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, 1995 Commission File No. 0-15450
SIERRA TAHOE BANCORP
(Exact Name of Registrant as Specified in its Charter)
California 68-0091859
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Reorganization)
10181 Truckee-Tahoe Airport Rd., P.O. Box 61000, 96160-9010
Truckee, California
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (916) 582-3000
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 ____
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of October 31, 1995: Common Stock - Authorized 10,000,000 shares of no par;
issued and outstanding - 2,587,669.
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<PAGE>
10-Q Filing
September 30, 1995
Part I. Financial Information
Item 1. Financial Statements
Following are condensed consolidated financial statements for Sierra Tahoe
Bancorp ("Bancorp", or together with its subsidiaries, the "Company") for the
reportable period ending September 30, 1995. These condensed consolidated
financial statements are unaudited, however, in the opinion of management, all
adjustments have been made for a fair presentation of the financial condition
and earnings of the Company in conformity with generally accepted accounting
principles. The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
<TABLE>
SIERRA TAHOE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
September 30, 1995 and December 31, 1994
(Amounts in thousands of dollars)
<CAPTION>
ASSETS 09/30/95 12/31/94
---------- ----------
<S> <C> <C>
Cash and due from banks $ 20,875 $ 18,049
Federal funds sold 13,500 8,000
Investment securities and
investments in mutual funds
(Note 4) 26,225 32,817
Loans held for sale 21,361 2,067
Loans and leases, net of
allowance for possible loan
and lease losses of $3,738
in 1995 and $3,546 in 1994
(Notes 2 & 5) 196,976 167,326
Other assets 32,097 31,716
--------- ---------
TOTAL ASSETS $ 311,034 $ 259,975
========= =========
LIABILITIES
Deposits $ 268,344 $ 218,876
Convertible debentures 10,000 10,000
Other liabilities 3,457 2,936
--------- ---------
TOTAL LIABILITIES 281,801 231,812
--------- ---------
SHAREHOLDERS' EQUITY
Common stock 10,634 11,002
Retained earnings 18,802 17,839
Unrealized loss on
investment securities
available for sale (203) (678)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 29,233 28,163
--------- ---------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 311,034 $ 259,975
========= =========
The accompanying notes are an integral part of these Condensed
Consolidated Statements of Condition.
</TABLE>
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<PAGE>
<TABLE>
SIERRA TAHOE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three and Nine Months Ended September 30, 1995 and 1994
(Amounts in thousands except per share amounts)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
09/30/95 09/30/94 09/30/95 09/30/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans
and leases $ 6,175 $ 4,521 $ 16,904 $ 12,404
Interest on federal funds
sold 186 165 360 337
Interest on investment
securities and deposits 405 485 1,238 1,301
-------- -------- -------- --------
Total Interest Income 6,766 5,171 18,502 14,042
-------- -------- -------- --------
Less Interest Expense:
Interest on deposits 2,075 1,214 5,188 3,521
Interest on convertible debentures 212 226 638 569
Other interest expense (1) 10 15 34
------- -------- -------- --------
Total Interest Expense 2,286 1,450 5,841 4,124
------- -------- -------- --------
Net Interest Income 4,480 3,721 12,661 9,918
Provision for Possible Loan
and Lease Losses 390 260 980 800
------- -------- -------- --------
Net Interest Income After Provision
for Possible Loan and Lease Losses 4,090 3,461 11,681 9,118
Other Operating Income 1,977 2,289 6,058 6,767
Other Operating Expenses 5,020 4,372 15,159 12,732
------- -------- -------- --------
Income Before Provision for Income
Taxes 1,047 1,378 2,580 3,153
Provision for Income Taxes 424 526 993 1,193
------- -------- -------- --------
NET INCOME $ 623 $ 852 $ 1,587 $ 1,960
======= ======== ======== ========
EARNINGS PER SHARE
Primary $ 0.23 $ 0.32 $ 0.59 $ 0.74
Weighted Average Shares
Outstanding 2,649 2,687 2,675 2,664
Fully diluted 0.20 0.26 0.53 0.64
Weighted Average Shares
Outstanding 3,676 3,734 3,687 3,574
Cash Dividends Paid Per Share
of Common Stock $ 0.12 $ 0 $ 0.24 $ 0
The accompanying notes are an integral part of these Condensed
Consolidated Statements of Income.
</TABLE>
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<PAGE>
<TABLE>
SIERRA TAHOE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, 1995 and 1994
(Amounts in thousands of dollars)
Nine Months Nine Months
Ended 09/30/95 Ended 09/30/94
-------------- --------------
<S> <C> <C>
Cash Flow From Operating Activities:
Interest and fees received $ 17,619 $ 13,463
Service charges and commissions received 1,283 1,111
Servicing income received 4,679 4,823
Interest paid (5,946) (4,140)
Cash paid to suppliers and employees (13,490) (11,455)
Income taxes paid (965) (1,328)
Mortgage loans originated for sale (25,176) (24,916)
SBA loans originated for sale (18,724) (28,473)
SBA loans sold 5,503 24,864
Mortgage loans sold 26,167 27,927
Other items 788 869
-------- ---------
Net Cash (Used In) Provided By
Operating Activities $ (8,262) $ 2,745
-------- ---------
Cash Flow From Investing Activities:
Proceeds from sales of mutual funds -
available for sale 225 6,516
Proceeds from maturities of investment
securities - held to maturity 573 1,552
Proceeds from maturities of investment
securities - available for sale 1,198 8,000
Proceeds from sales of investment
securities - available for sale 8,484 4,986
Proceeds from sales of investment
securities-held to maturity (Note 4) 999 0
Purchase of investment securities -
held to maturity 0 (1,496)
Purchase of investment securities -
available for sale (4,092) (26,362)
Loans made net of principal collections (37,303) (8,723)
Capital expenditures (1,944) (1,166)
(Increase) decrease in other assets (28) 298
-------- ---------
Net Cash Used In Investing Activities $(31,888) $ (16,395)
-------- ---------
Cash Flow From Financing Activities:
Net (decrease) increase in demand,
interest bearing and savings accounts (3,003) 8,007
Net increase (decrease) in time deposits 52,471 (4,609)
Dividend paid (624) 0
Proceeds from issuance of subordinated
debentures 0 10,000
Proceeds from issuance of common stock 77 8
Repurchase of common stock (445) 0
-------- ---------
Net Cash Provided by Financing Activities 48,476 13,406
-------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents 8,326 (244)
Cash and Cash Equivalents at Start of Year 26,049 32,133
-------- ---------
Cash and Cash Equivalents at September 30 $ 34,375 $ 31,889
======== =========
The accompanying notes are an integral part of these Condensed Consolidated
Statements of Cash Flows.
</TABLE>
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<PAGE>
<TABLE>
SIERRA TAHOE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine Months Ended September 30, 1995 and 1994
(Continued) (Amounts in thousands of dollars)
RECONCILIATION OF NET INCOME TO NET
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
Nine Nine
Months Months
Ended Ended
09/30/95 09/30/94
-------- ------
<S> <C> <C>
Net Income: $ 1,587 $ 1,960
Adjustment to Reconcile Net Income to Net
Cash Provided:
Depreciation and amortization 806 868
Provision for possible loan and lease losses 980 800
Provision for income taxes 993 1,193
Gain on sale of SBA loans under cash received 18 154
Amortization of excess servicing on SBA loans 1,009 1,436
Amortization of purchased mortgage servicing
rights 129 129
(Decrease) increase in interest payable (105) 134
Increase (decrease) in accrued expenses 396 (378)
Amortization of premiums/discounts on loans (345) (386)
Decrease in taxes payable (965) (1,328)
Increase in loans originated for
sale (12,230) (598)
Decrease (increase) in prepaid expenses 53 (1,056)
Other items (588) (183)
-------- --------
Total Adjustments (9,849) 785
-------- --------
Net Cash (Used In) Provided By Operating $ (8,262) $ 2,745
Activities ======== ========
</TABLE>
- ---------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
For the nine months ended September 30, 1995 and 1994, $373,000 and $682,000 of
loans were transferred to other real estate owned.
In the 1995 period, $572,000 of assets formerly classified as in-substance
foreclosures were reclassified as loans.
In 1995, $20.0 million of unguaranteed SBA loans originated in earlier years
were transferred to held for sale status. Concurrently, $21.4 million of
guaranteed SBA loans were transferred to the Company's investment portfolio at
cost, which was lower than market.
The accompanying notes are an integral part of these Condensed Consolidated
Statements of Cash Flows.
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<PAGE>
Sierra Tahoe Bancorp
Notes to Condensed Consolidated Financial Statements
September 30, 1995 and December 31, 1994
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in a condensed format and, therefore, do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. However, in the opinion of
management, all adjustments, consisting only of normal recurring
adjustments, considered necessary for a fair presentation have been
reflected in the financial statements. The results of operations for the
nine months ended September 30, 1995, are not necessarily indicative of the
results to be expected for the full year. Certain reclassifications have
been made to prior period amounts to present them on a basis consistent
with classifications for the nine months ended September 30, 1995.
2. LOANS
As of September 30, 1995, and December 31, 1994, the Bank's loan portfolio
consisted of the following (in thousands):
<TABLE>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Commercial .......................... $137,987 $126,495
Real Estate - Mortgage............... 23,233 18,526
Real Estate - Construction........... 30,605 18,599
Individual and Other................. 6,802 7,367
Lease Receivables.................... 2,319 202
-------- --------
Total gross loans and leases......... 200,946 171,189
Net deferred loan fees............... 232 317
Allowance for possible loan and lease
losses ............................ 3,738 3,546
-------- --------
Total loans and leases, net of deferred
fees and allowance for possible loan
and lease losses .................. $196,976 $167,326
======== ========
Guaranteed portion of SBA loans held
for sale........................... 0 636
Unguaranteed portion of SBA loans
held for sale...................... 20,772 0
Mortgage loans held for sale......... 589 1,431
-------- --------
Total loans held for sale............ $ 21,361 $ 2,067
======== ========
</TABLE>
The guaranteed portion of completed SBA loans at September 30, 1995 was
$14.0 million. Of total gross loans and leases at September 30, 1995, $4.0
million were considered to be impaired (see Note 5). The allowance for
possible loan and lease losses included $660 thousand related to these
loans. The average recorded investment in impaired loans during the nine
months ended September 30, 1995 was $3.0 million.
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<PAGE>
Sierra Tahoe Bancorp
Notes to Condensed Consolidated Financial Statements
September 30, 1995 and December 31, 1994
3. COMMITMENTS & CONTINGENT LIABILITIES
In the normal course of business, there are outstanding various
commitments and contingent liabilities, such as commitments to extend
credit and letters of credit, which are not reflected in the financial
statements. Management does not anticipate any material loss as a result
of these transactions.
4. INVESTMENT SECURITIES AND INVESTMENTS IN MUTUAL FUNDS
Sales of investment securities classified as held to maturity consist of
a single security which was sold within 90 days of the maturity date. The
amortized cost at the date of sale was $998,203 and the loss realized was
$1,172.
5. IMPAIRED LOANS
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 114, Accounting by Creditors for Impairment
of a Loan, and 118, Accounting by Creditors for Impairment of a Loan
Income Recognition and Disclosure. SFAS No. 114 requires that an impaired
loan be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the loan's
observable market price or the fair value of its collateral. SFAS No. 118
amends SFAS No. 114 to allow a creditor to use existing methods for
recognizing interest income on impaired loans and requires certain
disclosures.
A loan is impaired when, based upon current information and events, it is
probable that the Company will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Loans are
measured for impairment as part of the Company's normal loan review
process. Impairment losses are included in the allowance for possible
loan and lease losses through a charge to provision for loan losses. The
Company had previously calculated its allowance for possible loan and
lease losses using methods approximating those prescribed by SFAS No.
114. The adoption of SFAS No. 114 did not have a material impact on the
Company's financial condition or results of operations.
Interest is recognized on impaired loans where cash is received and the
future collection of principal is considered by management to be
probable. The amount so recognized was not material to operations during
the first nine months of 1995.
The principal effect on the Company of the adoption of SFAS No. 114 is
the elimination of the category of loans classified as in-substance
foreclosures, resulting in the reclassification of such amounts from
other real estate owned to loans. The Company accordingly reclassified
$572,000 of such loans at January 1, 1995.
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<PAGE>
SIERRA TAHOE BANCORP AND SUBSIDIARIES
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
FINANCIAL CONDITION
Effective February 8, 1994 the Bancorp issued $10 million of 8 1/2%
Convertible Debenture Securities due February 1, 2004 ("Debenture Offering"). A
portion of the net proceeds from this offering have been utilized to pay
operating expenses of the holding company, to provide a $300 thousand equity
infusion into Sierra Bank of Nevada ("SBN"), to repurchase 50,000 shares of
stock on the open market, and to pay dividends to the Bancorp's shareholders. Of
the $6.9 million remainder, $1.0 million is invested in a loan, $5.5 million has
been used to reduce the Company's reliance on out-of-area time deposits, and
$0.4 million provides the operating cash resources for the holding company. It
is intended that the additional capital will be used to expand the Company's
operations in Nevada and Northern California, and to expand the Company's
Small Business Administration ("SBA") and other business operations.
Total assets increased by $51.0 million from $260.0 million at December 31,
1994, to $311.0 million at September 30, 1995. This increase included increases
of $2.8 million in cash and due from banks, $5.5 million in federal funds sold,
$48.9 million in loans, net of the allowance for possible loan and lease losses,
and $0.4 million in other assets. These increases were offset by a decrease of
$6.6 million in investment securities and investments in mutual funds. Mutual
funds, federal funds sold and unpledged investment securities classified as
available for sale (which consist primarily of short-term U.S. Treasury and
agency securities with a remaining maturity of less than two years) are all
sources of short-term liquidity and can be used somewhat interchangeably to
provide liquidity. Of the Company's total investment securities, $5.0 million
were pledged at September 30, 1995.
The increase in loans includes the effect of the Company's decision to
retain the guaranteed portion of its SBA loans. This represents a new strategy
whereby the Company intends to securitize and sell the unguaranteed portion of
SBA loans. SBA loans increased $19.8 million from $95.9 million at December 31,
1994 to $115.7 million at September 30, 1995. Other loan increases were $11.8
million in commercial loans, $4.7 million in real estate loans, $12.0 million in
construction loans, and $2.1 million in leases. Consumer loans decreased by $600
thousand and mortgage loans held for sale decreased $800 thousand. Gross loans
outstanding at SBN increased during 1995 from $41.1 million at December 31, 1994
to $50.0 million at September 30, 1995.
The Company has decided to defer its planned securitization of the
non-guaranteed portion of SBA loans from the fourth quarter of 1995 into 1996.
This change will defer income that would have been recognized in 1995 into 1996
and is expected to result in earnings for 1995 being below those reported for
1994. The decision to defer the securitization was made because of a recently
announced pending change in regulations by the SBA which if enacted will reduce
the amount of loan value that must be retained by Truckee River Bank ("TRB")
from 20% to 10% with respect to loans made under the SBA's Preferred Lender
Program. This will allow the Company to increase the securitization from
approximately $20 million to approximately $40 million. The economies of scale
from the larger securitization is expected to increase the anticipated gain by
$400 thousand.
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<PAGE>
Deposits increased by $49.4 million from $218.9 million at December 31, 1994 to
$268.3 million at September 30, 1995. A decrease of $5.3 million in
interest-bearing transaction accounts was offset by increases of $1.8 million in
non-interest bearing demand accounts, $52.5 million in time deposits, and $0.4
million in savings accounts. The Company attributes the decrease in transaction
accounts primarily to two factors, the transfer of funds into higher yielding
time certificates of deposit and the movement of funds into nonbank investment
vehicles such as money market mutual funds. The increase in time deposits
includes an increase in out-of-area certificates of deposit of $19.0 million.
The unrealized loss on investment securities available for sale, net of the
related tax effect, decreased $475 thousand from $678 thousand at December 31,
1994 to $203 thousand at September 30, 1995. Of this ending balance, $106
thousand represents unrealized loss on mutual funds and $97 thousand relates to
other securities. Net unrealized losses on securities classified as available
for sale, excluding the related tax effect, represent 1.4% of the amortized cost
of the Company's available for sale securities at September 30, 1995.
In June and July 1993, SBN entered into two Memoranda of Understanding
("MOU") with the Federal Reserve Bank ("FRB") and the Nevada Department of
Commerce, Division of Financial Institutions (the "NDFI"). The June 1993 MOU was
terminated by the FRB and the NDFI on May 12, 1995. The July 1993 MOU with its
regulators includes provisions that it must establish satisfactory corrective
actions to remedy and prevent certain compliance deficiencies and weaknesses by
strengthening its policies and procedures related to its ongoing operations.
Termination of the agreement is dependent on the FRB and NDFI agreeing to
terminate the agreement which is in the sole discretion of the FRB and NDFI. The
Company believes SBN is in substantial compliance with the terms of the
agreement.
On April 17, 1995, TRB opened two new branches, one in Auburn and a second
branch in Grass Valley, California. On July 17, 1995, TRB opened a regional
facility in Sacramento, California. SBN opened a branch in Carson City, Nevada
on September 6, 1995. Start-up costs incurred for these branches will be funded
from operating surpluses at the respective banks.
SBN is constructing a new headquarters facility in Reno, and ground breaking
took place during the quarter. Total costs incurred through September 30, 1995
for the land and building were $1.2 million.
In July 1995, the Company discontinued its mortgage banking operations which in
recent years have not been a significant portion of the Company's business and
were not currently profitable. A one time pre-tax charge of approximately
$200 thousand was taken in the third quarter.
The Bancorp paid dividends of twelve cents per share during March and September
1995. During June 1995, the Company repurchased 50,000 shares of its common
stock on the open market at a total cost of $445 thousand.
RESULTS OF OPERATIONS (Nine Months Ended September 30, 1995 and 1994)
Net income for the nine months ended September 30, 1995 decreased by 19.0% from
$1,960 thousand for the nine months ended September 30, 1994 to $1,587 thousand
during the current nine month period. Net interest income increased by $2,743
thousand and the provision for income taxes was reduced by $200 thousand. The
positive effect of these items on net income was offset by a $180 thousand
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<PAGE>
increase in the provision for possible loan and lease losses, a reduction of
$709 thousand in other operating income and a $2,427 thousand increase in other
operating expenses.
Net Interest Income
The yield on average interest earning assets for the nine months ended
September 30, 1995 was 7.32%. This compares to 6.17% for the first nine months
of 1994. The increase reflects the increase in the average prime rate during the
comparison periods and an increase in the percentage of average loans to average
interest earning assets from 76.9% in the first nine months of 1994 to 83.2% in
the current nine months.
Interest on debentures for the first nine months of 1995 was $638 thousand
compared to $569 thousand for 1994. Pending the ultimate use of the debenture
proceeds as more fully described in the section "FINANCIAL CONDITION", these
funds are being temporarily used to reduce the Company's reliance on out-of-area
time deposits which are accruing interest at a lesser rate than the rate paid on
the debentures.
Yields and interest earned, including loan fees for the nine months ended
September 30, 1995 and 1994, were as follows (in thousands except percent
amounts):
<TABLE>
Nine Nine
Months Months
Ended Ended
09/30/95 09/30/94
-------- --------
<S> <C> <C>
Average loans outstanding (1) $192,393 $165,248
Average yields 11.8% 10.0%
Amount of interest and origination
fees earned $ 16,904 $ 12,404
</TABLE>
(1) Amounts outstanding are the average of daily balances for the periods.
Excluding loan fees of $846 thousand and $780 thousand for the nine months ended
September 30, 1995 and 1994, yields on average loans outstanding were 11.2% and
9.4%, respectively. The prime rate (upon which a large portion of the Company's
loan portfolio is based), averaged 8.9% for the 1995 period and 6.8% for the
1994 period.
The Company has experienced an increase in its overall cost of deposits from
2.15% for the nine months ended September 30, 1994 to 2.99% in the current
period. This includes the effect of the overall increase in rates during the
comparison period and an increase in the percentage of time deposits to total
deposits. Average time deposits were 35.3% and 28.6% of average total deposits
for the nine months ended September 30, 1995 and 1994, respectively.
Rates and amounts paid on average deposits including non-interest bearing
deposits for the nine months ended September 30, 1995 and 1994 were as follows
(in thousands except percent amounts):
<TABLE>
Nine Nine
Months Months
Ended Ended
09/30/95 09/30/94
-------- --------
<S> <C> <C>
Average deposits outstanding (1) $230,947 $219,055
Average rates paid 3.0% 2.2%
Amount of interest paid or accrued $ 5,188 $ 3,521
</TABLE>
(1) Amounts outstanding are the average of daily balances for the periods.
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<PAGE>
The effective interest rate paid on NOW accounts, Money Market accounts and Time
Certificates of Deposits during the first nine months of 1995 and 1994 were as
follows:
<TABLE>
1995 1994
--------------------------------------- --------------------------------------
MONEY MONEY
NOW MARKET TIME NOW MARKET TIME
<S> <C> <C> <C> <C> <C> <C>
Average Balance
(in thousands) (1) $35,779 $50,743 $81,503 $32,167 $61,882 $62,747
Rate Paid 1.3% 2.9% 5.8% 1.2% 2.4% 4.0%
</TABLE>
(1) Amounts outstanding are the average of daily balances for the periods.
Provision for Possible Loan and Lease Losses
In evaluating the Company's allowance for possible loan and lease losses,
management considers the credit risk in the various loan categories in its
portfolio. Historically, most of the Company's loan losses have been in its
commercial lending portfolio, which includes SBA loans and local commercial
loans. From inception of its SBA lending program in 1983 through 1990, the
Company sustained a relatively low level of losses from these loans. Losses, net
of recoveries from the unguaranteed portion of SBA loans retained in the
Company's loan portfolio, increased from $232 thousand in 1991 to $648 thousand
in 1992 and decreased to $377 thousand in 1993 and $373 thousand in 1994 and
totaled $489 thousand for the nine months ended September 30, 1995. The increase
in 1992, 1993, 1994 and 1995 over 1991 includes the effect of the maturing of
the SBA loan portfolio, the impact of the recession in California on borrowers
and collateral values, and an increase in the size of the SBA loan portfolio.
Most of the Company's other commercial loan losses have been for loans to
businesses within the Tahoe Basin area and, during 1993, 1994 and 1995 at the
Company's Sierra Bank of Nevada facility. The Company believes that it has taken
steps to minimize its commercial loan losses, including centralization of
lending approval and processing functions. It is important for the Company to
maintain good relations with local business concerns and, to this end, it
supports small local businesses with commercial loans. To offset the added risk
these loans may represent, the Company typically charges a higher interest rate.
It also attempts to mitigate this risk through the loan review and approval
process.
The provision for loan and lease losses was $980 thousand for the first
nine months of 1995 versus $800 thousand for the same period in 1994. The
allowance for possible loan and lease losses as a percentage of loans was 1.68%
at September 30, 1995, compared with 2.05% at December 31, 1994, and 2.09% at
September 30, 1994. The decrease in this percentage reflects an improvement in
the overall quality of the loan portfolio resulting in part from the increase in
loans in 1995. Net charge-offs for the nine months were $787 thousand compared
to $774 thousand for the first nine months of 1994. The percentage of portions
of loans guaranteed by the U.S. Government has increased from 6.7% at December
31, 1994 to 12.0% at September 30, 1995. The Company will monitor its exposure
to loan losses each quarter and adjust its level of provision in the future to
reflect changing circumstances. The Company expects that its existing allowance
for possible loan and lease losses will be adequate to provide for any
additional losses.
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<PAGE>
The following table sets forth the ratio of nonaccrual loans to total loans, the
allowance for possible loan and lease losses to nonaccrual loans and the ratio
of the allowance for possible loan and lease losses to total loans, as of the
dates indicated.
<TABLE>
September 30 December 31
------------------ ----------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonaccrual loans to
total loans 1.8% 1.4% 1.4% 1.8% 2.4%
Allowance for possible loan and
lease losses to nonaccrual loans 93.7% 150.0% 142.9% 120.9% 72.5%
Allowance for possible loan and
lease losses to total loans 1.7% 2.1% 2.1% 2.2% 1.8%
</TABLE>
Nonaccrual loans increased from $2.5 million at December 31, 1994 to $4.0
million at September 30, 1995. Of the $1.5 million increase, approximately $600
thousand represents assets reclassified to loans from in-substance foreclosures,
and $800 thousand is guaranteed by the U.S. Government.
Other Operating Income
Other operating income declined from $6.8 million during the first nine months
of 1994 to $6.1 million during the current nine month period. This reduction is
primarily related to a decrease in net gain on sale of loans.
The net gain on sale of SBA loans for the current nine month period
declined to $307 thousand from $1,525 thousand for the nine months ended
September 30, 1994. This decline resulted from a decrease in sales from $24.9
million for the nine months ended September 30, 1994 to $5.5 million in 1995.
The Company has altered its strategy with respect to the sale of SBA loans.
Rather than continuing to sell the guaranteed portion of the SBA portfolio, the
Company intends to retain the guaranteed portion and securitize and sell
portions of unguaranteed SBA loans. The Company estimates that the decline in
sales between the two periods would be reduced by up to $10.7 million if it had
continued to sell the guaranteed portion of loans available for sale in 1995,
resulting in an estimated decline in sales of approximately $8.7 million. This
decline includes the effect of temporary restrictions in the SBA program
including a reduction in the maximum loan that may be made under the SBA 7(a)
program to $500 thousand and, effective May 15, 1995, the elimination of
guarantees for refinanced debt, with limited exceptions. Effective October 12,
1995, these temporary restrictions were removed. The SBA established new
guarantee percentages of 80% for loans of $100,000 or less and 75% for all other
loans, subject to a maximum guaranteed amount of $750,000. At the same time, the
restriction on refinanced debt was eliminated, and the fee structure was
revised. These modifications are not expected to have a material adverse impact
on the Company's results of operations.
-13-
<PAGE>
Net servicing income on SBA loans (the net of the servicing income generated on
sold SBA loans less the amortization of the gain recorded on the sale of these
same loans and the amortization of purchased SBA servicing rights) increased by
$306 thousand from $3,230 thousand during the first nine months of 1994 to
$3,536 thousand for the nine months ended September 30, 1995. This increase
reflects a lower amortization resulting from a change in the estimates of
prepayment speeds of SBA loans TRB services for investors.
Other Operating Expense
The following table compares the various elements of non-interest expense as an
annualized percentage of total assets for the first nine months of 1995 and 1994
(in thousands except percentage amounts):
<TABLE>
Nine Months Salaries & Occupancy & Other
Ended Average Related Equipment Operating
September 30 Assets (1) Benefits (2) Expenses Expenses
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 $ 272,891 3.7% 1.1% 2.5%
1994 $ 256,932 3.5% 1.0% 1.8%
</TABLE>
(1) Based on average daily balances.
(2) Excludes provision for payment of bonuses and contribution to KSOP
plan. Including these items, percentages are 3.9% and 3.8% for 1995 and
1994, respectively.
The following table summarizes the principal elements of operating expenses and
discloses the increases (decreases) and percent of increases (decreases) for the
nine months ended September 30, 1995 and 1994 (amounts in thousands except
percentage amounts):
<TABLE>
Nine Months Increase (Decrease)
Ended September 30 1995 over 1994
1995 1994 Amount Percentage
---------------------- -----------------------------
<S> <C> <C> <C> <C>
Salaries and related benefits....$ 7,860 $ 7,279 $ 581 8.0%
Occupancy and equipment.......... 2,232 1,969 263 13.4
Insurance........................ 208 221 (13) (5.9)
Postage.......................... 235 197 38 19.3
Stationery and supplies.......... 240 198 42 21.2
Telephone........................ 249 187 62 33.2
Advertising...................... 552 240 312 130.0
Legal............................ 302 31 271 874.2
Consulting....................... 246 97 149 153.6
Audit and accounting fees........ 109 108 1 0.9
Directors' fees and expenses..... 631 266 365 137.2
FDIC assessments................. 260 438 (178) (40.6)
Sundry losses.................... 679 219 460 210.0
Other............................ 1,356 1,282 74 5.8
------- ------- ------
$15,159 $12,732 $2,427 19.1%
======= ======= ======
</TABLE>
The increase in salaries and benefits is primarily attributable to the new
branches and the opening of a new equipment leasing department at SBN during the
first quarter of 1995. The new TRB branches accounted for $188 thousand of
the increase in occupancy and equipment.
Advertising in 1995 includes an expanded budget for TRB and costs related to
TRB's new branches. Legal expenses relate to general litigation matters and a
voluntary internal investigation of the Company's investment in an entity known
as Community Assets Management. Consulting costs in 1995 include costs related
to a corporate identity study, a review of directors' compensation and
assistance in strategic planning. Directors' expenses in 1995 include a $314
thousand pre-tax charge for the Director Emeritus Program, which
-14-
<PAGE>
provides retirement benefits to certain directors who choose to participate
in the program, and $25 thousand for an additional retirement plan for TRB's
chairman. The decrease in FDIC assessments related to a reduction in rates.
Sundry losses in 1995 include a $100 thousand business loss related to other
real estate owned, $166 thousand related to two litigation matters, and $223
thousand related to the termination of mortgage operations.
Provision for Income Taxes
Provision for income taxes have been made at the prevailing statutory rates and
include the effect of items which are classified as permanent differences for
federal and state income tax. The provision for income taxes was $993 thousand
and $1,193 thousand for the nine months ended September 30, 1995 and 1994,
respectively, representing 38.5% and 37.8% of income before taxation for the
respective periods.
Results of Operations (Three months ended September 30, 1995 and 1994)
Net income decreased by $229 thousand from $852 thousand for the three months
ended September 30, 1994 to $623 thousand for the current quarter. The decrease
included a $759 thousand increase in net interest income and a $102 thousand
reduction in the provision for income taxes. These items were offset by a $130
thousand increase in the provision for possible loan and lease losses, a $312
thousand decrease in other operating income and a $648 thousand increase in
other operating expenses.
Net Interest Income
The yield on net interest earning assets increased from 6.70% during the third
quarter of 1994 to 7.02% during the three months ended September 30, 1995. As in
the nine month comparison, yield was positively affected by an increase in the
percentage of average loans to average earning assets from 75.6% during the 1994
quarter to 83.4% in the 1995 quarter.
Yields and interest earned, including loan fees for the three months ended
September 30, 1995 and 1994 were as follows (in thousands except percent
amounts):
<TABLE>
Three Months Three Months
Ended 09/30/95 Ended 09/30/94
-------------- --------------
<S> <C> <C>
Average loans outstanding (1) $211,264 $166,453
Average yields 11.6% 10.8%
Amount of interest and
origination fees earned $ 6,175 $ 4,521
</TABLE>
(1) Amounts outstanding are the average of daily balances for the periods.
Excluding loan fees of $285 thousand for both quarters, yields on average loans
outstanding were 11.1% and 10.1% for the 1995 and 1994 quarters, respectively.
The prime rate (upon which a large portion of the Company's loan portfolio is
based) was 8.8% for the 1995 quarter and averaged 7.5% for the 1994 quarter.
This increase in prime is the major component of the increase in loan yields.
-15-
<PAGE>
Other earning assets averaged $42.0 million in the current quarter as
compared to $53.8 million for the three months ended September 30, 1994. The
decreases in investment securities and federal funds sold of $9.2 million and
$1.9 million, respectively, were offset by the increase in loans of $44.8
million.
Rates and amounts paid on average deposits, including non-interest bearing
deposits for the three months ended September 30, 1995 and 1994, were as follows
(in thousands except percent amounts):
Three Months Three Months
Ended 09/30/95 Ended 09/30/94
--------------------------------
Average deposits outstanding (1) $253,767 $223,580
Average rate paid 3.2% 2.2%
Amount of interest paid or accrued $ 2,075 $ 1,214
(1) Amounts outstanding are the average of daily balances for the periods.
The effective interest rates paid on NOW accounts, Money Market accounts and
Time Certificates of Deposits during the third quarter of 1995 and 1994 were as
follows (in thousands except percent amounts):
<TABLE>
1995 1994
--------------------------------- -------------------------------
MONEY MONEY
N0W MARKET TIME NOW MARKET TIME
--------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average Balance $39,362 $47,073 $101,154 $33,690 $64,586 $60,169
Rate Paid 1.3% 3.1% 5.9% 1.2% 2.5% 4.2%
</TABLE>
Provision for Possible Loan and Lease Losses
The Company increased the provision for possible loan and lease losses in the
third quarter of 1995 with the increased volume in loan originations. Loan
growth during the quarter was $21.3 million compared to $4.3 million in the
third quarter of 1994.
Other Operating Income
The net gain on sale of SBA loans decreased by $374 thousand from $389 thousand
during the 1994 quarter to $15 thousand during the three months ended September
30, 1995. This decrease resulted from a decrease in sales from $7.2 million
during the third quarter of 1994 to $0.5 million in the current quarter. As
discussed earlier, the Company has changed its strategy with respect to sales of
SBA loans and has experienced a decline in its SBA loan production.
Net servicing income on SBA loans decreased from $1,226 thousand during the
third quarter of 1994 to $1,161 thousand for the three months ended September
30, 1995. This relates to the reduction in SBA sales during the 1995 period.
-16-
<PAGE>
Other Operating Expense
The following table compares the various elements of non-interest expense as an
annualized percentage of total assets for the third quarter of 1995 and 1994 (in
thousands except percentage amounts):
<TABLE>
Three Months Salaries & Occupancy & Other
Ended Average Related Equipment Operating
September 30 Assets(1) Benefits(2) Expenses Expenses
- ------------ ------ -------- -------- --------
<S> <C> <C> <C> <C>
1995 $296,222 3.7% 1.2% 2.2%
1994 $262,913 3.6% 1.0% 2.0%
</TABLE>
(1) Based on average daily balances.
(2) Excludes provision for payment of bonuses and contribution to KSOP
plan. Including these items, percentages are 3.5% and 3.8% for 1995 and
1994, respectively.
The following table summarizes the principal elements of operating expenses and
discloses the increases (decreases) and percent of increases (decreases) for the
three months ended September 30, 1995 and 1994 (amounts in thousands except
percentage amounts):
<TABLE>
Three Months Increase (Decrease)
Ended September 30 1995 over 1994
------------------------- -----------------------------
1995 1994 Amount Percentage
<S> <C> <C> <C> <C>
Salaries and related benefits....$ 2,596 $ 2,489 $ 107 4.3%
Occupancy and equipment.......... 803 636 167 26.3
Insurance........................ 68 73 (5) (6.8)
Postage.......................... 86 69 17 24.6
Stationery and supplies.......... 94 57 37 64.9
Telephone........................ 99 60 39 65.0
Advertising...................... 199 69 130 188.4
Legal............................ 91 19 72 378.9
Consulting....................... 55 23 32 139.1
Directors' fees and expenses..... 126 92 34 37.0
FDIC assessments................. (15) 137 (152) (110.9)
Sundry losses.................... 328 168 160 95.2
Other............................ 490 480 10 2.1
------- ------- ------
$ 5,020 $ 4,372 $ 648 14.8%
======= ======= ======
</TABLE>
Of the $167 thousand increase in occupancy and equipment, $157 thousand
relates to the new branches. Consistent with the nine month comparison,
advertising in 1995 reflects an expanded budget for TRB and costs related to the
new branches. The increase in legal results from general litigation matters. The
decrease in FDIC assessments results from a reduction in rates effective on June
1, 1995. Sundry losses in the third quarter of 1995 include the costs associated
with termination of operations of the company's mortgage subsidiary.
Provision for Income Taxes
The provision for income taxes was $424 thousand and $526 thousand for the
three months ended September 30, 1995 and 1994, respectively, representing
40.5% and 38.2% of income before taxation for the respective periods.
-17-
<PAGE>
Sierra Tahoe Bancorp
10-Q Filing
September 30, 1995
Part II.
Item 1.
Legal Proceedings.
During 1987, the Company took title, through foreclosure, of
a property located in Placer County which subsequent to TRB's
sale of the property was determined to be contaminated with a
form of hydrocarbons. At the time it owned the property, TRB
became aware of and investigated the status of certain
underground tanks that had existed on the property. TRB hired a
consultant to study the tanks and properly seal them. Several
years later, and after resale of the property, contamination was
observed in the area of at least one of the underground tanks and
along an adjoining riverbank of the Yuba River. TRB, at the time
of resale of the property, was not aware of this contamination
but was aware of the existence of the tanks and disclosed this to
its purchaser.
A formal plan of remediation has not been approved by the County
of Placer or the State Regional Water Quality Board. As a result
of the discovery of the contamination, two civil lawsuits have
been recently instituted against TRB by the current owner of
the property, who is also TRB's borrower.
TRB's counsel on this matter believes that TRB's share of the
cost of remediation will not be material to TRB's or the
Company's performance and will be within existing reserves
established by TRB for this matter.
The Company and its subsidiaries have been named in a suit
filed in the U.S. District Court, Central District of California.
The Plaintiffs are banks who lost portions of investments made
through a fund managed by Community Assets Management ("CAM"),
which is no longer in operation. Plaintiffs allege that the
Company and its subsidiaries exited the fund prior to being
exposed to loss based upon inside information. Also named in his
capacity as director of CAM is Jerrold Henley who also serves the
Company as a Director and Chairman of the Board. The Company has
investigated the allegations in detail and has found no basis for
the action and will defend the civil action. The Company believes
this issue will not have a material adverse impact on its
financial condition or results of operations.
In addition, the Company is subject to some minor pending
and threatened legal actions which arise out of the normal course
of business and, in the opinion of Management, the disposition of
these claims currently pending will not have a material adverse
effect on the Company's financial position.
Item 2.
Change in Securities. No changes.
Item 3.
Defaults Upon Senior Securities. Not applicable.
-18-
<PAGE>
Item 4.
Submission of Matters to a Vote of Securities Holders.
Sierra Tahoe Bancorp's Annual Meeting of shareholders was held on August 16,
1995, at the North Lake Tahoe Convention Center, Kings Beach, California. The
following resolutions were distributed to stockholders and adopted:
1. To elect the following eight nominees to serve as
directors until the next Annual meeting and until their
successors are elected and have been qualified:
<TABLE>
VOTE:
For Withheld
<S> <C> <C>
David W. Clark 1,872,798 60,332
William T. Fike 1,873,092 60,038
Jerrold T. Henley 1,874,118 59,012
A. Morgan Jones 1,873,092 60,038
Jack V. Leonesio 1,873,592 59,538
William W. McClintock 1,853,948 79,182
A. Milton Seymour 1,869,820 63,310
Thomas M. Watson 1,872,190 60,940
</TABLE>
2. To adopt certain amendments to the Sierra Tahoe Bancorp
1988 Stock Option Plan and approve certain possible
non-employee director stock option grants.
VOTE:
For 1,505,307
Against 217,367
Abstained 170,342
Item 5.
Other Information. Not applicable.
Item 6.
Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1. Construction agreement between Sierra Bank of
Nevada and Shaver Contruction, Inc.
11. Statement regarding computation of per share
earnings.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed for the quarter
ended September 30, 1995.
-19-
<PAGE>
10-Q Filing
September 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 of the
undersigned thereunto duly authorized.
Date: November 10, 1995 /s/ David C. Broadley
------------------ -------------------------------------
David C. Broadley
Executive Vice President/
Chief Financial Officer and authorized
to sign on behalf of the registrant
-20-
<PAGE>
EXHIBIT 10.1
FIXED PRICE CONSTRUCTION AGREEMENT
(Sierra Bank of Nevada--Reno Headquarters Building)
THIS FIXED PRICE CONSTRUCTION AGREEMENT (the "Agreement") is
made and entered into this 24th day of August, 1995 by and between
the following parties: SIERRA BANK OF NEVADA, a Nevada Banking
Corporation, whose address is 3301 S. Virginia Street, Reno, Nevada
89502 (hereinafter "Bank"), and SHAVER CONSTRUCTION INC., a Nevada
Corporation, whose address is 9 Greg Street, Sparks, Nevada 89431
(hereinafter "Contractor") and concerns the following Recitals:
W I T N E S S E T H:
WHEREAS, Bank currently owns that certain vacant parcel of
unimproved real property located at the Northeast corner of
Kietzke and McCarran Boulevards in the City of Reno, County of
Washoe, State of Nevada and specifically described in Exhibit
"A" attached hereto and incorporated herein consisting of
approximately three acres in size and containing certain
internal street and utility improvements (the "Property"); and
WHEREAS, Contractor is an experienced licensed contractor
licensed within the State of Nevada and has agreed, at the
specific request of Bank, to construct upon the Property
described in Exhibit "A" pursuant to this Agreement an office
building and main bank branch for Bank according to the plans,
specifications and design attached hereto as Exhibit "B" and
incorporated herein by this reference as if set forth in full
and generally consisting of three stories and with an
aggregate square footage of 28,566 square feet (the Property
currently owned by Bank and the improvements to be constructed
sometimes being collectively known as the "Building"); and
WHEREAS, Bank and Developer wish to formalize their intentions
with regard to the construction design, cost and completion of
the Building upon the Property;
NOW, THEREFORE, Bank and Contractor agree as follows:
1
<PAGE>
1. Purpose of Agreement; Incorporation of Recitals. The
purpose of this Agreement is to establish the respective terms,
conditions, rights and obligations regarding the construction of
the Building upon the Property. In that regard, the above-
referenced Recitals are incorporated into this Agreement.
2. Relationship of Bank and Contractor. Bank and Contractor
agree and restate that the relationship by and between them, their
employees, officers and directors, under this Agreement shall be
one between Bank as property owner and Contractor as independent
licensed contractor/builder. Bank and Contractor are not joint
venturers or partners with regard to this Agreement. Contractor
shall be the sole employer or contracting party of or for the
various employees, subcontractors, vendors and materialmen
furnishing labor or materials to construct the Building and
Contractor shall fully satisfy all laws regarding their
supervision, safety, industrial injury insurance, payroll-related
taxes and other job-related duties and responsibilities.
3. Approved Architect and Engineer; Approved Plans,
Specifications and Design; Change Orders; Quality of Construction;
Contact Persons. It is intended that Contractor build the building
according to the approved construction plans, including the
construction of all drive-thru, parking areas and landscaping
required therein. The architect and engineer for the project shall
be Don Mackey, A.I.A. and Clark Gribben, respectively. The
architect and engineer shall not be changed by Bank or by
Contractor without the other parties prior written concurrence;
that approval not to be unreasonably withheld. The plans,
specifications and design of the Building to be built and
surrounding drive-thru, parking areas and landscaping shall be
according to the approved plans and specifications. These approved
plans, specification and design shall be referred to collectively
herein as the "Plans". Except as to matters requiring immediate
change and for which no possible consent could be obtained in
sufficient time from the other party, the approved Plans may be
changed only upon the prior mutual written consent of Bank and
Contractor and only after appropriate changes in price have also
been agreed to in writing.
Any change orders or other adjustments for additional items or
changes rendering the project more or less expensive to complete or
which would cause a delay in completion and delivery dates shall
specify the Contractor's cost to fully complete that changed
project component and the new cost of the entire project and any
affect upon completion time being clearly noted thereon by
Contractor. In addition to Contractor's cost, any additional change
order(s) may add up to a 15.00% additional sum for overhead and
profit of the Contractor carrying out the change. Any change orders
deleting work will not include the 15.00%. Due to the fixed price
nature of this Agreement, no adjustments for cost or completion
2
<PAGE>
date shall be allowed to be unilaterally elected by Contractor as
to any matter reasonably within the original approved Plans. Any
additional changes in addition to the original approved Plans shall
be assumed to be within the current construction cost and
completion schedule unless specifically agreed to as set forth
above in the written change order. At all times the quality of
construction shall be comparable to construction of similar new
commercial office space in the geographic area with new materials
being used throughout. Bank shall specifically approve in writing
any deviation from this criteria.
The contact person(s) at Bank authorized to approve any change
orders or to verify design or other criteria are as follows: The
President/CEO of Bank; or, in his or her absence, the Chief
Operations Officer of Bank.
4. Construction Cost; Fixed Price Agreement; Exceeding Fixed
Price; Project Underbudget Benefit Sharing. The cost for the
construction of the building, including, but not limited to all
drive-thru, parking and landscaping required by the Plans and
project construction expenses, shall be the sum of Two Million Four
Hundred Thirty Five Thousand Three Hundred Twenty Eight Dollars
($2,435,328.00) (hereinafter referred to as the "Fixed Price"). The
Fixed Price is further defined in Exhibit "C" attached hereto. The
Fixed Price may be adjusted only by change orders executed only in
compliance with Paragraph 3, above. Contractor shall assume the
sole risk of any construction costs that exceed the Fixed Price for
the work set forth in the Plans plus any approved change orders for
additional work not set forth in the Plans. Should the project be
built according to the Plans plus any approved change orders, and
be completed at less than the Fixed Price plus any additional or
reduced amounts set forth in those approved change orders, and
provided the Building is delivered on a timely basis, Contractor
shall receive fifty percent (50.00%) of any resultant sum that was
saved by the Contractor measured by the difference between the
Fixed Price (plus the effect of approved change orders) and the
actual cost to complete the Building; provided, however, not
deducted from any deemed savings shall be any savings resulting
from budget line items for which Contractor has sole control such
as fees charged by wholly owned subsidiaries of Contractor or
Contractors' own management fees. Draws and disbursements by Bank
(or Bank's lending institution) to Contractor shall be in
accordance with the schedule set forth in Exhibit "D".
5. Start Date; Completion Date; Penalties For Not Meeting
Completion Date. Construction shall commence on or about August
17, 1995 or upon all permits being obtained after diligent attempt
to obtain all permits. Work shall proceed for the next Two Hundred
Forty (240) calendar days without interruption until April 17, 1996
when the project shall be completed and be available and ready for
normal use and occupancy by Bank. Completion shall be deemed to
3
<PAGE>
exist when a certificate of occupancy is issued. Should the
Building not be completed by April 17, 1996, Bank and Contractor
agree to negotiate in good faith an appropriate remedy in favor of
Bank to avoid any additional costs resulting from Contractor's
inability to deliver the Building to Bank on a timely basis.
6. Default; Lien Free Status of Project. Failure to adhere to
this Agreement by either Bank or Contractor shall result, at the
option of the party being affected by that noncompliance, in a
default and shall accord the party otherwise in accordance with
this Agreement to seek damages or equitable relief as allowed by
applicable law in conformance with the dispute resolution procedure
stated in Paragraph 7, below. During all times, Contractor shall
maintain a lien free status for all work performed as to the
project for which Bank has paid sums with regard to. Bank reserves
the right to utilize a construction control service to monitor
completion of work as set forth on each draw request and to issue
checks in the name of the contractor and subcontractor/materialmen
if lien releases are not obtained at the time of funding the draw
request. Any sums due to the other party shall accrue interest at
the legal rate from the date first due. In the event a default is
not promptly declared, it shall not be deemed to be a waiver of the
later right to declare a default. Time is of the essence in this
Agreement.
7. Arbitration of Disputes. All disputes regarding this
Agreement shall be resolved by final and binding arbitration
according to the commercial construction dispute resolution rules
of the American Arbitration Association. Venue shall be in Reno,
Nevada. Arbitration shall be commenced within 30 days of the first
demand for arbitration being made and shall be completed within 100
days of the first demand for arbitration. Any disputes determined
in good faith to be under $50,000 shall be resolved by a single
arbitrator. Any disputes determined in good faith over that amount
shall be resolved by a panel of three arbitrators. The decision of
the arbitrator(s) shall be final and binding and may include an
award of legal fees, costs and expenses, including reasonable and
necessary attorneys fees and costs and any bonding costs or
premiums.
8. Miscellaneous. This Agreement may not be assigned by
Contractor without the prior written consent of Bank. Contractor
shall identify all subcontractors intended to be used on the
project to Bank and Bank shall have the right to give preference as
subcontractors to Bank customer/tradesmen who serve that particular
trade where appropriate and where the project cost would not be
increased by that use of bank customer/tradesmen. This Agreement
shall be construed according to the laws of the State of Nevada.
This Agreement shall only be amended in writing, signed by each
party hereto. This Agreement may be executed in counterparts.
Gender and tense shall be read in context and shall include
4
<PAGE>
singular, plural, masculine, feminine and neuter, where applicable.
This Agreement is the result of negotiation and shall not be
construed against either party as draftsperson.
5
<PAGE>
IN WITNESS WHEREOF, we have executed this Agreement on the
above-referenced date in Reno, Nevada.
BANK:
SIERRA BANK OF NEVADA
a Nevada Corporation
By: /s/ David A. Funk
---------------------------
David A. Funk
Its: President/CEO
Contractor:
SHAVER CONSTRUCTION, INC.
a Nevada Corporation
By: /s/ Deane Shaver
--------------------------
Deane Shaver
Its: President
contract\agreement.sha
6
<PAGE>
EXHIBIT "A"
Legal Description of Property
[SEE ATTACHED]
<PAGE>
EXHIBIT "B"
Plans, Specifications and Design
[SEE ATTACHED]
<PAGE>
EXHIBIT "C"
Fixed Cost Breakdown By Line Item
[SEE ATTACHED]
<PAGE>
EXHIBIT "D"
Draw Disbursement Schedule
[SEE ATTACHED]
<PAGE>
<TABLE>
Exhibit 11
Sierra Tahoe Bancorp and Subsidiaries
Computation of Earnings Per Common Share
(Amounts in thousands except per share amounts)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
09/30/95 09/30/94 09/30/95 09/30/94
Primary
<S> <C> <C> <C> <C>
Net income $ 623 $ 852 $ 1,587 $ 1,960
======== ======== ======== ========
Shares
Weighted average number of
common shares outstanding 2,574 2,592 2,602 2,591
Assuming exercise of options
reduced by the number of
shares which could have
been purchased with the
proceeds from exercise of
such options 75 95 73 73
-------- -------- -------- --------
Weighted average number of
common shares outstanding
as adjusted 2,649 2,687 2,675 2,664
======== ======== ======== ========
Net income per share $ 0.23 $ 0.32 $ 0.59 $ 0.74
======== ======== ======== ========
Assuming full dilution
Earnings $ 623 $ 852 $ 1,587 $ 1,960
Add after tax interest expense
applicable to convertible
debentures 125 133 374 334
-------- -------- -------- --------
Net income $ 748 $ 985 $ 1,961 $ 2,294
======== ======== ======== ========
Shares
Weighted average number of
common shares outstanding 2,574 2,592 2,602 2,591
Assuming conversion of
convertible debentures 1,000 1,041 1,000 900
Assuming exercise of options
reduced by the number of
shares which could have been
purchased with the proceeds
from exercise of such options 102 101 85 83
-------- -------- -------- --------
Weighted average number of
common shares outstanding
as adjusted 3,676 3,734 3,687 3,574
======== ======== ======== ========
Net income per share assuming
full dilution $ 0.20 $ 0.26 $ 0.53 $ 0.64
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 20,875
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22,962
<INVESTMENTS-CARRYING> 3,263
<INVESTMENTS-MARKET> 3,238
<LOANS> 222075
<ALLOWANCE> 3738
<TOTAL-ASSETS> 311034
<DEPOSITS> 268344
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0
0
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</TABLE>
