SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999 .
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-25418 .
----------
CENTRAL COAST BANCORP
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 77-0367061
- -------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
301 Main Street, Salinas, California. 93901 .
- ----------------------------------------- ---------
(Address of principal executive offices) (Zip code)
(831) 422-6642 .
-----------------------------
(Registrants telephone number,
including area code)
not applicable
------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
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__ N0____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
No par value Common Stock - 6,456,255 shares outstanding at July 29, 1999.
Page 1 of 26
The Index to the Exhibits is located at Page 24
<PAGE>
<TABLE>
<CAPTION>
PART 1-FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
CENTRAL COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
June 30, 1999 December 31, 1998
----------- ------------
(In thousands)
<S> <C> <C>
Assets
Cash and due from banks $ 48,052 $ 44,684
Federal funds sold - 4,202
-------------- -------------
Total cash and equivalents 48,052 48,886
Available-for-sale securities 156,704 170,387
Loans held for sale 5,324 6,168
Loans:
Commercial 140,039 136,685
Real estate-construction 27,036 19,929
Real estate-other 177,817 144,685
Installment 11,110 11,545
Deferred loan fees, net (914) (674)
-------------- -------------
Total loans 355,088 312,170
Allowance for loan losses (4,882) (4,352)
-------------- -------------
Net Loans 350,206 307,818
-------------- -------------
Premises and equipment, net 3,156 3,069
Accrued interest receivable and other assets 9,311 7,605
-------------- -------------
Total assets $ 572,753 $ 543,933
============== =============
Liabilities and Shareholders' Equity
Deposits:
Demand, noninterest bearing $ 130,226 $ 149,757
Demand, interest bearing 108,578 98,226
Savings 106,389 104,447
Time 158,979 136,762
-------------- -------------
Total Deposits 504,172 489,192
Accrued interest payable and other liabilities 16,914 3,542
-------------- -------------
Total liabilities 521,086 492,734
-------------- -------------
Commitments and contingencies (Note 2)
Shareholders Equity:
Preferred stock-no par value; authorized
1,000,000 shares; no shares issued
Common stock - no par value; authorized 25,000,000 shares;
issued and outstanding: 6,477,369 shares at June 30, 1999
and 6,112,045 shares at December 31, 1998 40,141 41,103
Shares held in deferred compensation trust (247,148 at June 30, 1999
and 71,949 at December 31,1998), net of deferred obligation - -
Retained earnings 13,451 9,733
Accumulated other comprehensive income - net of
taxes of $1,338,000 at June 30,1999 and $254,000 at December 31, 1998 (1,925) 363
-------------- -------------
Shareholders' equity 51,667 51,199
-------------- -------------
Total liabilities and shareholders' equity $ 572,753 $ 543,933
============== =============
See Notes to Consolidated Condensed Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTRAL COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
Three months ended June 30, Six months ended June 30,
(In thousands) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Interest Income
Loans (including fees) $ 7,686 $ 6,669 $ 14,827 $ 12,936
Investment securities 2,343 2,027 4,591 3,807
Other 2 585 75 1,530
--------------- --------------- ---------------- -----------------
Total interest income 10,031 9,281 19,493 18,273
--------------- --------------- ---------------- -----------------
Interest Expense
Interest on deposits 3,180 3,415 6,266 6,750
Other 149 - 176 -
--------------- --------------- ---------------- -----------------
Total interest expense 3,329 3,415 6,442 6,750
--------------- --------------- ---------------- -----------------
Net Interest Income 6,702 5,866 13,051 11,523
Provision for Loan Losses 410 24 537 41
--------------- --------------- ---------------- -----------------
Net Interest Income after
Provision for Loan Losses 6,292 5,842 12,514 11,482
--------------- --------------- ---------------- -----------------
Noninterest Income 591 530 1,133 924
--------------- --------------- ---------------- -----------------
Noninterest Expenses
Salaries and benefits 2,250 2,053 4,581 4,208
Occupancy 297 273 577 492
Furniture and equipment 294 235 585 430
Other 983 897 1,904 1,780
--------------- --------------- ---------------- -----------------
Total noninterest expenses 3,824 3,458 7,647 6,910
--------------- --------------- ---------------- -----------------
Income Before Income Taxes 3,059 2,914 6,000 5,496
Provision for Income Taxes 1,065 1,205 2,281 2,273
--------------- --------------- ---------------- -----------------
Net Income $ 1,994 $ 1,709 $ 3,719 $ 3,223
=============== =============== ================ =================
Basic Earnings per Share $ 0.30 $ 0.28 $ 0.58 $ 0.54
Diluted Earnings per Share $ 0.29 $ 0.26 $ 0.55 $ 0.49
See Notes to Consolidated Condensed Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTRAL COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six months ended June 30, 1999 1998
-------- -------
<S> <C> <C>
Cash Flows from Operations:
Net income $ 3,719 $ 3,223
Reconciliation of net income to net cash provided
by operating activities:
Provision for loan losses 537 41
Net gain (loss) on sale of fixed assets 61 (1)
Writedown (gain on sale) of other real estate owned 90 (21)
Depreciation 403 278
Amortization and accretion 3 (52)
Increase in accrued interest receivable and other assets (64) (762)
Increase in accrued interest payable and other liabilities 965 366
Decrease in deferred loan fees 240 2
--------- --------
Net cash provided by operations 5,954 3,074
--------- --------
Cash Flows from Investing Activities:
Purchases of investment securities (88,912) (72,237)
Proceeds from maturities
of investment securities 92,854 72,040
Proceeds from sale of investment securities 5,987 -
Net (increase) decrease in loans held for sale 844 (3,008)
Net (increase) in loans (43,165) (16,550)
Proceeds from sale of other real estate owned - 126
Proceeds from sale of fixed assets - 1
Capital expenditures (821) (731)
--------- --------
Net cash used in investing activities (33,213) (20,359)
--------- --------
Cash Flows from Financing Activities:
Net increase in deposit accounts 14,979 502
Net increase (decrease) in short-term borrowings 12,408 (124)
Proceeds from sale of stock 1,098 136
Shares repurchased (2,060) (12)
--------- --------
Net cash provided by financing activities 26,425 502
--------- --------
Net increase (decrease) in cash and equivalents (834) (16,783)
Cash and equivalents, beginning of period 48,886 104,597
--------- --------
Cash and equivalents, end of period $48,052 $87,814
========= ========
Other Cash Flow Information:
Interest paid $ 6,417 $ 6,712
Income taxes paid 1,589 1,125
See Notes to Consolidated Condensed Financial Statements
</TABLE>
<PAGE>
CENTRAL COAST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of Management, the unaudited consolidated condensed
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
Company's consolidated financial position at June 30, 1999 and
December 31, 1998, the results of operations for the three and six
month periods ended June 30, 1999 and 1998, and cash flows for the
six month periods ended June 30, 1999 and 1998.
Certain disclosures normally presented in the notes to the annual
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These interim consolidated
condensed financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in
the Company's 1998 Annual Report to Shareholders. The results of
operations for the three and six month periods ended June 30, 1999
and 1998 may not necessarily be indicative of the operating results
for the full year.
In preparing such financial statements, management is required to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and
revenues and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that are
particularly susceptible to significant changes in the near term
relate to the determination of the allowance for loan losses and the
carrying value of other real estate owned. Management uses
information provided by an independent loan review service in
connection with the determination of the allowance for loan losses.
2. COMMITMENTS AND CONTINGENCIES
In the normal course of business there are outstanding various
commitments to extend credit which are not reflected in the
financial statements, including loan commitments of approximately
$130,722,000 and standby letters of credit of $2,083,000 at June 30,
1999. However, all such commitments will not necessarily culminate
in actual extensions of credit by the Company during 1999.
Approximately $31,474,000 of loan commitments outstanding at June
30, 1999 relate to real estate construction loans and are expected
to fund within the next twelve months. The remainder relate
primarily to revolving lines of credit or other commercial loans,
and many of these commitments are expected to expire without being
drawn upon. Therefore, the total commitments do not necessarily
represent future cash requirements. Each potential borrower and the
necessary collateral are evaluated on an individual basis.
Collateral varies, but may include real property, bank deposits,
debt or equity securities or business assets.
Stand-by letters of credit are commitments written to guarantee the
performance of a customer to a third party. These guarantees are
issued primarily relating to purchases of inventory by commercial
customers and are typically short-term in nature. Credit risk is
similar to that involved in extending loan commitments to customers
and accordingly, evaluation and collateral requirements similar to
those for loan commitments are used. Virtually all such commitments
are collateralized.
3. EARNINGS PER SHARE COMPUTATION
Basic earnings per share is computed by dividing net income by the
weighted average common shares outstanding for the period (6,493,000
and 6,410,000 for the three and six month periods ended June 30,
1999, and 6,025,000 and 6,016,000 for the three and six month
periods ended June 30, 1998). Diluted earnings per share reflects
the potential dilution that could occur if outstanding stock options
and stock purchase warrants were exercised. Diluted earnings per
share is computed by dividing net income by the weighted average
common shares outstanding for the period plus the dilutive effect of
options and warrants (185,000 and 255,000 for the three and six
month periods ended June 30, 1999 and 590,000 and 524,000 for the
three and six month periods ended June 30, 1998).
4. COMPREHENSIVE EARNINGS
In 1998, Central Coast Bancorp adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income",
which requires that an enterprise report, by major components and as
a single total, the change in net assets during the period from
nonowner sources. Such amounts are as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Earnings $ 1,994 $ 1,709 $ 3,719 $ 3,223
Other comprehensive income (loss)- Net unrealized
gain on available-for-sale securities (1,504) 230 (2,296) 115
Reclassification adjustment for gains included in
income, net of taxes of $4,000 and $(13,000)
for the three and six month periods ended
June 30, 1999. (5) - 8 -
-------------- -------------- ------------- --------------
Total comprehensive earnings $ 485 $ 1,939 $ 1,431 $ 3,338
============== ============== ============= ==============
</TABLE>
5. STOCK SPLIT
On January 25, 1999 the Board of Directors declared a five-for-four
stock split, which was distributed on February 26, 1999, to
shareholders of record as of February 8, 1999. All share and per
share data have been retroactively adjusted to reflect the stock
split.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to the historical information contained herein, this
report on Form 10-Q contains certain forward-looking statements.
The reader of this report should understand that all such
forward-looking statements are subject to various uncertainties and
risks that could affect their outcome. The Company's actual results
could differ materially from those suggested by such forward-looking
statements. Changes to such risks and uncertainties, which could
impact future financial performance, include, among others: (1)
competitive pressures in the banking industry; (2) changes in the
interest rate environment; (3) general economic conditions,
nationally, regionally and in the operating market areas of the
Company and the Banks; (4) changes in the regulatory environment;
(5) changes in business conditions and inflation; (6) changes in
securities markets; and (7) effects of possible Year 2000 problems.
This entire report should
be read to put such forward-looking statements in context. To gain
a more complete understanding of the uncertainties and risks
involved in the Company's business this report should be read in
conjunction with Central Coast Bancorp's annual report on Form 10-K
for the year ended December 31, 1998.
Interest income and net interest income are presented on a fully
taxable equivalent basis (FTE) within the Management's Discussion
and Analysis.
Business Organization
Central Coast Bancorp (Nasdaq symbol CCBN) (the "Company") is a
California corporation organized in 1994, and is the parent company
Bank of Salinas and Cypress Bank, state-chartered banks,
headquartered in Salinas and Seaside, California, respectively (the
("Banks"). Other than its investment in the Banks, the Company
currently conducts no other significant business activities,
although it is authorized to engage in a variety of activities which
are deemed closely related to the business of banking upon prior
approval of the Board of Governors of the Federal Reserve System
(the"FRB"), the Company's principal regulator.
The Banks offer a full range of commercial banking services,
including a diverse range of traditional banking products and
services to individuals, merchants, small and medium-sized
businesses, professionals and agribusiness enterprises located in
the Salinas Valley and Monterey Peninsula.
Overview
The Company reported record quarterly net income of $1,994,000 for
the quarter ended June 30, 1999. This represents a 16.7% increase
over the $1,709,000 reported for the same period of 1998. Diluted
earnings per share for the respective quarters were $0.30 versus
$0.26. The return on equity (ROE) and the return on assets (ROA)
for the second quarter 1999 were 15.2% and 1.45% as compared to
14.8% and 1.40% for the same period in 1998.
Net income for the six months ended June 30, 1999 and 1998 was
$3,719,000 and $3,223,000 with diluted earnings per share of $0.56
and $0.49, respectively. For the first six months of 1999 ROE was
14.4% and ROA was 1.39%, as compared to 14.3% and 1.33% for the same
period in 1998. The earnings per share for the 1998 periods have
been adjusted for the 5 for 4 stock split distributed on February
26, 1999.
Year over year internal growth was strong, as assets of the Company
increased $70,873,000 (14.1%) to total $572,753,000 at June 30,
1999. Loans totaled $360,412,000, up $84,067,000 (30.4%) from the
ending balances on June 30, 1998. Deposit growth in the like
period, excluding $20,000,000 of State of California certificates of
deposit, was 7.4% with ending deposit balances at $504,171,000.
The strong second quarter earnings reflect the results of continuing
loan demand, restructuring the investment portfolio during the past
year and improved operating efficiency.
<PAGE>
The following table provides a summary of the major elements of
income and expense for the periods indicated.
Condensed Comparative Income Statement
<TABLE>
<CAPTION>
Percentage Percentage
Three monts ended Change Six months ended Change
June 30, Increase June 30, Increase
(In thousands) 1999 1998 (Decrease) 1999 1998 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest income (1) $10,229 $9,296 10% $19,867 $18,303 9%
Interest expense 3,329 3,415 -3% 6,442 6,750 -5%
-------- ------- --------- --------- -------- ---------
Net interest income 6,900 5,881 17% 13,425 11,553 16%
Provision for loan losses 410 24 1608% 537 41 1210%
-------- ------- --------- --------- -------- ---------
Net interest income after
provision for loan losses 6,490 5,857 11% 12,888 11,512 12%
Noninterest income 591 530 12% 1,133 924 23%
Noninterest expense 3,824 3,458 11% 7,647 6,910 11%
-------- ------- --------- --------- -------- ---------
Net income before income taxes 3,257 2,929 11% 6,374 5,526 15%
Tax equivalent adjustment 198 15 1220% 374 30 1147%
Income taxes 1,065 1,205 -12% 2,281 2,273 0%
-------- ------- --------- --------- -------- ---------
Net income $1,994 $1,709 17% $3,719 $3,223 15%
======== ======= ========= ========= ======== =========
1) Interest on tax-free securities is reported on tax equivalent basis.
</TABLE>
<PAGE>
Net interest income / net interest margin
Net interest income, the difference between interest earned on loans
and investments and interest paid on deposits and other borrowings,
is the principal component of the Banks' earnings. Net interest
margin is net interest income expressed as a percentage of average
earning assets.
Second quarter 1999 net interest income of $6,900,000 was a 17.3%
increase of $1,019,000 over the same period in 1998. Interest
income was up $933,000 (10.0%). Average loan balances were
$73,547,000 (27.8%) higher in the second quarter of 1999 versus the
year earlier period. This volume difference added $1,852,000 to
interest income. It was offset in part by a 100 basis point
decrease in loan yields, which reduced interest income by $835,000.
The rate decrease was the result of the three 25 basis point
downward adjustments in the second half of 1998 and a competitive
rate environment. Average balances for investment securities and
Federal funds sold decreased $15,372,000 to $161,539,000. Due to
repositioning of the investment portfolio, interest income related
to investments and Federal funds sold decreased $84,000 in the
second quarter of 1999 versus the year earlier period.
For the three months ended June 30, 1999, interest expense was down
$86,000 (2.5%) from the year earlier quarter. Increased interest
expense of $366,000 resulting from higher average balances in
interest bearing liabilities during the second quarter of 1999
versus the year earlier period was offset by a 50 basis point
decrease in average rates paid which decreased interest expense
$452,000. Net interest margin for the second quarters of 1999 and
1998 were 5.5% and 5.3%, respectively.
For the first six-month period of 1999, interest income increased
$1,564,000 to $19,867,000. Average balances of both loans and
investment securities were higher in 1999. These higher balances
added $4,865,000 to interest income. The average balance in Federal
funds sold was lower by $53,323,000 in the first six months of 1999
versus the prior year. Interest income derived from Federal funds
sold consequently was $1,455,000 lower in the period. The average
yield on loans was 100 basis lower in the 1999 six-month period due
to the downward rate adjustments and competitive rate environment
discussed in the quarterly results paragraph above. The lower
yields reduced interest income by $1,601,000. The average yields
received on all earning assets for the first six months of 1999 was
8.2% as compared to 8.4% for the same period in 1998.
Interest expense for the six-month period decreased $308,000 (4.6%)
from the expense in the same 1998 period. Volume increases in
deposits and borrowings added $586,000 of interest expense. The
volume increases were more than offset by lower rates. Overall
average rates paid on interest-bearing liabilities in the first six
months of 1999 decreased 50 basis points to 3.6% from the same
period in 1998. The decrease attributable to the lower rates was
$894,000.
The combined effect of the increase in interest income coupled with
the decrease in interest expense for the six-month period ending
June 30, 1999, resulted in an increase in net interest income of
$1,872,000 or 16.2% as compared to the first six months of 1998.
Net interest margin rose 20 basis points to 5.5%.
The first two following tables provide a summary of the components
of net interest income and the changes within the components for the
periods indicated. The second two tables set forth a summary of the
changes in interest income and interest expense from changes in
average asset and liability balances (volume) and changes in average
interest rates.
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Three months ended June 30
(Taxable Equivalent Basis) 1999 1998
Avg. Avg. Avg. Avg.
(In thousands, except percentages) Balance Interest Yield Balance Interest Yield
------- -------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Earning Assets
Loans (1) (2) $338,094 $7,686 9.1% $264,547 $6,669 10.1%
Taxable investments 125,300 1,951 6.2% 131,703 1,998 6.1%
Tax-exempt securities (tax equivalent basis) 35,903 590 6.6% 2,089 44 8.4%
Federal funds sold 336 2 2.4% 43,119 585 5.4%
-------- -------- ------- ------
Total Earning Assets 499,633 $10,229 8.2% 441,458 $9,296 8.4%
-------- ------
Cash & due from banks 41,023 38,502
Other assets 12,446 10,787
--------- -------
$553,102 $490,747
========= ========
Liabilities & Shareholders'
Equity:
Interest bearing liabilities:
Demand deposits $102,864 $ 457 1.8% $86,377 $ 416 1.9%
Savings 101,001 816 3.2% 97,424 925 3.8%
Time deposits 156,071 1,907 4.9% 148,518 2,074 5.6%
Other borrowings 12,264 149 4.9% - - n/a
-------- ------ -------- ------
Total interest bearing liabilities 372,200 3,329 3.6% 332,319 3,415 4.1%
Demand deposits 123,985 ------ 108,111 ------
Other Liabilities 4,311 4,036
-------- --------
Total Liabilities 500,496 444,466
Shareholders' Equity 52,606 46,281
-------- --------
$553,102 $490,747
======== ========
Net interest income & margin (3) $6,900 5.5% $5,881 5.3%
====== ==== ====== ====
</TABLE>
(1) Loan interest income includes fee income of $307,000 and $262,000
for the three month period June 30, 1999 and 1998, respectively.
(2) Includes the average allowance for loan losses of $4,536,000 and
$4,206,000 and average deferred
loan fees of $853,000 and $528,000 for the three months ended June
30, 1999 and 1998, respectively.
(2) Net interest margin is computed by dividing net interest income by
the total average earning assets.
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Six months ended June 30,
(Taxable Equivalent Basis) 1999 1998
Avg Avg Avg Avg
(In thousands, except percentages) Balance Interest Yield Balance Interest Yield
------- -------- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Earning Assets
Loans (1) (2) $324,069 $14,827 9.2% $255,039 $12,936 10.2%
Taxable investments 126,377 3,844 6.1% 125,593 3,748 6.0%
Tax-exempt securities (tax equivalent basis) 34,118 1,121 6.6% 2,089 89 8.5%
Federal funds sold 3,267 75 4.6% 56,590 1,530 5.5%
-------- -------- --------- -------
Total Earning Assets 487,831 $19,867 8.2% 439,311 $18,303 8.4%
Cash & due from banks 41,708 -------- 38,112 -------
Other assets 11,677 10,446
--------- ---------
$541,216 $487,869
========= =========
Liabilities & Shareholders'
Equity:
Interest bearing liabilities:
Demand deposits $97,974 $ 812 1.7% $86,486 $ 837 2.0%
Savings 104,901 1,706 3.3% 98,492 1,867 3.8%
Time deposits 151,585 3,748 5.0% 145,289 4,046 5.6%
Other borrowings 7,222 176 4.9% - - n/a
-------- ----- ------- -----
Total interest bearing liabilities 361,682 6,442 3.6% 330,267 6,750 4.1%
Demand deposits 123,125 ----- 108,344 -----
Other Liabilities 4,232 3,705
-------- -------
Total Liabilities 489,039 442,316
Shareholders' Equity 52,177 45,553
-------- --------
$541,216 $487,869
======== ========
Net interest income & margin (3) $13,425 5.5% $11,553 5.3%
======= ==== ======= ====
</TABLE>
(1) Loan interest income includes fee income of $548,000 and
$506,000 for the six month periods ended June 30, 1999 and
1998, respectively.
(2) Includes the average allowance for loan losses of $4,452,000 and
$4,207,000 and average deferred loan fees of $786,000 and $538,000
for the six months ended June 30, 1999 and 1998, respectively.
(3) Net interest margin is computed by dividing net interest income
by the total average earning assets.
<PAGE>
<TABLE>
<CAPTION>
Volume/Rate Analysis
(in thousands) Three Months Ended June 30, 1999 over 1998
Increase (decrease) due to change in:
Net
Volume Rate (4) Change
------ -------- ------
<S> <C> <C> <C>
Interest-earning assets:
Net Loans (1)(2) $ 1,852 $(835) $1,017
Taxable investment securities (97) 50 (47)
Tax exempt investment securities (3) 708 (162) 546
Federal funds sold (576) (7) (583)
-------- ------ -------
Total 1,887 (954) 933
-------- ------ -------
Interest-bearing liabilities:
Demand deposits 78 (37) 41
Savings deposits 34 (143) (109)
Time deposits 105 (272) (167)
Other borrowings 149 - 149
-------- ------ ------
Total 366 (452) (86)
-------- ------ ------
Interest differential $ 1,521 $(502) $1,019
======== ====== =======
</TABLE>
(1) The average balance of non-accruing loans is immaterial as a
percentage of total loans and, as such, has been included in net loans.
(2) Loan fees of $307,000 and $262,000 for the three months ended June
30, 1999 and 1998, respectively, have been included in the interest
income computation.
(3) Includes taxable-equivalent adjustments that relate to income on
certain securities that is exempt from
federal income taxes. The effective federal statutory tax rate was
34% for 1999 and 1998.
(4) The rate / volume variance has been included in the rate variance.
<PAGE>
<TABLE>
<CAPTION>
Volume/Rate Analysis
(in thousands) Six Months Ended June 30, 1999 over 1998
Increase (decrease) due to change in:
Net
Volume Rate (4) Change
------ ------- ------
<S> <C> <C> <C>
Interest-earning assets:
Net Loans (1)(2) $3,492 $ (1,601) $ 1,891
Taxable investment securities 23 73 96
Tax exempt investment securities (3) 1,350 (318) 1,032
Federal funds sold (1,454) (1) (1,455)
------- --------- --------
Total 3,411 (1,847) 1,564
------- --------- --------
Interest-bearing liabilities:
Demand deposits 114 (139) (25)
Savings deposits 121 (282) (161)
Time deposits 175 (473) (298)
Other borrowings 176 - 176
------- --------- --------
Total 586 (894) (308)
------- --------- --------
Interest differential $2,825 $ (953) $ 1,872
======= ========= ========
</TABLE>
(1) The average balance of non-accruing loans is immaterial as a
1percentage of total loans and, as such, has been included net loans.
(2) Loan fees of $548,000 and $506,000 for the six months ended June 30,
1999 and 1998, respectively, have been included in the interest
income computation.
(3) Includes taxable-equivalent adjustments that relate to income on
certain securities that is exempt from federal income taxes.
The effective federal statutory tax rate was 34% for 1999 and 1998.
(4) The rate / volume variance has been included in
the rate variance.
Provision for Loan Losses
The Banks provided $410,000 for loan losses in the second quarter of
1999 versus $24,000 in 1998. The Banks had net loan recoveries of
$74,000 in the second quarter of 1999 versus $3,000 in the year
earlier period. The additional provision in 1999 was made primarily
as a result of increases in loan balances. For the six-month period
ended June 30, 1999, the Banks have provided $537,000 for loan
losses versus $41,000 in the year earlier period. In this six-month
period, the Banks have recorded net loan charge-offs of $7,000 as
compared to $36,000 in the first six-months of 1998.
Noninterest Income
Noninterest income consists primarily of service charges on deposit
accounts and fees for miscellaneous services. Noninterest income
totaled $591,000 in the second quarter of 1999, which was up $61,000
(11.5%) over the same period in 1998. The Banks realized a gain of
$45,000 from the sale of investment securities during the second
quarter of 1999. Most other increases were due to higher volumes.
For the first six-months of 1999, noninterest income was $1,133,000,
which reflected a 22.6% increase over the same period last year.
Service charges on deposits were up $66,000 (11.2%) due to higher
volumes and some selective fee increases implemented in the second
and fourth quarters in 1998. Other service charges and fees were up
$57,000 (52%) mostly due to new fee structures on several services
that were implemented in the fourth quarter of 1998. Also, fees from
mortgage originations increased $62,000 (69%) as activity levels
were higher in the first six months of 1999. As mortgage rates have
risen in the second quarter of 1999, the mortgage originations have
begun to slow down. Management does not expect continued growth in this
area during the balance of 1999.
Noninterest Expense
Second quarter 1999 noninterest expense increased $366,000 (10.6%)
to $3,824,000 from the 1998 second quarter. Salary and employee
benefits increased $198,000 (9.6%) due to increased staff for the
Westridge branch which opened in December 1998, higher commissions
on mortgage originations, additional staff due to growth, higher
benefit costs, and normal salary increases. On a quarter over
quarter basis, premise and fixed asset expenses were higher by
$82,000 (16.2%). Costs associated with the Westridge branch, the
new computer system and network upgrades installed in the second
half of 1998 were the major factors contributing to the increased
premise and fixed asset expenses. The overhead efficiency ratio for
the second quarter of 1999 improved to 52.4% as compared to 54.1% in
the same quarter of 1998.
Noninterest expenses for the first six-month period of 1999 were
$7,647,000 versus $6,910,000 for the same period in 1998. Salaries
and benefits increased $373,000 (8.9%) for the first six months of
1999 due to increased staffing levels and higher commissions on
mortgage originations, as indicated in the previous paragraph.
Premise and fixed asset expenses were up $240,000 (26.0%) due to the
addition of another branch and to increased computer system upgrades
as detailed above. Other costs increased $124,000 (7.0%) that
included $94,000 of one-time costs associated with merging Cypress
Bank into Bank of Salinas and changing the Bank's name. The overhead
efficiency ratio for the first six-months of 1999 improved to 53.9%
as compared to 55.5% in the same period of 1998.
Provision for Income Taxes
As a result of investments in tax qualified municipal bonds, the
Company revised its estimated income tax rate for the six months
ended June 30, 1999 to 38.0% from 41.3% in the first quarter of
1999. As a result of the recalculation of the year-to-date tax
rate, the effective rate for the second quarter of 1999 was 34.8%.
The second quarter and first six-month tax rate for 1998 was 41.4%.
Securities
At June 30, 1999 available-for-sale securities had a market value of
$156,704,000 with a cost basis of $159,967,000. The unrealized
losses of $3,263,000 at June 30, 1999 was an increase of $2,558,000
from the ending balance at March 31, 1999. The increase in
unrealized losses was the result of increasing interest rates and
changing spreads in the securities market during the second
quarter. The Company does not anticipate selling any of these
securities for liquidity needs in the immediate future.
Loans
Ending loan balances at June 30, 1999 were $360,412,000, which was
an increase of $42,074,000 (13.2%) from year-end 1998 balances and
$84,067,000 (30.4%) from June 30, 1998 balances. All categories of
loans were higher on a year over year basis. Loan demand has
remained strong heading into the third quarter of 1999.
Nonperforming Assets
Nonperforming assets are comprised of loans delinquent 90 days or
more with respect to interest or principal, loans for which the
accrual of interest has been discontinued, and other real estate
which has been acquired through foreclosure and is awaiting
disposition.
Unless well secured and in the process of collection, loans are
placed on nonaccrual status when a loan becomes 90 days past due as
to interest or principal, when the payment of interest or principal
in accordance with the contractual terms of the loan becomes
uncertain or when a portion of the principal balance has been
charged off. When a loan is placed on nonaccrual status, the
accrued and unpaid interest receivable is reversed and the loan is
accounted for on the cash or cost recovery method thereafter, until
qualifying for return to accrual status. Generally, a loan may be
returned to accrual status when all delinquent interest and
principal become current in accordance with the terms of the loan
agreement and remaining principal is considered collectible or when
the loan is both well secured and in process of collection.
<PAGE>
Real estate and other assets acquired in satisfaction of
indebtedness are recorded at the lower of estimated fair market
value net of anticipated selling costs or the recorded loan amount,
and any difference between this and the amount is treated as a loan
loss. The costs of maintaining other real estate owned and gains or
losses on the subsequent sale are reflected in current earnings.
The following is a summary of nonperforming assets:
<TABLE>
<CAPTION>
(In thousands) June 30, December 31,
1999 1998
-------- -------
<S> <C> <C>
Past due 90 days or more and still accruing :
Real estate $ 193 $ 1,174
Commercial 1,080 73
Installment and other - -
-------- --------
1,273 1,247
-------- --------
Nonaccrual:
Real estate 523 543
Commercial 1,179 333
Installment and other - -
-------- --------
1,702 876
-------- --------
Total nonperforming loans 2,975 2,123
-------- --------
Other real estate owned 515 -
-------- --------
Total nonperforming assets $ 3,490 $ 2,123
======== ========
Allowance for loan losses as a percentage of nonperforming loans 148% 205%
Nonperforming loans to total loans 0.93% 0.68%
</TABLE>
Nonperforming loans increased $852,000 during the first six months
of 1999. Three SBA loans (SBA guaranteed from 75% to 90%) totaling
$2,150,000 were added to the nonperforming status since the end of
1998. These loans account for a significant portion of the total
category. Coverage ratio of the allowance for loan losses to
nonperforming loans changed from 205% at year-end to 164%. Overall
loan quality has remained high during the first six months of 1999.
Allowance for Loan Losses
The allowance for loan losses reflects management's judgement as to
the level considered adequate to absorb probable losses inherent in
the loan portfolio. The allowance is increased by provisions
charged to expense and reduced by loan charge-offs net of
recoveries. Management determines an appropriate provision based
upon information currently available to analyze loan loss potential,
including (1) the loan portfolio balance in the period; (2) a
comprehensive grading and review of new and existing loans
outstanding; (3) actual previous charge-offs; and, (4) changes in
economic conditions.
In determining the provision for estimated losses related to
specific major loans, management evaluates its allowance on an
individual loan basis, including an analysis of the credit
worthiness, cash flows and financial status of the borrower, and the
condition and the estimated value of the collateral. Specific
valuation allowances for secured loans are determined by the excess
of recorded investment in the loan over the fair market value or net
realizable value where appropriate, of the collateral. In determining
overall generalvaluation allowances to be maintained and the loan loss
allowance ratio, management evaluates many factors including prevailing
and forecasted economic conditions, regular reviews of the quality of
loans, industry experience, historical loss experience, composition
and geographic concentrations of the loan portfolio, the borrowers'
ability to repay and repayment performance and estimated collateral
values.
Management believes that the allowance for loan losses at June
30,1999 is adequate, based on information currently available.
However, no prediction of the ultimate level of loans charged off in
future years can be made with any certainty.
<PAGE>
<TABLE>
<CAPTION>
The following table summarizes activity in the allowance for loan
losses for the periods indicated:
Three months ended June 30, Six months ended June 30,
(In thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance $ 4,398 $ 4,201 $ 4,352 $ 4,223
Provision charged to expense 410 24 537 41
Loans charged off (37) (21) (127) (90)
Recoveries 111 24 120 54
-------- -------- ------- -------
Ending balance $ 4,882 $ 4,228 $ 4,882 $ 4,228
======== ======== ======= =======
Ending loan portfolio $ 360,412 $ 276,345
========= =========
Allowance for loan losses as percentage of
ending loan portfolio 1.35% 1.53%
</TABLE>
Liquidity
Liquidity management refers to the Company's ability to provide
funds on an ongoing basis to meet fluctuations in deposit levels as
well as the credit needs and requirements of its clients. Both
assets and liabilities contribute to the Company's liquidity
position. Federal funds lines, short-term investments and
securities, and loan repayments contribute to liquidity, along with
deposit increases, while loan funding and deposit withdrawals
decrease liquidity. The Banks assess the likelihood of projected
funding requirements by reviewing historical funding patterns,
current and forecasted economic conditions and individual client
funding needs. Commitments to fund loans and outstanding standby
letters of credit at June 30,1999 were approximately $130,722,000
and $2,083,000, respectively. Such loans relate primarily to
revolving lines of credit and other commercial loans, and to real
estate construction loans.
The Company's sources of liquidity consist of its deposits with
other banks, overnight funds sold to correspondent banks, unpledged
short-term, marketable investments and loans available for sale. On
June 30, 1999, consolidated liquid assets totaled $172.8 million or
30.2% of total assets as compared to $153.5 million or 28.2% of
total consolidated assets on December 31, 1998. In addition to
liquid assets, the Banks maintain lines of credit with correspondent
banks for up to $80,000,000 available on a short-term basis.
Informal agreements are also in place with various other banks to
purchase participations in loans, if necessary. The Company serves
primarily a business and professional customer base and, as such,
its deposit base is susceptible to economic fluctuations.
Accordingly, management strives to maintain a balanced position of
liquid assets to volatile and cyclical deposits.
Capital Resources
The Company's total shareholders' equity was $51,667,000 at June 30,
1999 compared to $51,199,000 at December 31, 1998.
The Company and the Banks are subject to regulations issued by the
Board of Governors and the FDIC which require maintenance of a
certain level of capital. A banking organization's total qualifying
capital includes two components, core capital (Tier 1 capital) and
supplementary capital (Tier 2 capital). Core capital, which must
comprise at least half of total capital, includes common
shareholders' equity, qualifying perpetual preferred stock, trust
preferred securities and minority interests, less goodwill.
Supplementary capital includes the allowance for loan losses
(subject to certain limitations), other perpetual preferred stock,
trust preferred securities, certain other capital instruments and
term subordinated debt. The Company's major capital components are
shareholders' equity in core capital, and the allowance for loan
losses in supplementary capital.
<PAGE>
The following table shows the Company's actual capital amounts and
ratios at June 30, 1999 and December 31, 1998 as well as the minimum
capital ratios for capital adequacy under the regulatory framework:
<TABLE>
<CAPTION>
For Capital
Actual Adequacy Purposes:
Amount Ratio Amount Ratio
---------------------- ----------------------------
<S> <C> <C> <C> <C>
As of June 30, 1999
Total Capital (to Risk Weighted Assets): $ 57,234,000 14.2% $ 32,342,000 8.0%
Tier 1 Capital (to Risk Weighted Assets): 52,394,000 13.0% 16,171,000 4.0%
Tier 1 Capital (to Average Assets): 52,394,000 9.5% 22,124,000 4.0%
As of December 31, 1998
Total Capital (to Risk Weighted Assets): 53,588,000 14.8% 29,004,000 8.0%
Tier 1 Capital (to Risk Weighted Assets): 49,326,000 13.6% 14,502,000 4.0%
Tier 1 Capital (to Average Assets): 49,326,000 9.9% 19,935,000 4.0%
</TABLE>
Year 2000
As the year 2000 approaches, a critical issue has emerged regarding
how existing application software programs and operating systems can
accommodate this date value. In brief, many existing application
software products in the marketplace were designed to only
accommodate a two digit date position which represents the year
(e.g., "95" is stored on the system and represents the year 1995).
As a result, the year 1999 (i.e., "99") could be the maximum date
value these systems will be able to accurately process. This is not
just a banking problem, as corporations around the world and in all
industries are similarly impacted.
The Company is uncertain regarding the consequences of the Year 2000
(Y2K) issue on the future results of operations, liquidity and
financial condition; but believes that failure to ensure that its
systems are in compliance with Y2K requirements could have a
material adverse effect on its business. As a result, the Company
has made addressing Y2K issues a priority of management and the
Board. Based upon actions implemented to date, the Company
currently anticipates that it will be successful in addressing Y2K
issues and anticipates no materially adverse processing problems.
The Company is subject to examination by the Federal Deposit
Insurance Corporation and the Federal Reserve Bank under their Y2K
Phase I and Phase II programs. Management is not currently aware of
any conditions cited as unsatisfactory by such federal bank
regulatory agencies.
All mission critical systems have been identified by the Company,
and the Company has tested and developed contingency plans, for
each. The term"mission critical" refers to an application or system
that is vital to the successful continuance of core business
activity. Significantly all mission critical hardware and software
utilized by the Company are provided by third parties. This
requires that the Company be in close contact with relevant vendors
and contractors as it conducts testing and contingency planning.
Testing on the Company's mission critical systems is substantially
complete and monitoring of vendor and customer relationships is
ongoing.
The Company has made disclosures to all existing and new customers
regarding the importance of the Y2K issue and its relevance to the
Company and the customer. The Company is conducting an ongoing
effort to identify customers that represent material risk exposure
to the institution, to evaluate their Y2K preparedness and risk to
the Company and to implement appropriate risk controls.
The Company also continues to evaluate the cost to address Y2K
issues. Most costs incurred to date are in conjunction with the
planned replacement of systems. The cost of system replacements
accelerated to meet Y2K requirements and Y2K project specific costs
have not been significant to the operations of the Company as a
whole. Management estimates that the incremental cost of mitigating
Year 2000 risk exclusive of management time that has been redirected
to focus on this matter will be approximately $171,000.
Despite efforts undertaken to date and as projected, there can be no
assurance that problems will not arise which could have an adverse
impact upon the Company due, among other matters, to the
complexities involved in computer programming related to resolution
of Year 2000 problems and the fact that the systems of other
companies on which Central Coast Bancorp and its subsidiaries, Bank
of Salinas and Cypress Bank, may rely must also be corrected on a
timely basis. Many phases of the Company's Y2K preparedness plan
have been completed: the Company has identified, assessed and
prioritized mission critical systems; developed Year 2000 testing
strategies and plans; implemented a customer due diligence program;
and tested most mission critical systems. But, delays, mistakes or
failures in correcting Y2K system problems by other companies on
which Central Coast Bancorp and its subsidiaries may rely, could
have a significant adverse impact upon Central Coast Bancorp and its
subsidiaries, Bank of Salinas and Cypress Bank, and their ability to
mitigate the risk of adverse impact of Y2K problems for their
customers.
The disclosure set forth above contains forward-looking statements.
Specifically, such statements are contained in sentences including
the words "expect" or "anticipate" or "could" or "should". Such
forward-looking statements are subject to inherent risks and
uncertainties that may cause actual results to differ materially
from those contemplated by such forward-looking statements. The
factors that may cause actual results to differ materially from
those contemplated by the forward-looking statements include the
failure by third parties to remedy Y2K issues or the inability of
the Company to complete testing software changes on the time
schedules currently expected. Nevertheless, the Company currently
expects that its Y2K compliance efforts will be successful without
material adverse effects on its business.
Subsequent events
Previous to July 9, 1999, the Company operated two banks
subsidiaries, Bank of Salinas and Cypress Bank. Effective at the
close of business on July 9, 1999. Cypress Bank was merged into the
Bank of Salinas and the name of the Bank of Salinas was changed to
Community Bank of Central California.
Item 3. MARKET RISK MANAGEMENT
The reader is referred to Item 7A of the Company's 1998 Annual
Report on Form 10-K for information on market risk. There have been
no significant changes since December 31, 1998.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings.
None.
Item 2. Changes in securities.
None.
Item 3. Defaults upon senior securities.
None.
Item 4. Submission of matters to a vote of security holders.
THE ANNUAL MEETING OF THE SHAREHOLDERS WAS HELD ON MAY 24, 1999.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Number of Affirmative Votes
C. EDWARD BOUTONNET 4,293,063
BRADFORD G. CRANDALL 4,289,074
ALFRED P. GLOVER 4,289,432
MICHAEL T. LAPSYS 4,289,207
DUNCAN L. McCARTER 4,293,018
ROBERT M. MRAULE,
D.D.S., M.D. 4,289,207
LOUIS M. SOUZA 4,293,018
MOSE E. THOMAS, JR 4,289,207
NICK VENTIMIGLIA 4,293,063
PROPOSAL NO. 2: APPROVAL OF DELOITTE & TOUCHE LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
1999 FISCAL YEAR.
<TABLE>
<CAPTION>
Number of Number of Number of Shares
Votes Cast For Votes Cast Against Indicated As Abstentions
----------------- ------------------ ------------------------
<S> <C> <C> <C>
4,144,550 1,796 157,905
</TABLE>
TOTAL NUMBER OF SHARES FOR WHICH PROXIES HAVE BEEN
RECEIVED: 4,304,251.
Item 5. Other information.
None.
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits
(2.1) Agreement and Plan of Reorganization and Merger
by and between Central Coast Bancorp, CCB
Merger Company and Cypress Coast Bank dated as
of December 5, 1995, incorporated by reference
from Exhibit 99.1 to Form 8-K filed with the
Commission on December 7, 1995.
(3.1) Articles of Incorporation, incorporated by
reference from Exhibit 4.8 to Registration
Statement on Form S-8 No. 33-89948, filed with
the Commission on March 3, 1995.
(3.2) Bylaws, as amended, incorporated by reference
from the Company's 1998 Annual Report on Form
10K filed with the Commission on March 29,1999.
(4.1) Specimen form of Central Coast Bancorp stock
certificate incorporated by reference from the
Company's 1994 Annual Report on Form 10K filed
with the Commission on March 31, 1995.
(10.1) Lease agreement dated December 12, 1994,
related to 301 Main Street, Salinas, California
incorporated by reference from the Company's
1994 Annual Report on Form 10K filed with the
Commission on March 31, 1995.
(10.2) King City Branch Lease incorporated by
reference from Exhibit 10.3 to Registration
Statement on Form S-4 No. 33-76972, filed with
the Commission on March 28, 1994.
(10.3) Amendment to King City Branch Lease
incorporated by reference from Exhibit 10.4 to
Registration Statement on Form S-4 No.
33-76972, filed with the Commission on March
28, 1994.
*(10.4) 1982 Stock Option Plan, as amended,
incorporated by reference from Exhibit 4.2 to
Registration Statement on Form S-8 No.
33-89948, filed with the Commission on March 3,
1995.
*(10.5) Form of Nonstatutory Stock Option Agreement
under the 1982 Stock Option Plan incorporated
by reference from Exhibit 4.6 to Registration
Statement on Form S-8 No. 33-89948, filed with
the Commission on March 3, 1995.
*(10.6) Form of Incentive Stock Option Agreement under
the 1982 Stock Option Plan incorporated by
reference from Exhibit 4.7 to Registration
Statement on Form S-8 No. 33-89948, filed with
the Commission on March 3, 1995.
*(10.7) 1994 Stock Option Plan incorporated by
reference from Exhibit 4.1 to Registration
Statement on Form S-8 No. 33-89948, filed with
the Commission on March 3, 1995.
*(10.8) Form of Nonstatutory Stock Option Agreement
under the 1994 Stock Option Plan incorporated
by reference from Exhibit 4.3 to Registration
Statement on Form S-8 No. 33-89948, filed with
Commission on March 3, 1995.
*(10.9) Form of Incentive Stock Option Agreement under
the 1994 Stock Option Plan incorporated by
reference from Exhibit 4.4 to Registration
Statement on Form S-8 No. 33-89948, filed with
the commission on March 3, 1995.
*(10.10) Form of Director Nonstatutory Stock Option
Agreement under the 1994 Stock Option Plan
incorporated by reference from Exhibit 4.5 to
Registration Statement on Form S-8 No.
33-89948, filed with the commission on March 3,
1995.
*(10.11) Form of Bank of Salinas Indemnification
Agreement for directors and executive officers
incorporated by reference from Exhibit 10.9 to
Amendment No. 1 to Registration Statement on
Form S-4 No. 33-76972, filed with the
Commission on April 15, 1994.
*(10.12) 401(k) Pension and Profit Sharing Plan Summary
Plan Description incorporated by reference from
Exhibit 10.8 to Registration Statement on Form
S-4 No. 33-76972, filed with the Commission on
March 28, 1994.
*(10.13) Specimen form of Employment Agreement
incorporated by reference from Exhibit 10.13 to
the Company's 1996 Annual Report on Form 10K
filed with the Commission on March 31, 1997.
*(10.14) Specimen form of Executive Salary Continuation
Agreement incorporated by reference from
Exhibit 10.14 to the Company's 1996 Annual
Report on Form 10K filed with the Commission on
March 31, 1997.
*(10.15) 1994 Stock Option Plan, as amended,
incorporated by reference from Exhibit A to the
Proxy Statement filed with the Commission on
September 3, 1996 in connection with Central
Coast Bancorp's 1996 Annual Shareholders'
Meeting held on September 23, 1996.
(10.16) Specimen of Indemnification Agreement,
incorporated by reference from Exhibit D to the
Proxy Statement filed with the Commission on
September 3, 1996 in connection with Central
Coast Bancorp's 1996 Annual Shareholders'
Meeting held on September 23, 1996.
(10.17) Purchase and Assumption Agreement for the
Acquisition of Wells Fargo Bank Branches
incorporated by reference from Exhibit 10.17 to
the Company's 1996 Annual Report on Form 10K
filed with the Commission on March 31, 1997.
*(10.18) Employee Stock Ownership Plan and Trust
Agreement incorporated by reference from
Exhibit 10.18 to the Company's 1996 Annual
Report on Form 10K filed with the Commission on
March 31, 1997.
(10.19) Lease agreement dated March 7, 1997, related to 484
Lighthouse Avenue, Monterey, California
incorporated by reference from Exhibit 10.19 to
the Company's 1997 Annual Report on Form 10K
filed with the Commission on March 27, 1998.
(21.1) The Registrant's only subsidiaries
are its wholly-owned subsidiaries, Bank of
Salinas and Cypress Bank.
(27.1) Financial Data Schedule
*Denotes management contracts, compensatory plans or
arrangements.
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
- ----------------------------------------------------------------------
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
July 29, 1999 CENTRAL COAST BANCORP
/S/ROBERT M. STANBERRY
By: ------------------------
(Chief Financial Officer,
Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
27.1 Financial Data Schedule 25
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This Schedule Contains Summary Financial Information
Extracted >From (a) Item 7 - 'Financial Statements And
Supplementary Data" And Is Qualified In Its Entirety By Reference
To Such (b) Financial Statements Included In This Report And
Incorporated Herein By Reference.
</LEGEND>
<CIK> 0000921085
<NAME> CENTRAL COAST BANCORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> Apr-01-1999
<PERIOD-END> Jun-30-1999
<CASH> 48,052
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 156,704
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 360,412
<ALLOWANCE> 4,882
<TOTAL-ASSETS> 572,753
<DEPOSITS> 504,172
<SHORT-TERM> 12,408
<LIABILITIES-OTHER> 4,506
<LONG-TERM> 0
0
0
<COMMON> 40,141
<OTHER-SE> 13,451
<TOTAL-LIABILITIES-AND-EQUITY> 572,753
<INTEREST-LOAN> 7,686
<INTEREST-INVEST> 2,343
<INTEREST-OTHER> 2
<INTEREST-TOTAL> 10,031
<INTEREST-DEPOSIT> 3,180
<INTEREST-EXPENSE> 3,329
<INTEREST-INCOME-NET> 6,702
<LOAN-LOSSES> 410
<SECURITIES-GAINS> 45
<EXPENSE-OTHER> 3,824
<INCOME-PRETAX> 3,059
<INCOME-PRE-EXTRAORDINARY> 3,059
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,994
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 5.4
<LOANS-NON> 1,273
<LOANS-PAST> 1,702
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,398
<CHARGE-OFFS> 37
<RECOVERIES> 111
<ALLOWANCE-CLOSE> 4,882
<ALLOWANCE-DOMESTIC> 4,882
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
