<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 9, 1998
---------------
Commission file number 2-76555
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ELDORADO BANCSHARES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0720548
-------- ----------
(State or other jurisdiction of (I.R.S. Employer or
incorporation or organization) Identification No.)
24012 Calle de la Plata, Suite 150, Laguna Hills, California 92653
- ------------------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(949) 699-4344
--------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
Included as Exhibit 99.3 hereto is Antelope Valley Bank's Interim Report on Form
10-QSB for the quater ended September 30, 1998 as filed with the Federal Deposit
Insurance Corporation.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following exhibits are filed with this Current Report on Form 8-K:
Exhibit
Number Description
99.3 Antelope Valley Bank's Interim Report on Form 10-QSB
for the quarter ended March 31, 1998 as filed with
the Federal Deposit Insurance Corporation
-2-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------ ----------- ------
<S> <C> <C>
99.3 Antelope Valley Bank's Interim Report on Form 10-QSB
for the quarter ended March 31, 1998 as filed with
the Federal Deposit Insurance Corporation
</TABLE>
-3-
<PAGE>
SIGNATURE
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 hereunto duly authorized.
ELDORADO BANCSHARES, INC.
November 4, 1998 By: /s/ Curt A. Christianssen
--------------------------------------
Curt A. Christianssen
Senior Vice President
-4-
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20006
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to ___________
Commission File Number: n/a
ANTELOPE VALLEY BANK
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-346-3755
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
831 WEST LANCASTER BLVD, LANCASTER , CALIFORNIA 93534
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 945-4511
---------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods 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
---- ----
The number of shares of Common Stock of the registrant outstanding as of April
28, 1998 was 767,342.
Transitional Small Business Disclosure Format (check one): Yes No X
---- ----
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . . . . . . 3
March 31, 1998 and December 31, 1997
STATEMENT OF INCOME. . . . . . . . . . . . . . . . . . . . . . . 4,5
Three Months Ended March 31, 1998 and 1997
STATEMENT OF CASH FLOWS. . . . . . . . . . . . . . . . . . . . . 6
Three Months Ended March 31, 1998 and 1997
STATEMENT OF CHANGES IN STOCKHOLDER EQUITY . . . . . . . . . . . 7
Three Months Ended March 31, 1998 and 1997
STATEMENT OF CHANGES IN ALLOWANCE FOR POSSIBLE CREDIT LOSSES . . 8
Three Months Ended March 31, 1998 and 1997
STATEMENT OF CHARGE-OFFS AND RECOVERIES. . . . . . . . . . . . . 8
Three Months Ended March 31, 1998 and 1997
STATEMENT OF PAST DUE AND NONACCRUAL LOANS AND LEASES. . . . . . 9
Three Months Ended March 31, 1998 and 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION . . . . . . . . . . . . . . . . . . . . . . 10-15
PART II OTHER INFORMATION
ITEM 1-5 (INAPPLICABLE). . . . . . . . . . . . . . . . . . . 15
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . 15
</TABLE>
PAGE 2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
'THE ANTELOPE VALLEY BANK
YEAR DECEMBER 31,1997 AND FISCAL QUARTER MARCH 31, 1998
<TABLE>
<CAPTION>
BALANCE SHEET
-----------------------------------
ASSETS ENDING ENDING
(DOLLAR AMOUNTS IN THOUSANDS) DECEMBER 31,1997 MARCH 31, 1998
(UNAUDITED)
---------------- --------------
<S> <C> <C>
CASH AND DUE FROM DEPOSITORY INSTITUTIONS:
-Non-interest bearing balances
and coin and currency $18,446 $18,354
-Interest bearing balances 1,962 1,467
INVESTMENT SECURITIES:
(Schedule I)
-Held-To-Maturity 0 0
-Available-For-Sale 36,642 35,486
FEDERAL FUNDS SOLD AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL: 4,380 14,470
LOAN AND LEASE FINANCING RECEIVABLES:
-Loans and Leases, net
of unearned income and
deferred loan fees 117,655 118,811
LESS:ALLOWANCE FOR CREDIT LOSS (1,528) (1,439)
PREMISE AND FIXED ASSETS 2,527 2,471
ACCRUED INTEREST RECEIVABLE 908 812
DEFERRED INCOME TAXES 518 448
OTHER REAL ESTATE OWNED 20 100
OTHER ASSETS 4,041 4,139
GOODWILL 4,134 3,986
TOTAL ASSETS $189,705 $199,105
LIABILITIES
DEPOSITS:
-In Domestic Offices: $167,868 $176,646
-Noninterest bearing 48,855 54,248
-Interest bearing 119,013 122,398
ACCRUED INTEREST PAYABLE 1,073 926
OTHER LIABILITIES 1,085 1,314
TOTAL LIABILITIES $170,026 $178,886
EQUITY CAPITAL
COMMON STOCK- AUTHORIZED 10,000,000
AND 10,000,000 SHARES WITHOUT PAR
VALUE, FOR DECEMBER 31,1996 AND
MARCH 31,1997, RESPECTIVELY: ISSUED
AND OUTSTANDING, 767,342 AND 767,342
SHARES AT DECEMBER 31,1996 AND
MARCH 31,1997 RESPECTIVELY $3,625 $3,625
UNDIVIDED PROFITS AND CAPITAL RESERVES 16,054 16,594
TOTAL EQUITY CAPITAL $19,679 $20,219
TOTAL LIABILITIES, LIMITED LIFE
PREFERRED STOCK AND EQUITY
CAPITAL $189,705 $199,105
</TABLE>
PAGE 3
<PAGE>
THE ANTELOPE VALLEY BANK
ENDING FISCAL QUARTER MARCH 31,1998 AND CORRESPONDING PERIOD OF PRECEDING FISCAL
QUARTER 1997
<TABLE>
<CAPTION>
STATEMENT OF INCOME FOR THE 3 MONTHS
---------------------------------
ENDING ENDING
INTEREST INCOME MARCH 1998 MARCH 1997
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
REAL ESTATE LOANS $360 $306
INSTALMENT LOANS 1,439 1,089
CREDIT CARD AND RELATED 101 85
COMMERCIAL (TERM AND DEMAND) AND
ALL OTHER LOANS 948 801
INCOME FROM LEASE FINANCING RECEIVABLES 0 0
INTEREST INCOME ON BALANCES
DUE FROM DEPOSITORY INSTITUTIONS 25 41
INTEREST AND DIVIDEND INCOME ON SECURITIES:
-SECURITIES ISSUED BY STATE AND
POLITICAL SUBDIVISIONS IN THE U.S.
-TAXABLE 0 0
-NONTAXABLE 200 171
-U.S. GOVERNMENT SECURITIES AND
OTHER SECURITIES (DEBT AND EQUITY) 346 295
INTEREST INCOME ON FEDERAL FUNDS SOLD AND
SECURITIES PURCHASED UNDER AGREEMENT
TO RESELL 103 172
TOTAL INTEREST INCOME $3,522 $2,960
INTEREST EXPENSE
INTEREST ON DEPOSITS:
1. TRANSACTION ACCOUNTS:
-NOW, ATS ACCOUNTS AND TELEPHONE
AND PREAUTHORIZED TRANSFER ACCOUNTS $76 $61
2. NONTRANSACTION ACCOUNTS:
-MONEY MARKET (MMDA) $125 $116
-OTHER SAVINGS DEPOSITS 97 83
-TIME CERTIFICATES OF DEPOSIT
OF $100,000 OR MORE 123 109
-ALL OTHER TIME DEPOSITS 465 394
INTEREST ON MTG INDEBTEDNESS 0 0
INT ON FED FUNDS PURCHASED 0 0
TOTAL INTEREST EXPENSE $886 $763
NET INTEREST INCOME $2,636 $2,197
</TABLE>
PAGE 4
<PAGE>
THE ANTELOPE VALLEY BANK
ENDING FISCAL QUARTER MARCH 31,1998 AND CORRESPONDING PERIOD OF PRECEDING FISCAL
QUARTER 1997
<TABLE>
<CAPTION>
STATEMENT OF INCOME, CONTINUED FOR THE 3 MONTHS
---------------------------------
ENDING ENDING
MARCH 31,1998 MARCH 31,1997
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C>
PROVISION FOR POSSIBLE CREDIT LOSS $270 $180
NONINTEREST INCOME
SERVICE CHARGES ON DEPOSIT ACCOUNTS $770 $644
OTHER NONINTEREST INCOME 260 374
TOTAL NONINTEREST INCOME $1,030 $1,018
GAIN (LOSSES) ON SALE OF SECURITIES $0 $0
NONINTEREST EXPENSE
SALARY AND EMPLOYEE BENEFITS $1,353 $1,105
EXPENSE ON FIXED ASSETS AND PREMISE
(NET OF RENTAL INCOME; EXCLUDING SALARIES
AND BENEFITS AND MORTGAGE INTEREST) 248 256
OTHER NONINTEREST EXPENSE 1,183 1,128
TOTAL NONINTEREST EXPENSE $2,784 $2,489
INCOME(LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS AND OTHER ADJUSTMENTS $612 $546
APPLICABLE INCOME TAXES 169 168
NET INCOME (LOSS) $443 $378
EARNINGS PER SHARE $0.58 $0.49
# SHARES OUTSTANDING 767,342 767,342
</TABLE>
PAGE 5
<PAGE>
The Antelope Valley Bank
Statement of Cash Flows
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------
MARCH 31,1998 MARCH 31,1997
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
CASH FLOWS,OPERATING ACTIVITIES
Net Earnings (Loss) $443 $378
Reconcilement of net earnings to net cash from operations:
Provision for credit losses 270 180
Provision for losses on other real estate owned 0 93
Depreciation and Amortization 102 163
Loss (Gain)on sale of premises and equipment 0 0
Loss(gain) on sales of other real estate owned 0 12
Amortization Def Ln Fees (9) 11
Accretion of discounts on investment securities 2 (4)
Increase(decrease) unearned discount 70 495
Loss(gain) on sales of securities transactions, net 0 0
Deferred income taxes (benefit) expense (70) (174)
Decrease (increase) in other assets 146 (4,415)
Increase (decrease) in other liabilities 229 16
Net unrealized loss on available-for-sale securities 97 (243)
Unrealized holding gain on available-for-sale securities 0 0
OPERATING CASH FLOWS, NET $1,280 ($3,488)
CASH FLOWS, INVESTING ACTIVITIES
Purchase of available for sale securities $0 ($29,332)
Purchase of held to maturity securities 0 0
Proceeds from sales of available for sale securities 0 0
Proceeds from maturities of available for sale securities 755 1,060
Proceeds from maturities of held to matuity securities 0 0
Principal paydowns on investment securities 2,516 215
Decrease(increase) in time deposits due from financial
institutions 533 (495)
Decrease(increase) in loans, net (1,245) (4,244)
Purchase of premises, equipment, and real estate 25 (672)
Improvements on real estate owned 0 0
Proceeds from sale of equipment 0 0
Proceeds from sale of real estate owned 0 1,348
Net (increase) decrease in OREO (80) (14)
INVESTING CASH FLOWS, NET $2,504 ($32,134)
CASH FLOWS, FINANCING ACTIVITIES
Increase(decrease) in deposits $8,778 $37,146
Cash dividends 0 0
FINANCING CASH FLOWS, NET $8,778 $37,146
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS $12,562 $1,524
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,826 17,552
CASH AND CASH EQUIVALENTS, END OF PERIOD $35,388 $19,076
</TABLE>
PAGE 6
<PAGE>
THE ANTELOPE VALLEY BANK
Statement of Changes in Stockholder's Equity
For the Three Months Ended March 31,1998 and 1997
<TABLE>
<CAPTION>
---------------------------------------------------------------
NET UNREALIZED
COMMON RETAINED GAIN(LOSS)
1998 STOCK EARNINGS SECURITIES TOTAL
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance as of January 1,1998 $3,625,000 $15,934,000 $120,000 $19,679,000
Sales, Conversion, etc.
of capital stock 0 0 0
Net Earnings for the 3 months 443,000 443,000
Stock Dividend declared 0 0 0
Cash Dividend declared 0 0 0
FASB 115 entry N/A N/A 97,000 97,000
BALANCE AS OF MARCH 31,1998 $3,625,000 $16,377,000 $217,000 $20,219,000
1997
Balance as of January 1,1997 $3,625,000 $14,015,000 $83,600 $17,723,600
Sales, Conversion, etc.
of capital stock 0 0 0
Net Earnings for the 3 months 378,000 378,000
Stock Dividend declared 0 0 0
Cash Dividend declared 0 0 0
FASB 115 entry N/A N/A (243,700) (243,700)
BALANCE AS OF MARCH 31,1997 $3,625,000 $14,393,000 ($160,100) $17,857,900
</TABLE>
PAGE 7
<PAGE>
THE ANTELOPE VALLEY BANK
Statement of Changes in Allowance for Possible Credit Losses
For the Three Months Ending March 31,1998 and 1997
<TABLE>
<CAPTION>
(Dollar Amount in Thousands)
1998
<S> <C>
Balance as of January 1,1998 $1,528,000
Recoveries for the Quarter 197,000
Less:Charge-offs (556,000)
Provision for Possible Credit Losses 270,000
BALANCE AS OF MARCH 31,1998 $1,439,000
1997
Balance as of January 1,1997 $1,370,000
Recoveries for the Quarter 227,000
Less:Charge-offs (549,000)
Provision for Possible Credit Losses 180,000
BALANCE AS OF MARCH 31,1997 $1,228,000
</TABLE>
- ------------------------------------------------------------------------------
Statement of Charge-offs and Recoveries
For the Three Months Ending March 31,1998 and 1997
<TABLE>
<CAPTION>
(Dollar Amount in Thousands)
THREE MONTHS ENDING MARCH 31,1998
---------------------------
CHARGE-OFFS RECOVERIES
------------- ------------
<S> <C> <C>
Real Estate Loans $0 $0
Instalment Loans 372 186
Credit Card/Related 25 0
Commercial and all other Loans 159 11
Lease Fin Receivable 0 0
TOTAL $556 $197
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDING MARCH 31,1998
---------------------------
CHARGE-OFFS RECOVERIES
------------- ------------
<S> <C> <C>
Real Estate Loans $0 $0
Instalment Loans 222 210
Credit Card/Related 32 1
Commercial and all other Loans 295 16
Lease Fin Receivable 0 0
TOTAL $549 $227
</TABLE>
PAGE 8
<PAGE>
THE ANTELOPE VALLEY BANK
Statement of Past Due and Nonaccrual Loans and Leases
For the Three Months Ending March 31,1998 and 1997
<TABLE>
<CAPTION>
(DOLLAR AMOUNT IN THOUSANDS)
THREE MONTHS ENDING MARCH 31,1998
---------------------------------------------
PAST DUE PAST DUE
30-89 DAYS 90 DAYS OR MORE
& ACCRUING & ACCRUING NONACCRUAL
---------------------------------------------
<S> <C> <C> <C>
Real Estate Loans $37 $0 $47
Instalment Loans 745 0 41
Credit Card/Related 37 0 2
Commercial and all other Loans 37 186 180
Lease Fin Receivable 0 0 0
TOTAL $856 $186 $270
<CAPTION>
THREE MONTHS ENDING MARCH 31,1997
---------------------------------------------
PAST DUE PAST DUE
30-89 DAYS 90 DAYS OR MORE
& ACCRUING & ACCRUING NONACCRUAL
---------------------------------------------
<S> <C> <C> <C>
Real Estate Loans $852 $0 $209
Instalment Loans 469 0 18
Credit Card/Related 13 0 0
Commercial and all other Loans 727 468 117
Lease Fin Receivable 0 0 0
TOTAL $2,061 $468 $344
</TABLE>
PAGE 9
<PAGE>
THE ANTELOPE VALLEY BANK
ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
INTRODUCTION
Management's discussion and analysis of financial condition and results of
operations is designed to provide a better understanding of the significant
changes and trends related to the Bank's financial condition, including
liquidity and capital resources, and the results of operations. The discussion
should be read in conjunction with the financial reports herein.
ANALYSIS OF FINANCIAL CONDITION
CHANGES IN THE ASSET AND LIABILITY MIX
The Bank experienced moderate growth of almost 5% in total assets for the first
quarter of 1998. This increase was primarily driven by increased non-interest
bearing deposits as the economic climate continues to brighten in Southern
California. Management feels that we are still seeing new customers as a result
of major bank and thrift consolidations.
The influx of deposits is offset by an increase of almost 1.0% in the loan
portfolio, but most notably by higher Fed Funds Sold. Management has been
hesitant to seek alternative investment securities in the current low yielding
market place with talk of the Fed raising rates. Subsequent to the end of the
first quarter 1998, loan demand has increased to provide a higher return on
liquidity as opposed to Fed Funds. In addition to this, the Bank has invested $4
million in short term US Agencies.
Earning assets increased by $9.6 million or 6.0% from December 31,1997 to March
31,1998. At March 31,1998, the loan to deposit ratio was 67.5% compared to 70.1%
at December 31,1997. Earning assets as a percent of total assets are 85.5% and
84.7% for March 31,1998 and December 31,1997, respectively.
Cash and non-interest bearing deposits in other banks, including Federal Reserve
Bank, are $18.4 million and $18.5 million for March 31,1998 and December
31,1997, respectively. As a percent of total assets for these periods, it is
8.2% and 9.7% respectively.
10
<PAGE>
Fixed assets remained at $2.5 million for March 31,1998, the same as December
31,1997. The net for normal depreciation and ordinary purchases resulted in this
figure remaining static.
Other Real Estate Owned of $100,000 at March 31,1998 increased $80,000 from
December 31,1997. This variance is due to the addition of two single family
residence at approximately $40,000 each. One of the properties is in escrow to
close by the end of April 1998, with a small gain. The other property will be
marketed as soon as it is available. All property held in other real estate
owned is carried at either the value or loan balance, whichever is less.
Therefore, management feels that there is no loss exposure on any item.
Non-interest bearing demand deposits as a percent of total deposits were
respectively, 27.7%, 28.7% ,29.1% and 30.7% in the years ended 1995,1996,1997
and the first quarter ended March 1998.
Interest bearing demand deposits (Super Now Accounts) increased $.8 million or
2.5% from $32.3 million to $33.1 million for March 31,1998 from December
31,1997. As a percent of total deposits these were 19.2% and 18.7% respectively.
Time deposits of $100,000 or more were $9.3 million and $9.9 million at March
31, 1998 and December 31,1997, respectively. As a percent of total deposits,
these were 5.3% and 5.9% respectively.
Other time deposits were $36.0 million $35.8 million, respectively at March 31,
1998 and December 31, 1997. As a percent of total deposits, these were 21.3% and
20.4% respectively.
Insured Money Market Accounts had ending balances of $23.0 million and $21.2
million for March 31,1998 and December 31,1997, respectively. As a percent of
total deposits, these were 13.0% and 12.6% respectively.
CAPITAL RESOURCES
Asset growth must be regulated in relation to available capital. This
relationship, most commonly measured by capital adequacy ratio (primary capital,
adjusted for allowance for credit losses) is a determinant of a bank's leverage,
and thus, growth potential.
At March 31,1998 the Bank's capital adequacy ratio was 8.7% as compared to 8.2%
at December 31,1997. This variance in ratios is a direct result of retained
earnings and asset growth.
Risk-adjusted capital guidelines were issued by bank regulatory
11
<PAGE>
authorities early in 1989 which incorporate off-balance sheet exposures in the
measurement of capital adequacy and place increased emphasis on common equity.
The rules require by year end 1992, Tier I capital of 4 percent of risk-based
assets and combined Tier I and Tier II capital of 8 percent. Tier I capital
generally consists of common stockholder's equity and perpetual preferred stock.
less goodwill. Tier II capital is comprised of other elements, the only one
which concerns this bank being credit loss reserves, subject to certain
limitations. At March 31,1998 and December 31,1997, the bank's Tier I capital
ratios under risk-adjusted capital guidelines is 11.8% and 11.3% respectively.
At March 31,1998, the bank reports total shareholder's equity of $20.2 million.
This represents an increase of $540,000 which consists of $443,000 in first
quarter earnings, and a $97,000 net increase in unrealized loss on securities
available for sale.
LIQUIDITY
The bank has an arranged line of credit with two of its correspondent banks to
provide an alternative source of short term funds. It is management's policy to
limit usage of the credit lines to cover any short term gaps between maturing
investments and immediate cash needs. The bank has not used these lines of
credit during the first quarter of 1998.
ANALYSIS OF OPERATING PERFORMANCE
Net income for the period ending March 31,1998 is $443,000, an increase of
$65,000 or 17% from the same period in 1997. A contributing factor to this
difference is a larger base of earning assets that has outpaced additional
overhead of deposit growth.
NET INTEREST INCOME
Net interest income for the period ending March 31,1998 is $2,636,000 as
compared to $2,197,000 for the same period in 1997. This represents an increase
of 20.0%. The biggest factor in this increase is growth in earning assets,
specifically installment loan and to a lesser extent, other loan categories
along with the investment portfolio.
Interest income for the period ending March 31,1998 is $3,522,000 compared to
$2,960,000 for the same period in 1997. This represents an increase of $562,000
or 19.00%. Loan interest income increased by $567,000 while investments interest
income
12
<PAGE>
decreased slightly by $5,000.
Interest expense was $886,000 for the first quarter ending March 31,1998 as
compared to $763,000 for the same period in 1997. This represents an increase of
$123,000 or 16.1%. Increases in interest expense was noted in all categories,
primarily as a result of larger deposit account balances.
PROVISION FOR CREDIT LOSSES
The allowance for possible credit losses is reduced by net loan charge-offs and
increased by the provision for loan losses charges to operating expenses. The
allowance is reviewed quarterly. Additions to the reserve are based upon the
bank's credit loss experience, anticipated loan growth and economic conditions.
The provision for credit losses at March 31, 1998 was $270,000 and $180,000 for
the same period in 1997. Net loan losses net of recoveries charged to the
allowance for the first quarter of 1998 was $359,000 as compared to $322,000 for
the same period in 1997.
The allowance for credit losses of $1,439,000 at March 31,1998 is an increase of
$211,000 or 17% from the same period in 1997. Based on the bank's Allocation for
Loan Loss methodology and calculation, management feels that current economic
conditions warrant this loan loss reserve.
Management has addressed loan loss problems by having an independent loan review
performed twice a year by an outside credit analysis company. This, coupled with
conservative changes to the bank's loan policy, have been implemented to assist
in the control of credit losses which had increased in previous difficult
economic times.
Loans past due 90 days and still accruing are $186,000 and $468,000 at March
31,1998 and March 31,1997 respectively.
Loans past due 30 to 89 days compared by the two periods of March 31, 1998 and
1997 are $856,000 and $2,061,000 respectively.
NON-INTEREST INCOME
At the end of the first quarter 1998, the non-interest income is $1,030,000 as
compared to $1,018,000 for the same period in 1997. Service charges on deposit
accounts was $126,000 more in the first quarter of 1998 than 1997. This is due
to the increased deposit account base. Other non-interest income showed a
decline of $114,000 primarily due to (1) $62,000 in gross rent on an OREO
property sold on March 31, 1997; (2) $12,000 in gain on sale of
13
<PAGE>
real estate in 1997; (3) $12,000 in Account Receivable Financing in 1997; and
(4) $28,000 in numerous other categories of revenue in 1997 that outpaced that
of the first quarter of 1998.
OPERATING EXPENSES
Non-interest expense of $2,784,000 at March 31,1998 is an increase of $295,000
or 11.92% over $2,489,000 for the same period in 1997. $248,000 of this is in
salary and related expense with (1) $150,000 due to the acquisition of three
Wells Fargo Branch office in February 1997; (2) $15,000 in additional worker
compensation insurance; (3) $36,000 in group health costs as a result of a
discontinued rebate reflected in 1997; (4) $34,000 in additional officer salary
continuation amortization, and (5) $13,000 in other employee benefits. The
remaining $47,000 increase is the result of higher data processing fees for a
larger customer base.
GENERAL INFORMATION
In the past several months we have experienced positive events regarding the
economic environment in our primary market area of the Antelope Valley. Numerous
commercial and industrial ventures are under way in Lancaster and Palmdale.
Senior Systems, a manufacturing firm is near completion of its 100,000 square
foot building in Palmdale that will bring 300 jobs to the area. Michaels (retail
arts and craft store) distribution center is under construction and will bring
100 jobs to the valley. Rite Aid (pharmacy) is also constructing a distribution
center in Lancaster. Within the past 18 months, Lance Campers and Rexall RV
manufacturing have relocated to our valley with Lance Campers building in our
enterprise zone in Lancaster.
The feeling appears to be that real estate values may have finally reached their
bottom as inventory is declining. This could be a positive force on the bank as
far as future loan losses are concerned, as many of such losses in the past were
caused by the plummeting real estate prices of the past five or six years.
We are continuing to experience deposit growth, mostly as a result of major bank
and thrift consolidation. Management feels that the recent announcement of
Washington Mutual acquiring Home Savings will bring another flourish of
customers to our doors. Many of these Home Savings Branches in our area were
acquired from First Interstate Bank. With yet another change facing the customer
base of these branches, they may take this opportunity to change banking
relationships as they did with the Wells Fargo Bank acquisition of First
Interstate Bank.
14
<PAGE>
PART II OTHER INFORMATION
All items of Part II other than item 6 below are either inapplicable or would be
responded to in the negative.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) No reports on Form 8-K have been filed during the period, and no
events have occurred which would require on to be filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Bank
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
The Antelope Valley Bank
Date: April 30,1998
- ------------------- -------------------------------
Jack D. Seefus,
President and
Chief Executive Officer
15
<PAGE>
Date: April 30,1998
- ------------------- -------------------------------
Margaret A. Torres,
Executive Vice President and
Chief Financial Officer
16
