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, 1997 Commission File No. 0-15450
SIERRAWEST 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 require-
ments 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, 1997: Common Stock - Authorized 10,000,000 shares of no par;
issued and outstanding - 4,088,659.
Page -1-
<PAGE>
10-Q Filing
September 30, 1997
Part I. Financial Information
Item 1. Financial Statements
Following are condensed consolidated financial statements for SierraWest
Bancorp ("Bancorp", or together with its subsidiary, the "Company") for the
reportable period ending September 30, 1997. 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 results of operations of the Company in conformity with generally accepted
accounting principles. The accompanying notes are an integral part of these
condensed consolidated financial statements.
Page -2-
<PAGE>
SIERRAWEST BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
September 30, 1997 and December 31, 1996 (Amounts in thousands of dollars)
<S> <C> <C>
(Unaudited)
ASSETS 09/30/97 12/31/96
- ------ -------- --------
Cash and due from banks $ 35,907 $ 26,434
Federal funds sold 35,600 32,200
Investment securities 60,107 35,216
Loans held for sale 14,129 29,489
Loans and leases, net of allowance for
possible loan and lease losses of $6,634
in 1997 and $4,546 in 1996 387,969 289,331
Other assets 41,591 35,219
------ ------
TOTAL ASSETS $575,303 $447,889
======== ========
LIABILITIES
Deposits $513,029 $399,651
Convertible debentures 0 8,520
Other liabilities 10,788 5,802
------ -----
TOTAL LIABILITIES 523,817 413,973
------- -------
SHAREHOLDERS' EQUITY
Common stock 29,347 12,291
Retained earnings 21,111 21,654
Unrealized gain/(loss) on available for sale
investment securities and interest only strips
receivable, net of tax 1,028 (29)
----- ---
TOTAL SHAREHOLDERS' EQUITY 51,486 33,916
------ ------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $575,303 $447,889
======== ========
</TABLE>
The accompanying notes are an integral part of these Condensed Consolidated
Statements of Condition.
Page -3-
<PAGE>
SIERRAWEST BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three and Nine Months Ended September 30, 1997 and 1996
(Amounts in thousands except per share amounts)
<TABLE>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
09/30/97 09/30/96 09/30/97 09/30/96
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans
and leases $10,231 $ 8,018 $28,501 $22,001
Interest on federal funds
sold 773 236 1,436 652
Interest on investment
securities and other assets 872 460 2,194 1,290
--- --- ----- -----
Total Interest Income 11,876 8,714 32,131 23,943
------ ----- ------ ------
Less Interest Expense:
Interest on deposits 4,587 3,075 12,277 8,363
Interest on convertible
debentures 0 195 60 592
Other interest expense 47 5 133 (42)
-- - --- ---
Total Interest Expense 4,634 3,275 12,470 8,913
----- ----- ------ -----
Net Interest Income 7,242 5,439 19,661 15,030
Provision for Possible
Loan and Lease Losses 540 250 1,940 910
--- --- ----- ---
Net Interest Income After
Provision for Possible
Loan and Lease Losses 6,702 5,189 17,721 14,120
Non-interest Income 2,581 1,825 9,105 5,246
Non-interest Expense 6,042 5,472 18,139 16,302
----- ----- ------ ------
Income Before Provision
for Income Taxes 3,241 1,542 8,687 3,064
Provision for Income Taxes 1,245 602 3,348 1,168
----- --- ----- -----
NET INCOME $ 1,996 $ 940 $ 5,339 $ 1,896
======= ======= ======= =======
EARNINGS PER SHARE
Primary $ 0.47 $ 0.32 $ 1.47 $ 0.65
Weighted Average Shares
Outstanding 4,254 2,959 3,630 2,914
Fully diluted $ 0.47 $ 0.27 $ 1.34 $ 0.57
Weighted Average Shares
Outstanding 4,273 3,943 4,005 3,926
Cash Dividends Paid Per
Share of Common Stock $ 0.16 $ 0.15 $ 0.32 $ 0.30
</TABLE>
The accompanying notes are an integral part of these Condensed Consolidated
Statements of Income.
Page -4-
<PAGE>
SIERRAWEST BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, 1997 and 1996
(Amounts in thousands of dollars)
<TABLE>
Nine Nine
Months Months
Ended Ended
09/30/97 09/30/96
-------------------- -----------------
<S> <C> <C>
Cash Flow from Operating Activities:
Interest and fees received $ 31,216 $ 23,475
Service charges received 1,703 1,272
Servicing income and interest only
strips receivable income received 4,541 4,220
Interest paid (12,517) (8,973)
Cash paid to suppliers and employees (16,542) (14,695)
Income taxes paid (2,460) (1,090)
Government loans originated or purchased for sale (35,008) (8,194)
Government loans sold 66,277 134
Other items 1,202 812
----- ---
Net Cash Provided by/(Used in) Operating Activities $ 38,412 $ (3,039)
--------- --------
Cash Flow From Investing Activities:
Proceeds from:
Maturities of investment securities-held to maturity 1,012 1,015
Maturities of investment securities-available for sale 6,457 10,230
Sales of investment securities-available for sale 609 8,239
Purchase of investment securities-available for sale (28,249) (24,483)
Loans and leases made net of principal collections (89,046) (56,887)
Change in fixed assets 1,051 (3,701)
Change in other assets (411) 458
Acquisition of Mercantile Bank-
Net Cash Received 7,777 0
----- -
Net Cash Used in Investing Activities $(100,800) $(65,129)
--------- --------
Cash Flow from Financing Activities:
Net increase in demand, interest bearing and
savings accounts 51,017 25,348
Net increase in time deposits 24,659 40,447
Dividend paid (1,189) (805)
Proceeds from issuance of common stock 774 157
--- ---
Net Cash Provided by Financing Activities $ 75,261 65,147
--------- ------
Net Increase/(Decrease) in Cash and Cash Equivalents 12,873 (3,021)
Cash and Cash Equivalents at Beginning of Year 58,634 39,189
------ ------
Cash and Cash Equivalents at September 30 $ 71,507 $ 36,168
========= ========
</TABLE>
The accompanying notes are an integral part of these Condensed Consolidated
Statements of Cash Flows.
Page -5-
<PAGE>
SIERRAWEST BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine Months Ended September 30, 1997 and 1996 (Continued)
(Amounts in thousands of dollars)
RECONCILIATION OF NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES
<TABLE>
Nine Nine
Months Months
Ended Ended
09/30/97 09/30/96
----------------- ----------------
<S> <C> <C>
Net Income: $ 5,339 $ 1,896
Adjustment to Reconcile Net income to Net
Cash Provided:
Depreciation and amortization 1,138 891
Provision for possible loan and lease losses 1,940 910
Provision for income taxes 3,348 1,168
Amortization of servicing asset and interest
only strips receivable 1,226 0
Amortization of excess servicing on SBA loans 0 979
Amortization of purchased mortgage servicing
rights 0 129
Gain on sale of loans (over)/under cash received (3,369) 0
Amortization of premiums/discounts on loans (339) (358)
Changes in assets and liabilities net of effects
from purchase of Mercantile Bank:
Decrease in interest payable (47) (60)
Increase in accrued expenses 925 928
Decrease in taxes payable (2,460) (1,090)
Decrease/(increase) in loans originated for sale 31,269 (8,060)
Increase in prepaid expenses (76) (212)
Other items (482) (160)
---- ----
Total Adjustments $ 33,073 (4,935)
-------- ------
Net Cash Provided by/(Used In) Operating Activities $ 38,412 $(3,039)
======== =======
</TABLE>
____________________________________________________________________
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
In 1997 and 1996, $21.0 million and $15.7 million of unguaranteed SBA loans and
$0.0 and $4.3 million of guaranteed SBA loans were transferred to held for sale
status.
For the nine months ended September 30, 1997 and 1996, $8.5 million and
$965 thousand of convertible debentures were converted to common stock, net of
$568 thousand and $73 thousand in offering costs.
On June 30, 1997, the Company issued $3.4 million of common stock in
connection with the acquisition of Mercantile Bank.
On August 20, 1997, the Company issued a 5% stock dividend resulting in a
transfer of approximately $4.7 million from retained earnings to common stock.
For the nine months ended September 30, 1997 and 1996, $967 thousand and
$66 thousand of loans were transferred to other real estate owned.
The accompanying notes are an integral part of these Condensed Consolidated
Statements of Cash Flows.
Page -6-
<PAGE>
SierraWest Bancorp
Notes to Condensed Consolidated Financial Statements
As of September 30, 1997 and December 31, 1996 and for the
Three and Nine Months Ended September 30, 1997 and
September 30, 1996
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, 1997, are not necessarily
indicative of the results to be expected for the full year. Earnings per share
data has been restated for the effect of the 5% stock dividend issued in August,
1997.
2. 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.
3. SERVICING ASSETS
Effective January 1, 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. In accordance with the accounting
standards provided by this statement, after a transfer of financial assets, an
entity recognizes the financial and servicing assets it controls and liabilities
it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished.
On January 1, 1997, under provisions of SFAS 125, the Company recognized
servicing assets of $2.2 million. In addition, excess servicing assets of $12.2
million recognized on SBA loan sales made before January 1,1997 and mortgage
servicing rights of $601 thousand were reclassified to interest only strips
receivable. The fair value of the Company's interest only strips receivable at
September 30, 1997 was $17.4 million. Interest only strips receivable are
classified as other assets available for sale and are carried at fair value. The
servicing asset is carried at cost, less any required valuation allowance and is
classified as an other asset. The servicing asset is amortized over the expected
remaining life. The Company's amortization of the servicing asset during the
nine months ended September 30, 1997 was $153 thousand. The fair value of the
Company's servicing asset at September 30, 1997 based on the current quoted
market prices for similar instruments was estimated at $2.1 million. The
carrying value at this same date was also $2.1 million.
4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share. The Company is required to adopt SFAS 128 in the fourth
quarter of 1997 and will restate at that time earnings per share (EPS) data for
prior periods to conform with SFAS 128. Earlier application is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income by the weighted average of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
If SFAS 128 had been in effect during the current and prior year periods, basic
EPS would have been $0.49 and $0.33 for the quarters ended September 30, 1997
and 1996, respectively. For the nine months ended September 30, 1997 and 1996,
basic EPS would have been $1.55 and $0.68, respectively. Diluted EPS under SFAS
128 would not have been significantly different than fully diluted EPS currently
reported for the periods.
Page -7-
<PAGE>
SierraWest Bancorp
Notes to Condensed Consolidated Financial Statements
As of September 30, 1997 and December 31, 1996 and for the
Three and Nine Months Ended September 30, 1997 and
September 30, 1996
5. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the financial Accounting Standards Board adopted Statements of
Financial Accounting Standards No. 130, Reporting Comprehensive Income, which
requires that an enterprise report, by major components and as a single total,
the change in its net assets during the period from nonowner sources, and No.
131, Disclosures about Segments of an Enterprise and Related Information, which
establishes annual and interim reporting standards for an enterprise's business
segments and related disclosures about its products, services, geographic areas,
and major customers. Adoption of these statements will not impact the Company's
consolidated financial position, results of operations or cash flows. Both
statements are effective for fiscal years beginning after December 15, 1997,
with earlier application permitted.
6. RESTRUCTURING
During the first quarter of 1997, the Company engaged an outside consulting firm
to assist in identifying opportunities to reduce operating expenses and to
recommend more efficient methods of operating. Although this engagement is
ongoing, an accrual of $452 thousand was made during the nine months ended
September 30, 1997, representing Management's estimate of the cost of salaries
and benefits payable to terminated employees. This amount was charged to sundry
losses. The actual amount of these termination costs paid out through September
30, 1997 was $292 thousand. There were 28 positions eliminated in connection
with this reorganization, primarily in the areas of loan production and loan
operations, but not exclusively limited to a specific level or department.
7. ACQUISITION OF MERCANTILE BANK
On June 30, 1997, the Company acquired Mercantile Bank ("Mercantile") and merged
it with and into SierraWest Bank ("SWB"). Total value of the cash and stock
transaction was $6.7 million, equivalent to $20.0035 per Mercantile common
share. The acquisition was accounted for as a purchase. There are no contingent
payments, options or commitments in the acquisition agreement.
Mercantile, a business bank primarily servicing the commercial and real estate
industries, had total assets of $43 million and total equity of $5 million at
the date of the merger. The carrying value of Mercantile's assets and
liabilities at June 30, 1997 was not materially different than the fair market
value at that date. SWB recorded intangible assets of $1,072 thousand in
goodwill and a core deposit intangible ("CDI") of $737 thousand. The Company is
amortizing the goodwill over a period of fifteen years and the CDI over five
years, both on a straight-line basis.
Page -8-
<PAGE>
SIERRAWEST BANCORP AND SUBSIDIARY
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
FINANCIAL CONDITION
Total assets increased by $127.4 million from $447.9 million at December 31,
1996, to $575.3 million at September 30, 1997. This increase included increases
of $83.3 million in loans and loans held for sale, net of the allowance for
possible loan and lease losses, $24.9 million in investment securities, $9.5
million in cash and due from banks, $6.3 million in other assets and $3.4
million in federal funds sold. Of the Company's total investment securities,
$34.5 million were pledged at September 30, 1997.
The following table summarizes the Company's deposit and loan portfolios as of
September 30, 1997, and December 31, 1996 (in thousands).
<TABLE>
Deposits: 09/30/97 12/31/96 Change
<S> <C> <C> <C>
Non-interest bearing demand............ $112,538 $ 80,525 $ 32,013
Savings................................ 13,351 13,289 62
Interest bearing transaction accounts.. 162,465 120,417 42,048
Time................................... 224,675 185,420 39,255
------- ------- ------
TOTAL DEPOSITS....................... $513,029 $399,651 $113,378
======== ======== ========
Loans:
09/30/97 12/31/96 Change
SBA.................................... $147,162 $146,266 $ 896
Other Commercial....................... 80,632 57,668 22,964
Real Estate............................ 160,764 104,323 56,441
Individual and Other................... 6,616 6,824 (208)
Lease Receivables...................... 16,375 9,994 6,381
------ ----- -----
SUBTOTAL............................... 411,549 325,075 86,474
Net deferred loan fees/costs and
unearned income on leases............. (2,817) (1,709) (1,108)
------ ------ ------
TOTAL GROSS LOANS AND LEASES......... $408,732 $323,366 $85,366
======== ======== =======
</TABLE>
Page -9-
<PAGE>
Included at September 30, 1997 are SBA and Business and Industry ("B & I") loans
held for sale of $12.9 million and $1.2 million, respectively.
Loans held for sale decreased $15.4 million, primarily due to the Company's
completion of its first securitization of unguaranteed portions of SBA 7(a)
loans in June, 1997. Loans included in the sale were $51.4 million. Partially
offsetting the decrease in SBA loans through the securitization was growth in
the SBA loan portfolio of $25.0 million during the third quarter. New SBA loan
production offices were opened during the quarter in Portland, Oregon and
Knoxville and Chattanooga, Tennessee. The Company intends to continue expansion
of its SBA operations into other states.
Other loans increased as the result of the June acquisition of Mercantile Bank
and the efforts of existing branches. Total loans at the downtown Sacramento
Capitol Mall branch which was formerly Mercantile Bank were $24.8 million at
September 30, 1997, down from $26.9 million at acquisition. Total loans at the
Company's main Sacramento branch and its northern Nevada branches increased by
$27.9 million and $14.3 million, respectively, during the first nine months of
1997.
The Company is planning a securitization of SBA 504 and similar loans in
1998. These loans will be transferred to held for sale status once they are
identified.
The increase in deposits is also primarily attributable to the acquisition and
growth in our larger branches. Deposits at the Capitol Mall branch were $41.6
million at September 30, 1997, up from $37.7 million at June 30, 1997. Total
deposits at the Company's main Sacramento branch and its northern Nevada
branches increased by $29.8 million and $44.1 million, respectively, in the nine
months ended September 30, 1997. During the same period, out-of-area
certificates of deposit decreased by $24.8 million, as the proceeds of the
securitization were partially used to reduce the Company's reliance on these
funds.
The Company maintains an investment portfolio primarily for liquidity purposes.
Cash and due from banks, federal funds sold and unpledged investment securities
were 18.9% of total deposits at September 30, 1997 versus 21.0% at December 31,
1996. Both of these ratios are within management guidelines for liquidity.
Effective January 1, 1997, upon implementation of SFAS 125, the Company's excess
servicing receivable and purchased servicing rights were reclassified as a
servicing asset for that portion of the receivables that did not exceed
contractually specified servicing fees and interest only strips receivable for
the portion which exceeds contractually specified servicing fees. The amortized
book value of the servicing asset was $2.1 million at September 30, 1997. The
interest only strips receivable are measured like available-for-sale investments
in debt securities under SFAS 115. Included in other assets at September 30,
1997 are interest only strips receivable with an estimated market value of $17.4
million. This includes an unrealized gain of $1.2 million.
The Company sold its real property in Carson City, Nevada on July 30, 1997. The
property is being leased back for the Company's Carson City branch for an
initial term of thirteen years at an annual rate of $134 thousand for the first
five years and increasing thereafter. The gain on the sale was $164 thousand,
which has been deferred and is being amortized as a reduction of future rental
expense.
At September 30, 1997, the unrealized gain on interest only strips receivable
and investment securities available for sale, net of the related tax effect,
included $701 thousand related to the market value adjustment of the interest
only strips receivable. In addition, this balance included an unrealized loss of
$11 thousand related to mutual fund investments and an unrealized gain of $338
thousand related to other investment securities.
Bancorp paid cash dividends of sixteen cents per share in March and September
1997. A 5% stock dividend was paid in August 1997. During the nine months ended
September 30, 1997, $8.5 million of the Bancorp's 8 1/2% convertible debentures
were converted into 852 thousand shares of common stock and had the effect of
reducing the Company's interest expense. This represented the balance of
debentures outstanding.
Page -10-
<PAGE>
RESULTS OF OPERATIONS (Nine Months Ended September 30, 1997 and 1996)
Net income for the nine months ended September 30, 1997 increased by $3,443
thousand or 181.6% from $1,896 thousand for the nine months ended September 30,
1996 to $5,339 thousand during the current nine month period. Net interest
income increased by $4,631 thousand and non-interest income increased by $3,859
thousand. The positive effect of these items on net income was partially offset
by an increase of $1,030 thousand in the provision for possible loan and lease
losses, a $1,837 thousand increase in other operating expenses and a $2,180
thousand increase in the provision for income taxes.
Net Interest Income
The yield on average interest earning assets for the nine months ended September
30, 1997 was 5.82%. This compares to 6.25% for the first nine months of 1996.
The decrease reflects a reduction in the percentage of average loans to average
interest-earning assets from 85.1% in 1996 to 80.7% in 1997. In addition, the
Company has experienced a decline in its loan yields while the cost of its
deposits has increased.
Yields and interest earned on loans, including loan fees for the nine months
ended September 30, 1997 and 1996, were as follows (in thousands except percent
amounts):
<TABLE>
Nine Nine
Months Months
Ended Ended
09/30/97 09/30/96
--------------- ----------------
<S> <C> <C>
Average loans outstanding (1) $364,223 $272,826
Average yields 10.5% 10.8%
Amount of interest and origination fees earned $ 28,501 $ 22,001
</TABLE>
(1) Amounts outstanding are the average of daily balances for the periods.
Excluding loan fees of $849 thousand and $858 thousand for the nine months ended
September 30, 1997 and 1996, yields on average loans outstanding were 10.2% and
10.4%, respectively. The prime rate (upon which a large portion of the Company's
loan portfolio is based), averaged 8.4% for the 1997 period and 8.3% for the
1996 period. The Company has been aggressive in growing its loan portfolio and
has encountered price competition in its service areas, particularly the
Sacramento and Reno markets. There is strong competition in these markets for
larger, higher quality loans, and the decrease in loan yields reflects this.
Rates and amounts paid on average deposits including non-interest bearing
deposits for the nine months ended September 30, 1997 and 1996 were as follows
(in thousands except percent amount):
<TABLE>
Nine Nine
Months Months
Ended Ended
09/30/97 09/30/96
--------------- ---------------
<S> <C> <C>
Average deposits outstanding (1) $453,459 $321,348
Average rates paid 3.6% 3.5%
Amount of interest paid or accrued $12,277 $ 8,363
</TABLE>
(1) Amounts outstanding are the average of daily balances for the periods.
The Company has experienced an increase in its overall cost of deposits from
3.5% for the nine months ended September 30, 1996 to 3.6% in the current period.
Rates paid on interest- bearing transaction accounts and time deposits have all
increased as compared to the 1996 period. These increases are primarily related
to market conditions in the Company's service area and are consistent with the
increase in rates in general during the comparison periods. Average time
deposits were 46.0% and 46.1% of average total deposits for the nine months
ended September 30, 1997 and 1996, respectively.
Page -11-
<PAGE>
The effective interest rate paid on NOW accounts, Money Market accounts and Time
Certificates of Deposits during the first nine months of 1997 and 1996 were as
follows:
<TABLE>
1997 1996
----------------------------------------------------- -----------------------------------------------------
MONEY MONEY
NOW MARKET TIME NOW MARKET TIME
----------------- ---------------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Average Balance
(in thousands)(1) $52,841 $ 87,412 $208,635 $ 42,413 $ 56,612 $148,263
Rate Paid 1.4% 3.8% 5.8% 1.2% 3.4% 5.7%
</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, the Company has
sustained a relatively low level of losses from these loans, averaging less than
0.5% of loans outstanding per year. Net losses in 1995 for these loans were $575
thousand. During 1996, net losses in the SBA loan portfolio decreased to $27
thousand. For the first nine months of 1997, loan losses, net of recoveries,
totaled $508 thousand.
Most of the Company's other commercial loan losses have been for loans to
businesses within the Tahoe basin area and in its Nevada operations. 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. The Company also attempts to mitigate the risk inherent in these loans
through the loan review and approval process.
The provision for possible loan and lease losses was $1,940 thousand and $910
thousand for the first nine months of 1997 and 1996, respectively. The provision
in both years includes the effect of growth in the loan portfolio. Unguaranteed
loans increased $72.0 million and $53.1 million in the first nine months of 1997
and 1996, respectively. The 1997 increase is after the securitization and sale
of $51.4 million of unguaranteed portions of SBA loans. The increase in
provision in 1997 includes additional amounts to compensate for net loan losses
of $716 thousand and reflects revised estimates of potential losses primarily
related to two large loans with a combined reserve of $345 thousand.
The allowance for possible loan and lease losses as a percentage of loans and
leases was 1.62% at September 30, 1997, 1.41% at December 31, 1996 and 1.50% at
September 30, 1996. Net charge-offs for the nine months ended September 30, 1997
and 1996 were $716 thousand and $178 thousand, respectively. The increase of
0.21% in the allowance for possible loan and lease losses as a percentage of
loans from December includes .12% related to the acquisition of Mercantile Bank.
Guaranteed portions of loans were $52.0 million and $42.1 million at September
30, 1997 and 1996, respectively. The Company continues to monitor its exposure
to loan losses each quarter and will 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.
Of total gross loans and leases at September 30, 1997, $6.1 million were
considered to be impaired. The allowance for possible loan and lease losses
included $710 thousand related to these loans. The average recorded investment
in impaired loans during the nine months ended September 30, 1997 was $5.4
million.
Page -12-
<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 and
leases, as of the dates indicated.
<TABLE>
September 30 December 31
----------------------------- --------------------------------------------
1997 1996 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans to total loans 1.5% 1.9% 1.7% 2.3% 1.4%
Allowance for possible loan and lease
losses to nonaccrual loans 108.0% 79.7% 84.8% 70.2% 142.9%
Allowance for possible loan and lease
losses to total loans 1.6% 1.5% 1.4% 1.6% 2.1%
</TABLE>
If the guaranteed portions of loans on nonaccrual status, which total $1.7
million, are excluded from the calculations, the ratio of nonaccrual loans to
total loans and leases at September 30, 1997 declines to 1.2% and the allowance
for possible loan and lease losses to nonaccrual loans increases to 133.7%.
At September 30, 1996, excluding the guaranteed portions of loans on
nonaccrual, these same percentages are 1.2% and 120.7%, respectively.
The following table sets forth the amount of the Company's nonperforming loans
as of the dates indicated (amounts in thousands).
<TABLE>
September 30 December 31
---------------------------- --------------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
SBA............................. $4,968 $5,484 $4,985 $5,351 $2,423
Other........................... 1,176 261 378 125 59
Accruing loans past due 90
days or more:
SBA............................. 342 1,037 1,071 816 1,754
Other........................... 561 1,049 1,061 207 9
Restructured loans (in
compliance with modified terms) 801 140 275 78 194
</TABLE>
The performance of the Company's loan portfolio is evaluated regularly by
management. The Company places a loan on nonaccrual status when any installment
of principal or interest is 90 days or more past due, unless, in management's
opinion, the loan is well secured and the collection of principal and interest
is probable. A loan is placed on nonaccrual status even if principal or interest
is less than 90 days past due if management determines the ultimate collection
of principal or interest on the loan to be unlikely. When a loan is placed on
nonaccrual status, the Company's general policy is to reverse and charge against
current income previously accrued but unpaid interest. Interest income on such
loans is subsequently recognized only to the extent that cash is received and
future collection of principal is deemed by management to be probable.
Although the level of nonperforming assets will depend on the future economic
environment, as of October 31, 1997, in addition to the assets disclosed in the
above chart, management of the Company has identified approximately $123
thousand in potential problem loans about which it has serious doubts as to the
ability of the borrowers to comply with the present repayment terms and which
may become nonperforming assets, based on known information about possible
credit problems of the borrower.
Interest income on nonaccrual loans which would have been recognized if all such
loans had been current in accordance with their original terms totaled $566
thousand for the nine months ended September 30, 1997. Interest income actually
recognized on nonaccrual loans
Page -13-
<PAGE>
for the nine months ended September 30, 1997 was $286 thousand.
The following table shows the loans outstanding, actual charge-offs, recoveries
on loans previously charged off, the allowance for possible loan and lease
losses and net loans charged off to average loans outstanding during the periods
and as of the dates indicated (amounts in thousands except percentage amounts).
<TABLE>
September 30 December 31
----------------------------------- ---------------------------------------------------
1997 1996 1996 1995 1994
---------------- --------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Average loans.................. $364,223 $272,826 $284,487 $203,231 $166,366
Total gross loans at end of
period........................ 408,733 305,161 323,366 239,969 172,939
Allowance for possible loan and
lease losses: Balance
beginning of period........... $ 4,546 $ 3,845 $ 3,845 $ 3,546 $ 3,472
-------- -------- ------- ------- -------
Actual charge-offs:
SBA.......................... 561 84 114 595 447
Commercial and industrial.... 299 312 337 350 467
Leases....................... 14 0 84 0 0
Real estate.................. 0 0 0 40 60
Installment.................. 59 25 58 40 101
-- -- -- -- ---
Total...................... 933 421 593 1,025 1,075
--- --- --- ----- -----
Less recoveries:
SBA.......................... 53 68 87 20 74
Commercial and industrial.... 109 165 182 26 187
Leases....................... 6 0 0 0 0
Real estate.................. 0 0 0 0 0
Installment.................. 49 10 15 8 3
-- -- -- - -
Total...................... 217 243 284 54 264
--- --- --- -- ---
Net charge-offs................ 716 178 309 971 811
Provision for possible loan and
lease losses.................. 1,940 910 1,010 1,270 885
----- --- ----- ----- ---
Subtotal...................... 5,770 4,577 4,546 3,845 3,546
----- ----- ----- ----- -----
Acquisition of Mercantile Bank 864 0 0 0 0
--- - - - -
Balance-end of period.......... $ 6,634 $ 4,577 $ 4,546 $ 3,845 $ 3,546
======== ======== ======== ======== ========
Net loans charged off to
average loans outstanding (1). 0.26% 0.09% 0.11% 0.48% 0.49%
</TABLE>
(1) Percentages for the nine months are based on annualized net charge-offs.
Page -14-
<PAGE>
The following table sets forth management's historical allocation of the
allowance for possible loan and lease losses by loan category and percentage of
loans in each category. Percentage amounts are the percentage of loans in each
category to total loans at the dates indicated (in thousands except percentage
amounts).
<TABLE>
December 31,
------------------------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------------- ---------------------------------- --------------------------------
Percent- Percent- Percent-
Amount age Amount age Amount age
--------------- --------------- -------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
SBA loans............. $1,561 45% $ 1,468 49% $ 2,372 56%
Commercial and
industrial loans(2).. 1,720 21 1,592 24 627 18
Real estate loans..... 1,010 30 564 23 366 21
Consumer loans to
individuals(1)....... 255 4 221 4 181 5
--- - --- - --- -
Total............... $ 4,546 100% $ 3,845 100% $ 3,546 100%
======= === ======= === ======= ===
</TABLE>
<TABLE>
September 30,
------------------------------------------------------------------------
1997 1996
---------------------------------- ----------------------------------
Percent- Percent-
Amount age Amount age
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
SBA loans............. $ 1,963 36% $ 1,732 48%
Commercial and
industrial loans(2).. 2,756 23 1,992 31
Real estate loans..... 1,532 38 559 18
Consumer loans to
individuals(1)....... 383 3 294 3
--- - --- -
Total............... $ 6,634 100% $ 4,577 100%
======= === ======= ===
</TABLE>
___________________________________
(1) Includes equity lines of credit
(2) Includes commercial leases
In allocating the Company's allowance for possible loan and lease losses,
management has considered the credit risk in the various loan categories in its
portfolio. While every effort has been made to allocate the reserve to specific
categories of loans, management believes that any breakdown or allocation of the
loan loss reserve into loan categories lends an appearance of exactness which
does not exist, in that the reserve is utilized as a single unallocated reserve
available for losses on all types of loans.
Non-interest Income
Non-interest income increased $3,859 thousand during the first nine months of
1997 compared to the previous year's first nine months.
Included in 1997 is a gain of approximately $2.6 million generated from the sale
and securitization of unguaranteed portions of SBA loans.
The net gain on the sale of government guaranteed loans increased from a loss of
$22 thousand during the first nine months of 1996 to $342 thousand in 1997 for
the nine months ended September 30, 1997. Sales of government guaranteed loans
were $14,936 thousand in 1997
Page -15-
<PAGE>
compared to $134 thousand in 1996. Of these sales, $9,176 thousand were related
to the sale of "B & I" loans and $5,760 thousand were related to the sale of SBA
7(a) loans. Because B&I loans tend to have a lower yield than SBA loans, the
Company intends to sell the government guaranteed portion of the B&I loans it
originates. SBA loan sales were made in 1997 to reduce industry concentrations
and to facilitate the securitization.
Income related to the Company's servicing assets and interest only strips
receivable, net of the amortization of these assets, increased by $203 thousand
from $3,112 thousand during the first nine months of 1996 to $3,315 for the nine
months ended September 30, 1997. This increase results from the securitization
in June 1997, which contributed $499 thousand to the increase. Partially
offsetting the effect of the securitization were normal payments on existing
loans, including amortization and prepayments.
Service charge income increased by $431 thousand during the comparison periods.
This resulted from an increase in demand deposits and a change in the structure
of service charges effective February 1, 1997.
In the first nine months of 1997, the Company incurred a loss of $80 thousand on
the sale of securities, primarily mutual fund shares. This compares to an $8
thousand loss on the sale of securities in 1996.
Non-interest 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 1997 and 1996
(in thousands except percentage amounts):
Nine Months Salaries & Occupancy & Other
Ended Average Related Equipment Operating
September 30 Assets (1) Benefits (2) Expenses Expenses
______________________________________________________________________
1997 $ 508,358 2.5% 0.8% 1.3%
1996 $ 366,612 3.1% 0.9% 1.7%
(1) Based on average daily balances.
(2) Excludes provision for payment of bonuses and contribution to KSOP plan.
Including these items, percentages are 2.7% and 3.3% for 1997 and 1996,
respectively.
Page -16-
<PAGE>
The following table summarizes the principal elements of operating expenses and
discloses the changes and percent of changes for the nine months ended September
30, 1997 and 1996 (amounts in thousands except percentage amounts):
<TABLE>
Nine months ended Increase (decrease)
September 30 1997 over 1996
------------------------------ -------------------------------
Percent-
1997 1996 Amount age
--------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Salaries and related benefits........... $10,077 $ 9,076 $1,001 11.0%
Occupancy and equipment................. 3,085 2,575 510 19.8
Insurance............................... 178 183 (5) (2.7)
Postage................................. 255 254 1 0.4
Stationery and supplies................. 284 278 6 2.2
Telephone............................... 318 272 46 16.9
Advertising............................. 503 345 158 45.8
Legal................................... 109 462 (353) (76.4)
Consulting.............................. 708 428 280 65.4
Audit and accounting fees............... 116 116 0 0.0
Directors' fees and expenses............ 335 331 4 1.2
Other real estate owned................. 54 56 (2) (3.6)
Sundry losses........................... 703 688 15 2.2
Other................................... 1,414 1,238 176 14.2
----- ----- ---
$18,139 $16,302 $1,837 11.3%
======= ======= ======
</TABLE>
The increase in salaries and benefits includes an increase of $719 thousand in
commission and incentive expense, resulting from several factors. SBA and B&I
loan volume increased in 1997, and commission expense related to these loans
increased by approximately $302 thousand. In 1997, the Company expanded its
commission program to increase the benefits available to loan officers and
business development officers, yielding an increase of $298 thousand through
September 30, 1997. Incentives of $74 thousand were incurred in 1997 as a result
of the securitization. Salaries and benefits include an accrual of $374 thousand
and $195 thousand for incentive payments to the Company's senior management for
the nine month periods in 1997 and 1996, respectively. Base wages plus overtime
increased by just $100 thousand during the comparison periods. The rise in
occupancy and equipment is primarily attributable to maintenance and repair
costs on an expanded computer hardware and data communications network, as well
as depreciation on an increased base of fixed assets. Specifically, $283
thousand relates to the acquisition of Mercantile Bank and expansion of our
branches in Reno and Carson City, Nevada. Included in advertising expense is the
cost of printing new product brochures totaling approximately $50 thousand. In
addition, the 1996 expense reflects a reversal of an overaccrual. Legal fees
incurred in 1996 related primarily to two litigation matters. One matter was
resolved in the Company's favor, and the other is ongoing and relates to a
property acquired by the Company through foreclosure.
During the first quarter of 1997 the Company engaged an outside consulting firm
to assist in identifying opportunities to reduce operating expenses and to
recommend more efficient methods of operating. The increase in consulting costs
is primarily related to this engagement. Total cost of this engagement is
expected to be approximately $600 thousand, of which $430 thousand is included
in consulting expense for the nine months ended September 30, 1997. As a result
of this ongoing engagement, sundry losses in 1997 reflect an accrual of $452
thousand for the estimated salaries and benefits payable related to a reduction
in staffing. Sundry losses in 1996 included a charge of $352 thousand related to
a reduction in staffing, $114 thousand related to a servicing error on an SBA
loan and $70 thousand associated with a litigation matter.
Provision for Income Taxes
Provision for income taxes has been made at the prevailing statutory rates and
includes the effect of items which are classified as permanent differences for
federal and state income tax. The provision for income taxes was $3,348 thousand
and $1,168 thousand for the nine months ended September 30, 1997 and 1996,
respectively, representing 38.5% and 38.1% of income before taxation for the
respective periods.
Page -17-
<PAGE>
Results of Operations (Three months ended September 30, 1997 and 1996)
Net income increased by $1,056 thousand from $940 thousand for the three months
ended September 30, 1996 to $1,996 thousand for the current quarter. The
increase included a $1,803 thousand increase in net interest income and a $756
thousand increase in non-interest income. These items were partially offset by
increases of $290 thousand in the provision for loan and lease losses, $570
thousand in non-interest expense and $643 thousand in the provision for income
taxes.
Net Interest Income
The yield on net interest-earning assets decreased from 6.21% during the third
quarter of 1996 to 5.69% during the three months ended September 30, 1997. This
decrease in yield was offset by an increase of 45.0% in average interest-earning
assets. Average interest-earning assets totaled $505 million during the 1997
quarter and $348 million during the third quarter of 1996. As in the nine month
comparison, yield was negatively affected by a decrease in loans as a percentage
of interest-earning assets, a decrease in loan yields and an increase in the
cost of deposits.
Yields and interest earned on loans, including loan fees for the three months
ended September 30, 1997 and 1996 were as follows (in thousands except percent
amounts):
Three Three
Months Months
Ended Ended
09/30/97 09/30/96
------------ ----------
Average loans outstanding (1) $389,858 $297,294
Average yields 10.4% 10.7%
Amount of interest and origination fees earned $ 10,231 $ 8,018
(1) Amounts outstanding are the average of daily balances for the periods.
Excluding loan fees of $336 thousand and $366 thousand for the three months
ended September 30, 1997 and 1996, respectively, yields on average loans
outstanding were 10.1% and 10.2%. The prime rate (upon which a large portion of
the Company's loan portfolio is based) was 8.5% for the 1997 quarter and 8.25%
for the 1996 quarter. This increase in the prime rate was offset by increased
competitive pressures in loan acquisition.
Rates and amounts paid on average deposits, including non-interest bearing
deposits for the three months ended September 30, 1997 and 1996, were as follows
(in thousands except percent amounts):
Three Three
Months Months
Ended Ended
09/30/97 09/30/96
-------------- -------------
Average deposits outstanding (1) $507,236 $350,698
Average rate paid 3.6% 3.5%
Amount of interest paid or accrued $ 4,587 $ 3,075
(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 1997 and 1996 were as
follows (in thousands except percent amounts):
<TABLE>
1997 1996
-------------------------------------------------- --------------------------------------------------
MONEY MONEY
NOW MARKET TIME NOW MARKET TIME
-------------- ---------------- ---------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Average Balance (1) $57,038 $100,502 $227,206 $46,445 60,155 $163,004
Average Rate Paid 1.4% 3.9% 5.8% 1.2% 3.6% 5.7%
</TABLE>
(1) Amounts outstanding are the average of daily balances for the periods.
Page -18-
<PAGE>
The Company prices its deposits consistent with market conditions in its service
areas.
Time certificates of deposit represented 44.8% of average deposits during the
third quarter of 1997 and 46.5% during the 1996 quarter. This decrease resulted
from a decrease in average out-of-area time deposits from 13.5% of average total
deposits for the third quarter of 1996 to 6.4% for the current quarter.
Provision for Possible Loan and Lease Losses
A detailed comparison analysis of the Company's non-performing loans and
charge-off history is reported in the nine month discussion. The provision
recorded during the third quarter of 1997 reflects the $25.0 million in growth
in unguaranteed loans during the quarter.
Non-interest Income
Net servicing income increased from $1,001 thousand during the third quarter of
1996 to $1,401 thousand in the current quarter due to the securitization.
Service charges increased $137 thousand as compared to the 1996 quarter. Sundry
recoveries included an insurance settlement of $131 thousand in 1997.
Non-interest Expense
The following table compares the various elements of non-interest expense as an
annualized percentage of total assets for the third quarter of 1997 and 1996 (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>
1997 570,735 2.2% 0.7% 1.1%
1996 396,253 2.9% 0.9% 1.5%
</TABLE>
(1) Based on average daily balances.
(2) Excludes provision for payment of bonuses and contribution to KSOP plan.
Including these items, percentages are 2.3% and 3.2% for 1997 and 1996,
respectively.
The following table summarizes the principal elements of operating expenses and
discloses the changes and percent of changes for the three months ended
September 30, 1997 and 1996 (amounts in thousands except percentage amounts):
<TABLE>
Three Months Increase
Ended (decrease)
September 30 1997 over 1996
------------------------------ -------------------------------
Percent-
1997 1996 Amount age
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Salaries and related benefits........... $3,358 $3,145 $ 213 6.8%
Occupancy and equipment................. 1,062 864 198 22.9
Insurance............................... 69 65 4 6.2
Postage................................. 71 100 (29) (29.0)
Stationery and supplies................. 82 107 (25) (23.4)
Telephone............................... 103 93 10 10.8
Advertising............................. 157 53 104 196.2
Legal................................... 51 154 (103) (66.9)
Consulting.............................. 286 100 186 186.0
Directors' fees and expenses............ 154 103 51 49.5
Sundry losses........................... 98 177 (79) (44.6)
Other................................... 551 511 40 7.8
--- --- -- ---
$6,042 $5,472 $ 570 10.4%
====== ====== ===== ====
</TABLE>
Page -19-
<PAGE>
For a discussion of the changes in occupancy and equipment, see the nine month
review of non- interest expense. The change in salaries and benefits includes an
increase in commissions and incentives of $251 thousand and a decrease in base
salaries and overtime of $88 thousand. The changes in the commission structure
are discussed in the nine month review. Advertising expense in 1996 reflects a
reversal of an overaccrual. Consulting costs in the third quarter of 1997
included $173 thousand related to our ongoing engagement with an outside
consulting firm discussed in the nine month review.
Provision for Income Taxes
The provision for income taxes was $1,245 thousand and $602 thousand for the
three months ended September 30, 1997 and 1996, respectively, representing 38.4%
and 39.0% of income before taxation for the respective periods.
Page -20-
<PAGE>
SierraWest Bancorp
10-Q Filing
September 30, 1997
Part II.
Item 1. Legal Proceedings.
During 1987, SierraWest Bank, ("the Bank") took title, through foreclosure, of a
property located in Placer County which subsequent to the Bank's sale of the
property was determined to be contaminated with a form of hydrocarbons. At the
time it owned the property, the Bank became aware of and investigated the status
of certain underground tanks that had existed on the property. The Bank 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 buried tanks and along an adjoining riverbank of the Yuba River. The
Bank, at the time of resale of the property, was not aware of this contamination
adjacent to the tanks 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 but is being drafted by a consultant. As
a result of the discovery of the contamination, two civil lawsuits were
instituted against the Bank and other prior owners by the current owner of the
property, Rainbow Holding Company, who is also the Bank's borrower. One of the
actions, the state court matter, was dismissed by agreement of the parties. The
other matter, filed in the summer of 1995 in the U. S. District Court, Eastern
District of California, is in mediation. Informal mediation has taken place
during the summer of 1997. Formal mediation is expected to begin in
mid-November, 1997 and to be concluded by the end of the year.
The Bank's external and internal counsel on this matter believe that the Bank's
share of the cost of remediation and the costs of defense will not be material
to the Bank's or the Company's performance and will be within existing reserves
established by the Bank for this matter. It is also expected that clean-up of
the property will be undertaken during the spring of 1998 following approval of
a work plan.
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 and the Company's General Counsel, the disposition of these claims
currently pending will not have a material adverse affect on the Company's
financial position or results of operations.
Item 2. Change in Securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
Not applicable.
Item 5. Other Information. Not applicable.
Page -21-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
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, 1997.
Page -22-
<PAGE>
10-Q Filing
September 30, 1997
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.
November 12, 1997 /s/William T. Fike
Date: _______________________ ____________________________________
William T. Fike
President, Chief Executive Officer
November 12, 1997 /s/Richard Belstock
Date: _______________________ ____________________________________
Richard Belstock
Senior Vice President/
Chief Accounting Officer
Page -23-
<PAGE>
EXHIBIT 11
SIERRAWEST BANCORP AND SUBSIDIARY
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
(Amounts in thousands except per share amounts)
<TABLE>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
09/30/97 09/30/96 09/30/97 09/30/96
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Primary
Net income $ 1,996 $ 940 $ 5,339 $ 1,896
======= ======== ======= =======
Shares(1)
Weighted average number of
common shares outstanding 4,068 2,825 3,456 2,786
Assuming exercise of options
reduced by the number of
shares which could have been
purchased with the proceeds
from exercise of such option 186 134 174 128
--- --- --- ---
Weighted average number of
common shares outstanding as
adjusted 4,254 2,959 3,630 2,914
===== ===== ===== =====
Net income per share $ 0.47 $ 0.32 $ 1.47 $ 0.65
======= ======== ======= =======
Assuming full dilution
Earnings $ 1,996 $ 940 $ 5,339 $ 1,896
Add after tax interest expense
applicable to convertible
debentures 0 114 35 348
- --- -- ---
Net income $ 1,996 $ 1,054 $ 5,374 $ 2,244
======= ======== ======= =======
Shares(1)
Weighted average number of
common shares outstanding 4,068 2,825 3,456 2,786
Assuming conversion of
convertible debentures 0 964 364 995
Assuming exercise of options
reduced by the number of
shares which could have been
purchased with the proceeds
from exercise of such options 205 154 185 145
--- --- --- ---
Weighted average number of
common shares outstanding as
adjusted 4,273 3,943 4,005 3,926
===== ===== ===== =====
Net income per share assuming
full dilution $ 0.47 $ 0.27 $ 1.34 $ 0.57
======= ======== ======= =======
</TABLE>
(1) Restated to give effect to 5% stock dividend issued in August, 1997.
Page -24-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 35,907
<INT-BEARING-DEPOSITS> 694
<FED-FUNDS-SOLD> 35,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 58,413
<INVESTMENTS-CARRYING> 1,000
<INVESTMENTS-MARKET> 1,001
<LOANS> 408,732
<ALLOWANCE> 6,634
<TOTAL-ASSETS> 575,303
<DEPOSITS> 513,029
<SHORT-TERM> 0
<LIABILITIES-OTHER> 10,788
<LONG-TERM> 0
0
0
<COMMON> 29,347
<OTHER-SE> 22,139
<TOTAL-LIABILITIES-AND-EQUITY> 575,303
<INTEREST-LOAN> 28,501
<INTEREST-INVEST> 2,089
<INTEREST-OTHER> 1,541
<INTEREST-TOTAL> 32,131
<INTEREST-DEPOSIT> 12,277
<INTEREST-EXPENSE> 12,470
<INTEREST-INCOME-NET> 19,661
<LOAN-LOSSES> 1,940
<SECURITIES-GAINS> (80)
<EXPENSE-OTHER> 18,139
<INCOME-PRETAX> 8,687
<INCOME-PRE-EXTRAORDINARY> 5,339
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,339
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.34
<YIELD-ACTUAL> 5.82
<LOANS-NON> 6,144
<LOANS-PAST> 903
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,546
<CHARGE-OFFS> 933
<RECOVERIES> 217
<ALLOWANCE-CLOSE> 6,634
<ALLOWANCE-DOMESTIC> 6,634
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
