<PAGE>
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
June 2, 1997
-------------
Date of Report (Date of Earliest Event Reported)
WESTERN BANCORP
---------------
(Exact Name of Registrant As Specified In Its Charter)
CALIFORNIA
----------
(State or Other Jurisdiction of Incorporation)
0-13551 95-3863296
-------- -----------
(Commission File Number) (IRS Employer
Identification No.)
30000 Town Center Drive
Laguna Niguel, California 92677
--------------------------------------------------------------
(Address of Principal Executive Offices)(Zip Code)
(714) 495-3300
---------------
(Registrant's Telephone Number, including Area Code)
MONARCH BANCORP
---------------
(Former Name or Former Address, If Changed Since Last Report)
1
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
As a result of the acquisition of California Commercial Bankshares ("CCB"),
Mr. Robert McKay became an owner of 710,659 common shares of Western Bancorp
(formerly named Monarch Bancorp) (the "Company"), and as a result owns 10.0%
of the Company.
ITEM 2. ACQUISITION OF DISPOSITION OF ASSETS
On June 2, 1997, the shareholders of the Company approved the Amended and
Restated Agreement and Plan of Merger, dated as of December 19, 1996 (the
"Merger Agreement"), by and between the Company and CCB, providing for the
merger of CCB with and into the Company (the "Merger").
Pursuant to the Merger Agreement, the Merger was consummated on June 4, 1997.
Each outstanding share of common stock of CCB ("CCB Common Stock") was
converted into the right to receive one share (the "Conversion Number") of
common stock of the Company ("Company Common Stock") (after giving effect to
the Reverse Stock Split (as defined herein)). The Conversion Number was
determined by dividing (a) 1.6 times CCB's Per Share Book Value (as defined
in the Merger Agreement) by (b) the Company's Per Share Book Value (as
defined in the Merger Agreement) after giving effect to the Reverse Stock
Split.
Upon consummation of the Merger, the Company issued 3,043,226 shares of
Company Common Stock to former shareholders of CCB, and as a result, the
former holders of CCB Common Stock own shares of Company Common Stock
representing approximately 42.9% of the Company.
In connection with the consummation of the Merger, Monarch Bank, a
wholly-owned subsidiary of the Company, was merged with and into National
Bank of Southern California ("NBSC"), a wholly-owned subsidiary of CCB.
The description of the Merger Agreement contained herein is qualified in its
entirety by reference to the Merger Agreement.
The Merger increased the total pro forma assets of the Company and its
subsidiaries to approximately $850 million, total pro forma deposits to
approximately $753 million and total pro forma shareholders' equity to
approximately $81 million as of March 31, 1997, before merger and
restructuring costs.
ITEM 5. OTHER EVENTS
On June 2, 1997, the shareholders of Monarch Bancorp approved the following
items:
1) The merger of California Commercial Bankshares into the Company;
2) Changing the Company name from Monarch Bancorp to Western Bancorp;
3) An 8.5 to 1 reverse stock split of the Company common stock (the
"Reverse Stock Split"); and
4) Election of directors Rice E. Brown, Joseph J. Digange, John W. Rose,
Hugh S. Smith, Jr., Matthew P. Wagner, Dale E. Walter and John M.
Eggemeyer
Concurrent with the Company's merger with CCB (See Item 2 above) Mr. Mark H.
Stuenkel, Mr. William H. Jacoby and Mr. Robert L. McKay, former directors of
CCB, were appointed to the board of directors of the Company.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Incorporated by reference to
pages 45 through 70 of CCB's 1996 annual report on Form 10-K ("CCB's Annual
Report") which pages are filed as Exhibit 13.1 to this Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION.
The following Unaudited Pro Forma Combined Condensed Financial Information
combines the historical Consolidated Condensed Financial Statements of the
Company and CCB giving effect to the merger between the Company and CCB (the
"Merger") as if it had been effective on March 31, 1997 and December 31, 1996
with respect to the Pro Forma Combined Balance Sheets, and as of the
beginning of the periods indicated, with respect to the Pro Forma Combined
Statements of Income. This information is presented under
pooling-of-interests accounting after giving effect to the Reverse Stock
Split. This information should be read in conjunction with the historical
consolidated financial statements of the Company and CCB, including their
respective notes thereto. The effect of estimated merger and reorganization
costs expected to be incurred in connection with the Merger have been
reflected in the pro forma combined balance sheets; however, since the
estimated costs are non-recurring, they have not been reflected in the pro
forma combined statements of income. The unaudited pro forma combined
condensed financial information does not give effect to any anticipated
operating efficiencies in conjunction with the Merger. The pro forma balance
sheets are not necessarily indicative of the actual financial position that
would have existed had the Merger been consummated on March 31, 1997 or
December 31, 1996, or that may exist in the future. The pro forma combined
condensed statements of income are not necessarily indicative of the results
that would have occurred had the Merger been consummated on the dates
indicated or that may be achieved in the future. 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 operating results between the dates of the pro forma
financial data and the date on which the Merger took place.
3
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1997
Western CCB Pro Forma Pro Forma
(Historical) (Historical)(1) Adjustments(1) Combined
------------ --------------- -------------- ---------
(In thousands Except Per Share Data)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks $ 35,763 $ 31,282 $ - $ 67,045
Federal funds sold 17,618 25,000 - 42,618
-------- -------- -------- --------
TOTAL CASH & CASH EQUIVALENTS 53,381 56,282 - 109,663
Securities:
Securities held to maturity 6,928 - - 6,928
Securities available for sale 134,807 75,738 - 210,545
-------- -------- -------- --------
TOTAL SECURITIES 141,735 75,738 - 217,473
Net loans 245,331 212,921 - 458,252
Property, plant and equipment 5,748 1,339 - 7,087
Other real estate owned 7,121 3,333 - 10,454
Goodwill 28,843 - - 28,843
Other assets 11,883 6,487 438(2) 18,808
-------- -------- -------- --------
TOTAL ASSETS $ 494,042 $ 356,100 $ 438 $ 850,580
-------- -------- -------- --------
-------- -------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing deposits $ 138,407 $ 139,103 $ - $ 277,510
Interest bearing deposits 289,430 185,742 - 475,172
-------- -------- -------- --------
TOTAL DEPOSITS 427,837 324,845 - 752,682
Borrowed funds 8,000 950 1,350(2) 10,300
Accrued interest payable & other liabilities 3,573 4,276 1,909(2) 9,758
-------- -------- -------- --------
TOTAL LIABILITIES 439,410 330,071 3,259 772,740
SHAREHOLDERS' EQUITY
Preferred stock - - - -
Common stock 58,709 14,680 - 73,389
Additional paid-in capital - 497 - 497
Retained earnings (deficit) (3,823) 11,184 (2,821)(2) 4,540
Unrealized net gains (losses) on investments -
available for sale, net (254) (332) - (586)
-------- -------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 54,632 26,029 (2,821) 77,840
-------- -------- -------- --------
TOTAL LIABILITIES
& SHAREHOLDERS' EQUITY $ 494,042 $ 356,100 $ 438 $ 850,580
-------- -------- -------- --------
-------- -------- -------- --------
Number of common shares outstanding 4,043.9 3,039.5 7,083.4
Common shareholders' equity per share $ 13.51 $ 8.56 $ 10.99
See accompanying notes to unaudited pro forma combined condensed financial information
</TABLE>
4
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Western CCB Pro Forma Pro Forma
(Historical) (Historical)(1) Adjustments(1) Combined
------------ --------------- -------------- ---------
(In thousands Except Per Share Data)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks $ 37,385 $ 28,849 $ - $ 66,234
Federal funds sold 4,217 14,500 - 18,717
-------- -------- -------- --------
TOTAL CASH & CASH EQUIVALENTS 41,602 43,349 - 84,951
Securities:
Securities held to maturity 7,270 - - 7,270
Securities available for sale 157,454 91,504 - 248,958
-------- -------- -------- --------
TOTAL SECURITIES 164,724 91,504 - 256,228
Net loans 254,723 204,650 - 459,373
Property, plant and equipment 5,780 1,435 - 7,215
Other real estate owned 3,889 2,657 - 6,546
Goodwill 29,342 - - 29,342
Other assets 12,301 7,869 438(2) 20,608
-------- -------- -------- --------
TOTAL ASSETS $ 512,361 $ 351,464 $ 438 $ 864,263
-------- -------- -------- --------
-------- -------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing deposits $ 150,694 $ 146,257 $ - $ 296,951
Interest bearing deposits 292,290 172,447 - 464,737
-------- -------- -------- --------
TOTAL DEPOSITS 442,984 318,704 - 761,688
Borrowed funds 11,000 2,350 1,350(2) 14,700
Accrued interest payable & other liabilities 4,249 5,410 1,909(2) 11,568
-------- -------- -------- --------
TOTAL LIABILITIES 458,233 326,464 3,259 787,956
SHAREHOLDERS' EQUITY
Preferred stock - - - -
Common stock 58,709 14,382 - 73,091
Additional paid-in capital - 497 - 497
Retained earnings (deficit) (4,716) 10,244 (2,821)(2) 2,707
Unrealized net gains (losses) on investments -
available for sale, net 135 (123) - 12
-------- -------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 54,128 25,000 (2,821) 76,307
-------- -------- -------- --------
TOTAL LIABILITIES
& SHAREHOLDERS' EQUITY $ 512,361 $ 351,464 $ 438 $ 864,263
-------- -------- -------- --------
-------- -------- -------- --------
Number of common shares outstanding 4,043.9 2,984.0 7,027.9
Common shareholders' equity per share $ 13.39 $ 8.38 $ 10.86
See accompanying notes to unaudited pro forma combined condensed financial information
</TABLE>
5
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE QUARTER ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Western CCB Pro Forma Pro Forma
(Historical) (Historical)(1) Adjustments(1) Combined
------------ --------------- -------------- ---------
(In thousands Except Per Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 6,090 $ 5,193 $ - $ 11,283
Interest on investment securities 2,269 1,088 - 3,357
Interest on federal funds sold 81 330 - 411
-------- -------- -------- --------
TOTAL INTEREST INCOME 8,440 6,611 - 15,051
INTEREST EXPENSE:
Interest expense on deposits 2,336 1,473 - 3,809
Interest expense on other borrowings 233 49 - 282
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 2,569 1,522 - 4,091
-------- -------- -------- --------
NET INTEREST INCOME 5,871 5,089 - 10,960
Less: provision for loan losses 225 150 - 375
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN 5,646 4,939 - 10,585
NON-INTEREST INCOME
Service charges 490 286 - 776
Escrow fees - 155 - 155
Data processing income 39 - - 39
Securities gains (losses) 107 - - 107
Other income 44 222 - 266
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 680 663 - 1,343
NON-INTEREST EXPENSE
Salaries and benefits 2,199 1,934 - 4,133
Occupancy, furniture and equipment 502 581 - 1,083
Advertising and business development 110 116 - 226
Other real estate owned (21) 69 - 48
Professional services 480 360 - 840
Telephone, stationery and supplies 192 205 - 397
Goodwill amortization 499 - - 499
Data processing for company 159 167 - 326
Data processing for customers - 128 - 128
Other 325 477 - 802
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 4,445 4,037 - 8,482
-------- -------- -------- --------
Income before income taxes 1,881 1,565 - 3,446
Income taxes 988 627 - 1,615
-------- -------- -------- --------
NET INCOME $ 893 $ 938 $ - $ 1,831
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE INFORMATION
Number of shares (weighted average) 4,178.2 3,142.0 7,320.2
Income per share (dollars) $ 0.21 $ 0.30 $ 0.25
See accompanying notes to unaudited pro forma combined condensed financial information
</TABLE>
6
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Western CCB Pro Forma Pro Forma
(Historical) (Historical)(1) Adjustments(1) Combined
------------ --------------- -------------- ---------
(In thousands Except Per Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 786 $ 4,770 $ - $ 5,556
Interest on investment securities 403 928 - 1,331
Interest on federal funds sold 71 573 - 644
-------- -------- -------- --------
TOTAL INTEREST INCOME 1,260 6,271 - 7,531
INTEREST EXPENSE:
Interest expense on deposits 325 1,664 - 1,989
Interest expense on other borrowings - 59 - 59
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 325 1,723 - 2,048
-------- -------- -------- --------
NET INTEREST INCOME 935 4,548 - 5,483
Less: provision for loan losses 50 300 - 350
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN 885 4,248 - 5,133
NON-INTEREST INCOME
Service charges 143 291 - 434
Escrow fees - 121 - 121
Data processing income 14 - - 14
Other income 25 291 - 316
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 182 703 - 885
NON-INTEREST EXPENSE
Salaries and benefits 425 2,178 - 2,603
Occupancy, furniture and equipment 158 511 - 669
Advertising and business development 32 145 - 177
Other real estate owned 6 99 - 105
Professional services 150 228 - 378
Telephone, stationery and supplies 48 199 - 247
Data processing for company - 121 - 121
Data processing for customers - 96 - 96
Other 109 590 - 699
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 928 4,167 - 5,095
-------- -------- -------- --------
Income before income taxes 139 784 - 923
Income taxes 60 314 - 374
-------- -------- -------- --------
NET INCOME $ 79 $ 470 $ - $ 549
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE INFORMATION
Number of shares (weighted average) 968.0 2,939.0 3,907.0
Income per share (dollars) $ 0.08 $ 0.16 $ 0.14
See accompanying notes to unaudited pro forma combined condensed financial information
</TABLE>
7
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Western CCB Pro Forma Pro Forma
(Historical) (Historical)(1) Adjustments(1) Combined
------------ --------------- -------------- ---------
(In thousands Except Per Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 8,207 $ 20,022 $ - $ 28,229
Interest on interest bearing
deposits in other banks 3 - - 3
Interest on investment securities 3,683 4,923 - 8,606
Interest on federal funds sold 604 1,828 - 2,432
-------- -------- -------- --------
TOTAL INTEREST INCOME 12,497 26,773 - 39,270
INTEREST EXPENSE:
Interest expense on deposits 3,761 6,531 - 10,292
Interest expense on notes payable 191 278 - 469
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 3,952 6,809 - 10,761
-------- -------- -------- --------
NET INTEREST INCOME 8,545 19,964 - 28,509
Less: provision for
(recovery of) loan losses 228 1,260 - 1,488
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,317 18,704 - 27,021
NON-INTEREST INCOME
Service charges 903 1,157 - 2,060
Escrow fees - 781 - 781
Data processing income 100 - - 100
Gain (loss) on sale of loans and other assets - 665 - 665
Securities gains (losses) 267 - - 267
Other income 105 1,155 - 1,260
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 1,375 3,758 - 5,133
NON-INTEREST EXPENSE
Salaries and benefits 4,323 8,546 - 12,869
Occupancy, furniture and equipment 1,031 2,562 - 3,593
Advertising and business development 152 347 - 499
Other real estate owned (151) (422) - (573)
Professional services 1,469 2,386 - 3,855
Telephone, stationery and supplies 380 420 - 800
Goodwill amortization 499 - - 499
Data processing for company 186 587 - 773
Data processing for customers - 510 - 510
Other 713 3,619 - 4,332
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 8,602 18,555 - 27,157
-------- -------- -------- --------
Income before income taxes 1,090 3,907 - 4,997
Income taxes 352 111 - 463
-------- -------- -------- --------
NET INCOME $ 738 $ 3,796 $ - $ 4,534
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE INFORMATION
Number of shares (weighted average) 1,761.8 3,009.0 4,770.8
Income per share (dollars) $ 0.42 $ 1.26 $ 0.95
See accompanying notes to unaudited pro forma combined condensed financial information
</TABLE>
8
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Western CCB Pro Forma Pro Forma
(Historical) (Historical)(1) Adjustments(1) Combined
------------ --------------- -------------- ---------
(In thousands Except Per Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 3,054 $ 20,000 - $ 23,054
Interest on interest bearing
deposits in other banks 43 - - 43
Interest on investment securities 1,018 3,409 - 4,427
Interest on federal funds sold 376 1,333 - 1,709
-------- -------- -------- --------
TOTAL INTEREST INCOME 4,491 24,742 - 29,233
INTEREST EXPENSE:
Interest expense on deposits 1,147 7,022 - 8,169
Interest expense on notes payable 1 267 - 268
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 1,148 7,289 - 8,437
-------- -------- -------- --------
NET INTEREST INCOME 3,343 17,453 - 20,796
Less: provision for loan losses 425 6,600 - 7,025
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,918 10,853 - 13,771
NON-INTEREST INCOME
Service charges 545 983 - 1,528
Escrow fees - 308 - 308
Data processing income 70 - - 70
Securities gains (losses) - (72) - (72)
Other income 318 1,136 - 1,454
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 933 2,355 - 3,288
NON-INTEREST EXPENSE
Salaries and benefits 1,657 7,513 - 9,170
Occupancy, furniture and equipment 622 2,129 - 2,751
Advertising and business development 116 243 - 359
Other real estate owned 62 2,799 - 2,861
Professional services 398 1,439 - 1,837
Telephone, stationery and supplies 186 321 - 507
Lower of cost or market adjustment
on loans available for sale - 756 - 756
Data processing for company - 174 - 174
Data processing for customers - 184 - 184
Other 623 2,921 - 3,544
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 3,664 18,479 - 22,143
-------- -------- -------- --------
Income (loss) before income taxes 187 (5,271) - (5,084)
Income taxes (496) (1,930) (2,426)
-------- -------- -------- --------
NET INCOME (LOSS) $ 683 $ (3,341) $ - $ (2,658)
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE INFORMATION
Number of shares (weighted average) 596.6 2,564.0 3,160.6
Income (loss) per share (dollars) $ 1.14 $ (1.30) $ (0.84)
See accompanying notes to unaudited pro forma combined condensed financial information
</TABLE>
9
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Western CCB Pro Forma Pro Forma
(Historical) (Historical)(1) Adjustments(1) Combined
------------ --------------- -------------- ---------
(In thousands Except Per Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,878 $ 18,347 $ - $ 21,225
Interest on interest bearing
deposits in other banks 111 - - 111
Interest on investment securities 794 3,873 - 4,667
Interest on federal funds sold 155 501 - 656
-------- -------- -------- --------
TOTAL INTEREST INCOME 3,938 22,721 - 26,659
INTEREST EXPENSE:
Interest expense on deposits 945 6,036 - 6,981
Interest expense on notes payable 2 300 - 302
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 947 6,336 - 7,283
-------- -------- -------- --------
NET INTEREST INCOME 2,991 16,385 - 19,376
Less: provision for
(recovery of) loan losses 995 3,365 - 4,360
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,996 13,020 - 15,016
NON-INTEREST INCOME
Service charges 503 969 - 1,472
Escrow fees - 304 - 304
Data processing income 122 - - 122
Securities gains (losses) (47) 6 - (41)
Other income 71 849 - 920
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 649 2,128 - 2,777
NON-INTEREST EXPENSE
Salaries and benefits 1,788 6,454 - 8,242
Occupancy, furniture and equipment 682 2,008 - 2,690
Advertising and business development 110 88 - 198
Other real estate owned 243 1,070 - 1,313
Professional services 642 660 - 1,302
Telephone, stationery and supplies 178 267 - 445
Data processing for company - 130 - 130
Data processing for customers - 173 - 173
Other 851 2,895 - 3,746
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 4,494 13,745 - 18,239
-------- -------- -------- --------
Income (loss) before income taxes (1,849) 1,403 - (446)
Income taxes 2 544 - 546
-------- -------- -------- --------
NET INCOME (LOSS) $ (1,851) $ 859 $ - $ (992)
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE INFORMATION
Number of shares (weighted average) 93.4 2,427.0 2,520.4
Income (loss) per share (dollars) $ (19.81) $ 0.35 $ (0.39)
See accompanying notes to unaudited pro forma combined condensed financial information
</TABLE>
10
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Note 1: Basis of Presentation
Certain historical data of CCB have been reclassified on a pro forma basis
to conform to Western's classifications.
Note 2: Merger Costs
Reflects management's current estimate, for purposes of pro forma
presentation, of the aggregate estimated merger costs of $3,259,000 ($2,821,000
net of taxes, computed using the combined federal and state tax rate of 41.5%)
expect to be incurred in connection wit the Merger. While a portion of these
costs may be required to be recognized over time, the current estimate of these
costs has been recorded in the pro forma combined balance sheets in order to
disclose the aggregate effect of these activities on Western's pro forma
combined financial position. The estimated aggregate costs, primarily comprised
of anticipated cash charges, include the following:
(In Thousands)
---------------
Investment banking fees $1,350
Filing fees and other professional fees 854
Employee compensation and conversion 1,055
-----
3,259
Tax benefits 438
-----
$2,821
-----
-----
11
<PAGE>
(c) EXHIBITS. The following exhibits are filed as part of this Current Report
on Form 8-K:
Exhibit
Number Description
2.1 Amended and Restated Agreement and Plan of Merger, dated as of December
19, 1996, between the Company and CCB (Appendix C of Form S-4
Registration No. 33-26916 incorporated by reference).
4.1 Form of Certificate representing shares of Western Bancorp Common
Stock.
13.1 Pages 45 through 70 of CCB's Annual Report on Form 10-K which
constitute CCB's Consolidated Financial Statements for the Years Ended
December 31, 1996, 1995 and 1994.
23.1 Consent of Deloitte & Touche, LLP.
99.1 Press Release of Western Bancorp, dated June 4, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
Dated: June 18, 1997
WESTERN BANCORP
By: /s/ ARNOLD C. HAHN
-----------------------------------
Name: Arnold C. Hahn
Title: Executive Vice President and
Chief Financial Officer
12
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2.1 Amended and Restated Agreement and Plan of Merger, dated as of December
19, 1996, between the Company and CCB (Appendix C of Form S-4
Registration No. 33-26916 incorporated by reference).
4.1 Form of Certificate representing shares of Western Bancorp Common
Stock.
13.1 Pages 45 through 70 of CCB's Annual Report on Form 10-K which
constitute CCB's Consolidated Financial Statements for the Years
Ended December 31, 1996, 1995 and 1994.
23.1 Consent of Deloitte & Touche, LLP.
99.1 Press Release of Western Bancorp, dated June 4, 1997.
13
<PAGE>
NUMBER SHARES
WB WESTERN BANCORP
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF CALIFORNIA
CUSIP 957683 10'5
This Certifies that
Is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, NO PAR VALUE, OF
___________________________WESTERN BANCORP____________________________
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated: WESTERN BANCORP
INCORPORATED
MAY 20, 1983
CALIFORNIA
ARNOLD C. HAHN HUGH S. SMITH, JR.
SECRETARY CHAIRMAN AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
U.S. STOCK TRANSFER CORPORATION
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - _______Custodian_________
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act______________________________
of survivorship and not as (State)
tenants in common UNIF TRF MIN ACT - ___Custodian (until age___)
(Cust)
_______under Uniform Transfers
(Minor)
to Minors Act ________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________________Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated_____________________________
X _________________________________________
X _________________________________________
NOTICE: THE SIGNATURES TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-16.
<PAGE>
EXHIBIT 13.1
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1996, 1995 AND
1994 AND INDEPENDENT AUDITORS' REPORT
45
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of California Commercial Bankshares:
We have audited the accompanying consolidated balance sheets of California
Commercial Bankshares and subsidiaries (the "Company") as of December 31, 1996
and 1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of California Commercial
Bankshares and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
January 24, 1997
March 17, 1997 as to Notes 7 and 13
Los Angeles, California
46
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS (Note 3)................................................. $ 28,849,000 $ 28,549,000
FEDERAL FUNDS SOLD............................................................... 14,500,000 45,000,000
-------------- --------------
TOTAL CASH AND CASH EQUIVALENTS.................................................. 43,349,000 73,549,000
INVESTMENT SECURITIES available for sale at estimated fair value (Note 4)........ 91,504,000 62,283,000
LOANS AND INVESTMENT IN LEASES, net (Notes 5 and 9).............................. 203,416,000 178,050,000
LOANS AVAILABLE FOR SALE, net.................................................... 1,234,000 9,620,000
ACCRUED INTEREST RECEIVABLE...................................................... 2,668,000 2,649,000
PROPERTY, net (Note 6)........................................................... 1,435,000 1,084,000
OTHER REAL ESTATE OWNED, net..................................................... 2,657,000 2,165,000
OTHER ASSETS (Notes 8 and 10).................................................... 5,201,000 4,643,000
-------------- --------------
TOTAL........................................................................ $ 351,464,000 $ 334,043,000
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Demand:
Noninterest-bearing............................................................ $ 146,257,000 $ 130,660,000
Interest-bearing............................................................... 72,845,000 65,301,000
Savings.......................................................................... 46,179,000 45,312,000
Time certificates, $100,000 and over............................................. 32,324,000 34,718,000
Other time deposits.............................................................. 21,099,000 32,513,000
-------------- --------------
Total Deposits............................................................... 318,704,000 308,504,000
NOTE PAYABLE (Note 7)............................................................ 2,350,000 2,351,000
OTHER LIABILITIES (Notes 8 and 12)............................................... 5,410,000 2,069,000
-------------- --------------
Total Liabilities............................................................ 326,464,000 312,924,000
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS' EQUITY (Notes 7, 8 and 13):
Preferred stock--no par value; authorized, 1,000,000 shares; outstanding, none
Common stock--no par value; authorized, 10,000,000 shares; issued and
outstanding, 2,984,000 in 1996 and 2,922,000 in 1995........................... 14,382,000 14,077,000
Paid-in capital.................................................................. 497,000 470,000
Retained earnings................................................................ 10,244,000 6,448,000
Net unrealized (loss) gain on investment securities available for sale, net of
tax of $82,000 in 1996 and $67,000 in 1995..................................... (123,000) 124,000
-------------- --------------
Total Shareholders' Equity................................................... 25,000,000 21,119,000
-------------- --------------
TOTAL........................................................................ $ 351,464,000 $ 334,043,000
-------------- --------------
-------------- --------------
</TABLE>
See notes to consolidated financial statements.
47
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
INTEREST AND FEE INCOME:
Loans and leases, including fees.................................... $ 20,022,000 $ 20,000,000 $ 18,347,000
Investment securities............................................... 4,923,000 3,409,000 3,873,000
Federal funds sold.................................................. 1,828,000 1,333,000 501,000
------------- ------------- -------------
Total Interest and Fee Income................................... 26,773,000 24,742,000 22,721,000
INTEREST EXPENSE:
Deposits............................................................ 6,531,000 7,022,000 6,036,000
Note payable and other (Note 7)..................................... 278,000 267,000 300,000
------------- ------------- -------------
Total Interest Expense.......................................... 6,809,000 7,289,000 6,336,000
------------- ------------- -------------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND LEASE LOSSES...... 19,964,000 17,453,000 16,385,000
PROVISION FOR LOAN AND LEASE LOSSES (Note 5)........................ 1,260,000 6,600,000 3,365,000
------------- ------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES....... 18,704,000 10,853,000 13,020,000
------------- ------------- -------------
OTHER INCOME:
Escrow fees......................................................... 781,000 308,000 304,000
Service charges..................................................... 1,157,000 983,000 969,000
Securities (loss) gain, net......................................... (72,000) 6,000
Gain on sale of loans, net.......................................... 665,000
Other income........................................................ 1,155,000 1,136,000 849,000
------------- ------------- -------------
Total Other Income.............................................. 3,758,000 2,355,000 2,128,000
------------- ------------- -------------
OTHER EXPENSES:
Salaries and employee benefits (Note 8)............................. 8,546,000 7,513,000 6,454,000
Occupancy, furniture and equipment (Note 11)........................ 2,562,000 2,129,000 2,008,000
Advertising......................................................... 347,000 243,000 88,000
Credit card and other losses (recoveries)........................... 329,000 94,000 (39,000)
Data processing for company......................................... 587,000 174,000 130,000
Data processing for customers....................................... 510,000 184,000 173,000
Legal fees and related costs (Note 12).............................. 2,386,000 1,439,000 660,000
Loan collection and related costs................................... 446,000 414,000 331,000
Lower of cost or market adjustment on loans available for sale...... 756,000
Regulatory assessments.............................................. 576,000 717,000 928,000
Supplies............................................................ 420,000 321,000 267,000
Other real estate owned, net........................................ (422,000) 2,799,000 1,070,000
Other............................................................... 2,268,000 1,696,000 1,675,000
------------- ------------- -------------
Total Other Expenses............................................ 18,555,000 18,479,000 13,745,000
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAX............. 3,907,000 (5,271,000) 1,403,000
PROVISION (BENEFIT) FOR INCOME TAX (Note 10)........................ 111,000 (1,930,000) 544,000
------------- ------------- -------------
NET INCOME (LOSS)................................................... $ 3,796,000 $ (3,341,000) $ 859,000
------------- ------------- -------------
------------- ------------- -------------
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE............ $ 1.26 $ (1.30) $ 0.35
------------- ------------- -------------
------------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING....................................................... 3,009,000 2,564,000 2,427,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
48
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NET UNREALIZED
(LOSS) GAIN ON
INVESTMENT
COMMON STOCK SECURITIES TOTAL
------------------------- PAID-IN RETAINED AVAILABLE FOR SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SALE EQUITY
---------- ------------- ---------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994... 2,423,000 $ 10,782,000 $ 475,000 $ 8,930,000 $ 20,187,000
Net Income................... 859,000 859,000
Net Unrealized Loss On
Investment Securities
Available for Sale......... $ (1,318,000) (1,318,000)
---------- ------------- ---------- ------------- -------------- -------------
Balance at December 31,
1994....................... 2,423,000 10,782,000 475,000 9,789,000 (1,318,000) 19,728,000
Net Loss..................... (3,341,000) (3,341,000)
Stock Options Exercised (Note
8)......................... 25,000 95,000 (83,000) 12,000
Tax Benefit of Stock Options
Exercised.................. 78,000 78,000
Common Shares Sold Under
Private Placement (Note
7)......................... 474,000 3,200,000 3,200,000
Net change in Unrealized Gain
on Investment Securities
Available For Sale......... 1,442,000 1,442,000
---------- ------------- ---------- ------------- -------------- -------------
Balance at December 31,
1995....................... 2,922,000 14,077,000 470,000 6,448,000 124,000 21,119,000
Net Income................... 3,796,000 3,796,000
Stock Options Exercised (Note
8)......................... 62,000 305,000 (24,000) 281,000
Tax Benefit of Stock Options
Exercised.................. 51,000 51,000
Net change in Unrealized Loss
on Investment Securities
Available For Sale......... (247,000) (247,000)
---------- ------------- ---------- ------------- -------------- -------------
Balance at December 31,
1996....................... 2,984,000 $ 14,382,000 $ 497,000 $ 10,244,000 $ (123,000) $ 25,000,000
---------- ------------- ---------- ------------- -------------- -------------
---------- ------------- ---------- ------------- -------------- -------------
</TABLE>
See notes to consolidated financial statements.
49
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................. $ 3,796,000 $ (3,341,000) $ 859,000
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization..................................... 419,000 473,000 580,000
Amortization of discounts and premiums on investment securities
available for sale.............................................. 284,000 850,000 795,000
Provision for loan and lease losses............................... 1,260,000 6,600,000 3,365,000
Provision for losses on other real estate owned................... 96,000 177,000 244,000
Deferred income taxes............................................. (143,000) (1,627,000) 621,000
Gain (loss) on sale of investment securities available for sale... 72,000 (6,000)
Loans originated for sale......................................... (9,620,000)
Proceeds from sales of loans originated for sale.................. 3,466,000
(Gain) loss on sale of other real estate owned.................... (1,175,000) 1,675,000 4,000
Gain on sale of loans originated for sale......................... (1,074,000)
Write down of loans available for sale............................ 409,000
(Gain) loss on sale of property................................... (8,000) 2,000 (7,000)
(Increase) decrease in accrued interest receivable................ (19,000) 197,000 (359,000)
(Decrease) increase in deferred loan fees......................... (260,000) (80,000) 27,000
Decrease in unearned lease income................................. (35,000) (145,000) (19,000)
(Increase) decrease in other assets............................... (266,000) (166,000) 686,000
Net increase (decrease) in other liabilities...................... 2,487,000 872,000 (1,156,000)
-------------- ------------- --------------
Net cash provided by (used in) operating activities............... 9,237,000 (4,061,000) 5,634,000
-------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of investment securities available for
sale............................................................ 62,685,000 17,232,000 19,350,000
Proceeds from sale of investment securities available for sale.... 21,016,000 49,229,000
Purchases of investment securities available for sale............. (92,586,000) (27,158,000) (62,335,000)
Net (increase) decrease in loans and investment in leases......... (24,533,000) 3,260,000 (505,000)
Recoveries of loans and investment in leases...................... 553,000 494,000 1,156,000
Payments received on in-substance foreclosures.................... 93,000
Purchase of property.............................................. (771,000) (661,000) (251,000)
Proceeds from sale of property.................................... 9,000 24,000 18,000
Proceeds from sale of other real estate owned..................... 4,675,000 5,683,000 6,872,000
Additions to other real estate owned.............................. (390,000)
-------------- ------------- --------------
Net cash (used in) provided by investing activities............... (49,968,000) 19,890,000 13,237,000
-------------- ------------- --------------
</TABLE>
50
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994 (CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits............................... $ 10,200,000 $ 31,115,000 $ (22,337,000)
Net proceeds from sale of common stock and exercise of common
stock options................................................... 332,000 3,290,000
Payments on note payable.......................................... (1,000)
-------------- ------------- --------------
Net cash provided by (used in) financing activities............... $ 10,531,000 34,405,000 (22,337,000)
-------------- ------------- --------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.............. (30,200,000) 50,234,000 (3,466,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................... 73,549,000 23,315,000 26,781,000
-------------- ------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR.......................... $ 43,349,000 $ 73,549,000 $ 23,315,000
-------------- ------------- --------------
-------------- ------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest........................................................ $ 6,870,000 $ 7,217,000 $ 6,327,000
-------------- ------------- --------------
-------------- ------------- --------------
Income taxes.................................................... $ 1,107,000 $ 627,000 $ 602,000
-------------- ------------- --------------
-------------- ------------- --------------
SUPPLEMENTAL INFORMATION ON NONCASH INVESTING ACTIVITIES:
Property acquired through foreclosure............................. $ 3,234,000 $ 7,024,000 $ 7,143,000
-------------- ------------- --------------
-------------- ------------- --------------
Assumption of debt through foreclosure............................ $ 854,000 $ $ 67,000
-------------- ------------- --------------
-------------- ------------- --------------
Loan made to facilitate sale of loans available for sale.......... $ 2,593,000 $ $
-------------- ------------- --------------
-------------- ------------- --------------
Tax benefit for exercise of non-qualified stock options........... $ 51,000 $ 78,000 $
-------------- ------------- --------------
-------------- ------------- --------------
</TABLE>
See notes to consolidated financial statements.
51
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. GENERAL
California Commercial Bankshares (the "Company") was incorporated on June
16, 1982 for the purpose of becoming a bank holding company. National Bank of
Southern California (the "Bank") commenced operations as a wholly-owned
subsidiary of the Company on January 10, 1983. The Bank operates five branches
in Orange County, California. The Bank's primary source of revenue is providing
loans to customers who are predominantly middle market businesses and middle
income individuals.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION--The consolidated financial statements include the accounts of
the Company, the Bank and Venture Partners, Inc. Venture Partners Inc., a
California corporation, acts primarily as an intermediary for tax deferred
exchanges, a service function of the escrow department of the Bank. All
significant intercompany balances and transactions have been eliminated.
CONSOLIDATED STATEMENTS OF CASH FLOWS--Cash and cash equivalents for the
purpose of the consolidated statements of cash flows are defined as cash and due
from banks and Federal funds sold.
USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS--The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and the reported
amounts of 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.
INVESTMENT SECURITIES--Debt securities that the Bank has the positive intent
and ability to hold to maturity are classified as held to maturity securities
and reported at amortized cost. Debt and equity securities that are bought and
held principally for the purpose of selling them in the near term are classified
as trading securities and reported at fair value, with unrealized gains and
losses included in earnings. The Bank has no held to maturity or trading
securities. Debt and equity securities not classified as either held to maturity
securities or trading securities are classified as available for sale securities
and reported at fair value, with unrealized gains and losses excluded from
earnings and reported as a separate component of equity, net of deferred taxes.
The Bank designates investment securities as held to maturity or available
for sale upon acquisition. Gain or loss on the sales of investment securities is
determined on the specific identification method. Premiums and discounts on
investment securities are amortized or accreted using the interest method over
the expected lives of the related securities.
LOANS AND INVESTMENT IN LEASES--Loans and leases are carried at principal
amounts outstanding, net of deferred net loan origination fees, unearned lease
income and the allowance for loan and lease losses.
Nonaccrual loans are those for which management has discontinued accrual of
interest because (i) there exists reasonable doubt as to the full and timely
collection of either principal or interest or (ii) such loans have become
contractually past due ninety days with respect to principal or interest.
Interest accruals may be continued for loans that have become contractually past
due ninety days when such loans are well secured and in the process of
collection and, accordingly, management has determined such loans to be fully
collectible as to both principal and interest.
52
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
For this purpose, loans are considered well secured if they are
collateralized by property having a realizable value in excess of the amount of
principal and accrued interest outstanding or are guaranteed by a financially
capable party. Loans are considered to be in the process of collection if
collection of the loan is proceeding so that management reasonably expects
repayment of the loan or its restoration to a current status in the near future.
When a loan is placed on nonaccrual status, all interest previously accrued
but uncollected is reversed against current period operating results. Income on
such loans is then recognized only to the extent that cash is received and where
the ultimate collection of the carrying amount of the loan is probable, after
giving consideration to borrowers' current financial condition, historical
repayment performance and other factors. Accrual of interest is resumed only
when (i) principal and interest are brought fully current and (ii) such loans
are either considered, in management's judgement, to be fully collectible or
otherwise become well secured and in the process of collection.
Troubled debt restructured loans are those for which the Company has, for
reasons related to borrowers' financial difficulties, granted concessions to
borrowers (including reductions of either interest or principal) that it would
not otherwise consider, whether or not such loans are secured or guaranteed by
others.
The Bank considers a loan to be impaired when it is probable that the Bank
will be unable to collect all contractual principal and interest payments in
accordance with the terms of the original loan agreement. Impaired loans, except
those loans that are accounted for at fair value or at the lower of cost or fair
value, are accounted for at the present value of the expected future cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
at the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent. The Bank applies the measurement provisions to all
loans in its portfolio except for single-family residence and installment loans
which are collectively evaluated for impairment.
LOAN ORIGINATION FEES--Loan origination fees, net of certain related direct
incremental loan origination costs, are deferred and amortized to income over
the term of the loans using the effective interest method.
ALLOWANCE FOR LOAN AND LEASE LOSSES--The allowance for loan and lease losses
is based on an analysis of the loan and lease portfolio and reflects an amount
which, in management's judgment, is adequate to provide for potential loan and
lease losses after giving consideration to the loan and lease portfolio, current
economic conditions, past loan and lease loss experience and other factors that
deserve current recognition in estimating loan and lease losses. While
management uses the best information available to provide for possible losses,
future adjustments to the allowance may be necessary due to economic, operating,
regulatory or other conditions that may be beyond the Company's control.
In each reporting period, the allowance for loan and lease losses is
increased by provisions for losses charged against operations in that period and
recoveries of loans and leases previously charged off, and is reduced by
charge-offs of loans and leases recognized in that period.
LOANS AVAILABLE FOR SALE--Loans available for sale are recorded at the lower
of cost or estimated market value, determined on an aggregate basis, and include
loan origination costs and related fees. Any transfers of loans available for
sale to the investment portfolio are recorded at the lower of cost or estimated
market value on the transfer date. Gains or losses resulting from sales of loans
are recorded at
53
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
the time of sale and are determined by the difference between the net sales
proceeds and the carrying value of the loans sold.
OTHER REAL ESTATE OWNED--Other real estate owned, which represents real
estate acquired in settlement of loans, is carried at fair value less estimated
selling costs. Any subsequent operating expenses or income, reduction in
estimated fair values, or gains or losses on disposition of such properties are
charged or credited to current operations.
PROPERTY--Property is stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed using the straight-line
basis over the estimated useful lives of the related assets (estimated to be one
to five years) or, if shorter, the term of the lease in the case of leasehold
improvements.
INCOME TAXES--The Company accounts for income taxes under Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year-end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income.
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE--Net income (loss)
per common and common equivalent share is based on the weighted average number
of common and common equivalent shares (stock options) outstanding during the
year.
RECENT ACCOUNTING PRONOUNCEMENTS--On January 1, 1996, the Company adopted
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This Statement requires that long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, or to be disposed of, be reviewed for impairment based on
the fair value of the asset. Furthermore, this Statement requires that certain
long-lived assets and identifiable intangibles to be disposed of, be reported at
the lower of carrying amount or fair value less cost to sell. The Company has
determined that the impact of this Statement on its operations and financial
position is not material for the year ended December 31, 1996.
SFAS No. 123, "Accounting for Stock Based Compensation" encourages, but does
not require companies to record compensation cost for stock based employee
compensation plans at fair value. During 1996, the Company has chosen to
continue to account for stock based compensation using the intrinsic value
method prescribed in Accounting Principal Board No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock. The pro forma effects of adoption are
disclosed in Note 8.
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," as amended in December 1996 by SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of SFAS No. 125." This Statement provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. SFAS No. 125 applies prospectively to
financial statements for fiscal years beginning after December 31, 1996.
However, SFAS No. 127 defers for one year the effective date of certain
provisions within SFAS No. 125. SFAS No. 125 does not permit earlier or
retroactive application. As of December 31, 1996, the Company has not adopted
SFAS No. 125, as amended by SFAS No. 127;
54
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
however, the Company does not believe the impact on its operations and financial
position will be material upon adoption.
RECLASSIFICATION--Certain items in the previous years' consolidated
financial statements have been reclassified to conform to the current year
presentation.
3. CASH AND DUE FROM BANKS
The Bank is required to meet statutory reserve requirements. In part, the
Bank meets these requirements by maintaining a balance in a noninterest-bearing
account at a Federal Reserve Bank. During 1996 and 1995, the average balance in
this account was approximately $7,522,000 and $6,669,000, respectively.
4. INVESTMENT SECURITIES AVAILABLE FOR SALE
Book value and estimated fair value of investment securities available for
sale (in thousands of dollars) are summarized as of December 31 as follows:
<TABLE>
<CAPTION>
1996
--------------------------------------------
ESTIMATED GROSS UNREALIZED
AMORTIZED FAIR
COST VALUE GAINS LOSSES
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
U.S. Government securities....................................... $ 31,038 $ 31,080 $ 44 $ (2)
U.S. Government agencies or insured obligations.................. 57,537 57,297 17 (257)
State political subdivisions..................................... 413 411 (2)
Mortgage-backed securities--U.S. agencies........................ 880 884 14 (10)
Other securities................................................. 63 54 (9)
Federal Reserve Bank and Federal Home Loan Bank stocks........... 1,778 1,778
--------- --------- ----- ---------
Total............................................................ $ 91,709 $ 91,504 $ 75 $ (280)
--------- --------- ----- ---------
--------- --------- ----- ---------
<CAPTION>
1995
--------------------------------------------
ESTIMATED GROSS UNREALIZED
AMORTIZED FAIR
COST VALUE GAINS LOSSES
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
U.S. Government securities....................................... $ 35,314 $ 35,457 $ 168 $ (25)
U.S. Government agencies or insured obligations.................. 23,611 23,657 61 (15)
State political subdivisions..................................... 423 416 (7)
Mortgage-backed securities--U.S. agencies........................ 1,047 1,070 25 (2)
Other securities................................................. 80 66 (14)
Federal Reserve Bank and Federal Home Loan Bank stocks........... 1,617 1,617
--------- --------- ----- ---------
Total............................................................ $ 62,092 $ 62,283 $ 254 $ (63)
--------- --------- ----- ---------
--------- --------- ----- ---------
</TABLE>
55
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
The maturity distribution for investment securities available for sale at
December 31, 1996 is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
One year or less....................................................... $ 47,392 $ 47,428
Over one through five years............................................ 41,596 41,360
Over five years........................................................ 63 54
----------- -----------
$ 89,051 $ 88,842
Mortgage-backed securities-US Agencies................................. 880 884
Federal Reserve Bank and Federal Home Loan Bank stocks................. 1,778 1,778
----------- -----------
$ 91,709 $ 91,504
----------- -----------
----------- -----------
</TABLE>
No investment securities were sold during the year 1996.
Proceeds from sales of investment securities available for sale were
$21,016,000 and $49,229,000 for the year ended December 31, 1995 and 1994,
respectively. Gross realized losses from the sales of investment securities were
$72,000 for the year ended December 31, 1995. Gross realized gains were $12,000
and gross realized losses were $6,000 from sales of investment securities
available for sale for the year ended December 31, 1994.
The carrying value of investment securities pledged as required or permitted
by law amounted to $8,008,000 and $6,444,000 at December 31, 1996 and 1995,
respectively.
56
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
5. LOANS AND INVESTMENT IN LEASES
The loan portfolio and net investment in direct financing leases (in
thousands of dollars) at December 31 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Real estate:
Mortgage............................................................ $ 72,617 $ 55,207
Equity lines........................................................ 7,487 7,039
Construction.......................................................... 25,875 22,593
Commercial............................................................ 80,927 84,271
Installment and other................................................. 19,706 13,120
---------- ----------
206,612 182,230
---------- ----------
Less:
Allowance for loan losses........................................... (5,333) (6,431)
Deferred loan origination fees - net................................ (442) (702)
---------- ----------
Loans--net............................................................ 200,837 175,097
---------- ----------
Total minimum lease payments receivable............................... 2,848 3,253
Estimated unguaranteed residual value of leased property.............. 179 210
---------- ----------
3,027 3,463
Less:
Unearned lease income............................................... (364) (399)
Allowance for lease losses.......................................... (84) (111)
---------- ----------
Net investment in leases.............................................. 2,579 2,953
---------- ----------
Total............................................................. $ 203,416 $ 178,050
---------- ----------
---------- ----------
</TABLE>
The Bank grants loans to customers throughout its primary market area of
Southern California. The Bank makes loans to borrowers from a number of
different industries, the largest of which, including undisbursed amounts, are
as follows at December 31 (in thousands of dollars) (see Note 11):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Nonresidential construction............................................. $ 22,477 $ 34,717
Personal................................................................ 37,506 30,384
Real estate agents/developers........................................... 34,285 37,556
Residential construction................................................ 19,628 22,506
</TABLE>
Loans in the commercial loan portfolio are collateralized primarily by
accounts receivable and inventory.
The allowance for loan and lease losses is an estimate involving both
subjective and objective factors and its measurement is inherently uncertain,
pending the outcome of future events. Management's determination of the adequacy
of the allowance is based on an evaluation of the loan and lease portfolio,
previous loan and lease loss experience, current economic conditions, volume,
growth and composition of the loan and lease portfolio, the value of collateral
and other relevant factors. Management believes the
57
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
level of the allowance as of December 31, 1996 and 1995 is adequate to absorb
losses inherent in the loan and lease portfolio; however, additional
deterioration of the economy in the Bank's lending area could result in levels
of loan and lease losses that could not be reasonably predicted at that date.
A summary of the changes in the allowance for loan and lease losses (in
thousands of dollars) for the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Loans:
Balance at beginning of year................................... $ 6,431 $ 5,572 $ 7,137
Recoveries on loans charged off................................ 553 460 1,104
Provision for loan losses...................................... 1,260 6,600 3,365
Loans charged off.............................................. (2,911) (6,201) (6,034)
--------- --------- ---------
Balance at end of year........................................... 5,333 6,431 5,572
--------- --------- ---------
Leases:
Balance at beginning of year................................... 111 88 84
Recoveries on leases charged off............................... 34 52
Leases charged off............................................. (27) (11) (48)
--------- --------- ---------
Balance at end of year........................................... 84 111 88
--------- --------- ---------
Total...................................................... $ 5,417 $ 6,542 $ 5,660
--------- --------- ---------
--------- --------- ---------
</TABLE>
Loans and leases on which the accrual of interest has been discontinued
amounted to $3,995,000, $15,573,000 and $14,771,000 at December 31, 1996, 1995
and 1994 respectively. If interest on those loans and leases had continued to
accrue, the additional income would have been $327,000, $625,000 and $968,000 in
1996, 1995 and 1994 respectively.
At December 31, 1996, the Bank had pledged real estate loans amounting to
$2,935,000 as collateral for a line of credit with the Federal Home Loan Bank
(See note 7).
At December 31, 1996 and 1995, the Company had classified $45,000 and
$1,397,000 of its loans as impaired with a specific reserve of $34,000 and
$390,000 respectively. In addition, $4,321,000 and $15,147,000 of its loans are
classified as impaired with no related specific loss reserve at December 31,
1996 and 1995, respectively. The Company considers a loan impaired when it is
probable that the Company will be unable to collect all contractual principal
and interest under the terms of the loan agreement. The average recorded
investment in impaired loans during the years ended December 31, 1996 and 1995,
were $5,267,000 and $13,101,000, respectively. It is generally the Company's
policy to place loans on nonaccrual status when they are 90 days past due.
Thereafter, interest income is no longer recognized and the full amount of all
payments received, whether principal or interest, are applied to the principal
balance of the loan. As such, interest income may be recognized on impaired
loans to the extent they are not past due by 90 days or more. Interest income of
$214,000 and $236,000 was recognized on impaired loans during the year ended
December 31, 1996 and 1995, respectively, all of which was collected in cash.
The Company collected cash on impaired loans of $1,432,000 during 1996 and
$2,234,000 during 1995. The Company will charge-off an impaired loan in
accordance with its established charge-off policy.
58
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
6. PROPERTY
Property (in thousands of dollars) at December 31 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Furniture, fixtures and equipment........................................ $ 4,266 $ 3,976
Leasehold improvements................................................... 1,452 1,416
--------- ---------
5,718 5,392
Less accumulated depreciation and amortization........................... (4,283) (4,308)
--------- ---------
Property--net............................................................ $ 1,435 $ 1,084
--------- ---------
--------- ---------
</TABLE>
7. BORROWING ARRANGEMENTS
In December 1988 the Company obtained a $3,000,000 term loan from another
financial institution for the purpose of providing additional capital to the
Bank. The credit agreement for this loan was amended pursuant to a Second
Amendment to the credit agreement dated August 25, 1994. Interest was payable
monthly on the unpaid principal balance of the loan and required prepayment of
40% of the proceeds of any stock offering or placement of debt or equity. The
Second Amendment was supported by a Support Agreement between a shareholder
director of the Company and the Company whereby the shareholder guaranteed the
payment of the loan.
To compensate the shareholder for signing the Support Agreement and
subsequently paying off the lending institution the Company had signed a Holding
Company Support Agreement whereby the Company agreed to: (1) pay to the
shareholder a fee equal to 1% of the unpaid principal amount of the note on each
anniversary date and (2) issue to the shareholder on or prior to March 31, 1997,
and there after on each anniversary date, warrants to purchase 25,000 shares of
common stock of the Company at an exercise price per share equal to 80% of the
book value per share of the Company on December 31, 1996 and subsequent ending
periods respectively. The shareholder paid off the outstanding balance of
$2,350,000 to the lending institution in March of 1996 and the Company entered
into a new note with the shareholder. The new note bears an interest rate of 3%
over prime rate with interest only payable monthly for the first year; and
thereafter, quarterly principal payable of $125,000 plus interest payable
monthly. Any remaining principal and interest is due on April 1, 1999. On March,
17, 1997, the Company paid down $2,000,000 on this note and based on the
$350,000 remaining balance of the note issued to the Shareholder a proportionate
number of warrants to purchase 3,723 shares of the Company's common stock at an
exercise price of $6.60 per share pursuant to the terms of the Holding Company's
Support Agreement. The Company also paid the shareholder a fee equal to 1% of
the unpaid principal balance on March 17, 1997. The remaining unpaid principal
balance of $350,000 is subject to the original terms of the note.
In November 1995, the Company sold 474,000 shares of its common stock
through private placement at $6.75 per share for the purpose of contributing
most of the proceeds into the Bank as additional capital. Of the total proceeds
of $3,200,000, the Company contributed $2,900,000 into the Bank's capital in
December 1995.
The Bank maintains two lines of credit with outside financial institutions
for the purpose of purchasing Federal funds. The lines of credit bear interest
at a floating rate and provide for borrowing up to $8,000,000, and $5,000,000
respectively. At December 31, 1996 and 1995, no amounts were outstanding on
these lines of credit.
59
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
Under an agreement with the Federal Home Loan Bank, the Bank may obtain an
extension of credit of up to 50% of total assets collateralized by real estate
loans. At December 31, 1996, the Bank had pledged loans amounting to $2,935,000
and had available credit of $1,468,000 based on 50% of the outstanding balance
of pledged loans. No amounts were outstanding on this line of credit at December
31, 1996 and 1995.
8. EMPLOYEE BENEFIT PLANS
The Company had a stock option plan that expired in 1992. Under the plan the
options were granted to directors, officers and employees to purchase shares at
the fair market of the common stock on the date of grant. The outstanding
options become exercisable over a period of ten years.
A summary of stock option transactions for each of the three years in the
period ended December 31 is as follows:
<TABLE>
<CAPTION>
1996
1996 1995 1994 OPTION PRICE
--------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Options outstanding, beginning of year......... 133,947 229,446 229,446 $4.67 to $13.00
Options exercised............................ (72,267) (44,249)
Options canceled............................. (18,000) (51,250)
--------- --------- --------- -----------------
Options outstanding, end of year............... 43,680 133,947 229,446 $5.25 to $5.94
--------- --------- --------- -----------------
--------- --------- --------- -----------------
</TABLE>
At December 31, 1996, options for 43,680 shares were exercisable. During the
year ended December 31, 1996, 72,267 options were exercised and paid for with
cash of $276,000 and 11,255 shares of common stock previously outstanding.
During the year ended December 31, 1995, 44,249 options were exercised and paid
for with cash of $12,000 and 19,198 shares of common stock previously
outstanding. No options were exercised in 1994.
The Company also has a stock option plan it uses as a means of compensating
directors in lieu of cash director's fees for services performed. During the
years ended December 31, 1996 and 1995, 3,447 and 12,249 options were exercised,
respectively. No options were granted or canceled during the years ended
December 31, 1996, 1995 and 1994. At December 31, 1996, no options were
outstanding. All activity from this plan is reflected in the table above.
During 1995 the Company adopted a stock award plan that permits the granting
of options to directors, officers and employees to purchase, at the fair market
value of the common stock on the date of grant, up to 750,000 shares of the
Company's common stock. The outstanding options become exercisable over a period
of ten years.
A summary of stock option transactions for the stock award plan for each of
the two years in the period ended December 31, is as follows:
<TABLE>
<CAPTION>
1996
1996 1995 OPTION PRICE
--------- --------- ----------------
<S> <C> <C> <C>
Options outstanding, beginning of year................ 142,000 $5.25 to $6.50
Options granted..................................... 142,000
Options exercised................................... (1,000)
Options canceled.................................... (7,000)
--------- --------- ----------------
Options outstanding, end of year...................... 134,000 142,000 $5.25 to $6.50
--------- --------- ----------------
--------- --------- ----------------
</TABLE>
60
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
At December 31, 1996, 47,332 options were exercisable. During the year ended
December 31, 1996, 1,000 options were exercised and paid for with cash of
$5,250.
The Company maintains a stock bonus plan that covers substantially all
Company employees. The plan provides for the issuance to participating employees
of share units in the plan, which entitles participants to distributions
primarily of common stock of the Company. Contributions to the plan are held in
trust and invested in common stock of the Company (which is purchased from third
parties) or other investments under the terms of the plan agreement.
Contributions are determined based on the Bank's discretion. The Company's
contributions for 1996, 1995 and 1994 were $45,000, $45,000 and $5,000,
respectively.
The estimated fair value of options granted during 1995 was $3.71 per share.
The estimated fair value of warrants granted during 1996 (See Note 7) was $10.91
per share. The Company applies Accounting Principles Board Opinion No. 25 and
related Interpretations in accounting for its stock option plans. Accordingly,
no compensation cost has been recognized for its stock option plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under the plan consistent with the
method of SFAS No. 123, the Company's net income and earnings per share for the
year ended December 31, 1996, and 1995 would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Net Income (Loss) to Common Shareholders
As Reported.............................................................. $ 3,796,000 $ (3,341,000)
Pro forma................................................................ $ 3,607,000 $ (3,505,000)
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Net Income (Loss) per common and common equivalent share
As Reported.............................................................. $ 1.26 $ (1.30)
Pro forma................................................................ $ 1.20 $ (1.37)
</TABLE>
The fair value of warrants and options granted under the Company's fixed
stock option plan during 1996 and 1995, respectively, were estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used: no dividend yield, expected volatility of
approximately 13% for options and 40% for warrants, risk-free interest rate
ranging from 6.0% to 7.9%, and expected lives of 10 years for options and 7
years for warrants.
The Bank has a defined contribution plan, which meets the requirements of
Section 401(k) of the Internal Revenue Code and covers substantially all
employees. The Bank's contributions are determined as a percentage of each
participant's contribution. The amounts contributed to the plan by the Bank were
$121,000, $108,000 and $88,000 for 1996, 1995 and 1994, respectively.
In 1987, the Company purchased cost recovery life insurance with aggregate
death benefits in the amount of $2,473,000 on the lives of the senior management
participants. The Company is the sole owner and beneficiary of such policies,
which were purchased to fund the Company's obligation under separate deferred
compensation arrangements. The cash surrender values and obligation under
deferred compensation agreements at December 31, 1996 and 1995 of $1,296,000 and
$1,231,000, respectively, and $529,000 and $317,000, respectively, have been
included in other assets and in other liabilities, respectively, in the
accompanying consolidated balance sheets.
61
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
9. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has granted loans to certain
directors, executive officers and the businesses with which they are associated.
All such loans and commitments to loans were made under terms that are
consistent with the Bank's normal lending policies.
The following is an analysis of the activity of all such loans for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Outstanding balance, beginning of year.......................... $ 1,848,000 $ 2,623,000
Credit granted, including renewals............................ 1,022,000 1,474,000
Repayments.................................................... (1,120,000) (2,249,000)
------------- -------------
Outstanding Balance, end of year................................ $ 1,750,000 $ 1,848,000
------------- -------------
------------- -------------
</TABLE>
10. INCOME TAXES
Income tax expense (benefit) for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1996:
-----------------------------------------
FEDERAL STATE TOTAL
------------- ----------- -------------
<S> <C> <C> <C>
Current.......................................... $ 206,000 $ 48,000 $ 254,000
Deferred......................................... 31,000 (174,000) (143,000)
------------- ----------- -------------
Total.............................................. $ 237,000 $ (126,000) $ 111,000
------------- ----------- -------------
------------- ----------- -------------
<CAPTION>
1995:
-----------------------------------------
FEDERAL STATE TOTAL
------------- ----------- -------------
<S> <C> <C> <C>
Current.......................................... $ (341,000) $ 38,000 $ (303,000)
Deferred......................................... (1,051,000) (576,000) (1,627,000)
------------- ----------- -------------
Total.............................................. $ (1,392,000) $ (538,000) $ (1,930,000)
------------- ----------- -------------
------------- ----------- -------------
<CAPTION>
1994:
-----------------------------------------
FEDERAL STATE TOTAL
------------- ----------- -------------
<S> <C> <C> <C>
Current.......................................... $ (79,000) $ 2,000 $ (77,000)
Deferred......................................... 621,000 621,000
------------- ----------- -------------
Total.............................................. $ 542,000 $ 2,000 $ 544,000
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
62
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
Income tax expense (benefit) for the years ended December 31 (in thousands
of dollars) varies from the amounts computed by applying the statutory Federal
income tax rate as a result of the following factors:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes at statutory rate..................... $ 1,367 35.0% $ (1,845) (35.0)% $ 491 35.0%
State franchise taxes--net of Federal income tax benefit... 227 5.8 (355) (6.7) 95 6.8
Unbenefited state net operating losses..................... 20 1.4
(Decrease) Increase in deferred tax asset valuation
allowances--State and Federal............................ (1,714) (43.9) 178 3.4 (49) (3.5)
Federal taxes on state valuation adjustment................ 160 4.1
Other 71 1.8 92 1.7 (13) (0.9)
--------- --------- --------- --------- -------- ---
Income tax expense (benefit)............................... $ 111 2.8% $ (1,930) (36.6)% $ 544 38.8%
--------- --------- --------- --------- -------- ---
--------- --------- --------- --------- -------- ---
</TABLE>
The Company has recorded net deferred tax assets as of December 31
consisting principally of the following:
<TABLE>
<CAPTION>
DEFERRED TAX DEFERRED TAX
1996 1995
------------- -------------
<S> <C> <C>
Deferred Tax Assets:
Loan Loss Reserve............................................... $ 1,319,000 $ 2,465,000
Unrealized Loss on Loans........................................ 265,000 342,000
Unrealized Loss on Investment Securities........................ 82,000
Depreciation.................................................... 180,000 233,000
Nonaccrual Interest Income...................................... 111,000 171,000
Self-Insurance Reserve.......................................... 128,000 106,000
REO Reserves.................................................... 183,000 601,000
Contingencies................................................... 382,000 184,000
Other........................................................... 74,000 262,000
------------- -------------
Deferred Tax Assets............................................. 2,724,000 4,364,000
Valuation Allowance............................................. (1,202,000)
------------- -------------
Deferred Tax Assets,
Net of Allowance................................................ 2,724,000 3,162,000
------------- -------------
Deferred Tax Liabilities:
Unrealized Gain on Investment Securities........................ (67,000)
Financial Accounting Lease Difference........................... (183,000) (846,000)
------------- -------------
Net Deferred Tax Assets......................................... $ 2,541,000 $ 2,249,000
------------- -------------
------------- -------------
</TABLE>
In the event the future consequences of difference between financial
accounting bases and the tax bases of the Company's assets and liabilities
result in a deferred tax asset, SFAS No. 109 requires an evaluation of the
probability of being able to realize the future benefits indicated by such
asset. A valuation allowance related to a deferred tax asset is recorded when it
is more likely than not that some portion or all of the deferred tax asset will
not be recognized.
63
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Company and the Bank were obligated under various
noncancelable lease agreements, classified as operating leases, primarily for
the rental of office space. Certain leases for office space contain provisions
for renewal options of one or two five-year periods. Minimum future rental
payments under these lease agreements are summarized as follows:
1997............................................................ $1,157,000
1998............................................................ 1,139,000
1999............................................................ 1,099,000
2000............................................................ 1,118,000
2001............................................................ 865,000
Thereafter...................................................... 1,478,000
----------
Total........................................................... $6,856,000
----------
----------
Total rental expense was $1,417,000, $1,136,000 and $1,072,000 in 1996, 1995
and 1994, respectively.
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The Bank's exposure to credit loss in the event of
nonperformance by the other party to commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
At December 31, 1996 and 1995, the Bank had primarily variable rate commitments
to extend credit of $77,740,000, and $55,769,000, respectively, and obligations
under standby letters of credit of $1,669,000 and $2,032,000, respectively.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Standby letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for extending loan facilities to customers. The Bank
evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation of the customer. Collateral
held varies but may include accounts receivable, inventory, property, plant and
equipment or real estate.
12. LEGAL PROCEEDINGS
From time to time, the Company or the Bank is a party to claims and legal
proceedings arising in the ordinary course of business. Management of the
Company evaluates the Company's or Bank's exposure to the cases individually and
in the aggregate and provides for potential losses on such litigation if the
amount of the loss is determinable and if the incurrence of the loss is
probable. After taking into consideration information furnished by counsel to
the Company or the Bank as to the current status of various claims
64
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
and legal proceedings to which the Company or the Bank is a party, management
has accrued $950,000 as a reserve for various cases pending as of December 31,
1996.
13. RISK-BASED CAPITAL STANDARDS AND OTHER REGULATORY MATTERS
On April 8, 1992, the Bank executed a Formal Agreement (the "Agreement")
with the Office of the Comptroller of the Currency (the "Comptroller"). On
November 15, 1996, the Comptroller as a result of the examination as of
September 30, 1996, determined that the continued existence of the Formal
Agreement was no longer necessary and the Agreement was terminated as of that
date.
On May 27, 1993, the Company executed a Memorandum of Understanding (the
"Memorandum") with the Federal Reserve Bank of San Francisco (the "Fed"). On
March 13, 1997 the Fed as a result of the examinations of December 31, 1996,
determined that the memorandum was no longer necessary and was terminated as of
that date.
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgements by the regulators about components,
risk-weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital to risk-weighted assets, and of Tier I
capital to average assets. Management believes, as of December 31, 1996, and
1995 that the Bank meets all capital adequacy requirements to which it is
subject.
As of December 31, 1996 and 1995, the most recent notification from the
Comptroller categorized the Bank as "well capitalized" under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Bank must maintain minimum total risk-based, Tier I risked-based, Tier I
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the institution's
category.
65
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
The Company's and the Bank's actual capital amounts and ratios are also
presented in the table.
<TABLE>
<CAPTION>
FOR CAPITAL ADEQUACY
ACTUAL PURPOSES
------------------- -------------------------------------------------------------------
AMOUNT RATIO AMOUNT RATIO
----------- ------ ------------------------------------ -----------------------------
<S> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets)
Consolidated........................... $28,185,000 11.62% GREATER THAN OR EQUAL TO $19,404,000 GREATER THAN OR EQUAL TO 8.0%
Subsidiary Bank........................ $29,357,000 12.14% GREATER THAN OR EQUAL TO $ 9,347,000 GREATER THAN OR EQUAL TO 8.0%
Tier I Capital (to Risk-Weighted Assets)
Consolidated........................... $25,124,000 10.36% GREATER THAN OR EQUAL TO $ 9,702,000 GREATER THAN OR EQUAL TO 4.0%
Subsidiary Bank........................ $26,304,000 10.88% GREATER THAN OR EQUAL TO $ 9,674,000 GREATER THAN OR EQUAL TO 4.0%
Tier I Capital (to Average Assets)
Consolidated........................... $25,124,000 7.25% GREATER THAN OR EQUAL TO $13,852,000 GREATER THAN OR EQUAL TO 4.0%
Subsidiary Bank........................ $26,304,000 7.59% GREATER THAN OR EQUAL TO $13,845,000 GREATER THAN OR EQUAL TO 4.0%
As of December 31, 1995:
Total Capital (to Risk-Weighted Assets)
Consolidated........................... $23,817,000 10.70% GREATER THAN OR EQUAL TO $17,766,000 GREATER THAN OR EQUAL TO 8.0%
Subsidiary Bank........................ $25,252,000 11.36% GREATER THAN OR EQUAL TO $17,756,000 GREATER THAN OR EQUAL TO 8.0%
Tier I Capital (to Risk-Weighted Assets)
Consolidated........................... $20,995,000 9.45% GREATER THAN OR EQUAL TO $ 8,883,000 GREATER THAN OR EQUAL TO 4.0%
Subsidiary Bank........................ $22,431,000 10.11% GREATER THAN OR EQUAL TO $ 8,878,000 GREATER THAN OR EQUAL TO 4.0%
Tier I Capital (to Average Assets)
Consolidated........................... $20,995,000 6.32% GREATER THAN OR EQUAL TO $ 8,883,000 GREATER THAN OR EQUAL TO 4.0%
Subsidiary Bank........................ $22,431,000 6.76% GREATER THAN OR EQUAL TO $ 8,878,000 GREATER THAN OR EQUAL TO 4.0%
TO BE WELL CAPITALIZED
UNDER PROMPT CORRECTIVE
ACTION PROVISIONS
---------------------------------------------------------------------
AMOUNT RATIO
----------------------------------- ------------------------------
<S> <C> <C>
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets)
Consolidated........................... N/A
Subsidiary Bank........................ GREATER THAN OR EQUAL TO $24,184,000 GREATER THAN OR EQUAL TO 10.0%
Tier I Capital (to Risk-Weighted Assets)
Consolidated........................... N/A
Subsidiary Bank........................ GREATER THAN OR EQUAL TO $14,510,000 GREATER THAN OR EQUAL TO 6.0%
Tier I Capital (to Average Assets)
Consolidated........................... N/A
Subsidiary Bank........................ GREATER THAN OR EQUAL TO $17,306,000 GREATER THAN OR EQUAL TO 5.0%
As of December 31, 1995:
Total Capital (to Risk-Weighted Assets)
Consolidated........................... N/A
Subsidiary Bank........................ GREATER THAN OR EQUAL TO $22,194,000 GREATER THAN OR EQUAL TO 10.0%
Tier I Capital (to Risk-Weighted Assets)
Consolidated........................... N/A
Subsidiary Bank........................ GREATER THAN OR EQUAL TO $13,317,000 GREATER THAN OR EQUAL TO 6.0%
Tier I Capital (to Average Assets)
Consolidated........................... N/A
Subsidiary Bank........................ GREATER THAN OR EQUAL TO $15,583,000 GREATER THAN OR EQUAL TO 5.0%
</TABLE>
66
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
14. CONDENSED FINANCIAL INFORMATION--PARENT COMPANY ONLY
Balance sheets as of December 31:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Cash........................................................... $ 664,000 $ 587,000
Other real estate owned........................................ 83,000 83,000
Investments in subsidiaries.................................... 26,324,000 22,686,000
Other assets................................................... 284,000 122,000
------------- -------------
Total...................................................... $ 27,355,000 $ 23,478,000
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable................................................... $ 2,350,000 $ 2,351,000
Other liabilities.............................................. 4,000 8,000
Total shareholders' equity..................................... 25,001,000 21,119,000
------------- -------------
Total...................................................... $ 27,355,000 $ 23,478,000
------------- -------------
------------- -------------
</TABLE>
Statements of operations for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------- ------------
<S> <C> <C> <C>
Total interest income.................................................. $ 15,000 $ 21,000 $ 13,000
------------ ------------- ------------
Expenses:
Interest............................................................. 273,000 259,000 241,000
Other expenses....................................................... 44,000 45,000 27,000
------------ ------------- ------------
Total expenses......................................................... 317,000 304,000 268,000
------------ ------------- ------------
Loss before provision (benefit) for income tax and equity income (loss)
of subsidiaries...................................................... (302,000) (283,000) (255,000)
Provision (benefit) for income tax..................................... (214,000) 52,000 (89,000)
------------ ------------- ------------
Loss before equity in income (loss) of subsidiaries.................... (88,000) (335,000) (166,000)
Equity in income (loss) of subsidiaries................................ 3,884,000 (3,006,000) 1,025,000
------------ ------------- ------------
Net income (loss)...................................................... $ 3,796,000 $ (3,341,000) $ 859,000
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
67
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
Statements of cash flows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................. $ 3,796,000 $ (3,341,000) $ 859,000
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Equity in (income) loss of subsidiaries from operations.......... (3,884,000) 3,006,000 (1,025,000)
(Increase) decrease in other assets.............................. (162,000) 35,000 99,000
(Decrease) increase in other liabilities......................... (4,000) 3,000 (5,000)
------------- ------------- -------------
Net cash from operating activities............................... (254,000) (297,000) (72,000)
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sale of other real estate owned...................... 5,000
-------------
Net cash from investing activities................................. 5,000
-------------
Cash flows from financing activities:
Proceeds from sale of common stock and exercise of common stock
options.......................................................... 332,000 3,290,000
Payments on note payable........................................... (1,000)
Increase in Investment in subsidiaries............................... (2,900,000)
------------- -------------
Net cash from financing activities................................. 331,000 390,000
------------- -------------
Net increase (decrease) in cash...................................... 77,000 98,000 (72,000)
Cash at beginning of year............................................ 587,000 489,000 561,000
------------- ------------- -------------
Cash at end of year.................................................. $ 664,000 $ 587,000 $ 489,000
------------- ------------- -------------
------------- ------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest............................... $ 273,000 $ 259,000 $ 241,000
------------- ------------- -------------
------------- ------------- -------------
SUPPLEMENTAL INFORMATION ON NONCASH INVESTMENT ACTIVITY
Tax benefit for exercise of non-qualified stock options............ $ 51,000 $ 78,000 $
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
15. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by management using
available market information and appropriate valuation methodologies. However,
assumptions are necessary to interpret market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize in a current market
exchange. The use of
68
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
different assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------
ESTIMATED
CARRYING VALUE FAIR VALUE
-------------- --------------
<S> <C> <C>
ASSETS:
Cash and due from banks.................................... $ 28,849,000 $ 28,849,000
Federal funds sold......................................... 14,500,000 14,500,000
Investment securities available for sale................... 91,504,000 91,504,000
Loans and investment in leases, net........................ 203,416,000 202,853,000
Loans available for sale, net.............................. 1,234,000 1,234,000
Accrued interest receivable................................ 2,668,000 2,668,000
LIABILITIES:
Savings and demand deposits................................ 265,281,000 265,281,000
Time deposits.............................................. 53,423,000 53,434,000
Accrued interest payable................................... 148,000 148,000
Note payable............................................... 2,350,000 2,350,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------
ESTIMATED
CARRYING VALUE FAIR VALUE
-------------- --------------
<S> <C> <C>
ASSETS:
Cash and due from banks.................................... $ 28,549,000 $ 28,549,000
Federal funds sold......................................... 45,000,000 45,000,000
Investment securities available for sale................... 62,283,000 62,283,000
Loans and investment in leases, net........................ 178,050,000 177,402,000
Loans available for sale, net.............................. 9,620,000 9,620,000
Accrued interest receivable................................ 2,649,000 2,649,000
LIABILITIES:
Savings and demand deposits................................ 241,273,000 241,273,000
Time deposits.............................................. 67,231,000 67,234,000
Accrued Interest payable................................... 221,000 221,000
Note payable............................................... 2,351,000 2,351,000
</TABLE>
The carrying value of cash and due from banks, Federal funds sold, interest
receivable, loans available for sale, savings and demand deposits, time
deposits, interest payable and note payable is a reasonable estimate of the fair
value. The fair value of investment securities is based on quoted market prices.
The fair value of loans and investment in leases is estimated by discounting
the future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities. The fair value of classified loans with a carrying value of
approximately $4,659,000 and $16,307,000 as of December 31, 1996 and 1995,
respectively, was not estimated because it is not practical to reasonably assess
the credit adjustment that would be applied in the market place for such loans.
These classified loans, which are primarily real estate or construction loans,
have a weighted average
69
<PAGE>
CALIFORNIA COMMERCIAL BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
interest rate ranging from 7% to 11.0% and from 8% to 12.50% as of December 31,
1996 and 1995, respectively, and are due at various dates through the year 2026.
The fair value of savings and demand deposit accounts is the amount payable
on demand at December 31, 1996. The fair value of time deposit accounts is
estimated using the rates currently offered for deposits of similar remaining
maturities.
The fair value of commitments is not deemed material at December 31, 1996
and 1995.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these consolidated financial statements since that date and, therefore,
current estimates of fair value may differ significantly from amounts presented
herein.
16. MERGER
On December 18, 1996, California Commercial Bankshares signed a definitive
agreement, subject to regulatory and shareholder approval, whereby Monarch
Bancorp and California Commercial Bankshares will merge.
70
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use and incorporation by reference of our report on
California Commercial Bankshares and subsidiaries dated January 24, 1997
(March 17, 1997 as to Notes 7 and 13) in Form 8-K of Western Bancorp
(formerly Monarch Bancorp) dated June 2, 1997.
/s/ Deloitte & Touche, LLP
Los Angeles, California
June 19, 1997
<PAGE>
EXHIBIT 99.1
[Western Bancorp Letterhead]
- --------------------------------------------------------------------------------
PRESS RELEASE
- --------------------------------------------------------------------------------
Western Bancorp (NASDAQ: WEBC)
Monarch Bancorp (OTC: MOBP)
California Commercial Bankshares (OTC: CCBS)
30000 Town Center Drive
Laguna Niguel, CA 92677
Contacts: Hugh S. Smith, Jr. Arnold C. Hahn
Chairman and Chief Financial Officer
Chief Executive Officer
Phone: 310/477-2401 714/863-2351
FAX: 310/477-8611 714/757-5845
FOR IMMEDIATE RELEASE
MONARCH BANCORP COMPLETES 1 FOR 8.5 REVERSE STOCK SPLIT, CHANGES NAME TO WESTERN
BANCORP AND COMPLETES MERGER WITH CALIFORNIA COMMERCIAL BANKSHARES.
WESTERN BANCORP BEGINS TRADING ON NASDAQ.
June 4, 1997
On June 2, 1997, the shareholders of Monarch Bancorp (the "Company") approved
the following items:
1) The merger of California Commercial Bankshares ("CCB") into the Company
2) Changing the Company name from Monarch Bancorp to Western Bancorp
3) A reverse stock split of the Company common stock of 8.5 shares into 1
share
4) Election of directors Rice E. Brown, Joseph J. Digange, John W. Rose,
Hugh S. Smith, Jr., Matthew P. Wagner, Dale E. Walter and John M.
Eggemeyer
On June 4, 1997, Western Bancorp completed the acquisition of California
Commercial Bankshares ("CCB") and its wholly owned subsidiary, National Bank of
Southern California ("NBSC"), Newport Beach, California in which NBSC became a
wholly-owned subsidiary of the Company. Concurrent with the acquisition, Mr.
Mark H. Stuenkel, Mr. William H. Jacoby and Mr. Robert L. McKay were appointed
to the board of directors of the Company.
14
<PAGE>
The Company has also begun trading on NASDAQ under the symbol WEBC.
The acquisition of CCB by the Company increased the total pro forma assets of
the Company and its subsidiaries to approximately $850 million, total pro forma
deposits to approximately $753 million and total pro forma shareholders' equity
to approximately $81 million as of March 31, 1997.
Mr. Hugh S. Smith, Jr., Chairman and CEO of Western Bancorp stated "Much effort
and planning has gone into reaching this milestone of completing the merger with
CCB and becoming listed on NASDAQ. We can now complete our integration with
National Bank of Southern California and fully realize the benefits of operating
together. Also, with our listing on NASDAQ, our shareholders and potential
shareholders should be able to enjoy a more liquid market."
15
