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, 1998
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, St. Louis, Missouri 63105
--------------------------------------------
(address of principal executive offices) (Zip Code)
(314) 854-4600
--------------
(Registrant's telephone number, including area code)
-----------------------------------------------------
(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, 1998
----- -------------
Common Stock, $.15 par value 2,661,715
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, 1998
and December 31, 1997........................................ -1-
Consolidated Statements of Income for the three and six
months ended June 30, 1998 and 1997.......................... -3-
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended June 30, 1998 and 1997 and
the six months ended December 31, 1997....................... -4-
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997................................. -5-
Notes to Consolidated Financial Statements..................... -6-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... -10-
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............ -17-
Item 6. Exhibits and Reports on Form 8-K............................... -17-
SIGNATURES................................................................ -18-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets
(dollars expressed in thousands, except per share data)
June 30, December 31,
1998 1997
---- ----
(unaudited)
ASSETS
------
Cash and cash equivalents:
Cash and due from banks................................................... $ 28,343 32,257
Interest-bearing deposits with other financial institutions -
with maturities of three months or less................................. 1,043 690
Federal funds sold........................................................ 1,500 2,215
------------ ---------
Total cash and cash equivalents....................................... 30,886 35,162
------------ ---------
Investment securities available for sale, at fair value...................... 130,916 148,181
Loans:
Real estate construction and development.................................. 109,902 93,454
Commercial and financial.................................................. 118,002 109,763
Real estate mortgage...................................................... 170,676 149,951
Consumer and installment.................................................. 72,942 75,023
Loans held for sale....................................................... -- 5,708
------------ ---------
Total loans........................................................... 471,522 433,899
Unearned discount......................................................... (2,330) (2,444)
Allowance for possible loan losses........................................ (11,845) (11,407)
------------ ---------
Net loans............................................................. 457,347 420,048
------------ ---------
Bank premises and equipment, net of
accumulated depreciation................................................ 11,728 10,697
Intangibles associated with the purchase of
subsidiaries............................................................ 8,738 7,189
Accrued interest receivable.................................................. 4,248 4,819
Foreclosed property, net..................................................... 451 601
Deferred tax assets.......................................................... 13,312 14,164
Other assets................................................................. 17,177 2,803
------------ ---------
Total assets.......................................................... $ 674,803 643,664
============ =========
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets
(dollars expressed in thousands, except per share data)
(continued)
June 30, December 31,
1998 1997
---- ----
(unaudited)
LIABILITIES
-----------
Deposits:
Demand:
Non-interest-bearing....................................................... $ 96,278 97,393
Interest-bearing........................................................... 70,675 73,199
Savings..................................................................... 157,685 147,623
Time deposits:
Time deposits of $100 or more.............................................. 57,028 52,472
Other time deposits........................................................ 204,778 185,840
----------- ---------
Total deposits........................................................... 586,444 556,527
Short-term borrowings........................................................... 5,408 3,687
Promissory note payable......................................................... 11,100 14,900
Accrued interest payable........................................................ 3,364 4,185
Deferred tax liabilities........................................................ 1,388 1,092
Payable to former shareholders of Surety Bank................................... -- 3,829
Accrued expenses and other liabilities.......................................... 4,171 5,058
12% convertible debentures...................................................... 6,500 6,500
Minority interest in subsidiary................................................. -- 2,795
----------- ---------
Total liabilities........................................................ 618,375 598,573
----------- ---------
STOCKHOLDERS' EQUITY
--------------------
Common Stock:
Common stock, $.15 par value; 6,666,666 shares
authorized; 3,237,973 and 2,144,865 shares issued
at June 30, 1998 and December 31, 1997, respectively....................... 486 322
Class B common stock, $.15 par value; 4,000,000 shares
authorized; 2,500,000 shares issued and outstanding........................ 375 375
Capital surplus................................................................. 60,173 47,329
Retained earnings since elimination of accumulated deficit
of $259,117, effective December 31, 1994.................................... 3,204 1,083
Common treasury stock, at cost; 550,958 shares and 386,458
shares at June 30, 1998 and December 31, 1997,
respectively................................................................ (8,156) (4,350)
Accumulated other comprehensive income.......................................... 346 332
----------- ---------
Total stockholders' equity............................................... 56,428 45,091
----------- ---------
Total liabilities and stockholders' equity............................... $ 674,803 643,664
=========== =========
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,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
Interest income:
Interest and fees on loans................................................ $ 11,002 7,881 21,570 15,334
Investment securities..................................................... 2,122 2,018 4,155 3,799
Federal funds sold and other.............................................. 277 310 672 687
-------- ------- ------- --------
Total interest income................................................. 13,401 10,209 26,397 19,820
-------- ------- ------- --------
Interest expense:
Deposits:
Interest-bearing demand................................................. 334 347 683 701
Savings................................................................. 1,495 787 2,949 1,553
Time deposits of $100 or more........................................... 786 511 1,561 1,040
Other time deposits..................................................... 2,891 2,272 5,675 4,586
Promissory note payable and other borrowings.............................. 529 643 1,066 1,188
-------- ------- ------- --------
Total interest expense................................................ 6,035 4,560 11,934 9,068
-------- ------- ------- --------
Net interest income................................................... 7,366 5,649 14,463 10,752
Provision for possible loan losses........................................... 200 735 500 1,285
-------- ------- ------- --------
Net interest income after provision for possible loan losses.......... 7,166 4,914 13,963 9,467
-------- ------- ------- --------
Noninterest income:
Service charges on deposit accounts....................................... 604 574 1,343 1,149
Gain on sales of securities, net.......................................... 9 -- 101 --
Other income.............................................................. 266 448 585 744
-------- ------- ------- --------
Total noninterest income.............................................. 879 1,022 2,029 1,893
-------- ------- ------- --------
Noninterest expense:
Salaries and employee benefits............................................ 2,156 1,569 4,291 3,119
Occupancy, net of rental income........................................... 575 524 1,066 1,095
Furniture and equipment................................................... 480 289 827 556
Federal Deposit Insurance Corporation premiums............................ 30 37 73 75
Postage, printing and supplies............................................ 239 124 406 272
Data processing........................................................... 431 240 906 567
Legal, examination and professional fees.................................. 1,179 616 2,069 1,161
Communications............................................................ 227 128 427 292
(Gain) loss on sale of foreclosed property, net of expenses............... (70) (210) 87 (219)
Other..................................................................... 1,094 791 2,246 1,683
-------- ------- ------- --------
Total noninterest expense............................................. 6,341 4,108 12,398 8,601
-------- ------- ------- --------
Income before provision for income taxes and minority interest
in income of subsidiary............................................ 1,704 1,828 3,594 2,759
Provision for income taxes................................................... 683 709 1,473 1,070
-------- ------- ------- --------
Income before minority interest in income of subsidiary............... 1,021 1,119 2,121 1,689
Minority interest in income of subsidiary.................................... -- 134 -- 220
-------- ------- ------- --------
Net income............................................................ $ 1,021 985 2,121 1,469
======== ======= ======= ========
Earnings per common share:
Basic................................................................. $ 0.20 0.24 0.42 0.36
Diluted............................................................... 0.20 0.24 0.42 0.36
======== ======= ======= ========
Weighted average shares of common stock outstanding (in thousands)........... 5,206 4,058 5,059 4,070
======== ======= ======= ========
See accompanying notes to consolidated financial statements.
FIRST BANKS AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (unaudited)
Six month periods ended June 30, 1998 and 1997, and
six month period ended December 31, 1997
(dollars expressed in thousands, except per share data)
Accu-
mulated
other Total
Class B Compre- Retained Common compre- stock-
Common common Capital hensive earnings treasury hensive holders'
stock stock surplus income (deficit) stock income equity
----- ----- ------ ------- --------- ----- ------ ------
Consolidated balances, January 1, 1997........... $ 282 375 42,862 -- (2,450) (2,838) (36) 38,195
Six months ended June 30, 1997:
Comprehensive income:
Net income.................................. -- -- -- $ 1,469 1,469 -- -- 1,469
Other comprehensive income, net of tax (1) -
Unrealized gains on securities, net of
reclassification adjustment (2)......... -- -- -- 88 -- -- 88 88
-------
Comprehensive income........................ -- -- -- $ 1,557
=======
Exercise of stock options..................... -- -- 9 -- -- -- 9
Repurchases of common stock................... -- -- -- -- (527) -- (527)
Redemption of stock options................... -- -- (290) -- -- -- (290)
------- ---- ------- ----- ------ ---- -------
Consolidated balances, June 30, 1997............. 282 375 42,581 (981) (3,365) 52 38,944
Six months ended December 31, 1997:
Comprehensive income:
Net income.................................. -- -- -- $ 2,064 2,064 -- -- 2,064
Other comprehensive income, net of tax (1)
Unrealized gains on securities
net of reclassification adjustment (2).. -- -- -- 280 -- -- 280 280
-------
Comprehensive income........................ $ 2,344
=======
Issuance of common stock for purchase
accounting acquisition...................... 40 -- 4,723 -- -- -- 4,763
Exercise of stock options..................... -- -- 6 -- -- -- 6
Compensation paid in common stock............. -- -- 13 -- -- -- 13
Repurchases of common stock................... -- -- -- -- (985) -- (985)
Pre-merger transactions of FCB................ -- -- 6 -- -- -- 6
------- ---- ------- ----- ----- ---- -------
Consolidated balances, December 31, 1997......... 322 375 47,329 1,083 (4,350) 332 45,091
Six months ended June 30, 1998:
Comprehensive income:
Net income.................................. -- -- -- $ 2,121 2,121 -- -- 2,121
Other comprehensive income, net of tax (1) -
Unrealized gains on securities, net
of reclassification adjustment (2)...... -- -- -- 14 -- -- 14 14
-------
Comprehensive income........................ -- -- -- $ 2,135
=======
Issuance of common stock for acquisition
of entity under common control.............. 43 -- 2,965 -- -- -- 3,008
Conversion of promissory note payable......... 121 -- 9,879 -- -- -- 10,000
Repurchases of common stock................... -- -- -- -- (3,806) -- (3,806)
------- ---- ------- ----- ------ ---- -------
Consolidated balances, June 30, 1998............. $ 486 375 60,173 3,204 (8,156) 346 56,428
======= ==== ======= ===== ====== ==== =======
- ---------
(1) Components of other comprehensive income are shown net of tax.
(2) Disclosure of reclassification amount:
Six months Six months
ended June 30, ended
--------------
1998 1997 December 31, 1997
---- ---- -----------------
Unrealized gains arising during the period................................ $115 88 356
Less: reclassification adjustment for gains included in net income........ 101 -- 76
---- ----- ---
Unrealized gains on securities............................................ $ 14 88 280
==== ===== ===
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,
------------------
1998 1997
---- ----
Cash flows from operating activities:
Net income......................................................................... $ 2,121 1,469
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion, net.................................... 861 310
Provision for possible loan losses............................................... 500 1,285
Decrease in accrued interest receivable.......................................... 697 3
Interest accrued on liabilities.................................................. 11,934 9,068
Payments of interest on liabilities.............................................. (12,819) (8,078)
Provision for income taxes....................................................... 1,473 1,070
Payments of income taxes......................................................... (495) --
Gain on sales of securities, net................................................. 101 --
Other operating activities, net.................................................. (234) (251)
--------- ----------
Net cash provided by operating activities...................................... 4,139 4,876
--------- ----------
Cash flows from investing activities:
Cash received from acquired entities, net of cash paid............................. 3,241 --
Sales of investment securities..................................................... 13,027 --
Maturities of investment securities................................................ 44,724 62,096
Purchases of investment securities................................................. (40,197) (56,208)
Net increase in loans.............................................................. (10,522) (12,692)
Recoveries of loans previously charged off......................................... 1,063 1,130
Purchases of bank premises and equipment........................................... (1,417) (213)
Other investing activities, net.................................................... (13,375) 787
--------- ----------
Net cash provided by (used in) investing activities............................ (3,456) (5,100)
--------- ----------
Cash flows from financing activities:
Increase (decrease) in deposits.................................................... (5,245) (1,498)
Increase in borrowed funds......................................................... 4,092 4,505
Repurchase of common stock for treasury............................................ (3,806) (527)
Other financing activities, net ................................................... -- (281)
--------- ----------
Net cash provided by (used in) financing activities............................ (4,959) 2,199
--------- ----------
Net increase (decrease) in cash and cash equivalents........................... (4,276) 1,975
Cash and cash equivalents, beginning of period........................................ 35,162 42,874
--------- ----------
Cash and cash equivalents, end of period.............................................. $ 30,886 44,849
========= ==========
Noncash investing and financing activities:
Loans transferred to foreclosed real estate........................................ 462 --
Issuance of common stock in purchase accounting acquisition........................ $ 3,008 --
Conversion of promissory note payable to common stock.............................. 10,000 --
========= ==========
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 or the Company) are unaudited and should be read in
conjunction with the consolidated financial statements contained in the 1997
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 periods presented
herein, have been included. Operating results for the three and six month
periods ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998.
In connection with FBA's acquisition of First Commercial Bancorp, Inc.
(FCB) and its wholly owned subsidiary, First Commercial Bank (First Commercial)
as of February 2, 1998, FBA's financial information for the periods prior to the
acquisition has been restated to include the 61.48% ownership interest of First
Banks, Inc. (First Banks), FBA's majority owner, in FCB consistent with the
accounting treatment applicable to entities under common control. The remaining
interest in FCB acquired by FBA, or 38.52%, is reflected in the consolidated
financial statements as minority interest for the periods prior to the
acquisition. First Banks owned 72.6% of FBA as of June 30, 1998.
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. In addition to the
aforementioned restatement of 1997 financial information, certain
reclassifications of 1997 amounts have been made to conform with the 1998
presentation.
FBA operates through two banking subsidiaries, BankTEXAS N.A.,
headquartered in Houston, Texas (BankTEXAS) and First Bank of California,
headquartered in Roseville, California (FB California), collectively referred to
as the Subsidiary Banks.
(2) Transactions with Related Party
FBA purchases certain services and supplies from or through its
majority shareholder, 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. Fees payable to First Banks, as
discussed in the following paragraphs, generally increase as FBA expands through
acquisitions and internal growth, reflecting the higher levels of service needed
to operate the Subsidiary Banks.
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 management and
investment services, loan servicing and other management and administrative
services. Fees paid under this agreement were $576,000 and $1.0 million for the
three and six months ended June 30, 1998, compared to $422,000 and $739,000 for
the three and six months ended June 30, 1997.
Because of its affiliation through First Banks and the geographic
proximity of certain of their banking offices, FB California and First Bank &
Trust (FB&T), a wholly owned subsidiary of First Banks, share the cost of
certain personnel and services used by the banks. This includes the salaries and
benefits of certain loan and administrative personnel. The allocation of the
shared costs are charged and/or credited among the banks under the terms of a
cost sharing agreement. 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 the cost sharing agreement were $268,000 and $524,000 for the three
and six month periods ended June 30, 1998, and $158,000 and $332,000 for the
same periods in 1997, 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 under the terms of data processing agreements. Prior to
April 1, 1997, a subsidiary of First Banks provided data processing and various
related services to FBA. Fees paid under these agreements were $382,000 and
$811,000 for the three and six months ended June 30, 1998, compared to $231,000
and $514,000 for the same periods in 1997, respectively. The fees paid for
management services and data processing are significantly lower than FBA was
previously paying its nonaffiliated vendors.
The Subsidiary Banks had $118.5 million and $66.9 million in whole
loans and loan participations outstanding at June 30, 1998 and December 31,
1997, respectively, that were purchased from banks affiliated with First Banks.
In addition, the Subsidiary Banks had sold $67.2 million and $54.7 million in
whole loans and loan participations to affiliates of First Banks at June 30,
1998 and December 31, 1997, respectively. These loans 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 $11.1 million and $14.9 million from First Banks at
June 30, 1998 and December 31, 1997, respectively, under a $20.0 million
promissory note payable. The borrowings under the note 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 $546,000 and $573,000 for the six
months ended June 30, 1998 and 1997, respectively. The principal and accrued
interest under the note are due and payable on October 31, 2001. The accrued and
unpaid interest under the note was $81,000 and $1.4 million at June 30, 1998 and
December 31, 1997, respectively. As more fully discussed in Note 4, on February
2, 1998, FBA exchanged 804,000 shares of its common stock for $10.0 million
outstanding under the promissory note payable.
In connection with FBA's acquisition of FCB, FBA issued convertible
debentures to First Banks of $6.5 million. These debentures replaced similar FCB
debentures previously owned by First Banks. The related interest for these
debentures was $404,000 and $429,000 for the six months ended June 30, 1998 and
1997, respectively. FBA is not required to pay interest on the debentures prior
to maturity. At maturity in 2000, principal and accrued interest are payable in
FBA common stock (at a conversion rate of $14.06 per share), unless FBA elects
to pay cash and First Banks does not exercise its right to convert principal and
interest into FBA common stock. The accrued interest payable for these
debentures was $2.0 million and $1.6 million at June 30, 1998 and December 31,
1997, 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' financial statements.
Under capital adequacy guidelines that involve quantitative measures of the
sugsidiary Bank's 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 (as defined in the regulations). 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 considered well capitalized
under Prompt Corrective Action provisions, a bank is required to maintain a risk
weighted asset ratio of at least 10%, a Tier 1 to risk weighted assets ratio of
at least 6% and a leverage ratio of at lease 5%. As of December 31, 1997, the
date of the most recent notification from FBA's primary regulator, each of the
Subsidiary Banks was categorized as well capitalized under the regulatory
framework for Prompt Corrective Action.
At June 30, 1998 and December 31, 1997, FBA's and the Subsidiary Banks'
capital ratios were as follows:
Risk-based capital ratios
-------------------------
Total Tier 1 Leverage Ratio
----- ------ --------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
FBA.......................................... 8.72% 6.88% 7.46% 5.62% 6.02% 4.96%
BankTEXAS.................................... 12.48 12.26 11.23 11.00 9.27 8.90
FB California................................ 11.35 13.03 10.09 11.77 8.06 13.80
(4) Acquisitions
On June 8, 1998, FBA executed an Agreement in Principle to acquire
Redwood Bancorp, and its wholly-owned subsidiary, Redwood Bank, for cash
consideration of $26.0 million. Redwood Bank is headquartered in San Francisco,
California and operates four banking locations in the San Francisco Bay area.
Redwood Bank had $153.8 million in total assets, $119.4 million in loans, net of
unearned discount, and $139.0 million in deposits at June 30, 1998. FBA
anticipates that the transaction, which is subject to various conditions, will
be completed by the end of the fourth quarter.
On February 2, 1998, FBA completed its acquisition of FCB and its
wholly owned subsidiary, First Commercial. In the transaction, the FCB
shareholders received .8888 shares of FBA common stock for each share of FCB
common stock. Cash was paid in lieu of issuing fractional shares. In total, FCB
shareholders received approximately 752,000 shares of FBA common stock in the
transaction, including 462,176 shares received by First Banks in exchange for
its 61.48% ownership of FCB. The transaction also provided for First Banks to
receive 804,000 shares of FBA common stock in exchange for $10.0 million of
FBA's promissory note payable to First Banks, and for the exchange of FCB
convertible debentures of $6.5 million, which were owned by First Banks, for
comparable debentures of FBA. The Agreement 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.
First Commercial has six banking offices located in Sacramento,
Roseville (2), San Francisco, Concord and Campbell, California. At February 2,
1998, FCB had total assets of $192.5 million, investment securities of $64.4
million, loans, net of unearned discount of $118.9 million and deposits of
$173.1 million. The transaction was accounted for as a business combination of
entities under common control. Accordingly, FBA assumed First Banks' 61.48%
interest in FCB at its historical cost basis. The remaining 38.52%, or minority
interest, owned by unaffiliated parties was recorded at fair value. The excess
of the cost over the fair value of the minority interest's share in the fair
value of the net assets acquired was $1.6 million and is being amortized over 15
years. First Commercial was merged into FB California.
On February 2, 1998, FBA also completed its acquisition of Pacific Bay
Bank, San Pablo, California (Pacific Bay). Under the terms of the Pacific Bay
Agreement, Pacific Bay shareholders received $14.00 per share in cash for their
stock, an aggregate of $4.2 million. The transaction was accounted for using the
purchase method of accounting. The excess of the cost over the fair value of the
net assets acquired was $1.5 million and is being amortized over 15 years. This
transaction was funded from an advance under the promissory note payable to
First Banks.
Pacific Bay operated a banking office in San Pablo, California and a
loan production office in Lafayette, California. At February 2, 1998, Pacific
Bay had total assets of $38.3 million, investment securities of $232,000, loans,
net of unearned discount, of $29.7 million and deposits of $35.2 million.
Pacific Bay was merged into FB California.
(5) Cumulative Trust Preferred Securities of First America Capital Trust
During July 1998, First America Capital Trust (First Capital), a
newly-formed Delaware business subsidiary of FBA, issued 1.84 million shares of
8.50% Cumulative Trust Preferred Securities (Preferred Securities) at $25.00 per
share in an underwritten public offering. FBA made certain guarantees and
commitments relating to the Preferred Securities. FBA's proceeds from the
issuance of the Preferred Securities, net of underwriting fees and offering
expenses, were approximately $44.0 million. Distributions payable on the
Preferred Securities will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year commencing September 30, 1998. The
distributions will be recorded as noninterest expense in the consolidated
financial statements.
The proceeds from the offering will be used to repay outstanding
indebtedness to First Banks under the terms of the $20.0 million promissory note
payable, for acquisitions (including the pending acquisition of Redwood
Bancorp), possible repurchases of common stock from time to time and for general
corporate purposes. Available proceeds will be temporarily invested in short-
term securities.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
The discussion herein contains certain forward looking statements
regarding the financial condition, results of operations and business of the
Company. These forward looking statements are subject to risks and
uncertainties, not all of which can be predicted or anticipated. Factors that
may cause actual results to differ materially from those contemplated by such
forward looking statements include general market conditions, conditions
affecting the banking industry generally and factors having a specific impact on
the Company, including but not limited to fluctuations in interest rates and in
the economy; the impact of laws and regulations applicable to the Company and
changes therein; competitive conditions in the markets in which the Company and
the Subsidiary Banks conduct their operations; and the ability of the Company to
respond to changes in technology. Additional factors potentially affecting the
Company's results were identified in the Annual Report on Form 10-K filed with
the Securities and Exchange Commission. Readers should not place undue reliance
on any forward looking statements herein.
General
FBA is a registered bank holding company, incorporated in Delaware and
headquartered in Clayton, Missouri. At June 30, 1998, FBA had approximately
$674.8 million in total assets; $469.2 million in total loans, net of unearned
discount; $586.4 million in total deposits; and $56.4 million in total
stockholders' equity. FBA operates through its Subsidiary Banks.
As previously discussed in Notes 1 and 4 to the consolidated financial
statements, FBA's historical financial information presented in this Report on
Form 10-Q has been restated to reflect its acquisition of FCB.
Through the Subsidiary Banks' six locations in Texas and eleven
locations in the San Francisco-Sacramento corridor of northern 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 financial, real estate construction and development, commercial and
residential real estate and consumer loans. Other financial services include
mortgage banking, automatic teller machines, telephone banking, lockbox
deposits, cash management services, sweep accounts, credit-related insurance and
safe deposit boxes.
The following table lists the Subsidiary Banks at June 30, 1998:
Loans, net of
Number of Total unearned Total
locations assets discount deposits
--------- ------ -------- --------
(dollars expressed in thousands)
FB California................... 11 $ 401,841 291,774 355,084
BankTEXAS....................... 6 268,434 177,418 231,359
Financial Condition
FBA's total assets were $674.8 million and $643.7 million at June 30,
1998 and December 31, 1997, respectively, after the restatement for the
acquisition of FCB, as previously discussed in Notes 1 and 4 to the consolidated
financial statements. The increase in adjusted total assets from December 31,
1997 is primarily attributable to FBA's acquisition of Pacific Bay, which
provided total assets of $38.3 million.
During the six months ended June 30, 1998, FBA purchased $3.8 million
of its common stock for treasury. FBA utilized available cash to fund its
repurchase of common stock. As announced by FBA on April 29, 1998, the Board of
Directors authorized the purchase of an additional 5% of its common stock for
treasury. FBA has purchased an aggregate total of 550,958 common shares for
treasury as of June 30, 1998 and has approximately 266,000 shares remaining for
repurchase.
Results of Operations
Net Income
Net income was $1.0 million, or $0.20 per share on a diluted basis, for
the three months ended June 30, 1998, compared to $985,000, or $0.24 per share
on a diluted basis, for the same period in 1997. For the six months ended June
30, 1998 and 1997, net income was $2.1 million, or $0.42 per share on a diluted
basis, and $1.5 million, $0.36 per share on a diluted basis, respectively. The
results for the three and six months ended June 30, 1998 include the additional
costs associated with Surety Bank's and Pacific Bay Bank's data processing and
back-office conversions to FBA's systems and procedures completed during
February and May of 1998, respectively. Surety Bank, Vallejo, California, and
Pacific Bay Bank, San Pablo, California, were acquired in December 1997 and
February 1998, respectively. In addition, the results for the six months ended
June 30, 1998 include a net charge of $225,000 or $0.04 per share on a diluted
basis, in settlement of certain litigation.
Net Interest Income
Net interest income was $7.4 million, or 4.81% of average
interest-earning assets, for the three months ended June 30, 1998, compared to
$5.6 million, or 4.70% of average interest-earning assets, for the same period
in 1997. For the six months ended June 30, 1998 and 1997, net interest income
was $14.5 million, or 4.79% of average interest-earning assets, compared to
$10.8 million, or 4.50% of average interest-earning assets, respectively. The
improved net interest income is primarily attributable to the net
interest-earning assets provided by the acquisitions of Surety Bank and Pacific
Bay Bank, the improving yield on BankTEXAS' repositioned loan portfolio and the
effect of the exchange of $10.0 million of the promissory note payable for
common stock.
The following table sets forth certain information relating to FBA's
average balance sheets, 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,
----------------------------------------------- -------------------------
1998 1997 1998 1997
---------------------- ---------------------- --------------------- -----------
Interest Interest Interest Interest
Average income/Yield/ Average income/Yield/ Average Income/Yield/ Average Income/Yield/
balance expenserate balance expenserate balance expenserate balance expenserate
------- ----------- ------- ----------- ------- ----------- -------------------
(dollars expressed in thousands)
Assets
------
Interest-earning assets:
Loans......................... $456,869 11,002 9.66% $332,012 7,881 9.52% $447,717 21,570 9.72% $329,270 15,334 9.39%
Investment securities......... 137,702 2,122 6.18 127,231 2,018 6.36 137,095 4,155 6.11 126,396 3,799 6.06
Federal funds sold and other.. 19,797 277 5.61 22,760 310 5.46 23,875 672 5.68 26,017 687 5.32
-------- ------ ------- ----- ------- ------ -------- ------
Total interest-earning
assets 614,368 13,401 8.75 482,003 10,209 8.50 608,687 26,397 8.75 481,683 19,820 8.30
------ ------ ------ ------
Nonearning assets................ 66,127 42,343 64,186 42,702
-------- ------- -------- --------
Total assets................ $680,495 $524,346 $672,873 $524,385
======== ======== ======== ========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing liabilities:
Interest-bearing demand
deposits................... $ 74,360 334 1.80% $ 65,757 347 2.12% $ 73,829 683 1.87% $ 66,974 701 2.11%
Savings deposits.............. 153,917 1,495 3.89 98,216 787 3.21 152,560 2,949 3.90 98,133 1,553 3.19
Time deposits of $100 or more. 53,809 786 5.86 37,710 511 5.44 52,713 1,561 5.97 38,580 1,040 5.44
Other time deposits........... 211,170 2,891 5.49 168,442 2,272 5.41 208,582 5,675 5.49 169,950 4,586 5.44
-------- ------ ------- ----- ------- ------ -------- ------
Total interest-bearing
deposits.................. 493,256 5,506 4.48 370,125 3,917 4.24 487,684 10,868 4.49 373,637 7,880 4.25
Notes payable and other....... 25,797 529 8.23 26,900 643 9.59 26,398 1,066 8.14 25,647 1,188 9.34
-------- ------ ------- ----- ------- ------ -------- ------
Total interest-bearing
liabilities.............. 519,053 6,035 4.66 397,025 4,560 4.61 514,082 11,934 4.68 399,284 9,068 4.58
------ ----- ------ ------
Noninterest-bearing liabilities:
Demand deposits............... 96,188 76,655 93,753 74,412
Other liabilities............. 8,968 12,505 9,463 12,409
-------- ------- ------- --------
Total liabilities........... 624,209 486,185 617,298 486,105
Stockholders' equity............. 56,286 38,161 55,575 38,280
-------- ------- ------- --------
Total liabilities and
stockholders' equity..... $680,495 $524,346 $672,873 $524,385
======== ======== ======== ========
Net interest income.............. 7,366 5,649 14,463 10,752
====== ===== ====== ======
Net interest margin.............. 4.81% 4.70% 4.79% 4.50%
==== ==== ==== ====
Provision for Possible Loan Losses
The provision for possible loan losses was $200,000 and $500,000 for
the three month and six month periods ended June 30, 1998, compared to $735,000
and $1.3 million for the same periods in 1997. The decrease in the provision for
possible loan losses for the three and six months ended June 30, 1998, compared
to the same periods in 1997, is primarily attributable to improved asset quality
of FBA's existing loan portfolio, as determined by management's review and
evaluation of the credit quality of the loans in the portfolio and its
assessment of the adequacy of the allowance for possible loan losses. For
further discussion of asset quality, see "--Lending and Credit Management" for a
summary of nonperforming loans and a summary of loan loss experience.
Net loan charge-offs were $418,000 and $947,000 for the three and six
month periods ended June 30, 1998, compared to $496,000 and $918,000 for the
same periods in 1997. The increase in net loan charge-offs is primarily
attributable to the loans obtained through the acquisition of Pacific Bay Bank.
The acquired allowance for possible loan losses totaled $885,000 at the
acquisition date.
Noninterest Income
Noninterest income was $879,000 and $2.0 million for the three and six
month periods ended June 30, 1998 compared to $1.0 million and $1.9 million for
the same periods in 1997, respectively. Noninterest income consists primarily of
service charges on deposit accounts and customer service fees. The decrease in
noninterest income is primarily attributable to the decrease in other income.
Other income for the three and six month periods ended June 30, 1997 includes
certain legal settlements relating to the activities of Sunrise Bank of
California, which was acquired by FBA during 1996.
Service charges on deposit accounts and customer service fees increased
to $604,000 and $1.3 million for the three and six month periods ended June 30,
1998, from $574,000 and $1.1 million for the same periods in 1997, respectively.
This increase is primarily attributable to the acquisitions of Surety Bank and
Pacific Bay Bank.
Noninterest Expense
Noninterest expense was $6.3 million and $12.4 million for the three
and six month periods ended June 30, 1998, compared to $4.1 million and $8.6
million for the same periods in 1997. The increase is primarily attributable to
the noninterest expense of Surety Bank and Pacific Bay Bank, acquired by FBA in
December 1997 and February 1998, and the additional costs associated with Surety
Bank's and Pacific Bay Bank's data processing and back-office conversions to
FBA's systems and procedures. In addition, FBA's continuing expansion of its
corporate lending and retail banking business development staff, along with the
necessary operational support, has contributed to the overall increase in
noninterest expense.
Contrary to the overall increase in noninterest expense resulting from
the aforementioned acquisitions was occupancy, net of rental income, which
remained relatively constant at $575,000 and $1.1 million for the three and six
months ended June 30, 1998, compared to $524,000 and $1.1 million for the same
periods in 1997, respectively. This is the result of increased sub-leasing of
excess space within FBA's banking premises, relocation of certain California
branches and the related reductions in expenses attributable to centralization
of recently acquired entities' functions into FBA's systems.
Other noninterest expense for the six months ended June 30, 1998
includes a $350,000 charge in
settlement of certain litigation.
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 69.5% and 67.0% of
total assets as of June 30, 1998 and December 31, 1997, respectively. Total
loans, net of unearned discount, were $469.2 million and $431.5 million at June
30, 1998 and December 31, 1997, respectively. The increase in loans, as
summarized on the consolidated balance sheet, is attributable to the acquisition
of Pacific Bay Bank and to the expansion of the corporate lending function of
FBA. The expansion has generated growth in the commercial and financial, and
commercial real estate mortgage loan portfolios. Offsetting the growth in
corporate lending is the continuing decrease in the consumer indirect automobile
loan portfolio.
FBA's nonperforming loans consist of loans on nonaccrual status and
loans on which the original terms have been restructured. The following is a
summary of nonperforming assets and past due loans at the dates indicated:
June 30, December 31,
1998 1997
---- ----
(dollars expressed in thousands)
Nonperforming assets:
Nonperforming loans............................................... $ 6,201 2,846
Other real estate................................................. 451 601
----------- ----------
Total nonperforming assets..................................... $ 6,652 3,447
=========== ==========
Loans past due and still accruing:
Over 30 days to 90 days........................................... $ 7,490 7,866
Over 90 days...................................................... 386 1,158
----------- ----------
Total past due loans........................................... $ 7,876 9,024
=========== ==========
Loans, net of unearned discount..................................... $ 469,192 431,455
=========== ==========
Asset quality ratios:
Allowance for possible loan losses to loans....................... 2.52% 2.64%
Nonperforming loans to loans ..................................... 1.32 0.66
Allowance for possible loan losses to
nonperforming loans ........................................... 191.02 400.81
Nonperforming assets to loans and other real estate............... 1.42 0.80
=========== =========
Nonperforming loans, consisting of loans on nonaccrual status and
restructured loans, were $6.2 million at June 30, 1998 in comparison to $2.8
million at December 31, 1997, respectively. The increase is primarily
attributable to the loans obtained through the acquisition of Pacific Bay Bank.
The acquired allowance for possible loan losses totaled $885,000 at the
acquisition date.
Impaired loans, consisting of loans on nonaccrual status and certain
indirect consumer and installment loans 60 days or more past due, were $6.8
million and $3.3 million at June 30, 1998 and December 31, 1997, respectively.
The allowance for possible loan losses is monitored on a monthly basis.
Each month, credit administration provides FBA's management with detailed lists
of loans on the watch list and summaries of the entire loan portfolio of each
Subsidiary Bank by risk rating. These are coupled with analyses of changes in
the risk profiles of the portfolios, changes in past due and nonperforming loans
and changes in watch list and classified loans over time. In this manner, the
overall increases or decreases in the levels of risk in the portfolios are
monitored continually. Factors are applied to the loan portfolios for each
category of loan risk to determine acceptable levels of allowance for possible
loan losses. These factors are derived primarily from the actual loss experience
of the Subsidiary Banks and from published national surveys of norms in the
industry. The calculated allowances required for the portfolios are then
compared to the actual allowance balances to determine the provisions necessary
to maintain the allowances at appropriate levels. In addition, management
exercises judgment in its analysis of determining the overall level of the
allowance for possible losses. In its analysis, management considers the change
in the portfolio, including growth and composition, and the economic conditions
of the regions in which FBA operates.
Based on this quantitative and qualitative analysis, the allowance for
possible loan losses is adjusted. Such adjustments are reflected in the
consolidated statements of income.
The following is a summary of the loan loss experience:
Three months ended Six months ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
(dollars expressed in thousands)
Allowance for possible loan losses, beginning of period................ $ 12,063 10,872 11,407 10,744
Acquired allowances for possible loan losses........................ -- -- 885 --
---------- --------- --------- -------
12,063 10,872 12,292 10,744
---------- --------- --------- -------
Loans charged-off................................................... (951) (1,066) (2,010) (2,048)
Recoveries of loans previously charged-off.......................... 533 570 1,063 1,130
---------- --------- --------- -------
Net loan charge-offs................................................ (418) (496) (947) (918)
---------- --------- --------- -------
Provision for possible loan losses.................................. 200 735 500 1,285
---------- --------- --------- -------
Allowance for possible loan losses, end of period...................... $ 11,845 11,111 11,845 11,111
========== ========= ========= =======
Interest Rate Risk Management
Derivative financial instruments held by FBA for purposes of managing
interest rate risk are summarized as follows:
June 30, 1998 December 31, 1997
---------------- -----------------
Notional Credit Notional Credit
amount amount amount amount
------ ------ ------ ------
(dollars expressed in thousands)
Interest rate swap agreements............ $ 15,000 57 -- --
Interest rate cap agreements............. 10,000 131 10,000 222
The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
FBA's credit exposure through its use of derivative financial instruments. The
amounts and the other terms of the derivatives are determined by reference to
the notional amounts and the other terms of the derivatives.
FBA entered into a $15.0 million interest rate swap agreement on June
11, 1998 (Swap Agreement) to effectively shorten the repricing characteristics
of certain interest-bearing liabilities to correspond more closely with its
assets, with the objective of stabilizing net interest income over time. The
Swap Agreement, which matures on June, 11, 2002, provides for FBA to receive a
fixed rate of interest of 5.99% and pay an adjustable rate equivalent to the 90
day London Interbank offering rate (LIBOR). The net amount due to FBA under the
Swap Agreement was $2,000 at June 30, 1998.
FBA has interest rate cap and floor agreements outstanding to limit the
interest expense associated with certain interest-bearing liabilities. At June
30, 1998 and December 31, 1997, the unamortized costs for these agreements were
$186,000 and $242,000, respectively, and were included in other assets.
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 $62.4 million and $56.2 million at June 30, 1998 and December
31, 1997, respectively.
At June 30, 1998, FBA's more volatile sources of funds mature as
follows:
(dollars expressed
in thousands)
Three months or less..................................... $ 25,324
Over three months through six months..................... 7,847
Over six months through twelve months.................... 21,260
Over twelve months....................................... 8,005
----------
Total......................................... $ 62,436
==========
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.
Year 2000
FBA and the Subsidiary Banks are subject to risks associated with the
"Year 2000" problem, a term which refers to uncertainties about the ability of
various data processing hardware and software systems to interpret dates
correctly after the beginning of the Year 2000. Since most of these systems are
common with those of First Banks, FBA has been working with First Banks to
address this problem. Most of the software used by FBA is purchased from outside
vendors. Consequently, FBA has been working with these vendors to determine
whether these issues are being adequately addressed.
FBA's process of evaluating potential effects of Year 2000 issues on
customers of the Subsidiary Banks is in its early stages, and it is therefore
impossible to quantify the potential adverse effects of incompatible systems on
customers of the Subsidiary Banks. The failure of a commercial bank customer to
prepare adequately for Year 2000 compatibility could have a significant adverse
effect on such customer's operations and profitability, in turn inhibiting its
ability to repay loans in accordance with their terms or requiring the use of
its deposited funds. Until sufficient information is accumulated from customers
of the banks to enable FBA to assess the degree to which customers' operations
are susceptible to potential problems, FBA will be unable to quantify the
potential effect on its commercial customers. In addressing the uncertainty, FBA
has revised its methodology with respect to the adequacy of its allowance for
possible loan losses to include an allocation for the estimated risks associated
with the Year 2000 issue.
Effect of New Accounting Standards
FBA adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 130 - Reporting Comprehensive Income (SFAS 130)
retroactively on January 1, 1998. SFAS 130 established standards for reporting
and displaying income and its components (revenues, gains and losses) in a full
set of general purpose financial statements. The statement requires all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Comparative financial
statements provided for earlier periods have been restated to reflect the
application of SFAS 130. The implementation of SFAS 130 did not have a material
impact on FBA's consolidated financial statements.
During 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 131 - Disclosures about Segments of an Enterprise and Related
Information (SFAS 131). SFAS 131 establishes standards for the way public
business enterprises report information about operating segments in annual
financial statements and requires those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
Additionally, SFAS 131 establishes standards for related disclosures about
products and services, geographic areas, and major customers superseding SFAS
No. 14 - Financial Reporting for Segments of a Business Enterprise. FBA is
currently evaluating information required by SFAS 131 and believes expanded
disclosure information will be required to be included in FBA's consolidated
financial statements for fiscal years beginning after December 15, 1997.
In June 1998, the FASB issued SFAS No. 133 - Accounting for Derivative
Instruments and Hedging Activities (SFAS 133). SFAS 133 establishes standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS 133 is effective for
all fiscal years beginning after June 15, 1999. Earlier application of SFAS 133
is encouraged but should not be applied retroactively to financial statements of
prior periods. FBA is currently evaluating the requirements and impact of SFAS
133.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
An Annual Meeting of Stockholders was held on June 25, 1998. The seven
directors of FBA were reelected, with the vote totals indicated in the following
table:
Name of Director For Withheld
---------------- --- --------
Allen H. Blake 4,967,230 10,499
Charles A. Crocco, Jr. 4,968,232 9,497
James F. Dierberg 4,967,171 10,558
Albert M. Lavezzo 4,967,210 10,519
Edward T. Story, Jr. 4,968,234 9,495
Mark T. Turkcan 4,964,379 13,350
Donald W. Williams 4,964,425 13,304
Item 6 - Exhibits and Reports on Form 8-K
(a) The exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit
Number Description
------ -----------
11 Calculations of Earnings Per Share
27 Article 9 - Financial Data Schedule (EDGAR only)
(b) There were no reports filed on Form 8-K during the three months ended June
30, 1998.
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 10, 1998 By: /s/James F. Dierberg
--------------------
James F. Dierberg
Chairman, President
and Chief Executive
Officer
Date: August 10, 1998 By: /s/Allen H. Blake
-----------------
Allen H. Blake
Vice President,
Chief Financial Officer
and Secretary
(Principal Financial Officer)
Exhibit 11
The following is a reconciliation of the numerators and denominators of
the basic and diluted EPS computations for the periods indicated:
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- ------
(dollars expressed in thousands, except per share data)
Three months ended June 30, 1998:
Basic EPS - income available to common stockholders.... $ 1,021 5,206 $ 0.20
=======
Effect of dilutive securities - stock options.......... -- 13
------- ------
Diluted EPS - income available to common stockholders.. $ 1,021 5,219 $ 0.20
======= ====== =======
Three months ended June 30, 1997:
Basic EPS - income available to common stockholders.... $ 985 4,058 $ 0.24
=======
Effect of dilutive securities - stock options.......... -- 16
------- ------
Diluted EPS - income available to common stockholders.. $ 985 4,074 $ 0.24
======= ====== =======
Six months ended June 30, 1998:
Basic EPS - income available to common stockholders.... $ 2,121 5,059 $ 0.42
=======
Effect of dilutive securities - stock options.......... -- 13
------- ------
Diluted EPS - income available to common stockholders.. $ 2,121 5,072 $ 0.42
======= ====== =======
Six months ended June 30, 1997:
Basic EPS - income available to common stockholders.... $ 1,469 4,070 $ 0.36
=======
Effect of dilutive securities - stock options.......... -- 36
------- ------
Diluted EPS - income available to common stockholders.. $ 1,469 4,106 $ 0.36
======= ====== =======
The 12% convertible debentures are not presented above as they do not
have a significant impact in the calculations of diluted EPS for the periods
presented.