<PAGE>
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 June 30, 1995
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 0-11337
FOOTHILL INDEPENDENT BANCORP
----------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3815805
-------------------------------- ------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
510 SOUTH GRAND AVENUE, GLENDORA, CALIFORNIA 91741
-------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(818) 963-8551 or (714) 599-9351
(Registrants's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal
year, if changed, since last year)
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 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 XXX 90 days. YES /XX/. NO / /.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date.
3,938,918 shares of Common Stock
as of August 2, 199
<PAGE>
<TABLE>
<CAPTION>
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS JUNE 30, 1995 DECEMBER 31, 1994
<S> <C> <C>
Cash and due from banks $ 31,618,442 $ 29,218,006
Federal Funds Sold 49,800,000 7,450,000
------------ ------------
Total Cash and Cash Equivalents 81,418,442 36,668,006
------------ ------------
Interest bearing deposits at other banks 3,068,979 1,188,000
------------ ------------
Investment securities held to maturity
(approximate market value $23,373,290
in 1995 and $20,191,254 in 1994)
U.S. Treasury 7,903,710 16,454,851
U.S. Government agencies 13,006,519 996,104
Municipal agencies 2,227,830 2,759,135
Other Securities 250,000 250,000
------------ ------------
Total Investment securities
held to maturity 23,388,059 20,460,090
------------ ------------
Investment securities available for sale 9,958,797 10,517,101
------------ ------------
Loans, net of unearned discount and
prepaid points and fees 243,738,328 245,289,324
Direct lease Financing 2,862,687 3,726,697
Less reserve for possible loan
and lease losses (4,244,293) (3,145,193)
------------ ------------
Total Loans & Leases, net 242,356,722 245,870,828
------------ ------------
Bank premises and equipment 6,902,878 6,626,777
Accrued interest 2,260,901 2,393,707
Other real estate owned, net of allowance
for possible losses of $779,708 in 1995
and $515,503 in 1994 3,947,595 2,469,469
Cash surrender value of life insurance 3,006,771 2,862,019
Prepaid expenses 1,444,483 527,170
Deferred income taxes 1,103,663 1,103,663
Other assets 1,727,418 574,829
------------ ------------
TOTAL ASSETS $380,584,708 $331,261,659
============ ============
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Deposits
Demand deposits $ 89,076,858 $ 77,385,387
Savings and NOW deposits 78,662,350 78,966,296
Money market deposits 44,407,589 41,954,406
Time deposits in denominations of
$100,000 or more 64,305,503 51,294,361
Other time deposits 72,783,816 51,621,654
------------ ------------
Total deposits 349,236,116 301,222,104
Accrued employee benefits 1,052,532 992,955
Accrued interest and other liabilities 1,127,410 1,930,236
Long-term debt 227,249 245,098
------------ ------------
Total Liabilities 351,643,307 304,390,393
------------ ------------
Stockholders' Equity
Unrealized gain (loss) on marketable
equity securities (297,620) (399,610)
Unrealized gain (loss) on securities
available for sale 30,648 (4,240)
Contributed capital
Capital stock-authorized 12,500,000
shares without par value; issued and
outstanding 3,936,583 shares in 1995
and 3,547,565 in 1994 10,632,628 7,439,924
Additional Paid-in Capital 455,997 455,997
Retained Earnings 18,119,748 19,379,195
------------ ------------
Total Stockholders' Equity 28,941,401 26,871,266
------------ ------------
Total Liabilities and
Stockholders' Equity $380,584,708 $331,261,659
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended June 30, Three Months Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $14,296,651 $11,650,600 $ 7,261,555 $ 6,329,561
Interest on investment securities
U.S. Treasury 289,866 681,685 115,290 377,106
Obligations of other U.S. government
agencies 457,588 115,036 276,135 53,227
Municipal agencies 43,350 45,774 20,313 24,977
Other securities 67,452 0 33,185 0
Interest on deposits 45,495 28,578 28,554 14,158
Interest on Federal funds sold 792,145 156,743 537,995 91,642
Lease financing income 121,610 69,152 72,391 34,592
---------- ---------- ---------- ----------
Total Interest Income 16,114,157 12,747,568 8,345,418 6,925,263
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on savings & NOW deposits 616,625 568,235 306,751 298,803
Interest on money market deposits 603,385 453,841 322,727 234,010
Interest on time deposits in denominations
of $100,000 or more 1,455,163 912,801 852,685 485,039
Interest on other time deposits 1,535,093 749,225 869,862 401,569
Interest on borrowings 24,470 16,661 5,833 6,688
---------- ---------- ---------- ----------
Total Interest Expense 4,234,736 2,700,763 2,357,858 1,426,109
---------- ---------- ---------- ----------
Net Interest Income 11,879,421 10,046,805 5,987,560 5,499,154
PROVISION FOR LOAN AND LEASE LOSSES 1,499,536 863,650 869,536 735,000
---------- ---------- ---------- ----------
Net Interest Income After Provisions
for Loan and Lease Losses 10,379,885 9,183,155 5,118,024 4,764,154
---------- ---------- ---------- ----------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
OTHER INCOME
Fees and service charges 2,126,664 2,033,727 1,055,482 1,051,136
Other 252,714 417,714 89,253 280,114
---------- ---------- ---------- ----------
Total other income 2,379,378 2,451,441 1,144,735 1,331,250
---------- ---------- ---------- ----------
OTHER EXPENSES
Salaries and benefits 4,757,851 4,385,336 2,484,132 2,216,256
Occupancy expenses, net of revenue
of $64,338 in 1995 and $45,359 in 1994 929,875 741,658 488,734 433,339
Furniture and equipment expenses 620,604 579,262 306,147 279,126
Other operating expenses (Note 2) 3,734,556 3,592,645 1,529,666 1,861,505
---------- ---------- ---------- ----------
Total other expenses 10,042,886 9,298,901 4,808,679 4,790,226
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 2,716,377 2,335,695 1,454,080 1,305,178
---------- ---------- ---------- ----------
INCOME TAXES
Current payable 1,033,450 827,130 552,175 471,275
Deferred 0 (130) 0 5,225
---------- ---------- ---------- ----------
Total income taxes 1,033,450 827,000 552,175 476,500
---------- ---------- ---------- ----------
NET INCOME $ 1,682,927 $ 1,508,695 $ 901,905 $ 828,678
========== ========== ========== ==========
EARNINGS PER SHARE OF COMMON STOCK $0.43 $0.39 $0.23 $0.21
========== ========== ========== ==========
(Note 3)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
VALUATION
NUMBER OF ADDITIONAL ALLOWANCE
SHARES CAPITAL PAID-IN RETAINED FOR
OUTSTANDING STOCK CAPITAL EARNINGS INVESTMENT TOTAL
----------- ------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,December 31, 1993 3,531,460 $ 7,334,623 $ 455,997 $ 17,323,727 $ (155,297) $ 24,959,050
As previously reported
Prior year correction 17,732 (17,732) -
--------- ---------- -------- ----------- ---------- -----------
BALANCE,January 1, 1994 3,531,460 $ 7,334,623 $ 455,997 $ 17,341,459 $ (173,029) $ 24,959,050
Cash dividend paid (353,776) (353,776)
Cash dividend declared (353,986) (353,986)
Exercise of stock options 8,400 46,000 46,000
Net income for six
months 1,508,695 1,508,695
Net unrealized loss on
marketable equity securities
available for sale (168,068) (168,068)
Change in net unrealized
loss on securities
available for sale (253) (253)
--------- ---------- -------- ----------- ---------- -----------
BALANCE,June 30, 1994 3,539,860 $ 7,380,623 $ 455,997 $ 18,142,392 $ (341,350) $ 25,637,662
========= ========== ======== =========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
BALANCE,Jan. 1, 1995 3,547,565 $ 7,439,924 $ 455,997 $ 19,379,195 $ (403,850) $ 26,871,266
10% stock dividend 356,433 2,939,689 (2,939,689) -
Fractional shares of stock
dividend paid in cash (2,685) (2,685)
Exercise of stock 6,300 39,000 39,000
Common stock issued under
employer benefit/dividend
reinvestment plans 26,285 214,015 214,015
Net income for the six
months 1,682,927 1,682,927
Net unrealized loss on
marketable equity
securities available for sale 101,990 101,990
Change in net unrealized
loss on securities available
for sale 34,888 34,888
--------- ---------- -------- ----------- --------- -----------
BALANCE,June 30, 1995 3,936,583 $10,632,628 $ 455,997 $ 18,119,748 $ (266,972) $ 28,941,401
========= ========== ======== =========== ========= ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1995 1994
Cash Flows From Operating Activities:
Interest and fees received $16,037,077 $12,403,018
Service fees and other income received 2,129,917 1,447,535
Financing revenue received under leases 121,610 69,152
Interest paid (4,021,194) (2,469,582)
Cash paid to suppliers and employees (12,299,582) (8,460,461)
Income taxes paid (1,292,019) (667,164)
---------- ----------
Net Cash Provided by Operating Activities 675,809 2,322,498
---------- ----------
Cash Flows From Investing Activities:
Proceeds from maturity of investment
securities 25,960,835 14,058,568
Purchase of investment securities (28,102,962) (8,631,103)
Proceeds from maturity of deposits in
other financial institutions 495,000 1,472,000
Purchase of deposits in other financial
institutions (2,375,979) (890,975)
Net (increase) decrease in credit card and
revolving credit receivables (75,123) (20,040)
Recoveries on loans previously written off 325,969 55,849
Net (increase) decrease in loans 899,714 (30,843,406)
Net (increase) decrease in leases 946,365 486,373
Capital expenditures (2,009,715) (1,344,035)
Proceeds from sale of property, plant
and equipment 127,799 (4,797)
---------- ----------
Net Cash Used in Investing Activities (3,808,097) (25,661,566)
---------- ----------
Cash Flows From Financing Activities:
Net increase (decrease) in demand deposits,
NOW accounts, savings accounts, and money
market deposits 13,824,424 17,612,395
Net increase (decrease) in certificates of
deposit with maturities of three months or less 581,635 5,957,691
Net increase (decrease) in certificates of
deposit with maturities of more than three
months 33,591,669 6,624,830
Proceeds from sale of stock options 39,000 46,000
Proceeds from dividend reinvestment/employee
benefit plans 214,015 0
Principal payment on long term debt (17,849) (203,658)
Dividends paid (354,757) (711,175)
---------- ----------
Net Cash Provided byFinancing Activities 47,878,137 29,626,083
---------- ----------
Net Increase (Decrease) in Cash and Cash
Equivalents 44,745,849 6,287,015
Cash and Cash Equivalents at Beginning of Year 36,668,006 25,694,366
---------- ----------
Cash and Cash Equivalents at June 30, 1995 & 1994 $81,413,855 $31,981,381
========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
1995 1994
<S> <C> <C>
Net Income $ 1,682,927 $ 1,508,695
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and amortization 232,397 418,442
Provision for possible credit losses 1,499,536 863,650
(Gain) loss on disposition of property,
plant & equipment (104,709) 17,199
(Increase) decrease in taxes payable (258,569) 159,836
(Increase) decrease in other assets (2,152,255) 485,054
Increase (decrease) in interest receivable 44,530 (275,398)
(Increase) decrease in interest payable 213,542 231,181
Increase (decrease) in fees and other
receivables (144,752) (1,021,105)
(Increase) decrease in accrued expenses
and other liabilities (289,049) 62,122
Gain on sale of investments and other assets (47,789) (127,178)
---------- -----------
Total Adjustments (1,007,118) 813,803
---------- -----------
Net Cash Provided by Operating Activities $ 675,809 $ 2,322,498
========== ==========
DISCLOSURE OF ACCOUNTING POLICY
- -------------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on hand,
amounts due from banks and Federal funds sold. Generally, Federal funds are purchased and
sold for one-day periods.
See accompanying notes to financial statements
</TABLE>
<PAGE>
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1995 AND 1994
NOTE #1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
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 considered necessary for a fair
statement of the results for the interim periods presented have been included.
For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K the year ended
December 31, 1994. The results of operations for the six month period ended
June 30, 1995 are not necessarily indicative of the results to be expected for
the full year.
<PAGE>
<TABLE>
<CAPTION>
NOTE #2 - OTHER EXPENSES
The following is a breakdown of other expenses for each of the three month and six month periods ended June 30, 1995 and
1994.
Six Months Ended June 30, Three Months Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Data processing $ 403,208 $ 409,010 $ 185,485 $ 180,403
Marketing expenses 285,638 287,669 168,792 170,024
Office supplies, postage
and telephone 520,296 384,678 285,777 205,881
Bank insurance & assessment 591,685 524,189 302,309 252,813
Professional expenses 521,091 429,775 261,848 229,441
Provision for OREO loss 560,000 758,210 (10,000) 375,000
Other expenses 852,638 799,114 335,455 447,943
----------- ----------- ---------- ----------
Total Other Expenses $ 3,734,556 $ 3,592,645 $1,529,666 $1,861,505
=========== =========== ========== ==========
</TABLE>
<PAGE>
NOTE #3 - EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of shares
outstanding during each period. Stock options have been excluded from the
computation of earning per share, as their effect is immaterial.
The weighted average number of shares used to compute earnings per share was
3,929,463 in 1995 and 3,892,016 in 1994.
NOTE #4 - INCOME TAXES
The Bank adopted Statement No. 109 of the Financial Accounting Standard Board,
Accounting for Income Taxes, commencing January 1, 1993. This new statement
supersedes Statement No. 96 and among other things, changes the criteria for
the recognition and measurement of deferred tax assets. This adoption does not
create a material change in the financial statements of the Bank or the
Company.
NOTE #5 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement 107 is effective for financial
statements for fiscal years ended after December 15, 1992. The Statement
considers the fair value of financial instruments for both assets and
liabilities.
The following methods and assumptions were used to estimate the fair value of
financial instruments.
Investment Securities
For U.S. Government and U.S. Agency securities, fair values are based on market
prices. For other investment securities, fair value equals quoted market price
if available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities as the basis for a
pricing matrix.
Loans
The fair value for loans with variable interest rates is the carrying amount.
The fair value of fixed rate loans is derived by calculating the discounted
value of the future cash flows expected to be received by the various
homogeneous categories of loans. All loans have been adjusted to reflect
changes in credit risk.
Deposits
The fair value of demand deposits, savings deposits, savings accounts and NOW
accounts is defined as the amounts payable on demand at March 31, 1994. The
fair value of fixed maturity certificates of deposit is estimated based on the
discounted value of the future cash flows expected to be paid on the deposits.
Notes Payable
Rates currently available to the Bank for debt with similar terms and remaining
maturities are used to estimate the fair value of existing debt.
Commitments to Extend Credit and Standby Letter of Credit
The fair value of commitments is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present credit worthiness of the parties involved. For
fixed-rate loan commitments, fair value also considered the difference between
current levels of interest rates and committed rates.
The fair value of guarantees and letters of credit are based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with parties involved at June 30, 1995.
The estimated fair value of the Bank's financial instruments are as follows:
JUNE 30, 1995
Carrying Amount Fair Value
--------------- --------------
Financial Assets
Cash 84,487,421 84,487,421
Investment securities 33,096,856 32,616,487
Real estate loans 79,390,488 79,390,617
Installment loans 13,589,342 13,589,997
Commercial loans 177,030,011 177,029,694
Direct lease financing 2,856,161 2,855,698
Financial Liabilities
Deposits 349,236,116 350,157,116
Long term debt 227,249 227,249
Unrecognized Financial Instruments
Commitments to extend credit 47,431,252 47,431,252
Standby letters of credit 1,987,000 1,987,000
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
General
Foothill Independent Bancorp (the "Company") is a one-bank holding
company. Its principal asset is the common stock of, and its principal
operations are conducted by, Foothill Independent Bank, a California state
chartered bank (the "Bank"). The Bank accounts for substantially all of the
Company's revenues and income.
Results of Operations
Net Interest Income. Net interest income is the principal determinant of
a bank's income. Net interest income represents the difference or "margin"
between the interest earned on interest-earning assets, such as loans,
investment securities and Federal Funds sold, and the interest paid on
interest-bearing liabilities, principally deposits. The Bank's net interest
income increased by $488,000 or 8.9% in the three months ended June 30, 1995,
and by $1,833,000 or 18.2% in the six months ended June 30, 1995, as compared
to the same three and six month periods ended June 30, 1994. These increases
were primarily attributable to increases in interest and fees earned on loans,
and increases in interest earned on Federal Funds sold, which more than offset
increases in interest expense, in the three and six month periods ended June
30, 1995. The increases in interest and fees earned on loans, and in the
interest earned on Federal Funds sold, were attributable primarily to
increases in the volume of loans and in the volume of Federal Funds that were
outstanding during the quarter and six months ended June 30, 1995 and, to a
lesser extent, to increases in prevailing rates of interest during those
periods.
The increase in interest expense in the three and six months ended June
30, 1995 was attributable primarily to (i) an overall increase in the average
volume of interest-bearing deposits outstanding during these periods, as
compared to the corresponding periods of 1994, (ii) a change in the mix of
deposits due to increases in the average volume of time deposits which
generally bear interest at higher rates than savings deposits, and (iii)
somewhat higher interest rates paid on deposits as a result of increases in
market rates of interest due primarily to the credit tightening actions taken
by the Board of Governors of the Federal Reserve System in response to
concerns about inflation. The increases in the interest rates paid on
interest-bearing deposits resulted in a decline in the Bank's net interest
margin (i.e., net interest income expressed as a percentage of interest
income) to 71.8% and 73.7%, respectively, in the three and six month periods
ended June 30, 1995, from 79.4% and 78.8% in the corresponding periods of
1994.
Provision for Possible Loan Losses. The Bank follows the practice of
maintaining a reserve for possible losses on loans and leases (the "Loan Loss
Reserve" or the "Reserve") that occur from time to time as an incidental part
of the banking business. Write-offs of loans and leases (essentially
reductions in the carrying values of non-performing loans due to possible
losses on their ultimate recovery) are charged against the Reserve and the
Reserve is adjusted periodically to reflect changes in the volume of
outstanding loans and leases and increases in the risk of potential losses due
either to a deterioration in the condition of borrowers or in general economic
conditions. Additions to the Loan Loss Reserve are made though a charge
against income referred to as the "Provision for Loan and Lease Losses." The
Bank made provisions for potential loan and lease losses of $870,000 in the
second quarter of 1995, as compared to $735,000 in the corresponding quarter
of 1994. For the first six months of 1995 the provision for potential loan
and lease losses, inclusive of the provision made in the second quarter,
totaled $1,500,000, as compared to $864,000 for the first six months of 1994.
The increases in the provision during the quarter and six months ended June
30, 1995 were made primarily in response to the increase, since June 30, 1994,
in the average volume of outstanding loans and a continued "softness" in the
market values of commercial real estate in Southern California, which is
adversely affecting the values of the real properties that secure and may
become the source of repayment for some of the Bank's non-performing loans.
Other Income. Other income declined by $187,000 or 14% and by $72,000 or
2.9%, respectively, in the quarter and six months ended June 30, 1995, as
compared to the same quarter and six months of 1994, primarily as a result of
decreases in the volume of, and in the fees generated from, sales of SBA loans
as compared to 1994.
Other Expense. Other expense, consisting primarily of (i) salaries and
other employee expenses, (ii) occupancy expenses, (iii) furniture and
equipment expenses, and (iv) insurance, assessments and other operating and
miscellaneous expenses, was substantially unchanged in the quarter ended June
30, 1995 from the quarter ended June 30, 1994. For the six months ended June
30, 1995, other expense increase by $745,000 or 8% as compared to the
corresponding six month period of 1994. This increase was primarily
attributable to internal growth in the Bank's assets and operations subsequent
to June 30, 1994. In the first quarter of 1995, the Bank opened a new banking
office in Glendale, California and hired additional personnel to staff that
office. The opening of that office accounted for much of the increases in
occupancy and salary and other employee expenses in the six months ended June
30, 1995. In July 1995, the Bank opened another new office, in Corona,
California and expects to open a new banking office in Chino, California later
this year. Consequently, the Company expects to incur increases in occupancy
and salary and other employee expenses during the second half of 1995 related
to the opening of these two banking offices.
Provision for Income Taxes. The higher provision for income taxes in the
quarter and six months ended June 30, 1995, as compared to the provision for
income taxes in the corresponding periods of 1994, is attributable to the
increase in income before income taxes and the fact that the Company had less
tax-exempt income during the six months ended June 30, 1995 than it did in the
first six months of 1994.
Financial Condition and Liquidity
Between January 1, 1995 and June 30, 1995, the Company's total assets
increased by approximately $49,323,000, or 14.9%. That increase was primarily
the result of programs implemented to attract new customers and increase
deposits. The additional deposits that were generated by those programs were
used primarily to increase the Bank's liquidity and, to a lesser extent, to
fund new loans. As a result, the average volume of Federal Funds sold and
cash held at other banks increased significantly in the six months ended June
30, 1995. At June 30, 1995, the Company had $34,687,000 of cash held on
deposit at other financial institutions, $33,347,000 of investment securities
and $49,800,000 in Federal Funds sold.
For the quarter ended June 30, 1995, the average volume of time deposits
(TCD's) in denominations greater than $100,000 was approximately $5,915,000
higher than the average volume of those deposits for the quarter ended
December 31, 1994. Often, TCD's in denominations over $100,000 are of a
short-term duration and are quite sensitive to changes in interest rates. As
a result, reliance on these types of deposits can pose risks for banking
institutions. To reduce such risks, the Bank has made it a policy to seek
TCD's in denominations over $100,000 primarily from existing customers in its
local market areas and not to rely unduly on "brokered" deposits, which tend
to be more interest-sensitive and volatile. During the quarter ended June 30,
1995, the Bank has made an effort to attract more of these types of deposits,
primarily from customers in its existing markets, to increase the Bank's
liquidity.
In the first quarter of 1995, the Board of Directors decided to
discontinue payment of cash dividends in order to retain internally generated
funds to support internal growth of the Bank. In addition to the new banking
office opened in Glendale, California in March of 1995, the Bank opened a new
banking office in Corona, California on July 17, 1995 and has filed an
application for necessary regulatory approvals to open a new banking office in
Chino, California later this year. The Board of Directors intends to consider
, in the later part of 1995, whether to resume cash dividends. It is not
possible to predict at this time whether cash dividends will be resumed,
however, as that will depend on a number of factors, including the Company's
earnings and the growth of the Company's assets in 1995 and whether
opportunities for further growth may arise in the future. During the first
quarter of 1995, the Company did declare a 10% stock dividend on the Company's
outstanding shares, which was paid on May 1, 1995.
As a result of the increased earnings in the six months ended June 30,
1995 and the retention of internally generated funds, the Company's total
shareholders' equity increased by $2,070,000 to $28,941,000 at June 30, 1995
as compared to $26,871,000 at December 31, 1994 and the Bank's Tier 1 Capital
Ratio (the ratio of shareholders' equity-to-average assets) was 7.83% at June
30, 1995 compared to 7.77% at December 31, 1994, and is above the minimum
regulatory requirement applicable to the Bank of 5%.
Federal bank regulations also require federally insured banks to meet a
"risk-based capital ratio" of 8%. Under those regulations, a bank's assets
are weighted according to certain risk formulas; and, the higher the risk
profile of a bank's assets, the greater the amount of capital that is required
to meet the risk-based capital ratio. An asset that poses no risk, such as a
U.S. government security, is weighted at 0% and requires no capital; whereas,
a commercial loan or lease is weighted at 100% and requires 100% of the
capital requirement (i.e., 8%). Based upon the formulas set forth in the
risk-based capital regulations, the Bank's ratio of capital to risk-based
assets at June 30, 1995 was 11.56% , which is well in excess of the minimum
ratio required by these regulations.
<PAGE>
Part II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders was held on May 9, 1995.
(b) Set forth below is the name of (i) each director elected at the
meeting and (ii) the name of each other director whose term of office as a
director continued after the meeting. Opposite the names of each of the
directors elected at the meeting are the number of votes cast for their
election and the number of votes withheld. As the election was uncontested,
there were no broker non-votes.
Directors Elected at the Annual Meeting:
Name of Number of Number of
Nominee/Director Votes "For" Votes "Withheld"
---------------- ------------ ----------------
Richard H. Barker 2,936,002 17,228
Charles G. Boone 2,932,928 20,302
William V. Landecena 2,935,568 17,662
O.L. Mestad 2,930,590 22,640
Directors Continuing in Office. The terms of office of the following
incumbent directors extend to 1996 and, therefore, they did not stand for re-
election at the 1995 Annual Meeting: George E. Langley, Earl A. Musser,
Douglas F. Tessitor and Max E. Williams.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.Financial Data Schedule
(b) Reports on Form 8-K: None
<PAGE>
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.
Date: August 10, 1995 FOOTHILL INDEPENDENT BANCORP
By: /S/CAROL ANN GRAF
-----------------------------
CAROL ANN GRAF
First Vice President
Chief Financial Officer
Assistant Secretary
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered Page
Exhibit 27. Financial Data Schedule 16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S BALANCE SHEET AS OF JUNE 30, 1995 AND THE STATEMENT OF INCOME FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH BALANCE SHEET AND STATEMENT OF INCOME AND THE NOTES
THERETO.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 31,618 31,618
<INT-BEARING-DEPOSITS> 3,069 3,069
<FED-FUNDS-SOLD> 49,800 49,800
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 9,959 9,959
<INVESTMENTS-CARRYING> 23,388 23,388
<INVESTMENTS-MARKET> 23,373 23,373
<LOANS> 246,601 246,601
<ALLOWANCE> (4,244) (4,244)
<TOTAL-ASSETS> 380,585 380,585
<DEPOSITS> 349,236 349,236
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 2,180 2,180
<LONG-TERM> 227 227
<COMMON> 10,633 10,633
0 0
0 0
<OTHER-SE> 18,309 18,309
<TOTAL-LIABILITIES-AND-EQUITY> 380,585 380,585
<INTEREST-LOAN> 14,297 7,262
<INTEREST-INVEST> 1,818 1,084
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 16,115 8,346
<INTEREST-DEPOSIT> 4,210 2,353
<INTEREST-EXPENSE> 4,235 2,358
<INTEREST-INCOME-NET> 11,880 5,988
<LOAN-LOSSES> 1,500 870
<SECURITIES-GAINS> 8 8
<EXPENSE-OTHER> 10,043 4,809
<INCOME-PRETAX> 2,716 1,454
<INCOME-PRE-EXTRAORDINARY> 2,716 1,454
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,683 902
<EPS-PRIMARY> .43 .23
<EPS-DILUTED> .43 .23
<YIELD-ACTUAL> 0 0
<LOANS-NON> 0 0
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 0 0
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 0 0
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
