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 June 30, 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
809,593 Shares of Common Stock Outstanding as of June 30, 1995
Part 1 Item 1
<TABLE>
<CAPTION>
BAY AREA BANCSHARES & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS 6/30/95 12/31/94
<S> <C> <C>
Cash and due from banks $10,617,796 $8,406,265
Federal Funds Sold 9,770,000 6,355,000
Cash and cash equivalents 20,387,796 14,761,265
Time deposits with other financial instituions 102,647 197,585
Investment securities available for sale
(market value approximates book value) 1,498,751 1,439,872
Investment securities held to maturity
(market value of $9,779,000 in 1995 and $8,122,000 in 1994) 9,731,338 8,426,348
Loans, net of reserve for possible loan losses
of $1,537,508 in 1995 and $1,505,355 in 1994 49,001,201 52,016,341
Loans held for sale 1,869,717 327,586
Premises and equipment,net 933,012 1,023,060
Real estate owned 0 0
Interest receivable and other assets 1,250,289 1,344,825
Total assets $84,774,751 $79,536,882
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------
Deposits
Demand $21,221,333 $20,818,159
Interest-bearing transaction 35,944,568 32,884,654
Savings 4,184,340 4,439,217
Time 15,246,866 13,871,559
------------- --------------
Total Deposits 76,597,107 72,013,589
Interest payable and other liabilities 679,976 552,649
------------- --------------
Total liabilities 77,277,083 72,566,238
------------- --------------
Sharehoders' equity:
Preferred stock, $10 stated value; 6% Series A,
convertible and redeemable:
Authorized - 10,000,000 shares; issued & outstanding
5,000 in 1995 and 10,300 1994 50,000 103,000
Common stock, no par value:
Authorized - 20,000,000 shares; issues & outstanding 3,998,809 3,908,616
809,593 in 1995 and 789,525 in 1994
Unrealized loss on securities held for sale (13,000) (76,000)
Retained earnings 3,461,859 3,035,028
------------- --------------
Total shareholders' equity 7,497,668 6,970,644
------------- --------------
Total liabilities and shareholders' equity $84,774,751 $79,536,882
============= ==============
</TABLE>
<TABLE>
<CAPTION>
Part 1 Item 1
BAY AREA BANCSHARES & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
6/30/95 6/30/94
Interest Income: ------------- --------------
<S> <C> <C>
Interest and fees on loans $1,546,240 $1,382,013
Interest on investment securities 151,761 147,688
Interest on federal funds sold 151,226 71,797
Interest on time deposits with other financial
institutions 1,450 1,239
------------- --------------
Total Interest Income 1,850,677 1,602,737
Interest Expense: ------------- --------------
Interest on interest-bearing transaction accounts 327,437 215,227
Interest on savings deposits 52,082 14,847
Interest on time deposits 181,971 149,265
Interest on short-term borrowing 0 0
Interest on notes payable and redeemable debentures 0 3,312
------------- --------------
Total Interest Expense 561,490 382,651
------------- --------------
Net interest income 1,289,187 1,220,086
Provision for possible loan losses 35,000 105,000
------------- --------------
Net interest income after provision for
possible loan losses 1,254,187 1,115,086
Noninterest income: ------------- --------------
Service charges on deposit accounts 65,269 75,789
Net gain (loss) on sales of securities 0 0
Net gain on disposal of assets 0 647
Net gain on sale of loans held for sale 136,312 226,020
Other mortgage banking revenue 47,240 37,246
ATM network revenue 383,860 159,915
Other 45,253 10,013
------------- --------------
Total noninterest income 677,934 509,630
Noninterest expense: ------------- --------------
Salaries and related benefits 648,233 598,752
Occupancy 93,324 88,984
Equipment 143,968 78,099
Professional fees 51,980 79,407
Stationery and supplies 38,517 31,963
Other 467,028 315,595
------------- --------------
Total noninterest expense 1,443,050 1,192,800
------------- --------------
Income before provision for income taxes 489,071 431,916
Provision for income taxes 204,000 182,000
------------- --------------
Net Income $285,071 $249,916
Earnings per share: ============= ==============
Average common and common equivalent shares outstanding 890,000 865,000
============= ==============
Net income per share $0.32 $0.29
============= ==============
</TABLE>
<TABLE>
<CAPTION>
Part 1 Item 1
BAY AREA BANCSHARES & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Six Months
Ended Ended
6/30/95 6/30/94
Interest Income: ------------- --------------
<S> <C> <C>
Interest and fees on loans 3,078,465 $2,706,726
Interest on investment securities 292,864 279,410
Interest on federal funds sold 217,792 129,122
Interest on time deposits with other financial
institutions 3,125 3,369
------------- --------------
Total Interest Income 3,592,246 3,118,627
Interest Expense: ------------- --------------
Interest on interest-bearing transaction accounts 590,942 419,269
Interest on savings deposits 104,051 31,787
Interest on time deposits 338,675 297,249
Interest on short-term borrowing 0 0
Interest on notes payable and redeemable debentures 0 6,288
------------- --------------
Total Interest Expense 1,033,668 754,593
------------- --------------
Net interest income 2,558,578 2,364,034
Provision for possible loan losses 80,000 225,000
------------- --------------
Net interest income after provision for
possible loan losses 2,478,578 2,139,034
Noninterest income: ------------- --------------
Service charges on deposit accounts 131,609 150,822
Net gain (loss) on sales of securities 0 0
Net gain on disposal of assets 0 21,081
Net gain on sale of loans held for sale 234,937 342,867
Other mortgage banking revenue 102,467 72,185
ATM network revenue 687,563 258,167
Other 57,517 21,383
------------- --------------
Total noninterest income 1,214,093 866,505
Noninterest expense: ------------- --------------
Salaries and related benefits 1,277,599 1,142,663
Occupancy 187,972 176,564
Equipment 284,956 140,345
Professional fees 108,705 137,102
Stationery and supplies 75,445 55,205
Other 834,855 578,610
------------- --------------
Total noninterest expense 2,769,532 2,230,489
------------- --------------
Income before provision for income taxes 923,139 775,050
Provision for income taxes 380,000 323,000
------------- --------------
Net Income $543,139 $452,050
Earnings per share: ============= ==============
Average common and common equivalent shares outstanding 890,000 865,000
============= ==============
Net income per share $0.61 $0.52
============= ==============
</TABLE>
<TABLE>
<CAPTION>
Part 1 Item 1
BAY AREA BANCSHARES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Six Months
Ended Ended
6/30/95 6/30/94
Cash flows from operating activities: ------------- --------------
<S> <C> <C>
Net Income $543,139 $452,050
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of premises and equipment 209,287 86,718
Provision for possible loan losses 80,000 225,000
Net gain on sale of assets 0 (21,081)
Funding of loans held for sale (15,453,386) (12,221,580)
Proceeds from the sale of loans held for sale 14,146,192 12,545,513
Net gain on sale of loans held for sale (234,937) (342,867)
Net loss on sale of investment securities 0 0
Net ammortization and accretion of investment
premiums and discounts 20,530 37,381
Net decrease (increase) in interest receivable and
other assets 94,536 (133,577)
Net increase in interest payable and other liabilities 127,327 111,012
Net decrease in deferred loan fees (54,203) (18,578)
------------- --------------
Total adjustments (1,064,654) 267,941
------------- --------------
Net cash provided by operating activities (521,515) 719,991
Cash flows from investing activities:
Net decrease in time deposits with other financial
institutions 94,938 99,000
Proceeds from sale of investment securities 0 0
Proceeds from the maturity of investment securities
held to maturity 1,000,000 195,000
Mortgage backed securities principal payments 114,379 607,705
Purchase of investment securities held to maturity (2,433,778) (1,907,853)
Purchase of investment securities held for sale 0 0
Net decrease in gross loans 2,933,148 4,595,226
Capital expenditures (119,239) (534,078)
------------- --------------
Net cash provided by investing activities 1,589,448 3,055,000
Cash flows from financing activities:
Net increase in demand deposits, transaction and savings 3,208,211 3,393,195
Net increase in time deposits 1,375,307 728,306
Principle payments on short term notes payable 0 (50,000)
Proceeds from stock warrants and options exercised 36,718 83,277
Cash dividends paid (61,638) (45,266)
------------- --------------
Net cash provided by financing activities 4,558,598 4,109,512
------------- --------------
Net increase in cash and cash equivalents 5,626,531 7,884,503
Cash and cash equivalents,beginning of period 14,761,265 11,980,321
------------- --------------
Cash and cash equivalents,end of period $20,387,796 $19,864,824
============= ==============
</TABLE>
There were no Loans transferred to Real Estate Owned in the second
quarter of 1995 or 1994.
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 June 30, 1995,
results of operations for the three month and six month periods ended June
30, 1995 and the statement of cash flows for the six month period ended
June 30, 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 $6.9 million to $31.7 million over
the six month period from December 31, 1994 to June 30, 1995. At year-end,
total liquid assets as a percentage of total assets was 31.2% whereas on
June 30, 1995 it had increased to 37.4%.
Cash & due from banks increased $2.2 million over the first six months of
1995 to $10.6 million at June 30, 1995. During the first six months of
1995 cash and due from banks averaged $8.8 million. The portion of the
total cash & due from banks representing ATM network cash inventory has
averaged approximately $2.3 million during 1995 and at June 30, 1995 ATM
cash was approximately $3.1 million. At December 31, 1994, there was
approximately $3.0 in ATM network cash inventory. The reduction in average
ATM cash is a result of more aggressive cash management and the closure of
unproductive sites.
The increase in total liquid investments was a result of a decline in total
net loans outstanding of $3.0 million (5.8%) to $49.0 million and an
increase in deposits of $4.6 million (6.4%) to $76.6 million during the
first six months of 1995. Deposits have averaged $72.4 million thus far
in 1995 and $74.6 million in the second quarter of 1995 while they averaged
$73.4 million during 1994. Gross loans outstanding have averaged $53.5
million thus far in 1995 as compared to $54.2 million averaged in 1994.
Management feels the decline in demand for loans is primarily a result of
intense pricing competition in the marketplace as well as the continuation
of a sluggish local real estate economy. 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 $559,000 in the first
six months of 1995 from $8.5 million or 10.46% of total gross assets at
December 31, 1994 to $9.0 million or 10.47% of total gross assets at June
30, 1995.
Bay Area Bank, the Company's wholly owned subsidiary (the Bank) capital
plus reserves totaled $9.0 million on June 30, 1995 or 10.42% 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 June 30, 1995 the
Bank maintained a tier one capital ratio of 10.42% and a tier two capital
ratio of 13.20%.
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 $150,000 in dividends to the Company in the first
quarter. The Company also declared a cash dividends to common
shareholders of $.07 per share in the first and second quarters. The
second quarter dividend represents sixteen consecutive cash dividends
declared by the Company to shareholders.
Item 2B Results of Operations
Results of Operations
Consolidated operating profits were $285,100 ($.32 per share vs. $.29 in
the prior year) for the second quarter of 1995, the highest second quarter
in the company's history. This represents a 14% increase over the second
quarter of 1994. The second quarter operating profits were comprised of
Bank earnings of $301,800 and a Company loss of $16,700.
Consolidated operating profits were $543,200 ($.61 per share vs. $.52 in
the prior year) for the first six months of 1995, a 20.2% increase over the
same period in 1994 and the highest mid year results in the Company's
history. The first half operating profits were comprised of Bank earnings
of $577,600 and a Company loss of $34,400.
The increase in second quarter earnings in 1995 versus the second quarter
of 1994 is primarily a result of an increase in net interest income of
$69,100, a reduction in loan loss provisions of $70,000 and an increase in
non interest income of $168,300, offset by an increase of $250,300 in non
interest expense.
The increase in earnings for the first six months of 1995 versus the first
six months of 1994 is primarily a result of an increase in net interest
income of $194,500, a reduction in loan loss provisions of $145,000 and an
increase in non interest income of $347,600, offset by an increase of
$539,000 in non interest expense.
The growth in net interest income throughout 1995 is primarily a result of
rising interest rates throughout the first quarter when 64% ($125,400) of
the net interest income growth occurred. This $194,500 increase during the
first six months of 1995 was comprised of a $473,600 increase in interest
income offset in part by a $279,100 increase in interest expense over the
same period in 1994. The year to date net interest income to total
average assets has been 6.46% in the first six months of 1995 as compared
to 5.91% in the first six months of 1994.
The decline in loan loss provisions in the first half of 1995 as compared
to 1994 is primarily a result of lack of loan growth and improved
delinquency and performance ratios in the loan portfolio. Loan loss
reserves of $1.54 million at June 30, 1995 represent a ratio of 2.93% of
gross loans outstanding. Total nonearning assets, comprised solely of
nonaccrual loans, at June 30, 1995 were $225,000 or 14.6% of loan loss
reserves, and .27% of total assets. Total nonearning assets at December
31, 1994 were $200,000 or 13.3% of loan loss reserves and .25% of total
assets.
The $539,000 increase in non interest expense in 1995 can primarily be
attributed to the Bank's Electronic Funds Transfer (EFT) department which
operates approximately 45 ATM's throughout the state. EFT department
expenses were $693,600 in the first six months of 1995 as compared to
$284,200 in the first six months of 1994. EFT department revenues grew
from $258,200 in the six months of 1994 to $692,300 in the first six
months of 1995. The department has experienced a loss of $1,300 thus far
in 1995 as compared to $26,000 in the first six months of 1994. Revenues
have been growing consistently and management expects the department to
contribute to Bank profitability as early as the third quarter of 1995.
The Bank's mortgage department revenues for the first six months of 1995
total $437,700 (which includes $100,300 in interest income) as compared to
$467,900 (including $52,900 in interest income) in the first six months of
1994. Mortgage department expenses have been $405,000
during the first six months of 1995 as compared to $398,500 during the
first six months of 1994.
Part II Item 4
(a) The 1995 Annual Meeting of the Shareholders of the Registrant was held
on May 16, 1995.
(b) The following table shows the votes for, against or withheld, and the
broker nonvotes as to each candidate for director. Each candidate was
elected.
<TABLE>
<CAPTION>
Name Votes For Votes Against
or Withheld Broker Nonvotes
<S> <C> <C> <C>
Mario A. Biagi 615,862 269 0
Gary S. Gross 615,862 269 0
Robert R. Haight 615,862 269 0
David J. Macdonald 610,804 5,327 0
Thorwald A. Madsen 611,362 4,769 0
Alan B. Miller 615,862 269 0
</TABLE>
The shareholders also voted in favor of ratifying Ernst & Young as the
Registrant's auditors, with 611,280 shares in favor, 356 shares against,
4,495 shares abstaining, and no broker nonvotes.
Part II - Item 6
(a)
Exhibit
Number Exhibit
3.1 Restated Articles of Incorporation of
Company4*
3.2 Amendment to Restated Articles of
Incorporation5*
3.3 Bylaws of Company, as amended2*
3.4 Amendment to Bylaws of Company2*
4.1 Certificate of Determination of Preferred Stock3*
10.1 # 1983 Non-Qualified Stock Option Plan of the Company1*
10.2 # Non-Qualified Stock Option Agreement
Pursuant to the 1983 Non-Qualified Stock
Option Plan of the Company1*
10.3 Lease Entered Into By and Between
Alan B. Miller and Bay Area Bank*
10.4 # Employment Agreement Between John O. Brooks,
Bay Area Bancshares and Bay Area Bank dated
as of September 2, 1992*
10.5 # Amendment to 1983 Non-Qualified Stock
Option Plan of Company5*
10.6 Lease Entered Into By and Between
Eureka Bank and Bay Area Bank dated
dated December 18, 19906*
10.7 Promissory Note with Liberty Bank dated
November 18, 19928*
10.8 # 1993 Stock Option Plan9*
10.9 # Forms of Stock Option Agreements9*
10.10 Lease entered into by and between Nine C Corporation
and Bay Area Bank dated March 18, 19939*
10.11 #Director Emeritus Agreement*
27 Financial Data Schedule
(b) Not Applicable
*Previously filed.
1 Filed as Exhibits 10.8 and 10.9, respectively, to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1985.
2 Filed as Exhibits 3.2, and 3.3, respectively, to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987.
3 Filed as Exhibits 4.1, to the Company's Current Report on Form 8-K
filed September 15, 1988.
4 Filed as Exhibits 3.1, to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988.
5 Filed as Exhibits 3.2 and 10.11, respectively, to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989.
6 Filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990.
7 Filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991.
8 Filed as Exhibits 10.4 and 10.7, respectively, to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.
9 Filed as Exhibits 10.8, 10.9 and 10.10 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.
# Management contracts and compensation plans are identified with a number
sign ("#").
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: August 8, 1995
/s/ Robert R. Haight
President and Chief Executive Officer
/s/ Anthony J. Gould
Chief Accounting Officer
<TABLE> <S> <C>
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 10,617,796
<INT-BEARING-DEPOSITS> 102,647
<FED-FUNDS-SOLD> 9,770,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,498,751
<INVESTMENTS-CARRYING> 9,731,338
<INVESTMENTS-MARKET> 9,779,000
<LOANS> 52,408,426
<ALLOWANCE> (1,537,508)
<TOTAL-ASSETS> 84,774,751
<DEPOSITS> 76,597,107
<SHORT-TERM> 0
<LIABILITIES-OTHER> 679,976
<LONG-TERM> 0
<COMMON> 3,998,809
0
50,000
<OTHER-SE> 3,448,859
<TOTAL-LIABILITIES-AND-EQUITY> 84,774,751
<INTEREST-LOAN> 3,078,465
<INTEREST-INVEST> 292,864
<INTEREST-OTHER> 220,917
<INTEREST-TOTAL> 3,592,246
<INTEREST-DEPOSIT> 1,033,668
<INTEREST-EXPENSE> 1,033,668
<INTEREST-INCOME-NET> 2,558,578
<LOAN-LOSSES> 80,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,769,532
<INCOME-PRETAX> 923,139
<INCOME-PRE-EXTRAORDINARY> 543,139
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 543,149
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<YIELD-ACTUAL> 7.49
<LOANS-NON> 225,110
<LOANS-PAST> 264,531
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,505,355
<CHARGE-OFFS> 56,779
<RECOVERIES> 8,933
<ALLOWANCE-CLOSE> 1,537,508
<ALLOWANCE-DOMESTIC> 1,537,508
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
