FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR (15d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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 0-9876
WEST ONE BANCORP
Idaho 82-0362647
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 South Capitol Boulevard, P.O. Box 8247, Boise, Idaho 83733
(Address of principal executive offices) (Zip Code)
(208) 383-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
At April 25, 1994, 35,002,193 shares of the registrant's common stock,
$1 par value, were outstanding.
EXHIBIT INDEX IS LOCATED ON PAGE 9
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CONSOLIDATED BALANCE SHEETS
WEST ONE BANCORP AND SUBSIDIARIES (Unaudited)
March 31, March 31, December 31,
(Dollars in thousands) 1994 1993 1993
----------- ----------- -----------
Assets
Cash and due from banks $452,096 $393,713 $450,384
Due from banks - interest bearing 3,000 75,100 599
Federal funds sold, securities purchased under
agreements to resell and other 133,152 2,955 14,055
----------- ----------- -----------
Securities:
Available for sale 994,006 184,596 1,060,650
Held to maturity 575,576 1,599,775 565,165
----------- ----------- -----------
Total securities 1,569,582 1,784,371 1,625,815
----------- ----------- -----------
Loans:
Real estate 2,185,034 1,716,745 2,150,835
Commercial and agricultural 2,024,951 1,813,349 1,996,865
Consumer 1,061,828 912,660 1,038,678
Leases 158,843 148,333 168,119
----------- ----------- -----------
Total loans 5,430,656 4,591,087 5,354,497
Allowance for credit losses (77,204) (70,718) (74,923)
----------- ----------- -----------
Net loans 5,353,452 4,520,369 5,279,574
----------- ----------- -----------
Premises and equipment 122,692 120,035 122,828
Interest receivable 53,352 49,620 50,141
Other assets 126,488 125,039 127,957
----------- ----------- -----------
Total assets $7,813,814 $7,071,202 $7,671,353
=========== =========== ===========
Liabilities
Deposits:
Noninterest bearing $1,191,396 $969,295 $1,260,869
Interest bearing demand 734,430 670,198 729,247
Regular and money market savings 2,030,402 1,834,207 1,971,211
Time certificates under $100,000 1,503,643 1,607,587 1,505,177
Time certificates $100,000 and over 619,703 450,075 470,543
----------- ----------- -----------
Total deposits 6,079,574 5,531,362 5,937,047
Federal funds purchased and securities
sold under agreements to repurchase 368,518 707,990 568,295
Other short-term borrowings 500,548 100,551 330,609
Long-term debt 115,112 117,208 116,460
Other liabilities 110,658 105,150 95,376
----------- ----------- -----------
Total liabilities 7,174,410 6,562,261 7,047,787
----------- ----------- ------
Shareholders' equity
Common stock - $1.00 par value; 75,000,000 shares
authorized; 34,967,500, 32,389,108 and 34,718,731
shares outstanding 34,968 32,389 34,719
Capital surplus 313,850 250,565 304,413
Retained earnings 287,348 225,987 275,351
Unrealized gain on securities, net of tax 3,238 - 9,083
----------- ----------- -----------
Total shareholders' equity 639,404 508,941 623,566
----------- ----------- -----------
Total liabilities and shareholders' equity $7,813,814 $7,071,202 $7,671,353
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
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CONSOLIDATED STATEMENTS OF INCOME
WEST ONE BANCORP AND SUBSIDIARIES (Unaudited)
For the quarter ended,
March 31,
(Dollars in thousands, except per share data) 1994 1993
--------- ---------
Interest income
Loans $105,543 $93,865
Short-term investments 441 863
Interest and dividends on securities:
United States Treasury and
Government agencies 6,615 8,771
State and municipal bonds 7,157 5,429
Mortgage-backed securities 3,509 6,425
Other 2,721 4,067
--------- ---------
Total interest income 125,986 119,420
--------- ---------
Interest expense
Deposits 37,862 42,146
Federal funds purchased and securities
sold under agreements to repurchase 3,684 3,905
Other short-term borrowings 2,177 965
Long-term debt 1,761 2,519
--------- ---------
Total interest expense 45,484 49,535
--------- ---------
Net interest income 80,502 69,885
Provision for credit losses 3,989 3,092
--------- ---------
Net interest income after
provision for credit losses 76,513 66,793
--------- ---------
Noninterest income
Trust fees and commissions 3,543 3,237
Service charges on deposit accounts 8,984 8,424
Other service charges, fees and commissions 10,624 9,205
Other 3,287 2,297
Securities losses (158) (8)
--------- ---------
Total noninterest income 26,280 23,155
--------- ---------
Noninterest expense
Employee compensation and benefits 34,038 31,378
Outside services 7,464 6,189
Equipment 5,483 4,971
Net occupancy 4,718 5,003
Insurance and miscellaneous taxes 4,762 4,096
Marketing 2,474 2,049
Postage and courier 2,347 2,021
Supplies 1,799 1,859
Telephone 1,784 1,516
Other 5,604 5,019
--------- ---------
Total noninterest expense 70,473 64,101
--------- ---------
Income before taxes 32,320 25,847
Provision for income taxes 9,405 7,682
--------- ---------
Net income $22,915 $18,165
========= =========
Primary earnings per share $.65 $.55
Fully diluted earnings per share .62 .53
Dividends declared per share .18 -
========= =========
The accompanying notes are an integral part of the financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
WEST ONE BANCORP AND SUBSIDIARIES (Unaudited)
For the three months ended
March 31,
(Dollars in thousands) 1994 1993
--------- ---------
Cash flows from operating activities:
Net income $22,915 $18,165
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 3,989 3,092
Depreciation of premises and equipment 3,986 3,991
Amortization and accretion of premiums and discounts 2,963 3,579
Amortization of intangible and other assets 2,734 2,626
Originations of real estate loans held for sale (101,434) (54,221)
Proceeds from real estate loans sold 116,160 73,443
Net gain on sale of real estate loans (414) (113)
Net loss on sale of securities 158 8
Purchase of trading account securities (14,197) (13,449)
Sale of trading account securities 14,406 14,904
Change in assets and liabilities:
Interest receivable (2,663) (107)
Other assets 656 (5,160)
Other liabilities 945 10,281
--------- ---------
Net cash provided by operating activities 50,204 57,039
--------- ---------
Cash flows from investing activities:
Change in other short-term investments, maturities less than 90 days (119,952) 111,200
Purchase of securities available for sale (112,050) (9,976)
Maturity of securities available for sale 101,752 14,308
Sale of securities available for sale 89,827 --
Purchase of securities held to maturity (16,815) (212,720)
Maturity of securities held to maturity 14,498 102,218
Change in net loans and leases (77,866) (79,445)
Purchase of premises and equipment (2,755) (3,458)
Sale of premises and equipment 65 19
Additions to intangible assets (641) (776)
Sale of other real estate owned 2,076 608
Cash provided by acquisition 10,251 --
--------- ---------
Net cash used by investing activities (111,610) (78,022)
-4- --------- ---------
Cash flows from financing activities:
Change in deposits 98,053 (104,977)
Change in short-term borrowings, maturities less than 90 days (32,260) (18,321)
Proceeds from short-term borrowings 5,277 20,710
Payments on short-term borrowings (2,970) (3,902)
Payments on long-term debt (1,349) (690)
Proceeds from issuance of common stock 2,616 920
Cash dividends paid (6,249) (4,206)
--------- ---------
Net cash provided (used) by financing activities 63,118 (110,466)
--------- ---------
Net increase (decrease) in cash and due from banks 1,712 (131,449)
Cash and due from banks - January 1 450,384 525,162
--------- ---------
Cash and due from banks - March 31 $452,096 $393,713
========= =========
Supplemental information:
Interest paid 44,511 48,146
Income taxes paid 2,035 2,894
Noncash activities:
Reclassification of securities available for sale -- 28,248
Securities purchased not settled 16,345 24,171
Loans held for sale transferred to the loan portfolio 10,443 4,272
Loan charge-offs 4,509 3,267
Transfer of loans to other real estate owned 3,090 677
Tax benefit of stock options exercised 405 37
Dividends declared not paid 6,294 --
Acquisition:
Investments 17,532 --
Loans 18,081 --
Premises and equipment 1,191 --
Deposits 44,474 --
Equity 2,086 --
========= =========
The accompanying notes are an integral part of the financial statements.
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PAGE
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
West One Bancorp and Subsidiaries
These statements are unaudited financial statements and should be read
in conjunction with the 1993 Annual Report of West One Bancorp and Subsidiaries
(West One). All adjustments (consisting only of normal recurring accruals and
the acquisitions as discussed below) which are, in the opinion of management,
necessary to present fairly the consolidated financial position and results of
operations have been made in the accompanying financial statements. Related
historical data has been adjusted for the August 1993 two-for-one stock split.
RECLASSIFICATION
Certain reclassifications of 1993 amounts were made in order to conform
to the 1994 presentation, none of which affect previously reported net income.
ACQUISITIONS
On January 21, 1994, Idaho State Bank with assets of $50 million was
acquired in exchange for 133,332 shares of West One Bancorp common stock. The
transaction was accounted for as a pooling of interests. Because Idaho State
Bank's operations and financial position are immaterial to West One's results
of operations and financial position, historic data has not been restated.
On May 28, 1993, West One Bancorp acquired all outstanding common stock
of Ben Franklin National Bank in exchange for 206,254 shares of West One
Bancorp common stock. The combination was accounted for as a pooling of
interests. Since Ben Franklin National Bank's results of operations and
financial position is immaterial to West One's results of operations and
financial position, historic financial data was not restated.
OTHER EVENTS
During the first quarter of 1994, West One implemented Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," which did not have a material effect on West One's
financial condition, results of operations or the related disclosures.
On March 14, 1994, West One Bancorp announced the signing of a
definitive agreement under which West One Bancorp will acquire Valley
Commercial Bank, a two-branch, $64 million bank located in Clarkston,
Washington. The number of shares of West One Bancorp's common stock to be
received by the shareholders of Valley Commercial Bank will be determined by
a formula in which the purchase price (approximately one and one-half times book
value one month prior to closing) is divided by the average market price of
West One common stock for ten consecutive trading days ending 20 days preceding
the acquisition date.
On April 15, 1994, West One acquired ten Far West Savings Bank branches
in Oregon with approximately $179 million of deposits from the Resolution Trust
Corporation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PERFORMANCE SUMMARY
West One Bancorp reported net income of $22.9 million for the first
quarter of 1994, the highest quarterly earnings in the Corporation's history
and a 26% increase from the $18.2 million earned in the same quarter of 1993.
Net income per share was $.62 for the current quarter compared to $.53 for the
first quarter of 1993. The earnings gain was attributable to higher net
interest income reflecting a wider net interest margin and an improvement in
the volume and composition of earning assets. West One achieved a return on
average assets of 1.22% and a return on average shareholders' equity of 14.91%
in the first quarter of 1994.
The first quarter results were attributable to strength in core
operations as loans increased and net interest margin improved. Capital
growth and a further decline in nonperforming assets strengthened the balance
sheet. In April 1994, the Corporation expanded its presence in Oregon through
the purchase of ten Far West Savings Bank branches from the Resolution Trust
Corporation. The acquisition provides an entrance to seven new Oregon markets,
an opportunity to realize savings through consolidation in one market and
expands West One's presence in strategic locations in the key Portland market.
During the first quarter of 1994, West One acquired Idaho State Bank, a seven-
branch institution with assets of $50 million, and entered into a definitive
agreement to acquire Valley Commercial Bank, a two-branch institution with
assets of $64 million in Clarkston, Washington.
West One's service area of Idaho, Washington, Oregon and Utah continued
to outperform the national economy in the first quarter of 1994. During the
first two months of the year, more than 19,000 net new jobs were added to the
regional payroll with gains posted in all four states. Utah and Idaho ranked
second and third, respectively, in the nation in nonfarm employment growth
during the last year. Residential construction remained strong as the number
of authorized permits for residential dwelling units increased during the first
two months nearly 42% over last year. Strong gains in residential dwelling
units were reported in each of the four states. A resurgence in activity was
evident in Washington as the state registered a 38% increase after a year of
relatively flat residential construction activity. A high level of net
inmigration in all four states is expected to continue to fuel housing starts
in 1994. Commercial construction is also contributing to the economic strength
of the region. The average commercial real estate vacancy rates were 5.0% in
Boise, 12.8% in Seattle, 11.7% in Portland and 11.4% in Salt Lake City,
significantly below the national average vacancy rate of 17%.
NET INTEREST INCOME AND MARGIN
Taxable equivalent net interest income was $85.6 million in the first
quarter of 1994, up 15.5% from the same period last year. Earning assets
averaged $6.9 billion during the current quarter, an 11% increase from the same
quarter in 1993. Average loans increased 20% over the same period. Loans
accounted for 77% of earning assets in the current quarter compared to 71% in
the same quarter last year. Higher volumes and an improved mix of earning
assets contributed to a 21 basis point improvement in net interest margin to
5.00% in the first quarter of 1994 compared to 4.79% in the same quarter last
year. Loans increased at an annualized rate of 10% from the fourth quarter of
1993 to the first quarter of 1994 despite the seasonal decline of agricultural
loans. Net interest margin increased 4 basis points over the same period.
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ASSET QUALITY
Credit quality strengthened further in the first quarter of 1994 as
nonperforming assets declined 20% from a year ago to $26.4 million at March 31,
1994, representing only .34% of total assets. Credit loss allowance coverage
of nonperforming loans increased to 365% at March 31, 1994, up from 305% a year
ago. West One provided $4.0 million for credit losses in the first quarter of
1994 compared to $3.1 million for the same quarter of 1993. Net charge-offs
totaled $2.5 million or .19% of average loans in the first quarter of 1994
compared to .06% of average loans in the corresponding quarter last year. The
allowance for credit losses was $77.2 million at March 31, 1994, up from $70.7
million a year ago.
NONINTEREST INCOME AND EXPENSE
Noninterest income increased 13.5% to $26.3 million in the first quarter
of 1994 compared to the first quarter of 1993. The increase was attributable
to bankcard income, mortgage banking revenues, brokerage commissions and
service charges.
Noninterest expense totaled $70.5 million in the first quarter of 1994,
a 10% increase from the $64.1 million reported in the same quarter of 1993.
The increase was attributable to internal and acquisition related growth.
Noninterest expense for the first quarter of 1994 was 4% below such expenses
in the fourth quarter of 1993. The efficiency ratio, defined as noninterest
expense as a percent of total revenues, improved to 63% in the first quarter
of 1994, down from 66% in the same quarter last year. The ratio also improved
from the 65% recorded in the fourth quarter of 1993 as West One rapidly
progresses towards its efficiency ratio target of 60%.
CAPITAL ADEQUACY
Shareholders' equity was $639.4 million at March 31, 1994, a 26%
increase from a year ago, and represented 8.18% of assets compared to 7.20% last
year. Capital adequacy levels established by the Federal Reserve Board require
minimum leverage, Tier 1 and total capital ratios of 3%, 4% and 8%,
respectively. In addition, regulators deem a financial institution well
capitalized, the highest rating available, when leverage, Tier 1 and total
capital ratios total at least 5%, 6% and 10%, respectively. West One's
leverage, Tier 1 and total capital ratios were 7.87%, 9.85% and 12.13%,
respectively, at March 31, 1994 compared to 6.77%, 8.66% and 11.14% at March
31, 1993.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Various legal proceedings arising in the normal course of
business are pending against West One and its subsidiaries.
In the opinion of management, liability, if any, resulting from
these proceedings will not have a material impact on West One's
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Shareholders' Meeting of West One Bancorp was held on
April 14, 1994. The following matters were voted on by the
shareholders:
Proposal No. 1: Election of four Class III members of the Board
of Directors with the votes cast as follows:
Broker
In Favor Withheld Non-votes
William J. Deasy 28,387,050 234,878 39,993
Daniel R. Nelson 28,581,407 37,692 42,822
Allen T. Noble 28,583,937 38,236 39,748
Philip B. Soulen 28,583,027 37,104 41,790
The other directors whose term of office continued after the
meeting are: Harry Bettis, Norma Cugini, John B. Fery, Stuart
A. Hall, D. Michael Jones, Jack B. Little, Warren E. McCain and
Douglas W. McCallum.
Proposal No. 2: Ratification of selection of Coopers & Lybrand
as the Corporation's Independent Certified Public Accountants
for the current fiscal year ending December 31, 1994:
In favor Against Abstain
28,508,812 55,020 98,089
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Statement regarding computation of per
share earnings - Page 11.
(b) Reports on Form 8-K - No reports were filed on Form
8-K for the quarter ended March 31, 1994.
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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 under-
signed thereunto duly authorized.
WEST ONE BANCORP
Date: May 9, 1994
/s/ Scott M. Hayes
Scott M. Hayes
Executive Vice President and
Chief Financial Officer
/s/ Jim A. Peterson
Jim A. Peterson
Senior Vice President
and Controller
(Principal Accounting Officer)
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