<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____________________ to ______________________
Commission File No. 2-78293-LA
SOUTH VALLEY BANCORPORATION
(Exact name of registrant as specified in its charter)
California 94-2818095
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
500 Tennant Station, Morgan Hill, CA 95037
(Address of principal executive offices) (Zip code)
(408) 778-1510
(Registrant's telephone number,
including area code)
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 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
No par value Common Stock - 1,194,697 shares outstanding at
August 1, 1995
Page 1 of 26
Exhibit Index at Page 25
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTH VALLEY BANCORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994*
--------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks $ 8,703,000 $ 6,015,000
Federal funds sold 22,000,000 13,700,000
------------ ------------
Total cash and cash equivalents 30,703,000 19,715,000
Securities available-for-sale
($13,322,000 cost at June 30, 1995;
$10,544,000 cost at December 31, 1994) 13,360,000 10,460,000
Securities held-to-maturity
($15,884,000 market at June 30, 1995;
$15,876,000 market at December 31, 1994) 16,001,000 16,765,000
Loans, net 87,364,000 88,241,000
Premises and equipment, net 5,628,000 4,519,000
Other assets 5,092,000 4,170,000
------------ ------------
TOTAL ASSETS $158,148,000 $143,870,000
============ ============
LIABILITIES
Deposits:
Noninterest bearing $ 31,418,000 $ 30,869,000
Interest bearing 107,514,000 93,772,000
------------ ------------
Total deposits 138,932,000 124,641,000
Other liabilities 2,300,000 2,977,000
------------ ------------
TOTAL LIABILITIES 141,232,000 127,618,000
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Preferred stock - no par value;
authorized 2,000,000 shares, no shares issued --- ---
Common stock - no par value;
authorized 4,000,000 shares;
issued & outstanding 1,194,697 shares 11,331,000 11,331,000
Retained earnings 5,563,000 4,971,000
Unrealized gain on securities available-for-sale
22,000 (50,000)
------------ ------------
SHAREHOLDERS' EQUITY 16,916,000 16,252,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $158,148,000 $143,870,000
============ ============
</TABLE>
* Derived from December 31, 1994 audited balance sheets included in the
Company's 1994 Annual Report on Form 10-K.
See Notes to Consolidated Condensed Financial Statements
- 2 -
<PAGE> 3
SOUTH VALLEY BANCORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans (including fees) $2,535,000 $2,193,000 $4,957,000 $4,166,000
Investment securities 409,000 328,000 832,000 632,000
Other 216,000 140,000 382,000 214,000
---------- ---------- ---------- ----------
Total interest income $3,160,000 $2,661,000 $6,171,000 $5,012,000
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits $1,002,000 $ 686,000 $1,894,000 $1,271,000
Other 24,000 22,000 49,000 45,000
---------- ---------- ---------- ----------
Total interest expense $1,026,000 $ 708,000 $1,943,000 $1,316,000
---------- ---------- ---------- ----------
NET INTEREST INCOME $2,134,000 $1,953,000 4,228,000 $3,696,000
Provision for credit losses 90,000 75,000 150,000 165,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 2,044,000 1,878,000 4,078,000 3,531,000
Other income 435,000 176,000 628,000 350,000
Other expense 1,839,000 1,314,000 3,470,000 2,548,000
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 640,000 740,000 1,236,000 1,333,000
Provision for income taxes 235,000 285,000 453,000 501,000
---------- ---------- ---------- ----------
NET INCOME $ 405,000 $ 455,000 $ 783,000 $ 832,000
========== ========== ========== ==========
NET INCOME PER COMMON
AND EQUIVALENT SHARE $ 0.34 $ 0.38 $ 0.66 $ 0.70
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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<PAGE> 4
SOUTH VALLEY BANCORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
-------- --------
<S> <C> <C>
Increase (decrease) in cash and equivalents:
OPERATIONS
Net income $ 783,000 $ 832,000
Reconciliation to net cash provided by operations
Provision for credit losses 150,000 165,000
Depreciation and amortization 159,000 88,000
Origination of loans held for sale (1,205,000) (146,000)
Proceeds from sale of loans held for sale 924,000 145,000
Gain on sale of OREO --- (8,000)
(Increase)decrease in other assets (152,000) 134,000
(Decrease)increase in other liabilities (389,000) 139,000
Increase in deferred loan fees, net 12,000 69,000
----------- -----------
Net cash provided by operations 282,000 1,418,000
----------- -----------
INVESTMENT ACTIVITIES
Proceeds from sale of OREO --- 935,000
Proceeds from maturities of securities 5,138,000 2,321,000
Purchase of securities (7,152,000) (2,940,000)
Net increase in loans (225,000) (4,573,000)
Capital expenditures (869,000) (1,149,000)
----------- -----------
Net cash used for investment activities (3,108,000) (5,406,000)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposit accounts 14,292,000 7,012,000
Net increase(decrease) in other borrowings (287,000) 307,000
Payment of cash dividends (191,000) ---
----------- -----------
Net cash provided by financing activities 13,814,000 7,319,000
----------- -----------
Net increase in cash and equivalents 10,988,000 3,331,000
Cash and cash equivalents, beginning of period 19,715,000 16,243,000
----------- -----------
Cash and cash equivalents, end of period $30,703,000 $19,574,000
=========== ===========
OTHER CASH FLOW INFORMATION
Interest paid $ 1,920,000 $ 1,102,000
Income taxes paid 438,000 391,000
</TABLE>
See Notes to Consolidated Condensed Financial Statements
- 4 -
<PAGE> 5
SOUTH VALLEY BANCORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of Management, the unaudited consolidated condensed financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the Company's consolidated financial
position at June 30, 1995 and December 31, 1994, and the results of operations
and cash flows for the three and six month periods ended June 30, 1995 and 1994.
Certain information and footnote disclosures normally presented in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These interim consolidated condensed financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's 1994 Annual Report to Shareholders. The
results of operations for the three and six month periods ended June 30, 1995
may not necessarily be indicative of the operating results for the full year.
2. BRANCH ACQUISITION
On July 27, 1994 the Bank entered into an agreement to purchase certain assets
and assume certain liabilities of the San Juan Bautista branch office of Bank
of America, NT&SA as of the close of business on February 16, 1995. As a
result of the transaction the Bank assumed deposit liabilities of $8,514,000,
received cash of $7,560,000, and acquired tangible assets valued at
approximately $688,000. This transaction resulted in approximately $266,000 of
intangible assets, representing the excess of the liabilities assumed over the
fair value of the tangible assets acquired.
3. INVESTMENT SECURITIES
The Company is required under Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Investments in Certain Debt and Equity
Securities", to classify debt and equity securities into one of three
categories: held-to-maturity, trading or available-for-sale. Investment
securities classified as held-to-maturity are measured at amortized cost based
on the Company's positive intent and ability to hold such securities to
maturity. Trading securities are bought and held principally for the purpose of
selling them in the near term and are carried at market value with a
corresponding recognition of unrecognized holding gain or loss in the results
of operations. The remaining investment securities are classified as
available-for-sale and are measured at market value with a corresponding
recognition of the unrealized holding gain or loss (net of tax effect) as a
separate component of shareholders' equity until realized. Any gains and losses
on sales of investments are computed on a specific identification basis.
- 5 -
<PAGE> 6
The carrying value and approximate market value of securities at June 30, 1995
and December 31, 1994 are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Book Unrealized Unrealized Market
In thousands Value Gains Losses Value
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE:
June 30, 1995
U.S. Treasury and
agency securities $ 8,427 $ 28 $ 15 $ 8,440
State and municipal
obligations 707 1 1 707
Other 4,188 25 --- 4,213
--------------------------------------------------------------------------------------
Total $13,322 $ 54 $ 16 $13,360
======================================================================================
SECURITIES HELD-TO-MATURITY:
June 30, 1995
U.S. Treasury and
agency securities $10,275 $ 50 $183 $10,142
State and municipal
obligations 5,726 54 38 5,742
--------------------------------------------------------------------------------------
Total $16,001 $104 $221 $15,884
======================================================================================
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Book Unrealized Unrealized Market
In thousands Value Gains Losses Value
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE:
December 31, 1994
U.S. Treasury and
agency securities $ 7,962 $ 14 $ 87 $ 7,889
State and municipal
obligations 1,567 1 9 1,559
Other 1,015 --- 3 1,012
--------------------------------------------------------------------------------------
Total $10,544 $ 15 $ 99 $10,460
======================================================================================
SECURITIES HELD-TO-MATURITY:
December 31, 1994
U.S. Treasury and
agency securities $11,583 $--- $770 $10,813
State and municipal
obligations 5,182 19 138 5,063
--------------------------------------------------------------------------------------
Total $16,765 $ 19 $908 $15,876
======================================================================================
</TABLE>
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<PAGE> 7
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES
The activity in the allowance for credit losses is summarized as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
In thousands 1995 1994 1995 1994
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $1,347 $1,317 $1,331 $1,246
Provision charged to expense 90 75 150 165
Loans charged off ( 273) (113) (395) (138)
Recoveries 1 30 79 36
-----------------------------------------------------------------------------------------------------------
Ending balance $1,165 $1,309 $1,165 $1,309
===========================================================================================================
</TABLE>
The allowance for credit losses reflects management's judgment as to the level
which is considered adequate to absorb potential losses inherent in the loan
portfolio. This allowance is increased by provisions charged to expense and
reduced by loan charge-offs net of recoveries. Management determines an
appropriate provision based upon information currently available to analyze
credit loss potential, including (1) the loan portfolio balance in the period;
(2) a comprehensive grading and review of new and existing loans outstanding;
(3) actual previous charge-offs; and (4) changes in economic conditions.
On January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan" and No. 118, "Accounting by Creditors for Impairment
of a Loan -- Income Recognition and Disclosure." Under the new standards, the
1995 allowance for credit losses related to loans that are identified for
evaluation in accordance with Statements 114 and 118 is based on discounted
cash flows using the loan's initial effective interest rate or the fair value
of the collateral for certain collateral dependent loans. Prior to 1995, the
allowance for credit losses related to these loans was based on undiscounted
cash flows or the fair value of the collateral for collateral dependent loans.
The implementation of Statements 114 and 118 did not have a material effect on
the Company's financial position or operating results for the three and six
month periods ended June 30, 1995, respectively.
Management believes that the allowance for credit losses at June 30, 1995 is
adequate, based on information currently available. However, no prediction of
the ultimate level of loans charged-off in future years can be made with any
certainty.
Nonperforming assets are comprised of loans delinquent 90 days or more with
respect to interest or principal, loans for which the accrual of interest has
been discontinued, and other real estate which has been acquired through
foreclosure and is awaiting disposition.
Unless well secured and in the process of collection, loans are placed on
nonaccrual status when a loan becomes 90 days past due as to interest or
principal, when the payment of interest or principal in accordance with the
contractual terms of the loan becomes uncertain or when a portion of the
principal balance has been charged off. When a loan is placed on nonaccrual
status, the accrued and unpaid interest receivable is reversed and the loan is
accounted for on the cash or cost recovery method thereafter, until
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<PAGE> 8
qualifying for return to accrual status. Generally, a loan may be returned to
accrual status when all delinquent interest and principal become current in
accordance with the terms of the loan agreement and remaining principal is
considered collectible or when the loan is both well secured and in process of
collection.
Real estate and other assets acquired in satisfaction of indebtedness are
recorded at the lower of estimated fair market value net of anticipated selling
costs or the recorded loan amount, and any difference between this and the loan
amount is treated as a loan loss. Costs of maintaining other real estate owned
and gains or losses on the subsequent sale are reflected in current earnings.
Nonperforming loans and other real estate owned (foreclosed properties) are
summarized below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
June 30, December 31,
In thousands 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C>
Past due 90 days or more and still accruing:
Real estate $ 57 $ 543
Commercial 21 171
Installment and other 22 13
------------------------------------------------------------------------------------------
$ 100 $ 727
------------------------------------------------------------------------------------------
Nonaccrual:
Real estate $1,338 $1,073
Commercial 867 132
Installment and other --- 55
------------------------------------------------------------------------------------------
$2,205 $1,260
------------------------------------------------------------------------------------------
Total nonperforming loans $2,305 $1,987
==========================================================================================
Other real estate owned $2,823 $1,627
==========================================================================================
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
In the normal course of business there are outstanding various commitments to
extend credit which are not reflected in the financial statements, including
loan commitments of approximately $34,561,000 and standby letters of credit of
$643,000 at June 30, 1995. However, all such commitments will not necessarily
culminate in actual extensions of credit by the Bank during 1995.
Approximately $11,788,000 of loan commitments outstanding at June 30, 1995
relate to real estate construction loans and are expected to fund within the
next twelve months. The remainder relate primarily to revolving lines of
credit or other commercial loans, and many of these commitments are expected to
expire without being drawn upon. Therefore, the total commitments do not
necessarily represent future cash requirements. The Bank evaluates each
potential borrower and the necessary collateral on an individual basis.
Collateral varies, but may include real property, bank deposits, debt or equity
securities or business assets.
- 8 -
<PAGE> 9
Stand-by letters of credit are commitments written by the Bank to guarantee the
performance of a customer to a third party. These guarantees are issued
primarily relating to purchases of inventory by the Bank's commercial customers
and are typically short-term in nature. Credit risk is similar to that
involved in extending loan commitments to customers and the Bank accordingly
uses evaluation and collateral requirements similar to those for loan
commitments. Virtually all such commitments are collateralized.
6. NET INCOME PER SHARE COMPUTATION
Net income per common and equivalent share is calculated using weighted average
shares and the dilutive effect of stock options outstanding during the period
totaling 1,194,697 for the three and six month periods ended June 30, 1995.
7. CASH DIVIDEND
On April 20, 1995 the Board of Directors declared a cash dividend of $.08 per
common share payable May 5, 1995 to shareholders of record as of April 28,
1995. In addition, on July 18, 1995 the Board of Directors declared a cash
dividend of $.08 per common share payable August 23, 1995 to shareholders of
record as of August 9, 1995.
- 9 -
<PAGE> 10
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Summary of Financial Results
At June 30, 1995, total assets of South Valley Bancorporation were
$158,148,000, an increase of $14,278,000 or 9.9% over December 31, 1994 total
assets of $143,870,000. Average total assets for the quarter and six months
ended June 30, 1995 were $150,143,000 and $146,011,000, respectively.
In February 1995, the Bank entered into an agreement to purchase certain assets
and assume certain liabilities of the San Juan Bautista office of Bank of
America, NT & SA. This transaction resulted in an increase in total assets of
the Bank of approximately $8,514,000. This increase was partially offset by
deposit outflows at the Bank's existing offices resulting in a net increase in
total assets of $4,643,000. The increase in total assets at June 30, 1995
compared to December 31, 1994 was primarily invested in the Bank's securities
portfolio as well as in fixed assets acquired as part of the transaction.
Net loans at June 30, 1995 were $87,364,000 compared to $88,241,000 at December
31, 1994, a decrease of $877,000 or 1.0%. The decrease in loan balances
primarily represents decreases in construction and commercial loans. Real
estate construction loans of $15,099,000 at June 30, 1995 represented a
decrease of $1,714,000 or 10.2% from $16,813,000 at December 31, 1994.
Commercial loans decreased $3,097,000 or 9.2% to $30,522,000 at June 30, 1995
from $33,619,000 at December 31, 1994. Partially offsetting these decreases
were an increase in installment loans to $12,592,000 at June 30, 1995 from
$11,579,000 at December 31, 1994, an increase of $1,013,000 or 8.7% and an
increase of $2,768,000 or 9.9% in other real estate loans to $30,825,000 at
June 30, 1995 compared to $28,057,000 at December 31, 1994.
Investment securities were $29,361,000 at June 30, 1995 compared to $27,225,000
at December 31, 1994 representing an increase of $2,136,000. Of the $29,361,000
outstanding at June 30, 1995 $13,360,000 was designated as available-for-sale
and carried at market value. The amortized cost of securities designated as
available-for-sale at June 30, 1995 was $13,322,000.
Securities designated as held-to-maturity at June 30, 1995 were carried at an
amortized cost of $16,001,000. The estimated market value of the
held-to-maturity portfolio at quarter end June 30, 1995 was $15,884,000. The
held-to-maturity portfolio at June 30, 1995 consists primarily of securities
issued by U.S. government-sponsored agencies (FNMA, FHLMC and FHLB) and
investment grade municipal bonds with maturities within five years. Investment
securities classified as held-to-maturity are measured at amortized cost based
on the Company's intent and ability to hold such securities to maturity.
During the first six months of 1995, the Bank made $7,152,000 of securities
purchases to replace $5,138,000 of maturities and to more fully employ excess
liquidity.
- 10 -
<PAGE> 11
Federal funds sold balances of $22,000,000 at June 30, 1995 represent an
increase of $8,300,000 over $13,700,000 at December 31, 1994.
Total deposits of $138,932,000 at June 30, 1995 represent an increase of
$14,291,000 or 11.5% from balances of $124,641,000 at December 31, 1994. The
increase in total deposits was comprised of increases in all deposit
categories. Noninterest bearing demand balances of $31,418,000 at June 30, 1995
represent an increase of $549,000 or 1.8% over $30,869,000 at December 31,
1994. Interest bearing demand deposits were $35,024,000 at June 30, 1995
compared to $31,823,000 at December 31, 1994, an increase of $3,201,000 or
10.1%. Savings balances of $34,574,000 represent an increase of $2,730,000 or
8.6% over $31,844,000 at December 31, 1994. Additionally, time deposits
increased $7,812,000 or 25.9% to $37,915,000 at June 30, 1995 from $30,105,000
at December 31, 1994.
Core deposits (time deposits less than $100,000, demand and savings) gathered
in the local communities served by the Bank continue to be the Bank's primary
source of funds for loans and investments. Core deposits of $123,022,000
represented 88.5% of total deposits at June 30, 1995 compared to $113,478,000
and 91.0% of total deposits at December 31, 1994. The Company has never
purchased funds through deposit brokers.
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<PAGE> 12
SECOND QUARTER 1995 AND 1994
Net income for the second quarter of 1995 was $405,000 or $.34 per share
compared to $455,000 or $.38 per share for the comparable period in 1994. The
following discussion highlights changes in certain items in the consolidated
condensed statements of income.
Net interest income
Net interest income, the difference between interest earned on loans and
investments and interest paid on deposits, is the principal component of the
Bank's earnings. The components of net interest income are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Three months ended June 30,
In thousands (except percentages) 1995 1994
-------------------------------------------------------------------------------------------------------------------
Avg Avg Avg Avg
Balance Interest Yield(1) Balance Interest Yield(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans(2) $ 87,400 $2,535 11.6% $ 87,452 $2,193 10.1%
Investment securities:
Taxable 21,465 324 6.0% 15,409 240 6.1%
Nontaxable(3) 6,907 129 7.5% 7,503 134 7.1%
Federal funds sold 14,546 216 5.9% 14,562 140 3.8%
-------- ------ -------- ------
Total interest earning assets 130,318 3,204 9.8% 124,926 2,707 8.7%
Cash and due from banks 8,050 9,552
Other assets net of deferred
loan fees and allowance
for loan losses(4) 11,775 4,166
-------- --------
$150,143 $135,029
======== ========
LIABILITIES & SHAREHOLDERS'
EQUITY:
Interest bearing liabilities:
Demand deposits $ 35,496 256 2.9% $ 29,636 171 2.3%
Time deposits 68,961 746 4.3% 64,354 515 3.2%
Other borrowings 1,391 24 6.9% 2,178 22 4.0%
-------- ------ -------- ------
Total interest bearing
liabilities 105,848 1,026 3.9% 96,168 708 2.9%
Demand deposits 26,588 23,338
Other liabilities 967 202
-------- --------
Total liabilities 133,403 119,708
Shareholders' equity 16,740 15,321
-------- --------
$150,143 $135,029
======== ========
Net interest income & margin $2,178 6.7% $1,999 6.4%
====== ====== ===
</TABLE>
---------------
(1) Annualized
(2) Loan interest income includes fee income of $224,000 and $251,000 for the
quarters ended June 30, 1995 and 1994, respectively. 3 Tax exempt interest
income has been adjusted to fully taxable equivalent basis using the Federal
statutory rate of 34% ($44,000 and $46,000 for the quarters ended June 30, 1995
and 1994, respectively).
(4) Includes the average allowance for loan losses of $1,277,000 and $1,334,000,
and average deferred loan fees of $504,000 and $602,000 for the quarters ended
June 30, 1995 and 1994, respectively.
- 12 -
<PAGE> 13
Net taxable equivalent interest income for the quarter ended June 30, 1995 was
$2,178,000 representing an improvement of $179,000 or 9.0% over $1,999,000 for
the comparable period in 1994. As a percentage of average earning assets, net
taxable equivalent interest margin for the second quarter of 1995 improved to
6.7% from 6.4% in the same period one year earlier. The increase in net
taxable equivalent interest margin is primarily due to an increase in taxable
equivalent interest income.
Taxable equivalent interest income recognized in the quarter ended June 30,
1995 was $3,204,000 representing an increase of $497,000 or 18.4% over
$2,707,000 for the second quarter of 1994. The increase in taxable equivalent
interest income was primarily due to increases in the volume of average earning
assets and rates earned on such assets. Earning assets averaged $130,318,000 in
the quarter ended June 30, 1995 compared to $124,926,000 in the same period in
1994, representing an increase of $5,392,000 or 4.3%. The increase in average
earning assets was centered in an increase in average investments of $5,460,000
or 23.8%. In addition, the average yield on interest earning assets increased
to 9.8% in the second quarter of 1995 compared to 8.7% for the second quarter
of 1994. Loan fees recognized during the second quarter of 1995 decreased to
$224,000 compared to $251,000 one year earlier as a result of decreased loan
demand.
Partially offsetting the increase in taxable equivalent interest income was an
increase in the cost of liabilities funding the growth in average earning
assets. Interest expense for the three months ended June 30, 1995 was
$1,026,000 and represented an increase of $318,000 or 44.9% over $708,000 for
the second quarter of 1994. During the three months ended June 30, 1995, the
average rate paid by the Bank on interest-bearing liabilities was 3.9%
compared to 3.0% for the same period in 1994. In addition to the increase in
rates, interest expense was impacted by an increase in the volume of average
interest bearing liabilities. Average interest bearing liabilities were
$105,848,000 in the quarter ended June 30, 1995 compared to $96,168,000 for the
same period in 1994, an increase of $9,680,000 or 10.1%. The increase in
average noninterest bearing demand deposits also contributed to the improvement
in net taxable equivalent interest during the quarter. Average noninterest
bearing demand deposits were $26,588,000 for the quarter ended June 30, 1995
compared to $23,338,000 for the same quarter in 1994.
Provision for credit losses
The provision for credit losses is based upon management's evaluation of the
adequacy of the existing allowance for loan losses in relation to total loans
and the inherent risk in the loan portfolio. Management's evaluation takes
into consideration such factors as changes in the composition of the portfolio,
overall portfolio quality, loan concentrations, specific problem loans, and
current and anticipated economic conditions that may affect borrowers' ability
to repay. The Bank's loans are virtually all made within its defined market
area of South Santa Clara and San Benito counties. Real estate construction
loans of $15,099,000 represented 17% of total loans for the quarter ended
June 30, 1995, the majority of which are for the construction of single family
residential properties. In addition, 35% of the Bank's loans were real estate
term loans. These loans were primarily made to Bank depositors secured by first
deeds of trust on commercial and residential properties and with original loan
to value ratios not exceeding 75%. Commercial loans comprise 35% of total
loans at June 30, 1995. The
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<PAGE> 14
Bank's loans are not concentrated in any particular industry.
The Bank's service area is somewhat dependent on the economy of the greater
Santa Clara Valley, generally known as Silicon Valley, which has a
concentration of technology companies, and accordingly, the ability of the
Bank's borrowers to repay loans may be affected by the performance of this
sector of the economy. At June 30, 1995, virtually all loans were
collateralized, and the majority have adjustable rates. Generally, real estate
loans were secured by real property, and commercial and other loans were
secured by bank deposits and business or personal assets. Repayment is
generally expected from the sale of the related property for real estate
construction loans, and from the cash flow of the borrower for commercial and
other loans.
In the second quarter of 1995, the Bank increased its provision for loan losses
through a charge to earnings of $90,000. The provision compares to $75,000 for
the same period in 1994. The increase in loan loss provision for the 1995
quarter is primarily attributed to the higher charge-off activity in the
quarter ended June 30, 1995 compared to the same quarter in 1994. Loan
balances of $273,000, which were previously identified and were fully reserved
for, were charged-off in the second quarter of 1995 compared to $113,000
charged-off in the second quarter of 1994. Recoveries of loan balances
previously charged-off were $1,000 for the quarter ended June 30, 1995 compared
to $30,000 for the same period in 1994. See Note 4 of the consolidated
condensed financial statements at page 7 of this document for further
discussion of nonperforming loans and the allowance for credit losses.
At June 30, 1995 the allowance for credit losses was $1,165,000 or 1.31% of
total loans, compared to $1,331,000 or 1.45% at December 31, 1994.
Management believes that the allowance for loan losses is maintained at an
adequate level for known and anticipated future risks inherent in the loan
portfolio. However, the Company's loan portfolio, particularly the real estate
related segments, may be adversely affected if California's economic conditions
and the Santa Clara County real estate market continue to weaken. As a result,
the level of nonperforming loans, the provision for loan losses and the level
of the allowance for loan losses may increase.
Other income and expense
Other income consists primarily of service charges on deposit accounts and fees
for miscellaneous services. Total other income was $435,000 for the second
quarter of 1995 compared to $176,000 for the second quarter of 1994. Other
income in the second quarter of 1995 included certain non-recurring operational
adjustments of approximately $130,000 resulting from the conversion of the
Bank's computer systems. Excluding these adjustments, growth in other income
primarily resulted from increases in deposit-related service charges of $40,000
reflecting an increase in the number of deposit accounts served by the Bank,
and premiums of $70,000 on the sale of SBA guaranteed loans.
Noninterest expense increased $525,000 or 40.0% to $1,839,000 in the quarter
ended June 30, 1995 from $1,314,000 in the same period one year earlier. As a
percentage of average earning assets, other expenses, on an annualized basis,
increased to 5.6% in the second quarter of 1995 from 4.2% in the second quarter
of 1994. Increases in noninterest expense are attributed primarily to increases
in salary and benefit expense and data processing expense.
- 14 -
<PAGE> 15
Salary and benefits expense was $898,000 in the quarter ended June 30, 1995
compared to $633,000 in the same period one year earlier. The increase in
salary and benefits expense is primarily due to increased headcount as a result
of the addition of the San Juan Bautista office and expanded business hours in
previously existing Bank offices. In addition, salaries and benefits expense
for the second quarter of 1995 includes a one-time severance charge of $60,000
resulting from the departure of an employee in the San Juan Bautista office.
Data processing expense of $111,000 in the second quarter of 1995 represents a
net increase over 1994 as a result of the decision by the Bank to outsource the
function during the fourth quarter of 1994.
The Bank also experienced increases in advertising, depreciation, postage and
ATM network charges during the period ended June 30, 1995 compared to the same
period in 1994.
- 15 -
<PAGE> 16
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net income for the six months ended June 30, 1995 was $783,000 or $.66 per
share compared to $832,000 or $.70 per share for the comparable period in 1994.
The following discussion highlights changes in certain items in the
consolidated condensed statements of income.
Net interest income
Net interest income, the difference between interest earned on loans and
investments and interest paid on deposits, is the principal component of the
Bank's earnings. The components of net interest income are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended June 30,
In thousands (except percentages) 1995 1994
---------------------------------------------------------------------------------------------------------------------
Avg Avg Avg Avg
Balance Interest Yield(1) Balance Interest Yield(1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans(2) $ 86,480 $4,957 11.5% $ 86,137 $4,166 9.7%
Investment securities:
Taxable 21,000 664 6.3% 15,235 450 5.9%
Nontaxable(3) 6,821 255 7.5% 7,339 276 7.5%
Federal funds sold 13,011 382 5.9% 11,693 214 3.7%
-------- ------ -------- ------
Total interest earning assets 127,312 6,258 9.8% 120,404 5,106 8.5%
Cash and due from banks 8,670 6,945
Other assets net of deferred
loan fees and allowance
for loan losses(4) 10,029 4,130
-------- --------
$146,011 $131,479
======== ========
LIABILITIES & SHAREHOLDERS'
EQUITY:
Interest bearing liabilities:
Demand deposits $ 34,140 479 2.8% $ 29,585 300 2.0%
Time deposits 66,583 1,415 4.3% 61,635 972 3.2%
Other borrowings 1,520 49 6.4% 2,306 44 3.8%
-------- ------ -------- ------
Total interest bearing
liabilities 102,243 1,943 3.8% 93,526 1,316 2.8%
Demand deposits 26,312 22,665
Other liabilities 879 197
-------- -------
Total liabilities 129,434 116,388
Shareholders' equity 16,577 15,091
-------- --------
$146,011 $131,479
======== ========
Net interest income & margin $4,315 6.8% $3,790 6.3%
====== ====== ===
</TABLE>
---------------
(1) Annualized
(2) Loan interest income includes fee income of $466,000 and $488,000 for the
periods ended June 30, 1995 and 1994, respectively.
(3) Tax exempt interest income has been adjusted to fully taxable equivalent
basis using the Federal statutory rate of 34% ($87,000 and $94,000 for the six
months ended June 30, 1995 and 1994, respectively).
(4) Includes the average allowance for loan losses of $1,324,000 and $1,300,000,
and average deferred loan fees of $490,000 and $579,000 for the six months
ended June 30, 1995 and 1994, respectively.
- 16 -
<PAGE> 17
Net taxable equivalent interest income for the quarter ended June 30, 1995 was
equivalent interest income for the six months ended June 30, 1995 was $4,315,000
representing an improvement of $525,000 or 13.9% over $3,790,000 for the
comparable period in 1994. As a percentage of average earning assets, net
taxable equivalent interest margin for the first six months of 1995 improved to
6.8% from 6.3% in the same period one year earlier. The increase in net taxable
equivalent interest margin is primarily due to an increase in taxable equivalent
interest income.
Taxable equivalent interest income recognized in the six months ended June 30,
1995 was $6,258,000 representing an increase of $1,152,000 or 22.6% over
$5,106,000 for the same period of 1994. The increase in taxable equivalent
interest income was primarily due to increases in the volume of average earning
assets and rates earned on such assets. Earning assets averaged $127,312,000 in
the six months ended June 30, 1995 compared to $120,404,000 in the same period
in 1994, representing an increase of $6,908,000 or 5.7%. The increase in
average earning assets included increases in average loan, investment and Fed
funds sold balances of $343,000, $5,247,000 and $1,318,000 or 0.4%, 23.2% and
11.3%, respectively. In addition, the average yield on interest earning assets
increased to 6.8% in the first six months of 1995 compared to 6.3% for the first
six months of 1994. Loan fees recognized during the first six months of 1995
decreased to $466,000 compared to $488,000 one year earlier as a result of
decreased loan demand.
Partially offsetting the increase in taxable equivalent interest income was an
increase in the cost of liabilities funding the growth in average earning
assets. Interest expense for the six months ended June 30, 1995 was $1,943,000
and represented an increase of $627,000 or 47.6% over $1,316,000 for the six
months ended June 30, 1994. During the six months ended June 30, 1995, the
average rate paid by the Bank on interest-bearing liabilities was 3.7% compared
to 2.8% for the same period in 1994. In addition to the increase in rates,
interest expense was impacted by an increase in the volume of average interest
bearing liabilities. Average interest bearing liabilities were $102,243,000 in
the six months ended June 30, 1995 compared to $93,526,000 for the same period
in 1994, an increase of $8,717,000 or 9.3%. The increase in average noninterest
bearing demand deposits also contributed to the improvement in net taxable
equivalent interest during the quarter. Average noninterest bearing demand
deposits were $26,312,000 for the first half of 1995 compared to $22,665,000 for
the same period in 1994.
Provision for credit losses
For the first half of 1995, the Bank increased its provision for loan losses
through a charge to earnings of $150,000. The provision compares to $165,000
for the same period in 1994. The decrease in loan loss provision for the period
is primarily attributed to the decrease in loan balances at June 30, 1995
compared to the same date in 1994. Loan balances of $395,000, which were
previously identified and were fully reserved for, were charged-off in the first
six months of 1995 compared to $138,000 charged-off in the same period of 1994.
Recoveries of loan balances previously charged-off were $79,000 for the period
ended June 30, 1995 compared to $36,000 for the same period in 1994. See Note 4
of the consolidated condensed financial statements at page 7 of this document
for further discussion of nonperforming loans and the allowance for credit
losses.
- 17 -
<PAGE> 18
Other income and expense
Other income consists primarily of service charges on deposit accounts and fees
for miscellaneous services. Total other income was $628,000 for the six months
ended June 30, 1995 as compared to $350,000 for the same period of 1994. Other
income included certain non-recurring operational adjustments of approximately
$130,000 resulting from conversion of the Bank's computer systems. Excluding
these adjustments, growth in other income primarily resulted from increases in
deposit-related service charges of $63,000 reflecting an increase in the number
of deposit accounts served by the Bank, and $70,000 of premiums earned on the
sale of SBA guaranteed loans.
Noninterest expense increased $922,000 or 36.2% to $3,470,000 in the period
ended June 30, 1995 from $2,548,000 in the same period one year earlier. As a
percentage of average earning assets, other expenses, on an annualized basis,
increased to 5.5% in the first half of 1995 from 4.2% in the first half of 1994.
Increases in noninterest expense are attributed primarily to increases in salary
and benefit expense and data processing expense.
Salary and benefits expense was $1,678,000 in the six months ended June 30, 1995
compared to $1,310,000 in the same period one year earlier. The increase in
salary and benefits expense is primarily due to increased headcount as a result
of the addition of the San Juan Bautista office and expanded business hours in
previously existing Bank offices.
Data processing expense of $224,000 for the first half of 1995 is a net increase
over 1994 as a result of the decision by the Bank to outsource the function
during the fourth quarter of 1994.
The Bank also experienced increases in advertising, depreciation, professional
fees, postage and ATM network charges during the six months ended June 30, 1995
when compared to the same period in 1994.
- 18 -
<PAGE> 19
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity
Liquidity management refers to the Bank's ability to provide funds on an ongoing
basis to meet fluctuations in deposit levels as well as the credit needs and
withdrawal requirements of its customers. Both assets and liabilities
contribute to the Bank's liquidity position. Assets such as cash and due from
banks, Federal funds sold and investment securities, as well as loan repayments,
contribute to liquidity. Of greater significance are the diverse sources
comprising the Bank's funding base. These include demand deposits, interest
bearing transaction accounts and time deposits.
Liquidity is measured by various ratios, the most common being the ratio of
cash, deposits with other banks, Federal funds sold and unpledged securities to
total deposits. At June 30, 1995 this ratio was 41.0% (35.3% at December 31,
1994). Another key liquidity ratio is gross loans to total deposits. This
ratio was 64.1% at June 30, 1995 and 70.8% at December 31, 1994.
Interest rate sensitivity
Interest rate sensitivity is a measure of the exposure to fluctuations in the
Bank's future earnings caused by fluctuations in interest rates. If assets and
liabilities do not reprice simultaneously and in equal amounts, the potential
for such exposure exists. It is management's objective to maintain stability in
net interest margin through the maintenance of an appropriate mix of interest
rate sensitive assets and liabilities. Management regularly reviews general
economic and financial conditions, both external and internal, and determines
whether the positions taken with respect to liquidity and interest rate
sensitivity continue to be appropriate. The Bank also utilizes a monthly "GAP"
report which identifies rate sensitivity over the short- and long-term.
The following table sets forth the distribution of repricing opportunities,
based on contractual terms, of the Bank's earning assets and interest-bearing
liabilities at June 30, 1995, the interest rate sensitivity gap (i.e. interest
rate sensitive assets less interest rate sensitive liabilities), the cumulative
interest rate sensitivity gap, the interest rate sensitivity gap ratio (i.e.
interest rate sensitive assets divided by interest rate sensitive liabilities)
and the cumulative interest rate sensitivity gap ratio.
- 19 -
<PAGE> 20
<TABLE>
<CAPTION>
In thousands (except ratios)
-------------------------------------------------------------------------------------------------------------------
Over Over three
Assets and Liabilities Immediately thirty days months and Over one
which Mature or and within and within within and within Over
Reprice thirty days three months one year five years five years Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Federal funds sold $22,000 $ -- $ -- $ -- $ -- $ 22,000
Investment securities 5,362 5,368 2,324 10,690 5,579 29,323
Loans, excluding
nonaccrual loans
and overdrafts 53,308 940 15,479 10,175 4,559 84,461
-------------------------------------------------------------------------------------------------------------------
Total $80,670 $ 6,308 $17,803 $20,865 $10,138 $135,784
===================================================================================================================
Interest bearing
liabilities:
Interest bearing demand $35,025 $ 35,025
Savings 34,574 34,574
Time certificates 5,856 $ 6,460 $19,227 $ 6,372 37,915
Other borrowings 1,065 59 390 $ 70 1,584
-------------------------------------------------------------------------------------------------------------------
Total $75,453 $ 7,525 $19,286 $ 6,762 $ 70 $109,098
===================================================================================================================
Interest rate
sensitivity gap $ 5,215 $(1,217) $(1,483) $14,103 $10,068
Cumulative interest
rate sensitivity gap $ 5,215 $ 3,998 $ 2,515 $16,618 $26,686
Ratios:
Interest rate
sensitivity gap 1.07x .84x .92x 2.09x
Cumulative interest
rate sensitivity gap 1.07x 1.05x 1.02x 1.15x 1.24x
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Management has historically maintained a cumulative negative interest rate
sensitivity gap within one year. This mismatch in gap is largely a result of
the Bank's practice of pricing its demand and savings accounts on a floating
rate index based on the prime rate. Volatile interest rate fluctuations are
detrimental to the net interest margin in the instance of rapidly rising
interest rates. In a rising interest rate environment, certificates of deposit
are priced to encourage a lengthening in average maturity and reduce the
mismatch in gap.
CAPITAL RESOURCES
The Company has been able to sustain its growth in capital through profit
retention and the exercise of stock options by directors and officers of the
Company. In the second quarter of 1995, the Company declared and paid its fourth
consecutive cash dividend to shareholders. In the first six months of 1995
shareholders' equity grew by $592,000 primarily through retention of earnings
and appreciation in investments held as available-for-sale, offset by
distributions of $191,000 to shareholders in payment of the dividend.
The Company and Bank are subject to capital adequacy guidelines issued by the
Federal Reserve Board of Governors (FRB) and the Office of the Comptroller of
the Currency (OCC). The FRB and the OCC have adopted risk based capital
guidelines for bank holding companies and national banks. For 1995, the Company
and the Bank are required to maintain capital equal to a least 8% of assets and
commitments to extend credit, weighted by risk ("risk-adjusted" assets).
Further, capital equal to at least 4% of risk-adjusted assets must consist
primarily of common equity (including retained earnings) and the remainder
- 20 -
<PAGE> 21
may consist of subordinated debt, cumulative preferred stock or a limited amount
of loan loss reserves. Certain assets and commitments to extend credit present
less risk than others and will be assigned to lower risk weighted categories
requiring less capital allocation than the 8% total ratio. For example, cash
and government securities are assigned to a 0% risk weighted category; most home
mortgage loans are assigned to a 50% risk weighted category requiring a 4%
capital allocation; and commercial loans are assigned to a 100% risk weighted
category requiring an 8% capital allocation.
In addition, the FRB and the OCC require the Company and the Bank to maintain a
3% minimum leverage ratio as a supplement to the risk weighted capital
guidelines. The minimum leverage ratio is intended to limit the ability of
banking organizations to leverage their equity capital base by increasing assets
and liabilities without increasing capital proportionately. The 3% ratio
constitutes a minimum ratio for well-run banking organizations under the FRB's
standards and organizations experiencing or anticipating significant growth or
failing to meet such standards will be required to maintain a minimum leverage
ratio ranging from 100 to 200 basis points in excess of the 3% ratio.
At June 30, 1995, the Bank and the Company were in compliance with the
risk-based capital and leverage ratios noted above. The following table sets
forth the Company's risk-based capital and leverage ratios.
<TABLE>
<CAPTION>
Dollars June 30, 1995 December 31, 1994
in thousands Amount Ratio Amount Ratio
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RISK BASED CAPITAL RATIOS
Tier 1 Capital $ 16,916 15.2% $ 16,303 15.5%
Total Capital $ 18,081 16.3% $ 17,621 16.7%
Total risk adjusted assets $110,987 $ 105,461
--------------------------------------------------------------------------------------------------------------------
LEVERAGE RATIOS
Tier 1 Capital to
average total assets $ 16,916 11.6% $ 16,303 12.1%
Quarterly average
total assets $145,912 $134,776
--------------------------------------------------------------------------------------------------------------------
</TABLE>
On December 19, 1991, the President signed the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA). FDICIA, among other matters,
substantially revises banking regulations and establishes a framework for
determination of capital adequacy of financial institutions. Under FDICIA,
financial institutions are placed into one of five capital adequacy categories
as follows: (1) Well capitalized, consisting of institutions with a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio
of 6% or greater and a leverage ratio of 5% or greater, and the institution is
not subject to an order, written agreement, capital directive or prompt
corrective action directive; (2) Adequately capitalized, consisting of
institutions with a total risk-based capital ratio of 8% or greater, a Tier 1
risk-based capital ratio of 4% or greater and a leverage ratio of 4% or
greater, and the institution does not meet the definition of a well capitalized
institution; (3) Undercapitalized, consisting of institutions with a total
risk-based capital ratio less than 8%, a Tier 1 risk-based capital ratio of
less than 4%, or a leverage ratio of less than 4%; (4) Significantly
undercapitalized, consisting of institutions with a total risk-based capital
ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3%, or a
leverage ratio of less than 3%; (5) Critically undercapitalized, consisting of
an institution with a ratio of tangible equity to total assets that is equal to
or less than 2%.
- 21 -
<PAGE> 22
Financial institutions classified as undercapitalized or below are subject to
various limitations including, among other matters, certain supervisory actions
by bank regulatory authorities and restrictions related to (1) growth of
assets, (2) payment of interest on subordinated indebtedness, (3) payment of
dividends or other capital distributions, and (4) payment of management fees to
a parent holding company. FDICIA requires the bank regulatory authorities to
initiate corrective action regarding financial institutions which fail to meet
minimum capital requirements. Such action may include orders to, among other
matters, augment capital and reduce total assets. Critically undercapitalized
financial institutions may also be subject to appointment of a receiver or
conservator unless the financial institution submits an adequate capitalization
plan.
INFLATION
The impact of inflation on a financial institution differs significantly from
that exerted on manufacturing, or other commercial concerns, primarily because
its assets and liabilities are largely monetary. In general, inflation
primarily affects the Company indirectly through its effect on market rates of
interest, and thus the ability of the Bank to attract loan customers.
Inflation affects the growth of total assets by increasing the level of loan
demand, and potentially adversely affects the Company's capital adequacy
because loan growth in inflationary periods can increase at rates higher than
the rate that capital grows through retention of earnings which the Company may
generate in the future. In addition to its effects on interest rates,
inflation directly affects the Company by increasing the Company's operating
expenses.
The effect of inflation was not material to the Company's results of operations
during the periods covered by this report.
- 22 -
<PAGE> 23
PART II - OTHER INFORMATION
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.
(a) The 1995 Annual Meeting of Shareholders ("Annual Meeting") was
held on May 18, 1995.
(b) The following directors, each of whom was an incumbent, were
elected at the Annual Meeting by the following vote:
<TABLE>
<CAPTION>
Votes
Votes Against or
For Withheld
<S> <C> <C>
Laurence M. Connell 763,241 --
Joseph A. Filice 763,035 206
Eugene R. Guglielmo 763,035 206
Roger C. Knopf 723,775 39,466
Edward J. Lazzarini 740,573 22,668
Donald G. Mountz 746,237 17,004
James R. Price 763,241 --
Mary Lou Rawitser 747,337 15,904
Brad L. Smith 763,241 --
</TABLE>
Item 5. Other information.
None.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
(27.1) Financial Data Schedule
(b) Reports on Form 8-K - One report on Form 8-K dated June 22,
1995 reporting $.08 per share cash dividend declared for
shareholders of record April 28, 1995 and payable May 5, 1995.
- 23 -
<PAGE> 24
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.
August 9, 1995
SOUTH VALLEY BANCORPORATION
By /s/ Brad L. Smith
--------------------------------------------------------
Brad L. Smith
(President and Principal Financial & Accounting Officer)
- 24 -
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
------ ----------- -----------
<S> <C> <C>
27.1 Financial Data Schedule 26
</TABLE>
- 25 -
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUN-30-1995
<CASH> 8,703
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 22,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,360
<INVESTMENTS-CARRYING> 16,001
<INVESTMENTS-MARKET> 15,884
<LOANS> 88,277
<ALLOWANCE> (913)
<TOTAL-ASSETS> 158,148
<DEPOSITS> 138,932
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,300
<LONG-TERM> 0
<COMMON> 11,331
0
0
<OTHER-SE> 5,585
<TOTAL-LIABILITIES-AND-EQUITY> 158,148
<INTEREST-LOAN> 4,957
<INTEREST-INVEST> 832
<INTEREST-OTHER> 382
<INTEREST-TOTAL> 6,171
<INTEREST-DEPOSIT> 1,894
<INTEREST-EXPENSE> 1,943
<INTEREST-INCOME-NET> 4,228
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,470
<INCOME-PRETAX> 1,236
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 783
<EPS-PRIMARY> $.66
<EPS-DILUTED> $.66
<YIELD-ACTUAL> .098
<LOANS-NON> 2,205
<LOANS-PAST> 100
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,331
<CHARGE-OFFS> (395)
<RECOVERIES> 79
<ALLOWANCE-CLOSE> 1,165
<ALLOWANCE-DOMESTIC> 1,165
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
