<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, 1997 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 3,452,215 shares of common stock outstanding as of May 9, 1997.
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(Unaudited) 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 26,873,000 $ 30,369,000
Federal funds sold 25,000,000 20,075,000
Investment securities (approximate market value:
1997-$144,006,000; 1996-$148,532,000): 144,789,000 148,509,000
Investment securities available for sale at market value 32,165,000 33,290,000
- -----------------------------------------------------------------------------------------------
Total investment securities 176,954,000 181,799,000
Loans and leases 136,282,000 136,523,000
Less allowance for credit losses 2,420,000 2,448,000
- -----------------------------------------------------------------------------------------------
Net loans and leases 133,862,000 134,075,000
Premises and equipment, net 4,865,000 5,021,000
Other real estate owned 1,757,000 1,022,000
Other assets 7,040,000 7,155,000
- -----------------------------------------------------------------------------------------------
TOTAL ASSETS $ 376,351,000 $ 379,516,000
===============================================================================================
LIABILITIES
Deposits:
Noninterest bearing $ 110,988,000 $ 110,874,000
Interest bearing 225,410,000 231,047,000
- -----------------------------------------------------------------------------------------------
Total deposits 336,398,000 341,921,000
Interest bearing demand notes issued to the U.S. Treasury 3,531,000 2,413,000
Mortgage indebtedness and obligation under capital lease 245,000 205,000
Securities sold under agreement to repurchase 700,000 500,000
Other liabilities 1,626,000 1,255,000
- -----------------------------------------------------------------------------------------------
Total liabilities 342,500,000 346,294,000
STOCKHOLDERS' EQUITY,
Common stock, no par value: authorized 6,000,000 shares;
3,452,215 shares issued and out-standing in TransWorld
Bancorp in 1997 and 3,451,715 in 1996 8,037,000 8,033,000
Surplus 2,926,000 2,926,000
Retained earnings 23,177,000 22,367,000
Unrealized gain (loss) on securities (net of deferred taxes of
$205,000 in March 1997 and $74,000 in Dec 1996) (289,000) (104,000)
- -----------------------------------------------------------------------------------------------
Total stockholders' equity 33,851,000 33,222,000
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 376,351,000 $ 379,516,000
===============================================================================================
</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) 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 3,474 $ 3,394
Interest on state and municipal
securities 256 323
Interest on other investment
securities 2,421 2,093
Interest on Federal funds sold 381 388
- ----------------------------------------------------------------------
Total interest income 6,532 6,198
Interest expense:
Interest on deposits 2,130 1,969
Interest on short-term borrowings 45 75
- ----------------------------------------------------------------------
Total interest expense 2,175 2,044
Net interest income 4,357 4,154
Provision for credit losses 95 105
- ----------------------------------------------------------------------
Net interest income after provision
for credit losses 4,262 4,049
Noninterest income:
Service charges on deposit accounts 812 785
Bankcard merchant income 32 35
Other operating income 215 206
- ----------------------------------------------------------------------
Total noninterest income 1,059 1,026
Noninterest expense:
Salaries and employee benefits 2,130 2,085
Net occupancy expense 573 535
Furniture, fixtures and equipment 249 329
FDIC insurance costs 10 1
Data processing 73 59
Other operating expense 1,008 859
- ----------------------------------------------------------------------
Total noninterest expense 4,043 3,868
Income before income taxes 1,278 1,207
Income taxes 468 437
- ----------------------------------------------------------------------
Net income $ 810 $ 770
======================================================================
Net Income Per Share $ .23 $ .22
Book value per share $ 9.81 $ 8.74
Weighted Average shares outstanding 3,451,901 3,451,465
</TABLE>
3
<PAGE> 4
TRANSWORLD BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarter ending March 31, (Unaudited) 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 810,000 $ 770,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Net amortization of premium on investments 71,000 81,000
Provision for credit losses 95,000 105,000
Accretion of deferred loan fees and costs (78,000) (109,000)
Loan origination costs capitalized (39,000) (38,000)
Depreciation and amortization 178,000 157,000
(Increase) decrease in accrued interest receivable (92,000) 80,000
Increase (decrease) in accrued interest payable 6,000 (64,000)
Increase (decrease) in current income taxes payable 517,000 (430,000)
Provision for OREO losses - -
Increase in other, net (138,000) 358,000
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,330,000 1,770,000
Cash flows from investing activities:
Proceeds from matured securities held to maturity 9,960,000 2,835,000
Proceeds from matured securities available for sale 800,000 2,700,000
Proceeds from calls and redemptions of securities
held to maturity 11,671,000 28,651,000
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 (17,946,000) (23,359,000)
Purchase of securities available for sale - (20,648,000)
Net increase in loans (545,000) (3,749,000)
Proceeds from sale of SBA loans - 892,000
Loan origination fees received 135,000 219,000
Proceeds from sale of other real estate owned - 145,000
Purchase of premises and equipment (42,000) (316,000)
Decrease (increase) in other, net 227,000 (1,968,000)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities: 4,260,000 (8,598,000)
Cash flows from financing activities:
Net increase (decrease) in noninterest bearing deposits 114,000 (4,582,000)
Net (decrease) increase in interest bearing deposits (5,637,000) 13,955,000
Net increase (decrease) in repurchase agreements 200,000 (1,563,000)
Increase in interest bearing demand notes 1,118,000 528,000
Increase (decrease) in capital lease and mortgage indebtedness 40,000 (1,000)
Dividends paid in lieu of fractional shares issued - (5,000)
Exercise of stock purchase plan options 4,000 -
- -------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (4,161,000) 8,332,000
- -------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,429,000 1,504,000
Cash and cash equivalents, beginning of year 50,444,000 58,878,000
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 51,873,000 $ 60,382,000
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Supplemental disclosure of cash flows information:
Cash paid during the year: 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest $ 2,173,000 $ 2,112,000
Income taxes $ - $ 14,000
- -------------------------------------------------------------------------------------------------------------
Non cash activities:
Transfer from loans to other real estate owned $ 735,000 $ -
=============================================================================================================
</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
1997 1996 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate loans $155,000 $284,000 $ 973,000 $1,307,000
Commercial loans 1,000 - 155,000 282,000
Consumer loans - - 11,000 5,000
Leasing - - -
Other Real Estate Owned - - 1,757,000 1,022,000
- -----------------------------------------------------------------------------------
Total $156,000 $284,000 $1,896,000 $2,616,000
- -----------------------------------------------------------------------------------
</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
1997 1996
- ---------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $2,448,000 $2,282,000
Provision charged to operations 95,000 430,000
Recoveries 51,000 47,000
- ---------------------------------------------------------------
2,594,000 2,759,000
Less: Loans charged off 174,000 311,000
- ---------------------------------------------------------------
Balance $2,420,000 $2,448,000
===============================================================
</TABLE>
Transactions in the allowance for other real estate owned were as follows:
<TABLE>
<CAPTION>
Mar. 31 Dec. 31
1997 1996
- ---------------------------------------------------------
<S> <C> <C>
Balance, January 1 $70,000 $83,000
Provision charged to operations - -
- ---------------------------------------------------------
70,000 83,000
Less: OREO reserves recovered -
Less: OREO reserves charged off - 13,000
- ---------------------------------------------------------
Balance $70,000 $70,000
=========================================================
</TABLE>
NOTE 3 - ASSET QUALITY RATIOS
<TABLE>
<CAPTION>
Mar. 31 Dec. 31
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Nonperforming loans to total loans 0.95% 1.38%
Nonperforming assets to total assets 0.76% 0.78%
Loan loss allowance to nonperforming loans 186.87% 130.35%
Loan loss and OREO allowance to nonperforming assets 117.34% 84.78%
</TABLE>
5
<PAGE> 6
ITEM 2 - MANAGEMENT'S ANALYSIS OF FINANCIAL OPERATIONS
MARCH 31, 1997 VS. DECEMBER 31, 1996
ASSETS
Total Assets on March 31, 1997 were $376,351,000 compared to $379,516,000 at
year-end 1996, a decrease of $3,165,000 or 1%. The decrease was due to a
seasonal drop in total deposits. Investment securities decreased 3%, or
$4,845,000 from December 31, 1996. Portfolio investments are limited by the
merger agreement with Glendale Federal Bank and maturities in March, 1997 were
not renewed.
Loans were off slightly during the first quarter with the loans totaling
$136,282,000 at March 31, 1997 compared to $136,523,000 at December 31, 1996.
The quality of the Company's loan portfolio continues to be satisfactory with
non-performing loans totaling 0.95% of total loans.
Other Real Estate Owned (OREO) increased during the first quarter with the
addition of three properties during the first quarter. Two single family
residences totaling $355,000 and one multi-family unit for $380,000 accounted
for the change. Two properties totaling $469,000 were in escrow at quarter end.
LIABILITIES
Deposits declined during the first quarter due to seasonal trends and the fact
that the Bank did not renew $10,000,000 in brokered certificates of deposit
which came due in March. Money market deposits increased during the quarter
making up for most of the decrease in time deposits. Noninterest bearing
deposits remained almost constant over the period increasing by only $114,000.
CAPITAL AND LIQUIDITY
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 improved from year-end 1996. Risk based capital at
March 31, 1997 was 18.4% compared to 17.9% at December 31, 1996. Tier 1 (core
capital) ratio was 17.1% at quarter-end versus 16.7% at year-end, with the
leverage ratio (tier 1 capital to quarterly average assets) at 8.9% at March 31,
1997 compared to 8.9% at December 31, 1996.
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 22% of the Company's total
assets at March 31, 1997 giving the Company 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, 1997 VS. MARCH 31, 1996
Interest income increased $334,000, or 5% in the first quarter of 1997 compared
to the first quarter of 1996. This was primarily due to increased volume in
earning assets over 1996, especially the loan portfolio which was up 4%.
Interest expense during the same periods increased by $131,000 due to an
increase in interest bearing deposits. This brought the net interest income
(prior to loan loss provision) up $203,000, or 5% better than the first quarter
of 1996.
Noninterest income for the first quarter of 1997 was up $33,000, or 3% over the
1996 first quarter. Service charges on deposit accounts posted the largest
increase, rising $27,000, or 3% over the same period last year. The increase
came from an increase in the number and size of demand accounts paying service
charges. Other operating income also increased 4% over the first quarter of
1996.
Noninterest expense increased by $175,000, or 5% over 1996. Expenses incidental
to the merger with Glendale Federal Bank amounted to $181,000 during the first
quarter of 1997. If the Company had not incurred these expenses overall
noninterest costs would have decreased from last year and net income would have
significantly improved. The one category not affected by merger costs was
furniture and equipment expenses. This category decreased by $80,000 due to the
payoff of the lease on the Company's main computer at the end of 1996. The
equipment is now owned by the Company after a $1 buyout cost.
Net income for the quarter improved $40,000, or 5% over the first quarter of
1996 despite the merger related costs. Per share earnings were $0.23 versus
$0.22 for last year's first quarter and book value improved to $9.81 compared to
$8.74 in 1996.
The merger of TransWorld Bancorp and Glendale Federal Bank, approved by
shareholders on February 26, 1997, is anticipated to close on or about May 16,
1997.
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. FURNISH THE EXHIBITS REQUIRED BY ITEM 601 OF REGULATION 8-K
(27). Financial Data Schedule
B. REPORTS ON FORM 8-K
None
8
<PAGE> 9
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 9, 1997 By: Howard J. Stanke
------------ ----------------------------
Howard J. Stanke
Chief Financial Officer
Date: May 9, 1997 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-31-1997
<EXCHANGE-RATE> 1
<CASH> 26,873
<INT-BEARING-DEPOSITS> 225,410
<FED-FUNDS-SOLD> 25,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32,165
<INVESTMENTS-CARRYING> 144,789
<INVESTMENTS-MARKET> 144,006
<LOANS> 136,282
<ALLOWANCE> 2,420
<TOTAL-ASSETS> 376,351
<DEPOSITS> 336,396
<SHORT-TERM> 3,531
<LIABILITIES-OTHER> 2,338
<LONG-TERM> 0
0
0
<COMMON> 8,037
<OTHER-SE> 25,814
<TOTAL-LIABILITIES-AND-EQUITY> 376,351
<INTEREST-LOAN> 3,474
<INTEREST-INVEST> 2,677
<INTEREST-OTHER> 381
<INTEREST-TOTAL> 6,532
<INTEREST-DEPOSIT> 2,130
<INTEREST-EXPENSE> 2,175
<INTEREST-INCOME-NET> 4,262
<LOAN-LOSSES> 95
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,043
<INCOME-PRETAX> 1,278
<INCOME-PRE-EXTRAORDINARY> 1,278
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 810
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
<YIELD-ACTUAL> 7.72
<LOANS-NON> 1,139
<LOANS-PAST> 156
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,448
<CHARGE-OFFS> 174
<RECOVERIES> 51
<ALLOWANCE-CLOSE> 2,420
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,420
</TABLE>
