SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2005 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) |
For the transition period from to . |
Commission file number0-25418 CENTRAL COAST BANCORP (Exact name of registrant as specified in its charter) |
California | 77-0367061 | |
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
301 Main Street, Salinas, California | 93901 | |
(Address of principal executive offices) | (Zip Code) |
(831) 422-6642 (Registrant’s 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] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] 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 – 14,098,523 shares outstanding at November 3, 2005. The Index to the Exhibits is located at page 31 Page 1 of 200 Pages |
PART I - FINANCIAL INFORMATION |
In thousands (except share data) | September 30, 2005 | December 31, 2004 | |||||
---|---|---|---|---|---|---|---|
Assets | |||||||
Cash and due from banks | $ 48,861 | $ 49,068 | |||||
Federal funds sold | 39,062 | 9,029 | |||||
Total cash and equivalents | 87,923 | 58,097 | |||||
Available-for-sale securities at fair value (amortized cost of $212,666 | 212,528 | 169,151 | |||||
at September 30, 2005 and $168,052 at December 31, 2004) | |||||||
Commercial | 251,875 | 261,408 | |||||
Real estate-construction | 37,339 | 61,366 | |||||
Real estate-other | 624,718 | 594,507 | |||||
Consumer | 13,586 | 15,463 | |||||
Deferred loan fees, net | (1,212) | (1,228) | |||||
Total loans | 926,306 | 931,516 | |||||
Allowance for loan losses | (17,550 | ) | (16,270 | ) | |||
Net Loans | 908,756 | 915,246 | |||||
Premises and equipment, net | 3,523 | 3,944 | |||||
Accrued interest receivable and other assets | 20,597 | 18,223 | |||||
Total assets | $ 1,233,327 | $ 1,164,661 | |||||
Liabilities and Shareholders’ Equity | |||||||
Deposits: | |||||||
Demand, noninterest bearing | $ 295,220 | $ 344,244 | |||||
Demand, interest bearing | 151,564 | 141,190 | |||||
Savings | 256,616 | 259,319 | |||||
Time | 392,991 | 306,615 | |||||
Total Deposits | 1,096,391 | 1,051,368 | |||||
Accrued interest payable and other liabilities | 22,192 | 12,177 | |||||
Total liabilities | 1,118,583 | 1,063,545 | |||||
Commitments and contingencies (Note 3) | |||||||
Shareholders’Equity: | |||||||
Preferred stock — no par value; authorized 1,000,000 shares; none outstanding | |||||||
Common stock — no par value; authorized 39,062,500 shares; | |||||||
issued and outstanding: 14,098,522 shares at September 30, 2005 | |||||||
and 13,716,168 shares at December 31, 2004 | 85,942 | 85,034 | |||||
Shares held in deferred compensation trust (800,020 at September 30, 2005 | |||||||
and 600,899 as of December 31, 2004), net of deferred obligation | -- | -- | |||||
Retained earnings | 28,882 | 15,439 | |||||
Accumulated other comprehensive (loss) income - net of taxes | |||||||
of ($58) at September 30, 2005 and $456 at December 31, 2004 | (80) | 643 | |||||
Total shareholders’ equity | 114,744 | 101,116 | |||||
Total liabilities and shareholders’ equity | $ 1,233,327 | $ 1,164,661 | |||||
See notes to Consolidated Condensed Financial Statements
CENTRAL COAST BANCORP AND SUBSIDIARY |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
---|---|---|---|---|---|---|---|---|---|
In thousands (except per share data) | 2005 | 2004 | 2005 | 2004 | |||||
Interest Income | |||||||||
Loans (including fees) | $16,529 | $12,180 | $46,988 | $34,864 | |||||
Investment securities | 2,080 | 1,699 | 5,673 | 4,951 | |||||
Other | 625 | 58 | 1,066 | 138 | |||||
Total interest income | 19,234 | 13,937 | 53,727 | 39,953 | |||||
Interest Expense | |||||||||
Interest on deposits | 4,374 | 2,780 | 11,914 | 8,032 | |||||
Other | 145 | 73 | 321 | 235 | |||||
Total interest expense | 4,519 | 2,853 | 12,235 | 8,267 | |||||
Net Interest Income | 14,715 | 11,084 | 41,492 | 31,686 | |||||
Provision for Loan Losses | -- | 885 | 1,400 | 1,540 | |||||
Net Interest Income after | |||||||||
Provision for Loan Losses | 14,715 | 10,199 | 40,092 | 30,146 | |||||
Noninterest Income | |||||||||
Service charges on deposits | 814 | 799 | 2,327 | 2,346 | |||||
Other | 378 | 329 | 1,133 | 834 | |||||
Total noninterest income | 1,192 | 1,128 | 3,460 | 3,180 | |||||
Noninterest Expenses | |||||||||
Salaries and benefits | 4,392 | 3,709 | 13,059 | 10,891 | |||||
Occupancy | 841 | 704 | 2,401 | 2,027 | |||||
Furniture and equipment | 599 | 465 | 1,771 | 1,350 | |||||
Other | 1,548 | 1,457 | 4,645 | 4,200 | |||||
Total noninterest expenses | 7,380 | 6,335 | 21,876 | 18,468 | |||||
Income Before Provision for | |||||||||
Income Taxes | 8,527 | 4,992 | 21,676 | 14,858 | |||||
Provision for Income Taxes | 3,187 | 1,729 | 8,233 | 5,143 | |||||
Net Income | $ 5,340 | $ 3,263 | $13,443 | $ 9,715 | |||||
Basic Earnings per Share | $ 0.37 | $ 0.25 | $ 0.95 | $ 0.72 | |||||
Diluted Earnings per Share | $ 0.36 | $ 0.23 | $ 0.92 | $ 0.68 |
See Notes to Consolidated Condensed Financial Statements
CENTRAL COAST BANCORP AND SUBSIDIARY |
In thousands
Nine months ended September 30, | 2005 | 2004 | |||
---|---|---|---|---|---|
Cash Flows from Operations: | |||||
Net income | $ 13,443 | $ 9,715 | |||
Reconciliation of net income to net cash provided | |||||
by operating activities: | |||||
Provision for loan losses | 1,400 | 1,540 | |||
(Gain) loss on sale of investments | (12) | 116 | |||
Depreciation | 1,052 | 837 | |||
Net gain on sale of fixed assets | (4) | (10) | |||
Amortization and accretion | 536 | 635 | |||
Increase in accrued interest receivable and other assets | (1,860) | (41) | |||
Increase in accrued interest payable and other liabilities | 3,075 | 2,399 | |||
(Decrease) increase in deferred loan fees | (16) | 94 | |||
Net cash provided by operations | 17,614 | 15,285 | |||
Cash Flows from Investing Activities: | |||||
Proceeds from maturities of available-for-sale securities | 16,815 | 16,545 | |||
Purchases of available-for-sale securities | (66,700) | (59,473) | |||
Proceeds from sale of available-for-sale securities | 4,747 | 16,496 | |||
Net decrease (increase) in loans | 5,106 | (66,503) | |||
Proceeds from sale of equipment | 6 | 14 | |||
Purchases of equipment | (633) | (1,367) | |||
Net cash used in investing activities | (40,659) | (94,288) | |||
Cash Flows from Financing Activities: | |||||
Net increase in deposit accounts | 45,023 | 16,049 | |||
Net increase in other borrowings | 7,778 | 9,728 | |||
Cash received for stock options exercised | 1,307 | 609 | |||
Cash paid for shares repurchased | (1,237) | (2,501) | |||
Net cash provided by financing activities | 52,871 | 23,885 | |||
Net increase (decrease) in cash and equivalents | 29,826 | (55,118) | |||
Cash and equivalents, beginning of period | 58,097 | 101,463 | |||
Cash and equivalents, end of period | $ 87,923 | $ 46,345 | |||
Noncash Investing and Financing Activities: | |||||
Increase in other real estate owned (OREO) | $ -- | $ 5,250 | |||
Stock exchanged for option exercise | 1,267 | -- | |||
Other Cash Flow Information: | |||||
Interest paid | $ 10,572 | $ 7,736 | |||
Income taxes paid | 7,479 | 5,147 |
See Notes to Consolidated Condensed Financial Statements
CENTRAL COAST BANCORP AND SUBSIDIARY |
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly Central Coast Bancorp’s (the “Company’s”) consolidated financial position at September 30, 2005, the results of operations for the three and nine month periods ended September 30, 2005 and 2004 and cash flows for the nine month periods ended September 30, 2005 and 2004. Certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The interim consolidated condensed financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2004 Annual Report to Shareholders. The results of operations for the three and nine month periods ended September 30, 2005 and 2004 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. Management has determined that since all of the commercial banking products and services offered by the Company are available in each branch of the Community Bank of Central California, its bank subsidiary (the “Bank”), all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment. Stock split — On January 31, 2005, the Board of Directors declared a five-for-four stock split, which was distributed to shareholders on February 28, 2005. All earnings per share data and share data related to the stock option information have been retroactively adjusted to reflect the stock split. Subsequent event — On October 13, 2005, Central Coast Bancorp issued a press release and subsequently filed a Form 8-K with the Securities and Exchange Commission to announce the proposed acquisition of Central Coast Bancorp and its bank subsidiary, Community Bank of Central California, pursuant to a definitive agreement dated October 12, 2005, entered into by and between Central Coast Bancorp and VIB Corp, located in El Centro, California. Under the terms of the agreement, Central Coast Bancorp’s shareholders will be paid $25 per outstanding share in cash. The acquisition transaction is subject to approvals of applicable regulatory authorities and the favorable vote of the shareholders of Central Coast Bancorp. Subject to obtaining applicable regulatory and Central Coast Bancorp shareholder approvals, the transaction is expected to be completed in the first quarter of 2006. NOTE 2. STOCK COMPENSATIONThe Company accounts for its stock-based awards using the intrinsic value method in accordance with Accounting Principles Board No. 25,Accounting for Stock Issued to Employees and its related interpretations. No compensation expense has been recognized in the financial statements for employee stock arrangements, as the Company’s stock option plans provide for the issuance of options at a price of no less than the fair market value at the date of the grant. Statement of Financial Accounting Standards (SFAS) No. 123,Accounting for Stock-Based Compensation, requires the disclosure of pro forma net income and earnings per share had the Company adopted the fair value method of accounting for stock-based compensation. Under SFAS No. 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company’s calculations were made using the Black-Scholes option pricing model with the following assumptions: expected life of five years; average stock volatility of 15.7% and 16.8% for 2005 and 2004; risk free interest rates ranging from 3.77% to 3.90% for 2005 and 3.08% to 4.35% for 2004; and no cash dividends during the expected term for options granted in 2005 and 2004. The Company’s calculations are based on a multiple option valuation approach and forfeitures are recognized as they occur. A summary of the pro forma effects to reported net income and earnings per share as if the Company had elected to recognize compensation cost based on the fair value of the options granted at the grant date as prescribed by SFAS No. 123 is as follows. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
---|---|---|---|---|---|---|---|---|---|
In thousands (except per share data) | 2005 | 2004 | 2005 | 2004 | |||||
Net Income - As Reported | $ 5,340 | $ 3,263 | $ 13,443 | $ 9,715 | |||||
Compensation expense from amortization of | |||||||||
fair value of stock awards | (30) | (317) | (131) | (949) | |||||
Taxes on compensation expense | 12 | 130 | 55 | 389 | |||||
Pro Forma Net Income | $ 5,323 | $ 3,076 | $ 13,367 | $ 8,794 | |||||
Basic Earnings per Share - As Reported | $ 0 | .37 | $ 0 | .24 | $ 0 | .95 | $ 0 | .72 | |
Pro Forma Basic Earnings per Share | $ 0 | .37 | $ 0 | .20 | $ 0 | .95 | $ 0 | .66 | |
Diluted Earnings per Share - As Reported | $ 0 | .36 | $ 0 | .22 | $ 0 | .92 | $ 0 | .68 | |
Pro Forma Diluted Earnings per Share | $ 0 | .36 | $ 0 | .19 | $ 0 | .92 | $ 0 | .63 | |
NOTE 3. COMMITMENTS AND CONTINGENCIESIn 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 $250,684,000 and standby letters of credit of approximately $7,295,000 at September 30, 2005. However, all such commitments will not necessarily culminate in actual extensions of credit by the Company. Approximately $25,536,000 of loan commitments outstanding at September 30, 2005 relate to real estate construction loans that are expected to fund within the next twelve months. The remaining commitments primarily relate to commercial revolving lines of credit, other commercial loans and home equity lines of credit. Many of these commitments are expected to expire without being drawn upon. 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 contract performance or 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. NOTE 4. EARNINGS PER SHAREBasic earnings per share is computed by dividing net income by the weighted average common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised and converted into common stock. There was no difference in the numerator used in the calculation of basic earnings per share and diluted earnings per share. The denominator used in the calculation of basic earnings per share and diluted earnings per share for the three and nine-month periods ended September 30 is reconciled and basic and diluted earnings per share are calculated as follows: |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
---|---|---|---|---|---|---|---|---|---|
In thousands (except per share data) | 2005 | 2004 | 2005 | 2004 | |||||
Basic Earnings Per Share | |||||||||
Net income | $ 5,340 | $ 3,263 | $13,443 | $ 9,715 | |||||
Weighted average common shares outstanding | 14,175 | 13,579 | 14,109 | 13,586 | |||||
Basic earnings per share | $ 0.37 | $ 0.24 | $ 0.95 | $ 0.72 | |||||
Diluted Earnings Per Share | |||||||||
Net Income | $ 5,340 | $ 3,263 | $13,443 | $ 9,715 | |||||
Weighted average common shares outstanding | 14,175 | 13,579 | 14,109 | 13,586 | |||||
Dilutive effect of outstanding options | 505 | 679 | 483 | 674 | |||||
Weighted average common shares outstanding - Diluted | 14,680 | 14,258 | 14,592 | 14,260 | |||||
Diluted earnings per share | $ 0.36 | $ 0.22 | $ 0.92 | $ 0.68 | |||||
NOTE 5. COMPREHENSIVE INCOME
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
---|---|---|---|---|---|---|---|---|---|
In thousands | 2005 | 2004 | 2005 | 2004 | |||||
Net income | $ 5,340 | $ 3,263 | $ 13,443 | $ 9,715 | |||||
Other comprehensive (loss) income - Unrealized | |||||||||
(loss) gain on available-for-sale securities | (376) | 3,869 | (1,260) | (244) | |||||
Taxes on unrealized (loss) gain | 158 | (1,627) | 530 | 102 | |||||
Reclassification adjustment for gain (loss) | |||||||||
included in income | -- | 12 | 12 | 116 | |||||
Taxes on reclassification adjustment | -- | (5) | (5) | (48) | |||||
Total other comprehensive (loss) income | (218) | 2,249 | (723) | (74) | |||||
Total comprehensive income | $ 5,122 | $ 5,512 | $ 12,720 | $ 9,641 | |||||
Three Months Ended September 30, | Percentage Change Increase | Nine Months Ended September 30, | Percentage Change Increase | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In thousands (except percentages) | 2005 | 2004 | (Decrease) | 2005 | 2004 | (Decrease) | |||||||
Interest Income (1) | $19,603 | $14,224 | 38 | % | $54,703 | $40,794 | 34 | % | |||||
Interest Expense | 4,519 | 2,853 | 58 | % | 12,235 | 8,267 | 48 | % | |||||
Net interest income | 15,084 | 11,371 | 33 | % | 42,468 | 32,527 | 31 | % | |||||
Provision for Loan Losses | -- | 885 | -100 | % | 1,400 | 1,540 | -9 | % | |||||
Net interest income after | |||||||||||||
provision for loan losses | 15,084 | 10,486 | 44 | % | 41,068 | 30,987 | 33 | % | |||||
Noninterest Income | 1,192 | 1,128 | 6 | % | 3,460 | 3,180 | 9 | % | |||||
Noninterest Expense | 7,380 | 6,335 | 16 | % | 21,876 | 18,468 | 18 | % | |||||
Income before income taxes | 8,896 | 5,279 | 69 | % | 22,652 | 15,699 | 44 | % | |||||
Income Taxes | 3,187 | 1,729 | 84 | % | 8,233 | 5,143 | 60 | % | |||||
Tax Equivalent Adjustment | 369 | 287 | 29 | % | 976 | 841 | 16 | % | |||||
Net income | $ 5,340 | $ 3,263 | 64 | % | $13,443 | $ 9,715 | 38 | % | |||||
1) Interest on tax-free securities is reported on a tax equivalent basis.
Three months ended September 30, | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Taxable equivalent basis) | 2005 | 2004 | ||||||||||||
In thousands (except percentages) | Avg. Balance | Interest | Avg. Yield | Avg. Balance | Interest | Avg. Yield | ||||||||
Assets: | ||||||||||||||
Earning Assets | ||||||||||||||
Loans (1) (2) | $ 909,733 | $16,529 | 7 | .21% | $ 802,659 | $ 12,180 | 6 | .04% | ||||||
Taxable investments | 135,148 | 1,364 | 4 | .00% | 119,950 | 1,125 | 3 | .73% | ||||||
Tax-exempt securities (tax equiv. basis) | 69,964 | 1,085 | 6 | .15% | 53,255 | 861 | 6 | .43% | ||||||
Federal funds sold | 68,278 | 625 | 3 | .63% | 16,796 | 58 | 1 | .37% | ||||||
Total Earning Assets | 1,183,123 | 19,603 | 6 | .57% | 992,660 | 14,224 | 5 | .70% | ||||||
Cash & due from banks | 49,729 | 54,222 | ||||||||||||
Other assets | 24,412 | 17,053 | ||||||||||||
$1,257,264 | $1,063,935 | |||||||||||||
Liabilities & Shareholders' Equity: | ||||||||||||||
Interest bearing liabilities | ||||||||||||||
Demand deposits | $ 166,620 | 230 | 0 | .55% | $ 143,870 | 212 | 0 | .59% | ||||||
Savings | 269,500 | 1,139 | 1 | .68% | 261,444 | 830 | 1 | .26% | ||||||
Time deposits | 386,350 | 3,006 | 3 | .09% | 287,973 | 1,738 | 2 | .40% | ||||||
Other borrowings | 11,283 | 144 | 5 | .06% | 5,433 | 73 | 5 | .35% | ||||||
Total interest bearing liabilities | 833,753 | 4,519 | 2 | .15% | 698,720 | 2,853 | 1 | .62% | ||||||
Demand deposits | 294,259 | 267,033 | ||||||||||||
Other Liabilities | 17,118 | 3,139 | ||||||||||||
Total Liabilities | 1,145,130 | 968,892 | ||||||||||||
Shareholders' Equity | 112,134 | 95,043 | ||||||||||||
$1,257,264 | $1,063,935 | |||||||||||||
Net interest income & margin (3) | $15,084 | 5 | .06% | $ | 11,371 | 4 | .56% | |||||||
(1) | Loan interest income includes fee income of $675,000 and $416,000 for the three months ended September 30, 2005 and 2004, respectively. |
(2) | Includes the average allowance for loan losses of $17,516,000 and $17,510,000 and average deferred loan fees of $1,282,000 and $1,127,000 for the three months ended September 30, 2005 and 2004, respectively. |
(3) | Net interest margin is computed by dividing net interest income by the total average earning assets. |
Nine Months ended September 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Taxable equivalent basis) | 2005 | 2004 | |||||||||||
In thousands (except percentages) | Avg. Balance | Interest | Avg. Yield | Avg. Balance | Interest | Avg. Yield | |||||||
Assets: | |||||||||||||
Earning Assets | |||||||||||||
Loans (1) (2) | $ 912,258 | $46,988 | 6 | .86% | $776,315 | $34,864 | 6 | .00% | |||||
Taxable investments | 125,465 | 3,742 | 3 | .97% | 120,249 | 3,269 | 3 | .62% | |||||
Tax-exempt securities (tax equiv. basis) | 61,220 | 2,907 | 6 | .33% | 51,542 | 2,523 | 6 | .54% | |||||
Federal funds sold | 44,140 | 1,066 | 3 | .22% | 16,446 | 138 | 1 | .12% | |||||
Total Earning Assets | 1,143,083 | 54,703 | 6 | .37% | 964,552 | 40,794 | 5 | .64% | |||||
Cash & due from banks | 47,169 | 52,939 | |||||||||||
Other assets | 23,276 | 16,469 | |||||||||||
$1,213,528 | $1,033,960 | ||||||||||||
Liabilities & Shareholders' Equity: | |||||||||||||
Interest bearing liabilities | |||||||||||||
Demand deposits | $ 155,248 | 617 | 0 | .53% | $140,011 | 612 | 0 | .58% | |||||
Savings | 281,319 | 3,358 | 1 | .59% | 254,899 | 2,419 | 1 | .27% | |||||
Time deposits | 362,152 | 7,928 | 2 | .92% | 279,114 | 5,001 | 2 | .39% | |||||
Other borrowings | 8,205 | 332 | 5 | .39% | 7,790 | 235 | 4 | .03% | |||||
Total interest bearing liabilities | 806,924 | 12,235 | 2 | .02% | 681,814 | 8,267 | 1 | .62% | |||||
Demand deposits | 283,604 | 255,992 | |||||||||||
Other Liabilities | 15,231 | 3,406 | |||||||||||
Total Liabilities | 1,105,759 | 941,212 | |||||||||||
Shareholders' Equity | 107,769 | 92,748 | |||||||||||
$1,213,528 | $1,033,960 | ||||||||||||
Net interest income & margin (3) | $42,468 | 4 | .95% | $32,527 | 4 | .50% | |||||||
(1) | Loan interest income includes fee income of $1,616,000 and $1,333,000 for the nine months ended September 30, 2005 and 2004, respectively. |
(2) | Includes the average allowance for loan losses of $17,175,000 and $16,971,000 and average deferred loan fees of $1,287,000 and $1,143,000 for the nine months ended September 30, 2005 and 2004, respectively. |
(3) | Net interest margin is computed by dividing net interest income by the total average earning assets. |
Volume/Rate Analysis
(in thousands)
Three Months Ended September 30, 2005 over 2004
Increase (decrease) due to change in:
Net | |||||||
Interest-earning assets: | Volume | Rate (4) | Change | ||||
Net Loans (1)(2) | $1,630 | $ 2,719 | $4,349 | ||||
Taxable investment securities | 143 | 96 | 239 | ||||
Tax exempt investment securities (3) | 271 | (47) | 224 | ||||
Federal funds sold | 178 | 389 | 567 | ||||
Total | 2,222 | 3,157 | 5,379 | ||||
Interest-bearing liabilities: | |||||||
Demand deposits | 34 | (16) | 18 | ||||
Savings deposits | 26 | 283 | 309 | ||||
Time deposits | 595 | 673 | 1,268 | ||||
Other borrowings | 79 | (8) | 71 | ||||
Total | 734 | 932 | 1,666 | ||||
Interest differential | $1,488 | $ 2,225 | $3,713 | ||||
Nine Months Ended September 30, 2005 over 2004
Increase (decrease) due to change in:
Net | |||||||
Interest-earning assets: | Volume | Rate (4) | Change | ||||
Net Loans (1)(2) | $6,123 | $ 6,001 | $12,124 | ||||
Taxable investment securities | 142 | 331 | 473 | ||||
Tax exempt investment securities (3) | 475 | (91) | 384 | ||||
Federal funds sold | 233 | 695 | 928 | ||||
Total | 6,973 | 6,936 | 13,909 | ||||
Interest-bearing liabilities: | |||||||
Demand deposits | 66 | (61) | 5 | ||||
Savings deposits | 252 | 687 | 939 | ||||
Time deposits | 1,490 | 1,437 | 2,927 | ||||
Other borrowings | 13 | 84 | 97 | ||||
Total | 1,821 | 2,147 | 3,968 | ||||
Interest differential | $5,152 | $ 4,789 | $ 9,941 | ||||
(1) | The average balance of non-accruing loans is not significant as a percentage of total loans and, as such, has been included in net loans. |
(2) | Loan fees of $675,000 and $416,000 for the quarters ended September 30, 2005 and 2004, and loan fees of $1,616,000 and $1,333,000 for the nine months ended September 30, 2005 and 2004, respectively, have been included in the interest income computation. |
(3) | Includes taxable-equivalent adjustments that relate to income on certain securities that are exempt from Federal income taxes. The effective Federal statutory tax rate was 35% for 2005 and 2004. |
(4) | The rate / volume variance has been included in the rate variance. |
In thousands (except percentages) | September 30, 2005 | December 31, 2004 | |||
---|---|---|---|---|---|
Past due 90 days or more and still accruing interest: | |||||
Commercial | $ -- | $ -- | |||
Real estate | -- | -- | |||
Consumer and other | -- | -- | |||
-- | -- | ||||
Nonaccrual: | |||||
Commercial | -- | 102 | |||
Real estate | -- | -- | |||
Consumer and other | -- | -- | |||
-- | 102 | ||||
Restructured (in compliance with modified terms) - Commercial | 2,993 | 733 | |||
Total nonperforming and restructured loans | $2,993 | $835 | |||
Allowance for loan losses as a percentage of nonperforming and restructured loans | 586 | % | 1949 | % | |
Nonperforming and restructured loans to total loans | 0.32 | % | 0.09 | % | |
Nonperforming assets to total assets | 0.24 | % | 0.07 | % |
• | The current national and local economic and business conditions, trends and developments, including the condition of various market segments within our lending area; |
• | Changes in lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices; |
• | Changes in the nature, mix, concentrations and volume of the loan portfolio; |
• | The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Bank’s current portfolio. |
There can be no assurance that the adverse impact of any of these conditions on the Bank will not be in excess of the unallocated allowance as determined by management at September 30, 2005 and set forth in the preceding paragraph. The allowance for loan losses totaled $17,550,000 or 1.89% of total loans at September 30, 2005 compared to $17,514,000 or 1.88% at June 30, 2005 and $16,270,000 or 1.75% at December 31, 2004. At these dates, the allowance represented 586%, 2591% and 1949% of nonperforming loans. It is the policy of management to maintain the allowance for loan losses at a level adequate for risks inherent in the loan portfolio. Based on information currently available to analyze loan loss potential, including economic factors, overall credit quality, historical delinquency and a history of actual charge-offs, management believes that the loan loss provision and allowance are adequate. However, no prediction of the ultimate level of loans charged off in future years can be made with any certainty. The following table summarizes activity in the allowance for loan losses for the periods indicated: |
Three months ended September 30, | Nine months ended September 30, | ||||||||
---|---|---|---|---|---|---|---|---|---|
In thousands (except percentages) | 2005 | 2004 | 2005 | 2004 | |||||
Beginning balance | $ 17,514 | $ 17,232 | $ 16,270 | $ 16,590 | |||||
Provision charged to expense | -- | 885 | 1,400 | 1,540 | |||||
Loans charged off | (17 | ) | (3,394 | ) | (189 | ) | (3,495 | ) | |
Recoveries | 53 | 56 | 69 | 144 | |||||
Ending balance | $ 17,550 | $ 14,779 | $ 17,550 | $ 14,779 | |||||
Ending loan portfolio | $ 926,306 | $ 840,549 | |||||||
Allowance for loan losses as percentage of ending loan portfolio | 1.89 | % | 1.76 | % |
Actual: | Minimum Capital Requirement: | Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions: | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In thousands (except percentages) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||
Company | |||||||||||||
As of September 30, 2005: | |||||||||||||
Total Capital (to Risk Weighted Assets): | $127,472 | 12 | .7% | $80,520 | 8 | .0% | N/A | ||||||
Tier 1 Capital (to Risk Weighted Assets): | 114,824 | 11 | .4% | 40,245 | 4 | .0% | N/A | ||||||
Tier 1 Capital (to Average Assets): | 114,824 | 9 | .1% | 50,291 | 4 | .0% | N/A | ||||||
As of December 31, 2004: | |||||||||||||
Total Capital (to Risk Weighted Assets): | $113,111 | 11 | .2% | $80,589 | 8 | .0% | N/A | ||||||
Tier 1 Capital (to Risk Weighted Assets): | 100,473 | 10 | .0% | 40,295 | 4 | .0% | N/A | ||||||
Tier 1 Capital (to Average Assets): | 100,473 | 9 | .1% | 44,365 | 4 | .0% | N/A | ||||||
Community Bank | |||||||||||||
As of September 30, 2005: | |||||||||||||
Total Capital (to Risk Weighted Assets): | $114,499 | 11 | .6% | $79,238 | 8 | .0% | $99,048 | 10 | .0% | ||||
Tier 1 Capital (to Risk Weighted Assets): | 102,049 | 10 | .3% | 39,619 | 4 | .0% | 59,429 | 6 | .0% | ||||
Tier 1 Capital (to Average Assets): | 102,049 | 8 | .2% | 49,914 | 4 | .0% | 62,393 | 5 | .0% | ||||
As of December 31, 2004: | |||||||||||||
Total Capital (to Risk Weighted Assets): | $105,234 | 10 | .6% | $79,809 | 8 | .0% | $99,762 | 10 | .0% | ||||
Tier 1 Capital (to Risk Weighted Assets): | 92,716 | 9 | .3% | 39,905 | 4 | .0% | 59,857 | 6 | .0% | ||||
Tier 1 Capital (to Average Assets): | 92,716 | 8 | .4% | 44,105 | 4 | .0% | 55,132 | 5 | .0% |
Interest Rate Risk Simulation of Net Interest Income
In thousands | Estimated Impact on One Year Projection of Net Interest Income | ||
---|---|---|---|
Variation from flat rate scenario | |||
Most likely rates | $ 1,800 | ||
Declining rates | (4,204 | ) | |
Rising rates | 2,979 |
In thousands (except percentages) | % Change in NII from Current 12 Mo. Horizon | Change in NII from Current 12 Month Horizon | |||
---|---|---|---|---|---|
+ 300bp | 17 | .0% | $ 8,797 | ||
+ 200bp | 11 | .4% | 5,887 | ||
+ 100bp | 5 | .7% | 2,968 | ||
- 100bp | (7 | .2%) | (3,717) | ||
- 200bp | (14 | .0%) | (7,224) |
Period | Total Number of Shares Purchased | Average Price Per Share | Shares Purchased as Part of Publicly Announced Plan | Shares Remaining to Purchase Under the Plan | |||||
---|---|---|---|---|---|---|---|---|---|
July 1-31, 2005 | -- | $ -- | -- | 176,262 | |||||
August 1-31, 2005 | -- | -- | -- | 176,262 | |||||
September 1-30, 2005 | -- | -- | -- | 176,262 | |||||
Total | -- | $ -- | -- | ||||||
1) | The Repurchase Plan ("Plan') was announced on February 28, 2001. There is no stated expiration date for the Plan. |
2) | The Plan approved repurchase of 365,000 (5%) of the outstanding shares as of February 28, 2001. The approved shares equate to 690,077 shares as adjusted for the subsequent stock splits and stock dividends. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIESNone. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNone. ITEM 5. OTHER INFORMATIONNone. ITEM 6. 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. |
(2.2) | Agreement and Plan of Reorganization by and between Central Coast Bancorp and VIB Corp dated as of October 12, 2005, incorporated by reference from Exhibit 2.1 to Form 8-K, filed with the Commission on October 17, 2005. |
(3.1) | Articles of Incorporation, as amended, incorporated by reference from Exhibit 3.1 to the Registrant’s 2004 Annual Report on Form 10-K filed with the Commission on March 14, 2005. |
(3.2) | Bylaws, as amended, incorporated by reference from Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 8, 2004. |
(4.1) | Specimen form of Central Coast Bancorp stock certificate, incorporated by reference from the Registrant’s 1994 Annual Report on Form 10-K 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 Registrant’s 1994 Annual Report on Form 10-K 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. 333-76972, 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. 333-76972, filed with the Commission on March 28, 1994. |
*(10.4) | 1994 Stock Option Plan, as amended and restated, incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 333-89948, filed with the Commission on November 15, 1996. |
*(10.5) | Form of Nonstatutory Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 333-89948, filed with Commission on November 15, 1996. |
*(10.6) | Form of Incentive Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 333-89948, filed with the Commission on November 15, 1996. |
*(10.7) | Form of Director Nonstatutory Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 333-89948, filed with the Commission on November 15, 1996. |
*(10.8) | 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. 333-76972, filed with the Commission on April 15, 1994. |
*(10.9) | 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. 333-76972, filed with the Commission on March 28, 1994. |
*(10.10) | Form of Executive Employment Agreement incorporated by reference from Exhibit 10.13 to the Company’s 1996 Annual Report on Form 10-K filed with the Commission on March 31, 1997. |
*(10.11) | Form of Executive Salary Continuation Agreement incorporated by reference from Exhibit 10.14 to the Company’s 1996 Annual Report on Form 10-K filed with the Commission on March 31, 1997. |
*(10.12) | Form of Indemnification Agreement incorporated by reference from Exhibit D to the Proxy Statement filed with the Commission on September 3, 1996, in connection with Registrant’s 1996 Annual Shareholders’ Meeting held on September 23, 1996. |
(10.13) | Purchase and Assumption Agreement for the Acquisition of Wells Fargo Bank Branches incorporated by reference from Exhibit 10.17 to the Registrant’s 1996 Annual Report on Form 10-K filed with the Commission on March 31, 1997. |
(10.14) | Lease agreement dated November 27, 2001 related to 491 Tres Pinos Road, Hollister, California incorporated by reference from Exhibit 10.17 to the Registrant’s 2001 Annual Report on Form 10-K filed with the Commission on March 26, 2002. |
(10.15) | Lease agreement dated February 11, 2002, related to 761 First Street, Gilroy, California incorporated by reference from Exhibit 10.18 to the Registrant’s 2001 Annual Report on Form 10-K filed with the Commission on March 26, 2002. |
(10.16) | Lease agreement dated November 18, 2002, related to 439 Alvarado Street, Monterey, California incorporated by reference from Exhibit 10.16 to the Registrant’s 2002 Annual Report on Form 10-K filed with the Commission on March 20, 2003. |
*(10.17) | 2004 Stock Option Plan and Forms of Incentive and Nonstatutory Stock Option Agreement incorporated by reference from Exhibit 99.1 to Registration Statement on Form S-8, No. 333-117043, filed with the Commission on September 30, 2004. |
(10.18) | Lease agreement dated November 1, 1989 and Amended Lease Agreement dated November 22, 1999, related to 1658 Fremont Boulevard, Seaside, California. |
(10.19) | Lease agreement dated March 1, 1998, related to 400 Alta Street, Gonzales, California. |
(10.20) | Lease agreement dated April 16, 1998, related to 228 Reservation Road, Marina, California. |
(10.21) | Lease agreement dated February 14, 1992, related to 1285 North Davis Road, Salinas, California. |
(10.22) | Lease agreement dated April 25, 2000, related to 1915 Main Street, Watsonville, California. |
(10.23) | Lease agreement dated March 1, 2002, related to Salinas, California. |
(10.24) | Lease agreement dated February 10, 2004, related to 3110 A Mission Drive, Santa Cruz, California. |
(10.25) | Lease agreement dated February 26, 2004, related to 2149 H. De La Rosa Sr. Street Soledad, California. |
(10.26) | Lease agreement dated December 30, 2004, related to 591 and 599 Lighthouse Avenue, Monterey, California. |
(14.1) | Code of Ethics, incorporated by reference from Exhibit 14.1 to the Registrant’s 2004 Annual Report on Form 10-K filed with the Commission on March 1, 2004. |
(21.1) | The Registrant's only subsidiary is its wholly owned subsidiary, Community Bank of Central California. |
(31.1) | Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
(31.2) | Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
(32.1) | Certification of Central Coast Bancorp by its Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
*Denotes management contracts, compensatory plans or arrangements. |
SIGNATURESPursuant 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. |
November 4, 2005 | CENTRAL COAST BANCORP | ||
By:/s/NICK VENTIMIGLIA | |||
Nick Ventimiglia | |||
(Chief Executive Officer) | |||
By:/s/ JAYME C. FIELDS | |||
Jayme C. Fields | |||
(Chief Financial Officer, Principal | |||
Financial and Accounting Officer) |
EXHIBIT INDEX
Exhibit Number | Description | Sequential Page Number | |||
---|---|---|---|---|---|
10.18 | Lease agreement dated November 1, 1989 and Amended Lease Agreement dated November 22, 1999,related to 1658 Fremont Boulevard, Seaside, California. | 32 | |||
10.19 | Lease agreement dated March 1, 1998, related to 400 Alta Street, Gonzales, California. | 41 | |||
10.20 | Lease agreement dated April 16, 1998, related to 228 Reservation Road, Marina, California | 50 | |||
10.21 | Lease agreement dated February 14, 1992, related to 1285 North Davis Road, Salinas, California. | 75 | |||
10.22 | Lease agreement dated April 25, 2000, related to 1915 Main Street, Watsonville, California. | 101 | |||
10.23 | Lease agreement dated March 1, 2002, related to Salinas, California. | 138 | |||
10.24 | Lease agreement dated February 10, 2004, related to 3110 A Mission Drive, Santa Cruz, California. | 148 | |||
10.25 | Lease agreement dated February 26, 2004, related to 2149 H. De La Rosa Sr. Street Soledad, California. | 160 | |||
10.26 | Lease agreement dated December 30, 2004, related to 591 and 599 Lighthouse Avenue, Monterey, California. | 175 | |||
31.1 | Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | 198 | |||
31.2 | Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | 199 | |||
32.1 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 200 |