<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995 Commission File Number 0-21564
WEST COAST BANCORP, INC.
- - - --------------------------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
FLORIDA 65-0018667
- - - --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2724 DEL PRADO BOULEVARD SOUTH, CAPE CORAL, FLORIDA 33904
- - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER: (941) 772-2220
Check whether the Issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to
file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
CLASS OUTSTANDING AT OCTOBER 19, 1995
- - - ----- -------------------------------
COMMON STOCK, $1.00 PAR VALUE 1,539,548 SHARES
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
<S> <C> <C> <C>
PART I Item 1. Financial Statements 1 - 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5 - 6
PART II Item 6. Exhibits and Reports on Form 8-K 7
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEST COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks $ 4,112,398 $ 5,876,317
Federal funds sold 5,830,000 13,400,000
Interest-bearing deposits in other banks 0 250,000
Mortgage loans held for sale (at fair value) 5,167,055 5,113,154
Investment securities available for sale 2,352,262 2,503,711
Mortgage-backed securities available
for sale 4,406,027 4,145,168
Investment securities held to maturity
(aggregate fair value of $18,233,200
as of September 30, 1995 and
$14,844,696 as of December 31, 1994) 18,210,700 15,311,447
Loans (net of allowances for credit
losses and deferred loan fees of
$1,395,355 as of September 30,
1995 and $1,129,014 as of December
31, 1994) 96,833,368 85,198,080
Premises and equipment, net 4,127,549 3,871,568
Other assets 2,843,618 2,753,864
------------ ------------
Total assets $143,882,977 $138,423,309
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $125,887,175 $122,068,376
Long-term borrowings 1,057,692 1,097,053
Other liabilities 660,404 182,356
------------ ------------
Total liabilities 127,605,271 123,347,785
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value,
2,500,000 shares authorized, no
shares issued and outstanding 0 0
Common stock, $1.00 par value,
7,500,000 shares authorized,
1,539,248 shares issued and
outstanding at September 30,
1995 and 1,531,753 shares issued
and outstanding at December
31, 1994 1,539,248 1,531,753
Additional paid-in capital 12,769,768 12,709,997
Unrealized holding loss on
investment securities available
for sale, net (99,583) (409,511)
Retained earnings 2,068,273 1,243,285
------------ ------------
Total shareholders' equity 16,277,706 15,075,524
------------ ------------
Total liabilities and shareholders'
equity $143,882,977 $138,423,309
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
WEST COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest income
Interest on loans $ 2,640,206 $ 1,976,462 $ 7,283,482 $ 5,601,816
Interest on mortgage-backed securities,
taxable 69,674 63,386 204,122 215,447
Interest on investment securities,
taxable 248,535 181,578 718,634 440,218
Interest on investment securities,
nontaxable 49,423 20,735 129,971 69,099
Other interest income 81,283 60,684 323,928 153,679
----------- ----------- ------------ -------------
Total interest income 3,089,121 2,302,845 8,660,137 6,480,259
----------- ----------- ------------ -------------
Interest expense
Deposits 1,295,255 856,265 3,567,470 2,301,800
Borrowings 13,941 13,940 39,113 46,765
----------- ----------- ------------ -------------
Total interest expense 1,309,196 870,205 3,606,583 2,348,565
----------- ----------- ------------ -------------
Net interest income 1,779,925 1,432,640 5,053,554 4,131,694
Provision for credit losses 107,250 44,500 243,527 89,503
----------- ----------- ------------ -------------
Net interest income after provision
for credit losses 1,672,675 1,388,140 4,810,027 4,042,191
----------- ----------- ------------ -------------
Other income
Mortgage loan servicing fees 29,695 48,795 92,700 139,511
Service charges and other fees 167,703 119,187 457,869 328,728
Rental income 3,939 3,405 10,669 10,134
Gain (loss) on sale of securities (36,347) 0 (36,347) 19,678
Gain on sale of loan servicing 152,344 0 251,631 0
Gain on sale of loans 90,763 22,417 205,293 348,362
----------- ----------- ------------ -------------
Total other income 408,097 193,804 981,815 846,413
----------- ----------- ------------ -------------
Other operating expenses 1,410,913 1,359,741 4,079,897 3,807,702
----------- ----------- ------------ -------------
Income before income taxes 669,859 222,203 1,711,945 1,080,902
Provision for income taxes 257,300 76,103 641,400 389,825
----------- ----------- ------------ -------------
Net income $ 412,559 $ 146,100 $ 1,070,545 $ 691,077
=========== =========== ============ =============
Earnings per share
Net income per share $ .27 $ .09 $ .70 $ .45
=========== =========== ============ =============
Weighted average number of shares
outstanding 1,538,417 1,531,753 1,534,440 1,531,449
=========== =========== ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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WEST COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES: $ 1,978,306 $ 2,834,556
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (563,008) (303,458)
Purchase of investment securities (8,922,766) (15,872,531)
Maturities of investment securities 5,905,000 12,067,778
Proceeds from principal reduction of
investment securities 80,556 25,000
Proceeds from sale of investment
securities 508,962 0
Proceeds from principal reductions of
mortgage-backed securities 108,982 279,649
Proceeds from sale of mortgage-backed
securities 0 1,266,563
Net proceeds from the sale of other real
estate owned 166,503 196,097
Proceeds from maturities of interest-
bearing deposits 250,000 250,000
Net loans to customers (12,466,464) (7,989,960)
------------ ------------
Net cash used in investing activities (14,932,235) (10,080,862)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW,
money market and savings accounts (3,551,079) (3,648,556)
Net increase in certificates of
deposit 7,401,043 11,480,861
Proceeds from borrowings 1,000,000 1,000,000
Repayment of borrowings (1,039,360) (1,100,216)
Cash dividends paid (245,557) (229,707)
Proceeds from stock options exercised 54,963 0
------------ ------------
Net cash provided by financing
activities 3,620,010 7,502,382
------------ ------------
Net increase (decrease) in cash
and cash equivalents (9,333,919) 256,076
Cash and cash equivalents at
beginning of period 19,276,317 10,139,805
------------ ------------
Cash and cash equivalents at end
of period $ 9,942,398 $ 10,395,881
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING TRANSACTIONS:
Loans transferred to other real
estate owned $ 409,713 $ 526,601
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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WEST COAST BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the
Company's consolidated financial position as of September 30, 1995 and
the consolidated results of its operations and cash flows for the nine
month period ended September 30, 1995. The results of operations for the
nine month period ended September 30, 1995 are not necessarily indicative
of the results to be expected for the full year. For further information
refer to the consolidated financial statements and notes thereto included
in the Company's annual report on Form 10-KSB for the year ended December
31, 1994.
2. EARNINGS PER SHARE:
Earnings per share have been computed by dividing net income by the
weighted average number of shares outstanding for each period. Common
stock equivalents in the form of outstanding common stock options and
warrants are not included due to the immaterial impact on dilution of
earnings per share.
3. CAPITAL:
On January 19, 1995, the Company declared a cash dividend of $0.05 per
share which was payable on February 13, 1995 to shareholders of record on
February 3, 1995. On April 20, 1995, the Company declared a cash dividend
of $0.05 per share which was payable on May 15, 1995 to shareholders of
record on May 5, 1995. In addition, a cash dividend of $0.06 per share
was declared by the Company on July 20, 1995, which was payable on August
14, 1995 to shareholders of record on August 4, 1995.
4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS:
In May 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights," (SFAS No. 122). SFAS No. 122 requires companies that
engage in mortgage banking activities to allocate the total cost of the
mortgage loans it acquires or originates and then sells with servicing
rights retained between the estimated fair value of the loans and the
capitalized mortgage servicing rights, if practical. SFAS No. 122 also
requires that capitalized mortgage servicing rights be assessed for
impairment based on the fair value of those rights. SFAS No. 122 applies
prospectively to fiscal years beginning after December 15, 1995. The
adoption of the provisions of SFAS No. 122 is not expected to have a
material impact on the financial position of the Company upon adoption.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Total assets of the Company at September 30, 1995, compared to December
31, 1994, increased by approximately $6 million. The composition of the assets
of the Company did not change significantly. Net loans increased approximately
14%, from $85 to $97 million, which was funded primarily by a decrease in
federal funds sold and a slight increase in deposits of approximately 3%.
At September 30, 1995, investment securities comprised approximately 14% of the
Company's assets while mortgage-backed securities comprised approximately 3%.
Gross unrealized gains were less than 1% of the investment and mortgaged-backed
securities. Gross unrealized losses were approximately 1% of investment and
mortgage-backed securities. Securities are purchased with the intent to use as
part of management's asset/liability management strategy and may be sold in
response to changes in interest rates or for liquidity purposes. There was one
investment security sold for the first nine months of 1995. Management's
investment strategy for the current year has been to re-invest monies received
from the maturity of securities and excess funds primarily in U.S. Treasury
bills and notes in a two-year ladder and, also, tax exempt Florida bonds. This
strategy will enable the Company to take advantage of the current yield curve.
The implementation of Statement of Financial Accounting Standards No. 115
provides that securities classified as available for sale are recorded at fair
value, creating an unrealized gain or loss on the Company's balance sheet. The
interest rate environment this past quarter had no effect on the available for
sale portfolio, as it continues to reflect a market value loss of approximately
2%. This trend is expected to continue until the securities with lower yields
mature and are replaced with securities approximating market rates. The
principal on the securities is not compromised, and the reporting of market
value does not affect earnings.
During the third quarter of 1995, the Company originated approximately
$5 million of mortgage loans for sale to the secondary market and sold
approximately $4 million. The Company recognized approximately $30,000 in
servicing fee income in the third quarter of 1995 and $93,000 for the first nine
months of 1995.
During 1990, the OCC issued a final rule amending the leverage capital
requirements applicable to national banks. For all but the most highly rated
banks, the minimum leverage requirements is 3% of total assets plus an
additional 100 to 200 basis points. At September 30, 1995, the Company's
leverage ratio was approximately 11%.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The Company's net income for the quarter ended September 30, 1995 was
approximately $413,000 or $0.27 per share compared to the net income reported
for the quarter ended September 30, 1994 of approximately $146,000 or $0.09 per
share. Although real estate lending activity has decreased, the Company was able
to generate additional income from service charges and fees.
Other income, which totaled approximately $982,000 for the nine months ended
September 30, 1995 increased $136,000 or 16% from the corresponding period in
1994. This increase was primarily due to the gain on sale of loan servicing.
Other expenses increased $272,000, due primarily to the Company's cost in
employees and equipment for its Trafalgar Office, which is expected to open the
fourth quarter of 1995.
The Company recorded a provision for income taxes of approximately
$257,000 for the third quarter of 1995 compared to $76,000 for the third quarter
of 1994. Continued growth in the Company's earning assets resulted in a $347,000
or 24% increase in net interest income for the third quarter of 1995 over the
corresponding period for 1994. The Company recorded a $107,000 provision to the
allowance for credit losses during the quarter ended September 30, 1995 compared
to a provision of $45,000 recorded during the quarter ended September 30, 1994.
Company management reviews and evaluates the allowance for credit losses on a
quarterly basis. Based on the nature of the loan portfolio and prevailing
economic factors, the Company believes that the allowance for credit losses at
September 30, 1995 was sufficient to absorb potential losses in the loan
portfolio. At September 30, 1995, the Company had 23 non-accrual loans totaling
$2,099,000. The amount of interest income the Company would have recognized for
the quarter ended September 30, 1995 had those loans been on an accrual basis
was approximately $53,000.
At September 30, 1995, the Company had approximately $1,035,000 in other real
estate owned as compared to $1,212,000 at December 31, 1994. The decrease was
due primarily to the sale of 9 properties. Management has elected to hold the
remaining properties until a change in market conditions warrants their
disposal. Management cannot predict the actual amounts which will be realized
from the ultimate sale of these properties and, as part of the ongoing review
process, has assessed the carrying values of the properties to ensure that the
amounts recorded are reasonable. Management does not believe any potential
write-down will have a material effect on the Company's operations.
6
<PAGE> 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. No report on Form 8-K was filed
during the quarter ended September 30, 1995.
7
<PAGE> 10
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.
/s/ Michael P.Geml
------------------------------
Michael P. Geml, President and
Chief Executive Officer
(Principal Executive Officer)
Date: November 7, 1995
/s/ Nicholas J. Panicaro
------------------------------
Nicholas J. Panicaro
Chief Financial Officer
(Senior Vice President, Cashier)
Date: November 7, 1995
8
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WEST COAST BANCORP, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 4,112,398
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,830,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,758,289
<INVESTMENTS-CARRYING> 18,210,700
<INVESTMENTS-MARKET> 18,233,200
<LOANS> 96,833,368
<ALLOWANCE> 988,880
<TOTAL-ASSETS> 143,882,977
<DEPOSITS> 125,887,175
<SHORT-TERM> 0
<LIABILITIES-OTHER> 660,404
<LONG-TERM> 1,057,692
<COMMON> 1,539,248
0
0
<OTHER-SE> 14,738,458
<TOTAL-LIABILITIES-AND-EQUITY> 143,882,977
<INTEREST-LOAN> 7,283,482
<INTEREST-INVEST> 1,052,727
<INTEREST-OTHER> 323,928
<INTEREST-TOTAL> 8,660,137
<INTEREST-DEPOSIT> 3,567,470
<INTEREST-EXPENSE> 3,606,583
<INTEREST-INCOME-NET> 5,053,554
<LOAN-LOSSES> 243,527
<SECURITIES-GAINS> (36,347)
<EXPENSE-OTHER> 4,079,897
<INCOME-PRETAX> 1,711,945
<INCOME-PRE-EXTRAORDINARY> 1,711,945
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,070,545
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
<YIELD-ACTUAL> 5.27
<LOANS-NON> 2,099,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 638,155
<ALLOWANCE-OPEN> 791,000
<CHARGE-OFFS> 85,000
<RECOVERIES> 242,000
<ALLOWANCE-CLOSE> 987,000
<ALLOWANCE-DOMESTIC> 321,816
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 665,000
</TABLE>
