<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
--------------------------------
--- 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
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
444 S. Escondido Blvd., P.O.Box 462990, Escondido, California 92025
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (760) 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 May 7, 1997 the Registrant had 4,011,912 shares of no par value common
stock issued and outstanding.
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NORTH COUNTY BANCORP
<TABLE>
<CAPTION>
Page
<S> <C>
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet -
March 31, 1997 and December 31, 1996 2
Consolidated Statement of Income -
Three Months Ended March 31, 1997 and 1996 3
Consolidated Statement of Cash Flows -
Three months Ended March 31, 1997 and 1996 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
</TABLE>
1
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NORTH COUNTY BANCORP
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
--------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
Assets
------
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 27,274,000 $ 25,936,000
Federal funds sold 19,500,000 2,200,000
------------ ------------
46,774,000 28,136,000
Investment securities:
Available for sale 22,034,000 23,117,000
Held to maturity 10,220,000 11,344,000
Loans, net 182,516,000 177,281,000
Other real estate owned 3,295,000 2,756,000
Premises and equipment, net 8,500,000 8,710,000
Accrued interest receivable and
other assets 5,552,000 5,962,000
------------ ------------
$278,891,000 $257,306,000
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Non-interest bearing $ 83,800,000 $ 83,937,000
Interest bearing 165,108,000 145,407,000
------------ ------------
248,908,000 229,344,000
Accrued expenses and other liabilities 1,765,000 1,901,000
U.S. Treasury demand note 3,940,000 2,376,000
Notes payable 1,532,000 1,550,000
Capital lease obligation 426,000 429,000
Convertible subordinated debentures 1,519,000 1,534,000
----------- -----------
Total liabilities 258,090,000 237,134,000
----------- -----------
Stockholders' equity:
Common stock, no par value,
Authorized, 10,000,000 shares;
Outstanding shares 4,011,912 in 1997
and 4,006,386 in 1996 11,771,000 11,758,000
Retained earnings 9,150,000 8,500,000
Unrealized loss on available for sale
securities, net of tax (120,000) (86,000)
------------ ------------
Total stockholders' equity 20,801,000 20,172,000
------------ ------------
$278,891,000 $257,306,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
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NORTH COUNTY BANCORP
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
------------- ----------
<S> <C> <C>
Interest income:
Interest and fees on loans $4,470,000 $4,272,000
Investment securities 444,000 357,000
Federal funds sold 58,000 118,000
Deposits with other financial institutions --- ---
---------- ----------
Total interest income 4,972,000 4,747,000
---------- ----------
Interest expense:
Deposits 1,243,000 1,138,000
Federal funds purchased and
U.S. Treasury demand note 32,000 5,000
Notes payable, capital lease obligation and
convertible subordinated debentures 83,000 86,000
---------- ----------
Total interest expense 1,358,000 1,229,000
---------- ----------
Net interest income 3,614,000 3,518,000
Provision for loan and lease losses 335,000 300,000
---------- ----------
Net interest income after provision
for loan and lease losses 3,279,000 3,218,000
---------- ----------
Other income 1,445,000 1,518,000
Other expense 3,682,000 3,762,000
---------- ----------
Income before income taxes 1,042,000 974,000
Provision for income taxes 392,000 441,000
---------- ----------
Net income $ 650,000 $ 533,000
---------- ----------
---------- ----------
Primary earnings per share $ 0.16 $ 0.13
---------- ----------
---------- ----------
Fully diluted earnings per share $ 0.15 $ 0.13
---------- ----------
--------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
NORTH COUNTY BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
-------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 650,000 $ 533,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of:
Office property and equipment 330,000 335,000
Deferred loan fees and costs, net (52,000) (115,000)
Investment premiums and discounts, net 26,000 8,000
Loan servicing rights 33,000 52,000
Other 12,000 12,000
Provision for loan and lease losses 335,000 300,000
Decrease (increase) in interest receivable 202,000 (108,000)
Increase in taxes payable 58,000 293,000
(Decrease) increase in accrued expenses (368,000) 58,000
Increase in interest payable 161,000 60,000
Other, net 48,000 (684,000)
--------- ---------
Net cash provided by operating
activities 1,435,000 744,000
--------- ---------
Cash flows from investing activities:
Proceeds from sales and maturities of
investment securities 2,180,000 4,599,000
Purchase of investment securities --- (8,513,000)
Net increase in loans (6,099,000) (4,447,000)
Purchase of premises and equipment (120,000) (118,000)
Proceeds from sale of other real estate
owned 137,000 424,000
--------- ---------
Net cash used in investing activities (3,902,000) (8,055,000)
--------- ---------
Cash flows from financing activities:
Cash payments on notes payable and capital
lease obligations (3,000) (8,000)
Net increase in deposits 19,563,000 2,478,000
Net increase (decrease) in short term
borrowings 1,564,000 (43,000)
Net decrease in long term borrowings (33,000) (24,000)
Cash proceeds from sale of common stock 14,000 6,000
---------- ---------
Net cash provided by financing
activities 21,105,000 2,409,000
---------- ---------
Net increase (decrease) in cash and cash
equivalents 18,638,000 (4,902,000)
Cash and cash equivalents at beginning of
year 28,136,000 34,733,000
------------ ------------
Cash and cash equivalents at end of period $ 46,774,000 $ 29,831,000
------------ ------------
------------ ------------
Disclosures:
Total interest paid $ 1,197,000 $ 1,169,000
------------ -----------
------------ -----------
Total taxes paid $ 385,000 $ 185,000
------------ -----------
------------ -----------
Foreclosed real estate loans $ 581,000 $ 1,081,000
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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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,
1996.
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 months ended March 31, 1997 and
1996, 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 4,066,012 and 3,985,442 for the three months ended March
31, 1997 and 1996, respectively. The calculation of fully diluted earnings per
share for the three months ended March 31, 1997 and 1996, assumes the issuance
of 406,150 and 448,663 shares of common stock, respectively, upon conversion of
the Company's convertible subordinated debentures. The weighted average number
of shares outstanding for fully diluted earnings per share was 4,535,947 and
4,447,883 for the three months ended March 31, 1997 and 1996, respectively.
NOTE 3 - STOCK DIVIDEND
On February 19, 1997, the Company declared a two for one stock split to
stockholders effective March 14, 1997. This resulted in the issuance of
2,005,956 shares of common stock.
5
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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, 1996.
FINANCIAL CONDITION
Total assets of the Company increased $21.6 million or 8.4% to $278.9 million at
March 31, 1997, from $257.3 million at December 31, 1996. Federal funds sold
increased $17.3 million or 786.4%. The increase in Federal funds sold was
funded by a certificate of deposit promotion during March of 1997 that raised
approximately $17.0 million in seven month certificates of deposit. The deposit
promotion was aimed at increasing the Company's share of its current market
areas by developing new, and expanding existing, customer relationships. The
promotion was also timed in anticipation of meeting seasonal liquidity needs
that historically the Company has experienced during the second quarter.
Investment securities decreased 6.4% or $2.2 million to $32.3 million at period
end compared to $34.5 million at year-end 1996 due to maturities and bond calls
in the portfolio. Gross loans increased $5.4 million or 3.0% to $185.8 million
at period end from $180.4 million at the end of 1996. The increase in the loan
portfolio was primarily due to SBA and commercial real estate loans which
increased $6.7 million or 22.8% and $870,000 or 2.5%, respectively. These
increases were partially offset by decreases in consumer loans of $2.3 million
or 4.3%, construction loans of $104,000 or 3.0% and municipal lease financings
of $168,000 or 7.2%. Commercial loans, which includes SBA loans, increased to
47.8% as a percentage of gross loans as compared to 45.3% at year end. Consumer
loans declined to 27.7% of total gross loans from 29.8% at year end. The
Company continues to experience poor demand for consumer financing primarily due
to increased competition from non-bank lenders as well as other financial
institutions in its market area. Other real estate owned increased $539,000 to
$3.3 million from $2.8 million during the first three months of 1997 due to the
addition of one property . The Company was able to sell two properties from its
other real estate owned portfolio that had been written down to a carrying value
of $0. Three properties that totaled $935,000 were in escrow at March 31, 1997.
Total deposits at March 31, 1997 increased $19.6 million or 8.5% from December
31, 1996. The growth in deposits consisted of interest bearing accounts which
increased $19.7 million or 13.6% partially offset by noninterest-bearing demand
deposits which decreased slightly $137,000 or 0.2%. As discussed above, a
promotional campaign during the month of March contributed approximately $17.0
million to the time deposit category in 1997, for a total increase of $18.5
million to $56.0 million or 22.5% of total deposits compared to $37.5 million or
16.4% of deposits at year end. In the other interest-bearing deposit
categories, NOW accounts increased $1.0 million and savings and money market
accounts increased $327,000. U.S. Treasury demand note, which has a volatile
nature, increased $1.6 million or 65.8% to $3.9 million at quarter end. The
demand note is an overnight borrowing that consists of tax deposits that are
payable on demand to the Treasury. Total stockholders' equity at March 31, 1997
was $20.8 million compared to $20.2 million at December 31, 1996, an increase of
$629,000 or 3.1%. First quarter earnings of $650,000 and $14,000 from the sale
of common stock contributed to the increase in equity that was partially
offset by an increase in net unrealized losses on available for sale securities
of $34,000. The Company's Tier I risk based capital, total risk based capital
and Tier I leverage capital ratios were 9.98%, 11.97% and 8.12%, respectively at
March 31, 1997, as compared to 9.94%, 11.96% and 7.70%, respectively at December
31, 1996. The Bank's Tier I risk based capital, total risk based capital and
Tier I leverage capital ratios were 11.29%, 12.55% and 9.07%, respectively at
March 31, 1997, as compared to 11.28%, 12.53% and 8.74%, respectively at
December 31, 1996.
RESULTS OF OPERATIONS
SUMMARY
Net income for the three months ended March 31, 1997 increased $117,000 or 22.0%
to $650,000 from $533,000 for the same period in 1996. The increase is
attributable to a number of factors, the largest of which was an increase in net
interest income of $96,000 or 2.7% to $3.6 million for the first three months of
1997 from $3.5 million for the same 1996 period. The provision for loan and
lease losses increased $35,000 or 11.7% to $335,000 from $300,000. Other income
and other
6
<PAGE>
expense decreased $73,000 or 4.8% and $80,000 or 2.1%, respectively. The
provision for income taxes decreased $49,000 to $392,000 for the first three
months of 1997 from $441,000 for the same prior year period due to a lower
effective tax rate on pre-tax earnings which increased by $68,000 or 7.0%.
Return on average assets and average stockholders' equity increased during
the first quarter of 1997 to 1.01% and 12.62%, respectively, from 0.90% and
12.21%, respectively for the same 1996 period. Primary and fully diluted
earnings per share for the first three months of 1997 increased to $0.16 and
$0.15, respectively, from $0.13 for the same 1996 period. The 1996 earnings
per share calculations have been restated to reflect two 5% stock dividends
paid on March 29, 1996 and February 28, 1997, respectively, and a two for
one stock split effective March 14, 1997. (See RESULTS OF OPERATIONS --
PROVISION FOR LOAN AND LEASE LOSSES, RESULTS OF OPERATION -- NET INTEREST
INCOME, and RESULTS OF OPERATIONS -- OTHER INCOME AND EXPENSE.)
NET INTEREST INCOME
Net interest income for the three months ended March 31, 1997 compared to 1996
increased $96,000 or 2.7% primarily due to increased volume in interest earning
assets. Interest income increased $225,000 or 4.7% to $5.0 million from $4.7
million. The increase in interest income was comprised of an increase of
$198,000 in interest and fees on loans, an increase of $87,000 in investment
securities income, and a decrease of $60,000 in Federal funds sold interest.
The increase in loan income was due to an increase of $17.2 million to $182.2
million in average loans for the first three month of 1997 from $165.0 million
for the same prior year period. The increase in interest on loans due to volume
was partially offset by a decrease in the average tax equivalent yield on loans
to 9.97% from 10.55%. The lower yields on the loan portfolio over the past year
resulted in a decrease in the taxable equivalent yield on total earning assets
to 9.23% at March 31, 1997 from 9.65% for the same 1996 period. Generally
higher short term interest rates in the securities market during this time
period caused the tax equivalent yield on the investment portfolio to increase
to 5.63% from 5.58%. The average volume of investments also increased to $32.9
million from $26.5 million. The $60,000 decrease in interest on Federal funds
sold was due to a decrease of $4.8 million to $4.4 million in average balances
from $9.2 million partially offset by an increase to 5.36% from 5.24% in the
yield on this category. The net tax equivalent interest margin (net interest
income as a percentage of average interest-earning assets) was 6.72% and 7.16%
for the three months ended March 31, 1997 and 1996, respectively.
Interest expense increased $129,000 or 10.5% for the first three months of 1997
compared to the same period in 1996. The increase in interest expense consisted
of an increase of $105,000 in interest paid on deposits, an increase of $27,000
in interest paid on Federal funds purchased and U.S. Treasury demand note, and a
decrease of $3,000 in interest paid on notes payable, capital lease obligation
and subordinated convertible debentures. The average rate paid on deposits
increased during this time period to 3.34% at March 31, 1997 compared to 3.17%
for the same 1996 period. The average rate paid on NOW and money market and
savings accounts decreased slightly to 1.43% and 3.27%, respectively, from 1.45%
and 3.29%, respectively. During the same period the average rate paid on time
deposits increased to 5.06% from 4.81%. In addition to the rate increase on
average time deposits, average balances on time deposits grew by 26.7% or $8.9
million during the first quarter of 1997 to $42.2 million from $33.3 million for
the same 1996 period. The increase in both average volume and yield on time
deposits during the first quarter of 1997 is largely attributable to the
Company's efforts to increase its market share by offering a short term (seven
months) certificate of deposit at a rate of 6.0%. (See FINANCIAL CONDITION).
Federal funds purchased and the U.S. Treasury demand note account averaged $2.5
million for the first three months of 1997 compared to $457,000 for the same
period last year.
OTHER INCOME AND OTHER EXPENSE
Other income and expense decreased $73,000 and $80,000, respectively, for the
three months ended March 31, 1997 compared to the same 1996 period. The
decrease in other income is primarily due to a decrease of $103,000 or 43.1% in
gains on loan sales. The decrease in gain on loan sales consists of a decrease
of $209,000 related to Title I loan sales partially offset by an increase of
$106,000 related to the sale of other equity loans. The decrease in Title I
loan sales is largely due to management's decision to portfolio these 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 $156,000 to $2.2 million, occupancy expense which increased
$19,000 to $851,000, advertising and other public relations which decreased
$15,000 to $102,000, other real estate owned expenses which decreased $131,000
to a net gain of $35,000, regulatory assessments which decreased $61,000 to
$30,000, and expenses related to the loss collection effort which decreased
$31,000
6
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to $36,000. The overall reduction in other expenses in 1997 is due in
part to the continued emphasis by management on vigorous cost containment, an
improvement in the Bank's regulatory assessment classification and improved
results related to the Company's efforts to sell other real estate owned.
PROVISION FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses for the three months ended March 31,
1997 was $335,000 compared to $300,000 for the comparable 1996 period. The
amount of the provision reflects management's judgement as to the adequacy of
the reserve 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 increase in the provision for
loan and lease losses reflects a provision of $150,000 during the first quarter
of 1997 to supplement the Company's Title I HUD reserve due to potential losses
arising from the Title I participations sold in 1993 and 1994. Net charge offs
increased to $160,000 for the first three months of 1997 from $111,000 for the
same prior year period. The annualized ratio of net charge offs to total loans
was 0.34%, 0.60% and 0.27% at March 31, 1997, December 31, 1996, and March 31,
1996, respectively. The loan and lease loss reserve was 1.78%, 1.73% and 1.88%
of total gross loans at March 31, 1997, December 31, 1996 and March 31, 1996,
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 and lease
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.
NONPERFORMING ASSETS
The following table provides information with respect to the components of the
Company's nonperforming assets at March 31, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Commercial loans 90 days or more
due and still accruing $ 47 $ --
Nonaccrual loans:
Conventional real estate 284 150
Real estate construction -- 581
Commercial 2,182 1,540
Installment and consumer 1,254 1,270
-------- -------
Total 3,720 3,541
-------- -------
Total nonperforming loans 3,767 3,541
Other real estate owned 3,295 2,756
-------- -------
Total nonperforming assets $ 7,062 $ 6,297
-------- -------
-------- -------
Nonperforming assets to total
gross loans plus other real
estate owned 3.73% 3.44%
-------- -------
-------- -------
</TABLE>
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
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the loan as fully collectible.
Impaired loans were recorded at $1.5 million and $407,000 for commercial loans
and real estate mortgage loans, respectively, at March 31, 1997. The recorded
investments are stated net of reserves for loan losses of $485,000 and $56,000,
respectively. Impaired loans at December 31, 1996 were recorded at $1.1 million
and $846,000 for commercial loans and real estate mortgage loans, respectively,
net of reserves for loan losses of $274,000 and $68,000, 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
28.3% and 24.3% of the Company's total assets at March 31, 1997 and December 31,
1996, respectively. Liquidity management also includes the management of
unfunded commitments to make loans and undisbursed amounts under lines of
credit. At March 31, 1997, these commitments totaled $37.5 million in
commercial loans, $1.6 million in letters of credit, $3.3 million in real estate
construction loans, and $10.1 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 $6.0 million for
the purchase of Federal funds with other financial institutions and may borrow
funds at a correspondent financial institution, the Federal Home Loan Bank 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 March 31, 1997 approximately
54% 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
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CAPITAL RESOURCES
Stockholders' equity increased 3.1% to $20.8 million at March 31, 1997 from
$20.2 million at December 31, 1996. Net income of $650,000 partially offset by
an increase in net unrealized losses on available for sale securities of $34,000
contributed to the increase in equity. The sale common stock raised an
additional $14,000.
The following table provides information with respect to the Company's and the
Bank's regulatory capital ratios and regulatory minimum requirements:
<TABLE>
<CAPTION>
March 31, December 31, Regulatory Minimum
1997 1996 Ratios
-------- ----------- ------------------
<S> <C> <C> <C>
NORTH COUNTY BANCORP
Risk-based capital
Tier 1 9.98% 9.94% 4.00%
Total 11.97% 11.96% 8.00%
Tier 1 leverage capital 8.12% 7.70% 4.00% - 5.00%
NORTH COUNTY BANK
Risk-based capital
Tier 1 11.29% 11.28% 4.00%
Total 12.55% 12.53% 8.00%
Tier 1 leverage capital 9.07% 8.74% 4.00% - 5.00%
</TABLE>
At March 31, 1997, the Company had $1.5 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 $3.74 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 March 31, 1997 to par on or after May 15, 1999.
Under the risk-based capital regulations the debentures qualify as Tier 2
capital. The Company used a portion of the proceeds of the debentures to
purchase $1.5 million of noncumulative perpetual preferred stock from the Bank,
increasing the Bank's capital ratios. Additionally, the Company had $1.5
million outstanding under two term notes with current and former directors of
the Company as of March 31, 1997 that mature on January 1, 1999 and July 1,
1998, respectively. The notes were unsecured and had a fixed interest rate of
8.00%. The Company also used the proceeds of these notes to purchase $1.5
million of noncumulative perpetual preferred stock from the Bank.
In May 1997, the Bank paid a dividend of $1.3 million to the Company. The
Company applied the proceeds of the dividend to payment in full of the two term
notes that totaled $1.5 million at March 31, 1997. The pro forma effect of the
dividend payment on the Bank's Tier 1 risk based capital, total risk based
capital and Tier 1 leverage capital ratios as of March 31, 1997 is 10.66%,
11.92% and 8.56%, respectively.
Management anticipates capital expenditures of approximately $750,000 to $1.1
million primarily for upgrades to computer and data communications equipment and
computer software during 1997.
10
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PART II - OTHER INFORMATION
All items of Part II other than Item 6 below are either inapplicable or would be
responded to in the negative.
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: May 8, 1997
- ---------------------------- ------------
Michael J. Gilligan
Vice President & Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statement of income found on pages 2
and 3 of the Company's Form 10-Q for March 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 26,775,000
<INT-BEARING-DEPOSITS> 499,000
<FED-FUNDS-SOLD> 19,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22,034,000
<INVESTMENTS-CARRYING> 10,220,000
<INVESTMENTS-MARKET> 10,162,000
<LOANS> 185,820,000
<ALLOWANCE> 3,304,000
<TOTAL-ASSETS> 278,891,000
<DEPOSITS> 248,908,000
<SHORT-TERM> 3,940,000
<LIABILITIES-OTHER> 1,765,000
<LONG-TERM> 3,477,000
0
0
<COMMON> 11,771,000
<OTHER-SE> 9,030,000
<TOTAL-LIABILITIES-AND-EQUITY> 278,891,000
<INTEREST-LOAN> 4,470,000
<INTEREST-INVEST> 444,000
<INTEREST-OTHER> 58,000
<INTEREST-TOTAL> 4,972,000
<INTEREST-DEPOSIT> 1,243,000
<INTEREST-EXPENSE> 1,358,000
<INTEREST-INCOME-NET> 3,614,000
<LOAN-LOSSES> 335,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,682,000
<INCOME-PRETAX> 1,042,000
<INCOME-PRE-EXTRAORDINARY> 650,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 650,000
<EPS-PRIMARY> .16
<EPS-DILUTED> .15
<YIELD-ACTUAL> 9.23
<LOANS-NON> 3,720,000
<LOANS-PAST> 47,000
<LOANS-TROUBLED> 4,362,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,129,000
<CHARGE-OFFS> 171,000
<RECOVERIES> 11,000
<ALLOWANCE-CLOSE> 3,304,000
<ALLOWANCE-DOMESTIC> 3,304,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
