SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-8937
FIRST BANKS AMERICA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1604965
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
135 North Meramec, Clayton, Missouri 63105
------------------------------------------
(address of principal executive offices) (Zip Code)
(314) 854-4600
--------------
(Registrant's telephone number, including area code)
P. O. Box 630369, Houston, Texas 77263-0369
-------------------------------------------
(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 ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class July 31, 1997
----- -------------
Common Stock, $.15 par value 1,088,242
Class B Common Stock, $.15 par value 2,500,000
First Banks America, Inc.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 -1-
Consolidated Statements of Income for the three and six
month periods ended June 30, 1997 and 1996 -3-
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 -4-
Notes to Consolidated Financial Statements -5-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -8-
PART II OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K -13-
SIGNATURES -14-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
June 30, December 31,
1997 1996
---- ----
ASSETS
------
Cash and cash equivalents:
Cash and due from banks....................................... $ 16,340 12,343
Interest-bearing deposits with other financial institutions-
with maturities of three months or less..................... 433 146
Federal funds sold............................................ 8,400 9,475
---------- ---------
Total cash and cash equivalents........................... 25,173 21,964
---------- --------
Investment securities - available for sale, at fair value........ 78,426 86,910
Loans:
Real estate construction and development...................... 46,542 48,025
Commercial and financial...................................... 52,928 44,238
Real estate mortgage.......................................... 61,110 54,761
Consumer and installment...................................... 88,275 96,096
---------- --------
Total loans............................................... 248,855 243,120
Unearned discount............................................. (1,281) (1,246)
Allowance for possible loan losses............................ (6,251) (6,147)
--------- --------
Net loans................................................. 241,323 235,727
---------- --------
Bank premises and equipment, net of
accumulated depreciation..................................... 6,254 6,369
Intangible asset associated with the purchase of a
subsidiary................................................... 3,184 3,127
Accrued interest receivable...................................... 2,347 2,348
Other real estate owned.......................................... 374 785
Deferred income taxes............................................ 15,316 15,519
Other assets..................................................... 1,195 2,433
---------- ---------
Total assets.............................................. $ 373,592 375,182
========== =========
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
(continued)
June 30, December 31,
1997 1996
---- ----
LIABILITIES
-----------
Deposits:
Demand:
Non-interest bearing............................................ $ 56,295 56,161
Interest bearing................................................ 48,107 53,310
Savings.......................................................... 69,454 66,523
Time:
Time deposits of $100 or more................................... 29,137 31,679
Other time deposits............................................. 109,826 112,133
---------- --------
Total deposits................................................ 312,819 319,806
Short-term borrowings................................................ 6,097 2,092
Note payable......................................................... 14,500 14,000
Deferred income taxes................................................ 1,431 909
Accrued and other liabilities........................................ 4,845 4,877
---------- --------
Total liabilities............................................. 339,692 341,684
---------- --------
STOCKHOLDERS' EQUITY
--------------------
Common Stock:
Common stock, $.15 par value; 6,666,666 shares authorized;
1,414,150 and 1,412,900 shares issued and outstanding at June 30,
1997 and December 31, 1996, respectively......................... 212 212
Class B common stock, $.15 par value; 4,000,000 shares
authorized; 2,500,000 shares issued and outstanding
at June 30, 1997 and December 31, 1996.......................... 375 375
Capital surplus...................................................... 37,755 38,036
Retained deficit since elimination of accumulated deficit
of $259,117, effective December 31, 1994......................... (1,078) (2,251)
Common treasury stock, at cost; 327,158 shares and 280,430
shares at June 30, 1997 and December 31, 1996,
respectively..................................................... (3,365) (2,838)
Net fair value adjustment for securities available for sale.......... 1 (36)
---------- --------
Total stockholders' equity.................................... 33,900 33,498
---------- --------
Total liabilities and stockholders' equity.................... $ 373,592 375,182
========== ========
See accompanying notes to consolidated financial statements
FIRST BANKS AMERICA, INC.
Consolidated Statements of Income (unaudited)
(dollars expressed in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Interest income:
Interest and fees on loans........................................ $5,441 3,650 10,634 7,629
Investment securities............................................. 1,345 718 2,593 1,243
Federal funds sold and other...................................... 163 614 359 1,118
------ ----- ------ -----
Total interest income......................................... 6,949 4,982 13,586 9,990
------ ----- ------ -----
Interest expense:
Deposits:
Interest-bearing demand......................................... 291 100 589 198
Savings......................................................... 550 426 1,095 862
Time deposits of $100 or more................................... 385 363 806 706
Other time deposits............................................. 1,469 1,390 2,982 2,823
Other borrowings.................................................. 414 173 734 337
------ ----- ----- -----
Total interest expense........................................ 3,109 2,452 6,206 4,926
------ ----- ----- -----
Net interest income........................................... 3,840 2,530 7,380 5,064
Provision for possible loan losses................................... 735 250 1,285 350
------ ----- ----- -----
Net interest income after provision for
possible loan losses...................................... 3,105 2,280 6,095 4,714
------ ----- ----- -----
Noninterest income:
Service charges on deposit accounts
and customer service fees...................................... 396 392 811 737
Gain on sales of securities, net.................................. -- -- -- 75
Other income...................................................... 427 44 667 62
------ ----- ----- -----
Total noninterest income...................................... 823 436 1,478 874
------ ----- ----- -----
Noninterest expenses:
Salaries and employee benefits.................................... 1,061 661 2,095 1,386
Occupancy, net of rental income................................... 368 205 766 401
Furniture and equipment........................................... 195 137 381 304
Federal Deposit Insurance Corporation premiums.................... 33 19 67 37
Postage, printing and supplies.................................... 88 68 187 142
Data processing fees.............................................. 150 77 386 157
Legal, examination and professional fees.......................... 513 277 991 561
Communications.................................................... 93 93 222 203
Losses and expenses on foreclosed real estate,
net of gains................................................... (225) 11 (256) 17
Other expenses.................................................... 393 446 861 879
------ ----- ----- -----
Total noninterest expenses.................................... 2,669 1,994 5,700 4,087
------ ----- ----- -----
Income before provision for income taxes...................... 1,259 722 1,873 1,501
Provision for income taxes........................................... 463 284 700 602
------ ----- ----- -----
Net income.................................................... $ 796 438 1,173 899
====== ===== ===== ====
Earnings per common share............................................ $ .22 0.11 .32 0.23
====== ===== ===== ====
Weighted average shares of common stock and common
stock equivalents outstanding (in thousands)...................... 3,612 3,973 3,644 3,990
====== ====== ======== =======
See accompanying notes to consolidated financial statements
FIRST BANKS AMERICA, INC.
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands)
Six months ended
June 30,
-----------------
1997 1996
---- ----
Cash flows from operating activities:
Net income................................................................ $ 1,173 899
Adjustments to reconcile net income to net cash:
Depreciation and amortization of bank premises and equipment............ 311 285
Amortization, net of accretion.......................................... (199) (418)
Provision for possible loan losses...................................... 1,285 350
(Increase) decrease in accrued interest receivable...................... 1 (803)
Interest accrued on liabilities......................................... 6,206 4,926
Payments of interest on liabilities..................................... (5,628) (5,053)
Provision for income taxes.............................................. 700 318
Gain on sales of securities, net........................................ -- (75)
Other, net.............................................................. 176 (522)
---------- ---------
Net cash provided by (used in) operating activities................... 4,025 (93)
---------- ---------
Cash flows from investing activities:
Sales of investment securities............................................ -- 10,513
Maturities of investment securities....................................... 35,996 88,024
Purchases of investment securities........................................ (27,126) (152,615)
Net (increase) decrease in loans.......................................... (7,528) 29,563
Recoveries of loans previously charged off................................ 767 587
Purchases of bank premises and equipment.................................. (196) (112)
Other, net................................................................ 561 579
---------- ---------
Net cash provided by (used in) investing activities................... 2,474 (23,461)
---------- ---------
Cash flows from financing activities:
Decrease in deposits...................................................... (6,987) (3,801)
Increase (decrease) in borrowed funds..................................... 4,505 (4,926)
Repurchase of common stock for treasury................................... (527) (526)
Other, net ............................................................... (281) 24
---------- ---------
Net cash used in financing activities................................. (3,290) (9,229)
----------- ---------
Net increase (decrease) in cash and cash equivalents.................. 3,209 (32,783)
Cash and cash equivalents, beginning of period............................... 21,964 40,922
---------- ---------
Cash and cash equivalents, end of period..................................... $ 25,173 8,139
========== =========
See accompanying notes to consolidated financial statements
FIRST BANKS AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements of First Banks
America, Inc. (FBA) are unaudited and should be read in conjunction with the
consolidated financial statements contained in the 1996 annual report on Form
10-K. In the opinion of management, all adjustments, consisting of normal
recurring accruals considered necessary for a fair presentation of the results
of operations for the interim period presented herein, have been included.
Operating results for the three and six month periods ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. Certain reclassifications of 1996 amounts have been
made to conform with the 1997 presentation.
The consolidated financial statements include the accounts of FBA and
its subsidiaries, all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated.
FBA operates through two banking subsidiaries, BankTEXAS N.A.,
headquartered in Houston, Texas (BankTEXAS) and Sunrise Bank of California,
headquartered in Roseville, California (Sunrise Bank), collectively referred to
as the Subsidiary Banks. Sunrise Bank was acquired on November 1, 1996. The
acquisition was accounted for under the purchase method of accounting and,
accordingly, the consolidated financial statements include the financial
position and results of operations for the period subsequent to the acquisition
date.
(2) Transactions with Related Party
Following the private placement of Class B common stock in August 1994,
FBA began purchasing certain services and supplies from or through its majority
shareholder, First Banks, Inc. (First Banks). FBA's financial position and
operating results could significantly differ from those that would be obtained
if FBA's relationship with First Banks did not exist.
First Banks provides management services to FBA and the Subsidiary
Banks. Management services are provided under a management fee agreement whereby
FBA compensates First Banks on an hourly basis for its use of personnel for
various functions including internal auditing, loan review, income tax
preparation and assistance, accounting, asset/liability and investment services,
loan servicing and other management and administrative services. Fees paid under
this agreement were $271,000 and $474,000 for the three and six months ended
June 30, 1997, compared to $175,000 and $318,000 for the three and six months
ended June 30, 1996, respectively.
Because of this affiliation through First Banks and the geographic
proximity of certain of their banking offices, Sunrise Bank and First Bank &
Trust, a wholly owned subsidiary of First Banks, share the cost of certain
personnel and services used by both banks. This includes the salaries and
benefits of certain loan and administrative personnel. In January 1997, Sunrise
Bank and First Bank & Trust entered into a cost sharing agreement for the
purpose of allocating these expenses between them. Expenses associated with loan
origination personnel are allocated based on the relative loan volume between
the banks. Costs of most other personnel are allocated on an hourly basis.
Because this involves distributing essentially fixed costs over a larger asset
base, it allows each bank to receive the benefit of personnel and services at a
reduced cost. Fees paid under this agreement were $74,000 and $157,000 for the
three and six month periods ended June 30, 1997.
Under a data processing agreement, a subsidiary of First Banks provided
data processing and various related services to FBA through March 31, 1997. Fees
paid under this agreement were $196,000 for the six months ended June 30, 1997,
compared to $77,000 and $157,000 for the three and six months ended June 30,
1996, respectively. Effective April 1, 1997, First Services L.P., a limited
partnership indirectly owned by First Banks' Chairman and his children through
its General Partners and Limited Partners, began providing data processing and
various related services to FBA. Fees paid under this agreement were $143,000
for the three and six months ended June 30, 1997. The fees paid for management
services and data processing are significantly lower than FBA was paying its
nonaffiliated vendors.
The Subsidiary Banks have $33.3 million and $21.4 million in whole
loans and loan participations outstanding at June 30, 1997 and December 31,
1996, respectively, that were purchased from banks affiliated with First Banks.
In addition, the Subsidiary Banks have sold $19.5 million and $26.7 million in
whole loans and loan participations to affiliates of First Banks at June 30,
1997 and December 31, 1996, respectively. These loan and loan participations
were acquired and sold at interest rates and terms prevailing at the dates of
their purchase or sale and under standards and policies followed by the
Subsidiary Banks.
FBA has borrowed $14.5 million from First Banks under a $15.0 million
note payable agreement. The borrowings under the note agreement bear interest at
an annual rate of one-quarter percent less than the "Prime Rate" as reported in
the Wall Street Journal. The interest expense was $573,000 for the six months
ended June 30, 1997. The principal and accrued interest under the note agreement
are due and payable on October 31, 2001. The accrued and unpaid interest under
the note agreement was $767,000 and $194,000 at June 30, 1997 and December 31,
1996, respectively.
(3) Regulatory Capital
FBA and the Subsidiary Banks are subject to various regulatory capital
requirements administered by federal and state banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on FBA and the Subsidiary Banks' assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Subsidiary Banks' capital amounts and regulatory classification
are also subject to qualitative judgments by the regulators about components,
risk weighting, and other factors which may affect possible regulatory actions.
Quantitative measures established by regulations to ensure capital
adequacy require the Subsidiary Banks to maintain certain minimum capital
ratios. The Subsidiary Banks are required to maintain a minimum risk-based
capital to risk-weighted assets ratio of 8.00%, with at least 4.00% being "Tier
1" capital. Tier 1 capital is composed of total stockholders' equity excluding
the net fair value adjustment for securities available for sale and excess net
deferred tax assets, as defined by regulation. In addition, a minimum leverage
ratio (Tier 1 capital to total assets) of 3.00% plus an additional cushion of
100 to 200 basis points is expected. In order to be well capitalized under
Prompt Corrective Action provisions, the bank is required to maintain a risk
weighted assets ratio of at least 10%, a Tier 1 to risk weighted assets ratio of
at least 6%, and a leverage ratio of at least 5%. As of August 31, 1995, the
date of the most recent notification from FBA's primary regulator, BankTEXAS was
categorized as adequately capitalized under the regulatory framework for prompt
corrective action. Management believes, as of June 30, 1997, the Subsidiary
Banks are well capitalized as defined by the FDIC Act.
At June 30, 1997 and December 31, 1996, FBA's and the Subsidiary Banks'
capital ratios were as follows:
Risk-based capital ratios
-------------------------
Total Tier 1 Leverage Ratio
----- ------ --------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
FBA 7.53% 7.64% 6.27% 6.38% 5.18% 5.31%
BankTEXAS 11.17 10.29 9.92 9.04 8.38 7.53
Sunrise Bank 16.32 17.67 15.04 16.39 11.97 10.88
(4) Proposed Business Combinations
On July 25, 1997, FBA and First Commercial Bancorp, Inc. (FCB) jointly
announced an agreement in principle providing for the merger of the two
companies. Under the terms of the agreement, FCB will be merged into FBA, and
FCB's wholly owned subsidiary, First Commercial Bank, will be merged into
Sunrise Bank. In the transaction, which is subject to the execution of a
definitive agreement between FBA and FCB, the approval of regulatory authorities
and the approval of the shareholders of both FBA and FCB, the FCB shareholders
will receive .8888 shares of FBA common stock for each share of FCB common stock
that they hold. In total, FCB shareholders will receive approximately 752,000
shares of FBA common stock in the transaction. The transaction also provides for
First Banks to receive 804,000 shares of FBA common stock in exchange for $10
million of FBA's note payable to First Banks. In addition, the transaction
provides for the exchange of FCB convertible debentures, which are owned by
First Banks, for comparable debentures of FBA. The agreement in principal was
negotiated and approved by special committees of the boards of directors of FCB
and FBA. These special committees were comprised solely of independent directors
of the two respective boards of directors.
FCB operates through First Commercial Bank, its wholly owned subsidiary
bank. First Commercial Bank has six banking offices located in Sacramento,
Roseville (2), San Francisco, Concord and Campbell, California. At June 30,
1997, FCB had total assets of $159 million, and reported net income of $570,000
for the six month period then ended. FCB's common stock is traded on the NASDAQ
Small Cap Market, of which 61.5% is owned by First Banks. The transaction is
expected to be completed by December 31, 1997.
In addition, on July 28, 1997, FBA and Surety Bank entered into an
Agreement and Plan of Reorganization (Agreement) providing for the merger of the
two companies. Under the terms of the Agreement, Surety Bank will be merged into
a subsidiary of FBA. In the transaction, which is subject to the approval of
regulatory authorities and the shareholders of Surety Bank, the Surety Bank
common shareholders will be allowed to elect to receive either $36.12 in cash or
FBA common stock equivalent to the quotient of $38.12 divided by the exchange
price for each share of Surety common stock that they hold. The exchange price,
as defined in the Agreement, is subject to a minimum and maximum price per share
of common stock of $10.89 and $14.73, respectively. Holders of Surety Bank
convertible preferred stock will receive either $30.73 in cash or FBA common
stock equivalent to the quotient of $32.43 divided by the exchange price, which
are the equivalent amounts assuming the preferred shareholders had exercised
their rights to convert into Surety Bank common stock. The Agreement requires
that 51% of the Surety Bank stock be exchanged for FBA common stock. On this
basis, the total transaction price would be $7.45 million. If Surety Bank
shareholders representing more than 51% of the outstanding stock elect to
receive FBA stock in the transaction, Surety Bank and FBA may mutually agree to
increase the stock portion of the transaction to a maximum of 65% of the total
Surety Bank stock.
Surety Bank operates banking offices in Vallejo and Fairfield,
California. At June 30, 1997, Surety Bank had total assets of $72.7 million, and
reported net income of $154,000 for the six month period then ended. The
transaction will be accounted for using the purchase method of accounting and is
expected to be completed by December 31, 1997.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
FBA is a registered bank holding company, incorporated in Delaware and
headquartered in Clayton, Missouri. At June 30, 1997, FBA had approximately
$373.6 million in total assets; $247.6 million in total loans, net of unearned
discount; $312.8 million in total deposits; and $33.9 million in total
stockholders' equity. FBA operates through its Subsidiary Banks.
Through the Subsidiary Banks' six locations in Texas and three
locations in California, FBA offers a broad range of commercial and personal
banking services including certificate of deposit accounts, individual
retirement and other time deposit accounts, checking and other demand deposit
accounts, interest checking accounts, savings accounts and money market
accounts. Loans include commercial and industrial, real estate construction and
development, commercial and residential real estate and consumer loans. Other
financial services include credit-related insurance, automatic teller machines
and safe deposit boxes.
The following table lists the Subsidiary Banks at June 30, 1997:
Loans, net of
Number of Total unearned Total
locations assets discount deposits
--------- ------ -------------- --------
(dollars expressed in thousands)
BankTEXAS 6 $269,577 177,549 231,318
Sunrise Bank 3 100,223 70,025 82,068
Financial Condition
FBA's total assets were $373.6 million and $375.2 million at June 30,
1997 and December 31, 1996, respectively. The primary fluctuation in total
assets from December 31, 1996 was an increase in total loans, net of unearned
discount, of $5.70 million, offset by a reduction in investment securities of
$8.48 million. As more fully discussed under "-- Lending and Credit Management,"
the increase in total loans, net of unearned discount, is comprised of an
increase in commercial, construction and real estate mortgage loans
substantially offset by the continued decrease in the consumer and installment
loan portfolio, which consists primarily of indirect automobile loans.
Results of Operations
Net Income
Net income was $796,000 and $438,000 for the three months ended June
30, 1997 and 1996, respectively. Net income for the six months ended June 30,
1997 was $1.17 million compared to $899,000 for the same period in 1996. The
improved operating results of FBA are attributable to both BankTEXAS and Sunrise
Bank. BankTEXAS' net income increased to $854,000 and $1.48 million for the
three and six month periods ended June 30, 1997, from $416,000 and $908,000 for
the same periods in 1996. Sunrise Bank, which was acquired by FBA on November 1,
1996, recorded net income of $180,000 for the three months ended June 30, 1997,
in comparison to an operating loss of $9,000 for the three months ended March
31, 1997. In addition, FBA's results for the three and six month periods ended
June 30, 1997 include approximately $297,000 and $573,000 of interest expense
attributable to the borrowings incurred in connection with funding the
acquisition of Sunrise Bank.
Net Interest Income
Net interest income was $3.84 million, or 4.65% of average interest
earning assets, for the three months ended June 30, 1997, compared to $2.53
million, or 3.84% of average interest earning assets, for the same period in
1996. For the six month periods ended June 30, 1997 and 1996, net interest
income increased to $7.38 million, or 4.48% of interest earning assets, from
$5.06 million, or 3.84% of interest earning assets, respectively. The improved
net interest income is reflective of the repositioning of the loan and
investment security portfolios of BankTEXAS and the acquisition of Sunrise Bank.
The following table sets forth certain information relating to FBA's
average balance sheet, and reflects the average yield earned on interest-earning
assets, the average cost of interest-bearing liabilities and the resulting net
interest income for the three and six month periods ended June 30:
Three months ended June 30, Six months ended June 30,
1997 1996 1997 1996
--------------------- --------------------- ---------------------- ---------------------
Interest Interest Interest Interest
Average income/ Yield Average income/ Yield/ Average Income/ Yield/ Average Income/Yield/
balance expense rate balance expense rate balance expense rate balance expense rate
(dollars expressed in thousands)
Assets
Interest-earning assets:
Loans $234,699 5,441 9.30% $168,873 3,650 8.69% $ 234,197 10,634 9.16%$ 178,664 7,629 8.59%
Investment securities 84,428 1,345 6.39 49,796 718 5.80 84,848 2,593 6.16 44,328 1,243 5.64
Federal funds sold and other 12,017 163 5.44 46,008 614 5.37 13,498 359 5.36 42,143 1,118 5.33
-------- ------ -------- ----- --------- ------ -------- -----
Total interest-earning assets 331,144 6,949 8.42 264,677 4,982 7.57 332,543 13,586 8.24 265,135 9,990 7.58
------ ----- ------ -----
Nonearning assets 36,429 29,375 36,511 29,659
-------- --------- --------- ---------
Total assets $367,573 $ 294,052 369,054 $ 294,794
======== ========= ========= =========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 49,794 291 2.35% $ 21,340 100 1.88% $ 50,837 589 2.34% $ 21,089 198 1.89%
Savings deposits 67,246 550 3.29 53,993 426 3.17 67,546 1,095 3.27 53,932 862 3.21
Time deposits of $100 or more 28,337 385 5.46 26,044 363 5.61 29,695 806 5.47 25,025 706 5.67
Other time deposits 110,541 ,469 5.34 100,965 1,390 5.54 111,452 2,982 5.40 101,892 2,823 5.57
-------- ------ -------- ----- --------- ----- -------- -----
Total interest-bearing
deposits 255,918 2,695 4.24 202,342 2,279 4.53 259,530 5,472 4.25 201,938 4,589 4.57
Fed funds, Repos and
FHLB advances 5,249 118 9.04 5,337 161 12.13 4,263 161 7.62 5,718 293 10.30
Notes payable and other 14,412 296 8.26 499 12 9.67 14,207 573 8.13 991 44 8.93
-------- ----- -------- ----- --------- ----- -------- -----
Total interest-bearing
liabilities 275,579 3,109 4.53 208,178 2,452 4.74 278,000 6,206 4.50 208,647 4,926 4.75
------ ----- ----- -----
Noninterest-bearing liabilities:
Demand deposits 52,322 46,569 51,268 46,603
Other liabilities 6,390 3,959 6,352 4,153
-------- --------- --------- ---------
Total liabilities 334,291 258,706 335,620 259,403
Stockholders' equity 33,282 35,346 33,434 35,391
-------- --------- --------- --------
Total liabilities and
stockholders' equity $367,573 $294,052 $ 369,054 $294,794
======== ======== ========= ========
Net interest income 3,840 2,530 7,380 5,064
===== ===== ===== =====
Net interest margin 4.65% 3.84% 4.48% 3.84%
===== ===== ===== =====
Provision for Possible Loan Losses
The provision for possible loan losses was $735,000 and $1.29 million
for the three and six month periods ended June 30, 1997, compared to $250,000
and $350,000 for the same periods in 1996. Net loan charge-offs were $630,000
and $1.18 million for the three and six month periods ended June 30, 1997,
compared to $921,000 and $1.46 million for the same periods in 1996. The
increase in the provision for possible loan losses reflects the overall growth
in the loan portfolio, including the loans provided by the acquisition of
Sunrise Bank, and management's evaluation of the credit quality of the loans in
the portfolio and its assessment of the adequacy of the allowance for possible
loan losses. Nonperforming loans were $2.0 million at June 30, 1997 in
comparison to $2.10 million and $453,000 at December 31, 1996 and June 30, 1996,
respectively. The increase in nonperforming loans during 1996 is attributable to
the acquisition of Sunrise Bank.
Noninterest Income
Noninterest income was $823,000 and $1.48 million for the three and six
month periods ended June 30, 1997, as compared to $436,000 and $874,000 for the
same periods in 1996. Noninterest income consists primarily of service charges
on deposit accounts and customer service fees.
Service charges on deposit accounts and customer service fees
increased to $396,000 and $811,000 for the three and six month periods ended
June 30, 1997, respectively, in comparison to $392,000 and $737,000 for the same
periods in 1996. This increase is attributable to the acquisition of Sunrise
Bank.
Other income increased by $383,000 and $605,000 to $427,000 and
$667,000 for the three and six month periods ended June 30, 1997, respectively,
from $44,000 and $62,000 for the same periods in 1996, respectively. The
increase is primarily attributable to legal settlements received by Sunrise Bank
during the three and six month periods ended June 30, 1997, and a net gain of
$64,000 realized upon disposition of repossessed and other assets for the six
months ended June 30, 1997, compared to a net loss of $102,000 for the six
months ended June 30, 1996. Offsetting the increase in noninterest income for
the six months ended June 30, 1997, was a gain of $75,000 recognized upon the
sale of an investment security during the six months ended June 30, 1996.
Noninterest Expense
Noninterest expense was $2.67 million and $5.70 million for the three
and six month periods ended June 30, 1997, respectively, compared to $1.99
million and $4.09 million for the same periods in 1996. The increase is
attributable to the noninterest expense of Sunrise Bank, which was acquired by
FBA on November 1, 1996, of $1.08 million and $2.29 million for the three and
six month periods ended June 30, 1997, partially offset by a reduction in the
noninterest expense of BankTEXAS over these same periods. Offsetting noninterest
expense for the three months ended June 30, 1997, was a gain, net of losses and
expenses on foreclosed real estate, of $225,000.
Lending and Credit Management
Interest earned on the loan portfolio is the primary source of income
of FBA. Total loans, net of unearned discount, represented 66.3% and 64.5% of
total assets as of June 30, 1997 and December 31, 1996, respectively. Total
loans, net of unearned discount, were $247.6 million and $241.9 million at June
30, 1997 and December 31, 1996, respectively. The increase, as summarized on the
consolidated balance sheet, is attributable to the expansion of the corporate
lending function of FBA. The expansion has generated growth in the commercial
and real estate mortgage loan portfolios. Offsetting the growth in corporate
lending is a decrease in the consumer indirect automobile loan portfolio. The
expected decrease in the consumer indirect automobile loan portfolio reflects
the more stringent lending practices implemented during 1995 and 1996 to curtail
the level of loan charge-offs being experienced under the previous underwriting
practices.
FBA's nonperforming loans consist of loans on a nonaccrual status and
loans on which the original terms have been restructured. Impaired loans,
consisting of nonaccrual and consumer and installment loans 60 days or more past
due, were $2.7 million and $3.7 million at June 30, 1997 and December 31, 1996,
respectively.
The following is a summary of nonperforming assets and past due loans
at the dates indicated:
June 30, December 31,
1997 1996
---- ----
(dollars expressed in thousands)
Nonperforming assets:
Nonperforming loans.................................. $ 2,003 2,095
Other real estate.................................... 374 785
-------- -------
Total nonperforming assets........................ $ 2,377 2,880
======== =======
Loans past due:
Over 30 days to 90 days.............................. $ 5,825 6,471
Over 90 days and still accruing...................... 146 583
-------- -------
Total past due loans.............................. $ 5,971 7,054
======== =======
Loans, net of unearned discount........................ $247,574 241,874
======== =======
Asset quality ratios:
Allowance for possible loan losses to loans.......... 2.52% 2.54%
Nonperforming loans to loans ........................ .81 .87
Allowance for possible loan losses to
nonperforming loans .............................. 312.08 293.41
Nonperforming assets to loans and other real estate.. .96 1.19
======== ======
The allowance for possible loan losses is based on past loan loss
experience, on management's evaluation of the quality of the loans in the
portfolio and on the anticipated effect of national and local economic
conditions relative to the ability of loan customers to repay. Each month, the
allowance for possible loan losses is reviewed relative to FBA's internal watch
list and other data utilized to determine its adequacy. The provision for
possible loan losses is management's estimate of the amount necessary to
maintain the allowance at a level consistent with this evaluation. As
adjustments to the allowance for possible loan losses are considered necessary,
they are reflected in the results of operations.
The following is a summary of the loan loss experience:
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
(dollars expressed in thousands)
Allowance for possible loan losses, beginning of period $ 6,146 4,787 6,147 5,228
-------- ------ ------ ------
Loans charged-off (1,050) (1,298) (1,948) (2,049)
Recoveries of loans previously charged-off 420 377 767 587
-------- ------ ------ ------
Net loan (charge-offs) recoveries (630) (921) (1,181) (1,462)
-------- ------ ------ ------
Provision for possible loan losses 735 250 1,285 350
-------- ------ ------ ------
Allowance for possible loan losses, end of period $ 6,251 4,116 6,251 4,116
======== ====== ====== ======
Liquidity
The liquidity of FBA and the Subsidiary Banks is the ability to
maintain a cash flow which is adequate to fund operations, service debt
obligations and meet other commitments on a timely basis. The primary sources of
funds for liquidity are derived from customer deposits, loan payments,
maturities, sales of investments and operations. In addition, FBA and the
Subsidiary Banks may avail themselves of more volatile sources of funds through
issuance of certificates of deposit in denominations of $100,000 or more,
federal funds borrowed, securities sold under agreements to repurchase and
borrowings from the Federal Home Loan Bank. The aggregate funds acquired from
those sources were $35.2 million and $33.8 million at June 30, 1997 and December
31, 1996, respectively.
At June 30, 1997, FBA's more volatile sources of funds mature as
follows:
(dollars expressed in thousands)
Three months or less $ 15,188
Over three months through six months 5,393
Over six months through twelve months 7,237
Over twelve months 7,416
----------
Total $ 35,234
==========
Management believes the available liquidity and earnings of the
Subsidiary Banks will be sufficient to provide funds for FBA's operating and
debt service requirements both on a short-term and long-term basis.
Effects of New Accounting Standard
FBA adopted the provisions of SFAS 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities (SFAS 125)
prospectively on January 1, 1997. SFAS 125 established accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities.
The standards established by SFAS 125 are based on consistent
applications of a financial-components approach that focuses on control. Under
that approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
The implementation of SFAS 125 did not have a material effect on the
consolidated financial position or results of operation of FBA.
In February 1997, the FASB issued SFAS 128, Earnings Per Share (SFAS
128). SFAS 128 supersedes Accounting Principles Board Opinion No. 15, Earnings
Per Share (APB 15) and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held common
stock or potential common stock. SFAS 128 was issued to simplify the computation
of EPS and to make the U.S. standard more compatible with the EPS standards of
other countries and that of the International Accounting Standards Committee. It
replaces the presentation of primary EPS with a presentation of basic EPS and
fully diluted EPS with diluted EPS. SFAS 128 also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures, and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised and converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS under APB15.
SFAS 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted. After adoption, all prior-period EPS data presented shall be restated
to conform with SFAS 128.
FBA does not believe the implementation of SFAS 128 will have a
material effect on its computation of earnings per share.
In February 1997, the FASB issued SFAS 129, Disclosure of Information
about Capital Structure (SFAS 129). SFAS 129 establishes standards for
disclosing information about an entity's capital structure. It applies to all
entities. SFAS 129 continues the previous requirements to disclose certain
information about an entity's capital structure found in APB 10, Omnibus
Opinion-1966, APB 15 and SFAS 47, Disclosure of Long-Term Obligations, for
entities that were subject to the requirements of those standards. SFAS 129
eliminates the exemption of nonpublic entities from certain disclosure
requirements of APB 15 as provided by SFAS 21, Suspension of the reporting of
Earnings per Share and Segment Information by Nonpublic Enterprises. It
supersedes specific disclosure requirements of APB 10, APB 15 and SFAS 47 and
consolidates them in SFAS 129 for ease of retrieval and for greater visibility
to nonpublic entities.
SFAS 129 is effective for financial statements for periods ending
after December 15, 1997. It contains no change in disclosure requirements for
FBA as it was previously subject to the requirements of APB 10 and 15 and SFAS
47.
PART II - OTHER INFORMATION
Item 6 - Exhibit and Reports on Form 8-K
(a) The exhibit is numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
Exhibit
Number Description
27 Article 9 - Financial Data Schedule
(EDGAR only)
(b) A current report on Form 8-K was filed by FBA on August 7, 1997. Items
5 and 7 of the Report described the execution by FBA on July 29, 1997
of a definitive agreement for the acquisition of Surety Bank by FBA. In
addition, Items 5 and 7 of the Report described the proposed merger of
FBA and FCB as announced on July 25, 1997.
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.
FIRST BANKS AMERICA, INC.
Registrant
Date: August 12, 1997 By: /s/James F. Dierberg
--------------------
James F. Dierberg
Chairman, President
and Chief Executive Officer
Date: August 12, 1997 By: /s/Allen H. Blake
-----------------
Allen H. Blake
Vice President,
Chief Financial Officer
and Secretary
(Principal Financial Officer)