<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ to _____
Commission file number 0-10794
STERLING WEST BANCORP
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3712404
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3287 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90010
(Address of principal executive offices) (Zip Code)
(213) 384-4444
--------------
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has field 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
--- ---
Number of shares outstanding of the registrant's sole class of common stock at
July 31, 1997: 1,710,214
1
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STERLING WEST BANCORP
JUNE 30, 1997 QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Sterling West Bancorp and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 23,543,000 $ 24,322,000
Securities held to maturity 11,840,000 7,224,000
(fair value of $11,812,000 at June 30, 1997
and $7,204,000 at December 31, 1996)
Loans receivable, net 61,208,000 67,629,000
Real estate held for sale 3,717,000 2,749,000
Fixed assets
Land and building 246,000 243,000
Furniture and equipment 3,188,000 3,088,000
Leasehold improvements 1,408,000 1,408,000
------------- -------------
4,842,000 4,739,000
Less: accumulated depreciation (3,706,000) (3,583,000)
------------- -------------
1,136,000 1,156,000
Accrued interest receivable 603,000 589,000
Other assets 725,000 892,000
------------- -------------
$ 102,772,000 $ 104,561,000
============= =============
LIABILITIES
Deposits
Demand $ 26,474,000 $ 32,541,000
Savings and NOW 53,925,000 50,786,000
Money market 5,630,000 5,778,000
Time deposits $100,000 or greater 5,489,000 3,720,000
Other time deposits 2,859,000 3,361,000
------------- -------------
94,377,000 96,186,000
Notes payable 900,000 --
Other liabilities 874,000 1,114,000
------------- -------------
96,151,000 97,300,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock - authorized 5,000,000
shares without par value; issued and
outstanding 1,710,214 shares in 1997 8,686,000 8,686,000
and 1996
Accumulated deficit, restricted (2,065,000) (1,425,000)
------------- -------------
6,621,000 7,261,000
------------- -------------
Total liabilities & stockholders equity $ 102,772,000 $ 104,561,000
============= =============
</TABLE>
3
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Sterling West Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Loans $ 1,708,000 $ 1,925,000 $ 3,428,000 $ 3,889,000
Federal funds sold 189,000 203,000 354,000 378,000
Securities held to maturity 183,000 121,000 342,000 236,000
----------- ----------- ----------- -----------
2,080,000 2,249,000 4,124,000 4,503,000
Interest expense
Savings and NOW 512,000 512,000 985,000 1,051,000
Money market 24,000 30,000 57,000 40,000
Time deposits $100,000 or greater 29,000 24,000 54,000 40,000
Other time deposits 72,000 75,000 145,000 141,000
Notes payable 2,000 10,000 3,000 36,000
----------- ----------- ----------- -----------
639,000 651,000 1,244,000 1,308,000
----------- ----------- ----------- -----------
Net interest income 1,441,000 1,598,000 2,880,000 3,195,000
Provision for loan losses 650,000 120,000 1,039,000 181,000
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 791,000 1,478,000 1,841,000 3,014,000
Non-interest income
Service charges on deposit accounts 166,000 200,000 340,000 295,000
Gain on sale of SBA loans -- 11,000 229,000 11,000
Other 21,000 448,000 50,000 549,000
----------- ----------- ----------- -----------
187,000 659,000 619,000 855,000
Non-interest expenses
Salaries employee benefits 711,000 740,000 1,425,000 1,525,000
Occupancy 208,000 206,000 411,000 427,000
Furniture and equipment 48,000 75,000 101,000 132,000
Real estate operations, net 191,000 135,000 186,000 269,000
Other 519,000 562,000 975,000 1,031,000
----------- ----------- ----------- -----------
1,677,000 1,718,000 3,098,000 3,384,000
----------- ----------- ----------- -----------
Income before income taxes (699,000) 419,000 (638,000) 485,000
Income tax provision -- 180,000 2,000 210,000
----------- ----------- ----------- -----------
Net income (699,000) 239,000 (640,000) 275,000
=========== =========== =========== ===========
Net income per share $ (0.41) $ 0.14 $ (0.37) $ 0.16
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Sterling West Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ (640,000) $ 275,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 124,000 115,000
Provision for loan losses 1,039,000 181,000
Provision for real estate held for sale 215,000 315,000
(Increase) decrease in accrued interest receivable (14,000) 64,000
Decrease in other assets 167,000 85,000
Increase (decrease) in other liabilities (240,000) 33,000
------------ ------------
Total adjustments: 1,291,000 793,000
------------ ------------
Net cash provided by operating activities 651,000 1,068,000
Cash flows from investing activities
Proceeds from maturities of securities 897,000 448,000
Purchase of securities (5,514,000) (881,000)
Net (increase) decrease in loans receivable 2,987,000 (90,000)
Proceeds from sale of real estate 1,213,000 1,773,000
Purchase of fixed assets (104,000) (132,000)
------------ ------------
Net cash provided by investment(used in)
investing activities (521,000) 1,118,000
Cash flows from financing activities
Net decrease in demand deposits, savings
and other money market accounts (3,076,000) (18,709,000)
Net increase in time deposits 1,267,000 2,837,000
Net (increase) decrease in notes payable 900,000 (1,006,000)
------------ ------------
Net cash used in financing activities (909,000) (16,878,000)
------------ ------------
Net decrease in cash and cash equivalents (779,000) (14,692,000)
Cash and cash equivalents at beginning of period 24,322,000 35,835,000
------------ ------------
Cash and cash equivalents at end of period $ 23,543,000 $ 21,143,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOTE 1. PRESENTATION OF FINANCIAL INFORMATION
The accompanying unaudited consolidated interim financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and are in compliance with the instructions
for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial
statements. The accompanying unaudited consolidated interim financial statements
should be read in conjunction with the financial statements and the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations filed with the Annual Report on Form 10-K for the year ended December
31, 1996 of Sterling West Bancorp (the "Company"). In the opinion of Management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. The Results of Operations
for the six months ended June 30, 1997, are not necessarily indicative of
results that may be expected for the entire year ending December 31, 1997.
Certain prior period amounts have been reclassified to conform to the current
period presentation.
NOTE 2. COMMITMENTS TO EXTEND CREDIT
In the ordinary course of business the Company enters into commitments to extend
credit to its customers. These commitments are not reflected in the accompanying
consolidated financial statements and Management does not expect any loss to
result from such commitments. As of June 30, 1997 and December 31, 1996 the
Company had entered into the following commitments:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------
<S> <C> <C>
Letters of Credit $ 41,000 $ 255,000
Undisbursed Loan Commitments $10,150,000 $ 8,188,000
</TABLE>
NOTE 3. EARNINGS PER SHARE
Earnings per share amounts have been computed using the weighted average number
of common shares and dilutive common equivalent shares outstanding. The number
of such primary shares are 1,710,214 for the periods ended June 30, 1997 and
December 31, 1996.
NOTE 4. CASH AND CASH EQUIVALENTS
The cash and cash equivalents at June 30, 1997 and December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------
<S> <C> <C>
Cash & non-interest bearing deposits $ 7,413,000 $ 5,929,000
Federal funds sold $16,130,000 $18,393,000
</TABLE>
6
<PAGE> 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is intended to provide a better understanding of the material changes
in trends relating to the financial condition, results of operations, and
liquidity of the Company. The discussion and analysis for the second quarter and
six months ended June 30, 1997 and June 30, 1996, primarily reflect the
operations of Sterling Bank ("the Bank"). Sterling Business Credit, Inc.
("Business Credit") made no material contribution to the financial results for
the quarters ended June 30, 1997 and 1996, respectively. The Bank and Business
Credit are wholly-owned subsidiaries of the Company. Unless otherwise specified,
the discussion below relates to the Company's consolidated financial condition
and operations.
Discussions of certain matters contained in this Quarterly Report on Form 10-Q
may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act") and as such, may
involve risks and uncertainties. These forward-looking statements relate to,
among other things, expectations of the business environment in which the
Company operates, projections of future performance, perceived opportunities in
the market and statements regarding the Company's mission and vision. The
Company's actual results, performance or achievements may differ significantly
from the results, performance, or achievements expressed or implied in such
forward-looking statements. For discussion of the factors that might cause such
a difference, see "Item 1. Business -- Factors That May Affect Future Results"
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
Financial Condition
At June 30, 1997, assets of the Company were $102,772,000, a decrease of $1.8
million or 1.7% from $104,561,000 at December 31, 1996. The change in assets was
primarily attributable to decreases in cash and cash equivalents and loans
receivable, offset to a lesser extent by increases in securities held to
maturity and real estate held for sale.
Cash and cash equivalents decreased to $23.5 million at June 30, 1997 from $24.3
million at December 31, 1996. Securities held to maturity increased to $11.8
million at June 30, 1997 from $7.2 million at December 31, 1996. This shift is
primarily related to the decision by the asset-liability committee of the Bank
to employ excess liquidity to securities held to maturity. See Liquidity and
Capital Resources discussions below.
Loans receivable, net, decreased 9.5% to $61.2 million at June 30, 1997 from
$67.6 million at December 31, 1996. The decrease was primarily due to a $3.2
million reduction in real estate construction loans outstanding, as compared to
the year ended December 31, 1996.
7
<PAGE> 8
Financial Condition (continued)
The following table summarizes the nonperforming assets of the Company at the
dates indicated:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, December 31, June 30,
1997 1996 1996
------ ------ ------
<S> <C> <C> <C>
Nonaccrual loans $1,456 $1,964 $2,217
Real estate held for sale $3,717 $2,749 $1,337
------ ------ ------
Total nonperforming assets $5,173 $4,713 $3,554
====== ====== ======
Nonperforming assets as a % of total assets 5.03% 4.51% 3.36%
Nonaccrual loans as a % of total loans receivable 2.32% 2.85% 3.02%
</TABLE>
Total nonperforming assets at June 30, 1997 increased by 9.76% from December 31,
1996, and 45.56% from June 30, 1996, and represented 5.03%, 4.51% and 3.36% of
total assets, at such dates.
Nonaccrual loans decreased to $1.5 million at June 30, 1997 from $2.0 million
and $2.2 million at December 31, 1996 and June 30, 1996, respectively. The
decline in nonaccrual loans for the periods presented is a result of the
migration of such loans to real estate held for sale.
Of the $3.7 million of real estate held for sale, approximately $2.0 million
represents three properties. One such property totaling approximately $1.2
million closed escrow in July 1997, and the remaining two, totaling
approximating $0.8 million are expected to close escrow during the third quarter
of 1997. A program is underway toward reducing the remaining nonperforming
assets to minimum levels. Real estate held for sale at June 30, 1997, is stated
at the estimated fair value less estimated selling costs. Further foreclosures
may occur and no assurance can be given that additional losses will not occur in
excess of existing allowances.
Liquidity
The Company's most liquid assets are cash and cash equivalents and its
investment portfolio. The levels of these assets are dependent on the Company's
operating, financing and investing activities during any given period. The
liquidity needs of the Company primarily relate to the Bank.
The Bank's primary sources of funds are deposits and principal and interest
payments on its loan and securities portfolios. While maturities and scheduled
amortization of loans and securities are, in general, a predictable source of
funds, deposit flows and loan prepayments are greatly influenced by general
interest rates, economic conditions and competition.
The Bank had available $16.1 million of federal funds sold and a $11.8 million
investment portfolio at June 30, 1997, all of which could be used as immediate
sources of funds. In addition, the Bank has access to a $3.5 million federal
funds purchase line of credit from Community Bank, subject to cancellation,
which the Bank can use to meet short term needs. The Bank also has access to
funds through the Federal Reserve Bank discount window. The Bank maintained at
June 30, 1997, approximately 34% of its total assets in liquid assets.
8
<PAGE> 9
Liquidity (continued)
Total deposits decreased by $1.8 million, or 1.9%, comprising a $6.1 million
decrease in demand deposits, which was offset by a $3.1 million increase in
savings and Now accounts and a $1.8 million increase in time deposits $100,000
or greater, at June 30, 1997 as compared to December 31, 1996. The decrease in
demand deposits was primarily related to an outflow of demand deposits to
federal and local taxing authorities from the Bank's customers during the first
quarter of 1997 as compared to the fourth quarter of 1996, and the second
quarter of 1997. Average demand deposits for the first six months of 1997 were
$25.7 million as compared to $27.1 million for the fourth quarter of 1996. The
additional changes in deposit accounts are results of what management believes
to be normal fluctuations in these accounts.
Notes Payable
At June 30, 1997 the Company had outstanding $900,000 of promissory notes issued
to certain Directors of the Company. The proceeds of these notes were used by
the Company to reimburse the Bank for a deferred tax receivable from the
Company. It was determined during a recent Federal Deposit Insurance Corporation
and State Banking Department joint regulatory examination, that a net deferred
tax balance on the Bank's books is a functional receivable from the Company, and
should be repaid. This balance results from the filing of consolidated tax
returns of the Company, under an agreement, with its subsidiaries, which has
been in effect for many years. The balance represents prior operating losses at
Sterling Bank, and the offset of profits earned in Sterling Business Credit and
from the gain on the sale of Sterling Business Credit assets.
The notes bear interest at an initial rate of 10% per annum, but the interest
rate may fluctuate depending upon increases or decreases in the loan's interest
rate of 1.5% in excess of Bank of America's prime rate in effect from time to
time. These promissory notes have a maturity of September 18, 1997, with an
automatic 90 day renewal, subject to renewal at the option of the Company for a
maximum period of up to one year, unless a change is requested by the note
holder.
Capital Resources
Management seeks to maintain a level of capital adequate to support asset growth
and credit risks and to ensure that the Company is within established regulatory
guidelines and industry standards. The Company and the Bank are required to
achieve certain risk-based capital standards and leverage capital standards. The
risk-based capital standards establish capital requirements that are more
sensitive to risk differences between various assets, consider off balance sheet
activities in assessing capital adequacy, and minimize the disincentive to
holding liquid, low risk assets.
During the second quarter of 1997, the Company engaged the investment banking
firm of Hoefer & Arnett, Inc. to assist it in evaluating alternative strategies
for enhancing shareholder value.
9
<PAGE> 10
Capital Resources (continued)
The following table sets forth the regulatory capital ratios of the
Company and the Bank at June 30, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
Company Bank
Risk Weighted Amount Ratio Amount Ratio
------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Capital $6,621 9.24% $6,867 9.71%
Tier 1 Capital
minimum requirement $2,865 4.00% $2,829 4.00%
------ ----- ------ -----
Excess $3,756 5.24% $4,038 5.71%
Total capital $7,524 10.50% $7,758 10.97%
Total capital
minimum requirement $5,730 8.00% $5,659 8.00%
------ ----- ------ -----
Excess $1,794 2.50% $2,099 2.97%
Risk-weighted assets $71,624 $70,735
Average Total Assets
Tier 1 capital $6,621 6.51% $6,867 6.84%
Tier 1 capital
minimum
requirement $4,067 4.00%
----- -----
Memorandum
requirement $6,773 6.75%
------ -----
Excess $2,554 2.51% $94 0.09%
Average total assets $101,681 $100,339
</TABLE>
The leverage ratio consists of tangible Tier 1 capital divided by total average
assets. As of June 30, 1997, the Company and the Bank had leverage ratios of
6.51% and 6.84%, respectively.
During 1995, the Board of Directors of the Company and the Bank entered into
Memorandums of Understanding (collectively, the "Memorandums") with the Federal
Reserve Bank ("the FRB Memorandum"), the Federal Deposit Insurance Corporation
("FDIC Memorandum) and the State Banking Department ("SBD Memorandum"). Under
these Memorandums, the Company, among other things, may not directly or
indirectly, acquire or sell any interest in any entity, line of business,
problem loans or other assets, without the prior written approval of the Federal
Reserve Bank; and may not pay cash dividends without the prior written consent
of the Federal Reserve Bank. The Bank is also required, among other things, to
maintain Tier 1 capital equal to or above 6.75% of total assets; establish and
maintain an adequate allowance for loan losses; and not pay cash dividends
without the prior written consent of the FDIC and the California Superintendent
of Banks.
10
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Capital Resources (continued)
The Company and the Bank believe they are currently in full compliance, and
management believes that it can continue to comply with the terms of the FRB
Memorandum, the FDIC Memorandum and the SBD Memorandum, and otherwise meet
regulatory capital requirements, and that any actions taken to so comply in the
future will not have a material adverse effect on the Company's financial
condition or results of operations. However, failure to comply with any
Memorandum could result in regulatory action.
The Company expects that the ability of the Company to pay dividends in the
future will depend on continued profitability and the maintenance of acceptable
financial results.
Results of Operations
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest income earned on its loan
portfolio, investment securities and other earning assets, and its cost of
funds, consisting of interest paid on its deposits and borrowings. The Company's
operating results are also impacted by provisions for loan losses, and to a
lesser extent service charges on deposit accounts and other noninterest income.
In addition, the Company's operating expenses principally consist of salaries,
wages and employee benefits, occupancy expenses, real estate operations expense
and other general noninterest expenses. The Company's results of operations are
also significantly affected by general economic and competitive conditions,
particularly changes in interest rates and actions of regulatory authorities.
Net Income
During the second quarter of 1997, the Company had a net loss of $699,000 as
compared to net income of $239,000 for the second quarter of 1996. The Company's
second quarter loss was attributable to an additional allowance for loan loss
provision at the Bank of $650,000 and a real estate operations provision of
$190,000. The substantial increase in the provision was necessitated by
additional classified loans and loan charge-offs.
Net Interest Income
Net interest income is the difference between interest and fees received on
earning assets and interest paid on deposits and other sources of funds. The
Company's net interest income is affected by the change in the amount and mix of
interest-earning assets and interest-earning liabilities. It is also affected by
the change in the amount and mix of interest-earning assets and rates paid on
deposits and other borrowed funds.
Net interest income decreased 9.82% for the second quarter of 1997 as compared
to the second quarter of 1996 from $1.6 million to $1.4 million, respectively.
For the first six months ended June 30, 1997, net interest income decreased
9.86%, as compared to the same period in 1996, from $3.2 million to $2.9
million, respectively. The decreases were due primarily to a decline in interest
income received on loans outstanding due to lower loan volume, offset partially
by lower interest expense paid on interest bearing deposits in the 1997 periods
as compared to 1996.
11
<PAGE> 12
Allowance and Provision for Losses
The provision for loan losses is determined by management based upon the
Company's loan loss experience, the performance of loans in the Company's
portfolio, the quality of loans in the Company's portfolio, evaluation of
collateral for such loans, the economic conditions affecting collectibility of
loans, the prospects and financial condition of the respective borrowers or
guarantors and such other factors which in management's judgment deserve
recognition in the estimation of probable loan losses. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance or to take charge-offs (reductions in the
allowance) in anticipation of losses.
At June 30, 1997, the allowance for loan losses was $1.5 million or 2.36% of
total loans, as compared to $1.3 million or 1.83% of total loans at December 31,
1996 and $1.5 million or 2.07% of total loans at June 30, 1996. The allowance
for loan losses was 101% of nonaccrual loans at June 30, 1997 as compared to 64%
at December 31, 1996 and 68% at June 30, 1996. During the three months ending
June 30, 1997, the Company made additions to the allowance of $650,000 compared
to $120,000 of additions during the same period in 1996. For the first six
months of 1997 the Company made additions to the allowance of $1.0 million
compared to $181,000 for the same period in 1996. The increase in the allowance
during the second quarter of 1997 and the first six months, was the result of
additional classified loans and loan charge-offs.
Taking into account economic trends in the condition of the loan portfolio
management believes that the allowance for loan losses at June 30, 1997 is
adequate to absorb known and inherent risks in the loan portfolio. However, no
assurance can be given that the Company will not incur additional losses on
these loans or that additional provisions for loan losses will not be required.
In addition, the Company maintains an allowance for losses on loan repurchases
which amounted to $0.3 million at June 30, 1997, $0.4 million at December 31,
1996 and $0.4 million at June 30, 1996. This allowance is carried in Other
Liabilities on the balance sheet. In determining the amount of this allowance,
the Company considered the exposure of the Company to repurchases which takes
into account the Company's past experience with repurchases, the potential for
future repurchases and any losses thereon. Management believes that the
allowance for losses on loan repurchases at June 30, 1997 is adequate to absorb
future losses on loan repurchases. However, no assurance can be given that the
Company will not incur additional losses on such repurchases.
Noninterest Income
Noninterest income for the second quarter of 1997 was $187,000 compared to
$659,000 for the same period in 1996. For the first six months of 1997
noninterest income decreased to $619,000 from $855,000 in 1996. The decrease in
the 1997 period as compared to 1996 period results from income received from the
settlement of certain litigation in the second quarter of 1996.
12
<PAGE> 13
Noninterest Expenses
Noninterest expenses decreased 2.4% for the second quarter of 1997 to $1.67
million compared to $1.72 million for the same period in 1996. For the first six
months of 1997 noninterest expense decreased to $3.1 million from $3.4 million
for the same period in 1996. The reduction is primarily a result of the Company
and the Bank benefiting from lower cost expended on salaries, wages and employee
benefits and other noninterest expenses, during the second quarter and first six
months of 1997, as compared to the same periods in 1996.
Income taxes
Income tax expense for the second quarter of 1997 amounted to zero compared to
$180,000 for the second quarter in 1996. For the first six months of 1997 income
tax expense amounted to $2,000 as compared to $210,000 for the same period in
1996. The provision for income taxes reflects state minimum tax, which considers
the effect of the net operating loss carryforwards available for California
Franchise Tax , as well as Federal Income Tax purposes.
PART II: OTHER INFORMATION
ITEM 1-3. Not applicable.
ITEM 4. Submission of Matter to a Vote of Security Holders.
The following matters were submitted to a vote of the security holders of the
Registrant, by the solicitation of proxies for Registrant's Annual Meeting:
(A) Annual Meeting of Shareholders held on May 21, 1997.
(B) The following seven persons were elected as directors at the
Meeting and constitute all of the members of the Board of Directors:
Timothy Behunin
Howard M. Borris
Allan E. Dalshaug
Audrey J. Fimpler
Hassan Izad
Robert J. Schiller
Michael Wagner
13
<PAGE> 14
ITEM 5. Not applicable.
ITEM 6. Exhibits and Reports on 8-K.
(A) EXHIBITS:
EXHIBIT 27 -- Financial Data Schedule
(B) Report on Form 8-K: None.
SIGNATURES
Pursuant to the requirement 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.
STERLING WEST BANCORP
(Registrant)
DATED: August 14, 1997 By /s/ Joseph C. Carona
--------------------
Joseph C. Carona
Chief Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (STERLING
WEST BANCORP AND SUBSIDIARIES)CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,413
<INT-BEARING-DEPOSITS> 99
<FED-FUNDS-SOLD> 16,130
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 11,741
<INVESTMENTS-MARKET> 11,713
<LOANS> 62,684
<ALLOWANCE> 1,476
<TOTAL-ASSETS> 102,772
<DEPOSITS> 94,377
<SHORT-TERM> 900
<LIABILITIES-OTHER> 874
<LONG-TERM> 0
0
0
<COMMON> 8,686
<OTHER-SE> (2,065)
<TOTAL-LIABILITIES-AND-EQUITY> 102,772
<INTEREST-LOAN> 3,428
<INTEREST-INVEST> 696
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,124
<INTEREST-DEPOSIT> 1,241
<INTEREST-EXPENSE> 1,244
<INTEREST-INCOME-NET> 2,880
<LOAN-LOSSES> 1,039
<SECURITIES-GAINS> 619
<EXPENSE-OTHER> 3,098
<INCOME-PRETAX> (638)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (640)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
<YIELD-ACTUAL> 6.46
<LOANS-NON> 1,456
<LOANS-PAST> 13
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,260
<CHARGE-OFFS> 817
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,476
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
