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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995 Commission File Number 0-16187
_____________ _______
FWB BANCORPORATION
_____________________________
(Exact name of small business issuer as specified in its charter)
Maryland 52-1332050
_______________________________ __________________________________
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1800 Rockville Pike, Rockville, Maryland 20852
______________________________________________
(Address of principal executive offices)
(301) 770-1300
____________________
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
______ ______
At July 31, 1995, there were 3,258,833 shares of Common Stock, Par
Value $.10 per share outstanding.
Transitional Small Business Disclosure Format
YES NO X
______ ______
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TABLE OF CONTENTS
_________________
PART I - FINANCIAL INFORMATION PAGE
______________________________ ____
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets.....................................1
Consolidated Statements of Income (Loss)........................2
Consolidated Statements of Changes in Stockholders' Equity......3
Consolidated Statements of Changes in Cash Flow ................4
Notes to Consolidated Financial Statements......................5
Item 2 - Management's Discussion and Analysis
Financial Condition ..........................................5-8
Results of Operations........................................9-10
PART II - OTHER INFORMATION
___________________________
Item 1 - Legal Proceedings.............................................11
Item 2 - Changes in Securities.........................................11
Item 3 - Defaults Upon Senior Securities...............................11
Item 4 - Submission of Matters to a Vote of Security Holders...........12
Item 5 - Other Information.............................................12
Item 6 - Exhibits and Reports on Form 8-K...........................12-13
SIGNATURES.............................................................14
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<TABLE>
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PART I - FINANCIAL INFORMATION
Item 1 - CONSOLIDATED FINANCIAL STATEMENTS
FWB BANCORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
June 30, December 31,
1995 1994 1994
________ ________ ____________
ASSETS
<S> <C> <C> <C>
Cash and due from banks $1,900 $1,484 $1,567
Federal funds sold 2,761 260 -
Investment securities:
Available for sale - at fair value 3,500 10,265 2,244
Held to maturity - at amortized cost 4,910 - 4,866
________ ________ ________
Total Investment Securities 8,410 10,265 7,110
________ ________ ________
Loans 29,664 23,517 27,002
Less allowance for loan losses (710) (658) (704)
________ ________ ________
Loans - net 28,954 22,859 26,298
________ ________ ________
Property and equipment 308 327 289
Other real estate owned, net 1,052 2,142 1,633
Accrued interest receivable 307 358 429
Other assets 674 80 4,087
________ ________ ________
TOTAL ASSETS $44,366 $37,775 $41,413
======== ======== ========
LIABILITIES
Non-interest bearing deposits $8,852 $8,049 $8,850
Interest bearing deposits 31,923 28,355 27,992
________ ________ ________
Total deposits 40,775 36,404 36,842
Accrued expenses and other
liabilities 159 76 114
Federal funds purchased and
securities sold under
agreements to repurchase - - 1,352
________ ________ ________
TOTAL LIABILITIES 40,934 36,480 38,308
________ ________ ________
STOCKHOLDERS' EQUITY
Common stock - $.10 par value, shares
authorized 7,500,000; shares outstanding
3,241,783; 2,758,833 and 3,178,833
respectively 324 276 318
Additional paid-in capital 8,444 7,541 8,331
Accumulated deficit (4,970) (5,215) (5,081)
Net unrealized holding loss on
investment securities (366) (1,307) (463)
________ ________ ________
TOTAL STOCKHOLDERS'EQUITY 3,432 1,295 3,105
________ ________ ________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $44,366 $37,775 $41,413
======== ======== ========
</TABLE>
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<TABLE>
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FWB BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
(unaudited)
For the Six Second Quarter
Months Ended Ended
June 30, June 30,
1995 1994 1995 1994
_________ _________ _______ _______
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $1,447 $1,031 $742 $514
Interest on investment securities:
U. S. Government, its agencies,
and sponsored entities 223 358 110 184
Interest on federal funds sold 66 25 46 18
_________ _________ _______ _______
Total interest income 1,736 1,414 898 716
_________ _________ _______ _______
INTEREST EXPENSE:
Interest on certificates of deposit of
$100,000 or more 56 15 41 7
Interest on other deposits 481 446 253 225
_________ _________ _______ _______
537 461 294 232
Interest on federal funds purchased and securities
sold under agreements to repurchase 2 2 --- ---
_________ _________ _______ _______
Total interest expense 539 463 294 232
_________ _________ _______ _______
NET INTEREST INCOME 1,197 951 604 484
PROVISION (RECOVERY) FOR LOAN LOSSES (30) (114) --- (64)
_________ _________ _______ _______
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,227 1,065 604 548
_________ _________ _______ _______
NON-INTEREST INCOME:
Service charges on deposit accounts 115 93 56 49
Gain on sale of OREO --- 10 --- 9
Other income 74 71 27 43
_________ _________ _______ _______
Total non-interest income 189 174 83 101
_________ _________ _______ _______
NON-INTEREST EXPENSE:
Salaries and employee benefits 637 562 316 295
Occupancy and equipment expense 235 246 117 131
Data processing services 98 86 51 42
FDIC insurance 45 64 22 26
Insurance 18 52 8 32
Legal fees 88 40 51 34
Other real estate owned expense 41 122 7 78
Other expenses 143 129 75 73
_________ _________ _______ _______
Total non-interest expense 1,305 1,301 647 711
_________ _________ _______ _______
INCOME (LOSS) BEFORE INCOME TAXES 111 (62) 40 (62)
APPLICABLE INCOME TAX --- --- --- ---
_________ _________ _______ _______
NET INCOME (LOSS) $111 ($62) $40 ($62)
========= ========= ======= =======
EARNINGS PER COMMON SHARE: $0.07 ($0.02) $0.02 ($0.02)
</TABLE>
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<TABLE>
<CAPTION>
FWB BANCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Additional Unrealized Total
Common Paid-In Accumulated Holding (Loss) Stockholders'
Stock Capital (Deficit) on Securities Equity
_________ __________ _____________ ______________ _____________
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $ 276 $ 7,541 $ (5,153) $ (192) $ 2,472
Net loss for the six months
ended June 30, 1994 --- --- (62) --- (62)
Net change in unrealized depreciation on
investment securities --- --- --- (1,115) (1,115)
_________ __________ _____________ ______________ _____________
BALANCE AT JUNE 30, 1994 $ 276 $ 7,541 $ (5,215) $ (1,307) $ 1,295
========= ========== ============= ============== =============
BALANCE AT DECEMBER 31, 1994 $ 318 $ 8,331 $ (5,081) $ (463) $ 3,105
Net income for the six months
ended June 30, 1995 --- --- 111 --- 111
Issuance of common stock at
$2.00 per share 6 113 --- --- 119
Net change in unrealized appreciation
on investment securities --- --- --- 97 97
_________ __________ _____________ ______________ _____________
BALANCE AT JUNE 30, 1995 $ 324 $ 8,444 $ (4,970) $ (366) $ 3,432
========= ========== ============= ============== =============
</TABLE>
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<TABLE>
<CAPTION>
FWB BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For Six Months Ended
June 30,
1995 1994
________ ________
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $111 ($62)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 50 54
Accretion and amortization of securities (5) (3)
Provision for loan losses (30) (114)
Net realized (gain) loss from sales of assets --- (10)
Other real estate owned - write downs 30 114
Net changes in:
Accrued interest receivable 122 (21)
Prepaid expenses and other assets (37) 52
Accrued expenses and other liabilities 45 6
Other - net 65 81
________ ________
Net cash provided by operating activities 351 97
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in federal funds sold (2,761) (260)
Purchases of available for sale securities (1,248) (2,012)
Proceeds from maturities/principal payments on
available for sale securities 50 250
Proceeds from sale of available for sale securities 4,000 1,300
Net increase in loans originated (3,151) (3,579)
Net increase in loans sold 167 347
Net decrease in loans purchased 293 2,987
Purchases of property and equipment (68) (23)
Proceeds from disposition of other real estate owned --- 666
________ ________
Net cash used by investing activities (2,718) (324)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 3,933 (459)
Net decrease in federal funds purchased and securities sold
under agreements to repurchase (1,352) ---
Proceeds from issuance of common stock 119 ---
________ ________
Net cash provided by financing activities 2,700 (459)
________ ________
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 333 (686)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,567 2,170
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,900 $1,484
======== ========
Supplemental disclosures:
Interest payments $487 $437
Income tax payments --- ---
Noncash investing and financing activities:
Transfers from loans to other real estate owned --- ---
Unrealized loss on investment securities available
for sale (366) (1,307)
</TABLE>
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NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the financial statements which have been prepared
in accordance with generally accepted accounting principles. The financial
statements contained herein, except for the financial statements as of December
31, 1994, are unaudited. In management's opinion, the financial statements
present fairly the financial condition of the Corporation and its subsidiary at
June 30, 1994 and June 30, 1995, and all adjustments necessary to fairly state
the results of operations and financial condition are reflected and that such
adjustments are of a normal recurring nature. The results of operations
presented for the six months ended June 30, 1995 are not necessarily indicative
of the results of operations to be expected for the remainder of the year.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
FWB Bancorporation's (the "Corporation") total assets at June 30, 1995 of
$44,366,000 reflected an increase of $2,953,000 or 7.13% from December 31, 1994
and an increase of $6,591,000 or 17.45% from June 30, 1994. The Corporation's
Stockholders' Equity of $3,432,000 at June 30, 1995 reflected an increase of
$327,000 or 10.53% from December 31, 1994. The increase is attributable to
additional capital raised under a private placement memorandum, earnings from
operations, and a reduction in net unrealized holding loss on investment
securities available for sale. See "Stockholders' Equity of the Corporation"
below.
Total loans of the Corporation's wholly owned financial institution subsidiary,
FWB Bank, (the "Bank") at June 30, 1995 of $29,664,000 reflected an increase of
$2,662,000 or 9.86% from December 31, 1994, and an increase of $6,147,000 or
26.14% from June 30, 1994. The increase in total loans in both periods reflects
the results of the Bank's increased marketing efforts to small business and
professionals.
Deposits of Bank at June 30, 1995 of $40,775,000 reflected an increase of
$3,933,000 or 10.68% from December 1994. This growth was primarily in interest
bearing deposits, which reflects depositors' shift to higher yielding products
and the Bank's efforts to increase deposits to meet loan demand. Certificates of
deposit over $100,000 account for 79.71% of the increase in total deposits since
December 1994. Approximately $2,800,000 will mature in the third quarter.
Non-interest bearing deposits continue to be approximately 22% of total
deposits.
Liquidity. The Bank's liquidity position, those assets invested in cash, federal
_________
funds, and obligations of the U.S. Government, its agencies, and sponsored
entities available for sale of $8,161,000 reflected an increase of $4,350,000
from December 31, 1994. This amount consists of an increase of $2,761,000 in
federal funds resulting from the receipt in the first quarter of $4,000,000 from
the proceeds of the sale of investment securities and an increase in
certificates of deposits. These funds were also used to fund loans in the first
two quarters of 1995 and increase holdings of fixed rate securities in the
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Bank's available-for-sale portfolio. Funds available through the Bank's sources
of short term borrowing, asset maturities, and available-for-sale securities are
considered adequate to meet current needs. In addition, the Bank will reduce its
non-performing assets through the sale of a portion of its contractual interest
in the sales proceeds from a property held as other assets as of July 31, 1995
which will contribute to liquidity as well as earnings. See "Non-Performing
Loans and Assets" below. Although this liquidity position remains adequate, the
Bank continues to evaluate the asset and liability mix to ensure that liquidity
needs are met.
The Bank's loan to deposit ratio was 72.75% at June 30, 1995 compared to 73.29%
at December 31, 1994.
Investment Activity. The Corporation's investment policy is implemented by the
___________________
Investment Committee, which is comprised of selected Board members and
management. Investments are chosen primarily to provide and maintain adequate
liquidity and to generate a positive return on investments without undue
interest or credit risk. The Corporation invests in various types of liquid
assets, including United States Treasury obligations, securities of federal
government agencies and government sponsored entities, certain certificates of
deposit, federal funds, and other qualifying liquid investments. In June 1995,
the Bank purchased two $500,000 fixed rate medium term agency issues maturing in
two and five years, respectively. Both issues have callable options within one
year. At June 30, 1995, the Corporation had $3,500,000 in investments
available-for-sale and $4,910,000 in investments held-to-maturity.
Allowance for Loan Losses. The allowance for loan losses is analyzed and
___________________________
reviewed by management and the Executive Committee of the Board of Directors on
a quarterly basis to determine if adequate reserves are maintained based on the
risk ratings and classifications related to the loan portfolio, prior credit
loss experience, and projected future losses.
The allowance for loan losses at June 30, 1995 was $710,000, or 2.39% of total
loans outstanding, compared to $704,000, or 2.61% at December 31, 1994. As of
June 30, 1995 the Bank's total charge-offs were $29,000, a significant decrease
of $89,000, or 75.42%, from the same the period in 1994. Year-to-date recoveries
in 1995 totaled $65,000. At June 30, 1995, the allowance for loan loss was
181.12% of non-performing loans compared to 164.50% at June 30, 1994. In
management's opinion, the allowance for loan losses as of June 30, 1995 is
adequate to cover potential losses that can be anticipated at this time based on
current risks and knowledge of the portfolio.
Non-Performing Loans and Assets. The Bank's non-performing assets totalling
________________________________
$1,994,000 consist of non-performing and restructured loans ($392,000), other
real estate owned ("OREO") ($1,052,000), and other assets ($550,000). The
percentage of non-performing assets to total assets continues to decrease to
4.49% at June 30, 1995 from 4.90% at December 31, 1994 and 6.73% at June 30,
1994. The property carried in other assets is one in which the Bank has a
contractual interest in the sales proceeds. A significant portion of this asset
has been disposed of as of July 31, 1995. Management intends to continue its
efforts to reduce non-performing assets including future sales of OREO and
upgrading of non-performing loans.
Non-performing loans, consisting of loans delinquent 90 days or more and in
non-accrual status, and restructured loans were $392,000 at June 30, 1995,
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compared to $397,000 at December 31, 1994 and $400,000 at June 30, 1994. This
amount consists primarily of one loan in the amount of $373,000 which has been
renegotiated and is currently performing within its terms. The percentage of
non-performing loans to total loans continues to decrease to 1.32% at June 30,
1995 compared to 1.47% at December 31, 1994 and 1.70% at June 30, 1994 as a
result of continued improvement in asset quality and overall growth of the loan
portfolio.
At June 30, 1995, OREO, net of valuation reserve, was $1,052,000 compared to
$1,633,000 at December 31, 1994, a decrease of $581,000 or 35.58%. This decrease
is primarily a result of the reclassification of the property discussed above in
the amount of $550,000 to other assets. The reclassification of this property
was the result of an evaluation done in conjunction with the Bank's recent
examination as of January 31, 1995. The Bank has a contractual interest in sales
proceeds from the property which is now owned by an affiliate of the Bank as a
result of foreclosure. As stated above, a significant portion of this asset has
been disposed of as of July 31, 1995. The portion which continues to be held as
other assets remains available for sale. In addition, a valuation reserve in the
amount of $30,000 was established in the first quarter of 1995 for another
property as a result of an updated appraisal. This property is currently
generating rental income on a monthly basis (see "Non-Interest Income and
Expense") and the lease agreement contains a purchase option at a price
significantly above the Bank's carrying value. It is management's belief that
the property will be sold for the option price at the end of the lease. It is
the Bank's policy to write down OREO property to fair value at the date of
foreclosure and to obtain appraisals on an annual basis. At June 30, 1995,
management believes OREO properties approximate fair value. There were no
additions to OREO in the current period.
Stockholders' Equity. Stockholders' equity of $3,432,000 at June 30, 1995
_____________________
increased $327,000 or 10.53% from December 31, 1994 and $2,137,000 or 165.02%
from June 30, 1994. The increase at June 30, 1995 included earnings from
operations in the amount of $111,000 in the period ended June 30, 1995 and the
raising of an additional $119,000 under a private placement offering initiated
in December 1994. This offering closed June 25, 1995. Also included in
stockholders' equity at June 30, 1995 is an unrealized holding loss of $34,000
for securities available for sale compared to $86,000 at December 31, 1994 and
$332,000 of unamortized loss on securities held to maturity compared to $377,000
at December 31, 1994. The unamortized loss on securities held to maturity
relates to the transfer of securities from the available for sale portfolio to
the held to maturity portfolio in 1994. This unrealized loss is being amortized
over the remaining life of the securities as an adjustment of yield.
Capital Adequacy and Regulatory Requirements. Since May 1994, the Bank has been
____________________________________________
subject to a Memorandum of Understanding ("MOU") which it has entered into with
the Maryland State Bank Commission (the "Commissioner") and the FDIC. The Bank
underwent a Tier I examination as of January 31, 1995 performed jointly by the
Commissioner and FDIC. The examination included all aspects of the Bank's
capital, assets, management, earnings, and liquidity. As a result, the
Commissioner and FDIC terminated the MOU effective June 22, 1995.
The FDIC has issued regulations that require Bank Insurance Fund ("BIF")-insured
banks, such as the Bank, to maintain minimum levels of capital. The regulations
establish a minimum leverage capital requirement of not less than 3% Tier 1
capital to total average assets ("leverage capital ratio") for banks in the
strongest financial and managerial condition, with a CAMEL Rating of 1 (the
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highest rating of the FDIC for banks). For all other banks, the minimum leverage
capital requirements is 3% plus an additional 100 to 200 basis points. Tier 1
capital is comprised of the sum of common stockholders' equity, noncumulative
perpetual preferred stock (including any related surplus) and minority interests
in consolidated subsidiaries, minus all intangible assets (other than qualifying
mortgage servicing rights and purchased credit card relationships). At June 30,
1995, the Bank's ratio of Tier I capital to total average assets equalled 8.39%,
which exceeded the minimum leverage capital ratio standard.
The FDIC also requires that banks meet risk-based capital standards. The Tier I
risk-based capital standard requires the maintenance of Tier I capital to
risk-weighted assets of 4% and total capital (which is defined as Tier 1 capital
and supplementary capital) to risk-weighted assets of 8%. The components of Tier
1 capital are discussed above. The components of supplementary capital currently
include cumulative perpetual preferred stock, long-term perpetual preferred
stock, mandatory convertible securities, subordinated debt and intermediate-term
preferred stock, and allowance for loan and lease losses. Allowance for loan and
lease losses included in supplementary capital is limited to a maximum of 1.25%
of risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of Tier 1 capital. In determining the
amount of risk-weighted assets, all assets, including certain off balance sheet
assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the
FDIC believes are inherent in the type of asset. Federal law also prohibits a
bank from paying a dividend if it will not meet applicable capital requirements
after the payment. The Federal Reserve Board ("FRB") also has adopted capital
adequacy guidelines applicable to the Corporation, which are substantially
similar to those of the FDIC for the Bank.
At June 30, 1995, the Bank's Tier I capital to risk-weighted assets was 12.12%
and the Bank's total capital to risk-weighted assets was 13.37%.
The FDIC, along with the other federal banking agencies, recently adopted a
regulation providing that the agencies will take account of the exposure of a
bank's capital and economic value to changes in interest rate risk in assessing
a bank's capital adequacy. According to the agencies, applicable considerations
include the quality of the bank's interest rate risk management process, the
overall financial condition of the bank and the level of other risks at the bank
for which capital is needed. The agencies have also issued for public comment a
proposed policy statement containing a framework to measure a bank's exposure to
interest rate risk using a supervisory model. The model applies a series of
interest rate risk weights to a bank's reported repricing and maturity balances.
These weightings estimate the price sensitivity of an institution's reported
balances to a 200 basis point increase and decrease in interest rates. The sum
of these balances, along with certain price sensitivity information that a bank
may be required to self-report, would result in a net risk-weighted exposure for
the bank. The agencies indicated an intent to ultimately adopt explicit minimum
requirements for interest rate risk into their risk-based capital standards
based on the proposed framework. Unless otherwise required by the agencies, a
bank with less than $300 million in assets with a CAMEL rating of 1 or 2 would
be exempt from the policy statement if specified percentages of the
institution's loans and securities reprice or mature within certain time frames.
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RESULTS OF OPERATIONS
For the six months ended June 30, 1995, the Corporation had net income of
$111,000, an increase of $173,000 or 279% from the corresponding period in 1994.
This increase in net income resulted primarily from an increase in net interest
income of $246,000. Included in net income for the period ended June 30, 1995,
is a reduction of $30,000 in the allowance for loan losses through the provision
for loan losses in the first quarter of 1995. This is compared to a reduction in
the allowance for loan losses through the provision of $114,000 in the
corresponding period of 1994, a decrease of $84,000.
The earnings per share were $0.07 for the six months ended June 30, 1995,
compared to loss per share of $0.02 for the corresponding period in 1994.
Net Interest Income. Net interest income is the difference between interest
____________________
income on earning assets and interest expense on interest bearing deposits and
funds purchased. Net interest income for the period ending June 30, 1995 of
$1,197,000 reflected an increase of $246,000 or 25.87% compared to the
corresponding period in 1994. Interest income for the period ending June 30,
1995 was $1,736,000, an increase of $322,000 or 22.77% from the same period last
year. This increase was primarily due to an increase in interest and fees on
loans of $416,000 at June 30, 1995 compared to June 30, 1994 which resulted from
an increase in average loans outstanding of $5,896,000 at June 30, 1995 compared
to June 30, 1994 and an overall rate increase. Interest income on investment
securities for the period ending June 30, 1995 of $223,000 reflected a decrease
of $135,000 or 35.71% compared to the corresponding period in 1994. This
decrease is primarily the result of the sale of investment securities in
December 1994 and, to a lesser extent, the repricing of floating rate securities
in the investments portfolio. The earnings on these securities will continue to
be affected by changes in the relationship of yields for assets at various
maturities as they reprice. As a result of growth in interest bearing deposits
and an overall rising rate environment experienced thus far this year, interest
expense of $539,000 reflected an increase $76,000 or 16.49% from the
corresponding period in 1994.
The average yield on earning assets for the period ended June 30, 1995, was
9.06% compared to 8.07% for the six months ended June 30, 1994. The average
interest rate paid on interest bearing deposits for the six months ended June
30, 1995, was 3.65% compared to 3.19% for the same period in 1994. Additionally,
the net interest margin (annualized net interest income divided by average
earning assets) was 6.25% for the period ended June 30, 1995 compared to 5.42%
for the corresponding period in 1994.
Provision for Loan Loss. A reduction of $30,000 in the allowance for loan losses
_______________________
through a provision for loan loss in the period ended March 31, 1995 was the
result of management's evaluation that the allowance was more than adequate as
credit quality improved and recoveries were realized. No future reductions of
the allowance for loan losses through the provision for loan loss are
anticipated.
Non-Interest Income and Expense. Non-interest income for the period ended June
________________________________
30, 1995, was $189,000 compared to $174,000 for the six months ended June 30,
1994, an increase of $15,000 or 8.62%. The increase for the six months ended
June 30, 1995 compared to the corresponding period in 1994 was due primarily to
an increase in service charges on deposit accounts. Also included in
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non-interest income in the period ending June 30, 1995 is $9,000 in rental
income from a property carried as OREO.
Non-interest expense for the period ended June 30, 1995 of $1,305,000 reflected
only a slight increase of $4,000 or 0.31% compared to the corresponding period
of 1994. The increase in salaries and benefits expense of $75,000 at June 30,
1995 compared to the same period of 1994 resulted from the addition of an
internal auditor and a retail sales executive hired to further develop the
marketing efforts of the Bank's branch network. Legal expenses of $88,000 in the
period ended June 30, 1995 increased $48,000 compared to the corresponding
period of 1994 due to litigation arising from normal banking activities.
Expenses associated with OREO at June 30, 1995 of $41,000 decreased $81,000 or
66.39% from the corresponding period in 1994 due to a reduction in the amount of
OREO carried. In addition, the Bank's expense for FDIC insurance for the period
ending June 30, 1995 of $45,000 decreased by $19,000 or 29.69% compared to the
same period in 1994 due to its improved supervisory rating and well capitalized
position. The Corporation's expense for other insurance for the period ending
June 30, 1995 of $18,000 decreased by $34,000 compared to the corresponding
period in 1994 due to an re-evaluation of the Bank's insurance coverages and
premiums due to its improved financial condition and results of operations.
Applicable Income Tax. Net operating loss carryforwards are offsetting current
_____________________
tax expense.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Except as discussed below, the Company and Bank are not currently
involved in any legal proceedings which management believes will have a
material effect on its financial condition or results of operations.
The Bank filed suit against two borrowers (the "Borrowers") on January
28, 1992 in the Circuit Court for Montgomery County seeking a judgment
of $421,921.28 for the principal plus interest and late charges owed to
the Bank on the Borrowers' note (the "Note"). In addition, the Bank
sought and received a prejudgment attachment of an account in the name
of the Borrowers held at Shearson Lehman Brothers which was pledged as
collateral for the loan. In May 1992, the Borrowers filed for
protection under Chapter 11 of the United States Bankruptcy Code.
A motion by the Borrowers in the Bankruptcy proceeding seeking relief
from the automatic stay to pursue the action in state court was granted
and in December 1992 the Borrowers filed answers and counterclaims in
both the State Court and Bankruptcy actions. The counterclaims alleged
that the Bank breached its contract with the Borrowers when it
allegedly indicated in 1990 that it would not extend the Note for the
6-month period provided for in the Note; the Bank intentionally
misrepresented the ability of the Borrowers to hypothecate the Shearson
Lehman account; the Bank intentionally interfered with the Borrowers'
contracts; and the Bank violated Sections 1-302 and 5-807 of the
Maryland Financial Institutions Code. In the Bankruptcy action, the
Borrowers also alleged that the Bank violated the Equal Credit
Opportunity Act ("ECOA"). The Bankruptcy Court dismissed the ECOA
counterclaim with prejudice and other counterclaims without prejudice
to be resolved in the State Court litigation.
In 1993, the Borrowers filed a complaint against the Bank in the
Bankruptcy case requesting that proceeds of the Shearson Lehman account
be turned over to the Borrowers to fund a bankruptcy plan. The Bank
filed a counterclaim for a declaratory judgment that the Bank has a
perfected security interest in the account and for dismissal of the
complaint. (The Borrowers' complaint for turnover and the Bank's
counterclaim may be referred to collectively as the "Turnover Action".)
The Bankruptcy Court granted summary judgment in favor of the Bank in
the Turnover Action, ruling that the Bank has a perfected security
interest in the account. The Bankruptcy Court also denied motions for
reconsideration filed by the Borrowers and their counsel. In a
memorandum opinion very favorable to the Bank, the Bankruptcy Court
raised the issue that the Borrowers may be estopped from pursuing their
misrepresentation claim in the State Court litigation due to the
Borrowers' failure to raise that claim in the Turnover Action.
On or about August 15, 1994, the Borrowers' bankruptcy was converted to
a Chapter 7 proceeding. A Chapter 7 Trustee has been appointed to
liquidate the assets of the estate. The Bank has submitted an offer to
the Trustee for the settlement of the State Court litigation, which
offer is under review by the Trustee.
ITEM 2 - CHANGES IN SECURITIES N/A
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES N/A
11
<PAGE> 14
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of FWB Bancorporation (the
"Corporation") was held at FWB Bank, 1800 Rockville Pike, Rockville,
Maryland 20852, on April 6, 1995.
ELECTION OF DIRECTORS
The following persons were elected as Directors of the Corporation, to
serve for a period of one year.
<TABLE>
<CAPTION>
NAME VOTES FOR VOTES WITHHELD
<S> <C> <C>
Wilma E. Bernstein 2,327,945 254,702
Abbey J. Butler 2,327,945 254,702
Steven K. Colliatie 2,327,928 254,719
Melvyn J. Estrin 2,327,945 254,702
Nella C. Manes 2,327,461 255,186
Avis Y. Pointer 2,327,945 254,702
Joan H. Schonholtz 2,327,461 255,186
</TABLE>
ITEM 5 - OTHER INFN/AATION N/A
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
(2) Plan of purchase, sale, reorganization, arrangement,
liquidation or succession: N/A
(3) (i) Articles of Incorporation: Incorporated by reference to
Exhibit 3.1(a) of the issuer's Form 10-KSB for the period
ending December 31, 1994 filed with the Commission.
(ii) By-Laws: Incorporated by reference to Exhibit 3.2 of
the issuer's Form 10-KSB for the period ending December 31,
1994 filed with the Commission.
(4) Instruments defining the rights of security holders,
including indentures: N/A
(10) Material contracts: N/A
(11) Statement regarding computation of per share earnings:
Earnings per share have been computed based upon 3,227,455
shares, the weighted average number of shares outstanding
during the period ending June 30, 1995.
(15) Letter regarding unaudited interim financial information:
N/A
(18) Letter regarding change in accounting principles: N/A
(19) Report furnished to security holders: N/A
12
<PAGE> 15
(22) Published report regarding matters submitted to vote of
security holders: N/A
(23) Consents of experts and counsel: N/A
(24) Power of attorney: N/A
(27) Financial Data Schedule: Filed herewith.
B. Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of
1995.
13
<PAGE> 16
SIGNATURES
__________
In accordance withn the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FWB BANCORPORATION
(Registrant)
Date: August 4, 1995 /s/ Steven K. Colliatie
_______________________
Steven K. Colliatie
President
Date: August 4, 1995 /s/ Barbara L. Martinez
_______________________
Barbara Martinez
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q and is qualified in its entirety by reference to such fiancial statements.
</LEGEND>
<CIK> 0000719488
<NAME> FWB BANCORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 1,900
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,761
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,500
<INVESTMENTS-CARRYING> 4,910
<INVESTMENTS-MARKET> 0<F1>
<LOANS> 29,664
<ALLOWANCE> 710
<TOTAL-ASSETS> 44,366
<DEPOSITS> 40,775
<SHORT-TERM> 0
<LIABILITIES-OTHER> 159
<LONG-TERM> 0
<COMMON> 324
0
0
<OTHER-SE> 3,108
<TOTAL-LIABILITIES-AND-EQUITY> 44,366
<INTEREST-LOAN> 1,447
<INTEREST-INVEST> 223
<INTEREST-OTHER> 66
<INTEREST-TOTAL> 1,736
<INTEREST-DEPOSIT> 537
<INTEREST-EXPENSE> 539
<INTEREST-INCOME-NET> 1,197
<LOAN-LOSSES> (30)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,305
<INCOME-PRETAX> 111
<INCOME-PRE-EXTRAORDINARY> 111
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
<YIELD-ACTUAL> 6.25
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 392
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 704
<CHARGE-OFFS> 29
<RECOVERIES> 65
<ALLOWANCE-CLOSE> 710<F2>
<ALLOWANCE-DOMESTIC> 112
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 598<F3>
<FN>
<F1>Not broken out in 10-QSB.
<F2>Allowance for loan loss at end of period includes a reduction in the allowance
through the provision for loan losses.
<F3>All unallocated is for domestic loans.
</FN>
</TABLE>
