<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, 1996 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 3,451,465 shares of common stock outstanding as of May 6, 1996.
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(Unaudited) 1996 1995
- - - ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 29,382,000 $ 23,878,000
Federal funds sold 31,000,000 35,000,000
Investment securities (approximate market value:
1996-$131,489,000; 1995-$141,864,000): 132,011,000 141,184,000
Investment securities available for sale at market value 36,070,000 23,157,000
- - - ----------------------------------------------------------------------------------------------
Total investment securities 168,081,000 164,341,000
Loans and leases 131,519,000 128,870,000
Less allowance for credit losses 2,319,000 2,282,000
- - - ----------------------------------------------------------------------------------------------
Net loans and leases 129,200,000 126,588,000
Premises and equipment, net 3,854,000 3,695,000
Other real estate owned 451,000 601,000
Other assets 7,419,000 5,821,000
- - - ----------------------------------------------------------------------------------------------
TOTAL ASSETS $369,387,000 $359,924,000
==============================================================================================
LIABILITIES
Deposits:
Noninterest bearing $ 98,212,000 $102,794,000
Interest bearing 229,856,000 215,901,000
- - - ----------------------------------------------------------------------------------------------
Total deposits 328,068,000 318,695,000
Securities sold under agreement to repurchase 6,276,000 7,839,000
Interest bearing demand notes issued to the U.S. Treasury 2,714,000 2,186,000
Mortgage indebtedness and obligation under capital lease 112,000 113,000
Other liabilities 2,055,000 1,391,000
- - - ----------------------------------------------------------------------------------------------
Total liabilities 339,225,000 330,224,000
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 3,450,250 in 1995 8,030,000 8,022,000
Surplus 2,926,000 2,926,000
Retained earnings 19,443,000 18,672,000
Unrealized gain (loss) on securities (net of deferred taxes of
$168,000 in March 1996 and $(53,000) in Dec 1995) (237,000) 72,000
- - - ----------------------------------------------------------------------------------------------
Total stockholders' equity 30,162,000 29,700,000
- - - ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $369,387,000 $359,924,000
==============================================================================================
</TABLE>
The financial statements reflect all normal interim adjustments which are,
in the opinion of management, necessary to a fair statement of the results for
the periods presented.
2
<PAGE> 3
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ending
March 31
(Unaudited) ($ in thousands) 1996 1995
- - - --------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 3,394 $ 3,229
Interest on state and municipal
securities 323 421
Interest on other investment
securities 2,093 1,724
Interest on Federal funds sold 388 959
- - - --------------------------------------------------------------------------------
Total interest income 6,198 6,333
Interest expense:
Interest on deposits 1,969 1,563
Interest on short-term borrowings 75 50
- - - --------------------------------------------------------------------------------
Total interest expense 2,044 1,613
Net interest income 4,154 4,720
Provision for credit losses 105 220
- - - --------------------------------------------------------------------------------
Net interest income after provision
for credit losses 4,049 4,500
Noninterest income:
Service charges on deposit accounts 785 699
Bankcard merchant income 35 30
Gain on sale of securities
Other operating income 206 232
- - - --------------------------------------------------------------------------------
Total noninterest income 1,026 961
Noninterest expense:
Salaries and employee benefits 2,085 1,960
Net occupancy expense 535 579
Furniture, fixtures and equipment 329 314
FDIC insurance costs 1 188
Data processing 59 49
Other operating expense 859 809
- - - --------------------------------------------------------------------------------
Total noninterest expense 3,868 3,899
Income before income taxes 1,207 1,562
Income taxes 437 582
- - - --------------------------------------------------------------------------------
Net income $ 770 $ 980
================================================================================
Net Income Per Share* $ .22 $ .29
Book value per share* $ 8.74 $ 7.70
Weighted Average shares outstanding* 3,451,465 3,439,199
</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>
Quarter ending March 31, (Unaudited) 1996 1995
- - - ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 770,000 $ 980,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Net amortization of premium on investments 81,000 29,000
Provision for credit losses 105,000 220,000
Accretion of deferred loan fees and costs (109,000) (36,000)
Loan origination costs capitalized (38,000) (35,000)
Depreciation and amortization 157,000 184,000
Decrease (increase) in accrued interest receivable 80,000 (400,000)
(Decrease) increase in accrued interest payable (64,000) 59,000
Increase (decrease) in current income taxes payable 430,000 (469,000)
Provision for OREO losses - 73,000
Increase in other, net 358,000 42,000
- - - ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,770,000 1,585,000
Cash flows from investing activities:
Proceeds from matured securities held to maturity 2,835,000 2,252,000
Proceeds from matured securities available for sale 2,700,000 14,750,000
Proceeds from calls and redemptions of securities
held to maturity 28,651,000 5,000
Proceeds from calls and redemptions of securities
available for sale 6,000,000 -
Proceeds from sale of securities available for sale - -
Purchase of securities held to maturity (23,359,000) (11,815,000)
Purchase of securities available for sale (20,648,000) (15,614,000)
Net (increase) decrease in loans (3,749,000) 183,000
Proceeds from sale of SBA loans 892,000 462,000
Loan or origination fees received 219,000 111,000
Proceeds from sale of other real estate owned 145,000 1,375,000
Purchase of premises and equipment (316,000) (54,000)
(Increase) in other, net (1,968,000) (274,000)
- - - ------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities: (8,598,000) (8,619,000)
Cash flows from financing activities:
Net (decrease) increase in noninterest bearing deposits (4,582,000) 2,010,000
Net increase (decrease) in interest bearing deposits 13,955,000 (17,543,000)
Net (decrease) increase in repurchase agreements (1,563,000) 19,800,000
Increase (decrease) in interest bearing demand notes 528,000 (1,303,000)
(Decrease) in capital lease and mortgage indebtedness (1,000) (91,000)
Dividends paid in lieu of fractional shares issued (5,000) -
Exercise of stock purchase plan options - 209,000
- - - ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 8,332,000 3,082,000
- - - ------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,504,000 (3,952,000)
Cash and cash equivalents, beginning of year 58,878,000 85,541,000
- - - ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 60,382,000 $ 81,589,000
============================================================================================================
Supplemental disclosure of cash flows information:
Cash paid during the year: 1996 1995
- - - ------------------------------------------------------------------------------------------------------------
Interest $ 2,112,000 $ 1,504,000
Income taxes $ 14,000 $ 325,000
- - - ------------------------------------------------------------------------------------------------------------
Non cash activities:
Transfer from loans to other real estate owned $ - $ -
============================================================================================================
</TABLE>
4
<PAGE> 5
NOTE 1 - NONPERFORMING ASSETS
PAST DUE AND NONACCRUING ASSETS:
<TABLE>
<CAPTION>
Past due over 90 days Nonaccruals
----------------------------------------------------
Mar. 31 Dec. 31 Mar. 31 Dec. 31
1996 1995 1996 1995
- - - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate loans $5,000 $5,000 $ 591,000 $ 620,000
Commercial loans - - 351,000 404,000
Consumer loans - - 1,000 1,000
Leasing 2,000 2,000 - -
Other Real Estate Owned - - 451,000 601,000
- - - -------------------------------------------------------------------------------
Total $7,000 $7,000 $1,394,000 $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>
Mar. 31 Dec. 31
1996 1995
- - - -------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $2,282,000 $2,033,000
Provision charged to operations 105,000 830,000
Recoveries 27,000 116,000
- - - -------------------------------------------------------------------------------
2,414,000 2,979,000
Less: Loans charged off 95,000 697,000
- - - -------------------------------------------------------------------------------
Balance $2,319,000 $2,282,000
===============================================================================
</TABLE>
Transactions in the allowance for other real estate owned were as follows:
<TABLE>
<CAPTION>
Mar. 31 Dec. 31
1996 1995
- - - -------------------------------------------------------------------------------
<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>
Mar. 31 Dec. 31
1996 1995
- - - --------------------------------------------------------------------------------
<S> <C> <C>
Nonperforming loans to total loans 0.72% 0.80%
Nonperforming assets to total assets 0.40% 0.48%
Loan loss allowance to nonperforming loans 244.10% 221.55%
Loan loss and OREO allowance to nonperforming assets 162.03% 137.98%
</TABLE>
5
<PAGE> 6
ITEM 2 - MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS
MARCH 31, 1996 VS. DECEMBER 31, 1995
ASSETS
Total Assets on March 31, 1996, were $369,387,000 compared to $359,924,000 at
year-end 1995, an increase of $9,463,000 or 3%. Investment securities grew 2%,
or $3,740,000 from December 31, 1995, and were invested primarily in U.S.
Government agencies, the majority with three to six month call options.
Loan demand improved modestly during the first quarter with the loan portfolio
at March 31, 1996 at $131,519,000, compared to $128,870,000 at December 31,
1995, an increase of 2%. The quality of the Company's loan portfolio continues
to be solid with non-performing loans dropping to $950,000, or 0.72% of total
loans at March 31, 1996 compared to $1,032,000, or 0.80%, at December 31, 1995.
Other Real Estate Owned (OREO) decreased 25%, or $150,000, from year-end 1995.
During the first quarter, the Company sold one property for a net loss of $5,000
but made no additions to OREO. The remaining four properties held in OREO total
$401,000 and represent only 0.1% of total assets.
LIABILITIES
Deposits grew $9,373,000, or 3%, during the first quarter of 1996. Interest
bearing accounts grew $13,955,000, or 6%, while noninterest bearing accounts
declined $4,582,000. Balances in Time Certificates of deposits remained constant
with money market accounts contributing most of the growth in interest bearing
deposits.
CAPITAL AND LIQUIDITY
On January 30, 1996, the Board of Directors approved a five-for-four stock split
that was paid to shareholders March 15, 1996.
Management is not only committed to maintaining capital at a level sufficient to
assure stockholders, customers and regulators that the Company is financially
sound, but to also provide for planned growth and expansion. The company's
capital position remains strong, and continues to meet the requirements set by
the FDIC for a well capitalized bank. Capital ratios at the end of the first
quarter remained virtually unchanged from year-end 1995. Risk based capital at
March 31, 1996 was 15.3% compared to 15.4% at December 31, 1995. Tier 1 (core
capital) ratio was 16.5% at quarter-end versus 16.6% at year-end, with the
leverage ratio (tier 1 capital to quarterly average assets) at 8.3% at March 31,
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 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 26% of the Company's total
assets at March 31, 1996 giving the Company an adequate liquidity to handle
increased loan demand and short-term liability fluctuations.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS (CONTINUED)
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 VS. MARCH 31, 1995.
Income for the first quarter of 1996 was the second highest first quarter result
in the Company's history, at $770,000. This compares to the Company's
historically best first quarter of $980,000 earned last year. Net income per
share, after adjusting for the five-for-four stock split, was $0.22 for the
first quarter 1996 compared to $0.29 for the same period of 1995. Book value per
share increased to $8.74 at March 31, 1996, versus $7.70 for March 31, 1995.
The net interest margin declined to 5.19% compared to 5.38% during last years
first quarter, causing a drop in net interest income of $566,000. Increased
deposit rates (to meet market competition), coupled with higher interest bearing
deposit balances and a changing mix of deposits increased interest expense
$431,000, or 27%, over the same period last year. At the same time interest
rates in the bank's loan portfolio declined due to two prime rate drops in late
December 1995 and February 1996. Yields on the investment portfolio also
declined compared to the prior year's first quarter. The loan loss provision for
the first quarter 1996 decreased $115,000, or 52%, from the amount provided in
the first quarter of 1995.
Noninterest income increased 7%, or $65,000, over last year. This improvement
resulted from increased service charge income generated from a larger deposit
base and a concerted effort in the collection of all charges due.
Noninterest expenses were properly managed, decreasing $31,000, or 1% from the
same period last year. FDIC insurance premiums declined substantially from
$188,000 in the first quarter of 1995 to $1,000 in the first quarter 1996. The
Company pays the minimum semi-annual assessment for a well capitalized bank.
Increases in salaries and employee benefits as well as furniture, fixtures and
equipment corresponds to the addition of our newest office in Camarillo. Net
occupancy expense and furniture, fixtures and equipment will be further impacted
by the relocation of our San Fernando branch office in June 1996, the future
Valencia office, and the ongoing upgrading of computer equipment in other
offices.
We have received regulatory approval for our twelfth branch office in Valencia.
We anticipate opening this office in a temporary location in June 1996. With the
addition of this office we will have two full service banking facilities in the
Santa Clarita Valley area.
7
<PAGE> 8
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
TRANSWORLD BANCORP AND SUBSIDIARY
(a) Annual meeting of stockholders was held on April 23, 1996
(b) N/A
(c) Matters voted upon were:
<TABLE>
<CAPTION>
1. Election of Directors VOTES CAST WITHHOLD
FOR AUTHORITY
-------------------------------------
<S> <C> <C>
Louis Galen 2,538,830 9,044
David Hender 2,542,692 5,182
Douglas Bernards 2,538,830 9,044
Alvin H. Blaine 2,542,618 5,256
Helene V. Galen 2,542,570 5,304
Timothy Harris 2,542,692 5,182
Warren Kingsley 2,542,618 5,256
Ralph E. Phillips 2,542,680 5,194
</TABLE>
2. Ratification of the selection of Deloitte & Touche as the company's
independent auditors.
<TABLE>
<CAPTION>
VOTES CAST VOTES CAST
FOR AGAINST ABSTAIN
- - - ------------------------------------------------------------------------
<S> <C> <C>
2,532,361 3,803 11,710
</TABLE>
8
<PAGE> 9
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
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 14, 1996 By: Diane M. Auten
------------------------------------ ---------------
Diane M. Auten
Controller
Date: May 14, 1996 By: David H. Hender
------------------------------------ ---------------
David H. Hender
Chief Executive 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>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 29,382
<INT-BEARING-DEPOSITS> 229,856
<FED-FUNDS-SOLD> 31,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,070
<INVESTMENTS-CARRYING> 132,011
<INVESTMENTS-MARKET> 131,489
<LOANS> 131,519
<ALLOWANCE> 2,319
<TOTAL-ASSETS> 369,387
<DEPOSITS> 328,068
<SHORT-TERM> 2,714
<LIABILITIES-OTHER> 8,443
<LONG-TERM> 0
0
0
<COMMON> 8,030
<OTHER-SE> 22,132
<TOTAL-LIABILITIES-AND-EQUITY> 369,387
<INTEREST-LOAN> 3,394
<INTEREST-INVEST> 2,416
<INTEREST-OTHER> 388
<INTEREST-TOTAL> 6,198
<INTEREST-DEPOSIT> 1,969
<INTEREST-EXPENSE> 2,044
<INTEREST-INCOME-NET> 4,154
<LOAN-LOSSES> 105
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,868
<INCOME-PRETAX> 1,207
<INCOME-PRE-EXTRAORDINARY> 4,918
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 770
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
<YIELD-ACTUAL> 7.54
<LOANS-NON> 943
<LOANS-PAST> 7
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,282
<CHARGE-OFFS> 95
<RECOVERIES> 27
<ALLOWANCE-CLOSE> 2,319
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,319
</TABLE>
