SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2002.
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:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1924 subsequent to the distribution of securities under a plan confirmed by court. Yes _____ No _____
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, 2002, there were 3,092,777 shares of common stock, no par value outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PART II - OTHER INFORMATION
Item 1 | Legal Proceedings | 17 |
Item 2 | Changes in Securities | 17 |
Item 3 | Defaults Upon Senior Securities | 17 |
Item 4 | Submission of Matters to a Vote of | |
Security Holders | 17 | |
Item 5 | Other Materially Important Events | 17 |
Item 6 | Exhibits and Reports on Form 8-K | 17 |
Signatures | 18 |
BWC FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
In thousands March 31, December 31, Assets 2002 2001 -------------- -------------- (Unaudited) Cash and Due From Banks $ 21,066 $ 15,016 Federal Funds Sold 13,046 6,000 Other Short-term Investments 35 33 -------------- -------------- Total Cash and Cash Equivalents 34,147 21,049 Investment Securities: Available-for-Sale 69,946 76,684 Held-to-Maturity (approximate fair value of $10,322 in 2002 and $10,338 in 2001) 10,014 10,025 Loans, Net of Allowance for Credit Losses of $5,613 in 2002 and $5,403 in 2001 273,150 276,064 Bank Premises and Equipment, Net 3,442 3,558 Interest Receivable and Other Assets 7,295 7,677 -------------- -------------- Total Assets $ 397,994 $ 395,057 ============== ============== Liabilities and Shareholders' Equity Liabilities Deposits: Noninterest-bearing $ 89,441 $ 87,172 -------------- -------------- Interest-bearing: Money Market Accounts 152,149 143,317 Savings and NOW Accounts 43,088 44,543 Time Deposits: Under $100,000 28,191 30,416 $100,000 or more 29,861 35,021 -------------- -------------- Total Interest-bearing 253,289 253,297 Total Deposits 342,730 340,469 Federal Home Loan Bank Borrowings 14,177 12,955 Interest Payable and Other Liabilities 3,052 3,381 -------------- -------------- Total Liabilities 359,959 356,805 -------------- -------------- 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 - 3,092,777 shares in 2002 and 3,092,474 in 2001 26,087 27,160 Retained Earnings 11,472 10,391 Accumulated other comprehensive income 476 701 -------------- -------------- Total Shareholders' Equity 38,035 38,252 -------------- -------------- Total Liabilities and Shareholders' Equity $ 397,994 $ 395,057 ============== ============== The accompanying notes are an integral part of these consolidated statements.
BWC FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
In thousands except per-share amounts For the Period Ended March 31, Interest Income 2002 2001 --------------- --------------- (Unaudited) (Unaudited) Loans, Including Fees $ 5,607 $ 7,114 Investment Securities: Taxable 852 782 Non-taxable 112 110 Federal Funds Sold 53 203 Other Short-term Investments 4 17 --------------- --------------- Total Interest Income 6,628 8,226 Interest Expense Deposits 1,177 2,521 Federal Funds Purchased -- -- FHLB Borrowings 204 55 Other Borrowed Funds 1 -- --------------- --------------- Total Interest Expense 1,382 2,576 Net Interest Income 5,246 5,650 Provision For Credit Losses 300 375 --------------- --------------- Net Interest Income After Provision For Credit Losses 4,946 5,275 Noninterest Income BWC Mortgage Services - Commissions 1,491 1,200 BWC Mortgage Services - Fees & Other 286 183 Service Charges on Deposit Accounts 211 203 Other 394 332 Gains on Security Transactions 13 54 --------------- --------------- Total Noninterest Income 2,395 1,972 Noninterest Expense Salaries and Related Benefits 2,318 2,325 BWC Mortgage Services - Commissions 1,030 812 BWC Mortgage Services - Fees & Other 119 160 Occupancy 409 292 Furniture and Equipment 195 189 Other 1,357 948 --------------- --------------- Total Noninterest Expense 5,428 4,726 --------------- --------------- BWC Mortgage Services - Minority Interest 190 136 Income Before Income Taxes 1,723 2,385 Provision For Income Taxes 642 902 --------------- --------------- Net Income $ 1,081 $ 1,483 =============== =============== Basic Earnings Per Share $0.35 $0.47 Diluted Earnings Per Share $0.33 $0.43 =============== =============== Weighted Average Basic Shares 3,073,656 3,151,485 Weighted Average Diluted Share Equivalents Related to Options 249,435 334,666 Weighted Average Diluted Shares 3,323,091 3,486,151 =============== =============== The accompanying notes are an integral part of these consolidated statements.
BWC FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the periods ending December 31, 2001, and March 31, 2002 In thousands except share amounts Accumulated Other Number Common Retained Comprehensive Comprehensive of Shares Stock Earnings Income/(Loss) Total Income -------------------------------------------------------------------------------------- Balance, January 1, 2001 2,850,850 $ 23,193 $ 10,975 $ 43 $ 34,211 Net Income as of December 31, 2001 -- -- 5,464 -- 5,464 $ 5,464 Other Comprehensive Income, net of tax liability of $429 -- -- -- 658 658 658 ---------------- Comprehensive Income -- -- -- -- -- 6,122 Stock options exercised 91,918 329 -- -- 329 Repurchase and retirement of shares by the Corporation (132,002) (2,704) -- -- (2,704) 10% stock dividend including payment of fractional shares 281,708 6,043 (6,048) -- (5) Tax benefit from the exercise of stock -- 299 -- -- 299 options ---------------------------------------------------------------------- Balance, December 31, 2001 3,092,474 27,160 10,391 701 38,252 Net Income as of March 31, 2002 -- -- 1,081 -- 1,081 1,081 Other Comprehensive Income, net of tax liability of $292 -- -- -- (225) (225) (225) ---------------- Comprehensive Income -- -- -- -- -- $ 856 Stock options exercised 87,876 366 -- -- 366 Repurchase and retirement of shares by the Corporation (87,573) (1,853) -- -- (1,853) Tax benefit from the exercise of stock -- 414 -- -- 414 options ---------------------------------------------------------------------- Balance, March 31, 2002 3,092,777 $ 26,087 $ 11,472 $ 476 $ 38,035 The accompanying notes are an integral part of these consolidated statements.
BWC FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands For the Three Months Ended March 31, -------- -------- OPERATING ACTIVITIES: 2002 2001 -------- -------- (Unaudited) (Unaudited) Net Income ................................................... $ 1,081 $ 1,483 Adjustments to reconcile net income to net cash provided(used): Amortization of loan fees .................................... (479) (462) Provision for credit losses .................................. 300 375 Depreciation and amortization ................................ 133 133 Gain of sale of securities available-for-sale ................ 13 54 Tax benefit from the exercise of stock options ............... 414 160 (Decrease)/increase in accrued interest receivable and other assets ........................................ 382 (50) Decrease in accrued interest payable and other liabilities ................................... (329) (628) --------------------- Net Cash Provided by Operating Activities ............... 1,515 1,065 --------------------- INVESTING ACTIVITIES: Proceeds from maturities of investment securities ............ 5,266 3,889 Proceeds from the sales of available-for-sale investment securities ..................................... 6,077 20,881 Purchase of investment securities ............................ (4,815) (25,953) Loans originated, net of collections ......................... 3,093 (7,649) Purchase of bank premises and equipment ...................... (34) (173) --------------------- Net Cash Provided(Used) by Investing Activities ......... 9,587 (9,005) --------------------- FINANCING ACTIVITIES: Net increase in deposits ..................................... 2,261 13,004 Increase(decrease) in Fed Funds Purchased and other borrowings 1,222 3,256 Proceeds from issuance of common stock ....................... 366 184 Cash paid for the repurchase of common stock ................. (1,853) (848) --------------------- Net Cash Provided(Used) by Financing Activities ......... 1,996 15,596 --------------------- CASH AND CASH EQUIVALENTS: Increase in cash and cash equivalents ........................ 13,098 7,656 Cash and cash equivalents at beginning of year ............... 21,049 24,472 --------------------- Cash and Cash Equivalents at Period End ................. $ 34,147 $ 32,128 ===================== ADDITIONAL CASH FLOW INFORMATION: Interest Paid ................................................ $ 1,671 $ 2,503 ===================== Income Taxes Paid ............................................ $ 296 $ 880 ===================== The accompanying notes are an integral part of these consolidated statements.
BWC FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL 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, 2002 and the results of operations for the three months ended March 31, 2002 and 2001 and cash flows for the three months ended March 31, 2002 and 2001.
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 2001 Annual Report to Shareholders, which is incorporated by reference in the Company’s 2001 annual report on Form 10-K. The results of operations for the three months ended March 31, 2002, and the results of interm periods presented, 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 June, 2001.
2. INVESTMENT SECURITIES AND OTHER SHORT-TERM INVESTMENTS
The amortized cost and approximate market value of investment securities at March 31, 2002 are as follows:
In thousands Gross Amortized Unrealized Market Cost Gain Value ------------------------------------ Held-to-maturity Obligations of State and Political Subdivisions ............... $10,014 $ 308 $10,322 Available-for-sale U.S. Treasury Securities ............... 4,079 (25) 4,054 U.S. Government Agencies ............... 34,965 254 35,219 Taxable Obligations of State & Political Subdivisions ....... 23,686 499 24,185 Corporate Securities ................... 6,448 40 6,488 - -------------------------------------------------------------------------------- Total Available-for-sale ............... $69,178 $ 768 $69,946
The following table shows the amortized cost and estimated market value of investment securities by contractual maturity at March 31, 2002.
In thousands Held-to-Maturity Available-for-Sale -------------------------------------------------- Amortized Market Amortized Market Cost Value Cost Value -------------------------------------------------- Within one year ................ $ 1,055 $ 1,097 $35,138 $35,402 After one, but within five, years ................. 8,959 9,225 31,040 31,538 Over five years ................ -- -- 3,000 3,006 - ------------------------------------------------------------------------------------- Total .......................... $10,014 $10,322 $69,178 $69,946
3. ALLOWANCE FOR CREDIT LOSSES
In Thousands For the Three Months Ended March 31, 2002 2001 --------------------------- Total loans outstanding at end of period, before deducting allowance for credit losses .......................... $ 278,763 $ 260,467 --------------------------- Allowance for credit losses at beginning of period ....................... 5,403 5,042 Charge-offs .................................. (126) (72) Recoveries ................................... 36 105 --------------------------- Net (charge-offs)/recoveries ................. (90) 33 Provisions ................................... 300 375 Allowance for credit losses at end of period ............................. $ 5,613 $ 5,450 =========================== Ratio of allowance for credit losses to loans ........................... 2.01% 2.09%
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 nine months ended March 31, 2002 and 2001 are as follows:
In thousands 2002 2001 ================================================================================ Unrealized gain(loss) arising during the period, net of tax ..................... $(217) $ 303 - -------------------------------------------------------------------------------- Reclassification adjustment for net realized gains on securities available-for-sale included in net income during the year, net of tax ................ 8 33 - -------------------------------------------------------------------------------- Net unrealized gain(loss) included in other comprehensive income ..................... $(225) $ 270 ================================================================================
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 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 periods ended March 31, 2002 and 2001 concerning the Corporation's reportable segments is shown in the following table.
For the Three Months Ended 03/31/2002 Community Mortgage In thousands Banking Services Adjustments Total - -------------------------------------------------------------------------------- Total Interest Income ......... $ 6,627 $ 1 $ -- $ 6,628 Commissions Received .......... -- 1,491 -- 1,491 Total Interest Expense ........ 1,381 1 -- 1,382 Salaries & Benefits ........... 2,134 184 -- 2,318 Commissions Paid .............. -- 1,031 -- 1,031 Segment Profit before Tax ..... 1,610 380 (267) 1,723 Total Assets .................. $397,869 $ 549 $ (424) $397,994 ---------------------------------------------------------------------- For the Three Months 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 ----------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
Forward-Looking Statements
Except for historical financial information contained herein, certain matters discussed in the Annual Report of BWC Financial Corp. constitute “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties that may cause actual future results to differ materially. Such risks and uncertainties with respect to BWC Financial Corp., Bank of Walnut Creek and BWC Real Estate, include, but are not limited to, those related to the economic environment, particularly in the areas in which the Company and the Banks operate, competitive products and pricing, loan delinquency rates, fiscal and monetary policies of the U.S. government, changes in governmental regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management and asset/liability management, the financial and securities markets, and the availability of and costs associated with sources of liquidity.
General
Prime rate averaged 8.62% during the first quarter of 2001, compared to 4.75% for the first quarter of 2002, a decrease of 3.87% between the comparable quarters. Due to the Corporation’s asset-sensitive position, low interest rates result in a narrowing of the Corporation’s net interest margin. Continued low interest rates and slower economic activity most probably will have an adverse affect on performance in 2002.
Total assets of the Corporation at March 31, 2002 of $397,994,000 increased $30,600,000, or 8%, as compared to March 31, 2001. Total loans of $278,763,000 at March 31, 2002 increased $18,296,000, or 7%, during the same period. Total deposits of $342,730,000 increased $20,091,000, or 6%, during the same period.
The Corporation’s loan-to-deposit ratio as of March 31, 2002 and 2001 was 81%.
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.
Net Income
Net income for the first three months in 2002 of $1,081,000 was down $402,000 from the first three months in 2001. This represented a return on average assets during the quarter of 1.09% as compared to 1.67% in 2001, and a return on average equity of 11.34% as compared to 16.87% in 2001. 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 $372,590,000 during the first quarter of 2002, an increase of $38,666,000 from the comparable quarter of 2001. During this same period loans averaged $278,234,000, an increase of $21,433,000 over 2001, and deposits averaged $344,383,000, an increase of $31,076,000 over 2001.
Diluted earnings per average common share and common equivalent shares for the first three months of 2002 were $0.33, as compared to $0.43 for the first three months of 2001.
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 2002 was $5,246,000, or $404,000 less than the comparable period in 2001. This decrease is the result of decreases in interest rates. If there had been no change in the volume of loans and deposits, net interest income would have decreased by $624,000. Because of the increase in volume of loans and deposits, this amount was reduced by $220,000.
Provision for Credit Losses
An allowance for credit losses is maintained at a level considered adequate to provide for losses that can be reasonably estimated and is in accordance with SFAS 5. 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, 2002, was 2.01% as compared to 2.09% for the period ending March 31, 2001. 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 $4,555,000 in allocated reserves and $1,058,000 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 type of credit products that comprise the portfolio.
The Corporation had net losses of $90,000 during the first quarter of 2002 as compared to net recoveries of $33,000 during the comparable period in 2001.
The following table provides information on past-due and nonaccrual loans:
For the Three Months Ended March 31, ---------------------------- 2002 2001 ---------------------------- Loans Past Due 90 Days or More $ 37,000 $ 3,000 Nonaccrual Loans 1,365,000 2,050,000 ---------------------------- Total $1,402,000 $2,053,000
As of March 31, 2002 and 2001, no loans were outstanding that had been restructured. No interest earned on nonaccrual loans that was recorded in income during 2002 remains uncollected. Interest foregone on nonaccrual loans was approximately $389,000 and $183,000 as of March 31, 2002 and 2001, respectively.
Noninterest Income
Noninterest income during the first quarter of 2002 was $423,000 more than during the comparable quarter of 2001. The increase is attributed to increases in almost all areas of noninterest income as compared to 2001. Gains on securities sold was the only category lower this year than last. Due to the sharply declining rates in 2001, many securities were being called for redemption, with resulting gains to the holders.
Noninterest Expense
Noninterest expense during the first quarter of 2002 was $702,000 greater than during the comparable quarter of 2001. The increase in 2002 was reflected in increases in BWC Mortgage Service commissions of $218,000. Other expenses of BWC Mortgage Services were $41,000 less than the prior year. Salaries, bonuses and benefits were down $7,000 from the prior year, due to reduced bonus provisions during the current period.
Occupancy expense was $117,000 greater during the first quarter of the current year as compared to the prior year. The Corporation opened a new banking office in San Jose in March last year, renegotiated a long-term contract on its headquarters office in Walnut Creek in February, and renewed the lease on its Pleasanton facility in July, which had been at favorable subsidized rates. The new higher rates on these facilities, as well as general operating and CPI-based increases, account for the increase in this expense category over the prior year.
Furniture and equipment expense was up only $6,000 from the prior year.
Other expenses of $1,357,000 was up $409,000 from the prior year. The largest increase in this category was in operational losses, which increased $270,000 over this period last year. The Corporation had one operational loss of over $200,000 taken in March of 2002. The first quarter increase in operating losses may not be reflective of the full year’s results. The balance of the increase in other operating expenses, as compared to last year, is related to the Corporation’s growth and the timing and extent of its various activities.
Other Real Estate Owned
As of March 31, 2002, 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, 2002 was within the Corporation’s risk policy range and comparable to the interest rate exposure presented in the Corporation’s 2001 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 2002 and 2001. 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, 2002, December 31, 2001, and March 31, 2001.
Risk-based capital ratios: Capital Ratios Minimum Current guidelines March 31, December 31, March 31, regulatory 2002 2001 2001 requirements ------------------------------------------------- Tier 1 capital 11.54% 11.65% 11.47% 4.00% Total capital 12.79% 12.90% 12.73% 8.00% Leverage ratio 9.44% 9.22% 9.90% 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 29% of total assets at March 31, 2002 and 28% at March 31, 2001. 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.
Interest Rate Sensitivity
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, 2002. 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.
Repricing within: 3 3-6 12 1-5 Over 5 In thousands Months Months Months Years Years Totals - --------------------------------------------------------------------------------------------------- Assets: Federal Funds Sold & Short-term Investments ................. $ 13,081 $ -- $ -- $ -- $ -- $ 13,081 Investment securities .......... 9,198 8,530 18,729 40,497 3,006 79,960 Construction & Real Estate Loans 107,353 12,917 2,315 1,647 12,294 136,526 Commercial Loans ............... 75,652 2,257 2,772 2,200 93 82,974 Consumer Loans ................. 46,674 69 127 268 -- 47,138 Leases ......................... 1,876 1,773 3,033 5,443 -- 12,125 ---------------------------------------------------------------- Interest-bearing assets ........ $253,834 $ 25,546 $ 26,976 $ 50,055 $ 15,393 $371,804 ---------------------------------------------------------------- Liabilities: Money market accounts .......... $ 76,075 $ 76,074 $ -- $ -- $ -- $152,149 Time deposits <$100,000 ........ 12,245 8,308 5,988 1,565 85 28,191 Time deposits >$100,000 ........ 13,046 10,273 4,413 2,129 $ -- 29,861 ---------------------------------------------------------------- Interest-bearing liabilities ... $101,366 $ 94,655 $ 10,401 $ 3,694 $ 85 $210,201 ---------------------------------------------------------------- Rate-sensitive gap ............. $152,468 $(69,109) $ 16,575 $ 46,361 $ 15,308 $161,603 Cumulative rate-sensitive gap .. $152,468 $ 83,359 $ 99,934 $146,295 $161,603 ====================================================== Cumulative rate-sensitive ratio 2.50 1.43 1.48 1.70 1.77
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Corporation is a defendant in legal actions arising from normal business activities. Management believes that these actions are without merit or that the ultimate liability, if any, resulting from them will not materially affect the Corporation’s financial position.
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
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.
BWC FINANCIAL CORP. (Registrant) - --------------------------- --------------------------------- Date James L. Ryan Chairman and Chief Executive Officer - ---------------------- -------------------------------- Date Leland E. Wines CFO and Corp. Secretary