<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
- ------------------------------------------------------------------------------
FORM 10 - Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
------------------
COMMISSION FILE NUMBER 2-78788
-------
CALIFORNIA COMMERCIAL BANKSHARES
- ------------------------------------------------------------------------------
CALIFORNIA 95-3819471
- ------------------------------------------------------------------------------
(STATE OF OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
4100 NEWPORT PLACE, NEWPORT BEACH, CA 92660
- ------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER (714) 863-2300
--------------
- ------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR IF
CHANGED FROM LAST REPORT
INDICATE BY CHECK (X) WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OF 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS: INDICATE THE NUMBER OF SHARES OUTSTANDING
OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE
DATE 2,423,000.
----------
1
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES
INDEX
PART 1. FINANCIAL INFORMATION
- ------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THREE MONTHS AND NINE
MONTHS ENDED SEPTEMBER 30, 1995 AND 1994.
CONSOLIDATED CONDENSED BALANCE SHEETS SEPTEMBER 30, 1995 AND
DECEMBER 31, 1994.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SEPTEMBER 30, 1995.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
2
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
------------------- -------------------
<S> <C> <C> <C> <C>
INTEREST AND FEE INCOME:
LOANS AND LEASES 15,459 13,428 5,240 4,487
INVESTMENT SECURITIES 2,390 2,894 851 1,135
FEDERAL FUNDS SOLD 834 412 415 150
------ ------ ----- -----
TOTAL INTEREST AND FEE INCOME 18,683 16,734 6,506 5,772
INTEREST EXPENSE:
DEPOSITS 5,192 4,498 1,832 1,517
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE 8 6 0 4
NOTE PAYABLE 146 164 51 56
------ ------ ----- -----
TOTAL INTEREST EXPENSE 5,346 4,668 1,883 1,577
NET INTEREST INCOME 13,337 12,066 4,623 4,195
PROVISION FOR LOAN / LEASE LOSSES 1,300 2,665 300 1,045
NET INTEREST INCOME AFTER PROVISION FOR
LOAN / LEASE LOSSES 12,037 9,401 4,323 3,150
OTHER INCOME:
ESCROW FEES 177 233 91 47
SERVICE CHARGES 712 717 236 253
OTHER INCOME 773 614 324 232
------ ------ ----- -----
TOTAL OTHER INCOME 1,662 1,564 651 532
OTHER EXPENSES:
SALARIES AND EMPLOYEE BENEFITS 5,413 4,852 1,710 1,483
OCCUPANCY, FURNITURE AND EQUIPMENT 1,517 1,450 486 480
DATA PROCESSING 195 222 56 78
SUPPLIES 236 192 68 66
REGULATORY ASSESSMENTS 553 697 59 201
LEGAL FEES 759 478 344 167
LOSSES AND EXPENSES ON OREO 1,967 953 1,106 365
SECURITIES LOSSES 72
OTHER 1,748 1,481 609 531
------ ------ ----- -----
TOTAL OTHER EXPENSES 12,460 10,325 4,438 3,371
INCOME BEFORE INCOME TAXES 1,239 640 536 311
INCOME TAXES 494 225 214 110
NET INCOME 745 415 322 201
EARNINGS PER COMMON SHARE $ 0.30 $ 0.17 $0.13 $0.08
</TABLE>
3
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000'S OMITTED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1995 1994
------------ -----------
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS
NON INTEREST BEARING $ 24,039 $ 21,069
INTEREST BEARING 246
INVESTMENT SECURITIES - AVAILABLE FOR SALE 70,248 72,075
FEDERAL FUNDS SOLD 27,000 2,000
LOANS, NET OF UNEARNED INTEREST:
COMMERCIAL 78,512 82,600
REAL ESTATE - CONSTRUCTION 32,546 29,792
REAL ESTATE - EQUITY LINE 7,424 8,691
REAL ESTATE - MORTGAGE 66,231 66,102
INSTALLMENT AND OTHER 11,694 10,845
LEASE CONTRACTS RECEIVABLE 3,248 36,152
-------- --------
199,655 201,645
LESS: DEFERRED LOAN FEES & COSTS (758) (782)
-------- --------
198,897 200,863
LESS: RESERVE FOR LOAN LOSS (4,455) (5,660)
-------- --------
TOTAL LOANS, NET 194,442 195,203
-------- --------
REAL ESTATE OWNED 4,906 2,676
BANK PREMISES, FURNITURE & EQUIPMENT 1,081 988
ACCRUED INTEREST RECEIVABLE 2,479 2,846
DEFERRED INCOME TAXES 1,400 1,400
PREPAID EXPENSES AND OTHER ASSETS 1,662 2,162
-------- --------
TOTAL ASSETS $327,257 $300,665
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY
DEPOSITS:
DEMAND DEPOSIT
NON INTEREST BEARING $109,087 $ 98,733
INTEREST BEARING 69,178 79,695
SAVINGS DEPOSITS 50,168 40,504
TIME CERTIFICATES $100,000 AND OVER 38,631 28,896
OTHER TIME DEPOSITS 33,704 29,561
-------- --------
TOTAL DEPOSITS 300,768 277,389
NOTE PAYABLE 2,351 2,351
INTEREST PAYABLE 203 149
OTHER LIABILITIES 2,178 1,048
SHAREHOLDERS EQUITY:
CAPITAL STOCK - AUTHORIZED 10,000,000
SHARES; ISSUED AND OUTSTANDING 2,425,000
IN 1994 AND 1995 10,790 10,782
PAID IN CAPITAL 475 475
RETAINED EARNINGS 10,534 9,789
UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES AVAILABLE FOR SALE
(NET OF TAX) ( 42) (1,318)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 327,257 300,665
======== ========
</TABLE>
4
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME 745 415
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 351 444
NET AMORT. OF SECURITY DISCOUNTS AND PREMIUMS 654 571
PROVISION FOR LOAN AND LEASE LOSSES 1,300 2,665
PROVISION FOR LOSSES ON OTHER REAL ESTATE OWNED 453 246
LOSS (GAIN) ON SALE OF INVESTMENT SECURITIES 72 (7)
LOSS (GAIN) ON SALE OF PROPERTY (12) (12)
WRITEDOWNS AND LOSS ON SALE OF OTHER -
REAL ESTATE OWNED 522 160
DECREASE (INCREASE) IN ACCRUED INTEREST RECEIVABLE 367 171
DECREASE (INCREASE) IN OTHER ASSETS (186) 719
NET INCREASE (DECREASE) IN INTEREST AND ACCRUED
COMPENSATION PAYABLE, AND OTHER LIABILITIES 1,182 (610)
------- -------
TOTAL ADJUSTMENTS 4,703 4,347
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,448 4,762
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM MATURITY OF INVESTMENT SECURITIES 8,190 19,566
PURCHASE OF INVESTMENT SECURITIES (26,141) (62,320)
PROCEEDS FROM SALE OF INVESTMENT SECURITIES 21,016 48,965
NET DECREASE (INCREASE) IN LOANS AND LEASES (7,753) 3,997
INCREASE / (DECREASE) IN DEFERRED LOAN FEES (24) 33
INCREASE / (DECREASE) IN UNEARNED LEASE INCOME (108) 24
RECOVERIES OF LOANS AND LEASES CHARGED OFF 388 772
PURCHASES OF PROPERTY (458) (155)
PROCEEDS FROM SALE OF PROPERTY 26 16
PROCEEDS FROM SALE OF OTHER REAL ESTATE OWNED 3,753 4,553
ADDITIONS TO REAL ESTATE OWNED (80)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (1,111) 15,371
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE / (DECREASE) IN DEPOSITS 23,379 (23,429)
INCREASE / (DECREASE) IN SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE 4,994
PROCEEDS FROM EXERCISE OF COMMON STOCK OPTIONS 8 0
PAYDOWN ON CAPITAL NOTE 0
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 23,387 (18,435)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,724 1,698
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 23,315 26,781
------- -------
CASH AND CASH EQUIVALENTS ON SEPTEMBER 30, 1995 51,039 28,479
======= =======
</TABLE>
5
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS:
- -----------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
THE ACCOMPANYING UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
HAVE BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES FOR INTERIM FINANCIAL INFORMATION AND WITH THE INSTRUCTIONS
TO FORM 10-Q AND RULE 10-01 OF REGULATION S-X. ACCORDINGLY, THEY DO NOT
INCLUDE ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE FINANCIAL STATEMENTS. IN
THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS (CONSISTING OF NORMAL
RECURRING ACCRUALS) CONSIDERED NECESSARY FOR A FAIR PRESENTATION HAVE
BEEN INCLUDED. OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1995 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS THAT MAY BE
EXPECTED FOR THE YEAR ENDED DECEMBER 31, 1996.
NOTE 2 - EARNINGS PER SHARE WERE COMPUTED BASED ON THE FOLLOWING WEIGHTED
AVERAGE OUTSTANDING SHARES:
NINE MONTHS ENDED SEPTEMBER 30, 1995..........2,490,000
NINE MONTHS ENDED SEPTEMBER 30, 1994..........2,423,000
6
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THE PURPOSE OF THIS DISCUSSION IS TO PROVIDE ADDITIONAL INFORMATION ABOUT THE
COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS WHICH IS NOT OTHERWISE
APPARENT FROM THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THIS INTERIM
REPORT. SINCE THE BANKING SUBSIDIARY REPRESENTS MOST OF THE COMPANY'S ACTIVITY
AND INVESTMENT, THE FOLLOWING DISCUSSION RELATES PRIMARILY TO THE FINANCIAL
CONDITION AND OPERATIONS OF THE BANK. IT SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO.
THE FOLLOWING CHART SHOWS COMPARATIVE DATA FOR SELECTED ITEMS OF THE FINANCIAL
STATEMENTS:
<TABLE>
<CAPTION>
AVERAGES FOR THE THREE MONTHS ENDED
PERCENT
SEPTEMBER 30 SEPTEMBER 30 INCREASE/
1995 1994 (DECREASE)
------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
TOTAL ASSETS: $321,415 $325,953 ( 1.39)
INVESTMENT SECURITIES: 63,581 87,212 (27.10)
FED FUNDS SOLD: 28,492 12,845 121.81
GROSS LOANS: 200,388 196,674 1.89
TOTAL DEPOSITS: 295,578 300,440 ( 1.62)
INTEREST BEARING DEPOSITS 191,562 188,603 1.57
OTHER INTEREST BEARING
LIABILITIES: 2,351 2,795 (15.89)
</TABLE>
<TABLE>
<CAPTION>
AVERAGES FOR THE NINE MONTHS ENDED
PERCENT
SEPTEMBER 30 SEPTEMBER 30 INCREASE/
1995 1994 (DECREASE)
------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
TOTAL ASSETS: $305,391 $322,139 ( 5.20)
INVESTMENT SECURITIES: 59,210 77,838 (23.93)
FED FUNDS SOLD: 19,104 15,199 25.69
GROSS LOANS: 200,938 202,855 ( .95)
TOTAL DEPOSITS: 279,214 297,023 ( 6.00)
INTEREST BEARING DEPOSITS 183,195 194,938 ( 6.02)
OTHER INTEREST BEARING
LIABILITIES: 2,600 2,534 2.60
</TABLE>
7
<PAGE>
THE RELATIVELY SMALL DECREASE IN AVERAGE ASSETS AVERAGE LOANS AND AVERAGE
DEPOSITS REFLECTS COMPANY'S CONTINUING EMPHASIS ON IMPROVING ASSET QUALITY AND
COLLECTING LOANS. DURING THIS PERIOD THE COMPANY ALSO CONCENTRATED ON REPLACING
HIGHER COST TIME DEPOSITS WITH CORE DEMAND AND SAVINGS DEPOSITS.
THE FOLLOWING TABLE SHOWS AVERAGE EARNING ASSETS AND INTEREST BEARING
LIABILITIES AND THEIR RELATIVE COST AND YIELD WITHOUT LOAN FEES AND LOAN COSTS.
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1995 1994
-------- -------- PERCENT
INCREASE/ YIELD
AMT YLD AMT YLD (DECREASE) DIFF
-------- ---- -------- ---- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE EARNING
ASSETS $292,461 8.48 $296,746 7.51 (1.44) .97
AVERAGE INTEREST
BEARING
LIABILITIES $193,913 3.85 $191,398 3.27 1.31 .58
</TABLE>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1995 1994
-------- -------- PERCENT
INCREASE/ YIELD
AMT YLD AMT YLD (DECREASE) DIFF
-------- ---- -------- ---- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE EARNING
ASSETS $279,252 8.59 $295,892 7.31 (5.62) 1.28
AVERAGE INTEREST
BEARING
LIABILITIES $185,795 3.83 $197,472 3.16 (5.91) .67
</TABLE>
ACCORDING TO COMPANY POLICY LOANS PAST DUE 90 DAYS OR MORE AS TO INTEREST OR
PRINCIPAL PAYMENTS ARE PLACED ON NON-ACCRUAL. LOANS ACCOUNTED FOR ON A NON-
ACCRUAL BASIS AMOUNTED TO $7,698,000 ON SEPTEMBER 30, 1995 AS COMPARED TO
$15,208,000 ON SEPTEMBER 30, 1994. OTHER REAL ESTATE OWNED TOTALED $4,906,000
ON SEPTEMBER 30, 1995 AS COMPARED TO $4,852,000 ON SEPTEMBER 30, 1994.
THE COMPANY FOLLOWS SFAS 114 WITH RESPECT TO IMPAIRED LOANS WHICH STATES - "A
LOAN IS IMPAIRED WHEN, BASED ON CURRENT FINANCIAL INFORMATION AND EVENTS, IT IS
PROBABLE THAT A CREDITOR WILL BE UNABLE TO COLLECT ALL AMOUNTS DUE ACCORDING TO
THE CONTRACTUAL TERMS OF THE LOAN AGREEMENT...ALL AMOUNTS DUE ACCORDING TO THE
CONTRACTUAL TERMS MEANS THAT BOTH THE CONTRACTUAL INTEREST PAYMENTS
8
<PAGE>
AND THE CONTRACTUAL PRINCIPAL PAYMENTS OF A LOAN WILL BE COLLECTED AS SCHEDULED
IN THE LOAN AGREEMENT." (SEE ACCOUNTING PRONOUNCEMENTS)
A LOAN IS NOT CONSIDERED IMPAIRED DURING A PERIOD OF DELAY IN PAYMENT IF THE
COMPANY EXPECTS TO COLLECT ALL AMOUNTS DUE INCLUDING INTEREST ACCRUED AT THE
CONTRACTUAL INTEREST RATE FOR THE PERIOD OF DELAY. SIX MONTHS IS THE MAXIMUM
PERIOD OF DELAY ALLOWED BEFORE A LOAN IS CONSIDERED IMPAIRED. AS OF SEPTEMBER
30, 1995 THE AGGREGATE AMOUNT OF IMPAIRED LOANS MEASURED UNDER PRESENT VALUE
METHOD AND FAIR VALUE METHODS WERE $5,878,000 AND $4,827,000 RESPECTIVELY.
THE FOLLOWING LOANS ARE EXEMPT FORM SFAS 114 DUE TO THEIR CHARACTERISTICS AS
SMALLER BALANCE HOMOGENEOUS LOANS; CREDIT CARD LOANS, LEASES, OVERDRAFT
PROTECTION LOANS AND CONSUMER LOANS. RISK IN THESE LOANS IS ACCOUNTED FOR BY
APPLYING AN HISTORIC LOSS PERCENTAGE TO THE LOAN POOL.
DIFFERENCE BETWEEN NONACCRUAL AND IMPAIRED LOANS:
NON ACCRUAL LOANS - THESE LOANS ARE ON NON ACCRUAL FOR USUALLY ONE OF TWO
REASONS; 1) THE LOAN IS PAST DUE IN INTEREST OR PRINCIPAL PAYMENTS FOR 90 DAYS
OR MORE BUT SUFFICIENT COLLATERAL IS HELD TO OFFSET ANY POTENTIAL LOSS, OR 2)
FULL PAYMENT OF ALL PRINCIPAL PLUS INTEREST IS DOUBTFUL.
IMPAIRED LOAN - A LOAN CAN BE IMPAIRED ALSO FOR TWO REASONS; 1) A RESTRUCTURE OF
THE ORIGINAL NOTE HAS OCCURRED RESULTING IN A REDUCED INTEREST RATE. THEN THE
LOAN IS CONSIDERED IMPAIRED DUE TO PRESENT VALUE CALCULATIONS, OR 2) FULL
COLLECTION OF ALL PRINCIPAL AND INTEREST AS CURRENTLY SCHEDULED IS NOT EXPECTED.
THE COMPANY'S POLICY WITH RESPECT TO THE RECOGNITION OF INTEREST INCOME FOR
IMPAIRED LOANS IS TO RECOGNIZE THE INCOME ON ACCRUAL BASIS FOR ONLY THOSE LOANS
THAT ARE NOT AN NONACCRUAL. IF THE LOAN IS ON NONACCRUAL THE INCOME IS
GENERALLY NOT RECOGNIZED AS INCOME HOWEVER, APPLIED AS REDUCTION TO THE
PRINCIPAL. INCOME MAY BE RECOGNIZED ON A CASH BASIS ON NONACCRUAL ONLY IF THE
NET PRINCIPAL BALANCE IS ADEQUATELY COVERED BY COLLATERAL AND HAS SHOWN MINIMUM
OF SIX MONTHS PERFORMANCE TO CURRENT PROGRAM.
ACCORDING TO COMPANY POLICY A LOAN THAT IS NOT PERFORMING OR HAS BEEN NON
PERFORMING FOR OVER 90 DAYS IS CHARGED OFF UNLESS SUFFICIENT COLLATERAL IS HELD
TO OFFSET THE LOSS AMOUNT. IF COLLATERAL IS HELD, THEN APPROPRIATE MEASURES
SHOULD BE TAKEN TO OBTAIN POSSESSION OF THE COLLATERAL FOR IMMEDIATE SALE. THIS
POLICY APPLIES TO ALL TYPES OF LOANS INCLUDING IMPAIRED LOANS.
9
<PAGE>
THE FOLLOWING TABLE SHOWS THE TOTAL CHARGE OFFS, RECOVERIES AND THE NET RESULT
FOR THE THREE MONTHS AND NINE ENDED SEPTEMBER 30, 1995 AND 1994.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
CHARGE OFFS 1,095 2,460 2,893 5,634
RECOVERIES 250 333 387 772
NET CHARGE OFFS
(RECOVERIES) 845 2,127 2,506 4,862
</TABLE>
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1995 THE COMPANY ADDED
$300,000 AND $1,300,000 RESPECTIVELY TO ITS RESERVE WHICH COMPARES WITH
$1,045,000 AND $2,665,000 FOR THE SAME PERIODS IN 1994. THE RESERVE BALANCE AS
OF SEPTEMBER 30, 1995 WAS $4,455,000 WHICH WAS 2.23% OF TOTAL LOANS AND LEASES
WHICH COMPARES WITH $5,025,000 AND 2.56%, RESPECTIVELY, ON SEPTEMBER 30, 1994.
RESULTS OF OPERATIONS
INTEREST INCOME AND INTEREST EXPENSE
- ------------------------------------
THE COMPANY'S PRIMARY SOURCE OF REVENUE IS INTEREST INCOME. THE NET YIELD
WITHOUT THE LOAN FEES ON INTEREST EARNING ASSETS INCREASED TO 5.93% AND 6.04%
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 FROM 5.40% AND
5.20% FOR THE SAME PERIODS OF 1994. THE NET INTEREST INCOME WITHOUT THE LOAN
FEES INCREASED FROM $4,038,000 AND $11,515,000 FOR THE THREE AND NINE MONTHS
ENDING SEPTEMBER 30, 1994 TO $4,368,000 AND $12,667,000 FOR THE SAME PERIODS OF
1995. THIS WAS LARGELY DUE TO IMPROVED SPREADS IN INTEREST EARNINGS. THE AVERAGE
YIELD ON EARNING ASSETS INCREASED BY .97% FROM 7.51% IN THE THIRD QUARTER OF
1994 TO 8.48% IN 1995 AND BY 1.28% FROM 7.31% FOR THE NINE MONTHS ENDING
SEPTEMBER 30, 1994 TO 8.59% FOR THE SAME PERIOD OF 1995. THE AVERAGE INTEREST
RATE PAID ON INTEREST BEARING LIABILITIES INCREASED BY .58% FROM 3.27% IN THE
SECOND QUARTER OF 1994 TO 3.85% IN 1995 AND BY .67% FROM 3.16% FOR THE NINE
MONTHS ENDING SEPTEMBER 30, 1994 TO 3.83% FOR THE SAME PERIODS OF 1995.
THE FOLLOWING TABLE SHOWS THE AVERAGE BALANCES OF INTEREST EARNING ASSETS AND
INTEREST BEARING LIABILITIES AND INTEREST EARNED AND PAID ON THOSE BALANCES.
10
<PAGE>
THREE MONTHS ENDED
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
AVERAGE INTEREST AVERAGE INTEREST
ASSETS BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C>
SECURITIES 63,581 850 5.31 87,212 1,141 5.19
FED FUNDS 28,492 415 5.78 12,860 145 4.47
LOANS 200,388 4,986 9.87 196,674 4,328 8.73
------- ------ ---- ------- ------ ----
TOTAL 292,461 6,251 8.48 296,746 5,614 7.51
------- ------ ---- ------- ------ ----
LIABILITIES
SAVINGS 124,115 856 2.74 121,189 803 2.63
TIME 67,448 976 5.74 67,414 713 4.19
OTHER 2,351 51 8.66 2,795 608 .57
------- ------ ---- ------- ------ ----
TOTAL 193,913 1,883 3.85 191,398 1,576 3.27
------- ------ ---- ------- ------ ----
NET INTEREST
INCOME 4,368 4,038
YIELD ON EARNING
ASSETS 5.93 5.40
</TABLE>
NINE MONTHS ENDED
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
AVERAGE INTEREST AVERAGE INTEREST
ASSETS BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C>
SECURITIES 59,210 2,390 5.38 77,838 2,899 4.98
FED FUNDS 19,104 834 5.82 15,199 407 3.58
LOANS 200,938 14,790 9.80 202,855 12,877 8.49
------- ------ ---- ------- ------ ----
TOTAL 279,252 18,014 8.59 295,892 16,183 7.31
------- ------ ---- ------- ------ ----
LIABILITIES
SAVINGS 121,316 2,548 2.80 120,029 2,273 2.53
TIME 61,879 2,645 5.69 74,909 2,224 3.97
OTHER 2,600 154 7.88 2,534 171 9.01
------- ------ ---- ------- ------ ----
TOTAL 185,795 5,346 3.83 197,472 4,668 3.16
------- ------ ---- ------- ------ ----
NET INTEREST
INCOME 12,667 11,515
YIELD ON EARNING
ASSETS 6.04 5.20
</TABLE>
11
<PAGE>
OTHER INCOME AND OTHER EXPENSES - NON-INTEREST INCOME INCREASED BY $119,000 TO
- -------------------------------
$651,000 IN THE THIRD QUARTER OF 1995 FROM $532,000 IN THE THIRD QUARTER OF
1994. FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1995, THE NON-INTEREST INCOME
INCREASED BY $98,000 TO $1,662,000 COMPARED TO $1,564,000 FOR THE SAME PERIOD A
YEAR AGO. THE DECLINE WAS LARGELY IN THE FOLLOWING CATEGORIES:
1. ESCROW FEES DECREASED BY $56,000 FROM $233,000 FOR THE NINE MONTHS OF 1994
TO $177,000 IN 1995. FOR THE THREE MONTHS ENDING SEPTEMBER 30, 1995 THE ESCROW
FEE INCOME INCREASED BY $44,000 TO $91,000 IN 1995 FROM $47,000 IN 1994. THE
INCREASE IS DUE TO ADDITION TO THE STAFF IN ESCROW DEPARTMENT AND INCREASED
MARKETING EFFORTS.
2. DURING FIRST QUARTER OF 1995 THE COMPANY SOLD SOME SECURITIES IN THE AMOUNT
OF APPROXIMATELY $21,000,000 AT A LOSS OF $72,000. THESE SECURITIES WERE
ORIGINALLY PURCHASED WITH VERY SHORT MATURITIES TO MEET A PROJECTED CASH OUTFLOW
DURING THE FIRST QUARTER OF 1995.
3. OTHER INCOME INCREASED BY $92,000 TO $324,000 FOR THE THIRD QUARTER OF 1995
COMPARED TO $232,000 OF 1994 AND BY $159,000 TO $773,000 FOR THE NINE MONTHS
ENDING SEPTEMBER 30, 1995 COMPARED TO $614,000 FOR THE SAME PERIOD OF 1994. THE
INCOME WAS LARGELY DUE TO RENTAL INCOME ON OTHER REAL ESTATE OWNED WHICH
AMOUNTED TO $60,000 FOR THE THIRD QUARTER AND $122,000 FOR THE NINE MONTHS
ENDING SEPTEMBER 30, 1995. THE RENTAL INCOME FOR THE SAME PERIODS OF 1994 WAS
$15,000 AND $32,000 RESPECTIVELY.
NON-INTEREST EXPENSE INCREASED BY $1,067,000 FROM $3,371,000 IN THE THIRD
QUARTER OF 1994 TO $4,438,000 IN 1995. FOR THE NINE MONTHS ENDING SEPTEMBER 30,
1995 THE EXPENSE INCREASED BY $2,135,000 FROM $10,325,000 IN 1994 TO $12,460,000
IN 1995. FOLLOWING IS A SUMMARY OF INCREASE IN VARIOUS CATEGORIES OF NON-
INTEREST EXPENSE FOR THE THIRD QUARTER OF 1995 AND NINE MONTH ENDING SEPTEMBER
30, 1995 COMPARED TO THE SAME PERIODS OF 1994.
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
<S> <C> <C>
SALARIES & BENEFITS $ 561,000 $ 227,000
OCCUPANCY, FURNITURE & EQ. 65,000 4,000
DATE PROCESSING (28,000) (22,000)
SUPPLIES 44,000 2,000
LEGAL FEES 281,000 98,000
REGULATORY ASSESSMENTS (144,000) (63,000)
LOSSES (GAIN) ON OREO 1,009,000 736,000
OTHER 347,000 85,000
---------- ----------
TOTAL $2,135,000 $1,067,000
</TABLE>
12
<PAGE>
THE MAJOR INCREASES WERE IN THE CATEGORIES OF SALARIES AND BENEFITS WHICH WAS
DUE TO ADDITION TO THE STAFF TO MEET THE PROJECTED FUTURE GROWTH, AND LEGAL FEES
AND LOSSES ON OREO WHICH CONTINUES TO REMAIN HIGH AS THE BANK CONTINUES TO
RESOLVE PROBLEM LOANS AND DISPOSE OF FORECLOSURE PROPERTIES.
ACCOUNTING PRONOUNCEMENTS
- -------------------------
IN MAY 1993, THE FINANCIAL ACCOUNTING STANDARDS BOARD ("FASB") ISSUED STATEMENT
ON FINANCIAL ACCOUNTING STANDARDS NO. 114 ("SFAS 114"), "ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN" AS AMENDED BY SFAS 118, "ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURES". UNDER THE PROVISIONS
OF SFAS 114, A LOAN IS CONSIDERED IMPAIRED WHEN, BASED ON CURRENT INFORMATION
AND EVENTS, IT IS PROBABLE THAT A CREDITOR WILL BE UNABLE TO COLLECT ALL AMOUNTS
DUE ACCORDING TO THE CONTRACTUAL TERMS OF THE LOAN AGREEMENT. SFAS 114, AS
AMENDED, REQUIRES CREDITORS TO MEASURE IMPAIRMENT OF A LOAN BASED ON THE PRESENT
VALUE OF EXPECTED FUTURE CASH FLOWS DISCOUNTED AT THE LOAN'S EFFECTIVE INTEREST
RATE. IF THE MEASURE OF THE IMPAIRED LOAN IS LESS THAN THE RECORDED INVESTMENT
IN THE LOAN, A CREDITOR WILL RECOGNIZE AN IMPAIRMENT BY CREATING A VALUATION
ALLOWANCE WITH A CORRESPONDING CHARGE TO BAD DEBT EXPENSE. THIS STATEMENT ALSO
APPLIES TO RESTRUCTURED LOANS AND ELIMINATES THE REQUIREMENT TO CLASSIFY LOANS
THAT ARE IN-SUBSTANCE FORECLOSURES AS FORECLOSED ASSETS EXCEPT FOR LOANS WHERE
THE CREDITOR HAS PHYSICAL POSSESSION OF THE UNDERLYING COLLATERAL, BUT NOT LEGAL
TITLE. THE COMPANY ADOPTED SFAS 114 EFFECTIVE JANUARY 1, 1995. THE COMPANY DOES
NOT BELIEVE ADOPTION OF THIS STATEMENT WILL HAVE A MATERIAL IMPACT ON ITS
RESULTS OF OPERATIONS OR FINANCIAL POSITION.
CAPITAL RESOURCES
- -----------------
IT IS THE COMPANY'S POLICY TO ALWAYS MAINTAIN ADEQUATE LIQUIDITY IN CASH,
FEDERAL FUNDS AND IN READILY MARKETABLE GOVERNMENT SECURITIES. THE COMPANY'S
TOTAL LIQUID ASSETS ON SEPTEMBER 30, 1995 WERE: CASH AND DUE FROM BANKS
$24,039,000, FEDERAL FUNDS SOLD $27,000,000, AND INVESTMENT SECURITIES FREE OF
COLLATERAL $70,313,000; TOTALING $121,352,000 OR 37% OF TOTAL ASSETS.
ADDITIONALLY, THE MAJORITY OF THE COMPANY'S LOANS ARE ON A SHORT TERM BASIS,
MATURING IN APPROXIMATELY ONE YEAR, WHICH, COMBINED WITH LINES OF CREDIT WITH
CORRESPONDENT BANKS, PROVIDES ADDITIONAL LIQUIDITY.
13
<PAGE>
IN DECEMBER 1988, THE COMPANY OBTAINED A $3,000,000 TERM LOAN FROM ANOTHER
FINANCIAL INSTITUTION FOR THE PURPOSE OF PROVIDING ADDITIONAL CAPITAL TO THE
BANK. THE CREDIT AGREEMENT FOR THIS LOAN WAS AMENDED PURSUANT TO A SECOND
AMENDMENT TO THE CREDIT AGREEMENT DATED AUGUST 25, 1994. THE LOAN, AS AMENDED,
BEARS INTEREST AT A FLUCTUATING RATE PER ANNUM EQUAL TO .75% IN EXCESS OF THE
LENDER'S REFERENCE RATE (9.00% AT MARCH 31, 1995). INTEREST IS PAYABLE MONTHLY
ON THE UNPAID PRINCIPAL BALANCE OF THE LOAN. PRINCIPAL IS TO BE REPAID ON
JANUARY 1, 1997. THE SECOND AMENDMENT WAIVES ALL FINANCIAL COVENANTS RELATING
TO THE TERM LOAN. AT JUNE 30, 1995 AND 1994, $2,351,000 REMAINED OUTSTANDING ON
THE LOAN.
THE SECOND AMENDMENT IS SUPPORTED BY A SUPPORT AGREEMENT BETWEEN A SHAREHOLDER
OF THE COMPANY AND THE COMPANY, WHEREBY THE SHAREHOLDER HAS GUARANTEED THE
PAYMENT OF THE LOAN.
TO COMPENSATE THE SHAREHOLDER FOR SIGNING THE SUPPORT AGREEMENT, THE COMPANY
SIGNED A HOLDING COMPANY SUPPORT AGREEMENT WHEREBY THE COMPANY: (1) HAS PAID
THE SHAREHOLDER A STANDBY FEE OF $23,500, (2) WILL PAY A STANDBY FEE EQUAL TO
ONE PERCENT OF THE UNPAID PRINCIPAL AMOUNT OF THE TERM LOAN ON EACH ANNIVERSARY
DATE OF THE CLOSING DATE OF THE HOLDING COMPANY SUPPORT AGREEMENT (3) WILL ISSUE
TO THE SHAREHOLDER ON OR PRIOR TO MARCH 31, 1997 WARRANTS TO PURCHASE 25,000
SHARES OF COMMON STOCK OF THE COMPANY AT AN EXERCISE PRICE PER SHARE EQUAL TO
80% OF THE BOOK VALUE PER SHARE OF THE COMPANY ON DECEMBER 31, 1996.
ON DECEMBER 31, 1990, NEW RISK BASED CAPITAL REQUIREMENTS BECAME EFFECTIVE.
UNDER THE REQUIREMENTS, HOLDING COMPANIES AND BANKS ARE REQUIRED CURRENTLY TO
MAINTAIN MINIMUM RATIOS OF TOTAL CAPITAL AND "CORE" (TIER 1) CAPITAL TO RISK-
WEIGHTED ASSETS; HOWEVER, UNDER THE TERMS OF ITS FORMAL AGREEMENT WITH THE
COMPTROLLER, THE BANK IS REQUIRED TO MAINTAIN CAPITAL IN EXCESS OF THIS MINIMUM
REQUIREMENT. THE REGULATORY CAPITAL REQUIREMENTS, CAPITAL REQUIREMENTS UNDER THE
FORMAL AGREEMENT AND THE BANK AND COMPANY'S ACTUAL CAPITAL RATIOS ARE SHOWN IN
THE FOLLOWING TABLE AS OF THE DATES INDICATED:
14
<PAGE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
1995 1994
-------------------------------------------- ---------------------------------------------
EXCESS EXCESS
PER EXCESS TO PER EXCESS TO
MINIMUM FORMAL TO FORMAL MINIMUM FORMAL TO FORMAL
STATU- AGREE- STATU- AGREE- STATU- AGREE- STATU- AGREE-
TORY MENT ACTUAL TORY MENT TORY MENT ACTUAL TORY MENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE BANK
RISK-BASED CAPITAL:
TIER 1 4.00% N/A 10.29% 6.29% N/A 4.00% N/A 10.38% 6.38% N/A
TOTAL RISK-BASED 8.00% 9.00% 11.54% 3.54% 2.54% 8.00% 9.00% 11.63% 3.63% 2.63%
TIER 1 LEVERAGE
RATIO(1) 4.00% 6.00% 7.15% 3.15% 1.15% 4.00% 6.00% 7.21% 3.21% 1.21%
FOR THE COMPANY
RISK-BASED CAPITAL:
TIER 1 4.00% N/A 9.51% 5.51% N/A 4.00% N/A 9.62% 5.62% N/A
TOTAL RISK-BASED 8.00% N/A 10.75% 2.75% N/A 8.00% N/A 10.86% 2.86% N/A
TIER 1 LEVERAGE
RATIO 4.00% N/A 6.66% 2.66% N/A 4.00% N/A 6.73% 2.73% N/A
</TABLE>
_______________
(1) IN SOME CIRCUMSTANCES THIS MINIMUM RATIO MAY BE 3%.
AS OF SEPTEMBER 30, 1995 AND 1994, THE BANK AND THE COMPANY WERE IN COMPLIANCE
WITH STATUTORY RISK-BASED CAPITAL REQUIREMENTS AND THE BANK WAS IN COMPLIANCE
WITH THE MORE STRINGENT CAPITAL REQUIREMENTS IMPOSED BY THE FORMAL AGREEMENT.
15
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES
SIGNATURES:
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
CALIFORNIA COMMERCIAL BANKSHARES
(REGISTRANT)
DATE: NOVEMBER 10, 1995 /s/ WILLIAM H. JACOBY
-------------------- ----------------------------
WILLIAM H. JACOBY
PRESIDENT
DATE: NOVEMBER 10, 1995 /s/ ABDUL S. MEMON
-------------------- ----------------------------
ABDUL S. MEMON
CHIEF FINANCIAL OFFICER
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 24,039
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 70,248
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 198,897
<ALLOWANCE> 4,455
<TOTAL-ASSETS> 327,257
<DEPOSITS> 300,768
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,381
<LONG-TERM> 2,351
<COMMON> 10,790
0
0
<OTHER-SE> 10,967
<TOTAL-LIABILITIES-AND-EQUITY> 327,257
<INTEREST-LOAN> 15,459
<INTEREST-INVEST> 2,390
<INTEREST-OTHER> 834
<INTEREST-TOTAL> 18,683
<INTEREST-DEPOSIT> 5,192
<INTEREST-EXPENSE> 5,346
<INTEREST-INCOME-NET> 13,337
<LOAN-LOSSES> 1,300
<SECURITIES-GAINS> (72)
<EXPENSE-OTHER> 12,388
<INCOME-PRETAX> 1,239
<INCOME-PRE-EXTRAORDINARY> 1,239
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 745
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
<YIELD-ACTUAL> 5.93
<LOANS-NON> 7,751
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,739
<LOANS-PROBLEM> 10,705
<ALLOWANCE-OPEN> 5,660
<CHARGE-OFFS> 2,893
<RECOVERIES> 388
<ALLOWANCE-CLOSE> 4,455
<ALLOWANCE-DOMESTIC> 2,431
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,024
</TABLE>
