<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 JUNE 30, 1996 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 AUGUST 9, 1996
- ----- -----------------------------
COMMON STOCK, $1.00 PAR VALUE 1,544,466 SHARES
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGES
<S> <C> <C> <C>
PART I Item 1. Financial Statements 1-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-7
PART II Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEST COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
<S> <C> <C>
Cash and due from banks $ 5,652,200 $ 6,725,460
Federal funds sold 3,825,000 2,965,000
Interest-bearing deposits in other banks 0 250,000
Mortgage loans held for sale (at fair value) 1,449,173 5,866,318
Investment securities available for sale 8,202,432 7,821,017
Mortgage-backed securities available for sale 4,447,337 4,390,536
Investment securities held to maturity (aggregate fair value of
$ 16,395,560 as of June 30, 1996 and $13,799,181 as of
December 31, 1995) 16,286,471 13,680,277
Loans (net of allowances for credit losses and deferred loan
fees of $1,743,107 as of June 30, 1996 and $1,506,559 as of
December 31, 1995 103,344,036 98,082,748
Premises and equipment, net 4,414,681 3,650,483
Other assets 4,202,969 3,781,331
------------ ------------
Total assets $151,824,299 $147,213,170
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $133,843,327 $129,205,191
Long-term borrowings 1,000,000 1,028,846
Other liabilities 204,684 551,589
------------ ------------
Total liabilities 135,048,011 130,785,626
------------ ------------
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,
1,544,466 shares issued and outstanding as of June 30, 1996 1,544,466 1,540,066
and 1,540,066 as of December 31, 1995
Additional paid-in capital 12,814,885 12,775,695
Unrealized holding loss on investment securities available
for sale, net (182,525) (82,407)
Retained earnings 2,599,462 2,194,190
------------ ------------
Total shareholders' equity 16,776,288 16,427,544
------------ ------------
Total liabilities and shareholders' equity $151,824,299 $147,213,170
============ ============
</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 JUNE 30, SIX MONTHS ENDED JUNE 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income
Interest on loans $2,611,130 $2,432,004 $5,261,755 $4,643,277
Interest on mortgage-backed securities, taxable 64,818 67,780 133,089 134,449
Interest on investment securities, taxable 265,682 245,641 482,215 470,098
Interest on investment securities, nontaxable 84,418 44,716 161,108 80,548
Other interest income 92,614 98,717 181,128 242,644
---------- ---------- ---------- ----------
Total interest income 3,118,662 2,888,858 6,219,295 5,571,016
---------- ---------- ---------- ----------
Interest expense
Deposits 1,264,694 1,180,019 2,537,827 2,272,215
Borrowings 15,640 12,529 31,361 25,172
---------- ---------- ---------- ----------
Total interest expense 1,280,334 1,192,548 2,569,188 2,297,387
--------- --------- ---------- ----------
Net interest income 1,838,328 1,696,310 3,650,107 3,273,629
Provision for credit losses 246,898 78,592 380,487 136,277
---------- ---------- ---------- ----------
Net interest income after provision for credit losses 1,591,430 1,617,718 3,269,620 3,137,352
---------- ---------- ---------- ----------
Other Income
Mortgage loan servicing fee 742 33,949 5,218 63,005
Service charges and other fees 226,417 144,805 468,992 290,166
Rental income 26,038 3,364 38,760 6,729
Gain on sale of loan servicing 0 46,888 199,570 99,287
Gain on sale of loans 67,606 48,166 210,992 114,530
---------- ---------- ---------- ----------
Total other income 320,803 277,172 923,532 573,717
---------- ---------- ---------- ----------
Other operating expenses 1,641,590 1,369,178 3,302,935 2,668,983
---------- ---------- ---------- ----------
890,217 1,042,086
Income before income taxes 270,643 525,712
299,873 384,100
Provision for income taxes 88,370 195,800 ---------- ----------
---------- ----------
Net income $ 182,273 $ 329,912 $ 590,344 $ 657,986
========== ========== ========== ==========
Earnings per share
Net income per share $ 0.12 $ 0.22 $ 0.38 $ 0.43
========== ========== ========== ==========
Weighted average number of shares outstanding 1,544,466 1,533,077 1,543,402 1,532,419
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
WEST COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,860,708 $ 1,410,306
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (887,608) (934,600)
Purchase of investment securities (7,024,801) (5,544,681)
Maturities of investment securities 4,457,662 4,250,000
Proceeds from principal reductions of investment securities 52,778 52,778
Purchase of mortgage-backed securities (497,438) 0
Proceeds from principal reductions of mortgage-backed
securities 373,922 60,900
Proceeds from sale of other real estate owned 644,303 132,872
Proceeds from maturities of interest-bearing deposits 250,000 250,000
Net loans to customers (7,522,576) (8,899,324)
------------ ------------
Net cash used in investing activities (10,153,758) (10,632,055)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW, money
market and savings accounts 12,003,266 (3,622,147)
Net increase (decrease) in certificates of deposit (7,753,148) 6,744,488
Repayment of borrowings (28,846) (68,677)
Cash dividend paid (185,072) (153,202)
Proceeds from stock options exercised 43,590 19,972
------------ ------------
Net cash provided by financing activities 4,079,790 2,920,434
Net decrease in cash and cash equivalents (213,260) (6,301,315)
------------ ------------
Cash and cash equivalents at beginning of period 9,690,460 19,276,317
------------ ------------
Cash and cash equivalents at end of period $ 9,477,200 $12,975,002
============ ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING TRANSACTIONS:
Loans transferred to other real estate owned $ 1,872,732 $ 396,922
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
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 June 30, 1996 and the
consolidated results of its operations and cash flows for the six month
period ended June 30, 1996. The results of operations for the six month
period ended June 30, 1996 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,
1995.
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 18, 1996, the Company declared a cash dividend of $0.06 per
share which was payable on February 12, 1996 to shareholders of record on
February 2, 1996. In addition, on April 19, 1996, the Company declared a
cash dividend of $0.06 per share which was payable on May 13, 1996 to
shareholders of record on May 3, 1996.
On June 20, 1996, the Company's Board of Directors authorized the
issuance of stock options for 6,500 shares of the Company's common stock
to Bank directors and senior officers. 500 shares were granted at an
exercise price of $16.50 per share, which was the market price of record
on that date, to each of the ten directors and three senior officers of
record at that time. No shares have been exercised of those granted.
4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS:
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," issued by the Financial Accounting Standards Board (FASB)
in March 1995, was effective for the Company beginning January 1, 1996.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows expected
to result from the use of the asset and its eventual disposition. If the
sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment
loss is recognized. Measurement of an impairment loss for long-lived
assets and identifiable intangibles that an entity expects to hold and
use should be based on the fair value of the asset. No change in the
Company's financial statements was required due to the adoption of SFAS
121.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." SFAS No. 122 requires companies that engage in
mortgage banking activities to allocate the
4
<PAGE> 7
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 had no impact
on the financial position of the Company.
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation,"
was issued and was effective for the Company beginning January 1, 1996.
SFAS No. 123 provides an alternative method of accounting for stock-based
compensation determined by an option pricing model utilizing various
assumptions regarding the underlying attributes of the options and
Company's stock, rather than the existing method of accounting for
stock-based compensation which is provided in Accounting Practices
Bulletin Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25). The Company has elected to apply APB 25 and, therefore, there will
be no impact on the consolidated financial position and consolidated
results of operations.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Total assets of the Company at June 30, 1996, compared to December 31, 1995,
increased by approximately $4.6 million. The composition of the assets of the
Company did not change significantly. Net loans increased approximately 5%,
from $98 to $103 million, which was funded primarily by an increase in deposits
of approximately $4.6 million or 3.6%.
At June 30, 1996, investment securities comprised approximately 16% of the
Company's assets while mortgage-backed securities comprised approximately 3%.
Gross unrealized gains were less than 1% of the investment and mortgage-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 were no
investment securities sold in the first six months of 1996. 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
1%. 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 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 requirement is 3% of total assets plus an
additional 100 to 200 basis points. At June 30, 1996, the Company's leverage
ratio was 11.04 %.
6
<PAGE> 9
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 June 30, 1996 was $ 182,273 or $
0.12 per share compared to the net income reported for the quarter ended June
30, 1995 of $ 329,912 or $ 0.22 per share.
Other income, which totaled $ 924,000 for the six months ended June 30, 1996
increased $ 350,000 or 61% from the corresponding period in 1995. This
increase was primarily due to an increase in service charges and fees of
approximately $179,000 and a $100,000 increase in gain on sale of loan
servicing. Other expenses increased $ 634,000, due primarily to the Company's
cost of opening a new office (Trafalgar/Santa Barbara in January 1996), and
expenses incurred to carry OREO property.
The Company recorded a provision for income taxes of approximately $88,000 for
the second quarter of 1996 compared to $196,000 for the second quarter of 1995.
Continued growth in the Company's earning assets resulted in a $142,000 or 8 %
increase in net interest income for the second quarter of 1996 over the
corresponding period for 1995. The Company recorded a $ 247,000 provision to
the allowance for credit losses during the quarter ended June 30, 1996 compared
to a provision of $ 79,000 recorded during the quarter ended June 30, 1995.
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
June 30, 1996 was sufficient to absorb potential losses in the loan portfolio.
At June 30, 1996, the Company had 23 non-accrual loans totaling $ 2,906,705.
The amount of interest income the Company would have recognized for the quarter
ended June 30, 1996 had those loans been on an accrual basis was approximately
$68,000.
At June 30, 1996, the Company had approximately $ 2,750,000 in other real
estate owned as compared to $ 1,532,000 at December 31, 1995. The increase was
due primarily to a foreclosure on a $621,000 commercial building and a single
family home in the amount of $490,000. Management is actively seeking buyers
for these properties. 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.
7
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matter was submitted to a vote of security holders at the
Company's annual meeting on May 9, 1996.
To elect ten directors as members of the Board of Directors of the Company to
serve until the 1997 annual meeting of shareholders and until their respective
successors shall be duly elected and qualified.
The following directors, which consisted of all of the existing directors, were
nominated for reelection with the following results:
<TABLE>
<CAPTION>
Yes Withheld
-------- --------
<S> <C> <C>
Thomas R. Cronin 991,248 3,700
Michael P. Geml 993,408 1,540
Robert C. Adamski 986,228 8,720
Joseph G. Howard 992,658 2,290
Jeffrey C. Ledward 993,408 1,540
Robert E. McCormack 993,408 1,540
James B. McMenamy 992,658 2,290
Harland Frank Simonds 993,408 1,540
Stephen R. Zellner 992,658 2,290
William S. Hussey 992,558 2,390
</TABLE>
Of the total of 1,544,466 shares of common stock eligible to vote, there were
994,948 shares present in person or by proxy and the above named directors were
reelected.
There were no other matters submitted to a vote of the security holders of the
Company.
ITEM 5. OTHER INFORMATION
On June 20, 1996, the Board of Directors of the Company approved a resolution
increasing the number of authorized directors from ten to twelve. Upon further
motions, duly made and carried, the Board elected J. Keith Arnold and Nicholas
Panicaro to fill the vacancies.
Representative J. Keith Arnold was elected to the Florida House of
Representatives in 1982 at the age of 23. In 1991-92, he served as Chairman
of the Post Secondary Education Committee, where he was successful in
establishing the 10th University, Florida Gulf Coast University, in southwest
Florida. Since 1993, Representative Arnold has served as Chairman of the
Education Subcommittee under the House Appropriations Committee.
Representative Arnold was also the Chairman of the Lee County Legislative
Delegation in 1994. Since 1986, he has served as the Executive Vice President
of the Daltroff Investment Corporation and has been the senior sales
representative for the American Pioneer Title Company since 1993.
Nicholas J. Panicaro, age 43, has been the Chief Financial Officer of the
Company since June 1990, and has served as Senior Vice President and Cashier of
the Bank since December 1988.
8
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27.1 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 June 30, 1996.
9
<PAGE> 12
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: August 12, 1996
---------------------------------
/s/ Nicholas J. Panicaro
--------------------------------------
Nicholas J. Panicaro
Chief Financial Officer
(Executive Vice President, Chief
Operating Officer)
Date: August 12, 1996
---------------------------------
10
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WEST COAST BANCORP FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,652,200
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,825,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,649,769
<INVESTMENTS-CARRYING> 16,286,471
<INVESTMENTS-MARKET> 16,395,560
<LOANS> 105,087,143
<ALLOWANCE> 1,360,080
<TOTAL-ASSETS> 151,824,299
<DEPOSITS> 133,843,327
<SHORT-TERM> 0
<LIABILITIES-OTHER> 204,684
<LONG-TERM> 1,000,000
0
0
<COMMON> 1,544,466
<OTHER-SE> 15,231,822
<TOTAL-LIABILITIES-AND-EQUITY> 151,824,299
<INTEREST-LOAN> 5,261,755
<INTEREST-INVEST> 776,412
<INTEREST-OTHER> 181,128
<INTEREST-TOTAL> 6,219,295
<INTEREST-DEPOSIT> 2,537,827
<INTEREST-EXPENSE> 2,569,188
<INTEREST-INCOME-NET> 3,650,107
<LOAN-LOSSES> 380,487
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,302,935
<INCOME-PRETAX> 890,217
<INCOME-PRE-EXTRAORDINARY> 890,217
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 590,344
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
<YIELD-ACTUAL> 0
<LOANS-NON> 2,906,705
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
