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 September 30, 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 October 28, 1994, 35,609,518 shares of the registrant's common
stock, $1 par value, were outstanding.
EXHIBIT INDEX IS LOCATED ON PAGE 9
CONSOLIDATED BALANCE SHEETS (Unaudited)
WEST ONE BANCORP AND SUBSIDIARIES
September 30, December 31,
(Dollars in thousands) 1994 1993 1993
----------- ----------- -----------
Assets
Cash and due from banks $512,807 $386,450 $450,384
Due from banks - interest bearing 699 1,379 599
Federal funds sold, securities purchased under
agreements to resell and other 60,418 7,482 14,055
----------- ----------- -----------
Securities:
Available for sale 1,040,237 382,221 1,060,650
Held to maturity 600,329 1,223,160 565,165
----------- ----------- -----------
Total securities 1,640,566 1,605,381 1,625,815
----------- ----------- -----------
Loans:
Real estate 2,383,539 2,049,712 2,150,835
Commercial and agricultural 2,176,550 1,980,136 1,996,865
Consumer 1,123,140 991,512 1,038,678
Leases 156,228 154,851 168,119
----------- ----------- -----------
Total loans 5,839,457 5,176,211 5,354,497
Allowance for credit losses (79,417) (73,136) (74,923)
----------- ----------- -----------
Net loans 5,760,040 5,103,075 5,279,574
----------- ----------- -----------
Premises and equipment 124,992 123,043 122,828
Interest receivable 61,512 53,394 50,141
Other assets 147,066 141,487 127,957
----------- ----------- -----------
Total assets $8,308,100 $7,421,691 $7,671,353
=========== =========== ===========
Liabilities
Deposits:
Noninterest bearing $1,335,355 $1,101,653 $1,260,869
Interest bearing demand 714,385 694,880 729,247
Regular and money market savings 2,063,256 1,907,066 1,971,211
Time certificates under $100,000 1,688,429 1,546,940 1,505,177
Time certificates $100,000 and over 757,598 449,302 470,543
----------- ----------- -----------
Total deposits 6,559,023 5,699,841 5,937,047
Federal funds purchased and securities
sold under agreements to repurchase 458,917 573,245 568,295
Other short-term borrowings 326,794 377,900 330,609
Long-term debt 188,044 117,393 116,460
Other liabilities 90,956 101,958 95,376
----------- ----------- -----------
Total liabilities 7,623,734 6,870,337 7,047,787
----------- ----------- -----------
Shareholders' equity
Common stock - $1.00 par value; 75,000,000 shares
authorized; 35,555,744, 32,894,154 and 34,718,731
shares outstanding 35,556 32,894 34,719
Capital surplus 320,950 259,311 304,413
Retained earnings 333,228 259,149 275,351
Unrealized (loss) gain on securities, net of tax (5,368) - 9,083
----------- ----------- -----------
Total shareholders' equity 684,366 551,354 623,566
----------- ----------- -----------
Total liabilities and shareholders' equity $8,308,100 $7,421,691 $7,671,353
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
WEST ONE BANCORP AND SUBSIDIARIES
For the quarter ended, For the nine months ended,
September 30, September 30,
(Dollars in thousands, except per share data) 1994 1993 1994 1993
--------- --------- --------- ---------
Interest income
Loans $122,203 $104,172 $341,245 $296,581
Short-term investments 586 106 2,008 1,255
Interest and dividends on securities:
United States Treasury and
Government agencies 8,662 7,260 22,954 24,203
State and municipal bonds 7,770 6,528 22,484 18,159
Mortgage-backed securities 3,900 4,964 11,280 17,709
Other 2,158 3,610 7,251 11,976
--------- --------- --------- ---------
Total interest income 145,279 126,640 407,222 369,883
--------- --------- --------- ---------
Interest expense
Deposits 46,970 39,487 126,284 122,087
Federal funds purchased and securities
sold under agreements to repurchase 5,983 4,302 14,856 13,107
Other short-term borrowings 2,810 2,537 7,885 5,112
Long-term debt 2,230 1,843 5,805 6,416
--------- --------- --------- ---------
Total interest expense 57,993 48,169 154,830 146,722
--------- --------- --------- ---------
Net interest income 87,286 78,471 252,392 223,161
Provision for credit losses 3,046 3,894 10,822 10,400
--------- --------- --------- ---------
Net interest income after
provision for credit losses 84,240 74,577 241,570 212,761
--------- --------- --------- ---------
Noninterest income
Trust fees and commissions 3,526 3,480 10,872 10,224
Service charges on deposit accounts 10,171 9,260 29,068 26,880
Other service charges, fees and commissions 12,897 10,571 35,438 30,079
Other 2,128 2,858 10,231 7,475
Securities gains (losses) (327) 339 (812) 367
--------- --------- --------- ---------
Total noninterest income 28,395 26,508 84,797 75,025
--------- --------- --------- ---------
Noninterest expense
Employee compensation and benefits 36,385 32,739 105,424 95,063
Outside services 8,132 7,268 23,708 20,459
Equipment 5,075 5,670 16,179 16,093
Net occupancy 5,356 4,907 15,101 14,580
Insurance and miscellaneous taxes 4,932 4,269 14,395 12,710
Marketing 2,514 2,475 7,456 7,100
Postage and courier 2,442 2,071 7,187 6,228
Supplies 1,767 1,770 5,425 5,402
Telephone 2,020 1,787 5,616 4,855
Other 5,874 5,917 17,326 16,547
--------- --------- --------- ---------
Total noninterest expense 74,497 68,873 217,817 199,037
--------- --------- --------- ---------
Income before taxes 38,138 32,212 108,550 88,749
Provision for income taxes 11,077 10,437 32,651 27,995
--------- --------- --------- ---------
Net income $27,061 $21,775 $75,899 $60,754
========= ========= ========= =========
Primary earnings per share $.76 $.65 $2.14 $1.84
Fully diluted earnings per share .72 .62 2.03 1.75
Dividends declared per share .18 .155 .54 .31
========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
WEST ONE BANCORP AND SUBSIDIARIES
For the nine months ended
September 30,
(Dollars in thousands) 1994 1993
--------- ---------
Cash flows from operating activities:
Net income $75,899 $60,754
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 10,822 10,400
Depreciation of premises and equipment 12,193 11,696
Amortization and accretion of premiums and discounts 8,483 10,703
Amortization of intangible and other assets 8,595 8,080
Originations of real estate loans held for sale (220,808) (318,341)
Proceeds from real estate loans sold 248,046 281,056
Net gain on sale of real estate loans (2,740) (1,073)
Net loss (gain) on sale of securities 813 (339)
Purchase of trading account securities (68,271) (34,173)
Sale of trading account securities 68,881 28,201
Change in assets and liabilities:
Interest receivable (10,191) (3,409)
Other assets (4,462) (18,448)
Other liabilities (298) 15,894
--------- ---------
Net cash provided by operating activities 126,962 51,001
--------- ---------
Cash flows from investing activities:
Change in short-term investments, maturities less than 90 days (36,702) 189,490
Purchase of securities available for sale (481,190) (60,622)
Maturity of securities available for sale 263,157 54,570
Sale of securities available for sale 253,218 54,489
Purchase of securities held to maturity (62,538) (374,083)
Maturity of securities held to maturity 25,564 385,538
Change in net loans and leases (481,977) (592,524)
Purchase of premises and equipment (12,564) (14,456)
Sale of premises and equipment 228 821
Additions to intangible assets (8,984) (6,621)
Sale of other real estate owned 6,016 8,109
Cash provided by acquisition 175,874 2,019
--------- ---------
Net cash used by investing activities (359,898) (353,270)
--------- ---------
Cash flows from financing activities:
Change in deposits 349,340 31,242
Change in short-term borrowings, maturities less than 90 days (106,069) 82,582
Proceeds from short-term borrowings 37,324 118,954
Payments on short-term borrowings (44,912) (62,111)
Additions to long-term debt 80,000 27,500
Payments on long-term debt (8,309) (28,009)
Proceeds from issuance of common stock 6,844 7,692
Cash dividends paid (18,859) (14,293)
--------- ---------
Net cash provided by financing activities 295,359 163,557
--------- ---------
Net increase (decrease) in cash and due from banks 62,423 (138,712)
Cash and due from banks - January 1 450,384 525,162
--------- ---------
Cash and due from banks - September 30 $512,807 $386,450
========= =========
Supplemental information:
Interest paid 150,981 147,572
Income taxes paid 39,436 29,589
Noncash activities:
Reclassification of securities available for sale -- 270,503
Securities purchased not settled -- 7,327
Loans held for sale transferred to the loan portfolio 22,772 22,774
Loan charge-offs 13,861 12,110
Transfer of loans to other real estate owned 8,256 2,659
Tax benefit of stock options exercised 829 226
Dividends declared not paid 6,400 5,099
Acquisitions:
Investments 45,727 10,123
Loans 43,069 21,819
Premises and equipment 2,028 612
Intangible assets 11,249 --
Deposits 272,636 32,260
Equity 10,369 3,041
========= =========
The accompanying notes are an integral part of the financial statements.
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.
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 September 2, 1994, West One Bancorp acquired all the outstanding
shares of Valley Commercial Bank, a two-branch $64 million bank
headquartered in Clarkston, WA, in exchange for 404,523 shares of West One
Bancorp common stock. The transaction was accounted for as a pooling of
interests. Since Valley Commercial Bank's results of operations and
financial position are immaterial to West One's results of operations and
financial position, historic data has not been restated.
On April 15, 1994, West One Bancorp acquired ten Far West Federal
Savings Bank branches in Oregon with deposits of $173 million from the
Resolution Trust Corporation. The transaction was accounted for as a
purchase.
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 results of 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
On May 9, 1994, West One Bancorp announced the signing of a definitive
agreement under which West One Bancorp will acquire National Security Bank
Holding Company and its subsidiary, National Security Bank, a five-branch,
$133 million bank located in Newport, Oregon. The agreement calls for an
exchange of West One Bancorp common stock for all the outstanding shares of
National Security Bank Holding Company common stock. The number of shares
issued is dependent upon the purchase price and a calculated average market
price for West One Bancorp common stock. The transaction is expected to be
completed in mid-November 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PERFORMANCE SUMMARY
West One Bancorp reported net income of $27.1 million for the third quarter of
1994, the highest quarterly earnings in the Corporation's history and a 24%
increase from the $21.8 million earned in the third quarter of 1993. Net income
per share was $.72 for the current quarter compared to $.62 for the same
quarter last year. Improved earnings were attributable to loan growth and a
wider net interest margin. West One achieved a return on average assets of
1.32% and a return on average shareholders' equity of 16.04% in the third
quarter of 1994 compared to 1.16% and 16.10%, respectively, for the third
quarter of 1993.
The regional economy in West One's service area of Idaho, Washington, Oregon
and Utah continued to expand and outperform the national economy during the
third quarter of 1994. Employment increases were recorded in all states except
Washington. Although declines in government and construction reduced the total
job count in Washington, the important manufacturing sector indicated renewed
strength as employment increased during the third quarter following several
quarters of decline attributable to the aerospace sector. The labor supply
remained exceptionally constricted in Utah and Idaho as new job creation ranked
these two states first and third, nationally, during the third quarter.
Residential construction activity remained vigorous in all four states,
matching second quarter levels but slightly below the peak recorded during the
first quarter of 1994. Oregon's important high technology sector is booming,
with significant investments in new facilities and plant expansions announced
in recent months. Projections indicate that Oregon's high technology sector
will replace lumber and wood products as the state's largest employment sector
by 1996.
NET INTEREST INCOME AND MARGIN
Taxable equivalent net interest income was $92.6 million in the third quarter
of 1994, up 11% from the same period last year. Earning assets averaged $7.4
billion during the quarter, a 10% increase from the same quarter in 1993.
Average loans increased 13% over the same period as strong growth was recorded
in real estate, consumer, commercial and agricultural loans across all four
states. Loans increased to 77.5% of earning assets in the current quarter
compared to 75.5% in the third quarter of 1993. Loan growth and an improved
mix of earning assets contributed to a net interest margin of 4.96% in the
third quarter of 1994, up from 4.92% in the same quarter last year. Loans
increased at an annualized rate of 14% from the second to third quarters of
1994 due to double digit increases in real estate, consumer, commercial and
agricultural loans. Net interest margin was stable despite increases in
national money market rates. Taxable equivalent net interest income for the
first nine months of 1994 totaled $268.1 million, an increase of 13% from the
same period in 1993, as net interest margin increased 13 basis points to 4.98%
and earning assets grew 10%.
ASSET QUALITY
Excellent asset quality favorably impacted third quarter results. Net charge-
offs declined to .18% of average loans compared to .20% in the corresponding
quarter last year. West One provided $3.0 million for credit losses in the
third quarter of 1994 compared to $3.9 million for the same quarter of 1993.
Nonperforming assets declined 6% from a year ago to $26.4 million at September
30, 1994, representing .32% of total assets and .45% of loans and other real
estate owned. Credit loss allowance coverage of nonperforming loans increased
to 407% at September 30, 1994, up from 308% a year ago. The allowance for
credit losses was $79.4 million at September 30, 1994, up 9% from $73.1 million
a year ago. For the nine months ended September 30, 1994, West One provided
$10.8 million for credit losses compared to $10.4 million for the first nine
months of 1993.
NONINTEREST INCOME AND EXPENSE
Noninterest income was $28.4 million in the third quarter of 1994, up 7% from
the third quarter of 1993. Other service charges, fees and commissions
increased due to real estate servicing fees and bankcard income. Other income
declined as higher mortgage rates curtailed real estate loan origination
activity. Noninterest income for the nine months ended September 30, 1994
totaled $84.8 million and exceeded the prior year by 13%. Year-to-date results
included $1.7 million of interest on a Federal income tax settlement reported
during the second quarter of 1994.
Noninterest expense increased 8% to $74.5 million in the third quarter of 1994
and 9% to $217.8 million in the first nine months of 1994 compared to the
corresponding periods of 1993. The increases were attributable to acquisitions
and internal growth. Excluding the impact of 1994 acquisitions, noninterest
expense increased 5% in the third quarter of 1994.
CAPITAL ADEQUACY
Shareholders' equity was $684 million at September 30, 1994, a 24% increase
from a year ago and represented 8.24% of assets compared to 7.43% 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 7.98%, 10.05% and 12.26%,
respectively, at September 30, 1994 compared to 6.90%, 8.69% and 11.08%,
respectively, at September 30, 1993.
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 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 September 30, 1994.
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: November 10, 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)