UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 1999.
Commission File Number 0-10658
BWC FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-262100
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1400 Civic Drive, Walnut Creek, California _ 94596 __
(Address of principal executive offices)
(925) 932-5353
(Registrant's telephone number: (including area code)
N/A
(Former name, former address, and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No _____
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS 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 1924 subsequent to the distribution of securities under a plan
confirmed by court. Yes No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as the latest practicable date. As of March 31, 1999, there were
2,522,879 shares of common stock, no par value outstanding.
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
Item 1 Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Changes in
Shareholders' Equity 6
Notes to Consolidated Financial Statements 7-10
Item 2 Management's Discussion and Analysis
of Results of Operations 11-18
Interest Rate Sensitivity 19
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 20
Item 2 Changes in Securities 20
Item 3 Defaults Upon Senior Securities 20
Item 4 Submission of Matters to a Vote of
Security Holders 20
Item 5 Other Materially Important Events 20
Item 6 Exhibits and Reports on Form 8-K 20
Signatures 21
<PAGE>
<TABLE>
<CAPTION>
BWC FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS 1999 1998
<S> <C> <C>
(Unaudited)
Cash and Due From Banks $13,455,000 $14,345,000
Federal Funds Sold $9,950,000 2,300,000
Other Short Term Investments 2,305,000 35,000
Total Cash and Cash Equivalents 25,710,000 16,680,000
Investment Securities:
Available for Sale 44,407,000 45,655,000
Held to Maturity (approximate fair value of
$13,018,000 in 1999 and $13,797,000 in 1998) 12,850,000 13,592,000
Loans, Net of Allowance for Credit Losses of $4,039,000
in 1999 and $3,919,000 in 1998. 185,156,000 183,058,000
Bank Premises and Equipment, Net 1,314,000 1,303,000
Interest Receivable and Other Assets 4,825,000 4,611,000
Total Assets $274,262,000 $264,899,000
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $69,513,000 $69,783,000
Interest-bearing:
Money Market Accounts 75,302,000 64,687,000
Savings and NOW Accounts 35,947,000 37,139,000
Time Deposits:
Under $100,000 33,396,000 34,293,000
$100,000 or more 29,641,000 32,238,000
Total Interest-bearing 174,286,000 168,357,000
Total Deposits 243,799,000 238,140,000
Federal Funds Purchased --
BWC Mortgage Services Line of Credit 1,647,000
Interest Payable and Other Liabilities 3,258,000 2,416,000
Total Liabilities 248,704,000 240,556,000
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Preferred Stock, no par value:
5,000,000 shares authorized, none outstanding. -- --
Common Stock, no par value:
25,000,000 shares authorized; issued and outstanding -
2,522,879 shares in 1999 and 2,511,151 in 1998. 19,242,000 19,002,000
Retained Earnings 6,126,000 5,006,000
Capital adjustment on available-for-sale securities 190,000 335,000
Total Shareholders' Equity 25,558,000 24,343,000
Total Liabilities and Shareholders' Equity $274,262,000 $264,899,000
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BWC FINANCIAL CORP. For the Three Months
CONSOLIDATED STATEMENTS OF INCOME Ended March 31,
1999 1998
<S> <C> <C>
Interest Income
Loans, Including Fees $4,852,000 $4,367,000
Investment Securities:
Taxable 651,000 486,000
Non-taxable 148,000 102,000
Federal Funds Sold 75,000 98,000
Other Short Term Investments 8,000 16,000
Total Interest Income 5,734,000 5,069,000
Interest Expense
Deposits 1,542,000 1,580,000
Federal Funds Purchased 5,000 1,000
Total Interest Expense 1,547,000 1,581,000
Net Interest Income 4,187,000 3,488,000
Provision For Credit Losses 150,000 150,000
Net Interest Income After Provision For Credit Losses 4,037,000 3,338,000
Noninterest Income
BWC Mortgage Services - Commissions 903,000 722,000
BWC Mortgage Services - Fees & Other 233,000 83,000
Service Charges on Deposit Accounts 206,000 190,000
Other 220,000 178,000
Gains on Security Transactions 30,000 27,000
Total Noninterest Income 1,592,000 1,200,000
Noninterest Expense
Salaries and Related Benefits 1,655,000 1,270,000
BWC Mortgage Services - Commissions 525,000 416,000
BWC Mortgage Services - Fees & Other 353,000 160,000
Occupancy 214,000 208,000
Furniture and Equipment 120,000 144,000
Other 809,000 649,000
Total Noninterest Expense 3,676,000 2,847,000
BWC Mortgage Services - Minority Interest 129,000 114,000
Income Before Income Taxes 1,824,000 1,577,000
Provision For Income Taxes 704,000 611,000
Net Income $1,120,000 $966,000
Basic Earnings Per Share $0.45 $0.39
Diluted Earnings Per Share $0.38 $0.33
Average Basic Shares 2,513,799 2,482,315
Average Diluted Share Equivalents Related to Options 441,472 424,118
Average Diluted Shares 2,955,271 2,906,433
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
BWC FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $1,120,000 $966,000
Adjustments to reconcile net income to
net cash provided(used):
Amortization of loan fees (465,000) (362,000)
Provision for credit losses 150,000 150,000
Depreciation and amortization 90,000 97,000
Gain of sale of securities available-for-sale 30,000 27,000
Increase in accrued interest receivable
and other assets (214,000) (200,000)
Increase in accrued interest payable
and other liabilities 842,000 562,000
Net Cash Provided by Operating Activities 1,553,000 1,240,000
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 1,117,000 1,373,000
Proceeds from the sales of available-for-sale
investment securities 5,991,000 4,998,000
Purchase of investment securities (5,053,000) (10,004,000)
Loans originated, net of collections (1,782,000) 623,000
Purchase of bank premises and equipment (101,000) (35,000)
Net CashProvided (Used) by Investing Activities 172,000 (3,045,000)
FINANCING ACTIVITIES:
Net increase(decrease) in deposits 5,658,000 (717,000)
Increase in BWC Mortgage Services Line of Credit 1,647,000 --
Cash paid in lieu of fractional shares -- (7,000)
Net Cash Provided(Used) by Financing Activities 7,305,000 (724,000)
CASH AND CASH EQUIVALENTS:
Increase(decrease)in cash and cash equivalents 9,030,000 (2,529,000)
Cash and cash equivalents at beginning of year 16,680,000 22,143,000
Cash and Cash Equivalents at period end $25,710,000 $19,614,000
ADDITIONAL CASH FLOW INFORMATION:
Interest Paid $1,494,000 $1,483,000
Income Taxes Paid $20,000 $210,000
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
BWC FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the periods ending March 31, 1999, and 1998 Accumulated
other
Number Common Retained Comprehensive Comprehensive
of Shares Stock Earnings Income Total Income
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 1,233,051 $18,603,000 $706,000 $139,000 $19,448,000
Net Income as of March 31, 1998 -- -- 966,000 -- 966,000 966,000
Other Comprehensive Income, net of tax
liability of $13,000 -- -- -- 25,000 25,000 25,000
Comprehensive Income -- -- -- -- -- $991,000
Stock Options Exercised at $5.59 per share 1,100 6,000 -- -- 6,000
Balance, March 31, 1998 1,234,151 18,609,000 1,672,000 164,000 20,445,000
Balance, January 1, 1999 2,511,151 19,002,000 5,006,000 335,000 24,343,000
Net Income as of March 31, 1999 -- -- 1,120,000 -- 1,120,000 1,120,000
Other Comprehensive Income(Loss), net of tax
benefit of $88,000 -- -- -- (145,000) (145,000) (145,000)
Comprehensive Income -- -- -- -- -- $975,000
Common Stock Issued and sold to the
Defined Contribution Plan at $20.44 per share 11,728 240,000 -- -- 240,000
Balance, March 31, 1999 2,522,879 $19,242,000 $6,126,000 $190,000 $25,558,000
</TABLE>
<PAGE>
BWC FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position
at March 31, 1999 and the results of operations for the three months ended
March 31, 1999 and 1998 and cash flows for the three months ended March 31,
1999 and 1998.
Certain information and footnote disclosures presented in the
Corporation's annual consolidated financial statements are not included in
these interim financial statements. Accordingly, the accompanying
unaudited interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Corporation's 1998 Annual Report to Shareholders, which is
incorporated by reference in the Company's 1998 annual report on Form 10-K.
The results of operations for the three months ended March 31, 1999 are
not necessarily indicative of the operating results for the full year.
Diluted earnings per share is computed using the weighted average
number of shares outstanding during the period, adjusted for the dilutive
effect of stock options, stock dividends and the stock splits.
2. INVESTMENT SECURITIES AND OTHER SHORT TERM INVESTMENTS
The amortized cost and approximate market value of investment
securities at March 31, 1999 are as follows:
Gross
Amortized Unrealized Market
Cost Gain/(Loss) Value
Held-to-maturity
Obligations of State and
Political Subdivisions $12,850,000 $ 168,000 $13,018,000
Available-for-sale
Taxable Obligations of
State & Political
Subdivisions $10,155,000 $140,000 $10,295,000
U.S. Treasury Securities 11,609,000 63,000 11,672,000
U.S. Government Agencies 16,871,000 37,000 16,908,000
Preferred Stock
U.S. Government Agencies 1,653,000 92,000 1,745,000
Corporate Securities 3,811,000 (24,000) 3,787,000
Total Available-for-sale $44,099,000 $308,000 $44,407,000
The following table shows the amortized cost and estimated market
value of investment securities by contractual maturity at March 31, 1999.
Held-to-Maturity Available-for-Sale
Amortized Market Amortized Market
Cost Value Cost Value
Within one year $ 2,145,000 $2,156,000 $ 7,267,000 $ 7,317,000
After one but within
five years $ 4,849,000 $4,929,000 $25,287,000 $25,455,000
Over five years $ 5,856,000 $5,933,000 $11,545,000 $11,635,000
Total $12,850,000 $13,018,000 $44,099,000 $44,407,000
3. ALLOWANCE FOR CREDIT LOSSES
For the Three months
Ended
March 31,
1999 1998
Allowance for credit losses at
beginning of period $3,919,000 $2,936,000
Chargeoffs (39,000) (24,000)
Recoveries 9,000 189,000
Net (recoveries)/chargeoffs (30,000) 165,000
Provisions 150,000 150,000
Allowance for credit losses at
end of period $4,039,000 $3,251,000
Ratio of allowance for credit
losses to loans 2.20% 1.98%
4. COMPREHENSIVE INCOME
The Bank has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130), as of January 1, 1998. This
statement established standards for the reporting and display of
comprehensive income and its components in the financial statements. For
the Bank, comprehensive income includes net income reported on the
statements of income and changes in the fair value of its available-for-
sale investments reported as a component of shareholders' equity.
The Corporation's comprehensive income for the period is reflected in the
following table:
For the Three Months
Ended March 31,
1999 1998
Net Income $1,120,000 $966,000
Other Comprehensive Income, net
of tax:
Adjustment for available-for-
sale securities (145,000) 25,000
Total Comprehensive Income $975,000 $991,000
5. FASB 131 DISCLOSURE
The Corporation adopted Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
(SFAS 131) as of January 1, 1998. This statement establishes standards for
the reporting and display of information about operating segments in
financial statements and related disclosures.
The Corporation is principally engaged in community banking activities
through its seven Bank branches. In addition to its community banking
activities, the Corporation provides mortgage brokerage services through
its joint venture, BWC Mortgage Services. These activities are monitored
and reported by Corporation management as a separate operating segment. As
permitted under the Statement, the separate banking offices have been
aggregated into a single reportable segment, Community Banking. The other
operating segments do not meet the prescribed aggregation or materiality
criteria and therefore are reported as "All other" in the following table.
The Corporation's community banking segment provides loans, leases, SBA
loan products, asset based lending services and lines of credit to local
businesses and individuals. This segment also derives revenue by investing
funds, that are not loaned to others in the form of loans, leases or lines
of credits, into investment securities. The business purpose of BWC
Mortgage Services is the origination and placement of long-term financing
for real estate mortgages.
Summarized financial information for the period ending March 31, 1999, and
1998 concerning the Corporation's reportable segments is shown in the
following table.
6. SFAS No. 133
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Statement establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value. The Statement requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the
hedged item in the income statement, and requires that a company must
formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the Statement as of the beginning of any
fiscal quarter after issuance (that is, fiscal quarters beginning June 16,
1998 and thereafter). Statement 133 cannot be applied retroactively.
Statement 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1997 (and, at the
Corporation's election, before January 1, 1998).
The Corporation has no derivative or hedged instruments and therefore the
implementation of this statement is not expected to have a material impact
on the Corporation's financial position or results of operations.
<PAGE>
<TABLE>
INTEREST RATE SENSITIVITY
(in thousands except share and per share data)
<FN>
Proper management of the rate sensitivity and maturities of assets and liabilities is required
to provide an optimum and stable net interest margin. Interest rate sensitivity spread management
is an important tool for achieving this objective and for developing strategies and means to
improve profitability. The schedules shown below reflect the interest rate sensitivity position
of the Corporation as of March 31, 1999. Management believes that the sensitivity ratios
reflected in these schedules fall within acceptable ranges, and represent no undue interest rate
risk to the future earnings prospects of the Corporation.
</FN>
<CAPTION>
3 3-6 12 1-5 Over 5
Repricing within: months months months years years Totals
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Federal funds sold & Short Term Inv. $12,255 $ -- $ -- $ -- $ -- $12,255
Investment securities 2,304 1,558 5,600 30,302 17,493 57,257
Construction & real estate loans 87,524 7,546 3,474 88 0 98,632
Commercial loans 45,119 6,551 5,323 708 -- 57,701
Consumer Loans 27,236 355 669 1,438 0 29,698
Leases 391 393 741 1,639 -- 3,164
Interest-bearing assets 174,829 16,403 15,807 34,175 17,493 258,707
Savings and Now accounts $35,947 $ -- $ -- $ -- $ -- $35,947
Money market accounts 75,302 -- -- -- -- 75,302
Time deposits <$100,000 13,893 7,503 10,415 1,585 -- 33,396
Time deposits >$100,000 18,346 3,828 7,104 363 -- 29,641
Interest-bearing liabilities 143,488 11,331 17,519 1,948 -- 174,286
Rate sensitive gap $31,341 $5,072 -$1,712 $32,227 $17,493 $84,421
Cumulative rate sensitive gap $31,341 $36,413 $34,701 $66,928 $84,421
Cumulative rate sensitive ratio 1.22 1.24 1.20 1.38 1.48
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Materially Important Events
None
Item 6 - Exhibits and Reports on Form 8-K
None
<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.
BWC FINANCIAL CORP.
(Registrant)
May 2, 1999 James L. Ryan
___________________________ _________________________________
Date James L. Ryan
Chairman and Chief Executive Officer
May 2, 1999 Leland E. Wines
______________________ ________________________________
Date Leland E. Wines
CFO and Corp. Secretary
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000353650
<NAME> BWC FINANCIAL CORP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 13445000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9950000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44407000
<INVESTMENTS-CARRYING> 12850000
<INVESTMENTS-MARKET> 13018000
<LOANS> 189195000
<ALLOWANCE> 4039000
<TOTAL-ASSETS> 274262000
<DEPOSITS> 243799000
<SHORT-TERM> 1647000
<LIABILITIES-OTHER> 3258000
<LONG-TERM> 0
0
0
<COMMON> 19242000
<OTHER-SE> 6316000
<TOTAL-LIABILITIES-AND-EQUITY> 274262000
<INTEREST-LOAN> 4852000
<INTEREST-INVEST> 799000
<INTEREST-OTHER> 83000
<INTEREST-TOTAL> 5734000
<INTEREST-DEPOSIT> 1542000
<INTEREST-EXPENSE> 5000
<INTEREST-INCOME-NET> 1547000
<LOAN-LOSSES> 150000
<SECURITIES-GAINS> 30000
<EXPENSE-OTHER> 1562000
<INCOME-PRETAX> 1824000
<INCOME-PRE-EXTRAORDINARY> 1824000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1120000
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.38
<YIELD-ACTUAL> 6.90
<LOANS-NON> 192000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 743000
<ALLOWANCE-OPEN> 3919000
<CHARGE-OFFS> 39000
<RECOVERIES> 9000
<ALLOWANCE-CLOSE> 4039000
<ALLOWANCE-DOMESTIC> 2788000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1251000
</TABLE>
