<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 March 31, 1996
--------------------------------------------------------
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)
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)
(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 3,764,600 shares of common stock for the registrant outstanding as
of March 31, 1996.
1
<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 March 31, 1996 December 31, 1995
------ -------------- -----------------
<S> <C> <C>
Cash and due from banks $ 30,045 $ 32,233
Federal funds sold 19,200 9,700
Securities available-for-sale 94,893 86,580
Securities held-to-maturity - approximate
market value of $8,540 in 1996
and $7,212 in 1995 8,581 7,087
Loans and direct lease financing 222,943 229,957
Less allowance for possible credit losses 4,903 6,265
--------- ----------
Net loans and direct lease financing 218,040 223,692
Premises and equipment, net 8,468 8,598
Other real estate owned 1,535 1,965
Accrued interest receivable and other assets 14,584 13,331
--------- ----------
$ 395,346 $ 383,186
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
Deposits
Demand, non-interest bearing $ 106,245 $ 99,770
Savings and money market 155,111 157,882
Time certificates under $100,000 47,410 43,534
Time certificates of $100,000 or more 37,283 32,092
--------- ---------
Total deposits 346,049 333,278
Federal funds purchased 2,036 3,772
Other liabilities 3,851 3,763
--------- ---------
Total liabilities $ 351,936 $ 340,813
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 3,764,600 shares in 1996 and
3,733,822 shares in 1995 32,034 31,798
Retained earnings 11,183 10,175
Net unrealized gain on securities available-for-sale 193 400
--------- ---------
43,410 42,373
--------- ---------
Total shareholders' equity and liabilities $ 395,346 $ 383,186
========= =========
</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
March 31
------------------
1996 1995
<S> <C> <C>
Interest Income
Loans $ 5,593 $ 4,129
Securities 1,443 1,255
Federal funds sold 294 224
Direct lease financing 24 36
-------- --------
7,354 5,644
Interest Expense
Savings, NOW and money market deposits 775 735
Time deposits of $100,000 or more 454 225
Time deposits under $100,000 623 240
Other 37 39
-------- --------
Total interest expense 1,889 1,239
-------- --------
Net interest income 5,465 4,405
Provision for loan lease losses 152 302
-------- --------
Net interest income after provision
for loan and lease losses 5,313 4,103
Other Income
Service charges on deposit accounts 607 503
Loan servicing income 224 221
Bank card discounts 29 209
Gain (loss) on sales of SBA loans 13 (52)
Net gain (loss) on sales of securities --- (2)
Other 304 125
-------- --------
1,177 990
Other Expense
Salaries 1,364 1,054
Employee benefits 561 570
Net occupancy of bank premises 406 376
Furniture and equipment expense 298 223
Other real estate owned writedowns/expense 33 61
Other 1,603 1,312
-------- --------
4,265 3,596
-------- --------
Earnings before taxes 2,225 1,497
Income Taxes 915 615
--------- --------
Net Earnings $ 1,310 $ 882
======== ========
Earnings per common share $ 0.34 $ 0.29
======== ========
Weighted average common shares outstanding 3,865,806 3,032,401
</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>
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ ------------------
<S> <C> <C>
Cash Flows from operating activities:
Net earnings $ 1,310 $ 882
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 240 182
Amortization of goodwill 167 28
Provision for possible credit losses 152 302
Provision for possible losses on other real estate owned --- 58
(Gain) loss on sale of SBA loans (13) 52
(Gain) loss on sale of securities available-for-sale --- 2
Amortization of deferred income, costs, discounts and fees (97) (40)
Loan fees collected 4 121
(Gain) loss on sale of other real estate owned (170) (1)
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable 98 (17)
(Increase) decrease in other assets/current tax
receivable and other real estate owned (1,442) (1,322)
Increase (decrease) in other liabilities 88 329
-------- --------
Total adjustments (973) (305)
-------- --------
Net cash provided by operating activities 337 577
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 11,444 28,296
Proceeds from sale of securities available-for-sale 1,160 ---
Proceeds from sale of securities held-to-maturity 2,000 ---
Proceeds from sale of equipment 14 ---
Purchase of securities available-for-sale (21,246) (22,764)
Purchase of securities held-to-maturity (3,492) (503)
Net (increase) decrease in loans and leases 5,606 4,526
Purchases of premises and equipment (111) (241)
Proceeds from sale of other real estate owned 671 53
Proceeds from sale of loans --- 1,162
-------- --------
Net cash used in investing activities $ (3,994) $ (13,257)
-------- ---------
</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>
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ =------------------
<S> <C> <C>
Cash Flows from operating activities:
Net increase (decrease) in deposits $12,771 $(2,482)
Net increase (decrease) in federal funds purchased (1,736) 4,858
Dividends paid (302) 221
Proceeds from stock options exercised 236 ---
------- -------
Net cash provided by financing activities 10,969 2,155
------- -------
Increase (decrease) in cash and cash equivalents 7,312 13,261
Cash and cash equivalents at beginning of year 41,933 32,950
Cash and cash equivalents at March 31 $49,245 $46,211
======= =======
</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 three months ended March 31, 1996
and
For years ended December 31, 1995, 1994, and 1993
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Securities Gain (Loss) on Total
Common Stock Securities Retained Shareholders'
Shares Amount Available-for-Sale Earnings Equity
---------------------- ------------------ --------- -------------
<S> <C> <C> <C> <C> <C>
------------------------------------------
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 4,473 35,000 --- --- 35,000
Change in net unrealized gain on
securities available-for-sale --- --- (1,524,000) --- (1,524,000)
Net earnings --- --- --- 2,556,00 2,556,000
------------------------------------------ --------------------- ----------- ----------- -----------
Balance, December 31, 1994 2,756,728 $17,462,000 $ (345,000) $11,977,000 $29,094,000
Cash dividends declared ($0.36 per share) --- --- --- (960,000) (960,000)
Stock options exercised 7,380 62,000 --- --- 62,000
Common stock issued 630,276 8,928,000 --- --- 8,928,000
10% common stock dividend 339,438 5,346,000 --- (5,346,000) ---
Change in net unrealized gain on
securities available-for-sale --- --- 745,000 --- 745,000
Net earnings --- --- --- 4,504,000 4,504,000
----------------------------------------- --------------------- -------------------------------------------
Balance, December 31, 1995 3,733,822 $31,798,000 $ 400,000 $10,175,000 $42,373,000
Cash dividends declared ($0.08 per share) --- --- --- (302,000) (302,000)
Stock options exercised 30,778 236,000 --- --- 236,000
Change in net unrealized gain (loss)
in securities available-for-sale --- --- (207,000) --- (207,000)
Net earnings --- --- --- 1,310,000 1,310,000
----------------------------------------- --------------------- --------------------------------------------
Balance, March 31, 1996 3,764,600 $32,034,000 $ 193,000 $11,183,000 $43,410,000
</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 on the weighted average number of
shares outstanding giving retroactive effect to stock dividends, including the
10% stock dividend declared in November 1995. Stock options have been included
as common stock equivalents.
NOTE C - RECLASSIFICATIONS
-----------------
Certain items in prior periods have been reclassified to conform to the current
presentation.
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 March 31, 1996 were $395.3 million compared to $383.2 million
at December 31, 1995. The increase in total assets was primarily due to an
increase in total deposits. The funds received from depositors and loan
repayments, net of loan disbursements, were deployed largely in federal funds
sold and securities available-for-sale.
Federal funds sold , considered as overnight loans to other banks, increased
to $19.2 million at March 31, 1996 compared to $9.7 million at December 31,
1995.
Securities available-for-sale increased $8.3 million to $94.9 million at March
31, 1996 compared to $86.6 million at December 31, 1995.
The following table summarizes the components of total gross loans outstanding
in each category at the date indicated (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995 1994 1993 1992 1991
--------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Commercial, Secured and Unsecured $ 95,021 $ 95,548 $66,987 $66,987 $74,603 $83,937
Interim Construction 17,900 18,219 4,789 4,789 21,595 28,770
Real Estate 80,745 88,097 78,607 78,607 90,985 98,373
Installment 26,908 26,553 18,945 18,945 21,374 28,229
Credit Card 1,593 1,791 1,298 1,298 1,456 1,491
Lease Financing 904 876 1,286 1,286 3,515 3,853
Less: Unearned Income (128) (127) (38) (38) (739) 1,208)
-------- -------- -------- -------- -------- --------
Total Gross Loans $222,943 $229,957 $171,874 $182,465 $212,789 $243,445
</TABLE>
Total gross loans decreased to $222.9 million at March 31, 1996 from $230.0
million at December 31, 1995 due primarily to loan repayments exceeding funding
of loans. 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. Additional during this period, the Company
eliminated the construction lending department in order to reduce its exposure
to the declining real estate market. The Company, through the acquisition of
Mariners Bancorp in October 1995, operates a construction lending department.
The Company intends to originate and service interim construction loans.
8
<PAGE> 9
The following tables show the maturities of loans and their sensitivities to
changes in interest rates at March 31, 1996. 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 $ 74,778 $16,118 $ 4,468 $ 95,364
Interim Construction 14,193 3,059 648 17,900
Real Estate 62,374 13,445 4,926 80,745
Installment 20,886 4,501 1,174 26,561
Credit Card 1,564 0 29 1,593
Leases 245 535 0 780
-------- ------- ------- --------
$174,040 $37,658 $11,245 $222,943
======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Maturing
Within After
One Year One Year Total
----------------------------------------
<S> <C> <C> <C>
Loans with Predetermined Interest Rates $ 27,112 $40,715 $ 67,827
Loans with Floating or Adjustable Interest Rates 146,928 8,188 155,116
</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>
December 31,
March 31, ---------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual Loans $3,378 $5,818 $3,161 $2,092 $2,927 $8,364
Loans More Than 90 Days Past Due 259 380 246 56 361 349
------ ------ ------ ------ ------ ------
Total Nonperforming Loans $3,637 $6,198 $3,407 $2,148 $3,288 $8,713
------ ------ ------ ------ ------ ------
</TABLE>
Ordinarily, the accrual of interest ceases when no payment of interest or
principal has been made for 90 days or if the Bank 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 been current throughout their terms, interest and fees on loans
would have increased by approximately $43,000 the three months ended March 31,
1996 and $172,000, $144,000, $108,000, $103,000, and $166,000, for the years
ended 1995, 1994, 1993, 1992, and 1991 respectively.
9
<PAGE> 10
The following is a summary of impaired loans and the related allowance for
possible credit losses:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
------------------------- ------------------------------
Allowance Allowance
Recorded for Possible Recorded for Possible
Investment Credit Losses Investment Credit Losses
------------------------- ------------------------------
<S> <C> <C> <C> <C>
Impaired loans requiring an allowance
for possible credit losses $1,264,000 $ 186,000 $5,077,000 $1,985,000
Impaired loans not requiring an
allowance for possible credit losses 1,922,000 --- 741,000 ---
------------------------- -----------------------------
$3,186,000 $ 186,000 $5,818,000 $1,985,000
========================= =============================
</TABLE>
Troubled Debt Restructurings
- ----------------------------
<TABLE>
<CAPTION>
December 31,
March 31, ------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Troubled debt restructuring $2,514 $1,531 $7,069 $1,431 $ --- $ ---
</TABLE>
Troubled debt restructurings consist primarily of loans for which the
interest rate was reduced or the payment provisions were modified because of the
inability of the borrower to service the obligation under the original terms of
the agreements. Income is accrued at the lower effective rate provided the
borrower is current under the revised terms and conditions of the agreements.
Under the original terms of the restructured loans, interest earned would have
totaled approximately $25 thousand for the three months ended March 31, 1996 and
$235 thousand for the year ended December 31, 1995. Under the restructured
terms, recorded interest income amounted to $19 thousand for the three months
ended March 31, 1996 and $187 thousand for the year ended December 31, 1995.
10
<PAGE> 11
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 Three For the Year Ended December 31,
Months Ended -------------------------------------------
March 31, 1996 1995 1994 1993 1992 1991
-------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for possible credit losses:
Balance at beginning of period $6,265 $5,564 $4,740 $3,530 $3,757 $2,656
Actual charge-offs:
Commercial 20 342 570 502 574 406
Interim construction -- -- -- 590 741 --
Credit cards 6 36 36 35 66 48
Consumer 105 165 151 98 494 307
Real estate 1,458 763 720 1,277 142 --
Direct lease financing 2 5 97 32 60 21
------------ -----------------------------------------
Total charge-offs 1,591 1,311 1,574 2,534 2,077 782
Less recoveries:
Commercial 13 156 118 27 54 61
Interim construction -- -- -- 11 -- --
Credit cards 9 9 13 21 5 8
Consumer 16 49 30 106 50 60
Real estate 40 225 -- -- -- --
Direct lease financing -- -- 8 3 6 --
------------ -----------------------------------------
Total recoveries 78 439 169 168 115 129
------------ -----------------------------------------
Net loans charged off 1,513 872 1,405 2,366 1,962 653
Provision for credit losses 151 756 2,006 3,576 1,735 1,159
Changes incident to acquisitions -- 817 223 -- -- --
------------ -----------------------------------------
Balance at end of period $4,903 $6,265 $5,564 $4,740 $3,530 $3,757
============ =========================================
Ratios:
Net loans charged off to average loans 0.67% 0.47% 0.79% 1.22% 0.84% 0.30%
Allowance for credit losses to total
gross loans 2.20% 2.72% 3.24% 2.60% 1.66% 1.54%
Net loans charged off to allowance for
credit losses 30.86% 13.92% 25.25% 49.92% 55.58% 17.38%
Net loans charged off to provision for
credit losses 1,001.99% 115.34% 70.04% 66.16% 113.08% 56.34%
Allowance for credit losses to non-
performing loans 145.15% 101.08% 163.31% 220.07% 107.36% 43.12%
</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 is an
amount that management believes will be adequate to absorb losses inherent in
existing loans, leases and commitments to extend credit, based on the
evaluations of the collectibility and prior loss experience of loans, leases
and commitments to extend credit. 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.
11
<PAGE> 12
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.
Problem or substandard loans identified in the review process are largely due
to a decline in local real estate values during the past several years.
Management believes that it has adequately provided an allowance to cover
estimated losses in the credit portfolio. Significant further deterioration in
California real estate values could materially impact future operating results,
liquidity or capital resources.
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
Three Months
Ended For the Year Ended December 31,
March 31, 1996 1995 1994 1993 1992 1991
---------------- ---- ---- ---- ---- ----
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
and Unsecured $2,089 42.6% $2,117 33.8% $2,281 39.0% $2,164 37.1% $1,715 35.1% $1,296 34.5%
Interim Construction 392 8.0 280 4.5 310 2.8 325 7.1 440 10.1 443 11.8
Real Estate 1,775 36.2 3,274 52.3 2,597 45.7 1,780 43.9 1,091 42.8 1,518 40.4
Installment 543 12.1 500 8.0 271 11.0 334 9.8 245 10.0 428 11.4
Credit Card 34 0.7 64 1.0 52 0.8 101 0.8 11 0.7 23 0.6
Lease Financing 20 0.4 30 0.4 53 0.7 36 1.3 28 1.3 49 1.3
------ ------ ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total $4,903 100.00% $6,265 100.0% $5,564 100.0% $4,740 100.0% $3,530 100.0% $3,757 100.0%
====== ====== ====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
The Company sometimes acquires real estate properties in satisfaction of loans
receivable through foreclosure or other means. These real estate properties
acquired are accounted for pursuant to Statement of Position 92-3, Accounting
for Foreclosed Assets, which presumes that foreclosed assets are held for sale
and not for the production of income. Accordingly, the real estate properties
are carried at fair value less estimated costs to sell. Fair value is
determined based upon appraisals near the date of foreclosure. These
appraisals are updated periodically and subsequent write-downs of the carrying
value may be recognized in the event of declining fair values.
On March 31, 1995 other real estate owned totaled $1.5 million compared to $2.0
million at December 31, 1995.
Total deposits increased $12.7 million at March 31, 1996 to $346.0 million
compared to $333.3 million at December 31, 1995. Noninterest bearing demand
deposits, time certificates of deposits under $100,000 and time certificates of
$100,000 and greater increased $6.4 million, $3.9 million and $5.2 million,
respectively during the first quarter of 1996. Savings and money market
deposits, however, declined $2.8 million during this same period.
12
<PAGE> 13
Federal funds purchased increased $1.8 million to $2.0 million at March 31,
1996 compared to December 31, 1995. The Company purchases federal funds from
one of its financial institution customers as an accommodation.
Total shareholders' equity increased $1.0 million during the three months ended
March 31, 1996. Net earnings for the period contributed $1.3 million to
retained earnings while cash dividends of approximately $300 thousand decreased
retained earnings. During this period common stock increased approximately
$200 as a result of exercise of stock options and the value of securities
available-for-sale declined approximately $200.
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 securities available-for-sale.
Such cash and near-cash items, and securities available-for-sale totaled
$144.1 million at March 31, 1996, which represented 36.5 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 March 31, 1996 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 March 31, 1996
- ----------------------------------------------------
Net income for the three months ended March 31, 1996 was $1.3 million, or
$0.34 per share, compared to $882 thousand, or $0.29 per share, for the same
period in 1995. This increase was primarily due to higher net interest
margins, lower provisions for possible credit losses, higher other income, and
lower noninterest expenses.
Net interest income totaled $5.4 million for the three months ended March 31,
1996 compared to $4.4 million for the same period in 1995, an increase of $1.0
million. This increase was primarily due to higher yield and greater volume of
earning assets, and partially offset by higher rate and greater volume on
interest bearing deposits. During this period, interest expense on deposits
and borrowings has not increased as rapidly as interest income from earning
assets.
13
<PAGE> 14
The provision for loan and lease losses during the three months ended March 31,
1996 was $152 thousand compared to $302 in the same period in 1995. 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 quarter ended March 31, 1996 was $1.2 million compared to
$1.0 million for the same period in1995.
Other expenses for the three months ended March 31, 1996 were $3.4 million
compared to $3.6 million for the same period in 1995.
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.
14
<PAGE> 15
Part II.
Items 1 - 4.
No reportable events.
Item 5. Other Information
On February 21, 1996 the Board of Directors declared a cash dividend of 8 cents
per share payable April 5, 1996 to Shareholders of record March 4, 1996.
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)
May 14, 1996 /s/ RAYMOND E. DELLERBA
- ------------ --------------------------------
Date Raymond E. Dellerba
President
Chief Operating Officer
May 14, 1996 /s/ DAVID R. BROWN
- ------------ ---------------------------------
Date David R. Brown
Executive Vice President
Chief Financial Officer
16
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