<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
NOVEMBER 13, 1997
Date of Report
(Date of Earliest Event Reported)
WESTERN BANCORP
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 0-13551 95-3863296
(State or Other Jurisdiction (Commission File Number) I.R.S. Employer
of Incorporation) Identification
No.)
</TABLE>
<TABLE>
<S> <C>
4100 NEWPORT PLACE, SUITE 900, NEWPORT BEACH, 92660
CA
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number (714) 863-2300
NOT APPLICABLE
(Former Name or Former Address, if Changed since Last Report)
- --------------------------------------------------------------------------------
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<PAGE>
ITEM 5. OTHER EVENTS.
Item 5 includes the following:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
A. SC Bancorp Merger..................................................................................... 2
B. Santa Monica Bank Merger.............................................................................. 2
C. Supplemental Consolidated Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations as of September 30, 1997 and for the three and nine months
periods ended September 30, 1997 and 1996........................................................... 4
</TABLE>
A. SC BANCORP MERGER
Western Bancorp (the "Company") serves as the holding company for National
Bank of Southern California ("NBSC"), Southern California Bank ("SC Bank"),
Western Bank ("Western" and together with NBSC and SC Bank, the "Banks") and
Venture Partners. On October 10, 1997 the shareholders of the Company and the
shareholders of SC Bancorp ("SCB") each approved the principal terms of an
Agreement and Plan of Reorganization, dated as of April 29, 1997 (the "Merger
Agreement"), by and between the Company (formerly Monarch Bancorp) and SCB
providing for the merger of SCB with and into the Company (the "SCB Merger").
The SCB Merger was consummated on October 10, 1997.
Pursuant to the Merger Agreement, each outstanding share of common stock of
SCB ("SCB Common Stock") prior to the SCB Merger (other than shares held in a
fiduciary capacity or as a result of a debt previously contracted) was converted
into the right to receive 0.4556 shares (the "Conversion Number") of common
stock of the Company ("Company Common Stock"). In addition, each option or right
to purchase shares of SCB Common Stock (an "SCB Option") outstanding immediately
prior to the effective time of the SCB Merger was converted into the right to
receive, for each share otherwise issuable upon exercise thereof, a number of
shares of Company Common Stock equal to the quotient obtained by dividing the
Spread (as defined in the Merger Agreement) by $31.28. Pursuant to the Merger
Agreement, the Conversion Number was determined by dividing (i) $14.25 by (ii)
$31.28.
Upon consummation of the SCB Merger, the Company issued approximately
3,555,500 shares of Company Common Stock (prior to adjustment for fractional
shares) to former shareholders of SCB, and as a result, the former shareholders
of SCB own shares of Company Common Stock representing approximately 33.5
percent of the outstanding Company Common Stock.
The description of the Merger Agreement contained herein is qualified in its
entirety by reference to the Merger Agreement. After giving effect to the SCB
Merger, the total assets of the Company and its subsidiaries increased to
approximately $1.4 billion, total deposits increased to approximately $1.2
billion and total shareholders equity increased to approximately $134.5 million
as of September 30, 1997, on a restated basis, before merger and restructuring
costs.
As a part of the SCB Merger, Harold A. Beisswenger, Larry D. Hartwig,
William C. Greenbeck and Donald E. Wood, former directors of SCB, were appointed
to the Board of Directors of the Company.
B. SANTA MONICA BANK MERGER
The following tables show unaudited summary pro forma balance sheet and
income statement information for the SCB Merger and for the pending merger of
Santa Monica Bank ("SMB") with and into the Company (the "SMB Merger").
Pooling-of-interests accounting is used for the pro forma information for the
SCB Merger, and purchase accounting is used for the pro forma information for
the SMB Merger. Information for SMB is included only in the balance sheet as of
September 30, 1997, and the income statement information for the nine month
periods ended September 30, 1997 and September 30, 1996. The balance sheet and
income statement adjustments shown below are based on management's
2
<PAGE>
estimates for costs and, in the case of the SMB Merger, the fair value
adjustments associated with these transactions.
The unaudited summary pro forma balance sheet information is not necessarily
indicative of the actual financial position that would have existed had the SMB
Merger and the SCB Merger been consummated at the beginning of the periods
presented or that may exist in the future. The unaudited summary pro forma
income statement information is not necessarily indicative of the results that
would have occurred had either the SMB Merger or the SCB Merger been consummated
on the dates indicated or that may be achieved in the future. Assuming the
consummation of the SMB Merger, the actual financial position and results of
operations will differ, perhaps significantly, from the pro forma amounts
reflected herein because of a variety of factors, including changes in value of
assets and liabilities and changes in operating results between the dates of the
pro forma financial data and the date on which the SMB Merger takes place.
SUMMARY PRO FORMA BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------------------------------------------
SANTA PRO FORMA
WESTERN SCB MONICA ADJUSTMENTS COMBINED
---------- ---------- ---------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total assets..................................... $ 867,123 $ 502,692 $ 663,522 $ 81,722 $ 2,115,059
Securities....................................... 180,812 63,451 150,282 -- 394,545
Loans and leases, net............................ 512,532 346,591 375,866 2,390 1,237,379
Goodwill......................................... 27,845 3,220 -- 119,108 150,173
Deposits......................................... 762,064 437,344 579,633 (154) 1,778,887
Shareholders' equity............................. 81,209 53,318 78,877 49,024 262,428
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-------------------------------------------------
PRO FORMA
WESTERN SCB ADJUSTMENTS COMBINED
---------- ---------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Total assets.................................................. $ 862,900 $ 476,013 $ 1,088 $ 1,340,001
Securities.................................................... 256,228 76,590 -- 332,818
Loans and leases, net......................................... 459,373 342,228 -- 801,601
Goodwill...................................................... 29,342 3,626 -- 32,968
Deposits...................................................... 761,688 415,326 -- 1,177,014
Shareholders' equity.......................................... 79,128 49,919 (6,861) 122,186
</TABLE>
SUMMARY PRO FORMA INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------
SANTA PRO FORMA
WESTERN SCB MONICA ADJUSTMENTS COMBINED
--------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income and non-interest income............ $ 38,076 $ 22,203 $ 30,891 $ (3,440) $ 87,730
Provision for possible loan and lease losses........... 1,125 1,000 -- -- 2,125
Non interest expense................................... 28,266 14,338 18,531 6,423 67,558
Net income............................................. 3,514 4,014 8,022 (8,242) 7,308
Net income per share................................... $ 0.48 $ 0.54 $ 1.13 $ 0.48
Weighted average shares................................ 7,291 7,494 7,077 15,302
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------
SANTA PRO FORMA
WESTERN SCB MONICA ADJUSTMENTS COMBINED
--------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income and non-interest income............ $ 21,350 $ 20,704 $ 28,534 $ (3,440) $ 67,148
Provision for possible loan and lease losses........... 865 (470) -- -- 395
Non interest expense................................... 16,046 16,131 19,536 6,423 58,136
Net income............................................. 2,665 2,933 6,751 (8,242) 4,107
Net income per share................................... $ 0.67 $ 0.39 $ 0.95 $ 0.34
Weighted average shares................................ 3,984 7,474 7,077 11,996
</TABLE>
C. UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS AS OF SEPTEMBER 30, 1997 AND FOR THE
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996.
On October 10, 1997, the Company consummated the SCB Merger. On June 4,
1997, the Company consummated the merger of California Commercial Bankshares
("CCB") with and into the Company (the "CCB Merger"). On July 15, 1997 the
Company filed, on a Form 8-K, restated audited financial statements for the
years ended December 31, 1996, 1995 and 1994, reflecting the effect of the CCB
Merger, which was accounted for by the pooling-of-interests method of
accounting. On October 24, 1997 the Company filed, on a Form 8-K, audited
supplemental consolidated financial statements for the years ended December 31,
1996, 1995 and 1994, reflecting the effect of the SCB Merger, which was
accounted for by the pooling-of-interests method of accounting.
The Company hereby files Unaudited Supplemental Condensed Consolidated
Financial Statements as of September 30, 1997 and for the three and nine month
periods ended September 30, 1997 and 1996, reflecting the effect of the SCB
Merger. A restatement of Management's Discussion and Analysis of Financial
Condition and Results of Operation after giving effect to the SCB Merger and the
Unaudited Supplemental Condensed Consolidated Financial Statements as of
September 30, 1997 and for the three and nine month periods ended September 30,
1997 and September 30, 1996 are set forth below.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following tables and data set forth statistical information relating to
the Company and its subsidiaries as of September 30, 1997 and for the three
months and nine months ended September 30, 1997 and September 30, 1996. Such
tables and data reflect the combination of the Company and both CCB and SCB
which were acquired by the Company on June 4, 1997 and October 10, 1997,
respectively, each in a merger accounted for as a pooling-of-interests. This
discussion should be read in conjunction with the Unaudited Supplemental
Condensed Consolidated Financial Statements as of September 30, 1997 and for the
three and nine month periods ended September 30, 1997 and September 30, 1996 and
related notes included elsewhere herein.
FINANCIAL CONDITION
Since December 31, 1996, the Company's total assets have grown by
approximately $31 million, or 2.3%. From December 31, 1996 to September 30,
1997, due mostly to maturities, securities decreased by approximately $88.6
million. Due to improvements in the local economy and a recent deposit
promotion, deposits grew by approximately $22.4 million, or 1.9%. The cash
resulting from this decrease in securities and increase in deposits was invested
in federal funds sold, which increased by $61.5 million, and net loans, which
have grown by approximately $57.5 million, or 7.2%, from December 31, 1996 to
September 30, 1997.
4
<PAGE>
RESULTS OF OPERATIONS
The acquisition of Western on September 30, 1996 was accounted for under the
purchase method of accounting and, as a result, Western's operations are
included in the results of 1997, but are not part of the results in 1996.
The Company has experienced significant improvement in normalized earnings
(earnings before goodwill amortization, merger costs (after tax) and gains on
sales of loans and other assets (after tax) ("Normalized" earnings)) for the
three months and nine months ended September 30, 1997, as compared to the same
periods in 1996, which was attributable primarily to the Western acquisition in
September 1996, the CCB acquisition in June 1997 and the SCB acquisition in
October 1997, as well as a focus on controlling costs and centralizing
operations.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE INFORMATION
Number of shares (weighted average)............................... 10,843.2 7,536.7 10,840.8 7,538.0
Income per share (dollars)........................................ $0.69 $0.74 $0.38 $0.25
Normalized income per share....................................... $1.14 $0.70 $0.44 $0.29
PROFITABLILITY MEASURES:
Return on average assets.......................................... 0.75% 0.93% 1.19% 0.88%
Normalized return on average assets............................... 1.23% 0.88% 1.38% 1.10%
Return on average equity.......................................... 7.6% 11.0% 12.1% 10.5%
Normalized return on average equity............................... 12.5% 10.4% 13.9% 13.1%
</TABLE>
For the three months and nine months ended September 30, 1997, the Company,
on a consolidated basis, recorded net income of $4.1 million and $7.5 million,
respectively, versus net income of $1.9 million and $5.6 million, respectively,
for the same periods of 1996. While net income increased for the three and nine
months ended September 30, 1997, compared to fiscal 1996, net income before
goodwill amortization, after-tax merger costs and after-tax gains on sale of
loans and other assets increased significantly. Before (i) the amortization of
goodwill of $1.9 million in 1997 and $370 thousand in 1996, respectively, (ii)
after-tax merger costs of $3.0 million in 1997, and (iii) an after-tax gain on
sale of loans and other assets of $665 thousand in 1996 and $78 thousand in
1997, net income for the nine month periods ended September 30, 1997 and 1996
would have been $12.36 million and $5.30 million, respectively, or $1.14 and
$0.70 per share, respectively, a growth of approximately 42%.
Without the amortization of goodwill of $635 thousand and $135 thousand in
the third quarter of 1997 and 1996, respectively, and before an after-tax loss
on sale of loans and other assets of $2 thousand and $184 thousand, net income
for the three month periods ended September 30, 1997 and 1996 would have been
$4.72 million and $2.18 million in 1997 and 1996, respectively, or $0.44 and
$0.29 per share, respectively, a growth of approximately 51%.
Operating profits for the Company and the Banks are dependent on loan and
lease growth, controlling costs and continual efforts to prevent any unexpected
loan and lease losses which would require additions to the Allowance for Loan
and Lease Losses ("ALLL"). Demand for quality loans has increased in the
Company's primary market areas, and the Company expects to take advantage of
this increased demand, while maintaining its credit quality standards. While
deposits have grown by approximately $22.4 million since December 31, 1996, as a
result of a $55.2 million increase in gross loans, the Company's loan-to-deposit
ratio has also increased from 69.7%, as of December 31, 1996, to 73.0%, as of
September 30, 1997.
5
<PAGE>
NET INTEREST INCOME
Net interest income is the difference between interest earned on assets and
interest paid on liabilities. Net interest margin is net interest income
expressed as a percentage of average interest-earning assets. The following
table provides information concerning average interest-earning assets and
interest-bearing liabilities and yields and rates thereon for the nine months
and three months ended September 30, 1997 and September 30, 1996, respectively.
Nonaccrual loans are included in the average earning assets amounts.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Average earning assets............................. $ 1,185.3 $ 723.9 $ 1,200.9 $ 753.6
Yield............................................ 8.42% 9.24% 8.69% 9.07%
Average interest-bearing liabilities............... 796.6 521.3 807.2 30.6
Cost............................................. 3.67% 3.87% 3.72% 3.92%
Interest spread.................................. 4.75% 5.37% 7.45% 7.77%
Net interest margin.............................. 5.95% 6.45% 6.19% 6.31%
</TABLE>
The $6.7 million and $17.9 million increase in net interest income for the
comparative three months and nine months ended September 30, 1997 and 1996,
respectively, is due primarily to increases in the volume of interest-earning
assets mostly due to the acquisition of Western. For the nine month periods, net
interest margin decreased from 6.45% to 5.95%, and the interest spread also
decreased from 5.37% to 4.75%. The decline in net interest margin is a result of
the decrease in spread as the yield on interest-earning assets declined more
than the cost on interest-bearing liabilities. Also, interest income for the
first nine months of 1996 included $544 of income for interest on loans returned
to accrual status, and interest collected on the sale of loans.
The increase in interest income for the three and nine months ended
September 30, 1996, to the same periods of 1997 from approximately $17.1 million
to $26.1 million and from $50.2 million to $74.8 million, respectively, was due
almost entirely to the increase in average earning assets. Average
interest-earning assets, for the three month periods ended September 30, 1996
and September 30, 1997, increased from approximately $753.6 million to $1,200.9
million, respectively, resulting mostly from the acquisition of Western. Average
interest-earning assets, for the nine months ended September 30, 1996 and
September 30, 1997, increased from approximately $723.9 million to $1,185.3
million, respectively, resulting mostly from the acquisition of Western. For the
same three and nine month periods, the average yield on interest-earning assets
decreased from 9.07% in 1996 to 8.69% in 1997, and from 9.24% in 1996 to 8.42%
in 1997, respectively. The overall decrease in yield can be partially attributed
to the decrease in the average yield on loans, including the effect of the
interest rate swaps and the competitive pricing pressures experienced in the
Company's market area for commercial and real estate loans.
Interest expense increased from approximately $5.2 million to $7.5 million
and from $15.1 million to $21.9 million for the three months and nine months
ended September 30, 1996 and September 30, 1997, respectively. This increase is
mostly due to the volume increase in average interest-bearing liabilities as a
result of the acquisition of Western. The average cost of funds declined from
3.87% to 3.67% for the nine months ended September 30, 1997, compared to the
same period in 1996. The average cost of funds declined from 3.92% to 3.72% for
the three month period ended September 30, 1997, compared to the same period in
1996. As of September 30, 1997, 35.9% of the Company's deposits are in
non-interest bearing accounts which is unchanged from December 31, 1996.
6
<PAGE>
PROVISION FOR LOAN AND LEASE LOSSES
During the nine months ended September 30, 1997, approximately $2,866,000 in
loans were charged to the Company's allowance for loan and lease losses
("ALLL"), and approximately $1,022,000 of loans were recovered. The ratio of the
ALLL to total loans and leases was 1.73% as of September 30, 1997, compared to
1.92% as of December 31, 1996. The decline in ratio was largely due to an
increase in loans as the ALLL declined moderately. During the same period,
credit quality measures improved. Due to continued decline in non-performing
assets and improved credit quality and overall loan portfolio, management
believes that ALLL is adequate based on all currently available information.
NON-INTEREST INCOME
The following table shows the details of non-interest income (in thousands)
for the three and nine months ended September 30, 1997 and September 30, 1996.
Due to purchase accounting treatment of the acquisition of Western, Western is
not included in the 1996 numbers:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1997
---------------------------------------
THE 1996
COMPANY, -------------
WESTERN SCB & NBSC CONSOLIDATED CONSOLIDATED
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Service charges and fees........................................ $ 224 $ 937 $ 1,161 $ 1,001
(Loss) on sale of loans and other assets........................ -- (4) (4) (314)
Securities gains................................................ -- 5 5 --
Other income.................................................... 74 921 995 961
----- ----------- ------ ------
TOTAL NON-INTEREST INCOME..................................... $ 298 $ 1,859 $ 2,157 $ 1,648
----- ----------- ------ ------
----- ----------- ------ ------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1997
---------------------------------------
THE 1996
COMPANY, -------------
WESTERN SCB & NBSC CONSOLIDATED CONSOLIDATED
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Service charges and fees........................................ $ 771 $ 4,243 $ 5,014 $ 4,421
Gain on sale of loans and other assets.......................... -- 78 78 665
Securities gains................................................ 107 235 342 14
Other income.................................................... 184 1,753 1,937 1,908
----------- ----------- ------ ------
TOTAL NON-INTEREST INCOME..................................... $ 1,062 $ 6,309 $ 7,371 $ 7,008
----------- ----------- ------ ------
----------- ----------- ------ ------
</TABLE>
Non-interest income, for the three months ended September 30, 1996, includes
a loss on sale of loans and other assets in the amount of $314 thousand.
Non-interest income for the three months ended September 30, 1997, includes a
loss on sale of loans and other assets of $4 thousand and a gain on sale of
securities in the amount of $5 thousand. If adjusted for these non-recurring
items, and without the non-interest income contributed by Western, total
non-interest income decreased by $104 thousand from $1.96 million in 1996 to
$1.86 million in 1997. Most of this decrease was in service charges and fees.
Non-interest income, for the nine months ended September 30, 1996, includes
a gain on sale of loans and other assets in the amount of $665 thousand and
securities gains of $14 thousand. Non-interest income for the nine months ended
September 30, 1997, includes a gain on sale of securities in the amount of $342
thousand and a gain on sale of loans and other assets of $78 thousand. If
adjusted for these non-recurring items, and without the non-interest income
contributed by Western, total non-interest income decreased by $333 thousand
from $6.3 million in 1996 to $6.0 million in 1997. Service charge income on
deposit accounts
7
<PAGE>
decreased for the nine months ended September 30, 1997 over the comparable
period in 1996 due to competitive pricing on certain commercial accounts. In
addition, a recent deposit promotion featured a no service charge account for
depositors using direct deposit.
NON-INTEREST EXPENSE
The following table shows the details of non-interest expense for the three
and nine months ended September 30, 1997 (in thousands). Due to purchase
accounting treatment of the acquisition of Western, Western results are not
included in the 1996 numbers:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------
1997
--------------------------------------
THE 1996
COMPANY, ------------
WESTERN SCB & NBSC CONSOLIDATED CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Salaries and benefits........................................... $ 1,405 $ 5,052 $ 6,457 $ 4,744
Occupancy, furniture and equipment.............................. 247 1,663 1,910 1,604
Advertising and business development............................ 65 295 360 192
Other real estate owned......................................... 105 140 245 101
Professional services........................................... 313 751 1,064 1,054
Telephone, stationery and supplies.............................. 90 90 180 104
Goodwill amortization........................................... 499 136 635 135
Data processing................................................. 154 258 412 276
Customer services cost.......................................... 168 137 305 166
Merger costs.................................................... -- -- -- --
Other........................................................... 101 1,053 1,154 1,933
----------- ----------- ------------ ------------
TOTAL NON-INTEREST EXPENSE.................................. $ 3,147 $ 9,575 $ 12,722 $ 10,309
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Non-interest expense before goodwill amortization and merger
costs......................................................... $ 2,648 $ 9,439 $ 12,087 $ 10,174
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------
1997
--------------------------------------
THE 1996
COMPANY, ------------
WESTERN SCB & NBSC CONSOLIDATED CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Salaries and benefits........................................... $ 4,336 $ 14,836 $ 19,172 $ 15,052
Occupancy, furniture and equipment.............................. 923 4,907 5,830 5,308
Advertising and business development............................ 209 837 1,046 887
Other real estate owned......................................... 127 166 293 331
Professional services........................................... 561 2,554 3,115 3,525
Telephone, stationery and supplies.............................. 307 1,293 1,600 1,295
Goodwill amortization........................................... 1,497 406 1,903 370
Data processing................................................. 460 743 1,203 683
Customer services cost.......................................... 431 427 858 434
Merger costs.................................................... -- 3,404 3,404 --
Other........................................................... 691 3,489 4,180 4,292
----------- ----------- ------------ ------------
TOTAL NON-INTEREST EXPENSE.................................... $ 9,542 $ 33,062 $ 42,604 $ 32,177
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Non-interest expense before goodwill amortization and merger
costs......................................................... $ 8,045 $ 29,252 $ 37,297 $ 31,807
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
8
<PAGE>
Merger related costs include approximately $1.4 million of investment
banking fees, $923 thousand of other professional and filing fees, and $1.1
million of compensation related costs. The tax benefits for these costs are
approximately $395 thousand.
Non-interest expense, for the three and nine months ended September 30,
1997, includes goodwill amortization in the amount of $635 thousand and $1.9
million, respectively. Also included in the nine months ended September 30, 1997
non-interest expense is non-recurring merger related cost of $3.4 million. If
adjusted for the above items, total non-interest expense increased by $1.9
million from $10.2 million to $12.1 million for the three months ending
September 30, 1997, compared to the same period in 1996, which was due mostly to
expenses at Western, before goodwill amortization, of $2.6 million mitigated by
efficiency improvements.
Non-interest expense for the nine months ended September 30, 1997, increased
by $10.4 million. If adjusted for the amortization of goodwill and merger
related costs, the net increase was $5.5 million due mostly to expenses at
Western of $8.0 million (without goodwill amortization), offset partially by
efficiency improvements.
The decrease in professional services from 1996 to 1997, for both the three
month and nine month periods, is due mostly to the reduction in legal expenses
associated with various litigation.
CREDIT QUALITY AND ANALYSIS
The Company defines non-performing assets to include (i) loans on which it
has ceased to accrue interest ("Nonaccrual Loans"), and (ii) foreclosed real
estate owned.
Planned workout arrangements are currently in place for all non-performing
assets, and, unless there are any unexpected changes in the financial condition
of the borrowers, management is not aware of any additional significant loss
potential that has not already been included in the ALLL.
The following table shows the historical trends in non-performing assets and
comparative key credit statistics at the Company (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ ------------
<S> <C> <C>
Loans past due 90 days and still accruing............................................ $ 1,267 $ 193
------------ ------------
------------ ------------
Nonaccrual loans and leases.......................................................... 9,468 16,157
Other real estate owned.............................................................. 8,354 7,082
------------ ------------
Non performing assets.............................................................. 17,822 23,239
------------ ------------
------------ ------------
Impaired loans gross................................................................. 14,960 21,034
Allocated reserves................................................................... 418 2,172
------------ ------------
Net investment in impaired loans................................................... 14,542 18,862
------------ ------------
------------ ------------
ALLL................................................................................. 15,160 15,757
Gross loans and leases............................................................... 875,020 819,792
ALLL to loans and leases............................................................. 1.73% 1.92%
ALLL to nonaccrual loans and leases.................................................. 160.1% 97.5%
ALLL to non performing assets........................................................ 85.1% 67.8%
Non performing assets to loans, leases and OREO...................................... 2.02% 2.81%
</TABLE>
The Company has established a monitoring system for its loans in order to
identify impaired loans, potential problem loans and to permit periodic
evaluation of impairment and the adequacy of the allowance for loan losses in a
timely manner. The monitoring system and ALLL methodology have evolved
9
<PAGE>
over a period of years and loan classifications have been incorporated into the
determination of the ALLL. This monitoring system and allowance methodology
include a loan-by-loan analysis for all classified loans as well as loss factors
for the balance of the portfolio that are based on migration analysis relative
to the unclassified portfolio. This analysis includes such factors as historical
loss experience, current portfolio delinquency and trends and other inherent
risk factors such as economic conditions, risk levels of particular loan
categories, internal loan review and oversight, and concentrations in the loan
and lease portfolio.
On September 30, 1997, the Company had approximately $15.0 million of loans
which were considered to be impaired, which decreased from $21.0 million at
December 31, 1996. The Company had allocated reserves of approximately $0.4
million on these loans at September 30, 1997. Of these loans, $9.5 million are
on nonaccrual status.
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
On a stand-alone basis, the Company's sources of liquidity include dividends
from the Banks and outside borrowings. The amount of dividends that the Banks
can pay to the Company is restricted by regulatory guidelines.
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive earning
assets and interest-bearing liabilities. Liquidity management involves the
ability to meet the cash flow requirements of customers who may be either
depositors wanting to withdraw funds or borrowers who may need assurance that
sufficient funds will be available to meet their credit needs. Interest rate
sensitivity management seeks to avoid fluctuating interest margins and to
enhance consistent growth of net interest income through periods of changing
interest rates.
Historically, the overall liquidity of the Company is based on its core
deposit base. The Company has not relied on large denomination time deposits.
To meet short-term liquidity needs, the Company has maintained adequate
balances in federal funds sold, certificates of deposits with other financial
institutions and investments securities having maturities of five years or less.
Liquid assets (cash, federal funds sold and securities available for sale) as a
percentage of total deposits are 35.3% and 37.3% as of September 30, 1997 and
December 31, 1996, respectively.
REGULATORY MATTERS
The regulatory capital guidelines as well as the actual regulatory capital
ratios for NBSC, SC Bank, Western Bank and the Company, as of September 30,
1997, follow:
<TABLE>
<CAPTION>
REGULATORY REQUIREMENTS
(GREATER THAN OR EQUAL TO
STATED PERCENTAGE)
---------------------------- ACTUAL
ADEQUATELY WELL ------------------------------------------------
CAPITALIZED CAPITALIZED NBSC SC BANK WESTERN CONSOLIDATED
------------- ------------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Detailed computations of
Tier 1 leverage capital ratio................ 4.00% 5.00% 7.49% 9.51% 7.52% 7.59%
Tier 1 risk-based capital ratio.............. 4.00% 6.00% 9.67% 11.39% 11.00% 9.83%
Total risk-based capital..................... 8.00% 10.00% 10.93% 12.46% 12.26% 11.09%
</TABLE>
INCOME TAXES
The Company's normal effective income tax rate is approximately 41.5%,
representing a blend of the statutory Federal income tax rate of 34.0% and the
California income tax rate of 10.84%. The Company's actual effective income tax
rates were 51.6%, 41.0%, 44.0% and 41.5% for the nine months ended
10
<PAGE>
September 30, 1997 and 1996 and three months ended September 30, 1997 and 1996,
respectively. The actual effective tax rates were higher during the 1997 periods
largely as a result of nondeductible goodwill and certain merger costs.
ENHANCED DERIVATIVES DISCLOSURES
The Securities and Exchange Commission has approved rule amendments to
clarify and expand existing disclosure requirements for derivative financial
instruments. The amendments require enhanced disclosure of accounting policies
for derivative financial instruments in the footnotes to the financial
statements. In addition, the amendments expand existing disclosure requirements
to include quantitative and qualitative information about market risk inherent
in market risk-sensitive instruments. The required quantitative and qualitative
information are to be disclosed outside the financial statements and related
notes thereto. The enhanced accounting policy disclosure requirements are
effective for the quarter ended June 30, 1997. As the Company believes that the
derivative financial instrument disclosures contained within the notes to the
financial statements of its current report on Form 8-K, filed October 24, 1997,
which included the supplemental consolidated financial statements of the Company
reflecting the effect of the SCB Merger with and into the Company on a
pooling-of-interests basis, substantially conform with the accounting policy
requirements of these amendments, no further interim period disclosure has been
provided. The rule amendments that require expanded disclosure of quantitative
and qualitative information about market risk are effective with the Company's
1997 Form 10-K.
11
<PAGE>
UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- --------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 105,962 $ 96,202
Interest bearing deposits in other banks.................... 9 --
Federal funds sold.......................................... 84,000 22,517
-------------- --------------
Total cash and cash equivalents......................... 189,971 118,719
FRB and FHLB stock.......................................... 5,519 5,291
Securities:
Securities held to maturity............................... 5,365 7,270
Securities available for sale............................. 233,379 320,257
-------------- --------------
Total securities........................................ 244,263 332,818
Net loans................................................... 859,123 801,601
Property, plant and equipment............................... 13,615 14,955
Other real estate owned..................................... 8,354 7,082
Goodwill.................................................... 31,065 32,968
Other assets................................................ 23,424 30,770
-------------- --------------
Total assets............................................ $1,369,815 $1,338,913
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing deposits............................... $ 430,547 $ 422,854
Interest bearing deposits................................... 768,861 754,160
-------------- --------------
Total deposits.......................................... 1,199,408 1,177,014
Borrowed funds.............................................. 23,733 20,290
Accrued interest payable & other liabilities................ 12,147 12,562
-------------- --------------
Total liabilities....................................... 1,235,288 1,209,866
SHAREHOLDERS' EQUITY:
Preferred stock............................................. -- --
Common stock................................................ 111,311 110,829
Additional paid-in capital.................................. -- 497
Retained earnings (deficit)................................. 23,429 18,583
Unrealized net gains (losses) on investments................ -- --
available for sale, net................................... (213) (862)
-------------- --------------
Total shareholders' equity.............................. 134,527 129,047
-------------- --------------
Total liabilities and shareholders' equity.............. $1,369,815 $1,338,913
-------------- --------------
-------------- --------------
Number of common shares outstanding......................... 10,633.3 10,582.0
Common shareholders' equity per share....................... $ 12.65 $ 12.19
</TABLE>
See accompanying Notes to Unaudited Supplemental Condensed Consolidated
Financial Statements.
12
<PAGE>
UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans......................... $ 59,700 $ 39,948 $ 21,095 $ 13,514
Interest on interest bearing deposits in other
banks............................................ 2 1 2 1
Interest on securities............................. 12,343 8,159 3,843 2,878
Interest on federal funds sold..................... 2,794 2,081 1,141 701
--------- --------- --------- ---------
Total interest income............................ 74,839 50,189 26,081 17,094
INTEREST EXPENSE:
Interest expense on deposits....................... 20,915 14,320 7,180 4,995
Interest expense on notes payable.................. 1,016 823 317 203
--------- --------- --------- ---------
Total interest expense........................... 21,931 15,143 7,497 5,198
--------- --------- --------- ---------
Net interest income.................................. 52,908 35,046 18,584 11,896
Less: provision for loan and lease losses.......... 2,125 395 725 60
--------- --------- --------- ---------
Net interest income after provision for loan and
lease losses....................................... 50,783 34,651 17,859 11,836
NON-INTEREST INCOME:
Service charges and fees........................... 5,014 4,421 1,161 1,001
Gain (loss) on sale of loans and other assets...... 78 665 (4) (314)
Securities gains................................... 342 14 5 --
Other income....................................... 1,937 1,908 995 961
--------- --------- --------- ---------
Total non-interest income........................ 7,371 7,008 2,157 1,648
NON-INTEREST EXPENSE:
Salaries and benefits.............................. 19,172 15,052 6,457 4,744
Occupancy, furniture and equipment................. 5,830 5,308 1,910 1,604
Advertising and business development............... 1,046 887 360 192
Other real estate owned............................ 293 331 245 101
Professional services.............................. 3,115 3,525 1,064 1,054
Telephone, stationery and supplies................. 1,600 1,295 180 104
Goodwill amortization.............................. 1,903 370 635 135
Data processing.................................... 1,203 683 412 276
Customer services cost............................. 858 434 305 166
Merger costs....................................... 3,404 -- -- --
Other.............................................. 4,180 4,292 1,154 1,933
--------- --------- --------- ---------
Total non-interest expense....................... 42,604 32,177 12,722 10,309
--------- --------- --------- ---------
Income before income taxes......................... 15,550 9,482 7,294 3,175
Income taxes....................................... 8,022 3,884 3,211 1,319
--------- --------- --------- ---------
Net income....................................... $ 7,528 $ 5,598 $ 4,083 $ 1,856
--------- --------- --------- ---------
--------- --------- --------- ---------
PER SHARE INFORMATION:
Number of shares (weighted average)................ 10,843.2 7,536.7 10,840.8 7,538.0
Income per share (dollars)......................... $ 0.69 $ 0.74 $ 0.38 $ 0.25
</TABLE>
See accompanying Notes to Unaudited Supplemental Condensed Consolidated
Financial Statements.
13
<PAGE>
UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOW PROVIDED FROM OPERATING ACTIVITIES:
Net income............................................................ $ 7,528 $ 5,598
Adjustments to reconcile net income activities to net cash provided by
operations:
(Gain) on sale of securities available for sale..................... (342) (14)
(Gain) on sale of other real estate owned........................... (178) (569)
Provision for loan and lease losses................................. 2,125 395
Provision for selling expenses of other real estate owned........... 134 510
Goodwill amortization............................................... 1,903 370
Gain on sale of loans............................................... (78) (665)
(Gain) loss on sale of fixed assets................................. (6) 33
Termination of KSOP................................................. -- 121
Depreciation........................................................ 1,946 1,843
Amortization of (discounts) and premiums on investment securities... 106 991
Increase (decrease) in unearned loan and lease income............... (55) 157
Net increase (decrease) in accrued interest payable and other
liabilities....................................................... (416) 1,799
Net decrease in other assets........................................ 7,044 1,526
--------- ---------
Net cash provided by operating activities......................... 19,711 12,095
CASH FLOW PROVIDED FROM INVESTING ACTIVITIES:
Proceeds from sale of securities available for sale................... 8,465 8,549
Principal payments received on securities available for sale.......... 156,585 40,681
Principal payments received on securities held to maturity............ 1,905 2,910
Purchase of securities available for sale............................. (77,119) (70,506)
Purchase of securities held to maturity............................... -- (4,668)
Purchase of FHLB and FRB stock........................................ (94) (212)
Proceeds from sale of fixed assets.................................... 109 264
Proceeds from sale of loans........................................... 1,299 6,869
(Increase) decrease in net loans and leases........................... (70,572) (46,956)
Proceeds from sale of OREO............................................ 344 622
Recoveries of loans and investment leases............................. 1,022 803
Net (additions) to premises and equipment............................. (709) (1,164)
Reductions (additions) to other real estate owned..................... 7,252 2,128
Termination of KSOP................................................... -- 121
Increase in assets and liabilities assumed due to the acquisition of
Western Bank........................................................
(Increase) in investments available for sale........................ -- (134,397)
(Increase) in investments held to maturity.......................... -- (985)
(Increase) in loans................................................. -- (198,418)
(Increase) in other assets.......................................... -- (15,512)
(Increase) in premises and equipment................................ -- (5,099)
Increase in deposits................................................ -- 353,030
Increase in other liabilities....................................... -- 3,913
Excess of price paid over net assets acquired....................... -- (29,892)
--------- ---------
Net cash provided by investing activities......................... 28,487 (87,919)
</TABLE>
14
<PAGE>
UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES:
Cash received from exercise of options................................ 499 161
Proceeds from issuance of common stock................................ -- 42,213
Common stock repurchased and retired.................................. (515) --
Dividends declared.................................................... (2,680) --
Net increase in deposits.............................................. 22,394 24,503
Additional borrowings................................................. 192,352 386,983
Repayment of borrowed funds........................................... (188,996) (375,804)
--------- ---------
Net cash provided by financing activities......................... 23,054 78,056
Net increase in cash and cash equivalents............................. 71,252 2,232
Cash and cash equivalents at the beginning of the period.............. 118,719 110,322
--------- ---------
Cash and cash equivalents at the end of the period.................... $ 189,971 $ 112,554
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Property acquired through foreclosure................................. $ 8,879 $ 2,970
Loans to facilitate the sale of OREO.................................. $ 4,292 $ 1,037
Repayment of KSOP debt................................................ $ -- $ 11
Increase (decrease) of unrealized gain on investment securities
available for sale, net of tax...................................... $ 802 $ (13)
Cash paid for interest................................................ $ 21,781 $ 14,042
Cash paid for taxes................................................... $ 1,568 $ 3,364
</TABLE>
See accompanying Notes to Unaudited Supplemental Condensed Consolidated
Financial Statements.
15
<PAGE>
NOTES TO UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
1. BASIS OF PRESENTATION
On October 10, 1997, the Company completed the merger with SCB whereby the
Company issued approximately 3,555,500 shares (prior to reduction for fractional
shares) of Company Common Stock to the holders of SCB Common Stock and SCB
merged with and into the Company. The SCB Merger has been accounted for as a
pooling-of-interests. These Unaudited Supplemental Condensed Consolidated
Financial Statements, Notes to Unaudited Supplemental Condensed Consolidated
Financial Statements and management's discussion and analysis of financial
condition and results of operations as of September 30, 1997 and for the three
months and nine months ended September 30, 1997 and September 30, 1996 have been
restated as if the SCB Merger had occurred at the beginning of the periods
indicated.
The Company is the holding company for the Banks. The Unaudited Supplemental
Condensed Consolidated Financial Statements of the Company and the Banks
included herein reflect all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management, necessary to present a
fair statement of the results for the interim periods indicated. Certain
reclassifications have been made to the Unaudited Supplemental Condensed
Consolidated Financial Statements for 1996 to conform to the 1997 presentation.
Certain information and note disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The results of operations for the
three months and nine months ended September 30, 1997 and 1996, are not
necessarily indicative of the results of operations to be expected for the
remainder of the year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Material
estimates subject to change include the allowance for loan and lease losses, the
carrying value of other real estate owned, and the deferred tax asset.
These Unaudited Supplemental Condensed Consolidated Financial Statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report filed on Form 10-KSBA, for
the year ended December 31, 1996, as amended, CCB's Annual Report filed on Form
10-K/A, for the year ended December 31, 1996, as amended, SCB's Annual Report
filed on Form 10-K/A, for the year ended December 31, 1996, as amended, the
Company's Current Report filed on Form 8-K on July 17, 1997 and the Company's
Supplemental Consolidated Financial Statements for the years ended December 31,
1996, 1995 and 1994 and the notes thereto filed on Form 8-K on October 24, 1997.
2. COMPLETED ACQUISITIONS
WESTERN BANK ACQUISITION. On September 30, 1996, the Company acquired, for
cash, all of the issued and outstanding shares of Western, a state chartered
bank located in west Los Angeles. Western has five offices, including its head
office in Westwood. In connection with the acquisition, Western began operating
as a wholly-owned subsidiary of the Company. The acquisition of Western was
accounted for under the purchase method of accounting. As such, the results of
operations for Western were included in the Company's results of operations
beginning October 1, 1996.
CALIFORNIA COMMERCIAL BANKSHARES ACQUISITION. On December 18, 1997, the
Company reached an agreement to merge with CCB, a bank holding company operating
in Orange County, California. The
16
<PAGE>
NOTES TO UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
2. COMPLETED ACQUISITIONS (CONTINUED)
shareholders of the Company approved the acquisition on June 2, 1997, and the
transaction was closed on June 4, 1997. The Company issued approximately
3,043,200 shares of Company Common Stock to the CCB stockholders based upon an
exchange ratio of one (after the Company completed a reverse stock split of 8.5
to 1 just prior to this merger). Also on June 4, 1997, Monarch was merged into
NBSC. The acquisition of CCB was accounted for under the pooling-of-interests
method of accounting, and all financial information presented has been restated
for this combination.
SC BANCORP ACQUISITION. On April 29, 1997, the Company entered into an
agreement to merge with SCB, a bank holding company operating in Orange, San
Diego and Los Angeles counties in California. The shareholders of SCB and the
Company approved the SCB Merger on October 10, 1997, and the SCB Merger was
completed on that date. The exchange ratio was 0.4556 shares of the Company
Common Stock issued for each outstanding share of SCB Common Stock.
Approximately 3,555,500 shares of the Company's Common Stock (before adjustments
for fractional shares) were issued as part of the SCB Merger. Management
estimates charging to expense merger costs of $6.9 million (after tax)
representing severance costs, termination of interest rate swaps, and cost of
computer conversions. Such costs are not included in the accompanying unaudited
supplemental condensed consolidated financial statements. The Company has also
submitted an application to the appropriate regulatory authorities to merge NBSC
into SC Bank.
The acquisition of SCB was accounted for under the pooling-of-interests
method of accounting, and all financial information presented has been restated
for this combination.
3. PENDING ACQUISITION OF SMB
On July 30, 1997, the Company and SMB entered into a definitive agreement
for the merger of SMB with a subsidiary of the Company subject to approval by
the banking regulators and shareholders of both companies. Upon the SMB Merger
becoming effective, each share of common stock, $3.00 par value, of SMB (the
"SMB Common Stock") issued and outstanding at the time (other than (a) shares
that have not been voted in favor of the approval of the principal terms of the
Merger and with respect to which the dissenters' rights have been perfected in
accordance with the California General Corporation Law and (b) shares held
directly or indirectly by the Company other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted) will be converted
into the right to receive either (i) $28.00 in cash (the "Cash Consideration")
or (ii) 0.875 shares of Company Common Stock (the "Stock Consideration"). Each
holder of SMB Common Stock may elect to, and may, receive the Cash Consideration
and, if the number of holders of SMB Common Stock electing to receive the Cash
Consideration, is so great as to prevent a tax-free reorganization, all the
holders of SMB Common Stock shall receive the Cash Consideration. If the value
of shares of holders of SMB Common Stock electing to receive the Cash
Consideration is such as to permit a tax-free reorganization, the remaining
holders of SMB Common Stock shall receive the Stock Consideration subject to the
limitation that no more than 50% of the outstanding shares of SMB Common Stock
shall be converted into the right to receive Stock Consideration and that in the
event that holders of SMB Common Stock elect to receive Stock Consideration in
exchange for more than 50% of the outstanding shares of SMB Common Stock, the
holders of SMB Common Stock electing Stock Consideration shall receive both cash
and stock, subject to the option of the Company to increase the Stock
Consideration.
The SMB Merger is expected to be accounted for using the purchase method of
accounting. At December 31, 1996, SMB had total assets, deposits, shareholders'
equity and number of shares of SMB
17
<PAGE>
NOTES TO UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
3. PENDING ACQUISITION OF SMB (CONTINUED)
Common Stock outstanding of $632 million, $554 million, $73 million and 7.1
million, respectively; these amounts were not audited in connection with the
preparation of these financial statements. For the year ended December 31, 1996,
SMB reported net income and net income per share of approximately $9.6 million
and $1.36, respectively; these amounts were not audited in connection with the
preparation of these financial statements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
The following exhibits are filed with this Current Report on Form 8-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
27.1 Supplemental Financial Data Schedule
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized. Date: November 13, 1997
<TABLE>
<S> <C> <C>
WESTERN BANCORP
By:
-----------------------------------------
Name: Arnold C. Hahn
Title: CHIEF FINANCIAL OFFICER
</TABLE>
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 105,962 0
<INT-BEARING-DEPOSITS> 9 0
<FED-FUNDS-SOLD> 84,000 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 233,379 0
<INVESTMENTS-CARRYING> 5,365 0
<INVESTMENTS-MARKET> 5,404 0
<LOANS> 875,020 0
<ALLOWANCE> 15,160 0
<TOTAL-ASSETS> 1,369,815 0
<DEPOSITS> 1,199,408 0
<SHORT-TERM> 23,733 0
<LIABILITIES-OTHER> 12,147 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 111,311 0
<OTHER-SE> 23,216 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,369,815 0
<INTEREST-LOAN> 59,700 39,948
<INTEREST-INVEST> 12,343 8,159
<INTEREST-OTHER> 2,796 2,082
<INTEREST-TOTAL> 74,839 50,189
<INTEREST-DEPOSIT> 20,915 14,320
<INTEREST-EXPENSE> 21,931 15,143
<INTEREST-INCOME-NET> 52,908 35,046
<LOAN-LOSSES> 2,125 395
<SECURITIES-GAINS> 342 14
<EXPENSE-OTHER> 42,604 32,177
<INCOME-PRETAX> 15,550 9,482
<INCOME-PRE-EXTRAORDINARY> 7,528 5,598
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,528 5,598
<EPS-PRIMARY> .69 .74
<EPS-DILUTED> .69 .74
<YIELD-ACTUAL> 5.95 6.45
<LOANS-NON> 9,468 0
<LOANS-PAST> 1,267 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 14,960 0
<ALLOWANCE-OPEN> 15,757 0
<CHARGE-OFFS> 2,866 0
<RECOVERIES> 1,022 0
<ALLOWANCE-CLOSE> 15,160 0
<ALLOWANCE-DOMESTIC> 15,160 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
