QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2001.
Commission File Number 0-10658
BWC FINANCIAL CORP.
Incorporated pursuant to the Laws of California
Internal Revenue Service - Employer Identification No. 94-2621001
1400 Civic Drive, Walnut Creek, California 94596
(925) 932-5353
N/A
(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 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 _____
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as the latest practicable date. As of March 31, 2001, there were 2,831,305 shares of common stock, no par value outstanding.
| Item 1 | Legal Proceedings | 18 |
| Item 2 | Changes in Securities | 18 |
| Item 3 | Defaults Upon Senior Securities | 18 |
| Item 4 | Submission of Matters to a Vote of | |
| Security Holders | 18 | |
| Item 5 | Other Materially Important Events | 18 |
| Item 6 | Exhibits and Reports on Form 8-K | 18 |
| Signatures | 19 |
In thousands March 31, December 31,
Assets 2001 2000
-------------------
(Unaudited)(Unaudited)
Cash and Due From Banks ...................................... $ 18,388 $ 20,684
Federal Funds Sold ........................................... 13,703 3,268
Other Short-term Investments ................................. 37 520
-------------------
Total Cash and Cash Equivalents .......... 32,128 24,472
Investment Securities:
Available-for-Sale ...................................... 59,438 58,025
Held-to-Maturity (approximate fair value of
$10,112 in 2001 and $9,975 in 2000) .................. 9,906 9,920
Loans, Net of Allowance for Credit Losses of $5,450
in 2001 and $5,042 in 2000 .............................. 255,017 247,281
Bank Premises and Equipment, Net ............................. 2,932 2,892
Interest Receivable and Other Assets ......................... 7,973 7,923
-------------------
Total Assets ............................. $367,394 $350,513
===================
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Noninterest-bearing ..................................... $ 84,383 $ 88,143
-------------------
Interest-bearing:
Money Market Accounts .............................. 131,591 114,718
Savings and NOW Accounts ........................... 41,266 38,892
Time Deposits:
Under $100,000 ................................ 30,671 31,554
$100,000 or more .............................. 34,729 36,329
--------------------
Total Interest-bearing ........................ 238,257 221,493
Total Deposits ........................... 322,640 309,636
Federal Funds Purchased ...................................... -- --
Federal Home Loan Bank Borrowings ............................ 5,680 2,424
Interest Payable and Other Liabilities ....................... 3,614 4,242
-------------------
Total Liabilities ........................ 331,934 316,302
-------------------
Commitments and Contingent Liabilities (Note 10)
Shareholders' Equity
Preferred Stock, no par value:
5,000,000 shares authorized, none outstanding ......... -- --
Common Stock, no par value:
25,000,000 shares authorized; issued and outstanding -
2,845,349 shares in 2001 and 2,850,850 in 2000 ...... 22,689 23,193
Retained Earnings ............................................ 12,458 10,975
Accumulated other comprehensive income ....................... 313 43
-------------------
Total Shareholders' Equity ............... 35,460 34,211
-------------------
Total Liabilities and Shareholders' Equity $367,394 $350,513
===================
The accompanying notes are an integral part of these consolidated statements.
In thousands except per-share amounts For the Period Ended
March 31,
Interest Income 2001 2000
-----------------
(Unaudited)
Loans, Including Fees ............................... $7,114 $6,128
Investment Securities:
Taxable ........................................ 782 795
Non-taxable .................................... 110 127
Federal Funds Sold .................................. 203 89
Other Short-term Investments ........................ 17 15
---------------
Total Interest Income .................... 8,226 7,154
Interest Expense
Deposits .......................................... 2,521 1,948
Federal Funds Purchased ........................... -- 15
FHLB Borrowings ................................... 55
Other Borrowed Funds .............................. -- 40
----------------
Total Interest Expense .................. 2,576 2,003
Net Interest Income ...................................... 5,650 5,151
Provision For Credit Losses .............................. 375 225
----------------
Net Interest Income After Provision For Credit Losses .... 5,275 4,926
Noninterest Income
BWC Mortgage Services - Commissions ............... 1,200 515
BWC Mortgage Services - Fees & Other .............. 183 144
Service Charges on Deposit Accounts ............... 203 197
Other ............................................. 332 256
Gains on Security Transactions .................... 54 --
----------------
Total Noninterest Income ................. 1,972 1,112
Noninterest Expense
Salaries and Related Benefits ..................... 2,325 2,025
BWC Mortgage Services - Commissions ............... 812 369
BWC Mortgage Services - Fees & Other .............. 160 157
Occupancy ......................................... 292 243
Furniture and Equipment ........................... 189 169
Other ............................................. 948 1,006
----------------
Total Noninterest Expense ................ 4,726 3,969
-------------------------------------
BWC Mortgage Services - Minority Interest ................ 136 10
Income Before Income Taxes ............................... 2,385 2,059
Provision For Income Taxes ............................... 902 729
----------------
Net Income ............................................... $1,483 $1,330
================
Basic Earnings Per-share ......................... $ 0.52 $ 0.45
Diluted Earnings Per-share ....................... $ 0.47 $ 0.41
================
Weighted Average Basic Shares ......................... 2,859,434 2,930,566
Weighted Average Diluted Share Equivalents
Related to Options .................................. 297,925 325,468
Weighted Average Diluted Shares ....................... 3,157,359 3,256,034
====================
The accompanying notes are an integral part of these consolidated statements.
In thousands For the Three
Months Ended
March 31,
--------------------
OPERATING ACTIVITIES: 2001 2000
--------------------
(Unaudited)
Net Income ................................................... $ 1,483 $ 1,330
Adjustments to reconcile net income to
net cash provided(used):
Amortization of loan fees .................................... (462) (464)
Provision for credit losses .................................. 375 225
Depreciation and amortization ................................ 133 122
Gain of sale of securities available-for-sale ................ 54 --
Tax benefit from the exercise of stock options ............... 160 250
Decrease(increase) in accrued interest receivable
and other assets ........................................ (50) (799)
Increase(decrease) in accrued interest payable
and other liabilities ................................... (628) 635
--------------------
Net Cash Provided by Operating Activities ............... 1,065 1,299
--------------------
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities ............ 3,889 3,389
Proceeds from the sales of available-for-sale
investment securities ................................... 20,881 1,000
Purchase of investment securities ............................ (25,953) (1,983)
Loans originated, net of collections ......................... (7,649) (6,949)
Purchase of bank premises and equipment ...................... (173) (196)
--------------------
Net Cash Provided(Used) by Investing Activities ......... (9,005) (4,739)
--------------------
FINANCING ACTIVITIES:
Net increase(decrease) in deposits ........................... 13,004 27,676
Increase(decrease) in Fed Funds Purchased and other borrowings 3,256 (5,350)
Proceeds from issuance of common stock ....................... 184 626
Cash paid for the repurchase of common stock ................. (848) (1,214)
Increase(decrease) in BWC Mortgage Services borrowings ....... -- (245)
--------------------
Net Cash Provided(Used) by Financing Activities ......... 15,596 21,493
--------------------
CASH AND CASH EQUIVALENTS:
Increase in cash and cash equivalents ........................ 7,656 18,053
Cash and cash equivalents at beginning of year ............... 24,472 12,618
--------------------
Cash and Cash Equivalents at period end ................. $ 32,128 $ 30,671
====================
ADDITIONAL CASH FLOW INFORMATION:
Interest Paid ................................................ $ 2,503 $ 1,782
====================
Income Taxes Paid ............................................ $ 880 $ --
====================
The accompanying notes are an integral part of these consolidated statements.
For the periods ending December 31, 2000, and 2001 Accumulated
In thousands except share amounts Other
Number Common Retained Comprehensive Comprehensive
of Shares Stock Earnings Income/(Loss) Total Income
-------------------------------------------------------------------------
Balance, January 1, 2000 2,612,786 20,154 9,802 (527) 29,429
Net Income as of December 31, 2000 -- -- 6,435 -- 6,435 6,435
Other Comprehensive Income, net of tax
liability of $350,000 -- -- -- 570 570 570
---------------
Comprehensive Income -- -- -- -- -- $ 7,005
Stock options exercised 122,460 495 -- -- 495
Repurchase and retirement of shares by the
Corporation (159,774) (3,387) -- -- (3,387)
Common Stock Issued and sold to the
Defined Contribution Plan 15,640 321 -- -- 321
10% stock dividend including payment of
fractional shares 259,738 5,260 (5,262) -- (2)
Tax benefit from the exercise of stock -- 350 -- -- 350
options
----------------------------------------------------------
Balance, December 31, 2000 2,850,850 $ $ $ 43 $
23,193 10,975 34,211
(Unaudited)
Net Income as of March 31, 2001 -- -- 1,483 -- 1,483 1,483
Other Comprehensive Income, net of tax
liability of $165,000 -- -- -- 270 270 270
---------------
Comprehensive Income -- -- -- -- -- $ 1,753
Stock options exercised 31,031 184 -- -- 184
Repurchase and retirement of shares by the
Corporation (36,532) (848) -- -- (848)
Tax benefit from the exercise of stock -- 160 -- -- 160
options
----------------------------------------------------------
Balance, March 31, 2001 2,845,349 $ $ $ 313 $
22,689 12,458 35,460
The accompanying notes are an integral part of these consolidated
statements.
1. CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited interim consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2001 and the results of operations for the three months ended March 31, 2001 and 2000 and cash flows for the three months ended March 31, 2001 and 2000.
Certain information and footnote disclosures presented in the Corporation’s annual consolidated financial statements are not included in these interim financial statements. Accordingly, the accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s 2000 Annual Report to Shareholders, which is incorporated by reference in the Company’s 2000 annual report on Form 10-K. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the operating results for the full year.
Diluted earnings per-share is computed using the weighted average number of shares outstanding during the period, adjusted for the dilutive effect of stock options. All per-share amounts have been restated to reflect the 10% stock dividend given July, 2000.
2. INVESTMENT SECURITIES AND OTHER SHORT-TERM INVESTMENTS
The amortized cost and approximate market value of investment securities at March 31, 2001 are as follows:
Amortized Unrealized Market
Cost Gain Value
------------------------------------
Held-to-maturity
Obligations of State and
Political Subdivisions ................ $ 9,906 $ 206 $10,112
Available-for-sale
U.S. Treasury Securities ................ 2,010 7 2,017
U.S. Government Agencies ................ 28,396 171 28,567
Taxable Obligations of
State & Political Subdivisions ........ 23,688 288 23,976
Corporate Securities .................... 4,839 39 4,878
--------------------------------------------------------------
Total Available-for-sale ................ $58,933 $ 505 $59,438
The following table shows the amortized cost and estimated market value of investment securities by contractual maturity at March 31, 2001.
---------------------------------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------------------------------------------
Within one year ................ $ 867 $ 871 $15,642 $15,748
After one, but within
five, years ................. 8,027 8,198 39,026 39,390
Over five years ................ 1,012 1,043 4,265 4,300
- --------------------------------------------------------------------------------
Total .......................... $ 9,906 $10,112 $58,933 $59,438
3. ALLOWANCE FOR CREDIT LOSSES
In Thousands For the Three Months Ended
March 31,
2001 2000
---------------------------
Total loans outstanding at end of
period, before deducting allowance
for credit losses .......................... $ 260,467 $ 221,525
--------------------------
Allowance for credit losses at
beginning of period ....................... 5,042 4,466
Charge-offs .................................. (72) (47)
Recoveries ................................... 105 21
--------------------------
Net (charge-offs)/recoveries ................. 33 (26)
Provisions ................................... 375 225
Allowance for credit losses at
end of period ............................. $ 5,450 $ 4,665
==========================
Ratio of allowance for credit
losses to loans 2.09% 2.11%
4. COMPREHENSIVE INCOME
For the Bank, comprehensive income includes net income reported on the statement of income and changes in the fair value of its available- for-sale investments reported as a component of shareholders’ equity.
The components of other comprehensive income for the years ended March 31, 2001 and 2000 are as follows:
================================================================================ Unrealized gain(loss) arising during the period, net of tax ................. $ 303,000 ($141,000) - ------------------------------------------------------------------------------- Reclassification adjustment for net realized gains on securities available-for-sale included in net income during the year, net of tax ............ 33,000 -- - ------------------------------------------------------------------------------- Net unrealized gain included in other comprehensive income ................. $ 270,000 ($141,000) ===============================================================================
5. BUSINESS SEGMENTS
The Corporation is principally engaged in community banking activities through its eight Bank branches. In addition to its community banking activities, the Corporation provides mortgage brokerage services through its joint venture, BWC Mortgage Services. These activities are monitored and reported by Corporation management as a separate operating segment. The separate banking offices have been aggregated into a single reportable segment, Community Banking. The other operating segments do not meet the prescribed aggregation or materiality criteria and therefore are reported as ˜All Other˜ in the following table.
The Corporation’s community banking segment provides loans, leases and lines of credit to local businesses and individuals. This segment also derives revenue by investing funds that are not loaned to others in the form of loans, leases or lines of credit, into investment securities. The business purpose of BWC Mortgage Services is the origination and placement of long-term financing for real estate mortgages.
Summarized financial information for the years ended March 31, 2001 and 2000 concerning the Corporation’s reportable segments is shown in the following table.
Ended 03/31/2001 Community Mortgage In thousands Banking Services Adjustments Total - -------------------------------------------------------------------------------- Total Interest Income ......... $ 8,228 $ 1 $ (3) $ 8,226 Commissions Received .......... -- 1,200 -- 1,200 Total Interest Expense ........ 2,577 2 (3) 2,576 Salaries & Benefits ........... 2,187 138 -- 2,325 Commissions Paid .............. -- 812 -- 812 Segment Profit before Tax ..... 2,279 272 (166) 2,385 Total Assets .................. $367,215 $ 388 $ (209) $367,394 - -------------------------------------------------------------------------------- For the Three Months Community Mortgage Ended 03/31/2000 Banking Services Adjustments Total - -------------------------------------------------------------------------------- Total Interest Income ......... $ 7,147 $ 9 $ (2) $ 7,154 Commissions Received .......... -- 515 -- 515 Total Interest Expense ........ 1,992 13 (2) 2,003 Salaries & Benefits ........... 1,916 109 -- 2,025 Commissions Paid .............. -- 369 -- 369 Segment Profit before Tax ..... 2,063 20 (24) 2,059 Total Assets .................. $319,524 $ 664 $ (141) $320,047 - --------------------------------------------------------------------------------
6. DERIVATIVES AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities. The Statement, as amended, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Corporation does not own any freestanding or imbedded derivatives.
The Corporation adopted SFAS 133 effective January 1, 2001. The implementation of this statement did not have a material impact on the Corporation’s financial position or results of operations.
General
The nation, and California, are showing signs of an economic slowdown. Some forecasters are predicting California, and the Bay Area in particular, to be leading the nation in a downturn due to the concentration of the high-tech industry and to the California energy crisis. The housing market, which has been extremely strong the past few years, is expected to fall victim to the slowing economy resulting in a decline in prices and sales.
Even though the outlook for 2001 and 2002 does not look as promising as the last year, total assets of the Corporation at March 31, 2001 of $367,394,000 increased $47,347,000, or 15%, as compared to March 31, 2000. Total loans of $260,467,000 at March 31, 2001 increased $38,942,000 during the same period. Total deposits of $322,640,000 increased $36,295,000 during the same period.
The Corporation’s loan-to-deposit ratio as of March 31, 2001 was 81%, as compared to 77% on March 31, 2000.
Other short-term investments are investments in a mutual fund operated by Federated Funds Investments and are comprised of short-term US Treasury Securities. Investments are done on a daily basis and are similar in liquidity to Fed Funds Investments, but often carry a slightly higher yield.
Net Income
Net income for the first three months in 2001 of $1,483,000 was $153,000 greater then the first three months in 2000. This represented a return on average assets during the quarter of 1.67% as compared to 1.72% in 2000, and a return on average equity of 16.87% as compared to 17.76% in 2000. The reduction in rates of return is the result of the decreases in the prime rate that have been brought about by actions of the Federal Reserve. Since most of the Bank’s loans are indexed to the prime rate, decreases in this index will reduce the return on these assets to a greater extent than can be offset by reductions to interest-bearing deposits.
Earning assets averaged $333,924,000 during the first quarter of 2001, an increase of $45,666,000 from the comparable quarter of 2000. During this same period loans averaged $256,801,000, an increase of $39,232,000 over 2000, and deposits averaged $313,307,000, an increase of $37,527,000 over 2000.
Diluted earnings per average common share and common equivalent shares for the first three months of 2001 were $0.47, as compared to $0.41 for the first three months of 2000.
Net Interest Income
Interest income represents the interest earned by the Corporation on its portfolio of loans, investment securities, and other short-term investments. Interest expense represents interest paid to the Corporation’s depositors, as well as to others from whom the Corporation borrows funds on a temporary basis.
Net interest income is the difference between interest income on earning assets and interest expense on deposits and other borrowed funds. The volume of loans, deposits, and interest rate fluctuations caused by economic conditions greatly affect net interest income.
Net interest income during the first three months of 2001 was $5,650,000, or $499,000 greater than the comparable period in 2000. This increase is the result of increases in volume of funds rather than in rates. Based on the volume increase alone, net interest income would have increased by $792,000 over the comparable quarter in 2000, but due to the decrease in interest rates between the respective periods, this growth was reduced by $293,000.
Provision for Credit Losses
An allowance for credit losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated and is in accordance with SFAS 114. The allowance is increased by provisions charged to expense, and reduced by net charge-offs. Management continually evaluates the economic climate, the performance of borrowers, and other conditions to determine the adequacy of the allowance.
The ratio of the allowance for credit losses to total loans as of March 31, 2001, was 2.09% as compared to 2.11% for the period ending March 31, 2000. The Corporation’s ratios for both periods are considered adequate to provide for losses inherent in the loan portfolio.
The Corporation performs a quarterly analysis of the adequacy of its allowance for credit losses. As of March 31, 2001 the Corporation had $4,764,000 in allocated reserves and $686,000 in unallocated reserves. The Corporation’s management believes that the amount of unallocated reserves is reasonable, due to the growth of the Bank’s loan portfolio and the new credit products that have been introduced. In the past few years, the Bank has opened an Asset-based Lending Department, a Leasing Department and a Small Business Administration lending program. The Bank also has a high concentration of credit in Construction Real Estate lending. The uncertainties associated with these new products, coupled with the Bank’s traditionally strong construction concentration, fully supports the reserve position.
The Corporation had net recoveries of $33,000 during the first quarter of 2001 as compared to net charge-offs of $26,000 during the comparable period in 2000.
The following table provides information on past-due and nonaccrual loans:
March 31,
2001 2000
----------------------------
Loans Past Due 90 Days or More $ 3,000 $ 29,000
Nonaccrual Loans 2,050,000 25,000
- ------------------------------------------------------------------------
Total $2,053,000 $ 54,000
As of March 31, 2001 and 2000, no loans were outstanding that had been restructured. No interest earned on nonaccrual loans that was recorded in income during 2001 remains uncollected. Interest foregone on nonaccrual loans was approximately $183,000 and $6,000 as of March 31, 2001 and 2000, respectively. The increase in nonaccrual loans, as compared to the year earlier period, is primarily comprised of two loans. One loan, which represented over 21% of the total nonaccrual figure above, has now been paid-in-full. The other loan was over 70% of the above nonaccrual total and the Corporation has set aside $400,000 as a specific reserve against the loan, which management believes fully covers the potential loss on this credit. This is a secured credit which had been placed on nonaccrual at year-end 2000 and has been significantly reduced since that time. It continues to perform on a reduction plan.
Noninterest Income
Noninterest income during the first quarter of 2001 was $860,000 more than during the comparable quarter of 2000. The increase is primarily attributed to the increase in income from the Corporation’s subsidiary, BWC Mortgage Services. Their income has increased, in part, due to the drop in mortgage rates and increase in refinancing activity. However, almost all areas of noninterest income reflect increases over the comparable period in 2000.
Noninterest Expense
Noninterest expense during the first quarter of 2001 was $757,000 greater than during the comparable quarter of 2000. The increase in 2001 was reflected in increases in BWC Mortgage Service commissions and other expenses of $446,000, in salaries, bonuses and benefits of $300,000, of occupancy expense of $49,000, of furniture and equipment of $20,000 and a reduction in other expenses of $58,000.
The increase in BWC Mortgage Service expense is related to the increase in activity in the mortgage industry as compared to the year earlier period and is reflected in the income generated from the BWC Mortgage Services subsidiary.
The increase in salaries and benefits is related to general merit increases, performance bonuses and growth of operations. The Bank staff averaged 115.8 FTE (full time equivalent) persons during the first quarter of 2001 as compared to 111.0 FTE in 2000. The increase in occupancy expense over the comparable period in 2000 is due in part to the opening of the Bank’s new San Jose office, to CPI and operating increases. The increase in furniture and equipment expense is also related to the Corporation’s expansion and growth and to upgrading and increasing the Bank’s technology sector. The reduction in other expense is related in part to the timing of events and may not be reflective of the full year’s results.
Other Real Estate Owned
As of March 31, 2001, the Corporation had no other real-estate-owned assets (assets acquired as the result of foreclosure on real estate collateral) on its books.
Interest Rate Risk Management
Movement in interest rates can create fluctuations in the Corporation’s income and economic value due to an imbalance in the re-pricing or maturity of assets or liabilities. The components of interest rate risk which are actively measured and managed include: re-pricing risk, and the risk of non-parallel shifts in the yield curve. Interest rate risk exposure is actively managed with the goal of minimizing the impact of interest rate volatility on current earnings and on the market value of equity.
In general, the assets and liabilities generated through ordinary business activities do not naturally create offsetting positions with respect to re-pricing or maturity characteristics. Therefore, the Corporation uses a variety of measurement tools to monitor and control the overall interest rate risk exposure of the on-balance-sheet positions. For each measurement tool, the level of interest rate risk created by the assets and liabilities is a function primarily of their contractual interest rate re-pricing dates and contractual maturity (including principal amortization) dates.
The Corporation’s interest rate risk as of March 31, 2001 was well within the Corporation’s risk policy range and comparable to the interest rate exposure presented in the Corporation’s 2000 annual report, which was also within the Corporation’s risk policy range.
Capital Adequacy
In 1989, the Federal Deposit Insurance Corporation (FDIC) established risk-based capital guidelines requiring banks to maintain certain ratios of ˜qualifying capital˜ to ˜risk-weighted assets˜. Under the guidelines, qualifying capital is classified into two tiers, referred to as Tier 1 (core) and Tier 2 (supplementary) capital. Currently, the bank’s Tier 1 capital consists of shareholders’ equity, while Tier 2 capital also includes the eligible allowance for loan losses. The Bank has no subordinated notes or debentures included in its capital. Risk-weighted assets are calculated by applying risk percentages specified by the FDIC to categories of both balance-sheet assets and off-balance-sheet assets.
The Bank’s Tier 1 and Total (which included Tier 1 and Tier 2) risk-based capital ratios surpassed the regulatory minimum of 4% and 8% at March 31 for both 2001 and 2000. The FDIC also adopted a leverage ratio requirement. This ratio supplements the risk-based capital ratios and is defined as Tier 1 capital divided by the quarterly average assets during the reporting period. The requirement established a minimum leverage ratio of 3% for the highest-rated banks.
The following table shows the Corporation’s risk-based capital ratios and leverage ratio as of March 31, 2001, December 31, 2000, and March 31, 2000.
Minimum
Current guidelines March 31, December 31, March 31, regulatory
2001 2000 2000 requirements
------ ------ ------ ------
Tier 1 capital 11.47% 12.21% 12.13% 4.00%
Total capital 12.73% 13.58% 13.39% 8.00%
Leverage ratio 9.90% 10.66% 10.00% 3.00%
Liquidity
Liquidity is a key aspect in the overall fiscal health of a financial corporation. The primary source of liquidity for BWC Financial Corp. is its investment securities and Federal Funds Sold. Cash, investment securities, and other temporary investments represented 28% of total assets at March 31, 2001 and 29% at March 31, 2000. The Corporation’s management has an effective asset and liability management program and carefully monitors its liquidity on a continuing basis. Additionally, the Corporation has available from correspondent banks Federal Fund lines of credit totaling $15,000,000 plus secured borrowing lines available at the Federal Home Loan Bank and at the Federal Reserve Bank.
Proper management of the rate sensitivity and maturities of assets and liabilities is required to provide an optimum and stable net interest margin. Interest rate sensitivity spread management is an important tool for achieving this objective and for developing strategies and means to improve profitability. The schedules shown below reflect the interest rate sensitivity position of the Corporation as of March 31, 2001. In a rising interest rate environment, the Corporation’s net interest margin and net interest income will improve. A falling interest rate environment will have the opposite effect. Management believes that the sensitivity ratios reflected in these schedules fall within acceptable ranges, and represent no undue interest rate risk to the future earnings prospects of the Corporation.
3 3-6 12 1-5 Over 5
In thousands months months months years years Totals
- ---------------------------------------------------------------------------------------------------
Assets:
Federal Funds Sold & Short-term
Investments ................. $ 13,740 $ -- $ -- $ -- $ -- $ 13,740
Investment securities .......... 4,444 6,285 8,530 48,036 2,049 69,344
Construction & Real Estate Loans 96,914 9,758 3,305 1,461 4,972 116,410
Commercial Loans ............... 59,611 18,620 7,466 2,607 323 88,627
Consumer Loans ................. 41,851 129 261 644 0 42,885
Leases ......................... 2,311 1,715 3,178 5,341 -- 12,545
------------------------------------------------------------------------------
Interest-bearing assets ........ $218,871 $ 36,507 $ 22,740 $ 58,089 $ 7,344 $343,551
------------------------------------------------------------------------------
Liabilities:
Money market accounts .......... $ 65,796 $ 65,795 $ -- $ -- $ -- $131,591
Time deposits <$100,000 ........ 10,432 9,375 7,813 2,950 101 30,671
Time deposits >$100,000 ........ 10,387 9,596 11,009 3,737 0 34,729
------------------------------------------------------------------------------
Interest-bearing liabilities ... $ 86,615 $ 84,766 $ 18,822 $ 6,687 $ 101 $196,991
------------------------------------------------------------------------------
Rate-sensitive gap ............. $132,256 $(48,259) $ 3,918 $ 51,402 $ 7,243 $146,560
Cumulative rate-sensitive gap .. $132,256 $ 83,997 $ 87,915 $139,317 $146,560
=================================================================
Cumulative rate-sensitive ratio 2.53 1.49 1.46 1.71 1.74
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
None
Item 5 - Other Materially Important Events
None
Item 6 - Exhibits and Reports on Form 8-K
None
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.
(Registrant)
3/24/01 James L. Ryan
- --------------------------- ---------------------------------
Date James L. Ryan
Chairman and Chief Executive Officer
3/24/01 Leland E. Wines
- ---------------------- --------------------------------
Date Leland E. Wines
CFO and Corp. Secretary