<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): January 22, 1999
ELDORADO BANCSHARES, INC.
--------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 2-76555 33-0720548
- --------------------------- ---------------------- ------------
State or other jurisdiction Commission File Number IRS Employer
of incorporation Identification No.
24012 CALLE DE LA PLATA, SUITE 340
LAGUNA HILLS, CALIFORNIA 92653
-----------------------------------
(Address of principal executive offices)
(949) 699-4344
-----------------------------
(Registrant's telephone number,
including area code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 22, 1999, Eldorado Bancshares, Inc. (the "Company") completed
the acquisition of Antelope Valley Bank ("AVB"), upon the merger of a wholly-
owned subsidiary of the Company with and into AVB. Headquartered in Lancaster,
California (located approximately 50 miles northeast of Los Angeles), AVB
operates eight full service branches. As of December 31, 1998, AVB had total
assets of $211.7 million and deposits of $187.7 million.
In connection with the AVB Acquisition, the Company issued an aggregate
of approximately 2,781,600 shares of Class B Common Stock to the shareholders
of AVB based upon a fixed exchange ratio of 3.625 shares of Class B Common
Stock for each share of AVB common stock. The determination of the exchange
ratio was based upon arms length negotiation between the parties. The
acquisition is being treated as a pooling of interests for accounting
purposes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ANTELOPE VALLEY BANK
December 31, 1998, 1997, and 1996
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Page
-------
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
FINANCIAL STATEMENTS
BALANCE SHEETS 4
STATEMENTS OF EARNINGS 5
STATEMENT OF STOCKHOLDERS' EQUITY 7
STATEMENTS OF CASH FLOWS 8
NOTES TO FINANCIAL STATEMENTS 10
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Antelope Valley Bank
We have audited the accompanying balance sheets of Antelope Valley Bank
(a California corporation) as of December 31, 1998 and 1997, and the related
statements of earnings, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Bank's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Antelope Valley Bank as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
Los Angeles, California
January 22, 1999
<PAGE>
Antelope Valley Bank
BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS
1998 1997
-------------------- --------------------
<S> <C> <C>
Cash and noninterest-earning deposits (minimum Federal
Reserve balance at December 31, 1998 and 1997
was $4,357,000 and $3,306,000, respectively) $ 13,260,000 $ 18,447,000
Federal funds sold 19,300,000 4,380,000
-------------------- --------------------
Cash and cash equivalents 32,560,000 22,827,000
Time deposits due from financial institutions 1,863,000 1,962,000
Securities available for sale - at fair value 37,064,000 36,641,000
Loans, net 127,459,000 116,127,000
Premises and equipment - at cost, net of accumulated
depreciation and amortization 2,751,000 2,527,000
Other real estate owned 38,000 20,000
Other assets and accrued interest 9,965,000 9,555,000
-------------------- --------------------
$ 211,700,000 $ 189,659,000
-------------------- --------------------
-------------------- --------------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
-------------------- --------------------
<S> <C> <C>
Deposits
Noninterest-bearing demand deposits $ 54,706,000 $ 48,856,000
Interest-bearing deposits
NOW accounts 40,846,000 32,301,000
Money market accounts 21,685,000 21,221,000
Savings 22,736,000 19,842,000
Time deposits of $100,000 or more 11,390,000 9,885,000
Other time deposits 36,386,000 35,762,000
-------------------- --------------------
187,749,000 167,867,000
Other liabilities and accrued interest 2,558,000 2,112,000
-------------------- --------------------
190,307,000 169,979,000
Commitments and contingencies - -
Stockholders' equity
Common stock - authorized, 10,000,000 shares without par
value; issued and outstanding, 767,342 shares in
1998 and 1997 3,625,000 3,625,000
Retained earnings 17,397,000 15,935,000
Accumulated other comprehensive income, net of tax 371,000 120,000
-------------------- --------------------
21,393,000 19,680,000
-------------------- --------------------
$ 211,700,000 $ 189,659,000
-------------------- --------------------
-------------------- --------------------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Antelope Valley Bank
STATEMENTS OF EARNINGS
Year ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ -------------------
<S> <C> <C> <C>
Interest income
Loans $ 11,859,000 $ 10,408,000 $ 8,766,000
Securities available for sale
Taxable 1,131,000 1,562,000 926,000
Nontaxable 778,000 789,000 590,000
Time deposits 99,000 154,000 101,000
Federal funds sold 697,000 451,000 424,000
------------------ ------------------ -------------------
14,564,000 13,364,000 10,807,000
------------------ ------------------ -------------------
Interest expense
Time deposits of $100,000 or more 553,000 503,000 386,000
Other deposits 3,012,000 2,978,000 2,355,000
------------------ ------------------ -------------------
3,565,000 3,481,000 2,741,000
------------------ ------------------ -------------------
Net interest income 10,999,000 9,883,000 8,066,000
Provision for credit losses 1,280,000 1,054,000 700,000
------------------ ------------------ -------------------
Net interest income after provision
for credit losses 9,719,000 8,829,000 7,366,000
Noninterest income
Service charges on deposit accounts 3,106,000 2,887,000 2,224,000
Gain (loss) on sale of securities - net - (16,000) 23,000
Other 1,227,000 1,354,000 2,270,000
------------------ ------------------ -------------------
4,333,000 4,225,000 4,517,000
------------------ ------------------ -------------------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Antelope Valley Bank
STATEMENTS OF EARNINGS - CONTINUED
Year ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ -------------------
<S> <C> <C> <C>
Noninterest expense
Salaries, wages and employee benefits $ 5,716,000 $ 4,818,000 $ 4,160,000
Occupancy 569,000 571,000 562,000
Premises and equipment 519,000 482,000 488,000
Other 5,196,000 4,841,000 3,449,000
------------------ ------------------ -------------------
12,000,000 10,712,000 8,659,000
------------------ ------------------ -------------------
Earnings before income taxes 2,052,000 2,342,000 3,224,000
Income tax expense 590,000 422,000 1,130,000
------------------ ------------------ -------------------
NET EARNINGS $ 1,462,000 $ 1,920,000 $ 2,094,000
------------------ ------------------ -------------------
------------------ ------------------ -------------------
Basic and diluted earnings per share $ 1.91 $ 2.50 $ 2.73
------------------ ------------------ -------------------
------------------ ------------------ -------------------
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
Antelope Valley Bank
STATEMENT OF STOCKHOLDERS' EQUITY
For the three years ended December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Number Other
of Shares Common Retained Comprehensive
Outstanding Stock Earnings Income Total
------------- -------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1996 511,636 $ 3,625,000 $ 11,924,000 $ 350,000 $ 15,899,000
50% stock dividend 255,706 - - - -
Cash dividend on fractional shares - - (3,000) - (3,000)
Comprehensive income:
Net changes in unrealized loss
on securities available for
sale, net of tax
benefit of $199,000 - - - (267,000) (267,000)
Net earnings for the year - - 2,094,000 - 2,094,000
----------------
Comprehensive income 1,827,000
------------- -------------- ---------------- ----------------- ----------------
Balance - December 31, 1996 767,342 3,625,000 14,015,000 83,000 17,723,000
Comprehensive income:
Net changes in unrealized gain
on securities available for
sale, net of tax of $27,000 - - - 37,000 37,000
Net earnings for the year - - 1,920,000 - 1,920,000
----------------
Comprehensive income 1,957,000
------------- -------------- ---------------- ----------------- ----------------
Balance - December 31, 1997 767,342 3,625,000 15,935,000 120,000 19,680,000
Comprehensive income:
Net changes in unrealized gain
on securities available for
sale, net of tax of $179,000 - - - 251,000 251,000
Net earnings for the year - - 1,462,000 - 1,462,000
----------------
Comprehensive income 1,713,000
------------- -------------- ---------------- ----------------- ----------------
Balance - December 31, 1998 767,342 $ 3,625,000 $ 17,397,000 $ 371,000 $ 21,393,000
------------- -------------- ---------------- ----------------- ----------------
------------- -------------- ---------------- ----------------- ----------------
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
Antelope Valley Bank
STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996
------------ -------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net earnings $ 1,462,000 $ 1,920,000 $2,094,000
Adjustments to reconcile net earnings to net cash
provided by operating activities
Provision for credit losses 1,280,000 1,054,000 700,000
Provision for losses on other real estate owned - - 330,000
Depreciation of premises and equipment 429,000 825,000 596,000
Amortization of goodwill 446,000 367,000 -
Loss (gain) on sale of equipment (21,000) - (602,000)
(Gain) loss on sale of other real estate owned 21,000 (3,000) 22,000
Loss (gain) on sale of investment securities, net - 16,000 (23,000)
Net change in deferred loan fees 366,000 31,000 17,000
Accretion of premiums and discounts on
investment securities, net 478,000 (17,000) (32,000)
Increase in unearned discount on loans 326,000 2,054,000 1,209,000
Deferred income taxes (345,000) (89,000) (150,000)
Decrease (increase) in other assets (691,000) (4,589,000) (2,218,000)
Increase (decrease) in other liabilities 446,000 229,000 337,000
------------ -------------- ---------------
Net cash provided by operating activities 4,197,000 1,798,000 2,280,000
Cash flows from investing activities:
Proceeds from sale of securities available for sale 5,677,000 12,673,000 7,983,000
Purchases of securities available for sale (32,537,000) (32,807,000) (12,615,000)
Proceeds from matured securities available for sale 14,893,000 4,012,000 2,699,000
Principal paydowns on investment securities 11,498,000 3,362,000 520,000
Decrease (increase) in time deposits due from financial institutions 99,000 789,000 (1,378,000)
Net increase in loans (13,421,000) (25,726,000) (10,661,000)
Purchases of premises and equipment (667,000) (942,000) (192,000)
Proceeds from sale of equipment 35,000 - 868,000
Proceeds from sale of real estate owned 78,000 1,878,000 404,000
------------ -------------- ---------------
Net cash used by investing activities (14,345,000) (36,761,000) (12,372,000)
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
Antelope Valley Bank
STATEMENTS OF CASH FLOWS - CONTINUED
Year ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996
--------------- ---------------- ------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Cash dividends $ - $ - $ (3,000)
Increase in deposits 19,881,000 40,238,000 13,923,000
--------------- ---------------- ------------------
Net cash provided by financing activities 19,881,000 40,238,000 13,920,000
--------------- ---------------- ------------------
Increase in cash and cash equivalents 9,733,000 5,275,000 3,828,000
Cash and cash equivalents at beginning of year 22,827,000 17,552,000 13,724,000
--------------- ---------------- ------------------
Cash and cash equivalents at end of year $ 32,560,000 $ 22,827,000 $ 17,552,000
--------------- ---------------- ------------------
--------------- ---------------- ------------------
Supplemental disclosures of cash flow information:
Interest paid $ 3,787,000 $ 3,435,000 $ 2,421,000
--------------- ---------------- ------------------
--------------- ---------------- ------------------
Income taxes paid $ 744,000 $ 705,000 $ 1,389,000
--------------- ---------------- ------------------
--------------- ---------------- ------------------
Supplemental disclosures of noncash investing activities:
Acquisition of real estate in settlement of loans $ - $ 194,000 $ 251,000
--------------- ---------------- ------------------
--------------- ---------------- ------------------
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Antelope Valley Bank (the Bank) is engaged in the business of
attracting deposits from the general public and using such deposits,
together with borrowings and other funds, to make loans. Most of the
Bank's business activity is with customers located within the Antelope
Valley. The economy of the Antelope Valley is somewhat dependent upon
the defense and aerospace industries. The ability of the Bank's
customers to honor their loan agreements is dependent, in part, on the
general economy of the Bank's market area.
Bank revenues are derived principally from interest on loans and
investments, and other fees. A major expense of the Bank is interest
paid on deposits. Bank operations and net interest income are affected
by general economic conditions and by the monetary and fiscal policies
of the federal government. Deposit flows and costs of funds are
influenced by interest rates on competing investments and general
market interest rates.
The accounting and reporting policies of the Bank conform with generally
accepted accounting principles within the banking industry. A summary of
the significant accounting policies consistently applied in the preparation
of the accompanying financial statements follows:
1. CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash and noninterest-earning deposits and federal funds sold. Generally,
federal funds are sold for one-day periods.
2. SECURITIES AVAILABLE FOR SALE
Investments in marketable equity securities and all debt securities are
classified as securities available for sale. Securities available for sale
are carried at fair value and unrealized holding gains and losses, net of
tax, are reported as a net amount in comprehensive income. Gains and
losses on the sale of securities available for sale are determined using
the specific identification method.
3. LOANS
Loans are stated at their outstanding principal balances, less unearned
discount, allowance for credit losses and unamortized deferred loan fees or
costs.
10
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Interest is accrued daily as earned on all simple interest loans. Interest
income on discounted loans is recognized under a method that approximates
interest calculated using the interest method. Interest income is not
recognized on loans if collection of the interest is deemed by management
to be unlikely. The Bank recognizes loan origination fees as an adjustment
of the loan's yield over the life of the loans by the interest method,
which results in a constant rate of return. Certain direct costs,
primarily salaries, of originating the loan are recognized over the life of
the loan as a reduction of the yield rather than as an expense item when
incurred.
A loan is impaired when it is probable that a creditor will be unable to
collect all amounts due (principal and interest) according to the
contractual terms of the loan agreement. Measurement of the impairment is
based on either the discounted future cash flows of the impaired loan or
the fair market value of the collateral for a collateral-dependent loan.
The Bank may select the measurement method on a loan-by-loan basis, except
that collateral-dependent loans for which foreclosure is probable must be
measured at the fair value of the collateral. Restructured loans are
measured for impairment by discounting the total expected future cash flows
using the loan's effective rate of interest in the original loan agreement.
4. ALLOWANCE AND PROVISION FOR CREDIT LOSSES
The determination of the balance in the allowance for credit losses is
based on an analysis of the loan portfolio and reflects an amount which, in
management's judgment, is adequate to provide for potential losses after
giving consideration to known and inherent risks in the loan portfolio,
current economic conditions, past loss experience, estimated value of any
underlying collateral and such other factors as deserve current recognition
in estimating credit losses. The provision for credit losses is charged to
expense.
5. DEPRECIATION AND AMORTIZATION
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives.
Leasehold improvements are amortized over the life of the lease or the
service lives of the improvements, whichever is shorter. The straight-line
method of depreciation is used for financial reporting purposes, while both
straight-line and accelerated methods of depreciation are used for income
tax purposes.
11
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. OTHER REAL ESTATE OWNED
Other real estate owned, which represents properties acquired by
foreclosure or by a deed in lieu of foreclosure, is initially recorded at
the fair value of the property at the date of acquisition. Any valuation
reductions required at the date of acquisition are charged to the allowance
for credit losses. Subsequent to acquisition, other real estate owned is
carried at the lower of recorded cost or fair value less cost to sell.
Subsequent operating expenses or income, reduction in estimated values, and
gains or losses on disposition of such properties are recognized in current
operations.
7. INCOME TAXES
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets
or liabilities are expected to be realized or settled. As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
8. EARNINGS PER SHARE
Basic and diluted earnings per share are based on the weighted average
number of shares outstanding during each year retroactively adjusted for
stock dividends. The weighted average number of shares used in the
computation of earnings per share for each of the three years ended
December 31, 1998, 1997 and 1996 was 767,342.
9. FAIR VALUE OF FINANCIAL INVESTMENTS
A substantial portion of the Bank's assets and liabilities are considered
financial instruments. However, many of such instruments lack an available
trading market, as characterized by a willing buyer and seller engaging in
an exchange transaction. Therefore, the Bank uses significant estimations
and present value calculations to estimate their fair values.
Changes in the assumptions or methodologies used to estimate fair values
may materially affect the estimated amounts. Also, management is concerned
that there may not be reasonable comparability between institutions due to
the wide range of permitted assumptions and methodologies in the absence of
active markets. This lack of uniformity gives rise to a high degree of
subjectivity in estimating financial instrument fair values.
12
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
10. PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
11. GOODWILL
Goodwill, from the acquisition of three branch offices of Wells Fargo Bank
in 1997, representing the excess of cost over fair value of net assets
acquired and is being amortized over ten years using the straight-line
method.
12. COMPREHENSIVE INCOME
In 1998, the Bank adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), REPORTING COMPREHENSIVE INCOME, which prescribes
standards for reporting comprehensive income and its components. The
Bank's comprehensive income consists of net earnings for the current period
and the net change in unrealized gains and losses on securities available
for sale.
NOTE B - SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair values of securities available for
sale as of December 31, are as follows:
<TABLE>
<CAPTION>
1998
--------------------------------------------------------------------------
Gross unrealized
Amortized --------------------------------- Estimated
Cost Gains Losses Fair value
---------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
U.S. Agencies $20,510,000 $ 54,000 $(108,000) $20,456,000
Municipal 13,923,000 696,000 (2,000) 14,617,000
Corporate debt 1,995,000 - (4,000) 1,991,000
---------------- ------------- ---------------- ----------------
$36,428,000 $750,000 $(114,000) $37,064,000
---------------- ------------- ---------------- ----------------
---------------- ------------- ---------------- ----------------
</TABLE>
13
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE B - SECURITIES AVAILABLE FOR SALE - Continued
<TABLE>
<CAPTION>
1997
--------------------------------------------------------------------------
Gross unrealized
Amortized --------------------------------- Estimated
Cost Gains Losses Fair value
---------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
U.S. Treasury $ 1,010,000 $ 4,000 $ - $ 1,014,000
U.S. Agencies 21,638,000 97,000 (229,000) 21,506,000
Municipal 13,789,000 336,000 (4,000) 14,121,000
---------------- ------------- ---------------- ----------------
$36,437,000 $437,000 $(233,000) $36,641,000
---------------- ------------- ---------------- ----------------
---------------- ------------- ---------------- ----------------
</TABLE>
The amortized cost and estimated fair value of securities available for sale at
December 31, 1998, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
------------------- ------------------
<S> <C> <C>
Due in one year or less $ 7,251,000 $ 7,268,000
Due after one year through five years 6,535,000 6,608,000
Due after five years through ten years 6,720,000 6,795,000
Due after ten years 15,922,000 16,393,000
------------------- ------------------
$36,428,000 $37,064,000
------------------- ------------------
------------------- ------------------
</TABLE>
Securities available for sale pledged to secure public funds and for other
purposes as required or permitted by law amounts to approximately
$8,214,000 and $5,046,000 at December 31, 1998 and 1997, respectively.
14
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE C - LOANS AND ALLOWANCE FOR CREDIT LOSSES
The composition of the Bank's loan portfolio at December 31, is as follows:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
<S> <C> <C>
Real estate loans
Construction $ 1,859,000 $ 715,000
Mortgage 15,543,000 14,863,000
Commercial and industrial loans 37,194,000 35,920,000
Loans to individuals for automobiles, household,
family and other personal expenditures 82,784,000 74,264,000
------------------ ------------------
137,380,000 125,762,000
Less:
Unearned discount 8,531,000 8,206,000
Deferred loan costs, net (466,000) (99,000)
Allowance for credit losses 1,856,000 1,528,000
------------------ ------------------
$127,459,000 $116,127,000
------------------ ------------------
------------------ ------------------
</TABLE>
As of December 31, 1998 and 1997, the Bank has nonaccruing loans of $56,000
and $461,000, respectively.
Transactions in the allowance for credit losses are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- ---------------- ----------------
<S> <C> <C> <C>
Balance at beginning of year $1,528,000 $1,370,000 $1,410,000
Provision for credit losses
charged to operations 1,280,000 1,054,000 700,000
Credit losses charged to allowance (1,769,000) (1,665,000) (1,270,000)
Recoveries credited to allowance 817,000 769,000 530,000
--------------- ---------------- ----------------
Balance at end of year $1,856,000 $1,528,000 $1,370,000
--------------- ---------------- ----------------
--------------- ---------------- ----------------
</TABLE>
15
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE C - LOANS AND ALLOWANCE FOR CREDIT LOSSES - Continued
The recorded investment of impaired loans and the allowance for credit
losses related to these loans are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------- ----------------
<S> <C> <C>
Principal amount of impaired loans $886,000 $1,255,000
Accrued interest 1,000 28,000
--------------- ----------------
887,000 1,283,000
Less allowance for credit losses 106,000 151,000
--------------- ----------------
$781,000 $1,132,000
--------------- ----------------
--------------- ----------------
</TABLE>
The activity in the allowance for credit losses for impaired loans is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Allowance at beginning of year $151,000 $ 155,000 $127,000
Net (charges) recoveries from operations (20,000) 479,000 73,000
for impairment
Direct write-downs (25,000) (483,000) (45,000)
--------------- -------------- --------------
Allowance at end of year $106,000 $ 151,000 $155,000
--------------- -------------- --------------
--------------- -------------- --------------
</TABLE>
Total cash collected on impaired loans during 1998 and 1997 was $356,000 and
$274,000, of which $279,000 and $188,000 was credited to the principal
balance outstanding on such loans and $77,000 and $86,000 was recognized as
interest income, respectively. Interest that would have been accrued on
impaired loans during 1998 and 1997 was $81,000 and $98,000, respectively.
16
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE D - RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has granted loans to certain
directors and the companies with which they are associated. All such loans
and commitments to lend were made under terms that are consistent with the
Bank's normal lending policies.
A summary of directors' loan activity is as follows:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
Beginning balance $1,873,000 $2,486,000
New loans made, including renewals 451,000 356,000
Repayments (399,000) (969,000)
----------------- -----------------
Ending balance $1,925,000 $1,873,000
----------------- -----------------
----------------- -----------------
</TABLE>
As of December 31, 1998 and 1997, there are undisbursed lines of
credit of $810,000 and $545,000, respectively, to directors.
The Bank purchases insurance coverage through an agency controlled by a
director. Premiums paid in 1998, 1997 and 1996 were approximately $275,000,
$220,000 and $176,000, respectively. The Bank also obtains legal counsel
from a law firm wherein one of the directors of the Bank is a partner. Legal
expenses paid to the firm in 1998, 1997 and 1996 were $34,000, $27,000 and
$20,000, respectively.
The Bank has an ownership interest in a company which provides data
processing services to the Bank. The Bank paid approximately $1,169,000,
$1,300,000 and $677,000 in 1998, 1997 and 1996, respectively, to this
company for these services.
17
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE E - PREMISES AND EQUIPMENT - AT COST
Premises and equipment at December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------- ----------------
<S> <C> <C>
Building $2,267,000 $1,963,000
Furniture, fixtures and equipment 3,033,000 2,852,000
Leasehold improvements 95,000 88,000
Bank automobiles 126,000 117,000
--------------- ----------------
5,521,000 5,020,000
Less accumulated depreciation and amortization 3,276,000 2,868,000
--------------- ----------------
2,245,000 2,152,000
Land 506,000 375,000
--------------- ----------------
$2,751,000 $2,527,000
--------------- ----------------
--------------- ----------------
</TABLE>
During 1997, the Bank acquired three branch offices from Wells Fargo Bank
in Rosamond, Wrightwood, and Frazier Park, California.
NOTE F - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Bank's deferred tax liabilities and assets as of December
31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---------------- ---------------
<S> <C> <C>
Deferred tax assets:
Allowance for credit losses $ 390,000 $252,000
Deferred compensation 703,000 419,000
Current state taxes 109,000 90,000
Goodwill 122,000 55,000
---------------- ---------------
Total deferred tax assets 1,324,000 816,000
---------------- ---------------
</TABLE>
18
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE F - INCOME TAXES - Continued
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Deferred liabilities:
Depreciation $ (1,000) $ 30,000
Deferred state taxes 47,000 39,000
Deferred loan costs 324,000 137,000
Unrealized gains on securities 285,000 92,000
--------------- ---------------
Total deferred tax liabilities 655,000 298,000
--------------- ---------------
Net deferred tax asset $669,000 $518,000
--------------- ---------------
--------------- ---------------
</TABLE>
The current and deferred amounts of income tax provisions are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Current tax expense
Federal $664,000 $306,000 $ 889,000
State 271,000 205,000 391,000
--------------- --------------- ---------------
935,000 511,000 1,280,000
Deferred tax expense (benefit)
Federal (276,000) (89,000) (110,000)
State (69,000) - (40,000)
--------------- --------------- ---------------
(345,000) (89,000) (150,000)
--------------- --------------- ---------------
$590,000 $422,000 $1,130,000
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
19
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE F - INCOME TAXES - Continued
As a result of the following items, the total income tax expense differs
from the amount computed by applying the statutory federal income tax rate
to earnings before income taxes:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- ------------------------- --------------------------
Amount Percent Amount Percent Amount Percent
------------ --------- ----------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax
Expense at statutory $697,000 34.0% $796,000 34.0% $1,096,000 34.0%
rate
State franchise taxes,
net of federal benefit 147,000 7.2 177,000 7.6 244,000 7.6
Nontaxable income (313,000) (15.3) (331,000) (14.1) (245,000) (7.6)
Change in estimate
related to prior year
sale of fixed assets - - (154,000) (6.6) - -
Non-deductible expenses 59,000 2.9 (66,000) (2.9) 35,000 1.1
------------ --------- ----------- --------- ------------- ----------
$590,000 28.8% $422,000 18.0% $1,130,000 35.1%
------------ --------- ----------- --------- ------------- ----------
------------ --------- ----------- --------- ------------- ----------
</TABLE>
NOTE G - MATURITIES OF CERTIFICATES OF DEPOSIT
At December 31, 1998, the scheduled maturities of certificates of deposit
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $40,512,000
2000 5,719,000
2001 695,000
2002 230,000
2003 and thereafter 620,000
-----------------
$47,776,000
-----------------
-----------------
</TABLE>
NOTE H - COMMITMENTS AND CONTINGENCIES
The Bank leases offices and land from nonaffiliates under operating leases
expiring through 2003 with options to extend the leases for periods ranging
from two to twenty years. Additionally, the Bank has a commitment to assume
a land lease based on the sale of a building in 1995. This lease commitment
extends through 2005 and is for payments totalling $189,000.
20
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE H - COMMITMENTS AND CONTINGENCIES - Continued
The following is a schedule by years of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1998:
<TABLE>
<CAPTION>
Year ending December 31, Amount
------------------------ -------------
<S> <C>
1999 $ 95,000
2000 65,000
2001 45,000
2002 30,000
2003 6,000
--------------
Total minimum payments required $241,000
--------------
--------------
</TABLE>
Rental expense for 1998, 1997 and 1996 was approximately $82,000, $87,000
and $89,000, respectively.
In the normal course of business, the Bank is involved in various
litigation. In the opinion of management, based on the advice of the Bank's
legal counsel, the disposition of all pending litigation will not have a
material effect on the Bank's financial position and results of operation.
NOTE I - OTHER INCOME AND EXPENSE
Other income and expense for the years ended December 31, consist of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- --------------- --------------
<S> <C> <C> <C>
Income
------
Customer EFT transaction and
acquirer fees $ 212,000 $ 160,000 $ 165,000
Gross rental income - 63,000 240,000
Data processing income - - 240,000
Credit card/merchant fees 70,000 131,000 132,000
Gain on sale of assets 11,000 - 602,000
Fee income - customer service 418,000 496,000 447,000
Other 516,000 504,000 444,000
----------------- --------------- --------------
$1,227,000 $1,354,000 $2,270,000
----------------- --------------- --------------
----------------- --------------- --------------
</TABLE>
NOTE I - OTHER INCOME AND EXPENSE - Continued
21
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Expenses
--------
Office supplies $ 467,000 $ 452,000 $ 286,000
Advertising 215,000 240,000 230,000
Professional services 720,000 453,000 341,000
Data processing fees 1,169,000 1,300,000 677,000
Public relations 84,000 79,000 75,000
Telephone 248,000 191,000 131,000
Amortization of goodwill 446,000 367,000 -
Loan and collection expenses 151,000 254,000 454,000
Other 1,696,000 1,505,000 1,255,000
--------------- --------------- --------------
$ 5,196,000 $ 4,841,000 $ 3,449,000
--------------- --------------- --------------
--------------- --------------- --------------
</TABLE>
NOTE J - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements
of credit risk in excess of the amount recognized in the balance sheet. The
contract or notional amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.
22
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE J - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - Continued
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount
of those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.
<TABLE>
<CAPTION>
Contract or notional amount
December 31,
------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $10,352,000 $ 8,229,000
---------------- ----------------
---------------- ----------------
Standby letters of credit $ 502,000 $ 814,000
---------------- ----------------
---------------- ----------------
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation. Collateral held varies
but may include accounts receivable, inventory, property, plant, and
equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions.
23
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE K- BENEFIT PLANS
The Bank has a profit sharing and deferred compensation 401(k) plan for all
eligible employees. The employees may contribute up to 15% of their eligible
compensation. The Bank matches a portion of employee contributions and the
Bank's contribution vests over a period of five years. Contributions were
approximately $93,000, $81,000 and $75,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
The Bank has entered into retirement benefit agreements with certain
officers providing for future benefits aggregating approximately $6,157,000,
payable in equal annual installments for fifteen years from the death or
retirement dates of each participating officer. The obligations for these
agreements are funded by single premium life insurance policies, with cash
surrender values aggregating approximately $3,507,000 and $3,363,000 at
December 31, 1998 and 1997 respectively. As of December 31, 1998 and 1997,
approximately $1,568,000 and $941,000 respectively, has been accrued in
conjunction with these agreements. The Bank expensed approximately $639,440
$272,470 and $144,449 for the years ended December 31, 1998, 1997 and 1996,
respectively.
NOTE L - REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered
by the federal and state Banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional,
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. The regulations require
the Bank to meet specific capital adequacy guidelines that involve
quantitative measures of the Bank's assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting
principles. The Bank's capital classification is also subject to qualitative
judgments by the regulators about components, risk weightings and other
factors.
24
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE L - REGULATORY CAPITAL REQUIREMENTS - Continued
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and minimum ratios of Tier 1 and total
capital (as defined) to risk-weighted assets (as defined). Management
believes, as of December 31, 1998, that the Bank meets all capital adequacy
requirements to which it is subject.
As of December 31, 1998, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as "well capitalized"
under regulatory framework for prompt corrective action. To be considered
adequately capitalized (as defined) under the regulatory framework for
prompt corrective action, the Bank must maintain minimum Tier 1 leverage,
Tier 1 risk-based and total risk-based ratios as set forth in the table
below. There are no conditions, or events since that notification that
management believes have changed the Bank's category. The Bank's actual
capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------------- ------------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
-------------- -------- -------------- ------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998
Total Capital
(to Risk Weighted Assets) $19,260,000 12.7% $12,096,000 8.0% $15,121,000 10.0%
Tier I Capital
(to Risk Weighted Assets) $17,604,000 11.4% $ 6,048,000 4.0% $ 9,072,000 6.0%
Leverage Capital
(to Total Average Assets) $17,604,000 8.4% $ 8,185,000 4.0% $10,232,000 5.0%
</TABLE>
25
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE L - REGULATORY CAPITAL REQUIREMENTS - Continued
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------------- ------------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
-------------- -------- -------------- ------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997
Total Capital
(to Risk Weighted Assets) $16,990,000 12.6% $10,829,000 8.0% $13,536,000 10.0%
Tier I Capital
(to Risk Weighted Assets) $15,463,000 11.4% $ 5,414,000 4.0% $ 8,122,000 6.0%
Leverage Capital
(to Total Average Assets) $15,463,000 8.4% $ 7,410,000 4.0% $ 9,263,000 5.0%
</TABLE>
NOTE M - STOCK SPLIT EFFECTED IN THE FORM OF A DIVIDEND
On April 17, 1996, the Bank's Board of Directors declared a 50% stock
dividend that was distributed on June 7, 1996, to stockholders of record on
April 24, 1996. As a result of the split, 255,706 additional shares were
issued. There were no such stock splits or dividends in 1998 or 1997.
NOTE N - FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values have been estimated using data which management considered the
best available using methodologies deemed suitable for the pertinent
category of financial instruments. The estimation methodologies are as
follows:
CASH AND CASH EQUIVALENTS. The carrying amount approximates the fair value.
TIME DEPOSITS DUE FROM FINANCIAL INSTITUTIONS. The carrying amount
approximates the fair value.
SECURITIES AVAILABLE FOR SALE. Fair values are based upon quoted market
prices.
26
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE N - FAIR VALUES OF FINANCIAL INSTRUMENTS - Continued
LOANS RECEIVABLE. For variable-rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on carrying
values. Fair values for certain mortgage loans (for example, one-to-four
family residential), credit-card loans, and other consumer loans are based
on quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan
characteristics. Fair value of commercial real estate and commercial loans
are estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of similar
credit quality. Fair values for impaired loans are estimated using
discounted cash flow analyses or underlying collateral values, where
applicable.
DEPOSITS. The fair values disclosed for demand deposits are, by definition,
equal to the amount payable on demand (that is, their carrying amount). The
carrying amounts of variable-rate, fixed-term money-market accounts and
certificates of deposit (CDs) approximate their fair values at the reporting
date. Fair values for fixed-rate CDs are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on time
deposits.
OFF-BALANCE-SHEET INSTRUMENTS. Fair value estimates were not made for these
financial instruments as there is not a quoted market price for these types
of financial instruments and the Bank has not developed a valuation model
necessary to make such an estimate. However, management believes that the
current fees assessed on these off-balance-sheet items represent market
rates which would be charged for similar agreements. The Bank enters into
certain financial commitments in the normal course of business. Management
does not anticipate that those financial instruments will have a material
adverse effect on the Bank's financial position or results of operations.
27
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE N - FAIR VALUES OF FINANCIAL INSTRUMENTS - Continued
The estimated fair values of the Bank's financial instruments are as follows
(in thousands):
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------
Carrying
Amount Fair value
---------------- -----------------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 32,560 $ 32,560
Time deposits due from financial institutions 1,863 1,863
Securities available for sale 37,064 37,064
Loans - net 127,459 130,246
Accrued interest receivable 899 899
Financial liabilities:
Deposits 187,749 187,782
Accrued interest payable 852 852
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------
Carrying
Amount Fair value
---------------- -----------------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 22,827 $ 22,827
Time deposits due from financial institutions 1,962 1,962
Securities available for sale 36,641 36,641
Loans - net 116,127 118,060
Accrued interest receivable 908 908
Financial liabilities:
Deposits 167,867 167,944
Accrued interest payable 1,073 1,073
</TABLE>
28
<PAGE>
Antelope Valley Bank
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998, 1997 and 1996
NOTE O - SUBSEQUENT EVENT
As of January 22, 1999, the Bank consummated a business combination with
Eldorado Bancshares, Inc. in which the Bank's shareholders exchanged all of
their outstanding common stock for shares of common stock of Eldorado
Bancshares, Inc. The business combination was accounted for as a pooling of
interest. As a result, the Bank has become a wholly-owned subsidiary of
Eldorado Bancshares Inc.
29
<PAGE>
b) Proforma financial information
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Condensed Financial
Information combines the historical Consolidated Condensed Financial
Statements of the Company and Antelope giving effect to the Merger as if it
had been effective prior to the periods presented with respect to the Pro
Forma Combined Condensed Statement of Condition, and as of the beginning of
the periods indicated, with respect to the Pro Forma Combined Condensed
Statements of Operations. This information is presented under
pooling-of-interests accounting after giving effect to the 1-for-2 reverse
split of common stock that was effected by the Company in September 1999.
This information should be read in conjunction with the historical
consolidated financial statements of the Company and Antelope, including
their respective notes thereto. The effect of estimated merger and
reorganization costs expected to be incurred in connection with the Merger
has not been reflected in the pro forma combined condensed statement of
condition or in the pro forma combined condensed statements of operation. The
unaudited pro forma combined condensed financial information does not give
effect to any anticipated operating efficiencies in conjunction with the
Merger. The pro forma combined condensed statement of condition is not
necessarily indicative of the actual financial position that would have
existed had the Merger been consummated on December 31, 1998, or that may
exist in the future. The pro forma combined condensed statements of operation
are not necessarily indicative of the results that would have occurred had
the Merger been consummated on the dates indicated or that may be achieved in
the future. Assuming the consummation of the Merger, the actual financial
position and results of operations will differ, perhaps significantly, from
the pro forma amounts reflected herein because of a variety of factors,
including changes in value and changes in operating results between the dates
of the pro forma financial data and the date on which the Merger takes place.
30
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
POOLING-OF-INTERESTS METHOD
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ELBI Antelope Pro Forma Pro Forma
(Historical) (Historical) Adjustment ELBI
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Assets
- -----------------------------------------
Cash and due from banks $109,280,000 $13,260,000 $ - $122,540,000
Federal funds sold - 19,300,000 - 19,300,000
Interest bearing deposits in other banks - 1,863,000 - 1,863,000
Investment securities available for sale 213,399,000 37,064,000 - 250,463,000
Mortgage loans held for sale 248,833,000 - - 248,833,000
Loans and leases, net 505,452,000 127,459,000 - 632,911,000
Premise and equipment 9,632,000 2,751,000 - 12,383,000
Other real estate owned 1,545,000 38,000 - 1,583,000
Goodwill and other intangibles 63,727,000 3,651,000 - 67,378,000
Other assets 33,982,000 6,314,000 - 40,296,000
------------- ------------ ------------- --------------
Total assets 1,185,850,000 211,700,000 - 1,397,550,000
------------- ------------ ------------- --------------
------------- ------------ ------------- --------------
Liabilities and Shareholders' Equity
- -----------------------------------------
Liabilities
Deposits:
Non-interest bearing 259,185,000 54,706,000 - 313,891,000
Interest bearing 774,553,000 133,043,000 - 907,596,000
------------- ------------ ------------- --------------
Total deposits 1,033,738,000 187,749,000 - 1,221,487,000
Federal funds purchased 5,900,000 - - 5,900,000
Subordinated debentures 27,657,000 - - 27,657,000
Due to related parties 338,000 - - 338,000
Accrued expenses and other liabilities 20,077,000 2,558,000 - 22,635,000
------------- ------------ ------------- --------------
Total liabilities 1,087,710,000 190,307,000 - 1,278,017,000
Shareholders' equity:
Preferred stock 11,659,000 - - 11,659,000
Common stock 84,038,000 3,625,000 - 87,663,000
Retained earnings 3,194,000 17,397,000 - 20,591,000
Unearned compensation (1,006,000) - - (1,006,000)
Unrealized gain (loss) on securities
available for sale 255,000 371,000 - 626,000
------------- ------------ ------------- --------------
Total shareholders' equity 98,140,000 21,393,000 - 119,533,000
Total liabilities and shareholders' equity $1,185,850,000 $211,700,000 $ - $1,397,550,000
------------- ------------ ------------- --------------
------------- ------------ ------------- --------------
</TABLE>
See Accompanying Notes to Unaudited Pro
Forma Combined Condensed Financial Statements
31
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
POOLING-OF-INTERESTS METHOD
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ELBI Antelope Pro Forma ELBI
(Historical) (Historical) Adjustment Pro Forma
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans 59,323,000 11,859,000 - 71,182,000
Income from lease finance receivables 6,661,000 - - 6,661,000
Interest and dividend on securities 5,881,000 1,909,000 - 7,790,000
Interest on Federal funds sold 2,622,000 697,000 - 3,319,000
Interest on deposits with other financial institutions - 99,000 - 99,000
------------- ------------ ----------- -----------
Total interest income 74,487,000 14,564,000 - 89,051,000
Interest expense:
Interest on deposits 26,997,000 3,565,000 - 30,562,000
Debentures 3,310,000 - - 3,310,000
Federal funds purchased 806,000 - - 806,000
------------- ------------ ----------- -----------
Total interest expense 31,113,000 3,565,000 - 34,678,000
------------- ------------ ----------- -----------
Net interest income 43,374,000 10,999,000 - 54,373,000
Provision for loan and lease losses 4,272,000 1,280,000 - 5,552,000
------------- ------------ ----------- -----------
Net interest income after provision for loan and lease losses 39,102,000 9,719,000 - 48,821,000
Non-interest income:
Service charges on deposit accounts 3,350,000 3,106,000 - 6,456,000
Gain on sale of mortgage loans 11,994,000 - - 11,994,000
Other income 6,211,000 1,227,000 - 7,438,000
------------- ------------ ----------- -----------
Total non-interest income 21,555,000 4,333,000 - 25,888,000
Non-interest expense:
Salaries and employee benefits 21,884,000 5,716,000 - 27,600,000
Occupancy and equipment 7,335,000 1,088,000 - 8,423,000
Amortization of goodwill and other intangibles 3,550,000 446,000 - 3,996,000
Other 18,508,000 4,750,000 - 23,258,000
------------- ------------ ----------- -----------
Total non-interest expense 51,277,000 12,000,000 - 63,277,000
------------- ------------ ----------- -----------
Income before taxes 9,380,000 2,052,000 - 11,432,000
Income tax provision (5,428,000) (590,000) - (6,018,000)
------------- ------------ ----------- -----------
Net income $ 3,952,000 $ 1,462,000 - $ 5,414,000
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
Net income available to common $ 2,670,000 $ 1,462,000 - $ 4,132,000
Weighted average shares outstanding
Basic 9,173,699 2,781,615 - 11,955,314
Diluted 9,652,155 2,781,615 - 12,433,770
Earnings per share
Basic $ 0.29 $ 0.53 - $ 0.35
Diluted $ 0.28 $ 0.53 - $ 0.33
</TABLE>
See Accompanying Notes to Unaudited Pro
Forma Combined Condensed Financial Statements
32
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
POOLING-OF-INTERESTS METHOD
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ELBI Antelope Pro Forma ELBI
(Historical) (Historical) Adjustment Pro Forma
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans 43,103,000 10,408,000 - 53,511,000
Income from lease finance receivables 4,127,000 - - 4,127,000
Interest and dividend on securities 4,979,000 2,351,000 - 7,330,000
Interest on Federal funds sold 1,286,000 451,000 - 1,737,000
Interest on deposits with other financial institutions - 154,000 - 154,000
------------- ------------ ----------- -----------
Total interest income 53,495,000 13,364,000 - 66,859,000
Interest expense:
Interest on deposits 18,143,000 3,481,000 - 21,624,000
Debentures 1,908,000 - - 1,908,000
Federal funds purchased 563,000 - - 563,000
------------- ------------ ----------- -----------
Total interest expense 20,614,000 3,481,000 - 24,095,000
------------- ------------ ----------- -----------
Net interest income 32,881,000 9,883,000 - 42,764,000
Provision for loan and lease losses 1,495,000 1,054,000 - 2,549,000
------------- ------------ ----------- -----------
Net interest income after provision for loan and lease losses 31,386,000 8,829,000 - 40,215,000
Non-interest income:
Service charges on deposit accounts 2,675,000 2,887,000 - 5,562,000
Gain on sale of mortgage loans 6,887,000 - - 6,887,000
Other income 5,342,000 1,338,000 - 6,680,000
------------- ------------ ----------- -----------
Total non-interest income 14,904,000 4,225,000 - 19,129,000
Non-interest expense:
Salaries and employee benefits 16,172,000 4,818,000 - 20,990,000
Occupancy and equipment 5,959,000 1,053,000 - 7,012,000
Provision for recourse obligation 2,021,000 - - 2,021,000
Amortization of goodwill and other intangibles 2,514,000 367,000 - 2,881,000
Other 13,022,000 4,474,000 - 17,496,000
------------- ------------ ----------- -----------
Total non-interest expense 39,688,000 10,712,000 - 50,400,000
------------- ------------ ----------- -----------
Income before taxes 6,602,000 2,342,000 - 8,944,000
Income tax provision (3,612,000) (422,000) - (4,034,000)
------------- ------------ ----------- -----------
Net income $ 2,990,000 $ 1,920,000 - $ 4,910,000
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
Net income available to common $ 2,259,000 $ 1,920,000 - $ 4,179,000
Weighted average shares outstanding
Basic 7,406,062 2,781,615 - 10,187,677
Diluted 8,634,651 2,781,615 - 11,416,266
Earnings per share
Basic $ 0.31 $ 0.69 - $ 0.41
Diluted $ 0.26 $ 0.69 - $ 0.37
</TABLE>
See Accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
33
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
POOLING-OF-INTERESTS METHOD
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ELBI Antelope Pro Forma ELBI
(Historical) (Historical) Adjustment Pro Forma
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans 14,782,000 8,766,000 - 23,548,000
Income from lease finance receivables 1,601,000 - - 1,601,000
Interest and dividend on securities 1,968,000 1,516,000 - 3,484,000
Interest on Federal funds sold 934,000 424,000 - 1,358,000
Interest on deposits with other financial institutions 67,000 101,000 - 168,000
------------- ------------ ----------- -----------
Total interest income 19,352,000 10,807,000 - 30,159,000
Interest expense:
Interest on deposits 7,570,000 2,741,000 - 10,311,000
Debentures 74,000 - - 74,000
------------- ------------ ----------- -----------
Total interest expense 7,644,000 2,741,000 - 10,385,000
------------- ------------ ----------- -----------
Net interest income 11,708,000 8,066,000 - 19,774,000
Provision for loan and lease losses 515,000 700,000 - 1,215,000
------------- ------------ ----------- -----------
Net interest income after provision for loan and lease losses 11,193,000 7,366,000 - 18,559,000
Non-interest income:
Service charges on deposit accounts 2,911,000 2,224,000 - 5,135,000
Gain on sale of mortgage loans 1,727,000 - - 1,727,000
Other income 261,000 2,293,000 - 2,554,000
------------- ------------ ----------- -----------
Total non-interest income 4,899,000 4,517,000 - 9,416,000
Non-interest expense:
Salaries and employee benefits 6,816,000 4,160,000 - 10,976,000
Occupancy and equipment 2,726,000 1,050,000 - 3,776,000
Amortization of goodwill and other intangibles 268,000 - - 268,000
Other 5,460,000 3,449,000 - 8,909,000
------------- ------------ ----------- -----------
Total non-interest expense 15,270,000 8,659,000 - 23,929,000
------------- ------------ ----------- -----------
Income before taxes 822,000 3,224,000 - 4,046,000
Income tax benefit (provision) 1,503,000 (1,130,000) - 373,000
------------- ------------ ----------- -----------
Net income 2,325,000 2,094,000 - $ 4,419,000
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
Net income available to common $ 2,325,000 $ 2,094,000 - $ 4,419,000
Weighted average shares outstanding
Basic 2,650,386 2,781,615 - 5,432,001
Diluted 2,650,386 2,781,615 - 5,432,001
Earnings per share
Basic $ 0.88 $ 0.75 - $ 0.81
Diluted $ 0.88 $ 0.75 - $ 0.81
</TABLE>
See Accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
POOLING-OF-INTERESTS ACCOUNTING
NOTE 1: BASIS OF PRESENTATION
Certain historical data of Antelope have been reclassified on a pro forma
basis to conform to the Company's classifications. Weighted average share and
per share data has been retroactively restated giving effect to the Company's 1
for 2 reverse split in September 1998.
NOTE 2: MERGER COSTS
The pro forma combined condensed financial statements do not include
management's current estimate of the aggregate estimated merger costs of
$2,000,000 ($1,491,000 net of taxes, computed using the combined federal and
state tax rate of 42%) expected to be incurred in connection with the Merger.
The estimated aggregate costs, primarily comprised of anticipated cash charges,
include the following:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
Investment banking and other professional fees $ 650
Employee reduction costs and conversion 1,450
------------
Total $2,000
------------
------------
</TABLE>
Management's cost estimates are forward looking. While the costs represent
management's current estimate of merger and restructuring costs that will be
incurred, the ultimate level and timing of recognition of such costs will be
based on the final merger and integration plan to be completed prior to
consummation of the Merger. The integration plan and the resulting management
plans detailing actions to be undertaken to effect the Merger will impact these
estimates; the type and amount of actual costs incurred could vary materially
from these estimates if future developments differ from the underlying
assumptions used by management in determining its current estimate of these
costs.
35
<PAGE>
(c) Exhibits.
Exhibit 2.1 Agreement and Plan of Merger dated September 16, 1998
by and between the Company and AVB (incorporated by
reference to the Company's Current Report on Form 8-K
filed with the Commission on September 22, 1998.)
Exhibit 99.1 Press release dated January 25, 1999 announcing
completion of the Antelope Valley Bank merger
(incorporated by reference to the Company's Current
Report on Form 8-K filed with the Commission on January
29, 1999.)
36
<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.
By: /s/ Curt A. Christianssen
--------------------------
Curt A. Christianssen
Senior Vice President
Dated: March 29, 1999
