FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly 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 N/A to N/A
FOR QUARTER ENDED MARCH 31, 1995 COMMISSION FILE NUMBER: 0-10897
WEST COAST BANCORP
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3586860
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 CAMPUS DRIVE, SUITE 250
Newport Beach, California 92660-1833
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (714) 724-8733
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
---- ----
Number of shares of common stock of the registrant outstanding as of April
28, 1995:
9,192,942
This document contains a total of 19 pages.
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WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except shares) March 31, December 31,
1995 1994
ASSETS -------------------------
Cash and due from bank $ 5,916 $ 9,437
Interest-bearing deposits with
financial institutions 5,509 4,028
Investment securities held to maturity -
approximate market value of $5,786 and
$5,708 in 1995 and 1994, respectively 5,831 5,868
Investment securities available-for-sale -
approximate market value of $1,980 and
$5,947 in 1995 and 1994, respectively 1,980 5,947
Federal funds sold 19,100 10,200
Loans and direct lease financing held for sale 40 59
Loans 81,110 86,569
Less allowance for possible credit losses (4,726) (4,649)
----------------------
Net loans 76,384 81,920
----------------------
Real estate owned, net 3,250 4,352
Premises and equipment, net 2,203 2,347
Net assets held for sale 1,452 5,351
Other assets 1,433 1,401
----------------------
$123,098 $130,910
======================
LIABILITIES
Deposits:
Demand, non-interest bearing $ 32,946 $ 36,027
Savings, money market & interest
bearing demand 39,130 38,815
Time certificates under $100,000 33,989 39,134
Time certificates of $100,000 or more 5,573 5,293
----------------------
Total deposits 111,638 119,269
Notes payable to affiliates 811 720
Other borrowed funds 171 171
10% convertible subordinated debentures 3,035 3,035
Other liabilities 1,497 1,512
----------------------
Total liabilities 117,152 124,707
SHAREHOLDERS' EQUITY
Common stock, no par value - 30,000,000 shares
authorized, 9,192,942 shares issued and
outstanding in 1995 and 1994 30,200 30,200
Securities valuation allowance - (3)
Accumulated deficit (24,254) (23,994)
----------------------
Total shareholders' equity 5,946 6,203
----------------------
$123,098 $130,910
======================
See accompanying notes to consolidated financial statements.
-2-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
(in thousands, March 31,
except per share data) 1995 1994
-------------------
INTEREST INCOME
Loans, including fees $ 2,162 $ 4,749
Investment securities 177 213
Deposits with bank 69 36
Federal funds sold 238 256
-------------------
Total interest income 2,646 5,254
INTEREST EXPENSE
Interest on deposits 768 1,421
Other 103 132
-------------------
Total interest expense 871 1,553
-------------------
Net interest income 1,775 3,701
Provision for possible
credit losses 178 1,272
-------------------
Net interest income
after provision for
possible credit losses 1,597 2,429
Other operating income 251 683
Other operating expenses 2,108 4,496
-------------------
Loss before income taxes (260) (1,384)
Income taxes (benefit) - -
-------------------
Net loss $ (260)$ (1,384)
===================
Net loss per common share $ (.03)$ (.15)
===================
Weighted average number of common
and shares outstanding 9,193 9,193
===================
See accompanying notes to consolidated financial statements.
-3-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited)
Retained
Common Stock Securities Earnings Share-
------------- Valuation (Accum. holders'
(in thousands) Shares Amount Allowance Deficit) Equity
----------------------------------------------
Balance at December 31, 1994 9,193 $30,200 $ (3) $(23,994) $ 6,203
Net loss - - - (260) (260)
Change in securities
valuation allowance - - 3 - 3
----------------------------------------------
Balance at March 31, 1995 9,193 $30,200 $ - $(24,254) $ 5,946
==============================================
See accompanying notes to consolidated financial statements.
-4-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
(in thousands) 1995 1994
----------------------
Cash flows from operating activities:
Net loss $ (260) $ (1,384)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 152 254
Provision for possible credit losses 178 1,272
Net change in receivables, payables
and other assets (80) 1,353
Proceeds from sales of loans
originated for sale 773 2,516
Loans originated for sale (729) (1,679)
Gain from sales of loans, net (37) (175)
Write-downs of real estate owned 36 85
Gain from sales of real estate owned, net (12) (259)
----------------------
Net cash provided by operating activities 21 1,983
Cash flows from investing activities:
Proceeds from maturity of interest bearing balances 496 495
Purchases of interest bearing balances (1,977) (495)
Proceeds from maturity of investment securities 41 1,874
Purchase of investment securities - (4,166)
Net decrease in loans 5,114 16,636
Proceeds from sales of real estate owned 1,339 2,880
Capital expenditures for real estate owned (5) (276)
Purchase of premises and equipment (9) (33)
----------------------
Net cash provided by investing activities 4,999 16,915
Cash flows from financing activities:
Net decrease in deposits (7,631) (25,586)
Proceeds from sale of Sacramento First 3,512 -
Proceeds from sale of B&PB stock 387 -
Payments for notes payable to affiliates,
subordinated debt and other borrowed funds - (471)
Loan proceeds from affiliate 91 75
----------------------
Net cash used in financing activities (3,641) (25,982)
----------------------
Increase (decrease) in cash and cash equivalents 1,379 (7,084)
Beginning cash and cash equivalents 23,637 55,795
----------------------
Ending cash and cash equivalents $25,016 $ 48,711
======================
(Continued)
See accompanying notes to consolidated financial statements.
-5-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Three Months Ended
March 31,
(in thousands) 1995 1994
---------------------
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ 862 $ 1,582
Income taxes - (105)
Supplemental schedule of non-cash investing
and financing activities:
Transfer of loans to real estate owned $ 256 $ 1,814
Loans made to purchasers of real estate owned - 309
Senior debt recorded in acquisition of
real estate owned - 130
See accompanying notes to consolidated financial statements.
-6-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1995
(1) BASIS OF PRESENTATION
West Coast Bancorp entered into a definitive agreement on June 22, 1994
to sell Sacramento First National Bank ("Sacramento First") to Business
& Professional Bank ("B&PB"). The sale subsequently closed on January
20, 1995. All assets and liabilities of Sacramento First are included
in "Net assets held for sale" at December 31, 1994. Sacramento First's
operating results were included in the consolidated statements of
operations for all periods through June 30, 1994. As part of the sales
agreement with B&PB, West Coast received 243,000 shares or 14.5% of B&PB
then outstanding common shares upon closing the Sacramento First sale.
B&PB stock was recorded at approximate market value on January 20, 1995,
and is included in "Net assets held for sale." See "Management's
discussion and analysis - general" for additional details.
The unaudited consolidated financial statements reflect all adjustments,
consisting primarily of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the interim periods. Results for the three month periods
ended March 31, 1995 and 1994 are not necessarily indicative of results
which may be expected for any other interim period, or for the year as a
whole. All significant intercompany balances have been eliminated.
(2) RECLASSIFICATIONS
Certain reclassifications have been made in the 1994 financial
statements to conform to the presentation in 1995.
(3) NET LOSS PER SHARE
The stock options and 10% convertible subordinated debentures were not
included in the net loss per share computations as the effect would have
been anti-dilutive. Fully diluted loss per share approximates primary
loss per share.
(4) LOANS AND DIRECT LEASE FINANCING
A summary of loans and direct lease financing follows:
March 31, December 31,
(in thousands) 1995 1994
----------------------
Commercial $ 29,303 $33,010
Real estate - Mortgage 47,715 49,236
Installment 4,442 4,694
Less unearned income, discounts and fees (350) (371)
----------------------
Loans and direct lease financing $ 81,110 $86,569
======================
-7-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1995
(5) OTHER OPERATING INCOME
A summary of other operating income follows:
Three Months Ended
March 31,
(in thousands) 1995 1994
--------------------
Depositor charges $ 182 $332
Net gain from sales of loans 37 176
Service charges, commissions
and fees 21 149
Other income 11 26
--------------------
$ 251 $683
====================
(6) OTHER OPERATING EXPENSES
A summary of other operating expenses is as follows:
Three Months Ended
March 31,
(in thousands) 1995 1994
---------------------
Salaries and employee
benefits $ 1,152 $2,292
Occupancy 296 523
Depreciation and
amortization 152 254
Data processing 102 200
Professional services 98 190
Regulatory fees
and assessments 96 222
Customer service 86 103
Net cost of operation of
real estate owned 43 (62)
Insurance 36 75
Stationery and supplies 30 55
Printing and postage 29 44
Telephone and telefax 21 66
Advertising and promotion 14 75
Delivery and courier 13 68
Collection (130) 228
Miscellaneous 70 163
---------------------
$ 2,108 $4,496
=====================
-8-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
The following presents management's discussion and analysis of the
consolidated financial condition and operating results of West Coast Bancorp
(as a separate entity "West Coast" and together with its subsidiaries the
"Company") for the three month periods ended March 31, 1995 and 1994. The
discussion should be read in conjunction with the Company's consolidated
financial statements and the accompanying notes appearing elsewhere in this
report.
GENERAL
The Company posted losses of $260,000 or $.03 per share and $1,384,000 or
$.15 per share during the three months ended March 31, 1995 and 1994,
respectively. The net loss narrowed in 1995 as losses from the high levels
of nonperforming assets were reduced despite the continued weak economy and
depressed real estate values.
On June 22, 1994, West Coast announced the signing of a definitive agreement
among Business & Professional Bank ("B&PB"), Sacramento First National Bank
("Sacramento First"), and West Coast providing for the acquisition of its
majority owned subsidiary, Sacramento First by B&PB. The transaction was
completed on January 20, 1995 and provided West Coast with approximately $3.6
million of cash, approximately 243,500 shares of B&PB's common stock and a
contingent cash payment of up to $940,000 that may be received by West Coast
from three to five years after the sale date based on the performance of
Sacramento First's loan portfolio and real estate owned. All assets and
liabilities of Sacramento First are included in "Net assets held for sale" at
December 31, 1994. Sacramento First's operating results were included in the
consolidated statements of operations for all periods through June 30, 1994.
Subsequent to June 30, 1994, no amounts relating to Sacramento First were
included in any category of the Company's ending balance sheet, average
balance sheet and income statement except as noted above.
Exclusive of Sacramento First's earnings, the Company's loss would have been
$1,290,000 for the three months ended March 31, 1994 as compared with the
$260,000 loss for the same period in 1995.
The Company had total assets, loans and deposits as follows (in thousands):
March 31, December 31, March 31, December 31,
1995 1994 1994 1993
-----------------------------------------------------
Total assets $ 123,098 $ 130,910 $ 284,691 $ 312,263
Loans 81,150 86,628 203,951 223,343
Deposits 111,638 119,269 267,364 292,950
The 1994 reductions resulted primarily from the accounting treatment for the
sale of Sacramento First and secondarily from a decrease in loans due to
lower loan demand, more stringent underwriting standards, and Sunwest's
capital position and regulatory orders. Sunwest is operating under an Order
to Cease and Desist (the "C&D Order") from the FDIC and an order from the
State Banking Department (the "State Order"). Both orders require, among
other things, maintenance of certain capital levels.
-9-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
During 1993 Sunwest became "undercapitalized" and during part of 1994 Sunwest
was "significantly undercapitalized" under the prompt corrective action
provisions of the FDIC Improvement Act. This made it difficult for Sunwest
to compete with other financial institutions for deposits and loans.
In January 1995, West Coast used the cash proceeds from the sale of
Sacramento First to repay $3.4 million of management fees to Sunwest. This
increased Sunwest's capital ratios to amounts necessary for a depository
institution to be "well capitalized" under the prompt action provisions of
the FDIC Improvement Act. However, because Sunwest is still subject to
regulatory agreements it can only be deemed "adequately capitalized." See
"Capital Resources and Dividends." Despite Sunwest's current capital level,
significant asset growth is not anticipated and further declines may occur.
Further, West Coast's liquidity is limited. In the event West Coast is
unable to raise funds to increase its liquidity, West Coast may not be able
to meet its current obligations and may be forced into bankruptcy. If this
event were to occur, West Coast shareholders could suffer the elimination of
the value of their investments in the Company. See "Liquidity - the Parent
Company."
RESULTS OF OPERATIONS
GENERAL
The first quarter 1995 loss was significantly lower than the first quarter
1994 loss because of reduced loan losses and cost control efforts implemented
at Sunwest.
NET INTEREST INCOME
Net interest income decreased $1,926,000 or 52% from the first quarter of
1994 to the first quarter of 1995 because of the sale of Sacramento First and
reduced loan volumes at Sunwest. The sale of Sacramento First resulted in a
$1,505,000 decrease in net interest income for the three months ended March
31, 1995 versus 1994. Average loans at Sunwest decreased by $41 million or
33% from the first quarter of 1994 to the first quarter of 1995.
Average earning assets and average interest-bearing liabilities decreased
primarily as a result of the sale of Sacramento First. Excluding Sacramento
First from all periods, average earning assets would have decreased by $40
million and average interest-bearing liabilities would have decreased by $30
million for the three month periods ended March 31, 1995 versus 1994,
respectively.
-10-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
The following table sets forth the Company's average balance sheets, yields
on earning assets, rates paid on interest-bearing liabilities, net interest
margins and net yields on interest-earning assets for the three month periods
ended March 31, 1995 and 1994 (dollars in millions):
Three Months Ended March 31,
1995 1994
Average Yields/ Average Yields/
ASSETS Balance Rates Balance Rates
------------------------------------
Loans, net of unearned income,
discounts and fees $ 83.7 10.33% $210.0 9.05%
Investment securities 11.6 6.10 17.1 4.98
Federal funds sold 16.8 5.67 34.5 2.97
Interest-bearing deposits
with financial institutions 4.4 6.30 4.4 3.29
------------------------------------
Total interest-earning assets 116.5 9.08 266.0 7.90
Allowance for possible credit losses (4.7) (5.8)
Cash and due from banks 6.8 22.7
Other assets 9.5 16.5
------------------------------------
$128.1 $299.4
====================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Time deposits $ 42.4 5.37% $ 86.2 3.77%
Savings deposits 6.5 1.97 12.0 2.29
Interest-bearing demand deposits 33.8 1.97 94.1 2.29
Other 3.9 10.44 5.0 10.47
------------------------------------
Total interest-bearing liabilities 86.6 4.02 197.3 3.15
Demand deposits 33.7 88.0
Other liabilities 1.6 2.9
Shareholders' equity 6.2 11.2
------------------------------------
$128.1 $299.4
====================================
Net interest margin 5.06% 4.75%
Net yield on interest-earning assets 6.09 5.57
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WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
The increases (decreases) in interest income and expense and net interest
income resulting from changes in average assets, liabilities and interest
rates for the 1995 versus 1994 periods are summarized as follows (in
thousands):
Three Months Ended March 31,
------------------------------
Asset/ Interest
Liability Rate
Changes in Changes Changes Total
------------------------------
Interest
income $(3,435) $ 827 $(2,608)
Interest
expense (867) 185 (682)
-----------------------------
Net interest
income $(2,568) $ 642 $(1,926)
=============================
The declines in net interest income resulted primarily from the sale of
Sacramento First and volume declines in average earning assets offset
partially by general market rate increases.
Loans on which the accrual of interest had been discontinued at March 31,
1995 and 1994 amounted to $5,617,000 and $7,607,000, respectively. If these
loans had been current throughout their terms, it is estimated that net
interest income would have increased by approximately $162,000 and $243,000
in the first quarters of 1995 and 1994, respectively. This would have raised
the net yield on interest-earning assets and the net interest margin by
approximately 56 basis points during the first quarter of 1995 and by
approximately 36 basis points during the first quarter of 1994.
For the three months ended March 31, 1994 versus 1995 the yield on earning
assets increased from 7.90% to 9.08%. This increase was primarily a result
of general increases in market rates including the 300 basis point prime rate
increase from March 1994 to March 1995. The yield is expected to continue to
increase during the remainder of 1995 as a portion of the $25 million of real
estate loans that only reprice annually gradually reprice. The rate on
interest-bearing liabilities increased by 87 basis points from the first
quarter of 1994 to the first quarter of 1995 as time deposits have matured
and repriced at the higher current market rate. This trend is expected to
continue until all term deposits reprice at the current higher rate.
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WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
NONPERFORMING ASSETS AND PROVISION FOR POSSIBLE CREDIT LOSSES
The following table summarizes the activity in the allowance for possible
credit losses during the periods indicated (in thousands):
Three Months Ended
March 31,
1995 1994
----------------------
Allowance for possible credit losses
balance at beginning of period $ 4,649 $ 5,557
Charge-offs (290) (791)
Recoveries 189 202
----------------------
Net charge-offs (101) (589)
Provision for possible
credit losses 178 1,272
----------------------
Allowance for possible credit losses
balance at end of period $ 4,726 $ 6,240
======================
A summary of net (charge-offs) recoveries follows (in thousands):
Three Months Ended
March 31,
1995 1994
----------------------
West Coast $ - $ 35
Sacramento First - (159)
Sunwest (101) (465)
----------------------
$ (101) $ (589)
======================
The provision for possible credit losses was lower during the three months
ended March 31, 1995 than in the same respective periods in 1994, reflecting
the reduced charge-offs, lower levels of nonperforming loans and the sale of
Sacramento First. Sunwest's total charge-offs and provision decreased by
$295,000 and $775,000 respectively during the three months ended March 31,
1995 versus 1994.
Management believes that the allowance for possible credit losses at March
31, 1995 of $4,726,000 or 5.82% of loans was adequate to absorb known and
inherent risks in the Company's credit portfolio.
-13-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
A summary of nonperforming assets follows (dollars in thousands):
March 31, December 31, March 31, December 31,
1995 1994 1994 1993
------------------------------------------------------
Nonaccrual loans $ 5,617 $ 5,414 $ 7,607 $10,744
Loans 90 days past due
and still accruing 15 76 639 353
------------------------------------------------------
Nonperforming loans 5,632 5,490 8,246 11,097
Real estate owned 3,250 4,352 6,943 7,738
------------------------------------------------------
Nonperforming assets $ 8,882 $ 9,842 $ 15,189 $18,835
======================================================
Nonperforming loans/
Total loans 6.94% 6.34% 4.04% 5.04%
Nonperforming assets/
Total assets 7.22 7.52 5.34 6.03
======================================================
Nonperforming assets have decreased from $18.8 million at December 31, 1993
to $8.9 million at March 31, 1995. The sale of Sacramento First accounted
for $1,211,000 of the nonperforming loan decrease and $3,173,000 of the
nonperforming asset decrease from December 31, 1993 to December 31, 1994.
The high levels of nonperforming assets as a percentage of assets are
reflective of the current economic environment and depressed real estate
values in southern California. While significant progress in reducing
nonperforming assets has been made, until such time as the current economic
environment and real estate values improve, the Company may continue to
experience high levels of nonperforming assets, charge-offs and provisions
for possible credit losses.
Restructured loans which were performing substantially in accordance with
their modified terms totaled $5,818,000 at March 31, 1995. Restructured
loans totaling $490,000 were on nonaccrual status at March 31, 1995.
OTHER OPERATING INCOME
Other operating income decreased by $432,000 for the three months ended March
31, 1995 as compared with the same period in 1994. See notes (1) and (5) of
the notes to consolidated financial statements. Sunwest's other operating
income has continued to decrease primarily from lower deposit balances that
caused a $59,000 decrease in depositor charges.
-14-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
OTHER OPERATING EXPENSES
Other operating expenses have decreased $2,388,000 from the quarter ended
March 31, 1994 to the same period in 1995. See notes (1) and (6) of the
notes to consolidated financial statements. Total other operating expenses
expressed in dollars and as a percentage of total revenues and average assets
follows (dollars in thousands):
Three Months Ended
March 31,
1995 1994
----------------------
Other operating expenses $ 2,108 $ 4,496
Other operating expenses
(annualized)/average assets 6.58% 6.01%
Other operating expenses/interest
and other operating income 72.8% 75.7%
======================
Salaries decreased $1,140,000 for the three months ended March 31, 1995
versus the same period in 1994. Salaries decreased at Sunwest by $478,000
for the same period as a result of the 28% staff reduction during the second
quarter of 1994. Salaries decreased $716,000 as a result of selling
Sacramento First. Occupancy decreased by $227,000: $155,000 was a result of
selling Sacramento First and the remaining difference was primarily from
renegotiating various leases at Sunwest. Collection expenses decreased by
$358,000 of which $336,000 occurred at Sunwest. Sunwest's decrease was a
result of significant cost control efforts and a $195,000 recovery of
previously charged expenses. All other noninterest expenses decreased
$663,000 for the three months ended March 31, 1995 versus 1994 primarily from
the sale of Sacramento First.
INCOME TAXES
The Company did not record any significant income tax expense or benefit
during the three months ended March 31, 1995 or 1994. No significant income
tax expense is expected during 1995.
LIQUIDITY
The Company
Liquidity, as it relates to banking, represents the ability to obtain funds
to meet loan commitments and to satisfy demand for deposit withdrawals. The
principal sources of funds that provide liquidity to West Coast's
subsidiaries are maturities of investment securities and loans, collections
on loans, increased deposits and temporary borrowings. The Company's liquid
asset ratio (the sum of cash, investments available-for-sale and Federal
funds sold divided by total assets) was 26% and 23% at March 31, 1995 and
December 31, 1994, respectively. The Company believes it has sufficient
liquid resources, as well as available credit facilities, to enable it to
meet its operating needs.
-15-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
THE PARENT COMPANY
West Coast's liquidity is limited. West Coast has relied on sales of assets
and borrowings from officers/directors as sources of liquidity. Dividends
from subsidiaries ordinarily provide a source of liquidity to a bank holding
company. Sunwest is prohibited from paying cash dividends by the C&D and the
state order without the prior consent of the regulatory agencies.
During the first quarter of 1995 West Coast did not receive any management
fees or dividends from its subsidiaries. West Coast does not expect to
receive management fees or dividends from its subsidiaries throughout 1995.
West Coast received $3.5 million of cash, net of selling expenses, from the
sale of Sacramento First. West Coast immediately transferred $3.4 million
into Sunwest as a repayment of previously paid management fees. On March 23,
1995, West Coast sold 50,000 shares of B&PB stock. Of the total proceeds of
$387,000, $200,000 was infused as capital in Sunwest on March 30, 1995. At
March 31, 1995 the remaining $187,000 was held by Sunwest as collateral for
West Coasts guarantee of Sunwests capital plan. West Coast did not have any
other cash at March 31, 1995. In May 1995, pursuant to the approval of the
FDIC, $100,000 was released from the pledge and infused as capital into
Sunwest and the remaining $87,000 was released to West Coast. Sales of other
property are forecasted to provide $220,000 during the remainder of 1995.
WCV, Inc. may be eligible for reimbursement of certain costs incurred to
remediate a property. Such amounts, if any, are unable to be determined.
West Coast anticipates cash expenditures during the remainder of 1995 to
consist of debt service payments, advances to WCV, Inc. and other operating
expenses. West Coast's projected debt service includes quarterly interest
payments on the 10% subordinated debentures of $76,000 each and an annual
principal payment on the notes payable to affiliates of $113,000. A portion
of the notes payable to affiliates are currently secured by, and scheduled to
be repaid by sales proceeds totaling $220,000 from the other property sales
mentioned above. Advances to WCV, Inc. are forecasted at $320,000 primarily
for restoration of the real estate owned. West Coast anticipates that other
operating expenses, will be approximately $320,000 during the remainder of
1995, of which $150,000 relates to salaries and directors' fees that are
currently being deferred. A former officer of the Company has a judgment
against West Coast in the amount of $312,000 and is actively pursuing
collection of the judgment.
A cash shortfall is anticipated unless additional cash can be raised. West
Coast may elect to raise additional cash by limiting repayments of the
affiliate debt or interest payments on the subordinated debt, and/or
incurring additional debt. West Coast may not incur debt without the
approval of the Federal Reserve Board. West Coast is considering selling
additional shares of B&PB stock, however pursuant to agreement with B&PB,
West Coast can sell no additional shares of B&PB during 1995 without B&PB's
consent. Even if B&PB was to consent to sale of some additional shares,
proceeds of such sale would become security for West Coast's guarantee of
Sunwest's capital plan as all shares of B&PB stock and proceeds thereof are
pledged to Sunwest to secure such obligation. No assurances can be given
that the FDIC would permit Sunwest to release the collateral to West Coast.
-16-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1995
In the event West Coast is unable to raise funds to increase its liquidity,
West Coast may not be able to meet its current obligations and may be forced
into bankruptcy. If this event were to occur, West Coast shareholders could
suffer the elimination of the value of their investments in the Company.
CAPITAL RESOURCES AND DIVIDENDS
The following table sets forth the tier 1 and total risk-based capital and
leverage ratios as of March 31, 1995 for the Company and Sunwest:
Tier 1 Total
Capital Capital Leverage
Ratio Ratio Ratio
---------------------------
The Company 6.59% 8.55% 4.73%
Sunwest 9.34 10.64 6.66
Regulatory minimum 4.00 8.00 4.00 (a)
(a) Sunwest is subject to the C&D Order from the FDIC that requires Sunwest
to achieve a leverage ratio of 6.5% and is subject to a substantially
similar State Order.
On January 20, 1995, Sunwest received a repayment of previously paid
management fees totaling $3.4 million from West Coast and on March 30, 1995
Sunwest received an additional $200,000 from West Coast increasing Sunwest's
leverage ratio to above the 6.5% level required by the regulatory orders.
These amounts increase Sunwest's capital ratios to levels necessary for a
depository institution to be "well capitalized" under the prompt action
provisions of the FDIC Improvement Act. However, because Sunwest is still
subject to regulatory agreements it can only be deemed "adequately
capitalized." Sunwest received an additional $100,000 capital infusion from
West Coast during May 1995.
Management believes Sunwest is now in compliance with the regulatory
agreements and orders as set forth in the capital plan Sunwest submitted to
the FDIC, pursuant to the prompt corrective action provisions of the FDIC
Improvement Act, which is guaranteed by West Coast. The amount of such
guaranty is limited to the lesser of (i) 5% of Sunwest's total assets at Sep-
tember 30, 1993, the date the FDIC deemed Sunwest to have notice that it was
undercapitalized or (ii) the amount which is necessary to bring Sunwest into
compliance with all applicable capital standards at the time Sunwest fails to
comply with the capital restoration plan.
The Company had no material commitments for capital expenditures as of March
31, 1995.
-17-<PAGE>
WEST COAST BANCORP AND SUBSIDIARIES
March 31, 1995
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
NONE
(b) Reports on Form 8-K
West Coast Bancorp filed a report on Form 8-K on February 3, 1995 for
the event of January 20, 1995 reporting under Item 5 the agreement
between West Coast Bancorp, Sacramento First National Bank and Business
& Professional Bank.
-18-<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.
WEST COAST BANCORP
/s/John B. Joseph May 11, 1995
----------------------------------------- ----------------------
John B. Joseph Date
Chief Executive Officer
/s/Frank E. Smith May 11, 1995
----------------------------------------- ----------------------
Frank E. Smith Date
Chief Financial Officer<PAGE>
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