F) "Disability" for purposes of this Agreement shall be defined as it is
defined in METROBANK's or any successor's Long-Term Disability Policy
applicable to the Executive from time to time.
(G) "Executive" shall mean Scott T. Monson.
(H) "Expiration Date" shall mean the date two (2) years after the
Commencement Date.
(I) "Notice of Termination" shall mean a written notice issued by the
Executive or by METROBANK specifying the termination provision of this
Agreement that is being relied upon and setting forth in reasonable detail the
facts and circumstances claimed to provide a basis for the Executive's
termination of employment under the indicated provision.
SECTION 2. OPERATION OF AGREEMENT. This Agreement shall be effective as of
the date set forth in Section 3, below. The Executive shall be required to
comply with all policies and procedures of METROBANK applicable to officers;
provided, however, that the provisions of this Agreement shall supersede any
conflicting written or oral policies, promises, representations, procedures or
handbook provisions of METROBANK or any applicable parent, subsidiaries, or
affiliates.
SECTION 3. TERM OF AGREEMENT. This Agreement shall be effective as of the
Commencement Date and, subject to Section 6 hereof, shall terminate upon the
earlier of: (I) The Expiration Date; or (II) the termination of Executive's
employment due to death, retirement, Disability or Cause; or (III) the
Executive's voluntary termination of his employment; or (IV) the involuntary
termination of Executive's employment by METROBANK for any other reason. Any
purported termination of the Executive's employment by METROBANK or by the
Executive (except a termination pursuant to Subsections 3(i) and (ii) of this
Agreement) shall be pursuant to a written Notice of Termination.
SECTION 4. SERVICES. During the term of this Agreement, the Executive shall
devote his full time services to METROBANK as an executive officer of METROBANK
or any successor to METROBANK in positions consistent with his existing
responsibilities, as may be determined by the CEO of METROBANK. The Executive
shall serve METROBANK faithfully and diligently and shall devote his best
efforts, energies and skills to the discharge of his duties and
responsibilities under this Agreement.
2
<PAGE> 25
SECTION 5. SALARY AND BENEFITS. On and after the Commencement Date:
(A) METROBANK shall pay the Executive an annualized base salary of
$145,000 ("Base Salary") as compensation for his services hereunder, payable in
equal installments in accordance with METROBANK's then applicable payroll
practices for Senior Officers.
(B) In addition to the Base Salary payable to the Executive pursuant to
Section 5(a), METROBANK Executive shall be entitled to the following benefits
during the term of this Agreement: (I) participation in METROBANK's then
existing vacation, medical, dental, disability, automobile and sick leave
programs and any other benefit programs (except as excluded by Section 5(c)
below), provided by METROBANK or any successor from time to time to executive
officers. All sick leave accrued as of the Commencement Date shall continue
through the term of this Agreement or until used; (II) continued reimbursement
of the club dues and business related expenses being reimbursed by METROBANK on
the date hereof, consistent with the reimbursement practices currently in
effect; (III) payment of a bonus of $22,950 on the date that is one year from
the Commencement Date; and (IV) grant of options to purchase no less than 3,000
shares of Comerica Incorporated stock pursuant to Comerica Incorporated's then
existing stock option plan.
(C) Other than as specifically provided in this Agreement, the Executive
shall not be eligible to participate in or receive benefits pursuant to any
other plan, program, policy or agreement of METROBANK or any applicable parent,
subsidiaries or affiliates, including but not limited to any bonus, severance
or salary continuation pay or benefits plan; provided, however, that nothing in
this Section 5(c) shall have any effect upon any right in any plan of METROBANK
which vested prior to the Commencement Date (including any right to METROBANK's
1995 bonus prior to the Commencement Date, indemnification granted to the
Executive by METROBANK and any stock options from METROBANK or its affiliates,
including Comerica).
(D) As consideration for Executive's covenant not to compete contained in
Subsection 7(c), on the date that is one year from the Commencement Date
(provided there has been no breach by Executive of Subsection 7(c)): (i)
METROBANK shall make a cash lump sum payment of $20,000 to Executive; and (ii)
METROBANK shall pay Executive the sum of $22,900; provided, however, that in
the event this Agreement is terminated at any time during the one year period
beginning on the Commencement Date for any reason other than Executive's breach
of Subsection 7(c), and if Executive is not then in breach of Subsection 7(c),
METROBANK shall then begin monthly payments of $1,912.50 (to begin on the first
day of the month immediately following such termination) through the remainder
of such one year period, and shall pay the balance of said sum of $22,900 not
then already paid in one lump sum at the expiration of such one year period.
SECTION 6. TERMINATION DURING THE TERM OF THE AGREEMENT. During the term of
this Agreement, the Executive may be terminated by METROBANK for Cause,
Disability, death or without Cause and the Executive may voluntarily terminate
his employment with METROBANK.
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<PAGE> 26
(A) In the event of his termination by METROBANK for Cause, or upon his
voluntary termination during the term of this Agreement, the Executive shall
receive any unpaid Base Salary accrued through his date of termination, any
benefits he is entitled to receive under Section 5 through the date of
termination and the payments provided by Subsection 5(d), which shall be paid
in accordance with the terms thereof.
(B) In the event of his termination for Disability or death during the
term of this Agreement, the Executive, or his estate, if applicable, shall
receive any unpaid Base Salary accrued through his date of termination and the
benefits that he or his estate is eligible to receive under the then applicable
employee benefit plans outlined in Section 5(b).
(C) In the event of his termination without Cause in the first year after
the Commencement Date, the Executive shall receive the Base Salary under
Section 5(a) of this Agreement for a period of one year from the date of
termination and the payments provided by Subsection 5(d), which shall be paid
in accordance with the terms thereof.
(D) In the event of his termination without Cause in the second year
after the Commencement Date, the Executive shall receive no less the Base
Salary under Section 5(a) of this Agreement for a period of six months from the
date of termination.
SECTION 7. DISCLOSURE OF INFORMATION/COVENANT NOT TO COMPETE.
(A) The Executive agrees that, during his term of employment or at any
time thereafter, he will not divulge to any other person or entity, any details
of the confidential business or affairs of METROBANK or its parents,
subsidiaries or affiliates (including without limitation, financial
information, organizational structure, strategic planning, sales, marketing
strategies, distribution methods, data processing and other systems, personnel
policies and compensation plans and arrangements); any customer or advertising
lists; any confidential information, knowledge or data of a technical nature
(including, without limitation, methods, know-how, processes, discoveries, or
research projects); any confidential information, knowledge or data relating to
future developments (including, without limitation, research and development,
future marketing or merchandising); or any and all other trade secrets.
(B) When requested by the CEO, the Executive will deliver to METROBANK
any and all documents, manuals, letters, memoranda, lists, papers, notes,
reports, computer software, computer printouts, and similar materials, and all
copies thereof, relating in any way to the confidential trade secrets
referenced in Section 7(a), and will deliver to METROBANK any and all other
property of METROBANK in the possession of or under the control of the
Executive.
(C) During the longer period of either the term of his employment or one
year from the Commencement Date the Officer shall not: (i) solicit, cause,
induce or encourage, directly or indirectly, any employee of METROBANK to leave
its employ, or any independent contractor to terminate any independent
contractor relationship with METROBANK; (ii) cause, induce or encourage,
directly or indirectly, any customer or client of METROBANK to terminate
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or adversely change any relationship with METROBANK; (iii) cause, induce or
encourage any potential supplier or customer to not enter into any business
relationship with the Company; (d) directly or indirectly, including but not by
way of limitation, as an owner, employee, employer, operator, investor,
independent contractor, agent, stockholder, partner (general or limited), joint
venturer, officer, director, consultant, franchisee, franchiser or co-worker,
enter into, conduct, participate or engage in any form of business in the
county of Los Angeles in the State of California, which are related to banking
or operate a bank, bank holding company, savings and loan association, savings
bank or other financial institution in said counties. Nothing in this Section
7(c) shall prevent Executive from owning as a passive investor less than 5% of
the outstanding stock of any publicly traded company, including, without
limitation, Comerica Incorporated.
(D) Executive and METROBANK expressly agree and understand that the
provisions of this Section 7 shall survive without limitation any termination
of this Agreement for any reason.
SECTION 8. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to
METROBANK at its headquarters and to the Executive at his address as on file
with METROBANK provided that all notices to METROBANK shall be directed to the
attention of the CEO of METROBANK, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of a change of address shall be effective only upon receipt.
SECTION 9. TAX WITHHOLDING. METROBANK may withhold from any amounts payable
under this Agreement, or shall require the Executive to remit to METROBANK, all
applicable Federal, State, local or other withholding taxes.
SECTION 10. BINDING EFFECT.
(A) This Agreement shall be binding upon the successors and assigns of
METROBANK. METROBANK shall take whatever actions are necessary to ensure that
any successor to its operations (whether by purchase, merger, consolidation,
sale of substantially all assets or otherwise) assumes the obligations under
this Agreement and shall cause such successor to evidence the assumption of
such obligations in a written agreement satisfactory to the Executive.
(B) This Agreement shall be binding upon the Executive and shall inure to
the benefit of and be enforceable by his legal representatives and heirs.
However, except as specified herein, the rights of the Executive under this
Agreement shall not be assigned, transferred, pledged or otherwise encumbered.
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<PAGE> 28
SECTION 11. AMENDMENT OR MODIFICATION OF AGREEMENT. This Agreement may not
be modified or amended except by instrument in writing signed by the Executive
and the CEO of METROBANK.
SECTION 12. VALIDITY.
(A) It is expressly understood and agreed that although Executive and
METROBANK consider the restrictions contained in Section 7 of this Agreement
reasonable for the purpose of preserving for the Company goodwill, proprietary
rights and going concern value, if a final judicial determination is made by a
court having jurisdiction that the time or territory or any other restriction
contained in these paragraphs is an unenforceable restriction on the activities
of Executive, the provisions of Section 7 shall not be rendered void but shall
be deemed amended to apply as to such maximum time and territory and to such
other extent as such court may judicially determine or indicate to be
reasonable. Alternatively, if the court referred to above finds that any
restriction contained in Section 7 unenforceable, and such restriction cannot
be amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
(B) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall continue in full force and effect. If any portion of
this Agreement is held to be excessively broad it shall not be rendered void
but shall be construed by limiting or reducing the provision as required so
that the provision as limited or reduced is reasonable and enforceable under
applicable law.
SECTION 13. LIMITATION ON RIGHTS. Subject to the terms and conditions set
forth herein, this Agreement shall create no right in the Executive to continue
in METROBANK's employment for any specific period of time, or to create any
other rights in the Executive or obligations on the part of METROBANK.
SECTION 14. MISCELLANEOUS. A waiver of the breach of any term or condition
of this Agreement shall not be deemed to constitute a waiver of any subsequent
breach of the same or any other term or condition. This Agreement is intended
to be performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules and regulations. The headings in this
Agreement are inserted for convenience of reference only and shall not be a
part of or control or affect the meaning of any provision hereof.
SECTION 15. CONDITION. This Agreement is contingent upon the consummation
of the merger contemplated in the Merger Agreement. Should the merger not
occur for whatever reason, this entire Employment Agreement shall be null and
void.
SECTION 16. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of California, without taking into
account principles of conflicts of laws.
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SECTION 17. ENTIRE AGREEMENT. This Agreement, the Merger Agreement and the
documents and agreements delivered pursuant to the Merger Agreement represent
the entire agreement and understanding of the parties with respect to the
subject matter of the Agreement and it may not be altered or amended except by
an agreement in writing.
SECTION 18. ATTORNEYS' FEES. If Executive or METROBANK shall bring an
action against the other by reason of any alleged breach of any covenant,
provision or condition hereof, the unsuccessful party shall pay to the
prevailing party all reasonable attorneys' fees and costs incurred by the
prevailing party, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
Executive METROBANK
/s/ Scott T. Monson By: /s/ David L. Buell
- ------------------- ----------------------------
Scott T. Monson Name: David L. Buell
Its: Chief Executive Officer
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EMPLOYMENT AGREEMENT
This Agreement is entered into as of May 2, 1995 by and between
Metrobank ("METROBANK") and Paul Stroube ("Executive").
WITNESSETH:
WHEREAS, METROBANK believes that it is in the best interests of
METROBANK to continue the employment of the Executive on and after the
consummation of the transactions contemplated in the May 2, 1995 Agreement and
Plan of Reorganization and Merger by and among METROBANK, Comerica Holdings
Incorporated and Comerica Incorporated ("Merger Agreement") in accordance with
the terms and conditions of this Agreement, and the Executive wishes to accept
employment under such terms;
NOW, THEREFORE, in consideration of the mutual promises, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement,
certain words and phrases are defined as follows:
(A) "Agreement" shall mean this employment
agreement between the Executive and METROBANK, including any written amendments
thereto.
(B) "Cause" shall mean an act of misconduct
involving METROBANK or the Executive's failure to substantially perform his
duties with METROBANK (other than such failure resulting from his incapacity
due to physical or mental illness) which failure to substantially perform
continues for any period after a written demand has been delivered to the
Executive by the Chief Executive Officer of METROBANK (CEO) which specifically
identifies the manner in which said official reasonably believes that the
Executive has not substantially performed his duties. Examples of misconduct
include, but are not limited to: (I) any act of embezzlement, fraud,
dishonesty, breach of fiduciary duty to METROBANK or any applicable parent,
subsidiary or affiliate of METROBANK; (II) the deliberate disregard of the
rules, regulations, policies, procedures, or codes of ethical conduct of
METROBANK or any applicable parent, subsidiary or affiliate of METROBANK; (III)
the unauthorized disclosure of trade secrets or confidential information of
METROBANK or any applicable parent, subsidiary or affiliate of METROBANK; (IV)
removal of the Executive by any regulatory agency from an office of METROBANK
or any applicable parent, subsidiary or affiliate; (V) conviction for any
felony or criminal offense involving dishonesty; or (VI) breach of Executive's
covenant not to compete contained in Section 7.
(C) "Commencement Date" shall be the "Closing
Date" as defined in the Merger Agreement.
(D) "METROBANK" shall mean METROBANK and any
successor thereto.
<PAGE> 31
(E) "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination has been given (provided that the Executive has not
returned to the performance of his duties during such thirty (30) day period);
(ii) if the Executive's employment is terminated for any reason other than in
accordance with Subsections 3(i) or 3(ii) hereof, thirty (30) days after a
Notice of Termination has been given; and (iii) if the Executive's employment
is terminated due to an event described in Subsections 3(i) or 3(ii) hereof, on
the date of the occurrence of such event.
(F) "Disability" for purposes of this Agreement
shall be defined as it is defined in METROBANK's or any successor's Long-Term
Disability Policy applicable to the Executive from time to time.
(G) "Executive" shall mean Paul Stroube.
(H) "Expiration Date" shall mean the date two
(2) years after the Commencement Date.
(I) "Notice of Termination" shall mean a written
notice issued by the Executive or by METROBANK specifying the termination
provision of this Agreement that is being relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
the Executive's termination of employment under the indicated provision.
SECTION 2. OPERATION OF AGREEMENT. This Agreement shall be
effective as of the date set forth in Section 3, below. The Executive shall be
required to comply with all policies and procedures of METROBANK applicable to
officers; provided, however, that the provisions of this Agreement shall
supersede any conflicting written or oral policies, promises, representations,
procedures or handbook provisions of METROBANK or any applicable parent,
subsidiaries, or affiliates.
SECTION 3. TERM OF AGREEMENT. This Agreement shall be
effective as of the Commencement Date and, subject to Section 6 hereof, shall
terminate upon the earlier of: (I) The Expiration Date; or (II) the
termination of Executive's employment due to death, retirement, Disability or
Cause; or (III) the Executive's voluntary termination of his employment; or
(IV) the involuntary termination of Executive's employment by METROBANK for any
other reason. Any purported termination of the Executive's employment by
METROBANK or by the Executive (except a termination pursuant to Subsections
3(i) and (ii) of this Agreement) shall be pursuant to a written Notice of
Termination.
SECTION 4. SERVICES. During the term of this Agreement, the
Executive shall devote his full time services to METROBANK as an executive
officer of METROBANK or any successor to METROBANK in positions consistent with
his existing responsibilities, as may be determined by the CEO of METROBANK.
The Executive shall serve METROBANK faithfully and diligently and shall devote
his best efforts, energies and skills to the discharge of his duties and
responsibilities under this Agreement.
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SECTION 5. SALARY AND BENEFITS. On and after the Commencement
Date:
(A) METROBANK shall pay the Executive an
annualized base salary of $145,000 ("Base Salary") as compensation for his
services hereunder, payable in equal installments in accordance with
METROBANK's then applicable payroll practices for Senior Officers.
(B) In addition to the Base Salary payable to the
Executive pursuant to Section 5(a), METROBANK Executive shall be entitled to
the following benefits during the term of this Agreement: (I) participation in
METROBANK's then existing vacation, medical, dental, disability, automobile and
sick leave programs and any other benefit programs (except as excluded by
Section 5(c) below), provided by METROBANK or any successor from time to time
to executive officers. All sick leave accrued as of the Commencement Date
shall continue through the term of this Agreement or until used; (II) continued
reimbursement of the club dues and business related expenses being reimbursed
by METROBANK on the date hereof, consistent with the reimbursement practices
currently in effect; (III) payment of a bonus of $22,950 on the date that is
one year from the Commencement Date; and (IV) grant of options to purchase no
less than 3,000 shares of Comerica Incorporated stock pursuant to Comerica
Incorporated's then existing stock option plan.
(C) Other than as specifically provided in this
Agreement, the Executive shall not be eligible to participate in or receive
benefits pursuant to any other plan, program, policy or agreement of METROBANK
or any applicable parent, subsidiaries or affiliates, including but not limited
to any bonus, severance or salary continuation pay or benefits plan; provided,
however, that nothing in this Section 5(c) shall have any effect upon any right
in any plan of METROBANK which vested prior to the Commencement Date (including
any right to METROBANK's 1995 bonus prior to the Commencement Date,
indemnification granted to the Executive by METROBANK and any stock options
from METROBANK or its affiliates, including Comerica).
(D) As consideration for Executive's covenant not
to compete contained in Subsection 7(c), on the date that is one year from the
Commencement Date (provided there has been no breach by Executive of Subsection
7(c)): (i) METROBANK shall convey to Executive the Calabasas Golf Club
membership being utilized by Executive; (ii) METROBANK shall make a cash lump
sum payment of $10,000 to Executive; and (iii) METROBANK shall pay Executive
the sum of $22,950; provided, however, that in the event this Agreement is
terminated at any time during the one year period beginning on the Commencement
Date for any reason other than Executive's breach of Subsection 7(c), and if
Executive is not then in breach of Subsection 7(c), METROBANK shall then begin
monthly payments of $1,912.50 (to begin on the first day of the month
immediately following such termination) through the remainder of such one year
period, and shall pay the balance of said sum of $22,950 not then already paid
in one lump sum at the expiration of such one year period.
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SECTION 6. TERMINATION DURING THE TERM OF THE AGREEMENT. During
the term of this Agreement, the Executive may be terminated by METROBANK for
Cause, Disability, death or without Cause and the Executive may voluntarily
terminate his employment with METROBANK.
(A) In the event of his termination by METROBANK
for Cause, or upon his voluntary termination during the term of this Agreement,
the Executive shall receive any unpaid Base Salary accrued through his date of
termination, any benefits he is entitled to receive under Section 5 through the
date of termination and the payments provided by Subsection 5(d), which shall
be paid in accordance with the terms thereof.
(B) In the event of his termination for
Disability or death during the term of this Agreement, the Executive, or his
estate, if applicable, shall receive any unpaid Base Salary accrued through his
date of termination and the benefits that he or his estate is eligible to
receive under the then applicable employee benefit plans outlined in Section
5(b).
(C) In the event of his termination without Cause
in the first year after the Commencement Date, the Executive shall receive the
Base Salary under Section 5(a) of this Agreement for a period of one year from
the date of termination and the payments provided by Subsection 5(d), which
shall be paid in accordance with the terms thereof.
(D) In the event of his termination without Cause
in the second year after the Commencement Date, the Executive shall receive no
less the Base Salary under Section 5(a) of this Agreement for a period of six
months from the date of termination.
SECTION 7. DISCLOSURE OF INFORMATION/COVENANT NOT TO COMPETE.
(A) The Executive agrees that, during his term of
employment or at any time thereafter, he will not divulge to any other person
or entity, any details of the confidential business or affairs of METROBANK or
its parents, subsidiaries or affiliates (including without limitation,
financial information, organizational structure, strategic planning, sales,
marketing strategies, distribution methods, data processing and other systems,
personnel policies and compensation plans and arrangements); any customer or
advertising lists; any confidential information, knowledge or data of a
technical nature (including, without limitation, methods, know-how, processes,
discoveries, or research projects); any confidential information, knowledge or
data relating to future developments (including, without limitation, research
and development, future marketing or merchandising); or any and all other trade
secrets.
(B) When requested by the CEO, the Executive will
deliver to METROBANK any and all documents, manuals, letters, memoranda, lists,
papers, notes, reports, computer software, computer printouts, and similar
materials, and all copies thereof, relating in any way to the confidential
trade secrets referenced in Section 7(a), and will deliver to METROBANK any and
all other property of METROBANK in the possession of or under the control of
the Executive.
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(C) During the longer period of either the term
of his employment or one year from the Commencement Date the Officer shall not:
(i) solicit, cause, induce or encourage, directly or indirectly, any employee
of METROBANK to leave its employ, or any independent contractor to terminate
any independent contractor relationship with METROBANK; (ii) cause, induce or
encourage, directly or indirectly, any customer or client of METROBANK to
terminate or adversely change any relationship with METROBANK; (iii) cause,
induce or encourage any potential supplier or customer to not enter into any
business relationship with the Company; (d) directly or indirectly, including
but not by way of limitation, as an owner, employee, employer, operator,
investor, independent contractor, agent, stockholder, partner (general or
limited), joint venturer, officer, director, consultant, franchisee, franchiser
or co-worker, enter into, conduct, participate or engage in any form of
business in the county of Los Angeles in the State of California, which are
related to banking or operate a bank, bank holding company, savings and loan
association, savings bank or other financial institution in said counties.
Nothing in this Section 7(c) shall prevent Executive from owning as a passive
investor less than 5% of the outstanding stock of any publicly traded company,
including, without limitation, Comerica Incorporated.
(D) Executive and METROBANK expressly agree and
understand that the provisions of this Section 7 shall survive without
limitation any termination of this Agreement for any reason.
SECTION 8. NOTICE. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
METROBANK at its headquarters and to the Executive at his address as on file
with METROBANK provided that all notices to METROBANK shall be directed to the
attention of the CEO of METROBANK, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of a change of address shall be effective only upon receipt.
SECTION 9. TAX WITHHOLDING. METROBANK may withhold from
any amounts payable under this Agreement, or shall require the Executive to
remit to METROBANK, all applicable Federal, State, local or other withholding
taxes.
SECTION 10. BINDING EFFECT.
(A) This Agreement shall be binding upon the successors and
assigns of METROBANK. METROBANK shall take whatever actions are necessary to
ensure that any successor to its operations (whether by purchase, merger,
consolidation, sale of substantially all assets or otherwise) assumes the
obligations under this Agreement and shall cause such successor to evidence the
assumption of such obligations in a written agreement satisfactory to the
Executive.
(B) This Agreement shall be binding upon the Executive and shall
inure to the benefit of and be enforceable by his legal representatives and
heirs. However, except as specified herein,
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the rights of the Executive under this Agreement shall not be assigned,
transferred, pledged or otherwise encumbered.
SECTION 11. AMENDMENT OR MODIFICATION OF AGREEMENT. This
Agreement may not be modified or amended except by instrument in writing signed
by the Executive and the CEO of METROBANK.
SECTION 12. VALIDITY.
(A) It is expressly understood and agreed that
although Executive and METROBANK consider the restrictions contained in Section
7 of this Agreement reasonable for the purpose of preserving for the Company
goodwill, proprietary rights and going concern value, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in these paragraphs is an unenforceable
restriction on the activities of Executive, the provisions of Section 7 shall
not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such other extent as such court may judicially
determine or indicate to be reasonable. Alternatively, if the court referred
to above finds that any restriction contained in Section 7 unenforceable, and
such restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions contained
herein.
(B) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall continue in full force and
effect. If any portion of this Agreement is held to be excessively broad it
shall not be rendered void but shall be construed by limiting or reducing the
provision as required so that the provision as limited or reduced is reasonable
and enforceable under applicable law.
SECTION 13. LIMITATION ON RIGHTS. Subject to the terms and
conditions set forth herein, this Agreement shall create no right in the
Executive to continue in METROBANK's employment for any specific period of
time, or to create any other rights in the Executive or obligations on the part
of METROBANK.
SECTION 14. MISCELLANEOUS. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
subsequent breach of the same or any other term or condition. This Agreement
is intended to be performed in accordance with, and only to the extent
permitted by, all applicable laws, ordinances, rules and regulations. The
headings in this Agreement are inserted for convenience of reference only and
shall not be a part of or control or affect the meaning of any provision
hereof.
SECTION 15. CONDITION. This Agreement is contingent upon
the consummation of the merger contemplated in the Merger Agreement. Should
the merger not occur for whatever reason, this entire Employment Agreement
shall be null and void.
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SECTION 16. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without
taking into account principles of conflicts of laws.
SECTION 17. ENTIRE AGREEMENT. This Agreement, the Merger
Agreement and the documents and agreements delivered pursuant to the Merger
Agreement represent the entire agreement and understanding of the parties with
respect to the subject matter of the Agreement and it may not be altered or
amended except by an agreement in writing.
SECTION 18. ATTORNEYS' FEES. If Executive or METROBANK
shall bring an action against the other by reason of any alleged breach of any
covenant, provision or condition hereof, the unsuccessful party shall pay o the
prevailing party all reasonable attorneys' fees and costs incurred by the
prevailing party, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
Executive METROBANK
/s/ Paul Stroube By: /s/ David Buell
- ---------------- ----------------------------
Name: David Buell
Its: Chief Executive Officer
<PAGE> 37
99(g)
NON-COMPETITION AGREEMENT
This Agreement is entered into as of May 2, 1995 by and between
Metrobank, a California bank (the "Company") and David Buell ("Officer").
RECITALS
WHEREAS, due to the position of Officer with the Company and his
knowledge of information concerning the Company and its business, the Company
desires to restrict Officer's ability to compete with the Company;
NOW THEREFORE, in consideration of these circumstances, the parties
have entered into this Agreement on the terms set forth below for valuable
consideration, the adequacy and receipt of which is hereby acknowledged.
1. Effective Date. This Agreement shall be effective as of the Closing
Date as defined in the May 3, 1995 Agreement and Plan of Reorganization and
Merger by and among the Company, Comerica Holdings Incorporated and Comerica
Incorporated (the "Effective Date").
2. Compensation. On the Effective Date, the Company shall pay the
Officer, upon the execution and delivery of a limited release of employment
related claims in the form and substance satisfactory to counsel, whether or
not Officer is an officer, director, or employee of, or a consultant to, the
Company, the sum of $750,000 (less any applicable withholding).
3. Character of Payments. The Company and Officer agree and
acknowledge that the payment due Officer hereunder is in consideration of
Officer's refraining from competing with the Company for the period specified
in this Agreement. Such payment shall be treated as ordinary income to Officer
by Company and Officer on their tax returns.
4. Non-Disclosure of Confidential Information.
(a) Except as authorized in writing by the Company, the
Officer shall not at any time, disclose or use, directly or indirectly, on
behalf of himself or any other person or business entity, any confidential
information of the Company which the Officer has gained knowledge of by reason
of said employment, and the Officer shall retain all such information in trust
in a fiduciary capacity for the sole use and benefit of the Company. Such
confidential information includes, but is not limited to, confidential
information of the Company whether now owned or hereafter obtained, concerning
marketing and sale methods, materials, processes, procedures, devices, computer
programs, computer software, fringe benefit programs or any other process or
procedures utilized by the Company. Such confidential information shall also
include but is not limited to confidential information respecting products
distributed by the Company or its distributors, products manufactured and/or
sold by the Company business forms, computer programs, computer software,
prices, list of suppliers and customers, plans for new areas or
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markets, internal operations and any patents, improvements, ideas, variations,
trade secrets, proprietary information and other confidential information of
any type, together with all written, graphic and other materials relating to
all or any part of the same. The Officer acknowledges that the confidential
information of the Company is valuable, special and unique to the Company's
business and on which the Company's business depends, and is proprietary to the
Company, and that the Company wishes to protect said confidential information
by keeping it secret and confidential for its sole use and benefit. The
Officer will take all reasonable steps necessary, and all reasonable steps
requested by the Company, to insure that all such confidential information is
kept secret and confidential for the sole use and benefit of the Company.
(b) Upon termination of the Officer's employment with the
Company, or any other time the Company may in writing so request, the Officer
shall promptly deliver to the Company all materials concerning any confidential
information, copies thereof and any other material of the Company which are in
the possession or under the control of the Officer. The Officer shall not make
or retain any copy or extract thereof.
5. Non-Compete. For a period of two years from the Effective Date the
Officer shall not:
(a) solicit, cause, induce or encourage, directly or
indirectly, any employee of the Company to leave its employ, or any independent
contractor to terminate any independent contractor relationship with the
Company;
(b) cause, induce or encourage, directly or indirectly, any
customer or client of the Company to terminate or adversely change any
relationship with the Company;
(c) cause, induce or encourage any potential supplier or
customer to not enter into any business relationship with the Company;
(d) directly or indirectly, including but not by way of
limitation, as an owner, employee, employer, operator, investor, independent
contractor, agent, stockholder, partner (general or limited), joint venturer,
officer, director, consultant, franchisee, franchiser or co-worker, enter into,
conduct, participate or engage in any form of business in the counties of Los
Angeles and Orange in the State of California, which are related to banking or
operate a bank, bank holding company, savings and loan association, savings
bank or other financial institution in said counties. Nothing in this Section
3(d) shall prevent Executive from owning as a passive investor less than 5% of
the outstanding stock of any publicly traded company, including, without
limitation, Comerica Incorporated.
6. Disclosure. The Officer shall disclose to the Company all
inventions, discoveries, variations, computer programs, ideas and improvements,
whether or not copyrightable or patentable, conceived or made by the Officer
alone or jointly with other during the Officer's employment with the Company,
related to the business or activities of the Company or resulting tasks
assigned by the Company and assigns and agrees to assign all the Officer's
interest therein
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<PAGE> 39
to the Company as the sole exclusive property of the Company. The Officer
shall execute such documents and do such acts as shall be necessary to perfect
the Company's rights therein. These obligations shall continue after
termination of the Officer employment with the Company with respect to all
inventions, discoveries, variations, ideas and improvements conceived or made
by the Officer during the term of said employment.
7. Severability. It is expressly understood and agreed that although
the Officer and Company consider the restrictions contained in Sections 2, 3
and 4 above reasonable for the purpose of preserving for the Company goodwill,
proprietary rights and going concern value, if a final judicial determination
is made by a court having jurisdiction that the time or territory or any other
restriction contained in these paragraphs is an unenforceable restriction on
the activities of the Officer, the provisions of these paragraphs shall not be
rendered void but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such court may judicially determine or
indicate to be reasonable. Alternatively, if the court referred to above
finds that any restriction contained in these paragraphs is unenforceable, and
such restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions contained
herein.
8. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of Officer and his heirs and legal representatives, and
the Company and their respective successors and permitted assigns.
9. Enforcements.
(a) Damages Inadequate. In the event of a threatened or
actual breach of Sections 2, 3 or 4 of the Agreement by the Officer, it is
agreed and acknowledged that damages would not be an adequate remedy to
compensate the Company of the loss of goodwill and other harm to the business
of the Company.
(b) Injunctive Relief. In the event of a threatened or
actual breach of Section 2, 3 or 4 of this Agreement by the Officer, the
Company shall be entitled to a temporary restraining order, and to temporary
and permanent injunctive relief, to prevent or terminate such anticipated or
actual breach, provided that nothing in this Agreement shall be construed to
limit the damages otherwise recoverable by the Company in any such event.
(c) Notice to Third Parties. In addition, after discussing
the matter with the Officer, the Company shall have the right, subject to
applicable law, to inform any other third party that the Company reasonably
believes to be, or to be contemplating, participating with the Officer or
receiving from the Officer assistance in violation of this Agreement, of the
terms of this Agreement and of the rights of the Company hereunder, and that
participation by any such entity or persons with the Officer in activities in
violation of this Agreement may give rise to claims by the Company against such
entity, persons or third party.
3
<PAGE> 40
10. Assignment. The Company may assign its rights and benefits under
this Agreement to any person, firm, partnership, corporation, association, or
other entity to which may be transferred all or a part of the businesses of the
Company or its subsidiaries, in the aggregate, and/or a majority of the
outstanding capital stock of the Company or its subsidiaries, in the aggregate,
in which even the covenants, duties, obligations and agreements on the part of
Officer contained in this Agreement shall inure to the benefit of any such
transferee or other successor to the same extent and with the same force and
effect as if this Agreement had been entered into by Officer directly with such
transferee or other successor. The obligations of Officer under this Agreement
are personal as to Officer and may not be transferred or delegated by Officer
to any person, either voluntarily or involuntarily, but Officer shall be
entitled to assign his rights to receive payments hereunder and such rights
shall inure to the benefit of Officer's estate in the event of his death in the
absence of any prior assignment. Except as specifically provided herein, this
Agreement is not intended to, and shall not, confer any rights or benefits upon
any person or entity that is not a party hereto.
11. Waiver of breach. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any party.
12. Captions. The various titles of the paragraphs herein are used
solely for convenience and shall not be used for interpretation or construing
any word, clause, paragraph or subparagraph of this Agreement.
13. Governing law. This Agreement shall be construed and interpreted
according to the laws of the State of California, without taking into account
principles of conflicts of laws.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
/s/ David Buell
- ------------------------
David Buell
METROBANK
By: /s/ Douglas Krause
------------------------
Name: Douglas Krause
Its: General Counsel
4
<PAGE> 1
EXHIBIT 99(h)
FORM F-2
ANNUAL REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
FDIC CERTIFICATE NUMBER 22797-8
METROBANK
(Exact name of bank as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
95-3271474
(I.R.S. Employer Identification Number)
10900 Wilshire Boulevard, Los Angeles, California
(Address of Principal Office)
90024
(Zip Code)
(310) 824-5700
(Bank's telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Common Stock, No Par Value
(Title of Class)
American Stock Exchange
(Name of each exchange on which registered)
Securities registered under Section 12(g) of the Act:
None
Indicate by check mark if the bank, as a "small business issuer" as defined
under 17 CFR 240.12b-2, is providing alternative disclosures as permitted for
small business issuers in this Form F-2 or any amendment of this Form F-2. / /
Indicate by check mark whether the bank (1) has filed all reports required to
be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the bank was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Aggregate Market Value of Common Stock held by Non-affiliates at March 27,
1995: $49,710,260 (1)
Number of shares of Common Stock outstanding as of March 27, 1995: 5,377,124
Documents Incorporated by Reference:
1994 Annual Report Parts I, II and IV and 1994 Proxy Statement Parts I and III
(1) Non-affiliates are all shareholders except Directors, Executive Officers,
and Principal Shareholders of the Bank.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Security Ownership of Certain Beneficial Owners and Management 11
PART II
Item 5. Market for the Bank's Common Stock and Related Security Holder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 8. Consolidated Financial Statements and Supplementary Data 31
PART III
Item 9. Directors and Executive Officers of the Bank 32
Item 10. Management Compensation and Transactions 32
PART IV
Item 11. Exhibits, Financial Statement Schedules, and Reports on Form F-3 33
EXHIBITS
- - Exhibit Index 34
- - Supplemental Schedules 37
- - Schedule I - Securities 38
- - Schedule II - Loans to Officers, Directors, Principal Security
Holders, and any Associates of the Foregoing Persons 39
- - Schedule III - Loans and Lease Financing Receivables 40
- - Schedule IV - Bank Premises and Equipment 41
- - Schedule V - Investments in Income from Dividends and Equity in
Earnings or Losses of Subsidiaries and Associated Companies 42
- - Schedule VI - Allowance for Possible Loan Losses 43
Signatures 44
Consent of Independent Public Accountants 46
Report of Independent Public Accountants on Supplementary Schedules 47
Management's Report on Financial Information 48
Exhibit 6.4 - 1994 Metrobank Annual Report
</TABLE>
<PAGE> 3
ITEM 1. BUSINESS
GENERAL
Metrobank (the "Bank") is a California state chartered bank originally
incorporated as a national association on January 16, 1979. The Bank offers a
full range of commercial banking services, including the making of commercial
loans, accounts receivable loans, various types of consumer loans, and real
estate construction loans and commercial mortgage loans; the acceptance of
checking, interest-bearing checking (NOW), money market, savings and time
deposits; and the provision of traveler's checks, check guarantees, safe
deposit and other customary non-deposit banking services. The Bank does not
issue VISA or MasterCard credit cards, but is a merchant depository for
cardholder drafts under both types of credit cards. At the present time the
Bank does not have a trust department; however, the Bank makes arrangements
with correspondent banks to provide trust services. The Bank also provides
international banking services for its customers.
Although the Bank offers certain consumer banking services as an
accommodation to its existing business banking customers, the Bank does not
emphasize this "retail" portion of its business. Accordingly, the Bank does
not offer free checking accounts, Saturday or extended banking hours, or
drive-through tellers. Management feels strongly that all banking services
should be offered only if they are profitable and, if offered, should be
charged for on a competitive basis unless the account relationship provides
sufficient earnings through its demand deposit balances to more than offset the
cost of the services provided. The Bank has been offering certain mutual funds
and other non-deposit investments through an affiliation with Standard
Chartered Bank. This division of Standard Chartered Bank has recently been
acquired by First Interstate Bank which has given the Bank notice of
termination of the affiliation. The Bank expects to enter into an alternative
arrangement to be able to offer such products to its customers. There have
been no other significant changes in the kind of services offered by the Bank
in the past three fiscal years.
The Bank converted from a national association to a California state
chartered institution on November 1, 1988. Additionally, in 1988, the Bank
received approval from the California State Banking Department to establish a
wholly-owned subsidiary, Metrocorp, Inc. (Metrocorp), which could directly
invest in real estate projects. The real estate plan filed with the State
banking regulators allows Metrocorp to invest in the following types of
projects: single family residences, apartment complexes, commercial office
buildings, shopping centers, industrial projects or land development projects.
Neither the Bank nor Metrocorp has made any investments in real estate since
1990 and do not contemplate any such investments in the future.
As of December 31, 1994, Metrocorp had an investment in a low income
housing project amounting to approximately $16.2 million. The Bank intends to
hold this investment for a fifteen year period as part of its commitment to
comply with the Community Reinvestment Act and has applied to the Federal
Deposit Insurance Corporation ("FDIC") for its consent to do so. Additionally,
the Bank is able to take advantage of low income housing tax credits which are
generated by the project which causes its effective tax rate for federal
purposes to approximate the federal alternative minimum tax rate.
3
<PAGE> 4
On August 31, 1994, the Bank entered into an agreement to acquire the
National Bank of Long Beach from its Danish parent, Topdanmark Bank A/S.
According to the terms of the agreement, the Bank will purchase all outstanding
common and preferred National Bank of Long Beach stock for cash at the net book
value on December 31, 1994, subject to certain valuation adjustments. The due
diligence review of National Bank of Long Beach by the Bank was completed on
October 28, 1994. The acquisition, approved by the FDIC subsequent to
year-end, is scheduled to be completed during the second quarter of 1995.
As of December 31, 1994, National Bank of Long Beach had $143.0
million in gross loans and $198.7 million in total deposits. Shareholders'
equity at year-end totalled $28.0 million. Additionally, the Bank has agreed
to acquire from Topdanmark Bank A/S, participation interests in certain
nonclassified performing loans, which are currently participated from the
National Bank of Long Beach to its parent, these loans total approximately
$10.0 million to $15.0 million.
It is anticipated that the Bank will be required to raise between $7.0
million and $10.0 million of new capital. At this time, the Bank has not
determined whether to raise the new capital via a public offering or a private
placement.
OFFICES
The Bank's overall business plan is to become one of the prominent
regional banks operating in Southern California, providing banking services
primarily to entrepreneurs with companies that have sales volumes up to $50
million per annum. To attain this goal, the Bank strives to acquire high
quality personnel and attractive and prominent facilities in communities that
are well-recognized centers of commerce. This is reflected in the
establishment of the Los Angeles Headquarters Office in the 17-story Murdock
Plaza in the heart of Westwood at Wilshire and Westwood Boulevards; the South
Bay Regional Head Office in the Del Amo Financial Center in Torrance; the
Orange County Regional Head Office located in Koll Center in Newport Beach; the
San Fernando Valley Regional Head Office located in the Warner Center Plaza in
the West San Fernando Valley; and the San Diego Regional Head Office, located
in the Mission Valley area of San Diego. In addition, the Bank maintains
centralized loan, finance and administrative facilities in Torrance.
The principal executive offices of the Bank are located at 10900
Wilshire Boulevard, Los Angeles, California 90024. The telephone number of the
Bank is (310) 824-5700.
COMPETITION
The banking business in California, and specifically in the market
area served by the Bank, is highly competitive with respect to both loans and
deposits, and is dominated by a relatively small number of major banks with
many offices operating over a wide geographic area. The Bank competes for
deposits and loans primarily with other commercial banks,
4
<PAGE> 5
including many of which are much larger than the Bank, as well as with non-bank
financial institutions, including savings and loan associations, credit unions,
and investment banking firms.
Among the advantages which major banks have over the Bank is the
ability to conduct large advertising campaigns and to allocate their assets,
including loans, to regions of highest demand and yield. Additionally, these
institutions have higher lending limits than the Bank.
LENDING ACTIVITIES
The Bank primarily originates commercial, real estate construction,
commercial mortgage, accounts receivable and other consumer loans through its
lending division and through relationships its banking officers have created by
way of prior business contacts, customer relationships presently at the Bank,
or through the active solicitation of new business.
The Bank's loan portfolio totalled approximately $614.3 million at
December 31, 1994, an increase of approximately $48.1 million, or 8% from
December 31, 1993. At December 31, 1994, the loan portfolio represented
approximately 58% of the Bank's total assets.
COMMERCIAL AND ASSET BASED LOANS
Commercial loans are made for the purpose of providing working
capital, financing the purchase of equipment or inventory and for other
business purposes. These loans typically have maturities ranging from 30 days
to 1 year. The Bank also makes "term loans" which have maturities normally
ranging from one to five years. Short-term loans provide for periodic interest
payments, with principal being paid quarterly or at maturity. Term loans
normally provide for monthly payments of principal and interest. At December
31, 1994, commercial loans outstanding totalled $84.1 million.
Asset based loans are made primarily to provide working funds to
medium sized businesses. Such loans are provided on a revolving,
non-notification basis with advances made against eligible receivables and
inventory. These loans are variable rate, tied to the Bank's prime index. At
December 31, 1994, outstanding asset based loans totalled $44.6 million.
The Bank occasionally extends lines of credit to business customers.
On business credit lines, the Bank specifies a maximum amount which it stands
ready to lend the customer during a specified period in return for which the
customer agrees to maintain its primary banking relationship with the Bank.
The purposes for which such loans will be used and the security therefore, if
any, are generally determined before the Bank's commitment is extended.
Normally, the Bank does not make loan commitments in material amounts for
periods in excess of one year.
5
<PAGE> 6
REAL ESTATE LOANS
The real estate loan portfolio consists primarily of real estate
construction, commercial mortgage, and commercial loans secured by real estate.
The construction loans typically have a maturity of six to twelve months, are
variable rate, with principal due at maturity. It has been the policy of the
Bank at the completion of the construction loan to request that the borrower
secure permanent financing to pay off the interim construction loan. The
commercial mortgage loans typically have a five year maturity, are variable
rate with principal due at maturity. Commercial loans secured by real estate
typically have maturities ranging from 30 days to 1 year, and "term loans" have
maturities normally ranging from one to five years. Short-term loans provide
for periodic interest payments, with principal being paid quarterly or at
maturity. Term loans normally provide for monthly payments of principal and
interest. At December 31, 1994, real estate loans outstanding totalled $373.8
million.
CONSUMER LOANS
Consumer loans are loans made to individuals and businesses, banker's
acceptances, cash reserve and overdraft, and installment loans. These loans
typically provide for the monthly payment of both principal and interest, with
an interest rate that is competitive with current market interest rates and
which may be fixed. The term of these loans varies from one day to five years.
At December 31, 1994, consumer loans totalled $111.8 million.
LOAN LOSS RESERVE
Reserves for losses on loans are established by the Bank's credit
review committee in accordance with generally accepted accounting principles.
Assets are classified in accordance with FDIC guidelines. As a general rule,
the FDIC regulations require that problem assets be classified as either
"Substandard", "Doubtful", or "Loss" depending on the likelihood that the loan
will be collected. These regulations also require that the Bank charge off any
"Loss" loan or establish a specific allowance for loan losses equal to the
entire classified amount and that the Bank establish an appropriate amount of
general allowances for loan losses on performing loans as well. During 1994,
1993 and 1992, the Bank provided $3.6 million, $8.8 million and $5.2 million,
respectively, as a provision for estimated losses on loans or for real estate
acquired through foreclosure. At December 31, 1994, 1993 and 1992, the Bank's
loan loss reserve as a percentage of total loans was 2.08%, 2.31% and 1.91%,
respectively.
This decrease in the Bank's loan loss reserve ratio in comparing 1994
to 1993 was due to the decision by management to reduce the reserve to a level
which was adequate to absorb known and inherent risks in the loan portfolio and
take into account the decrease in net charge-offs to total loans of 0.66% in
1994 compared to 1.07% in 1993.
6
<PAGE> 7
OTHER REAL ESTATE OWNED (OREO)
At December 31, 1994, the Bank had $3.5 million in real estate
acquired in satisfaction of loans. The Bank records these properties at the
lower of cost or fair value at the date of transfer to OREO.
DEPOSITS
The Bank offers a variety of deposit accounts including passbook
accounts, fixed-rate, fixed-term accounts, demand deposit accounts, money
market accounts, and special purpose accounts (such as bankruptcy funds). The
accounts vary as to terms, the principal differences being the minimum balance
required, the maturity period, interest rate, the manner of paying interest,
and withdrawal limitations and penalties. Interest rates paid and minimum
balance requirements vary from time to time as determined by the Bank in
accordance with applicable regulations and changing market conditions. The
Bank's policy has been to offer a wide variety of rates and savings plans to
fit the needs of the deposit base while also conforming to the Bank's cash flow
requirements. The table on pages 19 and 20 of Management's Discussion and
Analysis sets forth the average balances outstanding for the period.
At December 31, 1994, the Bank had concentrations of demand deposits
within the escrow and title companies. To a large extent these deposits are
generated as a result of the Bank's providing at no cost, various banking
related services, or paying for others to provide such services. These
expenses are allocated to the customer's accounts through an account analysis,
whereby the customer is required to maintain minimum balances in their demand
deposit account. Total demand deposits averaged $460.7 million for December of
1994, of this amount, approximately $279.1 million or 61% was escrow and title
related.
To respond to changes in the Bank's deposit structure, the Bank
actively solicits time certificates of deposit, both locally and nationally.
These deposits range in duration from 30 days to one year, for which the Bank
pays market rates of interest on amounts of approximately $100,000. At
December 31, 1994, approximately $61.1 million of the Bank's certificates of
deposit were related to this funding source.
INTEREST RATE RISK MANAGEMENT
The Bank manages interest rate risk through the Asset/Liability
Management Committee (ALCO). In addition to managing the Bank's exposure to
changes in interest rates, the ALCO Committee's responsibilities include
managing the Bank's liquidity position, ensuring the Bank has adequate
collateral to fund collateralized deposit growth gathering activities and
borrowing activities, and to define operating strategies and implement such
strategies through defining products, product pricing strategies and execution
of financial transactions.
7
<PAGE> 8
The Bank's financial position and results of operation are effected by
changes in the interest rate environment. Since interest-earning assets and
interest-bearing liabilities have various repricings and maturities, changes in
interest rates may result in an increase or decrease in net interest income.
It is the responsibility of the Bank's ALCO to manage its exposure to
fluctuations in interest rate changes. An institution's interest rate
sensitivity can be measured by its "gap" (which represents the difference
between the maturities or rate change dates on interest earning assets and
interest bearing liabilities within a period). In general, banks try to match
the repricing intervals in amounts of their assets and liabilities to limit
their sensitivity to interest rate fluctuations. Banks that are asset
sensitive with more assets subject to repricing earlier than liabilities
benefit in periods of rising interest rates because the assets command higher
earnings rates earlier than the liabilities funding them and generate earnings
that can be reinvested at higher rates. Banks that are liability sensitive
benefit in periods of declining rates but suffer when rates increase because
funding for comparatively lower yielding assets becomes more expensive. In a
rising rate environment, liability sensitive banks need to pay more in interest
to retain existing liabilities and maintain liquidity. To offset this
exposure, the ALCO has several alternatives; it can extend the maturities of
its time certificates of deposit, increase its relative mix of variable rate
interest-earning assets or enter into off-balance sheet hedging transactions.
EMPLOYEES
At December 31, 1994, the Bank employed 288 individuals including 5
executive officers and a total of 120 other officers. The Bank's employees are
not represented by a union. The Bank has never experienced a work stoppage and
management of the Bank believes that its employee relations are satisfactory.
Management of the Bank also believes that the benefits provided by the Bank to
its employees are competitive when compared to similar financial institutions.
8
<PAGE> 9
ITEM 2. PROPERTIES
During the year ended December 31, 1994, the Bank leased office space
at an aggregate annual rent of approximately $2.9 million. The space is used
for the Bank's executive and business offices. The unexpired lease terms range
from nine months to nine years with options to renew for up to ten years. The
average unexpired lease term of material leases is four years. The Murdock
Plaza lease expires in 2001 (with an option to extend to 2011); the Del Amo
Financial Center lease expires in 1995; the Koll Center lease expires in 2002
(with an option to extend to 2012); the Warner Center lease expires in 1999
(with an option to extend to 2005); the Mission Valley lease expires in 1995
(with 2 five year options to extend); the lease for the Bank's Administrative
Loan Office in Torrance expires in 1995 (with a 5 year option to extend) and
the lease for the Bank's deposit operations facilities at the World Trade
Center in Los Angeles expires in 2004 (with a five year option to extend).
For additional information relating to the Bank's future leasehold
commitments, see footnote 13 on page 30 of the Bank's 1994 Annual Report to
Shareholders, attached as Exhibit 6.4 and incorporated herein by this
reference.
9
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
The Bank is a defendant in a number of lawsuits which have arisen in
the ordinary course of its business. It is the opinion of management of the
Bank that although it is not possible to assess with certainty the ultimate
outcome of some of these actions at the present time, resolution of the matters
will not have a material adverse effect on either the Bank or any of its
subsidiaries' financial condition or results of operations.
10
<PAGE> 11
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 4 is omitted since the information
called for is included in a definitive proxy statement which will be filed with
the FDIC within 120 days after the end of the most recent fiscal year and such
proxy statement is incorporated herein by this reference.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE BANK'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
For information concerning the market for the Bank's common stock and
related security holder matters, see "Securities Activity" on page 35 of the
Bank's 1994 Annual Report to Shareholders, attached hereto as Exhibit 6.4 and
incorporated herein by this reference.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
For selected financial data concerning the Bank see "Selected
Financial Data" on page 17 of the Bank's 1994 Annual Report to Shareholders,
attached hereto as Exhibit 6.4 and incorporated herein by this reference.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Management's discussion and analysis of financial condition and
results of operations is designed to provide a better understanding of
significant trends relating to the Bank's financial condition, results of
operations, liquidity, capital resources and interest rate sensitivity. It
should be read in conjunction with the consolidated financial statements and
related notes to the financial statements of the Bank appearing elsewhere in
this report. The consolidated financial statements include the accounts of
Metrobank (the "Bank"), a California state chartered bank, and its wholly owned
subsidiary, Metrocorp, Inc.
ACQUISITION OF NATIONAL BANK OF LONG BEACH
On August 31, 1994, the Bank entered into a definitive agreement to
acquire the National Bank of Long Beach from its Danish parent, Topdanmark Bank
A/S. According to the terms of the agreement, the Bank will purchase all
outstanding common and preferred National Bank of Long Beach stock for cash at
the net book value on December 31, 1994, subject to certain valuation
adjustments. The due diligence review of National Bank of Long Beach by the
Bank was completed on October 28, 1994. The acquisition, approved by the
Federal Deposit Insurance Corporation (FDIC) subsequent to year-end, is
scheduled to be completed during the second quarter of 1995.
As of December 31, 1994, National Bank of Long Beach had $143.0
million in gross loans and $198.7 million in total deposits. Shareholders'
equity at year-end totalled $28.0 million. Additionally, the Bank has agreed
to acquire participation interests in certain non-classified performing loans
held by Topdanmark Bank A/S, which are currently participated from the National
Bank of Long Beach to its parent, these loans total approximately $10.0 million
to $15.0 million.
It is anticipated that the Bank will be required to raise between $7
and $10 million of new capital. At this time, the Bank has not determined
whether to raise the new capital via public offering or a private placement.
NET INTEREST INCOME
The Bank's operating results depend primarily on the level of net
interest income (the difference between the interest earned on loans and
investments less interest expense on deposits and other liabilities). A
primary factor affecting the level of net interest income is the Bank's
interest rate margin between the yield earned on interest-earning assets and
the rate paid on interest-bearing liabilities, as well as the difference
between the relative amounts of average interest-earning assets and
interest-bearing liabilities.
14
<PAGE> 15
The following table shows the average balances of the Bank's assets,
liabilities, and shareholders' equity and the percentage distribution of the
items computed using average daily balances for the periods indicated:
<TABLE>
<CAPTION>
1994 1993
--------------------- --------------------
($ IN THOUSANDS) AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL
--------------------- --------------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 80,380 8.5% $ 72,072 8.0%
Federal funds sold 11,184 1.2% 8,217 0.9%
Investment securities 238,364 25.2% 238,696 26.6%
Investment in real estate 16,531 1.7% 18,558 2.1%
Loans, net 575,637 60.9% 530,706 59.3%
Accrued interest receivable 5,974 0.6% 5,718 0.6%
Other real estate owned, net 5,706 0.6% 9,570 1.1%
Premises and equipment 2,672 0.3% 2,897 0.3%
Other assets 9,809 1.0% 10,134 1.1%
--------------------- --------------------
Total assets $946,257 100.0% $896,568 100.0%
</TABLE>
<TABLE>
<CAPTION>
1994 1993
--------------------- --------------------
($ IN THOUSANDS) AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL
--------------------- --------------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Deposits:
Time certificates $125,003 13.2% $139,714 15.6%
Other deposits 718,346 75.8% 655,792 73.1%
--------------------- --------------------
Total deposits 843,349 89.0% 795,506 88.7%
Securities sold under agreement to repurchase
and funds purchased 28,480 3.1% 29,625 3.3%
Accrued interest payable 721 0.1% 768 0.1%
Other liabilities 6,473 0.7% 9,129 1.0%
--------------------- --------------------
Total liabilities 879,023 92.9% 835,028 93.1%
Shareholders' equity:
Common stock 35,019 3.7% 34,325 3.8%
Guarantee of ESOP loan (69) - % (414) - %
Undivided profits 31,732 3.3% 27,629 3.1%
Unrealized gain on securities available for sale 552 0.1% - - %
--------------------- --------------------
Total shareholders' equity 67,234 7.1% 61,540 6.9%
--------------------- --------------------
Total liabilities and shareholders' equity $946,257 100.0% $896,568 100.0%
</TABLE>
15
<PAGE> 16
The Bank's net interest income before provision for possible loan losses
was $52.9 million for the year ended December 31, 1994 compared to $48.4
million for the year ended December 31, 1993.
Interest and fee income increased to $66.6 million in 1994 from $61.1
million in 1993. Average earning assets for 1994 were $838.7 million, up from
$789.4 in 1993. This increase in earning assets resulted in an increase in
interest income of $4.2 million. The average rate on earning assets for 1994
was 7.94%, an increase of 21 basis points from 1993. This change was due to a
rising short-term interest rate environment experienced during 1994, which
resulted in an additional $1.3 million in interest income.
Interest expense increased to $13.7 million for the year ended December
31, 1994 from $12.6 million for the year ended December 31, 1993. Inasmuch as
the Bank funds its liquidity needs with short-term interest-bearing deposits,
the frequent repricing of these deposits was impacted by the substantial
increase in interest rates.
16
<PAGE> 17
The following table presents the average amounts outstanding for the
major categories of the Bank's interest-earning assets and interest-bearing
liabilities and the average interest rates earned or paid thereon:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
($ IN THOUSANDS) ----------------------------------------------------
INTEREST-EARNING ASSETS: 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Funds Sold:
Average outstanding $ 11,184 $ 8,217 $ 1,385
Average yield 4.61% 2.92% 3.61%
Interest income $ 516 $ 240 $ 50
-------- -------- --------
Investment Securities:
Average outstanding $238,364 $238,696 $235,532
Average yield 5.80% 6.50% 7.68%
Interest income $ 13,833 $ 15,517 $ 18,083
-------- -------- --------
Gross Loans:
Average outstanding $589,141 $542,466 $508,784
Average yield 8.87% 8.35% 8.58%
Interest income $ 52,253 $ 45,302 $ 43,631
-------- -------- --------
Total Interest-Earning Assets:
Average outstanding $838,689 $789,379 $745,701
Average yield 7.94% 7.74% 8.28%
Interest income $ 66,602 $ 61,059 $ 61,764
-------- -------- --------
INTEREST-BEARING LIABILITIES
NOW and money market demand accounts:
Average outstanding $281,201 $272,092 $225,431
Average yield 2.53% 2.34% 3.06%
Interest expense $ 7,125 $ 6,356 $ 6,892
-------- -------- --------
Savings Deposits:
Average outstanding $ 11,311 $ 14,320 $ 19,757
Average yield 2.00% 2.25% 2.98%
Interest expense $ 226 $ 322 $ 589
-------- -------- --------
Time Deposits:
Average outstanding $125,003 $139,714 $170,269
Average yield 4.12% 3.57% 3.91%
Interest expense $ 5,147 $ 4,990 $ 6,659
-------- -------- --------
Securities sold under agreement to repurchase,
funds purchased and other liabilities:
Average outstanding $ 28,480 $ 29,625 $ 40,683
Average yield 4.18% 3.26% 4.10%
Interest expense $ 1,190 $ 966 $ 1,666
-------- -------- --------
Capitalized carrying costs $ - $ - $ (65)
Total Interest-Bearing Liabilities:
Average outstanding $445,995 $455,751 $456,140
Average yield 3.07% 2.77% 3.45%
Interest expense $ 13,688 $ 12,634 $ 15,741
-------- -------- --------
Net interest income $ 52,914 $ 48,425 $ 46,023
Avg. net yield on interest-earning assets 6.31% 6.13% 6.17%
----------------------------------------------------
</TABLE>
17
<PAGE> 18
Loan interest and fee income for the year ended December 31, 1994 was
$52.3 million, an increase of $7.0 million from $45.3 million for 1993. This
increase resulted from an increase in average loans of $46.7 million over the
prior year, which increased interest income by $4.2 million. The average
interest rate earned on loans during 1994 was 8.87%, which was a 52 basis point
increase from 8.35% for the prior year. This increase in interest rates
resulted in an additional $2.8 million in loan interest income.
Interest on investment securities was $13.8 million in 1994, a decrease of
$1.7 million from 1993. The average interest rate on investment securities was
5.80% for 1994, as compared to 6.50% for 1993. This decrease of 70 basis
points in the yield on investment securities is primarily attributable to the
reinvestment of $145 million of investment proceeds into comparable securities
in the lower rate environment of 1993, which resulted in a decrease of $1.7
million in interest income. This trend is expected to reverse in 1995 as the
reinvestment of maturing securities will occur in a higher rate environment.
The following table summarizes the maturity of the Bank's investment
securities and their weighted average yield as of December 31, 1994:
<TABLE>
<CAPTION>
WEIGHTED
PRINCIPAL BOOK AVERAGE
TYPE AND MATURITY GROUPING AMOUNT VALUE YIELD
- -------------------------- --------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Available for Sale:
U.S. Treasury securities:
Within one year $ 10,000 $ 9,934 4.06%
After one year but within two years 55,000 55,045 6.73%
After two years but within five years - - -
After five years but within ten years - - -
-------- -------- -----
Total U.S. Treasury securities 65,000 64,979 6.32%
Federal Home Loan Bank Stock 2,979 2,979 5.20%
Held to Maturity:
U.S. Treasury securities:
Within one year 40,000 40,514 5.56%
After one year but within two years 70,000 72,400 5.02%
After two years but within five years - - -
After five years but within ten years - - -
-------- -------- -----
110,000 112,914 5.23%
Mortgage-backed securities and collateralized
mortgage obligations:
Within one year - - -
After one year but within two years 1,461 1,511 -
After two years but within five years 34,908 35,298 -
Total mortgage-backed securities and -------- -------- -----
collateralized mortgage obligations 36,369 36,809 7.19%
Other securities:
After five years but within ten years 200 200 6.63%
-------- -------- -----
Total other securities 200 200 6.63%
Total securities $214,548 $217,881 5.89%
======== ======== =====
</TABLE>
18
<PAGE> 19
Interest expense on time deposits was $5.1 million for the year ended
December 31, 1994, as compared to $5.0 million in 1993. This increase of
$100,000 is due to a 55 basis point increase in the average cost of funds to
4.12% in 1994, which resulted in an additional expense of $700,000. This
increase in the cost of funds was offset by a decrease in average balances of
$14.7 million which resulted in a $600,000 reduction in interest expense.
Interest expense on other interest-bearing deposits was $7.4 million in
1994, as compared to $6.7 million in 1993. This increase is due to a $6.1
million increase in average deposits which resulted in an increased cost of
approximately $200,000. Additionally, the cost of these funds increased
approximately 18 basis points which resulted in an increase in interest expense
of $500,000.
Interest expense on borrowed funds was $1.2 million for 1994 compared
to $1.0 million for 1993. While the average amount outstanding remained
relatively unchanged, the average borrowing rate was 4.18% in 1994, up from
3.26% in 1993 increasing interest expense by $300,000.
The following table summarizes certain information regarding the
sources, types and amounts of certain of the Bank's average deposit balances
during December 1994:
<TABLE>
<CAPTION>
($ IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------
INTEREST PERCENT OF
DEMAND BEARING TOTAL AVG. TOTAL
SOURCE OF DEPOSITS DEPOSITS DEPOSITS DEPOSITS DEPOSITS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insolvency trustees $ 51,452 $169,755 $221,207 24.6%
Commercial industry 92,386 83,424 175,810 19.5%
Escrow companies 208,478 26,827 235,305 26.2%
Title companies 70,677 4,204 74,881 8.3%
Entertainment industry 24,979 33,423 58,402 6.5%
Other industry 12,690 121,596 134,286 14.9%
-------- -------- -------- ------
Total $460,662 $439,229 $899,891 100.0%
======== ======== ======== ======
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
The following table shows the Bank's average deposits for each of the
periods indicated below, based upon average daily balances:
<TABLE>
<CAPTION>
($ IN THOUSANDS) YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1994 1993 1992
------------------- -------------------- ------------------
AVERAGE % OF AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL BALANCE TOTAL
------------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $425,834 50.5% $369,380 46.4% $331,505 44.4%
NOW & Super-NOW accounts 17,926 2.1% 17,885 2.2% 14,156 1.9%
Savings accounts 11,310 1.3% 14,320 1.8% 19,757 2.6%
Money market accounts 263,276 31.2% 254,207 32.0% 211,275 28.3%
Time certificates of deposits 125,003 14.9% 139,714 17.6% 170,269 22.8%
------------------- -------------------- ------------------
Total deposits $843,349 100.0% $795,506 100.0% $746,962 100.0%
======== ====== ======== ====== ======== ======
</TABLE>
The table below details the changes in interest income and interest expense
by component, and the amount of change attributable to variations in interest
rates, and variations in average balances.
<TABLE>
<CAPTION>
YEAR ENDED 12/31/94 OVER 1993 YEAR ENDED 12/31/93 OVER 1992 YEAR ENDED 12/31/92 OVER 1991
----------------------------- ----------------------------- -----------------------------
TOTAL TOTAL TOTAL
INCREASE CHANGE DUE TO: INCREASE CHANGE DUE TO: INCREASE CHANGE DUE TO:
($ IN THOUSANDS) (DECREASE) RATE VOLUME (DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans & bankers'
acceptances $ 6,951 $ 2,811 $4,140 $ 1,671 $(1,010) $ 2,681 $(3,416) $(8,104) $ 4,688
Other interest income 276 139 137 190 (10) 200 74 58 16
Investment securities (1,684) (1,665) (19) (2,566) (2,772) 206 1,009 (1,325) 2,334
- ---------------------------------------------------------------------------------------------------------------------------
Total interest income 5,543 1,285 4,258 (705) (3,792) 3,087 (2,333) (9,371) 7,038
- ---------------------------------------------------------------------------------------------------------------------------
Interest expense:
Time deposits 157 766 (609) (1,669) (577) (1,092) (7,752) (5,061) (2,691)
Other deposits 673 520 153 (803) (1,771) 968 (1,928) (3,768) (1,840)
Funds purchased and
securities sold under
agreements to repurchase 224 272 (48) (700) (339) (361) 234 (350) 584
Capitalized interest - - - 65 - 65 219 - 219
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense 1,054 1,558 (504) (3,107) (2,687) (420) (9,227) (9,179) (48)
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income $ 4,489 $ (273) $4,762 $ 2,402 $(1,105) $ 3,507 $ 6,894 $ (192) $ 7,086
===========================================================================================================================
</TABLE>
20
<PAGE> 21
The Bank's net interest income before provision for possible loan losses
was $48.4 million for the year ended December 31, 1993, as compared to $46.0
million for the year ended December 31, 1992. The increase in net interest
income was primarily due to a $3.1 million decrease in interest expense. Net
interest income was further enhanced by a $1.7 million increase in loan
interest and fee income, and was offset by a $2.4 million decrease in
investment and federal funds sold interest income.
Interest and fee income decreased to $61.1 million in 1993 from $61.8
million in 1992. Due primarily to a declining interest rate environment, the
average rate on earning assets was 7.74%, as compared to 8.28% for 1992. This
decrease in yields resulted in a lower interest income of $3.8 million. This
decrease was offset by an increase in average earning assets of $43.7 million,
which increased income by $3.1 million.
Interest expense decreased to $12.6 million for the year ended December 31,
1993, from $15.7 million for the year ended December 31, 1992. The decrease of
$3.1 million is primarily attributable to a 66 basis point decrease in
interest-bearing liabilities. Inasmuch as the Bank funds its liquidity needs
with short-term interest-bearing deposits and borrowings, the frequent
repricing of these liabilities was affected by the substantial decrease in the
interest rate environment.
Loan interest and fee income was $45.3 million for the year ended December
31, 1993, up from $43.6 million in 1992. This $1.7 million increase in loan
income resulted from a $33.7 million increase in average loans outstanding,
offset by a 20 basis point decrease in the average rate earned on loans.
Interest on investment securities was $15.5 million for 1993, a decrease of
$2.6 million from $18.1 million in 1992. This decrease in interest income is
primarily attributable to a 118 basis point drop in the Bank's average rate for
investment securities, which reduced related investment income by approximately
$2.8 million. A declining interest rate environment and the reinvestment of
sold and matured investments in shorter-term maturities caused the decline.
This decrease in interest income was partially offset by an increase in average
investments of $3.2 million, which increased income by $200,000. During 1993,
the Bank realized security gains totalling $3.3 million on the sale of $89
million of Treasury securities.
Interest expense on time certificates of deposits was $5.0 million in 1993,
as compared to $6.7 million in 1992. This decrease of $1.7 million was due
primarily to a $30.6 million decrease in the average deposits which resulted in
a reduction in interest expense of $1.1 million.
Interest expense on other interest-bearing deposits was $6.7 million in
1993, as compared to $7.5 million in 1992. This decrease is due to a 72 basis
point decrease in the average cost of funds to 2.33% for 1993. This resulted
in an interest expense decrease of $1.8 million, which was offset by a $41.2
million increase in average deposits.
21
<PAGE> 22
Average borrowings were $29.6 million for 1993, down from $40.7 million in
1992. This decrease in average borrowings decreased interest expense by
$400,000. Additionally, the average borrowing rate was 3.26%, down from 4.09%
in 1992, decreasing interest expense by $300,000.
PROVISION FOR POSSIBLE LOAN LOSSES
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited back
to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
operations as a provision for possible loan losses. The balance of the
allowance for possible loan losses reflects the amount which, in management's
judgement, is adequate to provide for potential loan losses after weighing the
mix of the loan portfolio, current economic conditions, past loan loss
experience and other factors relevant to estimating loan losses.
The following table indicates the amounts which were allocated to the
allowance for possible loan losses and the relationship of those amounts to net
charge-offs and total gross loans for the periods indicated:
<TABLE>
<CAPTION>
($ IN THOUSANDS)
- --------------------------------------------------------------------------------------
PROVISION NET CHARGE- RESERVE ALLOWANCE RATIO OF
FISCAL CREDITED TO OFFS AGAINST TRANSFERRED BALANCE AT ALLOWANCE TO
YEAR ALLOWANCE ALLOWANCE FROM/(TO) OREO YEAR-END GROSS LOANS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 $ 3,565 $ 3,878 $ - $ 12,791 2.08%
1993 8,820 5,818 - 13,104 2.31%
1992 5,200 3,272 - 10,102 1.91%
1991 2,130 788 160 8,174 1.69%
1990 5,619 1,903 (160) 6,672 1.59%
- --------------------------------------------------------------------------------------
</TABLE>
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured; such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk since property acquired through
foreclosure (other real estate owned) may not be sold for an amount sufficient
to offset the entire amount of the loan and costs associated with foreclosure.
Although management believes that the allowance for possible loan losses is
adequate, future provisions will be subject to continuing evaluation of risks
inherent in the loan portfolio.
In 1994, the provision for possible loan losses decreased by approximately
$5.3 million from the prior year. This decrease was primarily attributable to
the decline in loan charge-offs (net of recoveries) of $1.9 million.
Additionally, management decreased the ratio of its loan loss reserve to total
loans from 2.31% as of December 31, 1993 to 2.08% as of December 31, 1994,
22
<PAGE> 23
in connection with management's assessment of its most recent charge-off
experience and an evaluation of the Southern California economy.
Loan charge-offs (net of recoveries) for the year ended December 31, 1994
totalled approximately $3.9 million. This compares to the net charge-offs of
$5.8 million for 1993. The Bank's charge-offs were attributed primarily to
loans secured by real estate; of the $3.9 million in net charge-offs, $4.1
million was real estate loan related, while approximately $200,000 of the net
loan recoveries was attributable to the remainder of the portfolio. Loans
secured by real estate represented 61% and 58% of the Bank's loan portfolio as
of December 31, 1994 and December 31, 1993, respectively.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as the real estate values
in the Southern California region. Inasmuch as this is the principal
geographic area in which the Bank conducts its business, this environment, as a
result of the recession, has had an adverse impact on the Bank's asset quality.
As of December 31, 1994, the Bank had approximately $16.8 million of
nonperforming assets, compared to $12.3 million as of December 31, 1993, or
1.60% and 1.29% of total assets, respectively.
The following is a breakdown of nonperforming assets as of December 31:
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1994 1993
---- ----
<S> <C> <C>
Loans 90 days past due on accrual $ 2,047 $ 1,096
Nonaccrual loans 11,274 5,476
Other real estate owned 3,520 5,745
-------- --------
Total nonperforming assets $ 16,841 $ 12,317
======== ========
Nonperforming loans/gross loans 2.17% 1.16%
Nonperforming assets/total assets 1.60% 1.29%
</TABLE>
23
<PAGE> 24
The following tables summarize the Bank's loan loss experience for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
BALANCES ($ IN THOUSANDS): 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Loans:
Average gross loans $589,141 $542,466 $508,784
Gross loans at end of period 614,257 566,229 527,952
Analysis of allowance for possible losses:
Balance at beginning of period 13,104 10,102 8,174
Loans charged-off (5,069) (6,526) (3,559)
Recoveries of loans previously charged-off 1,191 708 287
-------- -------- --------
Net loans charged-off (3,878) (5,818) (3,272)
Provision for possible loan losses 3,565 8,820 5,200
-------- -------- --------
Balance at end of period $ 12,791 $ 13,104 $ 10,102
======== ======== ========
Ratios:
Net loan charge-offs to average loans 0.66% 1.07% 0.64%
Net loan charge-offs to loans at end of period 0.63% 1.03% 0.62%
Allowance for possible loans losses to average loans 2.17% 2.42% 1.99%
Allowance for possible loan losses at end of period 2.08% 2.31% 1.91%
Net loan charge-offs to allowance for possible loan losses 30.32% 44.40% 32.39%
Net loan charge-offs to provision for possible loan losses 108.78% 65.96% 62.92%
Charge-offs:
Commercial $ 220 $ 2,850 $ 2,235
Consumer 344 432 362
Real estate 4,202 3,187 958
Other 303 57 4
-------- -------- --------
Total $ 5,069 $ 6,526 $ 3,559
======== ======== ========
Recoveries:
Commercial $ 865 $ 317 $ 142
Consumer 217 137 59
Real estate 85 218 65
Other 24 36 21
-------- -------- --------
Total $ 1,191 $ 708 $ 287
======== ======== ========
</TABLE>
The following table shows for the periods indicated the remaining maturity
of fixed rate loans and the earliest possible repricing interval for variable
rate loans for the Bank's loan portfolio:
<TABLE>
<CAPTION>
($ IN THOUSANDS) DECEMBER 31,
--------------------------------
1994 1993
---- ----
<S> <C> <C>
Immediate or one day $478,861 $428,367
Three months or less 13,823 18,501
Three to twelve months 36,015 36,323
One to five years 76,723 74,263
Over five years 8,835 8,775
-------- --------
Total $614,257 $566,229
======== ========
</TABLE>
24
<PAGE> 25
NON-INTEREST INCOME
During 1994, the Bank recognized approximately $4.6 million in noninterest
income as compared to $9.6 million in 1993 and $5.7 million in 1992. This
decrease of $5.0 million in comparing 1994 to 1993 was due primarily to
nonrecurring security gains of approximately $3.3 million recognized in 1993.
Additionally, the Bank owned an insurance division for the first nine months of
1993 which generated income of $1.2 million prior to being sold. Other
noninterest income decreased $500,000.
The increase of $3.9 million in comparing 1993 to 1992 was due primarily to
a $3.3 million gain realized on the sale of $89 million of Treasury securities,
an increase of $500,000 in income for Metrocorp, Inc. and a net $100,000
increase in all other noninterest income.
PROVISION FOR OREO
During 1994, the Bank, inclusive of Metrocorp, Inc., its wholly owned
subsidiary, reduced OREO from $5.7 million at December 31, 1993 to $3.5 million
at December 31, 1994. During 1994, two new properties were acquired and four
properties were disposed of and the total provision for real estate losses
amounted to approximately $1.2 million for 1994, $2.0 million for 1993 and $2.0
million for 1992.
NON-INTEREST EXPENSE
For the year ending December 31, 1994, noninterest expense increased to
$42.5 million from $42.0 million in 1993 and from $39.2 million in 1992. This
increase of $500,000 in 1994 was due primarily to an increase of $2.3 million
in data processing and other services paid on behalf of certain depository
relationships and is directly attributable to an increase in average
noninterest-bearing demand deposits from $369.4 million during 1993 to $425.8
million during 1994. This increase was offset by decreases in professional
services and OREO provisions and expenses of $500,000 and $500,000,
respectively. Additionally, occupancy and equipment expenses decreased
$300,000; all other noninterest expenses decreased by $500,000.
For the year ended December 31, 1993, noninterest expense increased to
$42.0 million from $39.2 million in 1992. This increase of $2.8 million in
1993 was due primarily to an increase of $1.0 million in data processing and
other services paid on behalf of certain depository relationships and is
directly attributable to an increase in average noninterest-bearing demand
deposits increasing from $331.5 million during 1992 to $369.4 million during
1993. In addition, occupancy, furniture and equipment expense increased by
$700,000; of this increase, $200,000 was related to an increase in occupancy
expense and $400,000 was related to the Bank reversing an accrual associated
with its Orange County facility during the third quarter of 1992. Personnel
expense increased by $400,000 and $400,000 in goodwill associated with the
Bank's insurance division was written-off in the first quarter of 1993.
Additionally, the regulatory assessments increased by $300,000.
25
<PAGE> 26
PROVISION FOR INCOME TAXES
The Bank's provision for income taxes is lower than the statutory federal
income tax rate and is due primarily to the utilization of tax credits
associated with the Bank's low-income housing project. These tax credits, of
which approximately $1.5 million was utilized in 1994, 1993 and 1992, amount to
approximately $15 million in credits to be recognized over a 10 year period.
Through December 31, 1994, the Bank had utilized approximately $5.5 million of
these tax credits. The utilization of these tax credits is subject to certain
alternative minimum tax restrictions. The effective tax rate used in computing
net income was 28.6% in 1994, 16.3% in 1993 and 20.7% in 1992.
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." This statement changes the method of computing income taxes for
financial statement purposes by adopting the liability or balance sheet method
under which the net deferred liability or asset is determined based on the tax
effects of the differences between the book and tax bases of the various
balance sheet assets and liabilities. Under this method, the computation of
the net deferred tax asset or liability gives current recognition to changes in
tax laws and rates. The Bank adopted SFAS No. 109 effective January 1, 1993
and prior years' financial statements have not been restated. Previously the
Bank provided for income taxes under Accounting Principles Board Opinion No.
11, "Accounting For Income Taxes," under which the net deferred tax asset or
liability was an accumulation of annual adjustments based on the tax effects of
the book and tax income statement differences and was not adjusted for
subsequent changes in tax laws and rates. The adoption of SFAS No. 109 in 1993
resulted in a $350,000 credit to the Bank's tax provision in that year.
CAPITAL RESOURCES
The Bank's shareholders' equity totalled $70.2 million as of December 31,
1994, which represents an increase of $6.4 million from shareholders' equity on
December 31, 1993. This increase was due to net income for the year of $8.2
million, offset by dividends declared in the amount of $2.9 million, a decrease
in the indebtedness of the Bank's Employee Stock Ownership Plan and Trust
(which is treated as a reduction of capital for financial statement purposes)
of $288,000, an unrealized loss of $411,000, net of taxes, on our securities
classified as available for sale, as well as $1.3 million of new equity
generated through the exercise of employee stock options. Additionally, in
December of 1994, the Bank declared a 10% stock dividend payable in January of
1995. Upon declaration, approximately $8.4 million of retained earnings was
transferred to the Bank's common stock account.
The Bank's shareholders' equity totalled $63.8 million as of December 31,
1993, which represents an increase of $4.5 million from shareholders' equity on
December 31, 1992. This increase was due to net income for the year of $6.0
million, offset by dividends declared in the amount of $2.1 million, and a
decrease in the indebtedness of the Bank's Employee Stock Ownership Plan and
Trust of $575,000.
26
<PAGE> 27
The FDIC the Federal Reserve Board, and the Comptroller of the Currency
have adopted regulations that supplement the current regulatory capital
requirements by establishing guidelines for calculating "risk-based" and
"tier-one" capital ratios. These guidelines establish a framework that
requires regulatory capital requirements to be risk-adjusted. The risk-based
capital ratio is determined by segregating assets and specified
off-balance-sheet commitments into four risk-weighted categories, with higher
levels of capital required for the categories perceived as representing greater
risk. Under these guidelines, the Bank is required to maintain a risk-based
capital ratio of 8.00% and a tier-one capital ratio of 4.00%. At December 31,
1994, the risk-based capital ratio of the Bank was 11.4% and its tier-one
capital ratio was 10.1%. This is primarily because the Bank maintains a
significant amount of treasury securities, which are primarily pledged as
collateral for bankruptcy related deposits or repurchase agreements with
investment brokers and require a 0% risk-weighting; additionally most of the
Bank's loan commitments are for less than one year, which also require a 0%
risk-weighting. In addition, the regulations require financial institutions to
maintain a minimum tier-one leverage ratio of 3.00%. The tier-one leverage
ratio is defined as tier-one capital to total quarterly average assets.
The Bank was in compliance with all three capital requirements as of
December 31, 1994, as follows:
<TABLE>
<CAPTION>
TIER-1 ------RISK-BASED-----
($ IN THOUSANDS) LEVERAGE TIER-1 TOTAL
-------- -------- --------
<S> <C> <C> <C>
Common shareholders' equity $ 70,626 $ 70,626 $ 70,626
General valuation allowance -- -- 8,782
-------- -------- --------
Total capital, as defined $ 70,626 $ 70,626 $ 79,408
Asset base, as defined $974,965 $698,544 $698,544
-------- -------- --------
Actual capital ratio 7.24% 10.11% 11.37%
-------- -------- --------
Minimum required capital ratio 3.00% 4.00% 8.00%
-------- -------- --------
</TABLE>
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity, which primarily represents the ability of the Bank to meet
fluctuations in its deposit structure and to provide for customer credit needs,
is managed by the Bank's Asset/Liability Management Committee. Inasmuch as a
significant portion of the Bank's deposit structure is concentrated in
specialized niche industries (for example, escrow and title insurance
companies) which closely parallel the real estate economy in Southern
California, the Bank is subject to fluctuations in demand deposits which
correlate to trends in Southern California real estate activity. To mitigate
this exposure, the Bank has increased its emphasis on other types of deposits,
established an internal money desk operation, and to a lesser degree, relied
upon the use of secured and unsecured lines of credit with correspondent banks
and investment banking firms. As of December 31, 1994, the Bank's money desk
deposits totaled approximately $61.1 million and carried a weighted average
interest rate of 5.38%. Of this amount, approximately
27
<PAGE> 28
$41.3 million, or 68% of the total money desk deposits matured by the end of
the first quarter of 1994 and carried a weighted average interest rate of
5.36%. Additionally, as of the end of 1994, the Bank had established unsecured
credit facilities of $75.0 million, or 8% of total deposits, and secured credit
facilities of $111.2 million, or 11% of total deposits. The combination of
these facilities provides the Bank with secondary sources of liquidity of
approximately $186.2 million, or 19% of total deposits.
In addition to managing the liquidity needs of the Bank, the
Asset/Liability Management Committee reviews, recommends and implements changes
in the asset and liability structure of the Bank's balance sheet. Presently,
the relationship of interest sensitive assets to interest sensitive liabilities
would cause an improvement in net interest margin in a falling rate
environment. This would be caused primarily by the fact that the Bank's
liabilities reprice more rapidly than its assets and, accordingly, the Bank's
net interest income would increase.
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 requires that an
entity classify and account for its investments in equity securities that have
readily determinable fair values and for all of its investments in debt
securities as either trading, available for sale, or held to maturity, and
report these investments at fair value or amortized cost as stipulated by SFAS
No. 115. Investments and debt securities shall be classified as held to
maturity and measured at amortized cost only if the Bank has a positive intent
and ability to hold those securities to maturity. Securities that are bought
and held principally for the purpose of selling them in the near term (thus
held for only a short period of time) shall be classified as trading
securities. Securities classified as trading are carried at fair value with
any unrealized gains or losses, net of taxes, reflected in current earnings.
At this time, the Bank does not operate a trading portfolio. Investments not
classified as trading securities, nor as held to maturity securities shall be
classified as available for sale securities. Securities classified as
available for sale are carried at fair value with any unrealized gains or
losses, net of taxes, reflected as an addition or reduction of equity, as
appropriate. Management adopted SFAS No. 115 effective January 1, 1994
resulting in an increase to equity of $1.6 million, net of taxes. Prior year
financial statements have not been restated. As of December 31, 1994, the Bank
had U.S. Treasury securities with an amortized cost of $178.6 million, $112.9
million of these securities were classified as held to maturity and $65.7
million as available for sale. These securities had net unrealized losses of
$5.2 million and $700,000, respectively.
In managing the investment portfolio of the Bank, the Asset/Liability
Management Committee attempts to structure the portfolio in a manner that
reduces the adverse impact of changes in interest rates. In response to
significant increases in interest rates, the Bank acted to reduce the
weighted-average maturity of its investment portfolio; as highlighted in the
tables below, the weighted-average maturities have been shortened in 1994.
28
<PAGE> 29
As of December 31, 1994, the book value, weighted-average maturity,
weighted-average yield and net unrealized gain or loss of each component of the
Bank's securities portfolio is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
GROSS GROSS ESTIMATED AVERAGE WEIGHTED-
AMORTIZED UNREALIZED UNREALIZED MARKET MATURITY AVERAGE
($ IN THOUSANDS) COST GAINS LOSSES VALUE (YEARS) YIELD
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Held to Maturity:
U.S. Treasury securities $112,914 $14 $(5,201) $107,727 2.00 5.23%
Mortgage-backed securities 36,809 66 (1,186) 35,689 2.92 7.19%
Other securities 200 - - 200 4.25 6.63%
-------------------------------------------------------------------------------
149,923 80 (6,387) 143,616 2.23 5.71%
Available for Sale:
U.S. Treasury securities 65,679 76 (776) 64,979 1.25 6.32%
Other securities 2,979 - - 2,979 - 5.20%
-------------------------------------------------------------------------------
68,658 76 (776) 67,958 1.25 6.27%
-------------------------------------------------------------------------------
Total securities $218,581 $156 $(7,163) $211,574 1.92 5.89%
===============================================================================
</TABLE>
As of December 31, 1993, the book value, weighted-average maturity,
weighted-average yield and net unrealized gain or loss of each component of the
Bank's securities portfolio is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
GROSS GROSS ESTIMATED AVERAGE WEIGHTED-
AMORTIZED UNREALIZED UNREALIZED MARKET MATURITY AVERAGE
($ IN THOUSANDS) COST GAINS LOSSES VALUE (YEARS) YIELD
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Held to Maturity:
U.S. Treasury securities $114,760 $1,497 $(398) $115,859 2.40 5.51%
Mortgage-backed securities 43,367 1,564 (16) 44,915 2.60 6.38%
Other securities 2,975 - - 2,975 - 3.82%
-------------------------------------------------------------------------------
161,102 3,061 (414) 163,749 2.42 5.71%
Held for Sale
U.S. Treasury Securities 75,613 2,761 - 78,374 1.80 5.26%
-------------------------------------------------------------------------------
75,613 2,761 - 78,374 1.80 5.26%
-------------------------------------------------------------------------------
Total securities $236,715 $5,822 $(414) $242,123 2.25 5.57%
===============================================================================
</TABLE>
29
<PAGE> 30
It is management's policy to maintain the maturities of a majority of its
certificates of deposit in denominations of $100,000 or more to less than two
years. The maturities of such certificates of deposit ("TCD's") were as
follows for the period indicated:
<TABLE>
<CAPTION>
12/31/94
($ IN THOUSANDS) TCD'S
$100,000 +
----------
<S> <C>
Three months or less 58,973
Three to twelve months 28,011
One to five years 2,789
-------
Total $89,773
=======
</TABLE>
REGULATORY MATTERS
On July 6, 1993, the Bank entered into a Memorandum of Understanding (MOU)
with the FDIC which required that certain actions be taken. The FDIC mandated
that the Bank reduce specified classified assets, maintain a tier-1 leverage
ratio of at least 6.5%, and reduce its dependence on volatile liabilities to
specified levels over time (volatile liabilities are defined as brokered
deposits, money desk deposits, time deposits greater than or equal to $100,000,
federal funds purchased, repurchase agreements and other borrowings and debt
due in one year or less). Subsequent to year-end, the Bank was notified that
the FDIC was removing the Bank from its MOU based upon the results of its most
recent examination.
INFLATION
The impact of inflation on the Bank differs significantly from that of
industrial concerns, primarily because the Bank's assets and liabilities
consist largely of monetary items. The relatively low proportion of the Bank's
fixed assets to total assets (approximately 0.5% for each of the years ended
December 31, 1994, 1993, and 1992) reduces both the potential of inflated
earnings resulting from understated depreciation charges, and the potential
significant understatement of absolute values. Inasmuch as a significant
portion of the Bank's deposit base is associated with real estate activity in
Southern California, the Bank would be impacted negatively should interest
rates increase significantly in that a rise in interest rates would tend to
slow real estate activity and accordingly cause deposits to shrink.
30
<PAGE> 31
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
For consolidated financial statements of the Bank, see "Consolidated
Statements of Financial Condition", "Consolidated Statements of Earnings",
"Statements of Changes in Shareholders' Equity", "Consolidated Statements of
Cash Flows", "Notes to Consolidated Financial Statements" and "Report of
Independent Public Accountants" on pages 18 through 35 of the Bank's 1994
Annual Report to the Shareholders, attached hereto as Exhibit 6.4 and
incorporated herein by this reference, and the "Consent of Independent Public
Accountants" and "Report of Independent Public Accountants on Supplementary
Schedules" at pages 46 and 47 herein. See also "Item 11 - Exhibits, Financial
Statement Schedules, and Reports on F-3" herein.
31
<PAGE> 32
PART III
Part III of this report (Items 9 and 10) is omitted since the information
called for is included in a definitive proxy statement which will be filed with
the FDIC within 120 days after the end of the most recent fiscal year and such
proxy statement is incorporated herein by this reference.
32
<PAGE> 33
PART IV
ITEM 11. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM F-3
A. CONTENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The following financial statements of the Bank are included in the Bank's
1994 Annual Report to Shareholders (Exhibit 6.4 hereto) and are
incorporated herein by this reference.
Consolidated Statements of Financial Condition
Consolidated Statements of Earnings
Consolidated Statement of Changes in Shareholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedules not appearing below are omitted because of the absence of
conditions under which they are required or because they appear in the
Notes to Financial Statements appearing in the 1994 Annual Report to
Shareholders (Exhibit 6.4 hereto) and are incorporated herein by this
reference.
SCHEDULE I SECURITIES
The information required by Schedule I is incorporated herein by this
reference to Note 4 of the Bank's Consolidated Financial Statements as
contained on page 26 of the Bank's 1994 Annual Report to Shareholders
(Exhibit 6.4 hereto).
SCHEDULE II LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY HOLDERS,
AND ANY ASSOCIATES OF THE FOREGOING PERSONS
See page 39 of this filing.
SCHEDULE III LOANS AND LEASE FINANCING RECEIVABLES
The information required by Schedule III is incorporated herein by this
reference to Note 6 of the Bank's Consolidated Financial Statements as
contained on page 27 of the Bank's 1994 Annual Report to Shareholders
(Exhibit 6.4 hereto).
33
<PAGE> 34
SCHEDULE IV BANK PREMISES AND EQUIPMENT
The information required by Schedule IV is incorporated herein by this
reference to Note 8 of the Bank's Consolidated Financial Statements as
contained on page 28 of the Bank's 1994 Annual Report to Shareholders
(Exhibit 6.4 hereto).
SCHEDULE V INVESTMENTS IN INCOME FROM DIVIDENDS AND EQUITY IN
EARNINGS OR LOSSES OF SUBSIDIARIES AND ASSOCIATED
COMPANIES
See page 42 of this filing.
SCHEDULE VI ALLOWANCE FOR POSSIBLE LOAN LOSSES
The information required by Schedule VI is incorporated herein by this
reference to Note 6 of the Bank's Consolidated Financial Statements as
contained on page 27 of the Bank's 1994 Annual Report to Shareholders
(Exhibit 6.4 hereto).
B. REPORTS ON FORM F-3
No reports on Form F-3 were filed during the last quarter of the fiscal
year ended December 31, 1994.
C. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Filing Status
- -------------- ----------- -------------
<S> <C> <C>
1.1 The Bank's Articles of Incorporation effective Incorporated by Reference to
November 1, 1988 Exhibit "1.2" to the Bank's 1988
Form F-2
1.2 The Bank's Bylaws as restated on February 25, 1986 Incorporated by Reference to
Exhibit "2.2" to the Bank's 1985
Form F-2
1.3 The Bank's Bylaws, effective November 1, 1988 Incorporated by Reference to
Exhibit "1.4" to the Bank's 1988
Form F-2
</TABLE>
34
<PAGE> 35
<TABLE>
<S> <C> <C>
3.1 Copy of Bank's Incentive Stock Option Plan Incorporated by Reference to
Exhibit "D" to Form F-1
Registration Statement of the
Bank
3.2 Copy of Murdock Plaza Lease Incorporated by Reference to
Exhibit "G" to Form F-1
Registration Statement of the
Bank
3.3 Copy of Del Amo Financial Center Lease Incorporated by Reference to
Exhibit "H" to Form F-1
Registration Statement of the
Bank
3.4 Copy of Koll Center Lease Incorporated by Reference to
Exhibit "I" to Form F-1
Registration Statement of the
Bank
3.6 Copy of Warner Center Lease Incorporated by Reference to
Exhibit "L" to the Bank's 1984
Form F-2
3.10 Copy of Beaudry Center Lease Incorporated by Reference to
Exhibit "3.10" to the Bank's 1988
Form F-2
3.11 Copy of Bank's Nonqualified Stock Option Plan Incorporated by Reference to
Exhibit "E" to Form F-1
Registration Statement of the
Bank
3.12 Copy of Bank's Stock Bonus Plan and Trust Incorporated by Reference to
Registration Statement of the
Bank
3.13 Copy of Bank's Employee Savings Plan Incorporated by Reference to
Exhibit "3.13" to the Bank's 1988
Form F-2
</TABLE>
35
<PAGE> 36
<TABLE>
<S> <C> <C>
3.14 Metrobank Amended and Restated Employee Benefit Incorporated by Reference to
Plan Exhibit "5.12" to the Bank's 1986
Form F-2
3.15 Metrobank Amended and Restated Employee Stock Incorporated by Reference to
Ownership Trust Agreement Exhibit "5.13" to the Bank's 1986
Form F-2
3.16 First Amendment to Metrobank Amended and Restated Incorporated by Reference to
Employee Benefit Plan Exhibit "5.14" to the Bank's 1986
Form F-2
6.4 Copy of Bank's 1994 Annual Report to Shareholders Incorporated by Reference to
Exhibit "6.4" to the Bank's 1994
Form F-2
9.1 List of Subsidiaries Incorporated by Reference to
Exhibit "9.1" to the Bank's 1988
Form F-2
10.1 Copy of San Diego Office Lease Incorporated by Reference to
Exhibit "10.1" to the Bank's 1991
Form F-2
10.2 Copy of Torrance Office Lease Incorporated by Reference to
Exhibit "10.2" to the Bank's 1991
Form F-2
10.3 Copy of World Trade Center Lease Incorporated by Reference to
Exhibit "10.3" to the Bank's 1994
Form F-2
</TABLE>
36
<PAGE> 37
SUPPLEMENTAL SCHEDULES
37
<PAGE> 38
SCHEDULE I
SECURITIES
The information required by format F-9D is provided on page 26 of the
Bank's 1994 Annual Report to Shareholders, attached hereto as Exhibit 6.4 and
incorporated herein by this reference.
38
<PAGE> 39
SCHEDULE II
LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY
HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
12/31/93 12/31/94
NAME BALANCE ADDITIONS REPAYMENTS BALANCE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter Caloyeras $ 1,033,898 $ 798,027 $ 686,421 $ 1,145,504
Robert Mayer 6,425,000 1,000 30,000 6,396,000
Rudy Markmiller 2,614,570 115,500 509,024 2,221,045
Wallace Wong 3,535,726 152,508 1,611,458 2,076,776
----------- ---------- ---------- -----------
Total $13,598,194 $1,067,035 $2,836,903 $11,839,325
=========== ========== ========== ===========
</TABLE>
39
<PAGE> 40
SCHEDULE III
LOANS AND LEASE FINANCING RECEIVABLES
The information required by format F-9D is provided on page 27 of the
Bank's 1994 Annual Report to Shareholders, attached hereto as Exhibit 6.4 and
incorporated herein by this reference.
40
<PAGE> 41
SCHEDULE IV
BANK PREMISES AND EQUIPMENT
The information required by format F-9D is provided on page 28 on the
Bank's 1994 Annual Report to Shareholders, attached hereto as Exhibit 6.4 and
incorporated herein by this reference.
41
<PAGE> 42
SCHEDULE V
INVESTMENTS IN INCOME FROM DIVIDENDS AND EQUITY IN EARNINGS
OR LOSSES OF SUBSIDIARIES AND ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
BANK'S
PROPORTIONATE
PERCENT OF EQUITY IN PART OF
SUBSIDIARIES VOTING STOCK TOTAL UNDERLYING AMOUNT OF EARNINGS
CONSOLIDATED OWNED INVESTMENT NET ASSETS DIVIDENDS THIS PERIOD
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Metrocorp 100% $19,438,479 $19,438,479 $ - 100%
- ----------------------------------------------------------------------------------------------------
$19,438,479 $19,438,479
====================================================================================================
</TABLE>
42
<PAGE> 43
SCHEDULE VI
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The information required by format F-9D is incorporated herein by reference
to Note 6 of the Bank's Consolidated Financial Statements provided on page 27
of the Bank's 1994 Annual Report to Shareholders, attached hereto as Exhibit
6.4 and incorporated herein by this reference.
43
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
METROBANK
---------------------------
Date: March 28, 1995 By /s/ David L. Buell
---------------------------
David L. Buell
Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature
---------
<S> <C>
Date: March 28, 1995 /s/ David L. Buell
-----------------------------
David L. Buell
Chief Executive Officer
Chairman of the Board
(principal executive officer)
and Director
Date: March 28, 1995 /s/ David P. Malone
-----------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
(principal financial officer)
Date: March 28, 1995 /s/ Christopher T. Ishikawa
-----------------------------
Christopher T. Ishikawa
First Vice President
Controller
(principal accounting officer)
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
Signature
---------
<S> <C>
Date: March 28, 1995 /s/ Robert Bulseco
-----------------------------
Robert Bulseco, Director
Date: March 28, 1995 /s/ Peter Caloyeras
-----------------------------
Peter Caloyeras, Director
Date: March 28, 1995 /s/ Seymour Carr
-----------------------------
Seymour Carr, Director
Date: March 28, 1995 /s/ James W. Hobson
-----------------------------
James W. Hobson, Director
Date: March 28, 1995 /s/ Wallace Wong
-----------------------------
Wallace Wong, Director
Date: March 28, 1995 /s/ Robert L. Mayer
-----------------------------
Robert L. Mayer, Director
-----------------------------
Rudy B. Markmiller, Director
</TABLE>
45
<PAGE> 46
[ARTHUR ANDERSEN LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Annual Report on Form F-2 of Metrobank and subsidiaries of our
report dated January 17, 1995 included in the 1994 Annual Report to Shareholders
of Metrobank and subsidiaries.
Arthur Andersen LLP
Los Angeles, California
January 17, 1995
<PAGE> 47
[ARTHUR ANDERSEN LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTARY SCHEDULES
To the Shareholders and Board of Directors of Metrobank:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in the 1994 Annual Report to the
shareholders of Metrobank and subsidiaries (the Bank) included in this Form F-2,
and have issued our report thereon dated January 17, 1995. Our audit was made
for the purpose of forming an opinion on those consolidated financial statements
taken as a whole. Schedules I through VI included in pages 38 through 43 are
the responsibility of the Bank's management and are presented for the purpose of
complying with the Federal Deposit Insurance Corporation's rules and regulations
and are not a required part of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Los Angeles, California
January 17, 1995
<PAGE> 48
MANAGEMENT'S REPORT ON FINANCIAL INFORMATION
The management of Metrobank is responsible for the preparation, integrity and
fair presentation of the Bank's annual financial statements. The annual
financial statements have been prepared in accordance with generally accepted
accounting principles and, as such, include amounts based on judgements and
estimates made by management. Management has also prepared the other
information included in this annual report, and is responsible for its accuracy
and consistency with the financial statements.
The annual financial statements referred to above have been audited by Arthur
Andersen LLP, who have been given unrestricted access to all financial records
and related data, including minutes of all meetings of stockholders, the board
of directors, and committees of the board. Management believes that all
representations made to Arthur Andersen LLP during the audit were valid and
appropriate.
Management is responsible for establishing and maintaining an effective
internal control structure over financial reporting, defined to include
Financial Statements and Consolidated Reports of Condition and Income (Call
Reports), and the safeguarding and management of assets including loan
underwriting and documentation. The system contains monitoring mechanisms and
actions are taken to correct deficiencies identified.
Management has made its own assessment of the effectiveness of the Bank's
internal control structure over financial reporting as of December 31, 1994, in
relation to the criteria described in the Internal Control-Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management believes that, as of December
31, 1994, Metrobank's internal control structure was effective in achieving the
objectives stated above.
However, there are inherent limitations in the effectiveness of any internal
control structure, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an effective
internal control structure can provide only reasonable assurance with respect
to reliability of financial statements, and safeguarding and management of
assets. Furthermore, the effectiveness of any internal control structure can
change with changes in circumstances.
The Audit Committee of the Board of Directors meets regularly with Management,
the independent public accountants, and the internal auditors to ensure that
each is properly discharging its responsibilities with regard to the financial
statements and internal accounting controls. The independent public
accountants and internal auditors have full and free access to the Audit
Committee and meet with it, with and without Management being present, to
discuss auditing and financial reporting matters.
Management is also responsible for compliance with federal and state laws and
regulations concerning dividend restriction and regulations concerning loans to
insiders designated by the Federal Deposit Insurance Corporation as safety and
soundness laws and regulations.
Management assessed its compliance with these designated laws and regulations
referred to above relating to safety and soundness. Based on this assessment,
management believes that Metrobank complied, in all material respects, with the
designated laws and regulations relating to safety and soundness for the year
ended December 31, 1994.
/s/ David P. Malone /s/ David L. Buell
- ------------------------------ ------------------------------
David P. Malone David L. Buell
Executive Vice President Chairman
Chief Financial Officer Chief Executive Officer
January 17, 1995 January 17, 1995
METROBANK
<PAGE> 49
METROBANK
[PROMINENCE LOGO]
STRIVING TOWARDS A NEW SOUTHERN CALIFORNIA PROMINENCE
<PAGE> 50
Selected FINANCIAL DATA
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992 1991 1990
except per share amounts
<S> <C> <C> <C> <C> <C>
Total assets $1,052,172 $955,858 $905,083 $824,774 $744,521
Total deposits 959,160 885,386 801,863 740,824 672,765
Gross loans 614,257 566,229 527,952 483,648 418,949
Net earnings 8,153 6,015 5,758 5,513 2,101
Earnings per share 1.47 1.15 1.10 1.06 0.40
Shareholders' equity 70,215 63,752 59,279 55,761 52,002
</TABLE>
CORPORATE PROFILE
- ---------------------------
Metrobank is a financially strong, well-capitalized Southern California
regional business bank providing a full range of personalized banking services
to small and medium size companies, professionals, and affluent individuals
through a network of five regional offices in three counties. Offices are
located in Westwood, serving the West Los Angeles--Beverly Hills--Santa Monica
area; in Warner Center, serving the San Fernando Valley; in Torrance, serving
the South Bay; in Newport Beach, serving Orange County; in Mission Valley,
serving San Diego and in Long Beach, serving the nation's busiest port city.
1
<PAGE> 51
[PHOTO]
Left to right:
DAVID L. BUELL
Chairman and
Chief Executive Officer
ROBERT P. BULSECO
President and
Chief Operating Officer
<TABLE>
<CAPTION>
DIVIDENDS PAID BOOK VALUE
PER SHARE PER SHARE
<S> <C> <C> <C>
92 $0.52 92 $11.34
93 $0.55 93 $12.18
94 $0.55 94 $13.06
</TABLE>
<PAGE> 52
Metrobank reported RECORD FINANCIAL
PERFORMANCE for the year.
After celebrating its l5th anniversary in 1993--a milestone
itself--Metrobank reached two more milestones in 1994. First, the bank's total
assets climbed to the $1 billion mark. This placed us among the top ten
financial institutions headquartered in Southern California. Second, we
announced our first acquisition--National Bank of Long Beach (NBLB). Completed
April 1, 1995, this purchase will boost our assets by 20 percent and will add a
valuable banking franchise in another strong business community to our Southern
California regional office network. In addition to these two achievements,
Metrobank also reported record financial performance for the year.
All this is noteworthy for the present and in its own right. But also it
creates opportunities for even stronger performance for Metrobank in the coming
years. Your board of directors and bank management believe our success to date
makes it possible for the bank to strive over the next five years to emerge as
the leading regional business bank in all of Southern California, not just in
the Los Angeles area.
RECORD GAINS ACHIEVED FOR 1994
The bank's total assets of $1.05 billion at year-end 1994 represented a 10
percent increase over the $956 million reported at the close of the previous
year. Other important measures of financial performance improved as well. Our
record earnings stood at $8.2 million, or $1.47 per share, a 35 percent
increase over $6 million, or $1.15 per share, for 1993. Total deposits reached
$959 million, up 8 percent from $885 million. Total loans grew 8 percent, to
$614 million from $566 million.
Metrobank continued its standing as one of the best capitalized banks in
the region. At the end of 1994, our risk-based capital ratio was 11.4 percent
and our tier 1 capital ratio was 10.1 percent, well in excess of the minimum
federal regulatory requirements of 8 percent and 4 percent, respectively.
It is notable that record financial performance was achieved despite the
difficult banking environment that lingered during 1994, when the regional
economy just began to recover from the five-year recession that has plagued the
state, especially in the south. Indeed, the bank has performed quite well
financially in the last four years of this recession; we have outperformed most
of our peer banks and even large statewide institutions.
LOS ANGELES COUNTY
Our success in Los Angeles county makes it possible to emerge as the leading
regional business bank in all of Southern California.
<PAGE> 53
We will gain a MAJOR PRESENCE as we have sought
for some time IN LONG BEACH.
FIRST EXPANSION BY ACQUISITION ANNOUNCED
Announcing a major acquisition is always a pleasure. That it came during
an economy still challenging to the banking industry was doubly pleasing. In
the fall of 1994, Metrobank entered into a definitive agreement to purchase all
the outstanding stock of National Bank of Long Beach (NBLB) for cash at book
value. The agreement was with NBLB's Danish parent company, Topdanmark Bank
A/S.
Scheduled to close in the second quarter in 1995, we expect the transaction
to be financed readily by the sale of common stock in the public or private
market, and that the addition of this franchise will be accretive to earnings
and book value for Metrobank shareholders.
Founded in 1977, National Bank of Long Beach is a quality institution with
a sound community banking franchise in the nation's busiest port city. The
acquisition will add some $200 million in assets to Metrobank's $1 billion
asset base. This new total will place us among the top 20 of all California
banks, measured by asset size.
We also will gain a major presence we have sought for some time in Long
Beach. Plans are to keep NBLB's two Long Beach offices open, while merging its
Orange County and South Bay offices into our existing offices, augmenting our
successful operations in these two important business centers.
The addition of a Long Beach office to our strong regional office
network--Warner Center in the San Fernando Valley, Westwood serving the West
Los Angeles--Beverly Hills--Santa Monica areas, Torrance in the South Bay,
Newport Beach in Orange County and Mission Valley in San Diego--will strengthen
our presence along the western coastal perimeter of Southern California's three
core counties.
Despite this regional network, however, Metrobank is considered a Los
Angeles County-based institution with offices in two other counties. Rightly
so; 70-75 percent of our asset base is accounted for by our three Los Angeles
County offices, with 10 to 15 percent provided by each of our other two offices
in Orange and San Diego Counties. Metrobank can become the Premier Southern
California Regional Business Bank.
ORANGE COUNTY
The acquisition of National Bank of Long Beach will strengthen our presence
along the western coastal perimeter of Southern California's three
<PAGE> 54
[PHOTO]
EXECUTIVE MANAGEMENT Left to right
SCOTT T. MONSON
Executive Vice President
Regional Administration South
JOHN P. CRONIN
Senior Vice President
Marketing Administration
DONN E. LOE
Executive Vice President and
Chief Administrative Officer
PAUL W. STROUBE
Executive Vice President
Regional Administration North
PAMELA L. CITRON
Corporate Senior Vice President
and Cashier
DAVID P. MALONE
Executive Vice President and
Chief Executive Officer
PAUL B. ALEXANDER
Executive Vice President and
Chief Credit Officer
<TABLE>
<CAPTION>
NET INCOME TOTAL ASSETS
In thousands In thousands
<S> <C> <C> <C>
92 $5,758 92 $905,083
93 $6,015 93 $955,858
94 $8,153 94 $1,052,172
</TABLE>
<PAGE> 55
[PHOTO]
BOARD OF DIRECTORS Left to right:
WALLACE WONG
Chief Executive Officer
Cal-American Medical Supplies
JAMES W. HOBSON
Vice Chancellor (Emeritus)
University of California, Los Angeles
SHARON L. CANUP
Corporate Secretary and
Corporate Senior Vice President
SEYMOUR J. CARR
Professor (Emeritus)
University of California, Los Angeles
DAVID L. BUELL
Chairman and Chief Executive Officer
ROBERT P. BULSECO
President and Chief Operating Officer
ROBERT L. MAYER
President, The Robert Mayer Corporation
PETER B. CALOYERAS
President, Magnetika, Inc.
(Not shown)
RUDY B. MARKMILLER
President, Network Courier Services
<TABLE>
<CAPTION>
CAPITAL RATIOS TOTAL DEPOSITS
- -------------- --------------
1994 In thousands
<S> <C> <C> <C>
Government Required Ratio 4.00% 92 $801,863
Metrobank Tier 1 Capital Ratio 10.11% 93 $885,386
Government Required Ratio 8.00% 94 $959,160
Metrobank Risk-Based Capital Ratio 11.37%
</TABLE>
<PAGE> 56
Our constant FOCUS on providing a full range of INDIVIDUALIZED customer
services DELIVERED PERSONALLY to our target markets has served us well.
But the board and management believe the bank can achieve a broader
position in Southern California. Based on four particular strengths, we can
become by 1999--five years from now--the premiere regional business bank
serving selected thriving communities throughout Southern California's six
counties, not just in the three counties where we now operate. Our service
area would include the three core counties--Los Angeles, Orange and San
Diego--plus the peripheral Ventura, Riverside and San Bernardino Counties.
Here are four strengths that we will build upon as we strive toward a new
Southern California prominence.
- Our exemplary track record of maintaining a sound capital condition and
generating solid long-term financial results year-after-year, rather than
short-term temporary boosts to the bottom line. This conservative lending,
investment and operational philosophy accounts for our success so far; it will
guide our future expansion.
- The National Bank of Long Beach acquisition as a model for prudent
external expansion. While this first acquisition was a long time in coming, it
reflects our commitment to pursue only the highest quality acquisitions that
fit into our overall banking philosophy and business plans. This selectivity
enhances our shareholders' investment in Metrobank.
- Metrobank's survival--and prosperity--during a difficult economic era
that forced dramatic restructuring of community banking in the state.
Thirty-five of the forty California banks that have failed since 1989 (mostly
small community banks) have been located in Southern California. And there
have been almost 100 acquisitions and mergers over the last five years, about
half in Southern California.
- Our constant focus on providing a full range of individualized customer
services delivered personally to our target market of small to medium-sized
businesses, professionals and affluent individuals through our locally-oriented
regional head office network. This emphasis has served us well, and will
continue to do so as smaller community banks continue to be absorbed into
larger, more impersonal institutions.
Through this expansion, the bank would serve more middle market commercial
customers in a larger number of prime business communities throughout the six
counties. Some 35 to 40 percent of our assets would be based in our Los Angeles
County offices.
SAN DIEGO COUNTY
Based on four strengths, we will achieve a broader position from San Diego to
Ventura Soutny, Riverside
<PAGE> 57
We LOOK FORWARD to working with all of you as we enter
this NEXT PHASE of Metrobank's GROWTH.
Another 20 to 25 percent would be accounted for in regional offices in Orange
and San Diego Counties. The remainder would be in new offices in Ventura,
Riverside and San Bernardino Counties. Several key financial and operational
strategies will be pursued to reach this goal by year end 1999.
- We will seek to acquire, on a highly selective basis, quality
community-based banks that would increase asset size considerably over the five
year period. In addition, we are targeting 8 percent internal asset growth
yearly through our existing regional office system which will be expanded by
one to three new offices as may be required.
- We will expand the board of directors from its present size of six
external members, seeking the same kind of well-qualified and prominent
business leaders as our current directors. At present, three of our directors
are from Los Angeles County, two from Orange County and one from San Diego. In
the near term, the board composition will be distributed equally among the
region's three primary counties. At a later date, representation will be added
from Ventura, San Bernardino and Riverside.
- Through a highly selective process, we will establish in each county
community executive advisory boards made up of prominent business and civic
leaders. These boards will be responsible for reviewing and recommending bank
policy and operational services to the Metrobank Board for their respective
counties. Executive advisory board members will be required to become
shareholders in the bank. They will be compensated for their service. They
will meet regularly with the regional executives and directors from their
respective counties to review Metrobank's overall and local performance. The
executive advisory board members will be a talent pool from which future bank
directors will come. Clearly, these men and women will add a more local flavor
to the bank's presence and will be productive catalysts, helping generate
internal and external growth for both their county regional head offices and
the bank.
Underlying this expansion plan is our continuing commitment to achieve as
soon as possible for shareholders the important benchmarks of the bank's
success--a 15 percent or more return on equity and 1 percent or more return on
assets. We reached 12.1 percent return on equity at year-end 1994, up from 9.8
percent the year before, and .9 percent return on assets, up from .7 percent.
The dedicated efforts and support of Metrobank's extended family of
directors, officers, staff, customers and shareholders has accounted for our
excellent performance so far. We look forward to working with all of you as we
enter this next phase of Metrobank's growth.
David L. Buell Robert P. Bulseco
DAVID L. BUELL ROBERT P. BULSECO
Chairman and President and
Chief Executive Officer Chief Operating Officer
<PAGE> 58
1994
Financial STATEMENTS
Management's Discussion and Analysis 10
Selected Financial Data 17
Independent Auditor's Report 18
Consolidated Statements of Financial Condition 19
Consolidated Statements of Earnings 20
Consolidated Statements of Changes in Shareholders' Equity 21
Consolidated Statements of Cash Flows 22
Notes to Consolidated Financial Statements 23
Securities Activity 35
Shareholder Information 35
Metrobank Management 36
<PAGE> 59
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, liquidity,
capital resources and interest rate sensitivity. It should be read in
conjunction with the consolidated financial statements and the related notes to
the consolidated financial statements of the Bank appearing elsewhere in this
report. The consolidated financial statements include the accounts of Metrobank
(the "Bank"), a California state chartered bank, and its wholly owned
subsidiary, Metrocorp, Inc.
ACQUISITION OF NATIONAL BANK OF LONG BEACH
On August 31, 1994, the Bank entered into a definitive agreement to acquire the
National Bank of Long Beach from its Danish parent, Topdanmark Bank A/S.
According to the terms of the agreement, the Bank will purchase all outstanding
common and preferred National Bank of Long Beach stock for cash at the net book
value on December 31, 1994, subject to certain valuation adjustments. The due
diligence review of National Bank of Long Beach by the Bank was completed on
October 28, 1994. The acquisition, approved by the Federal Deposit Insurance
Corporation (FDIC) subsequent to year-end, is scheduled to be completed during
the second quarter of 1995.
As of December 31, 1994, National Bank of Long Beach had $143.0 million in
gross loans and $198.7 million in total deposits. Shareholder's equity at
year-end totalled $28.0 million. Additionally, the Bank has agreed to acquire
participation interests in certain non-classified performing loans held by
Topdanmark Bank A/S, which are currently participated from the National Bank of
Long Beach to its parent; these loans total approximately $10.0 to $15.0
million.
It is anticipated that the Bank will be required to raise between $7 and $10
million of new capital. At this time, the Bank has not determined whether to
raise the new capital via a public offering or a private placement.
NET INTEREST INCOME
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other liabilities). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities, as well as the difference between the relative
amounts of average interest-earning assets and interest-bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$52.9 million for the year ended December 31, 1994, as compared to $48.4
million for the year ended December 31, 1993.
Interest and fee income increased to $66.6 million in 1994 from $61.1 million
in 1993. Average earning assets for 1994 were $838.7 million, up from $789.4 in
1993. This increase in earning assets resulted in an increase in interest
income of $4.2 million. The average rate on earning assets for 1994 was 7.94%,
an increase of 21 basis points from 1993. This change was due to a rising
short-term interest rate environment experienced during 1994, which resulted in
an additional $1.3 million in interest income.
Interest expense increased to $13.7 million for the year ended December 31,
1994 from $12.6 million for the year ended December 31, 1993. Inasmuch as the
Bank funds its liquidity needs with short-term interest-bearing deposits, the
frequent repricing of these deposits was impacted by the substantial increase
in interest rates.
Loan interest and fee income for the year ended December 31, 1994 was $52.3
million, an increase of $7.0 million from $45.3 million for 1993. This
increase resulted from an increase in average loans of $46.7 million over the
prior year, which increased interest income by $4.2 million. The average
interest rate earned on loans during 1994 was 8.87%, which was a 52 basis point
increase from 8.35% for the prior year. This increase in interest rates
resulted in an additional $2.8 million in loan interest income.
Interest on investment securities was $13.8 million in 1994, a decrease of $1.7
million from 1993. The average interest rate on investment securities was 5.80%
for 1994, as compared to 6.50% for 1993. This decrease of 70 basis points in
the yield on investment securities is primarily attributable to the
reinvestment of $145 million of investment proceeds into comparable securities
in the lower rate environment of 1993, which resulted in a decrease of $1.7
million in interest income. This trend is expected to reverse in 1995 as the
reinvestment of maturing securities will occur in a higher interest rate
environment.
10 M E T R O B A N K
<PAGE> 60
Interest expense on time deposits was $5.1 million for the year ended December
31, 1994, as compared to $5.0 million in 1993. This increase of $100,000 is due
to a 55 basis point increase in the average cost of funds to 4.12% in 1994,
which resulted in an additional expense of $700,000. This increase in the cost
of funds was offset by a decrease in average balances of $14.7 million which
resulted in a $600,000 reduction in interest expense.
Interest expense on other interest-bearing deposits was $7.4 million in 1994,
as compared to $6.7 million in 1993. This increase is due to a $6.1 million
increase in average deposits, which resulted in an increased cost of
approximately $200,000. Additionally, the cost of these funds increased
approximately 18 basis points which resulted in an increase in interest expense
of $500,000.
Interest expense on borrowed funds was $1.2 million for 1994, as compared to
$1.0 million for 1993. While the average balance outstanding remained
relatively unchanged, the average borrowing rate was 4.18% in 1994, up from
3.26% in 1993 increasing interest expense by $300,000.
The Bank's net interest income before provision for possible loan losses was
$48.4 million for the year ended December 31, 1993, as compared to $46.0
million for the year ended December 31, 1992. The increase in net interest
income was primarily due to a $3.1 million decrease in interest expense. Net
interest income was further enhanced by a $1.7 million increase in loan
interest and fee income, and was offset by a $2.4 million decrease in
investment securities and federal funds sold interest income.
Interest and fee income decreased to $61.1 million in 1993 from $61.8 million
in 1992. Due primarily to a declining interest rate environment, the average
interest rate on earning assets was 7.74%, as compared to 8.28% for 1992. This
decrease in yields resulted in a lower interest income of $3.8 million. This
decrease was offset by an increase in average earning assets of $43.7 million,
which increased income by $3.1 million.
Interest expense decreased to $12.6 million for the year ended December 31,
1993, from $15.7 million for the year ended December 31, 1992. The decrease of
$3.1 million is primarily attributable to a 66 basis point decrease in
interest-bearing liabilities. Inasmuch as the Bank funds its liquidity needs
with short-term interest-bearing deposits and borrowings, the frequent
repricing of these liabilities was affected by the substantial decrease in the
interest rate environment.
Loan interest and fee income was $45.3 million for the year ended December 31,
1993, up from $43.6 million in 1992. This $1.7 million increase in loan income
resulted from a $33.7 million increase in average loans outstanding, offset by
a 20 basis point decrease in the average interest rate earned on loans.
Interest on investment securities was $15.5 million for 1993, a decrease of
$2.6 million from $18.1 million in 1992. This decrease in interest income is
primarily attributable to a 118 basis point drop in the Bank's average interest
rate for investment securities, which reduced related investment income by
approximately $2.8 million. A declining interest rate environment and the
reinvestment of sold and matured investments in shorter-term maturities caused
the decline. This decrease in interest income was partially offset by an
increase in average investments of $3.2 million, which increased income by
$200,000. During 1993, the Bank realized security gains totalling $3.3 million
on the sale of $89 million of Treasury securities.
Interest expense on time certificates of deposits was $5.0 million in 1993, as
compared to $6.7 million in 1992. This decrease of $1.7 million was due
primarily to a $30.6 million decrease in the average deposits which resulted in
a reduction in interest expense of $1.1 million.
Interest expense on other interest-bearing deposits was $6.7 million in 1993,
as compared to $7.5 million in 1992. This decrease is due to a 72 basis point
decrease in the average cost of funds to 2.33% for 1993. This resulted in an
interest expense decrease of $1.8 million, which was offset by a $41.2 million
increase in average deposits.
Average borrowings were $29.6 million for 1993, down from $40.7 million in
1992. This decrease in average borrowings decreased interest expense by
$400,000. Additionally, the average borrowing rate was 3.26%, down from 4.09%
in 1992, decreasing interest expense by $300,000.
M E T R O B A N K 11
<PAGE> 61
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest
rates, and variations in average balances.
<TABLE>
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1993 Year Ended December 31, 1992
over 1993 over 1992 over 1991
----------------------------- ---------------------------- ------------------------------
Total Total Total
Increase Change Due To: Increase Change Due To: Increase Change Due To:
(in thousands) (Decrease) Rate Volume (Decrease) Rate Volume (Decrease) Rate Volume
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans & bankers' acceptances $ 6,951 $ 2,811 $4,140 $ 1,671 $ (1,010) $ 2,681 $ (3,416) $ (8,104) $ 4,688
Investment securities (1,684) (1,665) (19) (2,566) (2,772) 206 1,009 (1,325) 2,334
Other interest income 276 139 137 190 (10) 200 74 58 16
-------------------------------------------------------------------------------------------------
Total interest income 5,543 1,285 4,258 (705) (3,792) 3,087 (2,333) (9,371) 7,038
-------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Time deposits 157 766 (609) (1,669) (577) (1,092) (7,752) (5,061) (2,691)
Other deposits 673 520 153 (803) (1,771) 968 (1,928) (3,768) 1,840
Securities sold under agreement
to repurchase and federal
funds purchased 224 272 (48) (700) (339) (361) 234 (350) 584
Capitalized interest -- -- -- 65 -- 65 219 -- 219
Total interest expense 1,054 1,558 (504) (3,107) (2,687) (420) (9,227) (9,179) (48)
-------------------------------------------------------------------------------------------------
Net interest income $ 4,489 $ (273) $4,762 $ 2,402 $ (1,105) $ 3,507 $ 6,894 $ (192) $ 7,086
=================================================================================================
</TABLE>
PROVISION FOR POSSIBLE LOAN LOSSES
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible are
charged to this allowance; subsequent recoveries, if any, are credited back to
the allowance. Additions to the allowance are made on a regular basis through
charges to operations and are reflected in the Bank's statement of operations
as a provision for possible loan losses. The balance of the allowance for
possible loan losses reflects the amount which, in management's judgement, is
adequate to provide for potential loan losses after weighing the mix of the
loan portfolio, current economic conditions, past loan loss experience and
other factors relevant to estimating loan losses.
The following table indicates the amounts which were allocated to the allowance
for possible loan losses and the relationship of those amounts to net
charge-offs and total gross loans for the periods indicated:
<TABLE>
<CAPTION>
Net
Provision Charge-Offs Reserve Allowance Ratio of
Credited to Against Transferred Balance at Allowance to
(in thousands) Allowance Allowance from/(to) OREO Year-End Gross Loans
<S> <C> <C> <C> <C> <C>
FISCAL YEAR
1994 $3,565 $3,878 $ -- $12,791 2.08%
1993 8,820 5,818 -- 13,104 2.31%
1992 5,200 3,272 -- 10,102 1.91%
1991 2,130 788 160 8,174 1.69%
1990 5,619 1,903 (160) 6,672 1.59%
==============================================================
</TABLE>
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured; such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk since property acquired through
foreclosure (other real estate owned) may not be sold for an amount sufficient
to offset the entire amount of the loan and costs associated with foreclosure.
Although management believes that the allowance for possible loan losses is
adequate, future provisions will be subject to continuing evaluation of risks
inherent in the loan portfolio.
In 1994, the provision for possible loan losses decreased by approximately $5.3
million from the prior year. This decrease was primarily attributable to the
decline in loan charge-offs (net of recoveries) of $1.9 million. Additionally,
management decreased the ratio of its allowance for possible loan losses to
total loans from 2.31% as of December 31, 1993 to 2.08% as of December 31,
1994, in connection with management's assessment of its most recent charge-off
experience and an evaluation of the Southern California economy.
12 M E T R O B A N K
<PAGE> 62
Loan charge-offs (net of recoveries) for the year ended December 31, 1994
totalled approximately $3.9 million. This compares to the net charge-offs of
$5.8 million for 1993. The Bank's charge-offs were attributed primarily to
loans secured by real estate; of the $3.9 million in net charge-offs, $4.1
million was real estate loan related, while approximately $200,000 of the net
loan recoveries was attributable to the remainder of the portfolio. Loans
secured by real estate represented 61% and 58% of the Bank's loan portfolio as
of December 31, 1994 and December 31, 1993, respectively.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as the real estate values
in the Southern California region. Inasmuch as this is the principal geographic
area in which the Bank conducts its business, this environment, as a result of
the recession, has had an adverse impact on the Bank's asset quality. As of
December 31, 1994, the Bank had approximately $16.8 million of nonperforming
assets, compared to $12.3 million as of December 31, 1993, or 1.60% and 1.29%
of total assets, respectively.
The following is a breakdown of nonperforming assets as of December 31:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Loans 90 days past due on accrual $ 2,047 $ 1,096
Nonaccrual loans 11,274 5,476
Other real estate owned 3,520 5,745
------------------------
Total nonperforming assets $ 16,841 $ 12,317
========================
Nonperforming loans/gross loans 2.17% 1.16%
Nonperforming assets/total assets 1.60% 1.29%
</TABLE>
NONINTEREST INCOME
During 1994, the Bank recognized approximately $4.6 million in noninterest
income as compared to $9.6 million in 1993 and $5.7 million in 1992. This
decrease of $5.0 million in comparing 1994 to 1993 was due primarily to
nonrecurring security gains of approximately $3.3 million recognized in 1993.
Additionally, the Bank owned an insurance division for the first nine months of
1993 which generated income of $1.2 million prior to being sold. Other
noninterest income decreased $500,000.
The increase of $3.9 million in comparing 1993 to 1992 was due primarily to a
$3.3 million gain realized on the sale of $89 million of Treasury securities,
an increase of $500,000 in income for Metrocorp, Inc. and a net $100,000
increase in all other noninterest income.
PROVISION FOR OTHER REAL ESTATE OWNED (OREO)
During 1994, the Bank, inclusive of Metrocorp, Inc., its wholly owned
subsidiary, reduced OREO from $5.7 million at December 31, 1993 to $3.5 million
at December 31, 1994. During 1994, two new properties were acquired and four
properties were disposed of and the total provision for real estate losses
amounted to approximately $1.2 million for 1994, $2.0 million for 1993 and $2.0
million for 1992.
NONINTEREST EXPENSE
For the year ending December 31, 1994, noninterest expense increased to $42.5
million from $42.0 million in 1993 and from $39.2 million in 1992. This
increase of $500,000 in 1994 was due primarily to an increase of $2.3 million
in data processing and other services paid on behalf of certain depository
relationships and is directly attributable to an increase in average
noninterest-bearing demand deposits from $369.4 million during 1993 to $425.8
million during 1994. This increase was offset by decreases in professional
services and OREO provisions and expenses of $500,000 and $500,000,
respectively. Additionally, occupancy and equipment expenses decreased
$300,000; all other noninterest expenses decreased by $500,000.
For the year ended December 31, 1993, noninterest expense increased to $42.0
million from $39.2 million in 1992. This increase of $2.8 million in 1993 was
due primarily to an increase of $1.0 million in data processing and other
services paid on behalf of certain depository relationships and is directly
attributable to an increase in average noninterest-bearing demand deposits
increasing from $331.5 million during 1992 to $369.4 million during 1993. In
addition, occupancy, furniture and equipment expense increased by $700,000; of
this increase, $200,000 was related to an increase in occupancy expense and
$400,000 was related to the Bank reversing an accrual associated with its
Orange County facility during the third quarter of 1992. Personnel expense
increased by $400,000 and $400,000 in goodwill associated with the Bank's
insurance division was written-off in the first quarter of 1993. Additionally,
the regulatory assessments increased by $300,000.
M E T R O B A N K 13
<PAGE> 63
PROVISION FOR INCOME TAXES
The Bank's provision for income taxes is lower than the statutory federal
income tax rate and is due primarily to the utilization of tax credits
associated with the Bank's low-income housing project. These tax credits, of
which approximately $1.5 million was utilized in 1994, 1993 and 1992, amount to
approximately $15 million in credits to be recognized over a 10 year period.
Through December 31, 1994, the Bank had utilized approximately $5.5 million of
these tax credits. The utilization of these tax credits is subject to certain
alternative minimum tax restrictions. The effective tax rate used in computing
net income was 28.6% in 1994, 16.3% in 1993 and 20.7% in 1992.
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." This statement changes the method of computing income taxes for
financial statement purposes by adopting the liability or balance sheet method
under which the net deferred liability or asset is determined based on the tax
effects of the differences between the book and tax bases of the various
balance sheet assets and liabilities. Under this method, the computation of the
net deferred tax asset or liability gives current recognition to changes in tax
laws and rates. The Bank adopted SFAS No. 109 effective January 1, 1993 and
prior years' financial statements have not been restated. Previously the Bank
provided for income taxes under Accounting Principles Board Opinion No. 11,
"Accounting For Income Taxes," under which the net deferred tax asset or
liability was an accumulation of annual adjustments based on the tax effects of
the book and tax income statement differences and was not adjusted for
subsequent changes in tax laws and rates. The adoption of SFAS No. 109 in 1993
resulted in a $350,000 credit to the Bank's tax provision in that year.
CAPITAL RESOURCES
The Bank's shareholders' equity totalled $70.2 million as of December 31, 1994,
which represents an increase of $6.4 million from shareholders' equity on
December 31, 1993. This increase was due to net income for the year of $8.2
million, offset by dividends declared in the amount of $2.9 million, a decrease
in the indebtedness of the Bank's Employee Stock Ownership Plan and Trust
(which is treated as a reduction of capital for financial statement purposes)
of $288,000, an unrealized loss of $411,000, net of taxes, on our securities
classified as available for sale, as well as $1.3 million of new equity
generated through the exercise of employee stock options. Additionally, in
December of 1994, the Bank declared a 10% stock dividend payable in January of
1995. Upon declaration, approximately $8.4 million of retained earnings was
transferred to the Bank's common stock account.
The Bank's shareholders' equity totalled $63.8 million as of December 31, 1993,
which represents an increase of $4.5 million from shareholders' equity on
December 31, 1992. This increase was due to net income for the year of $6.0
million, offset by dividends declared in the amount of $2.1 million, and a
decrease in the indebtedness of the Bank's Employee Stock Ownership Plan and
Trust of $575,000.
The FDIC, the Federal Reserve Board, and the Comptroller of the Currency have
adopted regulations that supplement the current regulatory capital requirements
by establishing guidelines for calculating "risk-based" and "tier-one" capital
ratios. These guidelines establish a framework that requires regulatory capital
requirements to be risk-adjusted. The risk-based capital ratio is determined by
segregating assets and specified off-balance-sheet commitments into four
risk-weighted categories, with higher levels of capital required for the
categories perceived as representing greater risk. Under these guidelines, the
Bank is required to maintain a risk-based capital ratio of 8.00% and a tier-one
capital ratio of 4.00%. At December 31, 1994, the risk-based capital ratio of
the Bank was 11.4% and its tier-one capital ratio was 10.1%. This is primarily
because the Bank maintains a significant amount of treasury securities, which
are primarily pledged as collateral for insolvency related deposits or
repurchase agreements with investment brokers and require a 0% risk-weighting;
additionally most of the Bank's loan commitments are for less than one year,
which also require a 0% risk-weighting. In addition, the regulations require
financial institutions to maintain a minimum tier-one leverage ratio of 3.00%.
The tier-one leverage ratio is defined as tier-one capital to total quarterly
average assets.
The Bank was in compliance with all three capital requirements as of December
31, 1994, as follows:
<TABLE>
<CAPTION>
Risk-Based
Tier 1 --------------------------
(in thousands) Leverage Tier 1 Total
<S> <C> <C> <C>
Common shareholders' equity $ 70,626 $ 70,626 $ 70,626
General valuation allowance -- -- 8,782
------------------------------------------
Total capital, as defined $ 70,626 $ 70,626 $ 79,408
==========================================
Asset base, as defined $974,965 $ 698,544 $ 698,544
==========================================
Actual capital ratio 7.24% 10.11% 11.37%
==========================================
Minimum required capital ratio 3.00% 4.00% 8.00%
==========================================
</TABLE>
14 M E T R O B A N K
<PAGE> 64
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity, which primarily represents the ability of the Bank to meet
fluctuations in its deposit structure and to provide for customer credit needs,
is managed by the Bank's Asset/Liability Management Committee. Inasmuch as a
significant portion of the Bank's deposit structure is concentrated in
specialized niche industries (for example, escrow and title insurance
companies), which closely parallel the real estate economy in Southern
California, the Bank is subject to fluctuations in demand deposits which
correlate to trends in Southern California real estate activity. To mitigate
this exposure, the Bank has increased its emphasis on other types of deposits,
established an internal money desk operation, and to a lesser degree, relied
upon the use of secured and unsecured lines of credit with correspondent banks
and investment banking firms. As of December 31, 1994, the Bank's money desk
deposits totalled approximately $61.1 million and carried a weighted-average
interest rate of 5.38%. Of this amount, approximately $41.3 million, or 68% of
the total money desk deposits were due to mature by the end of the first
quarter of 1995 and carried a weighted-average interest rate of 5.36%.
Additionally, as of the end of 1994, the Bank had established unsecured credit
facilities of $75.0 million, or 8% of total deposits, and secured credit
facilities of $111.2 million, or 11% of total deposits. The combination of
these facilities provides the Bank with secondary sources of liquidity of
approximately $186.2 million, or 19% of total deposits.
In addition to managing the liquidity needs of the Bank, the Asset/Liability
Management Committee reviews, recommends and implements changes in the asset
and liability structure of the Bank's balance sheet. Presently, the
relationship of interest-sensitive assets to interest-sensitive liabilities
would cause a decrease in net interest margin in a rising rate environment if
the yield on earning assets and the cost of interest-bearing funds shifted by
the same percentage. This would be caused primarily by the fact that the Bank's
liabilities reprice more rapidly than does its assets and, accordingly, the
Bank's net interest income would decrease.
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." SFAS No. 115 requires that an entity classify
and account for its investments in equity securities that have readily
determinable fair values and for all of its investments in debt securities as
either trading, available for sale, or held to maturity, and report these
investments at fair value or amortized cost as stipulated by SFAS No. 115.
Investments and debt securities shall be classified as held to maturity and
measured at amortized cost only if the Bank has a positive intent and ability
to hold those securities to maturity. Securities that are bought and held
principally for the purpose of selling them in the near term (thus held for
only a short period of time) shall be classified as trading securities.
Securities classified as trading are carried at fair value with any unrealized
gains or losses, net of taxes, reflected in current earnings. At this time, the
Bank does not operate a trading portfolio. Investments not classified as
trading securities, nor as held to maturity securities shall be classified as
available for sale securities. Securities classified as available for sale are
carried at fair value with any unrealized gains or losses, net of taxes,
reflected as an addition or reduction of equity, as appropriate. Management
adopted SFAS No. 115 effective January 1, 1994 resulting in an increase to
equity of $1.6 million, net of taxes. Prior year financial statements have not
been restated. As of December 31, 1994, the Bank had U.S. Treasury securities
with an amortized cost of $178.6 million, $112.9 million of these securities
were classified as held to maturity and $65.7 million as available for sale.
These securities had net unrealized losses of $5.2 million and $700,000,
respectively.
In managing the investment portfolio of the Bank, the Asset/Liability
Management Committee attempts to structure the portfolio in a manner that
reduces the adverse impact of changes in interest rates. In response to
significant increases in interest rates, the Bank acted to reduce the
weighted-average maturity of its investment portfolio; as highlighted in the
tables below, the weighted-average maturities have been shortened in 1994.
As of December 31, 1994, the book value, weighted-average maturity,
weighted-average yield and net unrealized gain or loss of each component of the
Bank's securities portfolio is as follows:
<TABLE>
<CAPTION>
Weighted-
Gross Gross Estimated Average Weighted-
(in thousands) Amortized Unrealized Unrealized Market Maturity Average
Cost Gains Losses Value (Years) Yield
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY
U.S. Treasury securities $112,914 $ 14 $(5,201) $107,727 2.00 5.23%
Mortgage-backed securities 36,809 66 (1,186) 35,689 2.92 7.19%
Other securities 200 -- -- 200 4.25 6.63%
-----------------------------------------------------------------------
149,923 80 (6,387) 143,616 2.23 5.71%
AVAILABLE FOR SALE
U.S. Treasury securities 65,679 76 (776) 64,979 1.25 6.32%
Other securities 2,979 -- -- 2,979 -- 5.20%
-----------------------------------------------------------------------
68,658 76 (776) 67,958 1.25 6.27%
-----------------------------------------------------------------------
Total securities $218,581 $156 $(7,163) $211,574 1.92 5.89%
=======================================================================
</TABLE>
M E T R O B A N K 15
<PAGE> 65
As of December 31, 1993, the book value, weighted-average maturity,
weighted-average yield and net unrealized gain or loss of each component of the
Bank's securities portfolio is as follows:
<TABLE>
<CAPTION>
Weighted-
Gross Gross Estimated Average Weighted-
(in thousands) Amortized Unrealized Unrealized Market Maturity Average
Cost Gains Losses Value (Years) Yield
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY
U.S. Treasury securities $114,760 $1,497 $(398) $115,859 2.40 5.51%
Mortgage-backed securities 43,367 1,564 (16) 44,915 2.60 6.38%
Other securities 2,975 -- -- 2,975 -- 3.82%
----------------------------------------------------------------
161,102 3,061 (414) 163,749 2.42 5.71%
HELD FOR SALE
U.S. Treasury securities 75,613 2,761 -- 78,374 1.80 5.26%
----------------------------------------------------------------
75,613 2,761 -- 78,374 1.80 5.26%
----------------------------------------------------------------
Total securities $236,715 $5,822 $(414) $242,123 2.25 5.57%
================================================================
</TABLE>
REGULATORY MATTERS
On July 6, 1993, the Bank entered into a Memorandum of Understanding (MOU) with
the FDIC, which required that certain actions be taken. The FDIC mandated that
the Bank reduce specified classified assets, maintain a tier-1 leverage ratio
of at least 6.5%, and reduce its dependence on volatile liabilities to
specified levels over time (volatile liabilities are defined as brokered
deposits, money desk deposits, time deposits greater than or equal to $100,000,
federal funds purchased, repurchase agreements and other borrowings and debt
due in one year or less). Subsequent to year-end, the Bank was notified that
the FDIC was removing the Bank from its MOU based upon the results of its most
recent examination.
INFLATION
The impact of inflation on the Bank differs significantly from that of
industrial concerns, primarily because the Bank's assets and liabilities
consist largely of monetary items. The relatively low proportion of the Bank's
fixed assets to total assets (approximately 0.5% for each of the years ended
December 31, 1994, 1993 and 1992) reduces both the potential of inflated
earnings resulting from understated depreciation charges, and the potential
significant understatement of absolute values.
16 M E T R O B A N K
<PAGE> 66
SELECTED FINANCIAL DATA
The following summarizes selected financial data concerning the Bank for the
years indicated. The selected financial data should be read in conjunction with
the Bank's Consolidated Financial Statements and Notes relating thereto,
included elsewhere herein:
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Interest income $ 66,602 $ 61,059 $ 61,764 $ 64,097 $ 64,433
Interest expense 13,688 12,634 15,741 24,968 25,107
---------------------------------------------------------------
Net interest income 52,914 48,425 46,023 39,129 39,326
Provision for possible loan losses 3,565 8,820 5,200 2,130 5,619
Net interest income after provision
for possible loan losses 49,349 39,605 40,823 36,999 33,707
Noninterest income 4,581 9,583 5,661 6,238 5,983
Noninterest expense 42,505 42,005 39,227 35,660 36,339
---------------------------------------------------------------
Earnings before income taxes 11,425 7,183 7,257 7,577 3,351
Provision for income taxes 3,272 1,168 1,499 2,064 1,250
---------------------------------------------------------------
Net earnings $ 8,153 $ 6,015 $ 5,758 $ 5,513 $ 2,101
PRINCIPAL BALANCE SHEET ITEMS (AS OF END OF PERIOD)
Investment securities $ 217,881 $ 236,715 $ 248,912 $ 209,104 $ 202,956
Federal funds sold 90,000 70,000 -- 30,000 25,000
Total loans-gross 614,257 566,229 527,952 483,648 418,949
Total loans-net 601,466 553,125 517,850 475,474 412,277
Total assets 1,052,172 955,858 905,083 824,774 744,521
Total deposits 959,160 885,386 801,863 740,824 672,765
Total shareholders' equity 70,215 63,752 59,279 55,761 52,002
---------------------------------------------------------------
PRINCIPAL BALANCE SHEET ITEMS (AVERAGE)
Investment securities $ 238,364 $ 238,696 $ 235,532 $ 204,204 $ 237,764
Federal funds sold 11,184 8,217 1,385 1,640 12,730
Total loans-gross 589,141 542,466 508,784 449,190 384,867
Total loans-net 575,637 530,706 499,628 442,084 380,466
Total assets 946,257 896,568 857,565 755,398 748,549
Total deposits 843,349 795,506 746,962 666,887 659,249
Total shareholders' equity 67,234 61,540 57,518 53,679 53,458
---------------------------------------------------------------
SHARE DATA
Net earnings per common share $ 1.47 $ 1.15 $ 1.10 $ 1.06 $ 0.40
Dividends declared per common share $ 0.55 $ 0.41 $ 0.55 $ 0.39 $ 0.28
Dividends paid per common share $ 0.55 $ 0.55 $ 0.52 $ 0.36 $ 0.20
Book value per share $ 13.06 $ 12.18 $ 11.34 $ 10.67 $ 9.95
Number of shares used in earnings
per share calculation (1) 5,545,659 5,231,354 5,228,846 5,225,131 5,224,040
Number of shares used in book value
per share calculation (2) 5,377,124 5,232,281 5,229,531 5,225,131 5,225,131
---------------------------------------------------------------
SELECTED RATIOS
Return on average shareholders' equity (net earnings
divided by average shareholders' equity) 12.1% 9.8% 10.0% 10.3% 3.9%
Return on average assets (net earnings divided by
average total assets) 0.9% 0.7% 0.7% 0.7% 0.3%
Equity to assets (average equity divided by
average total assets) 7.1% 6.9% 6.7% 7.1% 7.1%
Average gross loans to average total assets 62.3% 60.5% 59.3% 59.5% 51.4%
Average gross loans to average total deposits 69.9% 68.2% 68.1% 67.4% 58.4%
---------------------------------------------------------------
</TABLE>
(1) Earnings per common share are based upon the weighted-average number of
common shares and common share equivalents outstanding during each period.
(2) The number of shares used in computing the book value per share is the
number of common shares outstanding at the end of each period.
M E T R O B A N K 17
<PAGE> 67
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF METROBANK:
We have audited the accompanying consolidated statements of financial condition
of Metrobank (a California chartered state bank) (the Bank) and subsidiaries as
of December 31, 1994 and 1993, and the related consolidated statements of
earnings, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material aspects, the financial position of Metrobank and subsidiaries as
of December 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
January 17, 1995
<PAGE> 68
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Dollars in thousands)
December 31, 1994 1993
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 96,824 $ 56,148
Federal funds sold 90,000 70,000
Investment securities available for sale (approximate market value of
$67,958 and $78,374 at December 31, 1994 and 1993, respectively) 67,958 75,613
Investment securities held to maturity (approximate market value of
$143,616 and $163,749 at December 31, 1994 and 1993 respectively) 149,923 161,102
Gross loans 614,257 566,229
Allowance for possible loan losses (12,791) (13,104)
Accrued interest receivable 7,648 5,431
Other real estate owned, net 3,520 5,745
Premises and equipment,net 2,411 2,855
Investments in real estate 16,197 16,823
Other assets 16,225 9,016
-----------------------
$1,052,172 $955,858
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Time certificates $ 141,640 $110,485
Other deposits 817,520 774,901
-----------------------
959,160 885,386
Securities sold under agreement to repurchase and federal funds purchased 13,825 1,100
Accrued interest payable 547 372
Other liabilities 8,425 5,248
-----------------------
Total liabilities 981,957 892,106
Commitments and contingencies (Notes 13, 17)
Shareholders' equity:
Preferred stock, no par value:
Authorized - 15,000,000 shares as of December 31, 1994 and 1993
Outstanding - none -- --
Common stock, no par value:
Authorized - 25,000,000 shares as of December 31, 1994 and 1993
Outstanding - 5,377,124 and 5,232,281 shares as of December 31, 1994
and 1993, respectively 44,019 34,333
Retained earnings 26,607 29,707
Guarantee of ESOP loan -- (288)
Unrealized loss on securities available for sale, net (411) --
-----------------------
Total shareholders' equity 70,215 63,752
-----------------------
$1,052,172 $955,858
=======================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
M E T R O B A N K 19
<PAGE> 69
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Years ended December 31, 1994 1993 1992
<S> <C> <C> <C>
INTEREST AND FEE INCOME:
Loans $ 52,253 $ 45,278 $ 43,521
U.S. Treasury securities 11,035 12,020 11,896
Obligations of U.S. government agencies -- -- 788
Other securities 2,798 3,497 5,399
Federal funds sold 516 240 50
Other interest income -- 24 110
----------------------------------------------
66,602 61,059 61,764
INTEREST EXPENSE:
Time certificates of deposit 5,147 4,990 6,659
Other deposits 7,351 6,678 7,481
Securities sold under agreements to repurchase
and federal funds purchased 1,190 966 1,532
Capitalized carrying costs -- -- (65)
Other interest expense -- -- 134
----------------------------------------------
13,688 12,634 15,741
----------------------------------------------
Net interest income 52,914 48,425 46,023
Provision for possible loan losses 3,565 8,820 5,200
----------------------------------------------
Net interest income after provision for possible loan losses 49,349 39,605 40,823
NONINTEREST INCOME:
Service charges on deposit accounts 1,071 1,337 1,301
Gain on sales of securities -- 3,285 --
Other noninterest income 3,510 4,961 4,360
----------------------------------------------
4,581 9,583 5,661
NONINTEREST EXPENSE:
Personnel expense 16,180 15,984 15,595
Occupancy, furniture and equipment expense 4,868 5,217 4,546
Provision for other real estate owned 1,235 2,026 2,018
Other noninterest expense 20,222 18,778 17,068
----------------------------------------------
42,505 42,005 39,227
----------------------------------------------
Earnings before income taxes 11,425 7,183 7,257
Provision for income taxes 4,722 2,618 2,999
Income tax credit (1,450) (1,450) (1,500)
----------------------------------------------
3,272 1,168 1,499
Net earnings $ 8,153 $ 6,015 $ 5,758
==============================================
Earnings per share $ 1.47 $ 1.15 $ 1.10
==============================================
Weighted-average shares outstanding 5,545,659 5,231,354 5,228,846
==============================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
M E T R O B A N K 20
<PAGE> 70
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Unrealized
------------------ Guarantee of Retained Gain/(Loss)
(Dollars in thousands) Three years ended December 31, 1994 Shares Amount ESOP Loan Earnings on Securities Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 5,225,131 $34,273 $(1,438) $22,926 $ -- $55,761
$0.55 per share cash dividend -- -- -- (2,852) -- (2,852)
Exercise of stock options 4,400 37 -- -- -- 37
Reduction in guarantee of indebtedness for ESOP -- -- 575 -- -- 575
Net earnings -- -- -- 5,758 -- 5,758
----------------------------------------------------------------------
Balance, December 31, 1992 5,229,531 $34,310 $ (863) $25,832 $ -- $59,279
$0.41 per share cash dividend -- -- -- (2,140) -- (2,140)
Exercise of stock options 2,750 23 -- -- -- 23
Reduction in guarantee of indebtedness for ESOP -- -- 575 -- -- 575
Net earnings -- -- -- 6,015 -- 6,015
----------------------------------------------------------------------
Balance, December 31, 1993 5,232,281 $34,333 $ (288) $29,707 $ -- $63,752
$0.55 per share cash dividend -- -- -- (2,881) -- (2,881)
10% common stock dividend -- 8,372 -- (8,372) -- --
Exercise of stock options 144,843 1,314 -- -- -- 1,314
Reduction in guarantee of indebtedness for ESOP -- -- 288 -- -- 288
Unrealized gain on securities available for sale,
net of taxes, January 1, 1994 -- -- -- -- 1,619 1,619
Change in market valuation on securities available
for sale, net of taxes -- -- -- -- (2,030) (2,030)
Net earnings -- -- -- 8,153 -- 8,153
----------------------------------------------------------------------
Balance, December 31, 1994 5,377,124 $44,019 $ -- $26,607 $ (411) $70,215
======================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
M E T R O B A N K 21
<PAGE> 71
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in thousands)
Increase (decrease) in cash and cash equivalents Year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,153 $ 6,015 $ 5,758
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Amortization of investment securities 2,712 2,111 266
Depreciation and amortization of premises and equipment 853 999 879
Provision for possible loan losses 3,565 8,820 5,200
Provision for other real estate owned 1,235 2,026 2,018
Provision for real estate losses -- 197 639
(Gain) loss on sales of other real estate owned (72) (95) 11
Gain on sales of securities -- (3,285) --
Goodwill amortization -- 429 64
Interest capitalized -- -- (65)
Increase in deferred taxes (339) (2,232) (2,731)
(Increase) decrease in accrued interest receivable (2,217) 547 (363)
(Increase) decrease in other assets (6,579) 5,843 (2,993)
Increase (decrease) in accrued interest payable 175 (72) (493)
Increase (decrease) in other liabilities 3,465 (4,979) (854)
------------------------------------
Total adjustments 2,798 10,309 1,578
------------------------------------
Net cash provided by operating activities 10,951 16,324 7,336
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities available for sale (10,767) -- --
Purchase of investment securities held to maturity (25,172) (145,023) (124,663)
Proceeds from principal payments and maturities of investment securities 51,361 69,578 84,589
Proceeds from sales of investment securities -- 88,816 --
Loan fundings, net of principal collected (51,764) (43,689) (57,099)
Proceeds from sales of other real estate owned 1,992 2,384 1,133
Purchase of premises and equipment (409) (734) (741)
Decrease in real estate investments 626 2,344 6,653
(Increase) decrease in banker's acceptances (1,074) 886 (10)
------------------------------------
Net cash used in investing activities (35,207) (25,438) (90,138)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW, money market, and savings accounts 42,619 92,808 149,605
Net increase (decrease) in time certificates 31,155 (9,285) (88,566)
Net increase (decrease) in securities sold under agreement to repurchase
and federal funds purchased 12,725 (31,595) 18,285
Dividends paid (2,881) (2,853) (2,709)
Stock options exercised 1,314 23 37
------------------------------------
Net cash provided by financing activities 84,932 49,098 76,652
------------------------------------
Net increase (decrease) in cash and cash equivalents 60,676 39,984 (6,150)
Cash and cash equivalents, beginning of year 126,148 86,164 92,314
------------------------------------
Cash and cash equivalents, end of year $ 186,824 $ 126,148 $ 86,164
====================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 13,513 $ 12,800 $ 16,299
Income taxes 3,320 3,603 4,230
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Guarantee of ESOP loan $ (288) $ (575) $ (575)
Foreclosed real estate loans 3,518 6,358 5,588
</TABLE>
The accompanying notes are an integral part of these consolidated statements
22 M E T R O B A N K
<PAGE> 72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The consolidated financial statements include the accounts of Metrobank (the
"Bank"), a California state chartered bank, and its wholly owned subsidiary,
Metrocorp, Inc. (the "Company"). Material intercompany accounts and
transactions have been eliminated. Certain items in the 1993 financial
statements have been reclassified to conform to the presentation contained in
the 1994 statements.
The accounting and reporting policies of the Bank and its subsidiary conform
with generally accepted accounting principles and general practices within the
banking industry. The following are descriptions of the more significant
policies.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
and federal funds sold. Generally, federal funds are purchased and sold for
one-day periods.
INVESTMENT SECURITIES
The Bank adopted the Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities" on
January 1, 1994. SFAS No. 115 requires that an entity classify and account for
its investments in equity securities that have readily determinable fair values
and for all of its investments in debt securities as either trading, available
for sale, or held to maturity, and report these investments at fair value or
amortized cost as stipulated by SFAS No. 115. Investments and debt securities
shall be classified as held to maturity and recorded at amortized cost only if
the Bank has a positive intent and ability to hold those securities to
maturity. Securities that are bought and held principally for the purpose of
selling them in the near term (thus held for only a short period of time) shall
be classified as trading securities. Securities classified as trading shall be
carried at fair value with any unrealized gains or losses, net of taxes,
reflected in current earnings. At this time, the Bank does not have a trading
portfolio. Investments not classified as either held to maturity or trading
securities shall be classified as available for sale securities. Securities
classified as available for sale shall be carried at fair value with any
unrealized gains or losses, net of taxes, reflected as an addition or reduction
to a separate component of shareholders' equity, as appropriate. At the date of
adoption, this resulted in a $1.6 million increase to shareholders' equity, net
of taxes. Realized gains and losses on securities sold are determined on a
specific identification basis.
LOANS
Loans are carried at face amount, less payments, the allowance for possible
loan losses, unearned fees and unearned discounts. Interest income is accrued
principally on a simple interest basis. Unearned interest on certain consumer
loans is recognized in income on a sum-of-the-digits method, which approximates
a constant yield over the life of the loan. Loan fees and direct origination
costs are deferred and amortized as an adjustment to income and yield over the
life of the loan agreement using a level yield method.
In general, loans are placed on a nonaccrual basis when there is significant
doubt as to the collectibility of interest or principal, or when interest or
principal becomes 90 days past due, unless the loan is well secured and in the
process of collection. Interest accrued but uncollected is reversed when a loan
is placed on a nonaccrual basis. Loans are restored to an accrual basis only
when payments are current and the borrower has demonstrated an ability and an
intent to perform in accordance with the terms of the loan agreement.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is based upon Management's continuous
evaluation of the collectibility of outstanding loans, which takes into
consideration such factors as changes in the nature of the loan portfolio,
economic conditions that may affect the borrower's ability to pay, overall
portfolio quality and review of specific problem loans. The allowance for loan
losses is based on estimates, and ultimate losses may vary from the current
estimates. These estimates are reviewed periodically and, as adjustments become
necessary, they are reported in earnings in the periods in which they become
known. The allowance is increased by provisions charged to operating expense
and reduced by loan losses, net of recoveries.
M E T R O B A N K 23
<PAGE> 73
The Bank will adopt SFAS No. 114 "Accounting by Creditors for Impairment of a
Loan" on January 1, 1995. SFAS No. 114 requires that the Bank determine the
allowance for possible loan losses for an impaired loan by estimating the
present value of the expected future cash flows using the contractual interest
rate of the loan as a discount rate. Alternatively, the fair value of the
collateral may be used if the loan is collateral dependent. A loan is
considered impaired when it becomes probable that a borrower will not be able
to pay all amounts due according to the contractual terms of the loan
agreement. The Bank will consider any loan that is placed on nonaccrual status
as impaired, and will evaluate each credit per the guidelines outlined in SFAS
No. 114. This new accounting pronouncement will not have a material impact on
the financial position of the Bank or on the consolidated statements of
earnings.
INVESTMENTS IN REAL ESTATE
Real estate investments are stated at the lower of cost or net realizable
value. The Bank capitalizes interest on funds disbursed during the active
construction phases of real estate development projects. The Bank has made no
investments in real estate since 1990 and does not contemplate any such
investments in the future.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost, less accumulated depreciation.
Depreciation expense is computed using the straight-line method over the
estimated useful life of each type of asset. Leasehold improvements are
amortized over the term of the respective lease or the estimated useful life of
the property, whichever is shorter.
OTHER REAL ESTATE OWNED (OREO)
Real estate acquired in satisfaction of loans is reported as other real estate
owned and carried at fair value, less estimated selling costs. Any
adjustments to the carrying amount of these loans prior to transfer are charged
against the allowance for possible loan losses. Subsequent operating expenses
or income, reduction in estimated values, and gains or losses on disposition of
such properties are charged to current operations. Gains or losses on sale are
recorded in conformity with standards, which apply to the accounting for sales
of real estate. Losses that result from the ongoing periodic valuation of these
properties are charged against OREO reserves or to OREO provision in the period
in which they are identified.
INCOME TAXES
When income and expenses are recognized in different periods for financial
reporting purposes and income tax purposes, deferred taxes are provided on such
temporary differences. These result primarily from the provision for loan and
real estate losses, discount accretion and timing differences between book and
tax depreciation methods on fixed assets. The Bank adopted SFAS No. 109,
"Accounting for Income Taxes" on January 1, 1993, which supersedes Accounting
Principle Bulletin Opinion No. 11. The statement adopts the liability method of
accounting for recognition and measurement of income taxes and gives current
recognition to changes in the tax laws. Management implemented SFAS No. 109 on
a prospective basis, which resulted in a reduction to tax expense of
approximately $350,000 in 1993.
EARNINGS PER SHARE
Earnings per common share are based on the weighted-average number of shares
outstanding during the period. Stock options have been included as common stock
equivalents in 1994 but have been excluded from the computation, as their
effect is not material for the years ended December 31, 1993 and 1992. On
December 20, 1994, the Bank declared a 10% stock dividend, payable on January
20, 1995. This is a non-cash dividend and has been excluded from the
consolidated statement of cash flows. All prior period earnings per common
share amounts have been restated for the effect of the stock dividend.
24 M E T R O B A N K
<PAGE> 74
2. ACQUISITION OF NATIONAL BANK OF LONG BEACH
Pursuant to a definitive agreement dated as of August 31, 1994, the Bank will
acquire the National Bank of Long Beach (NBLB) from its Danish parent,
Topdanmark Bank A/S. According to the terms of the agreement, the purchase
price will be equal to the audited net book value of NBLB stock as of December
31, 1994, adjusted to reflect net earnings to the end of the month prior to the
closing of the transaction, with certain valuation adjustments. As of December
31, 1994, total shareholder's equity for NBLB was $28.0 million.
In addition, the Bank agreed to acquire certain nonclassified performing loans,
which were participated from NBLB to its parent, Topdanmark Bank A/S. The total
loans to be purchased by the Bank is estimated at $10 to $15 million.
NBLB, founded in 1977, is a subsidiary of Topdanmark Bank A/S, a bank organized
in Denmark, owned by Topdanmark A/S, a Danish financial services holding
company. NBLB provides commercial banking services to small to medium size
businesses, primarily in the Long Beach and South Bay regions. NBLB, operating
offices in Los Angeles and Orange County, also provides private banking,
foreign exchange and trade finance services.
In accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations," the acquisition will be recorded using the purchase method of
accounting. The purchase price will be allocated to the assets acquired and
liabilities assumed based on the estimated fair values at the closing date. The
due diligence review of NBLB by the Bank was completed on October 28, 1994. The
acquisition, approved by the Federal Deposit Insurance Corporation (FDIC)
subsequent to year-end, is scheduled to close in the second quarter of 1995.
The following financial information (not covered by the audit opinion) is
presented for informational purposes only, as reported by NBLB:
NATIONAL BANK OF LONG BEACH
CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31, 1994 1993
<S> <C> <C>
Interest income $16,145 $13,410
Interest expense 3,281 2,507
--------------------
Net interest income 12,864 10,903
Provision for possible loan losses 125 465
--------------------
Net interest income after provision for possible loan losses 12,739 10,438
Noninterest income 2,764 2,950
Noninterest expense 13,208 13,060
--------------------
Earnings before income taxes 2,295 328
Provision (benefit) for income taxes (1,106) 102
--------------------
Net earnings $ 3,401 $ 226
====================
</TABLE>
NATIONAL BANK OF LONG BEACH
CONDENSED STATEMENTS OF FINANCIAL CONDITION DATA
<TABLE>
<CAPTION>
(in thousands) December 31, 1994 1993
<S> <C> <C>
Loans $142,957 $148,548
Allowance for possible loan losses 4,092 4,909
Total assets 229,202 209,077
Deposits 198,662 181,539
Total shareholder's equity 27,974 24,879
</TABLE>
3. FEDERAL RESERVE REQUIREMENT
All depository institutions are required to maintain reserves on transaction
deposits in the form of balances at the Federal Reserve Bank. The average
reserve requirements for the Bank were $35.8 million and $31.0 million during
the years ended December 31, 1994 and 1993, respectively.
M E T R O B A N K 25
<PAGE> 75
4. INVESTMENT SECURITIES
The amortized cost and estimated market values of investments in debt
securities at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
HELD TO MATURITY SECURITIES
U.S. Treasury securities $112,914 $ 14 $(5,201) $107,727
Mortgage-backed securities 36,809 66 (1,186) 35,689
Other securities 200 -- -- 200
-------------------------------------------------------
149,923 80 (6,387) 143,616
AVAILABLE FOR SALE SECURITIES
U.S. Treasury securities 65,679 76 (776) 64,979
Other securities 2,979 -- -- 2,979
-------------------------------------------------------
68,658 76 (776) 67,958
-------------------------------------------------------
Total investment securities $218,581 $156 $(7,163) $211,574
=======================================================
</TABLE>
The amortized cost and estimated market values of investments in debt
securities at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
HELD TO MATURITY SECURITIES
U.S. Treasury securities $114,760 $1,497 $(398) $115,859
Mortgage-backed securities 43,367 1,564 (16) 44,915
Other securities 2,975 -- -- 2,975
-------------------------------------------------------
161,102 3,061 (414) 163,749
HELD FOR SALE SECURITIES
U.S. Treasury securities 75,613 2,761 -- 78,374
-------------------------------------------------------
75,613 2,761 -- 78,374
-------------------------------------------------------
Total investment securities $236,715 $5,822 $(414) $242,123
=======================================================
</TABLE>
The amortized cost and estimated market value of debt securities at December
31, 1994 and 1993, by contractual maturity, are shown below. Mortgage-backed
securities are listed separately as their estimated average lives vary
according to changes in prepayment rates. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. In general, these
investments at December 31, 1994 have estimated average lives of between one
and five years.
<TABLE>
<CAPTION>
1994 1993
------------------------------ -----------------------------
Amortized Estimated Amortized Estimated
(in thousands) Cost Market Value Cost Market Value
<S> <C> <C> <C> <C>
HELD TO MATURITY SECURITIES
Due in one year or less $ 40,515 $ 40,111 $ 20,095 $ 20,561
Due after one year through five years 72,399 67,616 94,665 95,298
Due after five years through ten years 200 200 -- --
Mortgage-backed securities 36,809 35,689 43,367 44,915
Other securities -- -- 2,975 2,975
-----------------------------------------------------------
149,923 143,616 161,102 163,749
AVAILABLE FOR SALE SECURITIES
Due in one year or less 9,997 9,935 20,140 20,164
Due after one year through five years 55,682 55,044 55,473 58,210
Due after five years through ten years -- -- -- --
Other securities 2,979 2,979 -- --
-----------------------------------------------------------
68,658 67,958 75,613 78,374
-----------------------------------------------------------
Total investment securities $218,581 $211,574 $236,715 $242,123
===========================================================
</TABLE>
26 M E T R O B A N K
<PAGE> 76
U.S. Treasury securities, obligations of U.S. government agencies and
mortgage-backed securities having a market value of approximately $193.8
million and $186.1 million were pledged to secure insolvency deposits,
securities sold under agreements to repurchase, and other liabilities as of
December 31, 1994 and 1993, respectively. Proceeds from the sales of U.S.
Treasury securities in the investment portfolio totalled $89 million during
1993, resulting in gross realized gains of $3.3 million on these sales. There
were no sales of investment securities during 1994.
5. INVESTMENTS IN REAL ESTATE
As of December 31, 1994, the Company owned a low-income housing project with a
book value of approximately $16.2 million. The Company has elected to retain
this project to help satisfy its commitment to contributing to the Southern
California com-munity redevelopment process; additionally, the Bank is able to
utilize favorable tax credits. These tax credits, of which $1.5 million were
utilized in 1994, amount to approximately $15 million in total credits over a
ten year life. Through December 31, 1994, the Bank has utilized approximately
$5.5 million in tax credits; however, the utilization of these tax credits is
subject to certain alternative minimum tax restrictions.
6. LOANS
The composition of the loan portfolio at December 31, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Commercial and industrial $124,747 $123,988
Real estate - other 326,533 286,767
Real estate - construction 47,286 40,184
Consumer 111,829 106,327
Other 4,905 10,403
-----------------------
615,300 567,669
Less:
Allowance for possible loan losses 12,791 13,104
Deferred loan fees, net 1,043 1,440
-----------------------
$601,466 $553,125
=======================
</TABLE>
As of December 31, 1994 and 1993, the Bank had loans totalling approximately
$11.3 million and $5.5 million, respectively, on which it was not accruing
income due to their delinquent status. If interest on nonaccrual loans had been
accrued, interest income would have increased approximately $532,000, $167,000,
and $385,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
In the ordinary course of business, the Bank has granted loans to certain
directors and entities with which these directors are associated. It is the
Bank's policy that all such loans and commitments to lend be made under terms
which are consistent with the Bank's lending policies applicable to third
parties. As of December 31, 1994 and 1993, loans outstanding to related parties
were approximately $11.3 million and $13.6 million, respectively.
An analysis of the activity in the allowance for possible loan losses is
summarized as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year $13,104 $10,102 $ 8,174
Provision for possible loan losses 3,565 8,820 5,200
Loans charged-off (5,069) (6,526) (3,559)
Recoveries on loans previously charged-off 1,191 708 287
--------------------------------------
Balance at end of year $12,791 $13,104 $10,102
======================================
</TABLE>
M E T R O B A N K 27
<PAGE> 77
7. OTHER REAL ESTATE OWNED
The composition of other real estate owned at December 31, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Unimproved land $1,500 $2,735
Commercial/retail buildings 3,429 3,429
Industrial buildings -- 500
---------------------
4,929 6,664
Less valuation allowance 1,409 919
---------------------
$3,520 $5,745
=====================
</TABLE>
An analysis of the activity in the valuation allowance is summarized as
follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year $ 919 $ 1,335 $ --
Provision charged to operations 1,235 2,026 2,018
Losses and valuation adjustments charged to allowance (745) (2,442) (683)
-----------------------------------
Balance at end of year $1,409 $ 919 $1,335
===================================
</TABLE>
Foreclosure and holding costs, net of rental income, amounted to approximately
$475,000, $434,000 and $203,000 for the years ended December 31, 1994, 1993,
and 1992, respectively, and are included in other noninterest expense. Sales of
other real estate owned resulted in a net gain of $72,000 in 1994, a net gain
of $95,000 in 1993 and a net loss of $11,000 in 1992.
8. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Furniture, fixtures and equipment $4,389 $4,010
Leasehold improvements 3,371 3,369
Automobiles 148 129
---------------------
7,908 7,508
Less accumulated depreciation and amortization 5,497 4,653
---------------------
$2,411 $2,855
=====================
</TABLE>
The amounts of depreciation and amortization included in noninterest expense
were $853,000, $999,000 and $879,000 for the years ended December 31, 1994,
1993 and 1992, respectively, and are based on estimated lives of three to
twenty years for furniture, fixtures and equipment, six to twenty years for
leasehold improvements and three years for automobiles.
9. OTHER ASSETS
The composition of other assets at December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Customer acceptances $ 4,196 $2,209
Securities matured and not yet settled 5,000 --
Prepaid expense 567 452
Deferred taxes, net 5,356 5,017
Other assets 1,106 1,338
---------------------
$16,225 $9,016
=====================
</TABLE>
28 M E T R O B A N K
<PAGE> 78
10. DEPOSITS
The composition of deposits at December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Noninterest-bearing demand deposits $522,523 $471,599
NOW accounts 20,301 23,726
Money market demand accounts 262,123 265,899
Savings deposits 12,573 13,677
Time certificates of $100,000 or more 89,773 48,690
Other time certificates 51,867 61,795
----------------------
$959,160 $885,386
======================
</TABLE>
Interest expense on time certificates of $100,000 or more was $2.7 million,
$1.9 million and $4.6 million for the years ended December 31, 1994, 1993 and
1992, respectively.
At December 31, 1994, the Bank had concentrations of deposits with escrow
companies, title companies and insolvency trustees. A substantial portion of
the Bank's demand deposits consist of funds deposited by escrow and title
companies. To a large extent, these deposits are generated as a result of
paying the cost of data processing and other services to assist these companies
in accounting for Bank related financial transactions.
11. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Repurchase agreements at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Repurchase agreements $13,825 $ 1,100
Weighted-average interest rate of repurchase agreements 5.12% 2.50%
Maximum month-end balance outstanding $17,893 $86,140
Average outstanding balance during the year $14,508 $22,530
Weighted-average interest rate during the year 4.04% 3.25%
Investment securities collateralizing repurchase agreements:
Par value $14,072 $ 1,200
Market value $14,058 $ 1,334
</TABLE>
All outstanding repurchase agreements at December 31, 1994 mature on or before
January 20, 1995.
All securities underlying repurchase agreements are held in safekeeping by
broker/dealers, and all agreements are to repurchase the same securities. It is
Management's policy to enter into repurchase agreements only with primary
broker/dealers.
12. OTHER LIABILITIES
The composition of other liabilities at December 31, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Acceptances outstanding $4,196 $2,209
Accrued expenses 1,946 1,475
Accrued professional services for customers 1,318 947
Other liabilities 965 617
--------------------
$8,425 $5,248
====================
</TABLE>
M E T R O B A N K 29
<PAGE> 79
13. LEASE COMMITMENTSAND CONTINGENCIES
The Bank leases certain office facilities from nonaffiliated parties under
operating leases expiring at various times through the year 2002, with options
to renew through the year 2012.
As of December 31, 1994, the approximate future lease rentals payable under
noncancelable operating lease contracts are as follows:
<TABLE>
<CAPTION>
(in thousands) Obligations
<S> <C>
Year ending December 31,
1995 $ 2,874
1996 1,890
1997 1,890
1998 1,890
1999 1,734
2000 and thereafter 3,748
-------
$14,026
=======
</TABLE>
The amounts shown in the chart do not include future increases in rental
amounts, if any, based on changes in the Consumer Price Index and building
operating costs, as provided in the leases.
Annual rental expense from these lease commitments was approximately $2.9
million, $3.0 million and $2.8 million for the years ended December 31, 1994,
1993 and 1992, respectively.
The Bank is involved in various legal proceedings arising from the normal
course of business. In the opinion of Management and the Bank's legal counsel,
the disposition of pending litigation will not have a material adverse effect
on the Bank's financial position or on the consolidated statements of earnings.
14. SHAREHOLDERS' EQUITY
STOCK OPTIONS
479,395 shares of authorized but unissued common stock are reserved for
issuance to key employees under a stock option plan adopted in April of 1982
(the Incentive Plan). On December 23, 1988, Metrobank adopted a 1988 Stock
Option Plan under which 800,000 shares of authorized but unissued stock are
reserved for issuance to certain key employees and directors of the Bank and
its subsidiaries. The purchase price of stock under the plans may not be less
than the fair market value of such stock at the time such option is granted.
Options presently issued under these plans are exercisable in such installments
and expire on such dates as the Board of Directors may determine, but not later
than ten years from the date of grant. The Stock Option Plan has been designed
to qualify options granted thereunder as incentive stock options, but does not
preclude the granting of nonqualified options.
The following table summarizes stock option activity for the year ended
December 31, 1994:
<TABLE>
<CAPTION>
Outstanding at
December 31, 1993 Granted Exercised Canceled
<S> <C> <C> <C> <C>
1988 Stock Option Plan:
Shares 350,625 155,430 34,513 7,700
Option price per share $6.48-$10.80 $10.91-$15.45 $6.48-$10.80 $6.48-$10.80
Incentive Plan:
Shares 342,430 -- 110,330 2,750
Option price per share $7.27-$ 9.09 -- $7.27-$ 9.09 $ 9.09
<CAPTION>
Outstanding at Exercisable at Shares Available
December 31, 1994 December 31, 1994 for Future Grant
<S> <C> <C> <C>
1988 Stock Option Plan:
Shares 463,842 354,613 379,720
Option price per share $6.48-$15.45 $6.48-$15.45
Incentive Plan:
Shares 229,350 229,350 --
Option price per share $7.27-$ 8.18 $7.27-$ 8.18 --
</TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
The Bank maintains an Employee Stock Ownership Plan and Trust for eligible
employees, under which, at the discretion of the Board of Directors, an amount
not to exceed 15 percent of the salaries of all employees may be contributed
each plan year. During 1994, the Employee Stock Ownership Plan and Trust paid
off its borrowings of $288,000 utilized for the purchases of additional shares
of Metrobank stock. For financial reporting purposes, the loan is considered
guaranteed by the Bank and is therefore shown as a reduction of capital. The
terms of the loan agreement require the Trust to pay principal and interest
quarterly on its outstanding borrowing to fully amortize the line of credit
beginning in September 1991. Inasmuch as the Trust does not have the liquidity
to fund principal and interest payments on the borrowing, the Bank made
payments of approximately $289,000, $578,000 and $593,000 during 1994, 1993 and
1992, respectively, to fund the scheduled note reduction. These loan payments
represented the Bank's contributions in each of those years.
30 M E T R O B A N K
<PAGE> 80
DIVIDEND RESTRICTIONS
The Financial Code of the State of California provides that dividends paid in
any one year may not exceed the lesser of the Bank's retained earnings or the
net earnings for the prior three years, less cash distributions to shareholders
during such period. As of December 31, 1994, approximately $12.1 million of
retained earnings are available for dividends.
PREFERRED STOCK
The Bank is authorized to issue up to 15 million shares of preferred stock, no
par value, in one or more series. The Board of Directors is authorized to
establish the terms and conditions of the preferred stock prior to issuance. As
of December 31, 1994, no shares were outstanding.
15. OTHER NONINTEREST EXPENSE
The following is a breakdown of other noninterest expense for the years ended
December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
<S> <C> <C> <C>
Professional services $ 1,987 $ 2,439 $ 2,441
Professional services to customers 8,994 6,714 5,723
Promotion expense 1,409 1,247 1,067
Low-income housing project expense 1,535 1,594 1,744
Office supplies and equipment 1,079 1,166 1,257
Regulatory assessments 2,244 2,017 1,754
Other real estate owned costs 760 434 203
Other 2,214 3,167 2,879
-----------------------------------
$ 20,222 $ 18,778 $ 17,068
===================================
</TABLE>
16. INCOME TAXES
The provision for taxes for the years ended December 31, 1994, 1993 and 1992
for financial reporting purposes is as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
<S> <C> <C> <C>
Current:
Federal $ 2,402 $ 2,197 $ 2,257
State 1,209 1,121 1,114
-----------------------------------
3,611 3,318 3,371
Deferred:
Federal (410) (1,849) (1,523)
State 71 (301) (349)
-----------------------------------
(339) (2,150) (1,872)
-----------------------------------
$ 3,272 $ 1,168 $ 1,499
===================================
</TABLE>
Deferred taxes arise from temporary differences in the recognition of revenues,
expenses and tax credits for tax and financial reporting purposes. The tax
effects of principal items affecting deferred taxes were as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
<S> <C> <C> <C>
Loan losses $ (179) $ (1,211) $ (852)
Depreciation (161) 3 39
OREO writedowns (500) 7 (1,093)
Discount accretion 168 (468) (61)
State franchise tax (30) 95 38
Other, net (1) 363 (576) 57
-----------------------------------
$ (339) $ (2,150) $ (1,872)
===================================
</TABLE>
(1) Includes the $350,000 effect of adopting SFAS No. 109 during 1993.
M E T R O B A N K 31
<PAGE> 81
The provision for income taxes differs from the amounts using the federal
statutory tax rate of 34 percent for the years ended December 31, 1994, 1993
and 1992, as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------- ----------------- ------------------
(in thousands) Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income tax expense at statutory rate $3,884 34.0% $2,442 34.0% $2,467 34.0%
Tax exempt income, net of exclusion -- -- (7) -0.1 (6) -0.1
State franchise taxes, net of federal benefit 849 7.4 541 7.5 510 7.0
Other, net (11) -0.1 (358) -4.9 28 0.4
---------------------------------------------------------------
Provision for income taxes 4,722 41.3 2,618 36.5 2,999 41.3
Income tax credit (1,450) -12.7 (1,450) -20.2 (1,500) -20.6
---------------------------------------------------------------
Net provision for income taxes $3,272 28.6% $1,168 16.3% $1,499 20.7%
===============================================================
</TABLE>
Deferred tax assets and deferred tax liabilities as of December 31, 1994 and
1993 are as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Deferred tax assets
Loan losses $5,339 $5,518
Real estate writedowns 1,392 892
State franchise tax 33 2
Other 103 149
---------------------------
Total deferred tax assets 6,867 6,561
Deferred tax liabilities
Depreciation 436 597
Discount accretion 925 757
Other 150 190
---------------------------
Total deferred tax liabilities 1,511 1,544
---------------------------
Net deferred tax asset $5,356 $5,017
===========================
</TABLE>
17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, and standby letters
of credit. These instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the statement of condition.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
Financial instruments whose contract amounts represent credit risk at December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(in thousands) Notional Amount
-----------------------
1994 1993
<S> <C> <C>
Commitments to extend credit $162,400 $119,157
Standby letters of credit 5,412 3,444
-------- --------
$167,812 $122,601
======== ========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral, obtained if
deemed necessary by the Bank upon extension of credit, is based on Management's
credit evaluation of the counterparty. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and various
forms of real estate.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Bank holds
marketable securities and property as collateral supporting those commitments
for which collateral is deemed necessary.
32 M E T R O B A N K
<PAGE> 82
18. CONCENTRATION OF CREDIT RISK
At December 31, 1994, approximately $374 million of the Bank's loan portfolio
was collateralized by various forms of real estate compared to $327 million at
December 31, 1993. This amounts to 61% and 58% of the total loan portfolio,
respectively. The Bank attempts to reduce its concentration of credit risk by
making loans, which are diversified by project type and geographic locations
throughout Southern California. While management believes that the collateral
presently securing these loans is adequate, there can be no assurances that a
significant deterioration in the Southern California real estate economy or a
significant increase in interest rates would not expose the Bank to a
significantly greater degree of credit risk.
19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments" requires
the disclosure, if practicable, of the fair value of certain financial
instruments, both on and off-balance sheet, and the methods and significant
assumptions used to estimate those fair values. In the case of financial
instruments for which it is not practicable to estimate the fair value, the
Bank is required to disclose information pertinent to estimating the fair value
such as interest rates and maturity, and also state the reasons why it is not
practicable to estimate fair value.
In the statement, the Financial Accounting Standards Board says the "fair
values of financial instruments depict the market's assessment of the present
value of net future cash flows directly or indirectly embodied in them,
discounted to reflect both current interest rates and the market's assessment
of the risk that the cash flows will not occur." The information about fair
value is said to better enable "investors, creditors, and other users to assess
the consequences of an entity's investment and financing strategies, that is,
to assess its performance."
Nonetheless, there are several factors which users of these financial
statements should keep in mind. First, the statement acknowledges that there
are uncertainties inherent in the process of estimating fair value of financial
instruments. Secondly, the statement covers only financial instruments, not
other assets like premises and equipment, the fair value of which might differ
significantly from the amounts at which they are carried in an entity's
financial statements. Thirdly, the Bank must exclude from its estimate of the
fair value of deposit liabilities any consideration of its ongoing customer
relationships, which provide stable sources of investable funds. Lastly, the
statement does not address means of evaluating an entity's performance in areas
other than the management of financial instruments, for example, the ability to
generate noninterest income and the control of noninterest expense. For these
reasons, users are advised not to regard the disclosure of the fair value of
financial instruments as in any way equivalent to a valuation of the Bank as a
whole.
The following assumptions were used to estimate the fair value of each
financial instrument listed below:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount is a reasonable estimate
of fair value.
INVESTMENT SECURITIES
For investment securities, fair value equals quoted market price, if available.
If a quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
LOANS
The fair value of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. These cash flow
assumptions include adjustments to reflect estimates of uncollectible amounts.
DEPOSITS
The fair value of demand deposits, money market, NOW and savings accounts is
the amount payable on demand at December 31, 1994. The fair value of fixed
maturity certificates of deposit is estimated using the rates currently offered
for deposits of similar remaining maturities.
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE AND FEDERAL FUNDS PURCHASED For
these short-term borrowings, the carrying amount is a reasonable estimate of
their fair value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of letters of credit is based on fees currently charged for
similar agreements. The utilization of a loan commitment is at the option of
the borrower, and to the extent a borrower exercises that option, the loans are
being written at rates comparable to current market rates.
M E T R O B A N K 33
<PAGE> 83
<TABLE>
<CAPTION>
December 31, 1994 1993
------------------------ -----------------------
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents $186,824 $186,824 $126,148 $126,148
Investment securities 217,881 211,574 236,715 242,123
Loans 601,466 599,427 553,125 553,384
FINANCIAL LIABILITIES:
Deposits 959,160 959,122 885,386 885,460
Securities sold under agreement to repurchase
and federal funds purchased 13,825 13,825 1,100 1,100
UNRECOGNIZED FINANCIAL INSTRUMENTS:
Commitments to extend credit -- -- -- --
Standby letters of credit -- 108 -- 68
</TABLE>
20. REGULATORY ISSUES
On July 6, 1993, the Bank entered into a Memorandum of Understanding (MOU) with
the Federal Deposit Insurance Corporation (FDIC), which required that certain
actions be taken. The FDIC mandated that the Bank reduce specified classified
assets over a twelve-month period, maintain a tier-1 leverage ratio of at least
6.5%, and reduce its dependence on volatile liabilities to specified levels
over time. Volatile liabilities are defined as brokered deposits, money desk
deposits, time deposits greater than or equal to $100,000, federal funds
purchased, repurchase agreements and other borrowings and debt due in one year
or less. Subsequent to year-end, the Bank was notified that the FDIC was
removing the Bank from its MOU based upon the results of its most recent
examination.
21. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data follows (in thousands except per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended March 31, June 30, September 30, December 31,
<S> <C> <C> <C> <C>
1994
Net interest income $11,971 $12,984 $13,521 $14,438
Provision for possible loan losses 415 1,000 1,600 550
Noninterest income 1,118 1,117 1,171 1,175
Noninterest expense 10,126 10,740 10,271 11,368
Net earnings 1,780 1,700 2,051 2,622
Earnings per share $ 0.34 $ 0.31 $ 0.37 $ 0.46
---------------------------------------------------------------
1993
Net interest income $11,785 $12,057 $12,262 $12,321
Provision for possible loan losses 1,520 3,915 2,360 1,025
Noninterest income 2,544 2,649 3,089 1,301
Noninterest expense 10,859 9,317 10,962 10,867
Net earnings 1,490 1,100 1,450 1,975
Earnings per share $ 0.28 $ 0.21 $ 0.27 $ 0.38
</TABLE>
34 M E T R O B A N K
<PAGE> 84
SECURITIES ACTIVITY
The Bank is a member of the American Stock Exchange and its common stock is
traded under the symbol of MBN.
The following table reflects the market price for the Bank's common stock for
each period presented.
<TABLE>
<CAPTION>
1994 1993
-------------- --------------
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $12.28 $10.47 $11.71 $10.12
Second Quarter 16.72 10.78 11.82 9.09
Third Quarter 15.69 13.28 9.89 8.41
Fourth Quarter 17.38 13.88 11.25 8.86
-----------------------------------
</TABLE>
The Bank had approximately 371 record holders of its common stock as of January
31, 1995. On February 1, 1994, the Bank declared a cash dividend of $0.14 per
share to shareholders of record on February 10, 1994, payable on February 24,
1994. On April 15, 1994, the Bank declared a second cash dividend of $0.14 per
share to shareholders of record on April 29, 1994, payable on May 13, 1994. On
July 13, 1994, the Bank declared a third cash dividend of $0.14 per share to
shareholders of record on July 22, 1994, payable on August 8, 1994. On October
12, 1994, the Bank declared a fourth cash dividend of $0.14 per share to
shareholders of record on October 25, 1994, payable on November 8, 1994. On
December 21, 1994, the Bank declared a stock dividend of 10 percent to
shareholders of record on January 6, 1995, payable on January 20, 1995. This
stock dividend increased the number of shares outstanding to 5,377,124.
SHAREHOLDER INFORMATION
The Annual Meeting of Shareholders of Metrobank will be held at the Bank's
Headquarters Office, 10900 Wilshire Boulevard, Los Angeles, California 90024,
on May 23, 1995 at 4:00 P.M. All shareholders are cordially invited to attend.
AUDITORS
Arthur Andersen LLP, Los Angeles, California
CORPORATE SECRETARY
Sharon L. Canup, Corporate Senior Vice President
OUTSIDE LEGAL COUNSEL
Loeb and Loeb, Los Angeles, California
TRANSFER AGENT
First Interstate Bank of California, Stock Transfer Department, 707 Wilshire
Boulevard, Los Angeles, California 90017
For shareholder and stock information, please contact Sharon L. Canup,
Corporate Secretary at (310) 824-5700. A copy of the Bank's Annual Report on
Form F-2 as filed with the Federal Deposit Insurance Corporation may also be
obtained without charge by writing Ms. Canup at Metrobank, 10900 Wilshire
Boulevard, Los Angeles, California 90024.
M E T R O B A N K 35
<PAGE> 85
METROBANK MANAGEMENT
BOARD OF DIRECTORS
DAVID L. BUELL
Chairman and Chief Executive Officer
Metrobank
ROBERT P. BULSECO
President and Chief Operating Officer
Metrobank
PETER B. CALOYERAS
President
Magnetika, Inc.
SEYMOUR J. CARR, DMD
Professor (Emeritus)
University of California, Los Angeles
JAMES W. HOBSON
Vice Chancellor (Emeritus)
University of California, Los Angeles
RUDY B. MARKMILLER
President
Network Courier Services
ROBERT L. MAYER
President
The Robert Mayer Corporation
WALLACE WONG
Chief Executive Officer
Cal-American Medical Supplies
SHARON L. CANUP
Corporate Secretary and
Corporate Senior Vice President
ADMINISTRATIVE DIVISION
ROBERT P. BULSECO
President and Chief Operating Officer
DONN E. LOE
Executive Vice President and
Chief Administrative Officer
DAVID P. MALONE
Executive Vice President and
Chief Financial Officer
PAMELA L. CITRON
Corporate Senior Vice President
and Cashier
JOHN P. CRONIN
Senior Vice President
Marketing Administration
DOUGLAS P. KRAUSE
Corporate Senior Vice President
and General Counsel
COMMERCIAL DIVISION
PAUL W. STROUBE
Executive Vice President
Regional Administration North
SCOTT T. MONSON
Executive Vice President
Regional Administration South
WILLIAM F. G. CARROLL
Regional Vice President
Orange County Regional Head Office
KENNETH J. COOKE
Regional Vice President
San Diego Regional Head Office
CRAIG L. MILLER
Regional Vice President
San Fernando Valley
Regional Head Office
BROUGHAM MORRIS
Regional Vice President
South Bay Regional Head Office
CHERYL K. WOLFORD
Senior Vice President
Fiduciary Services Department
LOAN DIVISION
PAUL B. ALEXANDER
Executive Vice President and
Chief Credit Officer
MESFIN AYENEW
Corporate Senior Vice President
Real Estate Group
FRANK D. DITOMASO
Corporate Senior Vice President
Asset-Based Loan Department
JOHN S. HARRIS
Corporate Senior Vice President
Trade Finance
GORDON SMITH
Corporate Senior Vice President
Indirect Loan Group
METROBANK OFFICES
WEST LOS ANGELES REGIONAL HEAD OFFICE
10900 Wilshire Boulevard
Los Angeles, CA 90024
(310) 824-5700
LONG BEACH REGIONAL
HEAD OFFICE (SECOND QUARTER, 1995)
301 East Ocean Boulevard
Long Beach, CA 90802
(310) 495-1993
EAST LONG BEACH
OFFICE (Second Quarter, 1995)
1650 Ximeno Avenue
Long Beach, CA 90804
(310) 498-3336
ORANGE COUNTY REGIONAL HEAD OFFICE
5000 Birch Street
Newport Beach, CA 92660
(714) 955-5400
SAN DIEGO REGIONAL
HEAD OFFICE
3131 Camino del Rio North
San Diego, CA 92108
(619) 563-9400
SAN FERNANDO VALLEY
REGIONAL HEAD OFFICE
21530 Oxnard Street
Woodland Hills, CA 91367
(818) 587-5200
SOUTH BAY REGIONAL
HEAD OFFICE
21535 Hawthorne Boulevard
Torrance, CA 90503
(310) 316-7111
ADMINISTRATIVE OFFICES
19191 S. Vermont Avenue
Torrance, CA 90502
(310) 516-9700
OPERATIONS CENTER
350 S. Figueroa Street
Suite 180
Los Angeles, CA 90071
(213) 346-8383
<PAGE> 86
EXHIBIT 10.3
<PAGE> 87
OFFICE SPACE LEASE
HASEKO CORPORATION,
a Japanese corporation
(Landlord)
METROBANK,
a California corporation
(Tenant)
350 South Figueroa Street
Suite 180
Los Angeles, California
(Building and Premises)
January 31, 1994
<PAGE> 88
BASIC LEASE INFORMATION
DATE: January 31, 1994
BUILDING: World Trade Center, 350 South Figueroa Street, Los Angeles,
California 90071
LANDLORD: HASEKO CORPORATION, a Japanese corporation
TENANT: METROBANK, a California corporation
LEASE SECTION
Sections 1, Premises: Suite 180 (but Tenant has Space Reduction Option,
54, 56 & 57 Expansion Option and Right of First Negotiation)
Section 2 Term Commencement Date: (i) for the Relocation Space described
in Exhibit "A-1", as defined in subsection 2(b); (ii) for all
other portions of the Premises, May 1, 1994 as may be extended
pursuant to Section 2
Sections 2, Term Expiration: April 30, 2004 (but Tenant has options to
52 and 53 extend and terminate)
Section 5 Monthly Base Rent and Additional Rent:
See Section 5 and Rider
Section 6 Base Year: 1994
Paragraphs
(a) and (b) Base Tax Year: July 1, 1994 to June 30, 1995
Section 6 Tenant's Percentage Share of Increased Operating Expenses and
Paragraphs Taxes: 2.0022% [Based on 349,619 rentable square feet of space
(a) and (b) in the Building]
Section 41 Security Deposit: None
Section 43 Landlord's Address for Notices:
HASEKO CORPORATION
c/o Haseko-Dunn Management Company
350 South Figueroa Street, Suite 141
Los Angeles, California 90071
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<PAGE> 89
Tenant's Address for Notices:
Prior to Term Commencement Date:
METROBANK
333 Beaudry Avenue, Suite 216
Los Angeles, California 90017
Attention: Ms. Pamela Citron
Senior Vice President
After Term Commencement Date:
METROBANK
350 South Figueroa Street, Suite 180
Los Angeles, California 90071
Attention: Operations Manager
Section 48 Exhibits and Addendum:
The Sections of the Lease identified above are the Sections which refer
to the Basic Lease Information and each Section shall be deemed to incorporate
by reference the applicable Basic Lease Information. In the event of any
conflict between the foregoing Basic Lease Information and any of the terms of
the Lease, the terms of the Lease shall control.
-2-
<PAGE> 90
OFFICE SPACE LEASE
THIS LEASE ("Lease"), dated January 31, 1994, is entered into by and
between HASEKO CORPORATION, a Japanese corporation, as Landlord, and METROBANK,
a California corporation, as Tenant, with the consent of ROYAL INVESTMENT
SYSTEMS (RIS) (03-07)/LOS ANGELES WORLD TRADE CENTER PARTNERSHIP, as Master
Landlord.
1. PREMISES
Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, upon the terms and conditions hereinafter set forth, those certain
premises ("Premises") consisting of approximately 7,283 square feet of "net
rentable area" outlined on Exhibit "A" attached hereto. The portion of the
Premises described on Exhibit "A-1" attached hereto (the "Relocation Space")
contains approximately 386 square feet of "net rentable area". The Premises are
located on the first concourse level of the Building. As used in this Lease,
the term "Building" shall mean the building described in the Basic Lease
Information attached hereto and all common areas, parking areas and walkways
serving said building and all areas adjacent to said building which are owned
by Landlord. Prior to the Commencement Date for portions of the Premises other
than the Relocation Space, Landlord and Tenant shall verify the "net rentable
area" of the Premises and prior to the Commencement Date for the Relocation
Space, Landlord and Tenant shall verify the "net rentable area" of the
Relocation Space. If the "net rentable area" of the Premises varies from 7,283
square feet, then Landlord and Tenant shall execute an amendment to this Lease
containing appropriate corrections and adjustments, as the case may be, to this
Section 1 and Sections 4 and 5 of this Lease and Exhibit "A", as well as
Tenant's Percentage Share of Increased Operating Expenses and Taxes as
specified in the Basic Lease Information. If the "net rentable area" of the
Relocation Space is greater than 386 square feet, then any overpayments of Base
Rent by Tenant for the other portions of the Premises shall be credited against
the Base Rent next coming due. If the "net rentable area" of the Relocation
Space is less than 386 square feet, then Tenant shall pay to Landlord any
underpayments of Base Rent for the other portions of the Premises together with
the Base Rent next coming due.
The Premises shall include the right to use, in common with others,
restrooms, walkways, lobbies, entrances, stairs, elevators and other public
portions of the Building.
-3-
<PAGE> 91
All of the outside walls and windows of the Premises and any space in the
Premises used for shafts, stacks, pipes, conduits, ducts, and electric or other
Building facilities, and the use thereof and access thereto through the
Premises for the purposes of operation, maintenance and repairs are reserved to
Landlord.
For purposes of this Lease, the term "net rentable area" shall mean
115% of the "net usable area." The term "net usable area" shall mean all floor
area in the Premises, measured to the inside glass surface of the outer
building walls, to the interior side of corridors and other permanent
partitions, and to the center of partitions that separate the Premises from
adjoining tenant spaces, without deduction for columns and projections
necessary to the Building.
2. TERM.
(a) The term of this Lease shall correlate upon the Commencement
Date (as hereinafter defined) and shall expire on April 30, 2004.
(b) For all portions of the Premises other than the Relocation
Space, the capitalized term "Commencement Date" shall mean May 1, 1994, as
extended by one (1) day that substantial completion of the tenant improvements
for the Premises is delayed beyond said date solely as a result of "Landlord
Delays" and "Force Majeure Delays" (as such capitalized terms are defined in
Paragraph 2.6 of Exhibit "B" attached hereto). Notwithstanding the foregoing,
Landlord shall not be obligated to deliver said portions of the Premises to
Tenant until the latest of: (i) the date that is five (5) days after the full
execution of this Lease; or (ii) the date Tenant gives Landlord reasonable
evidence that Tenant has obtained all of the insurance required to be
maintained by Tenant under this Lease (including, without limitation, the
insurance described in Section 2.5 of the Work Letter attached hereto as
Exhibit "B"); or (iii) the date on which Landlord completes any and all
demolition work which Landlord is expressly required in Exhibit "B" of this
Lease to complete.
(c) For the Relocation Space the capitalized term "Commencement
Date" shall mean the earlier of: (i) the date on which Tenant substantially
completes the tenant improvements for the Relocation Space, as determined by
Landlord; or (ii) the date which is forty-five (45) days after Landlord
delivers the Relocation Space to Tenant with the existing tenant improvements
in said Relocation Space demolished and removed. Landlord shall use
commercially reasonable efforts to relocate the existing tenant in the
-4-
<PAGE> 92
Relocation Space pursuant to the relocation clause in that tenant's lease and
to promptly demolish and remove the existing tenant improvements in the
Relocation Space after said relocation.
(d) All of the terms of this Lease, except for terms requiring
Tenant to pay Base Rent, Extraordinary Rent, Storage Space Rent, and Operating
Expenses and Taxes, shall apply to any occupancy of all or any portion of the
Premises by Tenant prior to the applicable Commencement Date.
(e) Upon request by Landlord, given from time to time, Tenant shall
confirm the Commencement Date and expiration date of this Lease (including the
Commencement Date for the Relocation Space, if so requested by Landlord) in
writing in the form attached hereto as Exhibit "C" and shall promptly return
the same to Landlord.
(f) As used in this Lease, the capitalized terms "Commencement
Date" shall mean: (i) as to the Relocation Space, the date on which this Lease
commences as to the Relocation Space, as set forth in Subsection (b) above; and
(ii) as to all other portions of the Premises, the date on which this Lease
commences as to said other portions, as set forth in Subsection (a) above. As
used in this Lease, the word "Term" shall mean: (i) as to the Relocation Space,
the period from the Commencement Date for the Relocation Space to
April 30, 2004; and (ii) as to all other portions of the Premises, the
period from the Commencement Date for said other portions of the Premises to
April 30, 2004.
3. FAILURE TO OCCUPY IMPROVED SPACE
[INTENTIONALLY DELETED]
4. RENTAL PAYMENTS
(a) Tenant shall pay base rent ("Base Rent") for the Premises to
Landlord throughout the Term on or before the first day of each calendar month
during the Term, without deduction or offset, in the amount(s) set forth in
Section 5 hereof, as adjusted in accordance with Section 6, except that upon
Tenant's execution and delivery of this Lease to Landlord, Tenant shall pay to
Landlord fifty percent (50%) of the first full monthly installment of Base Rent
payable to Landlord under this Lease and Tenant shall pay the remaining fifty
percent of said first full monthly installment of Base Rent to Landlord on May
1, 1994. If the Term commences on a day other than the first day of a calendar
month, then the Base Rent for the first partial month shall be equitably
prorated. All sums payable by
-5-
<PAGE> 93
Tenant to Landlord hereunder shall be paid to Landlord, without deduction or
offset, in lawful money of the United States of America, addressed to L.A.
World Trade Center, Haseko-Dunn Management Company, 350 S. Figueroa Street,
Suite 141, Los Angeles, California 90071, or to such other person or at such
other place as Landlord may from time to time designate in writing. If any
installment of Base Rent is not received by Landlord within ten (10) business
days after the date such installment is due, Tenant shall pay a late charge
equal to five percent (5%) of such installment and the installment and late
charge shall bear interest at the rate of twelve percent (12%) per annum.
Tenant recognizes and agrees that the late charge is intended to compensate
Landlord for and is a reasonable estimate of the administrative, legal,
bookkeeping and other expenses which will result from such delinquent rent
payment, which costs and expenses would be extremely difficult and impractical
to calculate.
Any payment by Tenant or receipt by Landlord of a lesser amount than
stipulated herein for Base Rent, additional rent or any other charge hereunder
shall be deemed payment of the earliest stipulated rent, additional rent or
other charge then due. No endorsement or statement on a check and no letter
accompanying any check or payment shall be deemed an accord and satisfaction.
Landlord may accept any check or payment without prejudice to Landlord's rights
to recover the balance of rent, additional rent or other charges then due or to
pursue any other remedy set forth in this Lease or available at law or in
equity.
5. MONTHLY BASE RENT
Months Monthly Base Rent
1-5 0
6-60 $8,375.45
61-63 0
64-120 $9,832.05
6. TENANT'S SHARE OF INCREASED COSTS
(a) The Base Rent payable during each calendar year or part thereof
during the Term, after the calendar year 1994 (the calendar year 1994 being
hereinafter referred to as the "Base Year") shall be increased by Tenant's
Percentage Share of Increased Operating Expenses and Taxes, as specified in the
Basic Lease Information, of the total dollare increase, if any, in Operating
Expenses paid or incurred by Landlord in the Base Year. As used herein
"Operating Expenses" means all costs related to the
-6-
<PAGE> 94
administration, management, operation and maintenance of the Building,
including without limitation, wages, salaries and other payroll costs and
expenses (provided such labor costs are expended directly or indirectly in
connection with the operation, maintenance or management of the Building),
janitorial, maintenance, guard and other security services (if any0, Building
office fair market rental value, ower, water, waste disposal and other
utilities, materials and supplies, maintenance and repairs, insurannce, and
depreciation on personal property and costs of making improvements to the
Building or common areas that are required by law, including, without
limitation, improvements required by the Americans With disabilities Act (42
U.S.C. & 12181 et seq.); provided, however, that costs of capital improvements
required by law shall be amortized as described in Section 6(f) below and
provided, further, that Operating Expenses shall not include ground lease
payments, payments by Landlord on indebtedness of Landlord secured by the
Building, taxes covered under paragraph (b) below, depreciation other than
depreciation on any exterior window draperies and any carpeting in public
corridors and common areas, costs of tenants' improvements, real estate
brokers' commissions, interest, capital items (except as set forth in Section
6(f) below), payroll costs of leasing personnel employed by Landlord and the
rent payable for the office space of such persons, legal fees expended in
connection with the preparation of leases for the Building or the eviction of
other tenants, costs incurred which benefit only other tenants and do not
directly or indirectly benefit Tenant, costs that are to be paid solely by the
Building manager, if any, (and not to be reimbursed to any such manager by
Landlord) pursuant to its management contract for the Building, sums paid to
affiliates of the Landlord for goods and services to the extent such sums
clearly exceed the amount that would be paid by Landlord in the market to
unaffiliated third parties for such goods and/or services, costs of removing
hazardous materials present in the Building as of the date of this Lease, and
charitable and political contributions made by Landlord. Actual Operating
Expenses for both the Base Year and each subsequent calendar year shall be
adjusted to equal Landlord's reasonable estimate of Operating Expenses had 100%
of the total rentable area of the Building been occupied. Landlord shall not be
entitled to charge all tenants of the Building, collectively, for more
Operating Expenses than the total Operating Expenses for the Building.
(b) The Base Rent payable during each tax year (July 1 through June
30), or part thereof during the Term, after the tax year ending June 30, 1995
(the "Base Tax Year"), shall be increased by Tenant's Percentage Share of
-7-
<PAGE> 95
Increased Operating Expenses and Taxes, as specified in the Basic Lease
Information, of the total dollar increase, if any, in real and personal
property taxes (and any tax, tax assessment, special assessment, charges or
other imposition of any nature whatsoever levied wholly or partly in lieu
thereof, whether or not such tax, tax assessment, special assessment, charge or
other imposition is presently within the contemplation of the parties) levied
against the Building and fixtures and other property used in connection with
the operation or maintenance of the Building for such tax year, over such taxes
for the Base Tax Year; provided, however, increases in real property taxes
which result from a sale of the Building during the first five (5) years of the
Term and do not directly or indirectly benefit Tenant, shall not be included in
such taxes.
(c) During March of each calendar year or as soon thereafter as
practicable, Landlord shall give Tenant written notice of its estimate of
amounts payable under paragraphs (a) and (b) above for the ensuing calendar
year. On or before the first day of each month during the ensuing calendar
year, Tenant shall pay to Landlord one-twelfth (1/12) of such estimated
amounts, provided that if such notice is not given in December, Tenant shall
continue to pay on the basis of the prior year's estimate until the month after
such notice is given. If at any time or times it appears to Landlord that the
amounts payable under either paragraph (a) and (b) above for the current
calendar year will vary from its estimate by more than five percent (5%),
Landlord shall, by written notice to Tenant, revise its estimate for such year,
and subsequent payments by Tenant for such year shall be based upon such
revised estimate.
(d) within one hundred eighty (180) days after the close of each
calendar year or as soon after such one hundred eighty (180) day period as
practicable, Landlord shall deliver to Tenant a statement of amounts payable
under paragraphs (a) and (b) above for such calendar year, and such statement
shall be final and binding upon Landlord and Tenant. If such statement shows an
amount owing by Tenant that is less than the estimated payments for such
calendar year previously made by Tenant, Landlord shall pay Tenant the
difference within thirty (30) days. If such statement shows an amount owing by
Tenant that is more thatn the estimated payment for such claendar year
previously made by Tenant, Tenant shall pay the deficiency to Landlord within
thirty (30) days after delivery of the statement.
-8-
<PAGE> 96
(e) If, for any reason, this Lease shall terminate on a day other
than the last day of a calendar year or a tax year, the amount of increase (if
any) in rent payable by Tenant applicable to the calendar year or tax year in
which such termination shall occur shall be equitable prorated on the basis of
the number of days actually elapsed.
(f) Tenant shall be charged for the amortization, with a market
rate of interest, of the cost of installation of capital investment items that
are for the purpose of reducing operating costs or that may be required by
governmental authority. All such costs shall be amortized over the reasonable
life of the capital investment items, with the reasonable life and amortization
schedule to be determined in accordance with sound management accounting
principles.
(g) Tenant may, at Tenant's sole cost and expense, upon no less
than ten (10) business days prior written notice to landlord, inspect any
records relating to Operating Expenses and Taxes payable by Tenant that may
then be in the possession of Landlord.
7. USE
(a) The Premises shall be used for general office purposes and for
no other purpose without the written consent of Landlord, which may be withheld
in Landlord's sole and absolute discretion, except that Landlord shall not
unreasonably withhold its consent to use of the Premises for retail banking
purposes provided Tenant delivers to Landlord no later than sixty (60) days
prior to such change in use: (i) a written request for the change in use; (ii)
a detailed written description of any and all improvements Tenant proposes to
make to the Premises in connection with such change in use (which shall be
subject to Landlord's approval); and (iii) a detailed written description of
any and all services and products to be made available in the Premises. Tenant
hereby acknowledges and agrees that in addition to any other applicable
reasonable bases for Landlord's withholding its consent to such change in use
if Landlord shall have given any rights to any Tenant in the Building (or one
of a number of specified tenants, excluding Tenant) to sell any of the services
or products to be performed or sold by Tenant in the Premises. Tenant shall not
do or permit to be brought or kept therein, anything which is prohibited by or
will in any way conflict with any law, statute, ordinance or governmental rule
or regulation now in force or which may hereafter be enacted or
-9-
<PAGE> 97
promulgated or which is prohibited by the standard form of fire insurance
policy, or will in any way increase the existing rate of or affect any fire or
other insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy covering the Building or any part thereof
or any of its contents. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants of the Building, or injure or annoy them, or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or
about the Premises or commit or suffer to be committed any waste in, on or
about the Premises.
(b) Tenant shall not use the name of the Building or any similar name
in connection with any business carried on by Tenant (except as Tenant's
address) without written consent of Landlord which Landlord may withhold in its
sole and absolute discretion.
(c) Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty as to the suitability of the
Premises for the conduct of Tenant's business, nor whether said business is
permitted by law.
8. SERVICES
(a) Landlord shall maintain the public and common areas of the
Building, such as lobbies, stairs, elevators, corridors and restrooms in
reasonably good order and condition except for damage occasioned by the act of
Tenant, which damage shall be repaired by Landlord at Tenant's expense.
(b) Landlord shall furnish the Premises with (i) 8 watts/sq.ft. of
electricity for lighting and the operation of office machines, (ii) heat and .8
CFM/sq.ft. of air conditioning to the extent reasonably required for the
comfortable occupation of the Premises during the reasonable and usual business
hours of 8:00 a.m. to 6:00 p.m., Monday through Friday, and between the hours
of 8:00 a.m. and 1:00 p.m. on Saturday (exclusive of Sundays and Holidays,
except that "Holidays" shall not include any days on which Tenant is required
by law to be open for business) or such shorter period specified or prescribed
by any applicable policies or regulations adopted by any utility or government
agency, (iii) elevator service, (iv) lighting replacement (for building
standard lights), (v) restroom supplies, and (vi) daily janitor service five
nights per week (exclusive
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of holidays) furnished in the manner that such services are customarily
furnished in comparable office buildings in the downtown Los Angeles area.
Tenant, and Tenant's contractors and vendors shall not be charged for
reasonable use of the non-exclusive Building parking and Building elevators
during the construction of the tenant improvements and Tenant's "move-in"
period; however, Tenant and its contractors and vendors shall at all times
reasonably cooperate with Landlord and any and all other users of such
elevators and parking. Tenant shall provide its own security services and
equipment for the Premises, subject to Landlord's approval of the installation
of any security equipment if such approval is otherwise required by this Lease.
If Tenant requires any utilities or services during times other than the
business hours set forth in item (ii) above, then Tenant shall promptly upon
demand reimburse Landlord for all of Landlord's actual costs of providing the
same, or as reasonably estimated by Landlord. Tenant shall also pay for all
costs of usage of any HVAC unit installed as part of the tenant improvements
(as measured by a separate meter for such HVAC unit, which must be concurrently
installed as part of the tenant improvements). If any tenant (or group of
tenants) orders an extra service or extra utilities, then the cost of such
service or utilities shall be charged to such tenant (or reasonably apportioned
among the group of tenants based upon the areas of their premises and the
degree to which they are benefitted by or receive such services or utilities).
Landlord shall not be in default hereunder or be liable for any damages
directly or indirectly resulting from, nor shall the rental herein reserved be
abated by reason of (1) the installation, use or interruption of use of any
equipment or phone lines used for the furnishing of any of the foregoing
services, (2) failure to furnish or delay in furnishing any such services when
such failure or delay is caused by repair, accident or any condition beyond the
reasonable control of Landlord or by the making of necessary repairs or
improvements to the Premises or to the Building, or (3) the limitation,
curtailment, rationing or restrictions on use of water, electricity, gas or any
other form of energy serving the Premises or the Building. Landlord shall use
good faith efforts to remedy the interruption in the furnishing of such
services. If more than five percent (5%) of the Premises is rendered
untenantable as a result of any interruption of elevator, lighting, HVAC,
electricity, or water services, and is not remedied within ten (10) business
days after written notice to Landlord, then to the extent such interruption and
any resulting interruption of business is not covered by the business
interruption insurance required to be maintained by Tenant hereunder (or if
Tenant fails to obtain such insurance, would not be covered), than Base Rent
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and other sums payable under this Lease shall be proportionately abated for the
portion(s) of the Premises rendered untenantable from the date Tenant's notice
is received by Landlord to the date such portion again becomes tenantable.
(c) Whenever heat generating machines or equipment or lighting other
than Building standard lights are used in the Premises by Tenant which affect
the temperature otherwise maintained by the air conditioning system, Landlord
shall have the right to install supplementary air conditioning units in the
Premises, and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Tenant to Landlord upon
billing by Landlord. If Tenant installs lighting requiring power in excess of
that required for normal desk-top office equipment or normal copying equipment,
Tenant shall pay for the cost of such excess power as additional rent, together
with the cost of installing any additional risers or other facilities that may
be necessary to furnish such excess power to the Premises.
9. TAXES PAYABLE BY TENANT
In addition to the monthly rental and other charges to be paid by
Tenant hereunder, Tenant shall reimburse Landlord directly upon demand for any
and all taxes payable by Landlord (other than: (i) net income taxes, franchise
taxes and payroll taxes payable by Landlord; (ii) penalties and fines resulting
from delays caused by Landlord; and (iii) attorneys, accountants and appraisers
fees for contesting the assessed value of the Premises or Building for property
tax purposes in the event Landlord does not prevail in such contest) whether or
not now customary or within the contemplation of the parties hereto: (a) upon,
measured by or reasonably attributable to the cost or value of Tenant's
equipment, furniture fixtures and other personal property located in the
Premises or by the cost or value of any leasehold improvements made in or to
the Premises by or for Tenant, other than Landlord's work under Exhibit "B"
regardless of whether title to such improvements shall be in Tenant or
Landlord; (b) upon or measured by the monthly rental payable hereunder,
including, without limitation, any gross income tax or excise tax levied by the
City of Los Angeles, the State of California, the Federal Government or any
other governmental body with respect to the receipt of such rental; (c) upon or
with respect to the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any portion
thereof; (d) upon this transaction or any document to which Tenant is a party
creating or transferring an
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interest or an estate in the Premises. In the event that it shall not be lawful
for Tenant so to reimburse Landlord, the monthly rental payable to Landlord
under this Lease shall be revised to net Landlord the same net rental after
imposition of any such tax upon Landlord as would have been payable to Landlord
prior to the imposition of any such tax.
10. IMPROVEMENTS, REPAIRS AND ALTERATIONS
Upon taking possession of the Premises as set forth herein,
Tenant shall be deemed to have accepted the Premises as being in tenantable and
good condition. Tenant shall, at Tenant's sole cost and expense, repair and
maintain the Premises and every part thereof in good order and condition and in
compliance with all applicable laws, ordinances and regulations (excluding
violations of hazardous materials laws which occurred prior to the date of this
Lease). Without limiting the foregoing, Tenant shall, at its sole cost and
expense, cause the Premises to comply at all times with the requirements of
Title III of the Americans With Disabilities Act (42 U.S.C. Section 12181 et
seq.), the regulations now or hereafter adopted pursuant thereto, and any and
all applicable laws, statutes, ordinances, rules and regulations concerning
public accommodations for disabled persons now or hereafter in effect. Tenant
shall not alter or change the Premises or any other portion of the Building
without the prior written consent of Landlord, which shall not be withheld for
changes required by law, except that such changes shall be subject to
Landlord's reasonable approval of plans therefor and Landlord may elect to have
its own contractors perform any such alterations that affect Building systems,
utilities or structural portions and Tenant shall reimburse Landlord for the
reasonable costs thereof within five (5) business days after written demand,
except that Landlord's consent shall not be required for interior,
nonstructural changes to the tenant improvement work in the Premises provided:
(i) Tenant gives Landlord at least fifteen (15) business days' prior written
notice of the change together with evidence satisfactory to Landlord that the
change will not cost more than $10,000 in the aggregate and will not adversely
affect, in any way, any Building utility systems or services or any other
Building system or services. Tenant hereby waives the provisions of Subdivision
(1) of Section 1932 of the Civil Code of California, and any successor or
similar statute or law to the extent inconsistent in any way with any of the
terms of this Lease. All improvements, repairs and/or alterations that may be
required of or desired by Tenant and that might affect any structural portion
of the Building or any Building utility systems or other systems, or the
appearance or exterior of the Building, shall be done by Landlord's
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contractor but at the cost of Tenant. All improvements, repairs, and
alterations shall become the property of Landlord and shall remain upon and be
surrendered with the Premises; provided, however, that Tenant shall, at
Tenant's expense, when surrendering the Premises, restore the same to their
original condition, if Landlord notifies Tenant concurrently with Landlord's
consent to any improvements (or in the case of improvements which do not
require Landlord's consent, prior to the commencement of the improvements) that
such removal will be required. All damage or injury done to the Premises by
Tenant, or by any persons who may be in or upon the Premises with the consent
of Tenant, shall be paid for by Tenant. Tenant shall, at the termination of
this Lease by the expiration of time or otherwise, surrender and deliver up the
Premises to Landlord in as good condition as when received by Tenant from
Landlord, reasonable wear, tear and casualty excepted. Tenant shall pay for all
damage to the Building, as well as all damage to tenants or occupants thereof,
caused by Tenant's misuse or neglect of the Premises or the appurtenances
thereto.
11. LIENS
Tenant shall keep the Premises and the Building free from any
mechanic's and/or materialmens liens or other liens arising out of any work
performed, materials furnished or obligations incurred by Tenant. Tenant shall
notify Landlord at least seventy-two (72) hours prior to the commencement of
any work or activity on the Premises which may give rise to such liens and
Landlord shall have the right to post and keep posted on the Premises any
notices that may be provided by law or which Landlord may deem to be proper for
the protection of Landlord, the Premises and the Building from such liens.
12. DAMAGE AND DESTRUCTION
If the Premises or the Building are completely destroyed by any
cause insured against under a standard form fire and extended coverage policy
of insurance, or are so damaged thereby that they are untenantable within one
hundred twenty (120) days after the date of such destruction or damage,
Landlord or Tenant may terminate this Lease by written notice to the other
given within five (5) business days after the end of the one hundred and twenty
(120) day period. Within forty-five (45) days after the date of such
destruction or damage, Landlord shall give written notice to Tenant as to
whether or not the Premises will be rendered tenantable within one hundred
twenty (120) days after the date of such destruction or damage. If this Lease
is not terminated by Landlord or Tenant as set forth above,
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Landlord shall with due diligence render the Premises tenantable to the extent
insurance proceeds are available therefor, and rent allocable to the untentable
portion of the Premises shall be abated while such portion remains untentable.
If the Premises or the Building are damaged or destroyed by any cause other than
a cause insured against under a standard form fire and extended coverage policy
of insurance, then Landlord may terminate this Lease by written notice to Tenant
given within thirty (30 days after such damage or destruction, which termination
shall be effective as of the date of the notice. Tenant hereby waives the
provisions of Subdivision 2 of Section 1932 of the California Civil code and the
provisions of Subdivision 4 of Section 1933 of the California Civil Code, and
all successor and similar statutes and laws and agrees that this Section 12 is
intended to govern damages and destruction to the Premises and the Building.
13. WAIVER OF SUBROGATION
Prior to or immediately after the execution of this Lease, Landlord and
Tenant shall each procure from their respective insurers under all policies of
fire, theft, workmen's compensation and other insurance now or hereafter
existing during the Term (other than liability insurance), and purchased by
either of them insuring or covering the Building or any portion thereof or
operations therin, a waiver of all rights of subrogation which the insurer might
otherwise have.
14. INDEMNIFICATION
Tenant hereby expressly waives any and all claims it may have nor or in
the future against Landlord, its agents, employees and contractors for any
damage whatsoever to Tenant's business from any cause whatsoever. Tenant also
hereby waives any and all claims it may have not or in the future for damage to
any of Tenant's or any other person's or entity's property or injury to or death
of any person in, upon or about the Premises arising at any time and from any
cause other than solely by reason of the gross negligence of Landlord, its
agents, employees or contractors or by reason of the breach by Landlord of the
terms of this Lease. Tenant shall defend (by counsel acceptable to Landlord),
indemnify and hold Landlord harmless from and against any and all losses,
claims, damages, liabilities and costs and expenses (including, without
limitation, reasonable attorneys' fees) arising directly or indirectly from
Tenant's (or any of Tenant's subtenants', assignees', agents', contractors',
employees', invitees', licensees', or guests') acts or omissions (including,
without limitation,
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any violation of any of the terms, covenants or conditions of this Lease, and
aany use or occupancy of the Premises and/or Building), except for those
losses, claims, damages, liabilities and costs and expesnes caused solely by
the gross negligence of Landlord, its agents, employees or contractors.
Tenant's obligations and Landlord's rights under this Section 14 survive the
expiration of earlier termination of this Lease.
15. COMPLIANCE WITH LAW
Tenant shall, at its sole cost and expense, promptly comply with all
laws, statutes, ordinances and governmental rules, regulations or requirements
now in force or which may hereafter be in force, with the requirements of any
board of fire underwriters or other similar body now or hereafter constituted,
with any directions or occupancy certificates issued pursuant to any law by any
public officer or officers, as well as the provisions of all recorded documents
affecting the Premises, insofar as any thereof relate to or affect the
condition, use or occupancy of the Premises, or Tenant's business conducted
therein, excluding structural changes that are not required due to improvements
made byor for Tenant or due to Tenant's acts (which may, at Landlord's option,
be completed by Landlord at Tenant's sole cost and expense).
16. INSURANCE
(a) Tenant shall, at its sole cost and expense, during the term of tis
Lease, call all improvements at any time located in the Premises (other than
the Building standard tenant improvements) and all equipment and fixtures from
time to time used or intended to be sued in connection with the operation and
maintenance of the Premises, to be insured for the mutual benefit of Landlord
and Tenant against loss or damage by fire and against loss or damage by other
risks now or hereafter included in the standard form of all-risk insurance
policy, in an amount equal to the full insurable value thereof. All proceeds
from such insurance shall be used for the repair or replacement of such
improvements, equipment and fixtures.
(b) Notwithstanding any other provisions of this Lease, Tenant, at its
own expense, shall also maintain the following insurance coverage. All coverage
shall be primary and non-contributory over any insurance the Landlord may elect
to provide on his behalf. Upon the commencement of the Term, and upon renewal
of such insurance coverage, Tenant shall deliver to the Landlord an original
certificate of such insurance from the insurer providing a minimum of
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thirty (30) days' notice of cancellation. All policies of insurance required to
be carried by Tenant under this Section 16 shall be in form reasonably
satisfactory to Landlord, shall be issued by responsible insurance companies
which are licensed to do business in the State of California, have a Best's
rating of at least B+ and have been approved in writing by Landlor
(1) Worker's Compensation. Tenant shall maintain Worker's
Compensation insurance sufficient to comply with all applicable State
and/or Federal laws.
(2) Comprehensive Geneal Liability. Tenant shall maintain a
Comprehensive General Liability policy including all coverages normally
provided by the "Extended Liability Endorsement." Such policies shall
specificaly name the Landlord as additional insured and shall include a
cross-liability endorsement.
(3) Business Interruption. Tenant shall also maintain a policy of (or
obtain an endorsement providing) business interruption insurance insuring
Tenant against losses from interruption of its use of the Premises for any
reason (including, without limitaiton, acts or ommisions of Landlord or its
contractors and any failure to maintain or repair any phone lines, cables,
conduits or risers in the Building).
The minimum limits of liability shall be:
(1) $1,000,000 Combined Single Limit for Bodily Injury and Property
Damage, except that during all times (if any) that the Premises are used for
retain banking purposes, Tenant shall maintain $2,000,000 of said coverage.
(2) Property Insurance. Tenant shall maintain a standard "all risk"
property insurance policy on all personal property and tenant improvements and
betterments for not less than ninety percent (90%) of the replacement cost of
the same. Tenant's property policy shall not provide for a deductible in excess
of $10,000 without prior written approval of Landlord.
(3) Plate Glass. Tenant shall assume all responsibility for all plate
glass on the Premises. Tenant may elect to self-insure damage to plate glass on
the Premises. Interior Only.
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17. ASSIGNMENT AND SUBLETTING
Tenant shall not assign, mortgage, pledge or otherwise transfer this
Lease, or any interest therein, either voluntarily, involuntarily, or by
operation of law, and shall not sublet the Premises or any part thereof, or any
right or privilege appurtenant thereto, or suffer any other person (the agents
and employees of Tenant excepted) to occupy or use the Premises, or any portion
thereof, without the written consent of Landlord, which consent shall not be
unreasonably withheld.
Tenant hereby expressly agrees that the following are all reasonable
grounds for Landlord's disapproval of an assignment or subletting (but shall
not limit the reasonable bases for Landlord's disapproval):
(i) The proposed assignee or subtenant does not, in
Landlord's good faith judgment, have a good reputation as a
tenant of property;
(ii) The use of the Premises by the proposed assignee
or subtenant is not permitted by this Lease;
(iii) In Landlord's reasonable judgment, the proposed
assignee or subtenant is engaged in a business, and the
Premises, or the relevant part thereof will be used in a
manner, that is not in keeping with the then current
standards of the building as a first-class office and retail
building;
(iv) The use of the Premises by the proposed assignee
or subtenant will violate any applicable law, ordinance or
regulation;
(v) The proposed assignee or subtenant is a person with whom
Landlord is in negotiation to lease space in the Building,
or has negotiated for such purpose within the six (6)
months prior to the request for approval;
(vi) Tenant is then in default of any obligation of
Tenant under this Lease; or
(vii) The proposed assignment or sublease conflicts
with or violates any provision in this Lease or in any other
tenant's
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lease (including, without limitation, any restrictive or
exclusive covenant as to use).
Notwithstanding the foregoing, if Tenant gives Landlord at least
fifteen (15) days' prior written notice of a Permitted Assignment or Subletting
(as hereinafter defined) and includes with such notice reasonable evidence, as
determined by Landlord, that the assignee or subtenant, as applicable, under
such Permitted Assignment or Subletting meets conditions (a), (b) or (c)
hereinafter set forth, then Landlord's consent shall not be required for such
assignment or subletting. As used herein, a "Permitted Assignment or
Subletting" shall mean an assignment or subletting by the initial Tenant to any
of the following corporations: (a) a corporation more than fifty percent (50%)
of the voting shares of which are owned by the initial Tenant; (b) a
corporation which owns more than fifty percent (50%) of the voting shares of
the initial tenant; or (c) a corporation more than fifty percent of the voting
shares of which are owned by a corporation which also owns more than fifty
percent (50%) of the voting shares of the initial Tenant.
A consent to one assignment, mortgage, pledge, subletting, occupation,
or use by any other person shall not relieve Tenant from any obligation under
this Lease and shall not be deemed to be a consent to any subsequent
assignment, mortgage, pledge, subletting, occupation or use by another person.
Any assignment, mortgage, pledge, subletting, occupation or use without such
consent shall be void, and shall, at the option of Landlord, terminate this
Lease. Tenant's request for Landlord's consent pursuant to this Section 17
shall be submitted in writing at least thirty (30) days prior to the date
Tenant desires to secure such consent. Such request shall be accompanied by all
relevant information reasonably necessary for Landlord to consider such
request. Any request for Landlord's consent pursuant to this Section 17 shall
also be accompanied by a payment to Landlord of $300.00 for the review,
evaluation, and/or preparation of any materials or documents; provided,
however, if Landlord elects to terminate pursuant to this Section 17, the
$300.00 shall be refunded to Tenant. In lieu of considering such request (other
than a request to the mortgage or pledge of this Lease), Landlord may, within
fifteen (15) days after receipt thereof from Tenant, notify Tenant of
Landlord's election to terminate this Lease (or if a subletting of only a part
of the Premises is involved, terminate this Lease only as to that part and
reduce the rent and other monetary obligations of Tenant proportionately), which
election, if made, shall be effective no less than sixty (60) nor more than
ninety (90)
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days after the date of such election. If such election is made by Landlord,
Tenant may rescind its request for consent within five (5) business days after
Landlord gives Tenant notice of Landlord's election to terminate. If Tenant
does not timely rescind its request for consent, then Tenant shall surrender
the Premises (or if a subletting of only a part of the Premises is involved,
only that part) to Landlord on the effective date of such termination, and
Tenant shall thereafter incur no further liability under this Lease for the
Premises (or for that part of the Premises required to be surrendered).
Fifty percent (50%) of any sums or other economic consideration
received by Tenant as a result of such subletting (other than the rental or
other payments received which are attributable to the amortization of the cost
of nonbuilding standard leasehold improvements made to the sublet portion of
the Premises at the cost of Tenant) whether denominated rentals under the
sublease or otherwise, which exceed in the aggregate the total sums which
Tenant is obligated to pay Landlord under this Lease (prorated to reflect
obligations allocable to that portion of the Premises subject to such sublease)
shall be payable to Landlord as additional rental under this Lease without
affecting or reducing any other obligation of Tenant hereunder.
Regardless of Landlord's consent, no subletting or assignment (or
merger or consolidation) shall release Tenant of Tenant's obligations hereunder
or otherwise alter the primary liability of Tenant hereunder. The acceptance of
rent or any other sum by Landlord from any person or entity shall not be deemed
to be a waiver by Landlord of any provision hereof. In the event of default by
any assignee of Tenant or any successor of Tenant in the performance of any of
the terms hereof, Landlord may proceed directly against Tenant without the
necessity of exhausting remedies against said assignee or successor. Landlord
may consent to subsequent subletting or assignments of this Lease by assignees
of Tenant without notifying Tenant or any successor of Tenant, and without
obtaining its or their consent thereto and such action shall not relieve Tenant
of any liability under this Lease.
18. RULES
Tenant shall faithfully observe and comply with the rules and
regulations annexed to this Lease as Exhibit "D" and, after notice thereof, all
reasonable modifications thereof and additions thereto from time to time
promulgated in writing by Landlord. Landlord shall not be responsible
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to Tenant for the nonperformance by any other tenant or occupant of the
Building of any of said rules and regulations.
19. ENTRY BY LANDLORD
Landlord may enter the Premises at reasonable hours to: (a) inspect the
same; (b) upon twenty-four (24) hours' prior written or oral notice, exhibit
the same to prospective purchasers, lenders or tenants; (c) determine whether
Tenant is complying with all of Tenant's obligations hereunder; (d) supply
janitor service and any other service to be provided by Landlord to Tenant
hereunder, (e) post notices of non-responsibility; and (f) make repairs
required of Landlord under the terms hereof or repairs to any adjoining space
or utility service or make repairs, alterations or improvements to any other
portion of the Building, provided, however, that all such work shall be done as
promptly as reasonably possible and so as to cause as little interference to
Tenant as reasonably possible. Tenant hereby waives any claim for damages for
any injury or inconvenience to or interference with Tenant's business, any loss
of occupancy or quiet enjoyment of the Premises or any other loss occasioned by
such entry. Landlord shall at all times have and retain a key with which to
unlock all of the doors in, on or about Premises (excluding Tenant's vaults,
safes and similar areas designated in writing by Tenant in advance) and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open said doors in an emergency in order to obtain entry to the
Premises. Any entry to the Premises obtained by Landlord by any of said means,
or otherwise, shall not be construed or deemed to be a forcible or unlawful
entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from the Premises, or any portion thereof.
20. EVENTS OF DEFAULT
The occurrence of any one or more of the following events ("Events of
Default") shall constitute a breach of this Lease by Tenant: (a) if Tenant
shall fail to pay any Base Rent, Storage Space Rent, Tenant's Share of
Increased Operating Expenses and Taxes or Additional Rent when and as the same
become due and payable, or (b) if Tenant shall fail to pay any other sum
payable under this Lease and as the same becomes due and payable and such
failure shall continue for more than ten (10) days; or (c) if Tenant shall
fail to perform or observe any other term hereof or of the rules and
regulations described in Section 18 to be performed or observed by Tenant, such
failure shall continue for more than thirty (30) days after notice thereof from
Landlord and
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Tenant shall not within such period commence with due diligence and dispatch
the curing of such default, or, having so commenced, shall thereafter fail or
neglect to prosecute or complete with due diligence and dispatch the curing of
such default; or (d) if Tenant shall make a general assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts as they
become due or shall file a petition in bankruptcy, or shall be adjudicated as
bankrupt or insolvent, or shall file a petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or shall fail
any answer admitting or shall fail timely to contest the material allegations
of a petition filed against it in any such proceeding, or shall seek or consent
to or acquiesce in the appointment of any trustee, receiver or liquidator of
Tenant or any material part of its properties; or (e) if within thirty (30)
days after the commencement of any proceeding against Tenant seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such proceeding shall not have been dismissed, or if, within thirty
(30) days after the appointment without the consent or acquiescence of Tenant
or of any material part of its properties, such appointment shall not have been
vacated; or (f) if this Lease or any estate of Tenant hereunder shall be levied
upon under any attachment or execution and such attachment or execution is not
vacated within ten (10) days. Tenant's vacation of the Premises shall also
constitute an Event of Default if: (i) Tenant is using the Premises for retail
banking purposes prior to the vacation; or (ii) Tenant is otherwise in default
under this Lease.
21. TERMINATION UPON DEFAULT
If an Event of Default shall occur, Landlord at any time
thereafter may give a written termination notice to Tenant, and on the date
specified in such notice (which shall be not less than three (3) days after
the giving of such notice) Tenant's right to possession and this Lease shall
terminate, unless on or before such date all rent and other sums payable by
Tenant under this Lease (together with interest thereon at the rate of twelve
percent [12] per annum) and all costs been paid by Tenant and all other
breaches of this Lease by Tenant at the time existing shall have been fully
remedied. Upon such termination, Landlord may recover from Tenant: (a) the
worth at the time of award of the unpaid rent which had been earned at the time
of termination; (b) the worth at the time of award of the amount by which the
unpaid rent which would have been earned
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after termination until the time of award exceeds the amount of such rental
loss that Tenant proves could have been reasonably avoided; (c) the worth at
the time of award of the amount by which the unpaid rent for the balance of the
Term after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; and (d) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's
failure to perform its obligations under this Lease or which results therefrom.
The "worth at the time of award" of the amounts referred to in clauses (a) and
(b) above shall be computed by allowing interest at the rate of ten percent
(10%) per annum. The worth at the time of award of the amount referred to in
clause (c) above shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%). For the purposes of determining unpaid rent under clauses (a),
(b) and (c) above, the monthly rent reserved in this Lease shall be deemed to
be the rent due under Sections 4 and 5 above, as adjusted by Section 6.
Landlord also has the remedy described in California Civil Code
Section 1951.4 (Lessor may continue Lease in effect after Lessee's breach and
abandonment and recover rent as it becomes due, if Lessee has the right to
sublet or assign, subject only to reasonable limitations).
22. CONTINUATION AFTER DEFAULT
Even though Tenant has breached this Lease and/or abandoned the
Premises, this Lease shall continue in effect for as long as Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all of its
rights and remedies under this Lease, including the right to recover rent as it
becomes due under this Lease. Acts of maintenance or preservation or efforts to
relet the Premises or the appointment of a receiver upon application of
Landlord to protect Landlord's interest under this Lease shall not constitute a
termination of Tenant's right to possession.
23. OTHER RELIEF
The remedies provided for in this Lease are in addition to any
other remedies available to Landlord at law or in equity by statute or
otherwise.
24. PARKING
Unless Tenant is in default hereunder, Tenant shall be entitled
to rent up to four (4) Building parking
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spaces per 1,000 of rentable square feet in the Premises (to be rounded up to
the nearest whole number of spaces), subject to a monthly parking fee for such
spaces designated by Landlord for parking, with Landlord reserving the right to
set and increase monthly parking fees for such spaces from time to time during
the term of this Lease. Tenant may also rent, over a month-to-month basis, and
subject to payment of said parking charges, additional parking spaces to the
extent such spaces are available for renting to Tenant, as determined by
Landlord. Landlord may assign any unreserved and unassigned parking spaces
and/or make all or a portion of such spaces reserved, if it determines in its
sole discretion that it is necessary for orderly and efficient parking. Tenant
shall not use more parking than said number. If Landlord has not assigned
specific spaces to Tenant, Tenant shall not use any spaces which have been so
specifically assigned by Landlord to other tenants or for such other uses as
visitor parking or which have been designated by governmental entities with
competent jurisdiction as being restricted to certain uses. Tenant shall not
permit or allow any vehicles that belong to or are controlled by Tenant or
Tenant's employees, suppliers, shippers, customers, or invitees to be loaded,
unloaded, or parking in areas other than those designated by Landlord for such
activities except as may be expressly provided otherwise below. Up to ten (10)
different third party messenger firms serving Tenant may park in the loading
dock areas free of charge (and on a non-exclusive basis) between the hours of
6 A.M. to 9 P.M. Monday through Friday and from 8:00 A.M. to 1:00 P.M. on
Saturdays (excluding Sundays and all holidays) provided that no more than five
(5) carriers may be parked at the same time and provided, further that no such
courier shall remain parked for more than twenty (20) minutes. Such couriers
may also park in non-reserved parking spaces in the Building parking garage
from 6:00 P.M. to 9:00 P.M. Monday through Friday (excluding holidays) free of
charge provided that no such courier shall remain parked for more than twenty
(20) minutes. If Tenant permits or allows any of the prohibited activities
described in this Section 24, then Landlord shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Tenant, which
cost shall be immediately payable upon demand by Landlord. Landlord reserves
the right at any time to relocate such spaces within the Building parking areas
and to substitute an equivalent number of parking spaces in the Building.
Tenant shall submit a written notice in a form reasonably specified by
Landlord containing the names, office addresses and telephone numbers of any
specific
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persons who are authorized by Tenant to use the parking spaces on a monthly
basis and the names, addresses and telephone numbers of the couriers described
above (collectively, the "Authorized Users") and shall use its best efforts to
identify each vehicle by make, model and license number. Such notice shall be
served upon Landlord prior to the beginning of the Term. Such notice, as
amended from time to time, is hereafter referred to as the "Parking Notice." No
person or courier whose name, address, and phone numbers are not contained in
the Parking Notice shall have any right to park an automobile in the area of
the parking facilities designated for parking or permitted to be used for
parking hereunder, and no person whether or not this name is included in the
Parking Notice shall have any right to park an automobile not indentified in
the Parking Notice without (in either case) paying the parking charge then
applicable for daily parking in the parking facilities for the Building and
parking in the area designated for daily parking.
Tenant and Authorized Users shall comply with all rules and regulations
as set forth in the Parking Rules and Regulations portion of the rules and
regulations adopted by Landlord from time to time. Landlord may refuse to
permit any person who violates the Parking Rules and Regulations to park in the
parking facility, and any violation of the rules shall subject the car to
removal. Tenant agrees to use its best efforts to acquaint all Authorized Users
and visitors with the Parking Rules and Regulations.
All responsibility for damage to cars is assumed by Authorized Users.
Tenant shall repair or cause to be repaired at its sole cost and expense any
and all damage to the parking facility or any part thereof caused by Tenant or
its Authorized Users or resulting from vehicles of Authorized Users.
Tenant and the couriers described above shall have the non-exclusive
right to reasonably use the freight elevator near the loading dock area of the
Building from 6:00 A.M. to 9:00 P.M. Monday through Friday and from 8:00 A.M.
to 1:00 P.M. on Saturday.
25. RIGHT TO RELOCATE
[INTENTIONALLY DELETED]
26. TRADE FIXTURES
Subject to the provisions of Sections 7 and 8 hereof, Tenant shall
install and maintain its trade fixtures
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on the Premises, provided that such fixtures, by reason of the manner in which
they are affixed, do not become an integral part of the Building or Premises.
Tenant, if not in default hereunder, may at any time or from time to time
during the Term, or upon the expiration or earlier termination of this Lease,
alter or remove any such trade fixtures so installed by Tenant. If not so
removed by Tenant on or before the expiration or earlier termination of this
Lease, Tenant, upon the request of Landlord so to do, shall thereupon remove
the same. Any damage to the Premises caused by any installation, alteration or
removal of such trade fixtures shall be promptly repaired at the expense of
Tenant.
27. SUCCESSORS AND ASSIGNS
Subject to the provisions hereof relating to assignment, mortgaging,
pledging and subletting, this Lease shall bind the heirs, executors,
administrators, successors and assigns of any and all the parties hereto.
28. TIME
Time is of the essence of this Lease.
29. LANDLORD'S DEFAULT
If Landlord shall default in the performance of any of its obligations
under this Lease (including, without limitation, Landlord's obligations, if
any, to maintain phone lines or other utility systems or equipment), Tenant
shall have no right to pursue any remedies against Landlord, including, without
limitation, termination of this Lease, unless and until Tenant shall have given
Landlord written notice of the default and Landlord shall not have commenced
the cure of such default within thirty (30) days after receipt of the notice,
or thereafter shall not diligently prosecute the cure to completion; provided,
however, that notwithstanding the foregoing, Landlord shall promptly use good
faith, commercially reasonable reasonable efforts to promptly cure any Landlord
default which results in the Premises or a material portion thereof becoming
untenantable. Satisfaction of any money judgment obtained against Landlord
shall be satisfied only out of: (i) proceeds of sale or disposition of
Landlord's interest in the Building, whether by Landlord or by execution of
judgment; or (ii) rentals and other payments from tenants in the Building.
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30. TENANT'S LEASE OF OTHER SPACE IN BUILDING
If Tenant leases space in the Building under a lease other than this
Lease, then any default by Tenant under such other lease may be deemed by
Landlord to be a default by Tenant under this Lease.
31. LANDLORD'S RIGHT TO CURE DEFAULTS
All agreements and provisions to be performed by Tenant under any of
the terms of this Lease shall be performed at Tenant's sole cost and expense
and without any abatement of rent. If Tenant shall fail to pay any sum of
money, other than rent, required to be paid by it hereunder or shall fail to
perform any other act on its part to be performed hereunder and such failure
shall continue for thirty (30) days after notice thereof by Landlord, Landlord
may, but shall not be obligated so to do, and without waiving or releasing
Tenant from any obligations of Tenant, make any such payment or perform any
such other act on Tenant's part to be made or performed as provided in this
Lease. All sums so paid by Landlord and all necessary incidental costs shall be
deemed additional rent payable hereunder and shall be payable to Landlord on
demand, and Landlord shall have (in addition to any other right or remedy of
Landlord) the same rights and remedies in the event of the nonpayment thereof
by Tenant as in the case of default by Tenant in the payment of rental.
32. ATTORNEYS' FEES
If as a result of any breach or default in the performance of any of
the provisions of this Lease, Landlord shall use the services of any attorney
in order to secure compliance with such provisions or recover damages
therefore, or to terminate this Lease or evict Tenant, Tenant shall reimburse
Landlord upon demand for any and all reasonable attorneys' fees and expenses so
incurred by Landlord, provided that if Tenant shall be the prevailing party in
any legal action brought by Landlord against Tenant, Tenant shall be entitled
to recover for the fees of its attorneys in such amount as the court may
adjudge reasonable.
33. EMINENT DOMAIN
Should the whole or any part of the Premises be condemned and taken by
any competent authority for any public or quasi-public use or purpose, all
awards payable on account of such condemnation and taking shall be payable to
Landlord, and Tenant hereby waives all interest in or claim
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to said awards, or any part thereof, except that Tenant shall be entitled to
retain any award specifically allocated and made to Tenant for loss of Tenant's
personal property and trade fixtures. If the whole of the Premises shall be so
condemned and taken, then this Lease shall terminate. If a part only of the
Premises is condemned and taken and the remaining portion thereof is not
suitable for the purposes of which Tenant had leased said Premises, Tenant
shall have the right to terminate this lease. If by such condemnation and
taking a part only of the Premises is taken, and the remaining part thereof is
suitable for the purposes for which Tenant has leased said Premises, this lease
shall continue, but the rental shall be reduced in an amount proportionate to
the value of the portion taken as it related to the total value of the
Premises. A voluntary sale of the building by Landlord to any public or
quasi-public body, agency or person, corporate or otherwise, having the power
of eminent domain, either under threat of condemnation or while condemnation
proceedings are pending, shall be deemed to be taking under the power of
eminent domain for purposes of this Section 33.
34. SUBORDINATION
This Lease, at Landlord's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation for security now or
hereafter placed upon the Building and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Tenant's right to quiet possession of the Premises shall not be disturbed if
Tenant is not in default and so long as Tenant shall pay the rent and observe
and perform all of the provisions of the Lease, unless this Lease is otherwise
terminated pursuant to its terms. Landlord shall use good faith efforts, at no
cost to Landlord, to obtain a commercially reasonable nondisturbance agreement
in favor of Tenant from each of Landlord's lenders who hold a mortgage or deed
of trust which encumbers the Building. If any mortgagee, trustee or ground
landlord shall elect to have this Lease prior to the lien of its mortgage, deed
of trust or ground lease, then this Lease shall be deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease is dated prior or
subsequent to the date of said mortgage, deed of trust or ground lease or the
date of recording thereof. Tenant agrees to execute any documents required to
effectuate such subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be, and failing to do
so within ten (10) days after demand, does hereby make, constitute and
irrevocably appoint Landlord as
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Tenant's attorney in fact and in Tenant's name, place and stead, to do so.
35. NO MERGER
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work at merger, and shall, at the option of
Landlord terminate all or any existing subleases or subtenancies, or may, at
the option of Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.
36. CONVEYANCE BY LANDLORD
In the event the original Landlord hereunder, or any successor owner of
the Building, shall sell, assign or transfer the Building, all liabilities and
obligations on the part of the original Landlord, or such successor owner,
under this Lease accruing thereafter shall terminate, and thereupon all such
liabilities and obligations shall be binding upon the new owner. Tenant agrees
to attorn to such new owner.
37. ESTOPPEL CERTIFICATE
Tenant shall execute and deliver within ten (10) business days after
written request by Landlord, a certificate certifying (a) that this lease is
unmodified and in full force and effect (or, if there have been modifications,
that this Lease is in full force and effect, as modified, and stating the date
and nature of each modification), (b) the date, if any, to which rental and
other sums payable hereunder have been paid, (c) that no notice has been
received by Tenant of any default which has not been cured, except as to
defaults specified in said certificate and (d) such other matters as may be
reasonably requested by Landlord. Any such certificate may be relied upon by
any prospective purchaser, mortgagee or beneficiary under any deed of trust of
the Building or any part thereof. The failure of Tenant so to deliver such
certificate within ten (10) business days after notice from Landlord that
Tenant has failed to deliver such certificate within the ten (10) business day
period shall be deemed to be a material breach of, and Event of Default under,
this Lease.
38. NO LIGHT, AIR OR VIEW EASEMENT
Any diminution or shutting off of light, air or view by any structure
which may be erected on lands adjacent to the Building shall in no way affect
this Lease or impose any liability on Landlord.
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39. HOLDING OVER
If Tenant holds over after the Term with or without the express or
implied consent of Landlord, Tenant shall become a tenant from month to month
upon the terms specified herein but at a monthly rent equivalent to one hundred
and fifty percent (150%) of the then prevailing monthly rent paid by Tenant at
the expiration of the Term payable in advance on or before the first day of
each month and otherwise payable in accordance with the provisions of Sections
4 and 5 hereof. Each party shall give the other notice at least one month prior
to the date of termination such monthly tenancy of its intention to terminate
such tenancy.
40. ABANDONMENT
In the event of the termination of this Lease by Landlord pursuant to
Section 21 hereof, Landlord may remove any property of Tenant from the Premises
and store the same elsewhere for the account and at the expense and risk of
Tenant, and if Tenant shall fail to pay the cost of storing such property after
it has been stored for a period of ninety (90) days or more, Landlord may sell
any or all such property at public or private sale, in such manner and at such
times and places as Landlord in its sole discretion, may deem proper, without
notice to or demand upon Tenant, for the payment of any part of such charges or
the removal of any such property, and shall apply the proceeds of such sale:
first, to the cost and expenses of such, including reasonable attorneys' fees
actually incurred; second, to the payment of the cost of or charges for
storing any such property; third, to the payment of any other sums of money
which may then or thereafter be due to Landlord from Tenant under any of the
terms thereof; and fourth, the balance, if any, to Tenant.
41. SECURITY DEPOSIT None.
42. WAIVER
The waiver by Landlord of any agreement, condition or provision herein
contained shall not be deemed to be a waiver of any subsequent breach of the
same or any other agreement, condition or provision herein contained, nor shall
any custom or practice which may be observed by the parties in the
administration of the terms hereof be construed to waive or to lessen the right
of Landlord to insist upon the performance by Tenant in strict accordance with
said terms. The subsequent acceptance of rental
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hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any agreement, condition or provision of this Lease, other
than the failure of Tenant to pay the particular rental so accepted, regardless
of Landlord's knowledge of such preceding breach at the time of acceptance of
such rental.
43. NOTICES
All notices and demands which may or are required to be given by either
party to the other hereunder shall be in writing and shall be deemed to have
been fully given when deposited in the United States mail, certified or
registered, postage prepaid, and addressed as follows: to Tenant at the address
specified in the Basic Lease Information, or to such other place as Tenant may
from time to time designate in a notice to Landlord; to Landlord c/o
Haseko-Dunn Management Company, 350 S. Figueroa Street, Suite 141, Los Angeles,
CA 90071 or to such other place as Landlord may from time to time designate in
a notice to Tenant, or, in the case of Tenant, delivered to Tenant at the
Premises. Tenant hereby appoints as its agent to receive the service of all
dispossessory or distraint proceedings and notices thereunder the person in
charge of or occupying the Premises at the time, and, if no person shall be in
charge of or occupying the same, then such service may be made by attaching the
same on the main entrance of the premises.
44. COMPLETE AGREEMENT
There are no oral agreements between Landlord and Tenant affecting this
Lease and this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between
Landlord and Tenant with respect to the subject matter of this Lease. There
are no representations between Landlord and Tenant other than those contained
in this Lease and all reliance with repsect to any representations is solely
upon such representations as are contained herein.
45. CORPORATE AUTHORITY
If Tenant is a corporation, each of the persons executing this Lease on
behalf of Tenant hereby covenants and represents and warrants that (a) Tenant
is a duly authorized and validly existing corporations, (b) Tenant has and is
qualified to do business in California, (c) Tenant has full right and authority
to enter into this lease, and (d) each person executing this Lease on behalf of
Tenant was authorized to do so.
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46. ADDITIONAL PROVISIONS
Tenant shall pay or cause to be paid before delinquency any and
all taxes levied or assessed, and which may become payable during the term upon
any of Tenant's leasehold property located in the Premises; except that which
has been paid for by the Landlord and is standard of the Building. If any or
all of Tenant's leasehold improvements, equipment, furniture, fixtures, and
personal property are assessed with the Building, and cause any increase in the
property taxes of the Building or any other tax levied on the Building, Tenant
shall pay to Landlord its share of such taxes within ten (10) days after
delivery to Tenant by Landlord of a statement in writing setting forth the
amount of such taxes applicable to Tenant's property.
47. MISCELLANEOUS
The words "Landlord" and "Tenant" as used herein shall include
the plural as well as the singular. If more than one person or entity
constitutes Tenant, the obligations thereunder imposed upon Tenant shall be
joint and several. Time is of the essence of this Lease and each of all of its
provisions. Submission of this instrument or examination or signature by Tenant
does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution and delivery by both Landlord
and Tenant. The agreements, conditions and provision herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
executors, administrators, successors and assignees of the parties hereto.
Tenant shall not, without the written consent of Landlord, use the name of the
Building for any purpose other than as the address of the business to be
conducted by Tenant in the Premises. All amounts of money payable by Tenant to
Landlord hereunder, if not paid when due, shall bear interest from the date due
until the due date paid at the rate of twelve percent (12%) per annum. If any
provision of this Lease or any portion thereof is determined to be illegal or
unenforceable, such determination shall not affect any other provision or
portion of this Lease and all such other provisions and portions shall remain
in full force and effect.
This Lease shall be governed by and construed in accordance
with the laws of the State of California.
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48. EXHIBITS
The exhibits and addendum, if any, specified in the Basic Lease
Information are attached to this Lease and are incorporated herein by
reference.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first written above.
"TENANT": "LANDLORD":
HASEKO CORPORATION,
a Japanese corporation
METROBANK,
a California corporation By: Haseko (California), Inc.,
a California corporation,
By: R. Bulseco its authorized agent
-------------------------
Name: Robert P. Bulseco
Title: President/Chief Administrative
Officer
By: Toru Nagayama
----------------------------
Name: TORU NAGAYAMA
Title: SENIOR EXECUTIVE VICE
PRESIDENT
"MASTER LANDLORD"
ROYAL INVESTMENT SYSTEMS
(RIS) (03-07)/LOS ANGELES WORLD
TRADE CENTER PARTNERSHIP
By: Haseko (California), Inc.,
a California corporation,
its authorized agent
By: Toru Nagayama
----------------------------
Name: TORU NAGAYAMA
Title: SENIOR EXECUTIVE VICE
PRESIDENT
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RIDER ATTACHED TO AND MADE A PART OF LEASE DATED JANUARY 21, 1994 BY
AND BETWEEN HASEKO CORPORATION, AS LANDLORD, AND METROBANK, AS TENANT
49. LEASE AS SUB-SUBLEASE
Supplementing Section 34, Tenant hereby acknowledges that Landlord has
leased the Building and the land underlying the Building pursuant to a master
lease (the "Master Lease") and that this Lease is actually a sub-sublease and
is subject and subordinate to the Master Lease.
If Landlord or the landlord under the Master Lease (the "Master
Landlord") gives written notice to Tenant at Tenant's address for notices in
Section 43 hereof that Landlord is in default under the Master lease or that
the Master Lease has expired or has been terminated, then provided that this
Lease has not expired or terminated: (i) Tenant shall thereafter deliver all
sums payable by Tenant under this Lease to Master Landlord at such address as
Master Landlord may direct and otherwise in accordance with this Lease, and
Landlord hereby unconditionally directs Tenant to so pay such sums upon such
written notice to Tenant; and (ii) provided Tenant is not in default under this
Lease after the giving of any applicable notice and the expiration of any
applicable cure period and provided, further, that Tenant pays all sums payable
under this Lease to Master Landlord in accordance with subsection (i) above and
attorns to Master Landlord as the Landlord under this Lease, then Master
Landlord shall observe and perform all of the obligations of Landlord to be
observed and performed under this Lease for the remaining term of this Lease
and shall not distrub or interfere with the quiet use, enjoyment and possession
of the Premises by Tenant.
Master Landlord's execution of this Lease shall constitute Master
Landlord's approval of: (a) the provisions of the preceding sentence; and (b)
the sub-subleasing of the Premises by Landlord to Tenant. Tenant hereby
acknowledges and agrees that Tenant is not a third party beneficiary or
intended beneficiary of the Master Lease.
50. STORAGE SPACE
Tenant shall have the right from and after the Commencement Date upon
at least thirty (30) days' prior written notice to Landlord to lease up to one
hundred and fifty (150) rentable square feet of storage space capable of being
locked by Tenant with a lock provided by Tenant and
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located on the "A" level of the Building parking garage in a location selected
by Landlord and at a rental rate of seventy-five cents ($.75) per rentable
square foot per month during the initial term of this Lease, and at the rate
then charged by Landlord (and subject to increase) for storage space ("Storage
Space rent"). Such Storage Space Rent shall be payable concurrently with
monthly Base Rent. Landlord shall have no responsibility for the safety of any
items stored in said storage space and shall have no obligation to supervise
other tenants of the Building in connection therewith. Tenant shall have the
right ot cancel its storage space upon six (6) months' prior written notice to
Landlord. Tenant shall maintain the same insurance for the storage space as
Tenant is requried to maintain for the Premises.
51. STORAGE PRIOR TO COMMENCEMENT DATE
Upon Landlord's delivery of possession of the Premises to Tenant prior
to the Commencement Date, Tenant shall have the right to store its furniture in
the Building at no charge at a location selected by Landlord and on such other
reasonable terms and conditions as may be determined by Landlord.
52. EXTENSION OPTION
Tenant shall have one (1) option to extend the term of the Lease, for a
period of five (5) years (the "Extension Term"), provided that the Tenant is
not in default under any of the terms or provisions of the Lease at the time
Tenant exercises the option and as of the beginning of the Extension Term and
also provided that Tenant has not been in default on three (3) or more separate
occasions during the term of this Lease. Tenant shall exercise the option by
giving written notice of Tenant's exercised its option to Landlord at least
nine (9) calendar months prior to the expiration of the term hereof. At the
commencement of an Extension Term, the Base Rent shall be adjusted to be equal
to ninety-five percent (95%) of the then Fair Market Rental Value (as defined
below) of the Premises. If Landlord and Tenant cannot agree upon the Fair
Market Rental Value of the Premises within sixty (60) days after Landlord's
receipt of Tenant's notice exercising the option contained herein, Landlord and
Tenant shall each appoint a "Qualified Arbitrator" (as defined below) within
seven (7) business days after the expiration of the aforementioned sixty (60)
day period. Such arbitrators shall confer and select a third Qualified
Arbitrator (the "Neutral Arbitrator"), who alone shall determine the Fair
Market Rental Value of the Premises. Should the two (2) arbitrators fail to
select a
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third Qualified Arbitrator to act as the Neutral Arbitrator within seven (7)
business days, the Neutral Arbitrator shall be designated pursuant to
California Code of Civil Procedure Section 1281.6, as that Section may be
amended or redesignated from time to time provided, however, that the Neutral
Arbitrator. The determination of the Neutral Arbitrator shall be binding upon
Landlord and Tenant. Landlord and Tenant shall bear the cost of the arbitrator
appointed by such party and shall equally bear the cost of the Neutral
Arbitrator. As used herein, the term "Qualified Arbitrator" shall mean a person
who is a real estate broker or lease appraiser licensed by the State of
California and who has not less than five (5) years' experience in commercial
leasing, whether as a real estate broker or lease appraiser. The term "Fair
Market Rental Rate" shall mean the annual amount per rentable square foot that
a tenant would pay and a landlord would accept at arm's length, for a new five
(5) year Lease (for renewal space) for delivery on or about the commencement of
the Extension Term, for comparable space int the Building and in other office
buildings in the downtown Los Angeles area, similarly improved, giving
appropriate consideration to annual rental rates per rentable square foot, the
type of escalation clauses (including, but without limitation, operating
expenses, real estate taxees and base years), rental abatement or free rent
concessions, if any, brokerage commissions, the length of the Lease Term, size
and location of the Premises being leased (including the floor level), building
standard work letter and/or tenant improvement allowances, if any, and the date
as of the which the Fair Market Rental Rate is to become effective.
53. TERMINATION OPTION
Provided Tenant is not in default as of the date Tenant exercises the
termination option described in this Subsection 53(a) and as of April 30, 1999,
then Tenant shall have the right to terminate this Lease as of April 30, 1999
by: (i) giving written notice to Landlord of Tenant's exercise of the
Termination Option on or before August 1, 1998, and (ii) paying to Landlord on
or before April 1, 1999, in immediately available funds, the sum of One Hundred
and Eight Thousand and No/100 Dollars ($108,000.00).
54. SPACE REDUCTION OPTION
If Tenant shall not have exercised any termination option in accordance
with Section 53 above, then Tenant shall have a one-time option after April 30,
1999 and prior
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to April 30, 2004 to elect upon ninety (90) days' prior written notice to
Landlord to reduce the Premises by the space outlined on Exhibit "F" attached
hereto provided: (i) concurrently with such notice, Tenant pays to Landlord in
immediately available funds, the sum of Twenty One Thousand Six Hundred and
No/100 Dollars ($21,600.00); (ii) Tenant is not in default under this Lease as
of the date Tenant gives Landlord written notice of the space reduction and as
of the date of the space reduction; and (iii) Tenant's notice specifies the
effective date of the reduction. If Tenant elects to reduce the Premises by the
space outlined on Exhibit "F", then: (a) the Base Rent and Tenant's Percentage
Share of Operating Costs and Taxes shall be appropriately adjusted upon the
effective date of the space reduction; and (b) promptly upon request from
Landlord, Tenant shall execute any and all reasonable amendments to this Lease
as may be required by Landlord in order to reflect said adjustments and the
reduction in the space included in the Premises; and (c) Tenant shall have no
further right to reduce the size of the Premises.
55. EXTRAORDINARY ALLOWANCE
If Tenant does not exercise its Termination Option in
accordance with Section 53 above, Landlord shall provide Tenant with an
additional improvement allowance (the "Extraordinary Allowance") of up to $3.50
for each square foot of rentable space that is included in the Premises at the
time the improvement work is completed. The Extraordinary Allowance shall be
disbursed in the same manner and subject to the same conditions as
disbursements of the Initial TI Allowance described in Paragraph 2.10 of the
Work Letter attached hereto as Exhibit "B"; provided, however, that any
portions of the Extraordinary Allowance that shall not have been disbursed
prior to July 1, 2000 shall no longer be available for disbursement, but
provided Tenant is not then in default, shall be automatically credited against
the Base Rent next due.
56. EXPANSION OPTION
During the Initial Term, and provided Tenant shall not have
exercised its option to reduce the size of the Premises and shall not be in
default under this Lease, then Tenant may lease Suite 172 of the Building upon
the terms and conditions of this Lease (with appropriate adjustments to
Tenant's Share of Operating Expenses and Taxes, and at a Base Rent equal to the
Fair Market Value for Suite 172 and the failure of the existing tenant therein
to renew said lease. On or before August 14, 1994 Tenant shall notify Landlord
of
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its election to lease Suite 172. Landlord and Tenant shall meet within thirty
(30) days after Tenant gives such notice to determine the Base Rent for Suite
172, and if Landlord and Tenant shall not have agreed thereon within thirty
(30) days, then the Base Rent shall be determined by appraisal in accordance
with the procedures set forth in this Lease for determination of the Base Rent
for the Extension Terms.
57. RIGHT OF FIRST NEGOTIATION
If the space described in Exhibit "G" attached hereto (the
"Negotiable Space") becomes available for lease from Landlord, and Landlord
elects in its sole discretion to Lease such space to an independent
unaffiliated third party, then provided Tenant is not then in default hereunder
and has not exercised its option to reduce the size of the Premises, then
Tenant shall have a right of first negotiation (the "Right of First
Negotiation") to negotiate with Landlord to lease such Negotiable Space. Within
fifteen (15) days after Landlord elects in its sole discretion to lease such
Negotiable Space, Landlord shall so advise Tenant by delivering to Tenant a
notice thereof. In such notice, Landlord shall offer to Tenant the Negotiable
Space on the same terms and conditions as Landlord intends to offer to any
third party. Upon its receipt of such notice, Tenant shall have fifteen (15)
days to accept or reject the Negotiable Space on such terms by delivering
written notice of Tenant's decision to Landlord. If Tenant chooses not to
exercise its Right of First Negotiation as to the Negotiable Space, Tenant
shall be deemed to have waived and relinquished its Right to First Negotiation.
If Tenant chooses not to exercise its Right of First Negotiation as to any
Negotiable Space, Landlord may lease the Negotiable Space to any other tenant
upon any terms and conditions, whether more or less favorable than Landlord's
proposal as set forth in the notice specified in this Section to Tenant.
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EXHIBIT "A"
DIAGRAM OF PREMISES
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<PAGE> 127
EXHIBIT A
[DIAGRAM OF PREMISES]
[CITY SPACES LOGO]
METROBANK
City Spaces, Inc. WORLD TRADE CENTER [CITY SPACES LOGO]
Interior Planning and Design FIRST FLOOR
87 N. Raymond Avenue
Suite 300
Pasadena, CA 91103
(818) 449-6222
Fax (818) 449-2775
<PAGE> 128
EXHIBIT "A-1"
[DIAGRAM OF RELOCATION SPACE]
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EXHIBIT "B"
IMPROVEMENTS TO PREMISES
1. General Provisions Relating to Preparation of Space Study and
Construction Documents.
1.1 Tenant and Landlord shall each cooperate with the other
and with their representatives in the preparation of the space study ("Space
Study"), the preparation of the plans and specifications ("Construction
Documents") for the construction of the Premises for Tenant ("Tenant
Improvements"), and construction of the Tenant Improvements.
1.2 Tenant shall meet with Interni Design (the "Space
Planner") in order that a Space Study showing the location of all partitions
and doors may be prepared by the Space Planner, such space study to be approved
by Tenant (which approval shall appear in writing on the Space Study in a form
satisfactory to Landlord) and submitted to Landlord on or before seven (7)
business days after the execution of this lease. Failure of Landlord to approve
or disapprove in writing such Space Study (specifying the reasons for any
disapproval) and the delivery of such approval or disapproval to Tenant within
three (3) business days after receipt of the same shall be conclusively deemed
an approval thereof. Landlord shall be reasonable in approving or disapproving
the Space Study. If Landlord disapproves such Space Study, the Space Planner
shall revise and resubmit the same ("First Revised Space Study") to Landlord
for approval on or before seven (7) business days after receipt of Landlord's
disapproval. Failure of Landlord to approve or disapprove in writing the First
Revised Space Study (specifying the reasons for any disapproval) and the
delivery of such approval or disapproval to Tenant within three (3) business
days after receipt of the same shall be conclusively deemed approval thereof.
If Landlord disapproves the First Revised Space Study, the Space Planner shall
again revise and resubmit the same ("Scond Revised Space Study") to Landlord
for approval. The procedure and timing for obtaining Landlord's approval of the
Second Revised Space Study and any subsequent revised Space Study shall be the
same as hereinabove provided for in the First Revised Space Study. Revision and
resubmission of the Space Study is approved by Landload. Each revised Space
Study submitted to Landlord for approval shall include thereon Tenant's written
approval therof in a form satisfactory to Landlord.
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1.3 Within fifteen (15) business days after approval of the
Space Study by Landlord, the Space Planner by Landlord, the Space Planner shall
prepare and submit to Landlord for approval a complete set of Construction
Documents Documents, which shall (i) be based upon the Space Study approved by
Landlord, (ii) include Tenant's written approval thereof in a form satisfactory
to Landlord, (iii) meet all items and contain all information necessary to
obtain all building all building and other permits and governmental licenses
required for the proper execution and completion of the Tenant Improvements and
(iv) include, without limitation, the location of doors, partitions, ceilings,
lighting, heating, ventilation and air conditioning, electrical and telephone
outlets, plumbing fixtures, heavy floor loads and any other special
requirements, the "Finish Schedule" (as that term is hereinafter defined) and
other construction detail. Tenant shall be required to utilize building
standard windown coverings, dooors to exterior hallways and suite entrance
detail, and no materials used in the Tenant Improvements shall be inferior to
building standard quality, without first obtaining Landlord's written consent.
In connection with the preparation of the Construction Documents, the Space
Planner shall meet with the building engeinners designated by Landlord from
time to time, who shall include, but not be limited to plumbing, electrical and
mechanical engineers, in order that the engineering plans and/or specifications
may be prepared for the Premises, which plans and/or specifications shall be
part of the Construction Documents. For the purposes of this Exhibit "B", the
term "Finish Schedule" shall mean the schedule prepared by the Space Planner
which locates and specifies the colors, materials and special finishes, if any,
for all wall and floor coverings. Failure of Landlord to approve or disapprove
the Construction Documents in writing (specifying the reasons for any
disapproval) within seven (7) business days after receipt of the Construction
Documents shall be conclusively deemed an approval thereof by Landlord. If
Landlord disapproves the Construction Documents, the Space Planner shall revise
and resubmit the same ("First Revised Construction Documents") to Landlord for
approval on or before five (5) business days after the receipt of Landlord's
disapproval. Failure of Landlord to approve or disapprove in writing the First
Revised Construction Documents (specifying the reasons for any disapproval) and
the delivery of such approval or disapproval to Tenant within five (5) business
days shall be conclusively deemed approval thereof. If Landlord disapproves the
First Revised Construction Documents, the Space Planner shall again revise and
resubmit the same ("Second Revised Construction Documents") to Landlord for
approval. The procedure and timing for obtaining Landlord's approval of the
Second Revised Construction Documents and
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any subsequent revised Construction Documents shall be the same as hereinabove
provided for the First Revised Construction Documents. Revision and
resubmission of the Construction Documents shall continue as set forth above
until the Construction Documents are approved by Landlord. Each set of revised
Construction Documents submitted to Landlord for approval shall include
Tenant's written approval thereof in a form satisfactory to Landlord.
1.4 Landlord's approval of matters relating to Tenant
Improvements shall not release or relieve Tenant from its obligations pursuant
to Section 2 of this Exhibit "B".
2. General Provisions Relating to Construction.
2.1 Tenant shall cause the Tenant Improvements to be
installed by a contractor approved by Landlord (the "Contractor") pursuant to
the Construction Documents approved by Landlord. Tenant shall obtain three (3)
bids for the construction of the Tenant Improvements in accordance with the
Consruction Documents from licensed general contractors approved by Landlord,
and shall deliver to Landlord a copy of the bids so obtained. Tenant shall pay
Landlord a fee ("Supervision Fee") on account of the supervision of the
Contractor equal to five percent (5%) of the amount of the the winning bid,
which amount shall be added to and included in each of the bids delivered to
Landlord; provided, however, that the allowanc described in Paragraph 2.10
below may be used to pay such Supervision Fee. Tenant shall within seven (7)
business days of receipt of said bids either: (i) select a bid and notify
Landlord in writing of the bid selected, or (ii) notify Landlord in writing of
its disapproval of said bids and provide the Space Planner with a detailed list
of revisions to the approved Construction Documents so as to reduce the cost of
construction or more accurately reflect the scope of the work. Failure of
Tenant to do either of the foregoing shall be conclusively deemed an approval
of the lowest bid delivered to Landlord by Tenant. If Tenant disapproves said
bids and submits to the Space Planner the revisions described in (ii) above,
Tenant shall obtain revised bids for the construction of the Tenant
Improvements in accordance with the revised Construction Documents from the
three contractors who previously bid and shall deliver to Landlord a copy of
the revised bids, each of which shall include the revised Supervision Fee
(""First Revised Bids''). Tenant shall within three (3) business days of
receipt of the First Revised Bids either (x) select one of the First Revised
Bids in a writing delivered to Landlord, or (y) again provide the Space Planner
with a detailed list of
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revisions to the approved Construction Documents so as to further reduce the
cost of construction or more accurately reflect the scope of the work. Failure
of Tenant to do either of the foregoing shall be conclusively deemed Tenant's
approval of the lowest of the First Revised Bids. If Tenant disapproves the
First Revised Bids and submits the revisions described in (y) above, Tenant
shall again obtain from the three (3) contractors revised bids for the
construction of the Tenant Improvements in accordance with the revised
Construction Documents and deliver to Landlord a copy of the revised bids, each
of which shall have added to and included with it a revised Supervision Fee
("Second Revised Bids"). The procedure and timing for obtaining Tenant's
approval of one of the Second Revised Bids and any subsequent set of revised
bids shall be the same as for the First Revised Bids. Revision and bidding of
the Tenant Improvements shall continue as set forth above until a revised bid
is approved by Tenant.
2.2 No change in the Construction Documents shall be made ("Change
Order") without the prior written consent of Landlord which shall not be
unreasonably withheld. Tenant shall pay to Landlord a Supervision Fee equal to
five percent (5%) of the cost of each Change Order, and, with respect to any
Change Order of $2,500.00 or more, Tenant shall pay said Supervision Fee to
Landlord upon Landlord's approval of the Change Order; however, such
Supervision Fees may, in any event, be paid from the Initial TI Allowances at
Tenant's request.
2.3 Tenant shall cause the Contractor to perform its work
diligently and in a first-class workmanlike manner in compliance with
applicable laws and codes. Neither Landlord nor Landlord's contractors or
consultants shall be liable for any direct or consequential damages resulting
from delays in construction beyond the reasonable control of Landlord,
including, but not limited to, strikes, availability of labor or materials, or
delays by Tenant or anyone performing services on behalf of Tenant.
2.4 All work shall be completed at the earliest possible date.
2.5 Tenant agrees at Tenant's expense to obtain and maintain "All
Risk" public liability insurance and workers' compensation insurance adequate
to fully protect Landlord, as well as Tenant, from and against any and all
liability for death or injury to persons or damage to property caused in or
about the Premises from Tenant performing its obligations under the lease,
including installation by Tenant of its fixtures and equipment and
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construction of the Tenant Improvements. Tenant shall deliver to Landlord prior
to entering the Premises a certificate of insurance.
2.6 "Tenant Delays" shall mean any delay caused by any violation by
Tenant or its contractors of the Contractor Rules and Regulations attached
hereto as Exhibit "B-1" or the document entitled "Landlord's Requirements for
Tenant Improvements/Alterations to Leased Space by Tenant or Contractors Hired
By Tenant" attached hereto as Exhibit "B-2" (and Tenant hereby agrees to comply
with, and to cause its contractors to comply with, such rules and regulations
and such document), any delay by Tenant in providing information for
preparation or approval of the Space Study and/or Construction Documents in
excess of the time periods provided, any delay caused by making revisions to
the Space Study after the First Revised Space Study or making revisions to the
Construction Documents after the First Revised Construction Documents, any
delay caused by revisions or changes to approved Consruction Documents
requested by Tenant, including, but not limited to, any delay caused by
obtaining revised bids after submission to Tenant of the First Revised Bid, any
delay in construction of the Tenant Improvements caused by Tenant, or any delay
in performance or completion by any person employed or engaged by Tenant or by
reason of building code problem arising from Tenant's design or requirements.
The term "Landlord Delays" shall mean delays in the completion of the tenant
improvements for the Premises (excluding the Relocation Space) caused solely by
(i) the acts or failures to act of Landlord, its agents or contractors that are
not permitted by this Lease; (ii) delays due to the interference of Landlord,
its agents or contractors with the completion of the tenant improvements, or
the unjustified failure or refusal of any party thereof to permit Tenant, its
agents and contractors, access to and use for the Building or any Building
facilities or services, which access and use are required for the orderly and
continuous performance of the work necessary to complete the tenant
improvements; and (iii) delays due to Landlord's failure to complete the Base
Building Work or to demolish the existing improvements in the Premises (other
than the Relocation Space) on or before the date which is fifteen (15) days
after execution of this Lease by Landlord and Tenant. "Force Majeure Delays"
shall mean delays in the completion of the tenant improvements for the Premises
(excluding the Relocation Space) caused solely by any order of any government,
court or regulatory body claiming jurisdiction that is not caused by or related
to Tenant; war, riot, or sabotage; inability to secure customary materials,
supplies or labor through ordinary sources by reason of new regulation or order
of any government or regulatory body; lighting, earthquake, fire
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storm, hurricane, tornado, flood, explosion or other similar casualty; or any
similar cause beyond the reasonable control of the party from whom performance
is required or any of its contractors or other representatives (except that it
is expressly agreed that nothing contained in this definition of Force Majeure
Delays or elsewhere in the Lease shall obligate Landlord to settle a strike or
other labor dispute when it does not wish to do so).
2.7 Tenant agrees that Tenant will accept the Premises in their current
"AS-IS" condition, without representation or warranty, express or implied,
except that on or before the date which is fifteen (15) days after the
execution of this Lease by Landlord and Tenant, Landlord shall, at Landlord's
cost and expense, demolish the existing tenant improvements and fixtures
(including, without limitation, ceiling tiles and teller stations, but
excluding the vault, vault walls and vault ceiling and all HVAC equipment and
duct work) in the Premises (excluding the Relocation Space). Landlord shall
use good faith efforts to cooperate with Tenant in a commercially reasonable
manner, at no cost to Landlord, in connection with Tenant's obtaining
governmental permits and approvals required for the tenant improvements.
2.8 Upon substantial completion of the Tenant Improvements, Tenant
shall commence and diligently complete the installation of its furniture,
furnishings and equipment.
2.9 The Tenant Improvements, including, but not limited to, the
preparation of the Space Study and the Construction Documents, and all costs
and expenses related thereto shall be at Tenant's sole cost and expense, except
as otherwise provided in this Paragraph 2.9 and in Paragraphs 2.10 and 2.12
below. Tenant shall pay only one-half the cost of installing demising interior
walls. Without cost or expense to Tenant, Landlord shall (i) bring electricity
to the distribution point on the floor, (ii) bring a main air-conditioning duct
to the perimeter of the Premises, and (iii) furnish construction sprinklers
only.
2.10 Landlord agrees to provide Tenant with an allowance in the amount
of $246,987.00 (the "Initial TI Allowance") for the reasonable costs of
constructing the Tenant Improvements pursuant to this Exhibit "B"; provided,
however, that said $246,987.00 amount shall be increased by up to $1,500.00 of
the reasonable, out-of-pocket costs (if any) incurred by Tenant in building the
tenant improvements for the Relocation Space that would not have been incurred
by Tenant if the Relocation Space had been delivered to
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<PAGE> 135
Tenant concurrently with all other portions of the Premises (as shown by
evidence satisfactory to Landlord), and provided, further, that in no event
shall more than an aggregate of $23,700 from the Initial TI Allowance be
expended in connection with the preparation and revision of the Space Study
and/or Construction Documents. The Initial TI Allowance shall be disbursed by
Landlord from time to time, but not more than once each calendar month and no
more frequently than every 30 days (and not when Tenant is in default), subject
to normal construction loan disbursement conditions, including, without
limitation, the conditions that Landlord receive a written request from Tenant
approving the disbursement and the bills to be paid therewith, the appropriate
mechanics lien releases from the contractors and materialmen to be paid with
the disbursement, copies of the bills to be paid and a certification from Tenant
that the work for which payment is requested complies with law and the approved
Space Plans and Construction Documents, and that Landlord shall have verified
that the work for which payment is requested shall have been completed in
accordance with the approved Space Plans and Construction Documents.
2.11 If any poriton of the Initial TI Allowance remains unused as of
the Commencement Date, then provided Tenant is not in default under the Lease,
Tenant may by written notice to Landlord given on or before May 15, 1994, elect
to use the remainder (the "Remaining Allowance") in one or more of the
following three ways: (i) obtain an abatement of the Base Rent next payable
under the Lease in the amount of the Remaining Allowance; (ii) require Landlord
to disburse the Remaining Allowance to Tenant from time to time but no more
often than once each calendar month and no more frequently than over every 30
days, to pay for furniture in the Premises and/or Tenant's reasonable out of
pocket costs directly relating to Tenant's moving into the Premises, subject to
Landlord's receipt of copies of bills or receipts therefor and, with respect to
furniture, that the furniture is located in and shall remain in the Premises
during all or substantially all of the Term of the Lease. If Tenant does not
make such a selection in accordance with this Paragraph 2.11, then provided
Tenant is not in default, the Remaining Allowance shall be credited against the
Base Rent next due.
2.12 Landlord shall also provide to Tenant a moving allowance (the
"Moving Allowance") of up to $7,283 for Tenant's reasonable, direct
out-of-pocket costs of moving into the Premises, which shall be disbursed by
Landlord from time to time, but not more often than once every calendar month
and not more often than once every
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thirty (30) days upon Landlord's receipt of invoices showing the costs to be
reimbursed and Landlord's receipt of reasonable evidence that such costs relate
to Tenant's moving into the Premises. If any portion of the Moving Allowance
remains undisbursed as of July 30, 1994, then Tenant shall receive an abatement
of the Base Rent next due in an amount equal to said undisbursed portion of the
Moving Allowance. Any and all Base Rent abatements to which Tenant may be
entitled under this Lease which are based upon unused portions of the Moving
Allowance shall be in addition to, and not in lieu of, any Base Rent abatements
which are based on unused portions of the Initial TI Allowance; however, except
as may be otherwise specifically provided in this Lease, Tenant shall have no
right to any rent abatement, rent credit or rent offset.
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EXHIBIT "B-1"
CONTRACTOR RULES
AND REGULATIONS
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EXHIBIT B-1
CONTRACTOR RULES AND REGULATIONS
1. Contractor, subcontractors, and materialsmen will check in and out with
Building Security.
2. Contractor, subcontractors, and materialsmen will be appropriately
dressed to work in an office environment: shirts with sleeves (T-shirts
with company name are acceptable), pants (no shorts), work shoes with
socks, and whatever other clothing as may be appropriate. No torn or
worn-out clothing is permitted. Contractor personnel will display a
courteous demeanor towards tenants, customers, visitors and general
public. There is no smoking permitted in occupied offices. In addition,
construction personnel are not to remain in the building after work
hours.
3. Contractor, subcontractors, and materialsmen are responsible for
cleaning the Job Site after meals are eaten. Alcoholic beverages and
drugs are not to be brought into, or consumed in the building.
Personnel appearing to be under the influence of either alcoholic
beverages or drugs will not be allowed into the building. Violation of
this regulation may subject this Contract to immediate cancellation.
4. Parking for all personnel must be arranged prior to commencement of
work, and will be provided in designated areas only. Vehicles
in unapproved areas will be subject to citation and towing without
notice. Any costs assessed by the parking operator of the garage are
the sole responsibility of the Contractors.
5. Contractor, subcontractors, and materialsmen personnel are to access
the building by freight elevator only.
6. Contractor, subcontractors and materialsmen personnel are to use the
restroom on the first (1st) floor only. The key may be checked
out at the security desk.
7. Delivery of materials and use of loading dock, freight and passenger
elevators must be scheduled with the Landlord's Agent prior to
receipt of materials.
Delivery Dock Hours: Monday-Friday 7:00 A.M. to 5:00 P.M.
Freight Elevator Hours: Monday-Friday 6:00 A.M. to 6:00 P.M.
Note: Other hours of access are available with prior
arrangement.
Page 1 of 3
<PAGE> 139
EXHIBIT B-1 (Cont'd)
8. Building access hours:
Monday-Friday: 6:00 A.M. to 10:00 P.M.
Saturday: 8:00 A.M. to 6:00 P.M.
Sunday: 10:00 A.M. to 6:00 P.M.
Note: Other hours of access are available with prior
arrangement.
9. Contractor, subcontractors and materialsmen are responsible for
maintaining the condition of docks, elevators and corridors
used. Contractor is responsible to protect floor and walls in corridors
leading from the freight elevator to the entrance of the construction
sight, as well as freight door jams.
10. All materials are to be stored at the Job Site or in designated storage
areas. No materials are to be stored in corridors or in public
areas. The Landlord's Agent may provide minimum secured storage for
materials with prior arrangement.
11. Contractor, subcontractors and materialsmen must arrange access to
areas other than Job Site at a minimum of 48 hours in advance.
12. All work areas are to be visually and materially protected from the
tenants and general public. Radios or other excessive noise are
not permitted. All Contractors will be held responsible for compliance
with O.S.H.A. Rules and Regulations.
13. Toxic materials or odor-causing liquids are not to be used without
prior scheduling with the Landlord's Agent, and prior notice to
the tenants in suites adjacent to the Job Site.
14. All non-Job Site areas of the building are to be kept clean; dust,
debris and materials are to be cleaned immediately. There is to
be no tracking of material residue through corridors or public areas.
15. The Contractor and subcontractors are to ensure the Job Site is left
broom clean at the completion of each scheduled work day. No
trash or excess materials are permitted to remain on, in, or at the Job
Site. Materials are to be disposed of in bins or by truck promptly, not
staged or stored at the Job Site in any public or adjacent areas, nor
disposed of in the building's trash receptacles.
16. Tool clean-up is permitted in janitorial/utility closets only; no
clean-up is permitted in rest rooms.
17. Contractor is to furnish adequate protection against personal injury to
employees and public while work is in progress. In addition,
all equipment, furniture and supplies shall be protected from damage.
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<PAGE> 140
EXHIBIT B-1 (Cont'd)
18. The work area may be occupied during construction, which may
require the Contractor to move and relocate furniture, files, machinery
and equipment during construction. Upon the completion of the work, the
Contractor is to return all items relocated during the work to their
original location.
19. All salvageable items removed during the course of the work that are to
be reused in the job, whenever possible, are to be stored and
maintained by the Contractor. All salvageable materials and items of
value, as determined by Landlord's Agent, that are removed from the
site, that are not to be reused in the work, shall remain the property
of the Landlord's Agent, and shall be stored or disposed of as directed
by the Landlord's Agent.
20. All work includes replacing, patching and finishing all adjacent
surfaces or features displaced or disturbed in the performance
of the work such as, but not limited to: acoustical tile, topset base,
cove base, floor coverings, paint, etc. Upon completion of the work,
there shall be no discrepancy between the new work and the existing
work.
21. The Contractor shall not disable, interrupt or test any building
utilities or systems without prior arrangement with the Agent,
nor without the presence of Building Engineering personnel.
23. All Contractors are responsible for supplying the following tools or
materials to the Job Site:
a. Ladders
b. Industrial vacuum cleaner
c. Protection for corridor floor coverings, walls and
ceilings from the Job Site to the elevators
d. Protection for the elevators and the Job Site
24. All anchoring of studs, drilling or coring of holes in concrete,
applying carpet tack, and applying noxious materials (stains,
fire-sealers, etc.) should be done after hours.
25. The Landlord's Agent is not responsible for providing any tools,
equipment, materials or labor for the work.
26. The Contractor is responsible for the compliance to these rules and
regulations by all his own personnel and those of his
subcontractors, materialsmen and any other parties who may be employed
for the performance and completion of the work.
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<PAGE> 141
EXHIBIT "B-2"
LANDLORD'S REQUIREMENTS FOR
TENANT IMPROVEMENTS/ALTERATIONS
TO LEASED SPACE BY TENANT OR
CONTRACTORS HIRED BY TENANT
[TO BE EXECUTED BY TENANT
CONCURRENTLY WITH THIS LEASE]
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LANDLORD'S
ALTERATIONS TO LEASED
BY TENANT OR CONTRACTOR(S) HIRED BY TENANT
The Tenant has certain requirements to provide information to the Landlord's
Agent regarding any alteration to be performed in the leased premises by
Tenant. Said information is to be submitted for approval by Landlord's Agent,
which approval shall not be unreasonably withheld. Below is a listing of those
requirements:
1. Two sets of plans (a.k.a. working drawings) of the work to be
performed, including details of connection to any building
system (i.e. electrical, life-safety, plumbing, HVAC, etc). One set
will be retained by Landlord's Agent. One set will be returned to
Tenant, signed by Landlord's Agent, as the approval set of record.
2. List of all Contractors, sub-contractors and material suppliers.
3. A copy of the Cotnractor's and sub-contractor's current construction
license including expiration date and type.
4. Certificates of Insurance from the Contractor, naming Landlord,
Landlord's Agent and Tenant as Additional Insureds, and an
adequate amount of liability coverage, specifically:
a. General & Public Liability, no less than $1,000,000.
b. Workers' Compensation not less than statutory requirements.
c. Contractor's Business Liability (Umbrella) coverage of not less
than $1,000,000.
Upon submittal to Landlord's Agent of the above items, landlord's Agent shall
receive the plans, list of project participants and other documentation, and
make recommendations. If any, for modifications and compliance with building
standards, including materials, as well as proper connections to the building
systems.
After obtaining approval from the Landlord's Agent, and prior to the
commencement of work, the Tenant shall provide:
2. Hold Harmless Agreements signed by the Tenant and the Tenant's
Contractor for the purpose of indemnifying the Landlord, and
the Landlord's Agent, from any liabilities, including but not limited
to, items filed against the property by any and all General
Contractors, sub-contractors and sub-sub-Contractors, material
suppliers and laborers.
3. A copy of the fully executed Contract for Work between Tenant and
Contractor.
4. A copy of all required Municipal Building Permits.
The Tenant shall be responsible for instructing the Contractor and
sub-contractors to follow the building's Rules and Regulations provided
herewith. The tenant will then advice the Landlord's Agent of the commencement
date of work, upon which notification the Landlord's Agent shall complete a
Notice of Non-Responsibility for filing with the County Recorder's Office and
posting on the job site. The Tenant shall provide Landlord with an anticipated
payment schedule prior to the commencement of work.
During the performances of the work, if there is a change or addition of
contractors, sub-contractors or material suppliers, the Tenenat shall
immediately notify the Landlord's Agent, in writing, of the changes or
addition. All the same qualifications shall apply to the changed or added
parties.
<PAGE> 143
PAGE 2
In the event a preliminary Lien Notice or Lien Notice is received by the
Tenant, Tenant shall immediately provide & copy of same to Landlord's Agent.
Landlord's Agent may, at its option, inspect the work in progress in insure
that the building's minimum standards of quality of craftsmanship are
maintained.
The tenant is responsible for coordinating with the office of the building, any
access requirements for the contractor for the purpose of stocking the job,
work to be performed in adjacent space, or connecting to or testing of base
building systems which may disturb the normal operation of the building.
After completion of the alteration, Tenant shall obtain the completed Permit
Job Card and a Temporary Certificate of Occupancy clearly indicating the City's
Final Inspection by signature and date. Tenant shall subjit a copy of same to
Landlord's Agent as evidence of the completed alteration.
Tenant shall, at the conclusion of all work, provide original Unconditional
Lien Release documents to the Landlord's Agent demonstrating the payment of all
outstanding invoices for the work.
Upon completion of the work, contractor is to provide Landlord's Agent with a
set of "as-built" plans, cut abeats and specifications on all installed
equipment, all warranties, and the stamped plancheck approved drawings with the
permit signature card. These plans would include, but not be limited to:
architectural, structural, electrical, plumbing and mechanical drawings as
applicable.
If any reimbursement from Landlord's Agent is due tenant, copies of all paid
invoices to all Contractors, sub-contractors and material suppliers must
accompany above said original Unconditional Lien Releases from each.
Landlord's Agent shall then reimburse Tenant's costs up to the agreed upon
Tenant Improvement Allowances, less any costs Landlord or Landlord's Agent may
have incurred in association with the performances of the work.
These requirements neither supersede or subjugate any of the terms and
consitions of the Lease Agreement for the leased space.
AGREED.
Metrobank
_________________________
Tenant
_________________________
By
Robert P. Bulseco
President/Chief Administrative Officer
February 2, 1994
________________________
Date
Page 2 of 2
<PAGE> 144
EXHIBIT "C"
TERM COMMENCEMENT LETTER
Date: ______________________
To: ______________________
______________________
______________________
______________________
Re: TERM/ACCEPTANCE OF Premises
In accordance with Paragraph 2 of your lease dated January 31, 1994,
please acknowledge your acceptance of possession of your Premises and your
agreement that the Commencement Date of the lease is ________, 1994 (except for
the Relocation Space, for which the Commencement Date [is ________, 1994] [has
not yet been determined]) and the Termination Date of the lease is ________,
2004.
Tenant hereby agrees to forward all necessary and normal day-to-day
lease requirements, such as rent and other charges, Insurance Certificates,
property tax payments, etc., to the following, unless otherwise designated by
Landlord:
Haseko-Dunn Management Company
350 South Figueroa Street
Suite 141
Los Angeles, California 90071
Tenant hereby agrees with the dates set forth above and further
acknowledges its acceptance of possession of the Premises.
TENANT:
METROBANK,
a California corporation
By: ________________________
Name: ______________________
Title: _____________________
-51-
<PAGE> 145
EXHIBIT "D"
RULES AND REGULATIONS
1. The sidewalks, halls, passages, exits, entrances, elevators and
stariways of the Building shall not be obstructed by any of the Tenants or used
by them for any purpose other than for ingress to and egress from their
respective Premises. The halls, passages, exits, entrances, elevators and
stariways are not for the general public, and the Landlord shall in all cases
retain the right to control and prevent access thereto of all persons whose
presence in the judgment of Landlord would br prejudicial to the safety,
character, reputation and interests of the Building and its Tenants, provided
that nothing herein contained shall be construed to prevent such access to
persons with whom any Tenant normally deals in the ordinary course of its
business, unless such persons are engaged in illegal activities. No tenant and
no employee or invitee of any Tenant shall go upon the roof of the Building
without the prior written consent of Landlord.
2. No signs, placard, picture, name, advertisement or notice,
visible from the exterior of any Tenant's Premises shall be inscribed,
paninted, affixed or otherwise displayed by any tenant on any part of the
building without the prior written consent of Landlord. Landlord will adopt and
furnish to Tenant general guidlelines relating to signs inside the Building on
the office floors. Tenant agrees to conform to such guidelines, but may request
approval of Landlord for modifications, which approval will not be unreasonably
withheld. All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of the Tenant by a person approved by
Landlord, which approval will not be unreasonably withheld.
3. All cooking equipment must be U.L. tested and be in compliance
with all applicable federal, state and city laws, codes, ordinances, rules and
regulations.
4. No Tenant shall employ any person or persons other than the
janitor of Landlord for the purpose of cleaning the Premises, unless otherwise
agreed to by Landlord in writing. Except with the written consent of Landlord,
no person or persons other than those approved by Landlord shall be permitted
to enter the Building for the purpose of cleaning the same. No Tenant shall
cause any unnecessary labor by reason of such Tenant's carelessness or
indifference in the preservation of good order and
-52-
<PAGE> 146
cleanliness. Janitor services will not be furnished on nights when rooms are
occupied after 9:30 p.m. unless, by agreement in writing, service is extended
to a later hour for specifically designated rooms.
5. Landlord will funish each Tenant free of charge with two keys
to each door lock in the Premises. Landlord may make a reasonable charge for
any additional keys. No Tenant shall have any keys made. No Tenant shall alter
any key or install a new or additional lock or any bolt on any door of its
Premises without the prior written consent of Landlord. Tenant shall in each
case funish Landlord with a key for any such lock. Each Tenant, upon the
termination of its tenancy, shall deliver to Landlord all keys to doors in the
Building which shall have been furnished to Tenant.
6. Landlord shall designate how all office equipment, furniture,
appliances and other large object or property ("Equipment") shall be moved in
or out of the Building. The persons employed to move such Equipment in or out
of the Building must be acceptable to Landlord. Landlord shall have the right
to prescribe the weight, size and position of all equipment brought into the
building. Heavy objects shall, if considered necessary by Landlord, stand on
wood strips of such thickness as is necessary to properly distribute the
weight. Landlord will not be responsible for loss of or damage to any such
Equipment from any cause, and all damage done to the Building by moving or
maintaining such Equipment shall be repaired at the expense of Tenant.
7. No Tenant shall use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material other than
limited quantities thereof reasonably necessary for the operation or
maintenance of office equipment, or, without Landlord's prior written approval,
use any method of heating or air conditioning other than that supplied by
Landlord. No Tenant shall use or keep or permit to be used or kept any foul
obnoxious gas or substance in the Premises, or permit or suffer the Premises to
be occupied or used in a manner offensive or objectionable to Landlord or to
other occupants of the Building by reason of noise, odors or vibrations, or
interfere in any way with other Tenants or those having business therein.
8. Landlord shall have the right, exercisable without notice and
without liablility to any Tenant, to change the name and street address of the
Building; however, if Landlord requires Tenant to change the suite number for
-53-
<PAGE> 147
the Premises, then Landlord shall reimburse Tenant for reasonable out-of-pocket
costs incurred by Tenant to alter Tenant's stationery and business cards to
reflect such change upon receipt of copies of invoices showing such costs.
9. Landlord reserves the right to exclude from the Building
between the hours of 6 p.m. and 7 a.m. and at all hours on Sundays, legal
holidays and on Saturdays, any person who, in Landlord's sole opinion has no
legitimate business in the Building. Landlord shall in no case be liable for
damages for any error with regard to the admission to or exclusion from the
Building of any person. In the event of riot, invasion, public excitement or
other circumstances rendering such action advisable in Landlord's opinion,
Landlord reserves the right to prevent access to the Building during the
continuance of the same by such action as Landlord may deem appropriate,
including closing doors.
10. The directory of the Building eill be provided for the display
of the name and location of Tenants and a reasonable number of the principal
officers and employees of Tenants, and Landlord reserves the right to exclude
any other names therefrom. Any additional name which Tenant shall desire to
place upon said bulletin board must first be approved by Landlord, and, if so
approved, a charge will be made therefore.
11. No curtains, draperies, blinds, shutters, shades, screens or
other coverings, hangings or decorations shall be attachecd to, hung or placed
in, or used in connection with any window of the Building without prior written
consent of Landlord and such items shall be installed as instructed by
Landlord.
12. No tenant shall obtain for use in the Premises, ice, drinking
water, food beverage, towel or other similar services, except in accordance
with reasonable regulations as may be fixed by Landlord. Notwithstanding the
foregoing, Tenant shall have the right to install and operate a bottled water
machine, microwave, refrigerator, ice-maker, provided all are UL approved and
installed in a manner acceptable to Landlord.
13. Each Tenant shall see that the doors of its Premises are closed
and locked and that all water faucets, water apparatus and utilities are shut
off before Tenant or Tenant's employees leave the Premises, so as to prevent
waste or damage, and for any default or carelessness in this regard Tenant
shall make good all injuries sustained by
-54-
<PAGE> 148
other tenants or occupants of the Building or Landlord. All Tenants shall keep
the doors to the Building corridors closed at all times except for ingress and
egress.
14. The toilet rooms, toilets, urinals, wash bowls, and other
apparatus shall not be used for any purpose other than that for which they were
construted, no foreign substance of any kind whatsoever shall be thrown therein
and the expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose employees or
invitees, shall have caused it.
15. Except with the prior written consent of Landlord, no Tenant
shall sell, or permit the sale at retail, of newspapers, magazines,
periodicals, theatre tickets or any other goods or merchandise to the general
public in or on the Premises, nor shall any Tenant carry on, or permit or allow
any employee or other person to carry on, the business or stenography,
typewriting or any similar business in or from the Premises for the service or
accommodation of occupants of any other portion of the Building, nor shall the
Premises of any Tenant be use for manufacturing of any kind, or any business or
activity other than that specifically provided for in such Tenant's lease.
16. No Tenant shall install any radio or television antenna,
loudspeaker, or other device on the roof or exterior walls of the Building,
without landlord's prior written consent.
17. There shall not be used in or about the Building, either by any
Tenant or other, any hand trucks except those equipped with rubber tires and
side guards or such other material-handling equipment as Landlord may approve.
No other vehicles of any kind shall be brought by any Tenant into the Building
or kept in or about the Premises.
18. Each Tenant shall store all its trash and garbage within its
Premises. No material shall be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in the downtown
Los Angeles area, without being in violation of any law or ordianance governing
such disposal. All garbage and refuse disposal shall be made only through entry
way and elevators provided for such purposes and at such times as Landlord
shall designate.
19. Canvassing, soliciting, distribution of handbills, or any other
written material peddling in the
-55-
<PAGE> 149
Building are prohibited, and each Tenant shall cooperate to prevent the same.
20. Tenant agrees to abide all governmental rules and regualtions
pertaining to thermostatic control of the temperature on the Premises as
required by said governmental rules and regulations, and agrees to maintain and
keep the temperature for heat at or below the maximum temperature allowed from
time to time by said governmental rules and regulations. Tenant agrees to
indemnify and hold Landlord free and harmless from any liability incurred by
Landlord as a result of Tenant's failure to comply with said governmental rules
reulations.
21. The requirements of the Tenants will be attended to only upon
application by telephone or in person at the office Landlord. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord.
22. Landlord may waive any one or more of these Rules and
Regulations for the benefit of any particular Tenant or Tenants, but no such
waiver by Landlord shall be construed as a waiver of such Rules and Regulations
in favor of any other Tenant or Tenants, nor prevent Landlord from thereafter
enforcing any such Rules and Regulations against any or all of the Tenants of
the Building.
23. These Rules and Regulations are in addition to, and shall not
be construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of Premises in the Building.
24. Landlord reserves the right to make such other reasonable Rules
Regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building, and for the preservation of good order
therein.
-56-
<PAGE> 150
EXHIBIT "E"
GUARANTY OF LEASE
[INTENTIONALLY DELETED]
-57-
<PAGE> 151
EXHIBIT "F"
SPACE SUBJECT TO
SPACE REDUCTION OPTION
-58-
<PAGE> 152
EXHIBIT F
[DIAGRAM OF 20% SPACE REDUCTION]
<PAGE> 153
EXHIBIT "G"
NEGOTIABLE SPACE
<PAGE> 154
EXHIBIT G
[FLOOR PLAN]
METROBANK
WORLD TRADE CENTER
RIGHT OF FIRST NEGOTIATION
<PAGE> 155
FIRST AMENDMENT OF LEASE
This FIRST AMENDMENT OF LEASE (the "First Amendment") is dated as of
February 4, 1994 and is entered into by an between HASEKO CORPORATION, a
Japanese corporation ("Landlord") and METROBANK, a California corporation
("Tenant") with the consent of ROYAL INVESTMENT SYSTEMS (RIS) (03-07)/LOS
ANGELES WORLD TRADE CENTER PARTNERSHIP ""(Master Landlord").
R E C I T A L S
A. Landlord and Tenant have entered into an Office Space Lease
dated January 31, 1994 ("Lease") for Suite 180 ("Premises") in the building
("Building") located at 350 South Figueroa Street in Los Angeles, California.
B. Landlord and Tenant desire to amend the Lease to adjust the
commencement date of the Lease as to the entire Premises.
In consideration of the foregoing recitals, the mutual convenants
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
1. Commencement Date. Section 2 of the Lease is hereby deleted in its
entirety and the following is hereby substituted in lieu thereof:
"2. TERM.
(a) The term of this Lease as to all of the Premises
(including, without limitation, the Relocation Space) shall commence upon the
later of: (i) May 1, 1994, as extended by one (1) day for each day that
substantial completion of the tenant improvements for the Premises is delayed
beyond May 1, 1994 solely as a result of "Landlord Delays" and "Force Majeure
Delays" (as such capitalized terms is defined in Paragraph 2.6 of Exhibit "B"
attached hereto); or (ii) the date which is the earlier of (a) the date on
which Tenant substantially completes the tenant improvements for the Relocation
Space, as determined by Landlord, or (b) the date which is forty-five (45) days
after Landlord delivers the Relocation Space to Tenant with the existing tenant
improvements in the Relocation Space demolished and removed.
-1-
<PAGE> 156
(b) Notwithstanding the foregoing, Landlord shall not
be obligated to deliver the Premises to Tenant until the
latest of: (i) the date taht is five (5) days after the full
execution of this Lease; or (ii) the date Tenant gives
Landlord reasonable evidence that Tenant has obtained all of
the insurance required to be maintained by Tenant under this
Lease (including, without limitation, the insurance
described in Section 2.5 of the Work Letter attached hereto
as Exhibit "B"); or (iii) the date on which Landlord
completes any and all demolition work which Landlord is
required in this Lease to complete.
(c) All of the terms of this Lease, except for terms
requiring Tenant to pay Base Rent, Extraordinary Rent,
Storage Space Rent, and Operating Expenses and Taxes, shall
apply to any occupancy of all or any portion of the Premises
by Tenant prior to the Commencemtn Date.
(d) Upon request by Landlord, given rom time to time,
Tenant shall confirm the Commencement Date and expiration
date of this Lease in writing in the form attached hereto as
Exhibit "C" and shall promptly return the same to Landlord."
2. Definitions. All capitalized terms used in this Fourth Amendment which are
not defined herein shall have the same meanings as set forth in the Lease.
3. Construction; Reaffirmation. In the event of a conflict between the terms
of the Lease and the terms of this First Amendment, the terms of this First
Amendment shall govern and prevail. The Lease, as amended by this First
Amendment, is hereby reaffirmed.
4. Governing Law. This First Amendment shall be construed in accordance with
and governed by the laws of the State of California.
5. Entire Agreement. The Lease, as amended by this First Amendment,
constitutes the entire agreement of Landlord and Tenant with respect to the
subject matter thereof and supersedes any and all prior or contemporaneous
written or oral agreements pertaining to said subject matter.
-2-
<PAGE> 157
Landlord and Tenant have executed this First Amendment as of the date
and year first written above with the consent of the Master Landlord.
"TENANT": "LANDLORD":
METROBANK, HASEKO CORPORATION,
a California corporation a Japanese corporation
By: /s/ Robert P. Bulseco By: Haseko (California), Inc.,
---------------------- --------------------------
Name: Robert P. Bulseco a California corporation,
Title: President/Chief Administrative its authorized agent
Officer
By: /s/ Toru Nagayama
------------------
Name: Toru Nagayama
Title: Senior Executive
Vice President
"MASTER LANDLORD":
ROYAL INVESTMENT SYSTEMS
(RIS) (03-07)/LOS ANGELES WORLD
TRADE CENTER PARTNERSHIP
By: Haseko (California), Inc.,
---------------------------
a California corporation
its authorized agent
By: /s/ Toru Nagayama
-------------------
Name: Toru Nagayama
Title: Senior Executive
Vice President
-3-
<PAGE> 1
EXHIBIT 99(i)
- --------------------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED MARCH 31, 1994
METROBANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
95-3271474
(IRS EMPLOYER IDENTIFICATION NO.)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
90024
(ZIP CODE)
(310) 824-5700
(BANK'S TELEPHONE NUMBER INCLUDING AREA CODE)
INDICATE BY CHECK-MARK WHETHER THE BANK (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE BANK WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST NINETY DAYS.
YES XX NO
---- ----
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 1994: 4,756,672
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1994, DECEMBER 31, 1993 AND MARCH 31, 1993
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
<PAGE> 3
METROBANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(in thousands, except MARCH 31, MARCH 31,
per share amounts) 1994 DECEMBER 31, 1993
(UNAUDITED) 1993 (UNAUDITED)
ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 92,536 $ 56,148 $ 63,994
Federal funds sold 35,000 70,000 20,000
Investment securities 253,436 236,715 240,787
Investment in real estate 16,680 16,823 18,918
Loans, net of reserve 563,253 553,125 516,737
Accrued interest receivable 6,318 5,431 7,314
Other real estate owned, net 5,495 5,745 10,462
Premises and equipment, net 2,691 2,855 2,914
Other assets 7,705 9,016 8,692
- --------------------------------------------------------------------------------------------------
Total Assets $ 983,114 $ 955,858 $ 889,818
==================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------
Deposits:
Time certificates $ 109,021 $ 110,485 $ 183,876
Other deposits 771,148 774,901 631,457
- --------------------------------------------------------------------------------------------------
Total deposits 880,169 885,386 815,333
Securities sold under agreement to repurchase
and federal funds purchased 1,500 1,100 3,156
Accrued interest payable 348 372 656
Funds payable on purchases of securities
not yet settled 30,901 -- --
Other liabilities 4,223 5,248 10,043
- --------------------------------------------------------------------------------------------------
Total liabilities 917,141 892,106 829,188
Shareholders' equity:
Common stock 34,333 34,333 34,310
Guarantee of ESOP loan -- (288) (288)
Unrealized gain on securities available for sale 867 -- --
Retained earnings 30,773 29,707 26,608
- --------------------------------------------------------------------------------------------------
Total shareholders' equity 65,973 63,752 60,630
- --------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 983,114 $ 955,858 $ 889,818
==================================================================================================
Book value per share $ 13.87 $ 13.40 $ 12.75
Standby letters of credit $ 4,400 $ 3,444 2,875
Ratio of average noninterest-bearing deposits
to average total deposits 49.9% 46.4% 41.7%
Ratio of average gross loans to average
total deposits 71.2% 68.1% 72.1%
Ratio of loan loss reserve to gross loans 2.34% 2.31% 2.14%
Tier 1 leverage ratio 7.2% 6.9% 6.9%
Tier 1 capital ratio 10.3% 10.0% 10.0%
Risk based capital ratio 11.6% 11.2% 11.3%
==================================================================================================
</TABLE>
<PAGE> 4
METROBANK
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Quarter Ended March 31,
(in thousands, except 1994 1993
per share amounts)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Loans $ 11,486 $ 10,960
U.S. Treasury securities 2,651 3,254
Other securities 705 1,126
Other interest income 19 63
- ----------------------------------------------------------------------------------------
14,861 15,403
Interest expense:
Time certificates of deposit 907 1,368
Other deposits 1,680 1,642
Securities sold under agreement to repurchase
and federal funds purchased 303 608
- ----------------------------------------------------------------------------------------
2,890 3,618
- ----------------------------------------------------------------------------------------
Net interest income 11,971 11,785
Provision for possible loan losses 415 1,520
- ----------------------------------------------------------------------------------------
Net interest income after provision for possible
loan losses 11,556 10,265
Noninterest income:
Service charges on deposit accounts 310 374
Gain on sales of securities -- 868
Other noninterest income 808 1,302
- ----------------------------------------------------------------------------------------
1,118 2,544
Noninterest expense:
Personnel expense 4,115 4,383
Occupancy, furniture and equipment expense 1,236 1,241
Other noninterest expense 4,775 5,235
- ----------------------------------------------------------------------------------------
10,126 10,859
- ----------------------------------------------------------------------------------------
Earnings before income taxes 2,548 1,950
Provision for income taxes 1,053 805
Income tax credit (285) (345)
- ----------------------------------------------------------------------------------------
Net earnings $ 1,780 $ 1,490
========================================================================================
Earnings per share $ 0.37 $ 0.31
Dividends declared per share $ 0.15 $ 0.15
========================================================================================
Weighted average shares outstanding 4,756,672 4,754,172
========================================================================================
Net return on average shareholders' equity 11.0% 10.1%
Net return on average assets 0.8% 0.7%
========================================================================================
</TABLE>
<PAGE> 5
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Quarter ended March 31, 1994
(dollars in thousands)
Common Stock
---------------------- Guarantee of Unrealized Retained
Shares Amount ESOP Loan gain (net of tax) Earnings Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 4,756,672 $34,333 $(288) $ -- $29,707 $63,752
Exercise of stock options -- -- -- -- -- --
$0.15 per share cash dividend -- -- -- -- (714) (714)
Reduction in indebtedness for ESOP -- -- 288 -- -- 288
Unrealized gain on securities -- -- -- 867 -- 867
Net earnings -- -- -- -- 1,780 1,780
- -------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1994 4,756,672 $34,333 $ 0 $867 $30,773 $65,973
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Quarter ended March 31, 1993
(dollars in thousands)
Common Stock
----------------------- Guarantee of Unrealized Retained
Shares Amount ESOP Loan gain (net of tax) Earnings Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 4,754,172 $34,310 $(863) $-- $25,832 $59,279
Exercise of stock options -- -- -- -- -- --
$0.15 per share cash dividend -- -- -- -- (713) (713)
Reduction in indebtedness for ESOP -- -- 575 -- -- 575
Net earnings -- -- -- -- 1,489 1,489
- -------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1993 4,754,172 $34,310 $(288) $ 0 $26,608 $60,630
===============================================================================================================================
</TABLE>
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Quarter ended March 31,
1994 1993
(in thousands)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,780 $ 1,490
- ---------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Net amortization of investment securities 727 238
Depreciation and amortization 225 234
Provision for possible loan losses 415 1,520
Provision for real estate investment losses -- 197
Provision for OREO losses 250 336
(Gain) on sale of securities -- (868)
Goodwill amortization -- 429
Increase (decrease) in taxes payable 771 185
Decrease (increase) in accrued interest receivable (384) (1,335)
Decrease (increase) in other assets (65) 3,838
Increase (decrease) in accrued interest payable (24) 212
Increase (decrease) in other liabilities (737) (270)
- ---------------------------------------------------------------------------------------------------------
Total adjustments 1,178 4,716
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 2,958 6,206
- ---------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (97) (22,250)
Proceeds from sales of investment securities -- 23,012
Proceeds from principal payments and maturities of investment securities 14,525 7,993
Loan fundings, net of principal collected (10,782) (82)
Purchase of premises and equipment (62) (28)
Decrease (increase) in real estate investments 142 248
Decrease (increase) in banker's acceptances 236 (486)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 3,962 8,407
- ---------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings (3,753) (50,636)
Net increase (decrease) in certificates of deposit (1,465) 64,105
Increase (decrease) in repurchase agreements and federal funds purchased 400 (29,539)
Dividends paid (714) (713)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (5,532) (16,783)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,388 (2,170)
- ---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 126,148 86,164
- ---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF FIRST QUARTER $ 127,536 $ 83,994
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- ---------------------------------------------------------------------------------------------------------
Cash paid during the first three months for:
Interest $ 2,914 $ 3,437
Income taxes -- 275
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- ---------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (288) $ (575)
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated statements of the financial condition of
Metrobank at March 31, 1994 and 1993, and the consolidated statements
of earnings, consolidated statements of changes in shareholders' equity
and consolidated statements of cash flows for the periods presented,
have been prepared by the Bank without audit. In the opinion of
Management, all adjustments necessary to present fairly the financial
position, results of operations and statements of cash flows at March
31, 1994 and 1993 and for all periods presented have been made.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles, and, accordingly,
these financial statements do not purport to present the Bank's
financial position in accordance with generally accepted accounting
principles.
These financial statements should be read in conjunction with the
consolidated financial statements contained in the Bank's Annual Report
(Form F-2).
The Bank adopted the Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" on January 1, 1994. SFAS No. 115 requires that an entity
classify and account for its investments in equity securities that have
readily determinable fair values and for all of its investments in debt
securities as either trading, available for sale, or held to maturity,
and report these investments at fair value or amortized cost as
stipulated by SFAS No. 115. Investments and debt securities shall be
classified as held to maturity and recorded at amortized cost only if
the Bank has a positive intent and ability to hold those securities to
maturity. Securities that are bought and held principally for the
purpose of selling them in the near term (thus held for only a short
period of time) shall be classified as trading securities. Securities
classified as trading shall be carried at fair value, with any
unrealized gains or losses, net of tax, reflected in current earnings.
At this time, the Bank does not have a trading portfolio. Investments
not classified as either held to maturity or trading securities shall
be classified as available for sale securities. Securities classified
as available for sale shall be carried at fair value with any
unrealized gains or losses, net of tax, reflected as an addition or
reduction to a separate component of shareholders' equity, as
appropriate. However, unrealized gains are not currently included as
capital for regulatory purposes.
Note 2. Earnings Per Share
Earnings per share is computed on the basis of the weighted average
number of shares outstanding for each period (4,756,672 and 4,754,172
for the three months ended March 31, 1994 and 1993, respectively).
Note 3. Letters of Credit
The Bank had outstanding letters of credit of $11.0 million as of March
31, 1994, $8.9 million as of December 31, 1993, and $9.3 million as of
March 31, 1993.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of its financial
condition and results of operations, which follows, should be read in
conjunction with the consolidated financial statements and related notes to the
financial statements of the Bank that appear elsewhere in this report.
Net Earnings
For the three month period ending March 31, 1994, the Bank reported net
earnings of $1.8 million, or $0.37 per share, compared to $1.5 million, or
$0.31 per share for the same period in the prior year.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other liabilities). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield on interest-earning assets and the rate paid on interest-
bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$12.0 million for the quarter ended March 31, 1994 as compared to $11.8 million
for the quarter ended March 31, 1993. Total interest income decreased by
approximately $540,000 for the quarter ended March 31, 1994 compared to the
quarter ended March 31, 1993. The quarterly average rate for loans and
investment securities was 7.49% for the quarter ended March 31, 1994 compared
to 8.01% for the quarter ended March 31, 1993. This decrease in interest rates
resulted in a decrease in interest income of approximately $1.1 million. This
decrease in total interest income associated with a decline in interest rates
was offset partially by an increase in average earning asset balances.
Total interest expense decreased by approximately $730,000 for the quarter
ended March 31, 1994 compared to the quarter ended March 31, 1993. This
decrease in interest expense can be attributed to a reduction in the Bank's
interest-bearing funds which resulted in an interest expense decrease of
$627,000 when compared to the prior year. In addition, an overall decline in
interest rates further reduced interest expense by approximately $101,000.
<PAGE> 9
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest
rates and average balances:
<TABLE>
<CAPTION>
Quarter ended March 31, 1994 Quarter ended March 31, 1993
over Qtr. ended March 31, 1993 Over Qtr. ended March 31, 1992
------------------------------ ------------------------------
Total Total
Increase Change Due To: Increase Change Due To:
In thousands (Decrease) Rate Volume (Decrease) Rate Volume
---------- -------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Other interest income $ (44) $ (19) $ (25) $ 57 $ 1 $ 56
Investment securities (1,024) (879) (145) (62) (499) 437
Loans and bankers' acceptances 526 (231) 757 275 (557) 832
------- ------- ------ ------ ------- ------
Total interest income $ (542) $(1,129) $ 587 $ 270 $(1,055) $1,325
------- ------- ------ ------ ------- ------
INTEREST EXPENSE:
NOW and money market deposits 101 (70) 171 (358) (624) 266
Savings deposits (63) (23) (40) (36) (45) 9
Time deposits (461) (26) (435) (640) (430) (210)
Funds purchased and securities sold
under agreement to repurchase (305) 18 (323) 21 (136) 157
Other interest expense -- -- -- 38 0 38
------- ------- ------ ------ ------- ------
Total interest expense $ (728) $ (101) $ (627) $ (975) $(1,235) $ 260
------- ------- ------ ------ ------- ------
Net interest income $ 186 $(1,028) $1,214 $1,245 $ 180 $1,065
======= ======= ====== ====== ======= ======
</TABLE>
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited back
to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
earnings as a provision for possible loan losses. The balance of the allowance
for possible loan losses reflects the amount which, in management's judgement,
is adequate to provide for potential loan losses after weighing the mix of the
loan portfolio, current economic conditions, past loan loss experience and
other factors relevant to estimating loan losses.
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured; such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk as property acquired through
foreclosure ("OREO") may not be sold for an amount sufficient to offset the
entire amount of the loan and costs associated with foreclosure. Although
management believes that the allowance for possible loan losses is adequate,
future provisions will be subject to continuing evaluation of risks inherent in
the loan portfolio.
The provision for possible loan losses of $400,000 decreased $1.1 million when
compared to the same quarter in prior year and is reflective of Management's
intention to maintain reserves for possible loan losses at a level sufficient
to provide for its loss expectations. The Bank's ratio
<PAGE> 10
of loan loss reserve to total loans was 2.34% and 2.14% as of March 31, 1994
and March 31, 1993, respectively.
Loan charge-offs (net of recoveries) for the three months ended March 31, 1994
totalled approximately $53,000 or 0.04% of average total loans. This compares
to net charge-offs of $325,000 or 0.25% for the three months ended March 31,
1993.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as real estate values in
Southern California. As of December 31, 1993, the Bank had approximately $12.3
million in non-performing assets which consisted primarily of $5.7 million in
other real estate owned, $5.5 million of non-accrual loans and $1.1 million in
loans which were over ninety days delinquent with respect to either principal
or interest. As of March 31, 1994, the Bank had approximately $15.1 million in
non-performing assets of which $5.5 million consisted of other real estate
owned, $7.7 million of non-accrual loans and $1.9 million in loans which were
over ninety days delinquent with respect to either principal or interest.
Total non-performing assets expressed as a percentage of total assets as of
December 31, 1993 and March 31, 1994 were approximately 1.3% and 1.5%,
respectively.
Non-Interest Income
Non-interest income totalled $1.1 million for the quarter ended March 31, 1994
compared to $2.5 million for the quarter ended March 31, 1993. Of this
decrease, approximately $900,000 is attributable to a gain recognized on the
sale of treasury securities in the first quarter of 1993. Other non-interest
income decreased by approximately $500,000 for the quarter ended March 31, 1994
compared to the quarter ended March 31, 1993 and was primarily caused by the
sale of the Bank's insurance subsidiary during 1993.
Non-Interest Expense
Non-interest expense totalled $10.1 million for the first quarter of 1994 as
compared to $10.9 million for the first quarter of 1993. Personnel expense
decreased by approximately $300,000 for the quarter ended March 31, 1994
compared to the quarter ended March 31, 1993, mainly due to a $290,000 decrease
in principal payments on the ESOP loan in the first quarter of 1994.
Additionally, goodwill of $430,000 relating to the Bank's insurance division
was written off in the first quarter of 1993. Other non-interest expenses
increased by approximately $200,000 during the first quarter of 1994.
Income Taxes
The Bank's effective tax rate for the three months ended March 31, 1994 was
approximately 30.1%, compared to 23.6% for the three months ended March 31,
1993. This increase in the effective tax rate from the prior year is due to a
decrease in the tax credits utilized in 1994 as the Bank exhausted its tax
credit carry back ability in 1993. The Bank's effective tax rate is less than
the statutory rate as a result of the utilization of the aforementioned income
tax credits generated by its low income housing project. The utilization of
these credits, however, is subject to certain alternative minimum tax
limitations. During the first quarter of 1994, the
<PAGE> 11
Bank generated pre-tax income which allowed the Bank to utilize approximately
$285,000 in tax credits.
Capital Resources
As of March 31, 1994, the Bank's shareholders' equity totalled $66.0 million,
an increase of approximately $5.4 million from March 31, 1993. This increase in
equity was caused by the $288,000 pay-off on a loan made for the benefit of the
Employee Stock Ownership Trust (ESOT), net income of $6.3 million for the
twelve months ended March 31, 1994, and a $867,000 after-tax unrealized gain on
investment securities classified as available for sale, offset by the
declaration of cash dividends totalling $2.1 million during the past twelve
months. As of March 31, 1994, the Bank's risk based and tier-1 capital ratios
were 11.6% and 10.3%, respectively. Both ratios exceed the December 31, 1992
regulatory requirement of 8.0% and 4.0%, respectively. Additionally, as a
result of the Bank entering into a "Memorandum of Understanding" with the
Federal Deposit Insurance Corporation, the Bank must maintain a tier-1 leverage
capital ratio of at least 6.5 percent and seek FDIC approval in connection with
the declaration of dividends. The Bank's tier-1 leverage capital ratios as of
March 31, 1994 and March 31, 1993 were 7.2% and 6.9%, respectively and has
received approval to pay dividends for the past four quarters.
Investments and Liquidity
Beginning January 1, 1994, Metrobank was required to abide by the requirements
of Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This statement requires
that institutions classify investment securities as either held to maturity,
available for sale, or trading. Investments classified as held to maturity
will be carried at amortized cost. Investments classified as available for
sale must be marked to market with unrealized gains or losses, net of the
taxes, included in equity. Trading securities must also be marked to market,
however, unrealized gains or losses must be reflected in current earnings.
During the second quarter of 1993, prior to the adoption of SFAS No. 115,
Metrobank had classified its investment securities as either held to maturity
or held for sale. The Bank does not anticipate holding any securities in a
trading account. As of March 31, 1994, the Bank had approximately $253 million
in investment securities, consisting of $211 million in treasury securities,
$39 million in mortgage-backed securities and $3 million in FHLB stock. $83
million of the treasury securities and the FHLB stock have been classified as
available for sale, while the remainder of the treasury securities, as well as
the mortgage-backed securities have been classified as held to maturity. As of
March 31, 1994, the Bank had a $1.5 million pre-tax unrealized gain in the
available for sale portion of the treasury securities portfolio, and a $833,000
pre-tax unrealized loss in the held to maturity portion of the portfolio.
The liquidity levels of the Bank are managed by its Asset/Liability Management
Committee. This committee is charged with the responsibility of insuring that
reserve balances are maintained and to ensure that the Bank obtains funds
necessary to meet existing deposit outflow requirements as well as asset
growth. The Bank's primary source of funds is derived from principal and
interest payments on loans, principal and interest payments on its investment
<PAGE> 12
portfolio, generation of non-interest-bearing and interest-bearing deposits,
and, to a lesser extent, borrowings, effected primarily through short-term
repurchase agreements and the use of the Bank's federal fund borrowing
arrangements.
Inasmuch as a significant portion of the Bank's deposit base is concentrated in
demand deposits, which are more volatile than time interest bearing deposits,
the Asset/Liability Committee operates a Money Desk as a means of supplementing
funding activities. Additionally, the Bank has established unsecured credit
facilities of approximately $91 million, or 10.3% of total deposits, and
secured credit facilities of $136 million, or 15.5% of total deposits. The
combination of these facilities provides the Bank with a secondary source of
liquidity of approximately $227 million or 25.8% of total deposits.
Additionally, as part of the Memorandum of Understanding, the Bank is required
to maintain a volatile liability dependency ratio not to exceed 15%. This
ratio measures the relationship of volatile deposits, primarily brokered
deposits, money desk deposits, time certificates of deposit in excess of
$100,000 and borrowings, in relation to adjusted net earning assets. One
factor which improves this ratio is the relationship of investment securities
which mature within one year of the reporting date which has caused the Bank to
deposit in its portfolio in shorter term securities. As of March 31, 1994,
Metrobank's volatile liability dependency ratio was 3.6%.
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 4, 1994 Metrobank
------------------------
(Bank)
By: /s/ David P. Malone
------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank in
the capacities indicated on the date set forth above.
Signature
/s/ Christopher T. Ishikawa
- -------------------------------
Christopher T. Ishikawa
First Vice President/Controller
(Principal Accounting Officer)
<PAGE> 14
- -------------------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED JUNE 30, 1994
METROBANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
95-3271474
(IRS EMPLOYER IDENTIFICATION NO.)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
90024
(ZIP CODE)
(310) 824-5700
(BANK'S TELEPHONE NUMBER INCLUDING AREA CODE)
INDICATE BY CHECK-MARK WHETHER THE BANK (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIODS THAT THE BANK WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST NINETY DAYS.
YES XX NO
---------- ----------
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 30, 1994: 4,796,097
- -------------------------------------------------------------------------------
<PAGE> 15
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1994, DECEMBER 31, 1993 AND JUNE 30, 1993
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1994 AND JUNE
30, 1993
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1994 AND JUNE 30, 1993
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1994 AND JUNE 30, 1993
SIX MONTHS ENDED JUNE 30, 1994 AND JUNE 30, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
<PAGE> 16
METROBANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
($ in thousands, except JUNE 30, JUNE 30,
per share amounts) 1994 DECEMBER 31, 1993
(UNAUDITED) 1993 (UNAUDITED)
ASSETS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $105,631 $ 56,148 $ 97,782
Federal funds sold 30,000 70,000 45,000
Investment securities 238,448 236,715 232,508
Loans, net of reserve 583,095 553,125 527,950
Investment in real estate 16,538 16,823 18,767
Accrued interest receivable 5,588 5,431 5,371
Other real estate owned, net 5,145 5,745 11,709
Premises and equipment, net 2,695 2,855 2,863
Other assets 9,808 9,016 9,139
- -------------------------------------------------------------------------------------------------
Total Assets $996,948 $955,858 $951,089
=================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------
Deposits:
Time certificates $128,351 $110,485 $142,305
Other deposits 781,442 774,901 736,557
- -------------------------------------------------------------------------------------------------
Total deposits 909,793 885,386 878,862
Securities sold under agreement to repurchase
and federal funds purchased 13,830 1,100 1,000
Accrued interest payable 380 372 614
Other liabilities 6,245 5,248 9,574
- -------------------------------------------------------------------------------------------------
Total liabilities 930,248 892,106 890,050
Shareholders' equity:
Common stock 34,717 34,333 34,332
Guarantee of ESOP loan -- (288) (288)
Unrealized gain on securities available for sale 226 -- --
Retained earnings 31,757 29,707 26,995
- -------------------------------------------------------------------------------------------------
Total shareholders' equity 66,700 63,752 61,039
- -------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $996,948 $955,858 $951,089
=================================================================================================
Book value per share $13.91 $13.40 $12.83
Standby letters of credit $5,137 $3,444 3,234
Ratio of average noninterest-bearing deposits
to average total deposits 51.3% 46.4% 44.9%
Ratio of average gross loans to average
total deposits 70.1% 68.1% 67.2%
Ratio of loan loss reserve to gross loans 2.28% 2.31% 2.24%
Tier 1 leverage ratio 7.0% 6.9% 6.9%
Tier 1 capital ratio 9.9% 10.0% 9.4%
Risk based capital ratio 11.2% 11.2% 10.7%
=================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 17
METROBANK
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
($ in thousands, except 1994 1993 1994 1993
per share amounts)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans $12,565 $11,027 $24,051 $21,986
U.S. Treasury securities 2,942 3,130 5,593 6,384
Other securities 681 1,079 1,386 2,205
Other interest income 36 25 55 88
- -------------------------------------------------------------------------------------------------------------------
16,224 15,261 31,085 30,663
Interest expense:
Time certificates of deposit 1,081 1,493 1,988 2,862
Other deposits 1,763 1,595 3,443 3,237
Securities sold under agreement to repurchase
and federal funds purchased 396 116 699 723
- -------------------------------------------------------------------------------------------------------------------
3,240 3,204 6,130 6,822
- -------------------------------------------------------------------------------------------------------------------
Net interest income 12,984 12,057 24,955 23,841
Provision for possible loan losses 1,000 3,915 1,415 5,435
- -------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible
loan losses 11,984 8,142 23,540 18,406
Noninterest income:
Service charges on deposit accounts 287 334 597 708
Gain on sales of securities -- 965 -- 1,833
Other noninterest income 830 1,350 1,638 2,652
- -------------------------------------------------------------------------------------------------------------------
1,117 2,649 2,235 5,193
Noninterest expense:
Personnel expense 3,985 3,715 8,100 8,098
Occupancy, furniture and equipment expense 1,267 1,283 2,503 2,524
Other noninterest expense 5,488 4,319 10,263 9,554
- -------------------------------------------------------------------------------------------------------------------
10,740 9,317 20,866 20,176
- -------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 2,361 1,474 4,909 3,423
Provision for income taxes 976 609 2,029 1,413
Income tax credit (315) (235) (600) (580)
- -------------------------------------------------------------------------------------------------------------------
Net earnings $ 1,700 $ 1,100 $ 3,480 $ 2,590
===================================================================================================================
Earnings per share $0.34 $0.23 $0.70 $0.54
Dividends declared per share $0.15 $0.15 $0.30 $0.30
===================================================================================================================
Weighted average shares outstanding 5,057,841 4,755,765 4,982,683 4,754,973
===================================================================================================================
Net return on average shareholders' equity 10.3% 7.2% 10.6% 8.6%
Net return on average assets 0.7% 0.5% 0.8% 0.6%
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 18
METROBANK
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Six months ended June 30, 1994
($ in thousands)
Common Stock
-------------------- Guarantee of Unrealized Retained
Shares Amount ESOP Loan gain (net of tax) Earnings Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 4,756,672 $34,333 $(288) $ -- $29,707 $63,752
Exercise of stock options 39,425 384 -- -- -- 384
$0.30 per share cash dividend -- -- -- -- (1,430) (1,430)
Reduction in indebtedness for ESOP -- -- 288 -- -- 288
Unrealized gain on securities -- -- -- 226 -- 226
Net earnings -- -- -- -- 3,480 3,480
- -------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1994 4,796,097 $34,717 $ 0 $226 $31,757 $66,700
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Six months ended June 30, 1993
($ in thousands)
Common Stock
-------------------- Guarantee of Unrealized Retained
Shares Amount ESOP Loan gain (net of tax) Earnings Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 4,754,172 $34,310 $(863) $-- $25,832 $59,279
Exercise of stock options 2,500 22 -- -- -- 22
$0.30 per share cash dividend -- -- -- -- (1,427) (1,427)
Reduction in indebtedness for ESOP -- -- 575 -- -- 575
Net earnings -- -- -- -- 2,590 2,590
- -------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1993 4,756,672 $34,332 $(288) $ 0 $26,995 $61,039
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 19
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Three months ended June 30,
1994 1993
($ in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,700 $ 1,100
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Net amortization of investment securities 671 289
Depreciation and amortization 228 247
Provision for possible loan losses 1,000 3,915
Provision for real estate investment losses -- --
Provision for other real estate owned and insubstance foreclosure 350 286
(Gain) on other real estate owned and insubstance foreclosures -- (275)
(Gain) on sale of securities -- (965)
Goodwill amortization -- --
Increase (decrease) in taxes payable (1,204) (818)
Decrease (increase) in accrued interest receivable 226 1,942
Decrease (increase) in other assets (447) 333
Increase (decrease) in accrued interest payable 32 (42)
Increase (decrease) in other liabilities 2,021 (430)
- -----------------------------------------------------------------------------------------------------------
Total adjustments 2,877 4,482
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 4,577 5,582
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (30,427) (50,464)
Proceeds from sales of investment securities -- 44,221
Proceed from principal payments and maturities on investment securities 13,254 15,125
Loan fundings, net of principal collected (19,559) (15,966)
Purchase of premises and equipment (232) (196)
Decrease (increase) in real estate investments 143 151
Decrease (increase) in banker's acceptances (1,283) (346)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (38,104) (7,475)
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 10,294 105,100
Net increase (decrease) in certificates of deposit 19,330 (41,571)
Increase (decrease) in repurchase agreements and federal funds purchased 12,330 (2,156)
Dividends paid (716) (713)
Stock options exercised 384 21
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 41,622 60,681
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 8,095 58,788
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF SECOND QUARTER 127,536 83,994
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF SECOND QUARTER $ 135,631 $ 142,782
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -----------------------------------------------------------------------------------------------------------
Cash paid during the second quarter for:
Interest $ 3,208 $ 3,284
Income taxes 1,865 1,180
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ -- $ --
Foreclosed real estate loans -- 2,632
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Six months ended June 30,
1994 1993
($ in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 3,480 $ 2,590
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Net amortization of investment securities 1,398 527
Depreciation and amortization 453 481
Provision for possible loan losses 1,415 5,435
Provision for real estate investment losses -- 197
Provision for other real estate owned and insubstance foreclosures 600 622
(Gain) on other real estate owned and insubstance foreclosure -- (275)
Gain on sale of securities -- (1,833)
Goodwill amortization -- 429
Increase (decrease) in taxes payable (433) (633)
Decrease (increase) in accrued interest receivable (158) 607
Decrease (increase) in other assets (512) 4,171
Increase (decrease) in accrued interest payable 8 170
Increase (decrease) in other liabilities 1,284 (700)
- -----------------------------------------------------------------------------------------------------------
Total adjustments 4,055 9,198
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 7,535 11,788
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (30,524) (72,714)
Proceeds from sales of investment securities -- 67,233
Proceeds from principal payments and maturities of investment securities 27,779 23,118
Loan fundings, net of principal collected (30,341) (16,048)
Purchase of premises and equipment (294) (224)
Decrease (increase) in real estate investments 285 399
Decrease (increase) in banker's acceptances (1,047) (832)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (34,142) 932
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 6,541 54,464
Net increase (decrease) in certificates of deposit 17,865 22,534
Increase (decrease) in repurchase agreements and federal funds purchased 12,730 (31,695)
Dividends paid (1,430) (1,426)
Stock options exercised 384 21
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 36,090 43,898
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 9,483 56,618
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 126,148 86,164
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF SECOND QUARTER $ 135,631 $ 142,782
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -----------------------------------------------------------------------------------------------------------
Cash paid during the first six months for:
Interest $ 6,122 $ 6,721
Income taxes 1,865 1,455
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (288) $ (575)
Foreclosed real estate loans -- 2,632
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated statements of the financial condition of
Metrobank at June 30, 1994 and 1993, and the consolidated statements
of earnings, consolidated statements of changes in shareholders'
equity and consolidated statements of cash flows for the periods
presented, have been prepared by the Bank without audit. In the
opinion of Management, all adjustments necessary to present fairly the
financial position, results of operations and statements of cash flows
at June 30, 1994 and 1993 and for all periods presented have been
made. Management has elected to omit substantially all of the
disclosures required by generally accepted accounting principles, and,
accordingly, these financial statements do not purport to present the
Bank's financial position in accordance with generally accepted
accounting principles.
These financial statements should be read in conjunction with the
consolidated financial statements contained in the Bank's Annual
Report (Form F-2).
Investments
Investment securities are stated at cost, with any discount or premium
accreted or amortized to maturity using the effective interest method.
Adjustments to the lower of cost or market value are made if
Management does not intend to or is financially unable to hold the
security to maturity, or if a decline in value indicates a possible
impairment of the ability to recover principal. Realized gains and
losses are determined on a specific identification basis.
The Bank adopted the Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" on January 1, 1994. SFAS No. 115 requires that an entity
classify and account for its investments in equity securities that
have readily determinable fair values and for all of its investments
in debt securities as either trading, available for sale, or held to
maturity, and report these investments at fair value or amortized cost
as stipulated by SFAS No. 115. Investments in debt securities shall
be classified as held to maturity and recorded at amortized cost only
if the Bank has a positive intent and ability to hold those securities
to maturity. Securities that are bought and held principally for the
purpose of selling them in the near term (thus held for only a short
period of time) shall be classified as trading securities. Securities
classified as trading shall be carried at fair value with any
unrealized gains or losses, net of tax, reflected in current earnings.
At this time, the Bank does not have a trading portfolio. Investments
not classified as either held to maturity or trading shall be
classified as available for sale securities. Securities classified as
available for sale shall be carried at fair value with any unrealized
gains or losses, net of tax, reflected as an addition or reduction of
shareholders' equity.
<PAGE> 22
Note 2. Earnings Per Share
Earnings per share is computed on the basis of the weighted average
number of common shares and common share equivalents outstanding for
each period (5,057,841 and 4,755,765 for the three months ended June
30, 1994 and 1993, and 4,982,683 and 4,754,973 for the six months
ended June 30, 1994 and 1993).
Common share equivalents include the number of shares issuable upon
the exercise of stock options less the number of shares that could
have been purchased with the proceeds from the exercise of the options
based upon the higher of the average price of common shares during the
period or the price at the balance sheet date.
Note 3. Letters of Credit
The Bank had letters of credit outstanding of $12.4 million as of June
30, 1994, $8.9 million as of December 31, 1993, and $9.2 million as of
June 30, 1993.
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of its financial
condition and results of operations should be read in conjunction with the
consolidated financial statements and related notes to the financial statements
of the Bank that appear elsewhere in this report.
Net Earnings
For the three and six months ended June 30, 1994 the Bank reported net earnings
of $1.7 million and $3.5 million, or $.34 and $.70 per share, compared to $1.1
million and $2.6 million, or $0.23 and $0.54 per share for the same periods in
the prior year.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other borrowings). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$13.0 million for the quarter ended June 30, 1994 as compared to $12.1 million
for the quarter ended June 30, 1993. A majority of this increase in net
interest income was caused by an increase in interest income.
Interest and fee income was $16.2 million for the second quarter of 1994
compared to $15.3 million for the second quarter of 1993. Total interest
income increased by approximately $900,000 for the quarter ended June 30, 1994,
as compared to the quarter ended June 30, 1993. Average earning assets for the
quarter ended June 30, 1994 was $841.5 million, as compared to $776.9 million
in the prior year. This increase in earning assets resulted in an increase in
interest income of approximately $1.3 million. This increase in interest
income was partially offset by a decrease in interest rates.
Total loan interest and fee income for the second quarter of 1994 was $12.5
million, compared to $11.0 million for the second quarter of 1993. This
increase of approximately $1.5 million resulted from an increase in average
loans of $50.4 million over the prior year, which increased
<PAGE> 24
interest income by approximately $1.1 million. The average rate on loans for
the quarter ended June 30, 1994 was 8.59%, a .34% increase from 8.24%
for the prior year. This increase resulted in an additional $460,000 in
interest income.
Interest on investment securities was $3.6 million for the second quarter of
1994, compared to $4.2 million in the prior year. The average investment
securities yield was 5.79%, compared to 7.12% in 1993. This decrease of 1.33%
in the yield on investment securities is primarily attributable to the
reinvestment of investment proceeds into comparable securities in a lower rate
environment, which resulted in a decrease of $786,000 in interest income. This
was offset by a $13.9 million increase in average investment securities to
$250.9 million, which increased interest income by approximately $200,000.
Total interest expense was $3.2 million for the quarter ended June 30, 1994, an
amount which was the same as compared to the prior year. The Bank reduced its
interest-bearing funds which decreased interest expense by $105,000; however,
this was offset by an increase in the average cost of funds which increased
interest expense by approximately $141,000.
Interest expense on time deposits was $1.1 million for the quarter ended June
30, 1994, compared to $1.5 million for the quarter ended June 30, 1993. This
decrease of $400,000 is due to a $47.6 million decrease in average time
deposits to $115.6 million for the second quarter of 1994. This decrease in
time deposits reduced interest expense by approximately $444,000.
The interest expense on NOW and money market deposits increased approximately
$188,000 to $1.7 million for the second quarter of 1994. This increase is due
to a $17.7 million increase in average deposits to $281.5 million, as compared
to $263.8 million in the prior year. The additional deposits resulted in a
$107,000 increase in interest expense. The average rate on these deposits also
increased to 2.44% in the second quarter of 1994, as compared to 2.31% in 1993.
This change in rate increased interest expense by approximately $81,000.
Average borrowings for the second quarter of 1994 were $37.8 million, or $23.3
million over the prior year. This increase in the average borrowings increased
the expense by approximately $244,000. The average rate increased .99% from
the second quarter of 1993 to 4.21% in 1994, resulting in an additional $36,000
in interest expense.
For the six months ended June 30, 1994 and 1993, net interest income before
provision for loan losses was $24.9 and $23.8 million, respectively. This
increase of $1.1 million is attributable to a combination of an increase in the
average balance of the loan portfolio and the overall decline in the Bank's
interest-bearing funds. This was offset by the impact of the decline in
interest rates on the investment portfolio.
Loan interest and fee income for the six months ended June 30, 1994 was $24.1
million as compared to $22.0 million for the six months ended June 30, 1993.
This $2.1 increase in interest income is due to the $43.9 million increase in
average loans to $577.1 million in 1994, as compared to the prior year. The
increase in loans resulted in an additional $1.8 million in income. The
average loan rate for the six months ended June 30, 1994 was 8.40%, a 0.09%
<PAGE> 25
increase over the average rate in the first six months of 1993. This change in
average rate increased interest income by approximately $234,000.
The interest on investment securities for the first six months of 1994 was $7.0
million as compared to $8.6 million in the prior year. This decrease of $1.6
million is primarily attributable to an average rate on investment securities
of 5.80% for the six months ended June 30, 1994, compared to 7.20% in the same
period of 1993. This decrease of 1.40% in average rates resulted in a decrease
of $1.7 million in interest income.
The interest expense on NOW and money market deposits for six months ended June
30, 1994 was $3.3 million, a $300,000 increase over the $3.0 million for the
first six months of 1993. The average balance for these deposits was
$281.2 million for the six months ended June 30, 1994, compared to $257.5
million for the same period in 1993. This increase in deposits of $23.7
million resulted in an increase in interest expense of approximately $280,000.
Time deposit interest expense was $2.0 million for the six months ended June
30, 1994, and represents a $900,000 decrease from $2.9 million in the prior
year. The decrease in interest expense is the result a $49.3 million
reduction in average time deposits. The average balance for the first six
months of 1994 was $110.9 million as compared to $160.2 million in the prior
year.
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest
rates and average balances:
<TABLE>
<CAPTION>
Quarter ended June 30, 1994 Six Months ended June 30, 1994
over Quarter ended June 30, 1993 over Six Months ended June 30, 1993
------------------------------------ -----------------------------------
Total Total
Increase Change Due To: Increase Change Due To:
In thousands (Decrease) Rate Volume (Decrease) Rate Volume
---------- -------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans and bankers' acceptances $ 1,538 $ 460 $ 1,078 $ 2,065 $ 234 $ 1,831
Investment securities (586) (786) 200 (1,610) (1,666) 56
Other interest income 11 8 3 (33) (6) (27)
--------- -------- -------- --------- --------- --------
Total $ 963 $ (318) $ 1,281 $ 422 $ (1,438) $ 1,860
--------- -------- -------- --------- --------- --------
INTEREST EXPENSE:
NOW and money market deposits 188 81 107 290 10 280
Savings deposits (20) (8) (12) (84) (7) (77)
Time deposits (412) 32 (444) (874) 9 (883)
Funds purchased and securities sold
under agreements to repurchase 280 36 244 (24) 114 (138)
--------- -------- -------- --------- --------- --------
Total $ 36 $ 141 $ (105) $ (692) $ 126 $ (818)
--------- -------- -------- --------- --------- --------
Net interest income $ 927 $ (459) $ 1,386 $ 1,114 $ (1,564) $ 2,678
========= ======== ======== ========= ========= ========
</TABLE>
<PAGE> 26
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited back
to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
earnings as a provision for possible loan losses. The balance of the allowance
for possible loan losses reflects the amount which, in management's judgement,
is adequate to provide for potential loan losses after weighing the mix of the
loan portfolio, current economic conditions, past loan loss experience and
other factors relevant to estimating loan losses. The adequacy of the
allowance for possible loan losses is also evaluated relative to the level of
non-performing loans (those for which principal or interest is past due more
than 90 days and those on non-accrual status).
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured. Such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk as property acquired through
foreclosure ("OREO") may not be saleable for an amount sufficient to offset the
entire amount of the loan and costs associated with foreclosure. Although
management believes that the allowance for possible loan losses is adequate,
future provisions will be subject to continuing evaluation of risks inherent
in the loan portfolio.
The provision for possible loan losses decreased by approximately $2.9 million
from the same quarter in prior year and by $4.0 million from the same six
months in the prior year and is reflective of current charge-off experiences as
well as Management's intention to maintain reserves for possible loan losses at
a level sufficient to provide for its loss expectations. The Bank's ratio of
loan loss reserve to total loans was 2.28% and 2.24% as of June 30, 1994 and
June 30, 1993, respectively.
Loan charge-offs (net of recoveries) for the three and six months ended June
30, 1994 totalled approximately $842,000 and $894,000, respectively. This
compares to net charge-offs of $3.1 and $3.4 million for the three and six
months ended June 30, 1993. This decrease in charge-offs is primarily
attributable to the decline in charge-offs of real estate loans.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as real estate values in
Southern California. As of December 31, 1993, the Bank had approximately $12.3
million in non-performing assets which consisted primarily of $5.7 million in
other real estate owned, $5.5 million of non-accrual loans and $1.1 million in
loans which were over ninety days delinquent with respect to principal or
interest. As of June 30, 1994, the Bank had approximately $15.4 million in
non-performing assets of which $5.1 million consisted of other real estate
owned, $8.5 million of non-accrual loans, and $1.8 million in loans which were
over ninety days delinquent with respect to principal or interest. Total
non-performing assets to total assets as of December 31, 1993 and June 30, 1994
were approximately 1.29% and 1.55%, respectively.
<PAGE> 27
Non-Interest Income
Non-interest income totalled $1.1 million for the quarter ended June 30, 1994
compared to $2.6 million for the quarter ended June 30, 1993. Of this
decrease, approximately $1.0 million was attributable to a gain recognized in
the sale of Treasury securities in the second quarter of 1993. Other
non-interest income decreased approximately $500,000 for the quarter ended June
30, 1994, as compared to the quarter ended June 30, 1993, and was primarily
attributable to the sale of the Bank's insurance subsidiary in 1993 and
$275,000 in gains on the sale of real estate in 1993.
Non-interest income totalled $2.2 million for the six months ended June 30,
1994, compared to $5.2 million for the same period in the prior year. The
decrease of $3.0 million was mainly the result of $1.8 million in gains
recognized in 1993 on the sale of Treasury securities. The sale of the Bank's
insurance subsidiary in 1993 reduced non-interest income by approximately
$670,000 and $275,000 was recognized in 1993 for gains on the sale of real
estate.
Non-Interest Expense
Non-interest expense totalled $10.7 million for the second quarter of 1994, as
compared to $9.3 million for the second quarter of 1993. This increase of $1.4
million was the result of a $976,000 increase in data processing and other
services paid on behalf of certain depository relationships and is directly
attributable to an increase in average demand deposits. Personnel expenses
increased by approximately $270,000 due to annual salary increases and
additions to staff.
Non-interest expense totalled $20.9 million for the six months ended June 30,
1994, compared to $20.2 million for the six months ended June 30, 1993. This
increase of $700,000 is primarily attributable to data processing and other
services paid on behalf of certain depository relationships which increased
$1.1 million in 1994, compared to 1993. This was offset by the 1993 write-off
of $430,000 for goodwill relating to the Bank's insurance division.
Income Taxes
The Bank's effective tax rate for the three and six months ended June 30, 1994
was approximately 28.0% and 29.1%, compared to 25.4% and 24.3% for the three
and six months ended June 30, 1993, respectively. The Bank's effective tax
rate is less than the statutory rate due to the utilization of income tax
credits generated by its low income housing project. The utilization of these
credits, however, is subject to certain alternative minimum tax limitations.
For the three and six month periods ended June 30, 1994, the Bank was not in an
alternative minimum tax position and, as such, was allowed to utilize the full
amount of the tax credits.
Capital Resources
As of June 30, 1994, the Bank's shareholders' equity totalled $66.7 million, an
increase of approximately $5.7 million from June 30, 1993. This increase in
equity was caused by the $288,000 payoff on a loan made for the benefit of the
Employee Stock Ownership Trust
<PAGE> 28
(ESOT), net income of $6.9 million for the twelve months ended June 30, 1994, a
$226,000 after-tax unrealized gain on investment securities classified as
available for sale, and $384,000 in additional capital as a result of the
exercise of stock options, offset by the declaration of cash dividends totalling
$2.1 million during the past twelve months. As of June 30, 1994, the Bank's
risk based capital ratio and tier one capital ratio were 11.2% and 9.9%,
respectively. Both ratios exceed the regulatory requirements of 8.0% and 4.0%,
respectively. As of June 30, 1993, the Bank's risk based capital and tier one
capital ratios were 10.7% and 9.4%, respectively. Additionally, the Bank has
entered into a Memorandum of Understanding (MOU) with the Federal Deposit
Insurance Corporation. The primary actions the Bank is taking under the informal
memorandum are to maintain a Tier 1 leverage capital ratio of at least 6.5
percent and to seek regulatory approval before paying quarterly cash dividends.
The Bank has received approval to pay dividends for the past five quarters. The
Bank's Tier 1 leverage capital ratio as of June 30, 1994 and June 30, 1993 was
7.0% and 6.9%, respectively.
Investments and Liquidity
Beginning January 1, 1994, Metrobank was required to abide by the requirements
of Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This statement requires
that institutions classify investment securities as either held to maturity,
available for sale, or trading. Investments classified as held to maturity
will be carried at amortized cost. Investments classified as available for
sale must be marked to market with unrealized gains or losses, net of the
taxes, included in equity. Trading securities must also be marked to market,
however, unrealized gains or losses must be reflected in current earnings.
During the second quarter of 1993, prior to the adoption of SFAS No. 115,
Metrobank had classified its investment securities as either held to maturity
or held for sale. The Bank does not anticipate holding any securities in a
trading account. As of June 30, 1994, the Bank had approximately $238 million
in investment securities, consisting of $200 million in Treasury securities,
$35 million in mortgage-backed securities and $3 million in FHLB stock. $76
million of the Treasury securities and the FHLB stock have been classified as
available for sale, while the remainder of the Treasury securities, as well as
the mortgage-backed securities have been classified as held to maturity. As of
June 30, 1994, the Bank had a $385,000 pre-tax unrealized gain in the available
for sale portion of the Treasury securities portfolio, and a $3.4 million
pre-tax unrealized loss in the held to maturity portion of the portfolio.
The liquidity levels of the Bank are managed by its Asset/Liability Management
Committee. This committee is charged with the responsibility of ensuring that
reserve balances are maintained and to ensure that the Bank obtains funds
necessary to meet existing deposit outflow requirements, as well as asset
growth. The Bank's primary source of funds is derived from principal and
interest payments on loans, principal and interest payments on its investment
portfolio, generation of non-interest bearing and interest bearing deposits,
and, to a lesser extent, borrowings, effected primarily through short-term
repurchase agreements and the use of the Bank's federal fund borrowing
arrangements.
Inasmuch as a significant portion of the Bank's deposit base is concentrated in
demand deposits, which are more volatile than time interest-bearing deposits,
the Asset/Liability Committee operates a money desk as a means of supplementing
funding activities. Additionally, the Bank
<PAGE> 29
has established unsecured credit facilities of approximately $75 million, or
8.24% of total deposits, and secured credit facilities of $129 million, or
14.18% of total deposits. The combination of these facilities provides the Bank
with a secondary source of liquidity of approximately $204 million, or 22.42% of
total deposits.
Additionally, as part of the MOU, the Bank is required to maintain a volatile
liability dependency ratio not to exceed 15%. This ratio measures the
relationship of volatile deposits, primarily brokered deposits, money desk
deposits, time certificates of deposit in excess of $100,000 and borrowings, in
relation to adjusted net earning assets. One factor which improves this ratio
is the relationship of investment securities which mature within one year of
the reporting date which has caused the Bank to deposit in its portfolio in
shorter term securities. Another factor which reduces this ratio is the Bank's
securities classified as available for sale. As of June 30, 1994, Metrobank's
volatile liability dependency ratio was 5.42%.
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 27, 1994
Metrobank
--------------------------------
(Bank)
By: /s/ David P. Malone
--------------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank in
the capacities indicated on the date set forth above.
Signature
/s/ Christopher T. Ishikawa
- -------------------------------
Christopher T. Ishikawa
First Vice President/Controller
(Principal Accounting Officer)
<PAGE> 31
- --------------------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1994
METROBANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
95-3271474
(IRS EMPLOYER IDENTIFICATION NO.)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
90024
(ZIP CODE)
(310) 824-5700
(BANK'S TELEPHONE NUMBER INCLUDING AREA CODE)
INDICATE BY CHECK-MARK WHETHER THE BANK (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIODS THAT THE BANK WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST NINETY DAYS.
YES XX NO
---- ----
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF SEPTEMBER 30, 1994:
4,800,597
- --------------------------------------------------------------------------------
<PAGE> 32
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1994, DECEMBER 31, 1993 AND SEPTEMBER 30,
1993
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1994
AND SEPTEMBER 30, 1993
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30,
1993
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30,
1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
<PAGE> 33
METROBANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
($ in thousands, except SEPTEMBER 30, SEPTEMBER 30,
per share amounts) 1994 DECEMBER 31, 1993
(UNAUDITED) 1993 (UNAUDITED)
ASSETS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 107,109 $ 56,148 $ 84,905
Federal funds sold 70,000 70,000 25,000
Investment securities 230,707 236,715 240,768
Loans, net of reserve 583,992 553,125 543,913
Investment in real estate 16,373 16,823 18,621
Accrued interest receivable 6,653 5,431 6,219
Other real estate owned, net 6,696 5,745 8,456
Premises and equipment, net 2,556 2,855 2,737
Other assets 9,739 9,016 12,882
- -------------------------------------------------------------------------------------------------------
Total Assets $1,033,825 $955,858 $943,501
=======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------
DEPOSITS:
Time certificates $ 139,086 $110,485 $115,115
Other deposits 798,570 774,901 750,641
- -------------------------------------------------------------------------------------------------------
Total deposits 937,656 885,386 865,756
Securities sold under agreement to repurchase
and federal funds purchased 20,675 1,100 3,500
Accrued interest payable 516 372 445
Other liabilities 7,058 5,248 11,310
- -------------------------------------------------------------------------------------------------------
Total liabilities 965,905 892,106 881,011
SHAREHOLDERS' EQUITY:
Common stock 34,770 34,333 34,333
Guarantee of ESOP loan -- (288) (288)
Unrealized gain on securities available for sale 62 --
Retained earnings 33,088 29,707 28,445
- -------------------------------------------------------------------------------------------------------
Total shareholders' equity 67,920 63,752 62,490
- -------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,033,825 $955,858 $943,501
=======================================================================================================
Book value per share $14.15 $13.40 $13.14
Standby letters of credit $6,213 $3,444 $4,911
Ratio of average noninterest-bearing deposits
to average total deposits 50.2% 46.4% 47.9%
Ratio of average gross loans to average
total deposits 69.7% 68.1% 67.2%
Ratio of loan loss reserve to gross loans 2.15% 2.31% 2.28%
Tier 1 leverage ratio 7.1% 6.9% 7.0%
Tier 1 capital ratio 10.1% 10.0% 10.1%
Risk based capital ratio 11.3% 11.2% 11.4%
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 34
METROBANK
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
September 30, September 30,
($ in thousands, except 1994 1993 1994 1993
per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans $13,542 $11,287 $37,593 $33,273
U.S. Treasury securities 2,812 2,919 8,404 9,303
Other securities 699 995 2,085 3,200
Other interest income 123 62 179 151
- ----------------------------------------------------------------------------------------------------------------------------------
17,176 15,263 48,261 45,927
Interest expense:
Time certificates of deposit 1,425 1,131 3,414 3,993
Other deposits 1,924 1,722 5,367 4,958
Securities sold under agreement to repurchase
and federal funds purchased 306 148 1,005 872
- ----------------------------------------------------------------------------------------------------------------------------------
3,655 3,001 9,786 9,823
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income 13,521 12,262 38,475 36,104
Provision for possible loan losses 1,600 2,360 3,015 7,795
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible
loan losses 11,921 9,902 35,460 28,309
Noninterest income:
Service charges on deposit accounts 254 339 851 1,047
Gain on sales of securities 0 1,148 0 2,981
Other noninterest income 917 1,602 2,555 4,255
- ----------------------------------------------------------------------------------------------------------------------------------
1,171 3,089 3,406 8,283
Noninterest expense:
Personnel expense 4,086 3,843 12,186 11,942
Occupancy, furniture and equipment expense 1,151 1,391 3,653 3,915
Other noninterest expense 5,034 5,728 15,297 15,282
- ----------------------------------------------------------------------------------------------------------------------------------
10,271 10,962 31,136 31,139
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 2,821 2,029 7,730 5,453
Provision for income taxes 1,166 839 3,195 2,253
Income tax credit (396) (260) (996) (840)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 2,051 $ 1,450 $ 5,531 $ 4,040
==================================================================================================================================
Earnings per share $ 0.41 $ 0.30 $ 1.10 $ 0.85
Dividends declared per share $ 0.15 $ 0.15 $ 0.45 $ 0.45
==================================================================================================================================
Weighted average shares outstanding 4,798,026 4,756,672 4,778,992 4,755,546
==================================================================================================================================
Net return on average shareholders' equity 12.1% 9.3% 11.2% 8.9%
Net return on average assets 0.9% 0.6% 0.8% 0.6%
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements
<PAGE> 35
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 1994
(dollars in thousands)
Common Stock
------------------------- Guarantee of Unrealized Retained
Shares Amount ESOP Loan gain (net of tax) Earnings Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 4,756,672 $34,333 $(288) $-- $29,707 $63,752
Exercise of stock options 43,925 437 -- -- -- 437
$0.30 per share cash dividend -- -- -- -- (2,150) (2,150)
Reduction in indebtedness for ESOP -- -- 288 -- -- 288
Unrealized gain on securities -- -- -- 62 -- 62
Net earnings -- -- -- -- 5,531 5,531
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1994 4,800,597 $34,770 $ 0 $62 $33,088 $67,920
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 1993
(dollars in thousands)
Common Stock
------------------------- Guarantee of Unrealized Retained
Shares Amount ESOP Loan gain (net of tax) Earnings Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 4,754,172 $34,310 $(863) $-- $25,832 $59,279
Exercise of stock options 2,500 23 -- -- -- 23
$0.15 per share cash dividend -- -- -- -- (1,427) (1,427)
Reduction in indebtedness for ESOP -- -- 575 -- -- 575
Net earnings -- -- -- -- 4,040 4,040
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1993 4,756,672 $34,333 $(288) $ 0 $28,445 $62,490
==================================================================================================================================
</TABLE>
<PAGE> 36
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Quarter ended Sept. 30,
1994 1993
(in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 2,051 $ 1,450
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Net amortization of investment securities 678 384
Depreciation and amortization 199 243
Provision for possible loan losses 1,600 2,360
Provision for real estate investment losses -- --
Provision for other real estate owned and insubstance foreclosures (55) 1,003
(Gain) on sale of other real estate owned and insubstance foreclosures 13 (13)
(Gain) on sale of securities -- (1,148)
(Gain) on sale of Josi & Dold -- (233)
(Gain) on sale of equipment -- (9)
Goodwill amortization -- --
Decrease (increase) in deferred taxes 100 (234)
Decrease (increase) in accrued interest receivable (1,065) (848)
Decrease (increase) in other assets 85 (3,544)
Increase (decrease) in accrued interest payable 137 (170)
Increase (decrease) in other liabilities 813 1,769
- -----------------------------------------------------------------------------------------------------------
Total adjustments 2,505 (440)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 4,556 1,010
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (5,377) (39,673)
Proceeds from sales of investment securities 0 16,226
Proceed from principal and maturities of investment securities 12,160 15,905
Loan fundings, net of principal collected (4,574) (13,747)
Proceeds from sale of Josi & Dold -- 250
Proceeds from sale of equipment -- 9
Sale of other real estate owned 447 --
Purchase of premises and equipment (60) (117)
Decrease (increase) in real estate investments 165 146
Decrease (increase) in banker's acceptances 119 (1,567)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 2,880 (22,568)
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 17,128 14,084
Net increase (decrease) in certificates of deposit 10,735 (27,189)
Increase (decrease) in repurchase agreements and federal funds purchased 6,845 2,500
Dividends paid (719) (714)
Stock options exercised 53 --
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 34,042 (11,319)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 41,478 (32,877)
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THIRD QUARTER 135,631 142,782
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF THIRD QUARTER $ 177,109 $ 109,905
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -----------------------------------------------------------------------------------------------------------
Cash paid during the first three months for:
Interest $ 3,518 $ 3,171
Income taxes 670 1,015
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ -- $ --
Foreclosed real estate loans 1,956 --
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 37
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Nine months ended Sept. 30,
1994 1993
(in thousands)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 5,531 $ 4,040
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Net amortization of investment securities 2,076 911
Depreciation and amortization 652 724
Provision for possible loan losses 3,015 7,795
Provision for real estate investment losses -- 197
Provision for other real estate owned and insubstance foreclosures 545 1,625
(Gain) on other real estate owned and insubstance foreclosure 13 (288)
Gain on sale of securities -- (2,981)
(Gain) on sale of Josi & Dold -- (233)
(Gain) on sale of equipment -- (9)
Goodwill amortization -- 429
Decrease (increase) in deferred taxes (333) (867)
Decrease (increase) in accrued interest receivable (1,223) (241)
Decrease (increase) in other assets (427) 627
Increase (decrease) in accrued interest payable 145 --
Increase (decrease) in other liabilities 2,097 1,069
- -----------------------------------------------------------------------------------------------------------
Total adjustments 6,560 8,758
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 12,091 12,798
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (35,901) (112,387)
Proceeds from sales of investment securities -- 83,459
Proceeds from principal payments and maturities of investment securities 39,939 39,023
Loan fundings, net of principal collected (34,915) (29,795)
Proceed from sale of Josi & Dold -- 250
Proceed from sale of equipment -- 9
Proceed from sale of other real estate owned 447 --
Purchase of premises and equipment (354) (341)
Decrease (increase) in real estate investments 450 545
Decrease (increase) in banker's acceptances (928) (2,399)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (31,262) (21,636)
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 23,669 68,548
Net increase (decrease) in certificates of deposit 28,600 (4,655)
Increase (decrease) in repurchase agreements and federal funds purchased 19,575 (29,195)
Dividends paid (2,149) (2,140)
Stock options exercised 437 21
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 70,132 32,579
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 50,961 23,741
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 126,148 86,164
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF THIRD QUARTER $ 177,109 $ 109,905
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -----------------------------------------------------------------------------------------------------------
Cash paid during the first three months for:
Interest $ 9,640 $ 9,892
Income taxes 2,535 2,470
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (288) $ (575)
Foreclosed real estate loans 1,956 2,632
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated statements of the financial condition of
Metrobank at September 30, 1994 and 1993, and the consolidated
statements of earnings, consolidated statements of changes in
shareholders' equity and consolidated statements of cash flows for the
periods presented, have been prepared by the Bank without an audit. In
the opinion of Management, all adjustments necessary to present fairly
the financial position, results of operations and statements of cash
flows at September 30, 1994 and 1993 and for all periods presented
have been made. Management has elected to omit substantially all of
the disclosures required by generally accepted accounting principles,
and, accordingly, these financial statements do not purport to present
the Bank's financial position in accordance with generally accepted
accounting principles.
These financial statements should be read in conjunction with the
consolidated financial statements contained in the Bank's Annual
Report (Form F-2).
Note 2. Investments
Investment securities are stated at cost, with any discount or premium
accreted or amortized to maturity using the effective interest method.
Adjustments to the lower of cost or market value are made if
Management does not intend to or is financially unable to hold the
security to maturity, or if a decline in value indicates a possible
impairment of the ability to recover principal. Realized gains and
losses are determined on a specific identification basis.
The Bank adopted the Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" on January 1, 1994. SFAS No. 115 requires that an entity
classify and account for its investments in equity securities that
have readily determinable fair values and for all of its investments
in debt securities as either trading, available for sale, or held to
maturity, and report these investments at fair value or amortized cost
as stipulated by SFAS No. 115. Investments in debt securities shall be
classified as held to maturity and recorded at amortized cost only if
the Bank has a positive intent and ability to hold those securities to
maturity. Securities that are purchased and held principally for the
purpose of selling them in the near term (thus held for only a short
period of time) shall be classified as trading securities. Securities
classified as trading shall be carried at fair value with any
unrealized gains or losses, net of tax, reflected in current earnings.
At this time, the Bank does not have a trading portfolio. Investments
not classified as either held to maturity or trading shall be
classified as available for sale securities. Securities classified as
available for sale shall be carried
<PAGE> 39
at fair value with any unrealized gains or losses, net of tax,
reflected as an addition or reduction of shareholders' equity.
Note 3. Earnings Per Share
Earnings per share is computed on the basis of the weighted average
number of shares and common share equivalents outstanding for each
period (4,798,026 and 4,756,672 for the three months ended September
30, 1994 and 1993, respectively, and 4,778,992 and 4,755,546 for the
nine months ended September 30, 1994 and 1993, respectively).
Note 4. Letters of Credit
The Bank had outstanding letters of credit of $16.6 million as of
September 30, 1994, $8.9 million as of December 31, 1993, and $10.5
million as of September 30, 1993.
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of its financial
condition and results of operations should be read in conjunction with the
consolidated financial statements and related notes to the financial statements
of the Bank that appear elsewhere in this report.
Net Earnings
For the three and nine month periods ending September 30, 1994, the Bank
reported net earnings of $2.1 million and $5.5 million, or $0.41 and $1.10 per
share, respectively, compared to $1.5 million and $4.0 million, or $0.30 and
$0.85 per share, respectively, for the same periods in the prior year.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments less
interest expense on deposits and other borrowings). A primary factor affecting
the level of net interest income is the Bank's interest rate margin between the
yield earned on interest-earning assets and the rate paid on interest-bearing
liabilities.
The Bank's net interest income before provision for possible loan losses was
$13.5 million for the quarter ended September 30, 1994, as compared to $12.3
million for the quarter ended September 30, 1993. A majority of this increase in
net interest income was caused by an increase in interest income.
Interest and fee income was $17.2 million for the third quarter of 1994 compared
to $15.3 million for the third quarter of 1993. Total interest income increased
by approximately $1.9 million for the quarter ended September 30, 1994, as
compared to the quarter ended September 30, 1993. Average earning assets for the
quarter ended September 30, 1994 was $828.8 million, as compared to $787.7
million in the prior year. This increase in earning assets resulted in an
increase in interest income of approximately $1.0 million. Additionally, the
average interest rate on earning assets increased 0.53% to 8.22% in the third
quarter of 1994 as compared to the third quarter of 1993. This increase resulted
in an additional $900,000 in interest income.
Total interest expense was $3.7 million for the quarter ended September 30,
1994, compared to $3.0 million in the prior year. The Bank's average cost of
funds increase 0.49% to 3.21%.
<PAGE> 41
This increase resulted in an additional expense of $500,000. The Bank also
increased its level interest-bearing funds by $13.7 million which increased
interest expense by $154,000.
Total loan interest and fee income for the third quarter of 1994 was $13.6
million, compared to $11.3 million for the third quarter of 1993. This increase
of approximately $2.3 million resulted from an increase in average loans of
$52.9 million over the prior year, which increased interest income by
approximately $1.2 million. The average rate on loans for the quarter ended
September 30, 1994 was 9.02%, which is a 0.77% increase from 8.25% for the prior
year. This increase resulted in an additional $1.1 million in interest income.
Interest on investment securities was $3.5 million for the third quarter of
1994, compared to $3.9 million in the prior year. The average investment
securities yield was 6.27%, compared to 6.57% in 1993. This decrease of 0.30% in
the yield on investment securities is primarily attributable to the reinvestment
of investment proceeds into comparable securities in a lower rate environment,
which resulted in a decrease of $177,000 in interest income. Additionally, a
$14.3 million decrease in average investment securities to $222.1 million
decreased interest income by approximately $226,000.
Interest expense on time deposits was $1.4 million for the quarter ended
September 30, 1994, compared to $1.1 million for the quarter ended September 30,
1993. This increase of $300,000 is due to a 0.77% increase in the average time
deposits' cost of funds to 4.34% for the third quarter of 1994. This increase
resulted in an additional expense of approximately $242,000.
The interest expense on NOW and money market deposits increased to $1.9 million
for the third quarter of 1994 from $1.7 million in the same period in 1993. This
increase is due to a $3.1 million increase in average deposits to $285.1
million, as compared to $282.0 million in the prior year. The additional
deposits resulted in a $20,000 increase in interest expense. The average rate on
these deposits also increased to 2.60% in the third quarter of 1994, as compared
to 2.33% in 1993. This change in the rate increased interest expense by
approximately $195,000.
Average borrowings for the third quarter of 1994 were $25.9 million, or $7.7
million over the prior year. This increase in the average borrowings increased
the expense by approximately $90,000. The average rate increased 1.44% from the
third quarter of 1993 to 4.61% in 1994, resulting in an additional $68,000 in
interest expense.
For the nine months ended September 30, 1994 and 1993, net interest income
before provision for loan losses was $38.5 million and $36.1 million,
respectively. This increase of $2.4 million is attributable to a combination of
an increase in the average balance of the loan portfolio and the overall
increase in the Bank's net interest margin.
Loan interest and fee income for the nine months ended September 30, 1994 was
$37.6 million as compared to $33.3 million for the nine months ended September
30, 1993. This $4.3 million increase in interest income is due to the $46.9
million increase in average loans to $583.4 million in 1994, as compared to the
prior year. The increase in loans resulted in an additional $3.0 million in
income. The average loan rate for the nine months ended September 30, 1994 was
8.62%, which is a 0.32% increase over the average rate in the first nine months
of 1993. This change in the average rate increased interest income by
approximately $1.3 million.
<PAGE> 42
The interest on investment securities for the first nine months of 1994 was
$10.5 million as compared to $12.5 million in the prior year. This decrease of
$2.0 million is primarily attributable to an average rate on investment
securities of 5.86% for the nine months ended September 30, 1994, compared to
6.99% in the same period of 1993. This decrease of 1.13% in average rates
resulted in a decrease of $2.0 million in interest income.
The interest expense on NOW and money market deposits for nine months ended
September 30, 1994 was $5.2 million, which is a $500,000 increase over the $4.7
million for the first nine months of 1993. The average balance for these
deposits was $282.5 million for the nine months ended September 30, 1994,
compared to $265.8 million for the same period in 1993. This increase in
deposits of $16.7 million resulted in an increase in interest expense of
approximately $309,000.
Time deposit interest expense was $3.4 million for the nine months ended
September 30, 1994, and represents a $600,000 decrease from $4.0 million in the
prior year. The decrease in interest expense is the result of a $31.0 million
reduction in average time deposits. The average balance for the first nine
months of 1994 was $117.5 million as compared to $148.5 million in the prior
year.
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest rates
and average balances:
<TABLE>
<CAPTION>
Quarter ended September 30, 1994 Nine Months ended September 30, 1994
over Quarter ended September 30, 1993 over Nine Months ended September 30, 1993
--------------------------------------- ----------------------------------------
Total Total
Increase Change Due To: Increase Change Due To:
In thousands (Decrease) Rate Volume (Decrease) Rate Volume
---------- ------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans and bankers' acceptances $2,255 $1,054 $1,201 $4,320 $ 1,295 $3,025
Investment securities (403) (177) (226) (2,014) (2,010) (4)
Other interest income 61 32 29 28 34 (6)
------ ------ ------ ------ ------- ------
Total $1,913 $ 909 $1,004 $2,334 $ (681) $3,015
------ ------ ------ ------ ------- ------
INTEREST EXPENSE:
NOW and money market deposits 215 195 20 507 198 309
Savings deposits (13) (4) (9) (98) (37) (61)
Time deposits 294 242 52 (579) 323 (902)
Funds purchased and securities sold
under agreements to repurchase 158 67 91 133 203 (70)
------ ------ ------ ------ ------- ------
Total $ 654 $ 500 $ 154 $ (37) $ 687 $ (724)
------ ------ ------ ------ ------- ------
Net interest income $1,259 $ 409 $ 850 $2,371 $(1,368) $3,739
====== ====== ====== ====== ======= ======
</TABLE>
<PAGE> 43
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible are
charged to this allowance; subsequent recoveries, if any, are credited back to
the allowance. Additions to the allowance are made on a regular basis through
charges to operations and are reflected in the Bank's statement of earnings as a
provision for possible loan losses. The balance of the allowance for possible
loan losses reflects the amount which, in management's judgement, is adequate to
provide for potential loan losses after weighing the mix of the loan portfolio,
current economic conditions, past loan loss experience and other factors
relevant to estimating loan losses. The adequacy of the allowance for possible
loan losses is also evaluated relative to the level of non-performing loans
(those for which principal or interest is past due more than 90 days and those
on nonaccrual status).
In evaluating the adequacy of the allowance for possible loan losses, management
also reviews the balance of the allowance as a percentage of loans outstanding
less loans considered secured. Such security generally is composed of cash and
first trust deeds on real property. The existence of collateral does not,
however, eliminate all credit risk as property acquired through foreclosure
("OREO") may not be saleable for an amount sufficient to offset the entire loan
amount and costs associated with foreclosure. Although management believes that
the allowance for possible loan losses is adequate, future provisions will be
subject to continuing evaluation of risks inherent in the loan portfolio.
The provision for possible loan losses of $1.6 million was $800,000 less than
the provision in the same quarter in prior year and a decrease of approximately
$4.8 million from the same nine months in the prior year. Management's intention
is to maintain reserves for possible loan losses at a level sufficient to
provide for its loss expectations. The Bank's ratio of loan loss reserve to
total loans was 2.15% and 2.28% as of September 30, 1994 and September 30, 1993,
respectively.
Loan charge-offs (net of recoveries) for the three and nine months ended
September 30, 1994 totalled approximately $2.4 and $3.3 million, respectively.
This compares to net charge-offs of $1.8 million and $5.2 million for the three
and nine months ended September 30, 1993. This increase in charge-offs during
the third quarter is primarily attributable to the charge-off of a real estate
credit.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as real estate values in
Southern California. As of December 31, 1993, the Bank had approximately $12.3
million in non-performing assets which consisted primarily of $5.7 million in
other real estate owned and insubstance foreclosures, $5.5 million of non-
accrual loans and $1.1 million in loans which were over ninety days delinquent
with respect to principal or interest. As of September 30, 1994, the Bank had
approximately $15.9 million in non-performing assets of which consisted of $6.7
million in other real estate owned and insubstance foreclosures, $8.1 million of
non-accrual loans and $1.1 million in loans which were over ninety days
delinquent with respect to either principal or interest. Total non-performing
assets expressed as a percentage of total assets as of December 31, 1993 and
September 30, 1994 was approximately 1.3% and 1.5%, respectively.
<PAGE> 44
Non-Interest Income
Non-interest income totalled $1.2 million for the quarter ended September 30,
1994 as compared to $3.1 million for the quarter ended September 30, 1993. This
decrease of $1.9 million was due to $1.1 million of gains realized on the sale
of $15 million of Treasury securities in the third quarter of 1993, $600,000 of
income related to the operation of an insurance subsidiary in the third quarter
of 1993, which was subsequently sold, and approximately a $200,000 decrease in
rental income associated with Metrocorp operations compared to the same quarter
in 1993.
Non-interest income totalled $3.4 million for the nine months ended September
30, 1994 as compared to $8.3 million for the same period last year. This
decrease of $4.9 million was mainly the result of $3.0 million in gains
recognized in 1993 on the sale of Treasury securities and $275,000 in gains on
the sale of real estate property in 1993. In addition, the Bank disposed of its
insurance subsidiary in 1993 which generated approximately $1.2 million for the
nine months ended September 30, 1993. All other non-interest income decreased by
approximately $500,000 from the prior year.
Non-Interest Expense
Non-interest expense totalled $10.3 million for the third quarter of 1994 as
compared to $11.0 million for the third quarter of 1993. This decrease of
$700,000 was primarily the result of approximately $1.0 million of reserves
associated with real estate booked in the third quarter of 1993. This decrease
was offset by approximately a $250,000 increase in personnel expense in the
third quarter of 1994.
Non-interest expense totalled $31.1 million for the nine months ended September
30, 1994 and 1993. Though the total for both periods remained unchanged, there
were some fluctuations in the composition of other non-interest expense.
Personnel expense increased by $200,000 over the prior period, occupancy,
furniture and equipment expense decreased by $300,000 and data processing
expense increased by $1.7 million. Additionally, there was a reduction in real
estate valuation reserves of $1.3 million and a decrease in other administrative
expenses of approximately $300,000.
Income Taxes
The Bank's effective tax rate for the three and nine months ended September 30,
1994 was approximately 27.3% and 28.4%, compared to 28.5% and 25.9% for the
three and nine months ended September 30, 1993, respectively. The Bank's
effective tax rate is less than the statutory rate as a result of the
utilization of income tax credits generated by its low income housing project.
The utilization of these credits, however, is subject to certain alternative
minimum tax limitations. For the three and nine month periods ended September
30, 1994, the Bank was not in an alternative minimum tax position, and, as such,
was allowed to utilize the full amount of the tax credits.
<PAGE> 45
Capital Resources
As of September 30, 1994, the Bank's shareholders' equity totalled $67.9
million, an increase of approximately $5.4 million from September 30, 1993. This
increase in equity was caused by a $288,000 reduction of a loan made for the
benefit of the Employee Stock Ownership Trust (ESOT), net income of $7.5 million
for the twelve months ended September 30, 1994, $437,000 in additional capital
as a result of the exercise of stock options and $62,000 in unrealized gains,
net of taxes, on securities classified as available for sale. This was offset by
the declaration of cash dividends totalling $2.9 million during the past twelve
months. As of September 30, 1994, the Bank's risk based capital ratio and tier
one capital ratio were 11.3% and 10.1%, respectively. Both ratios exceed the
regulatory requirements of 8.0% and 4.0%, respectively. As of September 30,
1993, the Bank's risk based capital and tier one capital ratios were 11.4% and
10.1%, respectively. Additionally, on July 6, 1993 the Bank entered into a
Memorandum of Understanding (MOU) with the Federal Deposit Insurance Corporation
(FDIC). The FDIC mandated that the Bank must maintain a tier 1 leverage capital
ratio of at least 6.5 percent and to seek regulatory approval prior to paying
cash dividends. The Bank has received approval to pay cash dividends for the
past six quarters and has been in compliance with the MOU requirements. The
Bank's tier 1 leverage capital ratio as of September 30, 1994 and September 30,
1993 was 7.1% and 7.0%, respectively.
Investments and Liquidity
Beginning January 1, 1994, Metrobank was required to implement Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This statement requires that
institutions classify investment securities as either held to maturity,
available for sale, or trading. Investments classified as held to maturity will
be carried at amortized cost. Investments classified as available for sale must
be marked to market with unrealized gains or losses, net of the taxes, included
in equity. Trading securities must also be marked to market, however, unrealized
gains or losses must be reflected in current earnings.
During the second quarter of 1993, prior to the adoption of SFAS No. 115,
Metrobank had classified its investment securities as either held to maturity or
held for sale. The Bank does not anticipate holding any securities in a trading
account. As of September 30, 1994, the Bank had approximately $231 million in
investment securities, consisting of $190 million in Treasury securities, $38
million in mortgage-backed securities and $3 million in FHLB stock. $71 million
of the Treasury securities and the FHLB stock have been classified as available
for sale, while the remainder of the Treasury securities, as well as the
mortgage-backed securities have been classified as held to maturity. As of
September 30, 1994, the Bank had a $106,000 pre-tax unrealized gain in the
available for sale portion of the Treasury securities portfolio, and a $4.3
million pre-tax unrealized loss in the held to maturity portion of the
portfolio.
The liquidity levels of the Bank are managed by its Asset/Liability Management
Committee. This committee is charged with the responsibility of ensuring that
reserve balances are maintained and to ensure that the Bank obtains funds
necessary to meet existing deposit outflow requirements, as well as asset
growth. The Bank's primary source of funds is derived from principal and
interest payments on loans, principal and interest payments on its investment
portfolio, generation of non-interest bearing and interest bearing deposits,
and, to a lesser extent,
<PAGE> 46
borrowings, effected primarily through short-term repurchase agreements and the
use of the Bank's federal fund borrowing arrangements.
Inasmuch as a significant portion of the Bank's deposit base in concentrated in
demand deposits, which are more volatile than time interest-bearing deposits,
the Asset/Liability Committee operates a money desk as a means of supplementing
funding activities. Additionally, the Bank has established unsecured credit
facilities of approximately $65.0 million, or 6.93% of total deposits, and
secured credit facilities of $115.9 million, or 12.36% of total deposits. The
combination of these facilities provides the Bank with a secondary source of
liquidity of approximately $180.9 million, or 19.29% of total deposits.
Additionally, as part of the MOU, the Bank is required to maintain a volatile
liability dependency ratio not to exceed 15%. This ratio measures the
relationship of volatile deposits, primarily brokered deposits, money desk
deposits, time certificates of deposit in excess of $100,000 and borrowings, in
relation to adjusted net earning assets. One factor which improves this ratio is
the relationship of investment securities which mature within one year of the
reporting date which has caused the Bank to deposit in its portfolio in shorter
term securities. Another factor which reduces this ratio is the Bank's
securities classified as available for sale. As of September 30, 1994,
Metrobank's volatile liability dependency ratio was 2.91%.
Definitive Agreement to Acquire National Bank of Long Beach
On September 1, 1994, Metrobank entered into a definitive agreement to purchase
the National Bank of Long Beach from its Danish parent, Topdanmark Bank A/S.
According to the terms of the agreement, Metrobank will purchase all outstanding
common and preferred National Bank of Long Beach stock for cash at book value
subject to certain valuation adjustments. Metrobank is in the process of
conducting its due diligence which is anticipated to be completed by October 28,
1994. The transaction, subject to regulatory approval, is scheduled to close
during the first quarter of 1995.
As of December 31, 1993, the National Bank of Long Beach had approximately $150
million in gross loans and $180 million in total deposits. Shareholders equity
at year end totalled approximately $25 million. Additionally, Metrobank has
agreed to acquire certain non-classified performing loans which are currently
participated from the National Bank of Long Beach to its parent. These loans
total approximately $20 - $25 million.
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act of
1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: October 19, 1994 Metrobank
------------------------
(Bank)
By: /s/ David P. Malone
------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Bank in the
capacities indicated on the date set forth above.
Signature
/s/ Christopher T. Ishikawa
- -------------------------------
Christopher T. Ishikawa
First Vice President/Controller
(Principal Accounting Officer)
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act of
1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: October 19, 1994 Metrobank
------------------------
(Bank)
By: /s/ David P. Malone
------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Bank in the
capacities indicated on the date set forth above.
Signature
/s/ Christopher T. Ishikawa
- -------------------------------
Christopher T. Ishikawa
First Vice President/Controller
(Principal Accounting Officer)
<PAGE> 1
EXHIBIT 99 (j)
[Logo]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
May 4, 1995
To Our Shareholders:
You are cordially invited to attend the 1995 Annual Meeting of the
Shareholders of Metrobank which will be held in the lobby of the Bank's
Headquarters Office, 10900 Wilshire Boulevard, Los Angeles, California 90024 on
May 23, 1995, commencing at 4:00 P.M.
The purposes of the meeting will be to elect directors for the coming year
and to report to you on the business and operations of the Bank.
The formal Notice of Meeting and Proxy Statement containing further
information pertinent to the business of the meeting are set forth on the pages
following this letter. Our Annual Report, which includes financial statements
for the Bank's fiscal year ended December 31, 1994, is enclosed herewith.
We hope you will be able to attend the meeting in person, but whether or
not you plan to attend, please sign and date the enclosed proxy and return it in
the accompanying envelope.
Sincerely,
DAVID L. BUELL
- --------------
David L. Buell
Chief Executive Officer,
Chairman of the Board
<PAGE> 2
[Logo]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 1995
The Annual Meeting of Shareholders of Metrobank (the "Bank") will be held
on May 23, 1995 at 4:00 P.M. in the lobby of the Bank's Headquarters Office,
10900 Wilshire Boulevard, Los Angeles, California 90024 for the following
purposes:
1. Election of Directors. The election as directors of the 8 persons
listed in the accompanying Proxy Statement.
2. Other Business. Such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Shares represented by properly executed proxies will be voted in accordance
with the instructions therein and it is the intention of the Board of Directors
that shares represented by proxies which are not limited to the contrary will be
voted cumulatively in favor of the election as directors of the persons named in
the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on April 13, 1995 as
the record date for determining those shareholders who will be entitled to vote
at the meeting.
Whether or not you presently plan to attend the meeting in person, the
Board of Directors urges you to date, sign and promptly return the enclosed
proxy. Your giving of such proxy does not preclude your right to vote in person
if you attend the meeting. A postage prepaid return envelope is enclosed for
your convenience in returning the signed proxy.
Your early attention to the proxy will be appreciated.
May 4, 1995
By Order of the Board of Directors,
SHARON L. CANUP
---------------
Sharon L. Canup
Corporate Secretary
<PAGE> 3
[Logo]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
PROXY STATEMENT
INFORMATION CONCERNING PROXY
The following information is furnished in connection with the solicitation
of the enclosed proxy by and on behalf of the Board of Directors of Metrobank
(the "Bank") for use at the Bank's Annual Meeting of Shareholders to be held in
the lobby of the Bank's Headquarters Office, 10900 Wilshire Boulevard, Los
Angeles, California 90024, on May 23, 1995 at 4:00 P.M. and at any adjournment
or adjournments thereof.
When proxies in the accompanying form are returned, properly dated and
executed, the shares they represent will be voted at the annual meeting in
accordance with the shareholder's directions by means of the ballot provided in
the proxies. If no contrary instructions are given, the persons named in the
proxy intend to vote the shares represented by the proxies (a) cumulatively in
favor of the election of the persons named as nominees for director in this
Proxy Statement and (b) in accordance with their best judgment on any other
matter which may come before the meeting and which is not presently contemplated
to come before the meeting. If any proxy is marked "withhold authority" with
regard to the withholding of authority to vote for the election of directors,
the shares such proxy represents will not be voted either for or against the
election of such directors.
The giving of the proxy does not affect any shareholder's right to vote in
person at the annual meeting and a proxy may be revoked by submitting a new
proxy or by appropriate notice in writing to the Corporate Secretary of the Bank
at any time before it is voted.
The principal solicitation of proxies is being made by mail; however,
additional solicitation may be made by telephone, telegraph or personal visits
by directors, officers and employees of the Bank. The total expense of this
solicitation will be borne by the Bank and will include reimbursements to
brokerage firms and others for their expense in forwarding soliciting material.
This Proxy Statement and the accompanying form of proxy are being mailed to
shareholders on or about May 4, 1995.
VOTING SECURITIES
OUTSTANDING VOTING SECURITIES AND RECORD DATE
The Bank has only one class of voting securities outstanding, identified as
no par value common stock ("Common Stock"). Shareholders of record entitled to
notice of and to vote at the meeting have been determined as of the close of
business on April 13, 1995. As of such date, 5,377,124 shares of Common Stock
were outstanding, all of which will be entitled to vote at the meeting and any
adjournment or adjournments thereof.
<PAGE> 4
CUMULATIVE VOTING
Each shareholder of record is entitled to one vote for each share held on
all matters to come before the meeting, except that shareholders have cumulative
voting rights with respect to the election of directors if a candidate's or
candidates' name(s) have been properly placed in nomination prior to the voting
and a shareholder present at the meeting has given notice of his or her
intention to vote his or her shares cumulatively. If a shareholder has given
such notice, all shareholders may cumulate their votes for candidates in
nomination. Under cumulative voting, each shareholder may give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which the shareholder's shares are entitled, or distribute
the shareholder's vote on the same principle among as many candidates as the
shareholder desires. The 8 candidates receiving the highest number of votes are
elected.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information, as of April 13, 1995,
with respect to the shareholdings of all principal officers and directors of the
Bank as a group and with respect to those persons (including any "group" as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) who
were known to the Bank to be the beneficial owners of more than 5% of the Bank's
outstanding Common Stock, the Bank's only outstanding class of voting
securities:
<TABLE>
<CAPTION>
Amount Percent of Class
Beneficially Beneficially
Name and Address Relationship with Bank Owned(1)(2) Owned(1)(2)
---------------- ---------------------- ------------ ----------------
<S> <C> <C> <C>
Robert L. Mayer Director 1,372,902(3) 25.52%
660 Newport Center Drive,
Suite 1050
Newport Beach, California 92658
David L. Buell Director; Chief 674,437(4) 11.64%
10900 Wilshire Boulevard Executive Officer and
Los Angeles, California 90024 Chairman of the Board
Wallace Wong Director 325,827(5) 6.06%
23042 Arroyo Vista
Rancho Santa Margarita, CA 92688
All principal officers and directors 2,828,632(6) 47.63%
as a group (10 people)
</TABLE>
- ----------------
(1) Includes 271,289 shares held by the Bank's Stock Bonus Plan and Trust.
(2) For purposes of calculating each percentage, the shares subject to the
options exercisable under the Bank's stock option plans of the persons to
whom the calculation relates were added to both their shares and the total
shares outstanding at April 13, 1995. Subject to applicable community
property law, except as otherwise indicated, each of the persons included
in the table has sole voting and investment power with respect to his or
her shares.
(3) Includes (a) an aggregate of 3,300 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans and (b) 39,831 shares owned by Mr. Mayer's wife as to which he
disclaims any beneficial interest.
2
<PAGE> 5
(4) Includes (a) an aggregate of 385,000 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans, (b) approximately 7,848 shares, determined as of December 31, 1994,
in the Employee Savings Plan account of Mr. Buell, and (c) approximately
23,089 shares, determined as of December 31, 1994, allocated to the Stock
Bonus Plan and Trust account of Mr. Buell.
(5) Includes an aggregate of 3,300 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans.
(6) Includes (a) an aggregate of 507,100 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans, (b) approximately 9,110 shares, determined as of December 31, 1994,
in the Employee Savings Plan accounts of Messrs. Alexander and Buell, and
(c) approximately 45,090 shares, determined as of December 31, 1994,
allocated to the Stock Bonus Plan and Trust accounts of Messrs. Alexander,
Buell, Bulseco and Malone, all as more fully described below.
ELECTION OF DIRECTORS
Eight directors of the Bank are to be elected at the annual meeting to
serve until the next annual meeting of shareholders and until their successors
are elected and qualified. All nominees of the Board of Directors except Robert
P. Bulseco are presently directors of the Bank. Unless authority to vote for
directors is withheld as to any or all of them, it is intended that shares
represented by proxies in the accompanying form will be cumulatively voted "FOR"
the election of the directors listed below or, if one or more of such persons
shall become unable or unwilling for good cause to stand for election, "FOR" the
election of such other persons as the Chief Executive Officer or Board of
Directors of the Bank may recommend in his or her place. The Board of Directors
has no reason to believe that any such nominees will be unable to serve.
The following information is furnished with respect to the nominees and the
principal officers of the Bank:
<TABLE>
<CAPTION>
Director or Percent of
Principal Amount Beneficially Class
Name of Individual, Officer Owned as of Beneficially
Position with Bank or Occupation Since Age April 13, 1995(1)(2) Owned(1)(2)
- -------------------------------- ----------- --- -------------------- ------------
<S> <C> <C> <C> <C>
DIRECTORS
David L. Buell, 1978 59 674,437(3) 11.64%
Chief Executive Officer and
Chairman of the Board of the Bank
Robert P. Bulseco, -- 49 107,603(4) 1.97%
President and Chief Administrative
Officer of the Bank
Peter B. Caloyeras, 1978 64 229,900(5) 4.27%
President, Magnetika, Inc.
(Electrical Manufacturing)
Seymour J. Carr, D.M.D. 1978 75 34,402(6) .64%
Professor (Emeritus),
University of California,
Los Angeles
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
Director or Percent of
Principal Amount Beneficially Class
Name of Individual, Officer Owned as of Beneficially
Position with Bank or Occupation Since Age April 13, 1995(1)(2) Owned(1)(2)
- -------------------------------- ----------- --- -------------------- ------------
<S> <C> <C> <C> <C>
DIRECTORS
James W. Hobson, 1978 72 23,067(7) .43%
Vice-Chancellor (Emeritus),
University of California, Los Angeles
Rudy B. Markmiller, 1984 59 6,344(7) .12%
President, Network Courier Services
Robert L. Mayer, 1978 69 1,372,902(8) 25.52%
President, The Robert Mayer
Corporation (Real Estate Developer)
Wallace Wong, 1981 53 325,827(9) 6.06%
Chairman of the Board,
Santa Barbara Business College
and Real Estate Investor
PRINCIPAL OFFICERS
Paul B. Alexander, 1991 38 27,927(10) .52%
Executive Vice President and
Chief Credit Officer
David P. Malone, 1988 44 26,224(11) .49%
Executive Vice President and
Chief Financial Officer
</TABLE>
- ----------------
(1) Includes 271,289 shares held by the Bank's Stock Bonus Plan and Trust.
(2) Subject to applicable community property law, except as otherwise
indicated, each of the persons included in the table has sole voting and
investment power with respect to his or her shares.
(3) Includes (a) an aggregate of 385,000 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans, (b) approximately 7,848 shares, determined as of December 31, 1994,
in the Employee Savings Plan account of Mr. Buell, and (c) approximately
23,089 shares, determined as of December 31, 1994, allocated to the Stock
Bonus Plan and Trust account of Mr. Buell.
(4) Includes (a) an aggregate of 59,675 shares issuable upon the exercise of
presently exercisable stock options, and (b) approximately 13,828 shares,
determined as of December 31, 1994, allocated to the Stock Bonus Plan and
Trust account of Mr. Bulseco.
(5) Includes (a) a total of 79,995 shares owned by Mr. Caloyeras' wife and
trusts for certain family members as to which he disclaims any beneficial
interest and (b) an aggregate of 3,300 shares issuable upon the exercise
of presently exercisable stock options.
(6) Dr. and Mrs. Carr share voting and investment power ; includes an
aggregate of 3,300 shares issuable upon the exercise of presently
exercisable stock options.
(7) Includes an aggregate of 3,300 shares issuable upon the exercise of
presently exercisable stock options.
(8) Includes 39,831 shares owned by Mr. Mayer's wife as to which he disclaims
any beneficial interest. Mr. Mayer can be viewed as a "control person" of
the Bank due to his substantial ownership interest in the Bank. Also
includes an aggregate of 3,300 shares issuable upon the exercise of
presently exercisable stock options.
4
<PAGE> 7
(9) Includes an aggregate of 3,300 shares issuable upon the exercise of
presently exercisable stock options.
(10) Includes (a) an aggregate of 20,625 shares issuable upon the exercise of
presently exercisable stock options, (b) approximately 1,136 shares,
determined as of December 31, 1994, in the Employee Savings Plan account
of Mr. Alexander, and (c) approximately 5,066 shares, determined as of
December 31, 1994, allocated to the Stock Bonus Plan and Trust account of
Mr. Alexander.
(11) Includes (a) an aggregate of 22,000 shares issuable upon the exercise of
presently exercisable stock options, and (b) approximately 3,108 and 126
shares allocated to the employee savings plan account of Mr. Malone,
determined as of December 31, 1994, allocated to the Stock Bonus Plan and
Trust account of Mr. Malone.
All members of the Board of Directors and principal officers of the Bank
have been engaged in the same business or profession in the capacities indicated
for more than the past five years.
5
<PAGE> 8
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth the aggregate amount of cash compensation
paid by the Bank during its fiscal year ended December 31, 1994 to (a) all
principal officers whose aggregate direct remuneration during such year exceeded
$60,000, and (b) all principal officers of the Bank as a group:
<TABLE>
<CAPTION>
Name of Individual or Cash
Number in Group Capacities in Which Served Compensation(1)
- ---------------------- -------------------------- ---------------
<S> <C> <C>
David L. Buell Chief Executive Officer $367,000
Robert P. Bulseco President and Chief Administrative Officer $234,750
Paul B. Alexander Executive Vice President and Chief Credit Officer $170,650
David P. Malone Executive Vice President and Chief Financial Officer $154,333
All principal officers $926,733
as a group (4 people)
</TABLE>
- ----------------
(1) Includes salary and bonus.
COMPENSATION PURSUANT TO PLANS
1988 Stock Option Plan. In May, 1989, the shareholders of the Bank approved
the Metrobank 1988 Stock Option Plan (the "1988 Plan"). The 1988 Plan provides
for the granting of both incentive options designed to qualify under Section
422A of the Internal Revenue Code of 1986, as amended (the "Code"), and
non-incentive options. The purposes of the 1988 Plan are to strengthen the
growth, development and financial success of the Bank and its subsidiaries by
providing to certain key employees and directors of the Bank and its
subsidiaries additional incentives for high levels of performance and to
encourage stock ownership in the Bank.
Under the 1988 Plan, up to an aggregate of 880,000 shares of the Bank's
unissued Common Stock may be issued to eligible employees and directors of the
Bank and its subsidiaries at an option price per share of not less than 100% of
the fair market value of a share of the Bank's Common Stock at the date the
options are granted, except that the option price for shares under any incentive
stock option granted to any eligible person owning more than 10% of the combined
voting power of all classes of stock of the Bank or of any parent or subsidiary
of the Bank must be 110% of the fair market value of such shares at the date of
the grant.
The 1988 Plan is administered by a committee of disinterested persons
appointed by the Bank's Board of Directors. The committee, in its sole
discretion, determines the persons eligible to receive options, the number of
shares subject to each option, the price at which each option is granted and
whether the option is an incentive stock option or a non-incentive stock option.
Members of the committee, unless they are directors of the Bank, are ineligible
to participate in the 1988 Plan. Under the 1988 Plan, incentive stock options
and non-incentive stock options may be granted to eligible employees of the Bank
or of any of its subsidiaries and non-incentive stock options may be granted to
eligible directors of the Bank and to directors of any of its subsidiaries.
Automatically and without action of the committee, each director of the Bank
receives a non-incentive stock option covering 1,100 shares upon his or her
election or appointment (if he or she has not served as a director of the Bank
in the previous 12 months) and also immediately following each annual meeting of
the
6
<PAGE> 9
shareholders of the Bank; provided, however, that no director of the Bank is
entitled to acquire more than 3,000 shares pursuant to the exercise of options
granted under the 1988 Plan. To the extent that the automatic grant of an option
would entitle a director to acquire more than 3,300 shares (inclusive of shares
previously acquired pursuant to the exercise of stock options under the 1988
Plan), the number of shares covered by the option is reduced accordingly.
Subject to the express terms of the 1988 Plan, the committee may determine the
duration of the stock options; however, the maximum duration is ten years. Any
incentive stock option granted to any eligible employee owning more than 10% of
the voting power of all classes of the stock of the Bank, or any subsidiary or
parent of the Bank, may not be exercised after five years from the date of
grant. Non-incentive stock options granted to directors of the Bank have a term
of ten years.
Subject to the express terms of the 1988 Plan, an option may be exercised
in accordance with its terms, as determined by the committee. The aggregate fair
market value of shares for which any employee may exercise incentive stock
options in any calendar year under any plans of the Bank or any subsidiary or
parent of the Bank may not exceed $100,000. A non-incentive stock option granted
to a director of the Bank is exercisable after 12 months. An option is exercised
by giving written notice to the Bank specifying the number of shares to be
purchased, accompanied by full payment. There is a minimum permitted exercise
amount of 50 shares.
If the employment of an employee, or the status as a director of the Bank
or a subsidiary, ceases, then any options which he or she holds under the 1988
Plan will automatically terminate except if such cessation is due to (a) the
death of the employee or director, in which case the option remains exercisable
for 12 months after the death to the extent that it was exercisable at the date
of death, (b) the permanent and total disability of the employee or director, in
which case the option remains exercisable for 12 months after the disability to
the extent that it was exercisable at the date of cessation, or (c) any other
reason at a time when the option is exercisable, in which case the option will
continue to be exercisable for 90 days to the extent that it was exercisable at
the date of cessation.
In consideration of the granting of an option to an employee, the employee
must agree to remain in the employ of the Bank or its subsidiary for a period of
at least one year after the option is granted or until his or her retirement
with the approval of the Bank or of the subsidiary, whichever may be the
earlier, generally at his or her salary rate in effect at the time of the
granting of the option. However, nothing in the 1988 Plan, or in any agreement
executed by the employee pursuant to the 1988 Plan, will confer upon the
employee any right to continue in the employ of the Bank or subsidiary or will
interfere with or restrict the rights of the Bank or any subsidiary to discharge
such employee at any time for any reason whatsoever, with or without good cause.
In the event of a dissolution or liquidation of the Bank, a reorganization,
merger, or consolidation of the Bank where the Bank is not the surviving
corporation, a sale of substantially all of the assets of the Bank, or a reverse
merger and the conversion of the outstanding shares of Common Stock of the Bank
into other property, all options will be exercisable in full for a period of 30
days following delivery of notice of such event to participants in the 1988 Plan
and thereafter shall terminate.
No option granted under the 1988 Plan may be assigned or transferred except
by will or by law of descent and distribution. During the lifetime
7
<PAGE> 10
of an optionee, the option is exercisable only by him or her. Any employee or
director of the Bank or its subsidiaries, so long as he or she remains such an
employee or director, must notify the Bank of any disposition of any shares
acquired pursuant to options granted under the 1988 Plan.
The 1988 Plan will terminate in 1998, unless terminated earlier by the
Board of Directors.
Stock Bonus Plan and Trust. On May 27, 1980, the Board of Directors adopted
and approved a Stock Bonus Plan and Trust (the "Plan") and on July 24, 1980
entered into a Trust Agreement with First Interstate Bank of California (the
"Trustee") establishing the trust (the "Trust"). The Plan was amended and
restated in its entirety on November 22, 1994, effective as of January 1, 1989.
On April 1, 1993 Union Bank was named trustee for the Plan. All Bank employees
participate in the Plan as of their date of hire. The Plan provides that the
Bank may make contributions to the Trust with the funds being invested primarily
in stock of the Bank, to be held by the Trustee until distributed to the Bank's
employees in accordance with the provisions of the Plan.
The Board of Directors of the Bank may determine, from time to time, to
make contributions to the Plan in the form of cash, stock of the Bank or other
property. However, the Bank is not required to make any contributions to the
Plan and no participant in the Plan is permitted to make contributions to the
Plan. The contributions by the Bank to the Plan generally will depend upon the
profitability of the Bank, the Bank's current needs for operating funds and the
overall compensation of participants. The Bank made loan payments of $288,000 on
behalf of the Trust in 1994. The Bank also made a cash contribution of $125,000
for the 1994 Plan year.
A separate account is established under the Plan to record each
participant's share of the Plan contributions, forfeitures and the Trust fund
earnings or losses. A participant who is in the Bank's employ on December 31st
of a given year and who has completed 1,000 hours of service for the Bank during
that year will share in the Plan contributions and forfeitures for that year as
will a participant who retires, dies or becomes disabled during the year. The
Plan contributions and forfeitures are allocated to participant accounts in
proportion to their relative compensation. Earnings or losses are allocated
based upon the relative value of participant accounts as of December 31st of a
given year.
The Plan has been designed as an employee stock ownership plan under
applicable provisions of the Code. As such, it is permitted to engage in exempt
loan transactions in order to finance the acquisition of Bank stock. Such
transactions may be structured as a loan made to the Trust by a "disqualified
person" as defined in the Code or a "party in interest" as defined in the
Employee Retirement Income Security Act of 1974, or a loan guaranteed by a
disqualified person or party in interest. Bank stock acquired in an exempt loan
transaction is held in a suspense account and is released from such account as
the loan is repaid. Allocation of such Bank stock is based strictly on the
relative compensation of the Plan participants eligible to share in the Bank
contributions for the year in question.
A participant's Plan account vests based on the number of years of credited
service with the Bank. A year of credited service is a year in which the
participant has completed at least 1,000 hours of service for the
8
<PAGE> 11
Bank. There is no vesting of a participant if he has completed less than five
years of credited service. A participant is 100% vested in his account after
completing five years of credited service. Notwithstanding this vesting
schedule, a participant is fully vested upon retirement, disability or death. A
participant is entitled to receive distribution of his account, if vested, upon
his separation of service from the Bank. Normal retirement under the Plan is the
later of the December 31st prior to the participant's 65th birthday and the
fifth anniversary of the participant's date of hire.
The Trust is designed to invest primarily in stock of the Bank and, to the
fullest extent possible the Trust funds are invested in such stock either
through purchases directly from the Bank on a new issue basis or through market
purchases. Nevertheless, Trust funds may legally be invested in any other type
of property available for investment by private trusts including stocks, bonds,
bank deposits, real estate and mortgages. It is contemplated, however, that such
other types of investment activity would be engaged in only if the Bank's stock
is unavailable for purchase.
Distribution of the amount to which a participant in the Plan is entitled
will ordinarily be made in the form of stock in the Bank. If the Plan has
engaged in an exempt loan transaction (as defined), then it is legally possible
to provide for distributions in cash or property other than Bank stock, but
participants in the Plan will always have the right to demand that distributions
be made in the form of Bank stock, and it is anticipated that distributions will
always be made in such form.
Metrobank Employee Savings Plan. In April, 1987, the Board of Directors
adopted and approved an Employee Savings Plan (the "Savings Plan"), and entered
into an agreement with First Interstate Bank of California (the "Trustee") to
act as the trustee with respect to the Savings Plan. The Savings Plan was
amended and restated in its entirety on November 22, 1994, to be effective on
January 1, 1989. On April 1, 1993 Union Bank was named trustee for the Savings
Plan. The purpose of the Savings Plan is to reward eligible employees for long
and loyal service by providing them with retirement benefits accumulated through
salary reduction contributions, discretionary matching contributions and
employee voluntary contributions.
All Bank employees are eligible to participate in the Savings Plan
beginning with the January 1, April 1, July 1 or October 1 after they satisfy
the Savings Plan's eligibility requirements. This requirement is six months of
service for employees hired on or after February 1, 1987.
Each year the Bank will make a cash contribution equal to the amount by
which participants elect to reduce their compensation ("Elective Deferrals")
through payroll withholding. Participants may make Elective Deferrals for each
year in any amount between 1% and 15% of compensation. A participant's Elective
Deferrals in any year may not exceed $9,240, subject to adjustment to reflect an
increase in the cost of living in accordance with the terms of the Savings Plan
and applicable law.
The Bank has the discretion to make matching contributions each year equal
to a percentage of the Elective Deferrals of participants. In order to share in
such contributions for a particular quarter, a Participant must be employed on
the last day of the quarter. Such contributions vest after a period of five
years during which the Participant has been credited with 1,000 hours of service
during each such year.
9
<PAGE> 12
The Savings Plan also permits non-highly compensated Participants (as
defined in the Code) to make voluntary nondeductible contributions in any year,
provided that these contributions do not exceed 10% of the individual's
compensation while a participant. A participant is at all times fully vested in
his account balance derived from Elective Deferrals and voluntary contributions.
Participants direct the Trustee to invest their accounts in the proportions
they designate among different investment portfolios. Participants may change
the manner or proportions in which the contributions are invested by filing a
written notice with the Administrator during the quarterly open enrollment
periods. A participant's accounts will be increased or decreased by the gains or
losses experienced as a result of the investment in these funds.
A participant's accounts are distributable upon retirement, death,
disability, termination of employment, attainment of age 59 1/2, hardship or the
Savings Plan termination.
In 1994 the Bank paid $116,572 in discretionary matching contributions to
the Savings Plan.
OTHER COMPENSATION
The Bank provides club memberships to certain of its principal officers and
is reimbursed for personal charges at such clubs. Management has concluded that
the amount of any personal benefits as to any individual is less than $5,000.
The Bank pays the premiums on a life insurance policy insuring the life of
Mr. Buell, with Mr. Buell's wife as beneficiary. The premium paid under such
policy for July 1993 through December 1994 was $56,472. In addition, $58,629 was
paid to Mr. Buell to cover all tax consequences of said premium payments.
COMPENSATION OF DIRECTORS
Effective March 23, 1993, the Bank's directors who are not also officers of
the Bank and who are not otherwise receiving compensation from the Bank are paid
a fee of $500 for each regular monthly board meeting attended and a fee of
$1,000 for each extended quarterly board meeting. Such persons are also paid a
$1,000 per month retainer.
Members of the Audit Committee, except Mr. Hobson, receive a fee of $100
for each Audit Committee meeting attended. Members of the Compensation Review
Committee receive a fee of $100 for each Compensation Review Committee meeting
attended.
Mr. Hobson received total compensation of $78,750 for services rendered to
the Bank and its affiliates during 1994. Such services primarily included
supervising the Bank's audit and appraisal functions.
INDEBTEDNESS OF MANAGEMENT
The highest aggregate extensions of credit to the directors and principal
officers of the Bank as a group during 1994 equalled $14,381,774, or 20.48% of
the equity capital accounts of the Bank. The highest aggregate direct and
guaranteed indebtedness during 1994 of Robert L. Mayer, a
10
<PAGE> 13
director of the Bank, aggregated $6,435,000, or 9.16% of the equity capital
accounts of the Bank. At April 1, 1995, this amount was $6,537,500, representing
9.06% of the equity capital amounts of the Bank.
The Bank has had, and expects to have in the future, transactions in the
ordinary course of business with directors, officers and principal shareholders
of the Bank, and their associates, on substantially the same terms including
interest rates, collateral and repayment terms on extensions of credit, as those
prevailing at the same time for comparable transactions with others. Such
extensions of credit did not involve more than the normal risk of collectibility
or present other unfavorable features.
STOCK OPTIONS
The following table provides certain information (a) as to all options
which were granted to or exercised by the Bank's principal officers from January
1, 1994 to December 31, 1994 and (b) as to all options held by such principal
officers as of December 31, 1994:
<TABLE>
<CAPTION>
All Principal
Officers as a
David L. Robert P. Paul B. David P. Group
Shares of Common Stock Buell Bulseco Alexander Malone (4 People)
---------------------- -------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Granted January 1, 1994 to December 31, 1994:
Number of shares . . . . . . . . . . . . . . . . . . . 82,500 25,300 6,600 5,500 119,900
Average per share exercise price . . . . . . . . . . . $13.64 $13.72 $14.86 $15.45 $13.81
Exercised January 1, 1994 to December 31, 1994:
Number of shares . . . . . . . . . . . . . . . . . . . 82,500 9,900 1,100 None 93,500
Aggregate option price of options exercised . . . . . $750,000 $89,991 $9,999 -- $849,990
Aggregate market value of shares acquired on
date options exercised . . . . . . . . . . . . . . . $1,153,103 $109,197 $13,123 -- $1,275,423
Unexercised options held as of December 31, 1994:
Number of shares . . . . . . . . . . . . . . . . . . . 385,000 82,500 33,000 33,000 533,500
Average per share exercise price . . . . . . . . . . . $9.11 $9.81 $10.36 $10.56 $9.39
</TABLE>
MISCELLANEOUS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Bank's last fiscal year, there were a total of 14 meetings of
the Board of Directors. All directors attended at least 75% of the total number
of meetings of the Board of Directors and committees on which they served during
the last fiscal year.
During 1994, the Board of Directors of the Bank had standing audit and
compensation review committees.
The Board of Directors considers all nominees for the Board of Directors
recommended by shareholders of the Bank. The bylaws of the Bank provide for the
nomination of directors as follows:
"Nominations for election of members of the Board of Directors may be made
by the Board of Directors or by any shareholder of any outstanding class of
voting stock of the Bank entitled to vote for the election of directors. Notice
of intention to make any nominations, other than by the Board of Directors,
shall be made in writing and shall be received by the President of the Bank no
more than 60 days prior to any meeting of
11
<PAGE> 14
shareholders called for the election of directors, and no more than 10 days
after the date the notice of such meeting is sent to shareholders pursuant to
the bylaws; provided, however, that if only 10 days' notice of the meeting is
given to shareholders, such notice of intention to nominate shall be received by
the President of the Bank not later than the time fixed in the notice of the
meeting for the opening of the meeting. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the number of shares of voting stock of the Bank owned by
each proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of voting stock of the Bank owned by
the notifying shareholder. Nominations not made in accordance with the bylaws
may be disregarded by the chairman of the meeting, and the inspectors of
election shall then disregard all votes cast for such nominee."
The Audit Committee, comprised of Messrs. Hobson (Chairman), Caloyeras and
Markmiller has overall responsibility for overseeing the Bank's entire audit
function, both internal and with its independent auditors, for ascertaining the
existence of adequate and effective accounting and internal control systems, for
selecting the Bank's independent auditors and for reviewing the Bank's audit
plan and audit results with the Bank's independent auditors. The Audit Committee
held 12 meetings during the last fiscal year.
The Compensation Review Committee, comprised of Messrs. Carr (Chairman),
Mayer and Wong, reviews the compensation practices of the Bank and makes
recommendations to the Board of Directors. The Compensation Review Committee
held 4 meetings during the last fiscal year.
THE BANK'S AUDITORS
It is anticipated that representatives of Arthur Andersen & Co. will be
present at the meeting with the opportunity to make a statement with respect to
the Bank's financial statements if they choose to do so and that such
representatives will be available to respond to appropriate shareholder
questions.
SHAREHOLDERS' PROPOSALS FOR 1996 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Bank's 1996
annual meeting of shareholders must be received by the Bank for inclusion in the
Proxy Statement and form of proxy for that meeting no later than December 31,
1995.
AVAILABILITY OF FORM F-2
Any shareholder who would like to receive without charge a copy of the
Bank's most recent annual report on Form F-2 filed with the Federal Deposit
Insurance Corporation should send a written request therefor to the Bank at
10900 Wilshire Boulevard, Los Angeles, California 90024, Attention: Sharon L.
Canup, Corporate Secretary.
ANNUAL REPORT; OTHER BUSINESS
Management does not know of any business to be presented other than the
matters set forth above, but if other matters properly come before the
12
<PAGE> 15
meeting, it is the intention of the persons named in the proxy to vote in
accordance with their best judgment on such matters.
By Order of the Board of Directors
SHARON L. CANUP
---------------
Sharon L. Canup
Corporate Secretary
13
<PAGE> 16
PRELIMINARY COPY
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
[LOGO] PROXY
10900 Wilshire Boulevard The undersigned hereby appoints David
Los Angeles, California 90024 L. Buell and Robert L. Mayer, and
either of them, as Proxies, each with
- --------------- the power to appoint his substitute,
and hereby authorizes either of them
to represent and to vote as designated
below, all of the shares of common
stock of Metrobank (the "Bank") held of
record by the undersigned on April 13,
1995, at the annual meeting of
shareholders to be held on May 23,
1995, or any adjournment or
adjournments thereof.
1. ELECTION OF DIRECTORS WITHHOLD AUTHORITY
FOR all nominees listed below to vote for all nominees
(except as marked to the contrary below) / / listed below / /
D.L. Buell, R. P. Bulseco, P.B. Caloyeras, S.J. Carr, J.W. Hobson,
R.L. Mayer, W. Wong, R.B. Markmiller
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized (a) to vote for the
election of any person as a director of the Bank in lieu of any nominee
named herein, provided such nominee is unable to serve or for good cause is
unwilling to serve, and (b) to vote upon such other business as may
properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR management's nominees as directors of the Bank.
- ----------------------------------------------------------
--------------------------
Signature
DATED: , 1995 --------------------------
----- Signature if held jointly
Please sign exactly as your name appears below. When shares are heldby
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give title as such. If a corporation,
please sign in full corporate name by the President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
PLEASE CHECK THIS BOX / / IF YOU PLAN TO ATTEND THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE> 1
EXHIBIT 99(l)
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
FORM F-3
CURRENT REPORT
UNDER SECTION 13 OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE MONTH OF MAY, 1995
--------------------------------
METROBANK
- --------------------------------------------------------------------------------
(EXACT NAME OF BANK AS SPECIFIED IN CHARTER)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL OFFICE)
<PAGE> 2
Item 2 - Acquisition or Disposition of Assets
Pursuant to the terms and conditions of that certain Stock Purchase
Agreement (the "Agreement"), dated as of August 31, 1994, as amended, by and
among Topdanmark Bank A/S ("Topdanmark"), Aktiv Bank Holding Company ("ABHC"),
National Bank of Long Beach ("NBLB") and Metrobank, on April 1, 1995, Metrobank
acquired all outstanding capital stock of NBLB from Topdanmark, NBLB's Danish
parent bank. There is no material relationship between Topdanmark and Metrobank.
Effective April 3, 1995, Metrobank merged NBLB with and into Metrobank with
Metrobank being the surviving bank.
The purchase price for the NBLB securities was $24,512,000 in cash
calculated on the basis of the audited book value of NBLB as of December 31,
1994, as adjusted in accordance with the terms of the Agreement and adjusted for
the payment by Topdanmark of the net purchase price for the assets described
below.
In addition, on and immediately following the closing of the
acquisition of NBLB by Metrobank, Metrobank sold and Topdanmark purchased all of
Metrobank's right, title and interest, as successor-by-merger to NBLB, in and to
certain real property classified as "other real property owned" and certain
loans (the "Loans") and Topdanmark sold and Metrobank purchased all of
Topdanmark's right, title and interest in and to certain participation interests
in certain of the Loans. The net purchase price payable by Topdanmark for these
assets was $102,466.19 which amount was paid by a reduction in the purchase
price paid by Metrobank for NBLB's outstanding securities.
Item 13 - Financial Statements and Exhibits
(a) Financial Statements of National Bank of Long Beach
(i) Audited Financial Statements for the years ended December 31, 1994,
1993 and 1992.
2
<PAGE> 3
(b) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Title
----------- -----
<S> <C>
2.1 Stock Purchase Agreement, dated as of August 31,
1994, by and between Topdanmark Bank A/S, Aktiv
Bank Holding Company, and National Bank of Long
Beach on the one hand and Metrobank, on the other
hand, as amended by that certain Amendment Letter
dated March 22, 1995 and that certain Closing
Agreement, dated as of March 31, 1995.
2.2 Agreement of Merger, dated as of April 1, 1995, by
and between Metrobank and National Bank of Long
Beach.
2.3 Agreement Regarding Conveyance of Real Property and
Loans, dated as of March 31, 1995, by and between
Topdanmark Bank A/S and Metrobank.
</TABLE>
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the
bank has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: May 9, 1995
Metrobank, a California
banking corporation
By: /s/ David P. Malone
---------------------------
David P. Malone
Executive Vice President
and Chief Financial Officer
3
<PAGE> 1
EXHIBIT 99(m)
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
FORM F-3
CURRENT REPORT
UNDER SECTION 13 OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE MONTH OF JUNE, 1995
--------------------------------
METROBANK
- --------------------------------------------------------------------------------
(EXACT NAME OF BANK AS SPECIFIED IN CHARTER)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL OFFICE)
<PAGE> 2
Item 12 - Other Materially Important Events
On May 2, 1995, Metrobank, Comerica Incorporated, a multibank bank
holding company incorporated under the laws of the State of Delaware
("Comerica"), and Comerica Holdings Incorporated, a California corporation to be
created by Comerica ("Holdings"), entered into an Agreement and Plan of
Reorganization and Merger (the "Merger Agreement") providing for, among other
things, the merger (the "Merger") of Holdings with and into Metrobank, with
Metrobank being the surviving corporation under the charter of Holdings and the
name "Metrobank". On the effective date of the Merger, Comerica will become the
sole shareholder of Metrobank and each issued and outstanding share of common
stock of Metrobank will be converted into shares of common stock of Comerica at
the conversion rate set forth in the Merger Agreement.
Concurrently with the execution and delivery of the Merger Agreement,
Metrobank and Comerica entered into a Stock Option Agreement, pursuant to which
Metrobank granted to Comerica an option, upon the occurrence of certain events
specified therein, to purchase from Metrobank (subject to receipt of any
necessary regulatory approvals) up to that number of shares of Metrobank common
stock constituting 9.9% of all issued and outstanding shares of Metrobank common
stock on the date of exercise of said option (after giving effect to the shares
issued pursuant to said option), for a purchase price per share of $15.75.
The consummation of the Merger is subject to a number of customary
conditions such as satisfactory due diligence reviews and regulatory approvals.
It is anticipated that the acquisition will close prior to March 10, 1996.
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the
bank has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: June 6, 1995
Metrobank, a California
banking corporation
By: /s/ David L. Buell
-------------------------
David L. Buell
Chief Executive Officer
and Chairman of the Board
2
<PAGE> 1
EXHIBIT 99(n)
FORM F-2
ANNUAL REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
FDIC CERTIFICATE NUMBER 22797-8
METROBANK
(Exact name of bank as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
95-3271474
(I.R.S. Employer Identification Number)
10900 Wilshire Boulevard, Los Angeles, California
(Address of Principal Office)
90024
(Zip Code)
(310) 824-5700
(Bank's telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Common Stock, No Par Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to item 10
is not contained herein, and will not be contained, to the best of bank's
knowledge, in definitive proxy or information statements incorporated by
reference in part III of this Form F-2 or any amendment of this Form F-2. [ ]
American Stock Exchange
(Name of each exchange on which registered)
Securities registered under Section 12(g) of the Act:
None
Indicate by check mark whether the bank (1) has filed all reports required to
be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the bank was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No ___
Aggregate Market Value of Common Stock held by Non-affiliates at March 28,
1994: $32,318,440 (1)
Number of shares of Common Stock outstanding as of March 28, 1994: 4,756,672
Documents Incorporated by Reference:
1993 Annual Report Parts I, II and IV and 1993 Proxy Statement Parts I and III
(1) Non-affiliates are all shareholders except Directors, Executive Officers,
and Principal Shareholders of the Bank.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
NUMBER
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Security Ownership of Certain Beneficial Owners and Management 11
PART II
Item 5. Market for the Bank's Common Stock and Related Security Holder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 8. Consolidated Financial Statements and Supplementary Data 29
PART III
Item 9. Directors and Executive Officers of the Bank 30
Item 10. Management Compensation and Transactions 30
PART IV
Item 11. Exhibits, Financial Statement Schedules, and Reports on Form F-3 31
EXHIBITS
- - Exhibit Index 32
- - Supplemental Schedules 35
- - Schedule I - Securities 36
- - Schedule II - Loans to Officers, Directors, Principal Security
Holders, and any Associates of the Foregoing Persons 37
- - Schedule III - Loans and Lease Financing Receivables 38
- - Schedule IV - Bank Premises and Equipment 39
- - Schedule V - Investments in Income from Dividends and Equity in
Earnings or Losses of Subsidiaries and Associated Companies 40
- - Schedule VI - Allowance for Possible Loan Losses 41
Signatures 42
Consent of Independent Public Accountants 44
Report of Independent Public Accountants on Supplementary Schedules 45
Management's Report on Financial Information 46
Exhibit 6.3 - 1993 Metrobank Annual Report
</TABLE>
<PAGE> 3
ITEM 1. BUSINESS
GENERAL
Metrobank (the Bank) is a California state chartered bank originally
incorporated as a national association on January 16, 1979. The Bank offers a
full range of commercial banking services, including the making of commercial
loans, accounts receivable loans, various types of consumer loans, and real
estate construction loans and commercial mortgage loans; the acceptance of
checking, interest-bearing checking (NOW), money market, savings and time
deposits; and the provision of traveler's checks, check guarantee, safe
deposit and other customary non-deposit banking services. The Bank does not
issue VISA or MasterCard credit cards, but is a merchant depository for
cardholder drafts under both types of credit cards. At the present time the
Bank does not have a trust department; however, the Bank makes arrangements
with correspondent banks to provide trust services. The Bank also provides
international banking services for its customers.
Although the Bank offers certain consumer banking services as an
accommodation to its existing business banking customers, the Bank does not
emphasize this "retail" portion of its business. Accordingly, the Bank does
not offer free checking accounts, Saturday or extended banking hours, or
drive-through tellers. Management feels strongly that all banking services
should be offered only if they are profitable and, if offered, should be
charged for on a competitive basis unless the account relationship provides
sufficient earnings through its demand deposit balances to more than offset the
cost of the services provided. The Bank has recently begun to offer certain
mutual funds and other non-deposit investments through an affiliation with
Standard Chartered Bank. There have been no other significant changes in the
kind of services offered by the Bank in the past three fiscal years.
Metrobank converted from a national association to a California state
chartered institution on November 1, 1988. Additionally, in 1988, the Bank
received approval from the California State Banking Department to establish a
wholly-owned subsidiary, Metrocorp, Inc. (Metrocorp), which could directly
invest in real estate projects. The real estate plan filed with the State
banking regulators allows Metrocorp to invest in the following types of
projects: single family residences, apartment complexes, commercial office
buildings, shopping centers, industrial projects or land development projects.
Neither the Bank nor Metrocorp has made any investments in real estate since
1990 and do not contemplate any such investments in the future.
As of December 31, 1993, Metrocorp had an investment in a low income
housing project amounting to approximately $16.8 million. The Bank intends to
hold this investment for a fifteen year period as part of its commitment to
comply with the Community Reinvestment Act and has applied to the Federal
Deposit Insurance Corporation for its consent to do so. Additionally, the Bank
is able to take advantage of low income housing tax credits which are generated
by the project which causes its effective tax rate for federal purposes to
approximate the federal alternative minimum tax rate.
In 1989, the Bank's wholly-owned subsidiary, Metrobancorp, purchased the
Josi & Dold Insurance Agency. This entity, incorporated as Metrobancorp,
provides a variety of insurance
3
<PAGE> 4
products to various individuals and businesses throughout Southern California.
During June of 1992, the Bank transferred the operations of Metrobancorp into
the Bank's operations. This transfer was effected to respond to recent
legislation which prohibits subsidiaries of banks from providing insurance
related services. During September 1993, the Bank sold the Josi & Dold
Insurance Agency.
OFFICES
The Bank's overall business plan is to become one of the prominent
regional banks operating in Southern California, providing banking services
primarily to entrepreneurs with companies that have sales volumes up to $50
million per annum. To attain this goal, the Bank strives to acquire high
quality personnel and attractive and prominent facilities in communities that
are well-recognized centers of commerce. This is reflected in the
establishment of the Los Angeles Headquarters Office in the 17-story Murdock
Plaza in the heart of Westwood at Wilshire and Westwood Boulevards; the South
Bay Regional Head Office in the Del Amo Financial Center in Torrance; the
Orange County Regional Head Office located in Koll Center in Newport Beach; the
San Fernando Valley Regional Head Office located in the Warner Center Plaza in
the West San Fernando Valley; and the San Diego Regional Head Office, located
in the Mission Valley area of San Diego. In addition, the Bank maintains
centralized loan, finance and administrative facilities in Torrance.
The principal executive offices of the Bank are located at 10900 Wilshire
Boulevard, Los Angeles, California 90024. The telephone number of the Bank is
(310) 824-5700.
COMPETITION
The banking business in California, and specifically in the market area
served by the Bank, is highly competitive with respect to both loans and
deposits, and is dominated by a relatively small number of major banks with
many offices operating over a wide geographic area. The Bank competes for
deposits and loans primarily with other commercial banks, including many of
which are much larger than the Bank, as well as with non-bank financial
institutions, including savings and loan associations, credit unions, and
investment banking firms.
Among the advantages which major banks have over Metrobank is the ability
to conduct large advertising campaigns and to allocate their assets, including
loans, to regions of highest demand and yield. Additionally, these
institutions have higher lending limits than Metrobank.
LENDING ACTIVITIES
The Bank primarily originates commercial, real estate construction,
commercial mortgage, accounts receivable and other consumer loans through its
lending division and through
4
<PAGE> 5
relationships its banking officers have created by way of prior business
contacts, customer relationships presently at the Bank, or through the active
solicitation of new business.
The Bank's loan portfolio totalled approximately $566.2 million at
December 31, 1993, an increase of approximately $38.2 million, or 7.2% from
December 31, 1992. At December 31, 1993, the loan portfolio represented
approximately 59.2% of the Bank's total assets.
COMMERCIAL AND ASSET BASED LOANS
Commercial loans are made for the purpose of providing working capital,
financing the purchase of equipment or inventory and for other business
purposes. These loans typically have maturities ranging from 30 days to 1
year. The Bank also makes "term loans" which have maturities normally ranging
from one to five years. Short-term loans provide for periodic interest
payments, with principal being paid quarterly or at maturity. Term loans
normally provide for monthly payments of principal and interest. At December
31, 1993, commercial loans outstanding totalled $77.5 million.
Asset based loans are made primarily to provide working funds to medium
sized businesses. Such loans are provided on a revolving, non-notification
basis with advances made against eligible receivables and inventory. These
loans are variable rate, tied to the Bank's prime index. At December 31, 1993,
outstanding asset based loans totalled $55.4 million.
The Bank occasionally extends lines of credit to business customers. On
business credit lines, the Bank specifies a maximum amount which it stands
ready to lend the customer during a specified period in return for which the
customer agrees to maintain its primary banking relationship with the Bank.
The purposes for which such loans will be used and the security therefore, if
any, are generally determined before the Bank's commitment is extended.
Normally, the Bank does not make loan commitments in material amounts for
periods in excess of one year.
REAL ESTATE LOANS
The real estate loan portfolio consists primarily of real estate
construction, commercial mortgage, and commercial loans secured by real estate.
The construction loans typically have a maturity of six to twelve months, are
variable rate, with principal due at maturity. It has been the policy of the
Bank at the completion of the construction loan to request that the borrower
secure permanent financing to pay off the interim construction loan. The
commercial mortgage loans typically have a five year maturity, are variable
rate with principal due at maturity. Commercial loans secured by real estate
typically have maturities ranging from 30 days to 1 year, and "term loans" have
maturities normally ranging from one to five years. Short-term loans provide
for periodic interest payments, with principal being paid quarterly or at
maturity.
5
<PAGE> 6
Term loans normally provide for monthly payments of principal and interest. At
December 31, 1993, real estate loans outstanding totalled $327.0 million.
CONSUMER LOANS
Consumer loans are loans made to individuals and businesses, banker's
acceptances, cash reserve and overdraft, and installment loans. These loans
typically provide for the monthly payment of both principal and interest, with
an interest rate that is competitive with current market interest rates and
which may be fixed. The term of these loans vary from one day to five years.
At December 31, 1993, consumer loans totalled $106.3 million.
LOAN LOSS RESERVE
Reserves for losses on loans are established by the Bank's credit review
committee in accordance with generally accepted accounting principles. Assets
are classified in accordance with FDIC guidelines. As a general rule, the FDIC
regulations require that problem assets be classified as either "Substandard",
"Doubtful", or "Loss" depending on the likelihood that the loan will be
collected. These regulations also require that the Bank charge off any "Loss"
loan or establish a specific allowance for loan losses equal to the entire
classified amount and that the Bank establish an appropriate amount of general
allowances for loan losses on performing loans as well. During 1993, 1992 and
1991, Metrobank provided $8,820,000, $5,200,000 and $2,130,000, respectively,
as a provision for estimated losses on loans or for real estate acquired
through foreclosure. At December 31, 1993, 1992 and 1991, the Bank's loan loss
reserve as a percentage of total loans was 2.31%, 1.91% and 1.69%,
respectively.
This increase in the Bank's loan loss reserve ratio in comparing 1993 to
1992 was due to the decision by management to increase the reserve to a level
which was adequate to absorb known and inherent risks in the loan portfolio and
take into account the increase in net charge-offs to total loans of 1.07% in
1993 compared to 0.64% in 1992. Additionally, the increase in reserves was
necessary due to a general concern about the economic conditions in the
Southern California area.
OTHER REAL ESTATE OWNED
At December 31, 1993, the Bank had $5.7 million in real estate acquired in
satisfaction of loans. The Bank records these properties at the lower of cost
or fair value at the date of transfer to OREO (other real estate owned).
6
<PAGE> 7
DEPOSITS
Metrobank offers a variety of deposit accounts including passbook
accounts, fixed-rate, fixed-term accounts, demand deposit accounts, money
market accounts, and special purpose accounts (such as bankruptcy funds). The
accounts vary as to terms, the principal differences being the minimum balance
required, the maturity period, interest rate, the manner of paying interest,
and withdrawal limitations and penalties. Interest rates paid and minimum
balance requirements vary from time to time as determined by Metrobank in
accordance with applicable regulations and changing market conditions. The
Bank's policy has been to offer a wide variety of rates and savings plans to
fit the needs of the deposit base while also conforming to the Bank's cash flow
requirements. The table on pages 18 and 19 of Management's Discussion and
Analysis sets forth the average balances outstanding for the period.
At December 31, 1993, the Bank had concentrations of demand deposits
within the escrow and title companies. To a large extent these deposits are
generated as a result of the Bank's providing at no cost, various banking
related services, or paying for others to provide such services. These
expenses are allocated to the customer's accounts through an account analysis,
whereby the customer is required to maintain minimum balances in their demand
deposit account. Total demand deposits averaged $446.5 million for December of
1993, of this amount, approximately $259.5 million or 58.1% was escrow and
title related.
To respond to changes in the Bank's deposit structure, the Bank actively
solicits time certificates of deposit, both locally and nationally. These
deposits range in duration from 90 days to 1 year, for which the Bank pays
market rates of interest on amounts of approximately $100,000. At December 31,
1993, approximately $66.9 million of the Bank's certificates of deposit were
related to this funding source.
INTEREST RATE RISK MANAGEMENT
The Bank manages interest rate risk through the Asset/Liability Management
Committee (ALCO). In addition to managing the Bank's exposure to changes in
interest rates, the ALCO Committee's responsibilities include managing the
Bank's liquidity position, ensuring the Bank has adequate collateral to fund
collateralized deposit growth gathering activities and borrowing activities,
and to define operating strategies and implement such strategies through
defining products, product pricing strategies and execution of financial
transactions.
The Bank's financial position and results of operation are effected by
changes in the interest rate environment. Since interest-earning assets and
interest-bearing liabilities have various repricings and maturities, changes in
interest rates may result in an increase or decrease in net interest income.
It is the responsibility of the Bank's ALCO to manage its exposure to
fluctuations in interest rate changes. An institution's interest rate
sensitivity can be measured by its "gap" (which represents the difference
between the maturities or rate change dates on interest earning assets and
interest bearing liabilities within a period). In general, banks try to
7
<PAGE> 8
match the repricing intervals in amounts of their assets and liabilities to
limit their sensitivity to interest rate fluctuations. Banks that are asset
sensitive with more assets subject to repricing earlier than liabilities
benefit in periods of rising interest rates because the assets command higher
earnings rates earlier than the liabilities funding them and generate earnings
that can be reinvested at higher rates. Banks that are liability sensitive
benefit in periods of declining rates but suffer when rates increase because
funding for comparatively lower yielding assets becomes more expensive. In a
rising rate environment, liability sensitive banks need to pay more in interest
to retain existing liabilities and maintain liquidity. To offset this
exposure, the ALCO has several alternatives; it can extend the maturities of
its time certificates of deposit, increase its relative mix of variable rate
interest-earning assets or enter into off-balance sheet hedging transactions.
EMPLOYEES
At December 31, 1993, the Bank employed 275 individuals including 5
executive officers and a total of 109 other officers. The Bank's employees are
not represented by a union. The Bank has never experienced a work stoppage and
management of the Bank believes that its employee relations are satisfactory.
Management of the Bank also believes that the benefits provided by the Bank to
its employees are competitive when compared to similar financial institutions.
8
<PAGE> 9
ITEM 2. PROPERTIES
During the year ended December 31, 1993, the Bank leased office space at
an aggregate annual rent of approximately $3.0 million. The space is used for
the Bank's executive and business offices. The unexpired lease terms range
from 4 months to 9 years with options to renew for up to 10 years. The average
unexpired lease term of material leases is 7 years. The Murdock Plaza lease
expires in 2001 (with an option to extend to 2011); the Del Amo Financial
Center lease expires in 1995; the Koll Center lease expires in 2002 (with an
option to extend to 2012); the Warner Center lease expires in 1999 (with an
option to extend to 2005); the Mission Valley lease expires in 1995 (with 2
five year options to extend); the lease for the Bank's Administrative Loan
Office in Torrance expires in 1995 (with a 5 year option to extend) and the
lease for the Bank's deposit operations facilities at the Beaudry Plaza in Los
Angeles expires in 1994. It is anticipated that this facility will relocate
sometime during the second quarter of 1994 to another location in downtown Los
Angeles.
For additional information relating to the Bank's future leasehold
commitments, see footnote 12 on page 26 of the Bank's 1993 Annual Report to
Shareholders, attached as Exhibit 6.3 and incorporated herein by this
reference.
9
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
The Bank is a defendant in a number of lawsuits which have arisen in the
ordinary course of its business. It is the opinion of management of the Bank
that although it is not possible to assess with certainty the ultimate outcome
of some of these actions at the present time, resolution of the matters will
not have a material adverse effect on either the Bank or any of its
subsidiaries' financial condition or results of operations.
10
<PAGE> 11
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 4 is omitted since the information called
for is included in a definitive proxy statement which will be filed with the
Federal Deposit Insurance Corporation within 120 days after the end of the most
recent fiscal year and such proxy statement is incorporated herein by this
reference.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE BANK'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
For information concerning the market for the Bank's common stock and
related security holder matters, see "Securities Activity" on page 32 of the
Bank's 1993 Annual Report to Shareholders, attached hereto as Exhibit 6.3 and
incorporated herein by this reference.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
For selected financial data concerning the Bank see "Selected Financial
Data" on page 15 of the Bank's 1993 Annual Report to Shareholders, attached
hereto as Exhibit 6.3 and incorporated herein by this reference.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, liquidity,
capital resources and interest rate sensitivity. It should be read in
conjunction with the consolidated financial statements and related notes to the
financial statements of the Bank appearing elsewhere in this report.
NET INTEREST INCOME
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other liabilities). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities, as well as the difference between the relative
amounts of average interest-earning assets and interest-bearing liabilities.
The following table shows the average balances of the Bank's assets,
liabilities, and shareholders' equity and the percentage distribution of the
items computed using average daily balances for the periods indicated:
<TABLE>
<CAPTION>
1993 1992
--------------------- ---------------------
($ IN THOUSANDS) AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL
--------------------- ---------------------
<S> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 72,072 8.0% $ 70,615 8.2%
FEDERAL FUNDS SOLD 8,217 0.9% 1,385 0.2%
INVESTMENT SECURITIES 238,696 26.6% 235,532 27.4%
INVESTMENT IN REAL ESTATE 18,558 2.1% 22,728 2.7%
LOANS, NET 530,706 59.3% 499,628 58.2%
ACCRUED INTEREST RECEIVABLE 5,718 0.6% 5,713 0.7%
OTHER REAL ESTATE OWNED, NET 9,570 1.1% 8,554 1.0%
PREMISES AND EQUIPMENT 2,897 0.3% 3,200 0.4%
OTHER ASSETS 10,134 1.1% 10,210 1.2%
-------- ----- -------- -----
TOTAL ASSETS $896,568 100.0% $857,565 100.0%
======== ===== ======== =====
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
1993 1992
--------------------- ---------------------
($ IN THOUSANDS) AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL
--------------------- ---------------------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
TIME CERTIFICATES $139,714 15.6% $170,269 19.9 %
OTHER DEPOSITS 655,792 73.1% 576,693 67.2 %
-------- ----- -------- -----
TOTAL DEPOSITS 795,506 88.7% 746,962 87.1 %
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
AND FUNDS PURCHASED 29,625 3.3% 40,683 4.8 %
ACCRUED INTEREST PAYABLE 768 0.1% 952 0.1 %
OTHER LIABILITIES 9,129 1.0% 11,450 1.3 %
-------- ----- -------- -----
TOTAL LIABILITIES 835,028 93.1% 800,047 93.3 %
SHAREHOLDERS' EQUITY:
COMMON STOCK 34,325 3.8% 34,304 4.0 %
GUARANTEE OF ESOP LOAN (414) 0.0% (1,217) (0.1)%
UNDIVIDED PROFITS 27,629 3.1% 24,431 2.8 %
-------- ----- -------- -----
TOTAL SHAREHOLDERS' EQUITY 61,540 6.9% 57,518 6.7 %
-------- ----- -------- -----
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $896,568 100.0% $857,565 100.0 %
======== ===== ======== =====
</TABLE>
The Bank's net interest income before provision for possible loan losses
was $48.4 million for the year ended December 31, 1993 compared to $46.0
million for the year ended December 31, 1992. The increase in net interest
income was primarily due to a $3.1 million decrease in interest expense. Net
interest income was further enhanced by a $1.7 million increase in loan
interest and fee income, and was offset by a $2.4 million decrease in
investment interest income.
15
<PAGE> 16
The following table presents the average amounts outstanding for the major
categories of the Bank's interest-earning assets and interest-bearing
liabilities and the average interest rates earned or paid thereon:
<TABLE>
<CAPTION>
($ IN THOUSANDS) YEAR ENDED DECEMBER 31,
------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
FUNDS SOLD:
AVERAGE OUTSTANDING $ 8,217 $ 1,385 $ 1,640
AVERAGE YIELD 2.92% 3.61% 5.24%
INTEREST INCOME $ 240 $ 50 $ 86
-------- -------- --------
INVESTMENT SECURITIES:
AVERAGE OUTSTANDING $238,696 $235,532 $204,204
AVERAGE YIELD 6.50% 7.68% 8.36%
INTEREST INCOME $ 15,517 $ 18,083 $ 17,074
-------- -------- --------
GROSS LOANS:
AVERAGE OUTSTANDING $542,466 $508,784 $449,190
AVERAGE YIELD 8.35% 8.58% 10.45%
INTEREST INCOME $ 45,302 $ 43,631 $ 46,937
-------- -------- --------
TOTAL INTEREST-EARNING ASSETS:
AVERAGE OUTSTANDING $777,813 $738,301 $655,034
AVERAGE YIELD 7.85% 8.37% 9.79%
INTEREST INCOME $ 61,059 $ 61,764 $ 64,097
-------- -------- --------
INTEREST-BEARING LIABILITIES
NOW AND MONEY MARKET DEMAND ACCOUNTS:
AVERAGE OUTSTANDING $272,092 $225,431 $164,443
AVERAGE YIELD 2.34% 3.06% 5.15%
INTEREST EXPENSE $ 6,356 $ 6,892 $ 8,467
-------- -------- --------
SAVINGS DEPOSITS:
AVERAGE OUTSTANDING $ 14,320 $ 19,757 $ 19,438
AVERAGE YIELD 2.25% 2.98% 4.85%
INTEREST EXPENSE $ 322 $ 589 $ 942
-------- -------- --------
TIME DEPOSITS:
AVERAGE OUTSTANDING $139,714 $170,269 $239,071
AVERAGE YIELD 3.57% 3.91% 6.03%
INTEREST EXPENSE $ 4,990 $ 6,659 $ 14,411
-------- -------- --------
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE,
FUNDS PURCHASED AND OTHER LIABILITIES:
AVERAGE OUTSTANDING $ 29,625 $ 40,683 $ 22,004
AVERAGE YIELD 3.26% 4.10% 6.51%
INTEREST EXPENSE $ 966 $ 1,666 $ 1,432
-------- -------- --------
CAPITALIZED CARRYING COSTS $ 0 $ (65) $ (284)
TOTAL INTEREST-BEARING LIABILITIES:
AVERAGE OUTSTANDING $455,751 $456,140 $444,956
AVERAGE YIELD 2.77% 3.45% 5.61%
INTEREST EXPENSE $ 12,634 $ 15,741 $ 24,968
-------- -------- --------
NET INTEREST INCOME: $ 48,425 $ 46,023 $ 39,129
AVG. NET YIELD ON INTEREST-EARNING ASSETS 6.23% 6.23% 5.97%
======== ======== ========
</TABLE>
16
<PAGE> 17
Interest and fee income decreased to $61.1 million in 1993 from $61.8
million in 1992. This decrease of $700,000 in interest and fee income is
primarily attributable to a 118 basis point drop in the Bank's average rate for
investment securities which reduced related investment income by approximately
$2.4 million. A declining interest rate environment and re-investment of sold
and matured investments in shorter maturities caused the decline. This
decrease in investment income was partially offset by a $1.7 million increase
in loan income which resulted from a $32 million increase in average loans
outstanding, offset by a 20 basis point drop in the Bank's average rate for
loans.
The following table summarizes the maturity of the Bank's investment
securities and their weighted average yield as of December 31, 1993:
<TABLE>
<CAPTION>
WEIGHTED
PRINCIPAL BOOK AVERAGE
AMOUNT VALUE YIELD
-------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C>
TYPE AND MATURITY GROUPING
U.S. TREASURY SECURITIES - HELD FOR SALE:
WITHIN ONE YEAR $ 20,000 $ 20,140 3.66%
AFTER ONE YEAR BUT WITHIN TWO YEARS 10,000 9,992 4.07%
AFTER TWO YEARS BUT WITHIN FIVE YEARS 45,000 45,481 7.06%
AFTER FIVE YEARS BUT WITHIN TEN YEARS - - -
------- ------- -----
TOTAL U.S. TREASURY SECURITIES $ 75,000 $ 75,613 5.76%
U.S. TREASURY SECURITIES - HELD TO MATURITY:
WITHIN ONE YEAR $ 20,000 $ 20,094 7.62%
AFTER ONE YEAR BUT WITHIN TWO YEARS 40,000 41,213 5.56%
AFTER TWO YEARS BUT WITHIN FIVE YEARS 50,000 53,453 4.68%
AFTER FIVE YEARS BUT WITHIN TEN YEARS - - -
------- ------- -----
$110,000 $114,760 5.51%
MORTGAGE-BACKED SECURITIES AND COLLATERALIZED
MORTGAGE OBLIGATIONS: $ 42,589 $ 43,367 6.38%
OTHER SECURITIES:
OVER FIVE YEARS $ 2,975 $ 2,975 3.82%
------- ------- -----
TOTAL OTHER SECURITIES $ 2,975 $ 2,975 3.82%
TOTAL SECURITIES $230,564 $236,715 5.73%
======== ======== =====
</TABLE>
17
<PAGE> 18
Interest expense decreased to $12.6 million for the year ended December 31,
1993 from $15.7 million for the year ended December 31, 1992. The decrease of
$3.1 million is primarily attributable to a 66 basis point decrease in interest
expense paid on interest bearing deposits. Inasmuch as the Bank funds its
liquidity needs with short term interest bearing deposits, the frequent
repricing of these deposits was affected by the substantial decrease in the
interest rate environment.
The following table summarizes certain information regarding the sources,
types and amounts of certain of the Bank's average deposit balances during
December 1993:
<TABLE>
<CAPTION>
($ IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------------
INTEREST PERCENT OF
DEMAND BEARING TOTAL AVG. TOTAL
SOURCE OF DEPOSITS DEPOSITS DEPOSITS DEPOSITS DEPOSITS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSOLVENCY TRUSTEES $ 39,743 $174,899 $214,642 25.0%
COMMERCIAL INDUSTRY 113,773 69,223 182,996 21.3%
ESCROW COMPANIES 178,529 30,574 209,103 24.3%
TITLE COMPANIES 80,981 2,135 83,116 9.7%
ENTERTAINMENT INDUSTRY 27,366 35,153 62,519 7.3%
OTHER INDUSTRY 6,121 100,527 106,648 12.4%
-------- -------- -------- ------
TOTAL $446,513 $412,511 $859,024 100.0%
======== ======== ======== ======
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
The following table shows the Bank's average deposits for each of the
periods indicated below, based upon average daily balances:
<TABLE>
<CAPTION>
($ IN THOUSANDS) YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
1993 1992 1991
--------------------------- ------------------------- -----------------------
AVERAGE % OF AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL BALANCE TOTAL
--------------------------- ------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
DEMAND DEPOSITS $369,380 46.4% $331,505 44.4% $243,935 36.6%
NOW & SUPER-NOW ACCTS 17,885 2.2% 14,156 1.9% 10,738 1.6%
SAVINGS ACCOUNTS 14,320 1.8% 19,757 2.6% 19,438 2.9%
MONEY MARKET ACCOUNTS 254,207 32.0% 211,275 28.3% 153,705 23.0%
TIME CERTIFICATES OF DEPOSITS 139,714 17.6% 170,269 22.8% 239,071 35.9%
------------------------- ------------------------- ----------------------
TOTAL DEPOSITS $795,506 100.0% $746,962 100.0% $666,887 100.0%
======== ======= ======== ====== ======== ======
</TABLE>
The table below details the changes in interest income and interest expense
by component, and the amount of change attributable to variations in interest
rates, and variations in average balances.
<TABLE>
<CAPTION>
YEAR ENDED 12/31/93 OVER 1992 YEAR ENDED 12/31/92 OVER 1991 YEAR ENDED 12/31/91 OVER 1990
----------------------------- ----------------------------- -----------------------------
TOTAL TOTAL TOTAL
INCREASE CHANGE DUE TO: INCREASE CHANGE DUE TO: INCREASE CHANGE DUE TO:
($ IN THOUSANDS) (DECREASE) RATE VOLUME (DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
- -----------------
INTEREST-EARNING
DEPOSITS $ - $ - $ - $ - $ - $ - $ (7) $ - $ (7)
OTHER INTEREST INCOME 190 (10) 200 74 58 16 (963) (331) (632)
INVESTMENT SECURITIES (2,565) (2,771) 206 1,009 (1,325) 2,334 (2,970) (127) (2,843)
LOANS & BANKERS'
ACCEPTANCES 1,670 (1,011) 2,681 (3,416) (8,104) 4,688 3,604 (3,474) 7,078
-------- -------- ------- -------- ------- ------- -------- ------- -------
TOTAL INTEREST INCOME (705) (3,792) 3,087 (2,333) (9,371) 7,038 (336) (3,932) 3,596
-------- -------- ------- -------- ------- ------- -------- ------- -------
INTEREST EXPENSE:
- -----------------
NOW AND MONEY MARKET
DEMAND ACCOUNTS (537) (1,627) 1,090 (1,568) (3,398) 1,830 (188) (924) 736
SAVINGS DEPOSITS (267) (145) (122) (360) (370) 10 (82) (14) (68)
TIME DEPOSITS (1,669) (577) (1,092) (7,752) (5,061) (2,691) (188) (3,023) 2,835
FUNDS PURCHASED AND
SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE (699) (338) (361) 234 (350) 584 (507) (483) (24)
CAPITALIZED INTEREST 65 - 65 219 - 219 826 826 -
-------- -------- ------- -------- ------- ------- -------- ------- -------
TOTAL INTEREST EXPENSE (3,107) (2,687) (420) (9,227) (9,179) (48) (139) (3,618) 3,479
-------- -------- ------- -------- ------- ------- -------- ------- -------
NET INTEREST INCOME $ 2,402 $ (1,105) $ 3,507 $ 6,894 $ (192) $ 7,086 $ (197) $ (314) $ 117
======== ======== ======= ======== ======= ======= ======== ======= =======
</TABLE>
19
<PAGE> 20
The Bank's net interest income was $46.0 million for the year ended
December 31, 1992 compared to $39.1 million for the year ended December 31,
1991. The increase in net interest income from 1991 to 1992 was due primarily
to a substantial decrease in interest expense. Net interest income increased
further through the growth in investment interest income and was offset by a
decrease in loan interest income and fees.
Interest and fee income decreased to $61.8 million in 1992 from $64.1
million in 1991. This decrease of $2.3 million in interest and fee income in
comparing 1992 to 1991 is primarily attributable to a 221 basis point drop in
the Bank's average prime rate which more than offset the $60 million increase
in average loans outstanding. This decrease in interest and fee income
relating to the loan portfolio was offset by an increase in investment interest
income. The average investment portfolio increased by $31.0 million during
1992 which offset the 67 basis point decrease in the yield of the portfolio.
The decrease in yield on the portfolio was caused by the reinvestment of
maturing investments and additional investments in comparable term securities
yielding less due to the drop in U.S. Treasury yields which occurred during
1992.
Interest expense decreased to $15.7 million for the year ended December
31, 1992 from $25.0 million for the year ended December 31, 1991. The decrease
of $9.3 million in comparing 1992 to 1991 is primarily attributable to a 223
basis point decrease in interest expense paid on interest-bearing deposits.
Because the Bank maintains primarily short term interest-bearing deposits, the
frequent repricing of these deposits was greatly affected by the substantial
decrease in interest rates. Additionally, average interest-bearing deposits
decreased by $7.5 million in 1992 which added to the decrease in interest
expense.
NON-INTEREST INCOME
During 1993, the Bank recognized approximately $9.6 million in
non-interest income as compared to $5.7 million in 1992 and $6.2 million in
1991. This increase of $3.9 million in comparing 1993 to 1992 was comprised
primarily of a $3.3 million gain realized on the sale of $89 million of
Treasury securities, an increase of $500,000 in income for Metrocorp, Inc. and
a net $100,000 increase in all other non-interest income.
The decrease of $500,000 in non-interest income in comparing 1992 to 1991
was due primarily to gains on the sale of other real estate owned in 1991
totalling $800,000, offset by an increase of $300,000 in gross rental income
attributable to the Bank's low-income housing project which was placed in
service during 1991.
PROVISION FOR POSSIBLE LOAN LOSSES
The Bank maintains an allowance for loan losses at a level which
management deems adequate to offset potential losses. Loans deemed to be
uncollectible are charged to this allowance; subsequent recoveries, if any, are
credited back to the allowance. Additions to the allowance are made on a
regular basis through charges to operations and are reflected in the Bank's
statement of operations as a provision for possible loan losses. The balance
of the allowance for possible loan losses reflects the amount which, in
management's judgement, is adequate to provide for potential loan losses after
weighing the mix of the loan portfolio, current economic conditions, past loan
loss experience and other factors relevant to estimating loan
20
<PAGE> 21
losses. The adequacy of the allowance for possible loan losses is also
evaluated relative to the level of non-performing loans (those for which
principal or interest is past due more than 90 days and those on non-accrual
status).
The following table indicates the amounts which were allocated to the
allowance for possible loan losses and the relationship of those amounts to net
charge-offs and total gross loans for the periods indicated:
<TABLE>
<CAPTION>
($ IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------
PROVISION NET CHARGE- RESERVE ALLOWANCE RATIO OF
FISCAL CREDITED TO OFFS AGAINST TRANSFERRED BALANCE AT ALLOWANCE TO
YEAR ALLOWANCE ALLOWANCE FROM/(TO) OREO YEAR END GROSS LOANS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 $8,820 $5,818 - $13,104 2.31%
1992 5,200 3,272 - 10,102 1.91%
1991 2,130 788 160 8,174 1.69%
1990 5,619 1,903 (160) 6,672 1.59%
1989 1,498 657 - 3,116 1.00%
1988 1,063 531 - 2,275 1.07%
- ----------------------------------------------------------------------------------------------------
</TABLE>
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured; such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk since property acquired through
foreclosure ("OREO") may not be saleable for an amount sufficient to offset the
entire amount of the loan and costs associated with foreclosure. Although
management believes that the allowance for possible loan losses is adequate,
future provisions will be subject to continuing evaluation of risks inherent in
the loan portfolio.
In 1993, the provision for possible loan losses increased by approximately
$3.6 million from the prior year. This increase was deemed necessary as loan
charge-offs (net of recoveries) increased by $2.5 million. Additionally,
management increased the ratio of its loan loss reserve to total loans from
1.91% as of December 31, 1992 to 2.31% as of December 31, 1993, as a result of
management's assessment of its most recent charge-off experience and a general
concern about the Southern California economy.
Loan charge-offs (net of recoveries) for the year ended December 31, 1993
totalled approximately $5.8 million. This compares to the net charge-offs of
$3.3 million for 1992. The increase in the Bank's charge-offs was primarily
attributable to loans secured by real estate; of the $2.5 million increase,
$2.1 million was real estate loan related while approximately $400,000 was
commercial loan related. Loans secured by real estate represented 58% and 57%
of the Bank's loan portfolio as of December 31, 1993 and December 31, 1992,
respectively, while commercial loans represented 22% and 24% as of December 31,
1993 and December 31, 1992, respectively.
The ability of the Bank's borrowers to repay their loans is dependent, to
a large extent, on the overall economic climate as well as the real estate
values in the Southern California region. Inasmuch as this is the principal
geographic area in which Metrobank conducts its business, this environment, as
a result of the recession, has had an adverse impact on the Bank's asset
quality.
21
<PAGE> 22
As of December 31, 1993, the Bank had approximately $12.3 million of
non-performing assets, compared to $17.3 million as of December 31, 1992, or
1.29% and 1.91% of total assets, respectively.
The following is a breakdown on non-performing assets for the years ended
December 31:
<TABLE>
<CAPTION>
($ in thousands) 1993 1992
---- ----
<S> <C> <C>
Loans 90 days past due on accrual $ 1,096 $ 1,572
Non-accrual loans 5,476 4,922
OREO/insubstance foreclosure 5,745 10,834
----- ------
Total non-performing assets $ 12,317 $ 17,328
====== ======
Non-performing loans/gross loans 1.16% 1.23%
Non-performing assets/total assets 1.29% 1.91%
</TABLE>
The Northridge earthquake of January 17, 1994 is not expected, based on
presently known information, to cause a material affect on the reported numbers
but the impact on the business of all borrowers of the Bank is not yet known;
if materially adverse to a significant number of borrowers, increased
delinquencies in coming months might be expected.
22
<PAGE> 23
The following tables summarize the Bank's loan loss experience for the
periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
Balances ($ in thousands): 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Loans:
Average loans, net of reserves $530,706 $499,628 $442,084
Loans at end of period, net of reserves 553,125 517,850 475,474
Analysis of allowance for possible losses:
Balance at beginning of period 10,102 8,174 6,672
Loans charged off (6,526) (3,559) (1,479)
Recoveries of loans previously charged off 708 287 691
-------- -------- --------
Net loans charged off (5,818) (3,272) (788)
Reserve transferred from OREO - - 160
Provision for possible loan losses 8,820 5,200 2,130
-------- -------- --------
Balance at end of period $ 13,104 $ 10,102 $ 8,174
======== ======== ========
Ratios:
Net loan charge-offs to average loans 1.10% 0.65% 0.18%
Net loan charge-offs to loans at end of period 1.05% 0.63% 0.17%
Allowance for possible loans losses to average loans 2.42% 1.99% 1.82%
Allowance for possible loan losses at end of period 2.31% 1.91% 1.69%
Net loan charge-offs to allowance for possible loan losses 44.40% 32.39% 9.64%
Net loan charge-offs to provision for possible loan losses 65.96% 62.92% 37.00%
Charge-offs:
Commercial $ 2,850 $ 2,235 $ 703
Consumer 432 362 214
Real estate 3,187 958 431
Other 57 4 131
-------- -------- --------
Total $ 6,526 $ 3,559 $ 1,479
======== ======== ========
Recoveries:
Commercial $ 317 $ 142 $ 319
Consumer 137 59 220
Real estate 218 65 152
Other 36 21 -
-------- -------- --------
Total $ 708 $ 287 $ 691
======== ======== ========
</TABLE>
The following table shows for the periods indicated the remaining maturity
of fixed rate loans and the earliest possible repricing interval for variable
rate loans for the Bank's loan portfolio:
<TABLE>
<CAPTION>
($ IN THOUSANDS) DECEMBER 31,
-------------------------------
1993 1992
---- ----
<S> <C> <C>
IMMEDIATE OR ONE DAY $428,367 $402,593
THREE MONTHS OR LESS 18,501 15,027
THREE TO TWELVE MONTHS 36,323 28,914
ONE TO FIVE YEARS 74,263 72,621
OVER FIVE YEARS 8,775 8,797
-------- --------
TOTAL $566,229 $527,952
======== ========
</TABLE>
23
<PAGE> 24
PROVISION FOR OREO AND REAL ESTATE INVESTMENT LOSSES
During 1993, the Bank and Metrocorp, Inc. reduced OREO from $10.8 million
at the end of 1992 to $5.7 million at the end of 1993. One new property was
acquired and five properties were disposed of throughout the year and total
provisions for real estate losses amounted to approximately $2 million for
1993, $2 million for 1992 and $600,000 for 1991.
NON-INTEREST EXPENSE
For the year ended December 31, 1993, non-interest expense increased to
$42 million from $39.2 million in 1992 and from $35.7 million in 1991. This
increase of $2.8 million in 1993 was due primarily to an increase of $1 million
in data processing and other services paid on behalf of certain depository
relationships and is directly attributable to an increase in average
non-interest bearing demand deposits increasing from $332 million during 1992
to $369 million during 1993. In addition, occupancy, furniture and equipment
expense increased by $700,000; of this increase, $200,000 was related to an
increase in occupancy expense and $350,000 was related to the Bank reversing an
accrual associated with its Orange County facility during the third quarter of
1992. Personnel expense increased by $400,000 and $400,000 in goodwill
associated with the Bank's insurance division was written off in the first
quarter of 1993. Additionally, regulatory assessments increased by $300,000 as
a result of an increase in FDIC insurance premiums, as well as the increase in
our demand deposits.
In comparing 1992 to 1991, the increase of $3.5 million was due primarily
to increases of $1.4 million in personnel expense, $1.4 million in provision
for OREO and insubstance foreclosures, $600,000 in operating expenses related
to two Metrocorp, Inc. rental properties, $500,000 in professional services,
$300,000 in regulatory assessments and $200,000 in all other non-interest
expenses. Offsetting these increases was a $900,000 decrease in data
processing and other services paid on behalf of certain depository
relationships.
PROVISION FOR INCOME TAXES
The Bank's provision for income taxes is lower than the statutory federal
income tax rate mainly due to the utilization of tax credits associated with
the Bank's low-income housing project. These tax credits, of which $1.5
million was utilized in 1993 and $1.5 million in 1992, amount to approximately
$15 million in credits over a 10 year period. Through December 31, 1993, the
Bank had utilized approximately $4 million in tax credits; the utilization of
these tax credits is subject to certain alternative minimum tax restrictions.
The effective tax rate used in computing net income was 16.3% in 1993, 20.7% in
1992 and 27.2% in 1991.
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." This statement changes the method of computing income taxes for
financial statement purposes by adopting the liability or balance sheet method
under which the net deferred liability or asset is
24
<PAGE> 25
determined based on the tax effects of the differences between the book and tax
basis of the various balance sheet assets and liabilities. Under this method,
the computation of the net deferred tax liability or asset gives current
recognition to changes in tax laws and rates. The Bank adopted SFAS No. 109
effective January 1, 1993 and prior years' financial statements have not been
restated. Previously the Bank provided for income taxes under Accounting
Principles Board Opinion No. 11, "Accounting For Income Taxes," under which the
net deferred tax asset or liability was an accumulation of annual adjustments
based on the tax effects of the book and tax income statement differences and
was not adjusted for subsequent changes in tax laws and rates. The adoption of
SFAS No. 109 in 1993 resulted in a $350,000 credit to the Bank's tax provision.
The Revenue Reconciliation Act of 1993 is not expected to have a significant
adverse impact on the Bank.
CAPITAL RESOURCES
The Bank's shareholders' equity totalled $63.8 million as of December 31,
1993, which represents an increase of $4.5 million from shareholders' equity on
December 31, 1992. This increase was due to net income for the year of $6
million, offset by dividends declared in the amount of $2.1 million, and a
decrease in the indebtedness of the Bank's Employee Stock Ownership Plan and
Trust (which is treated as a reduction of capital for financial statement
purposes) of $575,000.
The Bank's shareholders' equity totalled $59.3 million on December 31,
1992, which represents an increase of $3.5 million over shareholders' equity on
December 31, 1991. This increase was due to net income for the year of $5.8
million, offset by dividends in the amount of $2.9 million and a decrease in
the indebtedness of the Bank's Employee Stock Ownership Plan and Trust of
$575,000.
The Federal Deposit Insurance Corporation (FDIC), the Federal Reserve
Board, and the Comptroller of the Currency have adopted regulations that
supplement the current regulatory capital requirements by establishing
guidelines for calculating "risk-based" and "tier-one" capital ratios. These
guidelines establish a framework that requires regulatory capital requirements
to be risk adjusted. The risk-based capital ratio is determined by segregating
assets and specified off-balance sheet commitments into four risk weighted
categories, with higher levels of capital required for the categories perceived
as representing greater risk. Under these guidelines, the Bank is required to
maintain a risk- based capital ratio of 8.00% and a tier-one capital ratio of
4%. At December 31, 1993, the risk-based capital ratio of the Bank was 11.2%
and its tier-one capital ratio was 10.0%. This is primarily because the Bank
maintains a significant amount of treasury securities which are primarily
pledged as collateral for bankruptcy related deposits or repurchase agreements
with investment brokers and require a 0% risk weighting; additionally most of
the Bank's loan commitments are for less than one year which also require a 0%
risk weighting.
25
<PAGE> 26
The Bank was in compliance with all three capital requirements as of
December 31, 1993, as follows:
<TABLE>
<CAPTION>
Tier -------Risk-Based-----
($ in thousands) Leverage Tier-1 Total
-------- ------- -----
<S> <C> <C> <C>
Common stockholders' equity $ 63,752 $ 63,752 $ 63,752
General valuation allowance - - 7,975
--------- --------- ---------
Total capital, as defined $ 63,752 $ 63,752 $ 71,727
Asset base, as defined $ 921,852 $ 638,000 $ 638,000
--------- --------- ---------
Actual capital ratio 6.92% 9.99% 11.24%
------ ------ ------
Minimum required capital ratio (1) 6.50% 4.00% 8.00%
------ ------ ------
</TABLE>
(1) See discussion of mandated Tier 1 leverage ratio under "Regulatory
Matters."
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity, which primarily represents the ability of the Bank to meet
fluctuations in its deposit structure and to provide for customer credit needs,
is managed by the Bank's Asset/Liability Management Committee. Inasmuch as a
significant portion of the Bank's deposit structure is concentrated in
specialized industries (for example, escrow and title insurance companies)
which closely parallel the real estate economy in Southern California, the Bank
is subject to fluctuations in demand deposits due to trends in Southern
California real estate activity. To mitigate this exposure, the Bank has
increased its emphasis on other types of deposits, established an internal
money desk operation, and to a lesser degree, relied upon the use of secured
and unsecured lines of credit with correspondent banks, investment banking
firms and the Federal Home Loan Bank. As of December 31, 1993, the Bank's
money desk deposits totaled approximately $67 million and carried a weighted
average interest rate of 3.86%. Of this amount, approximately $49 million, or
74% of the total money desk deposits were due to mature by the end of the first
quarter of 1994 and carried a weighted average interest rate of 3.79%.
Additionally, as of the end of 1993, the Bank had established unsecured credit
facilities of $71 million, or 8% of total deposits, and secured credit
facilities of $147 million, or 17% of total deposits. The combination of these
facilities provides the Bank with secondary sources of liquidity of
approximately $218 million, or 25% of total deposits.
In addition to managing the liquidity requirements of the Bank, the
Asset/Liability Management Committee reviews, recommends and implements changes
in the asset and liability structure of the Bank's balance sheet. Presently,
the relationship of interest sensitive assets to interest sensitive liabilities
would cause an improvement in net interest margin in a falling rate
environment. This would be caused primarily by the fact that the Bank's
liabilities reprice more rapidly than its assets and, accordingly, the Bank's
net interest income would increase.
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 requires that an
entity classify and account for its investments in equity securities that have
readily determinable fair values and for all of its
26
<PAGE> 27
investments in debt securities as either trading, available for sale, or held
to maturity, and report these investments at fair value or amortized cost as
stipulated by SFAS No. 115. Investments and debt securities shall be
classified as held to maturity and measured at amortized cost only if the Bank
has a positive intent and ability to hold those securities to maturity.
Securities that are bought and held principally for the purpose of selling them
in the near term (thus held for only a short period of time) shall be
classified as trading securities. Securities classified as trading are carried
at fair value with any unrealized gains or losses, net of tax, reflected in
current earnings. At this time, the Bank does not operate a trading portfolio.
Investments not classified as trading securities, nor as held to maturity
securities shall be classified as available for sale securities. Securities
classified as available for sale are carried at fair value with any unrealized
gains or losses, net of tax, reflected as an addition or reduction of equity,
as appropriate. Management will adopt SFAS No. 115 during the first quarter of
1994. As of December 31, 1993, the Bank had $190 million in U.S. Treasury
securities, $114 million of these securities were classified as held to
maturity and $76 million as held for sale. These portfolios had net unrealized
gains of $1.1 million and $2.8 million, respectively. Management expects to
reclassify amounts currently held for sale as available for sale on adoption of
SFAS No. 115.
As of December 31, 1993, the book value, weighted-average maturity,
weighted-average yield and net unrealized gain of each component of the Bank's
securities portfolio is as follows:
<TABLE>
<CAPTION>
Weighted
Average Weighted- Net
Maturity Average Unrealized
($ in thousands) Book Value (Years) Yield Gain
---------- ------- ----- -----
<S> <C> <C> <C> <C>
U.S. Treasury securities, held for sale $ 75,613 1.80 5.76% $ 2,761
U.S. Treasury securities, held to maturity 114,760 2.40 5.51% 1,099
Mortgage-backed securities 43,367 2.60 6.38% 1,548
Other securities 2,975 - 3.82% -
------- -----
$ 236,715 $ 5,408
======= =====
</TABLE>
It is management's policy to maintain the maturities of a majority of its
certificates of deposit in denominations of $100,000 or more to less than one
year. The maturities of such certificates of deposit ("TCD's") were as follows
for the period indicated:
<TABLE>
<CAPTION>
12/31/93
($ IN THOUSANDS) TCD'S
$100,000 +
----------
<S> <C>
IMMEDIATE OR ONE DAY $ 5,513
THREE MONTHS OR LESS 21,185
THREE TO TWELVE MONTHS 18,326
ONE TO FIVE YEARS 3,666
OVER FIVE YEARS -
-------
TOTAL $48,690
=======
</TABLE>
27
<PAGE> 28
REGULATORY MATTERS
On July 6, 1993, the Bank entered into a Memorandum of Understanding (MOU)
with the Federal Deposit Insurance Corporation (FDIC) which requires that
certain actions be taken. The FDIC has mandated that the Bank reduce specified
classified assets over a twelve-month period, maintain a tier-1 leverage ratio
of at least 6.5%, and reduce its dependence on volatile liabilities to
specified levels over time (volatile liabilities are defined as brokered
deposits, money desk deposits, time deposits greater than or equal to $100,000,
federal funds purchased, repurchase agreements and other borrowings and debt
due in one year or less). The Bank must also seek regulatory approval prior to
paying cash dividends. As of December 31, 1993, the Bank was in compliance
with all of these requirements stipulated in the MOU and has requested and
received approval to pay dividends for the past three quarters.
INFLATION
The impact of inflation on the Bank differs significantly from that of
industrial concerns, primarily because the Bank's assets and liabilities
consist largely of monetary items. The relatively low proportion of the Bank's
fixed assets to total assets (approximately 0.5% for each of the years ended
December 31, 1993, 1992, and 1991) reduces both the potential of inflated
earnings resulting from understated depreciation charges, and the potential
significant understatement of absolute values. Inasmuch as a significant
portion of the Bank's deposit base is associated with real estate activity in
Southern California, the Bank would be impacted negatively should interest
rates increase significantly in that a rise in interest rates would tend to
slow real estate activity and accordingly cause deposits to shrink.
28
<PAGE> 29
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
For consolidated financial statements of the Bank, see "Consolidated
Statements of Financial Condition", "Consolidated Statements of Earnings",
"Statements of Changes in Shareholders' Equity", "Consolidated Statements of
Cash Flows", "Notes to Consolidated Financial Statements" and "Report of
Independent Public Accountants" on pages 16 through 32 of the Bank's 1993
Annual Report to the Shareholders, attached hereto as Exhibit 6.3 and
incorporated herein by this reference, and the "Consent of Independent Public
Accountants" and "Report of Independent Public Accountants on Supplementary
Schedules" at pages 44 through 45 herein. See also "Item 11 - Exhibits,
Financial Statement Schedules, and Reports on F-3" herein.
29
<PAGE> 30
PART III
Part III of this report (Items 9 and 10) is omitted since the information
called for is included in a definitive proxy statement which will be filed with
the Federal Deposit Insurance Corporation within 120 days after the end of the
most recent fiscal year and such proxy statement is incorporated herein by this
reference.
30
<PAGE> 31
PART IV
ITEM 11. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM F-3
A. CONTENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The following financial statements of the Bank are included in the Bank's
1993 Annual Report to Shareholders (Exhibit 6.3 hereto) and are
incorporated herein by this reference.
Consolidated Statements of Financial Condition
Consolidated Statements of Earnings
Consolidated Statement of Changes in Shareholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedules not appearing below are omitted because of the absence of
conditions under which they are required or because they appear in the
Notes to Financial Statements appearing in the 1993 Annual Report to
Shareholders (Exhibit 6.3 hereto) and are incorporated herein by this
reference.
SCHEDULE I SECURITIES
The information required by Schedule I is incorporated herein by this
reference to Note 3 of the Bank's Consolidated Financial Statements as
contained on page 23 of the Bank's 1993 Annual Report to Shareholders
(Exhibit 6.3 hereto).
SCHEDULE II LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY HOLDERS,
AND ANY ASSOCIATES OF THE FOREGOING PERSONS
See page 37 of this filing.
SCHEDULE III LOANS AND LEASE FINANCING RECEIVABLES
The information required by Schedule III is incorporated herein by this
reference to Note 5 of the Bank's Consolidated Financial Statements as
contained on page 24 of the Bank's 1993 Annual Report to Shareholders
(Exhibit 6.3 hereto).
31
<PAGE> 32
SCHEDULE IV BANK PREMISES AND EQUIPMENT
The information required by Schedule IV is incorporated herein by this
reference to Note 7 of the Bank's Consolidated Financial Statements as
contained on page 25 of the Bank's 1993 Annual Report to Shareholders
(Exhibit 6.3 hereto).
SCHEDULE V INVESTMENTS IN INCOME FROM DIVIDENDS AND EQUITY IN EARNINGS
OR LOSSES OF SUBSIDIARIES AND ASSOCIATED COMPANIES
See page 40 of this filing.
SCHEDULE VI ALLOWANCE FOR POSSIBLE LOAN LOSSES
The information required by Schedule VI is incorporated herein by this
reference to Note 5 of the Bank's Consolidated Financial Statements as
contained on page 24 of the Bank's 1993 Annual Report to Shareholders
(Exhibit 6.3 hereto).
B. REPORTS ON FORM F-3
No reports on Form F-3 were filed this fiscal year ended December 31, 1993.
C. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Filing Status
- --------------- ----------- -------------
<S> <C> <C>
1.1 The Bank's Articles of Association as amended on Incorporated by Reference to
October 6, 1983 Exhibit "A" to Form F-1
Registration Statement of the
Bank's 1983 Form F-2
1.2 The Bank's Articles of Incorporation effective Incorporated by Reference to
November 1, 1988 Exhibit "1.2" to the Bank's 1988
Form F-2
1.3 The Bank's Bylaws as restated on February 25, 1986 Incorporated by Reference to
Exhibit "2.2" to the Bank's 1985
Form F-2
</TABLE>
32
<PAGE> 33
<TABLE>
<S> <C> <C>
1.4 The Bank's Bylaws, effective November 1, 1988 Incorporated by Reference to
Exhibit "1.4" to the Bank's 1988
Form F-2
3.1 Copy of Bank's Incentive Stock Option Plan Incorporated by Reference to
Exhibit "D" to Form F-1
Registration Statement of the Bank
3.2 Copy of Murdock Plaza Lease Incorporated by Reference to
Exhibit "G" to Form F-1
Registration Statement of the Bank
3.3 Copy of Del Amo Financial Center Lease Incorporated by Reference to
Exhibit "H" to Form F-1
Registration Statement of the Bank
3.4 Copy of Koll Center Lease
Incorporated by Reference to
Exhibit "I" to Form F-1
Registration Statement of the Bank
3.6 Copy of Warner Center Lease Incorporated by Reference to
Exhibit "L" to the Bank's 1984
Form F-2
3.10 Copy of Beaudry Center Lease Incorporated by Reference to
Exhibit "3.10" to the Bank's 1988
Form F-2
3.11 Copy of Bank's Nonqualified Stock Option Plan Incorporated by Reference to
Exhibit "E" to Form F-1
Registration Statement of the Bank
3.12 Copy of Bank's Stock Bonus Plan and Trust Incorporated by Reference to
Exhibit "F" to Form F-1
Registration Statement of the Bank
</TABLE>
33
<PAGE> 34
<TABLE>
<S> <C> <C>
3.13 Copy of Bank's Employee Savings Plan Incorporated by Reference to
Exhibit "3.13" to the Bank's 1988
Form F-2
3.14 Metrobank Amended and Restated Employee Benefit Incorporated by Reference to
Plan Exhibit "5.12" to the Bank's 1986
Form F-2
3.15 Metrobank Amended and Restated Employee Stock Incorporated by Reference to
Ownership Trust Agreement Exhibit "5.13" to the Bank's 1986
Form F-2
3.16 First Amendment to Metrobank Amended and Restated Incorporated by Reference to
Employee Benefit Plan Exhibit "5.14" to Bank's 1986 Form F-2
6.3 Copy of Bank's 1993 Annual Report to Shareholders Incorporated by Reference to
Exhibit "6.3" to Bank's 1993 Form F-2
9.1 List of Subsidiaries Incorporated by Reference to
Exhibit "9.1" to Bank's 1988 Form F-2
10.1 Copy of San Diego Office Lease Incorporated by Reference to
Exhibit "10.1" to Bank's 1991 Form F-2
10.2 Copy of Torrance Office Lease Incorporated by Reference to
Exhibit "10.2" to Bank's 1991 F-2
</TABLE>
34
<PAGE> 35
SUPPLEMENTAL SCHEDULES
35
<PAGE> 36
SCHEDULE I
SECURITIES
The information required by format F-9D is provided on page 23 of the
Bank's 1993 Annual Report to Shareholders, attached hereto as Exhibit 6.3 and
incorporated herein by this reference.
36
<PAGE> 37
SCHEDULE II
LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY
HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
12/31/92 12/31/93
NAME BALANCE ADDITIONS REPAYMENTS BALANCE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter Caloyeras $ - $ 3,158,072 $ 2,129,173 $ 1,028,899
Robert Mayer 6,457,500 - 32,500 6,425,000
Rudy Markmiller 1,859,350 996,000 240,780 2,614,570
Wallace Wong 3,903,508 1,343,218 1,717,001 3,529,725
All Others 28,750 - 28,750 -
----------- ----------- ----------- -----------
Total $12,249,108 $ 5,497,290 $ 4,148,204 $13,598,194
=========== =========== =========== ===========
</TABLE>
37
<PAGE> 38
SCHEDULE III
LOANS AND LEASE FINANCING RECEIVABLES
The information required by format F-9D is provided on page 24 of the
Bank's 1993 Annual Report to Shareholders, attached hereto as Exhibit 6.3 and
incorporated herein by this reference.
38
<PAGE> 39
SCHEDULE IV
BANK PREMISES AND EQUIPMENT
The information required by format F-9D is provided on page 25 on the
Bank's 1993 Annual Report to Shareholders, attached hereto as Exhibit 6.3 and
incorporated herein by this reference.
39
<PAGE> 40
SCHEDULE V
INVESTMENTS IN INCOME FROM DIVIDENDS AND EQUITY IN EARNINGS
OR LOSSES OF SUBSIDIARIES AND ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
BANK'S
PROPORTIONATE
PERCENT OF EQUITY IN PART OF
SUBSIDIARIES VOTING STOCK TOTAL UNDERLYING AMOUNT OF EARNINGS
CONSOLIDATED OWNED INVESTMENT NET ASSETS DIVIDENDS THIS PERIOD
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
METROCORP 100% $21,813,113 $21,813,113 $ - 100%
---- ----------- ----------- --------- ----
$21,813,113 $21,813,113
=========== ===========
</TABLE>
40
<PAGE> 41
SCHEDULE VI
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The information required by format F-9D is incorporated herein by reference
to Note 5 of the Bank's Consolidated Financial Statements provided on page 24
of the Bank's 1993 Annual Report to Shareholders, attached hereto as Exhibit
6.3 and incorporated herein by this reference.
41
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
METROBANK
------------------------------
Date: March 29, 1994 By /s/ David L. Buell
------------------------------
David L. Buell
Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
-----------
Date: March 29, 1994 /s/ David L. Buell
-----------------------------------------
David L. Buell
Chief Executive Officer
Chairman of the Board
(principal executive officer) and Director
Date: March 29, 1994 /s/ David P. Malone
-----------------------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
(principal financial officer)
Date: March 29, 1994 /s/ Christopher T. Ishikawa
-----------------------------------------
Christopher T. Ishikawa
First Vice President
Controller
(principal accounting officer)
42
<PAGE> 43
Signature
-----------
Date: March 29, 1994 /s/ Peter Caloyeras
-----------------------------------------
Peter Caloyeras, Director
-----------------------------------------
Seymour Carr, Director
-----------------------------------------
James W. Hobson, Director
Date: March 29, 1994 /s/ Wallace Wong
-----------------------------------------
Wallace Wong, Director
Date: March 29, 1994 /s/ Robert L. Mayer
-----------------------------------------
Robert L. Mayer, Director
Date: March 29, 1994 /s/ Rudy B. Markmiller
-----------------------------------------
Rudy B. Markmiller, Director
43
<PAGE> 44
ARTHUR ANDERSEN & CO.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Annual Report on Form F-2 of Metrobank and subsidiaries of
our report dated January 18, 1994 included in the 1993 Annual Report to
Shareholders of Metrobank and subsidiaries.
Arthur Andersen & Co.
Los Angeles, California
January 18, 1994
44
<PAGE> 45
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTARY SCHEDULES
To the Shareholders and Board of Directors of Metrobank:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in the 1993 Annual Report to the
Shareholders of Metrobank and subsidiaries (the Bank) included in this Form
F-2, and have issued our report thereon dated January 18, 1994. Our audit was
made for the purpose of forming an opinion on those consolidated statements
taken as a whole. Schedules I through VI included in pages 36 through 40 are
the responsibility of the Bank's management and are presented for purposes of
complying with the Federal Deposit Insurance Corporation's rules and
regulations and are not a required part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen & Co.
Los Angeles, California
January 18, 1994
45
<PAGE> 46
MANAGEMENT'S REPORT ON FINANCIAL INFORMATION
The management of Metrobank is responsible for the preparation, integrity and
fair presentation of the Bank's annual financial statements. The annual
financial statements have been prepared in accordance with generally accepted
accounting principles and, as such, include amounts based on judgements and
estimates made by management. Management has also prepared the other
information included in this annual report, and is responsible for its accuracy
and consistency with the financial statements.
The annual financial statements referred to above have been audited by Arthur
Andersen & Co., who have been given unrestricted access to all financial
records and related data, including minutes of all meetings of stockholders,
the board of directors, and committees of the board. Management believes that
all representations made to Arthur Andersen & Co. during the audit were valid
and appropriate.
Management is responsible for establishing and maintaining an effective
internal control structure over financial reporting, defined to include
Financial Statements and Consolidated Reports of Condition and Income (Call
Reports), and the safeguarding and management of assets including loan
underwriting and documentation. The system contains monitoring mechanisms and
actions are taken to correct deficiencies identified.
Management has made its own assessment of the effectiveness of the Bank's
internal control structure over financial reporting as of December 31, 1993, in
relation to the criteria described in the Internal Control-Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management believes that, as of December
31, 1993, Metrobank's internal control structure was effective in achieving the
objectives stated above.
However, there are inherent limitations in the effectiveness of any internal
control structure, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an effective
internal control structure can provide only reasonable assurance with respect
to reliability of financial statements, and safeguarding and management of
assets. Furthermore, the effectiveness of any internal control structure can
change with changes in circumstances.
The Audit Committee of the Board of Directors meets regularly with Management,
the independent public accountants, and the internal auditors to ensure that
each is properly discharging its responsibilities with regard to the financial
statements and internal accounting controls. The independent public accountants
and internal auditors have full and free access to the Audit Committee and meet
with it, with and without Management being present, to discuss auditing and
financial reporting matters.
Management is also responsible for compliance with federal and state laws and
regulations concerning dividend restriction and regulations concerning loans to
insiders designated by the Federal Deposit Insurance Corporation as safety and
soundness laws and regulations.
Management assessed its compliance with these designated laws and regulations
referred to above relating to safety and soundness. Based on this assessment,
management believes that Metrobank complied, in all material respects, with the
designated laws and regulations relating to safety and soundness for the year
ended December 31, 1993.
46
<PAGE> 47
METROBANK
1993 ANNUAL REPORT
. . . . . .
F I F T E E N
Y E A R S
. . . . . .
<PAGE> 48
Founded in 1978, Metrobank now ranks 10th
in size out of 305 banks headquartered in Southern California
as of September 30, 1993.
. . . . . .
F I F T E E N
Y E A R S
. . . . . .
0FFICES
Los Angeles
Newport Beach
San Diego
Torrance
Woodland Hills
<PAGE> 49
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Dollars in thousands,
except per share amounts 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Total assets $955,858 $905,083 $824,774 $744,521 $898,153
Total deposits 885,386 801,863 740,824 672,765 799,901
Gross loans 566,229 527,952 483,648 418,949 311,525
Net earnings 6,015 5,758 5,513 2,101 5,468
Earnings per share 1.26 1.21 1.16 0.44 1.33
Shareholders' equity $ 63,752 $ 59,279 $ 55,761 $ 52,002 $ 51,904
</TABLE>
Metrobank is a financially strong, well-captitalized
Southern California regional business bank providing a full
range of personalized banking services to small and medium size
companies, professionals, and affluent individuals through a
network of five regional offices in three counties. Offices
are located in Westwood, serving the West Los Angeles-Beverly
Hills-Santa Monica area; in Warner Center, serving the San
Fernando Valley; in Torrance, serving the South Bay; in Newport
Beach, serving Orange County; and in Mission Valley, serving San
Diego.
1 | METROBANK
<PAGE> 50
TO OUR SHAREHOLDERS
Given the troubled economy of California and Southern
California in particular, Metrobank in 1993 - our 15th year of
operation - continued to perform in an excellent manner.
We achieved record earnings of $6 million, or $1.26 per
share (the second highest per share level in the Bank's history)
compared to $5.8 million, or $1.21 per share in the previous
year.
As detailed later, Metrobank's assets, deposits and
loans increased to record levels as well, while our capital
position remained especially strong.
In reflecting on 1993 performance, the management team of the
Bank believes it was achieved under challenging economic
circumstances primarily because of the Bank's adherence to
prudent banking fundamentals. These values formed the Bank's
foundation when we opened for business in 1979 with 13 employees
in a small one-story office in Westwood. These principles have
guided our growth to our present position as one of the largest
independent and most respected business banks in Southern
California.
Our solid achievements in 1993 came in the midst of
continued difficult economic times. California remained mired
in the fourth year of a recession, even as the national economy
slowly began recovery. While there were some signs of
improvement in the northern and central parts of the state, the
Southern California region - accounting for approximately 60
percent of the state's economy - remained particularly hard hit
by the impact of staggering cutbacks in the defense and
aerospace industry and the collapse of commer-
2 | METROBANK
<PAGE> 51
[PHOTO]
BOARD OF DIRECTORS
(left to right)
Sharon L. Canup
Corporate Secretary and
Corporate Senior Vice President
Seymour J. Carr, DMD
Professor (Emeritus)
University of California, Los Angeles
James W. Hobson
Vice Chancellor (Emeritus)
University of California, Los Angeles
Wallace Wong
Chief Executive Officer
Cal-American Medical Supplies
David L. Buell
Chairman and Chief Executive Officer
Rudy B. Markmiller
President
Network Courier Services
Peter B. Caloyeras
President
Magnetika, Inc.
Robert L. Mayer
President
The Robert Mayer Corporation
<PAGE> 52
[PHOTO]
EXECUTIVE MANAGEMENT
(seated, left to right)
David L. Buell
Chairman and Chief Executive Officer
Robert P. Bulseco
President and Chief Administrative
Officer
(standing, left to right)
David P. Malone
Executive Vice President and
Chief Financial Officer
Paul B. Alexander
Executive Vice President and
Chief Credit Officer
Paul W. Stroube
Executive Vice President,
Headquarters Office
<PAGE> 53
cial real estate development, creating an adverse
ripple effect on the entire business environment.
The severity of the recession caused 16 of California's
banks to fail in 1993, 15 of them Southern California
institutions. In addition, operating losses in many Southern
California banks have forced them to reduce assets and service
and even recapitalize.
But at Metrobank, in addition to record earnings, total
assets increased 5.6 percent in 1993 to $956 million from $905
million in 1992. Total deposits grew 10.3 percent to $885
million, from $802 million the previous year, and total loans
increased 7.2 percent to $566 million, compared to $528 million
the year before.
We also continued to be one of Southern California's
strongest capitalized banks. The year ended with a risk-based
capital ratio of 11.2 percent, far in excess of the 8 percent
minimum required by federal regulations, and a tier 1 capital
ratio of 10.0 percent, also considerably in excess of the 4
percent minimum regulatory standard.
On the negative side, in 1993 the Bank did incur the
highest loan losses in our 15 years of operation. But we were
fortunate to have structured our investment portfolio in such a
manner to allow us to recognize a $3.3 million pre-tax gain
from bond sales to offset this recessionary induced increase in
loan losses. Barring further deterioration in the economy,
management does not foresee loan losses of this magnitude in
the future.
What are the historic core values and basic strengths
that enabled Metrobank to perform well in 1993, and overall
throughout its 15-year existence? The Bank's management
summarizes them as follows:
5 | METROBANK
<PAGE> 54
- A stable management history, during which the
directors, chairman and chief executive officer, president, and
a number of executive officers have been present since the
founding year. A hard-working, dedicated and enthusiastic
staff of employees plays an important role as well.
- A conservative lending and investment philosophy that
emphasizes capital strength and asset quality. Our long-term
perspective focuses on developing solid financial improvement
year after year rather than short-term goals.
- A focus on individualized customer service delivered
personally to our middle market and professional clients
through five decentralized, autonomous regional head offices
strategically located in prime centers of business throughout
Southern California.
Management is very pleased with the Bank's overall
success during these first 15 years. As for near-term future
prospects, we are guardedly optimistic.
Guarded because for the last few years, the experts'
annual predictions that our California economy will start to
recover in a year or so - noted by us in prior annual reports -
have proven not true to date. Indeed, last year's predictions
for recovery by late 1994 have been pushed forward to early to
mid 1995.
Optimistic for two reasons. First, California's
economy accounts for about 13 percent of the nation's gross
domestic product and 12 percent of the nation's work force;
California is bound to return to a stronger economic level,
although not as robust as the expansionary period of the
1980's. Second, Metrobank's core values enable us to turn in
consistently sound financial performance during economic
downturns and - particularly important - positions us well to
participate in the economy when it turns the corner and
expands once again.
6 | METROBANK
<PAGE> 55
CAPITAL RATIOS - 1993 DEPOSITS
[GRAPH] [GRAPH]
Government Metrobank Government Metrobank In millions
Required Tier-1 Required Risk-Based
Ratio Capital to Ratio Capital to
Asset Ratio Asset Ratio
LOAN PORTFOLIO
GROSS LOANS CATEGORIES
[GRAPH] [GRAPH]
In millions
<PAGE> 56
There is little doubt that the unexpectedly long
Southern California recession has postponed Bank management's
goal of generating for shareholders a 15 percent return on
equity and a one percent return on assets. These measures were
9.8 percent and 0.7 percent, respectively, in I993. But be
assured that our primary financial objective continues to be to
drive toward these important benchmarks of financial
performance.
Again, for excellent performance in 1993 - and
especially for our overall successful 15 year history - thanks
is owed to the extended Metrobank family - the board of
directors, officers, staff, customers and shareholders - for
their unwavering contributions and support.
/s/ David L. Buell
-----------------------
David L. Buell
Chairman and
Chief Executive Officer
/s/ Robert P. Bulseco /s/ Paul B. Alexander
---------------------------- ----------------------------
Robert P. Bulseco Paul B. Alexander
President and Executive Vice President and
Chief Administrative Officer Chief Credit Officer
/s/ David P. Malone /s/ Paul W. Stroube
---------------------------- -------------------------
David P Malone Paul W. Stroube
Executive Vice President and Executive Vice President,
Chief Financial Officer Headquarters Office
8 | METROBANK
<PAGE> 57
15 YEAR HIGHLIGHTS
<TABLE>
<CAPTION>
(Dollars in thousands, except dividends per share) 1979 1980 1981 1982 1983 1984 1985
<S> <C> <C> <C> <C> <C> <C> <C>
Assets $23,684 $57,457 $89,267 $157,591 $296,599 $325,091 $395,436
Deposits 18,993 48,650 75,898 133,892 266,656 298,435 359,241
Gross loans 13,291 36,782 60,899 94,534 123,255 140,800 155,119
Shareholders' equity 4,567 5,265 6,590 11,951 18,314 18,798 21,442
Dividends paid per share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
</TABLE>
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets $670,368 $657,199 $830,995 $898,153 $744,521 $824,774 $905,083 $955,858
Deposits 629,022 601,003 757,274 799,901 672,765 740,824 801,863 885,386
Gross loans 167,707 174,049 213,208 311,525 418,949 483,648 527,952 566,229
Shareholders' equity 25,180 35,579 39,942 51,904 52,002 55,761 59,279 63,752
Dividends paid per share $ 0.00 $ 0.10 $ 0.10 $ 0.12 $ 0.22 $ 0.40 $ 0.57 $ 0.60
</TABLE>
9 | METROBANK
<PAGE> 58
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, liquidity,
capital resources and interest rate sensitivity. It should be read in
conjunction with the consolidated financial statements and the related notes to
the consolidated financial statements of the Bank appearing elsewhere in this
report. The consolidated financial statements include the accounts of
Metrobank (the "Bank"), a California state chartered bank, and its wholly owned
subsidiaries, Metrocorp, Inc. and Metrobancorp.
NET INTEREST INCOME
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other liabilities). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities, as well as the difference between the relative
amounts of average interest-earning assets and Interest-bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$48.4 million for the year ended December 31, 1993 compared to $46.0 million
for the year ended December 31, 1992. The increase in net interest income was
primarily due to a $3.1 million decrease in interest expense. Net interest
income was further enhanced by a $1.7 million increase in loan interest and fee
income, and was offset by a $2.4 million decrease in investment interest
income.
Interest and fee income decreased to $61.1 million in 1993 from $61.8 million
in 1992. This decrease of $700,000 in interest and fee income is primarily
attributable to a 118 basis point drop in the Bank's average rate for
investment securities which reduced related investment income by approximately
$2.4 million. A declining interest rate environment and reinvestment of sold
and matured investments in shorter maturities caused the decline. This
decrease in investment income was partially offset by a $1.7 million increase
in total loan income which resulted from a $32 million increase in average
loans outstanding, offset by a 20 basis point drop in the Bank's average rate
for loans.
Interest expense decreased to $12.6 million for the year ended December 31,
1993 from $15.7 million for the year ended December 31, 1992. The decrease of
$3.1 million is primarily attributable to a 66 basis point decrease in interest
expense paid on interest bearing deposits. Inasmuch as the Bank funds its
liquidity needs with short term interest bearing deposits, the frequent
repricing of these deposits was affected by the substantial decrease in the
interest rate environment.
The Bank's net interest income was $46.0 million for the year ended December
31, 1992 compared to $39.1 million for the year ended December 31, 1991. The
increase in net interest income from 1991 to 1992 was due primarily to a
substantial decrease in interest expense. Net interest income increased
further through the growth in investment interest income and was offset by a
decrease in loan interest income and fees.
Interest and fee income decreased to $61.8 million in 1992 from $64.1 million
in 1991. This decrease of $2.3 million in interest and fee income in comparing
1992 to 1991 is primarily attributable to a 221 basis point drop in the Bank's
average prime rate which more than offset the $60 million increase in average
loans outstanding. This decrease in interest and fee income relating to the
loan portfolio was offset by an increase in investment interest income. The
average investment portfolio increased by $ 31.0 million during 1992 which
offset the 67 basis point decrease in the yield of the portfolio. The decrease
in yield on the portfolio was caused by the reinvestment of maturing
investments and additional investments in comparable term securities yielding
less due to the drop in U.S. Treasury yields which occurred during 1992.
Interest expense decreased to $15.7 million for the year ended December 31,
1992 from $25.0 million for the year ended December 31, 1991. The decrease of
$9.3 million in comparing 1992 to 1991 is primarily attributable to a 223 basis
point decrease in interest expense paid on interest-bearing deposits. Because
the Bank maintains primarily short term interest-bearing deposits, the frequent
repricing of these deposits was greatly affected by the substantial decrease in
interest rates. Additionally, average interest-bearing deposits decreased by
$7.5 million in 1992 which added to the decrease in interest expense.
10 | METROBANK
<PAGE> 59
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest
rates, and variations in average balances.
<TABLE>
<CAPTION>
Year ended December 31, 1993 Year ended December 31, 1992 Year ended December 31, 1991
over 1992 over 1991 over 1990
---------------------------- ---------------------------- ----------------------------
Total Total Total
Increase Change Due To: Increase Change Due To: Increase Change Due To:
Dollars in thousands (Decrease) Rate Volume (Decrease) Rate Volume (Decrease) Rate Volume
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest--earning deposits $ -- $ -- $ -- $ -- $ -- $ -- $ (7) $ -- $ (7)
Other interest income 190 (10) 200 74 58 16 (963) (331) (632)
Investment securities (2,565) (2,771) 206 1,009 (1,325) 2,334 (2,970) (127) (2,843)
Loans & bankers acceptances 1,670 (1,011) 2,681 (3,416) (8,104) 4,688 3,604 (3,474) 7,078
-----------------------------------------------------------------------------------------------
Total interest income (705) (3,792) 3,087 (2,333) (9,371) 7,038 (336) (3,932) 3,596
-----------------------------------------------------------------------------------------------
INTEREST EXPENSE:
NOW and money market demand
accounts (537) (1,627) 1,090 (1,568) (3,398) 1,830 (188) (924) 736
Savings deposits (267) (145) (122) (360) (370) 10 (82) (14) (68)
Time deposits (1,669) (577) (1,092) (7,752) (5,061) (2,691) (188) (3,023) 2,835
Funds purchased and securities
sold under agreements to
repurchase (699) (338) (361) 234 (350) 584 (507) (483) (24)
Capitalized interest 65 -- 65 219 -- 219 826 826 --
-----------------------------------------------------------------------------------------------
Total interest expense (3,107) (2,687) (420) (9,227) (9,179) (48) (139) (3,618) 3,479
-----------------------------------------------------------------------------------------------
Net interest income $ 2,402 $(1,105) $3,507 $ 6,894 $ (192) $7,086 $ (197) $(314) $ 117
===============================================================================================
</TABLE>
NON-INTEREST INCOME
During 1993, the Bank recognized approximately $9.6 million in non-interest
income as compared to $5.7 million in 1992 and $6.2 million in 1991. This
increase of $ 3.9 million in comparing 1993 to 1992 was comprised primarily of
a $ 3.3 million gain realized on the sale of $89 million of Treasury
securities, an increase of $ 500,000 in income for Metrocorp, Inc. and a net
$100,000 increase in all other non-interest income.
The decrease of $500,000 in non-interest income in comparing 1992 to 1991 was
due primarily to gains on the sale of other real estate owned in 1991 totalling
$800,000, offset by an increase of $300,000 in gross rental income attributable
to the Bank's low-income housing project which was placed in service during
1991.
PROVISION FOR POSSIBLE LOAN LOSSES
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited back
to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
operations as a provision for possible loan losses. The balance of the
allowance for possible loan losses reflects the amount which, in management's
judgement, is adequate to provide for potential loan losses after weighing the
mix of the loan portfolio, current economic conditions, past loan loss
experience and other factors relevant to estimating loan losses.
The following table indicates the amounts which were allocated to the
allowance for possible loan losses and the relationship of those amounts to net
charge-offs and total gross loans for the periods indicated:
<TABLE>
<CAPTION>
Net
Provision Charge-Offs Reserve Allowance Ratio of
Credited to Against Transferred Balance at Allowance to
(Dollars in thousands) Allowance Allowance from/(to) OREO Year End Gross Loans
<S> <C> <C> <C> <C> <C>
FISCAL YEAR
1993 $8,820 $5,818 $ -- $13,104 2.31%
1992 5,200 3,272 -- 10,102 1.91%
1991 2,130 788 160 8,174 1.69%
1990 5,619 1,903 (160) 6,672 1.59%
1989 1,498 657 -- 3,116 1.00%
============================================================================
</TABLE>
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured; such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk since property acquired through
foreclosure ("OREO") may not be sold for an amount sufficient to offset the
entire amount of the loan and costs associated with
11 | METROBANK
<PAGE> 60
foreclosure. Although management believes that the allowance for possible loan
losses is adequate, future provisions will be subject to continuing evaluation
of risks inherent in the loan portfolio.
In 1993, the provision for possible loan losses increased by approximately $3.6
million from the prior year. This increase was deemed necessary as loan
charge-offs (net of recoveries) increased by $2.5 million. Additionally,
management increased the ratio of its loan loss reserve to total loans from
1.91% as of December 31, 1992 to 2.31% as of December 31, 1993, as a result of
management's assessment of its most recent charge-off experience and a
general concern about the Southern California economy.
Loan charge-offs (net of recoveries) for the year ended December 31, 1993
totalled approximately, $5.8 million. This compares to the net charge-offs of
$3.3 million for 1992. The increase in the Bank's charge-offs was primarily
attributable to loans secured by real estate; of the $2.5 million increase,
$2.1 million was real estate loan related while approximately $400,000 was
commercial loan related. Loans secured by real estate represented 58% and 57%
of the Bank's loan portfolio as of December 31, 1993 and December 31, 1992,
respectively, while commercial loans represented 22% and 24% as of December 31,
1993 and December 31, 1992, respectively.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as the real estate values
in the Southern California region. Inasmuch as this is the principal
geographic area in which Metrobank conducts its business, this environment, as
a result of the recession, has had an adverse impact on the Bank's asset
quality. As of December 31, 1993, the Bank had approximately $12.3 million of
non-performing assets, compared to $17.3 million as of December 31, 1992, or
1.29% and 1.91% of total assets, respectively.
The following is a breakdown on non-performing assets for the years ended
December 31:
<TABLE>
<CAPTION>
1993 1,992
<S> <C> <C>
Loans 90 days past due on accrual $ 1,096 $ 1,572
Non-accrual loans 5,476 4,922
Other real estate owned/insubstance foreclosure 5,745 10,834
------------------------
Total non-performing assets $12,317 $17,328
========================
Non-performing loans/gross loans 1.16% 1.23%
Non-performing assets/total assets 1.29% 1.91%
</TABLE>
PROVISION FOR OREO AND REAL ESTATE INVESTMENT LOSSES
During 1993, the Bank and Metrocorp, Inc. reduced OREO from $10.8 million at
the end of 1992 to $5.7 million at the end of 1993. One new property was
acquired and five properties were disposed of throughout the year and total
provisions for real estate losses amounted to approximately $2 million for
1993, $2 million for 1992 and $600,000 for 1991.
NON-INTEREST EXPENSE
For the year ended December 31, 1993, non-interest expense increased to $42
million from $39.2 million in 1992 and from $35.7 million in 1991. This
increase of $2.8 million in 1993 was due primarily, to an increase of $1
million in data processing and other services paid on behalf of certain
depository relationships and is directly attributable to an increase in average
non-interest bearing demand deposits increasing from $332 million during 1992
to $369 million during 1993. In addition, occupancy, furniture and equipment
expense increased by $700,000; of this increase, $200,000 was related to an
increase in occupancy expense and $350,000 was related to the Bank reversing an
accrual associated with its Orange County facility during the third quarter of
1992. Personnel expense increased by $400,000 and $400,000 in goodwill
associated with the Bank's insurance division was written off in the first
quarter of 1993. Additionally, the regulatory assessments increased by
$300,000 as a result of an increase in FDIC insurance premiums, as well as the
increase in our demand deposits.
In comparing 1992 to 1991, the increase of $3.5 million was due primarily, to
increases of $1.4 million in personnel expense, $1.4 million in provision for
OREO and insubstance foreclosures, $600,000 in operating expenses related to
two Metrocorp, Inc. rental properties, $500,000 in professional services,
$300,000 in regulatory assessments and $2,000,000 in all other non-interest
expenses. Offsetting these increases was a $900,000 decrease in data
processing and other services paid on behalf of certain depositors,
relationships.
PROVISION FOR INCOME TAXES
The Bank's provision for income taxes is lower than the statutory federal
income tax rate mainly due to the utilization of tax credits associated with
the Bank's low-income housing project. These tax credits, of which $1.5
million was utilized in 1993 and $1.5 million in 1992, amount to approximately
$15 million in credits over a 10 year period. Through December 31, 1993,
12 | METROBANK
<PAGE> 61
the Bank had utilized approximately $4 million in tax credits; the utilization
of these tax credits is subject to certain alternative minimum tax
restrictions. The effective tax rate used in computing net income was 16.3% in
1993, 20.7% in 1992 and 27.2% in 1991.
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." This statement changes the method of computing income taxes for
financial statement purposes by adopting the liability or balance sheet method
under which the net deferred liability or asset is determined based on the tax
effects of the differences between the book and tax basis of the various
balance sheet assets and liabilities. Under this method, the computation of
the net deferred tax liability or asset gives current recognition to changes in
tax laws and rates. The Bank adopted SFAS No. 109 effective January 1, 1993
and prior years' financial statements have not been restated. Previously the
Bank provided for income taxes under Accounting Principles Board Opinion No.
11, "Accounting For Income Taxes," under which the net deferred tax asset or
liability was an accumulation of annual adjustments based on the tax effects of
the book and tax income statement differences and was not adjusted for
subsequent changes in tax laws and rates. The adoption of SFAS No. 109 in
1993 resulted in a $350,000 credit to the Bank's tax provision. The Revenue
Reconciliation Act of 1993 is not expected to have a significant adverse impact
on the Bank.
CAPITAL RESOURCES
The Bank's shareholders' equity totalled $63.8 million as of December 31, 1993,
which represents an increase of $4.5 million from shareholders' equity on
December 31, 1992. This increase was due to net income for the year of $6
million, offset by dividends declared in the amount of $2.1 million, and a
decrease in the indebtedness of the Bank's Employee Stock Ownership Plan and
Trust (which 'is treated as a reduction of capital for financial statement
purposes) of $575,000.
The Bank's shareholders' equity totalled $59.3 million on December 31, 1992,
which represents an increase of $3.5 million over shareholders' equity on
December 31, 1991. This increase was due to net income for the year of $5.8
million, offset by dividends in the amount of $2.9 million and a decrease in
the indebtedness of the Bank's Employee Stock Ownership Plan and Trust of
$575,000.
The Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board,
and the Comptroller of the Currency have adopted regulations that supplement
the current regulatory capital requirements by establishing guidelines for
calculating "risk-based" and "tier-one" capital ratios. These guidelines
establish a framework that requires regulatory capital requirements to be risk
adjusted. The risk-based capital ratio is determined by segregating assets and
specified off-balance sheet commitments into four risk weighted categories,
with higher levels of capital required for the categories perceived as
representing greater risk. Under these guidelines, the Bank is required to
maintain a risk-based capital ratio of 8.00% and a tier-one capital ratio of
4%. At December 31, 1993, the risk-based capital ratio of the Bank was 11.2%
and its tier-one capital ratio was 10.0%. This is primarily because the Bank
maintains a significant amount of treasury securities which are primarily
pledged as collateral for bankruptcy related deposits or repurchase agreements
with investment brokers and require a 0% risk weighting; additionally most of
the Bank's loan commitments are for less than one year which also require a 0%
risk weighting.
The Bank was in compliance with all three capital requirements as of December
31, 1993, as follows:
<TABLE>
<CAPTION>
Risk-Based
Tier I -----------------------------
Leverage Tier I Total
<S> <C> <C> <C>
Common stockholders' equity $ 63,752 $ 63,752 $ 63,752
General valuation allowance -- -- 7,975
--------------------------------------------------
Total capital, as defined $ 63,752 $ 63,752 $ 71,727
==================================================
Asset base, as defined $921,852 $638,000 $638,000
==================================================
Actual capital ratio 6.92% 9.99% 11.24%
==================================================
Minimum required capital ratio(1) 6.50% 4.00% 8.00%
==================================================
</TABLE>
(1) See discussion of mandated Tier I leverage ratio under "Regulatory
Matters."
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity, which primarily represents the ability of the Bank to meet
fluctuations in its deposit structure and to provide for customer credit needs,
is managed by the Bank's Asset/Liability Management Committee. Inasmuch as a
significant portion of the Bank's deposit structure is concentrated in
specialized industries (for example, escrow and title insurance companies)
which closely parallel the real estate economy in Southern California, the Bank
is subject to fluctuations in demand deposits
13 | METROBANK
<PAGE> 62
due to trends in Southern California real estate activity. To mitigate this
exposure, the Bank has increased its emphasis on other types of deposits,
established an internal money desk operation, and to a lesser degree, relied
upon the use of secured and unsecured lines of credit with correspondent banks,
investment banking firms and the Federal Home Loan Bank. As of December 31,
1993, the Bank's money desk deposits totaled approximately $67 million and
carried a weighted average interest rate of 3.86%. Of this amount,
approximately $49 million, or 74% of the total money desk deposits were due to
mature by the end of the first quarter of 1994 and carried a weighted average
interest rate of 3.79%. Additionally, as of the end of 1993, the Bank had
established unsecured credit facilities of $71 million, or 8% of total
deposits, and secured credit facilities of $147 million, or 17% of total
deposits. The combination of these facilities provides the Bank with secondary
sources of liquidity of approximately $218 Million, or 25% of total deposits.
In addition to managing the liquidity requirements of the Bank, the
Asset/Liability Management Committee reviews, recommends and implements changes
in the asset and liability structure of the Bank's balance sheet. Presently,
the relationship of interest sensitive assets to interest sensitive liabilities
would cause an improvement in net interest margin in a falling rate
environment. This would be caused primarily by the fact that the Bank's
liabilities reprice more rapidly than its assets and, accordingly, the Bank's
net interest income would increase.
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." SFAS No. 115 requires that an entity classify
and account for its investments in equity securities that have readily
determinable fair values and for all of its investments in debt securities as
either trading, available for sale, or held to maturity, and report these
investments at fair value or amortized cost as stipulated by SFAS No. 115.
Investments and debt securities shall be classified as held to maturity and
measured at amortized cost only if the Bank has a positive intent and ability
to hold those securities to maturity. Securities that are bought and held
principally for the purpose of selling them in the near term (thus held for
only a short period of time) shall be classified as trading securities.
Securities classified as trading are carried at fair value with any unrealized
gains or losses, net of tax, reflected in current earnings. At this time, the
Bank does not operate a trading portfolio. Investments not classified as
trading securities, nor as held to maturity securities shall be classified as
available for sale securities. Securities classified as available for sale are
carried at fair value with any unrealized gains or losses, net of tax,
reflected as an addition or reduction of equity, as appropriate. Management
will adopt SFAS No. 115 during the first quarter of 1994. As of December 31,
1993, the Bank had $190 million in U.S. Treasury securities, $114 million of
these securities were classified as held to maturity and $76 million as held
for sale. These portfolios had net unrealized gains of $1.1 million and $2.8
million, respectively. Management expects to reclassify amounts currently held
for sale as available for sale on adoption of SFAS No. 115.
As of December 31, 1993, the book value, weighted-average maturity,
weighted-average yield and net unrealized gain of each component of the Bank's
securities portfolio is as follows:
<TABLE>
<CAPTION>
Net
Weighted Average Weighted- Unrealized
Book Value Maturity (Years) Average Yield Gain
<S> <C> <C> <C> <C>
U.S. Treasury securities, held for sale $ 75,613 1.80 5.76% $2,761
U.S. Treasury securities, held to maturity 114,760 2.40 5.51% 1,099
Mortgage-backed securities 43,367 2.60 6.38% 1,548
Other securities 2,975 -- 3.82% --
-------- ------
$236,715 $5,408
======== ======
</TABLE>
REGULATORY MATTERS
On July 6, 1993, the Bank entered into a Memorandum of Understanding (MOU) with
the Federal Deposit Insurance Corporation (FDIC) which requires that certain
actions be taken. The FDIC has mandated that the Bank reduce specified
classified assets over a twelve-month period, maintain a tier-1 leverage ratio
of at least 6.5%, and reduce its dependence on volatile liabilities to
specified levels over time (volatile liabilities are defined as brokered
deposits, money desk deposits, time deposits greater than or equal to $100,000,
federal funds purchased, repurchase agreements and other borrowings and debt
due in one year or less). The Bank must also seek regulatory approval prior
to paying cash dividends. As of December 31, 1993, the Bank was in compliance
with all of these requirements stipulated in the MOU and has requested and
received approval to pay dividends for the past three quarters.
INFLATION
The impact of inflation on the Bank differs significantly from that of
industrial concerns, primarily because the Bank's assets and liabilities
consist largely of monetary items. The relatively low proportion of the Bank's
fixed assets (approximately .5% for each of the years ended December 31, 1993,
1992 and 1991) reduces both the potential of inflated earnings resulting from
understated depreciation charges, and the potential significant understatement
of absolute values.
14 | METROBANK
<PAGE> 63
SELECTED FINANCIAL DATA
The following summarizes selected financial data concerning the Bank for the
years indicated. The selected financial data should be read in conjunction
with the Bank's Consolidated Financial Statements and Notes relating thereto,
included elsewhere herein:
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Interest income $ 61,059 $ 61,764 $ 64,097 $ 64,433 $ 61,855
Interest expense 12,634 15,741 24,968 25,107 21,736
------------------------------------------------------------------
Net interest income 48,425 46,023 39,129 39,326 40,119
Provision for possible loan losses 8,820 5,200 2,130 5,619 1,498
------------------------------------------------------------------
Net interest income after provision
for possible loan losses 39,605 40,823 36,999 33,707 38,621
Noninterest income 9,583 5,661 6,238 5,983 3,163
Noninterest expense 42,005 39,227 35,660 36,339 33,472
------------------------------------------------------------------
Earnings before income taxes 7,183 7,257 7,577 3,351 8,312
Provision for income taxes 1,168 1,499 2,064 1,250 2,844
------------------------------------------------------------------
Net earnings $ 6,015 $ 5,758 $ 5,513 $ 2,101 $ 5,468
PRINCIPAL BALANCE SHEET ITEMS (AS OF END OF PERIOD)
Investment securities $ 236,715 $ 248,912 $ 209,104 $ 202,956 $ 252,636
Federal funds sold 70,000 -- 30,000 25,000 130,000
Total loans -- gross 566,229 527,952 483,648 418,949 311,525
Total loans -- net 553,125 517,850 475,474 412,277 308,409
Total assets 955,858 905,083 824,774 744,521 898,153
Total deposits 885,386 801,863 740,824 672,765 799,901
Total shareholders' equity 63,752 59,279 55,761 52,002 51,904
------------------------------------------------------------------
PRINCIPAL BALANCE SHEET ITEMS (AVERAGE)
Investment securities $ 238,696 $ 235,532 $ 204,204 $ 237,764 $ 351,062
Fed funds sold 8,217 1,385 1,640 12,730 30,974
Total loans -- gross 542,466 508,784 449,190 384,867 253,150
Total loans -- net 530,706 499,628 442,084 380,466 250,588
Total assets 896,568 857,565 755,398 748,549 762,760
Total deposits 795,506 746,962 666,887 659,249 696,814
Total shareholders' equity 61,540 57,518 53,679 53,458 41,982
------------------------------------------------------------------
SHARE DATA
Net earnings per common share $ 1.26 $ 1.21 $ 1.16 $ 0.44 $ 1.33
Dividends declared per common share $ 0.45 $ 0.60 $ 0.43 $ 0.31 $ 0.12
Dividends paid per common share $ 0.60 $ 0.57 $ 0.40 $ 0.22 $ 0.12
Book value per share $ 13.40 $ 12.47 $ 11.74 $ 10.95 $ 10.96
Number of shares used in earnings per
share calculation(1) 4,755,829 4,754,172 4,750,172 4,749,180 4,123,726
Number of shares used in book value
per share calculation(2) 4,756,672 4,754,172 4,750,172 4,750,172 4,737,722
------------------------------------------------------------------
SELECTED RATIOS
Return on average shareholders' equity (net earnings divided
by average shareholders' equity) 9.8% 10.0% 10.3% 3.9% 13.0%
Return on average assets (net earnings divided
by average total assets) 0.7% 0.6% 0.7% 0.3% 0.7%
Equity to assets (average equity divided
by average total assets) 6.8% 6.7% 7.1% 7.1% 5.5%
Average gross loans to average
total assets 60.5% 59.3% 5.94% 51.4% 33.1%
Average gross loans to average total
deposits 68.1% 68.1% 67.3% 58.3% 36.3%
------------------------------------------------------------------
</TABLE>
(1) Earnings per common share are based upon the weighted average number of
common shares outstanding during each period.
(2) The number of shares used in computing the book value per share is the
number of common shares outstanding at the end of each period.
<PAGE> 64
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of Metrobank:
We have audited the accompanying consolidated statements of financial condition
of METROBANK (a California chartered state bank) (the Bank) and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated statements of
earnings, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements are
the responsibility of the Bank's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Metrobank and subsidiaries as
of December 31, 1993 and 1992, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles.
Arthur Andersen & Co.
Los Angeles, California
January 18, 1994
<PAGE> 65
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Dollars in thousands, except for number of shares) December 31, 1993 1992
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 56,148 $ 86,164
Federal funds sold 70,000 -
Investment securities (approximate market value of $242,123 and $256,801 at
December 31, 1993, and 1992, respectively) 236,715 248,912
Loans, net (gross $566,229 and $527,952 at December 31, 1993,
and 1992, respectively) 553,125 517,850
Accrued interest receivable 5,431 5,978
Other real estate owned, net 5,745 10,834
Premises and equipment, net 2,855 3,120
Investments in real estate 16,823 19,167
Other assets 9,016 13,058
---------------------------
$955,858 $905,083
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Time certificates $110,485 $119,770
Other deposits 774,901 682,093
---------------------------
885,386 801,863
Securities sold under agreement to repurchase and federal funds purchased 1,100 32,695
Accrued interest payable 372 444
Other liabilities 5,248 10,802
---------------------------
Total liabilities 892,106 845,804
Commitments and contingencies (Notes 12, 16)
Shareholders' equity:
Preferred stock, no par value:
Authorized - 15,000,000 shares as of December 31, 1993 and 1992
Outstanding - none
Common stock, no par value:
Authorized - 25,000,000 shares as of December 31, 1993 and 1992
Outstanding - 4,756,672 and 4,754,172 shares as of December 31, 1993 and 1992,
respectively 34,333 34,310
Guarantee of ESOP loan (288) (863)
Retained earnings 29,707 25,832
---------------------------
Total shareholders' equity 63,752 59,279
---------------------------
$955,858 $905,083
===========================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
17 | METROBANK
<PAGE> 66
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
(Dollars in thousands,
except per share amounts and number of shares) Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
INTEREST AND FEE INCOME
Loans $ 45,278 $ 43,521 $ 46,937
U.S. Treasury securities 12,020 11,896 9,230
Obligations of U.S. government agencies -- 788 2,386
Other securities 3,497 5,399 5,408
Other interest income 24 110 50
Federal funds sold 240 50 86
--------------------------------------------
61,059 61,764 64,097
INTEREST EXPENSE
Time certificates of deposit 4,990 6,659 14,411
Other deposits 6,678 7,481 9,409
Funds purchased and securities sold under agreements to repurchase 966 1,532 1,239
Capitalized carrying costs -- (65) (284)
Other interest expense -- 134 193
--------------------------------------------
12,634 15,741 24,968
--------------------------------------------
Net interest income 48,425 46,023 39,129
Provision for possible loan losses 8,820 5,200 2,130
--------------------------------------------
Net interest income after provision for possible loan losses 39,605 40,823 36,999
NON-INTEREST INCOME
Service charges on deposit accounts 1,337 1,301 1,108
Gain on sales of securities 3,285 -- --
Other noninterest income 4,961 4,360 5,130
--------------------------------------------
9,583 5,661 6,238
NON-INTEREST EXPENSE
Personnel expense 15,984 15,595 14,228
Occupancy, furniture and equipment expense 5,217 4,546 4,955
Provision for OREO 2,026 2,018 638
Other noninterest expense 18,778 17,068 15,839
--------------------------------------------
42,005 39,227 35,660
--------------------------------------------
Earnings before income taxes 7,183 7,257 7,577
Provision for income taxes 2,618 2,999 3,126
Income tax credit (1,450) (1,500) (1,062)
--------------------------------------------
1,168 1,499 2,064
Net earnings $ 6,015 $ 5,758 5,513
============================================
Earnings per share $ 1.26 $ 1.21 $ 1.16
============================================
Weighted average shares outstanding 4,755,829 4,754,172 4,750,172
============================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
18 | METROBANK
<PAGE> 67
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
----------------- Guarantee
of Retained
(Dollars in thousands) Three years ended December 31, 1993 Shares Amount ESOP Loan Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1990 4,750,172 $34,273 $(1,726) $19,455 $52,002
$0.43 per share cash dividend -- -- -- (2,042) (2,042)
Reduction in guarantee of indebtedness for ESOP -- -- 288 -- 288
Net earnings -- -- -- 5,513 5,513
-------------------------------------------------------
Balance, December 31, 1991 4,750,172 $34,273 $(1,438) $22,926 $55,761
$0.60 per share cash dividend -- -- -- (2,852) (2,852)
Exercise of stock options 4,000 37 -- -- 37
Reduction in guarantee of indebtedness for ESOP -- -- 575 -- 575
Net earnings -- -- -- 5,758 5,758
-------------------------------------------------------
Balance, December 31, 1992 4,754,172 $34,310 $ (863) $25,832 $59,279
$0.45 per share cash dividend(1) -- -- -- (2,140) (2,140)
Exercise of stock options 2,500 23 -- -- 23
Reduction in guarantee of indebtedness for ESOP -- -- 575 -- 575
Net earnings -- -- -- 6,015 6,015
-------------------------------------------------------
Balance, December 31, 1993 4,756,672 $34,333 $ (288) $29,707 $63,752
=======================================================
</TABLE>
(1) $0.60 per share cash dividend was paid during 1993. Fourth quarter 1993 cash
dividend of $0.15 was declared in 1994.
The accompanying notes are an integral part of these consolidated statements.
19 | METROBANK
<PAGE> 68
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in thousands)
Increase (decrease) in cash and cash equivalents Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,015 $ 5,758 $ 5,513
-------------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Amortization (accretion) of investment securities 2,111 266 (1,013)
Depreciation and amortization of premises and equipment 999 879 977
Provision for possible loan losses 8,820 5,200 2,130
Provision for OREO and insubstance foreclosures 2,026 2,018 638
Provision for real estate losses 197 639 --
(Gain) loss on sale of other real estate owned (95) 11 (773)
(Gain) on sale of securities (3,285) -- --
Goodwill amortization 429 64 63
Interest capitalized -- (65) (284)
(Increase) decrease in deferred taxes (2,232) (2,731) 101
(Increase) decrease in accrued interest receivable 547 (363) 1,106
(Increase) decrease in other assets 5,843 (2,993) 7,360
(Decrease) in accrued interest payable (72) (493) (842)
Increase (decrease) in other liabilities (4,979) (854) 3,045
-------------------------------------
Total adjustments 10,309 1,578 12,508
-------------------------------------
Net cash provided by (used in) operating activities 16,324 7,336 18,021
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities (145,023) (124,663) (65,022)
Proceeds from principal payments and maturities of investment securities 69,578 84,589 59,887
Proceeds from sales of investment securities 88,816 -- --
Loan fundings, net of principal collected (43,689) (57,099) (69,036)
Proceeds from sale of other real estate owned 2,384 1,133 8,766
Purchase of premises and equipment (734) (741) (426)
(Increase) decrease in real estate investments 2,344 6,653 (332)
(Increase) decrease in banker's acceptances 886 (10) (268)
Net cash provided by (used in) investing activities (25,438) (90,138) (66,431)
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW and money market, and
savings accounts 92,808 149,605 116,259
Net (decrease) of certificates of deposit (9,285) (88,566) (48,200)
Increase (decrease) in repurchase agreements (31,595) 18,285 6,191
Dividends paid (2,853) (2,709) (1,901)
Stock options exercised 23 37 --
-------------------------------------
Net cash provided by (used in) financing activities 49,098 76,652 72,349
-------------------------------------
Net increase (decrease) in cash and cash equivalents 39,984 (6,150) 23,939
Cash and cash equivalents, beginning of year 86,164 92,314 68,375
Cash and cash equivalents, end of year $ 126,148 $ 86,164 $ 92,314
=====================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 12,800 $ 16,299 $ 26,904
Income taxes 3,603 4,230 905
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Guarantee of ESOP loan $ (575) $ (575) $ (288)
Foreclosed real estate loans 6,358 5,588 3,777
=====================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
20 | METROBANK
<PAGE> 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The consolidated financial statements include the accounts of Metrobank (the
"Bank"), a California state chartered bank, and its wholly owned subsidiaries,
Metrocorp, Inc. and Metrobancorp. Material intercompany accounts and
transactions have been eliminated. Certain items in the 1992 financial
statements have been reclassified to conform to the presentation contained in
the 1993 statements.
The accounting and reporting policies of the Bank and its subsidiaries conform
with generally accepted accounting principles and general practices within the
banking industry. The following are descriptions of the more significant
policies.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
and federal funds sold. Generally, federal funds are purchased and sold for
one-day periods.
Investment Securities
Investment securities are stated at cost, with any discount or premium
accreted or amortized to maturity using the effective interest method.
Adjustments to the lower of cost or market value are made if Management does
not intend to or is financially unable to hold the security to maturity, or if
a decline in value indicates a possible impairment of the ability to recover
principal. Realized gains and losses are determined on a specific
identification basis.
The Bank will adopt the Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities" on
January 1, 1994. SFAS No. 115 requires that an entity classify and account for
its investments in equity securities that have readily determinable fair values
and for all of its investments in debt securities as either trading, available
for sale, or held to maturity, and report these investments at fair value or
amortized cost as stipulated by SFAS No. 115. Investments and debt securities
shall be classified as held to maturity and recorded at amortized cost only if
the Bank has a positive intent and ability to hold those securities to maturity.
Securities that are bought and held principally for the purpose of selling them
in the near term (thus held for only a short period of time) shall be
classified as trading securities. Securities classified as trading shall be
carried at fair value with any unrealized gains or losses, net of tax,
reflected in current earnings. At this time, the Bank does not have a trading
portfolio. Investments not classified as either held to maturity or trading
securities shall be classified as available for sale securities. Securities
classified as available for sale shall be carried at fair value with any
unrealized gains or losses, net of tax, reflected as an addition or reduction
to a separate component of shareholders' equity, as appropriate.
Loans
Loans are carried at face amount, less payments, the allowance for possible
loan losses, unearned fees and unearned discounts. Interest income is accrued
principally on a simple interest basis. Unearned interest on certain consumer
loans is recognized in income on a sum-of-the digits method, which approximates
a constant yield over the life of the loan. Loan fees and direct origination
costs are deferred and amortized as an adjustment to income and yield over the
life of the loan agreement using a level yield method.
In general, loans are placed on a non-accrual basis when there is significant
doubt as to the collectibility of interest or principal, or when interest or
principal becomes 90 days past due, unless the loan is well secured and in the
process of collection. Interest accrued but uncollected is reversed when a loan
is placed on a non-accrual basis. Loans are restored to an accrual basis only
when payments are current and the borrower has demonstrated an ability and an
intent to perform in accordance with the terms of the loan agreement.
21 | METROBANK
<PAGE> 70
Allowance for Possible Loan Losses
The allowance for possible loan losses is based upon Management's continuous
evaluation of the collectibility of outstanding loans, which takes into
consideration such factors as changes in the nature of the loan portfolio,
economic conditions that may affect the borrower's ability to pay, overall
portfolio quality and review of specific problem loans. The allowance for loan
losses is based on estimates, and ultimate losses may vary from the current
estimates. These estimates are reviewed periodically and, as adjustments become
necessary, they are reported in earnings in the periods in which they become
known. The allowance is increased by provisions charged to operating expense
and reduced by loan losses, net of recoveries.
Investments in Real Estate
Real estate investments are stated at the lower of cost or net realizable
value. The Bank captilizes interest on funds disbursed during the active
construction phases of real estate development projects. The Bank has made no
investments in real estate since 1990 and does not contemplate any such
investments in the future.
Premises and Equipment
Premises and equipment are carried at cost, less accumulated depreciation.
Depreciation expense is computed using the straight-line method over the
estimated useful life of each type of asset. Leasehold improvements are
amortized over the term of the respective lease or the estimated useful life of
the property, whichever is shorter.
Other Real Estate Owned (OREO)
Real estate acquired in satisfaction of loans and insubstance foreclosures are
reported as other real estate owned. Insubstance foreclosures are properties in
which a borrower with little or no equity in the collateral effectively
abandons control of the property or has no economic interest to continue
involvement in the property. These loans are recorded at the lower of the loan
balance or the fair value of the property. Insubstance foreclosures and
properties acquired by foreclosure or deed in lieu of foreclosure are
transferred to OREO and are recorded at the lower of the loan balance on the
property at the date of transfer or the fair value of the property
constructively or actually received. Any adjustments to the carrying amount
of these loans prior to transfer are charged against the allowance for possible
loan losses. Subsequent operating expenses or income, reduction in estimated
values, and gains or losses on disposition of such properties are charged to
current operations. Gains or losses on sale are recorded in conformity with
standards which apply to the accounting for sales of real estate. Losses that
result from the ongoing periodic valuation of these properties are charged
against OREO reserves or to OREO provision in the period in which they are
identified.
Income Taxes
When income and expenses are recognized in different periods for financial
reporting purposes and income tax purposes, deferred taxes are provided on such
timing differences. These result primarily from the provision for loan and real
estate losses, discount accretion and timing differences between book and tax
depreciation methods on fixed assets. The Bank adopted SFAS No. 109,
"Accounting for Income Taxes" on January 1, 1993, which supersedes Accounting
Principle Bulletin Opinion 11. The statement maintains the liability method of
SFAS No. 96 for recognition and measurement of income taxes, but simplifies the
computational complexity of implementation and allows recognition of deferred
tax assets. Management implemented SFAS No. 109 on a prospective basis which
resulted in a reduction to tax expense of approximately $350,000.
Earnings Per Share
Earnings per common share are based on the weighted average number of shares
outstanding during the period. Stock options have been excluded from the
computation of earnings per share, as their effect is not material for the
years ended December 31, 1993, 1992 and 1991.
2. FEDERAL RESERVE REQUIREMENT
All depository institutions are required to maintain reserves on transaction
deposits in the form of balances at the Federal Reserve Bank. The average
reserve requirements for the Bank were $31,018,000 and $27,969,000 during the
years ended December 31, 1993 and 1992, respectively.
22 | METROBANK
<PAGE> 71
3. INVESTMENT SECURITIES
The amortized cost and estimated market values of investments in debt
securities at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
(Dollars in thousands) Cost Gains Losses Market Value
<S> <C> <C> <C> <C>
U.S. Treasury securities $190,373 $4,258 $(398) $194,233
Mortgage-backed securities 43,367 1,564 (16) 44,915
Other securities 2,975 -- -- 2,975
---------------------------------------------------------------------------------
$236,715 $5,822 $(414) $242,123
=================================================================================
</TABLE>
The amortized cost and estimated market values of investments in debt
securities at December 31, 1992 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
(Dollars in thousands) Cost Gains Losses Market Value
<S> <C> <C> <C> <C>
U.S. Treasury securities $184,895 $6,298 $(168) $191,025
Mortgage-backed securities 61,337 1,926 (167) 63,096
Other securities 2,680 -- -- 2,680
---------------------------------------------------------------------------------
$248,912 $8,224 $(335) $256,801
=================================================================================
</TABLE>
The amortized cost and estimated market value of debt securities at December
31, 1993 and 1992, by contractual maturity, are shown below. Mortgage-backed
securities are listed separately as their estimated average lives vary
according to changes in interest rates. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. In general, these
investments at December 31, 1993 have estimated average lives of between one
and five years.
<TABLE>
<CAPTION>
1993 1992
------------------------------- -------------------------------
Amortized Estimated Amortized Estimated
(Dollars in thousands) Cost Market Value Cost Market Value
<S> <C> <C> <C> <C>
Due in one year or less $ 40,234 $ 40,725 $ 34,839 $ 35,902
Due after one year through five years 150,139 153,508 127,877 133,089
Due after five years through ten Years 2,975 2,975 24,859 24,714
----------------------------------------------------------------------
193,348 197,208 187,575 193,705
Mortgage-backed securities 43,367 44,915 61,337 63,096
----------------------------------------------------------------------
$236,715 $242,123 $248,912 $256,801
======================================================================
</TABLE>
U.S. Treasury securities, obligations of U.S. government agencies and
mortgage-backed securities having a market value of approximately $186,103,000
and $183,876,000 were pledged to secure bankruptcy deposits, securities sold
under agreements to repurchase, and other liabilities as of December 31, 1993
and 1992, respectively. Proceeds from the sales of U.S. Treasury securities in
the investment portfolio totaled $89 million during 1993 resulting in gross
realized gains of $3.3 million on these sales. There were no sales of
investment securities during 1992. There were approximately $76 million of U.S.
Treasury securities classified as held for sale at December 31, 1993 which will
be reclassified as available for sale on January 1, 1994 in response to the
adoption of SFAS No. 115. The pre-tax unrealized gain on these securities was
$2.8 million as of December 31, 1993.
4. INVESTMENTS IN REAL ESTATE
As of December 31, 1993, the Company owned a low-income housing project with a
book value of approximately $16.8 million. The Company has elected to retain
this project to help satisfy its commitment to contributing to the Southern
California community redevelopment process; additionally, the Bank is able to
utilize favorable tax credits. These tax credits, of which $1.5 million were
utilized in 1993, amount to approximately $15 million in total credits over a
ten year life. Through December 31, 1993, the Bank has utilized approximately
$4 million in tax credits; however, the utilization of these tax credits is
subject to certain alternative minimum tax restrictions.
23 | METROBANK
<PAGE> 72
5. LOANS
The composition of the loan portfolio at December 31, 1993 and 1992 is as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
<S> <C> <C>
Commercial and industrial $123,988 $125,702
Real estate - other 286,767 255,971
Real estate - construction 40,184 46,463
Consumer 106,327 91,681
Other 10,403 9,574
------------------------------
567,669 529,391
Less:
Allowance for possible loan losses 13,104 10,102
Deferred loan fees, net 1,440 1,439
------------------------------
$553,125 $517,850
==============================
</TABLE>
As of December 31, 1993 and 1992, the Bank had loans totaling approximately
$5,476,000 and $4,922,000, respectively, on which it was not accruing income
due to their delinquent status. If interest on non-accrual loans had been
accrued, interest income would have increased approximately $167,000, $385,000
and $143,000 for the years ended December 31, 1993, 1992 and 1991,
respectively.
In the ordinary course of business, the Bank has granted loans to certain
directors and entities with which these directors are associated. It is the
Bank's policy that all such loans and commitments to lend be made under terms
which are consistent with the Bank's lending policies applicable to third
parties. As of December 31, 1993 and 1992, loans outstanding to related
parties were approximately $13,609,000 and $12,249,000, respectively.
An analysis of the activity in the allowance for possible loan losses is
summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $10,102 $ 8,174 $6,672
Provision for possible loan losses 8,820 5,200 2,130
Loans charged off (6,526) (3,559) (1,479)
Recoveries on loans previously charged off 708 287 691
Reserve transferred from OREO - - 160
----------------------------------------------------
Balance at end of year $13,104 $10,102 $8,174
====================================================
</TABLE>
6. OTHER REAL ESTATE OWNED
The composition of other real estate owned at December 31, 1993 and 1992 is as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
<S> <C> <C>
Unimproved land $2,735 $ 4,336
Single family residences - 2,139
Commercial/retail buildings 3,429 4,422
Industrial buildings 500 1,272
------------------------------
6,664 12,169
Less - valuation allowance 919 1,335
------------------------------
$5,745 $10,834
==============================
</TABLE>
An analysis of the activity in the valuation allowance is summarized
as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $1,335 $ - $160
Provision transferred to allowance for
possible loan losses - - (160)
Provision charged to operations 2,026 2,018 638
Losses and valuation adjustments
charged to allowance (2,442) (683) (638)
---------------------------------------------------
Balance at end of year $ 919 $1,335 $ -
===================================================
</TABLE>
24 | METROBANK
<PAGE> 73
The Bank had $5,745,000 and $10,834,000 in real estate acquired in satisfaction
of loans and insubstance foreclosures at December 31, 1993 and 1992,
respectively. At December 31, 1992, a significant amount of real estate
related to insubstance foreclosures which the Bank expected would be
effectively abandoned, as the borrower had little or no economic interest to
continue its involvement in the properties.
Foreclosure and holding costs, net of rental income, amounted to approximately
$434,000, $203,000 and $148,000 during the years ended December 31, 1993, 1992,
and 1991 respectively, and are included in other non-interest expense. Sales
of other real estate owned resulted in a net gain of $95,000 in 1993, a net
loss of $11,000 in 1992 and a net gain of $773,000 in 1991.
7. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
<S> <C> <C>
Furniture, fixtures and equipment $4,010 $3,271
Leasehold improvements 3,369 3,612
Automobiles 129 -
----------------------------
7,508 6,883
Less - accumulated depreciation and amortization 4,653 3,763
----------------------------
$2,855 $3,120
============================
</TABLE>
The amounts of depreciation and amortization included in non-interest expense
were $999,000, $879,000 and $977,000 for the years ended December 31, 1993,
1992 and 1991, respectively, and are based on estimated lives of 3 to 20 years
for furniture, fixtures and equipment, 6 to 20 years for leasehold improvements
and 3 years for automobiles.
8. OTHER ASSETS
The composition of other assets at December 31, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
<S> <C> <C>
Goodwill $ - $ 429
Prepaid expense 452 425
Customer acceptances 2,209 3,747
Accounts receivable 62 635
Other assets 6,293 7,822
----------------------------
$9,016 $13,058
============================
</TABLE>
9. DEPOSITS
The composition of deposits at December 31, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
<S> <C> <C>
Noninterest-bearing demand deposits $471,599 $396,521
NOW accounts 23,726 30,348
Money market demand accounts 265,899 235,482
Savings deposits 13,677 19,742
Time certificates of $100,000 or more 48,690 77,163
Other time certificates 61,795 42,607
------------------------------
$885,386 $801,863
==============================
</TABLE>
Interest expense on time certificates of $100,000 or more was $1,922,000,
$4,626,000 and $10,855,000 for the years ended December 31, 1993, 1992 and
1991, respectively.
25 | METROBANK
<PAGE> 74
At December 31, 1993, the Bank had concentrations of deposits with escrow
companies, title companies and insolvency trustees. A substantial portion of
the Bank's demand deposits consist of funds deposited by escrow and title
companies. To a large extent, these deposits are generated as a result of
paying the cost of data processing and other services to assist these companies
in accounting for Bank related financial transactions.
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Repurchase agreements at December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
<S> <C> <C>
Repurchase agreements $ 1,100 $ 2,695
Weighted average rate of repurchase agreements 2.50% 2.94%
Maximum month-end balance outstanding $86,140 $29,466
Average outstanding balance during the year $22,530 $34,272
Weighted average rate during the year 3.25% 3.74%
Investment securities collateralizing repurchase agreements:
Par value $ 1,200 $ 2,530
Market value $ 1,334 $ 2,727
=============================
</TABLE>
All outstanding repurchase agreements at December 31, 1993 mature on or
before January 3, 1994.
All securities underlying repurchase agreements are held in safekeeping by
broker/dealers, and all agreements are to repurchase the same securities. It
is Management's policy to enter into repurchase agreements only with primary
broker/dealers.
11. OTHER LIABILITIES
The composition of other liabilities at December 31, 1993 and 1992 is as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
<S> <C> <C>
Customer acceptances $2,209 $ 3,747
Accrued expenses 1,475 3,160
Accrued customer expense 947 757
Mortgage payable -- 1,653
Guarantee of ESOP loan 288 863
Other liabilities 329 622
----------------------------
$5,248 $10,802
============================
</TABLE>
12. LEASE COMMITMENTS AND CONTINGENCIES
The Bank leases certain office facilities from non-affiliated parties under
operating leases expiring at various times through the year 2002, with options
to renew through the year 2012.
As of December 31, 1993, the approximate future lease rentals payable under
noncancelable operating lease contracts are as shown in the following chart.
<TABLE>
<CAPTION>
(Dollars in thousands) Obligations
<S> <C>
Year ending December 31
1994 $ 2,904
1995 2,782
1996 1,798
1997 1,798
1998 1,798
1999 and thereafter 4,990
-------
$16,070
=======
</TABLE>
The amounts shown in the chart do not include future increases in rental
amounts, if any, based on changes in the Consumer Price Index and building
operating costs, as provided in the leases.
26 | METROBANK
<PAGE> 75
Annual rental expense from these lease commitments was approximately
$3,006,000, $2,824,000 and $2,844,000 during the years ended December 31, 1993,
1992 and 1991, respectively.
The Bank is involved in various legal proceedings arising from the normal
course of business. In the opinion of Management and the Bank's legal counsel,
the disposition of pending litigation will not have a material adverse effect
on the Bank's financial position.
13. SHAREHOLDERS' EQUITY
Stock Options
479,395 shares of authorized but unissued common stock are reserved for
issuance to key employees under a stock option plan adopted in April of 1982
(the Incentive Plan). On December 23, 1988, Metrobank adopted a 1988 Stock
Option Plan under which 800,000 shares of authorized but unissued stock are
reserved for issuance to certain key employees and directors of the Bank and
subsidiaries. The purchase price of stock under the plans may not be less than
the fair market value of such stock at the time such option is granted.
Options presently issued under these plans are exercisable in such installments
and expire on such dates as the Board of Directors may determine, but not later
than ten years from the date of grant. The Stock Option Plan has been designed
to qualify options granted thereunder as incentive stock options, but does not
preclude the granting of non-qualified options.
The following table summarizes stock option activity for the year ended
December 31, 1993:
<TABLE>
<CAPTION>
Shares
Outstanding at Outstanding at Exercisable at Available
December 31, December 31, December 31, for Future
1992 Granted Exercised Canceled 1993 1993 Grant
<S> <C> <C> <C> <C> <C> <C> <C>
1988 Stock Option Plan:
Shares 317,750 17,000 -- 16,000 318,750 237,125 479,500
Option price per share $7.13-$11.88 $12.13-$12.87 -- $10.00 $8.00-$10.00 $7.13-$11.88
Incentive Plan:
Shares 313,800 -- 2,500 -- 311,300 311,00 --
Option price per share $8.00-$10.00 -- $8.50 -- $8.00-$10.00 $8.00-$10.00 --
====================================================================================================
</TABLE>
Employee Stock Ownership Plan and Trust
The Bank maintains an Employee Stock Ownership Plan and Trust for eligible
employees, under which, at the discretion of the Board of Directors, an amount
not to exceed 15 percent of the salaries of all employees may be contributed
each plan year. During 1993, the Employee Stock Ownership Plan and Trust paid
down its borrowing utilized for the purchases of additional shares of Metrobank
stock from $863,000 to $288,000. For Financial reporting purposes, the loan is
considered guaranteed by the Bank and is therefore shown as a reduction of
capital. The terms of the loan agreement require the Trust to pay principal
and interest quarterly on its outstanding borrowing to fully amortize the line
of credit beginning in September 1991. Inasmuch as the Trust does not have
the liquidity to fund principal and interest payments on the borrowing, the
Bank made payments of approximately $575,000, $593,000, and $401,000 during
1993, 1992 and 1991, respectively, to fund the scheduled note reduction. These
loan payments represented the Bank's contributions in each of those years.
Dividend Restrictions
The Financial Code of the State of California provides that dividends paid in
any one year may not exceed the lesser of the Bank's undivided profits or the
net income for the prior three years, less cash distributions to shareholders
during such period. As of December 31, 1993, approximately $10,252,000 of
undivided profits are available for dividends.
Preferred Stock
The Bank is authorized to issue up to 15,000,000 shares of preferred stock, no
par value, in one or more series. The Board of Directors is authorized to
establish the terms and conditions of the preferred stock prior to issuance.
As of December 31, 1993, no shares were outstanding.
27 | METROBANK
<PAGE> 76
14. OTHER NON-INTEREST EXPENSE
The following is a breakdown of other non-interest expense for the years ended
December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Professional services $ 2,439 $ 2,441 $ 1,932
Professional services to customers 6,714 5,723 6,607
Promotion expense 1,247 1,067 894
Low income housing project expense 1,594 1,744 1,274
Office supplies and equipment 1,166 1,257 1,087
Regulatory assessments 2,017 1,754 1,499
Other real estate owned costs 434 203 148
Other 3,167 2,879 2,398
------------------------------------------
$18,778 $17,068 $15,839
==========================================
</TABLE>
15. INCOME TAXES
The provision for taxes for the years ended December 31, 1993, 1992 and 1991
for financial reporting purposes was as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Current:
Federal $ 2,197 $ 2,257 $1,031
State 1,121 1,114 932
-------------------------------------------
3,318 3,371 1,963
Deferred:
Federal (1,849) (1,523) 197
State (301) (349) (96)
-------------------------------------------
(2,150) (1,872) 101
$ 1,168 $ 1,499 $2,064
===========================================
</TABLE>
Deferred taxes arise from temporary differences in the recognition of revenues,
expenses and tax credits for tax and financial reporting purposes. The tax
effects of principal items affecting deferred taxes were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Loan losses $(1,211) $ (852) $(613)
Depreciation 3 39 486
OREO writedowns 7 (1,093) -
Discount accretion (468) (61) 297
State franchise tax 95 38 (27)
Other, net (1) (576) 57 (42)
--------------------------------------------
$(2,150) $(1,872) $ 101
============================================
</TABLE>
(1) Includes the $350,000 effect of adopting SFAS No. 109 during 1993.
The provision for income taxes differs from the amounts using the Federal
statutory tax rate of 34 percent for the years ended December 31, 1993, 1992
and 1991, as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------------ ------------------ -------------------
(Dollars in thousands) Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income tax expense at statutory rate $2,442 34.0% $2,467 34.0% $2,576 34.0%
Tax exempt income, net of exclusion (7) -0.1 (6) -0.1 (10) -0.1
State franchise taxes, net of federal benefit 541 7.5 510 7.0 548 7.2
Other, net (358) -4.9 28 0.4 12 0.2
----------------------------------------------------------------------
Provision for income taxes 2,618 36.5 2,999 41.3 3,126 41.3
Income tax credit (1,450) -20.2 (1,500) -20.6 (1,062) -14.1
----------------------------------------------------------------------
Net provision for income tax $1,168 16.3% $1,499 20.7% $2,064 27.2%
======================================================================
</TABLE>
28 | METROBANK
<PAGE> 77
Deferred tax assets and deferred tax liabilities as of January 1, 1993 and
December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Dollars in thousands December 31, 1993 January 1, 1993
<S> <C> <C>
Deferred tax assets
Loan losses $5,518 $4,307
OREO writedowns 892 899
State franchise tax 2 97
Other 149 171
---------------------------
Total deferred tax assets 6,561 5,474
Deferred tax liabilities
Depreciation 597 594
Discount accretion 757 1,225
Other 190 788
---------------------------
Total deferred tax liabilities 1,544 2,607
---------------------------
Net deferred tax asset $5,017 $2,867
===========================
</TABLE>
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, and standby letters
of credit. These instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the statement of condition.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
Financial instruments whose contract amounts represent credit risk are as
follows:
<TABLE>
<CAPTION>
Notional Amount
----------------------
(Dollars in thousands) December 31, 1993 1992
<S> <C> <C>
Commitments to extend credit $119,157 $94,666
Standby letters of credit 3,444 4,081
----------------------
$122,601 $98,747
======================
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral,
obtained if deemed necessary by the Bank upon extension of credit, is based on
Management's credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment, and
various forms of real estate.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Bank holds
marketable securities and property as collateral supporting those commitments
for which collateral is deemed necessary.
29 | METROBANK
<PAGE> 78
17. CONCENTRATION OF CREDIT RISK
At December 31, 1993, approximately $327 million of the Bank's loan portfolio
was collateralized by various forms of real estate compared to $302 million
at December 31, 1992. This amounts to 58% and 57% of the total loan
portfolio, respectively. The Bank attempts to reduce its concentration of credit
risk by making loans which are diversified by project type and geographic
locations throughout Southern California. While management believes that the
collateral presently securing these loans is adequate, there can be no
assurances that a significant deterioration in the Southern California real
estate economy would not expose the Bank to a significantly greater degree of
credit risk.
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments" requires
the disclosure, if practicable, of the fair value of certain financial
instruments, both on and off balance sheet, and the methods and significant
assumptions used to estimate those fair values. In the case of financial
instruments for which it is not practicable to estimate the fair value, the
Bank is required to disclose information pertinent to estimating the fair value
such as interest rates and maturity, and also state the reasons why it is not
practicable to estimate fair value.
In the statement, the FASB says the "fair values of financial instruments
depict the market's assessment of the present value of net future cash flows
directly or indirectly embodied in them, discounted to reflect both current
interest rates and the market's assessment of the risk that the cash flows will
not occur." The information about fair value is said to better enable
"investors, creditors, and other users to assess the consequences of an
entity's investment and financing strategies, that is, to assess its
performance."
Nonetheless, there are several factors which users of these financial
statements should keep in mind. First, the statement acknowledges that there
are uncertainties inherent in the process of estimating fair value of financial
instruments. Secondly, the statement covers only financial instruments, not
other assets like premises and equipment, the fair value of which might differ
significantly from the amounts at which they are carried in an entity's
financial statements. Thirdly, the Bank must exclude from its estimate of the
fair value of deposit liabilities any consideration of its ongoing customer
relationships which provide stable sources of investable funds. Lastly, the
statement does not address means of evaluating an entity's performance in
areas other than the management of financial instruments, for example, the
ability to generate non-interest income and the control of non-interest
expense. For these reasons, users are advised not to regard the disclosure of
the fair market value of financial instruments as in any way equivalent to a
valuation of the Bank as a whole.
The following assumptions were used to estimate the fair value of each
financial instrument listed below:
Cash and Cash Equivalents
For these short term investments, the carrying amount is a reasonable estimate
of fair value.
Investment Securities
For investment securities, fair value equals quoted market price, if available.
If a quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
Loans
The fair value of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. These cash flow
assumptions include adjustments to reflect estimates of uncollectible amounts.
30 | METROBANK
<PAGE> 79
Deposits
The fair value of demand deposits, money market, NOW and savings accounts is the
amount payable on demand at December 31, 1993. The fair value of fixed maturity
certificates of deposit is estimated using the rates currently offered for
deposits of similar remaining maturities.
Securities Sold Under Agreement to Repurchase and Federal Funds Purchased
For these short term borrowings, the carrying amount is a reasonable estimate
of their fair value.
Commitments to Extend Credit and Stand-by Letters of Credit
The fair value of letters of credit is based on fees currently charged for
similar agreements. The utilization of a loan commitment is at the option of
the borrower, and to the extent a borrower exercises that option, the loans are
being written at rates comparable to current market rates. As such, these
commitments have no fair value.
<TABLE>
Carrying
(Dollars in thousands) December 31, 1993 Amount Fair Value
<S> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents $126,148 $126,148
Investment securities 236,715 242,123
Loans 553,125 553,384
FINANCIAL LIABILITIES
Deposits 885,386 885,460
Securities sold under agreement to repurchase &
federal funds purchased 1,100 1,100
UNRECOGNIZED FINANCIAL INSTRUMENTS
Commitments to extend credit -- --
Standby letters of credit $ -- $ 68
<CAPTION>
Carrying
December 31, 1992 Amount Fair Value
<S> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents $ 86,164 $ 86,164
Investment securities 248,912 256,801
Loans 517,850 518,000
FINANCIAL LIABILITIES
Deposits 801,863 801,835
Securities sold under agreement to repurchase &
federal funds purchased 32,695 32,695
UNRECOGNIZED FINANCIAL INSTRUMENTS
Commitments to extend credit -- --
Standby letters of credit $ -- $ 80
</TABLE>
19. REGULATORY MATTERS
On July 6, 1993, the Bank entered into a Memorandum of Understanding (MOU) with
the Federal Deposit Insurance Corporation (FDIC) which requires that certain
actions be taken. The FDIC has mandated that the Bank reduce specified
classified assets over a twelve-month period, maintain a tier-1 leverage ratio
of at least 6.5%, and reduce its dependence on volatile liabilities to specified
levels over time (volatile liabilities are defined as brokered deposits, money
desk deposits, time deposits greater than or equal to $100,000, federal funds
purchased, repurchase agreements and other borrowings and debt due in one year
or less). The Bank must also seek regulatory approval prior to paying cash
dividends. As of December 31, 1993, the Bank was in compliance with all of
these requirements stipulated in the MOU and has requested and received approval
to pay dividends for the past three quarters.
31 | METROBANK
<PAGE> 80
20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data follows (in thousands except per share
amounts):
<TABLE>
<CAPTION>
Three months ended March 31, June 30, September 30, December 31,
<S> <C> <C> <C> <C>
1993
Net interest income $11,785 $12,057 $12,262 $12,321
Provision for possible loan losses 1,520 3,915 2,360 1,025
Noninterest income 2,544 2,649 3,089 1,301
Noninterest expense 10,859 9,317 10,962 10,867
Net earnings 1,490 1,100 1,450 1,975
Earnings per share $ 0.31 $ 0.23 $ 0.30 $ 0.42
-----------------------------------------------------------------
1992
Net interest income $10,540 $11,536 $11,534 $12,413
Provision for possible loan losses 675 1,650 2,400 475
Noninterest income 1,398 1,321 1,398 1,544
Noninterest expense 9,507 9,962 8,781 10,977
Net earnings 1,408 1,097 1,404 1,849
Earnings per share $ 0.30 $ 0.22 $ 0.30 $ 0.39
</TABLE>
SECURITIES ACTIVITY
The Bank is a member of the American Stock Exchange and its common stock is
traded under the symbol of MBN.
The following table reflects the market price for the Bank's common stock for
each period presented.
<TABLE>
<CAPTION>
1993 1992
---------------- ----------------
High Low High Low
<S> <C> <C> <C> <C>
First quarter $12.88 $11.13 $12.88 $ 8.63
Second quarter 13.00 10.00 12.38 11.00
Third quarter 10.88 9.25 11.88 9.88
Fourth quarter 12.38 9.75 12.13 9.63
--------------------------------------
</TABLE>
The Bank had approximately 429 record holders of its common stock as of January
31, 1994. On February 23, 1993, the Bank declared a cash dividend of $.15 per
share to shareholders of record on April 1, 1993, payable on April 20, 1993. On
June 8, 1993, the Bank declared a second cash dividend of $.15 per share to
shareholders of record on July 1, 1993, payable on July 20, 1993. On October 4,
1993, the Bank declared a third cash dividend of $.15 per share to shareholders
of record on October 25, 1993, payable on November 8, 1993.
SHAREHOLDER INFORMATION
The Annual Meeting of Shareholders of Metrobank will be held at the Bank's
Headquarters Office, 10900 Wilshire Boulevard, Los Angeles, California 90024,
on May 24, 1994 at 4:00 P.M. All shareholders are cordially invited to attend.
AUDITORS
Arthur Andersen & Co., Los Angeles, California
CORPORATE SECRETARY
Sharon L. Canup, Corporate Senior Vice President
LEGAL COUNSEL
Buchalter, Nemer, Fields & Younger, Los Angeles, California
Loeb and Loeb, Los Angeles, California
TRANSFER AGENT
First Interstate Bank of California, Stock Transfer Department, 707 Wilshire
Boulevard, Los Angeles, California 90017
For shareholder and stock information, please contact Sharon Canup, Corporate
Secretary (310) 824-5700.
A copy of the Bank's Annual Report on Form F-2 as filed with the Federal
Deposit Insurance Corporation may also be obtained without charge by writing
Ms. Canup at Metrobank, 10900 Wilshire Boulevard, Los Angeles, California 90024.
32 | METROBANK
<PAGE> 81
METROBANK MANAGEMENT
<TABLE>
<CAPTION>
BOARD OF DIRECTORS COMMERCIAL DIVISION METROBANK OFFICES
<S> <C> <C>
David L. Buell Paul W. Stroube Headquarters Office
Chairman and Chief Executive Officer Executive Vice President 10900 Wilshire Boulevard
Metrobank Headquarters Office Los Angeles, CA 90024
(310) 824-5700
Peter B. Caloyeras William F.G. Carroll
President Regional Vice President Orange County Regional Head Office
Magnetika, Inc. Orange County Regional Head Office 5000 Birch Street
Newport Beach, CA 92660
Seymour J. Carr, DMD David M. Frandsen (714) 955-5400
Professor (Emeritus) Regional Vice President
University of California, Los Angeles San Fernando Valley San Diego Regional Head Office
Regional Head Office 3131 Camino del Rio North
James W. Hobson San Diego, CA 92108
Vice Chancellor (Emeritus) Kenneth J. Cooke (619) 563-9400
University of California, Los Angeles Regional Vice President
San Diego Regional Head Office San Fernando Valley Regional
Rudy B. Markmiller Head Office
President Anita R. Smith 21530 Oxnard Street
Network Courier Services Regional Vice President Woodland Hills, CA 91367
South Bay Regional Head Office (818) 587-5200
Robert L. Mayer
President Steve M. Saylor South Bay Regional Head Office
The Robert Mayer Corporation Corporate Senior Vice President 21535 Hawthorne Boulevard
Deposit Administration Torrance, CA 90503
Wallace Wong (310) 316-7111
Chief Executive Officer Cheryl K. wolford
Cal-American Medical Supplies Senior Vice President Administrative Offices
Fiduciary Services Department 19191 S. Vermont Avenue
Sharon L. Canup Torrance, CA 90502
Corporate Secretary and LOAN DIVISION (310) 516-9700
Corporate Senior Vice President
Paul B. Alexander Operations Center
ADMINISTRATIVE DIVISION Executive Vice President and 350 S. Figueroa Street
Chief Credit Officer Suite 180
Robert P. Bulseco Los Angeles, CA 90071
President and Mesfin Ayenew (213) 250-2000
Chief Administrative Officer Group Vice President
Real Estate Group
David P. Malone
Executive Vice President and Frank D. DiTomaso
Chief Financial Officer Senior Vice President
Asset-Based Loan Department
Pamela L. Citron
Corporate Senior Vice President John S. Harris
and Cashier Senior Vice President
Trade Finance
Douglas P. Krause
Senior Vice President Gordon Smith
and General Counsel Group Vice President
Indirect Loan Group
</TABLE>
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 99(0)
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED MARCH 31, 1993
METROBANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
95-3271474
(IRS EMPLOYER IDENTIFICATION NO.)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
90024
(ZIP CODE)
(310) 824-5700
(BANK'S TELEPHONE NUMBER INCLUDING AREA CODE)
INDICATE BY CHECK-MARK WHETHER THE BANK (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE BANK WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST NINETY DAYS.
YES XX NO
---- ----
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 1993: 4,754,172
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1993, DECEMBER 31, 1992 AND MARCH 31, 1992
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1993 AND MARCH 31, 1992
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1993
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1993 AND MARCH 31, 1992
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
<PAGE> 3
METROBANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1993 DECEMBER 31, 1992
(UNAUDITED) 1992 (UNAUDITED)
<S> <C> <C> <C>
ASSETS
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 63,994 $ 86,164 $ 90,906
Federal funds sold 20,000 -- --
Investment securities 240,787 248,912 219,839
Investment in real estate 18,918 19,167 25,242
Loans, net of reserve 516,737 517,850 490,433
Accrued interest receivable 7,314 5,978 6,692
Other real estate owned, net 10,462 10,834 5,286
Premises and equipment, net 2,914 3,120 3,272
Other assets 8,692 13,058 6,734
- --------------------------------------------------------------------------------------------------
Total Assets $ 889,818 $ 905,083 $ 848,404
==================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------
Deposits:
Time certificates $ 183,876 $ 119,770 $ 162,425
Other deposits 631,457 682,093 607,992
- --------------------------------------------------------------------------------------------------
Total deposits 815,333 801,863 770,417
Securities sold under agreement to repurchase
and federal funds purchased 3,156 32,695 9,350
Accrued interest payable 656 444 711
Other liabilities 10,043 10,802 11,289
- --------------------------------------------------------------------------------------------------
Total liabilities 829,188 845,804 791,767
Shareholders' equity:
Common stock 34,310 34,310 34,310
Guarantee of ESOP loan (288) (863) (1,294)
Undivided profits 26,608 25,832 23,621
- --------------------------------------------------------------------------------------------------
Total shareholders' equity 60,630 59,279 56,637
- --------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 889,818 $ 905,083 $ 848,404
==================================================================================================
Book value per share $12.75 $12.47 $11.91
Standby letters of credit 2,875 4,081 9,022
Ratio of average noninterest-bearing deposits
to average total deposits 41.69% 47.81% 40.86%
Ratio of average gross loans to average
total deposits 72.10% 68.11% 71.11%
Ratio of loan loss reserve to gross loans 2.14% 1.91% 1.66%
==================================================================================================
</TABLE>
<PAGE> 4
METROBANK
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Quarter Ended March 31,
(in thousands, except 1993 1992
per share amounts)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Loans $ 10,960 $ 10,685
U.S. Treasury securities 3,254 2,772
Obligations of U.S. government agencies -- 436
Other securities 1,126 1,234
Other interest income 63 6
- ------------------------------------------------------------------------------------------
15,403 15,133
Interest expense:
Time certificates of deposit 1,368 2,007
Other deposits 1,642 2,037
Funds purchased and securities sold under
agreements to repurchase 608 587
Capitalized carrying costs -- (65)
Other interest expense -- 27
- ------------------------------------------------------------------------------------------
3,618 4,593
- ------------------------------------------------------------------------------------------
Net interest income 11,785 10,540
Provision for possible loan losses 1,520 675
- ------------------------------------------------------------------------------------------
Net interest income after provision for possible
loan losses 10,265 9,865
Noninterest income:
Service charges on deposit accounts 374 329
Gain on sales of securities 868 --
Other noninterest income 1,302 1,069
- ------------------------------------------------------------------------------------------
2,544 1,398
Noninterest expense:
Personnel expense 4,383 3,671
Occupancy, furniture and equipment expense 1,241 1,146
Other noninterest expense 5,235 4,690
- ------------------------------------------------------------------------------------------
10,859 9,507
- ------------------------------------------------------------------------------------------
Earnings before income taxes 1,950 1,756
Provision for income taxes 805 723
Income tax credit (345) (375)
- ------------------------------------------------------------------------------------------
Net earnings $ 1,490 $ 1,408
==========================================================================================
Earnings per share $ 0.31 $ 0.30
Dividends declared per share $ 0.15 $ 0.15
==========================================================================================
Weighted average shares outstanding 4,754,172 4,751,710
==========================================================================================
Net return on average shareholders' equity 10.1% 10.0%
Net return on average assets 0.7% 0.7%
==========================================================================================
</TABLE>
<PAGE> 5
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Quarter ended March 31, 1993
(dollars in thousands)
Common Stock
----------------------- Guarantee of Undivided
Shares Amount ESOP Loan Profits Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 4,754,172 $34,310 $(863) $25,832 $59,279
$0.15 per share cash dividend -- -- -- (713) (713)
Reduction in indebtedness for ESOP -- -- 575 -- 575
Net earnings -- -- -- 1,489 1,489
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, March 31, 1993 4,754,172 $34,310 $(288) $26,608 $60,630
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Quarter ended Mar. 31,
1993 1992
(in thousands)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,490 $ 1,408
- ------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities 238 (76)
Depreciation and amortization 234 328
Provision for possible loan losses 1,520 675
Provision for real estate investment losses 197 402
Provision for OREO & ISF 336 --
Loss (gain) on other real estate owned -- --
Gain on sale of securities 868 --
Goodwill amortization 429 16
Interest capitalized -- (65)
Increase (decrease) in taxes payable 185 (897)
Decrease (increase) in accrued interest receivable (1,335) (1,077)
Decrease (increase) in other assets 3,838 1,813
Increase (decrease) in accrued interest payable 212 (225)
Increase (decrease) in other liabilities (270) (1,199)
- ------------------------------------------------------------------------------------------------------------------
Total adjustments 6,452 (305)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 7,942 1,103
- ------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (22,615) (25,000)
Proceeds from sales and maturities of investment securities 29,634 14,341
Loan fundings, net of principal collected (82) (15,666)
Sale of other real estate owned -- --
Purchase of premises and equipment (28) (355)
Decrease (increase) in real estate investments 248 176
Decrease (increase) in banker's acceptances (486) (6)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 6,671 (26,510)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings (50,636) 75,503
Net increase (decrease) in certificates of deposit 64,105 (45,912)
Increase (decrease) in repurchase agreements and federal funds purchased (29,539) (5,060)
Dividends paid (713) (570)
Stock options exercised -- 38
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (16,783) 23,999
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,170) (1,408)
- ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 86,164 92,314
- ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF FIRST QUARTER $ 83,994 $ 90,906
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- ------------------------------------------------------------------------------------------------------------------
Cash paid during the first three months for:
Interest $ 3,437 $ 4,890
Income taxes 275 1,245
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- ------------------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (575) $ (144)
Foreclosed real estate loans -- --
==================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated statements of the financial
condition of Metrobank at March 31, 1993 and 1992, and the
consolidated statements of earnings, consolidated statement of
changes in shareholders' equity and consolidated statements of
cash flows for the periods presented, have been prepared by
the Bank without audit. In the opinion of Management, all
adjustments necessary to present fairly the financial
position, results of operations and statements of cash flows
at March 31, 1993 and 1992 and for all periods presented have
been made. Management has elected to omit substantially all
of the disclosures required by generally accepted accounting
principles, and, accordingly, these financial statements do
not purport to present the Bank's financial position in
accordance with generally accepted accounting principles.
These financial statements should be read in conjunction with
the consolidated financial statements contained in the Bank's
Annual Report (Form F-2).
Note 2. Earnings Per Share
Earnings per share is computed on the basis of the weighted
average number of shares outstanding for each period
(4,754,172 and 4,751,710 for the three months ended March 31,
1993 and 1992, respectively).
Note 3. Letters of Credit
The Bank had outstanding letters of credit of $9.3 million as
of March 31, 1993, $10.1 million as of December 31, 1992, and
$11.4 million as of March 31, 1992.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of its financial
condition and results of operations, which follows, should be read in
conjunction with the consolidated financial statements and related notes to the
financial statements of the Bank that appear elsewhere in this report.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other borrowings). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$11.8 million for the quarter ended March 31, 1993 as compared to $10.5 million
for the quarter ended March 31, 1992. A majority of this increase in net
interest income was caused by the decrease in interest expense.
Interest and fee income increased to $15.4 million for the first quarter of
1993 compared to $15.1 million for the first quarter of 1992. This increase in
interest and fee income was primarily attributable to the $40 million increase
in average loan balances which more than offset the 39 basis point drop in
average loan yields. Interest income on the investment portfolio remained
stable, however, the $29 million increase in average investments outstanding
was offset in its entirety by the 93 basis point drop in the return on the
portfolio.
Interest expense on deposits decreased to $3.0 million for the first quarter of
1993 compared to $4.0 million for the first quarter of 1992. Although average
interest bearing deposits increased by approximately $21 million, the cost of
these funds decreased by approximately 114 basis points which more than offset
the increase in balances.
<PAGE> 9
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest
rates and average balances:
<TABLE>
<CAPTION>
Quarter ended March 31, 1993
over Qtr. ended March 31, 1992
------------------------------
Total
Increase Change Due To:
In thousands (Decrease) Rate Volume
<S> <C> <C> <C>
INTEREST INCOME:
Loans $ 275 $ (526) $ 801
Investment securities (62) (575) 513
Other 57 (9) 66
------- ------- ------
Total $ 270 $(1,110) $1,380
INTEREST EXPENSE:
Interest bearing deposits (1,034) (1,229) 195
Federal funds 21 (126) 147
Other 38 0 38
------- ------- ------
Total $ (975) $(1,355) $ 380
------- ------- ------
Net interest income $ 1,245 $ 245 $1,000
======= ======= ======
</TABLE>
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited
back to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
earnings as a provision for possible loan losses. The balance of the allowance
for possible loan losses reflects the amount which, in management's judgement,
is adequate to provide for potential loan losses after weighing the mix of the
loan portfolio, current economic conditions, past loan loss experience and
other factors relevant to estimating loan losses. The adequacy of the
allowance for possible loan losses is also evaluated relative to the level of
non-performing loans (those for which principal or interest is past due more
than 90 days and those on non-accrual status).
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured. Such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk since property acquired through
foreclosure ("OREO") may not be saleable for an amount sufficient to offset the
entire amount of the loan and costs associated with foreclosure. Although
management believes that the allowance for possible loan losses is adequate,
future provisions will be subject to continuing evaluation of risks inherent in
the loan portfolio.
<PAGE> 10
The provision for possible loan losses increased by approximately $850,000 from
the same quarter in the prior year and is reflective of Management's intention
to maintain reserves for possible loan losses at a level sufficient to provide
for its loss expectations. The Bank's ratio of loan loss reserve to total
loans was 2.14% and 1.66% as of March 31, 1993 and March 31, 1992,
respectively.
Loan charge-offs (net of recoveries) for the three months ended March 31, 1993
totalled approximately $325,000. This compares to net charge-offs of $600,000
for the first quarter of 1992.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as real estate values in
Southern California. Inasmuch as this is the principle geographic area in
which Metrobank conducts its business, this environment has had an adverse
impact on the Bank's asset quality. Additionally, the liquidation of real
estate by the Resolution Trust Corporation has added to the decline in Southern
California real estate values. As of December 31, 1992, the Bank had
approximately $17.3 million in non-performing assets which consisted primarily
of $10.8 million in other real estate owned and insubstance foreclosures and
$4.9 million of non-accrual loans. As of March 31, 1993, the Bank had
approximately $18.1 million in non-performing assets of which $10.5 million
consisted of other real estate owned and insubstance foreclosures and $4.2
million of non-accrual loans. Total non-performing assets to total assets as
of December 31, 1992 and March 31, 1993 were approximately 1.9% and 2.0%,
respectively.
Non-Interest Income
Non-interest income totalled $2.5 million for the first quarter ended March 31,
1993 compared to $1.4 million for the first quarter ended March 31, 1992. Of
this increase, approximately $870,000 of the increase was attributable to a
gain on the sale of investment securities and approximately $230,000 of the
increase was attributable to other non-interest income. During the first
quarter of 1993 the Bank sold approximately $20 million of U.S. Treasury
Securities at a gain of $870,000, primarily for the purpose of enhancing its
capital position. The Bank accomplished this by first, prepaying one year of
scheduled principal reductions on the employee stock ownership plan loan which
totalled $430,0000, and additionally, eliminated approximately $400,000 of
goodwill associated with the acquisition of the Bank's insurance division.
Both of these transactions served to improve the Bank's regulatory capital
position. The Bank's risk based capital ratio improved to 11.3% as of March
31, 1993 from 10.8% as of March 31, 1992. The $230,000 increase in other
non-interest income is attributable to a $90,000 improvement in residential
mortgage banking income and a $130,000 improvement in rental income on
Metrocorp's real estate holdings.
<PAGE> 11
Non-Interest Expense
Non-interest expense totalled $10.9 million for the first quarter of 1993 as
compared to $9.5 million for the first quarter of 1992. Personnel expenses
increased by approximately $700,000. Of this, $430,000 of the increase was
attributable to the prepayment of principal on the ESOP loan as discussed
above, and the remaining $300,000 increase is attributable to increases in
staff and annual salary adjustments. Other non-interest expenses increased by
approximately $545,000, of this increase, $400,000 was attributable to the
elimination of goodwill, as discussed earlier. Additionally, provisions for
real estate related write-downs totalled approximately $370,000 for the first
quarter of 1993 as compared to $400,000 for the first quarter of 1992.
Income Taxes
The Bank's effective tax rate for the three months ended March 31, 1993 was
approximately 23.6%, compared to 19.8% for the three months ended March 31,
1992, respectively. The Bank's effective tax rate is less than the statutory
rate due to the utilization of income tax credits generated by its low income
housing project. The utilization of these credits, however, is subject to
certain alternative minimum tax limitations. During the first quarter of 1993,
the Bank generated pre-tax profits which allowed the Bank to utilize
approximately $275,000 in tax credits. The remaining $70,000 of tax credits
utilized was carried back against income which was generated in prior periods.
As of March 31, 1993, the Bank had approximately $130,000 of carry-back ability
remaining.
Capital Resources
As of March 31, 1993, the Bank's shareholders' equity totalled $60.6 million,
an increase of approximately $4.0 million from March 31,1992. This increase in
equity was caused by the $1 million decrease in a loan made for the benefit of
the Employee Stock Ownership Trust (ESOT), as well as net income of $5.8
million for the twelve months ended March 31, 1993, offset by the payment of
cash dividends totalling $2.8 million during the past twelve months. As of
March 31, 1993, the Bank's risk based capital ratio and tier one capital ratio
were 11.3% and 10.0%, respectively. Both ratios exceed the December 31, 1992
regulatory requirement of 8.0% and 4.0%, respectively. As of March 31, 1992,
the Bank's risk based capital and tier one capital ratios were approximately
10.8% and 9.4%, respectively.
<PAGE> 12
Liquidity
The Bank is required by the Federal Reserve Board to maintain an average
balance of liquid assets equal to at least 5% of withdrawable deposits and
borrowings which are payable in one year or less. The Bank has consistently
met these liquidity requirements. The liquidity levels of the Bank are managed
by its Asset/Liability Management Committee. This committee is charged with
the responsibility of insuring that reserve balances are maintained and to
ensure that the Bank obtains funds necessary to meet existing deposit outflow
requirements as well as asset growth. The Bank's primary source of funds is
derived from principal and interest payments on loans, principal and interest
payments on its investment portfolio, generation of non-interest-bearing and
interest-bearing deposits, and, to a lesser extent, borrowings, effected
primarily through short-term repurchase agreements and the use of the Bank's
federal fund borrowing arrangements.
Inasmuch as a significant portion of the Bank's deposit base is concentrated in
demand deposits, which are inherently more volatile, the Asset/Liability
Committee operates a Money Desk to help supplement deposit generating
activities. Additionally, in connection with maintaining a liquidity cushion,
the Bank has established an unsecured borrowing capacity of approximately $73.6
million, or 9.03% of total deposits, and a secured borrowing capacity of $153.4
million, or 18.8% of total deposits. The combination of these two borrowing
facilities provides the Bank with a secondary source of liquidity of
approximately $227.0 million or 27.8% of total deposits.
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 12, 1993 Metrobank
------------------------------
(Bank)
By: /s/ David P. Malone
-------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank in
the capacities indicated on the date set forth above.
Signature
/s/ Christopher Ishikawa
- -------------------------------
Christopher Ishikawa
Vice President/Controller
(Principal Accounting Officer)
<PAGE> 14
- --------------------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED JUNE 30, 1993
METROBANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
95-3271474
(IRS EMPLOYER IDENTIFICATION NO.)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
90024
(ZIP CODE)
(310) 824-5700
(BANK'S TELEPHONE NUMBER INCLUDING AREA CODE)
INDICATE BY CHECK-MARK WHETHER THE BANK (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE BANK WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST NINETY DAYS.
YES XX NO
----------- -----------
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 30, 1993: 4,756,672
- --------------------------------------------------------------------------------
<PAGE> 15
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1993, DECEMBER 31, 1992 AND JUNE 30, 1992
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1993 AND JUNE
30, 1992
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1993 AND JUNE 30, 1992
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1993 AND JUNE 30, 1992
SIX MONTHS ENDED JUNE 30, 1993 AND JUNE 30, 1992
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
<PAGE> 16
METROBANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1993 DECEMBER 31, 1992
(UNAUDITED) 1992 (UNAUDITED)
ASSETS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 97,782 $ 86,164 $ 91,394
Federal funds sold 45,000 - 10,000
Investment securities 232,508 248,912 238,728
Investment in real estate 18,767 19,167 20,423
Loans, net of reserve 527,950 517,850 496,450
Accrued interest receivable 5,371 5,978 6,043
Other real estate owned, net 11,709 10,834 11,361
Premises and equipment, net 2,863 3,120 3,247
Other assets 9,139 13,058 9,449
- -------------------------------------------------------------------------------------------
Total Assets $951,089 $905,083 $887,095
===========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------
Deposits:
Time certificates $142,305 $119,770 $173,119
Other deposits 736,557 682,093 627,433
- -------------------------------------------------------------------------------------------
Total deposits 878,862 801,863 800,552
Securities sold under agreement to repurchase
and federal funds purchased 1,000 32,695 16,825
Accrued interest payable 614 444 672
Other liabilities 9,574 10,802 11,881
- -------------------------------------------------------------------------------------------
Total liabilities 890,050 845,804 829,930
Shareholders' equity:
Common stock 34,332 34,310 34,310
Guarantee of ESOP loan (288) (863) (1,150)
Undivided profits 26,995 25,832 24,005
- -------------------------------------------------------------------------------------------
Total shareholders' equity 61,039 59,279 57,165
- -------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $951,089 $905,083 $887,095
===========================================================================================
Book value per share $12.83 $12.47 $12.02
Standby letters of credit 3,234 4,081 6,665
Ratio of average noninterest-bearing deposits
to average total deposits 44.9% 47.81% 46.9%
Ratio of average gross loans to average
total deposits 67.2% 68.11% 66.3%
Ratio of loan loss reserve to gross loans 2.24% 1.91% 1.78%
===========================================================================================
</TABLE>
<PAGE> 17
METROBANK
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(in thousands, except 1993 1992 1993 1992
per share amounts)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans $11,027 10,933 21,986 21,618
U.S. Treasury securities 3,130 2,863 6,384 5,635
Obligations of U.S. government agencies - 328 - 764
Other securities 1,079 1,288 2,205 2,522
Other interest income 25 35 88 41
- ----------------------------------------------------------------------------------------------------------------
15,261 15,447 30,663 30,580
Interest expense:
Time certificates of deposit 1,493 1,647 2,862 3,654
Other deposits 1,595 1,992 3,237 4,029
Funds purchased and securities sold under
agreements to repurchase 116 233 723 820
Capitalized carrying costs - - - (65)
Other interest expense - 39 - 66
- ----------------------------------------------------------------------------------------------------------------
3,204 3,911 6,822 8,504
- ----------------------------------------------------------------------------------------------------------------
Net interest income 12,057 11,536 23,841 22,076
Provision for possible loan losses 3,915 1,650 5,435 2,325
- ----------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible
loan losses 8,142 9,886 18,406 19,751
Noninterest income:
Service charges on deposit accounts 334 301 708 630
Gain on sales of securities 965 - 1,833 -
Other noninterest income 1,350 1,020 2,652 2,089
- ----------------------------------------------------------------------------------------------------------------
2,649 1,321 5,193 2,719
Noninterest expense:
Personnel expense 3,715 3,744 8,098 7,415
Occupancy, furniture and equipment expense 1,283 1,235 2,524 2,381
Other noninterest expense 4,319 4,983 9,554 9,673
- ----------------------------------------------------------------------------------------------------------------
9,317 9,962 20,176 19,469
- ----------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,474 1,245 3,423 3,001
Provision for income taxes 609 523 1,413 1,246
Income tax credit (235) (375) (580) (750)
- ----------------------------------------------------------------------------------------------------------------
Net earnings $ 1,100 $ 1,097 2,590 2,505
================================================================================================================
Earnings per share $0.23 $0.23 $0.54 $0.53
Dividends declared per share $0.15 $0.15 $0.30 $0.30
================================================================================================================
Weighted average shares outstanding 4,755,765 4,754,172 4,754,973 4,752,941
================================================================================================================
Net return on average shareholders' equity 7.2% 7.7% 8.6% 8.8%
Net return on average assets 0.5% 0.5% 0.6% 0.6%
================================================================================================================
</TABLE>
<PAGE> 18
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Quarter ended June 30,
1993 1992
(in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,100 $ 1,097
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities 289 26
Depreciation and amortization 247 335
Provision for possible loan losses 3,915 1,650
Provision for real estate investment losses - -
Provision for OREO & ISF 286 805
Loss (gain) on OREO & ISF 275 -
Gain on sale of securities 965 -
Goodwill amortization - 16
Interest capitalized - -
Increase (decrease) in taxes payable (818) (803)
Decrease (increase) in accrued interest receivable 1,942 650
Decrease (increase) in other assets 333 (2,082)
Increase (decrease) in accrued interest payable (42) (39)
Increase (decrease) in other liabilities (430) 873
- -----------------------------------------------------------------------------------------------------------
Total adjustments 6,962 1,431
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 8,062 2,528
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (50,464) (52,857)
Proceeds from sales and maturities of investment securities 57,489 33,943
Loan fundings, net of principal collected (16,589) (9,716)
Sale of other real estate owned - -
Purchase of premises and equipment (196) (295)
Decrease (increase) in real estate investments 151 116
Decrease (increase) in banker's acceptances (346) (129)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (9,955) (28,938)
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 105,100 19,442
Net increase (decrease) in certificates of deposit (41,571) 10,694
Increase (decrease) in repurchase agreements and federal funds purchased (2,156) 7,475
Dividends paid (713) (713)
Stock options exercised 21 -
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 60,681 36,898
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 58,788 10,488
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of first quarter 83,994 90,906
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of second quarter $ 142,782 $ 101,394
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -----------------------------------------------------------------------------------------------------------
Cash paid during the first three months for:
Interest $ 3,284 $ 3,944
Income taxes 1,180 525
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ - $ (144)
Foreclosed real estate loans 2,632 7,317
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 19
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Six months ended June 30,
1993 1992
(in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 2,590 $ 2,505
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities 527 (50)
Depreciation and amortization 481 663
Provision for possible loan losses 5,435 2,325
Provision for real estate investment losses 197 402
Provision for OREO & ISF 622 805
Loss (gain) on OREO & ISF 275 -
Gain on sale of securities 1,833 -
Goodwill amortization 429 32
Interest capitalized - (65)
Increase (decrease) in taxes payable (633) (1,700)
Decrease (increase) in accrued interest receivable 607 (427)
Decrease (increase) in other assets 4,171 (269)
Increase (decrease) in accrued interest payable 170 (264)
Increase (decrease) in other liabilities (700) (326)
- -----------------------------------------------------------------------------------------------------------
Total adjustments 13,414 1,126
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 16,004 3,631
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (73,079) (77,857)
Proceeds from sales and maturities of investment securities 87,123 48,284
Loan fundings, net of principal collected (16,671) (25,382)
Sale of other real estate owned - -
Purchase of premises and equipment (224) (650)
Decrease (increase) in real estate investments 399 292
Decrease (increase) in banker's acceptances (832) (135)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (3,284) (55,448)
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 54,464 94,945
Net increase (decrease) in certificates of deposit 22,534 (35,218)
Increase (decrease) in repurchase agreements and federal funds purchased (31,695) 2,415
Dividends paid (1,426) (1,283)
Stock options exercised 21 38
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 43,898 60,897
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 56,618 9,080
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of the year 86,164 92,314
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of second quarter $ 142,782 $ 101,394
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -----------------------------------------------------------------------------------------------------------
Cash paid during the first three months for:
Interest $ 6,721 $ 8,834
Income taxes 1,455 2,195
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (575) $ (288)
Foreclosed real estate loans 2,632 7,317
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 20
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Six months ended June 30, 1992
(dollars in thousands)
Common Stock
---------------------- Guarantee of Undivided
Shares Amount ESOP Loan Profits Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991 4,750,172 $ 34,273 $ (1,438) $ 22,926 $ 55,761
Exercise of stock options 4,000 37 - - 37
$0.30 per share cash dividend - - - (1,426) (1,426)
Reduction in indebtedness for ESOP - - 288 - 288
Net earnings - - - 2,505 2,505
- -----------------------------------------------------------------------------------------------------------
Balance, June 30, 1992 4,754,172 $ 34,310 $ (1,150) $ 24,005 $ 57,165
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Six months ended June 30, 1993
(dollars in thousands)
Common Stock
---------------------- Guarantee of Undivided
Shares Amount ESOP Loan Profits Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 4,754,172 $ 34,310 $ (863) $ 25,832 $ 59,279
Exercise of stock options 2,500 22 - - 22
$0.30 per share cash dividend - - - (1,427) (1,427)
Reduction in indebtedness for ESOP - - 575 - 575
Net earnings - - - 2,590 2,590
- -----------------------------------------------------------------------------------------------------------
Balance, June 30, 1993 4,756,672 $ 34,332 $ (288) $ 26,995 $ 61,039
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated statements of the financial condition of
Metrobank at June 30, 1993 and 1992, and the consolidated statements
of earnings, consolidated statements of changes in shareholders'
equity and consolidated statements of cash flows for the periods
presented, have been prepared by the Bank without audit. In the
opinion of Management, all adjustments necessary to present fairly the
financial position, results of operations and statements of cash flows
at June 30, 1993 and 1992 and for all periods presented have been
made. Management has elected to omit substantially all of the
disclosures required by generally accepted accounting principles, and,
accordingly, these financial statements do not purport to present the
Bank's financial position in accordance with generally accepted
accounting principles.
Investments
Beginning January 1, 1994, Metrobank will be required to abide by the
requirements of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity securities."
This statement will require institutions to classify its investment
securities as either held to maturity, available for sale, or
trading. Investments held to maturity will be carried at amortized
cost. Investments available for sale must be marked to market with
unrealized gains or losses, net of the taxes, included in equity.
Trading securities must also be marked to market, however unrealized
gains or losses must be reflected in current earnings.
Note 2. Earnings Per Share
Earnings per share is computed on the basis of the weighted average
number of shares outstanding for each period (4,755,765 and 4,754,172
for the three months ended June 30, 1993 and 1992, and 4,754,973 and
4,752,941 for the six months ended June 30, 1993 and 1992.
Note 3. Letters of Credit
The Bank had outstanding letters of credit of $9.2 million as of June
30, 1993, $10.1 million as of December 31, 1992, and $11.5 million as
of June 30, 1992.
These financial statements should be read in conjunction with the
consolidated financial statements contained in the Bank's Annual
Report (Form F-2).
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of its financial
condition and results of operations, which follows, should be read in
conjunction with the consolidated financial statements and related notes to the
financial statements of the Bank that appear elsewhere in this report.
Net Earnings
For the three and six months ended June 30, 1993 the company reported net
earnings of $1.1 million and $2.6 million, or $0.23 and $0.54 per share,
compared to $1.1 million and $2.5 million, or $0.23 and $0.53 per share for the
same periods in the prior year.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other borrowings). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$12.1 million for the quarter ended June 30, 1993 as compared to $11.5 million
for the quarter ended June 30, 1992. A majority of this increase in net
interest income was caused by the decrease in interest expense.
Interest and fee income was $15.3 million for the second quarter of 1993
compared to $15.4 million for the second quarter of 1992. This decrease in
interest and fee income was caused primarily by a combination of a $280,000
decrease in investment interest income, and a $94,000 increase in loan and fee
interest income. Although the average loan portfolio increased from $506
million at June 30, 1992 to $537 million at June 30, 1993, the average
investment portfolio decrease of $13.5 million from the same period in prior
year combined with a decline in prime rate more than offset the increase in
the loan portfolio, causing a net decrease of approximately $186,000 in
interest and fee income (see rate/volume analysis on next page).
For the quarter ended June 30, 1993 and 1992, respectively, deposit interest
expense decreased to $3.2 million from $3.9 million. Although the average
balance of interest bearing deposits
<PAGE> 23
increased by approximately $16.0 million from June 30,1992, the significant
decline in cost of these deposits more than offset the increase in balance,
causing approximately $700,000 decrease in interest expense.
For the six months ended June 30, 1993 and 1992, net interest income before
provision for loan losses was $23.8 and $22.1 million, respectively. This
increase of $1.7 million is attributable to a combination of an increase in the
average balance of the loan portfolio and the overall decline in the Bank's
cost of funds, offset by the impact of the decline in interest rate on the loan
portfolio and a decrease in the average balance of the investment portfolio.
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest
rates and average balances:
<TABLE>
<CAPTION>
Quarter ended June 30, 1993 Six Months ended June 30, 1993
over Qtr. ended June 30, 1992 over six months ended June 30, 1992
---------------------------------- ------------------------------------
Total Total
Increase Change Due To: Increase Change Due To:
In thousands (Decrease) Rate Volume (Decrease) Rate Volume
---------- ------ ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 940 $ (539) $ 633 $ 369 $ (1,065) $ 1,434
Investment securities (270) (386) 116 (332) (961) 629
Other (10) (7) (3) 47 (16) 63
--------- ------ ------ --------- -------- -------
Total $ (186) $ (931) $ 745 $ 84 $ (2,042) $ 2,126
INTEREST EXPENSE:
Interest bearing deposits (551) (767) 216 (1,585) (1,996) 411
Federal funds (117) (42) (75) (96) (168) 72
Other (39) 0 (39) (1) 0 (1)
--------- ------ ------ --------- -------- -------
Total $ (707) $ (809) $ 102 $ (1,682) $ (2,164) $ 482
--------- ------ ------ --------- -------- -------
Net interest income $ 521 $ (122) $ 643 $ 1,766 $ 122 $ 1,644
========= ====== ====== ========= ======== =======
</TABLE>
<PAGE> 24
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any , are credited
back to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
earnings as a provision for possible loan losses. The balance of the allowance
for possible loan losses reflects the amount which, in management's judgement,
is adequate to provide for potential loan losses after weighing the mix of the
loan portfolio, current economic conditions, past loan loss experience and
other factors relevant to estimating loan losses. The adequacy of the
allowance for possible loan losses is also evaluated relative to the level of
non-performing loans (those for which principal or interest is past due more
than 90 days and those on non-accrual status).
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured. Such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk as property acquired through
foreclosure ("OREO") may not be saleable for an amount sufficient to offset the
entire amount of the loan and costs associated with foreclosure. Although
management believes that the allowance for possible loan losses is adequate,
future provisions will be subject to continuing evaluation of risks inherent in
the loan portfolio.
The provision for possible loan losses increased by approximately $2.3 from the
same quarter in prior year and by $3.1 million from the same six months in the
prior year and is reflective of Management's intention to maintain reserves for
possible loan losses at a level sufficient to provide for its loss
expectations. The Bank's ratio of loan loss reserve to total loans was 2.24%
and 1.78% as of June 30, 1993 and June 30, 1992, respectively.
Loan charge-offs (net of recoveries) for the three and six months ended June
30, 1993 totalled approximately $3.1 and $3.4 million, respectively. This
compares to net charge-offs of $1.0 and $1.6 million for the three and six
months ended June 30, 1992. This increase in charge-offs is primarily
attributable to the charge-off of certain real estate loans caused by the
continuing erosion in real estate values in Southern California.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as real estate values in
Southern California. Inasmuch as this is the principle geographic area in
which Metrobank conducts its business, this environment has had an adverse
impact on the Bank's asset quality. As of December 31, 1992, the Bank had
approximately $17.3 million in non-performing assets which consisted primarily
of $10.8 million in other real estate owned and insubstance foreclosures and
$4.9 million of non-accrual loans. As of June 30, 1993, the Bank had
approximately $17.1 million in non-performing assets of which $11.8 million
consisted of other real estate owned and insubstance foreclosures and $5.3
million of non-accrual loans. Total non-performing assets to total assets as
of December 31, 1992 and June 30, 1993 were approximately 1.9% and 1.8%,
respectively.
<PAGE> 25
Non-Interest Income
Non-interest income totalled $2.6 million for the quarter ended June 30, 1993
compared to $1.3 million for the quarter ended June 30, 1992. Of this
increase, approximately $965,000 was attributable to a gain on the sale of $40
million of investment securities and $275,000 was attributable to gains on
the sales of real estate. The purpose of selling the Treasury securities was
two fold. First, most of the gain realized was utilized to offset declining
asset values while preserving the Bank's capital position. Secondly, as part
of the Memorandum of Understanding which the Bank has entered into with the
Federal Deposit Insurance Corporation, the Bank is required to maintain a 15%
volatile liability dependency ratio. This ratio measures the relationship of
volatile deposits, primarily brokered deposits, money desk deposits, time
certificates of deposit in excess of $100,000 and borrowings, in relation to
adjusted net earning assets. One of the factors which improves this ratio is
the relationship of investment securities which mature within one year of the
reporting date, and as a result, approximately half of the funds reinvested
from the sale were invested in securities which mature in one year or less. As
of June 30, 1993, Metrobank's volatile liability dependency ratio was less than
5%, comfortably below the 15% maximum mandated by the FDIC.
Non-interest income totalled $5.2 million for the six months ended June 30,
1993 compared to $2.7 million for the same period in prior year. The increase
of $2.5 million was mainly the result of $1.8 million total gain on the sale of
investment securities and $275,000 of total gains on the sales of real estate.
The investment gains taken during the first half of 1993 were primarily used to
accomplish three objectives. First was to offset the declining asset valuation
issues as discussed above. Secondly, the Bank prepaid the scheduled principal
reductions on the Employee Stock Ownership Trust loan which totalled
approximately $430,000, and additionally, wrote off approximately $400,000 of
goodwill associated with the acquisition of the Bank's insurance division. All
three of these transactions served to improve the Bank's regulatory capital
position which remained in excess of regulatory minimums. The Bank experienced
approximately a $425,000 increase in all other non-interest income of which
$278,000 is attributable to an improvement in rental income on Metrocorp's real
estate holdings.
Non-Interest Expense
Non-interest expense totalled $9.3 million for the second quarter of 1993 as
compared to $10.0 million for the second quarter of 1992. This decrease of
$700,000 was the result of a decrease of $495,000 in the provision for real
estate related write-downs, a $160,000 decrease in data processing and other
services paid on behalf of certain depository relationships and a $45,000 net
decrease in all other non-interest expense.
Non-interest expense totalled $20.2 million for the six months ended June 30,
1993 compared to $19.5 million for the six months ended June 30, 1992.
Personnel expenses increased by approximately $700,000, of which $430,000 was
attributable to the prepayment on the Employee Stock Ownership and Trust loan.
Additionally, $400,000 of goodwill associated with the acquisition of the
Bank's insurance division was written off during the first half of the year.
Other non-interest expenses had a net decrease of $400,000 during the first
half of the year.
<PAGE> 26
Income Taxes
The Bank's effective tax rate for the three and six months ended June 30, 1993
was approximately 25.4% and 24.3%, compared to 11.9% and 16.5% for the three
and six months ended June 30, 1992, respectively. This increase in the
effective tax rate from prior year is mainly due to a decrease in the tax
credits that would be utilized against income. The Bank's effective tax rate is
less than the statutory rate due to the utilization of income tax credits
generated by its low income housing project. The utilization of these credits,
however, is subject to certain alternative minimum tax limitations. During the
second quarter of 1993, the Bank generated pre-tax profits which allowed the
Bank to utilize approximately $200,000 in tax credits. The remaining $35,000 of
tax credits utilized was carried back against income which was generated in
prior periods. During the first six months of 1993, the Bank generated pre-tax
profits which allowed the Bank to utilize approximately $480,000 in tax credits
and the remaining $100,000 of tax credits utilized was carried back against
income which was generated in prior periods. As of June 30, 1993, the Bank had
approximately $100,000 of carry-back ability remaining.
Capital Resources
As of June 30, 1993, the Bank's shareholders' equity totalled $61.0 million, an
increase of approximately $3.8 million from June 30, 1992. This increase in
equity was caused by the $800,000 decrease in a loan made for the benefit of
the Employee Stock Ownership Trust (ESOT), as well as net income of $5.8
million for the twelve months ended June 30, 1993, offset by the payment of
cash dividends totalling $2.8 million during the past twelve months. As of
June 30, 1993, the Bank's risk based capital ratio and tier one capital ratio
were 11.0% and 9.7%, respectively. Both ratios exceed the December 31, 1992
regulatory requirement of 8.0% and 4.0%, respectively. As of June 30, 1992,
the Bank's risk based capital and tier one capital ratios were 9.5% and 10.8%,
respectively. Additionally, the Bank has entered into a Memorandum of
Understanding with the Federal Deposit Insurance Corporation. The primary
actions the Bank is taking under the informal memorandum are to maintain a Tier
1 leverage capital ratio of at least 6.5 percent and to seek FDIC and
California State Banking Department approval before paying quarterly cash
dividends. The Bank's Tier 1 leverage capital ratio as of June 30, 1993 and
June 30, 1992 were 6.9% and 6.7%, respectively.
Investments and Liquidity
During the second quarter of 1993, in anticipation of the implementation of
SFAS No. 115, Metrobank classified its investment securities as either held to
maturity or available for sale based on management's intentions. The Bank will
not hold any securities in a trading category. As of June 30, 1993, the Bank
had approximately $233 million in investment securities, consisting of $178
million in U.S. Treasury securities and $55 million in mortgage-backed
<PAGE> 27
securities. $105 million of the U.S. Treasury securities have been classified
as held for sale while the remainder of the U.S. Treasury securities, as well
as the mortgage-backed securities have been classified as held to maturity. As
of June 30, 1993, the unrealized gains are $4.4 and $2.4 million for the
available for sale and held to maturity portion of the U.S. Treasury
securities, respectively.
The Bank is required by the Federal Reserve Board to maintain an average
balance of liquid assets equal to at least 5% of withdrawable deposits and
borrowings which are payable in one year or less. The Bank has consistently
met these liquidity requirements. The liquidity levels of the Bank are managed
by its Asset/Liability Management Committee. This committee is charged with
the responsibility of insuring that reserve balances are maintained and to
ensure that the Bank obtains funds necessary to meet existing deposit outflow
requirements as well as asset growth. The Bank's primary source of funds is
derived from principal and interest payments on loans, principal and interest
payments on its investment portfolio, generation of non-interest-bearing and
interest-bearing deposits, and, to a lesser extent, borrowings, effected
primarily through short-term repurchase agreements and the use of the Bank's
federal fund borrowing arrangements.
Inasmuch as a significant portion of the Bank's deposit base is concentrated in
demand deposits, which are inherently more volatile, the Asset/Liability
Committee operates a Money Desk to help supplement deposit generating
activities. Additionally, in connection with maintaining a liquidity cushion,
the Bank has established an unsecured borrowing capacity of approximately $73.6
million, or 8.37% of total deposits, and a secured borrowing capacity of $169.8
million, or 19.32% of total deposits. The combination of these two borrowing
facilities provides the Bank with a secondary source of liquidity of
approximately $243.4 million or 27.70% of total deposits.
Additionally, as part of the Memorandum of Understanding, the Bank stipulated
to maintain a volatile liability ratio of less than 15%. As of June 30, 1993,
the Bank's ratio was less than 5%. In connection with the adoption of the
Memorandum of Understanding relating to volatile liability dependency, the Bank
has taken certain actions designed to continue compliance with this
requirement. These actions include the elimination of broker deposits, the
restructuring of the Bank's securities portfolio and the development of plans
designed to augment the Bank's core deposit base.
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 2, 1993 Metrobank
----------------------------------
(Bank)
By: /s/ David P. Malone
-----------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank in
the capacities indicated on the date set forth above.
Signature
/s/ Christopher T. Ishikawa
- -------------------------------
Christopher T. Ishikawa
First Vice President/Controller
(Principal Accounting Officer)
<PAGE> 29
- --------------------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1993
METROBANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
95-3271474
(IRS EMPLOYER IDENTIFICATION NO.)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
90024
(ZIP CODE)
(310) 824-5700
(BANK'S TELEPHONE NUMBER INCLUDING AREA CODE)
INDICATE BY CHECK-MARK WHETHER THE BANK (1) HAS FILED ALL REPORTS REQUIRED TO BE
FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING
TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE BANK WAS REQUIRED TO FILE
SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST
NINETY DAYS.
YES XX NO
---- ----
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF SEPT. 30, 1993: 4,756,672
- --------------------------------------------------------------------------------
<PAGE> 30
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION SEPTEMBER 30,
1993, DECEMBER 31, 1992 AND SEPTEMBER 30, 1992
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1993
AND SEPTEMBER 30, 1992
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY NINE
MONTHS ENDED SEPT. 30, 1993 AND SEPT. 30, 1992
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPT. 30, 1993 AND SEPT. 30, 1992
NINE MONTHS ENDED SEPT. 30, 1993 AND SEPT. 30, 1992
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
<PAGE> 31
METROBANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, September 30,
1993 December 31, 1992
(Unaudited) 1992 (Unaudited)
Assets
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 84,905 $ 86,164 $ 71,186
Federal funds sold 25,000 -- 10,000
Investment securities 240,768 248,912 243,726
Investment in real estate 18,621 19,167 19,947
Loans, net of reserve 543,913 517,850 510,293
Accrued interest receivable 6,219 5,978 6,892
Other real estate owned, net 8,456 10,834 12,276
Premises and equipment, net 2,737 3,120 3,157
Other assets 12,882 13,058 11,387
- -------------------------------------------------------------------------------------------------
Total Assets $ 943,501 $ 905,083 $ 888,864
=================================================================================================
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------------------------------
Deposits:
Time certificates $ 115,115 $ 119,770 $ 177,934
Other deposits 750,641 682,093 634,890
- -------------------------------------------------------------------------------------------------
Total deposits 865,756 801,863 812,824
Securities sold under agreement to repurchase
and federal funds purchased 3,500 32,695 6,630
Accrued interest payable 445 444 567
Other liabilities 11,310 10,802 10,844
- -------------------------------------------------------------------------------------------------
Total liabilities 881,011 845,804 830,865
Shareholders' equity:
Common stock 34,333 34,310 34,310
Guarantee of ESOP loan (288) (863) (1,007)
Undivided profits 28,445 25,832 24,696
- -------------------------------------------------------------------------------------------------
Total shareholders' equity 62,490 59,279 57,999
- -------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 943,501 $ 905,083 $ 888,864
=================================================================================================
Book value per share $ 13.14 $ 12.47 $ 12.20
Standby letters of credit $ 4,911 $ 4,081 $ 5,470
Ratio of average noninterest-bearing deposits
to average total deposits 47.9% 47.8% 43.8%
Ratio of average gross loans to average
total deposits 67.2% 68.1% 68.3%
Ratio of loan loss reserve to gross loans 2.28% 1.91% 2.04%
=================================================================================================
</TABLE>
<PAGE> 32
METROBANK
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
September 30, September 30,
(in thousands, except 1993 1992 1993 1992
per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans $11,287 $10,802 $33,273 $32,420
U.S. Treasury securities 2,919 2,977 9,303 8,612
Obligations of U.S. government agencies -- 24 -- 788
Other securities 995 1,501 3,200 4,023
Other interest income 62 51 151 92
- ----------------------------------------------------------------------------------------------------------------------------------
15,263 15,355 45,927 45,935
Interest expense:
Time certificates of deposit 1,131 1,665 3,993 5,319
Other deposits 1,722 1,766 4,958 5,795
Funds purchased and securities sold under
agreements to repurchase 148 364 872 1,184
Capitalized carrying costs -- -- -- (65)
Other interest expense -- 26 -- 92
- ----------------------------------------------------------------------------------------------------------------------------------
3,001 3,821 9,823 12,325
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income 12,262 11,534 36,104 33,610
Provision for possible loan losses 2,360 2,400 7,795 4,725
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible
loan losses 9,902 9,134 28,309 28,885
Noninterest income:
Service charges on deposit accounts 339 340 1,047 970
Gain on sales of securities 1,148 -- 2,981 --
Other noninterest income 1,602 1,058 4,255 3,147
- ----------------------------------------------------------------------------------------------------------------------------------
3,089 1,398 8,283 4,117
Noninterest expense:
Personnel expense 3,843 3,622 11,942 11,036
Occupancy, furniture and equipment expense 1,391 888 3,915 3,269
Other noninterest expense 5,728 4,271 15,282 13,945
- ----------------------------------------------------------------------------------------------------------------------------------
10,962 8,781 31,139 28,250
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 2,029 1,751 5,453 4,752
Provision for income taxes 839 722 2,253 1,968
Income tax credit (260) (375) (840) (1,125)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings $1,450 $1,404 $4,040 $3,909
==================================================================================================================================
Earnings per share $0.30 $0.30 $0.85 $0.83
Dividends declared per share $0.15 $0.15 $0.45 $0.45
==================================================================================================================================
Weighted average shares outstanding 4,756,672 4,754,172 4,755,546 4,753,354
==================================================================================================================================
Net return on average shareholders' equity 9.3% 9.6% 8.9% 9.1%
Net return on average assets 0.6% 0.6% 0.6% 0.6%
==================================================================================================================================
</TABLE>
<PAGE> 33
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 1992
(dollars in thousands)
Common Stock
------------------------- Guarantee of Undivided
Shares Amount ESOP Loan Profits Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991 4,750,172 $34,273 $(1,438) $22,926 $55,761
Exercise of stock options 4,000 37 -- -- 37
$0.30 per share cash dividend -- -- -- (2,139) (2,139)
Reduction in indebtedness for ESOP -- -- 431 -- 431
Net earnings -- -- -- 3,909 3,909
- ----------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1992 4,754,172 $34,310 $(1,007) $24,696 $57,999
======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 1993
(dollars in thousands)
Common Stock
-------------------------- Guarantee of Undivided
Shares Amount ESOP Loan Profits Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 4,754,172 $34,310 $(863) $25,832 $59,279
Exercise of stock options 2,500 23 -- -- 23
$0.30 per share cash dividend -- -- -- (1,427) (1,427)
Reduction in indebtedness for ESOP -- -- 575 -- 575
Net earnings -- -- -- 4,040 4,040
- ----------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1993 4,756,672 $34,333 $(288) $28,445 $62,490
======================================================================================================================
</TABLE>
<PAGE> 34
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Quarter ended Sept. 30,
1993 1992
(in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,450 $ 1,404
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities 384 120
Depreciation and amortization 243 335
Provision for possible loan losses 2,360 2,400
Provision for real estate investment losses -- --
Provision for OREO & ISF 1,003 488
Loss (gain) on OREO & ISF 13 --
Gain on sale of FFE (9) --
Goodwill amortization -- 16
Interest capitalized -- --
Increase (decrease) in taxes payable (234) (542)
Decrease (increase) in accrued interest receivable (848) (850)
Decrease (increase) in other assets (3,544) (1,527)
Increase (decrease) in accrued interest payable (170) (105)
Increase (decrease) in other liabilities 1,769 (774)
- -----------------------------------------------------------------------------------------------------------
Total adjustments 967 (439)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 2,417 965
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (39,647) (23,565)
Proceeds from sales and maturities of investment securities 31,003 18,447
Loan fundings, net of principal collected (13,819) (17,935)
Proceeds from sale of equipment 9 --
Sale of other real estate owned -- --
Purchase of premises and equipment (100) (245)
Decrease (increase) in real estate investments 146 476
Decrease (increase) in banker's acceptances (1,567) 286
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (23,975) (22,536)
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 14,084 7,456
Net increase (decrease) in certificates of deposit (27,189) 4,815
Increase (decrease) in repurchase agreements and federal funds purchased 2,500 (10,195)
Dividends paid (714) (713)
Stock options exercised -- --
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (11,319) 1,363
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (32,877) (20,208)
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THIRD QUARTER 142,782 101,394
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF THIRD QUARTER $ 109,905 $ 81,186
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -----------------------------------------------------------------------------------------------------------
Cash paid during the first three months for:
Interest $ 3,171 $ 3,924
Income taxes 1,015 890
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ -- $ (144)
Foreclosed real estate loans -- 1,150
===========================================================================================================
</TABLE>
<PAGE> 35
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Nine months ended Sept. 30
1993 1992
(in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 4,040 $ 3,909
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities 911 70
Depreciation and amortization 724 998
Provision for possible loan losses 7,795 4,725
Provision for real estate investment losses 197 402
Provision for OREO & ISF 1,625 1,293
Loss (gain) on OREO & ISF 288 --
Gain on sale of FFE (9) --
Goodwill amortization 429 48
Interest capitalized -- (65)
Increase (decrease) in taxes payable (867) (2,242)
Decrease (increase) in accrued interest receivable (241) (1,277)
Decrease (increase) in other assets 627 (1,796)
Increase (decrease) in accrued interest payable -- (369)
Increase (decrease) in other liabilities 1,069 (1,100)
- -----------------------------------------------------------------------------------------------------------
Total adjustments 12,548 687
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 16,588 4,596
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (112,726) (101,422)
Proceeds from sales and maturities of investment securities 119,959 66,731
Loan fundings, net of principal collected (30,490) (43,317)
Proceeds from sale of equipment 9 --
Sale of other real estate owned -- --
Purchase of premises and equipment (324) (895)
Decrease (increase) in real estate investments 545 768
Decrease (increase) in banker's acceptances (2,399) 151
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (25,426) (77,984)
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 68,548 102,401
Net increase (decrease) in certificates of deposit (4,655) (30,403)
Increase (decrease) in repurchase agreements and federal funds purchased (29,195) (7,780)
Dividends paid (2,140) (1,996)
Stock options exercised 21 38
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 32,579 62,260
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 23,741 (11,128)
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 86,164 92,314
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF THIRD QUARTER $ 109,905 $ 81,186
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -----------------------------------------------------------------------------------------------------------
Cash paid during the first three months for:
Interest $ 9,892 $ 12,758
Income taxes 2,470 2,660
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (575) $ (432)
Foreclosed real estate loans 2,632 8,467
===========================================================================================================
</TABLE>
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated statements of the financial condition of
Metrobank at September 30, 1993 and 1992, and the consolidated
statements of earnings, consolidated statements of changes in
shareholders' equity and consolidated statements of cash flows for the
periods presented, have been prepared by the Bank without audit. In the
opinion of Management, all adjustments necessary to present fairly the
financial position, results of operations and statements of cash flows
at September 30, 1993 and 1992 and for all periods presented have been
made. Management has elected to omit substantially all of the
disclosures required by generally accepted accounting principles, and,
accordingly, these financial statements do not purport to present the
Bank's financial position in accordance with generally accepted
accounting principles.
These financial statements should be read in conjunction with the
consolidated financial statements contained in the Bank's Annual Report
(Form F-2).
Note 2. Earnings Per Share
Earnings per share is computed on the basis of the weighted average
number of shares outstanding for each period (4,756,672 and 4,754,172
for the three months ended September 30, 1993 and 1992, and 4,755,546
and 4,753,354 for the nine months ended September 30, 1993 and 1992).
Note 3. Letters of Credit
The Bank had outstanding letters of credit of $10.6 million as of
September 30, 1993, $10.1 million as of December 31, 1992, and $10.6
million as of September 30, 1992.
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of its financial
condition and results of operations, which follows, should be read in
conjunction with the consolidated financial statements and related notes to the
financial statements of the Bank that appear elsewhere in this report.
Net Earnings
For the three and nine month periods ending September 30, 1993, the Bank
reported net earnings of $1.4 million and $4.0 million, or $0.30 and $0.85 per
share, compared to $1.4 million and $3.9 million, or $0.30 and $0.83 per share
for the same periods in the prior year.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments less
interest expense on deposits and other liabilities). A primary factor affecting
the level of net interest income is the Bank's interest rate margin between the
yield on interest-earning assets and the rate paid on interest-bearing
liabilities.
The Bank's net interest income before provision for possible loan losses was
$12.3 million for the quarter ended September 30, 1993 as compared to $11.5
million for the quarter ended September 30, 1992. Total interest income
decreased by approximately $100,000 for the quarter ended September 30, 1993
compared to the quarter ended September 30, 1992. The quarterly average rate for
loans and investment securities was 8.05% for the quarter ended September 30,
1992 compared to 7.69% for the quarter ended September 30, 1993. This decrease
in interest rates resulted in a decrease in total interest income of
approximately $700,000. This decrease in total interest income associated with a
decline in interest rates was offset partially by an increase in average
balances which increased from $759 million for the quarter ended September 30,
1992 to $788 million for the quarter ended September 30, 1993.
Total interest expense decreased by approximately $800,000 for the quarter ended
September 30, 1993 compared to the quarter ended September 30, 1992. This
decrease of approximately $800,000 in total interest expense can be attributed
to a decline in rates which account for approximately $480,000 of the total
decline. In addition, the Bank reduced its dependence on
<PAGE> 38
volatile liabilities causing a reduction in average outstandings during the same
quarter resulting in a decrease of $340,000 associated with a change in volume.
The Bank's net interest income before provision for possible loan losses was
$36.1 million for the nine months ended September 30, 1993 as compared to $33.6
million for the nine months ended September 30, 1992. Total interest income
decreased by approximately $8,000 for the nine months ended September 30, 1993
compared to the nine months ended September 30, 1992 and was caused by a decline
in interest rates resulting in a decrease in total interest income of
approximately $2.7 million, offset by an increase in average balances which
resulted in an increase of approximately $2.7 million, the net result was a
total change of $8,000.
Total interest expense decreased by approximately $2.5 million for the nine
months ended September 30, 1993 compared to the nine months ended September 30,
1992. A decline in interest rates, in general, resulted in a decrease in total
interest expense of approximately $2.6 million. The change in interest expense
associated with a change in volume was considered immaterial for purposes of
this discussion (see rate volume analysis attached).
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest rates
and average balances:
<TABLE>
<CAPTION>
Quarter ended Sept. 30, 1993 Nine Months ended Sept. 30, 1993
over Qtr. ended Sept. 30, 1992 over nine months ended Sept. 30, 1992
------------------------------------- -------------------------------------
Total Total
Increase Change Due To: Increase Change Due To:
In thousands (Decrease) Rate Volume (Decrease) Rate Volume
---------- --------- ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 485 $ (98) $ 583 $ 853 $(1,163) $ 2,016
Investment securities (588) (542) (46) (920) (1,503) 583
Other 11 (24) 35 59 (40) 99
------- ------- ------- ------- ------- -------
Total $ (92) $ (664) $ 572 $ (8) $(2,706) $ 2,698
INTEREST EXPENSE:
Interest bearing deposits (578) (448) (130) (2,163) (2,444) 281
Federal funds (216) (32) (184) (312) (200) (112)
Other (26) 0 (26) (27) 0 (27)
------- ------- ------- ------- ------- -------
Total $ (820) $ (480) $ (340) $(2,502) $(2,644) $ 142
------- ------- ------- ------- ------- -------
Net interest income $ 728 $ (184) $ 912 $ 2,494 $ (62) $ 2,556
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 39
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible are
charged to this allowance; subsequent recoveries, if any , are credited back to
the allowance. Additions to the allowance are made on a regular basis through
charges to operations and are reflected in the Bank's statement of earnings as a
provision for possible loan losses. The balance of the allowance for possible
loan losses reflects the amount which, in management's judgement, is adequate to
provide for potential loan losses after weighing the mix of the loan portfolio,
current economic conditions, past loan loss experience and other factors
relevant to estimating loan losses. The adequacy of the allowance for possible
loan losses is also evaluated relative to the level of non-performing loans
(those for which principal or interest is past due more than 90 days and those
on non-accrual status).
In evaluating the adequacy of the allowance for possible loan losses, management
also reviews the balance of the allowance as a percentage of loans outstanding
less loans considered secured. Such security generally is composed of cash and
first trust deeds on real property. The existence of collateral does not,
however, eliminate all credit risk as property acquired through foreclosure
("OREO") may not be saleable for an amount sufficient to offset the entire
amount of the loan and costs associated with foreclosure. Although management
believes that the allowance for possible loan losses is adequate, future
provisions will be subject to continuing evaluation of risks inherent in the
loan portfolio.
The provision for possible loan losses of $2.4 million remained constant
compared to the same quarter in prior year and increased by $3.1 million from
the same nine months in the prior year and is reflective of Management's
intention to maintain reserves for possible loan losses at a level sufficient to
provide for its loss expectations. The Bank's ratio of loan loss reserve to
total loans was 2.28% and 2.04% as of September 30, 1993 and September 30, 1992,
respectively.
Loan charge-offs (net of recoveries) for the three and nine months ended
September 30, 1993 totalled approximately $1.7 and $5.2 million, respectively.
This compares to net charge-offs of $742,000 and $2.3 million for the three and
nine months ended September 30, 1992. This increase in charge-offs is primarily
attributable to charge-offs of certain real estate loans necessitated by the
continuing erosion in real estate values present in Southern California.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as real estate values in
Southern California. As of December 31, 1992, the Bank had approximately $17.3
million in non-performing assets which consisted primarily of $10.8 million in
other real estate owned and insubstance foreclosures and $4.9 million of non-
accrual loans. As of September 30, 1993, the Bank had approximately $14.4
million in non-performing assets of which $8.5 million consisted of other real
estate owned and insubstance foreclosures and $3.2 million of non-accrual loans
and $2.7 million in loans which were over ninety days delinquent with respect to
either principal or interest. Total non-performing assets expressed as a
percentage of total assets as of December 31, 1992 and September 30, 1993 was
approximately 1.9% and 1.5%, respectively.
<PAGE> 40
Non-Interest Income
Non-interest income totalled $3.1 million for the quarter ended September 30,
1993 compared to $1.4 million for the quarter ended September 30, 1992. Of this
increase, approximately $1.1 million was attributable to a gain recognized on
the sale of approximately $15 million of treasury securities, which were sold to
offset a decline in asset values while maintaining the Bank's capital position.
The securities which were sold are classified as held for sale. Other
non-interest income increased by approximately $500,000 for the quarter ended
September 30, 1993 compared to the quarter ended September 30, 1992.
Approximately $250,000 of this increase was the result of the sale of the Bank's
insurance division. In addition, Metrocorp's operating income increased by
approximately $200,000 and is largely attributable to a catch-up adjustment made
with respect to a foreclosed real estate asset which resulted in the collection
of rental income associated with the property in the amount of approximately
$200,000.
Non-interest income totalled $8.3 million for the nine months ended September
30, 1993 as compared to $4.1 million for the same period last year. This
increase of $4.2 million can be attributed to a $3.0 million gain on the sale of
treasury securities recognized so as to insulate the Bank's income stream from
the adverse effects of a declining real estate market in Southern California. In
addition, the Bank also disposed of its insurance division which resulted in a
pre-tax gain of approximately $250,000, as well as the disposition of a number
of real estate properties at a gain of $350,000.
Non-Interest Expense
Non-interest expense totalled $11.0 million for the third quarter of 1993 as
compared to $8.8 million for the third quarter of 1992. Personnel expense
increased by approximately $200,000 for the quarter ended September 30, 1993
compared to the quarter ended September 30, 1992. Bonus expense for the third
quarter of 1992 was $200,000 less than the third quarter of 1993. Additionally,
in the third quarter of 1992, there was a non-recurring reversal of
approximately $105,000 for various vacation accrual. However, during the third
quarter of 1993, there was approximately $145,000 less in Employee Stock
Ownership and Trust Loan payments. Occupancy, furniture and equipment expenses
increased by approximately $500,000 for the quarter ended September 30, 1993
compared to the quarter ended September 30, 1992. This variance was caused by
the reversal of a $350,000 accrual associated with our Newport Beach facility
which reduced occupancy, furniture and equipment expense for the third quarter
of 1992. Other non-interest expense increased by approximately $1.5 million for
the quarter ended September 30, 1993 compared to the quarter ended September 30,
1992, and was caused by an increase of approximately $650,000 associated with
real estate valuation issues, an increase of approximately $350,000 in costs
absorbed by the Bank in connection with the Bank's special industry deposit
base.
Non-interest expense totalled $31.1 million for the nine months ended September
30, 1993 compared to $28.3 million for the nine months ended September 30, 1992.
Personnel expense increased by approximately $900,000 for the nine months ended
September 30, 1993 compared to the nine months ended September 30, 1992.
Salaries increased by approximately $200,000,
<PAGE> 41
group insurance expense increased by approximately $100,000, 401K employer
contributions increased by approximately $100,000, deferred loan costs (a
credit) decreased by approximately $190,000. Additionally, increases in employer
taxes, employee expenses related to Metrobank's subsidiary, Josi & Dold,
temporary employee expenses and education expense increases amounted to
approximately $310,000. Occupancy, furniture and equipment expense increased
approximately $600,000 for the nine months ended September 30, 1993 compared to
the nine months ended September 30, 1992. $350,000 of this increase was
attributable to the reversal of the mark to market accrual discussed above.
Other non-interest expense increased by approximately $1.3 million for the nine
months ended September 30, 1993 compared to the nine months ended September 30,
1992. This increase is a result of transactions occurring in the third quarter
as discussed above. Additionally, $400,000 of goodwill associated with the
acquisition of the Bank's insurance division was written off during the first
half of the year.
Income Taxes
The Bank's effective tax rate for the three and nine months ended September 30,
1993 was approximately 28.5% and 25.9%, compared to 19.8% and 17.7% for the
three and nine months ended September 30, 1992, respectively. This increase in
the effective tax rate from prior year is due to a decrease in the tax credits
utilized in these respective periods. The Bank's effective tax rate is less than
the statutory rate as a result of the utilization of income tax credits
generated by its low income housing project. The utilization of these credits,
however, is subject to certain alternative minimum tax limitations. During the
third quarter of 1993, the Bank generated pre-tax profits which allowed the Bank
to utilize approximately $260,000 in tax credits. During the first nine months
of 1993, the Bank generated pre-tax profits which allowed the Bank to utilize
approximately $760,000 in tax credits with the remaining $80,000 of tax credits
utilized was attributable to tax credits carried back against income which was
generated in prior periods. As of September 30, 1993, the Bank had approximately
$120,000 of carry-back ability remaining.
Capital Resources
As of September 30, 1993, the Bank's shareholders' equity totalled $62.5
million, an increase of approximately $4.5 million from September 30, 1992. This
increase in equity was caused by the $700,000 decrease in a loan made for the
benefit of the Employee Stock Ownership Trust (ESOT), as well as net income of
$5.9 million for the twelve months ended September 30, 1993, offset by the
declaration of cash dividends totalling $2.1 million during the past twelve
months. As of September 30, 1993, the Bank's risk based capital ratio and tier-1
capital ratio were 11.4% and 10.1%, respectively. Both ratios exceed the
December 31, 1992 regulatory requirement of 8.0% and 4.0%, respectively.
Additionally, as a result of the Bank entering into a "Memorandum of
Understanding" with the Federal Deposit Insurance Corporation, the Bank must
maintain a tier-1 leverage capital ratio of at least 6.5 percent and seek FDIC
and California State Banking Department approval in connection with the
declaration of dividends. The Bank's tier-1 leverage capital ratio as of
September 30, 1993 and September 30, 1992 was 7.0% and 6.7%, respectively.
<PAGE> 42
Investments and Liquidity
Beginning January 1, 1994, Metrobank will be required to abide by the
requirements of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity securities." This statement will
require that institutions classify investment securities as either held to
maturity, available for sale, or trading. Investments held to maturity will be
carried at amortized cost. Investments available for sale must be marked to
market with unrealized gains or losses, net of the taxes, included in equity.
Trading securities must also be marked to market, however, unrealized gains or
losses must be reflected in current earnings.
During the second quarter of 1993, Metrobank classified its investment
securities as either held to maturity or available for sale. The Bank does not
anticipate holding any securities in a trading account. As of September 30,
1993, the Bank had approximately $241 million in investment securities,
consisting of $188 million in treasury securities, $50 million in
mortgage-backed securities and $3 million in FHLB stock. $86 million of the
treasury securities have been classified as held for sale while the remainder of
the treasury securities, as well as the mortgage-backed securities have been
classified as held to maturity. As of September 30, 1993, the unrealized gains
are $3.7 million and $3.8 million in the available for sale and held to maturity
portion of the treasury securities portfolio, respectively.
The Bank is required by the Federal Reserve Board to maintain an average balance
of liquid assets equal to at least 5% of withdrawable deposits and borrowings
which are payable in one year or less. The Bank has consistently met these
liquidity requirements. The liquidity levels of the Bank are managed by its
Asset/Liability Management Committee. This committee is charged with the
responsibility of insuring that reserve balances are maintained and to ensure
that the Bank obtains funds necessary to meet existing deposit outflow
requirements as well as asset growth. The Bank's primary source of funds is
derived from principal and interest payments on loans, principal and interest
payments on its investment portfolio, generation of non-interest-bearing and
interest-bearing deposits, and, to a lesser extent, borrowings, effected
primarily through short-term repurchase agreements and the use of the Bank's
federal fund borrowing arrangements.
Inasmuch as a significant portion of the Bank's deposit base is concentrated in
demand deposits, which are more volatile than time interest bearing deposits,
the Asset/Liability Committee operates a Money Desk as a means of supplementing
funding activities. Additionally, the Bank has established unsecured credit
facilities of approximately $71 million, or 8.2% of total deposits, and secured
credit facilities of $139 million, or 16.1% of total deposits. The combination
of these facilities provides the Bank with a secondary source of liquidity of
approximately $210 million or 24.3% of total deposits.
Additionally, as part of the Memorandum of Understanding which the Bank
stipulated to, the Bank is required to maintain a volatile liability dependency
ratio not to exceed 15%. This ratio measures the relationship of volatile
deposits, primarily brokered deposits, money desk deposits, time certificates of
deposit in excess of $100,000 and borrowings, in relation to adjusted net
earning assets. One factor which improves this ratio is the relationship of
investment securities which mature within one year of the reporting date which
has caused the Bank to deposit in its portfolio in shorter term securities. As
of September 30, 1993, Metrobank's volatile liability dependency ratio was 4.2%.
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act of
1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 12, 1993 Metrobank
-----------------------------
(Bank)
By:\s\ David P. Malone
-----------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Bank in the
capacities indicated on the date set forth above.
Signature
\s\ Christopher T. Ishikawa
- -------------------------------
Christopher T. Ishikawa
First Vice President/Controller
(Principal Accounting Officer)
<PAGE> 1
EXHIBIT 99(p)
[LOGO]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
April 21, 1994
To Our Shareholders:
You are cordially invited to attend the 1994 Annual Meeting of the
Shareholders of Metrobank which will be held in the lobby of the Bank's
Headquarters Office, 10900 Wilshire Boulevard, Los Angeles, California 90024 on
May 24, 1994, commencing at 4:00 P.M.
The purposes of the meeting will be to elect directors for the coming
year and to report to you on the business and operations of the Bank.
The formal Notice of Meeting and Proxy Statement containing further
information pertinent to the business of the meeting are set forth on the pages
following this letter. Our Annual Report, which includes financial statements
for the Bank's fiscal year ended December 31, 1993, is enclosed herewith.
We hope you will be able to attend the meeting in person, but whether
or not you plan to attend, please sign and date the enclosed proxy and return
it in the accompanying envelope.
Sincerely,
/s/ David L. Buell
- -------------------------
David L. Buell
Chief Executive Officer,
Chairman of the Board
<PAGE> 2
[LOGO]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 1994
The Annual Meeting of Shareholders of Metrobank (the "Bank") will be
held on May 24, 1994 at 4:00 P.M. in the lobby of the Bank's Headquarters
Office, 10900 Wilshire Boulevard, Los Angeles, California 90024 for the
following purposes:
1. Election of Directors. The election as directors of the 8
persons listed in the accompanying Proxy Statement.
2. Other Business. Such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Shares represented by properly executed proxies will be voted in
accordance with the instructions therein and it is the intention of the Board
of Directors that shares represented by proxies which are not limited to the
contrary will be voted cumulatively in favor of the election as directors of
the persons named in the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on April 1,
1994 as the record date for determining those shareholders who will be entitled
to vote at the meeting.
Whether or not you presently plan to attend the meeting in person, the
Board of Directors urges you to date, sign and promptly return the enclosed
proxy. Your giving of such proxy does not preclude your right to vote in person
if you attend the meeting. A postage prepaid return envelope is enclosed for
your convenience in returning the signed proxy.
Your early attention to the proxy will be appreciated.
April 21, 1994 By Order of the Board of Directors,
/s/ Sharon L. Canup
---------------------------
Sharon L. Canup
Corporate Secretary
<PAGE> 3
[LOGO]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
PROXY STATEMENT
INFORMATION CONCERNING PROXY
The following information is furnished in connection with the
solicitation of the enclosed proxy by and on behalf of the Board of Directors
of Metrobank (the "Bank") for use at the Bank's Annual Meeting of Shareholders
to be held in the lobby of the Bank's Headquarters Office, 10900 Wilshire
Boulevard, Los Angeles, California 90024, on May 24, 1994 at 4:00 P.M. and at
any adjournment or adjournments thereof.
When proxies in the accompanying form are returned, properly dated and
executed, the shares they represent will be voted at the annual meeting in
accordance with the shareholder's directions by means of the ballot provided in
the proxies. If no contrary instructions are given, the persons named in the
proxy intend to vote the shares represented by the proxies (a) cumulatively in
favor of the election of the persons named as nominees for director in this
Proxy Statement and (b) in accordance with their best judgment on any other
matter which may come before the meeting and which is not presently
contemplated to come before the meeting. If any proxy is marked "withhold
authority" with regard to the withholding of authority to vote for the election
of directors, the shares such proxy represents will not be voted either for or
against the election of such directors.
The giving of the proxy does not affect any shareholder's right to
vote in person at the annual meeting and a proxy may be revoked by submitting a
new proxy or by appropriate notice in writing to the Corporate Secretary of the
Bank at any time before it is voted.
The principal solicitation of proxies is being made by mail; however,
additional solicitation may be made by telephone, telegraph or personal visits
by directors, officers and employees of the Bank. The total expense of this
solicitation will be borne by the Bank and will include reimbursements to
brokerage firms and others for their expense in forwarding soliciting material.
This Proxy Statement and the accompanying form of proxy are being mailed to
shareholders on or about April 21, 1994.
VOTING SECURITIES
OUTSTANDING VOTING SECURITIES AND RECORD DATE
The Bank has only one class of voting securities outstanding,
identified as no par value common stock ("Common Stock"). Shareholders of
record entitled to notice of and to vote at the meeting have been determined as
of the close of business on April 1, 1994. As of such date, 4,756,672 shares of
Common Stock were outstanding, all of which will be entitled to vote at the
meeting and any adjournment or adjournments thereof.
<PAGE> 4
CUMULATIVE VOTING
Each shareholder of record is entitled to one vote for each share held
on all matters to come before the meeting, except that shareholders have
cumulative voting rights with respect to the election of directors if a
candidate's or candidates' name(s) have been properly placed in nomination
prior to the voting and a shareholder present at the meeting has given notice
of his or her intention to vote his or her shares cumulatively. If a
shareholder has given such notice, all shareholders may cumulate their votes
for candidates in nomination. Under cumulative voting, each shareholder may
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's vote on the same principle among as
many candidates as the shareholder desires. The 8 candidates receiving the
highest number of votes are elected.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information, as of April 1, 1994,
with respect to the shareholdings of all principal officers and directors of
the Bank as a group and with respect to those persons (including any "group" as
that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934)
who were known to the Bank to be the beneficial owners of more than 5% of the
Bank's outstanding Common Stock, the Bank's only outstanding class of voting
securities:
<TABLE>
<CAPTION>
Percent of
Amount Class
Beneficially Beneficially
Name and Address Relationship with Bank Owned(1)(2) Owned(1)(2)
---------------- ---------------------- ------------- ------------
<S> <C> <C> <C>
Robert L. Mayer Director 1,307,184(3) 27.46%
660 Newport Center Drive,
Suite 1050
Newport Beach, California 92658
David L. Buell Director; Chief 535,804(4) 10.44%
10900 Wilshire Boulevard Executive Officer and
Los Angeles, California 90024 Chairman of the Board
Peter B. Caloyeras Director 270,100(5) 5.67%
Magnetika, Inc.
4053 Redwood Avenue
Los Angeles, California 90066
Wallace Wong Director 276,371(6) 5.80%
23042 Arroyo Vista
Rancho Santa Margarita, CA
92688
All principal officers and directors 2,574,107(7) 48.98%
as a group (10 people)
</TABLE>
_______________
(1) Excludes 210,969 shares held by the Bank's Stock Bonus Plan and Trust
(but includes approximately 37,401 shares, determined as of December
31, 1993, allocated to the accounts of Messrs. Alexander, Buell,
Bulseco and Malone) of which certain directors act as trustees.
(2) For purposes of calculating each percentage, the shares subject to the
options exercisable under the Bank's stock option plans of the persons
2
<PAGE> 5
to whom the calculation relates were added to both their shares and
the total shares outstanding at April 1, 1994. Subject to applicable
community property law, except as otherwise indicated, each of the
persons included in the table has sole voting and investment power
with respect to his or her shares.
(3) Includes (a) an aggregate of 3,000 shares issuable upon the exercise
of presently exercisable stock options granted under the Bank's stock
option plans and (b) 36,210 shares owned by Mr. Mayer's wife as to
which he disclaims any beneficial interest.
(4) Includes (a) an aggregate of 350,000 shares issuable upon the exercise
of presently exercisable stock options granted under the Bank's stock
option plans, (b) approximately 6,211 shares, determined as of
December 31, 1993, in the Employee Savings Plan account of Mr. Buell,
and (c) approximately 19,593 shares, determined as of December 31,
1993, allocated to the Stock Bonus Plan and Trust account of Mr.
Buell.
(5) Includes (a) a total of 138,336 shares owned by Mr. Caloyeras' wife
and trusts for certain family members as to which he disclaims any
beneficial interest and (b) an aggregate of 3,000 shares issuable upon
the exercise of presently exercisable stock options granted under the
Bank's stock option plans.
(6) Includes an aggregate of 3,000 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock
option plans.
(7) Includes (a) an aggregate of 454,000 shares issuable upon the exercise
of presently exercisable stock options granted under the Bank's stock
option plans, (b) approximately 7,225 shares, determined as of
December 31, 1993, in the Employee Savings Plan accounts of Messrs.
Alexander and Buell, and (c) approximately 37,401 shares, determined
as of December 31, 1993, allocated to the Stock Bonus Plan and Trust
accounts of Messrs. Alexander, Buell, Bulseco and Malone, all as more
fully described below on pp. 7-9.
ELECTION OF DIRECTORS
Eight directors of the Bank are to be elected at the annual meeting to
serve until the next annual meeting of shareholders and until their successors
are elected and qualified. All nominees of the Board of Directors except Robert
P. Bulseco are presently directors of the Bank. Unless authority to vote for
directors is withheld as to any or all of them, it is intended that shares
represented by proxies in the accompanying form will be cumulatively voted
"FOR" the election of the directors listed below or, if one or more of such
persons shall become unable or unwilling for good cause to stand for election,
"FOR" the election of such other persons as the Chief Executive Officer or
Board of Directors of the Bank may recommend in his or her place. The Board of
Directors has no reason to believe that any such nominees will be unable to
serve.
3
<PAGE> 6
The following information is furnished with respect to the nominees
and the principal officers of the Bank:
<TABLE>
<CAPTION>
Director or Percent of
Principal Amount Beneficially Class
Name of Individual Officer Owned as of Beneficially
Position with Bank or Occupation Since Age April 1, 1994(1)(2) Owned(1)(2)
- -------------------------------- ----------- --- ------------------- ------------
<S> <C> <C> <C> <C>
DIRECTORS
David L. Buell, 1978 58 535,804(3) 10.44%
Chief Executive Officer and
Chairman of the Board of the Bank
Robert P. Bulseco, -- 48 89,322(4) 1.85%
President and Chief
Administrative Officer of the Bank
Peter B. Caloyeras, 1978 63 270,100(5) 5.67%
President, Magnetika, Inc.
(Electrical Manufacturing)
Seymour J. Carr, D.M.D. 1978 74 30,775(6) .64%
Professor (Emeritus),
University of California,
Los Angeles
James W. Hobson, 1978 71 20,783(7) .43%
Vice-Chancellor (Emeritus),
University of California,
Los Angeles
Rudy B. Markmiller, 1984 58 5,768(7) .12%
President, Network Courier Services
Robert L. Mayer, 1978 68 1,307,184(8) 27.46%
President, The Robert Mayer
Corporation (Real Estate
Developer)
Wallace Wong, 1981 52 276,371(9) 5.80%
Chairman of the Board,
Santa Barbara Business College
and Real Estate Investor
PRINCIPAL OFFICERS
Paul B. Alexander, 1991 37 18,983(10) .40%
Executive Vice President and
Chief Credit Officer
David P. Malone, 1988 43 19,017(11) .40%
Executive Vice President and
Chief Financial Officer
</TABLE>
_______________
(1) Excludes 210,969 shares held by the Bank's Stock Bonus Plan (but
includes approximately 37,401 shares, determined as of December 31,
1993, allocated to the accounts of Messrs. Alexander, Buell, Bulseco
and Malone) of which Messrs. Buell, Caloyeras, Mayer and Wong are
trustees.
(2) Subject to applicable community property law, except as otherwise
indicated, each of the persons included in the table has sole voting
and investment power with respect to his or her shares.
(3) Includes (a) an aggregate of 350,000 shares issuable upon the exercise
of presently exercisable stock options granted under the Bank's stock
option plans, (b) approximately 6,211 shares, determined as of
4
<PAGE> 7
December 31, 1993, in the Employee Savings Plan account of Mr. Buell,
and (c) approximately 19,593 shares, determined as of December 31,
1993, allocated to the Stock Bonus Plan and Trust account of Mr.
Buell.
(4) Includes (a) an aggregate of 55,750 shares issuable upon the exercise
of presently exercisable stock options, and (b) approximately 11,572
shares, determined as of December 31, 1993, allocated to the Stock
Bonus Plan and Trust account of Mr. Bulseco.
(5) Includes (a) a total of 138,336 shares owned by Mr. Caloyeras' wife
and trusts for certain family members as to which he disclaims any
beneficial interest and (b) an aggregate of 3,000 shares issuable upon
the exercise of presently exercisable stock options.
(6) Dr. and Mrs. Carr share voting and investment power ; includes an
aggregate of 3,000 shares issuable upon the exercise of presently
exercisable stock options.
(7) Includes an aggregate of 3,000 shares issuable upon the exercise of
presently exercisable stock options.
(8) Includes 36,210 shares owned by Mr. Mayer's wife as to which he
disclaims any beneficial interest. Mr. Mayer can be viewed as a
"control person" of the Bank due to his substantial ownership interest
in the Bank. Also includes an aggregate of 3,000 shares issuable upon
the exercise of presently exercisable stock options.
(9) Includes an aggregate of 3,000 shares issuable upon the exercise of
presently exercisable stock options.
(10) Includes (a) an aggregate of 14,000 shares issuable upon the exercise
of presently exercisable stock options, (b) approximately 1,014
shares, determined as of December 31, 1993, in the Employee Savings
Plan account of Mr. Alexander, and (c) approximately 3,969 shares,
determined as of December 31, 1993, allocated to the Stock Bonus Plan
and Trust account of Mr. Alexander.
(11) Includes (a) an aggregate of 16,250 shares issuable upon the exercise
of presently exercisable stock options, and (b) approximately 2,267
shares, determined as of December 31, 1993, allocated to the Stock
Bonus Plan and Trust account of Mr. Malone.
All members of the Board of Directors and principal officers of the
Bank have been engaged in the same business or profession in the capacities
indicated for more than the past five years. David L. Buell, Robert P. Bulseco,
Paul B. Alexander and David P. Malone filed their Forms F-8A for the year ended
December 31, 1993 with the Federal Deposit Insurance Corporation 30 days
subsequent to the applicable filing deadline.
5
<PAGE> 8
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth the aggregate amount of cash
compensation paid by the Bank during its fiscal year ended December 31, 1993 to
(a) all principal officers whose aggregate direct remuneration during such year
exceeded $60,000, and (b) all principal officers of the Bank as a group:
<TABLE>
<CAPTION>
Name of Individual Cash
or Number in Group Capacities in Which Served Compensation(1)
- ------------------ -------------------------- ---------------
<S> <C> <C>
David L. Buell Chief Executive Officer $355,644
Robert P. Bulseco President and Chief Administrative Officer $232,021
Paul B. Alexander Executive Vice President and Chief Credit Officer $166,984
David P. Malone Executive Vice President and Chief Financial Officer $150,476
All principal officers $905,125
as a group (4 people)
</TABLE>
_______________
(1) Includes salary and bonus.
COMPENSATION PURSUANT TO PLANS
1988 Stock Option Plan. In May, 1989, the shareholders of the Bank
approved the Metrobank 1988 Stock Option Plan (the "1988 Plan"). The 1988 Plan
provides for the granting of both incentive options designed to qualify under
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), and
non-incentive options. The purposes of the 1988 Plan are to strengthen the
growth, development and financial success of the Bank and its subsidiaries by
providing to certain key employees and directors of the Bank and its
subsidiaries additional incentives for high levels of performance and to
encourage stock ownership in the Bank.
Under the 1988 Plan, up to an aggregate of 800,000 shares of the
Bank's unissued Common Stock may be issued to eligible employees and directors
of the Bank and its subsidiaries at an option price per share of not less than
100% of the fair market value of a share of the Bank's Common Stock at the date
the options are granted, except that the option price for shares under any
incentive stock option granted to any eligible person owning more than 10% of
the combined voting power of all classes of stock of the Bank or of any parent
or subsidiary of the Bank must be 110% of the fair market value of such shares
at the date of the grant.
The 1988 Plan is administered by a committee of disinterested persons
appointed by the Bank's Board of Directors. The committee, in its sole
discretion, determines the persons eligible to receive options, the number of
shares subject to each option, the price at which each option is granted and
whether the option is an incentive stock option or a non-incentive stock
option. Members of the committee, unless they are directors of the Bank, are
ineligible to participate in the 1988 Plan. Under the 1988 Plan, incentive
stock options and non-incentive stock options may be granted to eligible
employees of the Bank or of any of its subsidiaries and non-incentive stock
options may be granted to eligible directors of the Bank and to directors of
any of its subsidiaries. Automatically and without action of the committee,
each director of the Bank receives a non-incentive
6
<PAGE> 9
stock option covering 1,000 shares upon his or her election or appointment (if
he or she has not served as a director of the Bank in the previous 12 months)
and also immediately following each annual meeting of the shareholders of the
Bank; provided, however, that no director of the Bank is entitled to acquire
more than 3,000 shares pursuant to the exercise of options granted under the
1988 Plan. To the extent that the automatic grant of an option would entitle a
director to acquire more than 3,000 shares (inclusive of shares previously
acquired pursuant to the exercise of stock options under the 1988 Plan), the
number of shares covered by the option is reduced accordingly. Subject to the
express terms of the 1988 Plan, the committee may determine the duration of the
stock options; however, the maximum duration is ten years. Any incentive stock
option granted to any eligible employee owning more than 10% of the voting
power of all classes of the stock of the Bank, or any subsidiary or parent of
the Bank, may not be exercised after five years from the date of grant.
Non-incentive stock options granted to directors of the Bank have a term of ten
years.
Subject to the express terms of the 1988 Plan, an option may be
exercised in accordance with its terms, as determined by the committee. The
aggregate fair market value of shares for which any employee may exercise
incentive stock options in any calendar year under any plans of the Bank or any
subsidiary or parent of the Bank may not exceed $100,000. A non-incentive stock
option granted to a director of the Bank is exercisable after 12 months. An
option is exercised by giving written notice to the Bank specifying the number
of shares to be purchased, accompanied by full payment. There is a minimum
permitted exercise amount of 50 shares.
If the employment of an employee, or the status as a director of the
Bank or a subsidiary, ceases, then any options which he or she holds under the
1988 Plan will automatically terminate except if such cessation is due to (a)
the death of the employee or director, in which case the option remains
exercisable for 12 months after the death to the extent that it was exercisable
at the date of death, (b) the permanent and total disability of the employee or
director, in which case the option remains exercisable for 12 months after the
disability to the extent that it was exercisable at the date of cessation, or
(c) any other reason at a time when the option is exercisable, in which case
the option will continue to be exercisable for 90 days to the extent that it
was exercisable at the date of cessation.
In consideration of the granting of an option to an employee, the
employee must agree to remain in the employ of the Bank or its subsidiary for a
period of at least one year after the option is granted or until his or her
retirement with the approval of the Bank or of the subsidiary, whichever may be
the earlier, generally at his or her salary rate in effect at the time of the
granting of the option. However, nothing in the 1988 Plan, or in any agreement
executed by the employee pursuant to the 1988 Plan, will confer upon the
employee any right to continue in the employ of the Bank or subsidiary or will
interfere with or restrict the rights of the Bank or any subsidiary to
discharge such employee at any time for any reason whatsoever, with or without
good cause.
In the event of a dissolution or liquidation of the Bank, a
reorganization, merger, or consolidation of the Bank where the Bank is not the
surviving corporation, a sale of substantially all of the assets of the Bank,
or a reverse merger and the conversion of the outstanding shares of Common
Stock of the Bank into other property, all options will be exercisable in full
for a period of 30 days following delivery of notice of such event to
participants in the 1988 Plan and thereafter shall terminate.
7
<PAGE> 10
No option granted under the 1988 Plan may be assigned or transferred
except by will or by law of descent and distribution. During the lifetime of
an optionee, the option is exercisable only by him or her. Any employee or
director of the Bank or its subsidiaries, so long as he or she remains such an
employee or director, must notify the Bank of any disposition of any shares
acquired pursuant to options granted under the 1988 Plan.
The 1988 Plan will terminate in 1998, unless terminated earlier by the
Board of Directors.
Stock Bonus Plan and Trust. On May 27, 1980, the Board of Directors
adopted and approved a Stock Bonus Plan and Trust (the "Plan") and on July 24,
1980 entered into a Trust Agreement with First Interstate Bank of California
(the "Trustee") establishing the trust (the "Trust"). The Plan was amended and
restated in its entirety on October 22, 1985, effective as of January 1, 1984,
and the Trust was amended and restated in its entirety on September 13, 1985,
in order to comply with changes in the tax laws regulating such stock bonus
plans and trusts. The Plan was amended and restated on January 1, 1991 to
comply with the provisions of the Tax Regulations Act of 1986. On April 1, 1993
Union Bank was named trustee for the Plan. All Bank employees participate in
the Plan as of their date of hire. The Plan provides that the Bank may make
contributions to the Trust with the funds being invested primarily in stock of
the Bank, to be held by the Trustee until distributed to the Bank's employees
in accordance with the provisions of the Plan.
The Board of Directors of the Bank may determine, from time to time,
to make contributions to the Plan in the form of cash, stock of the Bank or
other property. However, the Bank is not required to make any contributions to
the Plan and no participant in the Plan is permitted to make contributions to
the Plan. The contributions by the Bank to the Plan generally will depend upon
the profitability of the Bank, the Bank's current needs for operating funds and
the overall compensation of participants. The Bank made loan payments of
$575,000 on behalf of the Trust in 1993.
A separate account is established under the Plan to record each
participant's share of the Plan contributions, forfeitures and the Trust fund
earnings or losses. A participant who is in the Bank's employ on December 31st
of a given year and who has completed 1,000 hours of service for the Bank
during that year will share in the Plan contributions and forfeitures for that
year as will a participant who retires, dies or becomes disabled during the
year. The Plan contributions and forfeitures are allocated to participant
accounts in proportion to their relative compensation. Earnings or losses are
allocated based upon the relative value of participant accounts as of December
31st of a given year.
The Plan has been designed as an employee stock ownership plan under
applicable provisions of the Code. As such, it is permitted to engage in exempt
loan transactions in order to finance the acquisition of Bank stock. Such
transactions may be structured as a loan made to the Trust by a "disqualified
person" as defined in the Code or a "party in interest" as defined in the
Employee Retirement Income Security Act of 1974, or a loan guaranteed by a
disqualified person or party in interest. Bank stock acquired in an exempt loan
transaction is held in a suspense account and is released from such account as
the loan is repaid. Allocation of such Bank stock is based strictly on the
relative compensation of the Plan
8
<PAGE> 11
participants eligible to share in the Bank contributions for the year in
question.
A participant's Plan account vests based on the number of years of
credited service with the Bank. A year of credited service is a year in which
the participant has completed at least 1,000 hours of service for the Bank.
There is no vesting of a participant if he has completed less than five years
of credited service. A participant is 100% vested in his account after
completing five years of credited service. Notwithstanding this vesting
schedule, a participant is fully vested upon retirement, disability or death. A
participant is entitled to receive distribution of his account, if vested, upon
his separation of service from the Bank. Normal retirement under the Plan is
the later of the December 31st prior to the participant's 65th birthday or the
fifth anniversary of the participant's date of hire.
The Trust is designed to invest primarily in stock of the Bank and, to
the fullest extent possible the Trust funds are invested in such stock either
through purchases directly from the Bank on a new issue basis or through market
purchases. Nevertheless, Trust funds may legally be invested in any other type
of property available for investment by private trusts including stocks, bonds,
bank deposits, real estate and mortgages. It is contemplated, however, that
such other types of investment activity would be engaged in only if the Bank's
stock is unavailable for purchase.
Distribution of the amount to which a participant in the Plan is
entitled will ordinarily be made in the form of stock in the Bank. If the Plan
has engaged in an exempt loan transaction (as defined), then it is legally
possible to provide for distributions in cash or property other than Bank
stock, but participants in the Plan will always have the right to demand that
distributions be made in the form of Bank stock, and it is anticipated that
distributions will always be made in such form.
Metrobank Employee Savings Plan. In April, 1987, the Board of
Directors adopted and approved an Employee Savings Plan (the "Savings Plan"),
and entered into an agreement with First Interstate Bank of California (the
"Trustee") to act as the trustee with respect to the Savings Plan. The Savings
Plan was amended and restated in its entirety on August 27, 1991, to be
effective on January 1, 1989. On April 1, 1993 Union Bank was named trustee for
the Savings Plan. The purpose of the Savings Plan is to reward eligible
employees for long and loyal service by providing them with retirement benefits
accumulated through salary reduction contributions, discretionary matching
contributions and employee voluntary contributions.
All Bank employees are eligible to participate in the Savings Plan
beginning with the January 1, April 1, July 1 or October 1 after they satisfy
the Savings Plan's eligibility requirements. This requirement is six months of
service for employees hired on or after February 1, 1987.
Each year the Bank will make a cash contribution equal to the amount
by which participants elect to reduce their compensation ("Elective Deferrals")
through payroll withholding. Participants may make Elective Deferrals for each
year in any amount between 1% and 15% of compensation. A participant's Elective
Deferrals in any year may not exceed $7,000, which limitation has been adjusted
to $8,994 for 1993 and may be further adjusted to reflect an increase in the
cost of living in accordance with the terms of the Savings Plan and applicable
law.
9
<PAGE> 12
The Bank has the discretion to make matching contributions each year
equal to a percentage of the Elective Deferrals of participants. In order to
share in such contributions for a particular quarter, a Participant must be
employed on the last day of the quarter. Such contributions vest after a period
of five years during which the Participant has been credited with 1,000 hours
of service during each such year.
The Savings Plan also permits non-highly compensated Participants (as
defined in the Code) to make voluntary nondeductible contributions in any year,
provided that these contributions do not exceed 10% of the individual's
compensation while a participant. A participant is at all times fully vested
in his account balance derived from Elective Deferrals and voluntary
contributions.
Participants may direct the Trustee to invest their accounts in the
proportions they designate among an Equity Fund, a Fixed Investment Contract
Fund, a Government Money Market Fund and an Employer Stock Fund. Participants
may change the manner or proportions in which the contributions are invested by
filing a written notice with the Administrator during the quarterly open
enrollment periods. A participant's accounts will be increased or decreased by
the gains or losses experienced as a result of the investment in these funds.
A participant's accounts are distributable upon retirement, death,
disability, termination of employment, attainment of age 59 1/2, hardship or
the Savings Plan termination.
In 1993 the Bank paid $97,655 in discretionary matching contributions
to the Savings Plan.
OTHER COMPENSATION
The Bank provides club memberships to certain of its principal
officers and is reimbursed for personal charges at such clubs. Management has
concluded that the amount of any personal benefits as to any individual is less
than $5,000.
The Bank pays the premiums on a life insurance policy insuring the
life of Mr. Buell, with Mr. Buell's wife as beneficiary. The premium paid
under such policy for the fiscal year ended December 31, 1993, was $14,270.
COMPENSATION OF DIRECTORS
Effective March 23, 1993, the Bank's directors who are not also
officers of the Bank and who are not otherwise receiving compensation from the
Bank are paid a fee of $500 for each regular monthly board meeting attended and
a fee of $1,000 for each extended quarterly board meeting. Such persons are
also paid a $1,000 per month retainer.
Members of the Audit Committee, except Mr. Hobson, receive a fee of
$100 for each Audit Committee meeting attended. Members of the Compensation
Review Committee receive a fee of $100 for each Compensation Review Committee
meeting attended.
Mr. Hobson received total compensation of $74,412 for services
rendered to the Bank and its affiliates during 1993. Such services primarily
included supervising the Bank's audit and appraisal functions.
10
<PAGE> 13
INDEBTEDNESS OF MANAGEMENT
The highest aggregate extensions of credit to the directors and
principal officers of the Bank as a group during 1993 equalled $14,376,146, or
22.55% of the equity capital accounts of the Bank. The highest aggregate direct
and guaranteed indebtedness during 1993 of Robert L. Mayer, a director of the
Bank, aggregated $6,457,500, or 10.79% of the equity capital accounts of the
Bank. At April 1, 1994, this amount was $6,417,500, representing 9.73% of the
equity capital amounts of the Bank.
The Bank has had, and expects to have in the future, transactions in
the ordinary course of business with directors, officers and principal
shareholders of the Bank, and their associates, on substantially the same terms
including interest rates, collateral and repayment terms on extensions of
credit, as those prevailing at the same time for comparable transactions with
others. Such extenstions of credit did not involve more than the normal risk of
collectibility or present other unfavorable features.
STOCK OPTIONS
The following table provides certain information (a) as to all options
which were granted to or exercised by the Bank's principal officers from
January 1, 1993 to December 31, 1993 and (b) as to all options held by such
principal officers as of December 31, 1993:
<TABLE>
<CAPTION>
All Principal
Officers as a
David L. Robert P. Paul B. David P. Group
Shares of Common Stock Buell Bulseco Alexander Malone (4 People)
---------------------- -------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Granted January 1, 1993 to December 31, 1993:
Number of shares . . . . . . . . . . . . . . . 0 0 5,000 5,000 10,000
Average per share exercise price . . . . . . . $ -- $ -- $12.13 $12.13 $12.13
Exercised January 1, 1993 to December 31,
1993:
Number of shares . . . . . . . . . . . . . . . None None None None None
Aggregate option price of options
exercised . . . . . . . . . . . . . . . . . . -- -- -- -- --
Aggregate market value of shares acquired
on date options exercised . . . . . . . . . . -- -- -- -- --
Unexercised options held as of December 31,
1993:
Number of shares . . . . . . . . . . . . . . . 350,000 61,000 25,000 25,000 461,000
Average per share exercise price . . . . . . . $8.95 $9.05 $10.15 $10.54 $9.11
</TABLE>
MISCELLANEOUS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Bank's last fiscal year, there were a total of 13 meetings
of the Board of Directors. All directors attended at least 75% of the total
number of meetings of the Board of Directors and committees on which they
served during the last fiscal year.
During 1993, the Board of Directors of the Bank had standing audit and
compensation review committees.
11
<PAGE> 14
The Board of Directors considers all nominees for the Board of
Directors recommended by shareholders of the Bank. The bylaws of the Bank
provide for the nomination of directors as follows:
"Nominations for election of members of the Board of Directors may be
made by the Board of Directors or by any shareholder of any outstanding class
of voting stock of the Bank entitled to vote for the election of directors.
Notice of intention to make any nominations, other than by the Board of
Directors, shall be made in writing and shall be received by the President of
the Bank no more than 60 days prior to any meeting of shareholders called for
the election of directors, and no more than 10 days after the date the notice
of such meeting is sent to shareholders pursuant to the bylaws; provided,
however, that if only 10 days' notice of the meeting is given to shareholders,
such notice of intention to nominate shall be received by the President of the
Bank not later than the time fixed in the notice of the meeting for the opening
of the meeting. Such notification shall contain the following information to
the extent known to the notifying shareholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed nominee; (c)
the number of shares of voting stock of the Bank owned by each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of voting stock of the Bank owned by the notifying
shareholder. Nominations not made in accordance with the bylaws may be
disregarded by the chairman of the meeting, and the inspectors of election
shall then disregard all votes cast for such nominee."
The Audit Committee, comprised of Messrs. Hobson (Chairman), Caloyeras
and Markmiller has overall responsibility for overseeing the Bank's entire
audit function, both internal and with its independent auditors, for
ascertaining the existence of adequate and effective accounting and internal
control systems, for selecting the Bank's independent auditors and for
reviewing the Bank's audit plan and audit results with the Bank's independent
auditors. The Audit Committee held 12 meetings during the last fiscal year.
The Compensation Review Committee, comprised of Messrs. Carr
(Chairman), Mayer and Wong, reviews the compensation practices of the Bank and
makes recommendations to the Board of Directors. The Compensation Review
Committee held 3 meetings during the last fiscal year.
THE BANK'S AUDITORS
It is anticipated that representatives of Arthur Andersen & Co. will
be present at the meeting with the opportunity to make a statement with respect
to the Bank's financial statements if they choose to do so and that such
representatives will be available to respond to appropriate shareholder
questions.
SHAREHOLDERS' PROPOSALS FOR 1995 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Bank's
1995 annual meeting of shareholders must be received by the Bank for inclusion
in the Proxy Statement and form of proxy for that meeting no later than
December 31, 1994.
12
<PAGE> 15
AVAILABILITY OF FORM F-2
Any shareholder who would like to receive without charge a copy of the
Bank's most recent annual report on Form F-2 filed with the Federal Deposit
Insurance Corporation should send a written request therefor to the Bank at
10900 Wilshire Boulevard, Los Angeles, California 90024, Attention: Sharon L.
Canup, Corporate Secretary.
ANNUAL REPORT; OTHER BUSINESS
Management does not know of any business to be presented other than
the matters set forth above, but if other matters properly come before the
meeting, it is the intention of the persons named in the proxy to vote in
accordance with their best judgment on such matters.
By Order of the Board of Directors
/s/ Sharon L. Canup
----------------------------
Sharon L. Canup
Corporate Secretary
13
<PAGE> 16
PRELIMINARY COPY
<TABLE>
<CAPTION>
[LOGO] PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<S><C>
10900 Wilshire Boulevard The undersigned hereby appoints David L. Buell and Robert L. Mayer, and either of
Los Angeles, California 90024 them, as Proxies, each with the power to appoint his substitute, and hereby
authorizes either of them to represent and to vote as designated below, all of the
_______________ shares of common stock of Metrobank (the "Bank") held of record by the undersigned
on April 1, 1994, at the annual meeting of shareholders to be held on May 24, 1994,
or any adjournment or adjournments thereof.
1. ELECTION OF DIRECTORS WITHHOLD AUTHORITY
FOR all nominees listed below to vote for all nominees listed below / /
(except as marked to the contrary below) / /
D.L. Buell, R. P. Bulseco, P.B. Caloyeras, S.J. Carr, J.W. Hobson,
R.L. Mayer, W. Wong, R.B. Markmiller
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized (a) to vote for the
election of any person as a director of the Bank in lieu of any
nominee named herein, provided such nominee is unable to serve or
for good cause is unwilling to serve, and (b) to vote upon such
other business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR management's nominees as directors of the Bank.
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. PLEASE CHECK THIS BOX / / IF YOU PLAN TO ATTEND THE MEETING.
-------------------------------------
Signature
DATED: ,1994
----------- -------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
</TABLE>
<PAGE> 1
EXHIBIT 99(q)
FORM F-2
ANNUAL REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1992
FDIC CERTIFICATE NUMBER 22797-8
METROBANK
(Exact name of bank as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
95-3271474
(I.R.S. Employer Identification Number)
10900 Wilshire Boulevard, Los Angeles, California
(Address of Principal Office)
90024
(Zip Code)
(310) 824-5700
(Bank's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, No Par Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to item 10
is not contained herein, and will note be contained, to the best of bank's
knowledge, in definitive proxy or information statements incorporated by
reference in part III of this Form F-2 or any amendment of this Form F-2.
[ ]
American Stock Exchange
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the bank (1) has filed all reports required to
be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the bank was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No ___
Aggregate Market Value of Common stock held by Non-affiliates at March 25,
1993: $33,018,700 (1)
Number of shares of Common Stock outstanding as of March 20, 1993: 4,754,172
Documents Incorporated by Reference: 1992 Annual Report and 1992 Proxy
Statement Parts I and III
(1) Non-affiliates are all shareholders except Directors, Executive Officers,
and Principal Shareholders of the Bank.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
NUMBER
<S> <C>
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Security Ownership of Certain Owners and Management 11
PART II
Item 5. Market for the Bank's Common Stock and Related Security Holder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 8. Consolidated Financial Statements and Supplementary Data 27
PART III
Item 9. Directors and Executive Officers of the Bank 28
Item 10. Management Renumeration and Transactions 28
PART IV
Item 11. Exhibits, Financial Statement Schedules, and Reports on Form F-3 29
EXHIBITS
- - Exhibit Index 30
- - Supplemental Schedules 33
- - Schedule I - Securities 34
- - Schedule II - Loans to Officers, Directors, Principal Security
Holders, and any Associates of the Foregoing Persons 35
- - Schedule III - Loans and Lease Financing Receivables 36
- - Schedule IV - Bank Premises and Equipment 37
- - Schedule V - Investment in Income from Dividends and Equity in
Earnings or Losses of Subsidiaries and Associated Companies 38
- - Schedule VI - Allowance for Possible Loan Losses 39
Signatures 40
Consent of Independent Public Accountants 42
Report of Independent Public Accountants on Supplementary Schedules 43
Exhibit 6.2 - 1992 Metrobank Annual Report
</TABLE>
<PAGE> 3
ITEM 1. BUSINESS
GENERAL
Metrobank is a California state chartered bank originally incorporated
as a national association on January 16, 1979. The Bank offers a full range of
commercial banking services, including the making of commercial loans, accounts
receivable loans, various types of consumer loans, and real estate construction
loans and commercial mortgage loans; the acceptance of checking,
interest-bearing checking ("NOW"), money market, savings and time deposits; and
the provision of traveler's checks, check guarantee, safe deposit and other
customary non-deposit banking services. The Bank does not issue VISA or
MasterCard credit cards, but is a merchant depository for cardholder drafts
under both types of credit cards. At the present time the Bank does not have a
trust department; however, the Bank makes arrangements with correspondent banks
to provide trust services. The Bank also provides international banking
services for its customers.
Although the Bank offers certain consumer banking services as an
accommodation to its existing business banking customers, the Bank does not
emphasize this "retail" portion of its business. Accordingly, the Bank does not
offer free checking accounts, Saturday or extended banking hours, or
drive-through tellers. Management feels strongly that all banking services
should be offered only if they are profitable and, if offered, should be charged
for on a competitive basis unless the account relationship provides sufficient
earnings through its demand deposit balances to more than offset the cost of the
services provided. There have been no significant changes in the kind of
services offered by the Bank in the past three fiscal years.
Metrobank converted from a national association to a California state
chartered institution on November 1, 1988. Additionally, in 1988, the Bank
received approval from the California State Banking Department to establish a
wholly-owned subsidiary, Metrocorp, Inc., which could directly invest in real
estate projects. The real estate plan filed with the State banking regulators
allows Metrocorp to invest in the following types of projects: single family
residences, apartment complexes, commercial office buildings, shopping centers,
industrial projects or land development projects. As outlined in the plan it is
anticipated that investments in such projects will be made in the $5 million to
$10 million range, to a maximum total investment in Metrocorp of $72.0 million
at December 31, 1990, as allowed by the Real Estate Plan approved by the State
Banking Department. It is management's intent to wind down the operations of
Metrocorp to comply with the recently enacted Federal Deposit Insurance
Corporation Improvement Act.
As of December 31, 1992, Metrocorp had investments in real estate
amounting to approximately $19.2 million. Of this amount, approximately $17.4
million was an investment in a low income housing project which the Bank intends
to hold for a fifteen year period as part of its commitment to comply with the
Community Reinvestment Act. This investment was made primarily to take
advantage of low income housing tax credits which are generated by the project
which causes the Bank's effective tax rate for federal purposes to approximate
the federal alternative minimum tax rate.
3
<PAGE> 4
In 1989, the Bank's wholly owned subsidiary, Metrobancorp, purchased the
Josi & Dold Insurance Agency. This entity, incorporated as Metrobancorp,
provides a variety of insurance products to various individuals and businesses
throughout Southern California. During June of 1992, the Bank transferred the
operations of Metrobancorp into the Bank's operations. This transfer was
effected to respond to recent legislation which prohibits subsidiaries of Banks
from providing insurance related services. This new department of the Bank will
continue to do business as the Josi & Dold Insurance Agency.
OFFICES
The Bank's overall business plan is to become one of the dominant
regional banks operating in Southern California, providing banking services
primarily to entrepreneurs with companies that have sales volumes up to $50
million per annum. To attain this goal, the Bank strives to acquire high
quality personnel and attractive and prominent facilities in communities that
are well-recognized centers of commerce. This is reflected in the establishment
of the Los Angeles Headquarters Office in the 17-story Murdock Plaza in the
heart of Westwood at Wilshire and Westwood Boulevards; the South Bay Regional
Head Office in the Del Amo Financial Center in Torrance; the Orange County
Regional Head Office located in Koll Center in Newport Beach; the San Fernando
Valley Regional Head Office located in the Warner Center Plaza in the West San
Fernando Valley; and the San Diego Regional Head Office, located in the Mission
Valley area of San Diego. In addition, the Bank maintains centralized loan,
finance and administrative facilities in Torrance.
The principal executive offices of the Bank are located at 10900
Wilshire Boulevard, Los Angeles, California 90024. The telephone number of the
Bank is (310) 824-5700.
COMPETITION
The banking business in California, and specifically in the market area
served by the Bank, is highly competitive with respect to both loans and
deposits, and is dominated by a relatively small number of major banks with many
offices operating over a wide geographic area. The Bank competes for deposits
and loans primarily with other commercial banks, including many of which are
much larger than the Bank, as well as with non-bank financial institutions,
including savings and loan associations, credit unions, and investment banking
firms.
Among the advantages which major banks have over Metrobank is the
ability to conduct large advertising campaigns and to allocate their assets,
including loans, to regions of highest demand and yield. These institutions
have higher lending limits than Metrobank and generally perform certain customer
service functions such as investment and trust services which the Bank does not
presently offer.
4
<PAGE> 5
LENDING ACTIVITIES
The Bank primarily originates commercial, real estate construction,
commercial mortgage, accounts receivable and other consumer loans through its
lending division and through relationships its banking officers have created by
way of prior business contacts or customer relationships presently at the Bank.
The Bank's loan portfolio totalled approximately $528.0 million at
December 31, 1992, an increase of approximately $44.4 million or 9.2% from
December 31, 1991. At December 31, 1992, the loan portfolio represents
approximately 58.3% of the Bank's total assets.
COMMERCIAL AND ACCOUNTS RECEIVABLE LOANS
Commercial loans are made for the purpose of providing working capital,
financing the purchase of equipment or inventory and for other business
purposes. These loans typically have maturities ranging from 30 days to 1 year,
and "term loans" which have maturities normally ranging from one to five years.
Short-term loans provide for periodic interest payments, with principal being
paid quarterly or at maturity. Term loans normally provide for monthly payments
of principal and interest. At December 31, 1992, commercial loans outstanding
totalled $83.5 million.
Asset based loans are made primarily to provide working funds to medium
sized businesses. Such loans are provided on a revolving, non-notification
basis with advances made against eligible receivables and inventory. These
loans are variable rate, tied to the Bank's prime index. At December 31, 1992,
outstanding accounts receivable loans totalled $50.4 million.
The Bank occasionally extends lines of credit to business customers. On
business credit lines, the Bank specifies a maximum amount which it stands ready
to lend the customer during a specified period in return for which the customer
agrees to maintain its primary banking relationship with the Bank. The purposes
for which such loans will be used and the security therefore, if any, are
generally determined before the Bank's commitment is extended. Normally, the
Bank does not make loan commitments in material amounts for periods in excess of
one year.
5
<PAGE> 6
REAL ESTATE LOANS
The real estate loan portfolio consists primarily of real estate
construction and commercial mortgage loans. The construction loans typically
have a maturity of six to twelve months, are variable rate, with principal due
at maturity. It has been the policy of the Bank at the completion of the
construction loan to request that the borrower secure permanent financing to pay
off the interim construction loan. The commercial mortgage loans typically have
a five year maturity, are variable rate with principal due at maturity. At
December 31, 1992, real estate loans outstanding totalled $302.4 million.
CONSUMER LOANS
Consumer loans are short-term loans made to individuals and businesses,
banker's acceptances, cash reserve and overdraft, and installment loans. These
loans typically provide for the monthly payment of both principal and interest,
with an interest rate that is tied to a floating rate index, primarily the
Bank's prime rate. At December 31, 1992, consumer loans outstanding totalled
$91.7 million.
LOAN LOSS RESERVE
Reserves for losses on loans are established by the Bank's credit review
committee in accordance with generally accepted accounting principles, assets
are classified in accordance with FDIC guidelines. As a general rule, the FDIC
regulations require that problem assets be classified as either "Substandard",
"Doubtful", or "Loss" depending on the likelihood that the loan will be
collected. These regulations also require that the Bank charge off any "Loss"
loan or establish a specific allowance for loan losses equal to the entire
classified amount and that the Bank establish an appropriate amount of general
allowances for loan losses on performing loans as well. During 1992, 1991 and
1990, Metrobank provided $5,200,000, $2,130,000 and $5,619,000 respectively as a
provision for estimated losses on loans or for real estate acquired through
foreclosure. At December 31, 1992, 1991 and 1990, the Bank's loan loss reserve
as a percentage of total loans was 1.91%, 1.69% and 1.59% respectively.
This increase in the Bank's loan loss reserve ratio in comparing 1992 to
1991 was due to the decision by management to increase the reserve to a level
which was adequate to absorb known and inherent risks in the loans portfolio and
to bring its reserves to a level comparable with peer group banks, an increase
in net charge-offs to total loans of .64% in 1992 compared to .18% in 1991, as
well as additional reserves necessary due to the continued deterioration of the
real estate economy in the Southern California area.
6
<PAGE> 7
OTHER REAL ESTATE OWNED
At December 31, 1992, the Bank had $10.8 million in real estate acquired
in satisfaction of loans and "insubstance foreclosures". The Bank records these
properties at the lower cost or fair value at the date of transfer to other real
estate owned.
DEPOSITS
Metrobank offers a variety of deposit accounts including passbook
accounts, fixed-rate, fixed-term accounts, demand deposit accounts, money market
accounts, and special purpose accounts (such as bankruptcy funds). The accounts
vary as to terms, the principal differences being the minimum balance required,
the maturity period, interest rate, the manner of paying interest, and
withdrawal limitations and penalties. Interest rates paid and minimum balance
requirements vary from time to time as determined by Metrobank in accordance
with applicable regulations and changing market conditions. The Bank's policy
has been to offer a wide variety of rates and savings plans to fit the needs of
the deposit base while also conforming to the Bank's cash flow requirements.
The table on pages 18 and 19 of Management's Discussion and Analysis sets forth
the average balances outstanding for the period.
At December 31, 1992, the Bank had concentrations of demand deposits
within the entertainment industry, escrow companies, title companies and
insolvency trustees. To a large extent these deposits are generated as a result
of the Bank's paying for customer expenses such as data processing, accounting
and messenger services to assist these companies in accounting for real estate
and other transactions. These expenses are "passed through" to the customer in
the form of analysis whereby the customer is required to maintain minimum
balances in their demand deposit account. Bankruptcy deposits are placed in the
Bank through a court appointed trustee (usually an attorney). A majority of
these deposits are required to be collateralized by government backed securities
to the extent the deposit amount exceeds applicable insurance provided by the
FDIC. Of total demand deposits of $396.5 million at December 31, 1992,
approximately $205.5 million or 51.8% was escrow and title related, $25.1
million or 6.3% was insolvency related, and $27.1 million or 6.8% was related to
entertainment customers.
To respond to changes in the Bank's deposit structure, the Bank actively
solicits time certificates of deposit, both locally and nationally. These
deposits are usually short term in duration (90 - 180 days), for which the Bank
pays market rates of interest, for an amount of approximately $100,000. At
December 31, 1992, approximately $72.7 million of the Bank's certificates of
deposit were related to this funding source.
7
<PAGE> 8
INTEREST RATE RISK MANAGEMENT
The Bank manages interest rate risk through the Asset/Liability
Management Committee (ALCO). In addition to managing the Bank's exposure to
changes in interest rates, the ALCO Committee's responsibilities include
managing the Bank's liquidity position, ensuring the Bank has adequate
collateral to fund collateralized deposit growth gathering activities and
borrowing activities, and to define operating strategies and implement such
strategies through defining products, product pricing strategies and execution
of financial transactions.
The Bank's financial position and results of operation are effected by
changes in the interest rate environment. Since interest-earning assets and
interest-bearing liabilities have various repricings and maturities, changes in
interest rates may result in an increase or decrease of net interest income. It
is the responsibility of the Bank's ALCO to manage its exposure to fluctuations
in interest rate changes. An institution's interest rate sensitivity can be
measured by its "gap" (which represents the difference between the maturities or
rate change dates on interest earning assets and interest bearing liabilities
within a period). In general, banks try to match the repricing intervals in
amounts of their assets and liabilities to limit their sensitivity to interest
rate fluctuations. Banks that are asset sensitive with more assets subject to
repricing earlier than liabilities benefit in period of rising interest rates
because the assets command higher earnings rates earlier than the liabilities
funding them and generate earnings that can be reinvested at higher rates.
Banks that are liability sensitive benefit in periods of declining rates but
suffer when rates increase because funding for comparatively lower yielding
assets become more expensive. In a rising rate environment, liability sensitive
banks need to pay more in interest to retain existing liabilities and maintain
liquidity. To offset this exposure, the ALCO has several alternatives; it can
extend the maturities of its time certificates of deposit, increase its relative
mix of variable rate interest-earning assets or enter into off-balance sheet
hedging transactions.
EMPLOYEES
At December 31, 1992, the Bank employed 278 individuals including 6
executive officers and a total of 112 other officers. The Bank's employees are
not represented by a union. The Bank has never experienced a work stoppage and
management of the Bank believes that its employee relations are satisfactory.
Management of the Bank also believes that the benefits provided by the Bank to
its employees are competitive when compared to similar financial institutions.
8
<PAGE> 9
ITEM 2. PROPERTIES
During the year ended December 31, 1992, the Bank leased office space at
an aggregate annual rent of approximately $2.8 million. The space is used for
the Bank's executive and business offices. The unexpired lease terms range from
1 year to 10 years with options to renew for up to 10 years. The average
unexpired lease term of material leases is 7 years. The Murdock Plaza lease
expires in 2001 (with an option to extend to 2011); the Del Amo Financial Center
lease expires in 1995; the Koll Center lease expires in 2002 (with an option to
extend to 2012); the Warner Center lease expires in 1999 (with an option to
extend to 2005); the Mission Valley lease expires in 1995 (with 2 five year
options to extend); the lease for the Bank's Administrative Loan Office in
Torrance expires in 1995 (with a 5 year option to extend) and the lease for the
Bank's deposit operations facilities at the Beaudry Plaza in Los Angeles expires
in 1993 (with an option to extend to 1998).
For additional information relating to the Bank's future leasehold
commitments, see footnote 12 on page 25 of the Bank's 1992 Annual Report to
Shareholders, attached as Exhibit 6.2 and incorporated herein by this reference.
9
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
The Bank is a defendant in a number of lawsuits which have arisen in the
ordinary course of its business. It is the opinion of Management of the Bank
that although it is not possible to assess with certainty the ultimate outcome
of some of these actions at the present time, resolution of the matters will not
have a material adverse effect on the Bank's financial condition or results of
operations.
10
<PAGE> 11
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 4 is omitted since the information
called for is included in a definitive proxy statement which will be filed with
the Federal Deposit Insurance Corporation within 120 days after the end of the
most recent fiscal year and such proxy statement is incorporated herein by this
reference.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE BANK'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
For information concerning the market for the Bank's common stock and
related security holder matters, see "Securities Activity" on page 30 of the
Bank's 1992 Annual Report to Shareholders, attached hereto as Exhibit 6.2 and
incorporated herein by this reference.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
For selected financial data concerning the Bank see "Selected Financial
Data" on page 13 of the Bank's 1992 Annual Report to Shareholders, attached
hereto as Exhibit 6.2 and incorporated herein by this reference.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Management's discussion and analysis of financial condition and results
of operations is designed to provide a better understanding of significant
trends relating to the Bank's financial condition, results of operations,
liquidity, capital resources and interest rate sensitivity. It should be read
in conjunction with the consolidated financial statements and related notes to
the financial statements of the Bank appearing elsewhere in this report.
NET INTEREST INCOME
The Bank's operating results depend primarily on the level of net
interest income (the difference between the interest earned on loans and
investments less interest expense on deposit accounts and borrowings). A
primary factor affecting the level of net interest income is the Bank's interest
rate margin between the yield earned on interest-earning assets and the rate
paid on interest-bearing liabilities as well as the difference between the
relative amounts of average interest-earning assets and interest-bearing
liabilities.
The following table shows the average balances of the Bank's assets,
liabilities, and shareholders' equity and the percentage distribution of the
items computed using average daily balances for the periods indicated:
<TABLE>
<CAPTION>
1992 1991
---------------------------- ----------------------------
AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 70,615 8.2% $ 56,656 7.5%
FEDERAL FUNDS SOLD 1,385 0.2% 1,640 0.2%
INVESTMENT SECURITIES 235,532 27.4% 204,205 27.0%
INVESTMENT IN REAL ESTATE 22,728 2.7% 27,456 3.6%
LOANS, NET 499,628 58.2% 442,084 58.5%
ACCRUED INTEREST RECEIVABLE 5,713 0.7% 5,798 0.8%
OTHER REAL ESTATE OWNED, NET 8,554 1.0% 7,485 1.0%
PREMISES AND EQUIPMENT 3,200 0.4% 3,613 0.5%
OTHER ASSETS 10,210 1.2% 6,461 0.9%
-------------------------------------------------------------
TOTAL ASSETS $857,565 100.0% $755,398 100.0%
=============================================================
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
1992 1991
---------------------------- ----------------------------
AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
TIME CERTIFICATES $170,269 19.9% $239,071 31.7%
OTHER DEPOSITS 576,693 67.2% 427,816 56.6%
---------------------------------------------------------------
TOTAL DEPOSITS 746,962 87.1% 666,887 88.3%
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
AND FUNDS PURCHASED 40,683 4.8% 22,004 2.9%
ACCRUED INTEREST PAYABLE 952 0.1% 1,746 0.2%
OTHER LIABILITIES 11,450 1.3% 11,082 1.5%
---------------------------------------------------------------
TOTAL LIABILITIES 800,047 93.3% 701,719 92.9%
SHAREHOLDERS' EQUITY:
COMMON STOCK 34,304 4.0% 34,273 4.5%
GUARANTEE OF ESOP LOAN (1,217) -0.1% (1,687) -0.2%
UNDIVIDED PROFITS 24,431 2.8% 21,093 2.8%
---------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 57,518 6.7% 53,679 7.1%
---------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $857,565 100.0% $755,398 100.0%
===============================================================
</TABLE>
The Bank's net interest income was $46.0 million for the year ended
December 31, 1992. This compares to $39.1 million for the year ended December
31, 1991 and $39.3 million for the year ended December 31, 1990. The increase
in net interest income from 1991 to 1992 was primarily due to a substantial
decrease in interest expense. Net interest income was further increased by a
growth in investment interest income and was offset by a decrease in loan
interest income and fees.
15
<PAGE> 16
The following table presents the average amounts outstanding for the major
categories of the Bank's interest-earning assets and interest-bearing
liabilities and the average interest rates earned or paid thereon:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
INTEREST-EARNING ASSETS: 1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
FUNDS SOLD:
AVERAGE OUTSTANDING $ 1,385 $ 1,640 $ 12,730
AVERAGE YIELD 3.61% 5.24% 8.24%
INTEREST INCOME $ 50 $ 86 $ 1,049
-------- -------- --------
INVESTMENT SECURITIES:
AVERAGE OUTSTANDING $235,532 $204,204 $237,764
AVERAGE YIELD 7.68% 8.36% 8.43%
INTEREST INCOME $ 18,083 $ 17,074 $ 20,051
-------- -------- --------
GROSS LOANS:
AVERAGE OUTSTANDING $508,784 $449,190 $384,867
AVERAGE YIELD 8.55% 10.45% 11.26%
INTEREST INCOME $ 43,631 $ 46,937 $ 43,333
-------- -------- --------
TOTAL INTEREST-EARNING ASSETS:
AVERAGE OUTSTANDING $738,301 $655,034 $635,361
AVERAGE YIELD 8.37% 9.79% 10.14%
INTEREST INCOME $ 61,764 $ 64,097 $ 64,433
-------- -------- --------
INTEREST-BEARING LIABILITIES
NOW AND MONEY MARKET DEMAND ACCOUNTS:
AVERAGE OUTSTANDING $225,431 $164,443 $150,144
AVERAGE YIELD 3.06% 5.15% 5.76%
INTEREST EXPENSE $ 6,892 $ 8,467 $ 8,645
-------- -------- --------
SAVINGS DEPOSITS:
AVERAGE OUTSTANDING $ 19,757 $ 19,438 $ 20,830
AVERAGE YIELD 2.98% 4.85% 4.96%
INTEREST EXPENSE $ 589 $ 942 $ 1,034
-------- -------- --------
TIME DEPOSITS:
AVERAGE OUTSTANDING $170,269 $239,071 $193,112
AVERAGE YIELD 3.91% 6.03% 7.56%
INTEREST EXPENSE $ 6,659 $ 14,411 $ 14,599
-------- -------- --------
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE,
FUNDS PURCHASED AND OTHER LIABILITIES:
AVERAGE OUTSTANDING $ 40,683 $ 22,004 $ 24,270
AVERAGE YIELD 4.10% 6.51% 7.99%
INTEREST EXPENSE $ 1,666 $ 1,432 $ 1,939
-------- -------- --------
CAPITALIZED CARRYING COSTS $ (65) $ (284) $ (110)
TOTAL INTEREST-BEARING LIABILITIES:
AVERAGE OUTSTANDING $456,140 $444,956 $388,356
AVERAGE YIELD 3.45% 5.61% 6.46%
INTEREST EXPENSE $ 15,741 $ 24,968 $ 25,107
-------- -------- --------
NET INTEREST INCOME: $ 46,023 $ 39,129 $ 39,326
AVG NET YIELD ON INTEREST-EARNING ASSETS 6.23% 5.97% 6.19%
====================================================
</TABLE>
16
<PAGE> 17
Interest and fee income decreased to $61.8 million in 1992 from $64.1
million in 1991 and was $64.4 million for the year ended 1990. This decrease
of $2.3 million in interest and fee income in comparing 1992 to 1991 is
primarily attributable to a 221 basis point drop in the Bank's average prime
rate which more than offset the $60 million increase in average loans
outstanding. This decrease in interest and fee income in the loan portfolio
was offset by an increase in investment interest income. The average
investment portfolio increased by $31.0 million during 1992 which more than
offset the 67 basis point decrease in the return on the investment portfolio.
This decrease in yield was caused by the reinvestment of maturing investments
and additional investments in comparable term securities yielding less due to
the drop in U.S. Treasury yields which occurred during 1992.
The following table summarizes the maturity of the Bank's investment
securities and their weighted average yield as of December 31, 1992:
<TABLE>
<CAPTION>
WEIGHTED
PRINCIPAL BOOK AVERAGE
AMOUNT VALUE YIELD
-----------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
TYPE AND MATURITY GROUPING
U.S. TREASURY SECURITIES:
WITHIN ONE YEAR $ 35,000 $ 34,839 8.33%
AFTER ONE YEAR BUT WITHIN TWO YEARS 20,000 20,244 7.62%
AFTER TWO YEARS BUT WITHIN FIVE YEARS 105,000 107,633 6.82%
AFTER FIVE YEARS BUT WITHIN TEN YEARS 20,000 22,179 6.43%
-------- -------- ----
TOTAL U.S. TREASURY SECURITIES 180,000 184,895 7.16%
MORTGAGE-BACKED SECURITIES AND COLLATERALIZED
MORTGAGE OBLIGATIONS:
WITHIN ONE YEAR 5,422 5,387 8.33%
AFTER ONE YEAR BUT WITHIN TWO YEARS - - -
AFTER TWO YEARS BUT WITHIN FIVE YEARS 55,070 55,950 8.42%
-------- -------- ----
TOTAL MORTGAGE-BACKED SECURITIES AND
COLLATERALIZED MORTGAGE OBLIGATIONS 60,492 61,337 8.41%
OTHER SECURITIES:
OVER FIVE YEARS 255 2,680 5.34%
-------- -------- ----
TOTAL OTHER SECURITIES 255 2,680 5.34%
TOTAL SECURITIES $240,717 $248,912 7.47%
======== ======== =====
</TABLE>
17
<PAGE> 18
Interest expense decreased to $15.7 million for the year ended December 31,
1992 from $25.0 million for the year ended December 31, 1991 and $25.1 million
for the year ended 1990. The decrease of $9.3 million in comparing 1992 to
1991 is primarily attributable to the 223 basis point decrease in interest
expense paid on interest bearing deposits. Because the Bank maintains
primarily short term interest bearing deposits, the frequent repricing of these
deposits was greatly affected by the substantial decrease in interest rates.
Moreover, average interest bearing deposits decreased by $7.5 million in 1992
which added to the decrease in interest expense.
The following table summarizes certain information regarding the sources,
types and amounts of certain of the Bank's average deposit balances during
December 1992:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
INTEREST PERCENT OF
DEMAND BEARING TOTAL AVERAGE TOTAL
SOURCE OF DEPOSITS DEPOSITS DEPOSITS DEPOSITS DEPOSITS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSOLVENCY TRUSTEES $ 26,205 $166,392 $192,597 24.6%
COMMERCIAL INDUSTRY 130,159 74,177 204,336 26.1%
ESCROW COMPANIES 136,199 15,854 152,053 19.5%
TITLE COMPANIES 43,066 7,177 50,243 6.4%
ENTERTAINMENT INDUSTRY 23,129 38,988 62,117 7.9%
OTHER INDUSTRY 4,568 115,608 120,176 15.4%
-------- -------- -------- -----
TOTAL $363,326 $418,196 $781,522 100.0%
======== ======== ======== =====
- ------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
The following table shows the Bank's average deposits for each of the
periods indicated below, based upon average daily balances:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1992 1991 1990
----------------- ----------------- ------------------
AVERAGE % OF AVERAGE % OF AVERAGE % OF
BALANCE TOTAL BALANCE TOTAL BALANCE TOTAL
----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
DEMAND DEPOSITS $331,505 44.4% $243,935 36.6% $295,164 44.8%
NOW & SUPER-NOW ACCOUNTS 14,156 1.9% 10,738 1.6% 11,550 1.8%
SAVINGS ACCOUNTS 19,757 2.6% 19,438 2.9% 20,830 3.2%
MONEY MARKET ACCOUNTS 211,275 28.3% 153,705 23.0% 138,593 21.0%
TIME CERTIFICATES OF DEPOSITS 170,269 22.8% 239,071 35.9% 193,112 29.2%
----------------- ---------------- -----------------
TOTAL DEPOSITS $746,962 100.0% $666,887 100.0% $659,249 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
The table below details the changes in interest income and interest expense
by component, and the amount of change attributable to variations in interest
rates, and variations in average balances.
<TABLE>
Year Ended December 31, 1992 Year Ended December 31, 1991 Year Ended December 31, 1990
over 1991 over 1990 over 1989
--------------------------------------------------------------------------------------------------------
Total Total Total
Increase Change Due To: Increase Change Due To: Increase Change Due To:
(in thousands) (Decrease) Rate Volume (Decrease) Rate Volume (Decrease) Rate Volume
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest-earning
deposits $ - $ - $ $ (7) $ - $ (7) $ (154) $ (2) $ (152)
Other interest income 74 58 16 (963) (331) (632) (1,772) (111) (1,661)
Investment securities 1,009 (1,325) 2,334 (2,970) (127) (2,843) (8,392) 14 (8,406)
Loans & bankers'
acceptances (3,426) (8,104) 4,688 3,604 (3,474) 7,078 12,896 (2,804) 15,700
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest income (2,333) (9,371) 7,038 (336) (3,932) 3,596 2,578 (2,903) 5,481
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
NOW and money market
demand accounts (1,568) (3,398) 1,830 (188) (924) 736 570 273 297
Savings deposits (360) (370) 10 (82) (14) (68) (663) 3 (666)
Time deposits (7,752) (5,061) (2,691) (188) (3,023) 2,835 2,807 (614) 3,421
Funds purchased and
securities sold under
agreements to repurchase 234 (350) 584 (507) (483) (24) 647 (173) 820
Other interest expense 219 - 219 826 826 - 10 10 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest expense (9,227) (9,179) (48) (139) (3,618) 3,479 3,371 (501) 3,872
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 6,894 $ (192) $7,086 $ (197) $ (314) $ 117 $ (793) $(2,402) $1,609
===================================================================================================================================
</TABLE>
19
<PAGE> 20
The decrease in net interest margin from 1991 to 1990 was due primarily to
a $51.2 million decrease in average demand deposits outstanding which were
replaced by higher costing money market accounts and time certificates of
deposit, a decrease in the Bank's prime interest rate, a decrease in investment
interest income caused by a $44.7 million decrease in the average portfolio
balance; offset by an increase of approximately $3.6 million in loan interest
and fee income caused principally by the growth in the loan portfolio of $64.3
million.
NON-INTEREST INCOME
During 1992, the Bank recognized approximately $5.7 million in non-interest
income as compared to $6.2 million in 1991 and $6.0 million in 1990. This
decrease of $500,000 in comparing 1992 to 1991 is due primarily to
non-recurring gains on the sale of other real estate owned which totalled
$800,000 in 1991. Offsetting this decrease was an increase in rental income of
$300,000 compared to the previous year on the Bank's low-income housing project
which was placed in service in 1991. This low-income housing project also
generates a maximum of $1.5 million in tax credits per annum.
The increase of $200,000 in non-interest income in comparing 1991 to 1990
was due primarily to gains on the sale of other real estate owned and real
estate investments of approximately $800,000 in 1991 compared to $1.8 million
in 1990, a decrease of $1.0 million, offset by $1.2 million of gross rental
income attributable to the Bank's low-income housing project which was placed
in service during 1991.
PROVISION FOR POSSIBLE LOAN LOSSES
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited back
to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
operations as a provision for possible loan losses. The balance of the
allowance for possible loan losses reflects the amount which, in management's
judgement, is adequate to provide for potential loan losses after weighing the
mix of the loan portfolio, current economic conditions, past loan loss
experience and other factors relevant to estimating loan losses.
The following table indicates the amounts which were allocated as provision
for possible loan losses and the relation of those amounts to net charge-offs
and total gross loans for the periods indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------
PROVISION NET CHARGE- RESERVE ALLOWANCE RATIO OF
FISCAL CREDITED TO OFFS AGAINST TRANSFERRED BALANCE AT ALLOWANCE TO
YEAR ALLOWANCE ALLOWANCE TO/(FROM) OREO YEAR END GROSS LOANS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992 $5,200 $3,272 - $10,102 1.91%
1991 2,130 788 (160) 8,174 1.69%
1990 5,619 1,903 160 6,672 1.59%
1989 1,498 657 - 3,116 1.00%
1988 1,063 531 - 2,275 1.07%
- ----------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
The adequacy of the allowance for possible loan losses is also evaluated
relative to the level of non-performing loans (those for which principal or
interest is past due more than 90 days and those on non-accrual status). As of
December 31, 1992, the balance of non-performing loans and "insubstance
foreclosures" were approximately $13.1 million, of which $6.6 million was
"insubstance foreclosures". This represents 2.5% of the Bank's loan portfolio
(including "insubstance foreclosures"), as compared to $7.7 million (1.6% of
total loans) on December 31, 1991.
The following table sets forth the amount of loans on the Bank's books which
were contractually past due (including loans on non-accrual status) in payments
of interest or principal 90 days or more at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1992 1991
---- ----
<S> <C> <C>
COMMERCIAL AND ACCOUNTS RECEIVABLE $3,922 $2,125
REAL ESTATE 2,076 764
CONSUMER LOANS 307 54
OTHER 189 288
------ ------
TOTAL $6,494 $3,231
====== ======
</TABLE>
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured. Such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk since property acquired through
foreclosure ("OREO") may not be saleable for an amount sufficient to offset the
entire amount of the loan and costs associated with foreclosure. Although
management believes that the allowance for possible loan losses is adequate,
future provisions will be subject to continuing evaluation of risks inherent in
the loan portfolio.
The provision for possible loan losses increased by approximately $3.1
million from the prior year and is reflective of Management's intention to
maintain reserves for possible loan losses at a level sufficient to provide
coverage for loan growth and non-performing assets. The Bank's ratio of loan
loss reserves to total loans was 1.91% and 1.69% as of December 31, 1992 and
December 31, 1991, respectively.
Loan charge-offs (net of recoveries) for the year ended December 31, 1992
totalled approximately $3.3 million. This compares to the net charge-offs of
$800,000 for the same period in 1991. The increase in the Bank's charge-offs
was primarily attributable to its asset based loan portfolio; of the $2.5
million increase, $1.2 million was asset based related while approximately
$500,000 was real estate construction related. Asset based loans represented
10% and 12% of the Bank's loan portfolio as of December 31, 1992 and December
31, 1991,
21
<PAGE> 22
respectively, while real estate construction loans represented 9% and 11% as of
December 31, 1992 and December 31, 1991, respectively.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as the real estate values
in the Southern California region. Inasmuch as this is the principal
geographic area in which Metrobank conducts its business, this environment has
had an adverse impact on the Bank's asset quality. As of December 31, 1991,
the Bank had approximately $8.1 million of non-performing assets which
consisted of $5.2 million of other real estate owned and insubstance
foreclosures. As of December 31, 1992, the Bank had approximately $17.3
million in non-performing assets of which $10.8 million consisted of other real
estate owned and insubstance foreclosures. Total non-performing assets to
total assets as of December 31, 1991 and December 31, 1992 were approximately
1% and 2%, respectively. Additionally, non-accrual loans increased
approximately $3.3 million from December 31, 1991 to December 31, 1992. Of
this increase, $1.6 million was real estate related and $1.7 million was
commercial related.
The following tables summarize the Bank's loan loss experience for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
BALANCES (IN THOUSANDS): 1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
LOANS:
AVERAGE LOANS, NET OF RESERVES $499,628 $442,084 $380,466
LOANS AT END OF PERIOD, NET OF RESERVES 517,850 475,474 412,277
ANALYSIS OF ALLOWANCE FOR POSSIBLE LOSSES:
BALANCE AT BEGINNING OF PERIOD 8,174 6,672 3,116
LOANS CHARGED OFF (3,559) (1,479) (2,126)
RECOVERIES OF LOANS PREVIOUSLY CHARGED OFF 287 691 223
------- -------- --------
NET LOANS CHARGED OFF (3,272) (788) (1,903)
RESERVE TRANSFERRED FROM/(TO) OREO - 160 (160)
PROVISION FOR POSSIBLE LOAN LOSSES 5,200 2,130 5,619
------- -------- --------
BALANCE AT END OF PERIOD $10,102 $ 8,174 $ 6,672
======= ======== ========
RATIOS:
NET LOAN CHARGE-OFFS TO AVERAGE LOANS 0.64% 0.18% 0.50%
NET LOAN CHARGE-OFFS TO LOANS AT END OF PERIOD 0.63% 0.17% 0.46%
ALLOWANCE FOR POSSIBLE LOANS LOSSES TO AVERAGE LOANS 1.99% 1.82% 1.73%
ALLOWANCE FOR POSSIBLE LOAN LOSSES AT END OF PERIOD 1.91% 1.69% 1.59%
NET LOAN CHARGE-OFFS TO ALLOWANCE FOR POSSIBLE LOAN LOSSES 32.39% 9.64% 28.52%
NET LOAN CHARGE-OFFS TO PROVISION FOR POSSIBLE LOAN LOSSES 62.92% 37.00% 33.87%
CHARGE-OFFS:
COMMERCIAL $ 2,235 $ 703 $ 1,343
CONSUMER 362 214 300
REAL ESTATE 958 431 483
OTHER 4 131 -
------- -------- --------
TOTAL $ 3,559 $ 1,479 $ 2,126
======= ======== ========
RECOVERIES:
COMMERCIAL $ 142 $ 319 $ 204
CONSUMER 59 220 19
REAL ESTATE 65 152 -
OTHER 21 - -
------- -------- --------
TOTAL $ 287 $ 691 $ 223
======= ======== ========
</TABLE>
22
<PAGE> 23
The following table shows for the periods indicated the remaining maturity
of fixed rate loans and the earliest possible repricing interval for variable
rate loans for the Bank's loan portfolio:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1992 1991
---- -----
<S> <C> <C>
IMMEDIATE OR ONE DAY $402,593 $361,476
THREE MONTHS OR LESS 15,027 11,984
THREE TO TWELVE MONTHS 28,914 34,147
ONE TO FIVE YEARS 72,621 64,084
OVER FIVE YEARS 8,797 11,957
-------- --------
TOTAL $527,952 $483,648
======== ========
</TABLE>
PROVISION FOR OREO, INSUBSTANCE FORECLOSURE AND REAL ESTATE INVESTMENT LOSSES
During 1992, the Bank's wholly owned subsidiary, Metrocorp, Inc. (the
Company), transferred one of its joint ventures to insubstance foreclosure and
another to OREO. Total write-downs associated with these two properties
amounted to approximately $2 million. Additionally, the Company wrote-down its
investments in real estate by approximately $700,000 during 1992.
NON-INTEREST EXPENSE
Non-interest expense increased to $39.2 million for the year ended December
31, 1992 from $35.7 million for the year ended 1991 and $36.3 million for the
year ended 1990. This increase of $3.5 million in comparing 1992 to 1991 was
due primarily to an increase of $1.4 million in provisions for OREO and
insubstance foreclosures, an increase of $1.5 million in personnel expenses due
to the start-up of a residential mortgage division, increases to staff for
certain areas of the Bank targeted for expansion, as well as normal salary
increases. The Bank discontinued the residential mortgage division in December
1992 as anticipated volume was not realized. Additionally, there was an
increase of $600,000 in operating expenses related to the Bank's low-income
housing project and its commercial office building in Tustin and a $500,000
increase in professional services. Regulatory assessments increased $300,000
and office supplies increased $200,000. Offsetting these increases was a
decrease of $900,000 for data processing and other services paid on behalf of
certain depository relationships. Other non-interest expenses decreased by
approximately $100,000.
The decrease of $600,000 in comparing 1991 to 1990 was due primarily to a
decrease of $2.6 million in data processing and other services paid on behalf
of certain depository relationships and an $800,000 decrease in equipment
expense primarily related to a one-time charge in 1990. Offsetting these
decreases was a $1.2 million increase in operating expenses related to the
Bank's low-income housing project placed in service in 1991, a $600,000
increase in regulatory assessments, a $700,000 increase in provisions for OREO
and insubstance foreclosure reserves, and a $300,000 net increase in other
expenses.
23
<PAGE> 24
PROVISION FOR INCOME TAXES
The Bank's provision for income taxes is lower than the statutory federal
income tax rate due to the utilization of tax credits related to the Bank's
low-income housing project. These tax credits, of which $1.5 million was
utilized in 1992 and $1.1 million in 1991, amount to approximately $15 million
in credits over a 10 year period. However, the utilization of these tax
credits is subject to certain alternative minimum tax restrictions. During
1992, the Bank carried-back approximately $500,000 of tax credit utilization
against income recorded in previous years. As of the end of 1992, the Bank had
approximately $250,000 of carry-back ability remaining. The effective tax rate
used in computing net income was 20.7% in 1992, 27.2% in 1991 and 37.3% in
1990.
In February 1992, the FASB issued Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS 109 will be
effective on January 1, 1993 and supersedes Accounting Principle Bulletin
Opinion 11 (APB 11). The statement utilizes the liability method for the
recognition and measurement of income taxes. Management does not expect that
the adoption of SFAS 109 will have a material effect on the Bank's operations.
Management has not determined the proposed statement's results on operations;
also, management has not decided whether it will implement SFAS 109 by
restating prior years or by recording an adjustment for prior years in the
Consolidated Statement of Earnings for the year adopted.
CAPITAL RESOURCES
The Bank's shareholders' equity totalled $59.3 million on December 31,
1992, which represents an increase of $3.5 million over shareholders' equity on
December 31, 1991. This increase was due to net income for the year of $5.8
million, offset by dividends in the amount of $2.9 million and a decrease in
the indebtedness of the Bank's Employee Stock Ownership Plan and Trust of
$575,000.
The Bank's shareholders' equity totalled $55.8 million as of December 31,
1991, which represents an increase of $3.8 million from shareholders' equity on
December 31, 1990. This increase was due to net income for the year of $5.5
million, offset by dividends paid in the amount of $2.0 million and a decrease
in the indebtedness of the Bank's Employee Stock Ownership Plan and Trust of
$288,000.
The FDIC, the Federal Reserve Board, and the Comptroller of the Currency
have adopted regulations that supplement the current regulatory capital
requirements by establishing guidelines for calculating "risk-based" and
"tier-one" capital ratios. These guidelines establish a framework that
requires regulatory capital requirements to be risk adjusted. The risk-based
capital ratio is determined by segregating assets and specified off-balance
sheet commitments into four risk weighted categories, with higher levels of
capital required for the categories perceived as representing greater risk.
24
<PAGE> 25
Under the guidelines, the Bank is required to maintain a risk-based capital
ratio of 8.00% and a tier-one capital ratio of 4.00% by December 31, 1992. At
December 31, 1992, the risk-based capital ratio of the Bank was 11.00% and its
tier-one capital ratio was 9.8%. This is primarily because the Bank maintains
a significant amount of treasury and agency backed securities which are
primarily pledged as collateral for bankruptcy related deposits or repurchase
agreements with investment brokers and require either a 0% or 20% risk
weighting; additionally most of the Bank's loan commitments are for less than
one year which also require a 0% risk weighting.
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity, which primarily represents the ability of the Bank to meet
fluctuations in its deposit structure and to provide for customer credit needs,
is actively managed by the Bank's Asset/Liability Management Committee.
Inasmuch as a significant portion of the Bank's deposit structure is
concentrated in specialized industries (for example, escrow and title insurance
companies) which closely parallel the real estate economy in Southern
California, the Bank is subject to fluctuations in demand deposits due to
trends in real estate activity in Southern California. To mitigate this
exposure, the Bank has increased its emphasis on other types of deposits, and
to a lesser degree relied upon the use of secured and unsecured lines of credit
with correspondent banks and investment banking firms. Additionally, during
1992, Metrobank became a member of the FHLB which also allows it to draw upon
lines of credit which were established during the year.
In addition to managing the liquidity requirements of the Bank, the
Asset/Liability Management Committee reviews, recommends and implements changes
in the asset and liability structure of the Bank's balance sheet. Presently,
the relationship of interest sensitive assets to interest sensitive liabilities
would cause an improvement in net interest margin in a falling rate
environment. This would be caused primarily by the fact that the Bank's
liabilities reprice more rapidly than does its assets and, accordingly, the
Bank's net interest income would increase.
It is management's policy to maintain the maturities of a majority of its
certificates of deposit in denominations of $100,000 or more to less than one
year. The maturities of such certificates of deposit ("TCD's") were as follows
for the period indicated:
<TABLE>
<CAPTION>
DECEMBER 31, 1992
TCD'S
$100,000 OR MORE
----------------
<S> <C>
IMMEDIATE OR ONE DAY $ 1,628
THREE MONTHS OR LESS 38,208
THREE TO TWELVE MONTHS 36,215
ONE TO FIVE YEARS 1,112
OVER FIVE YEARS -
--------
TOTAL $ 77,163
========
</TABLE>
25
<PAGE> 26
INFLATION
The impact of inflation on the Bank differs significantly from that of
industrial concerns, primarily because the Bank's assets and liabilities
consist largely of monetary items. The relatively low proportion of the Bank's
fixed assets to total assets (approximately .5% for each of the years ended
December 31, 1992, 1991, and 1990) reduces both the potential of inflated
earnings resulting from understated depreciation charges, and the potential
significant understatement of absolute values. Inasmuch as a significant
portion of the Bank's deposit base is associated with real estate activity in
Southern California, the Bank would be impacted negatively should interest
rates increase significantly in that a rise in interest rates would tend to
slow real estate activity and accordingly cause deposits to shrink.
26
<PAGE> 27
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
For consolidated financial statements of the Bank, see "Consolidated
Statements of Financial Condition", "Consolidated Statements of Earnings",
"Statements of Changes in Shareholders' Equity", "Consolidated Statements of
Cash Flows", "Notes to Consolidated Financial Statements" and "Auditors'
Report" on pages 15 through 31 of the Bank's 1992 Annual Report to the
Shareholders, attached hereto as Exhibit 6.2 and incorporated herein by this
reference, and the "Consent of Independent Public Accountants" and "Auditors'
Report" at pages 42 through 43 herein. See also "Item 11 - Exhibits, Financial
Statement Schedules, and Reports on F-3" herein.
27
<PAGE> 28
PART III
Part III of this report (Items 9 and 10) is omitted since the information
called for is included in a definitive proxy statement which will be filed with
the Federal Deposit Insurance Corporation within 120 days after the end of the
most recent fiscal year and such proxy statement is incorporated herein by this
reference.
28
<PAGE> 29
PART IV
ITEM 11. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM F-3
A. CONTENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The following financial statements of the Bank are included in the Bank's
1992 Annual Report to Shareholders (Exhibit 6.2 hereto) and are
incorporated herein by this reference.
Consolidated Statements of Financial Condition
Consolidated Statements of Earnings
Statement of Changes in Shareholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedules not appearing below are omitted because of the absence of
conditions under which they are required or because they appear in the
Notes to Financial Statements appearing in the 1992 Annual Report to
Shareholders (Exhibit 6.2 hereto) and are incorporated herein by this
reference.
SCHEDULE I SECURITIES
The information required by Schedule I is incorporated herein by this
reference to Note 3 of the Bank's Consolidated Financial Statements as
contained on page 21 of the Bank's 1992 Annual Report to Shareholders
(Exhibit 6.2 hereto).
SCHEDULE II LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY
HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
See page 35 of this filing.
SCHEDULE III LOANS AND LEASE FINANCING RECEIVABLES
The information required by Schedule III is incorporated herein by this
reference to Note 5 of the Bank's Consolidated Financial Statements as
contained on page 22 of the Bank's 1992 Annual Report to Shareholders
(Exhibit 6.2 hereto).
29
<PAGE> 30
SCHEDULE IV BANK PREMISES AND EQUIPMENT
The information required by Schedule IV is incorporated herein by this
reference to Note 7 of the Bank's Consolidated Financial Statements as
contained on page 23 of the Bank's 1992 Annual Report to Shareholders
(Exhibit 6.2 hereto).
SCHEDULE V INVESTMENTS IN INCOME FROM DIVIDENDS AND EQUITY IN
EARNINGS OR LOSSES OF SUBSIDIARIES AND ASSOCIATED
COMPANIES
See page 38 of this filing.
SCHEDULE VI ALLOWANCE FOR POSSIBLE LOAN LOSSES
The information required by Schedule VI is incorporated herein by this
reference to Note 5 of the Bank's Consolidated Financial Statements as
contained on page 22 of the Bank's 1992 Annual Report to Shareholders
(Exhibit 6.2 hereto).
B. REPORTS ON FORM F-3
No reports on Form F-3 were filed this fiscal year ended December 31, 1992.
C. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Filing Status
- --------------- ----------- -------------
<S> <C> <C>
1.1 The Bank's Articles of Association as Incorporated by Reference to
amended on October 6, 1983 Exhibit "A" to Form F-1
Registration Statement of the
Bank's 1983 Form F-2
1.2 The Bank's Articles of Incorporation Incorporated by Reference to
effective November 1, 1988 Exhibit "1.2" to the Bank's
1988 Form F-2
1.3 The Bank's Bylaws as restated on Incorporated by Reference
February 25, 1986 to Exhibit "2.2" to the
Bank's 1985 Form F-2
</TABLE>
30
<PAGE> 31
<TABLE>
<S> <C> <C>
1.4 The Bank's Bylaws, effective November 1, Incorporated by Reference to
1988 Exhibit "1.4" to the Bank's
1988 Form F-2
3.1 Copy of Bank's Incentive Stock Option Plan Incorporated by Reference to
Exhibit "D" to Form F-1
Registration Statement of the
Bank
3.2 Copy of Murdock Plaza Lease Incorporated by Reference to
Exhibit "G" to Form F-1
Registration Statement of the
Bank
3.3 Copy of Del Amo Financial Center Lease Incorporated by Reference to
Exhibit "H" to Form F-1
Registration Statement of the
Bank
3.4 Copy of Koll Center Lease Incorporated by Reference to
Exhibit "I" to Form F-1
Registration Statement of the
Bank
3.6 Copy of Warner Center Lease Incorporated by Reference to
Exhibit "L" to the Bank's 1984
Form F-2
3.10 Copy of Beaudry Center Lease Incorporated by Reference to
Exhibit "3.10" to the Bank's 1988
Form F-2
3.11 Copy of Bank's Nonqualified Stock Option Incorporated by Reference to
Plan Exhibit "E" to Form F-1
Registration Statement of the
Bank
3.12 Copy of Bank's Stock Bonus Plan and Trust Incorporated by Reference to
Exhibit "F" to Form F-1
Registration Statement of the
Bank
</TABLE>
31
<PAGE> 32
<TABLE>
<S> <C> <C>
3.13 Copy of Bank's Employee Savings Plan Incorporated by Reference to
Exhibit "3.13" to the Bank's
1988 Form F-2
3.14 Metrobank Amended and Restated Employee Incorporated by Reference to
Benefit Plan Exhibit "5.12" to the Bank's
1986 Form F-2
3.15 Metrobank Amended and Restated Employee Incorporated by Reference to
Stock Ownership Trust Agreement Exhibit "5.13" to the Bank's
1986 Form F-2
3.16 First Amendment to Metrobank Amended Incorporated by Reference to
and Restated Employee Benefit Plan Exhibit "5.14" to Bank's
1986 Form F-2
6.1 Copy of Bank's 1988 Annual Report to Incorporated by Reference to
Shareholders Exhibit "6.1" to Bank's 1988
Form F-2
6.2 Copy of Bank's 1992 Annual Report to Incorporated by Reference to
Shareholders Exhibit "6.2" to Bank's 1992
Form F-2
9.1 List of Subsidiaries Incorporated by Reference to
Exhibit "9.1" to Bank's 1988
Form F-2
10.1 Copy of San Diego Office Lease Incorporated by Reference to
Exhibit "10.1" to Bank's 1991
Form F-2
10.2 Copy of Torrance Office Lease Incorporated by Reference to
Exhibit "10.2" to Bank's 1991
F-2
</TABLE>
32
<PAGE> 33
SUPPLEMENTAL SCHEDULES
33
<PAGE> 34
SCHEDULE I
SECURITIES
The information required by format F-9D is provided on page 21 of the
Bank's 1992 Annual Report to Shareholders, attached hereto as Exhibit 6.2 and
incorporated herein by this reference.
34
<PAGE> 35
SCHEDULE II
LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY
HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
12/31/91 12/31/92
NAME BALANCE ADDITIONS REPAYMENTS BALANCE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ROBERT MAYER $ 6,485,000 $ - $ 27,500 $6,457,500
RUDY MARKMILLER 1,070,875 788,475 - 1,859,350
WALLACE WONG 3,988,637 - 85,129 3,903,508
ALL OTHERS 43,750 - 15,000 28,750
--------- --------- ------ ---------
TOTAL $11,588,262 $788,475 $127,629 $12,249,108
=========== ======== ======== ===========
</TABLE>
35
<PAGE> 36
SCHEDULE III
LOANS AND LEASE FINANCING RECEIVABLES
The information required by format F-9D is provided on page 22 of the
Bank's 1992 Annual Report to Shareholders, attached hereto as Exhibit 6.2 and
incorporated herein by this reference.
36
<PAGE> 37
SCHEDULE IV
BANK PREMISES AND EQUIPMENT
The information required by format F-9D is provided on page 23 on the
Bank's 1992 Annual Report to Shareholders, attached hereto as Exhibit 6.2 and
incorporated herein by this reference.
37
<PAGE> 38
SCHEDULE V
INVESTMENTS IN INCOME FROM DIVIDENDS AND EQUITY IN EARNINGS
OR LOSSES OF SUBSIDIARIES AND ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
BANK'S
PROPORTIONATE
PERCENT OF EQUITY IN PART OF
SUBSIDIARIES VOTING STOCK TOTAL UNDERLYING EARNINGS FOR
CONSOLIDATED OWNED INVESTMENT NET ASSETS THE PERIOD
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
METROCORP 100% $26,044,623 $26,044,623 100%
- ----------------------------------------------------------------------------------------------------
$26,044,623 $26,044,623
=========== ===========
</TABLE>
38
<PAGE> 39
SCHEDULE VI
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The information required by format F-9D is incorporated herein by reference
to Note 5 of the Bank's Consolidated Financial Statements provided on page 22
of the Bank's 1992 Annual Report to Shareholders, attached hereto as Exhibit
6.2 and incorporated herein by this reference.
39
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 29, 1993 METROBANK
----------------------
(Bank)
By /s/ David L. Buell
--------------------------
David L. Buell
Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank and
in the capacities indicated on the date set forth above.
Signature Title
--------- -----
/s/ David L. Buell Chief Executive Officer
- -------------------------------------------
David L. Buell Chairman of the Board
(principal executive officer)
and Director
/s/ David P. Malone Executive Vice President
- -------------------------------------------
David P. Malone Chief Financial Officer
(principal financial officer)
/s/ Chris Ishikawa Vice President
- -------------------------------------------
Chris Ishikawa Controller
(principal accounting officer)
40
<PAGE> 41
/s/ Peter Caloyeras Director
- -------------------------------------------
Peter Caloyeras
/s/ Seymour Carr Director
- -------------------------------------------
Seymour Carr
Director
- -------------------------------------------
James W. Hobson
/s/ Wallace Wong Director
- -------------------------------------------
Wallace Wong
Director
- -------------------------------------------
Robert L. Mayer
Director
- -------------------------------------------
Rudy B. Markmiller
41
<PAGE> 42
[ARTHUR ANDERSEN LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Annual Report on Form F-2 of Metrobank and subsidiary of our
report dated January 19, 1993 included in the 1992 Annual Report to
Shareholders of Metrobank and subsidiary.
Arthur Andersen & Co.
Los Angeles, California,
January 19, 1993
42
<PAGE> 43
[ARTHUR ANDERSEN LOGO]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTARY
SCHEDULES
To the Shareholders and Board of Directors of Metrobank:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the annual report of
Metrobank and subsidiaries (the "Bank") included in this Form F-2, and have
issued our report thereon dated Janaury 19, 1993. Our audit was made for the
purpose of forming an opinion on those consolidated statements taken as a
whole. The supplemental schedules in pages 35 and 38 are the responsibility of
the Bank's management and are presented for purposes of complying with the
Federal Deposit Insurance Corporation's rules and regulations and are not a
required part of the basic financial statements. These supplemental schedules
have been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
Arthur Andersen & Co.
Los Angeles, California,
January 19, 1993
43
<PAGE> 44
METROBANK
1992
Annual Report
<PAGE> 45
Metrobank
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Dollars in thousands, except per share amounts 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
Total assets $905,083 $824,774 $744,521 $898,153 $830,995
Total deposits 801,863 740,824 672,765 799,901 757,274
Gross loans 527,952 483,648 418,949 311,525 213,208
Net earnings 5,758 5,513 2,101 5,468 4,773
Earnings per share $ 1.21 $ 1.16 $ .44 $ 1.33 $ 1.16
Shareholders' equity 59,279 55,761 52,002 51,904 39,942
Return on equity 10.0% 10.3% 3.9% 13.0% 12.8%
-------- -------- -------- -------- --------
</TABLE>
Metrobank is a financially strong, well-capitalized Southern California regional
business bank providing a full range of personalized banking services to small
and medium size companies, professionals, and affluent individuals through a
network of five regional offices in three counties. Offices are located in
Westwood, serving the West Los Angeles-Beverly Hills-Santa Monica area; in
Warner Center, serving the San Fernando Valley; in Torrance, serving the South
Bay; in Newport Beach, serving Orange County; and in Mission Valley, serving
San Diego. Founded in 1978, Metrobank now ranks 11th in size out of 317 banks
headquartered in Southern California as of September 30, 1992.
<PAGE> 46
To Our
SHAREHOLDERS
In a year characterized by severe economic conditions, Metrobank's success is
especially noteworthy. As California continued in its third year of recession,
our marketplace was particularly impacted by weakness in the aerospace, real
estate and tourism industries. These contractions caused substantial job losses
in Southern California and negatively affected the business sector regionwide.
As a result, most California banks, including Metrobank, were faced with an
increase in non-performing assets that required the establishment of larger
loan loss reserves. In addition, the recession resulted in a stepped-up pace of
industry mergers and consolidations and depressed the market valuation of most
California bank shares.
1992 RESULTS
Against this challenging backdrop, Metrobank succeeded in attaining record net
income of $5.8 million, up from the 1991 level of $5.5 million. Earnings per
share rose to $1.21 for 1992 (the second-highest level in the bank's history),
compared with $1.16 a year earlier. Significantly, these gains were achieved
after a substantially larger 1992 provision for loan losses and sizable real
estate write-downs taken to further strengthen our already-sound financial
condition.
To meet the challenge posed by the business climate, as well as to support
Southern California businesses that are succeeding despite the difficulties of
the economy. Metrobank actively sought to add quality loans during 1992. Real
estate construction lending was significantly reduced, but the selective
addition of other real estate loans and consumer loans boosted total loans by
more than $44 million to a new high of $528 million. During 1993, we will
maintain this policy of conservatively supporting the economic activity of
Southern California as we believe it is truly a bank's responsibility to
promote and sustain the business sectors in its marketplace.
A similar program to expand deposits lifted the total by $61 million to a
record $802 million. Importantly, this increase included a 29% boost in
non-interest bearing demand deposits to $389 million from $309 million, which
more than offset a decline in other deposits. Overall, the composition of the
deposit base was significantly strengthened.
Concurrently, total assets increased to an all-time high of $905 million, up
from $825 million a year
2
<PAGE> 47
<TABLE>
<CAPTION>
NET INCOME DIVIDENDS PER SHARE BOOK VALUE PER SHARE
---------- ------------------- --------------------
In thousands
<S> <C> <C> <C>
1992 $5,758 $0.60 $12.47
1991 $5,513 $0.43 $11.74
1990 $2,101 $0.31 $10.95
</TABLE>
<PAGE> 48
TOTAL ASSETS
In millions
<TABLE>
<S> <C>
1992 $905
1991 $825
1990 $745
</TABLE>
CAPITAL RATIOS - 1992
<TABLE>
<S> <C>
Metrobank Tier 1 Capital to Asset Ratio 9.8%
Government Required Ratio by Year End, 1992 4.0%
Metrobank Risk-Based Capital to Asset Ratio 11.0%
Government Required Ratio by Year End, 1992 8.0%
</TABLE>
<PAGE> 49
earlier. Although we are confident that assets will continue to grow, reaching
$1 billion within the foreseeable future, our primary goal is to continue to
enhance the quality of assets and the strength of Metrobank's balance sheet.
We are pleased that the bank's improved performance supported the declaration
of an increased dividend of $.60 per share for 1992, up from $.43 for 1991. We
are hopeful that we can maintain this dividend rate in 1993, but our ability to
do so will be dependent upon earnings, economic conditions and regulatory
constrainst.
Underlying the achievements of 1992 was our success in creating nearly 400 new
banking relationships during the year. This gratifying expansion of our client
base included a good cross-section of quality middle-market companies,
including manufacturers and distributors, as well as small businesses,
professionals and affluent individuals. This is an era when some financial
institutions seem hesitant to grow in this regard. Management believes strongly
that providing financing and other services to well-managed and successful
customers now offers substantial opportunities for even greater growth when the
Southern California economy rebounds.
A SOUND, HEALTHY BANK
As the industry experienced some weakening of its capital position in 1992, it
is reassuring that Metrobank continues to rank among the best-capitalized
institutions in California. Our tier one and risk-based capital ratios rose to
9.8% and 11%, respectively, from 9.6% and 10.9% in 1991. These important
measures of financial soundness comfortably exceed the federal minimums for
institutions established at 4% and 8%, respectively.
Considering the economic climate, the bank also succeeded in maintaining a
reasonable level of asset quality in 1992. Although the ratio of non-performing
assets to total assets increased to 1.91%, this percentage is down from a
recent high of more than 3% and is favorable in comparison to our industry in
the current Southern California economy.
Further, an analysis of the components of non-performing assets indicates that
the bank's position is sound. As a result of prudent write-downs, Metrobank's
real estate-owned and "in-substance foreclosures"--properties in process of
being foreclosed--presently offer only modest exposure to further deterioration
in value.
-----
5
<PAGE> 50
Consistent with the decline in business activity that began in 1990, Metrobank
expanded its reserves for loan losses from 1.59% and 1.69% of total loans in
1990 and 1991 to 1.91% at year-end 1992. This increased "risk prevention," we
are pleased to note, has been accomplished while maintaining a good earnings
trend.
However, it is clear that the difficult economic environment is preventing
attainment of Metrobank's long-term goals of 15% and 1% returns, respectively,
on equity and assets. While these returns equaled 10% and 0.7% in 1992, we are
optimistic that improving economic conditions will permit achievement of our
objectives later in this decade.
As a result of four separate examination processes conducted during 1992,
management concluded that the bank's practices and policies are sound. Most
recently, the bank was the object of a regular, comprehensive examination by
the Federal Deposit Insurance Corporation, as well as the annual evaluation of
our auditors, Arthur Andersen & Co. Earlier, as part of a continuing program to
solicit the opinions of outside parties, the bank retained two consulting firms
to review our loan portfolio and practices.
THE OUTLOOK
It appears that Southern California may not see any meaningful economic
improvement for several years. Accordingly, Metrobank's strategy for the
current year is conservative. It is designed to continue to protect the bank
against weak economic conditions externally and to take advantage of business
opportunities that accrue to us because of our sound marketplace position. The
following are among our goals for fiscal 1993:
- - To continue to expand our banking relationships in a manner that will
generate quality growth in loans and deposits;
- - To increase loan loss reserves as a safeguard against possible continuing
effects of the recession;
- - To remain alert to problem loans and to reflect any adverse changes
immediately through appropriate charge-offs and write-downs; and
- - To maintain our earnings stream at or above the level attained in 1992.
------
6
<PAGE> 51
GROSS LOANS
In millions
<TABLE>
<S> <C>
1992 $528
1991 $485
1990 $419
</TABLE>
LOAN PORTFOLIO CATEGORIES
<TABLE>
<S> <C>
Construction 9%
Asset Based 10%
Priority Personal 11%
Installment 17%
Commercial 25%
Mortgage 28%
</TABLE>
<PAGE> 52
Although it is obvious that Southern California remains one of the most
depressed regions in the nation, there are sound reasons for optimism regarding
the future.
California's importance to the U.S. economy cannot be over-estimated. It leads
all states in exports, accounting for 15% of the nation's total in 1991. It is
America's import/export gateway - largely through the port of Los Angeles - to
the 28 nations of the Pacific Rim, and it is a principal trading partner with
Mexico, a market that is growing rapidly with the increasing liberalization of
its economy. Additionally, California is and will remain a major center for may
industries.
These are just some of the factors that form the basis for Metrobank's
confidence in and commitment to Southern California and its middle market
businesses. As we have stated in previous annual reports, Metrobank is "the
right bank, in the right place, at the right time." This has never been more
true than today. The bank's sound economic and competitive position in the
current marketplace provides the springboard for our ful participation in the
inevitable resurgence of the region's economy.
A large part of Metrobank's success during this period of uncertainty can be
attributed to the continued confidence of our shareholders, clients and
employees. We also have benefitted from the sound guidance and supervision
supplied by our directors, auditors and the goverment agencies which oversee
our industry. The support of all of these valued constituencies is greatly
appreciated.
David L. Buell
David L. Buell
Chairman for the Board and Chief Executive Officer
Robert P. Bulseco Paul B. Alexander
Robert P. Bulseco Paul B. Alexander
President and Executive Vice
Chief Administraative President and
Officer Chief Credit Officer
David P. Malone Paul W. Stroube
David P. Malone Paul W. Stroube
Executive Vice Executive Vice
President and Chief President,
Financial Officer Headquarters Office
-----
8
<PAGE> 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF METROBANK
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, liquidity,
capital resources and interest rate sensitivity. It should be read in
conjunction with the consolidated financial statements and related notes to
consolidated financial sttements of the Bank appearing elsewhere in this
report.
NET INTEREST INCOME
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposit accounts and borrowings). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities, aas well as the difference between the relative
amounts of average interest-earning assets and interest-bearing liabilities.
The Bank's net interest income was $46.0 million for the year ended December
31, 1992. This compares to $39.1 million for the year ended Decemer 31, 1991
and $39.3 million for the year ended December 31, 1990. The increase in net
interest income from 1991 to 1992 was primarily due to a substantial decrease
in interest expense. Net interest income was further increased by growth in
investment interest income and was offset by a decrease in loan interest income
and fees.
Interest and fee income decreased to $61.8 million in 1992 from $64.1 million
in 1991 and was $64.4 million for the year ended 1990. This decrease of $2.3
million in interest and fee income in comparing 1992 to 1991 is primarily
attributable to a 221 basis point drop in the Bank's average prime rate which
more than offset the $60 million increase in average loans outstanding. This
decrease in interest and fee income relating to the loan portfolio was
offset by an increase in investment interest income. The average investment
portfolio increased by $31.0 million during 1992 which offset the 67 basis
point decrease in the yield of the investment portfolio. The decrese in yield
on the portfolio was caused by the reinvestment of maturing investments and
additional investments in comparable term securities yielding less due to the
drop in U.S. Treasury yields which occurred during 1992.
Interest expense decreased to $15.7 million for the year ended December 31,
1992 from $25.0 million for the year ended December 31, 1991 and $25.1 million
for the year ended 1990. The decrease of $9.3 million in comparing 1992 to
1991 is primarily attributable to a 223 basis point decrease in interest
expense paid on interest-bearing deposits. Because the Bank maintains
primarily short term interest-bearing deposits, the frequeent repricing of
these deposits was greatly affected by the substantial decrease in interest
rates. Additionally, average inerest-bearing deposits decreased by $47.5
million in 1992 which added to the decrease in interest expense.
The table below details the changes in interest income and interest expense by
component, and the amount of change attributable to variations in interest
rates and average balances.
<TABLE>
<CAPTION>
Year ended December 31, 1992 Year ended December 31, 1991 Year ended Decemer 31, 1990
over 1991 over 1990 over 1989
---------------------------- ---------------------------- ----------------------------
Total Total Total
Increase Change Due To: Increase Change Due To: Increase Change Due To:
(Decrease) Rate Volume (Decrease) Rate Volume (Decrease) Rate Volume
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
In thousands
INTEREST INCOME:
Interest-earning deposits $ -- $ -- $ -- $ (7) $ -- $ (7) $ (154) $ (2) $ (152)
Other interest income 74 58 16 (963) (331) (632) (1,772) (111) (1,661)
Investment securities 1,009 (1,325) 2,334 (2,970) (127) (2,843) (8,392) 14 (8,406)
Loans & Bankers' acceptances (3,416) (8,104) 4,688 3,604 (3,474) 7,078 12,896 (2,804) 15,700
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Interest income (2,333) (9,371) 7,038 (336) (3,932) 3,596 2,578 (2,903) 5,481
------- ------- ------- ------- ------- ------- ------- ------- -------
INTEREST EXPENSE:
NOW and money market demand
accounts (1,568) (3,398) 1,830 (188) (924) 736 570 273 297
Sasvings deposits (360) (370) 10 (82) (14) (68) (663) 3 (666)
Time deposits (7,752) (5,601) (2,691) (188) (3,023) 2,835 2,807 (614) 3,421
Funds purchases and other
borrowed money 234 (350) 584 (507) (483) (24) 647 (173) 820
Capitalized interst 219 -- 219 826 826 -- 10 10 --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total interest expense (9,227) (9,179) (46) (139) (3,618) 3,479 3,371 (501) 3,8872
------- ------- ------- ------- ------- ------- ------- ------- -------
Net interest income $ 6,894 $ (192) $ 7,086 $ (197) $ (314) $ 117 $ (793) $(2,402) $ 1,609
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 54
The decrease in net inerest margin from 1991 to 1990 was due primarily to a
$51.2 million decrease in average demand deposits outstanding which were
replaced by higher costing money market accounts and time certificates of
deposit, a decrease in the Bank's prime interest rate, a decrease in investment
interest income caused by a $44.7 million decrease in the average portfolio
balance; offset by an increase of approximately $3.6 million in loan interest
and fee income caused principally by the growth of $64.3 million in the loan
portfolio.
NON-INTEREST INCOME
During 1992, the Bank recognized approximately $5.7 million in non-interest
income as compared to $6.2 million in 1991 and $6.0 million in 1990. This
decrease of $500,000 in comparing 1992 to 1991 was due primarily to
non-recurring gains on the sale of other real estate owned in 1991 totalling
$800,000 Offsetting this decrease was an increase in rental income of $300,000
compared to the previous year on the Bank's low-income housing project which
was placed in service in 1991. This low-income housing project also generates
approximately $1.5 million in tax credits per year.
The increase of $200,000 in non-interest income in comparing 1991 to 1990 was
due primarily to gains on the sale of other real estate owned and real estate
investments of approximately $800,000 in 1991 compared to $1.8 million in 1990,
a decrease of $1.0 million, offset by $1.2 million of gross rental incoem
attributable to the Bank's low-income housing project which was placed in
service during 1991.
PROVISION FOR POSSIBLE LOAN LOSSES
The Bank maintains an allowance fo loan losses at a level which management
deems adequate to offset potential losses. Loans deemed to be uncollectible are
charged to this allowance; subsewquent recoveries, if any, are credited back to
the allowance. Additions to the allowance are made on a regular basis through
charges to operations and are reflected in the Bank's statement of earnings as
a provision for possible loan losses. The balance of the allowance for possible
loan losses reflects the amount which, in management's judgement, is adequate
to provide for potential loan losses after weighing the mix of the loan
portfolio, current economic conditions, past loan loss experience and other
factors relevant in estimating loan losses.
The following table indicates the amounts which were allocated as provision for
possible loan losses and the relation of those amounts to net charge-offs and
total gross loans for the periods indicated:
<TABLE>
<CAPTION>
Net Reserve
Provision Charge-Offs Transferred Allowance Ratio of
Credited to Against to/from Balance at Allowance to
In thousands Allowance Allowance OREO Year End Gross Loans
FISCAL YEAR
<S> <C> <C> <C> <C> <C>
1992 $5,200 $3,272 $ --- $10,102 1.91%
1991 2,130 788 (160) 8,174 1.69%
1990 5,619 1,903 160 6,672 1.59%
1989 1,498 657 --- 3,116 1.00%
1988 1,063 531 --- 2,275 1.07%
------ ------ ----- ------- ----
</TABLE>
The adequacy of the allowance for possible loan losses is also evaluated
relative to the level of non-performing loans (those for which principal or
interest are past due more than 90 days and those on non-accrual status).
In evaluating the adequacy of the allowance for possible loan losses, management
also reviews the balance of the allowance as a percentage of loans outstanding
less loans considered secured. Such security generally is composed of cash and
first trust deeds on real propety. The existence of collateral does not,
however, eliminate all credit risk since property acquired through foreclosure
("OREO") may not be saleable for an amount sufficient to offset the entire
amount of the loan and costs associated with foreclosure. Although management
believes that the allowance for possible loan losses is adequate, future
provisions will be subject to continuing evaluation of risks inherent in the
lown portfolio.
The provision for possible loan losses increased by approximately $3.1 million
from the prior year and is reflective of Management's intention to maintain
reserves for possible loan losses at a level sufficient to provide coverage for
loan growth and non-performing assets. The Bank's ratio of loan loss reserves to
total loans was 1.91% and 1.69% as of December 31, 1992 and December 31, 1991
respectively.
------
10
<PAGE> 55
Loan charge-offs (net of recoveries) for the year ended December 31, 1992
totalled approximately $3.3 million. This compares to the net charge-offs of
$800,000 for 1991. The increase in the Bank's charge-offs was primarily
attributable to its asset based loan portfolio; of the $2.5 million increase,
$1.2 million was asset based related while approximately $500,000 was real
estate construction realted. Asset based loans represented 10% and 12% of the
Bank's loan portfolio as of December 31, 1992 and December 31, 1991,
respectively, while real estate construction loans represented 9% and 11% as of
December 31, 1992 and December 31, 1991, respectively.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as the real estate values
in the Southern California region. Inasmuch as this is the principal geographic
area in which Metrobank conducts its business, the recession has had an
adverse impact on the Bank's asset quality. As of December 31, 1991, the Bank
had approximately $8.1 million of non-performing assets which consisted of $5.2
million of other real estate owned and insubstance foreclosures. As of December
31, 1992, the Bank had approximately $17.3 million non-performing assets of
which $10.8 million consisted of other real estate owned and insubstance
foreclosures. Total non-performing assets to total assets as of December 31,
1991 and December 31, 1992 was approximately 1% and 2%, respectively.
Additionally, non-accrual loans increased approximately $3.3 million to $4.9
million from December 31, 1991 to December 31, 1992. Of this increase, $1.6
million was real estate related and $1.7 million was commercial related.
PROVISION FOR OREO, INSUBSTANCE FORECLOSURE AND REAL ESTATE INVESTMENT LOSSES
During 1992, the Bank's wholly owned subsidiary, Metrocorp. Inc. (the Company),
transferred a joint venture to insubstance foreclosure and another to OREO.
Total write-downs associated with these two properties amounted approximately
$2 million. Additionally, the Company wrote-down an investment in real estate
by approximately $700,000during 1992.
NON-INTEREST EXPENSE
Non-interest expense increased to $39.2 million for the year ended December 31,
1992 from $35.7 million for the year ended 1991 and $36.3 million for the year
ended 1990. This increase of $3.5 million in comparing 1992 to 1991 was due
primarily to an increase $1.4 million in provisions for OREO and insubstance
foreclosures, an increase of $1.5 million in personnel expenses due to the
start-up of a residential mortgage division, increases to staff for certain
areas of the Bank targeted for expansion, as well as normal salary increases.
The Bank discontinued the residnetial mortgage division in December 1992 as
anticipated volume was not realized. Additionally, there was an increase of
$600,000 in operating expenses related to the Bank's low-income housing project
and its commercial office building in Tustin and a $500,000 increase in
professional services. Regualatory assessments increased $300,000 and office
supplies increased $200,000. Offsetting these increases was a decrease of
$900,000 for data processing and other services paid on behalf of certain
depository relationships. Other non-interest expenses decreased by
approximately $100,000.
The decrease of $600,000 in comparing 1991 to 1990 was due primarily to a
decrease of $1.6 million in data processing and other services paid on behalf
of certain depository relationships and an $800,000 decrease in equipment
expense primarily related to a one-time charge in 1990. Offsetting these
decreases was a $1.2 million increase in operating expenses related to the
Bank's low-income housing project placed in service in 1991, a $600,000
increase in regulatory assessments, a $700,000 increase in provisions for OREO
and insubstance foreclosure reserves, and a $300,000 net increase in other
expenses.
PROVISION FOR INCOME TAXES
The Bank's provision for income taxes is lower than the statutory federal
income tax rate due to the utilization of tax credits related to the Bank's
low-income housing project. These tax credits, of which $1.5 million was
utilized in 1992 and $1.1 million in 1991, amount to approximately $15 million
in credits over a 10 year period. However, the utilization of these tax credits
is subject to certain alternative minimum tax restrictions. During 1992, the
Bank carried back approximately $500,000 of tax credits against income recorded
in previous years. As of the end of 1992, the Bank had approximately $250,000
of carryback ability remaining. The effective tax rate used in computing net
income was 20.7% in 1992, 27.2% in 1991 and 37.3% in 1990.
In February 1992, the FASB issued Statement of Financial Accounting Standards
No. 109 (SFAS 109)m "Accounting for Income Taxes." SFAS 109 will be effective
on January 1, 1993 and supersedes Accounting Priniciple Bullentin Opinion 11
(APB 11). The statement utilizes the liability method of recognition and
measurement of income taxes. Management does not expect that the adoption SFAS
109 will have a material effect on the Bank's operations. Management has not
determined the
11
<PAGE> 56
proposed statement's results on operations; also, management has not decided
whether it will implement SFAS 109 by restating prior years or by recording an
adjustment for prior years in the Consolidated Statement of Income for the year
adopted.
CAPITAL RESOURCES
The Bank's shareholders' equity totalled $59.3 million December 31, 1992, which
represents an increase of $3.5 million over shareholders' equity on December
31, 1991. This increase was due to net income for the year of $5.8 million,
offset by dividend in the amount of $2.9 million and a decrease in the
indebtedness of the Bank's Employee Stock Ownership Plan and Trust of $575,000.
The Bank's shareholders' equity totalled $55.8 million as of December 31, 1991,
which represents an increase of $3.8 million from shareholders' equity on
December 31, 1990. This increase was due to net income for the year of $5.5
million, offset by dividends paid in the amount of $2.0 million and a decrease
in the indebtedness of the Bank's Employee Stock Ownership Plan and Trust of
$288,000.
The amount of dividends declared in 1992 and 1991 totalled $.60 per share and
$.43 per share, respectively. The continued payment of this level of dividends
is dependent upon a number of factors relating to earnings, economic conditions
in Southern California and regulatory considerations.
The FDIC, the Federal Reserve Board, and the Comptroller of the Currency have
adopted regualtions that supplement the current regulatory capital requirements
by establishing guidlelines for calculating "risk-based" and "tier-one" capital
ratios. These guidelines establish a framework that requires regulatory capital
requirements to be risk adjusted. The risk-based capital ratio is determined by
segregating assets and specified off-balance sheet commitments into foru risk
weighted categories, with higher levels of capital requried for the categories
prerceived as representing greater risk.
Under the guidelines, the Bank is required to maintain a ris-based capital
ratio of 8.00% and a tier-one capital ratio of 4.00% by December 31, 1992. At
December 31, 1992, the risk-based capital ratio of the Bank was 11.00% and its
tier-one capital ratio was 9.8%. This is primarily because the Bank maintains a
significant amount of treasury and agency backed securities ehich are primarily
pledged as ollateral for bankruptcy related deposits or repurchase agreements
with investment brokers and require either a 0% or 20% risk weighting;
additionally most of the Bank's loan commitments are for less than one year
which also require a 0% risk weighting.
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity, which primarily represents the ability of the Bank to meet
fluctuations in its deposit structure and to provide for customer credit needs,
is actively managed by the Bank's Asset/Liability Management Committee.
Inasmuch as a significant portion of the Bank's deposit structure is
concentrated in specialized industries (for example, escrow and title insurance
companies) which closely parallel the real estate economy in Southern
California, the Bank is subject to Fluctuations in volume due to economic
trends in Southern California real estate. To mitigate this exposure, the Bank
has increased its emphasis on other types of deposits, and to a lesser degree
relied upon the use of secured and unsecured lines of credit with correspondent
banks and investment banking firms. Additionally, during 1992, Metrobank became
a member of the Federal Home Loan Bank which Also allows it to draw upon lines
of credit which were established during the year.
In addition to managing the liquidity requirements of the Bank, the
Asset/Liability Management Committe reviews, recommends and implements changes
in the asset and liability structure of the Bank's balance sheet. Presently,
the relationship of interest sensitive assets to interest sensitive liabilities
would cause an improvement in net interest margin in a falling rate
environment. This would be caused primarily by the fact that the Bank's
liabilities reprice more rapidly than does its assets.
INFLATION
The impact of inflation on the Bank differs significantly from that of
industrial concerns, primarily because the Bank's assets and liablilities
consist largely of monetary items. The relatively low proportion of the Bank's
fixed assets to total assets (approximately .5% for each of the years ended
December 31, 1992, 1991, and 1990) reduces both the potential of inflated
earnings resulting from understated depreciation charges, and the potential
singificant understatement of absolute values.
12
<PAGE> 57
SELECTED FINANCIAL DATA Metrobank
The following summarizes selected financial data concerning the Bqnk for the
years indicated. The selected financial data should be read in conjunction with
the Bank's Consolidated Financial Statements and Notes relating thereto,
included elsewhere herein:
<TABLE>
<CAPTION>
Dollars in thousands, except
per share data Years ended December 31, 1992 1991 1990 1989 1988
EARNINGS SUMMARY
<S> <C> <C> <C> <C> <C>
Interest income $ 61,764 $ 64,097 $ 64,433 $ 61,855 $ 52,369
Interest expense 15,741 24,968 25,107 21,736 17,050
---------- ---------- ---------- ---------- ----------
Net interest income 46,023 39,129 39,326 40,119 35,319
Provision for possible loan losses 5,200 2,130 5,619 1,498 1,063
---------- ---------- ---------- ---------- ----------
Net interest income after provision for possible
loan losses 40,823 36,999 33,707 38,621 34,256
Non-interest income 5,661 6,238 5,983 3,163 1,800
Non-interest expense 39,227 35,660 36,339 33,472 28,692
---------- ---------- ---------- ---------- ----------
Earnings before income taxes 7,257 7,577 3,351 8,312 7,364
Provision for income taxes 1,499 2,064 1,250 2,844 2,591
---------- ---------- ---------- ---------- ----------
Net earnings $ 5,758 $ 5,513 $ 2,101 $ 5,468 $ 4,733
PRINCIPAL BALANCE SHEET ITEMS (AS OF END OF PERIOD)
Investment securities $ 248,912 $ 209,104 $ 202,956 $ 252,636 $ 367,619
Federal funds sold --- 30,000 25,000 130,000 115,675
Total loans -- gross 527,952 483,648 418,949 311,525 213,208
Total loans -- net 517,850 475,474 412,277 308,409 210,933
Total assets 905,083 824,774 744,521 898,153 830,995
Total deposits 801,863 740,824 672,765 799,901 757,274
Total shareholders' equity 59,279 55,761 52,002 51,904 39,942
PRINCIPAL BALANCE SHEET ITEMS (AVERAGE)
Investment securities $ 235,532 $ 204,204 $ 237,764 $ 351,062 $ 327,778
Federal funds sold 1,385 1,640 12,730 30,974 64,369
Total loans -- gross 508,784 449,190 384,867 253,150 189,756
Total loans -- net 499,628 442,190 380,466 250,588 187,756
Total assets 857,565 755,398 748,549 762,760 694,007
Total deposits 746,962 666,887 659,249 696,814 638,114
Total shareholders' equity 57,518 53,679 53,458 41,982 37,375
SHARE DATA
Net earnings per common share $ 1.21 $ 1.16 $ 0.44 $ 1.33 $ 1.16
Dividends per common share $ 0.60 $ 0.43 $ 0.31 $ 0.12 $ 0.10
Book value per share $ 12.47 $ 11.74 $ 10.95 $ 10.96 $ 9.73
Number of shares used in earnings per share
calculation (1) 4,754,172 4,750,172 4,749,180 4,123,726 4,104,532
Number of shares used in book value per share
calculation (2) 4,754,172 4,750,172 4,750,172 4,737,722 4,104,532
SELECTED RATIOS
Return on average shareholders' equity (net earn-
ings divided by average shareholders' equity) 10.0% 10.3% 3.9% 13.0% 12.8%
Return on average assets (net earnings divided
by average total assets) 0.7% 0.7% 0.3% 0.7% 0.7%
Equity to assets (average equity divided by
average total assets) 6.7% 7.1% 7.1% 5.5% 5.4%
Average gross loans to average total assets 59.3% 59.5% 51.4% 33.2% 27.3%
Average gross loans to average total deposits 68.1% 67.4% 58.4% 36.3% 29.7%
</TABLE>
(1) Earnings per common share are based upon the weighted average nubmer of
common shares outstanding during earh period.
(2) the number of shares used in computing the book value per share is the
number of common shares outstanding at the end of each period.
<PAGE> 58
MANAGEMENT REPORT ON FINANCIAL INFORMATION
Management of Metrobank is responsible for the preparation and presentation of
the financial statements, related financial data and other information in this
annual report. The financial statements have been prepared in conformity with
generally accepted accounting principles and include amounts that are based on
Management's informed estimates and judgement. Financial information appearing
throughout this annual report is consistent with that in the financial
statements.
In meeting its responsibility, Management relies on the Bank's internal control
structure. This structure is designed to provide reasonable assurance that
assets are safeguarded and transactions are properly recorded to permit the
preparation of appropriate financial information. The internal control
structure is supplemented by a program of internal audits to independently
evaluate the adequacy and application of financial and operating controls and
compliance with Bank policies and procedures.
The Audit Committee of the Board of Directors meets regularly with management,
the independent public accountants, and the internal auditors to ensure that
each is properly discharging its responsibilities with regard to the financial
statements and internal accounting controls. The independent public accountants
and internal auditors have full and free access to the Audit Committee and meet
with it, with and without Management being present, to discuss auditing and
financial reporting matters.
The financial statements in this annual report have been audited by Arthur
Andersen & Co., independent public accountants. Their audits were conducted in
accordance with generally accepted auditing standards and included a review of
the internal control structure, tests of accounting records and other audit
procedures necessary to allow them to express their opinion on the fairness of
the financial statements.
DAVID P. MALONE
DAVID P. MALONE
Executive Vice President, Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of Metrobank:
We have audited the accompanying consolidated statements of financial condition
of METROBANK (a California chartered state bank) (the Bank) and subsidiaries as
of December 31, 1992 and 1991, and the related consolidated statements of
earnings, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1992. These financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Metrobank and subsidiaries as
of December 31, 1992 and 1991, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1992 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Los Angeles, California
January 19, 1993
-----
11
<PAGE> 59
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION METROBANK
<TABLE>
<CAPTION>
In thousands, except for number of shares December 31, 1992 1991
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 86,164 $ 62,314
Federal funds sold - 30,000
Investment securities (approximate market value of $256,801
and $218,853 at December 3, 1992 and 1991, respectively) 248,912 209,104
Loans, net (gross $527,952 and $483,648 at December 31, 1992,
and 1991, respectively 517,850 475,474
Accrued interest receivable 5,978 5,615
Other real estate owned, net 10,834 5,245
Premises and equuipment,net 3,120 3,258
Investments in real estate 19,167 25,755
Other assets 13,058 8,009
-------- --------
$905,083 $824,774
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Time certificates $119,770 $208,336
Other deposits 682,093 532,488
-------- --------
801,863 740,824
Securities sold under agreement to repurchase and federal funds
purchased 32,695 14,410
Accured interest payable 444 937
Other liabilities 10,802 12,842
-------- --------
Total liabilities 845,804 769,013
Commitments and contingencies (Notes 12. 16)
Shareholders' equity:
Preferred stock, no par value:
Authorized-15,000,000 shares as of December 31, 1992 and 1991
Outstanding-none
Common stock, no par value:
Authorized-25,000,000 shares as of December 31, 1992 and 1991
Outstanding-4,754,172 and $,750.172 shares as of December
31, 1992 and 1991, respectively 34,310 34,273
Guarantee of ESOP loan (863) (1,438)
Undivided profits 25,832 22,926
-------- --------
Total shareholders' equity 59,279 55,761
-------- --------
$905,083 $824,774
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-----
15
<PAGE> 60
CONSOLIDATED STATEMENTS OF EARNINGS METROBANK
<TABLE>
<CAPTION>
In thousands, except per share amounts
and number of shares Years ended December 31, 1992 1991 1990
<S> <C> <C> <C>
INTEREST INCOME:
Loans $43,521 $46,937 $43,333
U.S. Treasury securities 11,896 9,230 8,340
Obligations of U.S. government agencies 788 2,386 4,220
Obligations of state political subdivisions - 50 1,113
Other securities 5,399 5,408 6,371
Other interest income 110 - 7
Federal funds sold 50 86 1,049
------- ------- -------
61,764 64,097 64,433
INTEREST EXPENSE:
Time certificates of deposit 6,659 14,411 14,599
Other deposits 7,481 9,409 9,679
Funds purchased and securities sodl under agreements to repurchase 1,532 1,239 1,749
Capitalized carrying costs (65) (284) (1,110)
Other interest expense 134 193 190
------- ------- -------
15,741 24,968 25,107
------- ------- -------
Net interest income 46,023 39,129 39,326
Provision for possible loan losses 5,200 2,130 5,619
------- ------- -------
Net interest income after provision for possible loan losses 40,823 36,999 33,707
NON-INTEREST INCOME:
Service charges on deposit accounts 1,301 1,108 1,098
Gain on sale of real estate investments - - 1,736
other non-interest income 4,360 5,130 3,149
------- ------- -------
5,661 6,238 5,983
NON-INTEREST EXPENSE:
Personnel expense 15,595 14,228 13,820
Occupancy, furniture and equipment expense 4,546 4,955 5,794
Provision for OREO and insubstance foreclosures 2,018 638 49
Other non-interest expense 17,068 15,839 16,676
------- ------- -------
39,227 35,660 36,339
------- ------- -------
Earnings before income taxes 7,257 7,577 3,351
Provision for income taxes 2,999 3,126 1,250
Income tax credit (1,500) (1,062) -
------- ------- -------
1,499 2,064 1,250
Net earnings $ 5,758 $ 5,513 $ 2,101
======= ======= =======
Earnings per share $ 1.21 $ 1.16 $ 0.44
======= ======= =======
Weighted average shares outstanding 4,754,172 4,750,172 4,749,180
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-----
16
<PAGE> 61
CONSOLIDATED STATEMENTS OF CHANGES IN METROBANK
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------ GUARANTEE OF UNDIVIDED
DOLLARS IN THOUSANDS THREE YEARS ENDED DECEMBER 31, 1992 SHARES AMOUNT ESOP LOAN PROFITS TOTAL
- ---------------------------------------------------------- --------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1989 4,737,722 $34,175 $(1,098) $18,827 $51,904
$0.31 per share cash dividend -- -- -- (1,473) (1,473)
Exercise of stock options 12,450 98 -- -- 98
Guarantee of indebtedness for ESOP -- -- (628) -- (628)
Net earnings -- -- -- 2,101 2,101
--------- -------- ---------- -------- --------
Balance, December 31, 1990 4,750,172 $34,273 $(1,726) $19,455 $52,002
$0.43 per share cash dividend -- -- -- (2,042) (2,042)
Reduction in guarantee of indebtedness
for ESOP -- -- 288 -- 288
Net earnings -- -- -- 5,513 5,513
--------- -------- ---------- -------- --------
Balance, December 31, 1991 4,750,172 $34,273 $(1,438) $22,926 $55,761
$0.60 per share cash dividend -- -- -- (2,852) (2,852)
Exercise of stock options 4,000 37 -- -- 37
Reduction in guarantee of indebtedness
for ESOP -- -- 575 -- 575
Net earnings -- -- -- 5,758 5,758
--------- -------- ---------- -------- --------
Balance, December 31, 1992 4,754,172 $34,310 $ (863) $25,832 $59,279
========= ======= ========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-17-
<PAGE> 62
CONSOLIDATED STATEMENT OF CASH FLOWS METROBANK
<TABLE>
<Ccaption>
In thousands
Increase(decrease) in cash and cash equivalents Years ended December 31, 1922 1991 1990
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,758 $ 5,513 $ 2,101
--------- -------- ----------
ADJUSTMENTS TO RECONCILE NEET INCOME TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
Accretion and amortization of investment securities 266 (1,013) (943)
Depreciation and amortization of premises and equipment 879 977 1,337
Provision for possible loan losses 5,200 2,130 5,619
Provision for OREO and insubstance foreclosures 2,018 638 49
Provision for real estate investments losses 639 -- --
Loss (gain) on sale of other real estate owned 11 (773) (93)
Gain on sale of real estate investments -- -- (1,736)
Goodwill amortization 64 63 80
Interest capitaalized (65) (284) (1,110)
Decrease(increseee) in deferred taxes (2,731) 101 (1,648)
Decrease (increase) in accrued interest receivable (363) 1,106 1,027
Decrease (increase) in other assets (2,993) 7,360 (610)
Increase (decrease) in accrued interest payable (493) (842) 493
Increase (decrease) in other liabilities (854) 3,045 (23,483)
-------- -------- ----------
Total adjustments 1,158 12,508 (21,018)
-------- -------- ----------
Net cash provided by (used in) operatingg activities 7,336 18,021 (18,917)
-------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities (124,663) (65,022) (31,203)
Proceeds from sales and maturities of investment securities 84,589 59,877 81,830
Loan fundings, net of principal collected (57,099) (69,036) (120,569)
Sale of other real estate owned 1,133 8,766 1,863
Purchase of premises and equipment (741) (426) (784)
Decrease (increase) in real estate investments 6,653 (332) 1,431
Decrease (increase) in banker's acceptances (10) (268) 1,077
-------- -------- ----------
Net cash provided by (used in) investing activities (90,138) (66,431) (66,355)
-------- -------- ----------
CASH FLOWS FROM FINANCINA ACTIVITIES:
Net increase (decrease) in demand deposits, NOW and money market,
and savings accounts 149,605 116,259 (224,823)
Net increase (decrease) of certificates of deposit (88,566) (48,200) 97,688
Increase (decrease) in repurchase agreements 18,285 6,191 (3,771)
Dividends paid (2,709) (1,901) (1,473)
Stock options exercised 37 -- 98
-------- -------- ----------
Net cash provided by (used in) financingg activities 76,652 72,349 (132,281)
-------- -------- ----------
Net increase (decrease) in cash and cash equivalents (6,150) 23,939 (217,553)
Cassh and cash equivalents, beginning of year 92,314 68,375 285,928
-------- -------- ----------
Cash and cash equivalents, end of year $ 86,164 $ 92,314 $ 68,375
-------- -------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 16,299 $ 26,904 $ 25,779
Income taxes 4,230 905 3,612
Supplemental disclosure of noncash investing and financiang activities:
Guarantee of ESOP loan $ (575) $ (288) $ 628
Foreclosed real estate loans 5,588 3,777 9,939
--------- -------- ----------
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE> 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS METROBANK
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The consolidated financial statements include the accounts of Metrobank (the
"Bank"), a California state chartered bank, and its wholly owned subsidiaries,
Metrocorp, Inc. and Metrobancorp. Material intercompany accounts and
transactions have been eliminated. Certain items in the 1991 and 1990
financial statements have been reclassified to conform to the presentation
contained in the 1992 statements.
The accounting and reporting policies of the Bank and its subsidiaries conform
with generally accepted accounting principles and general practices within the
banking industry. The following are descriptions of the more significant
policies.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
and federal funds sold. Generally, fuderal funds are purchased and sold for
one-day periods.
Investment Securities
Investment securities are stated at cost, with any discount or premium accreted
or amortized to maturity using the effective interest method. These securities
are not adjusted to the lower of cost or market because Management has the
ability and the intention of holding such securities to maturity. Adjustments
to the lower of cost or market value are made if Management does not intend to
or is financially unable to hold the security to maturity, or if a decline in
value indicates a possible impairment of the ability to recover principal.
Realized gains and losses are determined on a specific identification basis.
In September, 1992, the Financial Accounting Standards Board (the "FASB") issued
an exposure draft for public comment of a proposed new accounting standard that
would change the method of accounting for most of the Bank's investment
securities. The proposed standard defines a new classification of investment
securities, those that are "available for sale". Securities would be
considered available for sale if they would be sold under certain conditions,
among these being changes in interest rates or a need to restructure the
portfolio to better match the maturity or interest rate characteristics of
liabilities. Under the provisions of the proposed standard, securities that
are classified as available for sale would be accounted for at their current
fair value rather than amortized historical cost. Unrealized gains or losses
would not be recognized as current income; the appreciation or depreciation
would instead be reported as an increase or decrease of capital on the
consolidated statements of financial condition and in the statements of changes
in shareholders' equity.
Loans
Loans are carried at face amount, less payments, the allowance for possible
loan losses, unearned fees and unearned discounts. Interest income is accrued
principally on a simple interest basis. Unearned interest on certain consumer
loans is recognized in income on a sum-of-the-digits method, which approximates
a constant yield over the life of the loan. Loan fees and direct origination
costs are deferred and amortized as an adjustment to income and yield over the
life of the loan agreement using a level yield method.
In general, loans are placed on a non-accrual basis when there is significant
doubt as to the collectibility of interest or principal, or when interest or
principal becomes 90 days past due, unless the loan is well secured and in the
process of collection. Interest accrued but uncollected is reversed when a
loan is placed on a non-accrual basis. Loans are restored to an accrual basis
only when payments are current and the borrower had demonstrated an ability and
an intent to perform in accordance with the terms of the loan agreement.
------
19
<PAGE> 64
Allowance for Possible Loan Losses
The allowance for possible loan losses is based upon Management's continuous
evaluation of the collectibility of outstanding loans, which takes into
consideration such factors as changes in the nature of the loan portfolio,
economic conditions that may affect the borrower's ability to pay, overall
portfolio quality and review of specific problem loans. The allowance for
possible loan losses is based on estimates, and ultimate losses may vary from
the current estimates. These estimates are reviewed periodically and, as
adjustment become necessary, they are reported in earnings in the periods in
which they become known. The allowance is increased by provisions charged to
operating expense and reduced by loan losses, net of recoveries.
Investments in Real Estate
Real estate acquired for the acquisition, development and construction of real
estate in which the Bank participates with real estate developers are stated at
the lower of cost or net realizable value. The Bank capitalizes interest on
funds disbursed during the active construction phases of real estate
development projects.
Premises and Equipment
Premises and equipment are carried at cost, less accumulated depreciation.
Depreciation expense is computed using the straight-line method over the
estimated useful life of each type of asset. Leasehold improvements are
amortized over the term of the respective lease or the estimated useful life of
the property, whichever is shorter.
Other Real Estate Owned (OREO)
Real estate acquired in satisfaction of loans and "insubstance foreclosures"
are reported as other real estate owned. "Insubstance foreclosures" are
properties in which a borrower with little or no equity in the collateral
effectively abandons control of the property or has no economic interest to
continue involvement in the property. Property acquired by foreclosure or deed
in lieu of foreclosure and properties classified as "insubstance foreclosures"
are transferred to OREO and are recorded at the lower of the loan balance on
the property at the date of transfer or the fair value of the property
constructively or actually received. Subsequent operating expenses or income,
reduction in estimated values, and gains or losses on disposition of such
properties are charged to current operations. Gains or losses on sale are
recorded in conformity with standards which apply to the accounting for sales
of real estate. Losses that result from the ongoing periodic valuation of
these properties are changed against OREO reserves or to OREO expense in the
period in which they are indentified.
Income Taxes
When income and expenses are recognized in different periods for financial
reporting purposes and income tax purposes, deferred taxes are provided on such
timing differences. These result primarily from the provision for loan losses
and timing differences between book and tax depreciation methods on fixed
assets. In February 1992, the FASB issued Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS 109 will be
mandatorily effective for the Bank on January 1, 1993 and supersedes Accounting
Principle Bulletin Opinion 11 (APB 11). The statement utilizes the liability
method for recognition and measurement of income taxes. Management does not
expect that the adoption of SFAS 109 will have a material effect on the Bank's
operations. Management has not determined the proposed statement's results on
operations; also, management has not decided whether it will implement SFAS 109
by restating prior years or by recording an adjustment for prior years in the
Consolidated Statements of Earnings for the year adopted.
Earnings Per Share
Earnings per common share is based on the weighted average number of shares
outstanding during the period. Stock options have been excluded from the
computation of earnings per share, as their effect is not material for the
years ended December 31, 1992, 1991 and 1990.
2. FEDERAL RESERVE REQUIREMENT
All depository institutions are required to maintain reserves on transaction
deposits in the form of balances at the Federal Reserve Bank. The average
reserve requirements for the Bank were $27,969,000 and $22,303,000 during the
yeras ended December 31, 1992 and 1991, respectively.
----
20
<PAGE> 65
3. INVESTMENT SECURITIES
The amortized cost and estimated market values of investments in debt
securities at December 31, 1992 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
In thousands Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations government corporations
and agencies $184,895 $6,298 $(168) $191,025
Mortgage-backed securities 61,337 1,926 (167) 63,096
Other securities 2,680 - - 2,680
--------- ------ ----- ---------
$248,912 $8,224 $(335) $256,801
--------- ------ ----- ---------
</TABLE>
The amortized cost and estimated market values of investments in debt securities
at December 31, 1991 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
In thousands Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations government corporations
and agencies $150,386 $6,836 $ - $157,222
Mortgage-backed securities 58,518 2.913 - 61,431
Other securities 200 - - 200
--------- ------ ----- ---------
$209,104 $97494 $ - $218,853
--------- ------ ----- ---------
</TABLE>
The amortized cost and estimated market value of debt securities at December 31,
1992 and December 31, 1991, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties. Mortgage-backed secrities are listed spearately as their estimated
average lives vary according to changes in interest rates. In general, these
investments at December 31, 1992 have estimated average lives of between one and
five years.
<TABLE>
<CAPTION>
1992 1991
--------------------------- ---------------------------
Amortized Estimated Amortized Estimated
In thousands Cost Market Value Cost Market Value
<S> <C> <C> <C> <C>
Due in one year or less $ 34,839 $ 35,902 $ 49,928 $ 50,864
Due after one year through five years 127,877 133,089 100,458 106,358
Due after five years through ten years 24,859 24,714 200 200
--------- --------- --------- ---------
187,575 193,705 150,586 157,422
Mortgage-backed securities 61,337 63,096 58,518 61,431
--------- --------- --------- ---------
$248,912 $256,801 $209,104 $218,853
--------- --------- --------- ---------
</TABLE>
U.S. Treasury securities, obligations of U.S. government agencies and
mortgage-backed securities having a market value of approximately $183,876,000
and $166,940,000 were pledged to secure bankruptcy deposits, securities sold
under agreements to repurchase, and other liabilities as of December 31, 1992
and 1991, respectively. There were no sales of investment securities during 1992
or 1991.
4. INVESTMENTS IN REAL ESTATE
During 1992, the Bank's wholly owned subsidiary, Metrocorp, Inc. (the Company)
transferred one of its joint ventures to insubstance foreclosure and another to
OREO. Total write-downs associated with these two properties amounted to
approximately $2 million. Additionally, the Company wrote-down its investments
in real estate by approximately $700,000 during 1992.
Additionally, as of December 31, 1992, the Company owned a low income housing
project with a book value of approximately $17.4 million. The Company has
elected to retain this project due to favorable tax credits which are
available. These tax credits, of which $1.5 million was utilized in 1992, total
approximately $15 million over a 10 year life and are subject to certain
alternative minimum tax restrictions. As of December 31, 1992, the Bank had
approximately $12.4 million of remaining tax credit availability.
21
<PAGE> 66
5. LOANS
The composition of the loan portfolio at December 31 is as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991
<S> <C> <C>
Commercial and industrial $125,702 $127,166
Real estate-other 255,971 211,879
Real estate-construction 46,463 56,982
Consumer 91,681 75,646
Other 9,574 13,276
-------- --------
529,391 484,949
Less
Allowance for possible loan losses 10,102 8,174
Deferred loan fees, net 1,439 1,301
-------- --------
$517,850 $475,474
======== ========
</TABLE>
As of December 31, 1992 and 1991, the Bank had loans totaling approximately
$4,922.000 and $1,594,000, respectively, on which it was not accruing income
due to their delinquent status. If interest on non-accrual loans had been
accrued, interest income would have increased approximately $385,000, $143,000
and $22,000 for the years ended December 31, 1992, 1991, and 1990 respectively.
In the ordinary course of business, the Bank has granted loans to certain
directors and entities with which these driectors are associated. It is the
Bank's policy that all such loans and commitments to lend be made under terms
which are consistent with the Bank's lending policies applicable to third
parties. As of December 31, 1992 and 1991, loans outstanding to related parties
were approximately $12,249,000 and $11,590,000, respectively.
An analysis of the activity in the allowance for possible loan losses is
summarized as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991 1990
<S> <C> <C> <C>
Balance at beginning of year $ 8,174 $6,672 $3,116
Provision for possible loan losses 5,200 2,130 5,619
Loans charged off (3,559) (1,479) (2,126)
Recoveries on loans previously charged off 287 691 223
------- ------ ------
Balance at end of year $10,102 $8,174 $6,672
======= ====== ======
</TABLE>
6. OTHER REAL ESTATE OWNED
The composition of other real estate owned at December 31 is as follows:
<TABLE>
<CAPTION>
In thousands 1991 1990
<S> <C> <C>
Unimproved land $ 4,336 $1,836
Single family residences 2,139 2,137
Commercial buildings 4,422 -
Industrial buildings 1,272 1,272
------- ------
12,169 5,245
Less- avluation allowance 1,335 -
------- ------
$10,834 $5,245
======= ======
</TABLE>
-----
22
<PAGE> 67
An analysis of the activity in the valuation allowance is summarized as
follows:
<TABLE>
<CAPTION>
In thousands 1992 1991 1990
<S> <C> <C> <C>
Balance at beginning of year $ -- $160 $ 64
Provision transferred/(to) from allowance for possible loan losses -- (160) 160
Provision charged to operations 2,018 638 49
Losses and valuation adjustments charged to allowance (663) (638) (113)
------ ---- ----
Balance at end of year $1,335 $ -- $160
====== ==== ====
</TABLE>
The Bank has $10,834,000 and $5,245,000 in real estate acquired in satisfaction
of loans and "insubstance foreclosures" at December 31, 1992 and 1991,
respectively. A significant amout of this real estate relates to "insubstance
foreclosures" which the Bank expects will be effectively abandoned, as the
borrower has little or no economic interest to continue its involvement in the
properties. The Bank records the properties at the lower of cost or fair market
value at the date of transfer.
Foreclosure and holding costs, net of rental income, amounted to approximately
$203,000, $148,000 and $46,000 during the years ended December 31, 1992, 1991,
and 1990 respectively, and are included in the other non-interest expense. Sales
of others real estate owned resulted in the net loss of $11,000 in 1992, a net
gain of $773,000 in 1991, and a net gain of $92,500 in 1990.
7. PREMISES AND EQUIPMENT
Premises and equipment at December 31 are as follows:
<TABLE>
<CAPTION>
in thousands 1992 1991
<S> <C> <C>
Leasehold improvements $3,612 $3,371
Furniture, fixtures and equipment 7,609 7,114
------ ------
Less--accumulated depreciation and amortization $3,120 $3,258
------ ------
</TABLE>
The amounts of depreciation and amortization of premises and equipment included
in non-interest expense were $879,000, $977,000 and $1,337,000 for the years
ended Decembert 31, 1992, 1991 and 1990, respectively, and are based on
estimated lives of 6 to 20 years for leasehold improvements and 3 to 20 years
for furniture, fixtures and equipment.
8. OTHER ASSETS
The composition of other assets at December 31 is as follows:
<TABLE>
<CAPTION>
in thousands 1992 1991
<S> <C> <C>
Good will $ 429 $ 493
Prepaid expense 425 535
Customer acceptances 3,747 2,611
Accounts receivable 635 746
Other assets 7,822 3,624
------- ------
$13,058 $8,009
------- ------
</TABLE>
<PAGE> 68
9. DEPOSITS
The composition of deposits at December 31 is as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991
<S> <C> <C>
Non-interest -- bearing demand deposits $396,521 $306,939
NOW accounts 30,348 13,578
Money market demand accounts 235,482 193,029
Savings deposits 19,742 18,942
Time certificates of $100,000 or more 77,163 153,476
Other time certificates 42,607 54,860
-------- --------
$801,863 $740,824
======== ========
</TABLE>
Interest expense on time certificates of $100,000 or more was $4,626,000,
$10,855,000 and $11,840,000 for the years ended December 31, 1992, 1991 and
1990, respectively.
At December 31, 1992, the Bank had concentrations of deposits with the
entertainment industry, escrow companies, title companies and insolvency
trustees. A substantial portion of the Bank's demand deposits consist of funds
deposited by escrow and title companies. To a large extent, these deposits are
generated as a result of paying the cost of data processing and other services
to assist these companies in accounting for real estate and other transactions.
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Repurchase agreements at December 31 are as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991
<S> <C> <C>
Repurchase agreements $ 2,695 $14,410
Weighted average rate of repurchase agreements 2.94% 3.75%
Maximum month-end balance outstanding $29,466 $14,410
Average outstanding balance during the year $34,272 $11,303
Weighted average rate during the year 3.74% 5.29%
Investment securities collateralizing repurchase agreements:
Par value $ 2,530 $14,450
Market value $ 2,727 $15,123
------- -------
</TABLE>
All outstanding repurchase agreements at December 31, 1992 mature on or before
January 5, 1993.
All securities underlying repurchase agreements are held in safekeeping by
broker/dealers, and all agreements are to repurchase the same securities. It is
Management's policy to enter into repurchase agreements only with primary
broker/dealers.
11. OTHER LIABILITIES
The composition of other liabilities at December 31 is as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991
<S> <C> <C>
Customer acceptances $ 3,747 $ 2,611
Accrued expenses 3,160 3,806
Accrued customer expense 757 1,120
Mortgage payable 1,653 1,723
Guarantee of ESOP loan 863 1,438
Other liabilities 622 2,144
------- -------
$10,802 $12,842
======= =======
</TABLE>
24
<PAGE> 69
12. LEASE RENTALS AND CONTINGENCIES
The Bank leases certain office facilities from non-affiliated parties under
operating leases expiring at various times through the year 2002, with options
to renew through the year 2012.
As of December 31, 1992, the approximate future lease rentals payable under
noncancelable operating leas4e contracts are as shown in the following chart.
<TABLE>
<CAPTION>
In thousands Obligations
Year ending December 31
<S> <C>
1993 $ 3,454
1994 3,327
1995 3,151
1996 2,174
1997 2,174
1998 and thereafter 8,242
--------
$ 22,522
========
</TABLE>
The amounts shown in the chart do not include future increases in rental
amounts, if any, based on changes in the Consumer Price Index and building
operating costs, as provided in the leases.
Annual rental expense from these lease commitments was approximately
$2,824,000, $2,844,000 and $2,916,000 during the years ended December 31, 1992,
1991 and 1990, respectively.
The Bank is involved in vqrious legal proceedings arising from the normal
course of business. In the opinion of Management and the Bank's legal counsel,
the disposition of pending litigation will not have a material adverse effect
on the Bank's financial position.
13. SHAREHOLDERS' EQUITY
Stock Options
In October of 1978, the shareholders of the Bank adopted a non-qulified stock
option plan (the Non-qualified Plan), under which 136,755 shares of authorized
but unissued common stock were reserved for issuance to key employees. In
addition, 479,395 shares of authorized but unissued common stock are reserved
for inssuance to key employees under a stock option plan adopted in April of
1982 (the Incentive Plan). On December 23, 1988, Metrobank adopted a 1988 Stock
Option Plan under which 800,000 shares of authorized but unissued stock are
reserved for issuance to certain key employees and directors of the Bank and
subsidiaries. The purchase price of stock under the plans may not be less than
the fair market value of such stock at the time such option is granted. Options
presently issued under these plans are exercisable in such installments and
expire on such dates as the Board of Directors may determine, but not later
than five years from the date of grant for the Non-qualified Plan and ten years
from the date of grant for the Incentive Plan and the Stock Option Plan. The
Incentive/Non-incentive Plan has been designed to qualify options granted
thereunder as incentive stock options, but does not preclude the granting of
non-qualified options.
The following table summarized stock option activity for the year ended
December 31, 1992:
<TABLE>
<CAPTION>
Shares
Outstanding at Outstanding at Exercisable at Available
December 31, December 31, December 31, for Future
1991 Granted Exercised Canceled 1992 1992 Grant
<S> <C> <C> <C> <C> <C> <C> <C>
1988 stock option plan:
Shares 294,500 37,500 1,750 12,500 317,750 209,500 450,500
Option price per share $7.13-$10.00 $10.13-$11.88 $10.00 $8.00-$10.00 $7.13-$11.88 $7.13-$10.00
Nonqualified plan:
Shares 5,000 --- --- 5,000 --- --- ---
Option price per share $8.25-$8.75 --- --- $8.25-$8.75 --- --- ---
Incentive plan:
Shares 327,600 --- 2,250 11,500 313,800 313,800 ---
Option price per share $8.00-$10.00 --- $9.00 $8.00-$10.00 $8.00-$10.00 $8.00-$10.00 ---
------------ ------------- ----- ------------ ------------ ------------ -------
</TABLE>
------
25
<PAGE> 70
Employee Stock Ownership Plan and Trust
The Bank maintains an Employee Stock Ownership Plan and Trust for eligible
employees, under which, at the discretion of the Board of Directors, an amount
not to exceed 15 percent of the salaries of all employees may be contributed
each plan year. During 1992, the Employee Stock Ownership Lan and Trust paid
down its borrowings utilized for the pruchases of additional share of Metrobank
stock from $1,438,000 to $863,000. For financial reporting purposes, the loan
is considered guaranteed by the Bank and is therefore shown as a reduction of
capital. The terms of the loan agreement require the Trust to pay principal
andf interest quarterly on its outstanding borrowing to fully amortize the line
of credit beginning in September 1991. Inasmuch as the Trust does not have
adequate liquidity to fund principal and interest payments on the borrowing,
the Bank made payments of approximately $593,000 and $401,000 during 1992 and
1991, respectively, to fund the scheduled note reduction. Other than these loan
payments, the Bank made no vontributions in 1992, 1991 or 1990.
Dividend Restrictions
The Financial Code of the State of California provides that dividends paid in
any one year may not exceed the lesser of the Bank's undivided profits or the
net income for the prior three years, less cash distributions to shareholders
during such period. As of December 31, 1992, approximately $7,005,000 of
undivided profits are available for dividends.
Preferred Stock
The Bank is authorized to issure up to 15,000,000 shares of preferred stock, no
par value, in one or more series. The Board of Directors is authorized to
establish the terms and conditions of the preferred stock prior to issuance. As
of December 31, 1992, no shares were outstanding.
14. OTHER NON-INTEREST EXPENSE
The following is a breakdown of other non-interest expense for the years ended
December 31:
<TABLE>
<CAPTION>
In thousands 1992 1991 1990
<S> <C> <C> <C>
Professional services $ 2,441 $ 1,932 $ 2,154
Professional services for customers 5,723 6,607 9,261
Promotion expense 1,067 894 918
Low income housing project expense 1,744 1,274 ---
Office supplies and equipment 1,257 1,087 1,084
Regulatory assessments 1,754 1,499 937
Other real estate-owned costs 203 148 46
Other 2,879 2,398 2,276
-------- -------- --------
$ 17,068 $ 15,839 $ 16,676
======== ======== ========
</TABLE>
15. INCOME TAXES
The current and deferred amounts of the provison (benefit) for income taxes net
of income tax credit are summarized as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991 1990
<S> <C> <C> <C>
Current:
Federal $2,257 $1,031 $2,113
State 1,114 932 785
------ ------ ------
3,371 1,963 2,898
Deferred:
Federal (1,523) 197 (1,276)
State (349) (96) (372)
------ ------ ------
(1,872) 101 (1,648)
$1,499 $2,064 $1,250
====== ====== ======
</TABLE>
-------
26
<PAGE> 71
Deferred taxes arise from timing differences in the recognition of revenues,
expenses and tax credits for tax and financial reporting purposes. The tax
effects of principal items affecting deferred taxes for the years ended December
31 are as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991 1990
<S> <C> <C> <C>
Difference between accrual and cash basis income $ -- $ -- $ (250)
Difference between provisions for possible loan losses for tax and
financial statement purposes (852) (613) (1,770)
Difference beween depreciation for tax and financial statement purposes 39 486 (150)
Difference between provisions for losses on other real estate owned for tax and
financial statement purposes (1,093) -- 30
Difference beetween discount accreetion for tax and financial statement purposes (61) 297 175
State franchise tax 38 (27) 200
Other, net 57 (42) 117
-------- ------ -------
$(1,182) $ 101 $(1,648)
-------- ------ -------
</TABLE>
The provision for income taxes differs from the amounts computed by applying
statutory income tax rates to earnings before income taxess, as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991 1990
<S> <C> <C> <C>
Federal income tax expense at statutory rate $ 2,467 $2,576 $1,139
Tax exempt income, net of exclusion (6) (10) (375)
State franchise taxes, net of federal benefit 510 548 251
Other, net 28 12 235
-------- ------ -------
Provisions for income taxes 2,999 3,126 1,250
Income tax credit (1,500) (1,062) --
-------- ------ -------
Net provision for income tax $ 1,499 $2,064 $41,250
</TABLE>
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, and standby letters
of credit. These instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the statement of condition.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
Financial instruments whose contractuaaaal amounts represent credit risk as of
December 31 are as follows:
<TABLE>
<CAPTION>
Contractual Amount
------------------
In thousands 1992 1991
<S> <C> <C>
Commitments to extend credit $94,666 $112,543
Standby letters of credit 4,081 5,883
------- --------
$98,747 $118,426
======= =======
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral, obtained if
deemed necessary by the Bank upon extension of credit, is based on Management's
credit evaluation of the counterparty. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and various
forms of real estate.
27
<PAGE> 72
Standby letters of credit are unconditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilitiies to customers. The Bank holds
marketable securities and property as collateral supporting those commitments
for which collateral is deemed necessary.
17. CONCENTRATION OF CREDIT RISK
At December 31, 1992, approximately $302 million of the Bank's loan portfolio
is collateralized by various forms of real estate compared to $269 million at
December 31, 1991. The Bank attempts to reduce its concentration of credit
risk by making loans which are diversified by project type and geographic
locations throughout Southern California. While management believes that the
collateral presently securing these loans is adequate, there can be no
assurances that a significant deterioration in the Southern California real
estate economy would not expose the Bank to a significantly greater degree of
credit risk.
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
In December 1991, the FASB issued Statement of Financial Accounting Standards
107, Disclosures about Fair Value of Financial Instruments. This statement
requires all companies with assets in excess of $150 million to disclose
"...either in the body of the financial statements or in the accompanying
notes, the fair value of financial instruments for which it is practicable to
estimate that value." For purposes of this statement, the fair value of each
financial instrument is the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced or
liquidation sale. This statement is effective for the Bank's year ended
December 31, 1992.
In the statement, the FASB says the "fair values of financial instruments
depict the market's assessment of the present value of net future cash flows
directly or indirectly embodied in them, discounted to reflect both current
interest rates and the market's assessment of the risk that the cash flows will
not occur." The information about fair value is said to better enable
"Investors, creditors, and other users to assess the consequences of an
entity's investment and financing strategies, that is, to assess its
performance."
Nonetheless, there are several factors which users of these financial
statements should keep in mind. First, the statement acknowledges that there
are uncertainties inherent in the process of estimating fair market value of
financial instruments. Second, the statement covers only financial
instruments, not other assets like premises and equipment, the fair value of
which might differ significantly from the amounts at which they are carried in
an entity's financial statements. Third, the Bank must exclude from its
estimate of the fair value of deposit liabilities any consideration of the
value of its ongoing customer relationships which provide stable sources of
investable funds. Forth, it is the intent of the bank to hold substantially all
of its financial instruments to their maturities, and thus, any unrealized
gains and losses may not be realized through sale or other action. Lastly, the
statement does not address means of evaluating an entity's performance in areas
other than the management of financial instruments, for example, the ability to
generate non-interest income and the control on non-interest expense. For
these reasons, users are advised not to regard the disclosure of the fair
market value of financial instruments as in any way equivalent to a valuation
of the Bank as a whole.
The following assumptions were used to estimate the fair value of each
financial instrument listed below:
Cash and Cash Equivalents
For these short term investments, the carrying amount is a reasonable estimate
of fair value.
Investment Securities
For investment securities, fair value equals quoted market price, if available,
fair value is estimated using quoted market prices for similar securities.
Loans
The fair value of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. These cash flow
assumptions include adjustments to reflect estimates of uncollectible amounts.
------
28
<PAGE> 73
Deposits
The fair value of demand deposits, money market, NOW and savings accounts is
the amount payable on demand at December 31, 1992. The fair value of fixed
maturity certificates of deposit is estimated using the rates currently offered
for deposits of similar remaining maturities.
Securities Sold Under Agreement to Repurchase and Federal Funds Purchased
For these short term borrowings, the carrying amount is a reasonable estimate
of their fair value.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of letters of credit is based on fees currently charged for
similar agreements. The utilization of a loan commitment is at the option of
the borrower, and to the extent a borrower exercises that option, the loans are
being written at rates comparable to current market rates. As such, these
commitments have no fair value.
<TABLE>
<CAPTION>
Carrying
In thousands As of December 31, 1992 Amount Fair Value
<S> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents $ 86,164 $ 86,164
Investment securities $248,912 $256,801
Loans $517,850 $518,000
FINANCIAL LIABILITIES:
Deposits $801,863 $801,835
Securities sold under agreement to repurchase and federal funds purchased $ 32,695 $ 32,695
UNRECOGNIZED FINANCIAL INSTRUMENTS:
Commitments to extend credit $ -- $ --
Standby letters of credit $ -- $ 80
</TABLE>
19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data follows (in thousands except per share
amounts):
<TABLE>
<CAPTION>
Three months ended March 31, June 30, September 30, December 31,
<S> <C> <C> <C> <C>
1992
Net interest income $10,540 $11,536 $11,534 $12,413
Provision for possible loan losses 675 1,650 2,400 475
Noninterest income 1,398 1,321 1,398 1,544
Noninterest expense 9,507 9,962 8,781 10,977
Net earnings 1,408 1,097 1,404 1,849
Earnings per share $ 0.30 $ 0.22 $ 0.30 $ 0.39
------- ------- ------- -------
1991
Net interest income $ 8,542 $ 9,576 $10,013 $10,998
Provision for possible loan losses (255) 759 289 1,337
Noninterest income 1,119 1,523 1,519 2,077
Noninterest expense 8,495 9,359 9,516 8,290
Net earnings 960 800 1,350 2,403
Earnings per share $ 0.20 $ 0.17 $ 0.28 $ 0.51
------- ------- ------- -------
</TABLE>
29
<PAGE> 74
SECURITIES ACTIVITY METROBANK
The Bank is a member of the American Stock Exchange and its common stock is
traded under the symbol of MBN.
The following table reflects the market price for the Bank's common stock for
each period presented.
<TABLE>
<CAPTION> 1992 1991
-------------- --------------
HIGH LOW HIGH LOW
------ ----- ------ -----
<S> <C> <C> <C> <C>
First quarter $12.88 $ 8.63 $ 9.13 $6.75
Second quarter 12.38 11.00 10.88 8.75
Third quarter 11.88 9.88 10.88 8.63
Fourth quarter 12.13 9.63 10.00 8.25
------ ----- ------ -----
</TABLE>
The Bank had approximately 429 record holders of its common stock as of Janaury
31, 1993. On January 28, 1992, the Bank declared a cash dividend of $.15 per
share to shareholders of record on April 1, 1992, payable on April 20, 1992.
On May 26, 1992, the Bank declared a second cash dividend of $.15 per share to
shareholders of record on July 1, 1992, payable on July 20, 1992. On August
25, 1992, the Bank declared a third cash dividend of $.15 per share to
shareholders of record on October 1, 1992, payable on October 20, 1992. On
November 24, 1992, the Bank declared a fourth cash dividend of $.15 per share
to shareholders of record on January 1, 1993 payable on January 20, 1993.
The amount of dividends declared in 1992 and 1991 totalled $.60 per share and
$.43 per share, respectively. The continued payment of this level of dividends
is dependent upon a number of factors relating to earnings, economic conditions
in Southern California and regulatory conditions.
SHAREHOLDER INFORMATION
The Annual Meeting of Shareholders of Metrobank will be held at the Bank's
Headquarters Office, 10900 Wilshire Boulevard, Los Angeles, California 90024,
on May 25, 1993 at 4:00 P.M. All shareholders are cordially invited to attend.
Auditors
Arthur Andersen & Co., Los Angeles, California
Corporate Secretary
Sharon Canup, Corporate Senior Vice President
Legal Counsel
Buchalter, Nemer, Fields & Younger, Los Angeles, California
Loeb and Loeb, Los Angeles, California
Transfer Agent
First Interstate Bank of California, Corporate Trust Department, 707 Wilshire
Boulevard, Los Angeles, California 90017
For shareholder and stock information, please contact Sharon Canup, Corporate
Secretary (310) 824-5700.
A copy of the Bank's Annual Report on Form F-2 as filed with the Federal
Deposit Insurance Cororation may also be obtained without charge by writing Ms.
Canup at Metrobank, 10900 Wilshire Boulevard, Los Angeles, California 90024.
------
30
<PAGE> 75
METROBANK MANAGEMENT
BOARD OF DIRECTORS
David L. Buell
Chairman and Chief Executive Officer
Metrobank
Richard E. Butler
president
Kilkenny Consulting Corporation
Peter B. Caloyeras
President
Magnetika, Inc.
Seymour J. Carr
Oral and Maxillofacial Surgeon
Dorothy L. Castro
Chairman and Chief Executive Officer
Superior Fast Freight
James W. Hobson
Vice Chancellor (Emeritus)
University of California, Los Angeles
Rudy B. Markmiller
President
Network Courier Services
Robert L. Mayer
President
The Robert Mayer Corporation
Laurence H. Smead
Chairman
Sasco Electric
Wallace Wong
Chief Executive Officer
Cal-American Medical Supplies
Sharon L. Canup
Corporate Secretary and
Corporate Senior Vice President
ADMINISTRATIVE DIVISION
Robert P. Bulseco
President and
Chief Administrative Officer
David P. Malone
Executive Vice President and
Chief Financial Officer
Pamela L. Citron
Corporate Senior Vice President
and Cashier
Douglas P. Krause
Senior Vice President
and General Counsel
COMMERCIAL DIVISION
Paul W. Stroube
Executive Vice President
Headquarters Office
William F. G. Carroll
Regional Vice President
Orange County Regional Head Office
David Frandsen
Regional Vice President
San Fernando Valley
Regional Head Office
Kenneth J. Cooke
Regional Vice President
San Diego Regional Head Office
Anita R. Smith
Regional Vice President
South Bay Regional Head Office
Steve Saylor
Corporate Senior Vice President
Deposit Administration
LOAN DIVISION
Paul B. Alexander
Executive Vice President and
Chief Credit Officer
Mestin Ayenew
Senior Vice President
Mortgage Loan Division
Frank DiTomaso
Senior Vice President
Asset-Based Loan Department
Elmo Ondatje
Senior Vice President
International Department
Gordon Smith
Corporate Senior Vice President
Indirect Loan Center
Eiji Yamanishi
Corporate Senior Vice President
Real Estate Loan Department
METROBANK OFFICES
Headquarters Office
10900 Wilshire Boulevard
Los Angeles, CA 90024
(310) 824-5700
Orange County Regional Head Office
5000 Birch Street
Newport Beach, CA 92660
(714) 955-5400
San Diego Regional Head Office
3131 Camino del Rio North
San Diego, CA 92108
(619) 563-9400
San Fernando Valley Regional
Head Office
21530 Oxnard Street
Woodland Hills, CA 91367
(818) 587-5200
South Bay Regional Head Office
21535 Hawthorne Boulevard
Torrance, CA 90503
(310) 516-9700
Administrative Offices
19191 S. Vermont Avenue
Torrance, CA 90502
(310) 516-9700
Operations Center
333 S. Beaudry Avenue
Suite 216
Los Angeles, CA 90017
(213_ 250-2000
<PAGE> 76
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Bank has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized
Date: March 29, 1993 METROBANK
---------
(Bank)
By David L. Buell
-----------------------
David L. Buell
Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Bank and in the capacities indicated on the date set forth above.
Signature Title
David L. Buell Chief Executive Officer
- --------------------------- Chairman of the Board
David L. Buell (principal executive officer)
and Director
David P. Malone Executive Vice President
- --------------------------- Chief Financial officer
David P. Malone (principal financial officer)
Chris Ishikawa Vice President
- ---------------------------- Controller
Chris Ishikawa (principal accountinng officer)
40
<PAGE> 77
Peter Caloyeras Director
- ---------------------------
Peter Caloyeras
Seymour Carr Director
- ----------------------------
Seymour Carr
Director
- ----------------------------
James W. Hobson
Director
- ----------------------------
Wallace Wong
Director
- ----------------------------
Robert L. Mayer
Director
- ----------------------------
Rudy B. Markmiller
41
<PAGE> 1
- -------------------------------------------------------------------------------
EXHIBIT 99(r)
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED JUNE 30, 1992
METROBANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
95-3271474
(IRS EMPLOYER IDENTIFICATION NO.)
10900 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
90024
(ZIP CODE)
(310) 824-5700
(BANK'S TELEPHONE NUMBER INCLUDING AREA CODE)
INDICATE BY CHECKMARK WHETHER THE BANK (1) HAS FILED ALL REPORTS REQUIRED TO BE
FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING
TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE BANK WAS REQUIRED TO FILE
SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE
PAST NINETY DAYS.
YES XX NO
---- ----
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Statements of Financial Condition
June 30, 1992, December 31, 1991 and June 30, 1991
Statements of Earnings
Three Months and Six Months Ended June 30, 1992 and
June 30, 1991
Statements of Cash Flows
Three Months Ended June 30, 1992 and June 30, 1991
Statements of Cash Flows
Six Months Ended June 30, 1992 and June 30, 1991
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
<PAGE> 3
METROBANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1992 DECEMBER 31, 1991
(UNAUDITED) 1991 (UNAUDITED)
ASSETS (IN THOUSANDS)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 91,394 $ 62,314 $ 76,360
Federal funds sold 10,000 30,000 6,000
Investment securities 238,728 209,104 212,126
Investment in real estate 20,423 25,755 27,958
Loans, net of reserve 496,450 475,474 444,942
Accrued interest receivable 6,043 5,615 6,926
Other real estate owned, net 11,361 5,245 8,273
Premises and equipment, net 3,247 3,258 3,627
Other assets 9,449 8,009 4,849
- ----------------------------------------------------------------------------------------------
Total Assets $887,095 $824,774 $791,061
==============================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------
Deposits:
Time certificates $173,119 $208,336 $245,965
Other deposits 627,433 532,488 469,510
- ----------------------------------------------------------------------------------------------
Total deposits 800,552 740,824 715,475
Securities sold under agreement to repurchase 16,825 14,410 10,520
Accrued interest payable 672 937 1,396
Other liabilities 11,881 12,842 10,383
- ----------------------------------------------------------------------------------------------
Total liabilities 829,930 769,013 737,774
Shareholders' equity:
Common stock 34,310 34,273 34,273
Guarantee of ESOP loan (1,150) (1,438) (1,726)
Undivided profits 24,005 22,926 20,740
- ----------------------------------------------------------------------------------------------
Total shareholders' equity 57,165 55,761 53,287
- ----------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $887,095 $824,774 $791,061
==============================================================================================
Book value per share $12.02 $11.74 $11.22
Ratio of average noninterest-bearing deposits
to average total deposits 46.9% 39.0% 37.2%
Ratio of average gross loans to average
total deposits 66.3% 67.4% 66.3%
Ratio of loan loss reserve to gross loans 1.78% 1.69% 1.56%
</TABLE>
<PAGE> 4
METROBANK
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Quarter Ended Six Months Ended
(in thousands, except June 30, June 30,
per share amounts) 1992 1991 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans $10,933 $11,571 $21,618 $22,888
U.S. Treasury securities 2,863 2,268 5,635 4,222
Obligations of U.S. government agencies 328 641 764 1,371
Other securities 1,288 1,330 2,522 2,748
Federal funds sold 35 18 41 42
- -----------------------------------------------------------------------------------------------------------------------
15,447 15,828 30,580 31,271
Interest expense:
Time certificates of deposit 1,647 3,768 3,654 8,148
Other deposits 1,992 2,244 4,029 4,321
Funds purchased and securities sold under
agreements to repurchase 233 266 820 690
Capitalized carrying costs - (71) (65) (141)
Other interest expense 39 45 66 135
- -----------------------------------------------------------------------------------------------------------------------
3,911 6,252 8,504 13,153
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 11,536 9,576 22,076 18,118
Provision for possible loan losses 1,650 759 2,325 504
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible
loan losses 9,886 8,817 19,751 17,614
Noninterest income:
Service charges on deposit accounts 301 283 630 580
Other noninterest income 1,020 1,240 2,089 2,062
- -----------------------------------------------------------------------------------------------------------------------
1,321 1,523 2,719 2,642
Noninterest expense:
Personnel expense 3,744 3,601 7,415 7,206
Occupancy, furniture and equipment expense 1,235 1,248 2,381 2,542
Other noninterest expense 4,983 4,510 9,673 8,106
- -----------------------------------------------------------------------------------------------------------------------
9,962 9,359 19,469 17,854
- -----------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,245 981 3,001 2,402
Provision for income taxes 523 404 1,246 992
Income tax credit (375) (223) (750) (350)
- -----------------------------------------------------------------------------------------------------------------------
Net earnings $1,097 $800 $2,505 $1,760
=======================================================================================================================
Earnings per share $0.23 $0.17 $0.53 $0.37
=======================================================================================================================
Weighted average shares outstanding 4,754,172 4,750,172 4,752,941 4,750,172
=======================================================================================================================
Net return on average shareholders' equity 7.71% 6.05% 8.80% 6.72%
Net return on average assets 0.52% 0.43% 0.61% 0.49%
=======================================================================================================================
</TABLE>
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Quarter ended June 30,
1992 1991
(in thousands)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,097 $ 800
- -------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities 26 (168)
Depreciation and amortization 335 257
Provision for possible loan losses 1,650 759
Provision for real estate investment losses -- --
Provision for OREO 805 --
Goodwill amortization 16 16
Interest capitalized -- (71)
Increase (decrease) in taxes payable (803) (179)
Decrease (increase) in accrued interest receivable 650 386
Decrease (increase) in other assets (2,082) 1,383
Increase (decrease) in accrued interest payable (39) (133)
Increase (decrease) in other liabilities 873 (232)
- -------------------------------------------------------------------------------------------------------------------
Total adjustments 1,431 2,018
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 2,528 2,818
- -------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (52,857) (35,000)
Proceeds from sales and maturities of investment securities 33,943 18,363
Loan fundings, net of principal collected (9,716) (29,123)
Sale of other real estate owned -- 902
Purchase of premises and equipment (295) (71)
Decrease (increase) in real estate investments 116 (1,738)
Decrease (increase) in banker's acceptances (129) 579
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (28,938) (46,088)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 19,442 62,546
Net increase (decrease) in certificates of deposit 10,694 (9,637)
Increase (decrease) in repurchase agreements and federal funds purchased 7,475 5,020
Dividends paid (713) (476)
Stock options exercised -- --
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 36,898 57,453
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 10,488 14,183
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF SECOND QUARTER 90,906 68,177
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF SECOND QUARTER $ 101,394 $ 82,360
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -------------------------------------------------------------------------------------------------------------------
Cash paid during the second quarter for:
Interest $ 3,944 $ 6,395
Income taxes 525 175
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -------------------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (144) $ --
Foreclosed real estate loans 7,317 2,498
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Six months ended June 30,
1992 1991
(in thousands)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 2,505 $ 1,760
- -------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities (50) (362)
Depreciation and amortization 663 514
Provision for possible loan losses 2,325 504
Provision for real estate investment losses 402 --
Provision for OREO 805 313
Goodwill amortization 32 32
Interest capitalized (65) (141)
Increase (decrease) in taxes payable (1,700) 280
Decrease (increase) in accrued interest receivable (427) (205)
Decrease (increase) in other assets (269) 10,162
Increase (decrease) in accrued interest payable (264) (383)
Increase (decrease) in other liabilities (326) 1,057
- -------------------------------------------------------------------------------------------------------------------
Total adjustments 1,126 11,771
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 3,631 13,531
- -------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (77,857) (40,013)
Proceeds from sales and maturities of investment securities 48,284 31,188
Loan fundings, net of principal collected (25,382) (32,707)
Sale of other real estate owned -- 902
Purchase of premises and equipment (650) (332)
Decrease (increase) in real estate investments 292 (2,679)
Decrease (increase) in banker's acceptances (135) (13)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (55,448) (43,654)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 94,945 53,271
Net increase (decrease) in certificates of deposit (35,218) (10,561)
Increase (decrease) in repurchase agreements and federal funds purchased 2,415 2,301
Dividends paid (1,283) (903)
Stock options exercised 38 --
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 60,897 44,108
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 9,080 13,985
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 92,314 68,375
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF SECOND QUARTER $ 101,394 $ 82,360
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -------------------------------------------------------------------------------------------------------------------
Cash paid during the first six months for:
Interest $ 8,834 $ 13,617
Income taxes 1,770 175
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -------------------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (288) $ --
Foreclosed real estate loans 7,317 3,076
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying statements of the financial condition of Metrobank
at June 30, 1992 and 1991 and the statements of earnings and
statements of cash flows for the periods presented have been
prepared by the Bank without audit. In the opinion of Management,
all adjustments necessary to present fairly the financial position,
results of operations and statements of cash flows at June 30, 1992
and 1991 and for all periods presented have been made. Management
has elected to omit substantially all of the disclosures required by
generally accepted accounting principles, and, accordingly, these
financial statements do not purport to present the Bank's financial
position in accordance with generally accepted accounting
principles.
These financial statements should be read in conjunction with the
financial statements contained in the Bank's Annual Report
(Form F-2).
Note 2. Earnings Per Share
Earnings per share is computed on the basis of the weighted average
number of shares outstanding for each period (4,754,172 and
4,750,172 for the three months ended June 30, 1992 and 1991, and
4,752,941 and 4,750,172 for the six months ended June 30, 1992 and
June 30, 1991, respectively).
Note 3. Letters of Credit
The Bank had outstanding letters of credit of $11.5 million as of
June 30, 1992, $12.5 million as of December 31, 1991, and $9.5
million as of June 30, 1991.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of financial
condition and results of operations, which follows, should be read in
conjunction with the consolidated financial statements and related notes to the
financial statements of the Bank that appear elsewhere in this report.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other borrowings). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$11.5 million for the quarter ended June 30, 1992 as compared to $9.6 million
for the quarter ended June 30, 1991. This increase of approximately $1.9
million or 19.8% was caused by several factors. First, interest income
decreased approximately $400,000. Although the balance of the average loan
portfolio increased from $448 million at June 30, 1991 to $506 million at June
30, 1992, the declining prime rate environment caused the yield on the overall
loan portfolio to decrease 191 basis points. Although, loan income decreased
by $638,000, interest on investment income increased $257,000. This increase
in investment income was generated by an increase in the investment portfolio
from $212 million at June 1991 to $239 million at June 1992. The increase in
volume in the investment portfolio offset the impact of the 74 basis point
decline in yield on the portfolio.
For the three months ended June 30, 1992 and 1991, respectively, interest
expense decreased to $3.9 million from $6.3 million. This decrease in expense
occurred primarily in time certificate of deposit expense which decreased $2.2
million and was caused by a decline in time certificate of deposit balances
from $246 million at June 30, 1991, to $173 million at June 30, 1992, as well
as a 206 basis point decrease in cost from the second quarter of 1991 to the
second quarter of 1992.
<PAGE> 9
For the six months ended June 30, 1992 and 1991, net interest income before
provision for loan losses was $22.0 million and $18.1 million, respectively.
This increase of $3.9 million is attributable to a combination of an increase
in the average balance of the loan portfolio, as well as an increase in the
investment portfolio and the overall decline in the Bank's cost of funds,
offset by the impact of the decline in the prime rate on the loan portfolio.
Non-Interest Income
During the second quarter of 1992, the Bank recognized approximately $1.3
million in non-interest income, as compared to $1.5 million during the second
quarter of 1991. This decrease of approximately $200,000 or 13%, was primarily
from a decrease in rental income received on a low income housing development
project which was placed in service early in 1991 and became fully operational
in the second quarter of 1991.
During the six months ended June 30, 1992 and 1991 non-interest income was $2.7
million and $2.6 million, respectively.
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Losses deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited back
to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
operations as a provision for possible loan losses. The provision for possible
loan losses corresponds directly to the level of the allowance that management
deems sufficient to offset potential future losses. The balance of the
allowance for possible loan losses reflects the amount which, in management's
judgement, is adequate to provide for potential loan losses after weighing the
mix of the loan portfolio, current economic conditions, past loan loss
experience and other factors relevant to estimating loan losses. The adequacy
of the allowance for possible loan losses is also evaluated relative to the
level of non-performing loans (those for which principal or interest is past
due more than 90 days and those on non-accrual status).
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured. Such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk since property acquired through
foreclosure ("OREO") may not be saleable for an amount sufficient to offset the
entire amount of the loan and costs associated with foreclosure. Although
management believes that the allowance for possible loan losses is adequate,
future provisions will be subject to continuing evaluation of risks inherent in
the loan portfolio.
<PAGE> 10
The provision for possible loan losses increased by approximately $900,000 from
the same quarter in the prior year and by $1.8 million from the same six months
in the prior year and is reflective of Management's intention to maintain
reserves for possible loan losses at a level sufficient to provide coverage for
loan growth and non-performing assets. The Bank's ratio of loan loss reserves
to total loans was 1.78% and 1.56% as of June 30, 1992 and June 30, 1991,
respectively.
Loan charge-offs (net of recoveries) for the three and six months ended June
30, 1992 totalled approximately $1.0 million and $1.6 million, respectively.
Net loan charge-offs for the three and six months ended June 30, 1991 totalled
approximately $400,000 and $300,000, respectively. The increase in net
charge-offs for the second quarter of 1992 of approximately $600,000, and the
increase for the six months ended June 30, 1992 of approximately $1.3 million
is primarily attributable to the charge-offs of certain asset based loans.
Asset based loans represented approximately 11% and 14% of the total loan
portfolio as of June 1992 and 1991, respectively.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as the real estate values
in the southern California region. Inasmuch as this is the principle
geographic area in which Metrobank conducts its business, this environment has
had an adverse impact on the Bank's asset quality. As of December 31, 1991,
the Bank had approximately $8.1 million of nonperforming assets which
consisted primarily of other real estate owned and insubstance foreclosures of
$5.2 million. As of June 30, 1992, the Bank had approximately $13.5 million in
nonperforming assets of which $11.3 million consisted of other real estate
owned and insubstance foreclosures. Total nonperforming assets to total assets
as of December 31, 1991 and June 30, 1992 were 1.02% and 1.52%, respectively.
The increase since year-end in nonperforming assets is mainly attributable to
the transfer of two loans in its real estate subsidiary into insubstance
foreclosure. The first, a $4.8 million shopping center loan located in
Valencia, was transferred into insubstance foreclosure during the second quarter
after being written down by approximately $700,000. The second, a $2.5 million
land loan, was also transferred into insubstance foreclosure during the second
quarter of 1992.
Non-Interest Expense
Non-interest expense totalled $10.0 million for the second quarter of 1992 as
compared to $9.4 million for the second quarter of 1991. This increase of
approximately $600,000 in other non-interest expenses is due primarily to an
increase in the provision for real estate losses of approximately $764,000,
offset by a decrease in customer expenses related to the maintenance of demand
deposits of approximately $247,000.
For the six months ended June 30, 1992 and 1991, non-interest expense totalled
$19.4 million and $17.9 million, respectively. This increase of approximately
$1.5 million is the result of an increase in the provision for estimated real
estate losses by $885,000, as well as an increase in operating losses of
approximately $212,000 combined with a $427,000 increase in expenses related to
the low income housing project which was placed in service in 1991.
<PAGE> 11
Income Taxes
The Bank's effective tax rate for the three and six months ended June 30,
1992 was approximately 11.9% and 16.5%, compared to 18.5% and 26.7% for the
three and six months ended June 30, 1991, respectively. The Bank's effective
rate was significantly less than the statutory rate mainly due to the
utilization of income tax credits generated by its low income housing project.
The utilization of these credits, however, is subject to certain alternative
minimum tax limitations. During the second quarter of 1992, the Bank did not
generate enough pre-tax income to absorb all of the income tax credits, and as
such, was required to carryback a portion of this credit against income
generated in prior periods. Depending upon the pre-tax income generated in the
future, the Bank's utilization of these income tax credits benefit may be
restricted in the future. Currently, the Bank has approximately $700,000 of
carryback ability.
Capital Resources
As of June 30, 1992 the Bank's shareholders' equity totalled $57.2 million, an
increase of approximately $3.9 million from June 30, 1991. This increase in
equity was caused primarily by the decrease of a loan made for the benefit of
the Employee Stock Ownership Trust (ESOT), as well as net income for the twelve
months ended June 30, 1992, offset by the payment of cash dividends during the
year. As of June 30, 1992 the Bank's risk based capital ratio and tier one
capital ratio were 10.8% and 9.5%, respectively. Both ratios exceed the
December 31, 1992 regulatory requirement of 8.0% and 4.0%. As of June 30, 1991,
the Bank's risk based capital and tier one capital ratios were 10.8% and 9.5%,
respectively.
Liquidity
The Bank is required by the Federal Reserve Board to maintain an average
balance of liquid assets equal to at least 5% of withdrawable deposits and
borrowings which are payable in one year or less. The Bank has consistently met
these liquidity requirements. The liquidity levels of the Bank are managed by
its Asset/Liability Management Committee. This committee is charged with the
responsibility of insuring that reserve balances are maintained and to ensure
that the Bank obtains funds necessary to meet existing deposit outflow
requirements as well as asset growth. The Bank's primary source of funds is
derived from principal and interest payments on loans, principal and interest
payments on its investment portfolio, generation of noninterest-bearing and
interest-bearing deposits, and, to a lesser extent, borrowings, effected
primarily through short-term repurchase agreements and the use of the Bank's
private fund purchase lines.
Inasmuch as a significant portion of the Bank's deposit base is concentrated in
demand deposits, which are inherently more volatile, the Asset/Liability
Committee operates a Money Desk to help supplement deposit generating
activities. Additionally, in connection with maintaining a liquidity cushion,
the Bank has established an unsecured borrowing capacity of approximately
$70.4 million, or 8.79% of total deposits, and a secured borrowing capacity of
$102.5 million, or 12.80% of total deposits. The combination of the these two
borrowing facilities provides the
<PAGE> 12
Bank with a secondary source of liquidity of approximately $172.8 million or
21.59% of total deposits.
Metrobancorp
During June of 1992, the Bank merged the operations of Metrobancorp (dba the
Josi & Dold Insurance Agency) into the Bank's operations. This merger was
effected to respond to recent legislation which prohibits subsidiaries of Banks
from providing insurance related services. This new department of the Bank
will continue to do business as the Josi & Dold Insurance Agency which provides
a variety of insurance products to various individuals and businesses throughout
Southern California.
Residential Mortgage Department
On June 30, 1992, Metrobank formed a new department to compete in the
residential mortgage banking business. The new department of the Bank is
primarily engaged in the residential mortgage banking business and,
accordingly, acquires and sells mortgage loans which are principally first lien
mortgage loans secured by single family residences. The principal sources of
revenue from the department's business are 1) loan origination fees, 2) income
interest earned on mortgage loans during the period that they are held by the
Bank pending sale, 3) gains from the sale of mortgage loans, and 4) gains from
the sale of mortgage servicing rights. The Bank primarily acquires loans
originated in the Southern California area and sells them to both private and
governmental agencies.
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 12, 1992 Metrobank
----------------------------------
(Bank)
By: /s/ David P. Malone
----------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank in
the capacities indicated on the date set forth above.
Signature Title
/s/ Christopher Ishikawa
------------------------------ Vice President
Christopher Ishikawa Controller
(Principal Accounting Officer)
<PAGE> 14
- --------------------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D. C.
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1992
Metrobank
(Exact name of bank as specified in its charter)
95-3271474
(IRS Employer Identification No.)
10900 Wilshire Boulevard, Los Angeles, California
(Address of Principal Executive Offices)
90024
(Zip code)
(310) 824-5700
(Bank's Telephone Number including Area Code)
Indicate by checkmark whether the bank (1) has filed all reports required to be
filed by Section 13 of the Securities Exchange Act of 1934 during the preceding
twelve months (or for such shorter period that the bank was required to file
such reports), and (2) has been subject to such filing requirements for the
past ninety days.
YES XX NO
------ ------
- --------------------------------------------------------------------------------
<PAGE> 15
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Statements of Financial Condition
September 30, 1992, December 31, 1991 and
September 30, 1991
Statements of Earnings
Three Months and Nine Months Ended September
30, 1992 and September 30, 1991
Statements of Cash Flows
Three Months Ended September 30, 1992 and
September 30, 1991
Statements of Cash Flows
Nine Months Ended September 30, 1992 and
September 30, 1991
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> 16
METROBANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1992 DECEMBER 31, 1991
(UNAUDITED) 1991 (UNAUDITED)
ASSETS (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $71,186 $62,314 62,793
Federal funds sold 10,000 30,000 -
Investment securities 243,726 209,104 208,034
Investment in real estate 19,947 25,755 28,255
Loans, net of reserve 510,293 475,474 463,945
Accrued interest receivable 6,892 5,615 6,931
Other real estate owned, net 12,276 5,245 5,372
Premises and equipment, net 3,157 3,258 3,388
Other assets 11,387 8,009 5,908
- ---------------------------------------------------------------------------------------------------
Total Assets $888,864 $824,774 $784,626
===================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------
Deposits:
Time certificates $177,934 $208,336 221,071
Other deposits 634,890 532,488 491,117
- ---------------------------------------------------------------------------------------------------
Total deposits 812,824 740,824 712,188
Securities sold under agreement to repurchase 6,630 14,410 5,347
Accrued interest payable 567 937 1,199
Other liabilities 10,844 12,842 12,108
- ---------------------------------------------------------------------------------------------------
Total liabilities 830,865 769,013 730,842
Shareholders' equity:
Common stock 34,310 34,273 34,273
Guarantee of ESOP loan (1,007) (1,438) (1,582)
Undivided profits 24,696 22,926 21,093
- ---------------------------------------------------------------------------------------------------
Total shareholders' equity 57,999 55,761 53,784
- ---------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $888,864 $824,774 $784,626
===================================================================================================
BOOK VALUE PER SHARE $12.20 $11.74 $11.32
Ratio of average noninterest-bearing deposits
to average total deposits 43.8% 39.0% 36.78%
Ratio of average gross loans to average
total deposits 68.3% 67.4% 67.73%
Ratio of loan loss reserve to gross loans 2.04% 1.69% 1.58%
</TABLE>
<PAGE> 17
METROBANK
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED NINE MONTHS ENDED
(in thousands, except SEPTEMBER 30, SEPTEMBER 30,
per share amounts) 1992 1991 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 10,802 $ 11,792 $ 32,420 $ 34,680
U.S. Treasury securities 2,977 2,457 8,612 6,679
Obligations of U.S. government agencies 24 564 788 1,935
Other securities 1,501 1,358 4,023 4,106
Other interest income 51 11 92 53
- ----------------------------------------------------------------------------------------------------------------------------------
15,355 16,182 45,935 47,453
Interest expense:
Time certificates of deposit 1,665 3,324 5,319 11,472
Other deposits 1,766 2,572 5,795 6,893
Funds purchased and securities sold under
agreements to repurchase 364 343 1,184 1,033
Capitalized carrying costs 0 (72) (65) (213)
Other interest expense 26 2 92 137
- ----------------------------------------------------------------------------------------------------------------------------------
3,821 6,169 12,325 19,322
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income 11,534 10,013 33,610 28,131
Provision for possible loan losses 2,400 289 4,725 793
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible
loan losses 9,134 9,724 28,885 27,338
Noninterest income:
Service charges on deposit accounts 340 242 970 822
Other noninterest income 1,058 1,277 3,147 3,339
- ----------------------------------------------------------------------------------------------------------------------------------
1,398 1,519 4,117 4,161
Noninterest expense:
Personnel expense 3,622 3,746 11,036 10,952
Occupancy, furniture and equipment expense 888 1,214 3,269 3,756
Other noninterest expense 4,271 4,556 13,945 12,662
- ----------------------------------------------------------------------------------------------------------------------------------
8,781 9,516 28,250 27,370
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,751 1,727 4,752 4,129
Provision for income taxes 722 714 1,968 1,706
Income tax credit (375) (337) (1,125) (687)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 1,404 $ 1,350 $ 3,909 $ $3,110
==================================================================================================================================
Earnings per share $ 0.30 $ 0.28 $ 0.83 $ $ 0.65
==================================================================================================================================
Weighted average shares outstanding 4,754,172 4,750,172 4,753,354 4,750,172
==================================================================================================================================
Net return on average shareholders' equity 9.64% 9.95% 9.14% 7.82%
Net return on average assets 0.64% 0.69% 0.62% 0.56%
==================================================================================================================================
</TABLE>
<PAGE> 18
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Nine months ended Sept. 30,
1992 1991
(in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 3,909 $ 3,110
- -------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities 70 (639)
Depreciation and amortization 998 753
Provision for possible loan losses 4,725 793
Provision for real estate investment losses 402 -
Provision for OREO 1,293 638
Gain on OREO, net of loss - (72)
Gain on sale of securities - 17
Goodwill amortization 48 47
Interest capitalized (65) (213)
Increase (decrease) in taxes payable (2,242) 422
Decrease (increase) in accrued interest receivable (1,277) (210)
Decrease (increase) in other assets (1,796) 9,017
Increase (decrease) in accrued interest payable (369) (580)
Increase (decrease) in other liabilities (1,100) 2,316
- -------------------------------------------------------------------------------------------------------------------------------
Total adjustments 687 12,289
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 4,596 15,399
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (101,422) (55,022)
Proceeds from sales and maturities of investment securities 66,731 50,566
Loan fundings, net of principal collected (43,317) (51,220)
Sale of other real estate owned - 3,471
Purchase of premises and equipment (895) (333)
Decrease (increase) in real estate investments 768 (2,903)
Decrease (increase) in banker's acceptances 151 (713)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (77,984) (56,154)
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 102,401 74,887
Net increase (decrease) in certificates of deposit (30,403) (35,464)
Increase (decrease) in repurchase agreements and federal funds purchased (7,780) (2,872)
Dividends paid (1,996) (1,378)
Stock options exercised 38 -
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 62,260 35,173
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (11,128) (5,582)
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of the year 92,314 68,375
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of third quarter $ 81,186 $ 62,793
- -------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -------------------------------------------------------------------------------------------------------------------------------
Cash paid during the first six months for:
Interest $ 12,758 $ 20,013
Income taxes 2,660 175
- -------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- -------------------------------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (432) $ (144)
Foreclosed real estate loans 8,467 3,701
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 19
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Quarter ended Sept. 30,
1992 1991
(in thousands)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,404 $ 1,350
- ----------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accretion and amortization of investment securities 120 (277)
Depreciation and amortization 335 239
Provision for possible loan losses 2,400 289
Provision for real estate investment losses - -
Provision for OREO 488 325
Gain on OREO, net of loss - (72)
Goodwill amortization 16 15
Interest capitalized - (72)
Increase (decrease) in taxes payable (542) 142
Decrease (increase) in accrued interest receivable (850) (5)
Decrease (increase) in other assets (1,527) (1,128)
Increase (decrease) in accrued interest payable (105) (197)
Increase (decrease) in other liabilities (774) 1,259
- ----------------------------------------------------------------------------------------------------------------------------
Total adjustments (439) 518
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 965 1,868
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities (23,565) (15,009)
Proceeds from sales and maturities of investment securities 18,447 19,378
Loan fundings, net of principal collected (17,935) (18,513)
Sale of other real estate owned - 2,569
Purchase of premises and equipment (245) (1)
Decrease (increase) in real estate investments 476 (224)
Decrease (increase) in banker's acceptances 286 (700)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (22,536) (12,500)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, and savings 7,456 21,616
Net increase (decrease) in certificates of deposit 4,815 (24,903)
Increase (decrease) in repurchase agreements and federal funds purchased (10,195) (5,173)
Dividends paid (713) (475)
Stock options exercised - -
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,363 (8,935)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (20,208) (19,567)
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of third quarter 101,394 82,360
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of third quarter $ 81,186 $ 62,793
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- ----------------------------------------------------------------------------------------------------------------------------
Cash paid during the second quarter for:
Interest $ 3,924 $ 6,396
Income taxes 890 240
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
- ----------------------------------------------------------------------------------------------------------------------------
Guarantee of ESOP loan $ (144) $ (144)
Foreclosed real estate loans 1,150 625
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying statements of the financial condition of
Metrobank at September 30, 1992 and 1991 and the statements of
earnings and statements of cash flows for the periods
presented have been prepared by the Bank without audit. In
the opinion of Management, all adjustments necessary to
present fairly the financial position, results of operations
and statements of cash flows at September 30, 1992 and 1991
and for all periods presented have been made. Management has
elected to omit substantially all of the disclosures required
by generally accepted accounting principles, and, accordingly,
these financial statements do not purport to present the
Bank's financial position in accordance with generally
accepted accounting principles.
These financial statements should be read in conjunction with
the financial statements contained in the Bank's Annual Report
(Form F-2).
Note 2. Earnings Per Share
Earnings per share is computed on the basis of the weighted
average number of shares outstanding for each period
(4,754,172 and 4,750,172 for the three months ended September
30, 1992 and 1991, and 4,753,354 and 4,750,172 for the nine
months ended September 30, 1992 and September 30, 1991,
respectively).
Note 3. Letters of Credit
The Bank had outstanding letters of credit of $10.6 million as
of September 30, 1992, $12.5 million as of December 31, 1991,
and $15.2 million as of September 30, 1991.
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Introduction
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of significant trends
relating to the Bank's financial condition, results of operations, capital
resources and liquidity. Management's discussion and analysis of financial
condition and results of operations, which follows, should be read in
conjunction with the consolidated financial statements and related notes to the
financial statements of the Bank that appear elsewhere in this report.
Net Interest Income
The Bank's operating results depend primarily on the level of net interest
income (the difference between the interest earned on loans and investments
less interest expense on deposits and other borrowings). A primary factor
affecting the level of net interest income is the Bank's interest rate margin
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities.
The Bank's net interest income before provision for possible loan losses was
$11.5 million for the quarter ended September 30, 1992 as compared to $10.0
million for the quarter ended September 30, 1991. This increase of
approximately $1.5 million or 15.0% was caused by several factors. First,
interest income decreased approximately $800,000. Although the average loan
portfolio increased from $461 million for the third quarter 1991 to $519
million for the third quarter of 1992, the declining prime rate environment
caused the yield on the overall loan portfolio to decrease. Although loan
income decreased by approximately $1 million, interest on investment income
increased $163,000. This increase in investment income was generated by an
increase in the investment portfolio from $210 million for the third quarter of
1991 to $240 million for the third quarter of 1992. The increase in the
investment portfolio offset the impact of the decline in yield on the portfolio
caused by the investment in securities at lower yields.
For the three months ended September 30, 1992 and 1991, respectively, interest
expense decreased to $3.8 million from $6.2 million. This decrease in expense
occurred primarily in time certificate of deposit expense which decreased $1.7
million and was caused by a decline in time certificate of deposit average
balances from $232 million for the third quarter of 1991, to $178 million for
the third quarter of 1992, as well as a significant decrease in the cost of
these deposits from the third quarter of 1991 to the third quarter of 1992.
For the nine months ended September 30, 1992 and 1991, net interest income
before provision for loan losses was $33.6 million and $28.1 million,
respectively. This increase of $5.5 million is attributable to a combination
of several factors, including an increase in the average balances of loans and
investments and the overall decline in the Bank's cost of funds, offset by the
impact of the decline in interest rates in general.
<PAGE> 22
Provision for Possible Loan Losses
The Bank maintains an allowance for loan losses at a level which management
deems adequate to offset potential losses. Losses deemed to be uncollectible
are charged to this allowance; subsequent recoveries, if any, are credited back
to the allowance. Additions to the allowance are made on a regular basis
through charges to operations and are reflected in the Bank's statement of
operations as a provision for possible loan losses. The balance of the
allowance for possible loan losses reflects the amount which, in management's
judgement, is adequate to provide for potential loan losses after weighing the
mix of the loan portfolio, current economic conditions, past loan loss
experience and other factors relevant to estimating loan losses. The adequacy
of the allowance for possible loan losses is also evaluated relative to the
level of non-performing loans (those for which principal or interest is past
due more than 90 days and those on non-accrual status).
In evaluating the adequacy of the allowance for possible loan losses,
management also reviews the balance of the allowance as a percentage of loans
outstanding less loans considered secured. Such security generally is composed
of cash and first trust deeds on real property. The existence of collateral
does not, however, eliminate all credit risk since property acquired through
foreclosure ("OREO") may not be saleable for an amount sufficient to offset the
entire amount of the loan and costs associated with foreclosure. Although
management believes that the allowance for possible loan losses is adequate,
future provisions will be subject to continuing evaluation of risks inherent in
the loan portfolio.
The provision for possible loan losses increased by approximately $2.1 million
from the same quarter in the prior year and by $3.9 million from the same nine
months in the prior year and is reflective of Management's intention to
maintain reserves for possible loan losses at a level sufficient to provide
coverage for loan growth and non-performing assets. The Bank's ratio of loan
loss reserves to total loans was 2.04% and 1.58% as of September 30, 1992 and
September 30, 1991, respectively.
Loan charge-offs (net of recoveries) for the three and nine months ended
September 30, 1992 totalled approximately $742,000 and $2.3 million,
respectively. This compares to net recoveries of $140,000 and net charge-offs
of $160,000 for the same periods of 1991.
The ability of the Bank's borrowers to repay their loans is dependent, to a
large extent, on the overall economic climate as well as the real estate values
in the southern California region. Inasmuch as this is the principle
geographic area in which Metrobank conducts its business, this environment has
had an adverse impact on the Bank's asset quality. As of December 31, 1991,
the Bank had approximately $8.1 million of nonperforming assets which consisted
primarily of other real estate owned and insubstance foreclosures of $5.2
million. As of September 30, 1992, the Bank had approximately $26.7 million in
nonperforming assets of which $12.3 million consisted of other real estate
owned and insubstance foreclosures. Total nonperforming assets to total assets
as of December 31, 1991 and September 30, 1992 were approximately 1% and 3%,
respectively. The increase since year-end in other real estate owned and
insubstance foreclosures is mainly attributable to the transfer of two loans in
its real estate subsidiary into insubstance foreclosure. The first, a $4.8
million shopping center loan located in Valencia, was
<PAGE> 23
transferred into insubstance foreclosure during the second quarter after being
written down by approximately $700,000. The second, a $2.5 million land loan,
was also transferred into insubstance foreclosure during the second quarter of
1992 and was written down by $400,000 in the third quarter. Additionally,
non-accrual loans increased approximately $11.2 million from December 31, 1991
to September 30, 1992. Of this increase, $5.4 million was real estate related,
$5.7 million was commercial related and $100,000 was related to other loans.
Non-Interest Expense
Non-interest expense totalled $8.8 million for the third quarter of 1992 as
compared to $9.5 million for the third quarter of 1991. This decrease of
approximately $700,000 in other non-interest expenses is due primarily to a
decrease in data processing services required for the Bank's customers of
approximately $500,000. Additionally, in 1990, the Bank accrued approximately
$350,000 to set up a reserve for vacant space in its Newport Beach office. It
was the Bank's intent at that time to sublease approximately 10,000 square feet
of unused office space at a rate significantly less than it was paying. During
the third quarter of 1992, the Bank determined that it would utilize this space
for its own purposes and accordingly, removed the space from the market and
reversed the accrual. Other non-interest expenses increased by approximately
$150,000.
For the nine months ended September 30, 1992 and 1991, non-interest expenses
totalled $28.3 million and $27.4 million, respectively. This increase of
approximately $900,000 is the result of an increase in the provision for
estimated real estate losses of $1.1 million offset by a $500,000 decrease in
expenses related to data processing services for the Bank's customers. Other
non-interest expenses increased by $300,000.
Income Taxes
The Bank's effective tax rate for the three and nine months ended September 30,
1992 was approximately 19.8% and 17.7%, compared to 21.8% and 24.7% for the
three and nine months ended September 30, 1991, respectively. The Bank's
effective tax rate is less than the statutory rate due to the utilization of
income tax credits generated by its low income housing project. The
utilization of these credits, however, is subject to certain alternative
minimum tax limitations. During the third quarter of 1992, the Bank did not
generate sufficient pre-tax income to absorb all of the income tax credits, and
as such, was required to carryback a portion of those credits against income
generated in prior periods. As of September 30, 1992, the Bank has
approximately $500,000 of carryback ability remaining.
<PAGE> 24
Capital Resources
As of September 30, 1992 the Bank's shareholders' equity totalled $58.0
million, an increase of approximately $4.2 million from September 30, 1991.
This increase in equity was caused primarily by the decrease of a loan made for
the benefit of the Employee Stock Ownership Trust (ESOT), as well as net income
for the twelve months ended September 30, 1992, offset by the payment of cash
dividends during the year. As of September 30, 1992 the Bank's risk based
capital ratio and tier one capital ratio were 10.7% and 9.5%, respectively.
Both ratios exceed the December 31, 1992 regulatory requirement of 8.0% and
4.0%. As of September 30, 1991, the Bank's risk based capital and tier one
capital ratios were approximately 10.5% and 9.3%, respectively.
Liquidity
The Bank is required by the Federal Reserve Board to maintain an average
balance of liquid assets equal to at least 5% of withdrawable deposits and
borrowings which are payable in one year or less. The Bank has consistently met
these liquidity requirements. The liquidity levels of the Bank are managed by
its Asset/Liability Management Committee. This committee is charged with the
responsibility of insuring that reserve balances are maintained and to ensure
that the Bank obtains funds necessary to meet existing deposit outflow
requirements as well as asset growth. The Bank's primary source of funds is
derived from principal and interest payments on loans, principal and interest
payments on its investment portfolio, generation of noninterest-bearing and
interest-bearing deposits, and, to a lesser extent, borrowings, effected
primarily through short-term repurchase agreements and the use of the Bank's
private fund purchase lines.
Inasmuch as a significant portion of the Bank's deposit base is concentrated in
demand deposits, which are inherently more volatile, the Asset/Liability
Committee operates a Money Desk to help supplement deposit generating
activities. Additionally, in connection with maintaining a liquidity cushion,
the Bank has established an unsecured borrowing capacity of approximately $70.4
million, or 8.7% of total deposits, and a secured borrowing capacity of $163.3
million, or 20.1% of total deposits. The combination of the these two
borrowing facilities provides the Bank with a secondary source of liquidity of
approximately $233.7 million or 28.8% of total deposits.
Federal Deposit Insurance Corporation Examination
On October 6, 1992, the Federal Deposit Insurance Corporation (FDIC) began a
routine examination of the Bank as of September 30, 1992. It is not known at
this time what impact, if any, this examination may have on the Bank. It is
anticipated that the FDIC will complete their examination during the fourth
quarter of 1992.
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 10, 1992 Metrobank
-----------------------------
(Bank)
By:
-----------------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank in
the capacities indicated on the date set forth above.
Signature Title
--------- -----
- -------------------------------- Vice President
Christopher Ishikawa Controller
(Principal Accounting Officer)
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act
of 1934, the Bank has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 10, 1992 Metrobank
-----------------------------
(Bank)
By: /s/ David P. Malone
-----------------------------------
David P. Malone
Executive Vice President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Bank in
the capacities indicated on the date set forth above.
Signature Title
--------- -----
/s/ Christopher Ishikawa
- -------------------------------- Vice President
Christopher Ishikawa Controller
(Principal Accounting Officer)
<PAGE> 1
EXHIBIT 99(S)
[LOGO]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
April 8, 1993
To Our Shareholders:
You are cordially invited to attend the 1993 Annual Meeting of the
Shareholders of Metrobank which will be held in the lobby of the Bank's
Headquarters Office, 10900 Wilshire Boulevard, Los Angeles, California 90024 on
May 25, 1993, commencing at 4:00 P.M.
The purposes of the meeting will be to elect directors for the coming year
and to report to you on the business and operations of the Bank.
The formal Notice of Meeting and Proxy Statement containing further
information pertinent to the business of the meeting are set forth on the pages
following this letter. Our Annual Report, which includes financial statements
for the Bank's fiscal year ended December 31, 1992, is enclosed herewith.
We hope you will be able to attend the meeting in person, but whether or
not you plan to attend, please sign and date the enclosed proxy and return it in
the accompanying envelope.
Sincerely,
/s/ David L. Buell
------------------------
David L. Buell
Chief Executive Officer,
Chairman of the Board
<PAGE> 2
[LOGO]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 1993
The Annual Meeting of Shareholders of Metrobank (the "Bank") will be held
on May 25, 1993 at 4:00 P.M. in the lobby of the Bank's Headquarters Office,
10900 Wilshire Boulevard, Los Angeles, California 90024 for the following
purposes:
1. Election of Directors. The election as directors of the 7 persons
listed in the accompanying Proxy Statement.
2. Other Business. Such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Shares represented by properly executed proxies will be voted in
accordance with the instructions therein and it is the intention of the Board of
Directors that shares represented by proxies which are not limited to the
contrary will be voted cumulatively in favor of the election as directors of the
persons named in the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on April 1, 1993 as
the record date for determining those shareholders who will be entitled to vote
at the meeting.
Whether or not you presently plan to attend the meeting in person, the
Board of Directors urges you to date, sign and promptly return the enclosed
proxy. Your giving of such proxy does not preclude your right to vote in person
if you attend the meeting. A postage prepaid return envelope is enclosed for
your convenience in returning the signed proxy.
Your early attention to the proxy will be appreciated.
April 8, 1993 By Order of the Board of Directors,
/s/ Sharon L. Canup
--------------------------
Sharon L. Canup
Corporate Secretary
<PAGE> 3
[LOGO]
10900 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
PROXY STATEMENT
INFORMATION CONCERNING PROXY
The following information is furnished in connection with the solicitation
of the enclosed proxy by and on behalf of the Board of Directors of Metrobank
(the "Bank") for use at the Bank's Annual Meeting of Shareholders to be held in
the lobby of the Bank's Headquarters Office, 10900 Wilshire Boulevard, Los
Angeles, California 90024, on May 25, 1993 at 4:00 P.M. and at any adjournment
or adjournments thereof.
When proxies in the accompanying form are returned, properly dated and
executed, the shares they represent will be voted at the annual meeting in
accordance with the shareholder's directions by means of the ballot provided in
the proxies. If no contrary instructions are given, the persons named in the
proxy intend to vote the shares represented by the proxies (a) cumulatively in
favor of the election of the persons named as nominees for director in this
Proxy Statement and (b) in accordance with their best judgment on any other
matter which may come before the meeting and which is not presently contemplated
to come before the meeting. If any proxy is marked "withhold authority" with
regard to the withholding of authority to vote for the election of directors,
the shares such proxy represents will not be voted either for or against the
election of such directors.
The giving of the proxy does not affect any shareholder's right to vote in
person at the annual meeting and a proxy may be revoked by submitting a new
proxy or by appropriate notice in writing to the Corporate Secretary of the Bank
at any time before it is voted.
The principal solicitation of proxies is being made by mail; however,
additional solicitation may be made by telephone, telegraph or personal visits
by directors, officers and employees of the Bank. The total expense of this
solicitation will be borne by the Bank and will include reimbursements to
brokerage firms and others for their expense in forwarding soliciting material.
This Proxy Statement and the accompanying form of proxy are being mailed to
shareholders on or about April 8, 1993.
VOTING SECURITIES
OUTSTANDING VOTING SECURITIES AND RECORD DATE
The Bank has only one class of voting securities outstanding, identified
as no par value common stock ("Common Stock"). Shareholders of record entitled
to notice of and to vote at the meeting have been determined as of the close of
business on April 1, 1993. As of such date, 4,754,172 shares of Common Stock
were outstanding, all of which will be entitled to vote at the meeting and any
adjournment or adjournments thereof.
CUMULATIVE VOTING
Each shareholder of record is entitled to one vote for each share held on
all matters to come before the meeting, except that shareholders have cumulative
voting rights with respect to the election of directors if a
<PAGE> 4
candidate's or candidates' name(s) have been properly placed in nomination prior
to the voting and a shareholder present at the meeting has given notice of his
or her intention to vote his or her shares cumulatively. If a shareholder has
given such notice, all shareholders may cumulate their votes for candidates in
nomination. Under cumulative voting, each shareholder may give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which the shareholder's shares are entitled, or distribute
the shareholder's vote on the same principle among as many candidates as the
shareholder desires. The 7 candidates receiving the highest number of votes are
elected.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information, as of April 1, 1993,
with respect to the shareholdings of all principal officers and directors of the
Bank as a group and with respect to those persons (including any "group" as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) who
were known to the Bank to be the beneficial owners of more than 5% of the Bank's
outstanding Common Stock, the Bank's only outstanding class of voting
securities:
<TABLE>
<CAPTION>
Amount Percent of Class
Beneficially Beneficially
Name and Address Relationship with Bank Owned(1)(2) Owned(1)(2)
---------------- ---------------------- ------------ ----------------
<S> <C> <C> <C>
Robert L. Mayer Director 1,310,284(3) 27.54%
660 Newport Center Drive,
Suite 1050
Newport Beach, California 92658
David L. Buell Director; Chief 510,000(4) 9.99%
10900 Wilshire Boulevard Executive Officer and
Los Angeles, California 90024 Chairman of the Board
Peter B. Caloyeras Director 270,100(5) 5.67%
Magnetika, Inc.
4053 Redwood Avenue
Los Angeles, California 90066
Wallace Wong Director 263,471(6) 5.53%
2651 Manhattan Beach Boulevard
Redondo Beach, California 90278
All principal officers and
directors as a group (10 people) 2,550,676(7) 49.12%
</TABLE>
- ---------------
(1) Excludes 243,620 shares held by the Bank's Stock Bonus Plan and Trust of
which certain directors act as trustees.
(2) For purposes of calculating each percentage, the shares subject to the
options exercisable under the Bank's stock option plans of the persons to
whom the calculation relates were added to both their shares and the
total shares outstanding at April 1, 1993. Subject to applicable
community property law, except as otherwise indicated, each of the
persons included in the table has sole voting and investment power with
respect to his or her shares.
(3) Includes (a) an aggregate of 3,000 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans and (b) 36,210 shares owned by Mr. Mayer's wife as to which he
disclaims any beneficial interest.
2
<PAGE> 5
(4) Includes an aggregate of 350,000 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans.
(5) Includes (a) a total of 138,336 shares owned by Mr. Caloyeras' wife and
trusts for certain family members as to which he disclaims any beneficial
interest and (b) an aggregate of 3,000 shares issuable upon the exercise
of presently exercisable stock options granted under the Bank's stock
option plans.
(6) Includes an aggregate of 3,000 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans.
(7) Includes an aggregate of 438,000 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans.
ELECTION OF DIRECTORS
Seven directors of the Bank are to be elected at the annual meeting to
serve until the next annual meeting of shareholders and until their successors
are elected and qualified. The nominees of the Board of Directors, as set forth
below, are all presently directors of the Bank. Unless authority to vote for
directors is withheld as to any or all of them, it is intended that shares
represented by proxies in the accompanying form will be cumulatively voted "FOR"
the election of the directors listed below or, if one or more of such persons
shall become unable or unwilling for good cause to stand for election, "FOR" the
election of such other persons as the Chief Executive Officer or Board of
Directors of the Bank may recommend in his or her place. The Board of Directors
has no reason to believe that any such nominees will be unable to serve.
On February 23, 1993 the Board of Directors determined to reduce the
number of authorized directors to seven persons, as permitted by the bylaws of
the Bank. In connection with this reduction, Richard Butler, Dorothy Castro and
Laurence Smead voluntarily resigned as directors, effective February 23, 1993,
and became directors emeriti. Laurence Smead is a founding director of the Bank
and has served continuously as a director since 1978. Richard Butler is also a
founding director of the Bank and served as a director from 1978 through 1981
and 1984 through 1993. Dorothy Castro became a director of the Bank in 1980 and
served as a director of the Bank continuously thereafter. The Board wishes to
thank these individuals for their service, dedication and outstanding
contribution as directors of the Bank.
3
<PAGE> 6
The following information is furnished with respect to the nominees and
the principal officers of the Bank:
<TABLE>
<CAPTION>
Director Amount Beneficially Percent of Class
Name of Individual, or Principal Owned as of Beneficially
Position with Bank or Occupation Officer Since Age April 1, 1993(1)(2) Owned(1)(2)
-------------------------------- ------------- --- ------------------- ----------------
<S> <C> <C> <C> <C>
DIRECTORS
David L. Buell, 1978 57 510,000(3) 9.99%
Chief Executive Officer and
Chairman of the Board of the Bank
Peter B. Caloyeras, 1978 62 270,100(4) 5.67%
President, Magnetika, Inc.
(Electrical Manufacturing)
Seymour J. Carr, M.D. 1978 73 30,275(5) .63%
Oral Surgeon
James W. Hobson, 1978 70 18,708(6) .39%
Vice-Chancellor (Emeritus),
University of California,
Los Angeles
Rudy B. Markmiller, 1984 57 55,338(6) 1.16%
President, Network Courier Services
Robert L. Mayer, 1978 67 1,310,284(7) 27.54%
President, The Robert Mayer
Corporation (Real Estate
Developer)
Wallace Wong, 1981 51 263,471(8) 5.53%
Chief Executive Officer,
Cal-American Medical Supplies;
Chairman of the Board,
Santa Barbara Business College
PRINCIPAL OFFICERS
Robert P. Bulseco, 1979 47 72,500(9) 1.50%
President and Chief
Administrative Officer
Paul B. Alexander, 1991 36 8,250(10) .17%
Executive Vice President and
Chief Credit Officer
David P. Malone, 1988 42 11,750(11) .24%
Executive Vice President and
Chief Financial Officer
</TABLE>
- ---------------
(1) Excludes 243,620 shares held by the Bank's Stock Bonus Plan of which
Messrs. Buell, Caloyeras, Mayer and Wong are trustees.
(2) Subject to applicable community property law, except as otherwise
indicated, each of the persons included in the table has sole voting and
investment power with respect to his or her shares.
(3) Includes an aggregate of 350,000 shares issuable upon the exercise of
presently exercisable stock options granted under the Bank's stock option
plans.
(4) Includes (a) a total of 138,336 shares owned by Mr. Caloyeras' wife and
trusts for certain family members as to which he disclaims any beneficial
interest and (b) an aggregate of 3,000 shares issuable upon the exercise
of presently exercisable stock options.
4
<PAGE> 7
(5) Dr. and Mrs. Carr share voting and investment power; includes an aggregate
of 3,000 shares issuable upon the exercise of presently exercisable stock
options.
(6) Includes an aggregate of 3,000 shares issuable upon the exercise of
presently exercisable stock options.
(7) Includes 36,210 shares owned by Mr. Mayer's wife as to which he disclaims
any beneficial interest. Mr. Mayer can be viewed as a "control person" of
the Bank due to his substantial ownership interest in the Bank. Also
includes an aggregate of 3,000 shares issuable upon the exercise of
presently exercisable stock options.
(8) Includes an aggregate of 3,000 shares issuable upon the exercise of
presently exercisable stock options.
(9) Includes an aggregate of 50,500 shares issuable upon the exercise of
presently exercisable stock options.
(10) Includes an aggregate of 8,250 shares issuable upon the exercise of
presently exercisable stock options.
(11) Includes an aggregate of 11,250 shares issuable upon the exercise of
presently exercisable stock options.
All members of the Board of Directors and principal officers of the Bank
have been engaged in the same business or profession in the capacities indicated
for more than the past five years. David L. Buell, Robert P. Bulseco, Paul B.
Alexander and David P. Malone filed their Forms F-8A for the year ended December
31, 1992 with the Federal Deposit Insurance Corporation 30 days subsequent to
the applicable filing deadline.
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth the aggregate amount of cash compensation
paid by the Bank during its fiscal year ended December 31, 1992 to (a) all
principal officers whose aggregate direct remuneration during such year exceeded
$60,000, and (b) all principal officers of the Bank as a group:
<TABLE>
<CAPTION>
Name of Individual or Cash
Number in Group Capacities in Which Served Compensation(1)
--------------------- -------------------------- ---------------
<S> <C> <C>
David L. Buell Chief Executive Officer $325,500
Robert P. Bulseco President and Chief Administrative Officer $220,250
Paul B. Alexander Executive Vice President and Chief Credit Officer $156,500
David P. Malone Executive Vice President and Chief Financial Officer $133,750
All principal officers
as a group (4 people) $836,000
</TABLE>
______________
(1) Includes salary and bonus.
COMPENSATION PURSUANT TO PLANS
1988 Stock Option Plan. In May, 1989, the shareholders of the Bank
approved the Metrobank 1988 Stock Option Plan (the "1988 Plan"). The 1988
5
<PAGE> 8
Plan provides for the granting of both incentive options designed to qualify
under Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), and non-incentive options. The purposes of the 1988 Plan are to
strengthen the growth, development and financial success of the Bank and its
subsidiaries by providing to certain key employees and directors of the Bank and
its subsidiaries additional incentives for high levels of performance and to
encourage stock ownership in the Bank.
Under the 1988 Plan, up to an aggregate of 800,000 shares of the Bank's
unissued Common Stock may be issued to eligible employees and directors of the
Bank and its subsidiaries at an option price per share of not less than 100% of
the fair market value of a share of the Bank's Common Stock at the date the
options are granted, except that the option price for shares under any incentive
stock option granted to any eligible person owning more than 10% of the combined
voting power of all classes of stock of the Bank or of any parent or subsidiary
of the Bank must be 110% of the fair market value of such shares at the date of
the grant.
The 1988 Plan is administered by a committee of disinterested persons
appointed by the Bank's Board of Directors. The committee, in its sole
discretion, determines the persons eligible to receive options, the number of
shares subject to each option, the price at which each option is granted and
whether the option is an incentive stock option or a non-incentive stock option.
Members of the committee, unless they are directors of the Bank, are ineligible
to participate in the 1988 Plan. Under the 1988 Plan, incentive stock options
and non-incentive stock options may be granted to eligible employees of the Bank
or of any of its subsidiaries and non-incentive stock options may be granted to
eligible directors of the Bank and to directors of any of its subsidiaries.
Automatically and without action of the committee, each director of the Bank
receives a non-incentive stock option covering 1,000 shares upon his or her
election or appointment (if he or she has not served as a director of the Bank
in the previous 12 months) and also immediately following each annual meeting of
the shareholders of the Bank; provided, however, that no director of the Bank is
entitled to acquire more than 3,000 shares pursuant to the exercise of options
granted under the 1988 Plan. To the extent that the automatic grant of an option
would entitle a director to acquire more than 3,000 shares (inclusive of shares
previously acquired pursuant to the exercise of stock options under the 1988
Plan), the number of shares covered by the option is reduced accordingly.
Subject to the express terms of the 1988 Plan, the committee may determine the
duration of the stock options; however, the maximum duration is ten years. Any
incentive stock option granted to any eligible employee owning more than 10% of
the voting power of all classes of the stock of the Bank, or any subsidiary or
parent of the Bank, may not be exercised after five years from the date of
grant. Non-incentive stock options granted to directors of the Bank have a term
of ten years.
Subject to the express terms of the 1988 Plan, an option may be exercised
in accordance with its terms, as determined by the committee. The aggregate fair
market value of shares for which any employee may exercise incentive stock
options in any calendar year under any plans of the Bank or any subsidiary or
parent of the Bank may not exceed $100,000. A non-incentive stock option granted
to a director of the Bank is exercisable after 12 months. An option is exercised
by giving written notice to the Bank specifying the number of shares to be
purchased, accompanied by full payment. There is a minimum permitted exercise
amount of 50 shares.
6
<PAGE> 9
If the employment of an employee, or the status as a director of the Bank
or a subsidiary, ceases, then any options which he or she holds under the 1988
Plan will automatically terminate except if such cessation is due to (a) the
death of the employee or director, in which case the option remains exercisable
for 12 months after the death to the extent that it was exercisable at the date
of death, (b) the permanent and total disability of the employee or director, in
which case the option remains exercisable for 12 months after the disability to
the extent that it was exercisable at the date of cessation, or (c) any other
reason at a time when the option is exercisable, in which case the option will
continue to be exercisable for 90 days to the extent that it was exercisable at
the date of cessation.
In consideration of the granting of an option to an employee, the employee
must agree to remain in the employ of the Bank or its subsidiary for a period of
at least one year after the option is granted or until his or her retirement
with the approval of the Bank or of the subsidiary, whichever may be the
earlier, generally at his or her salary rate in effect at the time of the
granting of the option. However, nothing in the 1988 Plan, or in any agreement
executed by the employee pursuant to the 1988 Plan, will confer upon the
employee any right to continue in the employ of the Bank or subsidiary or will
interfere with or restrict the rights of the Bank or any subsidiary to discharge
such employee at any time for any reason whatsoever, with or without good cause.
In the event of a dissolution or liquidation of the Bank, a
reorganization, merger, or consolidation of the Bank where the Bank is not the
surviving corporation, a sale of substantially all of the assets of the Bank, or
a reverse merger and the conversion of the outstanding shares of Common Stock of
the Bank into other property, all options will be exercisable in full for a
period of 30 days following delivery of notice of such event to participants in
the 1988 Plan and thereafter shall terminate.
No option granted under the 1988 Plan may be assigned or transferred
except by will or by law of descent and distribution. During the lifetime of an
optionee, the option is exercisable only by him or her. Any employee or director
of the Bank or its subsidiaries, so long as he or she remains such an employee
or director, must notify the Bank of any disposition of any shares acquired
pursuant to options granted under the 1988 Plan.
The 1988 Plan will terminate in 1998, unless terminated earlier by the
Board of Directors.
Stock Bonus Plan and Trust. On May 27, 1980, the Board of Directors
adopted and approved a Stock Bonus Plan and Trust (the "Plan") and on July 24,
1980 entered into a Trust Agreement with First Interstate Bank of California
(the "Trustee") establishing the trust (the "Trust"). The Plan was amended and
restated in its entirety on October 22, 1985, effective as of January 1, 1984,
and the Trust was amended and restated in its entirety on September 13, 1985, in
order to comply with changes in the tax laws regulating such stock bonus plans
and trusts. The Plan was amended and restated on January 1, 1991 to comply with
the provisions of the Tax Regulations Act of 1986. All Bank employees
participate in the Plan as of their date of hire. The Plan provides that the
Bank may make contributions to the Trust with the funds being invested primarily
in stock of the Bank, to be held by the Trustee until distributed to the Bank's
employees in accordance with the provisions of the Plan.
7
<PAGE> 10
The Board of Directors of the Bank may determine, from time to time, to
make contributions to the Plan in the form of cash, stock of the Bank or other
property. However, the Bank is not required to make any contributions to the
Plan and no participant in the Plan is permitted to make contributions to the
Plan. The contributions by the Bank to the Plan generally will depend upon the
profitability of the Bank, the Bank's current needs for operating funds and the
overall compensation of participants. The Bank made loan payments of $593,000 on
behalf of the Trust in 1992.
A separate account is established under the Plan to record each
participant's share of the Plan contributions, forfeitures and the Trust fund
earnings or losses. A participant who is in the Bank's employ on December 31st
of a given year and who has completed 1,000 hours of service for the Bank during
that year will share in the Plan contributions and forfeitures for that year as
will a participant who retires, dies or becomes disabled during the year. The
Plan contributions and forfeitures are allocated to participant accounts in
proportion to their relative compensation. Earnings or losses are allocated
based upon the relative value of participant accounts as of December 31st of a
given year.
The Plan has been designed as an employee stock ownership plan under
applicable provisions of the Code. As such, it is permitted to engage in exempt
loan transactions in order to finance the acquisition of Bank stock. Such
transactions may be structured as a loan made to the Trust by a "disqualified
person" as defined in the Code or a "party in interest" as defined in the
Employee Retirement Income Security Act of 1974, or a loan guaranteed by a
disqualified person or party in interest. Bank stock acquired in an exempt loan
transaction is held in a suspense account and is released from such account as
the loan is repaid. Allocation of such Bank stock is based strictly on the
relative compensation of the Plan participants eligible to share in the Bank
contributions for the year in question.
A participant's Plan account vests based on the number of years of
credited service with the Bank. A year of credited service is a year in which
the participant has completed at least 1,000 hours of service for the Bank.
There is no vesting of a participant if he has completed less than five years of
credited service. A participant is 100% vested in his account after completing
five years of credited service. Notwithstanding this vesting schedule, a
participant is fully vested upon retirement, disability or death. A participant
is entitled to receive distribution of his account, if vested, upon his
separation of service from the Bank. Normal retirement under the Plan is the
later of the December 31st prior to the participant's 65th birthday or the
seventh anniversary of the participant's date of hire.
The Trust is designed to invest primarily in stock of the Bank and, to the
fullest extent possible the Trust funds are invested in such stock either
through purchases directly from the Bank on a new issue basis or through market
purchases. Nevertheless, Trust funds may legally be invested in any other type
of property available for investment by private trusts including stocks, bonds,
bank deposits, real estate and mortgages. It is contemplated, however, that such
other types of investment activity would be engaged in only if the Bank's stock
is unavailable for purchase.
Distribution of the amount to which a participant in the Plan is entitled
will ordinarily be made in the form of stock in the Bank. If the Plan has
engaged in an exempt loan transaction (as defined), then it is
8
<PAGE> 11
legally possible to provide for distributions in cash or property other than
Bank stock, but participants in the Plan will always have the right to demand
that distributions be made in the form of Bank stock, and it is anticipated
that distributions will always be made in such form.
Metrobank Employee Savings Plan. In April, 1987, the Board of Directors
adopted and approved an Employee Savings Plan (the "Savings Plan"), and entered
into an agreement with First Interstate Bank of California (the "Trustee") to
act as the trustee with respect to the Savings Plan. The Savings Plan was
amended and restated in its entirety on August 27, 1991, to be effective on
January 1, 1989. The purpose of the Savings Plan is to reward eligible employees
for long and loyal service by providing them with retirement benefits
accumulated through salary reduction contributions, discretionary matching
contributions and employee voluntary nondeductible contributions.
All Bank employees are eligible to participate in the Savings Plan
beginning with the January 1, April 1, July 1 or October 1 after they satisfy
the Savings Plan's eligibility requirements. This requirement is six months of
service for employees hired on or after February 1, 1987.
Each year the Bank will make a cash contribution equal to the amount by
which participants elect to reduce their compensation ("Elective Deferrals")
through payroll withholding. Participants may make Elective Deferrals for each
year in any amount between 1% and 15% of compensation. A participant's Elective
Deferrals in any year may not exceed $7,000, which limitation has been adjusted
to $8,728 for 1992 and may be further adjusted to reflect an increase in the
cost of living in accordance with the terms of the Savings Plan and applicable
law.
The Bank has the discretion to make matching contributions each year equal
to a percentage of the Elective Deferrals of participants. In order to share in
such contributions for a particular year, a participant must be credited with
1,000 hours of service during such year.
The Savings Plan also permits non-highly compensated Participants (as
defined in the Code) to make voluntary nondeductible contributions in any year,
provided that these contributions do not exceed 10% of the individual's
compensation while a participant. A participant is at all times fully vested in
his account balance derived from Elective Deferrals and voluntary contributions.
In addition, a participant is fully vested in his entire account balance in the
event of his attainment of age 65. Participants who leave the employ of the Bank
prior to age 65 are fully vested in their accounts derived from matching
contributions after seven years of service, 80% vested after six years, 60%
vested after five years, 40% vested after four years, 20% vested after three
years and 0% vested for years less than three.
Participants may direct the Trustee to invest their accounts in the
proportions they designate among an Equity Fund, a Fixed Investment Contract
Fund, a government money market fund and an Employer Stock Fund. Participants
may change the manner or proportions in which the contributions are invested by
filing a written notice with the Trustee during the quarterly open enrollment
periods. A participant's accounts will be increased or decreased by the gains or
losses experienced as a result of the investment in these funds.
9
<PAGE> 12
A participant's accounts are distributable upon retirement, death,
disability, termination of employment, attainment of age 59 1/2, hardship or the
Savings Plan termination.
To date, the Bank has made no discretionary matching contributions to the
Savings Plan. Accordingly, no amounts have been paid or distributed pursuant to
the Savings Plan during the last fiscal year, and no amounts have accrued as
nonforfeitable during the last fiscal year.
OTHER COMPENSATION
The Bank provides club memberships to certain of its principal officers
and is reimbursed for personal charges at such clubs. Management has concluded
that the amount of any personal benefits as to any individual is less than
$5,000.
The Bank pays the premiums on a life insurance policy insuring the life of
Mr. Buell, with Mr. Buell's wife as beneficiary. The premium paid under such
policy for the fiscal year ended December 31, 1992, was $18,070.
COMPENSATION OF DIRECTORS
Effective March 23, 1993, the Bank's directors who are not also officers
of the Bank and who are not otherwise receiving compensation from the Bank are
paid a fee of $500 for each regular monthly board meeting attended and a fee of
$1,000 for each extended quarterly board meeting. Such persons are also paid a
$1,000 per month retainer. In addition, the Bank's directors, other than Mr.
Buell and Mr. Hobson, were paid $500 for each quarterly Executive Committee
meeting attended during 1992 and $100 for each regular Executive Committee
meeting attended during 1992. The Executive Committee was terminated as of
February 23, 1992 due to the reduction of the number of Board Members from 10 to
seven persons.
Each of directors Smead, Butler and Castro received an honorarium of
$20,000 upon their retirement as directors of the Bank and their appointment as
directors emeriti. The Bank also paid $6,000 to each of these directors in
consideration of cancellation of their outstanding stock options.
Members of the Audit Committee, except Mr. Hobson, receive a fee of $100
for each Audit Committee meeting attended. Members of the Compensation Review
Committee receive a fee of $100 for each Compensation Review Committee meeting
attended.
Mr. Hobson received a salary of $66,000 for services rendered to the Bank
and its affiliates during 1992. Such services primarily included supervising the
Bank's audit functions and supervising the Bank's insurance brokerage
operations.
INDEBTEDNESS OF MANAGEMENT
The highest aggregate extensions of credit to the directors and principal
officers of the Bank as a group during 1992 equalled $13,086,108, or 22.07% of
the equity capital accounts of the Bank. The highest aggregate direct and
guaranteed indebtedness during 1992 of Robert L. Mayer, a director of the Bank,
aggregated $6,485,000, or 10.94% of the equity capital accounts of the Bank. At
April 1, 1993, this amount was $6,447,500, representing 10.67% of the equity
capital amounts of the Bank.
10
<PAGE> 13
The Bank has had, and expects to have in the future, transactions in the
ordinary course of business with directors, officers and principal shareholders
of the Bank, and their associates, on substantially the same terms including
interest rates, collateral and repayment terms on extensions of credit, as those
prevailing at the same time for comparable transactions with others. Such
extenstions of credit did not involve more than the normal risk of
collectibility or present other unfavorable features.
STOCK OPTIONS
The following table provides certain information (a) as to all options
which were granted to or exercised by the Bank's principal officers from January
1, 1992 to December 31, 1992 and (b) as to all options held by such principal
officers as of December 31, 1992:
<TABLE>
<CAPTION>
All
Principal
Officers
David L. Robert P. Paul B. David P. as a Group
Shares of Common Stock Buell Bulseco Alexander Malone (4 People)
---------------------- ----- ------- --------- ------ ----------
<S> <C> <C> <C> <C> <C>
Granted January 1, 1992 to December 31, 1992:
Number of shares ....................................... 0 0 3,000 5,000 8,000
Average per share exercise price ....................... $ -- $ -- $ 10.13 $ 11.88 $ 11.22
Exercised January 1, 1992 to December 31, 1992:
Number of shares ....................................... None None None None None
Aggregate option price of options exercised ............ -- -- -- -- --
Aggregate market value of shares acquired on
date options exercised ................................ -- -- -- -- --
Unexercised options held as of December 31, 1992:
Number of shares ....................................... 350,000 61,000 20,000 20,000 451,000
Average per share exercise price ....................... $ 8.95 $ 9.05 $ 9.66 $ 10.15 $ 9.05
</TABLE>
MISCELLANEOUS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Bank's last fiscal year, there were a total of 12 meetings of
the Board of Directors. All directors attended at least 75% of the total number
of meetings of the Board of Directors and committees on which they served during
the last fiscal year.
During 1992, the Board of Directors of the Bank had standing executive,
audit and compensation review committees. Effective February 23, 1993 the
Executive Committee was terminated due to the reduction of the number of Board
Members from 10 to seven persons.
The Executive Committee was comprised of Messrs. Smead (Chairman), Buell,
Butler, Caloyeras, Mayer and Wong and was authorized on behalf of the Board of
Directors to take whatever action the Board of Directors would take in the
ordinary course of business, including nominations to the Board of Directors and
the establishment of executive compensation levels. The Executive Committee held
11 meetings during the last fiscal year.
The Board of Directors considers all nominees for the Board of Directors
recommended by shareholders of the Bank. The bylaws of the Bank provide for the
nomination of directors as follows:
"Nominations for election of members of the Board of Directors may be made
by the Board of Directors or by any shareholder of any outstanding class of
voting stock of the Bank entitled to vote for the election of
11
<PAGE> 14
directors. Notice of intention to make any nominations, other than by the Board
of Directors, shall be made in writing and shall be received by the President of
the Bank no more than 60 days prior to any meeting of shareholders called for
the election of directors, and no more than 10 days after the date the notice of
such meeting is sent to shareholders pursuant to [the bylaws]; provided,
however, that if only 10 days' notice of the meeting is given to shareholders,
such notice of intention to nominate shall be received by the President of the
Bank not later than the time fixed in the notice of the meeting for the opening
of the meeting. Such notification shall contain the following information to the
extent known to the notifying shareholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed nominee; (c) the
number of shares of voting stock of the Bank owned by each proposed nominee; (d)
the name and residence address of the notifying shareholder ; and (e) the number
of shares of voting stock of the Bank owned by the notifying shareholder.
Nominations not made in accordance [with the bylaws] may be disregarded by the
chairman of the meeting, and the inspectors of election shall then disregard all
votes cast for such nominee."
The Audit Committee, comprised of Messrs. Hobson (Chairman), Caloyeras and
Markmiller has overall responsibility for overseeing the Bank's entire audit
function, both internal and with its independent auditors, for ascertaining the
existence of adequate and effective accounting and internal control systems, for
selecting the Bank's independent auditors and for reviewing the Bank's audit
plan and audit results with the Bank's independent auditors. The Audit Committee
held 10 meetings during the last fiscal year.
The Compensation Review Committee, comprised of Messrs. Carr (Chairman),
Mayer and Wong, reviews the compensation practices of the Bank and makes
recommendations to the Board of Directors. The Compensation Review Committee
held 2 meetings during the last fiscal year.
THE BANK'S AUDITORS
It is anticipated that representatives of Arthur Andersen & Co. will be
present at the meeting with the opportunity to make a statement with respect to
the Bank's financial statements if they choose to do so and that such
representatives will be available to respond to appropriate shareholder
questions.
SHAREHOLDERS' PROPOSALS FOR 1994 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Bank's 1994
annual meeting of shareholders must be received by the Bank for inclusion in the
Proxy Statement and form of proxy for that meeting no later than December 31,
1993.
AVAILABILITY OF FORM F-2
Any shareholder who would like to receive without charge a copy of the
Bank's most recent annual report on Form F-2 filed with the Federal Deposit
Insurance Corporation should send a written request therefor to the Bank at
10900 Wilshire Boulevard, Los Angeles, California 90024, Attention: Sharon L.
Canup, Corporate Secretary.
12
<PAGE> 15
ANNUAL REPORT; OTHER BUSINESS
Management does not know of any business to be presented other than the
matters set forth above, but if other matters properly come before the meeting,
it is the intention of the persons named in the proxy to vote in accordance with
their best judgment on such matters.
By Order of the Board of Directors
/s/ Sharon L. Canup
------------------------------
Sharon L. Canup
Corporate Secretary
13
<PAGE> 16
PRELIMINARY COPY
[LOGO] PROXY
<TABLE>
PROXY THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
<S> <C>
10900 Wilshire Boulevard The undersigned hereby appoints David L. Buell and Robert L. Mayer, and either of
Los Angeles, California 90024 them, as Proxies, each with the power to appoint his substitute, and hereby
- --------------- authorizes either of them to represent and to vote as designated below, all of the
shares of common stock of Metrobank (the "Bank") held of record by the undersigned
on April 1, 1993, at the annual meeting of shareholders to be held on May 25,
1993, or any adjournment or adjournments thereof.
</TABLE>
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS WITHHOLD AUTHORITY
FOR all nominees listed below to vote for all nominees listed below / /
(except as marked to the contrary below) / /
</TABLE>
D.L. Buell, P.B. Caloyeras, S.J. Carr, J.W. Hobson, R.L. Mayer,
W. Wong, R.B. Markmiller
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized (a) to vote for the
election of any person as a director of the Bank in lieu of any nominee
named herein, provided such nominee is unable to serve or for good cause
is unwilling to serve, and (b) to vote upon such other business as may
properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR management's nominees as directors of the Bank.
- --------------------------------------------------------------------------------
-------------------------
Signature
DATED: , 1993 --------------------------
-------- Signature if held jointly
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guard ian, please give title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE CHECK THIS BOX / / IF YOU PLAN TO ATTEND THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
