<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 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: 0-15984
--------------------------------------------------------
COMBANCORP
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
California 95-3737171
- --------------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
6001 E. Washington Blvd., City of Commerce, CA 90040
- --------------------------------------------------------------------------------------------------------------
(Address of Principal executive offices) (Zip Code)
</TABLE>
(213) 724-8800
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
As of June 30, 1995, there were 565,789 outstanding shares of the
issuer's Common Stock, no par value.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, 1995 December 31, l994
------------- -----------------
<S> <C> <C>
Cash and due from banks - demand $3,149,991 $5,745,356
Federal funds sold 14,100,000 11,605,000
----------- -----------
Cash and cash equivalents 17,249,991 17,350,356
Interest bearing deposits with
financial institutions 9,779,000 8,102,000
Securities held to maturity 120,000 120,000
Securities available for sale 13,367,584 16,830,404
Loans 23,960,243 25,809,010
Deferred loan fees and costs (42,819) (59,280)
Unearned discount on acquired loans (126,216) (285,827)
Allowance for loan losses (528,746) (498,827)
----------- -----------
Net loans 23,262,462 24,965,076
----------- -----------
Premises and equipment, net 3,146,769 2,526,677
Other real estate owned 125,922 371,013
Accrued interest receivable and other
assets 803,896 922,922
----------- -----------
Total assets $67,855,624 $71,188,448
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $22,587,537 $23,439,082
Savings and other interest
bearing accounts 26,734,386 28,870,686
Time, $100,000 and over 3,847,217 4,329,934
Other time 7,925,091 8,259,595
----------- -----------
Total deposits 61,094,231 64,899,297
Accrued interest payable and
other liabilities 423,196 342,524
----------- -----------
Total liabilities 61,517,428 65,241,821
----------- -----------
Shareholders' equity:
Common stock 4,453,300 4,453,300
Retained earnings 1,811,744 1,609,002
Unrealized gain (loss) on securities
available for sale, net 73,152 (115,675)
----------- -----------
Total shareholders' equity 6,338,196 5,946,627
----------- -----------
Total liabilities and shareholders' equity $67,855,624 $71,188,448
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
------------------------ ---------------------------
1995 1994 1995 1994
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $737,384 $576,596 $1,529,201 $1,094,867
Interest on deposits with
financial institutions 147,620 68,272 270,792 139,992
Interest on securities 245,651 152,530 500,801 276,272
Interest on Federal funds sold 192,432 71,047 349,252 113,173
--------- -------- ---------- ----------
Total interest income 1,323,087 868,445 2,650,046 1,624,304
Interest expense on deposits 296,888 190,668 577,348 370,680
--------- -------- ---------- ----------
Net interest income 1,026,199 677,777 2,072,698 1,253,624
Provision for loan losses 40,000 55,000 70,000 127,800
--------- -------- ---------- ----------
Net interest income after
provision for loan losses 986,199 622,777 2,002,698 1,125,824
--------- -------- ---------- ----------
Other income:
Gain (loss) on the sale of OREO (9,824) - (9,824) -
Other 161,904 138,900 339,215 274,892
--------- -------- ---------- ----------
Total other income 152,080 138,900 329,391 274,892
--------- -------- ---------- ----------
Other operating expenses:
Salaries and employee benefits 357,454 272,949 757,888 562,095
Occupancy expense 90,561 69,166 190,370 135,342
Equipment and utilities expense 61,938 18,245 101,022 43,142
Professional fees 42,420 31,320 89,251 55,153
Advertising expense 18,294 19,743 37,299 28,167
Business promotion 20,471 12,288 35,377 25,773
Supplies and Office expenses 54,955 24,762 90,861 44,708
Data processing 28,708 29,775 69,097 62,545
Other expenses 168,025 115,112 373,735 248,826
--------- -------- ---------- ----------
Total other operating expenses 842,826 593,360 1,744,900 1,205,751
--------- -------- ---------- ----------
Income before income taxes 295,453 168,317 587,189 194,965
Provision for income taxes 121,900 74,200 243,000 83,800
--------- -------- ---------- ----------
Net income $173,553 $94,117 344,189 111,165
========= ======== ========== ==========
Per share:
Net income $0.31 $0.17 $0.61 $0.20
========= ======== ========== ==========
Dividends - - $0.25 $0.09
========= ======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Period ended June 30,
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $344,189 $111,165
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments to reconcile net income to net cash provided by
operating activities
Loss on sale of premises and equipment and other real estate owned 9,824 48,836
Depreciation and amortization 106,085 68,926
Write down of other real estate owned 20,000 -
Provision for possible loan losses 70,000 127,800
Amortization of deferred loan fees (37,815) (43,078)
Net accretion of discount on securities (171,887) (163,453)
Accretion of unearned discount on acquired loans (143,940) (29,852)
Net increase in accrued income receivable and other assets 9,294 55,028
Increase in taxes payable 51,689 85,647
Net (decrease) in accrued interest payable and other liabilities (23,989) (10,165)
----------- ----------
Net cash provided by (used in) operating activities 233,450 250,854
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest bearing
deposits with other financial institutions (1,677,000) 265,874
Proceeds from sale of other real estate owned 361,189 -
Proceeds from maturities and calls of securities 7,901,902 20,659,716
Purchases of securities (3,944,143) (21,624,006)
Loan principal collections, net 1,668,447 1,181,297
Purchases of premises and equipment (697,697) (791,476)
----------- ----------
Net cash provided by investing 3,612,698 (308,595)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (3,805,066) 2,061,090
Dividends paid (141,447) -
----------- ----------
Net cash provided by financing activities (3,946,513) 2,061,090
----------- ----------
Increase in cash and cash equivalents (100,365) 2,003,349
----------- ----------
CASH AND CASH EQUIVALENTS
Beginning of year 17,350,356 7,324,373
----------- ----------
End of year $17,249,991 $9,327,722
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(unaudited)
Note 1. Basis of Presentation
The accounting and reporting policies of the Company and its
subsidiary are in accordance with generally accepted accounting principles and
conform to general practices within the banking industry. The financial
statements are prepared on the accrual basis of accounting with all significant
income and expense items accrued at the respective statement dates. The
financial statements include the accounts of the Company and its wholly-owned
subsidiary, Commerce National Bank (the "Bank"). All material intercompany
accounts and transactions have been eliminated.
In management's opinion, the accompanying financial statements reflect
all material adjustments (consisting only of normal recurring accruals)
necessary to a fair statement of the results for the interim periods presented.
The results for the interim period ended June 30, 1995, are not necessarily
indicative of the results which will be reported for the entire year.
Note 2. Income Per Share
Income per share is computed using the weighted average number of
shares of common stock and common stock equivalents outstanding. Stock options
are considered to be common stock equivalents, except when their effect would
be antidilutive or immaterial. The weighted average number of shares used to
compute income per share was 565,789 for each period presented.
Note 3. Reserve for Possible Loan Losses
On January 1, 1995, the Bank adopted FASB Statement No. 114,
Accounting by Creditors for Impairment of a Loan, as amended by FASB Statement
No. 118. There was no material effect on the Bank's financial statements.
Statement No. 114 generally requires impaired loans to be measured on the
present value of expected future cash flows discounted at the loan's effective
interest rate or, as an expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. A loan is
impaired when it is probable the creditor will be unable to collect all
contractual principal and interest payments due in accordance with the terms of
the loan agreement. At June 30, 1995, the Bank has classified $570,000 of its
loans as impaired with a specific loss reserve of $93,950. There was no impact
on the financial statements as a result of the adoption of Statement No. 114 as
the existing allowance was adequate for this reserve.
5
<PAGE> 6
Note 4. Securities Available for Sale
Effective January 1, 1995, the Bank adopted FASB Statement No. 119,
Disclosure About Derivative Financial Instruments and Fair Value of Financial
Instruments, which requires the Bank to make disclosures about the purposes of
the investment in derivative financial instruments and about how the
instruments are reported in financial statements. At June 30, 1995, the Bank
had no material derivative financial instruments.
Note 5. Availability of Funds From Bank
Under Federal banking law, dividends declared by the Bank in any
calendar year may not, without the approval of the Comptroller of the Currency,
exceed the Bank's net income, as defined, for that year combined with its
retained net income for the preceding two years.
Federal banking law restricts the Bank from extending credit to the
Company in excess of 10 percent of the Bank's capital stock and surplus, as
defined. Any such extensions of credit are subject to strict collateral
requirements.
6
<PAGE> 7
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company's consolidated balance sheet at June 30, 1995 reflected a
decrease of 4.7% and 5.9% in total assets and deposits, respectively, from
December 31, 1994. As a result of continued slow loan demand, the Bank
experienced a decrease of 7.2% in gross loans during this period.
The components of the changes in loans are as follows:
<TABLE>
<CAPTION>
Decrease over
December 31, 1994
-----------------
<S> <C>
Commercial loans (3.8%)
Real estate - construction (4.4%)
Real estate - primarily loans for
acquisition or improvement of
owner occupied offices and
industrial property (14.6%)
Real estate - mortgage loans
acquired (1.2%)
Installment loans (1.4%)
</TABLE>
On August 26, 1994, the Bank, as part of a consortium, entered into an
Insured Deposit Purchase and Assumption Agreement with the Federal Deposit
Insurance Corporation ("FDIC") for the purchase and assumption of certain
assets and liabilities of Capital Bank. The Bank purchased $674,000 of cash
assets and assumed deposits of $22,536,000 which included approximately $2
million of uninsured deposits payable to the FDIC for a premium of $185,000,
including expenses, which is being amortized over 7 years on the straight line
method. The $2 million uninsured deposits were wired to the FDIC on June 29,
1995. The Bank has retained approximately $12,800,000 of the deposits as of
June 30, 1995.
The components of the deposits purchased are as follows:
<TABLE>
<CAPTION>
June 30, 1995
August 26, 1994 (approximate)
--------------- -------------
<S> <C> <C>
Demand deposits $8,200,638 $5,230,783
Interest-bearing deposits 4,915,937 3,661,566
Time certificates of deposit 5,667,724 2,082,999
Savings deposits 3,697,787 1,777,191
Accrued interest payable 53,476 19,242
----------- -----------
Total $22,535,562 $12,771,781
=========== ===========
</TABLE>
7
<PAGE> 8
In addition, the Bank obtained a month-to-month lease on the Downey
Branch facility with an option to purchase. On May 23, 1995, the Bank
exercised its option to purchase the Downey Branch facility for $650,000, which
was the primary factor in the 24.5% increase in premises and equipment when
compared to December 31, 1994.
As part of the transaction, the Bank separately purchased
approximately $7,784,000 of face value loans, net of participations sold of
$2,035,000, from various pools of loans. The commercial loans were purchased
at a discount of $332,000 and the real estate loans at a discount of $203,000.
These discounts are being amortized over the remaining contractual terms of the
loans purchased. As of June 30, 1995, the Bank has approximately $4,400,000 in
acquired net loans outstanding attributable to this transaction.
The components of the loans purchased are as follows:
<TABLE>
<CAPTION>
June 30, 1995
August 26, 1994 (approximate)
--------------- -------------
<S> <C> <C>
Commercial loans $3,222,676 $2,565,805
Real Estate - primarily for acquisition or $2,124,541 1,373,638
improvement of owner occupied offices and
industrial properties
Installment loans 401,599 436,594
---------- ----------
Total $5,748,816 $4,376,037
========== ==========
</TABLE>
At June 30, 1995, the loan to deposit ratio was 39.2%, compared to
39.8% at December 31, 1994. Non-performing loans (i.e, those past due 90 days
and/or on non-accrual) at June 30, 1995, amounted to approximately $574,000,
as compared to approximately $397,000 at December 31, 1994, a 44.6% increase.
Non-performing loans at June 30, 1995 consisted of the following: one
loan totaling approximately $104,000 is secured by commercial real estate; one
(1) loan totaling approximately $98,000 which is secured by UCC filings on
equipment and which management believes provides adequate security to the Bank;
one (1) loan in the amount of $150,000 which is secured by approximately
$200,000 in receivables (this loan was purchased from the FDIC); one (1) loan
in the amount of approximately $202,000 which is unsecured. The balance of
non-performing loans consists of an installment loan and credit card
receivables. At July 31, 1995, the Bank received notice of a Bankruptcy filing
on a commercial loan (secured by receivables )in the amount of $200,000. This
loan is now considered non-performing but is not reflected on June 30, 1995
totals. Other Real Estate Owned ("OREO") at June 30, 1995 decreased from
$371,000 at December 31, 1994 to $125,900 at June 30, 1995, reflecting the sale
of the commercial property held at December 31, 1994 which was sold at a loss
of approximately $9,800 and an addition of one parcel in the amount of $145,900
which was written down to approximately $125,900 to reflect current fair value.
8
<PAGE> 9
<TABLE>
<CAPTION>
ASSETS QUALITY RATIOS: June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Non-performing loans to gross loans 2.4% 1.5%
Non-performing loans and OREO to assets 1.0% 1.1%
</TABLE>
The allowance and provision for possible loan losses is a general
reserve established by management to absorb potential losses inherent in the
entire loan portfolio. The level and rate of additions to the allowance for
loan losses are based on a continuing analysis of the loan portfolio and at
June 30, 1995, reflected an amount which in management's judgment was adequate
for known and inherent losses. In evaluating the adequacy of the allowance,
management gives consideration to economic prospects and net worth of
individual borrowers and guarantors, collateral evaluation, the nature and
amount of loans subject to adverse classification, the total size and mix of
the loan portfolio and such other factors that deserve recognition. The
allowance for loan losses, aggregated $528,746 at June 30, 1995, or 2.2% of
outstanding loans as compared to $498,827, or 1.9% of outstanding loans at
December 31, 1994. During the same period, the allowance for loan losses as a
percentage of non-performing loans was 92.1% and 79.6%, respectively.
Funds not required for lending activities at June 30, 1995 were
invested in U. S. Treasury and Agency securities, investment grade corporate
bonds, municipal bonds, interest-bearing deposits with other financial
institutions and Federal funds sold. Federal funds sold and interest-bearing
deposits with other financial institutions increased by approximately $2.5
million and $1.7 million, respectively, while securities available for sale
decreased by approximately $3.5 million. Securities maturing were invested in
Federal funds and/or interest bearing deposits due to the fact that they were
yielding rates equal to, or better than, those available on other securities.
The net unrealized gain on securities available for sale, net of deferred
taxes, included in shareholders' equity increased to $73,152 at June 30, 1995
from a net loss of ($115,675) at December 31, 1994, reflecting the decline in
yields during the first six months of 1995, which increased the market value of
these securities from December 31, 1994.
Results of Operations
Net income for the three months and six months ended June 30, 1995 was
$173,553, or $.31 per share, and $344,189 or $.61 per share, respectively,
compared to $94,117 or $.17 earnings per share and $111,165 or $.20 per share,
reported in the comparable periods last year. Approximately $106,000, or $.19
per share, and approximately $206,000, or $.36 per share, respectively, were
attributable to the establishment of the Downey branch resulting from the
August 26, 1994 transaction.
Net interest income for the three month and six month periods ended
June 30, 1995 increased approximately 51.4% and 65.3% over the comparable
periods in 1994 due primarily to the increase in total average earning assets
of 31.2% and 28.1% for the respective periods. Of the 51.4% and 65.3% increase
in net interest income, 18.9% and 22.7%, respectively, are attributable to the
establishment of the Downey branch. Average loans increased 15.8% and 12.1%
when compared to the three and six month periods in
9
<PAGE> 10
1994, while other average interest bearing assets consisting of securities and
time certificates of deposits with other institutions increased 43.4% and 41.1%
during the respective periods. Interest expense increased approximately 55.7%
for the three month and six month periods ended June 30, 1995 over the
comparable periods in 1994 due to the increase in average interest bearing
deposits of 32.1% and 29.7% for the respective periods. The annualized net
interest margin on average earning assets was 6.3% and 5.4% for the three
months ended June 30, 1995 and 1994, respectively, and was 6.6% and 5.1% for
the six months ended June 30, 1995 and 1994, respectively.
The provision for loan losses decreased $15,000, or 27.3%, during the
three month period and $57,800, or 45.2%, during the six month period ending
June 30, 1995, compared to the respective periods in 1994. This reflects
management's improved assessment of the potential risks in the loan portfolio,
the adequacy of the underlying collateral, collectibility, and the experience
of past loan losses. For analytical purposes, as part of the overall estimate
of the allowance for loan losses, management attributes a portion of the
allowance to each category in the loan portfolio. However, this does not imply
that any part of the allowance is segregated for, or allocated to, any
particular loan or group of loans. The allowance is available to absorb all
loan losses originating from the loan portfolio.
Other income increased approximately 16.6% and 19.8% during the three
month and six month periods ending June 30, 1995 compared to the respective
periods in 1994 due primarily to service charges attributable to the increase
of deposit accounts due to the deposits acquired in the August, 1994
transaction. Other operating expenses increased approximately 42.0% and 44.7%
for the three month and six month periods ending June 30, 1995 compared to the
respective periods in 1994. These increases were primarily due to the
following: 31.0% and 34.8% increase in salaries and employee benefits due to
the acquisition and staffing of the Bank's Downey Branch and the related costs;
30.9% and 40.7% attributable to occupancy expense related to the accrued rent
liability to the FDIC pending the purchase of the Downey building; 239.5% and
134.2% in equipment expense related primarily to the upgrade in hardware and
software related to the conversion to a new data processing system and to
installation of a wide/local area network; 121.9% and 103.2% in stationery and
supplies also attributable to the establishment of the Downey branch and the
conversion new data processing system; and the 46% and 50.2% increase in other
expenses due primarily to the increased FDIC assessment for the acquired
deposits related to the Downey Branch. Other operating expenses as a percentage
of total interest income was 63.7% and 65.8% during the three month and six
month periods ending June 30, 1995 compared to 68.3% and 74.2% during
comparable periods in 1994, respectively. Total other operating expense as a
percentage of total average assets was 1.1% and 2.4% during the three month and
six month periods ending June 30, 1995 compared to 1.1% and 2.2% during 1994's
comparable periods, respectively.
Liquidity and Interest Rate Sensitivity
At June 30, 1995, total earning assets were $61.3 million, or 90.4% of
total assets. The Company's liquid assets were $31.5 million and consisted of
cash and due from
10
<PAGE> 11
banks, interest-bearing deposits with financial institutions, unpledged
securities maturing within one year and Federal funds sold. The liquidity
ratio (i.e., liquid assets to total deposits) was stable at 51.5% compared to
56.2% at December 31, 1994. Except for commitments to lend in the amount of
approximately $6.1 million at June 30, 1995, which are expected to be funded by
deposits, the Company has no material unrecorded commitments for funds.
Interest-bearing deposits with financial institutions at June 30, 1995
consisted exclusively of time certificates of deposit, of which 99% mature
within one year. The Company's securities consisted primarily of U.S. treasury
and agency obligations, corporate bonds, and bank qualified municipal bonds,
which were readily marketable. At June 30, 1995, the market value of these was
more than their book value by approximately $126,100. Securities totaling
$400,000 were pledged to secure Treasury Tax and Loan deposits. The Company's
loan portfolio also was relatively liquid with approximately 78.1% of the
outstanding loans maturing within one year and/or sensitive to changes in
interest rates.
The Company believes that its position with respect to interest rate
fluctuations is favorable, in that the majority of the Company's loans bear a
floating rate of interest and the majority of its investments have short
maturities.
At June 30, 1995, the Company was in an asset sensitive
position in its 90 day gap, (i.e., the difference between assets and
liabilities that reprice in that period as a percentage of total assets) was 6%
and its cumulative gap was 34%. Generally, an asset sensitive position will
result in enhanced earnings in a rising interest rate environment and declining
earnings in a falling interest rate environment because larger volumes of
assets than liabilities will reprice. Conversely, a liability sensitive
position will be detrimental to earnings in a rising interest rate environment
and will enhance earnings in a falling interest rate environment.
The Asset and Liability Maturity Repricing Schedule below sets
forth the distribution of Repricing opportunities for the Company's interest
earning assets and liabilities, the interest sensitivity gap and the ratio of
cumulative gap to total assets.
11
<PAGE> 12
Interest Sensitivity Period
(IN THOUSANDS)
<TABLE>
<CAPTION>
over over over
3 months 6 months 1 year
3 months through through through over
or less 6 months 1 year 5 years 5 years Total
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Federal funds sold $14,100 $ - $ - $ - $ - $14,100
Securities 1,387 1,971 1,594 7,769 767 13,488
Deposits with other institutions 3,547 2,575 3,557 100 - 9,779
Loans 16,748 6,441 1,331 3,868 1,369 23,960
------- ------ ------ ------- ------- -------
TOTAL $35,872 $5,190 $6,482 $11,737 $ 2,136 $61,327
======= ====== ====== ======= ======= =======
Interest Bearing Liabilities:
Time Deposits:
a) TCD's less than $100M $ 3,706 $1,697 $2,108 $ 414 $ - $ 7,925
b) TCD's $100M and over 1,559 988 1,200 100 - 3,847
Savings 9,679 - - - - 9,679
Money Market 8,891 - - - - 8,891
Now Accounts 8,164 - - - - 8,164
------- ------ ------ ------- ------- -------
TOTAL $31,999 $2,685 $3,308 $ 514 $ - $38,506
======= ====== ====== ======= ======= =======
Interest Sensitivity Gap:
Interval $ 3,783 $2,505 $3,174 $11,223 $ 2,136
Cumulative $ 3,783 $6,288 $9,462 $20,685 $22,821 $22,821
======= ====== ====== ======= ======= =======
Ratio of cumulative gap
to total assets 6% 9% 14% 30% 34% 34%
</TABLE>
At June 30, 1995, the Company was entitled to borrow on a
collateralized basis at the discount window at the Federal Reserve Bank of San
Francisco. In addition, the Bank has available a Federal funds line of credit
in the amount of $1 million with one of its correspondent banks.
Capital Resources
The Company is currently exempt from the Federal Reserve Board's
risk-based capital guidelines because consolidated assets are under $150
million. However, the Bank is subject to the risk-based capital guidelines
adopted by the Office of the Comptroller of the Currency. These guidelines
require the Bank to maintain a minimum ratio of total capital-to-risk-weighted
assets of 8% (of which at least 4% must consist of Tier I capital), and a
leverage ratio of at least 3%. At June 30, 1995, the Bank had a total
capital-to-risk-weighted assets ratio of 18.8%, with a Tier I capital ratio of
17.5%, and a leverage ratio of 8.6%. Currently, the Company and the Bank
exclude the impact of the net unrealized gains (loss) on securities available
for sale, net of deferred taxes in their regulatory capital ratios.
During the last two years, capital has been generated through the
retention of earnings.
12
<PAGE> 13
Recent Accounting Developments
In December 1991, the FASB issued Statement No. 107, Disclosures about
Fair Value of Financial Instruments. Statement 107 requires disclosure of fair
value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. The
disclosures include the methods and assumptions used to estimate the fair value
if quoted market prices are not used. Statement 107 will first be required for
the Company's fiscal year that ends December 31, 1995.
On January 1, 1995, the Bank adopted FASB Statement No. 114,
Accounting by Creditors for Impairment of a Loan, as amended by FASB Statement
No. 118. There are no material effect on the Bank's financial statements.
Statement No. 114 generally requires impaired loans to be measured on the
present value of expected future cash flows discounted at the loan's effective
interest rate or, as an expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. A loan is
impaired when it is probable the creditor will be unable to collect all
contractual principal and interest payments due in accordance with the terms of
the loan agreement. At June 30, 1995, the Bank has classified $570,000 of its
loans as impaired with a specific loss reserve of $93,950. There was no impact
on the financial statements as a result of the adoption of Statement No. 114 as
the existing allowance was adequate for this reserve.
Effective January 1, 1995, the Bank adopted FASB Statement No. 119,
Disclosure About Derivative Financial Instruments and Fair Value of Financial
Instruments, which requires the Bank to make disclosures about the purposes of
the investment in derivative financial instruments and about how the
instruments are reported in financial statements. At June 30, 1995, the Bank
had no material derivative financial instruments.
13
<PAGE> 14
PART II. OTHER INFORMATION
Items 1 - 3. Inapplicable
Item 4. At the registrant's annual meeting of shareholders held on May
10, 1995, the following individuals were elected to the Board
of Directors of the registrant:
Richard F. Demerjian, Robert L. Glover, Jack Minasian, James
C. Oppenheim, Phillip J. Pace, Richard J. Strayer, Esther G.
Wilson
Item 5. Inapplicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
The registrant filed no reports on Form 8-K during the quarter
ended June 30, 1995.
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.
COMBANCORP
Date: August 11, 1995 By: /s/ RICHARD F. DEMERJIAN
--------------------------
Richard F. Demerjian
Chief Executive Officer
Date: August 11, 1995 By: /s/ ESTHER G. WILSON
--------------------------
Esther G. Wilson
Chief Financial Officer
14
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