<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the QUARTER ENDED MARCH 31, 1998 Commission file number: 0-11090
NAPA NATIONAL BANCORP
(Exact name of Small Business Issuer as specified in its charter)
CALIFORNIA 94-2780134
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
901 MAIN STREET, NAPA, CALIFORNIA 94559
(Address of principal executive offices) (Zip Code)
(707) 257-2440
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
--- ---
The number of shares of the registrant's Common Stock, no par value, outstanding
as of May 1, 1998, was 783,500.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE>
NAPA NATIONAL BANCORP
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheets:
March 31, 1998
December 31, 1997
Consolidated Statements of Income:
Three Months ended March 31, 1998
Three Months ended March 31, 1997
Consolidated Statements of Cash Flows:
Three Months ended March 31, 1998
Three Months ended March 31, 1997
Notes to Consolidated Financial Statements
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5 - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
The following interim consolidated financial statements of Napa National Bancorp
and its subsidiary Napa National Bank are unaudited and prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. However, they reflect all adjustments
(which included only normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of financial position, results of
operations, and cash flows for the interim periods presented and are normal and
recurring.
Results for the period as presented are not necessarily indicative of results to
be expected of the year as a whole.
3
<PAGE>
NAPA NATIONAL BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in 000's)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1997
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 9,686 $ 9,926
Federal funds sold 17,960 16,221
Time deposits with other financial institutions 792 1,782
Investment securities: Held to Maturity 1,824 1,823
Investment securities: Available for Sale 25,920 17,250
Federal Reserve and Federal Home Loan Bank
Stock 511 582
Loans, less allowance for loan losses of $1,638
and $1,566 at March 31, 1998 and December 31,
1997 79,045 78,057
Premises, furniture, fixtures and equipment, net 2,613 2,612
Accrued interest receivable 813 934
Other real estate owned 607 607
Other assets 1,152 1,025
--------------- ---------------
TOTAL ASSETS $ 140,923 $ 130,819
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand $ 33,778 $ 33,386
Interest-bearing:
Savings 17,374 12,982
Transaction 38,861 34,557
Time certificates 41,291 40,536
--------------- ---------------
TOTAL DEPOSITS 131,304 121,461
Accrued interest payable and other liabilities 911 771
--------------- ---------------
TOTAL LIABILITIES 132,215 122,232
--------------- ---------------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000 shares
authorized; no shares outstanding 0 0
Common stock, no par value, 20,000,000 shares
authorized; 783,500 shares issued and
outstanding at March 31, 1998 and December 31,
1997, respectively 7,147 7,147
Retained earnings 1,611 1,417
Net unrealized (loss)gain on available for sale
securities, net of taxes (50) 23
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 8,708 8,587
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 140,923 $ 130,819
--------------- ---------------
</TABLE>
(See notes to consolidated financial statements)
4
<PAGE>
NAPA NATIONAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in 000's, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 2,007 $ 1,866
Interest on federal funds sold 226 222
Interest on time deposits with other
financial institutions 14 58
Interest and dividends on investment
securities 342 31
--------------- --------------
TOTAL INTEREST INCOME 2,589 2,177
INTEREST EXPENSE ON DEPOSITS 865 757
--------------- --------------
NET INTEREST INCOME 1,724 1,420
Provision for loan losses 105 102
--------------- --------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,619 1,318
--------------- --------------
NON-INTEREST INCOME:
Service charges on deposit accounts 117 87
Mortgage loan service fees 16 16
Other 136 88
--------------- --------------
TOTAL NON-INTEREST INCOME 269 191
--------------- --------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 818 833
Occupancy 119 110
Furniture, fixtures and equipment 103 117
Other 365 395
--------------- --------------
TOTAL NON-INTEREST EXPENSE 1,405 1,455
--------------- --------------
INCOME BEFORE INCOME TAXES 483 54
INCOME TAXES 191 22
--------------- --------------
NET INCOME $ 292 $ 32
=============== ==============
EARNINGS PER COMMON SHARE $ 0.37 $ 0.04
=============== ==============
EARNINGS PER COMMON SHARE - ASSUMING DILUTION $ 0.35 $ 0.04
=============== ==============
Weighted average common shares outstanding used
to compute net earnings per common share 783,500 759,500
=============== ==============
Weighted average common shares outstanding used
to compute net earnings per common share -
Assuming Dilution 826,998 815,407
=============== ==============
</TABLE>
(See notes to consolidated financial statements)
5
<PAGE>
NAPA NATIONAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in 000's)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 292 $ 32
Reconciliation of net income to net cash provided
by operating activities:
Depreciation on premises and equipment 100 114
Amortization of deferred loan fees and
discounts/premiums on securities 71 (8)
Provision for loan losses 105 102
Decrease in accrued interest receivable 121 98
(Increase) in other real estate owned - (388)
(Increase)Decrease in other assets, net (75) 293
Increase(decrease) in accrued interest payable
and other liabilities 140 (21)
------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 754 222
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations, net of repayments (1,081) (119)
Proceeds from maturities of time deposits with
other financial institutions 990 -
Activity in securities held to maturity:
Purchases (975) (974)
Maturities 974 974
Activity in securities available for sale:
Purchases (9,392) -
Principal Paydowns 513 -
Sale(Purchases)of Federal Reserve and Federal
Home Loan Bank stock 71 (10)
Capital expenditures (101) (61)
------------------ -----------------
NET CASH (USED) BY INVESTING ACTIVITIES (9,001) (190)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase(decrease) in deposits 9,843 (256)
Cash dividends (97) (95)
Exercise of incentive stock options - 60
------------------ -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,746 (291)
------------------ -----------------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 1,499 (259)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 26,147 24,479
------------------ -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $27,646 $24,220
================== =================
</TABLE>
(continued)
(See notes to consolidated financial statements)
6
<PAGE>
NAPA NATIONAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in 000's)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS AT MARCH 31:
Cash and due from banks $ 9,686 $ 7,040
Federal funds sold 17,960 17,180
------------------ -----------------
$ 27,646 $ 24,220
================== =================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 890 $ 847
Cash paid for income taxes 275 0
</TABLE>
(See notes to consolidated financial statements)
7
<PAGE>
NAPA NATIONAL BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), Reporting Comprehensive Income. SFAS 130
establishes new rules for the reporting and display of comprehensive income or
loss and its components; however, the adoption of the Statement had no impact on
the Company's net income or shareholders' equity. SFAS 130 requires unrealized
gains or losses on the Company's available-for-sale securities, which prior to
adoption were reported separately in shareholders' equity to be included in
other comprehensive income or loss.
During the first quarter of 1998, total comprehensive income amounted to the
following:
<TABLE>
<CAPTION>
1998 1997
------------- ---------
<S> <C> <C>
Net income $ 292 $ 32
Other Comprehensive Income:
Unrealized Loss on Securities (73) -
------------- ---------
Comprehensive Income $ 219 $ 32
============= =========
</TABLE>
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Napa National Bancorp (the "Company") was incorporated in 1981 in the State of
California and is headquartered in Napa, California. The Company is a bank
holding company. Its principal subsidiary, Napa National Bank (the "Bank"), was
organized as a national banking association in 1982. The following discussion
and analysis by the Company's management compares the results of the Company's
operations for the three months ended March 31, 1998 and 1997 and the financial
condition and liquidity of the Company as of March 31, 1998 and December 31,
1997.
Certain matters discussed in this report are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements. Such risks
and uncertainties include, but are not limited to, the competitive environment
and its impact on the Company's net interest margin, changes in interest rates,
asset quality risks, concentrations of credit and the economic health of Napa
County (particularly the health of the wine industry), volatility of rate
sensitive deposits, asset/liability matching risks, the dilutive impact which
might occur upon the issuance of new shares of common stock, and liquidity
risks. Therefore, the matters set forth below should be carefully considered
when evaluating the Company's business and prospects. For additional information
concerning these risks and uncertainties, please refer to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997
FINANCIAL CONDITION
The Company's assets increased approximately $10.1 million during the first
three months of 1998 as compared to the period ended December 31, 1997. Total
assets were $140.9 million at March 31, 1998 compared with $130.8 million at
December 31, 1997. Total deposits increased to $131.3 million at March 31, 1998
compared with $121.4 million at December 31, 1997.
The loan portfolio of $80.6 million at March 31, 1998 increased $1.3 million
compared to the December 31, 1997 total of $79.6 million. The allowance for loan
losses on March 31, 1998 was $1,638,000 or 2.03% of total gross loans
outstanding. Net loan charge-offs for the first three months of 1998 were
$33,000. In the opinion of management, the allowance for loan losses was
considered adequate at March 31, 1998 based on management's analysis of the
risks inherent in the loan portfolio.
The Company's "held to maturity securities" consist of Treasury bonds,
municipals and stock in the Federal Reserve and Federal Home Loan Bank and are
classified as such in accordance with SFAS No. 115. At March 31, 1997, the "held
to maturity" investment portfolio's fair market value was $2,335,000.
9
<PAGE>
In 1997, the Company began to diversify its investment portfolio to include
collateralized mortgage obligations and municipal bonds. The intention of
management is to increase earnings and improve asset liability management
through this strategy. The Company's general policy is to acquire "A" rated or
better, insured tax-free municipal bonds. Collateralized mortgage obligations
have an average life of five years or less at purchase date. New purchases of
collateralized mortgage obligations and municipal bonds are classified as
available-for-sale securities. At March 31, 1997, Collateralized mortgage
obligations and municipal securities had a book value of $22,817,000 and
$3,187,000, respectively and a market value of $22,703,000 and $3,217,000,
respectively.
RESULTS OF OPERATIONS
The Company's after-tax earnings were $292,000 during the first three months
of 1998 compared with $32,000 during the same period in 1997.
Net interest income, the principal source of the Company's earnings, represents
the difference between interest and fees earned from lending and investment
activities and the interest paid on deposits used to fund those activities.
Variations in the volume and mix of loans, investments, and deposits and their
relative sensitivity to movements in interest rates impact net interest income.
During the first three months of 1998, net interest income at $1,724,000 was
$304,000 ahead of the same period in 1997. The primary cause of the increase was
the growth in loan and fee income and investment income generated through the
increase in deposits. That increase was mitigated by the decrease in interest on
time deposits with other financial institutions during the first three months of
1998 of $44,000 as compared to the same period in 1997.
Non-interest income increased by $78,000 in the first three months of 1998. This
increase resulted mainly from the increase in service charges on deposit
accounts and fees from brokered mortgage loans.
Non-interest expenses consist of salaries and benefits provided to employees of
the Bank, expenses related to premises and equipment, and operating expenses
associated with the continuing business affairs of the Company. Total
non-interest expenses decreased $50,000 or 3.4% during the first three months of
1998 when compared with the first three months of 1997. Salaries and benefits
accounted for $15,000 of this decrease through the attrition of full-time
equivalent employees. Other non-interest expense decreased $35,000 for the first
three months of 1998 compared to the same period in 1997, primarily, as a result
of more effective expense control system.
10
<PAGE>
CAPITAL RESOURCES AND ADEQUACY
Shareholders equity was $8.7 million or 6.2% of total assets at March 31, 1998
compared with $8.6 million or 6.6% of total assets at December 31, 1997. The
ratio of capital to risk-weighted assets at March 31, 1998 was 10.89% for the
Company and 10.96% for the Bank. Both ratios exceeded the regulatory
requirements for a "well-capitalized" institution. Management anticipates that
both the Company and the Bank will continue to exceed the regulatory minimums
for "well-capitalized"institutions in the foreseeable future. Therefore, in
management's opinion, the Company and the Bank have adequate capital in order to
support future growth. The Board of Directors declared a $.125 per share
dividend on March 17,1998 for stockholders of record of March 20,1998 and
payable on April 1, 1998.
INFLATIONARY FACTORS
Since the assets and liabilities of the Bank are primarily monetary in nature,
the performance of the Bank is affected more by changes in interest rates than
by inflation.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
As of March 31, 1998, the Company was not party to any significant
legal proceeding.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
There were no changes in the Company's securities during the quarter.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
No securities of this nature.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See Index to Exhibits to this Form 10-QSB, for a list of
the exhibits filed as a part of this report and incorporated herein by
reference.
(b) Reports on Form 8-K:
The Company did not file a report on Form 8-K during the first
quarter of 1998.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NAPA NATIONAL BANCORP
---------------------
(Registrant)
Date: May 14, 1998 /s/ Brian J. Kelly
------------------
Brian J. Kelly
President / COO
Date: May 14, 1998 /s/ Michael D. Irwin
--------------------
Michael D. Irwin
Chief Financial Officer
13
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
3(i)* Articles of Incorporation of the Registrant, as amended.
3(ii)* Restated Bylaws of the Registrant.
4.1* A specimen copy of the certificates evidencing Common Stock.
10.1* Napa National Bancorp 1992 Stock Option Plan.
10.2* Form of Incentive Stock Option Agreement.
10.3* Form of Nonstatutory Stock Option Agreement.
27 Financial Data Schedule.
*Previously filed.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,686
<INT-BEARING-DEPOSITS> 792
<FED-FUNDS-SOLD> 17,960
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,920
<INVESTMENTS-CARRYING> 1,824
<INVESTMENTS-MARKET> 1,824
<LOANS> 80,682
<ALLOWANCE> 1,638
<TOTAL-ASSETS> 140,923
<DEPOSITS> 131,303
<SHORT-TERM> 0
<LIABILITIES-OTHER> 912
<LONG-TERM> 0
0
0
<COMMON> 7,147
<OTHER-SE> 1,611
<TOTAL-LIABILITIES-AND-EQUITY> 140,923
<INTEREST-LOAN> 2,007
<INTEREST-INVEST> 342
<INTEREST-OTHER> 240
<INTEREST-TOTAL> 2,589
<INTEREST-DEPOSIT> 865
<INTEREST-EXPENSE> 865
<INTEREST-INCOME-NET> 1,724
<LOAN-LOSSES> 105
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,405
<INCOME-PRETAX> 483
<INCOME-PRE-EXTRAORDINARY> 483
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 291
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<YIELD-ACTUAL> 5.68
<LOANS-NON> 2,815
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,566
<CHARGE-OFFS> 48
<RECOVERIES> 15
<ALLOWANCE-CLOSE> 1,638
<ALLOWANCE-DOMESTIC> 1,638
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
