SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended September 30, 1996
Commission file number 2-94245-LA
BILTMORE BANK CORP.
(Exact name of registrant as specified in its charter)
ARIZONA 86-0490147 012112
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2425 East Camelback, Suite 100, Phoenix, Arizona 85016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 381-6800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
None
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
--- ---
16,522,530 shares of common stock are outstanding at September 30, 1996.
<PAGE>
Page
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Part I Financial Information
---------------------
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995 1
Consolidated Statements of Operations
for the nine months ended
September 30, 1996 and September 30, 1995 2
Consolidated Statement of Shareholders'
Equity for the nine months ended
September 30, 1996 3
Consolidated Statements of Cash Flows
for the nine months ended
September 30, 1996 and September 30, 1995 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II Other Information 7
-----------------
Part III Financial Data Schedule 8
-----------------------
Part IV Signatures 11
----------
<PAGE>
Part I Item 1. Financial Statements
--------------------
BILTMORE BANK CORP.
-------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
(000's Omitted)
September 30, December 31,
1996 1995
------------- ------------
CASH AND DUE FROM BANKS $ 8,820 $ 6,337
FEDERAL FUNDS SOLD 0 -
-------- --------
TOTAL CASH AND CASH EQUIVALENTS 8,820 6,337
INVESTMENT SECURITIES AVAILABLE FOR SALE 26,489 36,808
LOANS, less allowance for credit losses
of $2,369 and $2,362 at 9/30/96 and 97,393 89,152
12/31/95, respectively
ACCRUED INTEREST RECEIVABLE AND
OTHER ASSETS 1,715 2,099
PREMISES AND EQUIPMENT, net 1,077 1,616
OTHER REAL ESTATE OWNED 103 103
INTANGIBLE ASSETS 1,307 1,400
-------- --------
$136,904 $137,515
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
DEPOSITS:
Demand - Noninterest-bearing $ 28,983 $ 23,985
Time certificates of deposit,
$100,000 and over 10,133 13,690
Other time certificates and
individual retirement accounts 18,454 30,267
Money Market Savings 57,595 48,415
-------- --------
115,165 116,357
ACCRUED INTEREST PAYABLE 123 199
SHORT-TERM BORROWINGS 6,274 6,340
OTHER LIABILITIES 1,024 849
-------- --------
122,586 123,745
SHAREHOLDERS' EQUITY:
Preferred stock, no par value:
Authorized and unissued, 10,000,000 shares - -
Common stock, no par value (stated value $.50)
Authorized, 25,000,000 shares; issued and
outstanding, 16,522,530 shares 8,261 8,261
Additional paid-in capital 4,417 4,417
Undivided Profits 1,735 930
Net unrealized gain (loss) on securities (95) 162
-------- --------
14,318 13,770
-------- --------
$136,904 $137,515
======== ========
See notes to consolidated financial statements.
1
<PAGE>
BILTMORE BANK CORP. AND SUBSIDIARY
----------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Nine months ended September 30,
1996 1995
------------ ------------
INTEREST INCOME:
Interest and fees on loans $ 5,956,350 $ 5,899,354
Other interest income 1,553,613 1,715,982
------------ ------------
Total interest income 7,509,963 7,615,336
INTEREST EXPENSE 2,932,085 3,293,229
------------ ------------
Net interest income 4,577,878 4,322,107
PROVISION FOR CREDIT LOSSES (237,000) --
------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 4,814,878 4,322,107
------------ ------------
CUSTOMER SERVICE FEES 193,594 192,054
LOAN FEES 201,011 185,411
GAIN (LOSS) ON SALE OF SECURITIES (4,468) 28,455
INCOME FROM "LINK" BROKERAGE OFFICE 163,416 75,655
TRUST REVENUES 210,029 136,301
------------ ------------
TOTAL NONINTEREST INCOME 763,582 617,876
------------ ------------
OPERATING EXPENSES:
Salaries and employee benefits, net
of deferred loan origination costs
of $187,263 in 1996 and $99,305 in 1995 2,248,027 1,958,604
Occupancy 494,912 483,509
Equipment 357,077 264,748
Data processing 522,018 232,888
Management fee expense 352,767 302,346
Other 363,226 1,050,662
------------ ------------
4,338,027 4,292,757
------------ ------------
NET INCOME BEFORE INCOME TAX EXPENSE 1,240,433 647,226
INCOME TAX EXPENSE (436,800) (176,771)
------------ ------------
NET INCOME 803,633 470,455
============ ============
NET INCOME PER SHARE $ 0.05 $ 0.03
============ ============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 16,522,530 16,522,530
============ ============
See notes to consolidated financial statements.
2
<PAGE>
BILTMORE BANK CORP.
-------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-in Accumulated Equity in
Shares Amount Capital Earnings Investments
------ ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 16,522,530 $8,261,265 $4,417,304 $ 930,377 $ 161,732
Net income - - - 803,633 -
Unrealized gain (loss) in
Investments available for
sale as of September 30, 1996 - - - - (256,674)
---------- ---------- ----------- ----------- -----------
BALANCE, September 30, 1996 16,522,530 $8,261,265 $4,417,304 $ 1,734,010 $ (94,942)
========== ========== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
BILTMORE BANK CORP. AND SUBSIDIARY
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(000's Omitted)
<TABLE>
<CAPTION>
Nine months ended September 30,
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 804 $ 471
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 271 254
Net amortization and accretion of investment
securities premiums and discounts (27) 56
Net (gain) loss on sale of securities 5 (28)
Net (gain) loss on sale of fixed assets (260) --
Decrease (increase) in accrued interest receivable
and other assets 149 (55)
(Decrease) increase in accrued interest payable and other
liabilities 100 (134)
-------- --------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,042 564
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 4,813 5,132
Proceeds from maturities of investment securities 7,653 4,000
Purchase of investment securities (2,161) (14,901)
Net (increase) decrease in loans (8,241) 2,807
Purchase of bank premises and equipment (166) (261)
Proceeds on sale of fixed assets 801 8
-------- --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 2,699 (3,215)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits and savings 14,178 (9,181)
Net decrease in time certificates of deposit (15,370) 3,942
Net (decrease) increase in short-term borrowings (66) (177)
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,258) (5,416)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,483 (8,067)
CASH AND CASH EQUIVALENTS, beginning of year 6,337 13,560
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 8,820 $ 5,493
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on deposits $ 2,007 $ 3,254
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
BILTMORE BANK CORP. AND SUBSIDIARY
----------------------------------
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
September 30, 1996
------------------
(Unaudited)
NOTE 1 -- Basis of Preparation and Presentation
-------------------------------------
The consolidated financial statements included herein have been prepared by
Biltmore Bank Corp. (the Company), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation. The condensed consolidated financial statements include the
accounts of the Company and its subsidiary. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principals have been condensed or omitted
pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading;
however, it is suggested that these financial statements be read in conjunction
with the financial statements and the notes thereto which are incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995. The financial data for the interim periods may not
necessarily be indicative of results to be expected for the year.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Total assets decreased slightly from $137,515,000 at December 31, 1995 to
$136,904,000 at September 30, 1996. Total loans increased $8,241,000 to
$97,393,000. The loan growth was funded by the decline in investment securities
of $10,319,000.
Total deposits declined to $115,165,000 on September 30, 1996 from $116,357,000
on December 31, 1995. The deposit mix changed to shorter maturities as time
deposits declined $15,370,000. Demand deposits and money market savings
increased $14,178,000.
Net income for the nine month period ending September 30, 1996, increased
$333,178 to $803,633 over the same period in 1995. The net interest income
increase of $693,782 was caused by higher yielding loans replacing investment
securities. Increases in brokerage and trust operations accounted for the
majority of the $147,706 increase in noninterest income. Operating expenses
increased $45,270 and income taxes increased $260,029.
These regulations require the Bank to maintain two separate minimum capital
ratios: the Tier 1 Capital Ratio and the Total Risk- Weighted Capital Ratio. The
bank's capital ratios are shown, along with the minimum required ratios as of
September 30, 1996 and December 31, 1995, respectively, in the following table:
Total Risk-
Tier 1 Weighted
Capital Capital
------- -------
Capital Ratio at September 30, 1996 15.44% 16.71%
Regulatory Capital Requirement 4.00% 8.00%
Capital Ratio at December 31, 1995 13.57% 16.16%
Regulatory Capital Requirement 4.00% 8.00%
The federal banking agencies have also adopted leverage capital guidelines which
banking organizations must meet. Under these guidelines, the most highly rated
banking organizations must meet a leverage ratio of at least 3% Tier 1 capital
to adjusted total assets, while lower rated banking organizations must maintain
a ratio of at least 4% to 5%. In all cases, banking institutions are expected to
hold capital commensurate with the level and nature of risks. The Bank's
leverage ratios as of September 30, 1996 and December 31, 1995 were 9.76% and
8.88%, respectively.
6
<PAGE>
Part II
Item 1. Legal Proceedings
-----------------
There are no material legal proceedings pending against the Company or
its subsidiary, the Bank.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults in Senior Securities
-----------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
Mr. Ronald R. Estervig was elected as Director, President and Chief
Executive Officer of Biltmore Bank Corp., and as Director, President and Chief
Executive Officer of Biltmore Investors Bank, N.A. Mr. Estervig was elected on
September 19, 1996, with an effective date of October 1, 1996.
The Company has filed a Rule 13e-3 transaction statement with the
Securities and Exchange Commission. The Board of Directors of the Company has
proposed a Rule 13e-3 going private transaction. The filing is currently being
reviewed by the Securities and Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) None.
(b) None.
7
<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.
Registrant Biltmore Bank Corp.
---------------------------
BY Ronald R. Estervig Date November 12, 1996
------------------------------ -------------------
Ronald R. Estervig
President and Chief Executive Officer
BY James E. Chappell Date November 12, 1996
----------------------------- ------------------
James E. Chappell, Secretary
10
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 8,820
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,489
<INVESTMENTS-CARRYING> 26,489
<INVESTMENTS-MARKET> 26,489
<LOANS> 97,393
<ALLOWANCE> 2,369
<TOTAL-ASSETS> 136,904
<DEPOSITS> 115,165
<SHORT-TERM> 6,274
<LIABILITIES-OTHER> 1,025
<LONG-TERM> 0
0
0
<COMMON> 8,261
<OTHER-SE> 6,057
<TOTAL-LIABILITIES-AND-EQUITY> 136,904
<INTEREST-LOAN> 6,157
<INTEREST-INVEST> 1,554
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7,711
<INTEREST-DEPOSIT> 2,932
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 4,779
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 4,338
<INCOME-PRETAX> 1,240
<INCOME-PRE-EXTRAORDINARY> 804
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 804
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
<YIELD-ACTUAL> 4.71
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,362
<CHARGE-OFFS> 59
<RECOVERIES> 303
<ALLOWANCE-CLOSE> 2,369
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
