<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 June 30, 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 August 9, 1996.
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
(Unaudited) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 31,940,000 $ 23,878,000
Federal funds sold 32,000,000 35,000,000
Investment securities held to maturity (approximate market
value: 1996-$142,249,000; 1995-$141,864,000;): 143,235,000 141,184,000
Investment securities available for sale, at market value 35,694,000 23,157,000
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities 178,929,000 164,341,000
Loans and leases 132,482,000 128,870,000
Less allowance for credit losses 2,389,000 2,282,000
- ----------------------------------------------------------------------------------------------------------------------
Net loans and leases 130,093,000 126,588,000
Premises and equipment, net 4,368,000 3,695,000
Other real estate owned, net 451,000 601,000
Other assets 8,183,000 5,821,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $385,964,000 $359,924,000
======================================================================================================================
LIABILITIES
Deposits:
Noninterest bearing $108,728,000 102,794,000
Interest bearing 237,753,000 215,901,000
- ----------------------------------------------------------------------------------------------------------------------
Total deposits 346,481,000 318,695,000
Securities sold under agreement to repurchase 3,272,000 7,839,000
Interest bearing demand notes issued to the U.S. Treasury 3,255,000 2,186,000
Mortgage indebtedness and obligation under capital lease 110,000 113,000
Other liabilities 1,969,000 1,391,000
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 355,087,000 330,224,000
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 20,313,000 18,672,000
Unrealized gain/(loss) on securities (net of deferred taxes
of $253,000 in 1996 and ($23,000) in 1995) (392,000) 72,000
- ----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 30,877,000 29,700,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $385,964,000 $359,924,000
======================================================================================================================
</TABLE>
2
<PAGE> 3
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ending Six Months Ending
June 30 June 30
(Unaudited) ($ in thousands) 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,431 $ 3,356 $ 6,825 $ 6,585
Interest on state and municipal securities 335 402 658 823
Interest on other investment securities 2,208 2,021 4,301 3,745
Interest on Federal funds sold 427 949 815 1,908
- ---------------------------------------------------------------------------------------------------------------------------
Total interest income 6,401 6,728 12,599 13,061
Interest expense:
Interest on deposits 2,054 1,628 4,023 3,191
Interest on short-term borrowings 52 417 127 467
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense 2,106 2,045 4,150 3,658
Net interest income 4,295 4,683 8,449 9,403
Provision for credit losses 130 225 235 445
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for credit losses 4,165 4,458 8,214 8,958
Noninterest income:
Service charges on deposit accounts 794 724 1,579 1,423
Bankcard merchant income 37 34 72 64
Other operating income 290 224 496 456
- ---------------------------------------------------------------------------------------------------------------------------
Total noninterest income $ 1,121 982 2,147 1,943
Noninterest expense:
Salaries and employee benefits 2,101 1,959 4,186 3,919
Net occupancy expense 567 525 1,102 1,104
Furniture, fixtures and equipment 309 314 638 628
FDIC insurance costs 1 188 2 376
Data processing 65 54 124 103
Other operating expense 874 810 1,733 1,619
- ---------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 3,917 3,850 7,785 7,749
Income before income taxes 1,369 1,590 2,576 3,152
Income taxes 499 608 936 1,190
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 870 $ 982 $ 1,640 $ 1,962
===========================================================================================================================
Net Income Per Share* $ 0.25 $ 0.28 $ 0.47 $ 0.57
===========================================================================================================================
Book value per share* $ 8.95 $ 8.00
Average shares outstanding* 3,451,465 3,450,250 3,451,465 3,444.755
</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 June 30, (Unaudited) 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 1,640,000 $ 1,962,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Net amortization (accretion) of premium on investments 151,000 (74,000)
Provision for credit losses 235,000 445,000
Accretion of deferred loan fees and costs (188,000) (59,000)
Loan origination costs capitalized (97,000) (75,000)
Depreciation and amortization 311,000 326,000
(Increase) in accrued interest receivable (250,000) (438,000)
Increase (decrease) in accrued interest payable 101,000 (205,000)
Increase in current income taxes payable 359,000 47,000
Provision for OREO losses - 92,000
Increase in other, net 183,000 185,000
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,445,000 2,616,000
Cash flows from investing activities:
Proceeds from matured securities held to maturity 11,620,000 10,000,000
Proceeds from matured securities available for sale 3,700,000 25,650,000
Proceeds from calls and redemptions of securities
held to maturity 36,476,000 8,315,000
Proceeds from calls and redemptions of securities
available for sale 6,650,000 1,000,000
Purchase of securities held to maturity (51,028,000) (27,644,000)
Purchase of securities available for sale (22,663,000) (24,919,000)
Net (increase) decrease in loans (5,442,000) 1,756,000
Proceeds from sale of SBA loans 1,530,000 1,295,000
Loan origination fees received 445,000 325,000
Proceeds from sale of other real estate owned 145,000 1,375,000
Purchase of premises and equipment (984,000) (367,000)
(Increase) decrease in other, net (2,112,000) 277,000
- --------------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities: (21,663,000) (7,003,000)
Cash flows from financing activities:
Net increase in noninterest bearing deposits 5,934,000 1,912,000
Net increase in interest bearing deposits 21,852,000 19,181,000
Net (decrease) increase in repurchase agreements (4,567,000) 36,208,000
Increase in interest bearing demand notes 1,069,000 953,000
(Decrease) in capital lease and mortgage indebtedness (3,000) (92,000)
Dividends paid in lieu of fractional shares issued (5,000) -
Exercise of stock purchase plan options - 209,000
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 24,280,000 20,009,000
- --------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 5,062,000 15,622,000
Cash and cash equivalents, beginning of year 58,878,000 85,541,000
Cash and cash equivalents, end of period $ 63,940,000 $101,163,000
==========================================================================================================================
Supplemental disclosure of cash flows information:
Cash paid during the year: 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
Interest $ 4,020,000 $ 2,992,000
Income taxes $ 574,000 $ 1,340,000
- --------------------------------------------------------------------------------------------------------------------------
Non cash activities:
Transfer from loans to other real estate owned $ - $ 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
---------------------------------------------------------------------------------------
June 30 Dec. 31 June 30 Dec. 31
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate loans $40,000 $5,000 $ 459,000 $ 620,000
Commercial loans - - 298,000 404,000
Consumer loans - - - 1,000
Leasing - 2,000 - -
Other Real Estate Owned - - 451,000 601,000
- ---------------------------------------------------------------------------------------------------------------------------
Total $40,000 $7,000 $1,208,000 $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>
June 30 Dec. 31
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $2,282,000 $2,033,000
Provision charged to operations 235,000 830,000
Recoveries 38,000 116,000
- ---------------------------------------------------------------------------------------------------------------------------
2,555,000 2,979,000
Less: Loans charged off 166,000 697,000
- ---------------------------------------------------------------------------------------------------------------------------
Balance $2,389,000 $2,282,000
===========================================================================================================================
</TABLE>
Transactions in the allowance for other real estate owned were as follows:
<TABLE>
<CAPTION>
June 30 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>
June 30 Dec. 31
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonperforming loans to total loans 0.60% 0.80%
Nonperforming assets to total assets 0.34% 0.48%
Loan loss allowance to nonperforming loans 299.74% 221.55%
Loan loss and OREO allowance to nonperforming assets 185.98% 137.98%
</TABLE>
5
<PAGE> 6
ITEM 2 - MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS
JUNE 30, 1996 VS. DECEMBER 31, 1995
ASSETS
Assets continued to grow during the first half of 1996, gaining 7%, or
$26,040,000, to $385,964,000 at June 30, 1996. The growth in assets was
primarily in the securities portfolio which increased 9%, or $14,588,000 from
year-end 1995, the majority being invested in U.S. Government agency securities.
The loan portfolio grew 3% during the first half of 1996, increasing to
$132,482,000 at June 30, 1996 compared to $128,870,000 at December 31, 1995.
Asset quality remained solid with non-performing loans decreasing during the
first half of 1996 to $797,000, or 0.60% of total loans, compared to
$1,032,000, or 0.80% of total loans, at year-end 1995. The reserve for credit
losses amounted to $2,389,000, or 1.80% of total loans at the end of the second
quarter.
Other real estate owned (OREO) decreased 25%, or $150,000, from year-end 1995
with the sale of one property. No additions to OREO were made in the first
half of the year; the remaining four properties held in OREO total $401,000,
or 0.1% of total assets.
LIABILITIES
Deposits grew steadily during the first half of 1996 reaching $346,481,000 at
June 30, 1996 versus $318,695,000 at December 31, 1995, an increase of
$27,786,000, or 9%. The most significant contributor to the increased deposits
was the new "Investors Money Market Account", which pays a higher yield (4.77%
at June 30th) as long as the balance remains at $50,000 or above. Deposits in
Investors Money Market Accounts as of June 30, 1996 were $27,948,000.
CAPITAL AND LIQUIDITY
The Company continues to enjoy a strong capital position, which continues to
meet and exceed current regulatory requirements. Capital ratios at the end of
the second quarter remain virtually unchanged from year-end 1995. Risk-based
capital at June 30, 1996 was 15.5% compared to 15.4% at December 31, 1995.
Tier 1 (core capital) was 16.7% at quarter-end versus 16.6% at year-end, with
the leverage ratio (Tier 1 capital to quarterly average assets) at 8.3% at June
30, 1996 compared to 8.4% at December 31, 1995.
The objective of liquidity management is to maintain cash flow adequate for
funding the Company's operations and to meet obligations on a timely and cost
effective basis. The Company manages its liquidity position through continuous
monitoring of profitability trends, asset quality and maturity and repricing
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 at June 30, 1996 were
$99,634,000, or 26% of total assets giving the Company more than adequate
funds to increase the loan portfolio and handle any short term liability
fluctuations.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS (CONTINUED)
OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 VS. JUNE 30, 1995.
Second quarter earnings were $870,000, up from $770,000 earned in the first
quarter of 1996 and down from a record $982,000 earned in the second quarter of
1995. Second quarter per share earnings were $0.25 versus $0.22 in this year's
first quarter and $0.28 in last year's second quarter.
The net interest margin declined to 5.18% from 5.35% in the same quarter last
year, causing a drop in net interest income of $293,000. The new Investors
Money Market account, coupled with higher levels of other interest bearing
deposits increased interest expense $61,000 over the second quarter last year.
Two prime rate drops in late 1995 and early 1996 lowered the yield on interest
earning assets compared to the prior year second quarter.
Noninterest income increased $139,000, or 14%, over the same period last year.
Service charges on deposits rose 10% ,or $70,000, compared to the second
quarter last year. Other income improved during the second quarter with
increased investment and insurance sales commissions, up $4,000, and a gain on
the sale of leased equipment of $15,000.
Noninterest expenses rose a modest 2%, or 67,000, over the second quarter of
1995. A reduction in FDIC insurance premiums partially offset a 6% increase in
salaries, occupancy, and furniture fixtures and equipment costs compared to the
same period last year.
OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30,1996 VS. JUNE 30, 1995.
Operating earnings for the six months ended June 30, 1996 were $1,640,000, down
from the $1,962,000 earned for the same period in 1995. Earnings per share
were $0.47 for the first six months compared to $0.57 in 1995. Book value per
share increased $0.95 to $8.95 in 1996.
The net interest margin was reduced during the first half by the rising
interest costs on 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 first half was $8,214,000 versus $8,958,000 in 1995.
Noninterest Income increased 10%, or $204,000, over last years first half. Our
larger business checking deposit base resulted in increased service charge
income, up $156,000, or 11%, from 1995.
With careful management of expenses, and the decreased FDIC insurance expense,
we were able to keep expenses in line with 1995. Salaries and employee
benefits were up 7% over last year due to the addition of our Camarillo office
in May, 1995 and our Valencia office which opened in June, 1996. Net occupancy
expense and furniture fixtures and equipment will increase during the second
half of 1996 as a result of (1.) Our new Valencia office, (2.) The recent
relocation, after 35 years, of our San Fernando office to new quarters and
(3.) The ongoing upgrading of computer equipment through out the Company.
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
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: August 12, 1996 By: Howard J. Stanke
-------------------------- ----------------------------
Howard J. Stanke
Chief Financial Officer
Date: August 12, 1996 By: Diane M. Auten
-------------------------- -----------------------------
Diane M. Auten
Controller
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>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 31,940
<INT-BEARING-DEPOSITS> 237,753
<FED-FUNDS-SOLD> 32,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,694
<INVESTMENTS-CARRYING> 143,235
<INVESTMENTS-MARKET> 142,249
<LOANS> 132,482
<ALLOWANCE> 2,389
<TOTAL-ASSETS> 385,964
<DEPOSITS> 346,481
<SHORT-TERM> 3,255
<LIABILITIES-OTHER> 5,351
<LONG-TERM> 0
0
0
<COMMON> 8,030
<OTHER-SE> 20,313
<TOTAL-LIABILITIES-AND-EQUITY> 385,964
<INTEREST-LOAN> 6,825
<INTEREST-INVEST> 4,959
<INTEREST-OTHER> 815
<INTEREST-TOTAL> 12,599
<INTEREST-DEPOSIT> 4,023
<INTEREST-EXPENSE> 4,150
<INTEREST-INCOME-NET> 8,449
<LOAN-LOSSES> 235
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,785
<INCOME-PRETAX> 2,576
<INCOME-PRE-EXTRAORDINARY> 2,576
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,640
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
<YIELD-ACTUAL> 7.38
<LOANS-NON> 808
<LOANS-PAST> 342
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,282
<CHARGE-OFFS> 166
<RECOVERIES> 38
<ALLOWANCE-CLOSE> 2,389
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,389
</TABLE>
