<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File Number 0-10692
TRANSWORLD BANCORP
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3730637
- - ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) dentification No.)
15233 Ventura Boulevard
Sherman Oaks, California 91403
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 783-7501
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 2,760,334 shares of common stock outstanding as of May 5, 1995.
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(Unaudited) 1995 1994
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 28,589,000 $ 30,541,000
Federal funds sold 53,000,000 55,000,000
Investment securities held to maturity
(approximate market value:
1995-$136,356,000, 1994-$124,383,000): 138,615,000 128,907,000
Investment securities available for
sale at market value 24,116,000 23,379,000
- - --------------------------------------------------------------------------------------------------------------------
Total investment securities 162,731,000 152,286,000
Loans and leases 124,415,000 125,209,000
Less allowance for credit losses 2,106,000 2,033,000
- - --------------------------------------------------------------------------------------------------------------------
Net loans and leases 122,309,000 123,176,000
Premises and equipment, net 3,215,000 3,345,000
Other real estate owned 602,000 2,048,000
Other assets 5,430,000 4,756,000
- - --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $375,876,000 $371,152,000
====================================================================================================================
LIABILITIES
Deposits:
Noninterest bearing $115,610,000 $113,600,000
Interest bearing 210,442,000 227,985,000
- - --------------------------------------------------------------------------------------------------------------------
Total deposits 326,052,000 341,585,000
Securities sold under agreement to repurchase 20,000,000 200,000
Interest bearing demand notes issued
to the U.S. Treasury 1,437,000 2,740,000
Mortgage indebtedness and obligation
under capital lease 229,000 320,000
Other liabilities 1,586,000 977,000
- - --------------------------------------------------------------------------------------------------------------------
Total liabilities 349,304,000 345,822,000
STOCKHOLDERS' EQUITY
Common stock, no par value:
authorized $6,000,000 shares;
2,760,334 shares issued and out-
standing in TransWorld Bancorp in
1995 and 2,727,182 in 1994 8,022,000 7,813,000
Surplus 2,926,000 2,926,000
Retained earning 15,647,000 14,666,000
Unrealized gain/loss on securities
(net of deferred taxes of $16,000
in March 1995 and $53,000 in Dec 1994) (23,000) (75,000)
- - --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 26,572,000 25,330,000
- - --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $375,876,000 $371,152,000
====================================================================================================================
</TABLE>
The financial statements reflect all normal interim adjustments which are,
in the opinion of management, necessary to a fair statement of the results for
the periods presented.
2
<PAGE> 3
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
March 31,
1995 1994
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $3,229,000 $2,653,000
Interest on state and municipal
securities 421,000 301,000
Interest on other investment
securities 1,724,000 1,002,000
Interest on Federal funds sold 959,000 494,000
- - -----------------------------------------------------------------------------------------------------------------
Total interest income 6,333,000 4,450,000
Interest expense:
Interest on deposits 1,563,000 1,147,000
Interest on short-term borrowings 50,000 30,000
- - -----------------------------------------------------------------------------------------------------------------
Total interest expense 1,613,000 1,177,000
Net interest income 4,720,000 3,273,000
Provision for credit losses 220,000 150,000
- - -----------------------------------------------------------------------------------------------------------------
Net interest income after provision
for credit losses 4,500,000 3,123,000
Noninterest income:
Service charges on deposit accounts 699,000 751,000
Bankcard merchant income 30,000 115,000
Other operating income 232,000 199,000
- - -----------------------------------------------------------------------------------------------------------------
Total noninterest income 961,000 1,065,000
Noninterest expense:
Salaries and employee benefits 1,960,000 1,841,000
Net occupancy expense 579,000 553,000
Furniture, fixtures and equipment 314,000 236,000
FDIC insurance costs 188,000 158,000
Data processing 49,000 56,000
Other operating expense 802,000 692,000
Earthquake expense 7,000 303,000
- - -----------------------------------------------------------------------------------------------------------------
Total noninterest expense 3,899,000 3,839,000
Income before income taxes 1,562,000 349,000
Income taxes 582,000 81,000
- - -----------------------------------------------------------------------------------------------------------------
Net income $ 980,000 $ 268,000
=================================================================================================================
Net income per share* $ .36 $ .10
=================================================================================================================
Book value per share* $ 9.63 $ 8.48
Weighted average shares outstanding* 2,749,283 2,727,182
</TABLE>
*Adjusted to reflect the two-for-one split paid March 7, 1995.
3
<PAGE> 4
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended March 31, 1995 1994
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 980,000 $ 268,000
Adjustment to reconcile net income to net cash
provided by operating activities:
Net amortization of premium on investments 29,000 148,000
Provision for credit losses 220,000 150,000
Accretion of deferred loan fees and costs (36,000) (36,000)
Loan origination costs capitalized (35,000) (48,000)
Depreciation and amortization 184,000 178,000
Increase in accrued interest receivable (400,000) (103,000)
Increase in accrued interest payable 59,000 -
Increase (decrease) in current income taxes payable 469,000 (164,000)
Provision for OREO losses 73,000 -
Increase in other, net 42,000 238,000
- - -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,585,000 631,000
Cash flows from investing activities:
Proceeds from matured securities held to maturity 2,252,000 2,938,000
Proceeds from matured securities available for sale 14,750,000 3,000,000
Proceeds from calls and redemptions
of securities held to maturity 5,000,000 5,705,000
Proceeds from calls and redemptions
of securities available for sale - 61,000
Purchase of securities held to maturity (11,815,000) (12,529,000)
Purchase of securities available for sale (15,614,000) -
Net decrease in loans 183,000 107,000
Proceeds from sale of SBA loans 462,000 521,000
Loan origination fees received 111,000 95,000
Proceeds from sale of other real estate owned 1,375,000 260,000
Purchase of premises and equipment (54,000) (118,000)
(Increase) decrease in other, net (274,000) 156,000
- - -----------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (8,619,000) 196,000
Cash flows from financing activities:
Net increase in noninterest bearing deposits 2,010,000 6,068,000
Net (decrease) increase in interest bearing deposits (17,543,000) 17,558,000
Net increase in repurchase agreements 19,800,000 -
(Decrease) increase in interest bearing demand notes (1,303,000) 1,337,000
Decrease in capital lease and mortgage indebtedness (91,000) (210,000)
Repayments on long-term debt - -
Dividends paid in lieu of fractional shares issued - -
Exercise of stock purchase plan options 209,000 -
- - -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3,082,000 24,753,000
- - -----------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents (3,952,000) 25,580,000
Cash and cash equivalents, beginning of year 85,541,000 77,234,000
- - -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 81,589,000 $102,814,000
=============================================================================================================================
Supplemental disclosures of cash flows information:
Cash paid during the year of: 1995 1994
- - -----------------------------------------------------------------------------------------------------------------------------
Interest $ 1,504,000 $ 1,178,000
Income taxes $ 325,000 $ 216,000
- - -----------------------------------------------------------------------------------------------------------------------------
Non cash activities:
Transfer from loans to other real estate owned $ - $ -
=============================================================================================================================
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
TRANSWORLD BANCORP AND SUBSIDIARY
NOTE 1 - NONPERFORMING ASSETS
PAST DUE AND NONACCRUING ASSETS:
<TABLE>
<CAPTION>
Past due over 90 days Nonaccruals
----------------------------------------------------------------------------
March 31 December 31 March 31 December 31
1995 1994 1995 1994
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate loans $255,000 $455,000 $ 985,000 $ 853,000
Commercial loans - - 224,000 250,000
Consumer loans - - 12,000 20,000
Leasing 1,000 1,000 - -
Other Real Estate Owned - - 602,000 2,048,000
- - ----------------------------------------------------------------------------------------------------------------------------
Total $256,000 $456,000 $1,823,000 $3,171,000
============================================================================================================================
</TABLE>
NOTE 2 - ALLOWANCE FOR CREDIT LOSSES AND OTHER REAL ESTATE OWNED:
Transactions in the allowance for credit losses were as follows:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $2,033,000 $2,029,000
Provision charged to operations 220,000 921,000
Recoveries 63,000 109,000
- - ----------------------------------------------------------------------------------------------------------------------------
2,316,000 3,059,000
Less: Loans charged off 210,000 1,026,000
- - ----------------------------------------------------------------------------------------------------------------------------
Balance $2,106,000 $2,033,000
============================================================================================================================
</TABLE>
Transactions in the allowance for other real estate owned were as follows:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $135,000 $ 93,000
Provision charged to operations 73,000 105,000
- - ---------------------------------------------------------------------------------------------------------------------------
208,000 198,000
Less: OREO reserves recovered - -
Less: OREO reserves charged off 148,000 63,000
- - ---------------------------------------------------------------------------------------------------------------------------
Balance $ 60,000 $135,000
===========================================================================================================================
</TABLE>
NOTE 3 - ASSET QUALITY RATIOS
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonperforming loans to total loans 1.19% 1.26%
Nonperforming assets to total assets .57% 1.01%
Loan loss allowance to nonperforming loans 142.59% 128.75%
Loan loss and OREO allowance to nonperforming assets 101.26% 57.63%
</TABLE>
5
<PAGE> 6
TRANSWORLD BANCORP AND SUBSIDIARY
NOTE 4 - IMPAIRED LOANS
The Bank adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan" as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures" on January 1, 1995 and it has had no
material effect on the Company's financial position. This statement prescribes
that a loan is impaired when it is probable that a creditor will be unable to
collect all amounts due (principal and interest) according to the contractual
terms of the loan agreement. Measurement of the impairment can be based on the
expected future cash flows of an impaired loan, which are to be discounted at
the loan's effective interest rate, or impairment can be measured by reference
to an observable market price, if one exists, or the fair value of the
collateral.
Collateral-dependent loans for which foreclosure is probable must be measured
at the fair value of the collateral. Additionally, the statement prescribes
measuring impairment of a restructured loan by discounting the total expected
future cash flows at the loans effective rate of interest in the original loan
agreement. Finally, the impact of initially applying the statement is recorded
as a part of the provision for credit losses.
A change in the present value of an impaired loan's expected future cash flows
from one reporting period to the next, because of the passage of time or
revised estimates, shall be reported in the same manner in which impairment
initially was recognized, an increase or reduction in the bad-debt expense.
<TABLE>
<CAPTION>
(in thousands)
MARCH 31, 1995
- - ------------------------------------------------------------------------------------------------------------
<S> <C>
Total recorded investment in the impaired loans 466
Amount of recorded investment for which there is a related allowance for credit losses 119
Amount of the recorded investment for which there is no related allowance for credit losses 347
Average recorded investment in impaired loans during the first quarter 503
Interest income recognized during the first quarter 0
Interest income recognized during the first quarter using the cash basis method of accounting 0
</TABLE>
6
<PAGE> 7
ITEM 2 MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS
March 31, 1995 vs December 31, 1994
ASSETS
Total assets on March 31, 1995, were $375,876,000 compared to $371,152,000 at
year-end, an increase of $4,724,000 , or 1%. Investment securities grew
$10,445,000, or 7%, from December 31, 1994. The increase was invested
primarily in U.S. government agencies, with an average maturity of 2 years.
The loan portfolio at the end of the first quarter was virtually unchanged from
year-end 1994 with total loans dropping 1%, to, $124,415,000 at March 31, 1995,
versus $125,209,000 at December 31, 1994. The reserve for credit losses at
March 31, 1995, was $2,106,000, or 1.69% of loans outstanding, compared to
$2,033,000, or 1.62%, at December 31, 1994. Nonperforming loans decreased
during the first quarter to $1,477,000, or 1.19% of total loans, versus
$1,579,000, or 1.26%, at year-end. The ratio of nonperforming assets to total
assets also decreased from 1.01% at December 31, 1994, to 0.57% at March 31,
1995, reflective of the reduction in nonperforming assets and Other Real Estate
Owned during the first quarter.
Other Real Estate Owned (OREO) decreased a substantial 71%, or $1,446,000 from
year-end 1994. During the first quarter the Company sold one property for a
net loss of $71,000 but made no additions to OREO. The remaining six
properties held in OREO total $602,000 and represent only 0.2% of assets.
Offers have been received on two of the properties, but have yet to be sold.
LIABILITIES
Total Deposits were $326,052,000 at March 31, 1995, compared to $341,585,000 at
December 31, 1994, a decrease of $15,533,000, or 5%. The reduction in deposits
is directly related to one customer reducing its deposit balance in order to
invest in securities sold under agreements to repurchase. The securities sold
under agreements to repurchase were $20,000,000 at the end of the first quarter
compared to $200,000 at year-end 1994. In February the company offered a
special, high yielding 10-month certificate of deposit which helped fuel the
increase of $9,426,000, or 19%, in time certificates of deposit over year end
1994.
CAPITAL AND LIQUIDITY
On January 30, 1995, the Board of Directors approved a two for one stock split
that was paid to shareholders on March 7, 1995. The stock split reflects the
Company's optimism about the outlook for the Southern California economy and
its desire to increase the number of shares outstanding in order to improve the
liquidity of our stock and, over time, add to shareholder value.
The Company's capital position continues to meet the FDIC requirements of a
well capitalized bank. Risk based capital at quarter-end was 15.39%, up from
14.84% at year-end. The minimum risk based capital required by the FDIC and
Federal Reserve Bank is 8%. The Tier 1 (core capital) ratio was 14.24% at
March 31, 1995, compared to 13.72% at December 31, 1994, with the leverage
ratio (tier 1 capital to quarterly average assets) up from 6.69% at year end to
7.19% at the end of the first quarter.
The Company's financial position continues to be strong and liquid, with cash
and federal funds sold totaling $81,589,000 at March 31, 1995. This gives the
company the liquidity to meet any increase in loan demand.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1995 VS MARCH 31, 1994.
TransWorld Bancorp recorded first quarter net income of $980,000, up from
$268,000 in the first quarter of 1994, an increase of $712,000 or 266%.
Earnings for 1994 included a $300,000 pre-tax expense for earthquake repairs.
Comparisons of pre-tax earnings, before the earthquake adjustment, show
$1,562,000 for the first quarter 1995 and $649,000 for the same period in 1994,
an increase of $913,000 or, 141%. Net income per share, after adjusting for
the two for one stock split, was $0.36 for the first quarter of 1995 compared
to $0.10 for the same period of 1994. Book value increased to $9.63 at March
31, 1995, versus $8.48 for March 31, 1994.
Net interest income, after the provision for credit losses, increased
$1,377,000, or 44% over the same period last year. This is a result of higher
interest rates in the loan portfolio, investment securities and Federal funds
sold. The average rate of return on the loan portfolio rose from 8.62% at
March 31, 1994, to 10.77% at March 31, 1995. The provision for credit losses
increased $70,000, or 47%, over the amount provided in the first quarter last
year. The net interest margin for March 31, 1995, was 4.5% versus 4.3% for
March 31, 1994.
Noninterest income totaled $961,000 at March 31, 1995, compared to $1,065,000
for the same period in 1994. A component of noninterest income is the bankcard
merchant income which was $30,000 at March 31, 1995, versus $115,000 at March
31, 1994, a decrease of $85,000, or 74%. In January 1994 the Company was not
only servicing the merchant portfolio, but receiving income for those services.
In February 1994 the servicing was outsourced, which substantially reduced
expenses as well as gross revenues.
SBA income was up 44% to $47,000, or $15,000, over the same period last year,
and with the Company's aggressive marketing, our SBA lending program will
continue to grow.
7
<PAGE> 8
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1995 VS MARCH 31, 1994.
Noninterest expenses, excluding the $300,000 charged in the first quarter 1994
for earthquake expenses, rose 10%, or $360,000. Salaries and employee benefits
were up $119,000, or 6%, from the first quarter 1994. Net occupancy expense
increased 5% due to CPI adjustments in three of our leased facilities. FDIC
Insurance costs rose $30,000, or 19%, over the same period last year, due to
the increase in the computed deposit base. The Company continues to pay the
lowest FDIC insurance rate of $0.23 per hundred, as a result of meeting the
requirements of a well capitalized Bank.
The Company adopted, on January 1, 1995, SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan" as amended by SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures". It has had no
material effect on the Company's financial position. Disclosure of the of
effect of adoption of SFAS No. 114 and SFAS No. 118 are included in Note 4 of
the accompanying financial statements.
The Company received approval for an office in Camarillo, California, during
the first quarter and we anticipate opening this branch in June 1995.
Camarillo will be the second office in Ventura County, a market we believe will
respond to our style of results oriented banking.
PART II
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INCOME
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
27. Financial Data Schedule
B. REPORTS ON FORM 8-K
None
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.
TRANSWORLD BANCORP
Date: May 12, 1995 By: Howard J. Stanke
------------------ ------------------------
Howard J. Stanke
Chief Financial Officer
Date: May 12, 1995 By: David H. Hender
------------------ ------------------------
David H. Hender
Chief Executive Officer
8
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 28,589
<INT-BEARING-DEPOSITS> 115,610
<FED-FUNDS-SOLD> 53,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,116
<INVESTMENTS-CARRYING> 138,615
<INVESTMENTS-MARKET> 136,356
<LOANS> 124,415
<ALLOWANCE> 2,106
<TOTAL-ASSETS> 375,876
<DEPOSITS> 326,052
<SHORT-TERM> 1,437
<LIABILITIES-OTHER> 21,815
<LONG-TERM> 0
<COMMON> 8,022
0
0
<OTHER-SE> 18,550
<TOTAL-LIABILITIES-AND-EQUITY> 375,876
<INTEREST-LOAN> 3,229
<INTEREST-INVEST> 2,145
<INTEREST-OTHER> 959
<INTEREST-TOTAL> 6,333
<INTEREST-DEPOSIT> 1,563
<INTEREST-EXPENSE> 1,613
<INTEREST-INCOME-NET> 4,720
<LOAN-LOSSES> 220
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,899
<INCOME-PRETAX> 1,562
<INCOME-PRE-EXTRAORDINARY> 1,562
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 980
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 5.63
<LOANS-NON> 1,221
<LOANS-PAST> 256
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,033
<CHARGE-OFFS> 210
<RECOVERIES> 63
<ALLOWANCE-CLOSE> 2,106
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,106
</TABLE>
