<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 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: 1-9709
--------------------------------------------------------
ELDORADO BANCORP
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 95-3642383
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
17752 EAST SEVENTEENTH STREET, TUSTIN, CALIFORNIA 92680
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(714) 798-1100
- --------------------------------------------------------------------------------
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 requirement for the past 90 days.
[ X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDING DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
There were 2,762,008 shares of common stock for the registrant outstanding as
of September 30, 1995.
<PAGE> 2
Part I. Financial Information
Item I. Financial Statements
Eldorado Bancorp and Its Subsidiary
Eldorado Bank
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Cash and due from banks $ 24,641 $ 23,950
Investment securities available-for-sale 79,709 86,107
Investment securities held-to-maturity 5,089 586
Federal funds sold 10,300 9,000
Commercial loans held for sale 3,029 3,274
Loans and direct lease financing 176,624 171,874
Less allowance for possible credit losses 5,752 5,564
-------- --------
Net loans and direct lease financing 170,872 166,310
Deferred income taxes 250 696
Premises and equipment, net 7,415 7,433
Accrued interest receivable and other assets 7,227 5,693
Other real estate owned 2,036 973
-------- --------
$310,568 $304,022
======== ========
Investment securities held-to maturity - approximate market value 5,138 562
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand, non-interest bearing $ 85,288 $ 79,347
Savings and money market 130,568 145,958
Time certificates under $100,000 29,443 23,102
Time certificates of $100,000 or more 24,486 22,919
-------- --------
Total deposits 269,785 271,326
Other liabilities 3,059 2,572
Federal funds purchased 5,488 1,030
-------- --------
Total liabilities $278,332 $274,928
Shareholders' equity
Preferred stock, no par value;
authorized 5,000 shares, none issued --- ---
Common stock, no par value;
authorized 12,500,000 shares, issued and
outstanding 2,762,008 shares in 1995 and
2,756,728 shares in 1994 17,506 17,462
Retained earnings 14,428 11,977
Securities valuation allowance, net 302 (345)
-------- --------
32,236 29,094
-------- --------
Total shareholders' equity and liabilities $310,568 $304,022
======== ========
</TABLE>
2
<PAGE> 3
Part I. Financial Information
Item I. Financial Statements (continued)
Eldorado Bancorp and Its Subsidiary
Eldorado Bank
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in Thousands except for earnings per share
and weighted average number of shares outstanding)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ----------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income
Loans $ 4,454 $ 4,166 $ 12,914 $ 12,045
Investment securities 1,376 977 3,956 2,588
Interest bearing deposits with banks 0 1 0 10
Federal funds sold 188 241 644 665
Direct lease financing 25 51 96 184
------- ------- -------- --------
6,043 5,436 17,610 15,492
Interest Expense
Savings, NOW and money market deposits 656 781 2,088 2,331
Time deposits of $100,000 or more 325 171 819 535
Time deposits under $100,000 375 191 924 575
Other 86 2 216 4
------- ------- -------- --------
Total interest expense 1,442 1,145 4,047 3,445
------- ------- -------- --------
Net interest income 4,601 4,291 13,563 12,047
Provision for loan lease losses 152 302 755 1,705
------- ------- -------- --------
Net interest income after provision
for loan and lease losses 4,449 3,989 12,808 10,342
Other Income
Service charges on deposit accounts 493 558 1,524 1,581
Loan servicing income 210 213 639 670
Bank card discounts 36 197 372 618
Gain on sale of SBA loans 14 (36) 4 151
Investment security gains (losses) 50 (1) 48 (51)
Other 163 190 417 537
------- ------- -------- --------
966 1,121 3,004 3,506
Other Expense
Salaries 1,079 1,063 3,228 3,251
Employee benefits 485 511 1,506 1,505
Net occupancy of bank premises 401 391 1,163 1,133
Furniture and equipment expense 214 220 658 616
Other real estate owned writedowns/expense 24 274 125 286
Other 1,174 1,354 3,830 4,059
------- ------- -------- --------
3,377 3,813 10,510 10,850
------- ------- -------- --------
Earnings before taxes 2,038 1,297 5,302 2,998
Income Taxes 842 529 2,189 1,216
------- ------- -------- --------
Net Earnings $ 1,196 $ 768 $ 3,113 $ 1,782
======= ======= ======== ========
Earnings per common share $ .43 $ .28 $ 1.13 $ .65
======= ======= ======== ========
Weighted average common shares outstanding 2,760,543 2,753,755 2,758,221 2,752,994
</TABLE>
3
<PAGE> 4
Part I. Financial Information
Item I. Financial Statements (continued)
Eldorado Bancorp and Its Subsidiary
Eldorado Bank
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
Cash Flows from operating activities:
Net earnings $ 3,113 $ 1,782
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 638 783
Amortization of goodwill 83 82
Provision for possible credit losses 755 1,703
Provision for possible losses on other real estate owned 58 29
(Gain) loss on sale of SBA loans (4) (151)
(Gain) loss on sale of securities available-for-sale (48) 51
Amortization of deferred income, costs, discounts and fees (58) (377)
Loan fees collected 259 466
(Gain) loss on sale of other real estate owned (51) 194
(Increase) decrease in market value of securities (1,091) 92
Unrealized gain (loss) on securities, net of tax 647 (55)
(Gain) loss on sale of premises and equipment (6) 7
Change in assets and liabilities net of effects from acquisitions of banks:
(Increase) decrease in accrued interest receivable (963) (148)
(Increase) decrease in other assets/current tax
receivable and other real estate owned (2,391) 221
Increase (decrease) in other liabilities 487 378
(Increase) decrease in deferred income taxes 446 (37)
-------- --------
Total adjustments (1,239) 3,238
-------- --------
Net cash provided by operating activities 1,874 5,020
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 68,910 59,458
Proceeds from sale of securities available-for-sale 569 2,223
Purchase of securities available-for-sale (61,962) (77,108)
Purchase of securities held-to-maturity (4,503) (585)
Net (increase) decrease in interest bearing deposits with banks --- 495
Net (increase) decrease in loans and leases (5,518) 21,047
Purchases of premises and equipment (599) (1,142)
Proceeds from sale of other real estate owned 667 3,090
Proceeds from sale of loans 1,732 3,524
Net (increase) decrease in commercial loans held for sale (1,483) (2,841)
Proceeds from sale of premises and equipment 5 12
Purchase of loans --- (11,665)
-------- --------
Net cash used in investing activities $ (2,182) $ (3,492)
-------- --------
</TABLE>
4
<PAGE> 5
Part I. Financial Information
Item I. Financial Statements (continued)
Eldorado Bancorp and Its Subsidiary
Eldorado Bank
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1995 September 30, 1994
------------------ -------------------
<S> <C> <C>
Cash Flows from operating activities:
Net increase (decrease) in deposits $(1,541) $(13,037)
Net increase (decrease) in federal funds purchased 4,458 (788)
Dividends paid (662) (220)
Proceeds from stock options exercised 44 34
------- --------
Net cash provided by financing activities 2,299 (14,011)
------- --------
Increase (decrease) in cash and cash equivalents 1,991 (12,483)
Cash and cash equivalents at beginning of year 32,950 60,803
Cash and cash equivalents at September 30 $34,941 $ 48,320
======= ========
</TABLE>
5
<PAGE> 6
Part I. Financial Information
Item I. Financial Statements (continued)
Eldorado Bancorp and Its Subsidiary
Eldorado Bank
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For nine months ended September 30, 1995
and
For years ended December 31, 1994, 1993, and 1992
(Unaudited)
<TABLE>
<CAPTION>
Securities Total
Common Stock Valuation Retained Shareholders'
Shares Amount Allowance, Net Earnings Equity
------------------------------------------ ----------------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 2,745,634 $17,400,000 --- $11,810,000 $29,210,000
Cash dividends declared ($0.08 per share) --- --- --- (221,000) (221,000)
Stock options exercised (note 8) 12,621 86,000 --- --- 86,000
Stock repurchased and canceled (6,000) (59,000) --- --- (59,000)
Net loss --- --- --- (1,727,000) (1,727,000)
------------------------------------------ ----------------------- ----------- ----------- -----------
Balance, December 31, 1993 2,752,255 17,427,000 --- 9,862,000 27,289,000
Net unrealized holding gain on securities
available-for-sale as of January 1, 1994 --- --- $ 1,179,000 --- 1,179,000
Cash dividends declared ($0.16 per share) --- --- --- (441,000) (441,000)
Stock options exercised (note 8) 4,473 35,000 --- --- 35,000
Change in securities valuation allowance,
net --- --- (1,524,000) --- (1,524,000)
Net earnings --- --- --- 2,556,000 2,556,000
------------------------------------------ ----------------------- ----------- ----------- -----------
Balance, December 31, 1994 2,756,728 $17,462,000 $ (345,000) $11,977,000 $29,094,000
Stock options exercised 5,280 44,000 --- --- 44,000
Cash dividends declare ($0.24per share) --- --- --- (662,000) (662,000)
Change in securities valuation allowance,
net --- --- 647,000 --- 647,000
Net earnings --- --- --- 3,113,000 3,113,000
------------------------------------------ ----------------------- ----------- ----------- -----------
Balance, September 30, 1995 2,762,008 $17,506,000 $ 302,000 $14,428,000 $32,236,000
------------------------------------------ ----------------------- ----------- ----------- -----------
</TABLE>
6
<PAGE> 7
Part I. Financial Information
Item I. Financial Statements (continued)
Eldorado Bancorp and Its Subsidiary
Eldorado Bank
NOTE OF CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
------------------------
NOTE A - BASIS OF PRESENTATION
The financial statements for interim periods are unaudited. In the opinion of
management, all material adjustments necessary for fair presentation of the
interim financial statements have been included.
Interim period financial statements are not necessarily indicative of results
to be expected for the entire year.
NOTE B - EARNINGS PER SHARE
Net earnings per common share are based upon the weighted average number of
shares outstanding during each period.
7
<PAGE> 8
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Total assets at September 30, 1995 were $310.6 million compared to $304.0
million at December 31, 1994. The increase in total assets was primarily due
to an increase in federal funds purchased largely deployed into loans.
Investment securities available-for-sale declined to $79.7 million at September
30, 1995 from $86.1 million at December 31, 1994 due to maturities in the
relatively short-term portfolio. Investment securities held-to-maturity
increased to $5.1 million at September 30, 1995 from $586 thousand at year end
1994 due to the purchase of securities classified in this category since year
end.
The following table summarizes the components of total gross loans outstanding
in each category at the date indicated (in thousands):
<TABLE>
<CAPTION> Septem-
ber 30, December 31,
-------- -----------------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
LOANS
Commercial, Secured and Unsecured $ 77,153 $ 66,987 $ 66,987 $ 74,603 $ 83,937 $ 74,377
Interim Construction -- 4,789 4,789 21,595 28,770 31,165
Real Estate 77,762 78,607 78,607 90,985 98,373 68,366
Installment 19,685 18,945 18,945 21,374 28,229 28,927
Credit Card 1,229 1,298 1,298 1,456 1,491 1,422
Lease Financing 899 1,286 1,286 3,515 3,853 4,351
Less: Unearned Income (104) (38) (38) (739) (1,208) (1,888)
-------- -------- -------- -------- -------- --------
Total Gross Loans $176,624 $171,874 $182,465 $212,789 $243,445 $206,720
</TABLE>
Total gross loans increased to $176.6 million at September 30, 1995 from $171.9
million at December 31, 1994 due to increased demand in the commercial loan
sector. The Company had experienced declining loan balances from 1991 to 1994
largely due to more stringent underwriting criteria, fewer borrowers in the
recessionary environment meeting the underwriting criteria, loan payoffs and
reduced demand for new credit as a result of a lower level of economic
activity. Additionally, the Company eliminated its interim construction
lending department in order to reduce its exposure to the real estate market
during the recession.
8
<PAGE> 9
The following tables show the maturities of loans and their sensitivities to
changes in interest rates at December 31, 1994. Lease financing is not
included in this table:
<TABLE>
<CAPTION>
Due in Due after
One Year One Year to Due after
Or Less Five Years Five Years Total
-------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Commercial, Secured and Unsecured $ 51,358 $12,264 $3,365 $ 66,987
Interim Construction 3,672 877 240 4,789
Real Estate 60,713 14,392 3,502 78,607
Installment 14,525 3,468 952 18,945
Credit Card 1,298 0 0 1,298
-------- ------- ------ --------
$131,566 $31,001 $8,059 $170,626
======== ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
Maturing
Within After
One Year One Year Total
---------------------------------------------
<S> <C> <C> <C>
Loans with Predetermined Interest Rates $42,305 $17,146 $59,451
Loans with Floating or Adjustable Interest Rates 89,261 21,914 111,175
</TABLE>
The following table provides information with respect to the components of the
Company's nonperforming assets at the dates indicated (amounts in thousands):
<TABLE>
<CAPTION>
SEPTEM- DECEMBER 31,
BER 30, -------------------------------------------------------
1995 1994 1993 1992 1991 1990
------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Non-Accrual Loans (1) $2,287 $ 3,161 $ 2,092 $ 2,927 $ 8,364 $ 6,108
Loans More Than 90 Days Past Due 17 246 56 361 349 74
Troubled Debt Restructured (2) 6,651 7,069 1,431 -- -- --
------ ------- ------- ------- ------- -------
Total Nonperforming Loans $8,955 $10,476 $ 3,579 $ 3,288 $ 8,713 $ 6,182
====== ======= ======= ======= ======= =======
</TABLE>
(1) Reflects loans for which there has been no payment of interest and/or
principal due for 90 days or more. Ordinarily, the accrual of interest ceases
when no payment of interest or principal has been made for 90 days or if the
Company has reason to believe that continued payment of interest and principal
is unlikely. Accrued interest, if any, is reversed at the time such loans are
placed on nonaccrual status. If these loans had be current throughout their
terms, interest and fees on loans would have increased by approximately $55,000
for the nine months ended September 30, 1995 and $144,000, $108,000, $103,000,
$166,000, and $157,000, for 11994, 1993, 1992, 1991, and 1990, respectively.
(2) Troubled debt restructured loans consist primarily of loans for which the
interest rate was reduced or the interest payment provisions were modified
because of the inability of the borrower to service the obligation under the
original terms of the agreement. Income is accrued at the lower effective rate
so long as the borrower is current under the revised terms and conditions of
the agreement. Under the original terms of the restructured loans, interest
earned would have totaled approximately $723 thousand for the nine months ended
September 30, 1995. Under the restructured terms, interest income recorded
amounted to $608 thousand for the nine months ended September 30, 1995.
9
<PAGE> 10
At September 30, 1995, the carrying value of loans that are considered to be
impaired under SFAS 114 totaled $1.8 million. At September 30, 1995, the
allowance for possible credit losses determined in accordance with the
provisions of SFAS 114, related to loans considered to be impaired under SFAS
114 totaled $133 thousand. The carrying value of loans considered impaired
under SFAS 114 for which there is no related allowance for possible credit
losses was zero at September 30, 1995. The average recorded investment in
impaired loans during the six months ended September 30, 1995 was approximately
$2.8 million. For the six months ended September 30, 1995, the Company
recognized interest income on those impaired loans of $118 thousand, all of
which was recognized using the cash basis method of income.
The following table summarizes, for the periods indicated, changes in the
allowance for possible credit losses arising from loans charged off, recoveries
on loans previously charged off, and additions to the allowance which have been
charged to operating expenses and certain ratios relating to the allowance for
possible credit losses (amounts in thousands):
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -------------------------------
1995 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR POSSIBLE CREDIT
LOSSES:
Balance at Beginning of Period $5,564 $4,740 $3,530 $3,757 $2,656 $2,448
Actual Charge-offs:
Commercial 311 570 502 574 406 308
Credit Cards 35 36 35 66 48 30
Consumer 118 151 98 494 307 279
Real Estate 444 720 1,867 883 0 333
Direct Lease Financing 5 97 32 60 21 4
------ ------ ------ ------ ------ ------
Total Charge-Offs 913 1,574 2,534 2,077 782 954
------ ------ ------ ------ ------ ------
Less Recoveries:
Commercial 129 118 27 54 61 250
Credit Cards 8 13 21 5 8 1
Consumer 37 30 116 50 60 87
Real Estate 172 0 11 0 0 0
Direct Lease Financing 0 8 3 6 0 0
------ ------ ------ ------ ------ ------
Total Recoveries 33 169 168 115 129 338
------ ------ ------ ------ ------ ------
Net Loans Charged Off 346 1,045 2,366 1,962 653 616
Provision for Credit Losses 755 2,006 3,576 1,735 1,159 824
------ ------ ------ ------ ------ ------
Changes Incident to Acquisition of --- 223 --- --- --- ---
Loans
Balance at End of Period $5,752 $5,564 $4,740 $3,530 $3,757 $2,656
====== ====== ====== ====== ====== ======
RATIOS:
Net Loans Charged Off to Average 0.44% 0.79% 1.22% 0.84% 0.30% 0.29%
Loans
Allowance for Credit Losses to Total 3.20% 3.24% 2.60% 1.66%
Gross Loans 1.54% 1.28%
Allowance for Credit Losses to Non 155.81% 226.58% 48.22% 43.11% 42.96%
Performing Loans 249.65%
</TABLE>
The allowance for possible credit losses is established by a provision for
possible credit losses charged against current period income. Loans and leases
are charged against the allowance for possible credit losses when management
believes that the collectibility of principal is unlikely. The allowance for
possible credit losses is established based upon an analysis providing specific
allowances for loans that management has identified to have potential loss and
general allowances for unidentified losses inherent in the portfolio. The
general allowance is determined by segmenting the portfolio by risk rating and
loan type with allowances established based upon historical losses in each
portfolio segment. The evaluations take into consideration such factors as
changes in the nature and volume of the portfolio, overall portfolio quality;
loan concentrations; specific problem loans, leases and commitments; and
current and anticipated economic conditions that may affect the borrowers'
ability to pay.
10
<PAGE> 11
Management believes that the allowance for possible credit losses is adequate.
While management uses available information to recognize losses on loans and
leases, future additions to the allowance may be necessary based on changes in
economic conditions. In addition, both Federal and state regulators, as an
integral part of their examination process, periodically review the Bank's
allowance for possible credit losses and may recommend additions based upon
their evaluation of the portfolio at the time of their examination.
The risk of nonpayment of loans is an inherent feature of the banking business.
That risk varies with the type and purpose of the loan, the collateral which is
utilized to secure payment, and ultimately, the credit worthiness of the
borrower. In order to minimize this credit risk, the Bank has established
lending limits for each of its officers having lending authority, in each case
based upon the officer's experience level and prior performance. Whenever a
proposed loan by itself, or when aggregated with outstanding extensions of
credit to the same borrower, exceeds the officer's lending limits, the loan
must be approved by the Bank's Chairman, President or Executive Vice
President/Chief Credit Officer or by the Bank's loan committee, depending upon
the dollar amount involved. The loan committee is comprised of two directors
and four members of the Bank's senior management. In addition, each loan
officer has primary responsibilities to conduct credit documentation reviews of
all loans made by that officer.
Furthermore, the Bank also maintains a program of periodic review of all
existing loans and employs a specialist who reviews loans over a certain dollar
amount and grades these loans based upon the dollar amount and credit
worthiness using a grading system. Loans are graded from "one" to "eight"
depending on credit quality, with "grade one" representing a prime loan with a
definite and reliable repayment program based upon liquid collateral with
adequate margin or supported by a strong up-to-date financial statement.
Problem or substandard loans identified in the review process are scheduled for
remedial action, and where appropriate, allowances are established for such
loans. Periodically, an outside loan review consultant further reviews loans
for credit quality. Additionally, the Bank is examined regularly by the FDIC
and California State Banking Department at which time a further review of loans
is conducted.
The Company has allocated the allowance for credit losses according to the
amount deemed to be reasonably necessary to provide for the possibility of
losses being incurred within the categories of loans set forth in the following
table:
<TABLE>
<CAPTION>
For the Nine
Months Ended For the Year Ended December 31,
September 30, 1995 1994 1993 1992 1991 1990
------------------ ---- ---- ---- ---- ----
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, Secured $2,515 43.7% $2,281 39.0% $2,164 37.1% $1,715 35.1% $1,296 34.5% $1,020 36.0%
and Unsecured
Interim Construction --- --- 310 2.8 325 7.1 440 10.1 443 11.8 385 15.1
Real Estate 2,530 44.0 2,597 45.7 1,780 43.9 1,091 42.8 1,518 40.4 845 33.0
Installment 638 11.10 271 11.0 334 9.8 245 10.0 428 11.4 345 13.5
Credit Card 40 0.7 52 0.8 101 0.8 11 0.7 23 0.6 18 0.7
Lease Financing 29 0.5 53 0.7 36 1.3 28 1.3 49 1.3 43 1.7
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total $5,752 100.0% $5,564 100.0% $4,740 100.0% $3,530 100.0% $3,757 100.0% $2,656 100.0%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Other real estate owned increase to $2.1 million at September 30, 1995 from
$973 thousand at December 31, 1994 reflecting the foreclosure of real estate
properties in satisfaction of certain loans.
Total deposits declined $1.5 million at September 30, 1995 to $269.8 million
compared to $271.3 million at year end 1994, however, there was a significant
change in the mix of deposits. Noninterest bearing demand deposits grew $5.9
million to $85.3 million at September 30, 1995 from December 31, 1994. This
was offset by a decline in savings and money market deposits of $15.4 million
to $130.6 million at September 30, 1995 from $146.0 million at December 31,
1994. Time certificates of deposit under $100,000 increased $6.3 million
during the first nine months of 1995 and time certificates of deposit of
$100,000 or more increased $1.6 million during this same period.
11
<PAGE> 12
Federal funds purchase increased $4.5 million to $5.5 million at September 30,
1995 compared to December 31, 1994. The Company purchases federal funds from
one of its financial institution customers as an accommodation.
Total shareholders' equity increased $3.1 million during the nine months ended
September 30, 1995 primarily due to an increase in retained earnings and also
due to an increase of $647 thousand in the net securities valuation allowance.
The increase in the net securities valuation allowance reflects the overall
downward trend in capital market interest rates since year end combined with
favorable repricing upon maturity of the relatively short-term securities
portfolio available-for-sale.
Liquidity and Interest Sensitivity
In order to meet periodic increases in loan demand, potential deposit
withdrawals and maturities of short-term, large time certificates of deposit,
the Company maintains short-term fund sources. These include cash on hand and
on deposit with correspondent banks; "federal funds sold", which are
essentially demand loans to other banks; and investments in marketable
securities available-for-sale. Such cash and near-cash items, marketable
securities available-for-sale and short-term investments totaled $114.7 million
at September 30, 1995, which represented 36.9 percent of total assets.
Other possible liquidity sources to meet cash requirements include federal
funds purchased lines, the sale of loans, and anticipated increases in
deposits. Substantially all of the Company's installment loans and leases are
made on terms that require regular monthly repayments, which provides a regular
flow of cash funds.
The Company manages its interest rate sensitivity by matching the repricing
opportunities on its earning assets to those on its funding liabilities.
Management uses various asset/liability strategies to manage the repricing
characteristics of its assets and liabilities to ensure that exposure to
interest rate fluctuations is limited within Company guidelines of acceptable
levels of risk-taking. Hedging strategies, including the terms and pricing of
loans and deposits, and managing the deployment of its securities are used to
reduce mismatches in interest rate repricing opportunities of portfolio assets
and their funding sources. The Company does not utilize derivative financial
instruments as part of its hedging strategy.
One way to measure the impact that future change in interest rates will have on
net interest income is through a cumulative gap measure. The gap represents
the net position of assets and liabilities subject to repricing in specified
time periods. The Company's cumulative gap at September 30, 1995 for a three
month and one year period was 74 percent and 110 percent, respectively.
Since interest rate changes do not affect all categories of assets and
liabilities equally or simultaneously, a cumulative gap analysis alone cannot
be used to evaluate the Company's interest rate sensitivity position. To
supplement traditional gap analysis, the Company performs simulation modeling
to estimate the potential effects of changing interest rates. The process
allows the Company to explore the complex relationships within the gap over
time and various interest rate environments. The simulation analysis indicates
certain scenarios in which the Company may experience a decline in its net
interest income despite its strategy of matching repricing opportunities of its
earning assets and funding liabilities.
Results of Operations - Quarter Ended September 30, 1995
Net income for the three months ended September 30, 1995 was $1.2 million, or
$0.43 per share, compared to $768 thousand, or $0.28 per share, for the same
period in 1994. The increase in third quarter 1995 earnings is due to higher
net interest margins, lower provisions for possible credit losses and lower
noninterest expenses.
Net interest income increased $310 thousand in the three month period ended
September 30, 1995 to $4.6 million compared to $4.3 million for the same period
in 1994. The increase is due to higher yields on loans indexed to the prime
lending rate, higher yields on federal funds sold and upward repricing upon
reinvestment of the Company's relatively short-term investment portfolio. The
higher yields on loans, federal funds sold and investment securities is a
result of higher market rates of interest in the 1995 period as compared to
1994. While higher yields have been obtained on the Company's earning assets,
the cost of funds on the deposits has not increased as rapidly. Additionally,
lower volumes of interest-bearing liabilities funding the earning assets has
further widened the net interest margin.
12
<PAGE> 13
The provision for loan and lease losses during the three months ended September
30, 1995 was $152 thousand compared to $302 in the same period in 1994. This
reduction was made based upon the Company's evaluation of the adequacy of its
allowance for possible credit losses. The allowance for possible credit losses
is established based upon an analysis providing specific allowances for loans
that management has identified to have potential loss and general allowances
for unidentified losses inherent in the portfolio. The general allowance is
determined by segmenting the portfolio by risk rating and loan type with
allowances established based upon historical losses in each portfolio segment.
Additionally, consideration is given to loan type concentrations in the
portfolio and the current and anticipated economic environment.
Other income for the third quarter ended September 30, 1995 was $1.0 million
compared to $1.1 million for the 1994 period. This decline was due to lower
service charges on deposit accounts due to fewer accounts and lower bankcard
discounts.
Other expenses for the three months ended September 30, 1995 were $3.4 million
compared to $3.8 million for the same period in 1994. Salaries were nearly
flat in the 1995 period compared with 1994. While the Company's staffing
levels were significantly lower in the 1995 period than 1994, the full impact
is not reflected in the salary expense line item due to the application of
Statement of Financial Accounting Standards No. 91 "Accounting for
Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and
Initial Direct Costs of Leases (SFAS 91). After reengineering its lending
process, the Company, as provided for under SFAS 91, reevaluated the direct
costs of specific activities performed in originating loans, which are
primarily salary expense. As a result of the lower costs associated with
originating loans in the new process, a lower amount of loan fees collected is
offset against salary expense and a larger amount is deferred and amortized
into income over the estimated life of the loan.
Other real estate owned writedowns and expenses were $24 thousand in the third
quarter of 1995 compared to $274 thousand for the same quarter last year.
Additionally, other miscellaneous expenses were down in the 1995 period.
Results of Operations - Nine Months Ended September 30, 1995
Net earnings for the nine months ended September 30, 1995 were $3.1 million, or
$1.13 per share, compared to $1.8 million, or $0.65 per share, for the first
nine months in 1994. The increase is due to wider interest margins and lower
provisions for loan and lease losses.
Net interest income increased $1.5 million to $13.6 million for the nine months
ended September 30, 1995 compared to $12.0 million for the same period in 1994.
Interest income increased $2.1 million in the 1995 period while interest
expense on deposits and other borrowings increased only $602 thousand. The
1995 interest income was higher due to higher yields on loans, federal funds
sold and investment securities as a result of higher market rates of interest
and favorable repricing. The cost of deposits did not experience as large an
increase during the 1995 period as compared to 1994. Additionally, a greater
level of noninterest bearing deposits funded the earning assets in the first
nine months of 1995.
The provision for loan and lease losses for the first nine months of 1995 was
$755 thousand compared to $1.7 million for the nine months ended September 30,
1994. The decrease was based upon management's assessment of the adequacy of
the allowance for possible credit losses as discussed above in the quarterly
discussion.
Other income decreased to $3.0 million for the nine months ended September 30,
1995 compared to $3.5 million for the same period in 1994. This decrease is
primarily due to lower bankcard discounts and lower gains on the sale of Small
Business Administration-guaranteed (SBA) loans. The bank is retaining more of
the SBA loans in 1995 as compared to 1994 as a result of a strategic decision.
Other expense was $340 thousand lower in the first nine months of 1995 totaling
$10.5 million compared to $10.9 million for the same period in 1994. Salary
expense and employee benefit expense was flat for the 1995 period compared to
1994. While the Company's staffing levels were significantly lower in the 1995
period than 1994, the full impact is not reflected in the salary expense line
item due to the application of Statement of Financial Accounting Standards No.
91 "Accounting for Nonrefundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases (SFAS 91). After
reengineering its lending process, the Company, as provided for under SFAS 91,
reevaluated the direct costs of specific activities performed in originating
loans, which are primarily salary expense. As a result of the lower costs
associated with originating loans in the new process, a lower amount of loan
fees collected is offset against salary expense and a larger amount is deferred
and amortized into income over the estimated life of the loan.
Other real estate owned writedowns and expenses were $125 thousand and $286
thousand for the nine months ended September 30, 1995, respectively. Other
miscellaneous expenses were $3.8 million for the first nine months of 1995
compared to $4.1 million for the same period in 1994.
13
<PAGE> 14
Newly Issued Accounting Pronouncements
In March 1995, the FASB issued Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 provides guidance for
recognition and measurement of impairment of long-lived assets, certain
identifiable intangibles and goodwill related both to assets to be held and
used by an entity and assets to be disposed of. SFAS 121 is effective for
financial statements for fiscal years beginning after December 15, 1995. The
Bank owns certain of its branch banking facilities. The Company expects to
adopt the statement on January 1, 1996 and does not expect that the adoption of
the statement will have a material impact on the Company's results of
operations or financial position.
14
<PAGE> 15
Part II.
Items 1 - 4.
No reportable events.
Item 5. Other Information
On August 16, 1995 the Board of Directors declared a cash dividend of 8 cents
per share payable October 2, 1995 to Shareholders of record September 4, 1995.
Item 6. Exhibits and Reports on Form 8-K
- Exhibits
(27) Financial Data Schedule.
- Reports on Form 8-K
(1) None.
15
<PAGE> 16
SIGNATURE
Pursuant to 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.
Eldorado Bancorp
---------------------------------
(Registrant)
November 13, 1995 /s/ RAYMOND E. DELLERBA
- ------------------------------- ---------------------------------
Date Raymond E. Dellerba
President
Chief Operating Officer
November 13, 1995 /s/ DAVID R. BROWN
- --------------------------------- ---------------------------------
Date David R. Brown
Executive Vice President
Chief Financial Officer
16
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