<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1995
------------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
------------------ ----------------------
Commission file number 0-9584
CALIFORNIA BANCSHARES, INC.
- - - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2147553
- - - - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Park Place, Ste 140, San Ramon California 94583
- - - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(510) 743-4200
- - - - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - - - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----------- ------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 25, 1995
----- -----------------------------
Common Stock, $2.50 par value 10,002,707
This report contains a total of 26 pages
---------------
<PAGE>
CALIFORNIA BANCSHARES, INC.
FORM 10-Q
TABLE OF CONTENTS
Page
-----
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements
Consolidated Balance Sheet................................ 3
Consolidated Statement of Income.......................... 4
Consolidated Statement of Cash Flows...................... 5
Notes to Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Highlights...................................... 9
Overview.................................................. 10
Results of Operations..................................... 10
Net Interest Income..................................... 10
Allowance and Provision for Loan Losses................. 12
Noninterest Income...................................... 13
Noninterest Expense..................................... 13
Income Taxes............................................ 14
Financial Condition....................................... 15
Securities.............................................. 15
Loan Portfolio.......................................... 16
Nonaccrual Loans, Restructured Loans
and Foreclosed Assets.................................. 17
Deposits................................................ 18
Asset/Liability Management................................ 19
Interest Rate Risk...................................... 19
Liquidity............................................... 21
Capital................................................. 21
Subsequent Event.......................................... 22
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................... 23
SIGNATURES............................................................... 24
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<PAGE>
ITEM 1. Financial Statements
California Bancshares, Inc. and Subsidiaries
Consolidated Balance Sheet (Unaudited)
(In thousands except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
---------- -----------
ASSETS 1995 1994
---------- ----------
<S> <C> <C>
Cash and due from banks $69,847 $66,587
Federal funds sold 52,324 14,800
---------- ----------
Total cash and cash equivalents 122,171 81,387
Securities:
Available for sale 37,022 51,426
Held to maturity (approximate market values
of $259,054-1995 and $233,479-1994) 265,359 245,984
---------- ----------
Total securities 302,381 297,410
Loans 943,118 913,476
Less: Allowance for loan losses (14,377) (12,822)
---------- ----------
Net loans 928,741 900,654
Premises and equipment, net 18,551 17,329
Interest receivable and other assets 33,498 32,709
---------- ----------
TOTAL ASSETS $1,405,342 $1,329,489
---------- ----------
---------- ----------
LIABILITIES
Deposits:
Non interest-bearing demand $228,305 $228,211
Savings and interest-bearing demand 529,516 519,431
Time certificates, $100,000 or more 81,689 86,338
Other time 412,418 345,737
---------- ----------
Total deposits 1,251,928 1,179,717
Borrowed funds 26,000 29,747
Interest payable and other liabilities 6,367 7,782
---------- ----------
Total liabilities 1,284,295 1,217,246
---------- ----------
Commitments and Contingent Liabilities
SHAREHOLDERS' EQUITY
Preferred stock, no par value
Share authorized: 2,000,000
Shares issued: none --- ---
Common stock, $2.50 par value
Shares authorized: 16,000,000
Shares issued and outstanding: 1995 - 9,984,000
1994 - 9,353,000 24,960 23,383
Capital surplus 37,489 35,707
Unrealized loss on securities available for
sale, net (144) (421)
Retained earnings 58,742 53,574
---------- ----------
Total shareholders' equity 121,047 112,243
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,405,342 $1,329,489
---------- ----------
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
California Bancshares, Inc. and Subsidiaries
Consolidated Statement of Income (Unaudited)
For the Three Month Period Ended March 31, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans $21,819 $13,289
Securities:
Taxable 3,736 3,125
Exempt from Federal income taxes 627 711
Other interest income 549 445
------- -------
Total interest income 26,731 17,570
------- -------
INTEREST EXPENSE
Interest on deposits:
Savings and interest-bearing demand 3,339 2,402
Time certificates, $100,000 or more 819 507
Other time 4,768 1,894
------- -------
Total interest on deposits 8,926 4,803
Interest on borrowed funds 565 27
------- -------
Total interest expense 9,491 4,830
------- -------
Net interest income 17,240 12,740
Provision for loan losses 390 470
------- -------
Net interest income after provision for
loan losses 16,850 12,270
------- -------
NONINTEREST INCOME
Service charges on deposit accounts 1,321 1,019
Other operating income 689 979
------- -------
Total noninterest income 2,010 1,998
------- -------
NONINTEREST EXPENSE
Salaries and employee benefits 6,716 5,491
Occupancy expense 1,115 836
Equipment expense 933 755
Other operating expense 3,624 3,516
------- -------
Total noninterest expense 12,388 10,598
------- -------
Income before provision for income taxes 6,472 3,670
Provision for income taxes 2,472 1,240
------- -------
NET INCOME $4,000 $2,430
------- -------
------- -------
PER SHARE
Net Income $0.40 $0.26
------- -------
------- -------
Dividends declared $0.18 $0.13
------- -------
------- -------
Weighted average shares outstanding 9,974 9,365
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
California Bancshares, Inc. and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
For the Three Month Period Ended March 31, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $4,000 $2,430
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 779 728
Provision for loan losses 390 470
Net loss on sales of securities --- 11
Net gain on sales of premises and equipment and
foreclosed assets (105) (16)
Provision for foreclosed assets 142 41
Net (additions) proceeds from sales of mortgages
held for sale (1,391) 559
Net change in interest receivable, other assets
interest payable and other liabilities (789) (2,826)
-------- --------
Net cash provided by operations 3,026 1,397
-------- --------
Cash flows from investing activities:
Securities:
Held to Maturity:
Proceeds from prepayments and maturities 8,233 22,082
Purchases --- (28,768)
Available for Sale:
Proceeds from prepayments and maturities 15,458 8,500
Purchases --- (6,182)
Loans made to customers less principal payments
collected 8,014 5,833
Capital expenditures (1,209) (1,242)
Proceeds from sales of premises and equipment --- 5
Proceeds from sales of foreclosed assets 151 171
-------- --------
Net cash provided by investing activities 30,647 399
-------- --------
Cash flows from financing activities:
Net increase in deposits 7,828 12,165
Net decrease in borrowed funds (3,947) ---
Cash dividends paid (1,312) (1,025)
Proceeds from issuance of common stock for stock
options exercised and dividend reinvestment plan 329 996
Repurchase of common stock (554) (182)
-------- --------
Net cash provided by financing activities 2,344 11,954
-------- --------
Net change in cash and cash equivalents 36,017 13,750
Cash and cash equivalents at beginning of period 81,387 114,318
Livermore's cash and cash equivalents on
January 1, 1995 4,767 ---
-------- --------
Cash and cash equivalents at end of period $122,171 $128,068
-------- --------
-------- --------
Supplemental disclosure on non-cash investing
activities:
Loans transferred to foreclosed assets $757 $531
-------- --------
-------- --------
Supplemental disclosure of cash flow
information:
Cash paid during the period for :
Interest $9,144 $4,966
-------- --------
-------- --------
Income taxes $775 $ ---
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
California Bancshares, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The unaudited consolidated financial statements of California Bancshares,
Inc. and Subsidiaries (the "Company") are prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q. In the opinion of management, all
adjustments necessary for a fair presentation of the financial position,
results of operations and cash flows for the periods presented have been
included and are normal and recurring. These unaudited consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements included in the Company's annual report
on Form 10-K for the year ended December 31, 1994.
The unaudited financial statements of the Company include the accounts of
California Bancshares, Inc. (the Parent) and its banking subsidiaries,
Alameda First National Bank, Bank of Livermore, The Bank of Milpitas, N.A.,
The Bank of San Ramon Valley, Commercial Bank of Fremont, Community First
National Bank, Concord Commercial Bank, Lamorinda National Bank, Modesto
Banking Company and Westside Bank (collectively, the Banks), and non-bank
subsidiaries, CBI Mortgage, Island Bancorp. Leasing, Inc. and LNB Corp.
The revenues, expenses, assets and liabilities of the subsidiaries are
included in the respective line items in the unaudited consolidated
financial statements, after elimination of all material intercompany
accounts and transactions. The results of operations and cash flows are
not necessarily indicative of those expected for the full fiscal year.
2. ACQUISITIONS:
On January 31, 1995, the Company completed the acquisition of Bank of
Livermore (Livermore), which had $71 million in total assets at December
31, 1994. The Company issued 633,908 shares of common stock valued at
approximately $10.9 million at the time of the transaction. The
acquisition of Livermore was accounted for as a pooling-of-interests.
Livermore is not material to the financial condition or operating results
of the Company, and therefore, prior period balances were not restated.
However, 1995 amounts were adjusted to reflect the transaction as if it had
occurred January 1, 1995.
3. ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 114 AND 118:
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 114 (SFAS No. 114), "Accounting by Creditors for Impairment
of a Loan", as amended by SFAS No. 118 (collectively referred to as SFAS
No. 114), on a prospective basis. These Statements address the accounting
treatment of certain impaired loans and amend SFAS No. 5 and 15. These
statements do not apply to large groups of smaller-balance homogeneous
loans unless they have been involved in a restructuring.
A loan is considered impaired, within the scope of SFAS No. 114, when,
based on current information and events, it is probable that the Company
will be unable to collect principal or
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<PAGE>
interest due according to the contractual terms of the loan. For a loan
that has been restructured the contractual terms of the loan refer to the
contractual terms of the original loan agreement.
The Company measures the impairment of a loan when and while a loan is on
nonaccrual or the loan has been restructured. The amount of impairment is
calculated by the Company using discounted cash flows, except when the
source of repayment for the loan is through the liquidation of the
underlying collateral. For these loans, the net realizable value of the
collateral (current fair value less estimated costs to sell) is used in
place of discounted cash flows. If the measurement of the impaired loan is
less than the recorded investment in the loan, the Company recognizes such
impairment by creating or adjusting the existing allowance for loan losses.
If full collections is uncertain, cash receipts shall be applied first to
principal, then to recovery of amounts previously charged off, then to
interest income.
The following table presents the recorded investment in impaired loans and
the related SFAS No. 114 allowance for loan losses at March 31, 1995:
<TABLE>
<CAPTION>
Related
Recorded SFAS No. 114
investment in allowance for
(In thousands) impaired loans loan losses
-------------- -------------
<S> <C> <C>
Impaired loans with a required allowance $2,680 $795
Impaired loans not requiring an allowance 8,486 ---
------ ----
Total $11,166 $795
------ ----
------ ----
</TABLE>
4. BORROWINGS:
Borrowed funds consist of mortgage-backed securities sold under agreements
to repurchase. These securities are held in a custodial account by a third
party.
Mortgage backed securities with an average carrying value of $32.8 million
($31.1 million, market-value) and weighted average interest rate of 6.19%
at March 31, 1995 were sold under repurchase agreements.
5. COMMITMENTS AND CONTINGENT LIABILITIES:
In the normal course of business there are outstanding various commitments
to extend credit, letters of credit and contingent liabilities that are not
reflected in the financial statements. While no related losses are
anticipated, such instruments do involve elements of credit and interest
rate risk in excess of amounts recorded in the balance sheet. 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 amount does not
necessarily represent future cash requirements. Standby and commercial
letters of credit are written conditional commitments issued by the Banks
to guarantee the performance of a customer to a third party. Letters of
credit have fixed expiration dates and require payment of a
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<PAGE>
fee. When making commitments or issuing letters of credit, the Banks
evaluate each customer's creditworthiness on a case-by-case basis. The
same credit policies are used in making commitments and conditional
obligations as are used for on-balance sheet instruments. The Banks
control the credit risk of these transactions through credit approval,
limits and monitoring procedures. The amount of collateral obtained, if
deemed necessary, is based on management's credit evaluation of the
customer. Exposure to credit loss, in the event of nonperformance by the
other party to the financial instrument, for commitments to extend credit
and letters of credit is represented by the contractual notional amount of
those instruments.
Amounts of these financial instruments at March 31, 1995 and December 31,
1994 are summarized below:
<TABLE>
<CAPTION>
(In thousands)
1995 1994
-------- --------
<S> <C> <C>
Commitments to extend credit $202,462 $195,217
Standby letters of credit 8,143 5,837
Commercial letters of credit 18 ---
</TABLE>
The Company and its subsidiaries, in the ordinary course of business, are
defendants in various legal proceedings. Management believes the aggregate
contingent liability, if any, will not materially affect the Company's
financial position.
The California franchise tax returns for the Company for the years 1977
through 1979, 1983 and 1984 have been examined by the California Franchise
Tax Board. These examinations have resulted in the assessment of
additional taxes, principally relating the tax treatment of direct
financing leases. Due to the complex nature of the matter, it is not
reasonably possible to predict the eventual outcome of this issue; however,
management will continue to vigorously protest this assessment. Management
does not believe that the resolution of the issue will have a material
adverse effect on the Company's financial position.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended March. 31
----------------------------
(Dollar amounts in thousands except per share data) 1995 1994
----------- ----------
<S> <C> <C>
FOR THE PERIOD
Net interest income on a taxable- equivalent basis $17,564 $13,106
Less: Taxable-equivalent adjustments 324 366
Provision for loan losses 390 470
----------- ----------
Net interest income after provision for
loan losses 16,850 12,270
Noninterest income 2,010 1,998
Noninterest expense 12,388 10,598
Provision for income taxes 2,472 1,240
----------- ----------
Net income $4,000 $2,430
----------- ----------
----------- ----------
Net income per share $0.40 $0.26
----------- ----------
----------- ----------
FINANCIAL RATIOS
Return on average assets (1) 1.17% 0.94%
Return on average equity (1) 13.60% 9.21%
Average shareholders' equity to average assets 8.61% 10.25%
Total risk-based capital ratio (2) 14.24% 16.27%
Net interest margin (TE) (1) 5.52% 5.51%
AT PERIOD END
Loans $943,118 $603,405
Allowance for loan losses 14,377 11,008
Assets 1,405,342 1,060,600
Shareholders' equity 121,047 108,134
Deposits 1,251,928 945,938
STOCK DATA
Book value per common share $12.12 $11.52
Common stock price range:
High 18-1/2 16
Low 16-1/2 14-1/2
Closing common stock price 17 15-3/8
Average common shares outstanding (000's) 9,974 9,365
Number of common shares outstanding at period 9,984 9,384
end (000)'s
Dividend payout ratio 45.0% 50.0%
<FN>
- - - - --------------------
(1) Annualized
(2) Tier 1 and Tier 2 capital.
</TABLE>
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<PAGE>
OVERVIEW
Net income for the first quarter of 1995 was $4.0 million ($0.40 per
share), a 64.6% increase from the $2.4 million ($0.26 per share) reported for
the same period in 1994.
The return on average assets for the three months ended March 31, 1995 was
1.17%, up from 0.94% for the like period in 1994. Return on average
shareholders' equity for the three months ended March 31, 1995 was 13.60%,
compared to 9.21% for the comparable period in 1994.
On January 31, 1995, the Company completed the acquisition of Bank of
Livermore (Livermore), in a transaction accounted for as a pooling-of-interests.
Bank of Livermore is not material to the financial condition or operating
results of the Company, and therefore, prior periods balances have not been
restated. However, 1995 amounts were adjusted to reflect the transaction as if
it had occurred January 1, 1995. On December 2, 1994 the Company completed the
acquisition of Old Stone Bank of California, F.S.B. (Old Stone), which was
merged into an existing subsidiary. This transaction was accounted for using
the purchase method. Under this method of accounting the estimated fair values
of Old Stone's assets and liabilities were combined with the Company's existing
assets and liabilities as of the date of the acquisition. Subsequent to the
acquisition, the results of operations of Old Stone were combined with the
Company's. When appropriate, this analysis discusses the impact of these
transactions so meaningful comparisons can be made.
The following discusses significant areas , including the above mentioned
acquisitions, that have affected the Company's results of operations for the
three months ended March 31, 1995 as compared to the same period in 1994 and
financial condition at March 31, 1995 as compared to December 31, 1994.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income on a taxable-equivalent basis was $17.6 million for the
first quarter of 1995, compared with $13.1 million for the first quarter of
1994. The increase in net interest income between these periods is primarily
attributable to increases in loan volume. Loan volume increased $338.9 million
(56.2%) in 1995 compared to 1994. This increase was principally related to the
Company's acquisitions. Rising interest rates also helped increase the yields
on the Company's earning assets but were substantially offset by increases on
deposit rates. In addition, the Company's deposits and borrowings volume also
increased substantially in 1995 compared to 1994 which was also acquisition
related.
The net interest margin on a taxable-equivalent basis increased slightly,
to 5.52% for the first quarter of 1995 compared with 5.51% for the first quarter
in 1994.
The following tables present the Company's consolidated average balance
sheets including average yields and rates on a taxable-equivalent basis for the
three month period ended March 31, 1995 and 1994 (Table A) and the approximate
effect on net interest income of volume and rate changes from these periods
(Table B). The change in interest due to both rate and volume has been
allocated to change due to rate and change due to volume in proportion to the
relationship of absolute dollar amounts of change in each.
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<PAGE>
<TABLE>
<CAPTION>
TABLE A Three Months Ended March 31,
------------------------------------------------------------------------------
(Dollars in thousands) 1995 1994
-------------------------------------- -------------------------------------
Average Yields Average Yields
Balance Interest & Rates Balance Interest & Rates
---------- ------- ----- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-bearing time deposits $ --- $ --- --- $300 $2 2.70%
Federal funds sold 35,998 549 6.10% 57,724 443 3.07
Securities:
Taxable 265,962 3,736 5.70 250,905 3,125 5.05
Non-taxable (TE) (1) 47,703 951 7.97 53,602 1,077 8.04
---------- ------- ----- ---------- ------- -----
Total securities (1) 313,665 4,687 6.06 304,507 4,202 5.60
Loans (2) 941,773 21,819 9.40 602,839 13,289 8.94
---------- ------- ----- ---------- ------- -----
Total earning assets 1,291,436 27,055 8.50 965,370 17,936 7.53
Nonearning assets, net of
allowance for loan losses 94,951 79,200
---------- ----------
Total Assets $1,386,387 $1,044,570
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing deposits:
Savings and interest-bearing
demand accounts $533,826 $3,339 2.54 $469,435 $2,402 2.08
Time 476,648 5,587 4.75 259,522 2,401 3.75
---------- ------- ----- ---------- ------- -----
Total interest-bearing deposits 1,010,474 8,926 3.58 728,957 4,803 2.67
Other borrowings 26,101 565 8.78 1,500 27 7.30
---------- ------- ----- ---------- ------- -----
Total interest-bearing liabilities 1,036,575 9,491 3.71 730,457 4,830 2.68
Demand deposits 223,030 203,757
Other liabilities 7,465 3,298
---------- ----------
Total liabilities 1,267,070 937,512
Shareholders' equity 119,317 107,058
---------- ----------
Total Liabilities and
Shareholders' Equity $1,386,387 $1,044,570
---------- ------- ----- ---------- ------- -----
---------- ----------
Net Interest Income and Margin (3) $17,564 5.52% $13,106 5.51%
------- ----- ------- -----
------- ----- ------- -----
<FN>
- - - - ----------------------------
(1) Interest income is presented on a taxable-equivalent basis. The
taxable-equivalent adjustments were based on a marginal tax rate of 34%.
(2) Nonaccrual loans are included in total loans, but are not material to
this presentation.
(3) Net interest margin is calculated as annualized net interest income on
a taxable-equivalent basis divided by average earning assets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TABLE B Quarter Ended March 31,
--------------------------
1995 compared to 1994
--------------------------
Volume Rate Total
------ ---- -----
(In thousands)
<S> <C> <C> <C>
Increase (decrease) in interest income:
Interest-bearing time deposits ($1) ($1) ($2)
Federal funds sold (212) 318 106
Securities:
Taxable 195 416 611
Non-taxable (TE) (118) (8) (126)
Loans 7,821 709 8,530
------ ----- ------
Total average earning assets 7,685 1,434 9,119
------ ----- ------
Increase in interest expense:
Savings and interest-bearing
demand deposits 357 580 937
Time certificates 2,415 771 3,186
Other borrowings 531 7 538
------ ----- ------
Total average interest-bearing liabilities 3,303 1,358 4,661
------ ----- ------
Net increase in net interest income $4,382 $76 $4,458
------ ----- ------
------ ----- ------
</TABLE>
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The following table details the changes in the Company's allowance for loan
losses for the first three months of 1995 and 1994. The allowance for loan
losses should not be interpreted as an indication that charge-offs in the future
will occur in these amounts or proportions.
<TABLE>
<CAPTION>
Three Months ended March 31,
----------------------------
(Dollars in thousands) 1995 1994
-------- --------
<S> <C> <C>
Balance at beginning of year $12,822 $11,547
-------- --------
Deduct loans charged-off:
Real estate 50 ---
Commercial and industrial 171 614
Consumer 146 482
-------- --------
Total charge-offs 367 1,096
-------- --------
Add recoveries of loans charged-off:
Real estate --- ---
Commercial and industrial 202 50
Consumer 60 37
-------- --------
Total recoveries 262 87
-------- --------
Net chargeoffs 105 1,009
-------- --------
Provision for loan losses 390 470
Allowance related to acquisition 1,270 ---
-------- --------
Balance at end of period $14,377 $11,008
-------- --------
-------- --------
Net chargeoffs to average loans outstanding
(annualized) 0.04% 0.67%
Average loans outstanding $941,773 $602,839
Allowance at end of period to loans outstanding 1.52% 1.82%
Period end loans $943,118 $603,405
</TABLE>
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<PAGE>
At March 31, 1995, the allowance for loan losses was $14.4 million or 1.52%
of total loans compared with $12.8 million or 1.40% at December 31, 1994 and
$11.0 million or 1.82% at March 31, 1994. The provision for loan losses
declined to $390,000 for 1995 from $470,000 for 1994. Net charge-offs for 1995
were $105,000, or 0.04% (annualized) of average total loans, compared with $1.0
million or 0.67% (annualized) in 1994. At March 31, 1995, December 31, 1994 and
March 31, 1994, the Company's ratio of the allowance for loan losses to total
nonperforming loans was 91%, 98% and 110%, respectively.
The Company's determination of the allowance for loan losses and the
corresponding provision for loan losses is based on various judgments and
assumptions including, but not limited to, general economic conditions, the
composition of the loan portfolio, prior loss experience and estimates of
potential future losses. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Banks'
allowances for loan losses.
The Company performs a quarterly assessment to determine the appropriate
level of the allowance for loans losses. This process uses a series of
allocation methods including specific credit allocations for individual loans
and historical loss experience for each loan category and degree of criticism
within each category. The total of these allocations is then supplemented by
the unallocated portion of the allowance for loan losses. Based on management's
analysis of the Company's overall allowance for loan losses, management believes
that the provision for loan losses for the first three months of 1995 is
appropriate. It is management's opinion that the allowance for loan losses at
March 31, 1995 is adequate to provide for potential losses in the current loan
portfolio. No assurances can be given that adverse economic conditions will not
result in increased losses in the Company's loan portfolio.
NONINTEREST INCOME
Noninterest income for the first quarter of 1995 was $2.0 million, an
increase of $12,000 compared to 1994. The components of noninterest income were
as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
(In thousands) 1995 1994
------ ------
<S> <C> <C>
Service charges on deposit accounts $1,321 $1,019
Other fee income 360 392
Loss on sale of securities --- (11)
Gains on sales of loans 161 420
Other income 168 178
------ ------
Total noninterest income $2,010 $1,998
------ ------
------ ------
</TABLE>
Service charges on deposit accounts increased $302,000 or 29.6% in 1995
compared to 1994. This increase was primarily related to increases in deposit
accounts related to acquisitions. The decrease in gains on sales of loans of
$259,000 is attributable to a decrease in the Company's mortgage banking
activity. This is reflective of the slowdown in new mortgages and refinances
due to rising interest rates.
NONINTEREST EXPENSE
Total noninterest expense was $12.4 million for the first quarter of 1995
compared with $10.6 million for 1994. The ratio of noninterest expense to
operating revenue, excluding securities transactions, was 64.4% for the first
quarter of 1995 compared with 71.9% for the like period in 1994.
-13-
<PAGE>
The following table presents the major components of noninterest expense for the
first quarter of 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Ended March 31, Change 95/94
---------------------------- ------------
1995 1994 $ %
------- ------- ------- ------
<S> <C> <C> <C> <C>
(In thousands)
Salaries and benefits $6,716 $5,491 $1,225 22.3%
Occupancy 1,115 836 279 33.4
Equipment 933 755 178 23.6
Regulatory expenses 732 605 127 21.0
Banking forms and stationery 403 255 148 58.0
Communications 437 314 123 39.2
Outside data processing expense 189 224 (35) (15.6)
Legal expense 105 136 (31) (22.8)
Foreclosed assets expense, net --- 71 (71) n/m
Consultant fees 174 177 (3) (1.7)
Courier service 231 174 57 32.8
Promotional expense 251 260 (9) (3.5)
Other 1,102 1,300 (198) (15.2)
------- ------- ------- ------
Total noninterest expense $12,388 $10,598 $1,790 16.9%
------- ------- ------- ------
------- ------- ------- ------
Percent of average assets 0.89% 1.01%
------- -------
------- -------
</TABLE>
The increase in salaries and benefits for the first quarter of 1995
compared to 1994 is directly related to the Company's expansion between these
two periods. The Company's full time equivalent staff numbered 778 at March 31,
1995, this compares with 559 at March 31, 1994.
The increase in occupancy, equipment, regulatory, banking forms and
stationery, communication and courier expenses for the first quarter of 1995
compared to the same period in 1994 is primarily expansion related. The Company
at March 31, 1995 had 36 banking locations, compared to 26 locations at March
31, 1994.
The Company recently announced plans to re-focus on cost reduction and
revenue enhancement with a target efficiency ratio of 62% to be achieved by the
first quarter of 1996. This goal will be achieved through on-going efforts to
enhance revenue growth while achieving operational efficiencies through
acquisition consolidation, re-engineering of work flows and normal employee
attrition.
INCOME TAXES
The provision for income taxes was $2.5 million for the first quarter of
1995 and $1.2 million for the first quarter of 1994. The effective tax rates
for these periods were 38.2% and 33.8%, respectively. The increase in the
Company's effective tax rate between these two periods is attributable to the
decrease in nontaxable income in 1995 relative to the Company's earnings.
-14-
<PAGE>
FINANCIAL CONDITION
SECURITIES
The Company's securities portfolio increased by $5.0 million between
December 31, 1994 and March 31, 1995. The increase was entirely due to the
addition of $28.0 million in securities in the Livermore acquisition. Excluding
this transaction, the Company had first quarter maturities and repayments
totaling $23.6 million and no purchases.
At March 31, 1995 and December 31, 1994, the held to maturity securities
had an estimated unrealized pretax loss of $6.3 million and $12.5 million,
respectively.
At March 31, 1995, the available for sale securities portfolio had an
unrealized pretax loss of $252,000 or a net of tax loss of $144,000. This net
loss has been reported as a separate component of shareholders' equity. At
December 31, 1994 the pretax loss in this segment of the portfolio was $721,000
with a net of tax loss of $421,000.
The amortized cost and estimated market value of securities at March 31,
1995 by contractual maturity are shown in the following table. Actual
maturities will differ from contractual maturities because borrowers have the
right to call or prepay obligations with or without call or prepayment
penalties. For asset/liability purposes, the Company monitors these securities
with consideration of prepayment assumptions. Yields have been calculated by
dividing the taxable-equivalent interest income, including discount or premium
by the book value. Yields on nontaxable securities of states and political
subdivisions were presented on a taxable-equivalent basis using a marginal tax
rate of 34%.
<TABLE>
<CAPTION>
Securities Available for Sale
---------------------------------------------------------------
Within 1 1 to 5 5 to 10 After 10
(Dollars in thousands) Year Years Years Years Total
-------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
U.S. Treasury
securities $19,982 $10,662 $ --- $ --- $30,644
Securities of U.S.
Government agencies and
corporations 1,014 2,001 500 1,888 5,403
Obligations of states
and political sub-
divisions --- --- --- 135 135
Federal Reserve Stock --- --- --- 1,092 1,092
-------- --------- ------- -------- --------
Total $20,996 $12,663 $500 $3,115 $37,274
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
Weighted average yield 4.57% 5.33% 7.09% 6.32% 5.00%
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
Market value $20,909 $12,497 $501 $3,115 $37,022
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
Securities Held to Maturity
---------------------------------------------------------------
Within 1 1 to 5 5 to 10 After 10
(Dollars in thousands) Year Years Years Years Total
-------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $13,042 $61,822 $ --- $ --- $74,864
Securities of U.S.
Government agencies
and corporations 3,999 48,286 52,008 25,314 129,607
Obligations of states
and political subdivisions 10,663 33,213 14,910 1,952 60,738
Other securities --- 150 --- --- 150
-------- --------- ------- -------- --------
Total $27,704 $143,471 $66,918 $27,266 $265,359
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
Weighted average yield 5.75% 6.08% 6.48% 6.84% 5.00%
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
Market Value $27,591 $140,926 $64,647 $25,890 $259,054
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
</TABLE>
LOAN PORTFOLIO
The Company's loan portfolio consists primarily of commercial and
industrial loans, real estate 1-4 family residential properties, other
commercial real estate mortgages, construction and land development loans,
consumer installment loans and individual lines of credit. The following table
presents the loan mix at March 31, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
$ %
---------------------- ----------------
(In thousands) 03/31/95 12/31/94 1995 1994
-------- -------- ------ ------
<S> <C> <C> <C> <C>
Real estate -
Construction and land development $101,667 $99,975 10.8% 10.9%
Secured by 1-4 family residential
properties 346,055 347,093 36.7 38.0
Other real estate mortgages 198,272 186,638 21.0 20.4
Loans held for sale 2,659 1,268 0.3 0.1
Commercial and industrial 169,695 159,266 18.0 17.4
Consumer 124,770 119,236 13.2 13.1
-------- -------- ------ ------
Total loans $943,118 $913,476 100.0% 100.0%
-------- -------- ------ ------
-------- -------- ------ ------
</TABLE>
The Company's loan portfolio increased by $29.6 million or 3.2% at March
31, 1995 compared to December 31, 1994. This increase was primarily
attributable to the Livermore acquisition. Included in the commercial and
industrial loan totals were agricultural loans of $ 16.3 million and $18.8
million at March 31, 1995 and December 31, 1994, respectively. Agricultural
loans consist of loans to finance agricultural production and other loans to
farmers. Agricultural loans that are primarily secured by real estate
(farmland) are included in other real estate mortgages.
The Company has historically been active in financing the construction and
development of residential properties. The underwriting standards and
administrative guidelines regarding these credits are specific and stringent.
Although a significant percentage of the Company's nonperforming loans come from
this portion of the portfolio the Company has not historically suffered any
material losses in this area.
-16-
<PAGE>
Other real estate mortgages, the majority of which are commercial
properties, are another active market for the Company. These credits are also
governed by stringent loan policies. These credits are primarily owner occupied
business properties that are limited to specific types of properties.
Inherent in any loan portfolio are risks associated with certain types of
loans. The Company's objective is to limit these risks through strict loan
policies and review procedures. Included in these policies are specific loan-
to-value (LTV) limitations as to various categories of real estate related
loans. The Company has also established policies to limit the degree of
portfolio concentration in any product type or to any individual borrower.
NONACCRUAL LOANS, RESTRUCTURED LOANS AND FORECLOSED ASSETS
The following table presents the Company's nonaccrual and restructured
loans and foreclosed assets at March 31, 1995 and December 31, 1994.
Classification of a loan as nonaccrual or restructured does not necessarily
indicate the loan is not performing with respect to collection of principal and
interest nor does it mean that the principal of the loan is uncollectible in
whole or in part.
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in thousands) 1995 1994
-------- -----------
<S> <C> <C>
Nonaccrual loans $11,923 $8,751
Restructured loans 3,912 4,285
-------- --------
Total nonperforming loans 15,835 13,036
Foreclosed assets 3,647 2,415
-------- --------
Total nonperforming assets $19,482 $15,451
-------- --------
-------- --------
Nonperforming loans as a percentage of
total loans 1.7% 1.4%
Nonperforming assets as a percentage of
total loans and foreclosed assets 2.1% 1.7%
Loans past due 90 days and still accruing
interest $310 $659
Foregone interest $307 $665
</TABLE>
Effective January 1, 1995, the Company adopted Statement of Financial
Account Standards No. 114 (SFAS No. 114), "Accounting by Creditors for
Impairment of a Loan", as amended by SFAS No. 118 (collectively referred to as
SFAS No. 114). The adoption of SFAS No. 114 has not affected the Company's
policy for placing loans on nonaccrual status. The Company generally identifies
loans to be evaluated for impairment when such loans are on nonaccrual or have
been restructured. Loans are placed on nonaccrual status when full
collectibility of principal or interest is uncertain or when principal or
interest is past due for 90 days (unless the loan is well secured and in the
process of collection). From the time a loan is placed on nonaccrual status,
interest previously accrued but not collected is reversed and charged against
interest income. Any interest or principal payments received on a nonaccrual
loan is normally applied as a principal reduction. A nonaccrual loan may be
restored to accrual status when none of its principal and interest is past due
and unpaid or when it otherwise becomes well secured and in the process of
collection. In a case where a borrower experiences financial difficulties and
the Company makes certain
-17-
<PAGE>
concessionary modifications to contractual terms (i.e., the reduction of either
interest or principal or other such modifications that the Company would not
otherwise consider), the loan is classified as a restructured loan. If the
borrower is not able to meet the revised payment schedule and the loan becomes
delinquent, the loan is placed on nonaccrual status.
The increase in nonaccrual loans between the two periods is primarily
$900,000 in nonaccrual loans associated with the Livermore acquisition and a
$1.5 million commercial property that has been transferred to nonaccrual status
during 1995. This loan, which is fully secured with no anticipated loss, was
disclosed as a potential problem loan at December 31, 1994. Restructured loans
are principally three credits, a residential lot development loan (of which $1.6
million was reduced from the December 31, 1994 balance) and two commercial real
estate properties. All loans in this category are currently performing
according to their respective revised terms and are yielding a market rate.
Foreclosed assets include property acquired through foreclosure. These
properties are carried at the lower of (i) fair value less estimated costs to
sell or (ii) the recorded cost of the asset. Upon foreclosure, any necessary
write-downs are charged to the allowance for loan losses. The difference
between cost and fair value less estimated cost to sell, if lower, is recorded
as a valuation allowance. Subsequent declines in the fair value of the property
are recorded as an addition to the valuation allowance. Foreclosed assets at
March 31, 1995 increased to $3.6 million from the December 31, 1994 balance of
$2.4 million, largely because the fact that the acquisition of Livermore added
$700,000 in foreclosed assets.
Loans 90 days or more past due and still accruing at March 31, 1995 were
$310,000, down $349,000 from the December 31, 1994 total of $659,000. All loans
in this category are well secured or in the process of collection.
Management is not aware of any significant potential problem loans which
have not otherwise been disclosed as a nonaccrual or restructured loan at March
31, 1995, in which there is known information about possible credit problems of
a borrower that has caused management to have serious doubts as to the ability
of such borrowers to comply with the present loan repayment terms.
DEPOSITS
Total deposits increased to $1.25 billion at March 31, 1995 from $1.18
billion at December 31, 1994. Average daily deposits, along with the average
rates paid thereon, for the three months ended March 31, 1995 and 1994 on an
annualized basis are summarized on the following table:
<TABLE>
<CAPTION>
1995 1994
------------------ ------------------
(Dollars in thousands) Amount Rate Amount Rate
------ ---- ------ ----
<S> <C> <C> <C> <C>
Noninterest-bearing demand $223,030 ---% $203,757 ---%
Savings and interest-bearing demand 533,826 2.54 469,435 2.08
Time certificates, $100,000 or more 81,171 4.04 65,471 3.14
Other time 395,477 4.82 194,051 3.96
------- ---- ------- ----
Total $1,233,504 2.89% $932,714 2.09%
---------- ----- -------- -----
---------- ----- -------- -----
</TABLE>
The total amount held in the accounts of any single depositor is not
material in relationship to total deposits.
-18-
<PAGE>
ASSET/LIABILITY MANAGEMENT
The Company has separate policies and guidelines for managing the Company's
balance sheet and off-balance sheet activities which are incorporated and
considered integral parts of the asset/liability management process. Certain
policies may be governed and implemented by committees or persons other than the
Asset/Liability Committee (ALCO) as directed by the Board of Directors. Overall
asset/liability management encompasses the management and monitoring of asset
quality, liquidity and capital needs and interest rate risk.
INTEREST RATE RISK
One of the principal objectives of asset/liability management is to manage
the risks associated with changing interest rates and their impact on earnings.
The ALCO regularly evaluates and sets predetermined limits on the sensitivity of
each Bank's net interest income to changes in interest rates.
Interest rate risk can be viewed from a variety of perspectives, including
the sensitivity of earnings to rate movements and the sensitivity of the market
value of the Company's equity to changes in interest rates. One way to measure
how a change in interest rates will impact net interest income in specific time
frames is through a cumulative gap analysis. Traditional gap analysis
represents interest rate risk in terms of the mismatch between the stated
repricing of the Company's earning assets and interest-bearing liabilities
within defined time periods. As shown in the following table, at March 31,
1995, the cumulative one-year contractual gap for the Company was a negative
$130.7 million, or ( 10.1%) of earning assets. In other words, 10.1% of the
Company's interest-bearing liabilities has the potential to reprice or mature
more quickly than its earning assets in one year.
-19-
<PAGE>
<TABLE>
<CAPTION>
Interest Rate Sensitivity
-----------------------------------------------------------------------------------------
0-3 >3-12 >1-5 >5 Non-
(Dollars in thousands) months months years years market Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $52,324 $ ---- $ ---- $ ---- $ ---- $52,324
Securities(1) 13,494 35,079 155,898 96,818 1,092 302,381
Loans(2) 413,642 311,820 134,592 71,141 11,923 943,118
-----------------------------------------------------------------------------------------
Total earning assets 479,460 346,899 290,490 167,959 13,015 1,297,823
Noninterest-earning assets ---- ---- ---- ---- 107,519 107,519
-----------------------------------------------------------------------------------------
Total assets 479,460 346,899 290,490 167,959 120,534 1,405,342
-----------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Savings and interest-bearing
demand deposits $529,516 $ ---- $ ---- $ ---- $ ---- $529,516
Time certificates, $100,000
or more 29,152 43,065 9,241 231 ---- 81,689
Other time 111,038 218,287 82,768 325 ---- 412,418
-----------------------------------------------------------------------------------------
Total interest-bearing
deposits 669,706 261,352 92,009 556 ---- 1,023,623
Borrowed funds 26,000 ---- ---- ---- ---- 26,000
-----------------------------------------------------------------------------------------
Total interest-bearing
liabilities 695,706 261,352 92,009 556 ---- 1,049,623
-----------------------------------------------------------------------------------------
Noninterest-bearing liabilities ---- ---- ---- ---- 234,672 234,672
Shareholders' equity ---- ---- ---- ---- 121,047 121,047
-----------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity 695,706 261,352 92,009 556 355,719 1,405,342
-----------------------------------------------------------------------------------------
Incremental gap (216,246) 85,547 198,481 167,403 (235,185) $ ----
-----------------------------------------------------------------------------------------
Cumulative gap ($216,246) $(130,699) $67,782 $235,185 $ ----
-------------------------------------------------------------------------
-------------------------------------------------------------------------
% to earning assets (16.7%) (10.1%) 5.2% 18.1% ----
-------------------------------------------------------------------------
-------------------------------------------------------------------------
<FN>
- - - - ------------------------
(1)The nonmarket column consists of Federal Reserve Bank stock
(2)The nonmarket column consists of nonaccrual loans of $11,923
</TABLE>
Over the short period (one year or less) changes in interest rates affect
net interest income to the extent that there is a timing difference between the
repricing of assets and liabilities. For instance, if more liabilities than
assets reprice during a time period, such as the Company's gap analysis
indicates, given a rising rate environment, net interest income will have a
tendency to decrease if the assets and liabilities reprice in rate by
approximately the same amount. Conversely, if an institution is considered to
be asset sensitive, or as having a positive gap, when the amount of its
liabilities maturing or repricing is less than the amount of its assets also
maturing or repricing during the same period, net interest income would benefit
from a rising rate environment. Generally, in a falling interest rate
environment, a negative gap should result in an increase in net interest income,
and in a rising interest rate environment this negative gap should adversely
affect net interest income. The converse would be true for a positive gap.
-20-
<PAGE>
However, shortcomings are inherent in a simplified gap analysis that may
result in an institution with a nominally negative gap having interest rate
behavior associated with an asset sensitive balance sheet. For example,
although certain assets and liabilities may have similar maturities or periods
to repricing, they may react in different degrees to changes in market interest
rates. Furthermore, repricing characteristics of certain assets and liabilities
vary substantially within a given time period. In the event of a change in
interest rates, prepayment and early withdrawal levels could also deviate
significantly from those assumed in calculating gap. The Company attempts to
quantify these characteristics by taking into account the expected repricing or
maturities of earning assets and funding sources, as opposed to their
contractual maturities.
Because net interest income is not necessarily a conclusive indication of
an institution's ongoing net worth, a second measure of interest rate risk - the
market value of portfolio equity (MVPE) is important. This measure attempts to
quantify the ongoing worth of the institution by considering all cash flows,
regardless of their timing, and discounting these back to the present. The
difference between the discounted assets less the discounted liabilities is the
present value of equity or the economic measure of the institution's net worth.
These two approaches to interest rate risk measurement are complimentary
and are used in tandem by the individual Banks to provide a more complete
picture of the interest rate risk associated with their balance sheets.
Included in the Company's Asset/Liability Management Policy are limitations on
the maximum volatility each Bank may undertake associated with possible interest
rate movement.
LIQUIDITY
Liquidity is defined as the Company's ability to provide funds to meet
customers' loan and deposit needs and to fund operations in the most timely and
cost effective basis. The Company's liquidity is measured and managed on a
individual bank basis. The holding company (parent) is funded primarily by
dividends and management fee income from its subsidiaries.
Core deposits have historically provided the Company with funding sources.
The Company also utilizes repurchase agreements. In addition, the Banks have
informal federal funds borrowing arrangements with correspondents banks to meet
unforeseen deposit outflows. At March 31, 1995 and December 31, 1994, the
Company's loan to deposit ratio was 75.3% and 77.4%, respectively.
CAPITAL
The Company reviews various capital adequacy ratios on a quarterly basis to
ensure that each banking subsidiary and the consolidated Company are within
established internal and external guidelines. The Company and its banking
subsidiaries are subject to risk-based capital regulations. These guidelines
are used to evaluate capital adequacy and are based on an institution's balance
sheet risk and off-balance sheet risk. Current regulations define capital
adequacy into five categories; well capitalized, adequately capitalized,
undercapitalized, significantly under capitalized and critically
undercapitalized. Each of these capital categories have predefined risk-based
capital ratio minimums. At March 31, 1995 and December 31, 1994, the capital
ratios of the Company exceeded the "well capitalized" threshold as prescribed by
banking regulators. An institution's deposit insurance premiums are determined
through a matrix based on the institution's capital category and supervisory
subgroup. Any reduction in an
-21-
<PAGE>
institution's capital category can significantly increase premiums.
The following table presents the Company's capital positions at March 31,
1995 and December 31, 1994, including the risk-based capital ratio and leverage
ratio.
<TABLE>
<CAPTION>
(Dollars in thousands) March 31, December 31,
Tier 1: 1995 1994
-------- --------
<S> <C> <C>
Shareholders'equity $121,047 $112,243
Less: Intangibles (1,273) (906)
Add: Unrealized losses on securities
available for sale 144 421
-------- --------
Total Tier 1 capital 119,918 111,758
Tier 2 capital 11,542 11,042
-------- --------
Total risk-based capital $131,460 $122,800
-------- --------
-------- --------
Risk-adjusted assets $923,329 $883,325
-------- --------
-------- --------
Tier 1 capital/risk-adjusted assets
Capital ratio 12.99% 12.65%
Minimum ratio 4.00% 4.00%
Total risk-based capital/risk-
adjusted assets
Capital ratio 14.24% 13.90%
Minimum 8.00% 8.00%
Leverage ratio 8.65% 10.27%
</TABLE>
The Company regularly evaluates opportunities for expansion through merger
and acquisition. Such transactions, if any, in the future could involve capital
commitments giving rise to a need for additional capital.
SUBSEQUENT EVENT
On April 18, 1995, the Company and the principle shareholder of First
Community Bankshares and its wholly-owned subsidiary, Centennial Bank, announced
that they have signed a definitive agreement for Centennial Bank to be acquired
by the Company for $16.25 million, payable in cash at closing. The acquisition,
which will be accounted for as a purchase transaction, is subject to regulatory
approval and is expected to close in July, 1995.
At March 31, 1995, Centennial Bank had total assets of $119 million. For
the year ended December 31, 1994 and three months ended March 31, 1995,
Centennial Bank earned $1.6 million and $452,000, respectively.
-22-
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of Earnings Per Share
(b) Reports on Form 8-K
None
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
California Bancshares, Inc.
------------------------------------
(Registrant)
Date: May 2, 1995 /s/ Joseph P. Colmery
------------------------------------
Joseph P. Colmery
President/Chief Executive Officer
(Principal Executive Officer)
Date: May 2, 1995 /s/ Vincent M. Leveroni
------------------------------------
Vincent M. Leveroni
Exec. Vice President and
Chief Financial Officer
(Principal Financial Officer)
-24-
<PAGE>
CALIFORNIA BANCSHARES, INC.
EXHIBIT INDEX
Exhibit Page
Number Description Number
------- ----------- ------
11 Computation of Earnings Per Share ---
-25-
<PAGE>
EXHIBIT 11
CALIFORNIA BANCSHARES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1995 1994
------- ------
(In thousands, except per share data)
<S> <C> <C>
Net income $4,000 $2,430
------- ------
------- ------
Weighted average number
of common shares
outstanding 9,974 9,365
------- ------
------- ------
Earnings per common share $ 0.40 $ 0.26
------- ------
------- ------
Fully diluted earnings per
common share(1):
Weighted average number of
common shares outstanding 9,974 9,365
Assuming exercise of stock
options reduced by the
number of shares which
could have been purchased
with the proceeds from
exercise of such options 161 135
------- ------
10,135 9,500
------- ------
------- ------
Earnings per common and
common equivalent share $ 0.39 $ 0.26
------- ------
------- ------
- - - - ------------------------
<FN>
(1) This presentation is submitted in accordance with Item 601(b)(11) of
Regulation S-K. This presentation is not required by APB Opinion No. 15,
because it results in dilution of less than 3%.
</TABLE>
-26-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 69,847
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 52,324
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 37,022
<INVESTMENTS-CARRYING> 265,359
<INVESTMENTS-MARKET> 259,054
<LOANS> 943,118
<ALLOWANCE> (14,377)
<TOTAL-ASSETS> 1,405,342
<DEPOSITS> 1,251,928
<SHORT-TERM> 26,000
<LIABILITIES-OTHER> 6,367
<LONG-TERM> 0
<COMMON> 24,960
0
0
<OTHER-SE> 96,087
<TOTAL-LIABILITIES-AND-EQUITY> 1,405,342
<INTEREST-LOAN> 21,819
<INTEREST-INVEST> 4,363
<INTEREST-OTHER> 549
<INTEREST-TOTAL> 26,731
<INTEREST-DEPOSIT> 8,926
<INTEREST-EXPENSE> 9,491
<INTEREST-INCOME-NET> 17,240
<LOAN-LOSSES> 390
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 12,388
<INCOME-PRETAX> 6,472
<INCOME-PRE-EXTRAORDINARY> 6,472
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,000
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
<YIELD-ACTUAL> 5.52
<LOANS-NON> 11,923
<LOANS-PAST> 310
<LOANS-TROUBLED> 3,912
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,822
<CHARGE-OFFS> 367
<RECOVERIES> 262
<ALLOWANCE-CLOSE> 14,377
<ALLOWANCE-DOMESTIC> 8,553
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,824
</TABLE>
