<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
<TABLE>
<S> <C>
For Quarter Ended September 30, 1996 Commission File Number 0-10692
</TABLE>
TRANSWORLD BANCORP
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
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
</TABLE>
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 3,451,715 shares of common stock outstanding as of November 12, 1996.
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
(Unaudited) 1996 1995
-------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 28,263,000 $ 23,878,000
Federal funds sold 20,000,000 35,000,000
Investment securities held to maturity (approximate market
value: 1996-$142,564,000; 1995-$151,931,000;): 143,179,000 141,184,000
Investment securities available for sale, at market value 36,388,000 23,157,000
------------- ------------
Total investment securities 179,567,000 164,341,000
Loans and leases 136,426,000 128,870,000
Less allowance for credit losses 2,395,000 2,282,000
------------- ------------
Net loans and leases 134,031,000 126,588,000
Premises and equipment, net 5,099,000 3,695,000
Other real estate owned, net 840,000 601,000
Other assets 7,488,000 5,821,000
------------ ------------
TOTAL ASSETS $375,288,000 $359,924,000
============ ------------
LIABILITIES
Deposits:
Noninterest bearing $109,850,000 102,794,000
Interest bearing 227,926,000 215,901,000
------------ ------------
Total deposits 337,776,000 318,695,000
Securities sold under agreement to repurchase - 7,839,000
Interest bearing demand notes issued to the U.S. Treasury 3,410,000 2,186,000
Mortgage indebtedness and obligation under capital lease 207,000 113,000
Other liabilities 1,688,000 1,391,000
------------ ------------
Total liabilities 343,081,000 330,224,000
STOCKHOLDERS' EQUITY
Common stock, no par value: authorized 6,000,000 shares;
3,451,465 shares issued and out-standing in TransWorld
Bancorp in 1996 and 1995 8,030,000 8,030,000
Surplus 2,926,000 2,926,000
Retained earnings 21,463,000 18,672,000
Unrealized gain/(loss) on securities (net of deferred taxes
of $236,000 in 1996 and ($25,000) in 1995) (212,000) 72,000
------------ ------------
Total stockholders' equity 32,207,000 29,700,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $375,288,000 $359,924,000
============ ============
</TABLE>
2
<PAGE> 3
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
September 30 September 30
(Unaudited) ($ in thousands) 1996 1995 1996 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,460 $ 3,364 $10,285 $ 9,949
Interest on state and municipal securities 332 325 990 1,148
Interest on other investment securities 2,381 2,147 6,682 5,892
Interest on Federal funds sold 447 1,064 1,262 2,972
------- ------- ------- --------
Total interest income 6,620 6,900 19,219 19,961
Interest expense:
Interest on deposits 2,156 1,744 6,179 4,935
Interest on short-term borrowings 53 527 180 994
------- ------- ------- --------
Total interest expense 2,209 2,271 6,359 5,929
Net interest income 4,411 4,629 12,860 14,032
Provision for credit losses 110 220 345 665
------- ------- ------- --------
Net interest income after provision for credit losses 4,301 4,409 12,515 13,367
Noninterest income:
Service charges on deposit accounts 813 725 2,392 2,148
Bankcard merchant income 33 34 105 98
Gain on sale of securities 1 51 1 51
Other operating income 694 242 1,190 698
------- ------- ------- --------
Total noninterest income 1,541 1,052 3,688 2,995
Noninterest expense:
Salaries and employee benefits 2,100 1,978 6,286 5,897
Net occupancy expense 596 554 1,698 1,658
Furniture, fixtures and equipment 398 317 1,036 945
FDIC insurance costs 0 (24) 2 352
Data processing 64 50 188 153
Other operating expense 846 820 2,579 2,439
------- ------- ------- --------
Total noninterest expense 4,004 3,695 11,789 11,444
Income before income taxes 1,838 1,766 4,414 4,918
Income taxes 687 671 1,623 1,861
------- ------- ------- --------
Net income $ 1,151 $ 1,095 $ 2,791 $ 3,057
======= ======= ======= ========
Net Income Per Share* $ 0.33 $ 0.32 $ 0.81 $ 0.89
======= ======= ======= ========
Book value per share* $ 9.33 $ 8.32
Average shares outstanding* 3,451,465 3,451,067 3,451,465 3,446,882
</TABLE>
*Adjusted to reflect the five-for-four split paid on March 15, 1996
3
<PAGE> 4
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Periods ended September 30, (Unaudited) 1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 2,791,000 $ 3,057,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Net amortization (accretion) of premium on investments 218,000 (49,000)
Provision for credit losses 345,000 665,000
Accretion of deferred loan fees and costs (279,000) (151,000)
Loan origination costs capitalized (140,000) (120,000)
Depreciation and amortization 455,000 477,000
(Increase) in accrued interest receivable (213,000) (472,000)
(Decrease) increase in accrued interest payable (89,000) 287,000
Decrease (increase) in current income taxes payable 335,000 (132,000)
Provision for OREO losses - 92,000
Increase in other, net 115,000 296,000
------------ ------------
Net cash provided by operating activities 3,538,000 3,950,000
Cash flows from investing activities:
Proceeds from matured securities held to maturity 28,169,000 23,638,000
Proceeds from matured securities available for sale 5,200,000 28,650,000
Proceeds from calls and redemptions of securities
held to maturity 38,950,000 19,984,000
Proceeds from calls and redemptions of securities
available for sale 6,650,000 6,000,000
Proceeds from sale of securities available for sale - 498,000
Purchase of securities held to maturity (70,090,000) (60,960,000)
Purchase of securities available for sale (24,663,000) (32,936,000)
Net increase in loans (10,197,000) (4,506,000)
Proceeds from sale of SBA loans 1,663,000 2,384,000
Loan origination fees received 653,000 481,000
Proceeds from sale of other real estate owned 267,000 1,375,000
Purchase of premises and equipment (1,859,000) (686,000)
Increase in other, net (1,451,000) (78,000)
------------ ------------
Net cash (used in) investing activities: (26,708,000) (16,156,000)
Cash flows from financing activities:
Net increase (decrease) in noninterest bearing deposits 7,056,000 (3,174,000)
Net increase (decrease) in interest bearing deposits 12,025,000 (24,827,000)
Net (decrease) increase in repurchase agreements (7,839,000) 33,789,000
Increase in interest bearing demand notes 1,224,000 1,176,000
Increase (decrease) in capital lease and
mortgage indebtedness 94,000 (94,000)
Dividends paid in lieu of fractional shares issued (5,000) -
Exercise of stock purchase plan options - 217,000
------------ ------------
Net cash provided by financing activities 12,555,000 7,087,000
------------ ------------
Net increase in cash and cash equivalents (10,615,000) (5,119,000)
Cash and cash equivalents, beginning of year 58,878,000 85,541,000
Cash and cash equivalents, end of period $ 48,263,000 $ 80,422,000
============ ============
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<TABLE>
<CAPTION>
Supplemental disclosure of cash flows information:
Cash paid during the year: 1996 1995
-------------- --------------
<S> <C> <C>
Interest $ 6,285,000 $ 4,658,000
Income taxes $ 1,276,000 $ 2,210,000
Non cash activities: ------------- -------------
Transfer from loans to other real estate owned $ 512,000 $ 155,000
============= =============
</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
1996 1995 1996 1995
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Real Estate loans $ 726,000 $ 5,000 $ 249,000 $ 620,000
Commercial loans - - 207,000 404,000
Consumer loans - - 1,000 1,000
Leasing - 2,000 - -
Other Real Estate Owned - - 840,000 601,000
---------- ----------- ----------- -----------
Total $ 726,000 $ 7,000 $ 1,297,000 $1,626,000
========== =========== =========== ===========
</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
1996 1995
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<S> <C> <C>
Balance, January 1 $2,282,000 $2,033,000
Provision charged to operations 345,000 830,000
Recoveries 43,000 116,000
---------- ----------
2,670,000 2,979,000
Less: Loans charged off 275,000 697,000
---------- ----------
Balance $2,395,000 $2,282,000
========== ==========
</TABLE>
Transactions in the allowance for other real estate owned were as follows:
<TABLE>
<CAPTION>
Sept 30 Dec. 31
1996 1995
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<S> <C> <C>
Balance, January 1 $ 83,000 $ 135,000
Provision charged to operations - 96,000
------------ -----------
83,000 231,000
Less: OREO reserves recovered - -
Less: OREO reserves charged off 4,000 148,000
------------ -----------
Balance $ 79,000 $ 83,000
============ ===========
</TABLE>
NOTE 3 - ASSET QUALITY RATIOS
<TABLE>
<CAPTION>
Sept 30 Dec. 31
1996 1995
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<S> <C> <C>
Nonperforming loans to total loans 0.87% 0.80%
Nonperforming assets to total assets 0.56% 0.48%
Loan loss allowance to nonperforming loans 202.45% 221.55%
Loan loss and OREO allowance to nonperforming assets 117.70% 137.98%
</TABLE>
5
<PAGE> 6
ITEM 2 - MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS
SEPTEMBER 30, 1996 VS. DECEMBER 31, 1995
ASSETS
Assets grew $15,364,000, or 4%, to $375,288,000 during the first three quarters
of 1996. The funds were invested primarily in U.S. Government agency
securities which increased by $9,751,000, or 8%, since year-end 1995. The
yield on agency securities has increased from 5.95% at year-end to 6.42% in
September 1996.
The bank grew the loan portfolio $7,556,000, or 6%, to $136,426,000 compared to
$128,870,000 at December 31, 1995, while maintaining high asset quality.
Non-performing loans totaled $1,182,000, or 0.87%, of total loans at September
30, 1996 compared to $1,032,000, or 0.80%, of total loans, at year-end 1995.
The reserve for credit losses amounted to $2,395,000, or 1.76% of total loans
at the end of the third quarter.
Other real estate owned (OREO) totaled $840,000, or 0.22%, of total assets at
the end of the third quarter compared to $601,000, or 0.17%, at year-end 1995.
Two sales of OREO were recorded during the third quarter with a net loss of
$6,000. A third sale, at book value, was recorded shortly after the close of
the third quarter. The remaining four properties in OREO, after recording this
latest sale, total $677,000.
LIABILITIES
Deposits grew steadily during the first three quarters of 1996 reaching
$337,776,000 at September 30, 1996 versus $318,695,000 at December 31, 1995, an
increase of $19,081,000, or 6%. The increase in deposits is primarily
attributable to the introduction of our "Investors Money Market Account" which
was introduced in early 1996.
CAPITAL AND LIQUIDITY
The Company continues to maintain a strong capital position, which meets and
exceeds current regulatory requirements. Capital ratios at the end of the
second quarter remain virtually unchanged from year-end 1995. Risk-based
capital at September 30, 1996 was 16.5% compared to 16.6% at December 31, 1995.
Tier 1 (core capital) was 15.3% at quarter-end versus 15.4% at year-end, with
the leverage ratio (Tier 1 capital to quarterly average assets) at 8.2% at
September 30, 1996 compared to 8.4% at December 31, 1995.
The Company manages its liquidity position through continuous monitoring of
profitability trends, asset quality and maturity and the repricing schedules of
our earning assets and supporting liabilities. Liquid assets include cash and
demand balances due from banks, federal funds sold and investment securities
available for sale. At September 30, 1996 liquid assets were $84,651,000, or
23%, of total assets giving the Company adequate funds to increase the loan
portfolio and handle liability fluctuations.
6
<PAGE> 7
OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 VS.
SEPTEMBER 30, 1995.
Record earnings of $1,151,000 were posted in the third quarter of 1996.
Earnings were up 5% from the $1,095,000 earned in the third quarter 1995.
During this year's third quarter the Company recorded an after tax gain of
$241,000 from an insurance settlement related to the fire loss at our North
Hollywood office. Third quarter 1995 earnings also included a one time after
tax gain of $117,000 resulting from an FDIC premium rebate. Per share earnings
were $0.33 compared to $0.32 in the prior year.
The net interest margin for the third quarter was 5.32%, up from 5.18% in the
second quarter 1996. The margin in the third quarter of 1995 was 5.38%. Net
interest income, after provision for credit losses, for the three months ended
September 30, 1996 was $4,301,000 compared to $4,409,000 for the same period
last year. Net interest income was down primarily due to lower interest rates
on loans compared to 1995.
Noninterest income increased $489,000, or 46%, over the same period last year.
Included in this year's third quarter was the gain of $412,000 from the
insurance settlement for the fire loss at our North Hollywood office. Service
charges on deposits rose 12%, or $88,000, compared to the third quarter last
year. Last year's third quarter also included a net gain of $51,000 on
securities called or sold.
Noninterest expenses rose 8%, or $309,000, over the third quarter of 1995.
Salaries increased 6% and net occupancy expenses were up 8%. Furniture,
fixtures and equipment rose 25% over the same period last year as a result of
the addition of our Valencia office, relocating our San Fernando office and the
continued upgrading of the Company's computer system during 1996. Third
quarter 1995 noninterest expenses were reduced by the FDIC premium rebate
mentioned above.
OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30,1996 VS.
SEPTEMBER 30, 1995
Operating earnings for the nine months ended September 30, 1996 were $2,791,000
down 8% from the $3,057,000 earned for the same period in 1995. Earnings per
share were $0.81 for the first nine months versus $0.89 for the prior year.
Book value per share increased $1.01 to $9.33 in 1996.
The net interest margin was reduced during the first nine months by the rising
interest costs on time deposits and prime interest rate drops in late December
of 1995 and February of 1996. Net interest income after the provision for
credit losses for the nine months ended September 30, 1996 was $12,515,000
versus $13,367,000 in 1995.
Noninterest income increased 23%, or $693,000, over last year, which includes
the insurance settlement related to the North Hollywood office fire. Our larger
deposit base resulted in increased service charge income, up $244,000, or 11%,
from 1995.
Continued careful management of expenses, and decreased FDIC insurance expense,
enabled us to hold expenses to a 3% increase over 1995. Salaries and employee
benefits were up 7%, or $389,000 over last year due to the addition of our
Camarillo office in May, 1995 and our Valencia office in June, 1996. Net
occupancy expenses rose 2% over last year with the addition of our Valencia
office. The 10% increase over last year in furniture, fixtures and equipment
is a result of the computer upgrading during 1996, new furniture and fixtures
expense associated with the relocation of our San Fernando Office, and
temporary location costs for North Hollywood.
7
<PAGE> 8
OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30,1996 VS.
SEPTEMBER 30, 1995 (CONTINUED).
As announced to our shareholders November 4, 1996, TransWorld Bancorp has
entered into a definitive agreement whereby Glendale Federal Bank will acquire
TransWorld Bancorp and its principal subsidiary, TransWorld Bank. Under terms
of the agreement, shareholders will receive $18.25 per share, equivalent to
1.96 times TransWorld's book value on September 30, 1996. The agreement is
subject to shareholder and regulatory approval and should be completed by early
in the second quarter of 1997. When completed TransWorld's operations will be
merged into Glendale Federal.
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. 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: October 12, 1996 By: /s/ David H. Hender
----------------------
David H. Hender
Vice Chairman, CEO
Date: October 12, 1996 By: /s/ Howard J. Stanke
-----------------------
Howard J. Stanke
Chief Financial Officer
9
<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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 28,263
<INT-BEARING-DEPOSITS> 227,926
<FED-FUNDS-SOLD> 20,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,388
<INVESTMENTS-CARRYING> 143,179
<INVESTMENTS-MARKET> 142,564
<LOANS> 136,426
<ALLOWANCE> 2,395
<TOTAL-ASSETS> 375,288
<DEPOSITS> 337,776
<SHORT-TERM> 3,410
<LIABILITIES-OTHER> 1,895
<LONG-TERM> 0
0
0
<COMMON> 8,030
<OTHER-SE> 21,463
<TOTAL-LIABILITIES-AND-EQUITY> 375,288
<INTEREST-LOAN> 10,285
<INTEREST-INVEST> 7,672
<INTEREST-OTHER> 1,262
<INTEREST-TOTAL> 19,219
<INTEREST-DEPOSIT> 6,179
<INTEREST-EXPENSE> 6,359
<INTEREST-INCOME-NET> 12,860
<LOAN-LOSSES> 345
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,789
<INCOME-PRETAX> 4,414
<INCOME-PRE-EXTRAORDINARY> 4,414
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,791
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
<YIELD-ACTUAL> 7.75
<LOANS-NON> 456
<LOANS-PAST> 726
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,282
<CHARGE-OFFS> 275
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 2,395
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,395
</TABLE>
