1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 28, 1995
-----------------
WEST COAST BANCORP (Formerly COMMERCIAL BANCORP)
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Oregon 0-10997 93-0810577
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
5335 S.W. Meadows Road, Suite 201 Lake Oswego, Oregon 97035
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (503) 684-0884
--------------
Not applicable
-------------------------------------------------------------
(Former Name or Former Address, If Changed Since Last Report)
Page 1 of 3 Pages
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective February 28, 1995 Commercial Bancorp, Salem, Oregon
("Commercial") completed its pending merger of West Coast Bancorp, Newport,
Oregon ("West Coast"), with and into Commercial, with the surviving corporation
operating under the name West Coast Bancorp ("Combined Corporation"). The
Merger was accomplished pursuant to an Agreement and Plan of Merger ("Merger
Agreement") dated as of October 24, 1994, as amended December 12, 1994. The
Merger Agreement was included as Exhibit 10(a) to the Form 8-K dated October
24, 1994, previously filed by Commercial with the Securities and Exchange
Commission.
Under the terms of the Merger Agreement, consummation of the Merger
was subject to obtaining the approval of the Board of Governors of the Federal
Reserve System, the Oregon Department of Consumer and Business Services, and
the shareholders of Commercial and West Coast. Commercial and West Coast
applied for and received the necessary approvals referenced above, and the
Shareholders of Commercial and West Coast approved the Merger Agreement at
their respective meetings held on February 27, 1995.
Pursuant to the terms of the Merger Agreement, each outstanding share
of West Coast common stock (except for shares held by Commercial or a
subsidiary of Commercial other than in a fiduciary capacity and fractional
shares) were converted into .60 shares of the Combined Corporation's common
stock. The shares of Commercial outstanding at Closing automatically became
shares of the Combined Corporation.
In accordance with the terms of the Merger Agreement, Lloyd D. Ankeny,
Victor L. Bartruff, Phillip G. Bateman, Chester C. Clark, Stanley M. Green,
J.F. Ouderkirk and Gary D. Putnam, (the previous directors of West Coast) will
join Iral D. Barrett, Lester D. Green, Jack E. Long, William B. Loch,
C. Douglas McGregor, Robert D. Morrison and Rodney B. Tibbatts, (seven of the
directors of Commercial), to serve as the Board of Directors of the Combined
Corporation. Rodney B. Tibbatts and Victor L. Bartruff will serve as
Co-Presidents and Co-Chief Executive Officers, Donald A. Kalkofen will serve as
the Chief Financial Officer and Cora A. Hallauer will serve as Secretary of the
Combined Corporation.
- 2 -
3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA, FINANCIAL INFORMATION, AND EXHIBITS
(a) Financial Statements
(b) Pro forma financial information
(c) Exhibits.
10(a) Agreement and Plan of Merger dated as of October 24,
1994, between Commercial and West Coast (incorporated
by reference to the Form 8-K filed by Commercial
dated October 24, 1994)
99(a) Press Release dated February 28, 1995 issued by the
Combined Corporation to announce the closing of the
Merger (incorporated by reference to the Form 8-K
filed by West Coast (formerly Commercial) on March
13, 1995)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Amendment No. 1 to the report to be signed
on its behalf by the undersigned hereunto duly authorized.
WEST COAST BANCORP
(Formerly Commercial Bancorp)
-----------------------------
(Registrant)
Date: May 11, 1995 By /s/ DONALD A. KALKOFEN
------------- ----------------------------------
Donald A. Kalkofen
Chief Financial Officer
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4
WEST COAST BANCORP
CONSOLIDATED BALANCE SHEETS
[CAPTION]
Year Ended December 31, 1994 1993
- -------------------------------------------------------------------------------------------------
ASSETS
Cash and Due from Banks.......................................... $ 4,228,447 $ 5,931,927
Interest-Bearing Deposits in Other Banks......................... 89,653 285,876
------------ ------------
Total Cash and Cash Equivalents............................. 4,318,100 6,217,803
Investment Securities:
Investments Available for Sale................................. 34,330,238 22,782,736
Investments Held to Maturity................................... 13,233,348 14,533,044
------------ ------------
Total Investment Securities (Notes 2 and 3)................. 47,563,586 37,315,780
Loans Held for Sale.............................................. - 858,467
Loans (Note 4)................................................... 103,214,958 96,668,868
Allowance for Loan Loss (Note 4)................................. (1,545,342) (1,424,582)
------------ ------------
Loans, net.................................................. 101,669,616 95,244,286
Premises and Equipment, net (Note 5)............................. 3,927,288 3,256,869
Intangible Assets................................................ 137,363 157,967
Other Assets..................................................... 3,037,564 2,183,740
------------ ------------
Total Assets................................................ $160,653,517 $145,234,912
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand......................................................... $ 18,829,748 $ 16,679,600
Savings and Interest-Bearing Demand............................ 60,375,328 50,329,917
Certificates of Deposits (Note 8).............................. 45,491,910 47,923,267
------------ ------------
Total Deposits.............................................. 124,696,986 114,932,784
Short-term Borrowings:
Federal Funds Purchased........................................ 860,000 3,270,000
Other Short-term Borrowings (Note 6)........................... 7,955,000 5,050,000
------------ ------------
Total Short-term Borrowings................................. 8,815,000 8,320,000
Other Liabilities................................................ 1,464,403 1,396,884
Long-term Borrowings (Note 6).................................... 8,545,699 9,095,238
------------ ------------
Total Liabilities........................................... 143,522,088 133,744,906
Commitments and Contingent Liabilities (Notes 10 and 11)
STOCKHOLDERS' EQUITY
Preferred Stock, $2.50 par value; none issued:
Non-voting, 5,000,000 shares authorized
Voting, 5,000,000 shares authorized
Common Stock: $2 par value, 10,000,000 shares authorized;
shares issued and outstanding, 2,820,800, and 965,841
respectively (Note 9).......................................... 5,641,600 1,931,682
Additional Paid-in Capital....................................... 7,904,194 4,990,996
Retained Earnings................................................ 4,313,018 4,385,547
Net Unrealized Gains (Losses) on Investments Available for Sale
(Note 2)....................................................... (727,383) 181,781
------------ ------------
Total Stockholders' Equity.................................. 17,131,429 11,490,006
------------ ------------
Total Liabilities and Stockholders' Equity.................. $160,653,517 $145,234,912
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
5
WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and Fees on Loans............................. $ 9,828,015 $ 8,798,249 $ 7,490,360
Interest on Taxable Investment Securities.............. 2,318,432 2,813,347 3,164,671
Interest on Non-taxable Investment Securities.......... 218,789 243,621 200,245
Interest from Other Banks.............................. 63,706 29,881 30,860
Interest on Federal Funds Sold......................... 4,964 5,699 20,075
----------- ----------- -----------
Total Interest Income............................. 12,433,906 11,890,797 10,906,211
INTEREST EXPENSE
Savings and Interest-Bearing Demand.................... 1,515,090 1,148,357 1,443,254
Certificates of Deposit................................ 1,972,520 2,051,591 2,428,307
Short-term Borrowings.................................. 109,447 101,030 43,330
Long-term Borrowings................................... 447,268 343,807 171,413
----------- ----------- -----------
Total Interest Expense............................ 4,044,325 3,644,785 4,086,304
----------- ----------- -----------
NET INTEREST INCOME.................................... 8,389,581 8,246,012 6,819,907
PROVISION FOR LOAN LOSS (Note 4)....................... 240,000 455,000 360,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS...... 8,149,581 7,791,012 6,459,907
NONINTEREST INCOME
Gains on Sales of Loans................................ 1,010,267 688,932 361,112
Other Service Charges, Commissions, and Fees........... 1,033,638 688,001 572,174
Service Charges on Deposit Accounts.................... 652,455 596,800 486,299
Loan Servicing Fees.................................... 151,046 40,976 -
Other.................................................. 16,702 15,553 23,556
Net Gains on Sales of Securities....................... - - 9,619
----------- ----------- -----------
Total Non-interest Income......................... 2,864,108 2,030,262 1,452,760
NON-INTEREST EXPENSE
Salaries and Employee Benefits......................... 3,974,787 3,234,309 2,597,295
Equipment.............................................. 519,849 533,718 444,894
Professional Fees...................................... 897,257 793,522 619,729
Occupancy.............................................. 444,467 383,566 305,035
ATM and Bankcard....................................... 489,873 383,082 297,383
Printing and Office Supplies........................... 228,302 210,633 140,007
Marketing.............................................. 184,952 201,831 119,314
FDIC Insurance......................................... 262,931 261,897 241,397
Communications......................................... 193,679 159,543 139,952
Other Non-interest Expense............................. 879,844 634,301 739,412
----------- ----------- -----------
Total Non-interest Expense........................ 8,075,941 6,796,402 5,644,418
----------- ----------- -----------
INCOME BEFORE INCOME TAXES............................. 2,937,748 3,024,872 2,268,249
PROVISION FOR INCOME TAXES (Note 7).................... 1,073,894 923,056 820,031
----------- ----------- -----------
NET INCOME............................................. $ 1,863,854 $ 2,101,816 $ 1,448,218
=========== =========== ===========
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Primary........................................... $0.74 $ 0.99 $ 0.70
Fully Diluted..................................... $0.74 $ 0.98 $ 0.69
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
6
WEST COAST BANCORP
CONSOLIDATED BALANCE STATEMENTS OF CASH FLOWS
Year ended December 31, 1994 1993 1992
- -------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.......................................... $ 1,863,854 $ 2,101,816 $ 1,448,218
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization of Premises
and Equipment................................... 303,569 344,356 275,636
Amortization of Intangibles....................... 20,604 20,604 94,249
Net Gains on Sales of Investments................. - - (9,619)
Provision for Loan Losses......................... 240,000 455,000 360,000
Decrease (Increase) in Interest Receivables....... (191,371) 49,695 245,534
(Increase) Decrease in Other Assets............... (662,453) (313,737) 27,534
Increase (Decrease) in Interest Payable........... (158,097) 171,352 (133,465)
Increase in Other Liabilities..................... 225,616 229,858 127,129
------------ ------------ ------------
Net Cash Provided by Operating Activities........ 1,641,722 3,058,944 2,435,216
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Investment Securities:
Available for Sale................................ 5,246,678 - -
Held to Maturity.................................. 5,424,082 14,189,198 12,223,308
Proceeds from Sales of Investment Securities:
Available for Sale................................ - - -
Held to Maturity.................................. - - 5,188,126
Purchase of Investment Securities:
Available for Sale................................ (17,703,344) - -
Held to Maturity.................................. (4,124,386) (9,179,346) (9,960,265)
Proceeds from Maturities of Time Deposits
with Other Banks.................................. - - 250,406
Loans Made to Customers (Greater) than
Principal Collected on Loans...................... (5,806,863) (15,060,835) (21,596,953)
Capital Expenditures................................ (973,988) (1,366,823) (364,045)
------------ ------------ ------------
Net Cash Used in Investing Activities............ (17,937,821) (11,417,806) (14,259,423)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Demand, Savings and
Interest-bearing Transaction Accounts............. 12,195,559 3,994,357 5,016,021
Net Increase (Decrease) in Proceeds from Sales
of Certificates of Deposits Greater than
Payments for Maturing Time Deposits............... (2,431,357) (4,720,325) 1,725,416
Proceeds from Long-term Borrowings.................. 1,000,000 10,000,000 -
Payments on Long-term Borrowings.................... (1,549,539) (904,762) -
Net Increase in Short-term Borrowings............... 495,000 2,523,000 5,797,000
Payments on Capital Notes (Note 14)................. - - (850,000)
Proceeds from Issuance of Common Stock.............. 5,076,364 204,183 194,840
Dividends Paid and Cash Paid for Fractional Shares.. (389,631) (283,692) (198,533)
------------ ------------ ------------
Net Cash Provided by Financing Activities........ 14,396,396 10,812,761 11,684,744
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,899,703) 2,453,899 (139,463)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR...... 6,217,803 3,763,904 3,903,367
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR............ $ 4,318,100 $ 6,217,803 $ 3,763,904
============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
7
WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Net Unrealized
Gains (Losses)
Additional on Investments
Paid-In Retained Available
Shares Amount Capital Earnings For Sale Total
--------- ---------- ----------- ----------- -------------- -----------
BALANCE, December 31, 1991.............. 807,970 $1,615,940 $ 3,595,620 $ 2,629,833 $ - $ 7,841,393
Net Income.............................. - - - 1,448,218 - 1,448,218
Cash Dividends, $.10 per Common
Share................................. - - - (198,533) - (198,533)
Sale of Common Stock Pursuant to
Stock Option Plans.................... 33,760 67,520 127,320 - - 194,840
--------- ---------- ----------- ----------- --------- -----------
BALANCE, December 31, 1992.............. 841,730 1,683,460 3,722,940 3,879,518 - 9,285,918
Net Income.............................. - - - 2,101,816 - 2,101,816
Net Unrealized Gains on Investments
Available for Sale.................... - - - - 181,781 181,781
Cash Dividends, $.13 per Common
Share................................. - - - (283,120) - (283,120)
Sale of Common Stock Pursuant to
Stock Option Plans.................... 36,638 73,276 130,907 - - 204,183
10 percent Stock Dividend............... 87,473 174,946 1,137,149 (1,312,095) - -
Cash Paid for Fractional Shares......... - - - (572) - (572)
--------- ---------- ----------- ----------- --------- -----------
BALANCE, December 31, 1993.............. 965,841 1,931,682 4,990,996 4,385,547 181,781 11,490,006
Net Income.............................. - - - 1,863,854 - 1,863,854
Net Unrealized Losses on Investments
Available for Sale.................... - - - - (909,164) (909,164)
Cash Dividends, $.16 per Common
Share................................. - - - (388,222) - (388,222)
Sale of Common Stock Pursuant to
Stock Option Plans.................... 3,464 6,928 12,993 - - 19,921
10 percent Stock Dividend............... 96,672 193,344 1,353,408 (1,546,752) - -
Stock Split in the Form of
100 percent Dividend.................. 1,064,823 2,129,646 (2,129,646) - - -
Cash Paid for Fractional Shares......... - - - (1,409) - (1,409)
Issuance of Common Stock in
Public Offering....................... 690,000 1,380,000 3,676,443 - - 5,056,443
--------- ---------- ----------- ----------- --------- -----------
BALANCE, December 31, 1994.............. 2,820,800 $5,641,600 $ 7,904,194 $ 4,313,018 $(727,383) $17,131,429
========= ========== =========== =========== ========= ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
8
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of West Coast Bancorp (West Coast) and its
wholly owned subsidiary, The Bank of Newport, after elimination of intercompany
transactions and balances.
INVESTMENT SECURITIES. West Coast adopted Financial Accounting Standards Board
Statement SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" as of December 31, 1993. Under the standard, investment Securities
are classified as either Available for Sale or Held to Maturity. Available for
Sale securities are carried at fair value with unrealized gains and losses, net
of any tax effect, added to or deducted directly from stockholders' equity.
Held to Maturity securities are carried at amortized cost.
LOANS HELD FOR SALE. Loans held for sale are carried at the lower of cost or
market. Market value is determined in the aggregate.
LOANS. Interest income on simple interest loans is accrued daily on the
principal balance outstanding. Generally, no interest is accrued on loans when
factors indicate collection of interest is doubtful or when the principal or
interest payment becomes 90 days past due. For such loans, previously accrued
but uncollected interest is charged against current earnings, and income is
only recognized to the extent payments are subsequently received. Loan fees
are offset against operating expense to the extent these fees cover the direct
expense of originating loans. Fees in excess of origination costs are deferred
and amortized to income over the related loan period.
ACCOUNTING CHANGES. In May 1993, the Financial Accounting Standards Board
("FASB") issued SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan" and in October 1994 issued SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition Disclosures, an amendment to SFAS No.
114." They require that impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's effective interest rate
or, as a practical expedient, at the loan's observable market price or the fair
market value of the collateral if the loan is collateral dependent. These
statements exclude loans that are currently measured at fair value or at lower
of cost or fair value, leases and certain large groups of smaller balance
homogeneous loans that are collectively measured for impairment. These
statements apply to financial statements for fiscal years beginning after
December 31, 1994. Management believes that implementation of the statements
will not have a material effect on West Coast's reported financial position or
net income.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is based on
management's estimates. Actual losses may vary from current estimates. These
estimates are reviewed periodically and, as adjustments become necessary, they
are reported in earnings in the periods in which they become known. Losses are
charged and recoveries are credited to the allowance.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost, less
accumulated depreciation. The provision for depreciation is computed on the
straight-line method over the estimated useful lives of the related assets.
Improvements are capitalized and depreciated over their estimated useful lives.
Minor repairs, maintenance, and improvements are charged to operations as
incurred. When property is replaced or otherwise disposed of, the cost of such
assets and the related accumulated depreciation are removed from their
respective accounts. Related profit or loss, if any, is recorded in the
Consolidated Statements of Income.
OTHER BORROWINGS. Federal funds purchased and securities sold under agreements
to repurchase generally mature within one to four days from the transaction
date. Other short-term borrowed funds consist of term federal funds purchased
and other such borrowings that mature within 1 to 120 days from the transaction
date, other long-term borrowed funds extend beyond 120 days.
INCOME TAXES. In 1993 West Coast adopted the SFAS No. 109, "Accounting for
Income Taxes." Under the standard income taxes are accounted for using the
asset and liability method. Under this method, a deferred tax asset or
liability is determined based on the enacted tax rates which will be in effect
when the differences between the financial statement carrying amounts and tax
bases of existing assets and liabilities are expected to be reported in
West Coast's income tax returns. The deferred tax provision for the year is
equal to the net change in the deferred tax asset from the beginning to the end
of the year, less amounts applicable to the change in value related to
investments available for sale. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date. The cumulative effect of this change as of January 1, 1993 was $97,163
and is included in the 1993 provision for income taxes.
EARNINGS PER SHARE. Earnings per share computations are based on the weighted
average common stock equivalent shares outstanding during the year. The shares
used in calculating fully diluted earnings per share were 2,519,505, 2,147,707,
and 2,089,871 for December 31, 1994, 1993, and 1992, respectively. The shares
used in calculating earnings per share have been restated to reflect the stock
dividends of 10 percent each, payable on August 27, 1993, and April 8, 1994, as
well as the two-for-one stock split in the form of a 100 percent stock dividend
payable on June 8, 1994.
SUPPLEMENTAL CASH FLOW INFORMATION. For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, amounts due from banks, and federal
funds sold. Generally, federal funds are purchased and sold for one-day
periods.
West Coast paid $4,202,000, $3,473,000, and $4,220,000 for interest in 1994,
1993, and 1992, respectively. Income taxes paid were $1,027,000, $1,090,000,
and $1,033,000 in 1994, 1993, and 1992, respectively.
RECLASSIFICATIONS. Certain reclassification of prior year amounts have been
made to conform to current classifications.
9
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT SECURITIES
AVAILABLE FOR SALE
--------------------------------------------------------
1994 Amortized Unrealized Unrealized
(Dollars in thousands) Cost Gross Gains Gross Losses Fair Value
- ---------------------- --------- ----------- ------------ ----------
U.S. Treasury Securities......................... $10,565 $3 $ 192 $10,376
U.S. Government Agency Securities................ 13,841 1 382 13,460
Corporate Securities............................. - - - -
Mortgage-backed Securities....................... 9,543 4 610 8,937
Obligations of State and Political Subdivisions.. - - - -
Other Securities................................. 1,561 - 4 1,557
------- -- ------ -------
Total.......................................... $35,510 $8 $1,188 $34,330
======= == ====== =======
HELD TO MATURITY
--------------------------------------------------------
1994 Amortized Unrealized Unrealized
(Dollars in thousands) Cost Gross Gains Gross Losses Fair Value
- ---------------------- --------- ----------- ------------ ----------
U.S. Treasury Securities......................... $ - $ - $ - $ -
U.S. Government Agency Securities................ 3,902 9 40 3,871
Corporate Securities............................. 5,304 20 47 5,277
Mortgage-backed Securities....................... - - - -
Obligations of State and Political Subdivisions.. 3,624 28 30 3,622
Other Securities................................. 403 - - 403
------- --- ---- -------
Total.......................................... $13,233 $57 $117 $13,173
======= === ==== =======
AVAILABLE FOR SALE
--------------------------------------------------------
1994 Amortized Unrealized Unrealized
(Dollars in thousands) Cost Gross Gains Gross Losses Fair Value
- ---------------------- --------- ----------- ------------ ----------
U.S. Treasury Securities......................... $ 6,182 $165 $ 2 $ 6,345
U.S. Government Agency Securities................ 6,923 183 21 7,085
Corporate Securities............................. - - - -
Mortgage-backed Securities....................... 7,923 34 64 7,893
Obligations of State and Political Subdivisions.. - - - -
Other Securities................................. 1,460 - - 1,460
------- ---- --- -------
Total.......................................... $22,488 $382 $87 $22,783
======= ==== === =======
HELD TO MATURITY
--------------------------------------------------------
1994 Amortized Unrealized Unrealized
(Dollars in thousands) Cost Gross Gains Gross Losses Fair Value
- ---------------------- --------- ----------- ------------ ----------
U.S. Treasury Securities......................... $ - $ - $- $ -
U.S. Government Agency Securities................ - - - -
Corporate Securities............................. 8,559 297 - 8,856
Mortgage-backed Securities....................... - - - -
Obligations of State and Political Subdivisions.. 5,241 105 3 5,343
Other Securities................................. 733 - 3 730
------- ---- -- -------
Total.......................................... $14,533 $402 $6 $14,929
======= ==== == =======
Gross Gains of $0, $0, and $12,334 and gross losses of $0, $0, and $2,715 were
realized on sales of investment securities in 1994, 1993, and 1992,
respectively. Securities with a fair value of approximately $11,434,718 at
December 31, 1994, were pledged to secure public deposits.
10
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. MATURITIES OF INVESTMENTS
Available for Sale Held to Maturity
1994 ---------------------- ----------------------
(Dollars in thousands) Amortized Amortized
Cost Fair Value Cost Fair Value
--------- ---------- --------- ----------
U.S. Treasury Securities
One Year or Less................................... $ 4,494 $ 4,463 $ - $ -
One Year Through Five Years........................ 6,071 5,913 - -
After Five Through Ten Years....................... - - - -
Due After Ten Years................................ - - - -
------- ------- ------- -------
Total........................................... 10,565 10,376 - -
U.S. Government Agency Securities
One Year or Less................................... 498 499 - -
One Year Through Five Years........................ 13,343 12,961 3,902 3,871
After Five Through Ten Years....................... - - - -
Due After Ten Years................................ - - - -
------- ------- ------- -------
Total........................................... 13,841 13,460 3,902 3,871
Corporate Securities
One Year or Less................................... - - 3,353 3,371
One Year Through Five Years........................ - - 1,951 1,906
After Five Through Ten Years....................... - - - -
Due after Ten Years................................ - - - -
------- ------- ------- -------
Total........................................... - - 5,304 5,277
Obligations of State and Political Subdivisions
One Year or Less................................... - - 625 626
One Year Through Five Years........................ - - 2,994 2,991
After Five Through Ten Years.......................
Due After Ten Years................................ - - 5 5
------- ------- ------- -------
Total........................................... - - 3,624 3,622
Other Securities
One Year or Less................................... - - 227 227
One Year Through Five Years........................ - - 176 176
After Five Through Ten Years....................... - - - -
Due After Ten Years................................ - - - -
------- ------- ------- -------
Total.......................................... - - 403 403
Sub-total...................................... 24,406 23,836 13,233 13,173
Mortgage-backed Securities........................... 9,543 8,937 - -
Equity Investments................................... 1,561 1,557 - -
------- ------- ------- -------
Total Securities............................... $35,510 $34,330 $13,233 $13,173
======= ======= ======= =======
11
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LOANS AND ALLOWANCE FOR LOAN LOSS
The loan portfolio consists of the following:
December 31,
---------------------------
1994 1993
----------- ------------
Commercial Loans..................... $ 16,444,014 $14,575,680
Real Estate - Construction.......... 8,783,393 9,875,395
Real Estate - Mortgage.............. 22,792,168 22,528,597
Real Estate - Commercial............ 38,923,079 36,616,085
Installment and other Consumer...... 16,272,304 13,073,111
------------ -----------
Total Loans...................... 103,214,958 96,668,868
Allowance for Loan Loss............. (1,545,342) (1,424,582)
------------ -----------
Total Loans, Net................. $101,669,616 $95,244,286
============ ===========
The following is an analysis of the changes in the allowance for loan loss:
December 31,
----------------------------------------
1994 1993 1992
---------- --------- ---------
Balance, beginning of period............ $1,424,582 $1,102,504 $ 875,132
Provision for Loan Loss................ 240,000 455,000 360,000
Losses Charged to the Allowance........ (176,618) (144,048) (165,303)
Recoveries Credited to the Allowance... 57,378 11,126 32,675
---------- ---------- ----------
Balance, end of period............ $1,545,342 $1,424,582 $1,102,504
========== ========== ==========
Loans on which the accrual of interest has been discontinued or reduced
amounted to approximately $174,117, $239,202, and $164,096 at December 31,
1994, 1993, and 1992, respectively. Interest income foregone on non-accrual
loans was approximately $5,687, $23,151, and $11,654, in 1994, 1993, and 1992,
respectively.
As of December 31, 1994, The Bank of Newport had loans to persons serving as
directors, officers, and employees, including their spouses, associates, and
related organizations totaling $2,221,037. These loans were made substantially
on the same terms, including interest rates, maturities, and collateral, as
those made to other customers of The Bank of Newport.
The Bank of Newport grants commercial and residential loans to customers
throughout the central Oregon coast. Although The Bank of Newport has a
diversified loan portfolio, a substantial portion of the portfolio belongs to
debtors whose ability to honor their contracts is dependent upon the economy of
the central Oregon coast. The addition of the Business Banking Office in the
Portland area has allowed diversification both in geographic and portfolio mix.
12
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. PREMISES AND EQUIPMENT
Premises and equipment consists of the following:
December 31,
-------------------------
1994 1993
----------- -----------
Land and Buildings............................. $ 3,600,261 $ 2,344,091
Furniture and Equipment........................ 2,348,790 2,143,052
Construction in Progress....................... 180,256 793,824
----------- -----------
6,129,307 5,280,967
Accumulated Depreciation....................... (2,202,019) (2,024,098)
----------- -----------
Total....................................... $ 3,927,288 $ 3,256,869
=========== ===========
Depreciation included in net occupancy and equipment expense amounted to
$307,532, $344,356, and $275,636 for the years ended December 31, 1994, 1993,
and 1992 respectively.
6. BORROWINGS
Short-term borrowings consist of a $7.96 million cash management advance line
for overnight funding from the Federal Home Loan Bank of Seattle. The balance
outstanding at December 31, 1994, was $7,955,000 at a rate of 6.80 percent. In
addition, West Coast had a $300,000 line of credit at prime plus 1 percent with
another financial institution, of which the amount outstanding at December 31,
1994, was $0.
Long-term borrowings consist of two notes. A $10,000,000 note with a balance
of $7,666,667 at December 31, 1994 and a seven-year term and monthly payments,
maturing on April 12, 2000 at a rate of 5.0 percent and a $1,000,000 note with
a balance of $879,032 at December 31, 1994 and a seven-year term and monthly
payments, maturing January 26, 2001 at a rate of 5.4 percent. Principal
payments on long term borrowings are due in 1995 through 1999 in equal amounts
of $1,571,429 annually with a balance of $688,554 due thereafter.
7. INCOME TAXES
The provision for income taxes attributable to income for the last three years
consisted of the following:
Year ended December 31,
--------------------------------------
1994 1993 1992
---------- ---------- ----------
Current
Federal.............................. $ 797,912 $ 845,179 $ 834,574
State................................ 179,838 190,351 186,604
---------- ---------- ----------
977,750 1,035,530 1,021,178
Deferred
Federal.............................. 85,216 (93,123) (167,855)
State................................ 10,928 (19,351) (33,292)
---------- ---------- ----------
96,144 (112,474) (201,147)
Total
Federal.............................. 883,128 752,056 666,719
State................................ 190,766 171,000 153,312
---------- ---------- ----------
Total.............................. $1,073,894 $ 923,056 $ 820,031
========== ========== ==========
13
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES (Continued)
The tax effect of temporary differences that give rise to significant portions
of deferred tax assets and deferred tax liabilities for the last three years
are presented below:
December 31,
----------------------------------
1994 1993 1992
----------------------------------
Deferred Tax Assets:
Allowance for Possible Loan Loss ....... $ 352,568 $306,245 $182,696
Deferred Income ........................ 103,790 252,190 184,107
Net Unrealized Losses on Investments
Available for Sale .................. 452,589 - -
Deferred Liabilities ................... 17,262 23,016 -
Accrued Expenses ....................... 125,070 39,330 6,722
Other .................................. - - 28,255
---------- -------- --------
Total Deferred Tax Assets ........... 1,051,279 620,781 401,780
Deferred Tax Liabilities:
Accumulated Depreciation ............... 130,798 92,458 112,289
Federal Home Loan Bank Stock Dividends.. 162,071 126,358 -
Net Unrealized Gains on Investments
Available for Sale .................. - 113,108 -
---------- -------- --------
Total Deferred Liabilities .......... 292,869 331,924 112,289
---------- -------- --------
Net Deferred Tax Assets ................... $ 758,410 $288,857 $289,491
========== ======== ========
The effective tax rate of the provision for income taxes varies from the
federal income tax statutory rate. The reasons for the variance are as
follows:
Year ended December 31,
-----------------------------------
1994 1993 1992
--------- ---------- --------
Expected Federal Income Tax Provision at 34 Percent ...... $ 998,834 $1,028,456 $771,205
State Income Tax, net of federal income tax effect ....... 128,086 131,884 98,896
Interest on Obligations of State and Political
Subdivisions Exempt from Federal Tax ................... (72,700) (74,228) (59,869)
Income Tax Effect of Adoption of SFAS No. 109 ............ - (97,163) -
Capitalization of Merger Costs ........................... 161,552 - -
Other, net................................................ (141,878) (65,893) 9,799
---------- ---------- --------
Total .............................................. $1,073,894 $ 923,056 $820,031
========== ========== ========
The nature and tax effects of the timing differences reflected in the
provisions for deferred income taxes in 1992 as computed in accordance with
Accounting Principles Board Opinion No. 11 are as follows:
Provision for Loan Loss .......................... $(116,772)
Deferred Loan Fees ............................... (87,230)
Other, net ....................................... 2,855
---------
Total ............................................ $(201,147)
=========
8. CERTIFICATES OF DEPOSITS
Included in certificates of deposit are certificates in denominations of
$100,000 or greater, totaling $9,580,405 and $12,904,682 at December 31, 1994,
and 1993, respectively. Interest expense relating to certificates of deposits
in denominations of $100,000 or greater was $473,001, $391,930, and $512,807
for the years ended December 31, 1994, 1993, and 1992, respectively.
14
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY AND STOCK OPTION PLANS
Authorized capital of West Coast Bancorp includes 5,000,000 shares of Voting
Preferred Stock and 5,000,000 shares of Nonvoting Preferred Stock, both with
$2.50 par value, none of which was issued at December 31, 1994.
On March 15, 1994, the Board of Directors declared a 10 percent stock dividend
and on May 9, 1994, the Board of Directors declared a two-for-one stock split
payable on June 8, 1994, in the form of a 100 percent stock dividend. Par
value remained at $2 per share. The stock split resulted in the issuance of
1,064,823 additional shares of Common Stock from authorized but unissued
shares. The stock split issuance resulted in a transfer of $2,129,646 from
Paid-in Capital to Common Stock, representing the par value of shares issued.
All share and per share amounts have been restated to retroactively reflect the
stock split as well as all previous stock dividends.
West Coast has two stock option plans. Plan I is a non-qualified stock option
plan. Plan II is a qualified incentive stock option plan. Options are either
granted or available for grant until exercised. The option price is determined
by the Board of Directors on the grant date, but cannot be less than the fair
market value of the stock. As of December 31, 1994, outstanding options had
been granted under the plans at an option price of $1.24 to $8.375 per share.
Outstanding options expire within ten years of the grant date.
Plan I Plan II
------- -------
Common Stock Reserved Under the Plan............. 242,000 242,000
Exercised Under the Plan......................... 167,550 90,686
Granted and Outstanding.......................... 70,133 149,232
------- -------
Granted....................................... 237,683 239,918
------- -------
Available for Future Grant....................... 4,317 2,082
======= =======
All options and prices have been adjusted retroactively for a stock split
payable June 8, 1994, and all stock dividends declared.
10. COMMITMENTS AND CONTINGENT LIABILITIES
West Coast and The Bank of Newport lease land and office space under seven
long-term noncancellable operating leases that expire between 1995 and 2010.
At the end of the respective lease terms, West Coast may renew the leases at
fair rental value. Minimum future lease payments under these leases and other
operating leases are:
Minimum Future
Year Lease Payment
---- --------------
1995.................................... $ 224,091
1996.................................... 247,764
1997.................................... 195,413
1998.................................... 199,530
1999.................................... 202,936
Thereafter.............................. 537,236
----------
Total................................. $1,606,970
==========
Rental expense for all operating leases was $115,032, $105,678, and $91,868,
for the years ended December 31, 1994, 1993, and 1992, respectively.
15
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
11. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank of Newport is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the Consolidated Balance Sheets.
The Bank of Newport's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual notional amount
of those instruments. The Bank of Newport uses the same credit policies in
making commitments and conditional obligations as it does for on-balance sheet
instruments. Management does not anticipate any material loss as a result of
these transactions.
Contract or
(Dollars in thousands) Notional Amount
- ---------------------- ---------------
Financial Instruments Whose Contract Amounts Represent Credit Risk:
Commitments to Extend Credit
Real Estate Secured for Commercial Construction or Land Development....... $ 13,037,174
Revolving Open-end Lines Secured by 1-4 Family Residential Properties..... 2,942,558
Credit Card Lines......................................................... 4,738,876
Other..................................................................... 1,497,367
Standby letters of credit and financial guarantees........................... 201,268
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Many of the commitments may expire without
being drawn upon, therefore the total commitment amounts do not necessarily
represent future cash requirements. The Bank of Newport evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by The Bank of Newport upon extension of credit,
is based on management's credit evaluation of the customer. Collateral held
varies, but may include accounts receivable, inventory, property, plant and
equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by The Bank of
Newport to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.
12. BALANCES WITH THE FEDERAL RESERVE BANK
The Bank of Newport is required to maintain cash reserves or deposits with the
Federal Reserve Bank equal to a percentage of its reservable deposits. Average
required reserves were $993,000 during 1994.
13. EMPLOYEE BENEFIT PLANS
In 1987, West Coast established an employee benefit plan pursuant to section
401(k) of the Internal Revenue Code for certain qualified employees.
Contributions made to the 401(k) plan are based on percentages of employees'
salaries. West Coast matches 50 percent of the employee's contribution up to a
maximum of 6 percent of the employee's salary. Expenses under the Plan totaled
$49,973, $26,599, and $68,945 for 1994, 1993, and 1992, respectively.
In 1991, West Coast established a Non-qualified Deferred Compensation Trust
Plan for Directors. In addition, West Coast has accrued deferred compensation
for former employees who have retired. Expenses relating to these plans and
the deferred compensation were $48,984, $39,852, and $39,324 for 1994, 1993,
and 1992, respectively.
16
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. CAPITAL NOTES
During 1991, West Coast sold $850,000 in Capital Notes to stockholders of
West Coast paying interest at the rate of 10 percent per annum. Interest was
paid quarterly with the entire principal balance due and payable in full on
December 31, 2005. The holders of the Notes had the right at any time prior to
payment of the Notes, by West Coast, to convert the outstanding principal
balance of the Notes, in whole or in part, into shares of Common Stock at the
rate of one share of Common Stock for each $3.00 (adjusted for stock dividends
and the stock split) of unpaid principal under the Notes.
During 1992, West Coast entered into an agreement with the purchasers of the
Capital Notes and redeemed the notes at a price of 110 percent of the principal
amount.
15. PARENT COMPANY ONLY FINANCIAL DATA
The following sets forth the condensed financial information of West Coast
Bancorp on a stand-alone basis:
Statement of Condition
(Unconsolidated)
December 31,
----------------------------
1994 1993
----------- -----------
Assets
Cash and Due from the Subsidiary Bank................... $ 4,548,265 $ 12,228
Cash and Due from Other Banks........................... 49 185
Advances from Subsidiary................................ 91,023 257,998
Investment in the Subsidiary............................ 12,884,776 11,428,413
Other Assets............................................ 147,591 35,367
----------- -----------
Total Assets......................................... $17,671,704 $11,734,191
=========== ===========
Liabilities and Stockholders' Equity
Balances Due to Subsidiary.............................. $ 11,073 $ 6,445
Short-term Borrowings................................... - 95,000
Other Liabilities....................................... 529,202 142,740
----------- -----------
Total Liabilities..................................... 540,275 244,185
Stockholders' Equity.................................... 17,131,429 11,490,006
----------- -----------
Total Liabilities and Stockholders' Equity............ $17,671,704 $11,734,191
=========== ===========
17
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. PARENT COMPANY ONLY FINANCIAL DATA (Continued)
Statement of Income
(Unconsolidated)
Year Ended December 31,
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
Income
Cash Dividends from Subsidiary............................ $ 90,000 $ 550,000 $ 560,000
Other Income from the Subsidiary.......................... 163,682 95,233 156,509
Other Income.............................................. 170,787 119,710 40,640
----------- ----------- -----------
Total Income........................................... 424,469 764,943 757,149
Expenses
Interest Expense.......................................... 2,311 9,566 172,675
Other Expense............................................. 1,116,690 840,344 845,972
----------- ----------- -----------
Total Expense.......................................... 1,119,001 849,910 1,018,647
----------- ----------- -----------
Loss Before Income Taxes and Equity in
Undistributed Earnings of the Bank........................ (694,532) (84,967) (261,498)
Income Tax Benefit.......................................... 192,859 359,715 314,283
----------- ----------- -----------
Income (Loss) Before Equity in Undistributed
Earnings of the Bank...................................... (501,673) 274,748 52,785
Equity in Undistributed Earnings of the Bank................ 2,365,527 1,827,068 1,395,433
----------- ----------- -----------
Net Income................................................ $ 1,863,854 $ 2,101,816 $ 1,448,218
=========== =========== ===========
Statement of Cash Flows
(Unconsolidated)
Year Ended December 31,
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................. $ 1,863,854 $ 2,101,816 $ 1,448,218
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Undistributed Earnings of Subsidiary...................... (2,365,527) (1,827,068) (1,395,433)
Decrease (Increase) in Advances to Subsidiary............. 166,975 (209,715) 168,210
(Increase) Decrease in Other Assets....................... (112,224) 18,066 121,027
Increase (Decrease) in Balances Due to Subsidiary......... 4,628 (5,098) 11,543
Increase (Decrease) in Other Liabilities.................. 386,462 (72) (41,332)
----------- ----------- -----------
Net Cash Provided by (Used for) Operating Activities... (55,832) 77,929 312,233
CASH FROM FINANCING ACTIVITIES:
Net Payments on Borrowings.................................. (95,000) (5,000) (750,000)
Proceeds from Issuance of Common Stock...................... 5,076,364 204,183 194,840
Dividends Paid and Cash Paid for Fractional Shares.......... (389,631) (283,692) (198,533)
----------- ----------- -----------
Net Cash Provided by (Used for) Financing Activities... 4,591,733 (84,509) (753,693)
Net Increase (Decrease) in Cash and Cash Equivalents........ 4,535,901 (6,580) (441,460)
Cash and Cash Equivalents at Beginning of Year.............. 12,413 18,993 460,453
----------- ----------- -----------
Cash and Cash Equivalents at End of Year.................... $ 4,548,314 $ 12,413 $ 18,993
=========== =========== ===========
18
WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. BUSINESS COMBINATIONS
On October 24, 1994, West Coast entered into an Agreement and Plan of Merger,
as amended December 12, 1994, (the "Merger"), with Commercial Bancorp of Salem,
Oregon. The Merger provides that shareholders of West Coast will receive, for
each share of West Coast Common Stock, .60 shares of common stock in the
combined company.
Completion of the Merger was subject to shareholder and regulatory approvals
and closed on February 28, 1995. The Merger will be accounted for as a
pooling-of-interests under generally accepted accounting principles.
Commercial Bancorp is a bank holding company headquartered in Salem, Oregon.
Its principal business activities are conducted through its bank subsidiaries,
The Commercial Bank and Valley Commercial Bank, both of which are Oregon state-
chartered, full-service commercial banks whose deposits are insured by the
Federal Deposit Insurance Corporation ("FDIC"). At December 31, 1994,
Commercial's bank subsidiaries had facilities in a total of 11 cities and towns
in Oregon, operating a total of 14 full-service branches and two limited
service branches. The primary service area of Commercial's bank subsidiaries
extends from the Salem, Oregon, area to the southern and western suburbs of
Portland, Oregon. Much of the industry in this area is agriculturally related,
although there are also various other light manufacturing industries and
service businesses. Salem is the capital of Oregon, and much of its economy is
dependant upon the public sector.
Commercial Bancorp Condensed Consolidated Summary of Operations
Year Ended December 31,
------------------------
(unaudited)
(Dollars in thousands) 1994 1993
- ---------------------- ------- -------
Interest Income.................................... $21,633 $19,540
Interest Expense................................... 5,538 5,630
------- -------
Net Interest Income.............................. 16,095 13,910
Provision for Loan Losses.......................... 300 325
------- -------
Net Interest Income After Provision
for Loan Loss.................................. 15,795 13,585
Noninterest Income................................. 3,850 4,292
Noninterest Expense................................ 14,168 12,582
------- -------
Income Before Income Taxes....................... 5,477 5,295
Provision for Income Taxes......................... 1,464 1,344
------- -------
Net Income................................... $ 4,013 $ 3,951
======= =======
Earnings per Common and Common Equivalent Share.... $ 1.53 $ 1.51
======= =======
Commercial Bancorp Condensed Consolidated Balance Sheet Data at December 31,
1994.
(Dollars in thousands) (unaudited)
- ---------------------- -----------
Loans............................................................ $176,893
Allowance for Loan Losses........................................ 2,905
Total Assets..................................................... 282,579
Deposits......................................................... 246,654
Total Stockholders' Equity....................................... 27,007
The historical and financial information of Commercial Bancorp presented above
is for informational purposes only.
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of West Coast Bancorp:
We have audited the accompanying consolidated balance sheets of West Coast
Bancorp (an Oregon corporation) and subsidiary as of December 31, 1994, and
1993, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
West Coast Bancorp's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West Coast Bancorp and
subsidiary as of December 31, 1994, and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Portland, Oregon,
January 30, 1995
20
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give
effect to the Merger of Commercial Bancorp (Commercial) and West Coast Bancorp
(West Coast) on a pooling-of-interests basis. The unaudited pro forma combined
balance sheet as of the end of the most recent period is presented for December
31, 1994. The unaudited pro forma combined statements of income assume the
Merger was consummated as of the beginning of the first period presented.
The unaudited pro forma statements of income are not necessarily
indicative of operating results which would have been achieved had the Merger
been consummated as of the beginning of the first period presented and should
not be construed as representative of future operations.
21
WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Year Ended December 31, 1994
(Dollars in thousands) WEST COAST COMMERCIAL PRO-FORMA PRO-FORMA
ADJUSTMENT COMBINED
ASSETS
Cash and cash equivalents:
Cash and due from banks . . . . . . . . . . . $ 4,228 $ 20,282 $ 0 $ 24,510
Interest-bearing deposits in other banks . . 90 3,029 0 3,119
Federal funds sold . . . . . . . . . . . . . 0 2,474 0 2,474
-------- -------- ------- --------
Total cash and cash equivalents . . . . . . 4,318 25,785 0 30,103
Investment securities:
Investments available for sale . . . . . . . 34,330 27,497 (849) 60,978
Investments held to maturity . . . . . . . . 13,233 41,811 0 55,044
-------- -------- ------- --------
Total investment securities . . . . . . . 47,563 69,308 (849) 116,022
Loans held for sale . . . . . . . . . . . . . . 0 0 0 0
Loans . . . . . . . . . . . . . . . . . . . . 103,215 176,893 0 280,108
Allowance for loan loss . . . . . . . . . . . (1,545) (2,905) (4,450)
-------- -------- ------- --------
Loans, net . . . . . . . . . . . . . . . . . 101,670 173,988 0 275,658
Premises and equipment, net . . . . . . . . . . 3,927 9,109 0 13,036
Intangible assets . . . . . . . . . . . . . . . 137 232 0 369
Other assets . . . . . . . . . . . . . . . . . 3,038 4,157 0 7,195
-------- -------- ------- --------
Total assets . . . . . . . . . . . . . . . $160,653 $282,579 ($849) $442,383
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand . . . . . . . . . . . . . . . . . . . $ 18,830 $ 51,419 $ 0 $ 70,249
Savings and interest-bearing demand . . . . . 60,375 148,135 0 208,510
Certificates of deposits . . . . . . . . . . 45,492 47,100 0 92,592
-------- -------- ------- --------
Total deposits . . . . . . . . . . . . . . 124,697 246,654 0 371,351
Short-term borrowings:
Federal funds purchased . . . . . . . . . . . 860 6,000 0 6,860
Other short-term borrowings . . . . . . . . . 7,955 0 0 7,955
-------- -------- ------- --------
Total short-term borrowings . . . . . . . . 8,815 6,000 0 14,815
Other liabilities . . . . . . . . . . . . . . . 1,464 2,918 (5) 4,377
Long-term borrowings . . . . . . . . . . . . . 8,545 0 0 8,545
-------- -------- ------- --------
Total liabilities . . . . . . . . . . . . . 143,521 255,572 (5) 399,088
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Common Stock . . . . . . . . . . . . . . . . 5,642 3,277 (3,596) 5,323
Additional paid-in capital . . . . . . . . . . 7,904 13,783 2,834 24,521
Retained earnings . . . . . . . . . . . . . . . 4,313 10,407 (78) 14,642
Net unrealized (loss) gain on investments
available for sale . . . . . . . . . . . . . (727) (460) (4) (1,191)
-------- -------- ------- --------
Stockholders' equity . . . . . . . . . . . 17,132 27,007 (844) 43,295
-------- -------- ------- --------
Total liabilities and stockholders' equity $160,653 $282,579 ($849) $442,383
======== ======== ======= ========
22
WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1994
WEST COAST COMMERCIAL PRO-FORMA PRO-FORMA
(Dollars in thousands, except per share data) ADJUSTMENT COMBINED
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . $ 9,828 $17,089 $ 0 $26,917
Interest on taxable investment securities . . . . 2,318 1,798 (16) 4,100
Interest on non-taxable investment securities . . 219 2,396 0 2,615
Interest from other banks . . . . . . . . . . . . 64 0 0 64
Interest on federal funds sold . . . . . . . . . 5 258 0 263
------- ------- ---- -------
Total interest income . . . . . . . . . . . . . 12,434 21,541 (16) 33,959
INTEREST EXPENSE
Savings and interest-bearing demand . . . . . . . 1,515 4,035 0 5,550
Certificates of deposit . . . . . . . . . . . . . 1,973 1,454 0 3,427
Short-term borrowings . . . . . . . . . . . . . . 109 42 0 151
Long-term borrowings . . . . . . . . . . . . . . 447 0 0 447
------- ------- ---- -------
Total interest expense . . . . . . . . . . . . 4,044 5,531 0 9,575
------- ------- ---- -------
NET INTEREST INCOME . . . . . . . . . . . . . . . 8,390 16,010 (16) 24,384
PROVISION FOR LOAN LOSSES . . . . . . . . . . . 240 300 0 540
------- ------- ---- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES . . . . . . . . . . . 8,150 15,710 (16) 23,844
------- ------- ---- -------
NON-INTEREST INCOME
Service charges on deposit accounts . . . . . . . 652 1,479 0 2,131
Other service charges, commissions and fees . . . 1,034 534 0 1,568
Trust revenue . . . . . . . . . . . . . . . . . . 0 1,206 0 1,206
Gains on Sales of Loans . . . . . . . . . . . . . 1,010 0 0 1,010
Loan servicing fees . . . . . . . . . . . . . . . 151 299 0 450
Other . . . . . . . . . . . . . . . . . . . . . . 17 542 0 559
Net gains on sales of securities . . . . . . . . 0 (48) 0 (48)
------- ------- ---- -------
Total non-interest income . . . . . . . . . . . 2,864 4,012 0 6,876
NON-INTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . 3,975 7,781 0 11,756
Equipment . . . . . . . . . . . . . . . . . . . . 520 1,135 0 1,655
Occupancy . . . . . . . . . . . . . . . . . . . . 444 1,082 0 1,526
Professional fees . . . . . . . . . . . . . . . . 897 954 0 1,851
FDIC insurance . . . . . . . . . . . . . . . . . 263 538 0 801
Marketing . . . . . . . . . . . . . . . . . . . . 185 459 0 644
ATM and Bankcard . . . . . . . . . . . . . . . . 490 153 0 643
Printing and Office supplies . . . . . . . . . . 228 276 0 504
Communications . . . . . . . . . . . . . . . . . 194 205 0 399
Other non-interest expense . . . . . . . . . . . 880 1,662 0 2,542
------- ------- ---- -------
Total non-interest expense . . . . . . . . . . 8,076 14,245 0 22,321
INCOME BEFORE INCOME TAXES . . . . . . . . . . . 2,938 5,477 (16) 8,399
------- ------- ---- -------
PROVISION FOR INCOME TAXES . . . . . . . . . . . 1,074 1,464 (6) 2,532
NET INCOME . . . . . . . . . . . . . . . . . . . $ 1,864 $ 4,013 ($10) $ 5,867
======= ======= ==== =======
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . 2,520,000 2,624,000 (62,000) 4,074,000
EARNINGS PER COMMON SHARE . . . . . . . . . . . . $.74 $1.53 ($.16) $1.44
23
WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1993
WEST COAST COMMERCIAL PRO-FORMA PRO-FORMA
(Dollars in thousands, except per share data) ADJUSTMENT COMBINED
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . $ 8,798 $15,129 $ 0 $23,927
Interest on taxable investment securities . . . . 2,813 1,950 (4) 4,759
Interest on non-taxable investment securities . . 244 2,256 0 2,500
Interest from other banks . . . . . . . . . . . . 30 0 0 30
Interest on federal funds sold . . . . . . . . . 6 326 0 332
------- ------- ----- -------
Total interest income . . . . . . . . . . . . 11,891 19,661 (4) 31,548
INTEREST EXPENSE
Savings and interest-bearing demand . . . . . . . 1,148 3,674 0 4,822
Certificates of deposit . . . . . . . . . . . . . 2,052 1,955 0 4,007
Short-term borrowings . . . . . . . . . . . . . . 101 1 0 102
Long-term borrowings . . . . . . . . . . . . . . 344 0 0 344
-------- ------- ----- -------
Total interest expense . . . . . . . . . . . . 3,645 5,630 0 9,275
-------- ------- ----- -------
NET INTEREST INCOME . . . . . . . . . . . . . . . 8,246 14,031 (4) 22,273
PROVISION FOR LOAN LOSSES . . . . . . . . . . . 455 325 0 780
-------- ------- ----- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES . . . . . . . . . . . 7,791 13,706 (4) 21,493
-------- ------- ----- -------
NON-INTEREST INCOME
Service charges on deposit accounts . . . . . . . 597 1,593 0 2,190
Other service charges, commissions and fees . . . 688 467 0 1,155
Trust revenue . . . . . . . . . . . . . . . . . . 0 1,078 0 1,078
Gains on Sales of Loans . . . . . . . . . . . . . 689 0 0 689
Loan servicing fees . . . . . . . . . . . . . . . 41 282 0 323
Other . . . . . . . . . . . . . . . . . . . . . . 16 733 0 749
Net gains on sales of securities . . . . . . . . 0 76 0 76
------- ------- ----- -------
Total non-interest income . . . . . . . . . . . 2,031 4,229 0 6,260
NON-INTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . 3,234 7,385 0 10,619
Equipment . . . . . . . . . . . . . . . . . . . . 534 971 0 1,505
Occupancy . . . . . . . . . . . . . . . . . . . . 384 930 0 1,314
Professional fees . . . . . . . . . . . . . . . . 794 472 0 1,266
FDIC insurance . . . . . . . . . . . . . . . . . 262 481 0 743
Marketing . . . . . . . . . . . . . . . . . . . . 202 356 0 558
ATM and Bankcard . . . . . . . . . . . . . . . . 383 399 0 782
Printing and Office supplies . . . . . . . . . . 211 298 0 509
Communications . . . . . . . . . . . . . . . . . 160 186 0 346
Other non-interest expense . . . . . . . . . . . 634 1,162 0 1,796
------- ------- ----- -------
Total non-interest expense . . . . . . . . . . 6,798 12,640 0 19,438
INCOME BEFORE INCOME TAXES . . . . . . . . . . . 3,024 5,295 (4) 8,315
------- ------- ----- -------
PROVISION FOR INCOME TAXES . . . . . . . . . . . 923 1,344 (1) 2,266
NET INCOME . . . . . . . . . . . . . . . . . . . $ 2,101 $ 3,951 ($ 3) $ 6,049
======= ======= ===== =======
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . 2,148,000 2,623,000 (15,000) 3,897,000
EARNINGS PER COMMON . . . . . . . . . . . . . . $.98 $1.51 ($.20) $1.55
24
WEST COAST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1992
WEST COAST COMMERCIAL PRO-FORMA PRO-FORMA
(Dollars in thousands, except per share data) ADJUSTMENT COMBINED
INTEREST INCOME
Interest and fees on loans . . . . . . . . . $ 7,490 $15,471 $0 $22,961
Interest on taxable investment securities . . 3,165 1,976 0 5,141
Interest on non-taxable investment securities 200 1,865 0 2,065
Interest from other banks . . . . . . . . . . 31 0 0 31
Interest on federal funds sold . . . . . . . 20 235 0 255
------- ------- ------ -------
Total interest income . . . . . . . . . . . 10,906 19,547 0 30,453
INTEREST EXPENSE
Savings and interest-bearing demand . . . . . 1,443 3,323 0 4,766
Certificates of deposit . . . . . . . . . . . 2,428 3,295 0 5,723
Short-term borrowings . . . . . . . . . . . . 43 15 0 58
Long-term borrowings . . . . . . . . . . . . 171 0 0 171
------- ------- ------ -------
Total interest expense . . . . . . . . . . 4,085 6,633 0 10,718
------- ------- ------ -------
NET INTEREST INCOME . . . . . . . . . . . . . 6,821 12,914 0 19,735
PROVISION FOR LOAN LOSSES . . . . . . . . . 360 832 0 1,192
------- ------- ------ -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES . . . . . . . . . 6,461 12,082 0 18,543
------- ------- ------ -------
NON-INTEREST INCOME
Service charges on deposit accounts . . . . . 486 1,550 0 2,036
Other service charges, commissions and fees . 572 329 0 901
Trust revenue . . . . . . . . . . . . . . . . 0 776 0 776
Gains on Sales of Loans . . . . . . . . . . . 361 0 0 361
Loan servicing fees . . . . . . . . . . . . . 0 249 0 249
Other . . . . . . . . . . . . . . . . . . . . 24 943 0 967
Net gains on sales of securities . . . . . . 10 45 0 55
------- ------- ------ -------
Total non-interest income . . . . . . . . . 1,453 3,892 0 5,345
NON-INTEREST EXPENSE
Salaries and employee benefits . . . . . . . 2,597 6,818 0 9,415
Equipment . . . . . . . . . . . . . . . . . . 445 1,010 0 1,455
Occupancy . . . . . . . . . . . . . . . . . . 305 883 0 1,188
Professional fees . . . . . . . . . . . . . . 620 501 0 1,121
FDIC insurance . . . . . . . . . . . . . . . 241 461 0 702
Marketing . . . . . . . . . . . . . . . . . . 119 276 0 395
ATM and Bankcard . . . . . . . . . . . . . . 297 150 0 447
Printing and Office supplies . . . . . . . . 140 291 0 431
Communications . . . . . . . . . . . . . . . 140 168 0 308
Other non-interest expense . . . . . . . . . 742 1,696 0 2,438
------- ------- ------ -------
Total non-interest expense . . . . . . . . 5,646 12,254 0 17,900
INCOME BEFORE INCOME TAXES . . . . . . . . . 2,268 3,720 0 5,988
------- ------- ------ -------
PROVISION FOR INCOME TAXES . . . . . . . . . 820 854 0 1,674
NET INCOME . . . . . . . . . . . . . . . . . $ 1,448 $ 2,866 $0 $ 4,314
======= ======= ====== =======
AVERAGE COMMON SHARES OUTSTANDING . . . . . . 2,090,000 2,621,000 - 3,875,000
EARNINGS PER COMMON SHARE . . . . . . . . . . $.69 $1.09 - $1.11
25
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. The unaudited pro forma combined balance sheet reflects the issuance
of 1,692,000 shares of Combined Corporation Common Stock using the
exchange ratio of 0.60, derived by using the outstanding shares of
West Coast Common Stock. A pro forma adjustment of $3,526,000 to
common stock and capital surplus is necessary to reflect the
difference between issuance of the 1,692,000 shares of Combined
Corporation Common Stock with an aggregate stated value of $2,116,000
and the par value of West Coast Common Stock that will be canceled of
$5,642,000. A pro forma adjustment also was made to give effect to
the cancellation of the 102,740 shares of West Coast Common Stock held
by Commercial using Commercial's recorded value of $849,000 at
December 31, 1994 resulting in the elimination of unrealized gain of
$4,000. Additionally, $16,000, $4,000, and 0 were eliminated for
1994, 1993 and 1992 respectively from dividend income for funds
received on the West Coast common stock held by Commercial. $5,000,
$1,000 and 0 for 1994, 1993 and 1992 were eliminated from tax expense
and accrued taxes for the tax effect of the dividends received. There
were no other significant pro forma adjustments made to the historical
balance sheets or statements of income of Commercial and West Coast to
arrive at the unaudited pro forma combined balance sheets and
unaudited pro forma combined statements of income. Total costs
incurred by Commercial and West Coast in connection with the Merger
were $950,000. These costs, relating to legal, accounting, printing,
and other expenses, were charged to expenses of the respective
companies in the periods incurred.
2. Pro forma weighted average shares outstanding for each of the three
years in the period ended December 31, 1994, reflect the issuance of
0.60 shares of Combined Common Stock for each share of West Coast
Common Stock.
3. The pro forma combined financial statements do not reflect the merger
of Great Western Bank which occurred on March 30, 1995, into the
Combined Company as the size of the transaction is insignificant to
the operations of the Combined Corporation.