<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
/X/ QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
---------------------------
/ / TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-10627
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NORTH COUNTY BANCORP
- ----------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
California 95-3669135
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
444 S. Escondido Blvd., P.O.Box 1476, Escondido, California 92025
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 743-2200
------------------------
- ----------------------------------------------------------------------------
(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 Sections 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 August 5, 1996 the Registrant had 1,885,545 shares of no par value common
stock issued and outstanding.
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NORTH COUNTY BANCORP
Page
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Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statement of Financial Condition -
June 30, 1996 and December 31, 1995 2
Consolidated Statement of Income -
Three Months Ended and Six months Ended
June 30, 1996 and 1995 3
Consolidated Statement of Cash Flows -
Six months ended June 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
Part II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 11
1
<PAGE>
NORTH COUNTY BANCORP
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 22,825,000 $ 24,233,000
Federal funds sold 7,500,000 10,500,000
------------ ------------
30,325,000 34,733,000
Investment securities:
Available for sale 16,976,000 18,250,000
Held to maturity 11,151,000 7,922,000
Loans, net 168,418,000 159,034,000
Other real estate owned 2,786,000 2,402,000
Premises and equipment, net 9,130,000 9,526,000
Accrued interest receivable and other
assets 5,903,000 5,167,000
------------ ------------
$244,689,000 $237,034,000
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 73,522,000 $ 70,728,000
Interest bearing 143,461,000 143,108,000
------------ ------------
216,983,000 213,836,000
Accrued expenses and other liabilities 1,822,000 1,788,000
U.S. Treasury demand note 3,805,000 543,000
Notes payable 1,605,000 1,500,000
Capital lease obligation 445,000 462,000
Convertible subordinated debentures 1,675,000 1,678,000
------------ ------------
Total liabilities 226,335,000 219,807,000
------------ ------------
Stockholders' equity:
Common stock, no par value,
Authorized, 5,000,000 shares;
Outstanding shares 1,885,545 in 1996
and 1,878,984 in 1995 9,958,000 9,156,000
Retained earnings 8,602,000 8,164,000
Unrealized loss on available for sale
securities, net of tax (206,000) (93,000)
------------ ------------
Total stockholders' equity 18,354,000 17,227,000
------------ ------------
$244,689,000 $237,034,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
NORTH COUNTY BANCORP
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -------------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $4,373,000 $4,494,000 $8,645,000 $8,905,000
Investment securities 388,000 296,000 745,000 637,000
Federal funds sold 37,000 56,000 155,000 66,000
Deposits with other financial institutions --- 1,000 --- 2,000
---------- ---------- ---------- ----------
Total interest income 4,798,000 4,847,000 9,545,000 9,610,000
---------- ---------- ---------- ----------
Interest expense:
Deposits 1,125,000 1,166,000 2,263,000 2,271,000
Federal funds purchased and
U.S. Treasury demand note 17,000 34,000 22,000 67,000
Long term debt 87,000 86,000 173,000 172,000
---------- ---------- ---------- ----------
Total interest expense 1,229,000 1,286,000 2,458,000 2,510,000
---------- ---------- ---------- ----------
Net interest income 3,569,000 3,561,000 7,087,000 7,100,000
Provision for loan losses 700,000 1,239,000 1,000,000 1,736,000
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 2,869,000 2,322,000 6,087,000 5,364,000
Other income 2,187,000 1,891,000 3,705,000 3,383,000
Other expense 3,945,000 3,812,000 7,707,000 7,694,000
---------- ---------- ---------- ----------
Income before income taxes 1,111,000 401,000 2,085,000 1,053,000
Provision for income taxes 444,000 132,000 885,000 288,000
---------- ---------- ---------- ----------
Net income $ 667,000 $ 269,000 $1,200,000 $ 765,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Primary earnings per share $ 0.35 $ 0.17 $ 0.63 $ 0.47
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted earnings per share $ 0.33 $ 0.16 $ 0.59 $ 0.44
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
3
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NORTH COUNTY BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,200,000 $ 765,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of:
Office property and equipment 674,000 768,000
Deferred loan fees and costs, net (210,000) (46,000)
Investment premiums and discounts, net 52,000 (1,000)
Loan servicing rights 115,000 160,000
Other 25,000 25,000
Provision for loan and lease losses 1,000,000 1,736,000
Loss on sale of investment securities 24,000 11,000
(Increase) decrease in interest receivable (68,000) 320,000
(Decrease) increase in taxes payable (221,000) 50,000
Increase in accrued expenses 275,000 158,000
Increase in interest payable 75,000 146,000
(Increase) decrease in SBA loan sales receivable (561,000) 1,313,000
Other, net (300,000) (712,000)
----------- -----------
Net cash provided by operating activities 2,080,000 4,693,000
----------- -----------
Cash flows from investing activities:
Proceeds from sales and maturities of investment
securities 10,109,000 11,258,000
Purchase of investment securities (12,140,000) (2,446,000)
Net (increase) decrease in loans (11,917,000) 4,174,000
Purchase of premises and equipment (277,000) (391,000)
Proceeds from sale of other real estate owned 1,383,000 2,014,000
----------- -----------
Net cash (used in) provided by investing
activities (12,842,000) 14,609,000
----------- -----------
Cash flows from financing activities:
Cash payments on notes payable and capital lease
obligations (16,000) (13,000)
Net increase (decrease) in deposits 3,148,000 (17,630,000)
Net increase (decrease) in short term borrowings 3,262,000 (1,630,000)
Net decrease in long term borrowings (78,000) ---
Cash proceeds from sale of common stock 38,000 87,000
----------- -----------
Net cash provided by (used in) financing
activities 6,354,000 (19,186,000)
----------- -----------
Net (decrease) increase in cash and cash equivalents (4,408,000) 116,000
Cash and cash equivalents at beginning of year 34,733,000 33,053,000
----------- -----------
Cash and cash equivalents at end of period $30,325,000 $33,169,000
----------- -----------
----------- -----------
Disclosures:
Total interest paid $ 2,565,000$ 2,363,000
----------- -----------
----------- -----------
Total taxes paid $ 1,255,000$ 359,000
----------- -----------
----------- -----------
Foreclosed real estate loans $ 1,743,000$ 2,113,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
NORTH COUNTY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial information has been prepared in accordance with the
Securities and Exchange Commission rules and regulations for quarterly reporting
and therefore does not necessarily include all information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles. This information should be read
in conjunction with the Company's Annual Report for the year ended December 31,
1995.
Operating results for interim periods are not necessarily indicative of
operating results for an entire fiscal year. In the opinion of management, the
unaudited financial information for the three month and six month periods ended
June 30, 1996 and 1995, reflect all adjustments, consisting only of normal
recurring accruals and provisions, necessary for a fair presentation thereof.
NOTE 2 - EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of common stock
and common stock equivalent shares outstanding adjusted retroactively for stock
dividends. The weighted average number of shares outstanding for primary
earnings per share was 1,909,546 and 1,907,159 for the three and six months
ended June 30, 1996, respectively, and 1,634,383 and 1,630,667 for the three and
six months ended June 30, 1995, respectively. The calculation of fully diluted
earnings per share assumes the issuance of 213,648 shares of common stock upon
conversion of the Company's convertible subordinated debentures. The weighted
average number of shares outstanding for fully diluted earnings per share was
2,123,478 and 2,120,807 for the three and six months ended June 30, 1996,
respectively, and 1,848,414 and 1,844,698 for the three and six months ended
June 30, 1995, respectively.
NOTE 3 - STOCK DIVIDEND
On February 21, 1996, the Company declared a 5% stock dividend which was paid on
March 29, 1996 to stockholders of record on March 1, 1996. This resulted in the
issuance of 89,288 shares of common stock.
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
North County Bancorp (the "Company") has one wholly owned subsidiary, North
County Bank (the "Bank"). North County Bank's operations are the only
significant operations of the Company. The accompanying financial
information should be read in conjunction with the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995.
FINANCIAL CONDITION
Total assets of the Company increased $7.7 million or 3.2% to $244.7 million
at June 30, 1996, from $237.0 million at December 31, 1995. Cash and cash
equivalents showed an overall decrease of 12.7% or $4.4 million. Within this
category Federal funds sold decreased 28.6% or $3.0 million to $7.5 million
at period end from $10.5 million at the end of 1995 and cash and due from
banks decreased $1.4 million to $22.8 million from $24.2 million during the
same time period. Investment securities increased 7.5% or $1.9 million to
$28.1 million at quarter end compared to $26.2 million at December 31, 1995.
This increase consisted of $12.1 million in investment purchases partially
offset by $7.6 million in maturities and bond calls and $2.6 million in the
sale of securities. The Company purchased investment securities during the
first half of 1996 to take advantage of higher market yields to increase the
portfolio's overall return. The sale of securities during the second quarter
of 1996, which netted an after tax loss of $13,000, was effected to meet
short term liquidity needs due to an increase in loan demand. Net loans
increased 5.9% or $9.4 million to $168.4 million at period end from $159.0
million at the end of 1995. The increase was primarily due to real estate
mortgage loans which increased $9.6 million or 35.8% to $36.5 million due to
the Company's efforts to increase commercial real estate loans. Consumer
lending increased $3.4 million or 7.2% to $50.1 million at June 30, 1996
primarily due to Title I loans which increased $5.2 million or 43.6% offset
by a decrease of $1.9 million or 5.3% in other consumer loans. The increase
in real estate and consumer loans was partially offset by construction loans
which decreased $3.2 million or 34.3%. Real estate mortgage loans increased
to 21.2% as a percentage of gross loans as compared to 16.6% at year end.
Commercial loans, which increased 1.0% or $796,000, decreased from 46.2% of
total gross loans at the end of the 1995 to 43.9% of the gross loan portfolio
at June 30, 1996. Lending rates, which declined during the first quarter in
response to a 25 basis point cut in the discount rate by the Federal Reserve
Bank, remained relatively stable during the second quarter. Declining
interest rates and improved economic conditions in southern California
contributed to increased loan demand in the Company's market area. Other
real estate owned increased $384,000 million to $2.8 million from $2.4
million during the first half of 1996. The Company sold seven properties
from its other real estate owned portfolio for $1.4 million during the six
months ended June 30, 1996. Foreclosures during the first half of 1996
totaled $1.7 million.
Total deposits at June 30, 1996 increased $3.1 million or 1.5% from December 31,
1995. Non-interest bearing demand deposits increased $2.8 million or 4.0% to
$73.5 million. Interest bearing deposits increased only $353,000. Within the
interest bearing deposit category time deposits of $100,000 or more increased
$1.6 million or 23% to $8.6 million from $7.0 million and NOW accounts increase
$749,000 or 2.1% to $35.9 million at June 30, 1996 from $35.1 million at year
end. During that same time frame savings accounts decreased $1.2 million or
1.6% to $73.0 million from $74.2 million and time deposit of less than $100,000
decreased $817,000 or 3.1% to $25.9 million from $26.8 million. An increase of
$3.3 million to $3.8 million from $543,000 in the U.S. Treasury demand note
account was utilized as a short term source of funds. Total stockholders'
equity at June 30, 1996 was $18.4 million as compared to $17.2 million at
December 31, 1995, an increase of $1.1 million or 6.5%. (See "CAPITAL
RESOURCES.")
6
<PAGE>
RESULTS OF OPERATIONS
SUMMARY
Net income for the six months ended June 30, 1996 increased $435,000 or 56.9% to
$1.2 million from $765,000 for the same period in 1995. The increase is
attributable to a number of factors the largest of which was a decrease in the
provision for loan and lease losses to $1.0 million for the first six months of
1996 from $1.7 million for the first six months of 1995, a decrease of $736,000
or 42.4%. Other income increased $322,000 or 9.5% to $3.7 million for the first
six months of 1996 compared to $3.4 million for the same prior year period. The
provision for income taxes increased $597,000 to $885,000 for the first six
months of 1996 from $288,000 for the same prior year period due to a higher
effective tax rate on an increase in pre-tax earnings of $1.0 million. Return
on average assets and average stockholders' equity for the first six months of
1996 were 1.00% and 13.45%, respectively, compared to .66% and 10.75%,
respectively for the same 1995 period. Primary and fully diluted earnings per
share for the first six months of 1996 increased to $.63 and $.59, respectively,
from $.47 and $.44, respectively for the same 1995 period. (See "RESULTS OF
OPERATIONS -- PROVISION FOR LOAN AND LEASE LOSSES", "RESULTS OF OPERATION --
NONPERFORMING ASSETS", and "RESULTS OF OPERATIONS -- OTHER INCOME AND EXPENSE.")
For the three months ended June 30, 1996, the Company recorded net income of
$667,000 compared to $269,000, an increase of $398,000 or 148.0% over the same
1995 period. The increase in second quarter earnings is primarily due to a
decrease of $539,000 in the provision for loans and lease losses combined with
an increase in other income of $296,000 partially offset by increases of
$133,000 in other expense and $312,000 in the provision for income taxes. The
return on average assets and equity for the quarter ended June 30, 1996 were
1.10% and 14.71%, respectively, compared to .47% and 7.42% for the same quarter
last year. Primary and fully diluted earnings per share for the second quarter
of 1996 increased to $.35 and $.33, respectively, from $.17 and $.16,
respectively, for the same 1995 period.
NET INTEREST INCOME
Net interest income for the six months ended June 30, 1996 and 1995 virtually
remained at the same level decreasing only $13,000 or 0.2%. Total interest
income decreased $65,000 or 0.7% which consisted primarily of a decrease of
$260,000 in interest and fees on loans partially offset by increases in
investment securities interest of $108,000 and Federal funds sold interest of
$89,000. Generally lower short term interest rates over the past year decreased
the taxable equivalent yield on earning assets to 9.54% at June 30, 1996 from
10.13% for the same 1995 period. During this time period the tax equivalent
yield on loans decreased to 10.39% from 10.76% on average loan balances
outstanding which increased to $168.5 million from $167.8 million for the six
months ended June 30, 1996 and 1995, respectively. Although the tax equivalent
yield on the investment portfolio decreased to 5.56% from 5.92% the average
volume increased to $28.2 million from $22.4 million for the six months ended
June 30, 1996 and 1995, respectively. During this same time period the yield
on Federal funds sold decreased to 5.14% from 5.89% while the related average
balance increased to $6.0 million from $2.3 million. The net tax equivalent
interest margin (net interest income as a percentage of average interest-earning
assets) was 7.10% and 7.50% for the six months ended June 30, 1996 and 1995,
respectively.
Interest expense decreased $52,000 or 2.1% for the first six months of 1996
compared to the same period in 1995. This variance consisted of an decrease of
$45,000 in interest paid on Federal funds purchased and U.S. Treasury demand
note and a decrease of $8,000 in interest paid on deposits. The average rate
paid on deposits decreased during this time period to 3.14% at June 30, 1996
compared to 3.21% for the same 1995 period while average deposit balances
increased to $214.6 million from $209.4 million. The average rate paid on NOW
and money market and savings accounts dropped to 1.44% and 3.69%, respectively
from 1.75% and 4.00%, respectively. During the same period the average rate
paid on time deposits increased to 4.72% from 4.23%. In addition to the rate
increase average balances on time deposits grew $6.8 million during the first
six months of 1996 to $33.5 million compared to $22.4 million for the same 1995
period. Federal funds purchased and the U.S. Treasury demand note account
averaged $1.1 million for the first half of 1996 compared to $2.5 million for
the same period last year.
7
<PAGE>
OTHER INCOME AND OTHER EXPENSE
Other income and other expense increased $322,000 and $13,000, respectively
for the six months ended June 30, 1996 as compared to the same 1995 period.
The increase in other income is primarily attributable to an increase of
$382,000 or 25.3% in service charges on deposit accounts, primarily increased
overdraft fees, an increase of $104,000 or 18.3% in other fees due to
increased loan servicing income, partially offset by a decrease of $188,000
or 14.8% in gains from the sale of loans. The decrease in gain on loan sales
for 1996 as compared to 1995 is due to management's decision to increase the
Bank's level of Title I loans due to slow consumer loan demand in the
Company's market area and to enhance loan yields. Other expense consists
primarily of salaries and employee benefits which increased $199,000 to $4.1
million, occupancy expense which increased $14,000 to $1.6 million,
advertising and other public relations which increased $42,000 to $278,000,
expenses related to other real estate owned which decreased $89,000 to
$186,000, and regulatory assessments which decreased $151,000 to $183,000.
PROVISION FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses for the six months ended June 30,
1996 was $1.0 million compared to $1.7 million for the comparable 1995
period. The amount of the provision reflects management's judgement as to
the adequacy of the allowance for loan and lease losses and is generally
determined by the periodic review of the loan portfolio, the Bank's loan loss
experience, and current and expected economic conditions. The decrease in
the provision for loan and lease losses reflects a decrease in net charge
offs to $314,000 for the first six months of 1996 as compared to $1.8 million
for the same prior year period. The annualized ratio of net charge offs to
total loans was 0.37%, 1.93% and 2.30% at June 30, 1996, December 31, 1995,
and June 30, 1995, respectively. The allowance for loan and lease losses was
2.09%, 1.80% and 1.65% of total gross loans at June 30, 1996, December 31,
1995 and June 30, 1995, respectively.
Loans are charged against the reserve, when in management's opinion, they are
deemed uncollectible, although the Bank continues to aggressively pursue
collection. Although management believes that the reserve for loan losses is
adequate to absorb losses as they arise, there can be no assurance that the
Company will not sustain losses in any given period which could be substantial
in relation to the size of the reserve for loan and lease losses.
NONPERFORMING ASSETS
The following table provides information with respect to the components of the
Company's nonperforming assets at June 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Loans 90 days or more past due
and still accruing $ --- $ ---
Nonaccrual loans:
Conventional real estate 316 1,095
Real estate construction 844 1,506
Commercial 1,884 1,560
Installment and consumer 1,296 1,129
------- --------
Total 4,340 5,290
------- --------
Total nonperforming loans 4,340 5,290
Other real estate owned 2,786 2,402
------- --------
Total nonperforming assets $7,126 $7,692
------- --------
------- --------
Nonperforming assets to total
gross loans plus other real
estate owned 4.08% 4.68%
------- --------
------- --------
</TABLE>
8
<PAGE>
The Company considers a loan to be nonperforming when any one of the following
events occurs: (a) any installment of principal or interest is 90 days past due;
(b) the full timely collection of interest or principal becomes uncertain; -C-
the loan is classified as "doubtful" by bank examiners; or (d) a portion of its
principal balance has been charged-off. The Company's policy is to classify
loans which are 90 days past due as nonaccrual loans unless Management
determines that the loan is adequately collateralized and in the process of
collection or other circumstances exist which would justify the treatment of the
loan as fully collectible.
Impaired loans were recorded at $1,061,000 and $1,458,000 for commercial loans
and real estate mortgage loans, respectively, at June 30, 1996. The recorded
investments are stated net of reserves for loan losses of $417,000 and $109,000,
respectively. Impaired loans at December 31, 1995 were recorded at $1,270,000
and $2,467,000 for commercial loans and real estate mortgage loans,
respectively, net of reserves for loan losses of $289,000 and $134,000,
respectively.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The liquidity of a banking institution reflects its ability to provide funds to
meet customer credit needs, to accommodate possible outflows in deposits, to
provide funds for day-to-day operations, and to take advantage of interest rate
market opportunities. Asset liquidity is provided by cash, certificates of
deposit with other financial institutions, Federal funds sold, investment
maturities and sales and loan maturities, repayments and sales. Liquid assets
(consisting of cash, Federal funds sold and investment securities) comprised
24.3% and 25.7% of the Company's total assets at June 30, 1996 and December 31,
1995, respectively. Liquidity management also includes the management of
unfunded commitments to make loans and undisbursed amounts under lines of
credit. At June 30, 1996, these commitments totaled $26.7 million in commercial
loans, $2.6 million in letters of credit, $3.7 million in real estate
construction loans, and $9.4 million in consumer and installment loans.
In addition to loan and investment sales and deposit growth, the Bank has
several secondary sources of liquidity. Many of the Bank's real estate
construction loans are originated pursuant to underwriting standards which make
them readily marketable to other financial institutions or investors in the
secondary market. In addition, in order to meet liquidity needs on a temporary
basis, the Bank has unsecured lines of credit in the amount of $3.0 million for
the purchase of Federal funds with other financial institutions and may borrow
funds at a correspondent financial institution and the Federal Reserve discount
window, subject to the Bank's ability to supply collateral.
Asset/Liability Management involves minimizing the impact of interest rate
changes on the Company's earnings through the management of the amount,
composition and repricing periods of rate sensitive assets and rate sensitive
liabilities. Emphasis is placed on maintaining a rate sensitivity position
within the Company's policy guidelines to avoid wide swings in spreads and to
minimize risk due to changes in interest rates. At June 30, 1996 approximately
52% of the Company's interest earning assets have interest rates which are tied
to the Bank's base lending rate or mature in one year or less. In order to
match the rate sensitivity of its assets, the Company's policy is to offer a
large number of variable rate deposit products and limit the level of large
dollar time deposits with maturities of one year or longer. In addition to
managing its asset/liability position, the Company has taken steps to mitigate
the impact of changing interest rates by generating non-interest income through
service charges, offering products which are not interest rate sensitive, such
as escrow services and insurance products, and through the servicing of mortgage
loans.
9
<PAGE>
CAPITAL RESOURCES
Stockholders' equity increased 6.5% to $18.4 million at June 30, 1996 from $17.2
million at December 31, 1995. Net income of $1.2 million partially offset by an
increase in net unrealized losses on available for sale securities of $113,000
contributed to the increase in equity. The sale of common stock through the
exercise of stock options and the conversion of convertible subordinated
debentures increased stockholders an additional $40,000.
The following table provides information with respect to the Company's and the
Bank's regulatory capital ratios and regulatory minimum requirements:
<TABLE>
<CAPTION>
June 30, December 31, Regulatory Minimum
1996 1995 Ratios
-------- ------------ ------------------
<S> <C> <C> <C>
NORTH COUNTY BANCORP
Risk-based capital
Tier 1 9.25% 9.06% 4.00%
Total 11.35% 11.21% 8.00%
Tier 1 leverage capital 7.54% 7.17% 4.00% - 5.00%
NORTH COUNTY BANK
Risk-based capital
Tier 1 10.43% 10.40% 4.00%
Total 11.68% 11.65% 8.00%
Tier 1 leverage capital 8.49% 8.20% 4.00% - 5.00%
</TABLE>
At June 30, 1996, the Company had $1.7 million in 9 1/4% Convertible
Subordinated Debentures ("Debentures") due May 15, 2002 outstanding. The
debentures are convertible at the option of the holder into common stock of
the Company at a conversion price $7.84 per share, subject to adjustments for
stock splits, stock dividends or other certain events. The debentures are
redeemable, in whole or in part, at the option of the Company at declining
redemption prices that range from 103.25% at June 30, 1996 to par on or after
May 15, 1999. Under the risk-based capital regulations the debentures
qualify as Tier 2 capital. Additionally, the Company had $1.6 million
outstanding under two term notes with directors of the Company as of June 30,
1996 that mature on January 1, 1999 and July 1, 1998, respectively. The
notes are unsecured and have a fixed interest rate of 8.00%. The notes have
varying interest and principal payment schedules. The Company used the
proceeds of these notes to purchase $1.5 million of noncumulative perpetual
preferred stock from the Bank.
Management anticipates no significant capital expenditures during 1996.
10
<PAGE>
PART II - OTHER INFORMATION
All items of Part II other than Items 4 and 6 below are either inapplicable or
would be responded to in the negative.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
North County Bancorp held its Annual Meeting of Shareholders on May 22, 1996, at
which the following nine directors were elected.
Alan P. Chamberlain Jack Port
G. Bruce Dunn Clarence R. Smith
Ronald K. Goode Raymond V. Stone
James M. Gregg Burnet F. Wohlford
Rodney D. Jones
All directors are elected each year at the Annual Meeting and hold office until
the next Annual Meeting or until their successors are elected.
No other matters were presented for vote at the Annual Meeting. The following
table describes the number of affirmative and negative votes cast with respect
to the election.
<TABLE>
<CAPTION>
Matter voted upon Affirmative votes Negative votes Abstain
- ----------------- ----------------- -------------- -------
<S> <C> <C> <C>
Election of directors as
nominated by management 1,395,772 -0- 3,848
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) No reports on Form 8-K have been filed during the period, and no
events have occurred which would require one to be filed.
11
<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.
NORTH COUNTY BANCORP
(Registrant)
/s/ MICHAEL J. GILLIGAN Date: August 6, 1996
- -------------------------------------- --------------
Michael J. Gilligan
Vice President & Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the consolidated
balance sheets and consolidated statements of operations found on pages 2 and 3
of the Company's 10-QSB for June 30, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000357262
<NAME> NORTH COUNTY BANCORP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 22,825,000
<INT-BEARING-DEPOSITS> 143,461,000
<FED-FUNDS-SOLD> 7,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,976,000
<INVESTMENTS-CARRYING> 11,151,000
<INVESTMENTS-MARKET> 10,991,000
<LOANS> 172,019,000
<ALLOWANCE> 3,601,000
<TOTAL-ASSETS> 244,689,000
<DEPOSITS> 216,983,000
<SHORT-TERM> 3,805,000
<LIABILITIES-OTHER> 1,822,000
<LONG-TERM> 3,725,000
0
0
<COMMON> 9,958,000
<OTHER-SE> 8,396,000
<TOTAL-LIABILITIES-AND-EQUITY> 244,689,000
<INTEREST-LOAN> 8,645,000
<INTEREST-INVEST> 745,000
<INTEREST-OTHER> 155,000
<INTEREST-TOTAL> 9,545,000
<INTEREST-DEPOSIT> 2,263,000
<INTEREST-EXPENSE> 2,458,000
<INTEREST-INCOME-NET> 7,087,000
<LOAN-LOSSES> 1,000,000
<SECURITIES-GAINS> (24,000)
<EXPENSE-OTHER> 7,683,000
<INCOME-PRETAX> 2,085,000
<INCOME-PRE-EXTRAORDINARY> 2,085,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,200,000
<EPS-PRIMARY> .63
<EPS-DILUTED> .59
<YIELD-ACTUAL> 9.54
<LOANS-NON> 4,340,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 4,648,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,916,000
<CHARGE-OFFS> 543,000
<RECOVERIES> 228,000
<ALLOWANCE-CLOSE> 3,601,000
<ALLOWANCE-DOMESTIC> 3,601,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
