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.
/X/ For the Quarterly Period Ended March 31, 1996 or
Transition Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the transition period from _________ to _________.
Commission File Number 0-11008
CU BANCORP
(Exact name of registrant as specified in its charter)
California 95-3657044
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
818-907-9122
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year if changes 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 / /
As of March 31, 1996, the Registrant has 5,296,583 outstanding shares of its
Common stock, no par value.
<PAGE> 1
CU Bancorp
Quarter Ended March 31, 1996
Table of Contents - Form 10-Q
<TABLE>
<CAPTION>
Page
<S> <S>
Part I. Financial Information
Item 1. Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operation. 3
Consolidated Statements of Financial Condition:
-March 31, 1996, and December 31, 1995. 14
Consolidated Statements of Income:
-Three Month Periods Ended March 31, 1996, and
March 31, 1995. 15
Consolidated Statements of Cash Flows:
-Three Month Periods Ended March 31, 1996 and
March 31, 1995. 16
Notes to Consolidated Financial Statements 17
Signatures 22
Part II. Other Information
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holder 23
Item 5. Other Information 23
Item 6. Exhibits and Filings on Form 8-K 25
</TABLE>
<PAGE> 2
Management Discussion and Analysis
Overview
The Company earned $567 thousand or $.10 per share, during the first quarter of
1996, compared to $710 thousand, or $.15 per share, during the same period in
1995. Income for the current quarter was reduced by costs totaling $.05 per
share related to merger activity. Net income for the quarter ended March 31,
1996 would have been $.15 per share without the direct expenses incurred in the
period related to the acquisition of Corporate Bank and the proposed merger with
Home Bank. This compares with $710 thousand, or $.15 per share for the
comparable quarter of last year. Earnings for the first quarter of 1995
included approximately $.02 per share attributable to a sale of mortgage
servicing rights.
On January 12, 1996, the Bank completed the acquisition of Santa Ana based
Corporate Bank. Inclusion of the Corporate Bank balances for the first time had
a number of effects on the Bank's financial statements. Non performing assets
increased to $3.8 million at March 31, 1996, up from $1 million at December 31,
1995 and $66 thousand at the end of the first quarter of 1995. Real estate
acquired through foreclosure totaled $450 thousand at March 31, 1996, compared
with zero at December 31, 1995 and March 31, 1995. The Bank's allowance for
loan losses as a percent of loans was 243% at March 31, 1996, compared with
11503% at the comparable quarter of 1995. These asset quality ratios, even
after the inclusion of the non performing assets from Corporate Bank's
portfolio, remain strong.
Capital ratios are strong, substantially exceeding levels required for the "well
capitalized" category established by bank regulators. The Total Risk-Based
Capital Ratio was 13.60%, the Tier 1 Risk-Based Capital Ratio was 12.33%, and
the Leverage Ratio was 9.41% at March 31, 1996, compared to 16.19%, 14.92%, and
10.52%, respectively, at year-end 1995. Regulatory requirements for Total Risk-
Based, Tier 1 Risk-Based, and Leverage capital ratios are a minimum of 8%, 4%,
and 3%, respectively, and for classification as well capitalized, 10%, 6%, and
5%, respectively.
The Bank's strong capital and asset quality position allows the Bank to continue
to grow its core business which provides relationship based services to middle
market customers and positions the Bank for its acquisition strategy. During
the first quarter of 1996, the Bank generated approximately $33 million in new
loan commitments, compared with about $31 million for the comparable period of
1995.
In January 1996, the Bank announced the signing of an agreement to merge with
Home Interstate Bancorp, the parent of Home Bank, based in the South Bay. This
merger, targeted to be completed in the second or third quarter of 1996, would
create a combined bank with over $800 million in assets and 22 branches.
Balance Sheet Analysis
Loan Portfolio Composition and Credit Risk
The Bank's loan portfolio at March 31, 1996 has maintained the high standards of
credit quality that have been established as the commercial loan portfolio has
been built over the past three years. Non performing assets are at manageable
levels and exposures to real estate have been greatly reduced to consist
primarily of loans secured by real estate made to the Bank's core middle market
customers as a secondary part of their total business relationship.
Total loans at March 31 ,1996 increased by $45 million from December 31, 1995.
A significant part of the change in the loan portfolio was due to the
acquisition of Corporate Bank in January 1996. Approximately $43 million of
the March 31, 1996 loan balances relate to loans acquired in the Corporate Bank
transaction. The remaining small increase in outstandings represents new
business production more than offsetting the usual seasonal declines that occur
in the first quarter in the commercial portfolio.
<PAGE> 3
<TABLE>
<CAPTION>
Table 1 Loan Portfolio Composition
Amounts in thousands of dollars March 31, December 31, March 31,
1996 1995 1995
<S> <C> <C> <C> <C> <C> <C>
Commercial & Industrial Loans $177,754 75% $159,768 84% $136,884 78%
Real Estate Loans:
Commercial 39,907 17 20,190 11 26,528 15
Mortgages 7,108 3 5,470 3 4,773 3
Construction 3,113 2 0 0 416 1
Total Real Estate Loans 50,128 22 25,660 14 31,717 19
Other loans 7,724 3 5,198 2 6,001 3
Total loans net of unearned fees $235,606 100% $190,626 100% $174,602 100%
</TABLE>
<TABLE>
<CAPTION>
Table 1a Loan Portfolio Maturities
(in Millions)
Remaining Maturity
Within After One After
One but Within Five
Year Five Years Years Total
<S> <C> <C> <C> <C>
Commercial & Industrial Loans $135,237 $47,139 $6,215 $188,591
Real Estate - Commercial & Mortgage 11,245 30,531 5,239 47,015
Total loans $146,482 77,670 11,454 $235,606
Loans due after one year with
predetermined interest rates 21,318 3,419
Loans due after one year with
floating or adjustable rates 56,352 8,035
$77,670 $11,454
</TABLE>
Table 1a above summarizes the maturities of the loan portfolio based upon the
contractual terms of the loans. The Bank does not automatically rollover any
loans at maturity. Maturing loans must go through the Bank's normal credit
approval process in order to roll a loan over to a new maturity date.
The Bank lending effort is focused on business lending to middle market
customers. Current credit policy now permits commercial real estate lending
generally only as part of a complete commercial banking relationship with a
middle market customer. Commercial real estate loans are secured by first or
second liens on office buildings and other structures. The loans are secured by
real estate that had appraisals in excess of loan amounts at origination.
Monitoring and controlling the Bank's allowance for loan losses is a continuous
process. All loans are assigned a risk grade, as defined by credit policies, at
origination and are monitored to identify changing circumstances that could
modify their inherent risks. These classifications are one of the criteria
considered in determining the adequacy of the allowance for loan losses.
<PAGE> 4
<TABLE>
<CAPTION>
The amount and composition of the allowance for loan losses is as follows:
Table 2 Allocation of Allowance for Loan Losses
Amounts in thousands of dollars March 31, December 31, March 31,
1996 1995 1995
<S> <C> <C> <C>
Commercial & Industrial Loans(1) $7,923 $6,594 $6,392
Real estate loans - Mortgages 0 0 277
Real estate loans - Construction Loans 222 0 5
8,145 6,594 6,674
Unfunded commitments and letters of credit 80 336 551
Total Allowance for loan losses $8,225 $6,930 $7,225
(1) Including Commercial loans secured by real
estate
</TABLE>
Adequacy of the allowance is determined using management's estimates of the risk
of loss for the portfolio and individual loans. Included in the criteria used to
evaluate credit risk are, wherever appropriate, the borrower's cash flow,
financial condition, management capabilities, and collateral valuations, as well
as industry conditions. A portion of the allowance is established to address the
risk inherent in general loan categories, historic loss experience, portfolio
trends, economic conditions, and other factors. Based on this assessment a
provision for loan losses may be charged against earnings to maintain the
adequacy of the allowance. The allocation of the allowance based upon the risks
by type of loan, as shown in Table 2, implies a degree of precision that is not
possible when using judgments. While the systematic approach used does consider
a variety of segmentations of the portfolio, management considers the allowance
a general reserve available to address risks throughout the entire loan
portfolio.
During the first quarter of 1996, the Bank had net charge offs of $1.6 million,
compared to net recoveries of $165 thousand for the comparable period of 1995.
The charge offs in 1996 are the result of applying the Bank's aggressive and
disciplined approach to credit management to the portfolio acquired in the
Corporate Bank transaction.
<PAGE> 5
Activity in the allowance, classified by type of loan, is as follows:
<TABLE>
<CAPTION>
Table 3 Analysis of the Changes in the Allowance for Loan Loss
Amounts in thousands of dollars For the Periods Ended
March 31, December 31, March 31,
1996 1995 1995
<S> <C> <C> <C>
Balance at January 1 $6,930 $7,427 $7,427
Loans charged off:
Real estate secured loans 1058 529 0
Commercial loans secured and unsecured 537 543 0
Loans to individuals, installment and other loans 115 17 4
Total charge-offs 1,710 1,089 4
Recoveries of loans previously charged off:
Real estate secured loans 16 58 20
Commercial loans secured and unsecured 136 522 144
Loans to individuals, installment and other loans 1 12 5
Total recoveries of loans previously charged off 153 592 169
Net charge-off (recovery) 1,557 497 (165)
Provision for loan losses 0 0 0
Allowance of acquired bank 2,852 0 0
Balance at end of period $8,225 $6,930 $7,592
Net loan charge-offs (recoveries) as a percentage of
average gross loans outstanding during the period ended .67% .28% (0.98)%
</TABLE>
The Bank's policy concerning nonperforming loans is more conservative than is
generally required. It defines nonperforming assets as all loans ninety days or
more delinquent, loans classified nonaccrual, and foreclosed, or in substance
foreclosed real estate. Nonaccrual loans are those whose interest accrual has
been discontinued because the loan has become ninety days or more past due or
there exists reasonable doubt as to the full and timely collection of principal
or interest. When a loan is placed on nonaccrual status, all interest previously
accrued but uncollected is reversed against operating results. Subsequent
payments on nonaccrual loans are treated as principal reductions. At March 31,
1996, nonperforming loans amounted to $3.4 million compared with $1.0 million at
December 31, 1995. The increase in nonperforming assets, both loans and other
real estate owned, is due to the acquisition of Corporate Bank.
Potential problem loans are defined as loans as to which there are serious
doubts about the ability of the borrowers to comply with present loan repayment
terms. It is the policy of the Bank to place all potential problem loans on
nonaccrual status. At March 31, 1996, therefore, the Bank had no potential
problem loans other than those disclosed in Table 4 as nonperforming loans.
<PAGE> 6
<TABLE>
<CAPTION>
Table 4: Nonperforming Assets
Amounts in thousands of dollars March 31, December 31, March 31,
1996 1995 1995
<S> <C> <C> <C>
Loans not performing $3,379 $1,024 $66
Other real estate owned 450 0 0
Total nonperforming assets $3,829 $1,024 $66
Allowance for loan losses as a percent of:
Nonperforming loans 243% 677% 11,503%
Nonperforming assets 215% 677% 11,503%
Nonperforming assets as a percent of total
assets 1.0% 0.3% 0%
Nonperforming loans as a percent of total
loans 1.6% 0.5% 0%
</TABLE>
Securities
The Securities Held to Maturity portfolio totaled $89 million at March 31,
1996, compared with $67 million at year-end 1995. In the fourth quarter of
1995, the Bank performed a one-time reassessment of the designations of
securities as held to maturity or available for sale, in accordance with a
special report issued by the Financial Accounting Standards Board on the subject
of investments. As a result of this assessment, $5.9 million of collateralized
mortgage obligations were transferred out of the held to maturity portfolio
into the available for sale portfolio. The collateralized mortgage obligations
were subsequently sold in the first quarter of 1996 at a gain of $113 thousand.
Also included in the Held to Maturity portfolio at March 31, 1996 is
approximately $20 million in commercial paper. The Bank has invested in high
quality, short term commercial paper as a diversification from Federal Funds
sold. Commercial paper held is less than six months in maturity, and is rated
A1/P1 by Standard and Poors. At March 31, 1996, there were unrealized gains of
$1 thousand and no losses in the securities held to maturity portfolio.
The Securities Available for Sale portfolio totaled $5 million at March 31,
1996 with no investments being included in this category during the first
quarter of 1995. The investment portfolio of the Corporate Bank, acquired in
January, 1996, was classified as available for sale at the purchase date. The
securities acquired in this transaction may be sold as needed to match the
investment strategies and balance sheet needs of the Bank. There was an
unrealized gain of $16 thousand included in the March 31, 1996 balance, compared
with an unrealized gain of $143 thousand at December 31, 1995.
In the first quarter of 1996, the Bank realized a gain of $113 thousand on the
sale of securities available for sale. There were no gains or losses realized
in 1995.
Additional information concerning securities is provided in the footnotes to the
accompanying financial statements.
Other Real Estate Owned
There was $450 thousand of Other Real Estate Owned on the Bank's balance
sheet at March 31, 1996. At December 31, 1995, and March 31, 1995 the Bank had
no Other Real Estate Owned. The Bank's policy is to carry properties acquired
in foreclosure at fair value less estimated selling costs, which is determined
using recent appraisal values adjusted, if necessary, for other market
conditions. Loan balances in excess of fair value are charged to the allowance
for loan losses when the loan is reclassified to other real estate. Subsequent
declines in fair value are charged against a valuation allowance for other real
estate owned, created by charging a provision to other operating expenses. The
<PAGE> 7
Bank has not had any significant expenses related to Other Real Estate Owned in
1996 or 1995.
Deposit Concentration
Prior to 1992, the Bank's focus on real estate-related activities resulted in a
concentration of deposit accounts from title insurance and escrow companies. As
the Bank has changed its focus to commercial lending, the amounts of title and
escrow related deposits has declined for the past three years. These deposits
are generally noninterest bearing transaction accounts that contribute to the
Bank's interest margin. Noninterest expense related to these deposits is
included in other operating expense. The Bank monitors the profitability of
these accounts through an account analysis procedure.
The Bank offers products and services allowing customers to operate with
increased efficiency. A substantial portion of the services, provided through
third party vendors, are automated data processing and accounting for trust
balances maintained on deposit at the Bank. These and other banking related
services, such as deposit courier services, will be limited or charged back to
the customer if the deposit relationship profitability does not meet the Bank's
expectations.
Noninterest bearing deposits represent nearly the entire title and escrow
relationship. These balances have been reduced substantially as the Bank
focused on middle market business loans. The balance at March 31, 1996 was $17
million compared to $20 million at December 31, 1995. The bank has greatly
reduced their reliance on title and escrow deposits, with these relationships
representing approximately 5% of deposits in the first quarter of 1996, and 7%
at year end 1995.
The Bank had $55 million in certificates of deposit larger than $100 thousand
dollars at March 31,1996. The maturity distribution of these deposits is
relatively short term, with $37 million maturing within 3 months and the $47
million maturing within 12 months.
Liquidity and Interest Rate Sensitivity
The objective of liquidity management is to ensure the Bank's ability to meet
cash requirements. The liquidity position is managed giving consideration to
both on and off-balance sheet sources and demands for funds.
Sources of liquidity include cash and cash equivalents (net of Federal Reserve
requirements to maintain reserves against deposit liabilities), investments in
commercial paper, securities eligible for pledging to secure borrowings from
dealers pursuant to repurchase agreements, loan repayments, deposits, and
borrowings from a $25 million overnight federal funds line available from a
correspondent bank. Potential significant liquidity requirements are withdrawals
from noninterest bearing demand deposits and funding of commitments to loan
customers.
From time to time the Bank may experience liquidity shortfalls ranging from one
to several days. In these instances, the Bank will either purchase federal
funds, and/or sell securities under repurchase agreements. These actions are
intended to bridge mismatches between funding sources and requirements, and are
designed to maintain the minimum required balances. The Bank has had no Fed
Funds purchased or borrowings under repurchase agreements during 1995 or 1996.
During 1994 and 1995, loan growth for the Bank outpaced growth of deposits from
the Banks commercial customers. The Bank funded this growth, combined with the
Bank's reduced concentration in title and escrow deposits, in part with
certificates of deposit from customers from outside the Bank's normal service
area. These out of area deposits are certificates of deposit of $90,000 or
greater, that are priced competitively with similar certificates from other
financial institutions throughout the country. At March 31, 1996, the Bank had
approximately $81 million of these out of area deposits, compared to $83 million
at December 31, 1995. The Bank's experience with raising out of area deposits
for the past two years indicates that the balances are quite stable when priced
to the current market.
The Bank's portfolio of large certificates of deposit (those of $100 thousand or
more), includes both deposits from its base of commercial customers and out of
area deposits. At March 31, 1996 this funding source was 17% of average
deposits, compared to 17% at December 31, 1995.
<PAGE> 8
<TABLE>
<CAPTION>
Table 5 Interest Rate Maturities of Earning Assets and Funding Liabilities at
March 31, 1996
Amounts in thousands of dollars Amounts Maturing or Repricing in
More Than More Than More Than
3 Months 6 Months 9 Months
But But But
Less Than Less Than Less Than Less than 12
3 Months 6 Months 9 Months 12 Months Months
& Over
<S> <C> <C> <C> <C> <C>
Earning Assets
Gross Loans $204,906 $2,445 $2,945 $573 $24,737
Securities 27,409 6,018 5,397 5,082 45,577
Federal funds sold & other 22,000 99 0 0 0
Total earning assets 254,315 8,562 8,342 5,655 70,314
Interest-bearing deposits:
Now and money market 81,511
Savings 11,070
Time certificates of deposit:
Under $100 30,367 11,574 11,999 5,975 7,627
$100 or more 39,186 5,406 4,432 3,448 2,374
Non interest-bearing demand deposits 12,183 0 0 0 0
Total interest-bearing liabilities 174,317 16,980 16,431 9,423 10,001
Interest rate sensitivity gap 79,998 (8,418) (8,089) 3,768 60,313
Cumulative interest rate sensitivity gap 79,998 71,580 43,582 39,814 100,127
Off balance sheet financial instruments 0 0 0 0 0
Net cumulative gap $79,998 $71,580 $43,582 39,814 100,127
Adjusted cumulative ratio of rate sensitive
assets to rate sensitive liabilities (1) 1.45 1.37 1.21 1.18 1.44
(1) Ratios greater than 1.0 indicate a net asset sensitive position. Ratios
less than 1.0 indicate a liability sensitive position. A ratio of 1.0
indicates a risk neutral position.
</TABLE>
Assets and liabilities shown on Table 5 are categorized based on contractual
maturity dates. Maturities for those accounts without contractual maturities are
estimated based on the Bank's experience with these customers. Noninterest
bearing deposits of title and escrow companies, having no contractual maturity
dates, are considered subject to more volatility than similar deposits from
commercial customers. The net cumulative gap position shown in the table above
indicates that the Bank does not have a significant exposure to interest rate
fluctuations during the next twelve months.
Capital
Total shareholders' equity was $38 million at March 31, 1996, compared to $33
million at year-end 1995. This increase was due to the issuance of stock to
acquire Corporate Bank, and earnings and the exercise of stock options. The
Bank is guided by statutory capital requirements, which are measured with three
ratios, two of which are sensitive to the risk inherent in various assets and
which consider off-balance sheet activities in assessing capital adequacy.
During 1996 and 1995, the Bank's capital levels substantially exceeded the "well
capitalized" standards, the highest classification established by bank
regulators.
<TABLE>
<CAPTION>
Table 7 Capital Ratios
Regulatory Standards
March 31, December 31, Well
1996 1995 Capitalized Minimum
<S> <C> <C> <C> <C>
Total Risk Based Capital 13.60% 16.19% 10.0% 8.00%
Tier 1 Risk Base Capital 12.33 14.92 6.0 4.00
Equity to Average Assets 9.41 10.52 5.0 3.00
</TABLE>
<PAGE> 9
The Company declared and paid cash dividends totaling of $.02 per share in the
first quarter of 1996. The Company paid cash dividends totaling $.02, for each
of the four quarters of 1995. Subsequent to the end of the first quarter of
1996, the Company declared a dividend of $.03 per share, payable June 10, 1996
to shareholders of record May 10, 1996. The dividend payout ratio was 20% for
the first quarter of 1996, compared with 13% for the comparable period of 1995.
The common stock of the Company is listed on the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market Systems where it
trades under the symbol CUBN.
Market Expansion and Acquisitions
The Bank is committed to expanding the market penetration of the commercial
bank, including the creation of new branches and pursuing acquisition
opportunities. In March, 1995, the Company entered into an agreement to acquire
Santa Ana based Corporate Bank. The agreement was subsequently amended in
October 1995 and the transaction was completed on January 12, 1996 for stock and
cash. This acquisition brings two Orange County branches to the Bank,
representing an important geographic expansion. During 1995, the Bank converted
its former loan production offices in Ventura County, the San Gabriel Valley and
the South Bay to full service banking offices in improved facilities. These
moves expanded the Bank's branch system to seven full service locations serving
the greater Los Angeles area. See footnote I to the financial statements.
On January 10, 1996, the Bank announced an agreement to merge with Home
Interstate Bancorp, parent of Home Bank, based in the South Bay. The merger
with Home Bank is expected to be completed in mid - 1996, and will create a Bank
with 22 branches and over $800 million in assets.
Net Interest Income and Interest Rate Risk
Net interest income is the difference between interest and fees earned on
earning assets and interest paid on funding liabilities. Net interest income was
$4.8 million for the quarter ended March 31, 1996 compared to $ 3.8 million
for the same period in 1995. The increased margin in 1996 is primarily due to
the increased volumes of loans and deposits, due to both the acquisition of
Corporate Bank, and the commercial loan growth generated over the past year.
The change in 1995 is attributable to changes in volume and deposit mix. The
Bank's net interest income improved with the growth of the commercial loan
portfolio from 1994 to 1995. This improvement was offset in part by the change
in deposit mix away from non interest bearing title and escrow deposits, and the
increase in certificates of deposit.
<PAGE> 10
<TABLE>
<CAPTION>
Table 8 Analysis of Changes in Net Interest Income (1)
Amounts in thousands of dollars Three months ended March 31, Three months ended March 31,
1996 compared to 1995 1995 compared to 1994
Increases(Decreases) Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans, net $1,504 $307 $1,197 $751 $830 $1,581
Investments 235 70 305 5 254 260
Federal Funds Sold 78 (62) 16 162 192 354
Total interest income 1,817 (299) 1,518 918 1,276 2,195
Interest Expense
Interest-bearing deposits:
Demand and Savings 199 (102) 97 (37) 100 63
Time Certificates of deposit:
Under $100 194 (44) 150 539 200 759
$100 or more 231 (51) 180 236 203 439
Federal funds purchased / Repos 0 0 0 0 0 0
Other borrowings 16 8 24 (42) (22) (64)
Total interest expense 640 (189) 451 696 501 1,197
Net interest income $1,177 $(110) $1,067 $222 $775 $998
(1) The change in interest income or interest expense that is attributable to
both change in average balance and average rate has been allocated to the
changes due to (i) average balance and (ii) average rate in proportion to the
relationship of the absolute amounts of the changes in each.
</TABLE>
Yields on earning assets were approximately 8.5 % for the first quarter of
1996, compared to 8.7% yield for the same period of 1995. The lower average
yield on earning assets in 1995 is the result of both a decrease in the prime
rate from an average of 8.8% to an average of 8.3% in 1996, and an increasing
percentage of assets being held in loans.
Rates on interest bearing liabilities resulted in an average cost of funds of
3.0 % for the first quarter of 1996, compared with 3.2% for the comparable
period of 1995. The decline in rates on certificates of deposit reflected the
lower interest rate environment in 1996.
Expressing net interest income as a percent of average earning assets is
referred to as margin. Margin was 5.6 % for the first quarter of 1996, compared
to 5.6% for the same period in 1995. The Bank's margin is strong because it has
funded itself with a significant amount of noninterest bearing deposits. The
deposit portfolio of Corporate Bank, which is included in the first quarter 1996
totals, was similar in composition to the Bank's deposits, resulting in very
little change in the Bank's margin.
<PAGE> 11
<TABLE>
<CAPTION>
Table 9 Average Balance Sheets and Analysis of Net Interest Income
Three months ended Three months ended
Amounts in thousands of dollars March 31, 1996 March 31, 1995
Interest Annual Interest Annual
Income Yield Income Yield
Balance or or Rate Balance or or
Expense Expense Rate
Interest Earning Assets
<S> <C> <C> <C> <C> <C> <C>
Loans, Net $218,873 $5,610 10.25% $160,816 $4,413 10.98%
Investments 88,452 1,222 5.53 71,129 915 5.15
Certificates of Deposit
in other banks 99 1 4.04 149 3 6.71
Federal Funds Sold 40,233 517 5.14 34,489 501 5.81
Total Earning Assets 347,657 7,350 8.46 266,583 5,832 8.75
Non Earning Assets
Cash & Due From Banks 23,947 23,985
Other Assets 10,932 8,397
Total Assets $382,536 $298,965
Interest-bearing Liabilities
Demand and savings 95,002 566 2.38 $63,740 469 2.94
Time Certificates of Deposits
Less Than $100 76,743 1,123 5.85 63,599 973 6.12
More Than $100 54,951 762 5.55 38,545 582 6.04
Fed Funds Purchased/Repos 0 0 0.00 0 0 0.00
Total interest-bearing 226,696 2,451 4.32 165,884 2,024 4.88
Noninterest-bearing Deposits 109,157 92,797
Total Deposits 335,853 2,451 2.92 258,681 2,024 3.13
Other Borrowings 4,760 82 6.89 3,798 58 6.11
Total Funding Liabilities 339,613 2,533 2.97 262,479 2,082 3.17
Other Liabilities 10,058 6,630
Shareholders' Equity 32,865 29,859
Total Liabilities and Shareholders' Equity $382536
$298,968
Net Interest Income $4,817 5.54% $3,750 5.63%
Shareholders' Equity to Total Assets
8.59% 9.99%
</TABLE>
Other Operating Income
The Bank reported a gain of $197 thousand in the first quarter of 1995 on the
sale of mortgage servicing rights, representing final settlement payments
received related to open issues on servicing sales from prior quarters. No
servicing sales have been made in 1996, and no further servicing rights are
owned at March 31, 1996. Operating income for the first quarter of 1996
includes a gain of $113 thousand on the sale of available for sale securities.
<PAGE> 12
The trends and composition of other operating income are shown in the following
table.
<TABLE>
<CAPTION>
Table 10 Other operating income
Amounts in thousands of dollars
For three months ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Gain on sale of SBA Loans $8 $100
Documentation fees 28 19
Other service fees and charges 483 304
Gain on sale of securities 113
Gain on sale of mortgage servicing portfolio 0 197
Total $632 $620
</TABLE>
Operating Expense
Total operating expenses for the Bank were $4.4 million for the quarter ended
March 31, 1996 , compared to $3.1 million for the same period in 1995. Included
in the first quarter 1996 totals is $330 thousand of direct expenses related to
the Corporate Bank acquisition and the planned merger with Home Bank. These
expenses include severance payments, investment banker fees and expenses of
integrating Corporate Bank's operations. Because a portion of the acquisition
costs are not tax deductible, the after tax effect of these expenses is
approximately $260 thousand, or $.05 per share. Other increases in operating
expenses relate to the additional staff and facilities acquired in the Corporate
Bank transaction.
Provision for Loan Losses
The Bank has made no provision for loan losses in 1996 or 1995. No loan loss
provision has been deemed necessary , due to the low levels of nonperforming
assets, and the strong reserve position. The relationship between the level and
trend of the allowance for loan losses and nonperforming assets, combined with
the results of the ongoing review of credit quality, determine the level of
provisions.
Legal and Regulatory Matters
In June 1992, the Bank entered into an agreement with the Office of the
Comptroller of the Currency (OCC), the Bank's primary federal regulator, which
required the implementation of certain policies and procedures for the operation
of the bank to improve lending operations and management of the loan portfolio.
In November 1993, after completion of its annual examination, the OCC released
the Bank from the Formal Agreement. Following this, the Federal Reserve Bank of
San Francisco ("Fed") notified the Company on November 29, 1993, that the
Memorandum of Understanding, which it had signed, was terminated because the
requirements of the agreement were satisfied.
<PAGE> 13
<TABLE>
<CAPTION>
Consolidated Statements of Financial Condition
CU Bancorp and Subsidiary
March 31, December 31,
Amounts in thousands of dollars, except share data 1996 1995
Assets
<S> <C> <C>
Cash and due from banks $30,883 $28,376
Federal funds sold 22,000 32,500
Total cash and cash equivalents 52,883 60,876
Securities held to maturity (Market value of $84,561 and $67,114 at March 84,560 66,735
31, 1996 and December 31, 1995, respectively)
Securities available for sale, at market value 4,923 6,345
Total Securities 89,483 73,080
Loans, (Net of allowance for loan losses of $8,225 and $6,930 at March 31,
1996 and December 31, 1995, respectively) 227,381 183,696
Premises and equipment, net 1,512 1,111
Other real estate owned 450 0
Accrued interest receivable and other assets 11,962 6,546
Total Assets $383,671 $325,309
Liabilities and Shareholders' equity
Deposits:
Demand, non-interest bearing $119,026 $94,099
Savings and interest bearing demand 92,581 74,413
Time deposits under $100 67,542 70,866
Time deposits of $100 or more 54,846 45,132
Total deposits 333,995 284,510
Accrued interest payable and other liabilities 11,495 7,793
Total liabilities 345,491 292,303
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
Authorized -- 10,000,000 shares
No shares issued or outstanding in 1996 or 1995 --- ---
Common stock, no par value:
Authorized - 24,000,000 shares
Issued and outstanding - 5,296,583 in 1996, and 4,636,462 in 1995 32,148 27,264
Retained earnings 6,317 5,841
Unrealized gain on securities available for sale, net of taxes 9 83
Unearned Compensation (294) (182)
Total Shareholders' equity 38,180 33,006
Total liabilities and shareholders' equity $383,671 $325,309
The accompanying notes are an integral part of these consolidated
statements.
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Consolidated Statements of Income
CU Bancorp and Subsidiary
For the three months
ended March 31,
Amounts in thousands of dollars, except per share data 1996 1995
<S> <C> <C>
Revenue from earning assets:
Interest and fees on loans $5,610 $4,413
Interest on taxable investment securities 1,223 900
Interest on tax exempt securities 0 15
Interest on time deposits with other financial institutions 0 3
Interest on federal funds sold 517 501
Total revenue from earning assets 7,350 5,832
Cost of funds:
Interest on savings and interest bearing demand 566 469
Interest on time deposits under $100 1,021 973
Interest on time deposits of $100 or more 864 582
Interest on other borrowings 61 58
Interest on subordinated notes 21 0
Total cost of funds 2,533 2,082
Net revenue from earning assets before provision for loan losses 4,817 3,750
Provision for loan losses 0 0
Net revenue from earning assets 4,817 3,750
Other operating revenue:
Other fees and charges 519 423
Gain on sale of mortgage servicing portfolio 0 197
Gain on sale of securities available for sale (before taxes of $47 in 1996) 113 0
Total other operating revenue 632 620
Other operating expenses:
Salaries and related benefits 2,490 1,652
Acquisition related expenses 330 0
Other operating expenses 1,629 1,458
Total operating expenses 4,449 3,110
Income before provision for income taxes 1,000 1,260
Provision for income taxes 433 550
Net income $567 $710
Earnings per common and equivalent share $0.10 $0.15
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
CU Bancorp and Subsidiary
Amounts in thousands of dollars For the Quarter
ended March 31,
1996 1995
Cash flows from operating activities
<S> <C> <C>
Net income $567 $710
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for depreciation and amortization 98 120
Amortization of goodwill 38 0
Amortization of deferred compensation 9 0
Net amortization of (discount)/premium on investment securities (184) 145
Provision for losses on loans and other real estate owned 0 0
Provision (benefit) of deferred taxes 654 298
Gain on sale of investment securities, net (113) 0
(Increase)/decrease in other assets (1,196) (374)
Increase/(decrease) in other liabilities (1,032) (1,809)
(Increase)/decrease in accrued interest receivable (358) (188)
Increase/(decrease) in deferred loan fees 49 81
Increase/(decrease) in accrued interest payable (110) 202
Accrued benefits from interest rate hedge transactions 0 0
Total adjustments (2,145) (1,525)
Net cash provided by operating activities (1,578) (815)
Cash flows from investing activities
Proceeds from investment securities sold or matured 49,835 6,023
Purchase of investment securities (61,875) 0
Net decrease in time deposits with other financial institutions 0 (200)
Purchase of business 18,316 0
Net (increase)/decrease in loans 1,773 6,093
Purchases of premises and equipment, net (165) (124)
Net cash provided (used in) by investing activities 7,884 11,792
Cash flows from financing activities
Net increase/(decrease) in demand and savings deposits (8,570) (10,783)
Net increase/(decrease) in time certificates of deposit (5,736) 23,881
Proceeds from exercise of stock options and director warrants 0 562
Cash dividend paid (92) (90)
Net cash provided (used) by financing activities (14,398) 13,570
Net increase (decrease) in cash and cash equivalents (8,092) 24,547
Cash and cash equivalents at beginning of year 60,876 55,397
Cash and cash equivalents at end of year $52,784 $79,944
Supplemental disclosure of cash flow information
Cash paid during the year:
Interest $2,643 $1,880
Taxes 0 1,500
Supplemental disclosure of noncash investing activities:
Loans transferred to OREO 450 0
The accompanying notes are an integral part of these consolidated
statements
</TABLE>
<PAGE> 16
Notes to Consolidated Financial Statements
March 31, 1996
UNAUDITED
Note A. BASIS OF PRESENTATION
The accounting and reporting policies of CU Bancorp ("the Company") and its
wholly owned subsidiary, California United Bank, N.A. ("the Bank"), are prepared
in accordance with generally accepted accounting principles used in the banking
industry. All material inter company balances have been eliminated and all
material interim period adjustments which, in the opinion of management, are
necessary for a fair presentation of financial condition, results of operations,
and cash flow have been made. All interim period adjustments that have been
made have been of a normal and recurring nature.
Note B. EARNINGS PER SHARE
Net income per share is computed using the weighted average number of shares of
common stock and common stock equivalents outstanding during the periods
presented, except when the effect of the latter would be anti-dilutive.
Weighted average shares outstanding for the three month period ended March 31,
1996 were 5,481,705, compared with 4,700,688 for the comparable period of 1995.
NOTE C. SECURITIES
The Bank has the intent and ability to hold its investment securities until
maturity. Accordingly, investment securities are carried at cost, adjusted for
amortization of premiums and accretion of discounts on a straight-line basis,
which approximates the effective interest method. Gains and losses recognized on
the sale of investment securities are based upon the adjusted cost and
determined using the specific identification method.
The Bank has $5 million in securities classified as "Available for sale",
indicating the willingness to sell these securities under certain conditions.
These securities are carried at current market value with unrealized gains or
losses not recognized as current income but reported as an increase or decrease
to capital in the statements of financial condition and in the statements of
shareholders' equity.
<PAGE> 17
The following tables set forth the book value and market value, of investment
securities at March 31, 1996.
<TABLE>
<CAPTION>
A summary of Securities Held to Maturity at March 31, 1996 is as follows:
Held To Maturity
Gross Gross
Book Unrealized Unrealized Market
Value Gains Losses Value
<S> <C> <C> <S> <C>
U.S. Treasury securities $64,630 $1 -- $64,631
Commercial Paper 19,909 -- -- 19,909
U.S. Government Agency Securities 21 -- -- 21
Total investment portfolio $84,560 $1 $0 $84,561
</TABLE>
A summary of Securities Available for Sale for March 31, 1996 is as follows:
<TABLE>
<CAPTION>
Available For Sale Book Gross Gross Market
Value Unrealized Unrealized Value
Gains Losses
<S> <C> <C> <S> <C>
U.S. Treasury securities $1,482 $14 $1,496
U.S. Agency securities 1,000 2 -- 1,002
Mortgage backed securities 1,583 0 1,582
Federal Reserve stock 433 0 433
Redevelopment bonds 410 0 410
$4,908 $16 $0 $4,923
</TABLE>
At March 31, 1996, investment securities with a book value of $28,558 were
pledged to secure court deposits and for other purposes as required or
permitted by law.
Actual maturities may differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
Note D. AVERAGE FEDERAL RESERVE BALANCES
The average cash reserve required to be maintained at the Federal Reserve Bank
was approximately $4.5 million, $2.8 million, and $3 million for the periods
ending March 31, 1996, and December 31 and March 31, 1995, respectively.
Note E. PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Amortization of leasehold improvements is
also computed using the straight-line method over the shorter of the useful life
of the improvement or the term of the lease.
<PAGE> 18
Note F. OTHER REAL ESTATE OWNED
Real estate owned, acquired either through foreclosure or deed in lieu of
foreclosure, is recorded at the lower of the loan balance or estimated fair
market value. When acquired, any excess of the loan balance over the estimated
fair value is charged to the allowance for loan losses. Subsequent write-downs,
if any, are charged to operation expenses in the periods that they become known.
There was
$450 of other real estate owned as of March 31, 1996. There was no other real
estate owned as of March 31, 1995, or December 31, 1995.
Note G. INCOME TAXES
Effective January 1, 1993, the Bank implemented the provisions of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No.
109 utilizes the liability method and deferred taxes are determined based on the
estimated future tax effects of differences between the financial statement and
tax bases of assets and liabilities given the provisions of the enacted tax
laws.
Note H. LOANS
Loans are carried at face amount, less payments collected, allowance for loan
losses, and unamortized deferred fees. Interest on loans is accrued monthly on a
simple interest basis. The general policy of the Bank is to discontinue the
accrual of interest and transfer loans to nonaccrual (cash basis) status where
reasonable doubt exists with respect to the timely collectibility of such
interest. Payments on nonaccrual loans are accounted for using a cost recovery
method.
Loan origination fees and commitment fees, offset by certain direct loan
origination costs, are deferred and recognized over the contractual life of the
loan as a yield adjustment.
The allowance for loan losses is maintained at a level considered adequate to
provide for losses that can reasonably be anticipated. Management considers
current economic conditions, historical loan loss experience, and other factors
in determining the adequacy of the allowance. The allowance is based on
estimates and ultimate losses may differ from current estimates. These estimates
are reviewed periodically and as adjustments become necessary, they are charged
to earnings in the period in which they become known. The allowance is increased
by provisions charged to operating expenses, increased for recoveries of loans
previously charged-off, and reduced by charge-offs.
The Bank adopted Statement of Financial Standards (SFAS) 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures," as of January 1, 1995.
SFAS 114 requires that impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate.
When the measure of the impaired loan is less than the recorded balance of the
loan, the impairment is recorded through a valuation allowance included in the
allowance for loan losses. The Bank had previously measured the allowance for
loan losses using methods similar to the prescribed in SFAS 114. As a result,
no additional provision was required by the adoption of this pronouncement.
The Bank considers all loans where reasonable doubt exists as to the payment of
interest or principal to be impaired loans. All loans that are ninety days or
more past due are automatically included in this category. An impaired loan
will be charged off when the Bank determines that repayment of principal has
become unlikely or subject to a lengthy collection process. All loans that are
six months or more past due and not well secured or in the process of collection
are charged off.
At March 31, 1996, the Bank had $3.8 million in impaired loans, against which a
loss allowance of $590 thousand has been provided. The recorded investment in
all impaired loans has been calculated based on the present value of expected
cash flows discounted at the loan's effective interest rate. All impaired loans
are included in nonaccrual status, and as such no interest income is recognized.
For the first quarter of 1996, the Bank had an average investment in impaired
loans of approximately $4.1 million.
Note I. Acquisitions
On January 12, 1996, the Company completed the acquisition of Corporate Bank, a
Santa Ana, California based commercial bank. The <PAGE> 19
acquisition was accounted for as a purchase. The Company issued 649 thousand
shares of common stock, and paid $1.7 million in cash, for a total purchase
price of $6.5 million. The acquired operations of Corporate Bank have been
included in the Statement of Income from the acquisition date of January 12,
1996. The Company's income for the first quarter of 1996 would not have been
materially different if the combination had been completed as of January 1,
1996. The pro forma results of operations for the first quarter of 1995, had
the acquisition been completed on January 1, 1995, would have been as follows:
<TABLE>
<S> <C>
Net interest income $7,025
Income before provision for income taxes 1,309
Net income 713
Earnings per common and equivalent share $ .13
</TABLE>
The fair value of assets acquired from Corporate Bank was $72.7 million, with
liabilities assumed of $68.6 million. Cash and cash equivalents acquired, net
of cash paid, totaled $20 million. Goodwill of $2.4 million generated by the
purchase transaction is being amortized on a straight line basis over a ten year
period.
Note J. RECLASSIFICATIONS
Certain items have been reclassified in the prior period financial statements
presented herein, in order to conform to classifications followed for September
30, 1995.
Note K. LEGAL MATTERS
In the normal course of business the Bank occasionally becomes a party to
litigation. In the opinion of management, based upon consultation with legal
counsel, the Bank believes that pending or threatened litigation involving the
Bank will have no adverse material effect upon its financial condition, or
results of operations. Until third quarter 1995, the Bank was a defendant in
multiple lawsuits related to the failure of two real estate investment
companies, Property Mortgage Company, Inc., ("PMC") and S.L.G.H., Inc. ("SLGH").
The lawsuits, consisted of a federal action by investors in PMC and SLGH (the
"Federal Investor Action"), at least three state court actions by groups of
Investors (the "State Investor Actions"), and an action filed by the Resolution
Agent for the combined and reorganized bankruptcy estate of PMC and SLGH (the
"Neilson" Action). An additional action was filed by an individual investor and
his related pension and profit sharing plans (the "Individual Investor Action").
Other defendants in these multiple actions and in related actions include
financial institutions, title companies, professionals, business entities and
individuals, including the principals of PMC and SLGH. The Bank was a
depository bank for PMC, SLGH and related companies and was a lender to certain
principals of PMC and SLGH ("Individual Loans"). Plaintiffs alleged that
PMC/SLGH was or purported to be engaged in the business of raising money from
investors by the sale and issuance of interests in loans evidenced by promissory
notes secured by real property. Plaintiffs alleged that false representations
were made, and the investment merely constituted a "Ponzi" scheme. Other
charges related to the Bank's conduct with regard to the depository accounts,
the lending relationship with the principals and certain collateral taken ,
pledged by PMC and SLGH in conjunction with the Individual Loans. The lawsuits
alleged inter alia violations of federal and state securities laws, fraud,
negligence, breach of fiduciary duty, and conversion as well as conspiracy and
aiding and abetting counts with regard to these violations. The Bank denied all
allegations of wrongdoing. Damages in excess of $100 million were alleged, and
compensatory and punitive damages were sought generally against all defendants,
although no specific damages were prayed for with regard to the Bank. A former
officer and director of the Bank was also been named as a defendant.
The Bank has entered into a settlement agreement with the representatives of the
various plaintiffs, which has now been consummated, with the dismissal of all of
the above referenced cases, with prejudice, against the Bank, its officers and
directors, with the exception of the officer/director previously named pending.
Court approval of these settlements has been received. In connection with the
settlement, the Bank released its security interest in certain disputed
collateral and cash proceeds thereof, which the Bank received from PMC, SLGH, or
the principals, in connection with the Individual Loans. This collateral had
been a subject of dispute in the Neilson Action, with both the Bank and the
representatives of PMC/SLGH asserting the right to such collateral. All the
Individual Loans have been charged off. The Bank also made a cash payment to
the Plaintiffs in connection with the settlement. The effect of this settlement
on CU Bancorp or the Bank's financial statements was immaterial. In connection
with the settlement the Bank assigned its rights, if any, under various
insurance policies, to the Plaintiffs. The settlement does not resolve the
claims asserted against the officer/director. The Bank is still providing a
defense to its former director/officer who continues as a defendant and who
retains his rights of indemnity, if any, against the Bank arising out of his
status as a former employee. At this time the only viable claims which remain
against the former director/employee are claims of negligence in connection with
certain depository relationships with <PAGE> 20
PMC/SLGH. While the Bank's Director and Officer Liability Insurer has not
acknowledged coverage of any potential judgment or cost of defense, the Insurer
is on notice of the action and has participated in various aspects of the case.
As of May 10, 1996, the Bank and the Insurer orally agreed that the Insurer
would assume all future costs of defense of the former director/employee, and
would repay the Bank $75,000 for certain of the prior costs expended. The
agreement has not yet been finalized. Also during May 1996, the Bank was
informed that an oral agreement for global resolution of these matters had been
reached. However such a settlement is subject to a number of contingencies and
approvals.
Note L. REGULATORY MATTERS
On November 2, 1993, the Office of the Comptroller of the Currency ("OCC"),
after completion of their annual examination of the Bank, terminated the Formal
Agreement entered into in June, 1992. In December 1993, the Fed terminated the
Memo of Understanding entered into in August, 1992.
The Formal Agreement had been entered into in June 1992 and required the
implementation of certain policies and procedures for the operation of the Bank
to improve lending operations and management of the loan portfolio. The Formal
Agreement required the Bank to maintain a Tier 1 Risk Weighted Capital ratio of
10.5% and a 6.0% Tier 1 Leverage Ratio. The Formal Agreement mandated the
adoption of a written program to essentially reduce criticized assets, maintain
adequate loan loss reserves and improve bank administration, real estate
appraisal, asset review management and liquidity policies, and restricted the
payment of dividends.
The agreement specifically required the Bank to: 1) create a compliance
committee; 2) have a competent chief executive officer and senior loan officer,
satisfactory to the OCC, at all times; 3) develop a plan for supervision of
management; 4) create and implement policies and procedures for loan
administration; 5) create a written loan policy; 6) develop and implement an
asset review program; 7) develop and implement a written program for the
maintenance of an adequate Allowance for Loan and Lease Losses, and review the
adequacy of the Allowance; 8) eliminate criticized assets; 9) develop and
implement a written real estate appraisal policy; 10) obtain and improve
procedures regarding credit and collateral documentation; 11) develop a
strategic plan; 12) develop a capital program to maintain adequate capital (this
provision also restricts the payment of dividends by the Bank unless (a) the
Bank is in compliance with its capital program; (b) the Bank is in compliance
with 12 U.S.C. 55 and 60 and (c) the Bank receives the prior written approval
of the OCC District Administrator); 13) develop and implement a written
liquidity, asset and liability management policy; 14) document and support the
reasonableness of any management and other fees to any director or other party;
15) correct violations of law; and 16) provide reports to the OCC regarding
compliance.
The Memorandum of Understanding was executed in August 1992 and required 1) a
plan to improve the financial condition of CU Bancorp and the Bank; 2)
development of a formal policy regarding the relationship of CU Bancorp and the
Bank, with regard to dividends, inter-company transactions, tax allocation and
management or service fees; 3) a plan to assure that CU Bancorp has sufficient
cash to pay its expenses; 4) ensure that regulatory reporting is accurate and
submitted on a timely basis; 5) prior approval of the Federal Reserve Bank prior
to the payment of dividends; 6) prior approval of the Federal Reserve Bank
prior to CU Bancorp incurring any debt and 7) quarterly reporting regarding the
condition of the Company and steps taken regarding the Memorandum of
Understanding.
<PAGE> 21
SIGNATURES
Pursuant to the Securities Exchange Act of 1934, the Registrant has caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CU BANCORP
May 14, 1996
By:___________________
Patrick Hartman
Chief Financial Officer
Part II - Other Information
Item 1. Legal Proceedings
Please refer to Note K , on page 19 above, for a complete discussion of legal
and matters.
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 Matters
Item 6. Exhibits and Filings on Form 8-K
(a) Exhibits:
(10) Material Contracts (NONE)
(b) Reports on Form 8-K: In a report filed on Form 8-K dated March 27, 1996,
the Company reported the completion of the acquisition of Corporate Bank.
<PAGE> 22
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 30784
<INT-BEARING-DEPOSITS> 99
<FED-FUNDS-SOLD> 22000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4923
<INVESTMENTS-CARRYING> 84560
<INVESTMENTS-MARKET> 89484
<LOANS> 235606
<ALLOWANCE> 8225
<TOTAL-ASSETS> 383671
<DEPOSITS> 333995
<SHORT-TERM> 0
<LIABILITIES-OTHER> 11495
<LONG-TERM> 0
0
0
<COMMON> 32148
<OTHER-SE> 6317
<TOTAL-LIABILITIES-AND-EQUITY> 383671
<INTEREST-LOAN> 5610
<INTEREST-INVEST> 1740
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7350
<INTEREST-DEPOSIT> 2451
<INTEREST-EXPENSE> 2533
<INTEREST-INCOME-NET> 4817
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 113
<EXPENSE-OTHER> 4449
<INCOME-PRETAX> 1000
<INCOME-PRE-EXTRAORDINARY> 567
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 567
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
<YIELD-ACTUAL> 5.54
<LOANS-NON> 3379
<LOANS-PAST> 0
<LOANS-TROUBLED> 2459
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6930
<CHARGE-OFFS> 1710
<RECOVERIES> 153
<ALLOWANCE-CLOSE> 8225
<ALLOWANCE-DOMESTIC> 8225
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
