<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 September 30, 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) Identification No.)
15233 Ventura Boulevard 91403
Sherman Oaks, California (Zip Code)
(Address of principal executive offices)
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 2,761,546 shares of common stock outstanding as of
November 8, 1995.
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
(Unaudited) 1995 1994
- - --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 25,422,000 $ 30,541,000
Federal funds sold 55,000,000 55,000,000
Investment securities (approximate market value:
1995-$151,931,000; 1994-$124,383,000): 152,062,000 128,907,000
Investment securities available for sale at market value 15,406,000 23,379,000
- - --------------------------------------------------------------------------------------------
Total investment securities 167,468,000 152,286,000
Loans and leases 126,777,000 125,209,000
Less allowance for credit losses 2,224,000 2,033,000
- - --------------------------------------------------------------------------------------------
Net loans and leases 124,553,000 123,176,000
Premises and equipment, net 3,554,000 3,345,000
Other real estate owned 738,000 2,048,000
Other assets 5,306,000 4,756,000
- - --------------------------------------------------------------------------------------------
TOTAL ASSETS $382,041,000 $371,152,000
============================================================================================
LIABILITIES
Deposits:
Noninterest bearing $110,426,000 $113,600,000
Interest bearing 203,158,000 227,985,000
- - --------------------------------------------------------------------------------------------
Total deposits 313,584,000 341,585,000
Securities sold under agreement to repurchase 33,989,000 200,000
Interest bearing demand notes issued to the U.S. Treasury 3,916,000 2,740,000
Mortgage indebtedness and obligation under capital lease 226,000 320,000
Other liabilities 1,611,000 977,000
- - --------------------------------------------------------------------------------------------
Total liabilities 353,326,000 345,822,000
STOCKHOLDERS' EQUITY,
Common stock, no par value: authorized 6,000,000 shares;
2,761,546 shares issued and out-standing in TransWorld
Bancorp in 1995 and 2,727,182 in 1994 8,030,000 7,813,000
Surplus 2,926,000 2,926,000
Retained earnings 17,724,000 14,666,000
Unrealized gain (loss) on securities (net of deferred taxes of
$(25,000) in September 1995 and $53,000 in Dec 1994) 35,000 (75,000)
- - --------------------------------------------------------------------------------------------
Total stockholders' equity 28,715,000 25,330,000
- - --------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $382,041,000 $371,152,000
============================================================================================
</TABLE>
The financial statements reflect all normal interim adjustments which are, in
the opinion of management, necessary to a fair statement of the results for the
periods presented.
2
<PAGE> 3
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
September 30 September 30
(Unaudited) ($ in thousands) 1995 1994 1995 1994
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,364 $ 3,060 $ 9,949 $ 8,527
Interest on state and municipal
securities 325 398 1,148 1,035
Interest on other investment
securities 2,147 1,313 5,892 3,445
Interest on Federal funds sold 1,064 839 2,972 2,130
- - -----------------------------------------------------------------------------------------------
Total interest income 6,900 5,610 19,961 15,137
Interest expense:
Interest on deposits 1,744 1,341 4,935 3,722
Interest on short-term borrowings 527 40 994 100
- - -----------------------------------------------------------------------------------------------
Total interest expense 2,271 1,381 5,929 3,822
Net interest income 4,629 4,229 14,032 11,315
Provision for credit losses 220 325 665 731
- - -----------------------------------------------------------------------------------------------
Net interest income after provision
for credit losses 4,409 3,904 13,367 10,584
Noninterest income:
Service charges on deposit accounts 725 680 2,148 2,179
Bankcard merchant income 34 30 98 172
Gain on sale of securities 51 -- 51 --
Other operating income 242 211 698 625
- - -----------------------------------------------------------------------------------------------
Total noninterest income 1,052 921 2,995 2,976
Noninterest expense:
Salaries and employee benefits 1,978 1,860 5,897 5,529
Net occupancy expense 554 591 1,658 1,711
Furniture, fixtures and equipment 317 296 945 831
FDIC insurance costs (24) 173 352 489
Data processing 50 40 153 139
Other operating expense 820 677 2,439 2,067
Earthquake expense -- -- -- 300
- - -----------------------------------------------------------------------------------------------
Total noninterest expense 3,695 3,637 11,444 11,066
Income before income taxes 1,766 1,188 4,918 2,494
Income taxes 671 424 1,861 837
- - -----------------------------------------------------------------------------------------------
Net income $ 1,095 $ 764 $ 3,057 $ 1,657
===============================================================================================
Net Income Per Share* $ .40 $ .28 $ 1.11 $ .61
Book value per share* $ 10.40 $ 8.97
Weighted Average shares outstanding* 2,760,334 2,727,182 2,756,966 2,727,182
</TABLE>
*Adjusted to reflect the two-for-one split paid on March 7, 1995
3
<PAGE> 4
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Periods ended September 30, (Unaudited) 1995 1994
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 3,057,000 $ 1,657,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Net (accretion) amortization of premium on investments (49,000) 177,000
Provision for credit losses 665,000 731,000
Accretion of deferred loan fees and costs (151,000) (123,000)
Loan origination costs capitalized (120,000) (127,000)
Depreciation and amortization 477,000 471,000
Increase in accrued interest receivable (472,000) (661,000)
Increase in accrued interest payable 287,000 1,000
Increase in current income taxes payable (132,000) (73,000)
Provision for OREO losses 92,000 25,000
Increase in other, net 296,000 275,000
- - ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,950,000 2,353,000
Cash flows from investing activities:
Proceeds from matured securities held to maturity 23,638,000 6,895,000
Proceeds from matured securities available for sale 28,650,000 6,450,000
Proceeds from calls and redemptions of securities
held to maturity 19,984,000 10,095,000
Proceeds from calls and redemptions of securities
available for sale 6,000,000 61,000
Proceeds from sale of securities available for sale 498,000 --
Purchase of securities held to maturity (60,960,000) (51,903,000)
Purchase of securities available for sale (32,936,000) (11,095,000)
Net increase in loans (4,506,000) (644,000)
Proceeds from sale of SBA loans 2,384,000 2,243,000
Loan origination fees received 481,000 453,000
Proceeds from sale of other real estate owned 1,375,000 246,000
Purchase of premises and equipment (686,000) (257,000)
(Increase) decrease in other, net (78,000) 25,000
- - ---------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities: (16,156,000) (37,431,000)
Cash flows from financing activities:
Net (decrease) increase in noninterest bearing deposits (3,174,000) 26,024,000
Net (decrease) increase in interest bearing deposits (24,827,000) 42,858,000
Net increase in repurchase agreements 33,789,000 100,000
Increase in interest bearing demand notes 1,176,000 771,000
(Decrease) increase in capital lease and mortgage
indebtedness (94,000) 182,000
Dividends paid in lieu of fractional shares
issued -- (10,000)
Exercise of stock purchase plan options 217,000 --
- - ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 7,087,000 69,925,000
- - ---------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (5,119,000) 34,847,000
Cash and cash equivalents, beginning of year 85,541,000 77,234,000
- - ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 80,422,000 $ 112,081,000
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Supplemental disclosure of cash flows information:
Cash paid during the year: 1995 1994
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest $ 4,658,000 $ 3,723,000
Income taxes $ 2,210,000 $ 881,000
- - ---------------------------------------------------------------------------------------------------------
Non cash activities:
Transfer from loans to other real estate owned $ 155,000 $ 645,000
=========================================================================================================
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
NOTE 1 - NONPERFORMING ASSETS
PAST DUE AND NONACCRUING ASSETS:
<TABLE>
<CAPTION>
Past due over 90 days Nonaccruals
------------------------------------------------
Sept. 30 Dec. 31 Sept. 30 Dec. 31
1995 1994 1995 1994
- - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate loans $ 243,000 $ 455,000 $ 625,000 $ 853,000
Commercial loans -- -- 430,000 250,000
Consumer loans -- -- 1,000 20,000
Leasing 1,000 1,000 -- --
Other Real Estate Owned -- -- 738,000 2,048,000
- - ---------------------------------------------------------------------------
Total $ 244,000 $ 456,000 $1,794,000 $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>
Sept. 30 Dec. 31
1995 1994
- - ---------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $2,033,000 $2,029,000
Provision charged to operations 665,000 921,000
Recoveries 107,000 109,000
- - ---------------------------------------------------------------------------
2,805,000 3,059,000
Less: Loans charged off 581,000 1,026,000
- - ---------------------------------------------------------------------------
Balance $2,224,000 $2,033,000
===========================================================================
</TABLE>
Transactions in the allowance for other real estate owned were as follows:
<TABLE>
<CAPTION>
Sept. 30 Dec. 31
1995 1994
- - ---------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $ 135,000 $ 93,000
Provision charged to operations 92,000 105,000
- - ---------------------------------------------------------------------------
227,000 198,000
Less: OREO reserves recovered -- --
Less: OREO reserves charged off 148,000 63,000
- - ---------------------------------------------------------------------------
Balance $ 79,000 $ 135,000
===========================================================================
</TABLE>
NOTE 3 - ASSET QUALITY RATIOS
<TABLE>
<CAPTION>
Sept. 30 Dec. 31
1995 1994
- - ---------------------------------------------------------------------------
<S> <C> <C>
Nonperforming loans to total loans 1.03% 1.26%
Nonperforming assets to total assets 0.55% 1.01%
Loan loss allowance to nonperforming loans 171.08% 128.75%
Loan loss and OREO allowance to nonperforming assets 91.92% 57.63%
</TABLE>
5
<PAGE> 6
ITEM 2 - MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS
SEPTEMBER 30, 1995 VS. DECEMBER 31, 1994
ASSETS
Assets grew $10,889,000, or 3%, to $382,041,000 during the first three quarters
of 1995. Growth has been invested mostly in one to five year U.S. Government
agency securities which have increased by $15,286,000, or 10% since year-end
1994. The larger securities portfolio and the increase in yields over 1994 have
substantially improved the overall yield on the investment portfolio, which has
improved the bottom line profit.
Total loans at the end of the third quarter were up $1,568,000. The southern
California economy still remains weak, and while loan demand is still soft it is
slowly improving. The Bank's SBA program has continued to expand with the
Company selling the guaranteed portion of many SBA loans to generate fee income
and reinvesting cash flow while retaining servicing rights and income on all
loans sold.
The quality of the Company's loan portfolio continues to be very satisfactory
with the non-performing loan totals dropping to $1,056,000 or 0.83% of loans at
September 30, 1995 compared to $1,579,000, or 1.26% at December 31, 1994. The
reserve for credit losses amounted to $2,224,000, or 1.75% of loans at the end
of the quarter.
The adoption of SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," at the beginning of 1995 has not had a material impact on the Company's
results of operations or financial condition.
Other real estate owned (OREO) was reduced to $738,000 at September 30th
compared to $2,048,000 at year-end 1994. The Company has had both sales and
additions to the OREO over the nine month period. All the current (OREO)
properties are residential properties that were collateral to business loans.
LIABILITIES
Total deposits declined from $341,585,000 at year-end 1994 to $313,584,000 at
September 30, 1995 as a result of the transfer of deposits of one large
business customer into repurchase agreements. This customer will more than
likely reduce their repurchase agreements during the fourth quarter. Interest
bearing deposits have decreased from $227,985,000 at December 31, 1994 to
$203,158,000 at September 30, 1995. Non-interest bearing deposits decreased
from $113,600,000 at year-end to $110,426,000 at September 30th.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS (CONTINUED)
CAPITAL AND LIQUIDITY
The Company's capital position continues to meet the FDIC requirements of a well
capitalized Bank. Risk-based capital at the end of the third quarter was 16.05%,
up from 14.84% at year-end, exceeding the 8% minimum set by the FDIC and Federal
Reserve Bank. The Tier 1 (core capital) ratio was 14.88% at September 30, 1995
compared to 13.72% at December 31, 1994. The leverage ratio (Tier 1 capital to
quarterly average assets) was up from 6.69% at year-end to 7.16% at the end of
the third quarter.
The Company manages its liquidity position through continuous monitoring of
profitability trends, asset quality and maturity schedules of earning assets and
supporting liabilities. The Company's liquid assets include cash and demand
balances due from banks, Federal funds sold, and investment securities available
for sale. Liquid assets represented approximately 25% of the Company's total
assets at September 30, 1995 and affords the Company the liquidity to handle
increased loan demand and short-term liability fluctuations.
OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30,1995 VS. SEPTEMBER 30,
1994.
TransWorld Bancorp posted record earnings in the third quarter of 1995 of
$1,095,000, up 43% from the $764,000 earned in the third quarter 1994. Per share
earnings for the quarter also increased 43% to $0.40 compared to $0.28 in the
prior year.
Net interest income, after the provision for credit losses, increased $505,000,
or 13% over the same period last year, a result of a higher net interest margin.
The net interest spread improved because increases in the prime interest rate
during the last twelve months resulted in higher yields on loans, while rates
paid on interest bearing liabilities increased only slightly between quarters.
The yield on the investment portfolio increased substantially to 6.00% for the
third quarter 1995 versus 5.14% in the third quarter of 1994. The average rate
of return in the loan portfolio rose from 9.94% at September 30, 1994, to 10.85%
at September 30, 1995. The loan loss provision for the third quarter decreased
$105,000, or 32%, from the amount provided in the third quarter 1994.
Noninterest income, including gains and losses on securities, increased
$131,000, or 14% over the same period last year. A net gain of $51,000 was
realized during the third quarter of 1995 on securities called or sold. Service
charges on deposit accounts rose 7%, or $45,000, over the same period in 1994.
Noninterest expense was $3,695,000 for September 30, 1995 compared to $3,637,000
at September 30, 1994. Management's continuing focus on cost controls plus a
premium refund from the FDIC, which amounted to $117,000 after taxes,
contributed to the modest 2% increase.
7
<PAGE> 8
OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30,1995 VS.
SEPTEMBER 30, 1994.
Operating earnings for the nine months ended September 30, 1995 increased 85% to
$3,057,000, up from the $1,657,000 earned in the same period of 1994. Earnings
for 1994 included a $300,000 pre-tax expense for earthquake repairs. Per share
earnings for the third quarter were $1.11 versus $0.61 for the prior year, up
82%. Book Value per share was $10.40 at September 30, 1995 compared to $8.97 at
September 30, 1995. The Company's annualized return on assets at September 30,
1995, rose to 1.07% versus 0.64% for the same period last year.
Net interest income, after provision for credit losses, grew $2,783,000, or 26%
over the prior year. The net interest margin was positively impacted by higher
interest rates on earning assets in 1995 compared to 1994, while liability costs
increased at a slower rate. With higher rates available the Company moved
approximately $28,000,000 from federal funds sold to investment securities
improving the yield on assets.
Noninterest income totaled $2,995,000 for 1995 compared to $2,976,000 for 1994.
SBA income was $130,000 at September 30, 1995, up 83%, or $59,000, over the same
period last year. A net gain of $51,000 was realized on securities called and
sold in 1995.
Noninterest expenses, excluding the $300,000 charged in the first quarter 1994
for earthquake expenses, rose a modest 3%, or $378,000. Increases in salaries
and employee benefits as well as furniture, fixtures and equipment corresponds
to the opening of our newest office in Camarillo. Included in other operating
expenses are marketing and advertising expenses, which were $294,000 at
September 30, 1995 compared to $181,000 for the same period last year. During
the third quarter the Company began a new advertising campaign to add to our
customer base through newspaper advertising. With our extension into Ventura
county and the anticipated opening of an office in Valencia the Company is
aggressively seeking to reach a broader base of clientele.
We expect completion of our permanent office in Camarillo, California in early
December after operating in temporary quarters for the past six months. The
establishment of a twelfth office, in Valencia, California has been approved by
the State Banking Department and awaits FDIC approval. This office is an
important addition to our system and will give us the opportunity to improve
service to the Santa Clarita Valley community. With the addition of this office
we will have two full service banking facilities in this area.
8
<PAGE> 9
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. FURNISH THE EXHIBITS REQUIRED BY ITEM 601 OF REGULATION 8-K
27. Financial Data Schedule
B. REPORTS ON FORM 8-K
None
9
<PAGE> 10
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: November 13, 1995 By: /s/ Howard J. Stanke
----------------- ------------------------------
Howard J. Stanke
Chief Financial Officer
Date: November 13, 1995 By: /s/ David H. Hender
----------------- ------------------------------
David H. Hender
Chief Executive Officer
10
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 25,422
<INT-BEARING-DEPOSITS> 203,158
<FED-FUNDS-SOLD> 55,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,406
<INVESTMENTS-CARRYING> 152,062
<INVESTMENTS-MARKET> 151,931
<LOANS> 126,777
<ALLOWANCE> 2,224
<TOTAL-ASSETS> 382,041
<DEPOSITS> 313,584
<SHORT-TERM> 3,916
<LIABILITIES-OTHER> 35,826
<LONG-TERM> 0
<COMMON> 8,030
0
0
<OTHER-SE> 20,650
<TOTAL-LIABILITIES-AND-EQUITY> 382,041
<INTEREST-LOAN> 9,949
<INTEREST-INVEST> 7,040
<INTEREST-OTHER> 2,972
<INTEREST-TOTAL> 19,961
<INTEREST-DEPOSIT> 4,935
<INTEREST-EXPENSE> 5,929
<INTEREST-INCOME-NET> 14,032
<LOAN-LOSSES> 665
<SECURITIES-GAINS> 51
<EXPENSE-OTHER> 11,444
<INCOME-PRETAX> 4,918
<INCOME-PRE-EXTRAORDINARY> 4,918
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,057
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<YIELD-ACTUAL> 7.17
<LOANS-NON> 1,056
<LOANS-PAST> 244
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,033
<CHARGE-OFFS> 581
<RECOVERIES> 107
<ALLOWANCE-CLOSE> 2,224
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,224
</TABLE>
