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 THE QUARTER ENDED March 31, 1995
Commission File Number 2-76003
BAY AREA BANCSHARES
California #94-2779021
900 Veterans Blvd., Redwood City, CA 94063
Telephone (415) 367-1600
The registrant (1) has filed all reports required by Section 13 or 15(d)
of the Securities Exchange Act during the preceding 12 months, and
x Yes No
(2) has been subject to such filing requirements for the past 90 days.
x Yes No
792,255 Shares of Common Stock Outstanding as of March 31, 1995
Part 1 Item 1
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<CAPTION>
BAY AREA BANCSHARES & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS 3/31/95 12/31/94
<S> <C> <C>
Cash and due from banks $11,968,347 $8,406,265
Federal Funds Sold 6,612,000 6,355,000
----------- --------------
Cash and cash equivalents 18,580,347 14,761,265
Time deposits with other financial institutions 102,647 197,585
Investment securities available for sale (market value approximates book value) 1,469,688 1,439,872
Investment securities held to maturity
(market value of $8,407,000 in 1995 and $8,122,000 in 1994) 8,530,276 8,426,348
Loans, net of reserve for possible loan losses
of $1,553,555 in 1995 and $1,505,355 in 1994 50,965,361 52,016,341
Loans held for sale 712,321 327,586
Premises and equipment, net 961,057 1,023,060
Real estate owned 0 0
Interest receivable and other assets 1,326,235 1,344,825
------------- --------------
Total assets $82,647,932 $79,536,882
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $19,938,702 $20,818,159
Interest-bearing transaction 36,088,218 32,884,654
Savings 4,602,499 4,439,217
Time 14,244,364 13,871,559
------------- --------------
Total Deposits 74,873,783 72,013,589
Interest payable and other liabilities 561,105 552,649
Notes payable 0 0
------------- --------------
Total liabilities 75,434,888 72,566,238
Shareholders' equity:
Preferred stock, $10 stated value; 6% Series A, convertible and redeemable:
Authorized - 10,000,000 shares; issued & outstanding
10,300 in 1995 and 1994 103,000 103,000
Common stock, no par value:
Authorized - 20,000,000 shares; issued & outstanding 3,921,584 3,908,616
792,255 in 1995 and 789,525 in 1994
Unrealized loss on securities held for sale (43,000) (76,000)
Retained earnings 3,231,460 3,035,028
------------- --------------
Total shareholders' equity 7,213,044 6,970,644
------------- --------------
Total liabilities and shareholders' equity $82,647,932 $79,536,882
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Part 1 Item 1
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<CAPTION>
BAY AREA BANCSHARES & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
3/31/95 3/31/94
<S> <C> <C>
Interest Income:
Interest and fees on loans $1,532,225 $1,324,713
Interest on investment securities 141,103 131,722
Interest on federal funds sold 66,566 57,325
Interest on time deposits with other financial institutions 1,675 2,130
------------- --------------
Total Interest Income 1,741,569 1,515,890
Interest Expense:
Interest on interest-bearing transaction accounts 263,505 204,042
Interest on savings deposits 51,969 16,940
Interest on time deposits 156,704 147,984
Interest on short-term borrowing 0 0
Interest on notes payable and redeemable debentures 0 2,976
------------- --------------
Total Interest Expense 472,178 371,942
Net interest income 1,269,391 1,143,948
Provision for possible loan losses 45,000 120,000
______________ _______________
Net interest income after provision for possible loan losses 1,224,391 1,023,948
Noninterest income:
Service charges on deposit accounts 66,340 75,033
Net gain (loss) on sales of securities 0 0
Net gain on disposal of assets 0 20,434
Net gain on sale of loans held for sale 98,625 116,847
Other mortgage banking revenue 55,228 34,940
ATM network revenue 303,703 98,252
Other 12,263 11,369
------------- --------------
Total noninterest income 536,159 356,875
Noninterest expense:
Salaries and related benefits 629,366 543,911
Occupancy 94,648 87,580
Equipment 140,988 62,246
Professional fees 56,725 57,695
Stationery and supplies 36,928 23,242
Other 367,827 263,015
------------- --------------
Total noninterest expense 1,326,482 1,037,689
Income before provision for income taxes 434,068 343,134
Provision for income taxes 176,000 141,000
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Net Income $258,068 $202,134
Earnings per share:
Average common and common equivalent shares outstanding 875,000 865,000
Net income per share $0.29 $0.23
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Part 1 Item 1
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<CAPTION>
BAY AREA BANCSHARES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Three Months
Ended Ended
3/31/95 3/31/94
Cash flows from operating activities: ------------- --------------
<S> <C> <C>
Net Income $258,068 $202,134
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of premises and equipment 104,387 41,765
Provision for possible loan losses 45,000 120,000
Net gain on sale of assets 0 (20,434)
Funding of loans held for sale (7,661,350) (4,524,153)
Proceeds from the sale of loans held for sale 7,375,240 4,641,000
Net gain on sale of loans held for sale (98,625) (116,847)
Net loss on sale of investment securities 0 0
Net amortization and accretion of investment premiums and discounts 9,224 16,080
Net decrease (increase) in interest receivable and other assets 18,590 (13,648)
Net increase in interest payable and other liabilities 8,456 74,614
Net decrease in deferred loan fees (69,285) (11,204)
------------- --------------
Total adjustments (268,363) 207,173
------------- --------------
Net cash provided by operating activities (10,295) 409,307
Cash flows from investing activities:
Net decrease in time deposits with other financial institutions 94,938 0
Proceeds from sale of investment securities 0 0
Proceeds from the maturity of investment securities held to maturity 1,000,000 0
Mortgage backed securities principal payments 59,113 357,652
Purchase of investment securities held to maturity (1,169,081) (1,032,578)
Purchase of investment securities held for sale 0 0
Net decrease in gross loans 1,013,630 2,158,951
Capital expenditures (42,384) (323,575)
------------- --------------
Net cash provided by investing activities 956,216 1,160,450
Cash flows from financing activities:
Net increase in demand deposits, transaction and savings 2,487,389 852,652
Net increase in time deposits 372,805 1,133,134
Proceeds from stock warrants and options exercised 12,967 0
------------- --------------
Net cash provided by financing activities 2,873,161 1,985,786
------------- --------------
Net increase in cash and cash equivalents 3,819,082 3,555,543
Cash and cash equivalents, beginning of period 14,761,265 11,980,321
------------- --------------
Cash and cash equivalents, end of period $18,580,347 $15,535,864
There were no Loans transferred to Real Estate Owned in the
first quarter of 1995 or 1994.
</TABLE>
BAY AREA BANCSHARES & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All adjustments, which in the opinion of management are necessary for a
fair statement of the Company's financial condition at March 31, 1995,
results of operations for the three month period ended March 31, 1995 and
the statement of cash flows for the three month period ended March 31, 1995
have been included. These adjustments are of a normal and recurring
nature. The results of operations and statement of cash flows are not
necessarily indicative of the results for a full year's activity.
The accompanying unaudited financial statements have been prepared on a
basis consistent with the accounting principles and policies reflected in
the Company's Annual Report for the year ended December 31, 1994.
BAY AREA BANCSHARES & SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Item 2A Financial Condition
Liquidity
Liquid assets (cash, federal funds sold, time deposits with other financial
Institutions and investments) increased $3.9 million to $28.7 million over
the three month period from December 31, 1994 to March 31, 1995. At
year-end, total liquid assets as a percentage of total assets was 31.2%
whereas on March 31, 1995 it had increased to 34.7%.
Cash & due from banks increased $3.6 million over the first three months of
1995 to $12.0 million at March 31, 1995. However, during the first quarter
of 1995, cash and due from banks averaged $9.1 million. The increase in
liquid assets at quarter-end was a result of a buildup of deposits which
occurred primarily during the last two weeks of March. The portion of the
total cash & due from banks representing ATM network cash inventory at
March 31, 1995 was approximately $2.2 million. At December 31, 1994, there
was approximately $3.0 in ATM network cash inventory. The reduction in ATM
cash was a result of more aggressive cash management and the closing of
unproductive sites.
The increase in total liquid investments was a result of a decline in total
net loans outstanding of $666,000 or 1% to $51.7 million and an increase in
deposits of $2.9 million (4.0%) to $74.9 million during the first three
months of 1995. Deposits have averaged $70.2 million thus far in 1995, a
4.3% decrease over average deposits of $73.4 million throughout 1994.
Average gross loans outstanding have averaged $54.1 million thus far in
1995 as compared to an average of $54.2 million averaged in 1994.
Management feels the decline in demand for loans is primarily a result of
the rise in interest rates, which began in the third quarter of 1993, and
the resulting increase in the cost of borrowing for potential lending
customers of the Bank. Management has embarked on other lending areas to
stimulate loan demand, and continues to explore new avenues for lending.
Management feels current liquid assets and current available credit lines
are adequate to cover the working capital requirements of the Company and
any reasonable needs arising from deposit withdrawals.
Capital
Consolidated equity capital plus reserves increased $291,000 in the first
three months of 1995 from $8.5 million or 10.46% of total gross assets at
December 31, 1994 to $8.8 million or 10.41% of total gross assets at March
31, 1995.
Bank capital plus reserves totaled $8.8 million on March 31, 1995 or 10.39%
of total adjusted assets as compared to capital plus reserves of $8.5
million or 10.45% of total adjusted assets at December 31, 1994. At March
31, 1995 the Bank maintained a tier one capital ratio of 12.44% and a tier
two capital ratio of 13.69%.
The Bank's capital level continues to exceed State and Federal Deposit
Insurance Corporation requirements and satisfies the Federal Reserve
Board's current risk-based capital guidelines.
The Bank declared $75,000 in dividends to the Parent company in the first
quarter of 1995. The Parent company also declared a cash dividend of 6% to
preferred shareholders and a dividend to common shareholders of $.07 per
share. This represents the fourteenth consecutive cash dividend declared
by the Bank's parent company to common shareholders and an increase over
the prior dividend of $.06 per share.
Item 2B Results of Operations
Results of Operations
Consolidated operating profits were $258,100 for the first quarter of 1995,
the highest first quarter in the Company's history. The first quarter
operating profits were comprised of Bank earnings of $275,700, and a Parent
company loss of $17,600.
Consolidated earnings increased $55,900 or 27.7% and earnings per share
increased $.06 to $.29 for the first quarter of 1995 as compared to the
same period in 1994. The increase in first quarter earnings in 1995 versus
1994 is primarily a result of an increase in net interest income of
$125,000, a reduction in loan loss provisions of $75,000, and an increase
in non interest income of $179,000 offset in part by an increase of
$289,000 in non interest expense.
Net interest income grew $125,000 in the first quarter of 1995 as a result
of rising interest rates. This increase was comprised of a $226,000
increase in interest income offset in part by a $100,000 increase in
interest expense. The year to date net interest income to total average
assets has been 6.63% in the first three months of 1995 as compared to
5.95% in the first three months of 1994.
The decline in loan loss provisions in the first quarter of 1995 as
compared to the first quarter of 1994 is primarily a result of loan
recoveries of $203,000 in 1994, and improved delinquency ratios in the loan
portfolio.
The increase in non interest expense in the first quarter of 1995 can be
substantially attributed to the Bank's Electronic Funds Transfer (EFT)
department which operates approximately 42 ATM's throughout the state.
EFT department revenues grew from $98,000 in the first quarter of 1994 to
$304,000 in the first quarter of 1995.
The increase in non interest expense of $289,000 in the first quarter of
1995 was driven by an increase of $85,000 in salary expense, a $79,000
increase in equipment expenses and a $105,000 increase in other expenses.
These expenses were primarily attributable to growth in the EFT and
Mortgage departments. After allocation of certain indirect expenses the
EFT department contributed $3,300 to pre-tax profits and the Mortgage
department contributed $9,700 in the first quarter as opposed to a loss of
$17,100 in the EFT department and a loss of $12,000 in the Mortgage
department in the first quarter of 1994.
Total nonearning assets, comprised solely of nonaccrual loans, at March 31,
1995 were $250,000 or 16.1% of loan loss reserves, and .3% of total assets.
Total nonearning assets at December 31, 1994 were $200,000 or 13.3% of loan
loss reserves and .3% of total assets.
PART II- Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
SIGNATURES
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.
BAY AREA BANCSHARES
Registrant
Dated: May 9, 1995
/s/ Robert R. Haight
President and Chief Executive Officer
/s/ Anthony J. Gould
Chief Accounting Officer
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<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet, and Statement of Income, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 11,968,347
<INT-BEARING-DEPOSITS> 102,647
<FED-FUNDS-SOLD> 6,612,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,469,688
<INVESTMENTS-CARRYING> 8,530,276
<INVESTMENTS-MARKET> 8,407,000
<LOANS> 53,231,237
<ALLOWANCE> (1,553,555)
<TOTAL-ASSETS> 82,647,932
<DEPOSITS> 74,873,783
<SHORT-TERM> 0
<LIABILITIES-OTHER> 561,105
<LONG-TERM> 0
<COMMON> 3,921,584
0
103,000
<OTHER-SE> 3,188,460
<TOTAL-LIABILITIES-AND-EQUITY> 82,647,932
<INTEREST-LOAN> 1,532,225
<INTEREST-INVEST> 141,103
<INTEREST-OTHER> 68,241
<INTEREST-TOTAL> 1,741,569
<INTEREST-DEPOSIT> 472,178
<INTEREST-EXPENSE> 472,178
<INTEREST-INCOME-NET> 1,269,391
<LOAN-LOSSES> 45,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,326,482
<INCOME-PRETAX> 434,068
<INCOME-PRE-EXTRAORDINARY> 258,068
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258,068
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
<YIELD-ACTUAL> 7.43
<LOANS-NON> 250,006
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,505,355
<CHARGE-OFFS> 0
<RECOVERIES> 3,200
<ALLOWANCE-CLOSE> 1,553,555
<ALLOWANCE-DOMESTIC> 1,553,555
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
