<PAGE> 1
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 March 31, 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 (909) 599-9351
----------------------------------
(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 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 XX 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.
3,931,103 shares of Common Stock
as of May 10, 1995
Page 1 of 15 pages
<PAGE> 2
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
------ ----------- -----------
<S> <C> <C>
Cash and due from banks $ 27,764,001 $ 29,218,006
Federal Funds Sold 23,600,000 7,450,000
------------ ------------
Total Cash and Cash Equivalents 51,364,001 36,668,006
------------ ------------
Interest bearing deposits at other banks 1,287,000 1,188,000
------------ ------------
Investment securities held to maturity (approximate market
value $14,872,498 in 1995 and $20,191,254 in 1994)
U.S. Treasury 10,988,342 16,454,851
U.S. Government agencies 1,497,748 996,104
Municipal agencies 2,507,822 2,759,135
Other Securities 250,000 250,000
------------ ------------
Total Investment Securities held to maturity 15,243,912 20,460,090
------------ ------------
Investment securities available for sale 15,096,243 10,517,101
------------ ------------
Loans, net of unearned discount and
prepaid points and fees 240,515,492 245,289,323
Direct Lease Financing 3,436,742 3,726,697
Less reserve for possible loan and lease losses (3,608,208) (3,145,193)
------------ ------------
Total Loans & Leases, net 240,344,026 245,870,827
------------ ------------
Bank premises and equipment 6,588,937 6,626,777
Accrued interest 2,340,654 2,393,707
Other real estate owned, net of allowance for possible losses
of $1,085,503 in 1995 and $515,503 in 1994 5,269,995 2,469,469
Cash surrender value of life insurance 2,921,989 2,862,019
Prepaid expenses 712,464 527,170
Deferred income taxes 1,103,663 1,103,663
Other assets 960,569 574,830
------------ ------------
TOTAL ASSETS $343,233,453 $331,261,659
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Demand deposits $ 78,469,730 $ 77,385,387
Savings and NOW deposits 83,606,016 78,966,296
Money market deposits 43,677,968 41,954,406
Time deposits in denominations of $100,000 or more 47,492,156 51,294,361
Other time deposits 59,988,442 51,621,654
------------ ------------
Total deposits 313,234,312 301,222,104
Accrued employee benefits 992,562 992,955
Accrued interest and other liabilities 919,230 1,930,236
Long-term debt 236,284 245,098
------------ ------------
Total Liabilities 315,382,388 304,390,393
------------ ------------
Stockholders' Equity
Unrealized gain (loss) on marketable equity securities (356,716) (399,610)
Unrealized gain (loss) on securities available for sale 12,978 (4,240)
Stock dividend to be distributed 2,941,925 0
Contributed capital
Capital stock - authorized 12,500,000 shares without
par value; issued and outstanding 3,566,005 shares
in 1995 and 3,547,565 in 1994 7,578,589 7,439,924
Additional Paid-in Capital 455,997 455,997
Retained Earnings 17,218,292 19,379,195
------------ ------------
Total Stockholders' Equity 27,851,065 26,871,266
------------ ------------
Total Liabilities and Stockholders' Equity $343,233,453 $331,261,659
============ ============
</TABLE>
See accompanying notes to financial statements
Page 2 of 15 pages
<PAGE> 3
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
---------- -----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $7,035,096 $5,272,193
Interest on investment securities
U.S. Treasury 174,576 304,579
Obligations of other U.S. government
agencies 181,453 61,809
Municipal agencies 23,037 20,797
Other Securities 34,267 34,560
Interest on deposits 16,941 14,420
Interest on Federal Funds sold 254,150 65,101
Lease financing income 49,219 48,846
---------- ----------
Total Interest Income 7,768,739 5,822,305
---------- ----------
INTEREST EXPENSE
Interest on savings & NOW deposits 309,874 269,432
Interest on money market deposits 280,658 219,831
Interest on time deposits in denominations
of $100,000 or more 602,478 427,762
Interest on other time deposits 665,231 347,656
Interest on borrowings 18,637 9,973
---------- ----------
Total Interest Expense 1,876,878 1,274,654
---------- ----------
Net Interest Income 5,891,861 4,547,651
PROVISION FOR LOAN AND LEASE LOSSES 630,000 128,650
---------- ----------
Net Interest Income After Provisions
for Loan and Lease Losses 5,261,861 4,419,001
---------- ----------
OTHER INCOME
Fees and service charges 1,071,182 982,591
Other 163,461 137,600
---------- ----------
Total other income 1,234,643 1,120,191
---------- ----------
OTHER EXPENSES
Salaries and benefits 2,273,719 2,149,899
Occupancy expenses, net of revenue
of $30,546 in 1995 and $23,265 in 1994 441,141 308,319
Furniture and equipment expenses 314,457 300,136
Other operating expenses (Note 2) 2,204,890 1,750,321
---------- ----------
Total other expenses 5,234,207 4,508,675
---------- ----------
INCOME BEFORE INCOME TAXES 1,262,297 1,030,517
---------- ----------
INCOME TAXES
Current payable 481,275 355,855
Deferred 0 (5,355)
---------- ----------
Total income taxes 481,275 350,500
---------- ----------
NET INCOME $ 781,022 $ 680,017
========== ==========
EARNINGS PER SHARE OF COMMON STOCK $0.22 $0.19
(Note 3) ========== ==========
</TABLE>
See accompanying notes to financial statements
Page 3 of 15 pages
<PAGE> 4
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
VALUATION
NUMBER OF ADDITIONAL ALLOWANCE
SHARES CAPITAL PAID-IN RETAINED FOR
OUTSTANDING STOCK CAPITAL EARNINGS INVESTMENTS 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 declared (353,776) (353,776)
Exercise of stock options 6,300 33,000 33,000
Net income for three months 680,017 680,017
Change in net unrealized loss
on marketable equity securities (115,225) (115,225)
--------- ---------- -------- ----------- --------- -----------
BALANCE, March 31, 1994 3,537,760 $7,367,623 $455,997 $17,667,700 $(288,254) $25,203,066
========= ========== ======== =========== ========= ===========
BALANCE, January 1, 1995 3,547,565 $7,439,924 $455,997 $19,379,195 $(403,850) $26,871,266
10% stock dividend declared 2,941,925 (2,941,925) -
Exercise of stock options 6,300 39,000 39,000
Common stock issued under
employer benefit and dividend
reinvestment plans 12,140 99,665 99,665
Net income for the three months 781,022 781,022
Net unrealized loss on marketable
equity securities available for sale 42,894 42,894
Change in net unrealized loss
on securities available for sale 17,218 17,218
--------- ----------- -------- ----------- --------- -----------
BALANCE, March 31, 1995 3,566,005 $10,520,514 $455,997 $17,218,292 $(343,738) $27,851,065
========= =========== ======== =========== ========= ===========
</TABLE>
See accompanying notes to financial statements
Page 4 of 15 pages
<PAGE> 5
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1995 1994
- ------------------------------------------------ ------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Interest and fees received $ 7,716,905 $ 5,645,012
Service fees and other income received 1,099,092 1,002,352
Financing revenue received under leases 49,219 34,560
Interest paid (1,961,733) (1,212,492)
Cash paid to suppliers and employees (6,003,524) (4,070,810)
Income taxes paid (415,968) (409,715)
------------ ------------
Net Cash Provided by Operating Activities 483,991 988,907
------------ ------------
Cash Flows From Investing Activities:
Proceeds from maturity of investment securities 11,840,000 5,221,563
Purchase of investment securities (11,077,524) (3,694,173)
Proceeds from maturity of deposits in
Other financial institutions 297,000 1,090,000
Purchase of deposits in other financial
institutions (396,000) (692,975)
Net (increase) decrease in credit card and
revolving credit receivables 87,125 (37,030)
Recoveries on loans previously written off 101,366 32,216
Net (increase) decrease in loans 4,418,355 (10,819,323)
Net (increase) decrease in leases 337,901 (150,086)
Capital expenditures (2,812,696) (2,431,725)
Proceeds from sale of property, plant and equipment 75,581 24,638
------------ ------------
Net Cash Used in Investing Activities 2,871,108 (11,456,895)
------------ ------------
Cash Flows From Financing Activities:
Net increase (decrease) in demand deposits, NOW accounts,
savings accunts, and money market deposits 7,442,678 5,033,334
Net increase (decrease) in certificates of deposit
with maturities of three months or less (9,371,283) (4,469,842)
Net increase (decrease) in certificates of deposit
with maturities of more than three months 13,935,866 14,778,960
Proceeds from sale of stock options 39,000 33,000
Proceeds from dividend reinvestment 99,665 0
Principal payment on long term debt (8,814) (195,478)
Dividends paid (354,757) (357,399)
------------ ------------
Net Cash Provided by Financing Activities 11,782,356 14,822,575
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 15,137,455 4,354,587
Cash and Cash Equivalents at Beginning of Year 36,668,006 25,694,366
------------ ------------
Cash and Cash Equivalents at March 31, 1995 & 1994 $ 51,805,461 $ 30,048,953
============ ============
</TABLE>
See accompanying notes to financial statements
Page 5 of 15 pages
<PAGE> 6
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Net Income $ 781,022 $ 680,017
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and amortization 50,009 204,402
Provision for possible credit losses 630,000 128,650
(Gain) loss on disposition of property, plant & equipment (75,581) (13,038)
(Increase) decrease in taxes payable 65,307 (59,215)
(Increase) decrease in other assets (177,518) 179,800
Increase (decrease) in interest receivable (2,615) (142,733)
(Increase) decrease in interest payable (84,855) 62,162
Increase (decrease) in fees and other receivables (59,970) (45,982)
(Increase) decrease in accrued expenses and other
liabilities (611,808) (5,156)
Gain on sale of investments and other assets (30,000) 0
--------- ---------
Total Adjustments (297,031) 308,890
--------- ---------
Net Cash Provided by Operating Activities $ 483,991 $ 988,907
========= =========
</TABLE>
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
Page 6 of 15 pages
<PAGE> 7
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 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 for the year ended
December 31, 1994. The results of operations for the three month period ended
March 31, 1995 are not necessarily indicative of the results to be expected for
the full year.
NOTE #2 - OTHER EXPENSES
The following is a breakdown of other expenses for the three months ended
March 31, 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Data processing $ 217,723 $ 228,607
Marketing expenses 116,846 117,645
Office supplies, postage
and telephone 234,519 178,797
Bank insurance & Assessment 289,376 271,376
Professional expenses 259,243 200,334
Provision for OREO loss 570,000 383,210
Other expenses 517,183 370,352
--------------------------------
Total Other Expenses $2,204,890 $1,750,321
================================
</TABLE>
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 earnings per share, as their effect is immaterial.
The weighted average number of shares used to compute earnings per share was
3,555,986 in 1995 and 3,536,547 in 1994.
Page 7 of 15 pages
<PAGE> 8
Notes to Condensed Consolidated Financial Statements (continued)
NOTE #4 - INCOME TAXES
The Bank adopted Statement No. 109 of the Financial Accounting Standards 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 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement 107 is effective for financial
statements for fiscal years ending 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 catagories 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.
Page 8 of 15 pages
<PAGE> 9
Notes to Condensed Consolidated Financial Statements (continued)
Note #5 - Disclosures about Fair Value of Financial Instruments (Continued)
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 creditworthiness 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 March 31, 1995.
The estimated fair value of the Bank's financial instruments are as follows:
<TABLE>
<CAPTION>
March 31, 1995
--------------
Carrying Amount Fair Value
--------------- ------------
<S> <C> <C>
Financial Assets
Cash $ 52,651,001 $ 52,651,001
Investment securities 30,090,155 29,968,741
Real estate loans 97,459,428 97,460,189
Installment loans 13,384,232 13,383,924
Commercial loans 130,741,166 130,739,454
Direct lease financing 3,423,784 3,423,382
Financial Liabilities
Deposits 313,234,312 313,398,312
Long term debt 236,284 236,284
Unrecognized Financial Intruments
Commitments to extend credit 53,478,012 53,478,012
Standby letters of credit 1,848,676 1,848,676
</TABLE>
Page 9 of 15 pages.
<PAGE> 10
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 and
investment securities, and the interest paid on interest-bearing liabilities,
principally deposits. The Bank's net interest income for the three months ended
March 31, 1995 increased by $1,344,000 or 30.0% as compared to the three months
ended March 31, 1994, primarily as a result of a $1,763,000 increase in interest
and fees earned on loans, which was only partially offset by a $602,000 increase
in interest paid on deposits. The increase in interest and fees earned on loans
was primarily attributable to an increase in the volume of outstanding loans
and, to a lesser extent, increases in interest rates.
The increase in interest expense in the three months ended March 31,
1995 was attributable primarily to (i) an increase in the average volume of
deposits outstanding during the quarter, as compared to the same quarter of
1994, including an increase in the average volume of outstanding time deposits,
which generally bear interest at higher rates than savings deposits, and (ii)
an increase in the rates of interest paid on interest-bearing liabilities,
principally deposits, as a result of increases in market rates of interest due
primarily to credit-tightening actions taken by the Board of Governors of the
Federal Reserve System in response to concerns about inflation. The increases
in the volume of, and in 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 75.8% for the quarter
ended March 31, 1995 from 78.1% in the same period of 1994.
Provision for Possible Loan Losses. The Bank follows the practice of
maintaining a reserve (the "Loan Loss Reserve" or the "Reserve") for possible
losses on loans or leases that occur from time to time as a incidental part of
the banking business. Write-offs of loans and leases (essentially reductions in
the carrying values of non-performing loans or leases 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 to deterioration in
the condition of borrowers or in the value of collateral securing outstanding
loans or in general economic conditions. Additions to the Loan Loss Reserve are
made through a charge against income referred to as the "Provision for Loan and
Lease Losses." A higher Provision for Loan and Lease Losses was made in the
first quarter of 1995, than was made in the same quarter of 1994, because of an
increase in the volume of loans outstanding during the first quarter of 1995,
as compared to the same quarter of 1994, and the lingering effects of the
economic recession that impacted southern California during the past three
years which has adversely affected the ability of some borrowers to repay
10 of 15 Pages
<PAGE> 11
their loans and has continued to depress the value of real properties
securing some of the Bank's non-performing loans. Despite these conditions,
loan write-offs during the quarter ended March 31, 1995 aggregated $268,000,
which is eleven hundredths of one percent (0.11%) of the Bank's average volume
of loans and leases outstanding during such quarter. This compares to loan
write-offs of $180,000, which was nine hundredths of one percent (0.09%) of the
average volume of loans and leases outstanding, during the quarter ended March
31, 1994.
Other Income. Other income increased by $114,000 or 10.2% in the quarter
ended March 31, 1995, as compared to the same quarter of 1994. That was
primarily due to a $89,000 increase in fees and charges generated primarily from
deposit account activity and appraisal and other ancillary services provided to
Bank customers.
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, increased by approximately $726,000 or 16.1% during the three month
period ended March 31, 1994. This increase in Other Expense was attributable
primarily to internal growth in the Bank's operations subsequent to the first
quarter of 1994. During the second quarter of 1994, the Bank opened a new and
larger banking office in Covina, California to replace its West Covina banking
office, and in the first quarter of 1995 opened a new banking office in
Glendale, California. The Bank also hired additional personnel to staff those
offices. As a result, occupancy expense, salaries and other employee expenses
and other miscellaneous expenses were higher in the first quarter of 1995 than
in the same quarter of 1994. Also contributing to the increase in Other Expense
was an increase of $187,000 in the Bank's reserve for possible losses on future
dispositions of real properties acquired on foreclosures of defaulted loans.
However, as a percentage of operating income (Net Interest Income plus Other
Income), Other Expense was lower in the first quarter of 1995 than in the same
quarter of 1994.
The higher provision for income taxes in the three months ended March 31,
1995, as compared to the provision for income taxes in the same three months of
1994, is due to the increase in pre-tax income and an increase in the Company's
overall tax rate to approximately 38% due to a reduction in the proportion of
the Bank's interest income that is exempt from Federal income taxes.
Financial Condition and Liquidity
Between January 1, 1995 and March 31, 1995, the Company's total assets
increased by approximately $11,972,000 or 3.6%. The Company continued to have
adequate cash resources with approximately $29,051,000 of cash held on deposit
at other financial institutions, $30,340,000 of investment securities and
$23,600,000 in federal funds sold at March 31, 1995. The average volume of loans
and leases outstanding during the three months ended March 31, 1995 was
approximately 24.3% higher than for the same period in 1994.
During the quarter ended March 31, 1995, the average volume of time
deposits in denominations greater than $100,000 was approximately $13,764,000
higher than the average volume of those deposits during the quarter ended March
31, 1994. Generally, 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
11 of 15 Pages
<PAGE> 12
institutions. To reduce such risks, the Bank has made it a policy to seek
such deposits 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. In March 1994, the Bank did acquire $8,560,000
of TCD's in denominations greater than $100,000, of which $5,130,000 will
mature in March 1997 and the remaining $3,430,000 will mature in March 1999. In
January 1995, the Bank acquired an additional $2,500,000 of TCD's in
denominations greater than $100,000 which will mature in January 1998. The
decision to acquire these deposits was made to fix the cost of funds in
anticipation of increasing interest rates and to provide a source of additional
funds for anticipated withdrawals of short term TCD's over $100,000.
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 opening a new
banking office in Glendale, California, the Bank has filed applications for
necessary regulatory approvals to open new banking offices later this year in
the cities of Chino and Corona, California. The Board of Directors intends to
consider, in the latter 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 will may arise in the future. During the
quarter ended March 31, 1995, the Company did declare a 10% stock dividend on
the Company's outstanding shares, which was paid on May 1, 1995.
Primarily as a result of the increase in earnings in the first quarter
and the retention of internally generated funds, the Company's total
shareholders equity increased by $980,000 to $27,851,000 at March 31, 1995 as
compared to $26,871,000 at December 31, 1994 and the Bank's tier 1 capital ratio
(shareholders' equity-to-total average assets) rose to 8.04% at March 31, 1995
as compared to 7.77% at December 31, 1994, which is above minimum bank
regulatory requirements 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 March 31, 1995 was 11.25%,
which is well in excess of the minimum ratio required by these regulations.
ITEM 6, EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
27. Financial Data Schedule
(B) Reports on Form 8-K: None.
12 of 15 Pages
<PAGE> 13
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: May 10, 1995 FOOTHILL INDEPENDENT BANCORP
By: /s/ CAROL ANN GRAF
---------------------------------
CAROL ANN GRAF
First Vice President
Chief Financial Officer
Assistant Secretary
13 of 15 Pages
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered Page
- ------- -------------
<S> <C>
Exhibit 27. Financial Data Schedule 15
</TABLE>
14 of 15 Pages
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTIANS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
REGISTRANT'S BALANCE SHEET AS OF MARCH 31, 1995 AND THE STATEMENT OF INCOME FOR
THE THREE MONTHS ENDED MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH BALANCE SHEET AND STATEMENT OF INCOME AND THE NOTES THERETO.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 27,764
<INT-BEARING-DEPOSITS> 1,287
<FED-FUNDS-SOLD> 23,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,096
<INVESTMENTS-CARRYING> 15,244
<INVESTMENTS-MARKET> 14,872
<LOANS> 243,952
<ALLOWANCE> 3,608
<TOTAL-ASSETS> 343,233
<DEPOSITS> 313,234
<SHORT-TERM> 0
<LIABILITIES-OTHER> 919
<LONG-TERM> 236
<COMMON> 10,977
0
0
<OTHER-SE> 16,872
<TOTAL-LIABILITIES-AND-EQUITY> 343,233
<INTEREST-LOAN> 7,084
<INTEREST-INVEST> 685
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7,769
<INTEREST-DEPOSIT> 1,857
<INTEREST-EXPENSE> 1,877
<INTEREST-INCOME-NET> 5,892
<LOAN-LOSSES> 630
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,234
<INCOME-PRETAX> 1,262
<INCOME-PRE-EXTRAORDINARY> 781
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 781
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
