<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
() TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-18440
BURLINGAME BANCORP
------------------
(Exact name of registrant as specified in its charter)
California 94-2921417
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
350 Primrose Road
Burlingame, California
-------------------------------------
(Address of principal executive offices)
94010
------------
(Zip Code)
(415) 348-2500
------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _______
-------
Number of shares of common stock outstanding at August 9, 1995 is 576,974.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
--------------------
The information required by Rule 10-01 of Regulation S-X is attached hereto as
Exhibit A.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
The sole business operation of Burlingame Bancorp (the "Company") is conducted
through its wholly owned subsidiary, Burlingame Bank & Trust Co. (the "Bank").
This discussion, therefore, although presented on a consolidated basis, analyzes
primarily the financial condition and results of operations of the Bank for the
3 month and 9 month periods ended September 30, 1995.
Changes in Financial Condition
------------------------------
During the nine month period ended September 30, 1995, deposits increased $8.4
million or 14.4% to $66.6 million. During the same period, loans increased $4.6
million or 11.5% to $44.8 million, and investment securities decreased $6.7
million or 34.3%, to $12.9 million.
During the quarter ended September 30, 1995 deposits increased $1.1 million or
1.7%, loans increased $2.1 million or 4.9%, and investment securities decreased
$3.9 million or 23.3%.
Non-performing assets, including Other Real Estate owned, decreased to $1.2
million (1.5% of total assets) as of September 30, 1995, which compares with
$2.1 million (3.3% of total assets) at December 31, 1994. Other Real Estate
Owned totaled $32,281. The Bank's allowance for credit losses at September 30,
1995 was 2.4% of total loans compared with 4.0% at December 31, 1994.
Earnings Summary
----------------
Net income for the quarter ended September 30, 1995 was $127,000, an increase of
$84,000 compared with the net income of $43,000 in the same quarter a year ago.
Net income per common and common equivalent share was $0.22 which compares with
net income per share of $0.07 in the same quarter a year ago. For the nine
months ended September 30, 1995, net income was $237,000, an increase of
$177,000 compared with net income of $60,000 in the same period a year ago.
Earnings per common and common equivalent share were $0.41 for the nine months
ended September 30, 1995, which compares with earnings per share of $0.10 for
the same period in 1994. The improved earnings during the period was due
primarily to the reduced volume of non-performing assets, increase in net
interest income, and improvement in the mix of earning assets.
2
<PAGE>
Net Interest Income
-------------------
Total interest income increased $291,000 or 24.1% for the quarter as compared to
the prior year. During the same period, interest expense increased $216,000 or
66.5%. Net interest income increased $75,000 or 8.5% in the third quarter
compared to the same quarter in 1994. The increase is a result of an increase
in earning assets. Average loans as a percentage of average earning assets was
66.6% during the quarter ended September 30, 1995, compared to 62.7% a year
earlier. The average balance of lower yielding other earning assets as a
percentage of average total earning assets was 33.4% during the quarter ended
September 30, 1995, compared to 37.3% a year earlier.
Total interest income increased $764,000 or 21.7% for the nine month period
ending September 30, 1995. During the same period, interest expense increased
$512,000 or 55.2%. Net interest income increased $252,000 or 9.7% for the nine
month period compared to the same period in 1994. The increase is a result of
an increase in earning assets.
Provision for Credit Losses
---------------------------
The Bank maintains its allowance for credit losses at a level considered
appropriate by management to provide for known and inherent risks in the loan
portfolio. This consideration includes an evaluation of various factors
affecting the collectability of loans, including current and projected economic
conditions, past credit experience and a periodic review of the Bank's loan
portfolio. Because of the decrease in non-performing assets and the general
improvement in asset quality, the Bank recorded no additional provision to the
allowance for credit losses for the nine month periods ending September 30, 1995
and 1994. Loans charged off during the nine month period totaled $598,719 in
1995 and $243,096 in 1994. Recoveries in the same period were $84,112 in 1995
and $89,315 in 1994.
On January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure". The effect of
adoption on the Company's financial statements was not material.
Other Income
------------
Other Income consists of gain on sale of assets, service fees and other fees
related to deposit accounts, escrow fees, letter of credit fees, referral fees
and safe deposit box rentals. In this quarter, income from these sources was
$97,000, a decrease of $100,000 from the same period in 1994. For the nine month
period ended September 30, 1995, other income was $242,000 as compared to
$480,000 a year earlier. The decrease is attributable primarily to reduced
gains on sales of SBA loans due to the Bank's decision in 1995 not to
immediately sell the guaranteed portion of all SBA loans.
Other Expenses
--------------
Other expenses decreased $151,000, or 15.2%, to $841,000 for the quarter ended
September 30, 1995, compared to the same period in 1994. For the nine month
period, other expenses decreased $272,000,
3
<PAGE>
or 9.2% to $2,687,000, as compared to $2,959,000 for the same period a year ago.
The improvement reflects more efficient use of personnel resources and reduced
costs as a result of reduced problem assets.
Capital Resources
-----------------
Management seeks to maintain adequate capital to support anticipated asset
growth and credit risks and to ensure that the Company meets all regulatory
capital requirements.
On June 22, 1995, the Federal Deposit Insurance Corporation (the "FDIC")
terminated the order which had been entered with respect to Burlingame Bank &
Trust Co. (the "Bank") and replaced it with a Memorandum of Understanding (the
"MOU") with the FDIC and the California State Banking Department (the "CSBD").
The prior minimum capital requirements of the order, 9% total risk-based and
6.5% leverage, were replaced in the MOU with a 6.0% leverage ratio. As of
September 30, 1995, the Bank was in compliance with all regulatory capital
guidelines and requirements, with total and tier 1 risk-based capital ratios of
11.34% and 10.07%, respectively, and tier 1 leverage ratio of 8.00%.
Future growth and earnings retention, as currently projected by management, are
expected to provide for the maintenance of capital ratios in conformance with
the requirements.
Income Taxes
------------
The provision for income taxes was $88,000 for the quarter ended September 30,
1995, compared to $46,000 in the same quarter a year earlier. The provision is
classified as a current tax liability for interim reporting purposes. The
effective tax rate was 41% for the nine month period ended September 30, 1995,
compared to 48% for the same period in 1994.
Liquidity
---------
The Bank manages its liquidity to ensure that sufficient funds are available to
meet loan commitments and deposit fluctuations. Primary sources of liquidity
include cash and deposits due from banks, unpledged short-term U.S. Government
securities, adjustable rate government securities funds, money market funds, and
federal funds sold. The Bank's primary liquidity ratio, which is the ratio of
liquid assets to total deposits, was 29% at September, 1995, 31% at June 30,
1995, 34% at March 31, 1995, and 27% at December 31, 1994.
4
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
-----------------
None
ITEM 2 - Changes in Securities
---------------------
None
ITEM 3 - Defaults upon Senior Securities
-------------------------------
None
ITEM 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
ITEM 5 - Other Information
-----------------
On October 10, 1995 a definitive agreement was signed calling
for Burlingame Bancorp to be acquired by The Pacific Bank of San Francisco. Upon
closing of the transaction, Burlingame Bancorp and its wholly owned subsidiary,
Burlingame Bank & Trust Co., will be merged into The Pacific Bank.
The cash purchase price will be 122.3% of adjusted book value of
Burlingame Bancorp at the time of closing. The transaction is estimated to be
valued at $8.6 million, or approximately $12.00 per share. The consumation of
the transaction is subject to various conditions including approval by the
shareholders of both companies as well as regulatory approval and is scheduled
to close in the second quarter of 1996.
ITEM 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
------------
None
(b) Report on Form 8-K
----------------------
None
There are no other applicable items.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BURLINGAME BANCORP
------------------
Registrant
Date: October 20, 1995 /s/ Theodore H. Kruttschnitt
---------------------------------------
Theodore H. Kruttschnitt
Chairman and C.E.O.
(Principal Executive Officer)
Date: October 20, 1995 /s/ David V. Campbell
---------------------------------------
David V. Campbell
President
6
<PAGE>
Exhibit A
Part I - Financial Statements
Burlingame Bancorp and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30
1995 December 31
(Unaudited) 1994
-------------- --------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,060,000 $ 3,512,000
Federal funds sold 9,900,000 400,000
Short-term investments 0 0
-------------- --------------
Total cash and equivalents 13,960,000 3,912,000
Investment securities:
Held to Maturity 10,726,000 17,609,000
Available for Sale 2,173,000 2,030,000
Loans Held for Sale 3,414,000 1,098,000
Loans 41,400,000 39,078,000
Allowance for credit losses (1,091,000) (1,605,000)
Premises and equipment, net 954,000 1,132,000
Other real estate owned 32,000 32,000
Accrued interest receivable
and other assets 1,861,000 1,395,000
-------------- --------------
Total Assets $73,429,000 $64,681,000
============== ==============
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits:
Interest-bearing $54,360,000 $46,151,000
Noninterest-bearing 12,285,000 12,058,000
-------------- --------------
Total deposits 66,645,000 58,209,000
Accrued interest payable
and other liabilities 578,000 537,000
-------------- --------------
Total Liabilities 67,223,000 58,746,000
-------------- --------------
Shareholders' Equity
Preferred stock - no par value
Authorized 20,000,000 shares;
Issued, none
Common stock - no par value
Authorized 20,000,000 shares;
Issued, 576,974 shares 4,567,000 4,567,000
Unrealized loss on investment secur-
ities available for sale, net of tax (67,000) (101,000)
Retained earnings 1,706,000 1,469,000
-------------- --------------
Total Shareholders' Equity 6,206,000 5,935,000
-------------- --------------
Total Liabilities and
Shareholders' Equity
$73,429,000 $64,681,000
============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Burlingame Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------------------------------ --------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Loans (including fees) $1,213,000 $949,000 $3,436,000 $2,798,000
Investment securities 182,000 209,000 619,000 580,000
Federal funds sold 105,000 51,000 232,000 145,000
------------------------------ --------------------------------
Total Interest Income 1,500,000 1,209,000 4,287,000 3,523,000
Interest Expense on Deposits 541,000 325,000 1,440,000 928,000
------------------------------ --------------------------------
Net Interest Income 959,000 884,000 2,847,000 2,595,000
Provision for credit losses 0 0 0 0
------------------------------ --------------------------------
Net Interest Income
after provision for credit
losses 959,000 884,000 2,847,000 2,595,000
Other Income 97,000 197,000 242,000 480,000
Other Expenses:
Salaries & benefits 467,000 470,000 1,380,000 1,491,000
Occupancy 68,000 69,000 195,000 200,000
Furniture & equipment 71,000 75,000 219,000 216,000
Data processing 32,000 30,000 97,000 97,000
Professional services 94,000 134,000 283,000 379,000
Other 109,000 214,000 513,000 576,000
------------------------------ --------------------------------
Total Other Expenses 841,000 992,000 2,687,000 2,959,000
------------------------------ --------------------------------
Income before income taxes 215,000 89,000 402,000 116,000
Income taxes 88,000 46,000 165,000 56,000
------------------------------ --------------------------------
Net Income $127,000 $43,000 $237,000 $60,000
============================== ================================
Income per common share and
common share equivalent $0.22 $0.07 $0.41 $0.10
============================== ================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Burlingame Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income 127,000 $43,000 $237,000 $60,000
Reconciliation to net cash provided by
(used in) operating activities:
Depreciation and amortization
of premises and equipment 76,000 85,000 236,000 244,000
Amortization of deferred loan fees (43,000) (23,000) (153,000) (84,000)
Amortization of investment
security premiums (discounts) (33,000) 4,000 (101,000) 29,000
Origination of loans held for sale (411,000) (3,382,000) (3,049,000) (5,894,000)
Sales of loans held for sale 471,000 2,904,000 733,000 5,043,000
(Increase) decrease in interest
receivable and other assets (445,000) 36,000 (483,000) 497,000
Increase (decrease) in interest
payable and other liabilities (194,000) 23,000 41,000 (66,000)
----------------------------- -----------------------------
Net cash provided by (used in)
operating activities (452,000) (310,000) (2,539,000) (171,000)
----------------------------- -----------------------------
INVESTING ACTIVITIES:
Activities in securities held-to-maturity:
Purchases (2,511,000) (3,079,000) (4,216,000) (13,602,000)
Maturities 5,000,000 4,200,000 11,200,000 8,800,000
Activities in securities available-for-sale:
Purchases (32,000) 0 (1,592,000) 0
Maturities 1,500,000 0 1,500,000 0
Net loan originations, collections
and principal repayments (1,832,000) 2,443,000 (2,683,000) 6,507,000
Purchases of premises and equipment (28,000) (30,000) (58,000) (144,000)
----------------------------- -----------------------------
Net cash provided by (used in)
investing activities 2,097,000 3,534,000 4,151,000 1,561,000
----------------------------- -----------------------------
FINANCING ACTIVITIES:
Net increase (decrease) in interest-
bearing deposits 3,849,000 (4,490,000) 8,209,000 (8,078,000)
Net increase (decrease) in noninterest-
bearing deposits (2,734,000) 4,951,000 227,000 1,363,000
----------------------------- -----------------------------
Net cash provided by (used in)
financing activities 1,115,000 461,000 8,436,000 (6,715,000)
----------------------------- -----------------------------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 2,760,000 3,685,000 10,048,000 (5,325,000)
CASH AND EQUIVALENTS:
Beginning of period 11,200,000 16,406,000 3,912,000 17,788,000
----------------------------- -----------------------------
End of period $13,960,000 $20,091,000 $13,960,000 $ 12,463,000
============================= =============================
OTHER CASH FLOW INFORMATION:
Interest paid $551,000 $349,000 $1,419,000 $932,000
----------------------------- -----------------------------
Taxes paid $0 $35,000 $83,000 $55,000
----------------------------- -----------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Burlingame Bancorp and Subsidiary
Notes to Consolidated Financial Statements
September 30, 1995
(Unaudited)
Note 1 - Basis of Presentation
- ---- - ---------------------
In the opinion of Management, the unaudited interim consolidated financial
statements contain all adjustments of a normal recurring nature, which are
necessary to present fairly the financial condition of Burlingame Bancorp and
Subsidiary at September 30, 1995 and the results of operations for the three
months and nine months then ended.
Certain information and footnote disclosures presented in the Company's annual
consolidated financial statements are not included in these interim financial
statements. Accordingly, the accompanying unaudited interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1994 Annual
Report on Form 10-K. The results of operations for the nine months ended
September 30, 1995 are not necessarily indicative of the operating results
through December 31, 1995.
Note 2 - New Accounting Pronouncements
- ------- -----------------------------
On January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure." These statements
address the accounting and reporting by creditors for impairment of certain
loans. A loan is impaired when, based upon current information and events, it
is probable that a creditor will be unable to collect all amounts due according
to the contractual terms of the loan agreement. These statements are applicable
to all loans, uncollaterialized as well as collateralized, except large groups
of smaller-balance homogeneous loans that are collectively evaluated for
impairment such as consumer installment loans and loans held for sale which are
measured at fair value or at the lower of cost or fair value. Impairment is
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate, except that as a practical expedient, the
Company measures impairment based on a loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. Loans are
measured for impairment as part of the Company's normal internal asset review
process.
Interest income is recognized on impaired loans in a manner similar to that of
all loans. It is the Company's policy to place loans that are delinquent 90
days or more as to principal or interest on a nonaccrual of interest basis
unless secured and in the process of collection, and to reverse from current
income accrued but uncollected interest. Cash payments subsequently received on
nonaccrual loans are recognized as income only where the future collection of
principal is considered by management to be probable.
10
<PAGE>
At September 30, 1995, the Company's total recorded investment in the impaired
loans was $1,121,000 for which there was a related allowance for credit losses
of $207,000 determined in accordance with these Statements.
The average recorded investment in the impaired loans during the three months
ended September 30, 1995 was $1,121,000. The related amount of interest income
recognized during the period that such loans were impaired was $0 and the amount
of interest income recognized using a cash-basis method of accounting during the
time within the period that the loans were impaired was $0.
Note 3 - Consolidation
- ---- -------------
The consolidated financial statements include the accounts of Burlingame Bancorp
and its wholly-owned subsidiary, Burlingame Bank & Trust Co and its wholly-owned
subsidiary, Burlingame Development Corporation. All material intercompany
accounts and transactions have been eliminated in consolidation.
Note 4 - Commitments
- ---- -----------
The Bank has outstanding standby letters of credit of $771,000 at September 30,
1995.
Note 5 - Net Income Per Common Share
- ---- ---------------------------
Net income per share is calculated by using the weighted average common shares
outstanding plus common stock equivalents resulting from stock options. The
difference between primary and fully diluted net income per share is not
significant. The weighted average number of common and common equivalent shares
used in computing the net income per common share for the periods ending
September 30, 1995 and 1994 was 576,974.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,060,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,900,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,173,000
<INVESTMENTS-CARRYING> 10,726,000
<INVESTMENTS-MARKET> 10,702,000
<LOANS> 44,814,000
<ALLOWANCE> 1,091,000
<TOTAL-ASSETS> 73,429,000
<DEPOSITS> 66,645,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 578,000
<LONG-TERM> 0
<COMMON> 4,567,000
0
0
<OTHER-SE> 1,639,000
<TOTAL-LIABILITIES-AND-EQUITY> 73,429,000
<INTEREST-LOAN> 3,436,000
<INTEREST-INVEST> 619,000
<INTEREST-OTHER> 232,000
<INTEREST-TOTAL> 4,287,000
<INTEREST-DEPOSIT> 1,440,000
<INTEREST-EXPENSE> 1,440,000
<INTEREST-INCOME-NET> 2,847,000
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,687,000
<INCOME-PRETAX> 402,000
<INCOME-PRE-EXTRAORDINARY> 402,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237,000
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
<YIELD-ACTUAL> 9.07
<LOANS-NON> 1,121,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,605,000
<CHARGE-OFFS> 598,000
<RECOVERIES> 84,000
<ALLOWANCE-CLOSE> 1,091,000
<ALLOWANCE-DOMESTIC> 1,006,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 85,000
</TABLE>
