--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ________.
Commission File Number: 33-41102
SILICON VALLEY BANCSHARES
(Exact name of Registrant as specified in its charter)
California 94-2856336
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3003 Tasman Drive 95054
Santa Clara, California (Zip Code)
(Address of principal executive offices)
(408) 383-5282
(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 ____
At July 31, 1995, 8,828,561 shares of the Registrant's Common Stock
(no par value) were outstanding.
--------------------------------------------------------------------------------
This Report Contains a Total of 23 Pages
SILICON VALLEY BANCSHARES
FORM 10-Q
JUNE 30, 1995
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1 SILICON VALLEY BANCSHARES INTERIM CONSOLIDATED
------ FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS 3
CONDENSED INCOME STATEMENTS 4
CONDENSED STATEMENTS OF CASH FLOWS 5
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
---------------------------
ITEM 1 LEGAL PROCEEDINGS 21
------
ITEM 2 CHANGES IN SECURITIES 21
------
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 21
------
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
------ HOLDERS 21
ITEM 5 OTHER INFORMATION 22
------
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 22
------
SIGNATURE 23
2
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1
------
SILICON VALLEY BANCSHARES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
CONDENSED BALANCE SHEETS
--------------------------------------------------------------------------------
JUNE 30, December 31, June 30,
1995 1994 1994
(Dollars in thousands) (Unaudited) (Unaudited)
--------------------------------------------------------------------------------------------------
ASSETS:
Cash and Due from Banks $ 119,619 $ 139,792 $ 94,592
Federal Funds Sold and Securities Purchased Under
Agreements to Resell 238,128 150,057 37,739
Investment Securities:
At Fair Market Value 133,447 148,703 181,740
At Cost 7,019 7,786 8,252
Loans:
Commercial 574,857 616,652 510,373
Real Estate Construction 11,769 10,674 10,338
Real Estate Term 58,960 59,120 54,279
Consumer and Other 16,881 21,017 23,521
-------------------------------------------------------------------------------------------------
Gross Loans 662,467 707,463 598,511
Unearned Income on Loans (3,169) (3,654) (3,894)
-------------------------------------------------------------------------------------------------
Loans, Net of Unearned Income 659,298 703,809 594,617
Allowance for Loan Losses (22,500) (20,000) (25,000)
-------------------------------------------------------------------------------------------------
Net Loans 636,798 683,809 569,617
Premises and Equipment 4,351 2,221 2,512
Other Real Estate Owned 5,133 7,089 8,145
Accrued Interest Receivable and Other Assets 29,038 22,082 22,196
-------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,173,533 $1,161,539 $924,792
-------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Noninterest-Bearing Demand Deposits $ 391,138 $ 401,455 $325,029
Money Market, NOW and Savings Deposits 619,008 585,171 454,770
Time Deposits 60,473 88,747 65,203
-------------------------------------------------------------------------------------------------
Total Deposits 1,070,620 1,075,373 845,003
Other Liabilities 10,668 8,910 8,221
-------------------------------------------------------------------------------------------------
Total Liabilities 1,081,288 1,084,282 853,223
-------------------------------------------------------------------------------------------------
Shareholders' Equity:
Preferred Stock, No Par Value:
20,000,000 Shares Authorized;
None Outstanding
Common Stock, No Par Value:
30,000,000 Shares Authorized;
8,818,528 Shares Outstanding at June 30, 1995;
8,509,194 Shares Outstanding at December 31, 1994;
8,366,930 Shares Outstanding at June 30, 1994. 58,282 54,068 52,763
Retained Earnings 34,963 27,702 22,611
Net Unrealized Loss on Available-for-Sale Investments (765) (4,159) (3,360)
Unearned Compensation (234) (355) (445)
-------------------------------------------------------------------------------------------------
Total Shareholders' Equity 92,246 77,257 71,569
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,173,533 $1,161,539 $924,792
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
See notes to interim consolidated financial statements.
3
SILICON VALLEY BANCSHARES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
CONDENSED INCOME STATEMENTS
--------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1995 1994 1995 1994
(Dollars in thousands, except per share amounts) (UNAUDITED) (Unaudited) (UNAUDITED) (Unaudited)
--------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
Loans, including Fees $19,999 $14,144 $40,178 $27,355
Investment Securities:
Taxable 2,250 3,120 4,481 6,035
Non-Taxable 117 136 239 275
Other 1,937 108 3,413 797
--------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 24,303 17,508 48,311 34,462
--------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 5,936 3,190 11,780 6,411
Other Borrowings -- 19 -- 19
--------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 5,936 3,209 11,780 6,431
--------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 18,366 14,299 36,531 28,031
Provision for Loan Losses 1,406 1,055 2,761 1,692
--------------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 16,960 13,244 33,770 26,339
--------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Disposition of Client Warrants 1,578 779 1,803 1,866
Letter of Credit and Foreign Exchange Income 756 569 1,461 1,036
Deposit Service Charges 333 475 685 781
Investment Losses (348) (897) (770) (897)
Other 162 130 280 263
--------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 2,481 1,056 3,459 3,049
--------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Compensation and Benefits 6,767 5,484 13,857 11,697
Professional Services 1,626 1,026 2,589 1,757
Occupancy 715 601 1,647 1,124
Furniture and Equipment 675 295 1,205 685
FDIC Deposit Insurance 598 609 1,196 1,219
Data Processing Services 223 346 552 610
Corporate Legal Expenses and Litigation 239 472 392 1,210
Client Services 44 321 257 608
Cost of Other Real Estate Owned 20 72 15 1,304
Other 1,508 1,129 2,773 2,182
--------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense 12,416 10,356 24,483 22,397
--------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 7,026 3,944 12,746 6,992
INCOME TAX EXPENSE 3,046 1,703 5,485 3,017
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 3,980 $ 2,241 $ 7,261 $ 3,975
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.44 $ 0.26 $ 0.81 $ 0.47
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
See notes to interim consolidated financial statements.
4
SILICON VALLEY BANCSHARES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
Six Months Ended
June 30,
-------------------------
1995 1994
(Dollars in thousands) (UNAUDITED) (Unaudited)
--------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS WERE PROVIDED BY (APPLIED TO):
OPERATING ACTIVITIES:
Net Income $ 7,261 $ 3,975
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 2,761 1,692
Provision for Valuation Adjustments on
Other Real Estate Owned -- 794
Depreciation and Amortization 1,193 476
(Increase) Decrease in Accrued Interest Receivable 956 (181)
(Increase) Decrease in Accounts Receivable (10,450) (662)
Increase (Decrease) in Accrued Interest Payable (36) 39
Increase (Decrease) in Deferred Loan Fees (485) 418
Gain on Sales of Other Real Estate Owned (124) (162)
Net Loss on Sales of Investment Securities 770 897
Other, Net 1,324 1,072
--------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 3,170 8,358
--------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from Maturities, Paydowns and
Sales of Investment Securities 53,988 190,469
Purchases of Investment Securities (32,333) (124,839)
Net (Increase) Decrease in Loans 44,735 (41,512)
Net Proceeds from Sales of Other Real Estate Owned 2,079 14,878
Capital Asset Expenditures (3,323) (651)
--------------------------------------------------------------------------------------------------
Net Cash Provided by Investing Activities 65,146 38,345
--------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net Decrease in Deposits (4,753) (69,956)
Proceeds from Issuance of Common Stock, Net of Issuance Costs 4,335 608
--------------------------------------------------------------------------------------------------
Net Cash Applied to Financing Activities (418) (69,348)
--------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 67,898 (22,645)
Cash and Cash Equivalents at January 1, 289,849 154,976
--------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at June 30, $357,747 $132,331
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
OTHER CASH FLOW INFORMATION:
Interest Paid $ 11,816 $ 6,392
Income Taxes Paid $ 5,318 $ 4,275
--------------------------------------------------------------------------------------------------
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Transfer of Loans to Other Real Estate Owned $ -- $ 2,601
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
See notes to interim consolidated financial statements.
5
SILICON VALLEY BANCSHARES
-------------------------
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accounting and financial reporting policies of Silicon Valley
Bancshares (the "Company") and its subsidiaries conform with generally
accepted accounting principles and prevailing practices within the banking
industry.
The interim consolidated financial statements include the accounts of the
Company and those of its wholly-owned subsidiaries, Silicon Valley Bank
(the "Bank") and SVB Leasing Company (inactive). The revenue, expenses,
assets and liabilities of the subsidiaries are included in the respective
line items in the interim consolidated financial statements after
elimination of intercompany accounts and transactions.
In the opinion of Management, the interim consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position
at June 30, 1995, December 31, 1994, and June 30, 1994, the results of its
operations for the three and six month periods ended June 30, 1995 and June
30, 1994, and the results of its cash flows for the six month periods ended
June 30, 1995 and June 30, 1994.
The December 31, 1994 interim consolidated financial statements were
derived from audited financial statements, and certain information and
footnote disclosures normally presented in financial statements prepared
in accordance with generally accepted accounting principles have been
omitted. These interim consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's 1994 Annual Report to Shareholders. The results
of operations for the three and six month periods ended June 30, 1995 may
not necessarily be indicative of the operating results for the full year.
Certain reclassifications have been made to the Company's 1994 consolidated
financial statements to conform to the 1995 presentations. Such
reclassifications had no effect on the results of operations or
shareholders' equity.
Amounts presented in tables throughout this report have been rounded to the
nearest thousand. Totals or subtotals may appear to differ slightly due to
the effects of rounding.
Cash and cash equivalents as reported in the condensed statements of cash
flows include cash on hand, cash balances due from banks, federal funds
sold and securities purchased under agreements to resell.
2. NET INCOME PER SHARE COMPUTATION
Net income per common and common equivalent share is calculated using
weighted average shares, including the dilutive effect of stock options
outstanding during the
6
period. Weighted average shares totaled: 9,033,164 and 8,944,291 for the
three and six month periods ended June 30, 1995, and 8,523,244 and
8,498,841 for the three and six month periods ended June 30, 1994,
respectively.
3. FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Federal funds sold and securities purchased under agreements to resell
includes interest-bearing deposits in other financial institutions of
$128,000, $57,000, and $39,000 at June 30, 1995, December 31, 1994, and
June 30, 1994, respectively.
4. INVESTMENT SECURITIES
The fair market value of investment securities classified as
"held-to-maturity" and recorded at historical cost, adjusted for the
amortization of premium or the accretion of discount where appropriate, was
$7,413,000 at June 30, 1995, $8,050,000 at December 31, 1994, and
$8,671,000 at June 30, 1994.
5. NEW ACCOUNTING PRONOUNCEMENTS
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 114, "Accounting by Creditors
for Impairment of a Loan." This standard, including its amendment by SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures," was adopted by the Company on January 1,
1995. SFAS No. 114 requires the Company to measure impairment of a loan
based upon the present value of expected future cash flows discounted at
the loan's effective interest rate, except that as a practical expedient,
a creditor may measure impairment based on a loan's observable market price
or the fair value of the collateral if the loan is collateral-dependent. A
loan is considered impaired when, based upon current information and
events, it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the loan agreement.
At the time of adoption, certain insubstance foreclosure loans previously
classified as other real estate owned were reclassified to nonaccrual
loans. The amount of loans reclassified to conform with this new
accounting standard was $1.4 million at December 31, 1994 and $6.9 million
at June 30, 1994.
The aggregate recorded investment in loans for which impairment has been
recognized in accordance with SFAS No. 114 totaled $12.3 million at June
30, 1995. Average impaired loans for the quarter ended June 30, 1995 were
$13.1 million. Allocations to the allowance for loan losses related to
impaired loans totaled $3.3 million at
7
June 30, 1995. The activity in the allowance for loan losses for the
three and six month periods ended June 30, 1995 and 1994 is as follows:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(Dollars in thousands) 1995 1994 1995 1994
-------------------------------------------------------------------------------------------
Beginning Balance $21,500 $25,000 $20,000 $25,000
Provision for Loan Losses 1,406 1,055 2,761 1,692
Charge-offs (1,552) (1,455) (2,374) (3,360)
Recoveries 1,146 400 2,113 1,668
-------------------------------------------------------------------------------------------
Balance June 30, $22,500 $25,000 $22,500 $25,000
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Loans are placed on nonaccrual status when they become 90 days past due as
to principal or interest payments (unless both are well secured and in the
process of collection), when the Company has determined that the timely
collection of principal or interest is doubtful, or when they otherwise
become impaired under the provisions of SFAS No. 114. When a loan is
placed on nonaccrual status, the accrued interest receivable is reversed
and the loan is accounted for on the cash or cost recovery method
thereafter until qualifying for return to accrual status.
6. REGULATORY MATTERS
During 1993, the Company and Bank consented to formal supervisory orders by
the Federal Reserve Bank of San Francisco and the Bank consented to a
formal supervisory order by the California State Banking Department. These
orders require, among other actions, the following: suspension of cash
dividends; restrictions on transactions between the Company and the Bank
without prior regulatory approval; development of a capital plan to ensure
the Bank maintains adequate capital levels subject to regulatory approval;
development of plans to improve the quality of the Bank's loan portfolio
through collection or improvement of the loans within specified time
frames; changes to the Bank's loan policies requiring the Directors' Loan
Committee to approve all loans to any one borrower exceeding $3.0 million
and requiring the Board of Directors to become more actively involved in
loan portfolio management and monitoring activities; review of, and changes
in, the Bank's loan policies to implement (i) policies for controlling and
monitoring credit concentrations, (ii) underwriting standards for all loan
products and (iii) standards for credit analysis and credit file
documentation; development of an independent loan review function and
related loan review policies and procedures; development of Board of
Directors oversight programs to establish and maintain effective control
and supervision of Management and major Bank operations and activities;
development of a plan, including a written methodology, to maintain an
adequate allowance for loan losses, defined as a minimum of 2.0% of total
loans; development of business plans to establish guidelines for growth and
ensure maintenance of adequate capital levels; a review and evaluation of
existing compensation practices and development of officer compensation
policies and procedures by the Boards of Directors of the Company and Bank;
policies requiring that changes in fees paid to directors as well as
bonuses paid to executive officers first receive regulatory approval; and
development of a detailed internal audit plan for approval by the Board of
Directors of the Bank. The State Banking Department order further requires
the Bank maintain a tangible equity-to-assets ratio of 6.5%.
8
In addition, such plans, policies, and procedures may not be amended
without prior regulatory approval. The Company and the Bank have taken
steps to address these requirements. The Company believes compliance with
these actions has not and will not have a material adverse impact on the
business of the Bank, its clients, or the Company. The Company and the
Bank were in substantial compliance with such orders at June 30, 1995.
9
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 2
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
BUSINESS OVERVIEW
-----------------
Silicon Valley Bancshares (the "Company") is a bank holding company whose
principal subsidiary is Silicon Valley Bank (the "Bank"), a California-chartered
bank with headquarters in Santa Clara, California. The Bank maintains
regional banking offices in Northern and Southern California, and
additionally has loan offices in Oregon and Massachusetts. The Bank focuses
on specific segments within each of its selected markets, including a variety
of high technology, life science, and other emerging growth industries that
present an opportunity for the Bank to differentiate its services from other
providers. Substantially all assets, liabilities, and earnings of the
Company relate to its investment in the Bank.
Early in 1995, the Bank received regulatory approval to relocate its
corporate headquarters and main branch to a new 100,000 square foot facility
in Santa Clara. Concurrent with this move, the Bank will close its existing
branch offices in San Jose and Santa Clara, California and consolidate them
with the nearby headquarters. The Bank commenced the relocation of its staff
beginning in August 1995. The move will continue throughout the remainder of
1995 and early 1996. Additionally, the Bank received regulatory approval in
early 1995 to open a loan production office in San Diego, California. The
San Diego office officially opened June 1, 1995.
RESULTS OF OPERATIONS
---------------------
Amounts presented in tables throughout this analysis have been rounded to the
nearest thousand. Totals or subtotals may appear to differ slightly due to
the effects of rounding.
EARNINGS SUMMARY
The Company reported net income of approximately $4.0 million, or $0.44 per
share, for the second quarter of 1995. This represents an increase of $1.7
million, or $0.18 per share, compared with net income of $2.2 million, or
$0.26 per share, for the second quarter of 1994. Net income for the first six
months of 1995 was $7.3 million, or $0.81 per share, compared with net income
of $4.0 million, or $0.47 per share, for the first six months of the prior
year. The increase in 1995 net income as compared with 1994 (for both the
three and six month periods ended June 30) was primarily due to significant
loan originations and deposit growth during the latter half of 1994, a higher
net interest margin and a substantial reduction in nonperforming assets
during the past twelve months.
The Company's annualized return on average assets ("ROA") was
1.5% for the second quarter of 1995, and 1.4% for the six months
ended June 30, 1995. These ratios improved from the Company's
1.0% ROA for the second quarter of 1994, and 0.8% ROA for the
first six months of 1994. The Company's annualized return on
average equity was 18.4% for the second quarter of
10
1995 and 17.4% for the first half of 1995, up from 12.5% for the second quarter
of 1994 and 11.0% for the first half of 1994.
NET INTEREST INCOME AND MARGIN
Net interest income is the principal source of revenue for the Company. It
represents the difference between interest earned on loans and investments
and interest paid on funding sources, primarily deposits. Net interest
margin is the amount of net interest income, on a fully taxable-equivalent
basis, expressed as a percentage of average interest-earning assets.
11
The following table sets forth average assets, liabilities, and shareholders'
equity, interest income and interest expense, average yields and rates, and
the composition of the Company's net interest margin for the three month
periods ended June 30, 1995 and June 30, 1994:
AVERAGE BALANCES, RATES AND YIELDS
Three Months Ended June 30,
-------------------------------------------------------------------
1995 1994
(UNAUDITED) (Unaudited)
--------------------------------------------------------------------------------------------------------------
AVERAGE Average
AVERAGE YIELD/ Average Yield/
(Dollars in thousands) BALANCE INTEREST RATE Balance Interest Rate
---------------------------------------------------------------------------------------------------------------
INTEREST-EARNING ASSETS:
Federal Funds Sold and Securities
Purchased Under Agreements
to Resell $ 128,331 $ 1,937 6.1% $ 11,402 $ 108 3.8%
Investment Securities:
Taxable 151,088 2,250 6.0 232,749 3,120 5.4
Non-Taxable (1) 7,131 180 10.1 8,308 210 10.1
Loans, Net of Unearned Income:
Commercial 582,635 17,758 12.2 478,820 12,432 10.4
Real Estate Construction and Term 64,925 1,691 10.4 60,535 1,192 7.9
Consumer and Other 16,682 549 13.2 23,617 520 8.8
---------------------------------------------------------------------------------------------------------------
Total Loans 664,242 19,999 12.1 562,972 14,144 10.1
---------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets 950,792 $24,366 10.3% 815,431 $17,582 8.6%
---------------------------------------------------------------------------------------------------------------
Cash and Due from Banks 114,058 111,997
Allowance for Loan Losses (22,511) (25,521)
Other Real Estate Owned 5,862 9,880
Other Assets 20,295 15,213
---------------------------------------------------------------------------------------------------------------
Total Assets $1,068,497 $ 927,000
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
FUNDING SOURCES:
Interest-Bearing Liabilities:
Money Market, NOW and
Savings Deposits $ 553,494 $ 5,418 3.9% $ 461,749 $ 2,784 2.4%
Time Deposits 59,949 518 3.5 63,503 406 2.6
Federal Funds Purchased -- -- -- 1,825 19 4.3
---------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities 613,443 5,936 3.9 527,077 3,209 2.4
Portion of Noninterest-Bearing
Funding Sources 337,349 288,354
---------------------------------------------------------------------------------------------------------------
Total Funding Sources 950,792 $ 5,936 2.5% 815,431 $ 3,209 1.6%
---------------------------------------------------------------------------------------------------------------
Noninterest-Bearing Funding Sources:
Demand Deposits 355,243 325,319
Portion Used to Fund Interest-Earning
Assets (337,349) (288,354)
Other Liabilities 13,220 2,871
Shareholders' Equity 86,591 71,733
---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,068,497 $ 927,000
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $18,429 $14,373
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
NET INTEREST MARGIN 7.8% 7.1%
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Memorandum: Total Deposits $ 968,685 $ 850,571
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
<FN>
(1) Interest income on tax exempt investments has been adjusted to a fully
taxable-equivalent basis using the federal statutory rate of 35% for 1994
and 1995. The taxable-equivalent adjustments were $63 and $73 for the
three month periods ended June 30, 1995 and 1994, respectively.
12
Net interest income on a fully taxable-equivalent basis was $18.4 million for
the second quarter of 1995, up $4.1 million, or 28.2%, from the $14.4 million
reported for the second quarter of 1994, and $36.5 million for the first six
months of 1995, up $8.5 million from the $28.0 million reported for the first
six months of 1994. This increase resulted from a higher net interest
margin and the growth in average interest-earning assets. The net interest
margin for the quarter ended June 30, 1995 was 7.8%, compared to 7.1% for the
second quarter of 1994. The increase in net interest margin resulted from
higher market interest rates in combination with the Company's asset and
liability repricing structure. It is Management's objective to manage
interest rate risk by maintaining a modestly asset-sensitive position
(whereby interest-earning assets reprice sooner than funding sources), so
that the net interest margin increases as market interest rates rise and
decreases when rates decline. It is likely that the net interest margin
will stabilize or decline should interest rates decline in future periods.
Average loans increased 18.0%, or $101.3 million, to $664.2 million for the
second quarter of 1995, from $563.0 million for the second quarter of 1994.
Average loans for the six months ended June 30, 1995 were $683.5 million, an
increase of 23.3%, or $129.1 million, from $554.4 million for the six months
ended June 30, 1994. This year-over-year increase occurred primarily during
the last six months of 1994, and was concentrated in the commercial loan
portfolio. Average loans have remained fairly constant since December 1994.
Although the production of new loans during the first half of 1995 was
consistent with Management's expectations, there has been a higher than
expected amount of loan payoffs related to the capital raising activities of
some of the Bank's technology clients. The Company estimates that over $70
million of outstanding loans were paid off during the first half of 1995 as a
result of these capital market activities. Because of these loan payoffs,
growth in net interest income may be adversely affected. See "RESULTS OF
OPERATIONS -- Noninterest Income" for additional related information.
Another factor affecting the level of interest-earning assets and net
interest income growth was an improvement in credit quality, as evidenced by
the more than 50% decline in nonperforming assets from June 30, 1994 to June
30, 1995.
The growth in average loans, higher interest rates, and improved credit
quality combined to increase interest and fee income on loans to $20.0
million for the second quarter of 1995 and $40.2 million for the first two
quarters of 1995 combined, up $5.9 million and $12.8 million, respectively,
from $14.1 million and $27.4 million for the comparable periods in 1994.
Average investment securities decreased to $158.2 million for the second
quarter of 1995 from $241.1 million for the second quarter of 1994, and
decreased to $159.7 million for the six months ended June 30, 1995 from
$230.8 million for the six months ended June 30, 1994. The proceeds from
maturities and sales of the investment portfolio have been used to fund a
portion of the growth in loans.
Average total deposits increased to $968.7 million and $984.5 million for the
three and six month periods ended June 30, 1995. These figures represent an
increase of $118.1 million, or 13.9%, and $107.0 million, or 12.2%, from the
comparable periods of 1994. A significant portion of this growth occurred in
money market deposit accounts, which increased 19.8% to average $539.8
million for the second quarter of 1995. Average noninterest-bearing demand
deposits represented
13
36.7% of average total deposits for the second quarter of 1995 compared to
38.2% of average total deposits for the second quarter of 1994.
PROVISION FOR LOAN LOSSES
The provision for loan losses is based on Management's evaluation of the
adequacy of the existing allowance for loan losses in relation to total loans
and Management's continuous assessment of the inherent and identified risk
dynamics of the loan portfolio resulting from reviews of selected individual
loans and loan commitments.
The provision for loan losses was $1.4 million during the second quarter of
1995, compared with $1.1 million during the second quarter of 1994, and $2.8
million for the first six months of 1995, compared with $1.7 million for the
comparable period in 1994. Gross charge-offs for the first six months of
1995 were $2.4 million, compared with $3.4 million for the first six months
of 1994. Loan loss recoveries for the first six months of the year were $2.1
million in 1995 and $1.7 million in 1994. See "FINANCIAL CONDITION -- Credit
Risk and the Allowance for Loan Losses" for additional related information.
NONINTEREST INCOME
Total noninterest income for the three and six month periods ended June 30,
1995 was $2.5 million and $3.5 million, respectively, up from $1.1 million
and $3.0 million in the comparable 1994 periods. The increase in noninterest
income for the second quarter of 1995 compared to the second quarter of 1994
was primarily related to reduced losses on sales of investment securities
combined with an increase in income related to the disposition of client
warrants. The increase in warrant-related income during the second quarter
of 1995 can be attributed to the high level of technology company stock
offerings during the first half of 1995.
The Company has historically obtained rights to acquire stock (in the form of
warrants) in certain nonpublic clients as part of negotiated credit
facilities. The receipt of warrants does not change the loan covenants or
other collateral control techniques employed by the Bank to mitigate the risk
of a loan becoming nonperforming. Interest rates, loan fees and collateral
requirements on loans with warrants are similar to lending arrangements where
warrants are not obtained. The timing and amount of income from the
disposition of warrants typically depends on factors beyond the control of
the Company, including the general condition of the equity markets, and
therefore cannot be predicted with any degree of accuracy and is likely to
vary materially over time. Based upon public stock offerings which occurred
in the first half of 1995, the Company announced that it has realized
approximately $3.8 million in warrant-related income between July 1 and
August 4, 1995. This income is expected to mitigate anticipated pressure on
net interest income attributable to more than $70 million of loan payoffs
during the first half of 1995 by clients which have recently accessed the
capital markets. See "RESULTS OF OPERATIONS -- Net Interest Income and
Margin" for additional related information.
Losses related to the sales of investment securities decreased from $0.9
million during the second quarter of 1994 to $0.3 million during the second
quarter of 1995. On a year-to-date basis, the losses on sales of investment
securities were $0.8 million at June 30, 1995 and $0.9 million at June 30,
1994. The securities sold during the first half of 1995 were primarily
mortgage-backed
14
securities. All sales of investment securities were conducted as a normal
component of the Company's interest rate risk and liquidity management
activities.
Letter of credit fees, foreign exchange fees and other income related to
trade finance activities increased 32.8%, or $0.2 million, from the second
quarter of 1994 to the second quarter of 1995, and 40.9%, or $0.4 million,
for the first six months of the respective years. The growth in this
category of noninterest income reflects a concerted effort by Management to
expand the penetration of trade-related services among the existing base of
borrowing clients.
Deposit service charges for the three and six month periods ended June 30
decreased from $0.5 million and $0.8 million in 1994 to $0.3 million and $0.7
million in 1995. Clients compensate the Bank for depository services either
through earnings credits computed on their demand deposit balances, or via
explicit payments recognized as deposit service charges. As interest rates
rose throughout 1994 and early 1995, the earnings credit rates increased,
thus lowering the amount of explicit service charges.
NONINTEREST EXPENSE
Noninterest expense increased to $12.4 million and $24.5 million from $10.4
million and $22.4 million for the three and six month periods ended June 30,
1995 and 1994, respectively. The following table presents the detail of
noninterest expense and the incremental contributions of each line item to
the efficiency ratio:
Three Months Ended June 30,
----------------------------------------------------------------------------------------
1995 1994
----------------------------------------------------------------------------------------
Percent Percent
of Adjusted of Adjusted
(Dollars in thousands) Amount Revenues Amount Revenues
----------------------------------------------------------------------------------------
Compensation and Benefits $ 6,767 34.5% $ 5,484 35.4%
Professional Services 1,626 8.3 1,026 6.6
Occupancy 715 3.6 601 3.9
FDIC Deposit Insurance 598 3.0 609 3.9
Furniture and Equipment 675 3.4 295 1.9
Corporate Legal Expenses and Litigation 239 1.2 472 3.0
Data Processing Services 223 1.1 346 2.2
Client Services 44 0.2 321 2.1
Other 1,508 7.7 1,129 7.3
------- ---- ------- ----
Total Excluding Cost of Other
Real Estate Owned 12,396 10,283
Efficiency Ratio 63.2% 66.5%
---- ----
---- ----
Cost of Other Real Estate Owned 20 72
------- -------
Total Noninterest Expense $12,416 $10,356
------- -------
------- -------
Management closely monitors the level of noninterest expense using a variety
of financial ratios. The efficiency ratio is calculated by dividing the
amount of noninterest expense, excluding costs associated with other real
estate owned ("OREO"), by adjusted revenues, defined as the total of net
interest income and noninterest income, excluding warrant income and gains or
losses from securities sales. This ratio reflects the level of operating
expense required to generate $1 of
15
operating revenue. The Company's efficiency ratio improved from 66.5% for
the second quarter of 1994 to 63.2% for the second quarter of 1995, and
improved substantially from 70.0% for the first half of 1994 to 62.8% for the
first half of 1995.
Salaries and related employee benefits expenses increased $1.3 million, or
23.4%, to $6.8 million and increased $2.2 million, or 18.5%, to $13.9 million
for the three and six month periods ended June 30, 1995, from $5.5 million
and $11.7 million for the comparable periods in 1994. Average full-time
equivalent staff for the second quarter of 1995 was 331, compared with 285
for the second quarter of 1994, and 327 for the first six months of 1995,
compared with 290 for the first six months of 1994. Staff increases
year-over-year were primarily due to expansion of the lending staff during
the second half of 1994 in response to growth in the loan portfolio.
Expenses related to professional services have increased $0.6 million from
the second quarter of 1994 to the second quarter of 1995, and $0.8 million
from the first half of 1994 to the first half of 1995. The level of expense
incurred, as well as the increases in 1995 over the comparable periods in
1994, reflects the continuing extensive use of consulting and legal services
associated with building the infrastructure of the Bank, establishing new
policies and procedures, and complying with regulatory consent orders.
Occupancy, furniture and equipment, and other miscellaneous expenses have all
increased during the second quarter and first half of 1995 compared to the
corresponding periods in 1994 in response to the aforementioned growth in
personnel. These expense categories have also increased as a result of the
Company's move to a new corporate headquarters facility and its conversion to
an in-house core computer system.
As a result of the reduction in nonperforming assets throughout the past four
quarters, there has been a sharp decline in the expenses related to OREO.
For the three and six month periods ended June 30, 1995, this expense was
less than $20,000, compared with $72,000 for the second quarter of 1994 and
$1.3 million for the six months ended June 30, 1994. The cost of OREO
includes: maintenance expenses; property taxes; marketing costs; net
operating expense or income associated with income-producing properties;
property write-downs; and losses or gains on the sales of such properties.
The total amount of OREO declined to $5.1 million at June 30, 1995, from $8.1
million at June 30, 1994.
INCOME TAXES
The Company's effective tax rate was 43.0% for the first six months of 1995
and 43.1% for the first six months of 1994. The Company's effective tax rate
does not differ significantly from the statutory rate structure, currently
35.0% for Federal income taxes, and approximately 11.5% for California
franchise taxes.
FINANCIAL CONDITION
-------------------
Total assets were $1.2 billion at June 30, 1995, compared with $1.2 billion
at December 31, 1994, and $0.9 billion at June 30, 1994.
16
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Federal funds sold, interest-bearing deposits in other financial
institutions, and securities purchased under agreements to resell totaled
$238.1 million at the end of the second quarter of 1995, compared with $150.1
million at year-end 1994, and $37.7 million at the end of the second quarter
of 1994. The significant increase from June to December of 1994 was
primarily due to successful deposit gathering efforts by the Company. The
further increase during the first six months of 1995 was due to technology
company public stock offerings and the resulting loan paydowns, as well as
increased deposit balances.
INVESTMENT SECURITIES
Investment securities were $140.5 million at June 30, 1995, 10.2% lower than
the $156.5 million total at December 31, 1994, and 26.1% lower than the
$190.0 million at June 30, 1994. The decrease in investment securities was
primarily in response to the growth of the loan portfolio as well as the
Bank's interest rate risk and liquidity management activities. The Company
had an outstanding receivable of $9.5 million at June 30, 1995 related to the
sales of certain investment securities, the proceeds of which were received
in early July, 1995.
LOANS
As of June 30, 1995, total loans, net of unearned income, were $659.3
million, down 6.3% from the $703.8 million at year-end 1994, but up 10.9%
from the $594.6 million recorded at the end of the second quarter of 1994.
Commercial loans, net of unearned income, were $572.3 million and accounted
for 86.8% of the total loan portfolio at June 30, 1995. This represents a
12.9% increase from the $507.0 million one year prior. The decline in total
loans from year-end reflects an unusually large amount of capital-raising
activity by the Bank's technology clients. Over $70 million of loan payoffs
during the first six months of 1995 are attributable to such events. See,
"RESULTS OF OPERATIONS -- Net Interest Income and Margin, and Noninterest
Income", respectively, for additional related information.
CREDIT RISK AND THE ALLOWANCE FOR LOAN LOSSES
Lending money involves an inherent risk of nonpayment. Through the
administration of the loan policies and careful monitoring of the portfolio,
Management seeks to reduce such risks to an acceptable level. The allowance
for loan losses provides a financial buffer for losses, both identified and
unidentified, in the loan portfolio. Management regularly reviews and
monitors the loan portfolio to determine the risk profile of each credit and
to identify credits whose risk profiles have changed. This review includes,
but is not limited to, such factors as payment status, the financial
condition of the borrower, borrower compliance with loan covenants,
underlying collateral values, potential loan concentrations, and general
economic conditions. Potential problem credits are identified and
appropriate action plans are developed.
17
Nonperforming assets consist of loans that are past due 90 days or more but
still accruing interest, loans on nonaccrual status, and OREO. The table
below sets forth certain relationships between nonperforming loans,
nonperforming assets, and the allowance for loan losses.
----------------------------------------------------------------------------------------------------
CREDIT QUALITY
----------------------------------------------------------------------------------------------------
JUNE 30, December 31, June 30,
1995 1994 1994
(Dollars in thousands) (Unaudited) (Unaudited)
----------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS:
Loans Past Due 90 Days or More $ 936 $ 444 $ 2,726
Nonaccrual Loans (1) 12,255 11,269 29,098
----------------------------------------------------------------------------------------------------
Total Nonperforming Loans 13,191 11,713 31,824
OREO (1) 5,133 7,089 8,145
----------------------------------------------------------------------------------------------------
Total Nonperforming Assets $18,324 $18,802 $39,969
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Nonperforming Loans as a Percent of Total Loans 2.0% 1.7% 5.4%
OREO as a Percent of Total Assets 0.4% 0.6% 0.9%
Nonperforming Assets as a Percent of Total Assets 1.6% 1.6% 4.3%
ALLOWANCE FOR LOAN LOSSES $22,500 $20,000 $25,000
As a Percent of Total Loans 3.4% 2.8% 4.2%
As a Percent of Nonaccrual Loans 183.6% 177.5% 85.9%
As a Percent of Nonperforming Loans 170.6% 170.8% 78.6%
<FN>
(1) In accordance with Statement of Financial Accounting Standard No. 114,
insubstance foreclosure loans have been reclassified from OREO to
nonaccrual loans. The reclassified amounts are: $6,869 at June 30, 1994
and $1,377 at December 31, 1994.
Nonperforming assets have shown substantial improvement from one year ago,
declining from $40.0 million at June 30, 1994 to $18.8 million at December
31, 1994 and $18.3 million at June 30, 1995. The improvement in nonperforming
assets has resulted from the concerted efforts of Management to maintain a
strong credit discipline and consistent administration of credit policies and
procedures.
As of January 1, 1995, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan"
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan
-- Income Recognition and Disclosures." At the time of adoption,
approximately $1.4 million of insubstance foreclosure loans previously
classified as other real estate owned were reclassified to nonaccrual loans.
Prior period presentations of insubstance foreclosure loans have been
reclassified to conform with this accounting standard.
In addition to loans included in nonperforming assets, Management has
identified one loan with a principal amount aggregating approximately $7.0
million that, on the basis of information available to Management as of June
30, 1995, was judged to have a higher than normal risk of becoming
nonperforming. The Company is not aware of any other loans at June 30, 1995
where known information about possible problems of the borrower casts serious
doubts about the ability of the borrower to comply with the loan repayment
terms.
18
DEPOSITS
The growth in total assets over the past four quarters was funded, primarily,
by the growth in total deposits. Total deposits were $1,070.6 million at
June 30, 1995, compared with $1,075.4 million at December 31, 1994 and $845.0
million at June 30, 1994. Noninterest-bearing demand deposits were $391.1
million at the end of the second quarter of 1995, compared with $401.5
million at year-end 1994, and $325.0 million at the end of the second quarter
of 1994. Money market, NOW, and savings deposits totaled $619.0 million at
June 30, 1995, up from $585.2 million at December 31, 1994, and $454.8
million at June 30, 1994. The increase in deposits during the past four
quarters resulted from successful marketing efforts by the Bank.
LIQUIDITY MANAGEMENT
Management regularly reviews general economic and financial conditions, both
external and internal, and determines whether the positions taken with
respect to liquidity and interest rate sensitivity are appropriate. The
objectives of liquidity management are to provide funds at an acceptable cost
to meet loan demand and depositors' needs, and to service other liabilities
as they come due. As of June 30, 1995, liquid assets as a percentage of
deposits were 36.5%, compared with 30.4% at December 31, 1994 and 19.6% at
June 30, 1994. Liquid assets include cash and due from banks, short-term
time deposits, federal funds sold, securities purchased under agreements to
resell, and investment securities maturing within one year.
CAPITAL RESOURCES
Management seeks to maintain adequate capital to support anticipated asset
growth and credit risks, and to ensure that the Company and the Bank are in
compliance with all regulatory capital guidelines. The primary source of
increased capital for the Company has been the retention of earnings. Aside
from current earnings, an additional source of new capital for the Company
has been proceeds from the issuance of common stock under the Company's
employee benefits plans including the Company's Stock Option Plan, Employee
Stock Ownership Plan, and Employee Stock Purchase Plan. Capital generated
through employee benefits plans during the second quarter and first six
months of 1995 was $2.8 million and $4.3 million, respectively, compared with
$0.2 million and $0.6 million during the comparable periods of 1994.
Shareholders' equity also increased during the twelve month period ended June
30, 1995 due to a decline in the net unrealized loss on investment securities
from $3.4 million at June 30, 1994 and $4.2 million at year-end 1994 to $0.8
million at June 30, 1995.
The Company and Bank are subject to capital adequacy guidelines issued by the
Federal Reserve Board. Under these guidelines, the minimum total capital
requirement is 8.0% of assets and certain off-balance sheet items, weighted
by risk. At least 4.0% of the total 8.0% capital ratio must consist of Tier
1 capital, defined as tangible common equity, and the remainder may consist
of subordinated debt, cumulative preferred stock, and a limited amount of the
allowance for loan losses.
The Federal Reserve Board has established minimum capital leverage ratio
guidelines for state member banks. The ratio is determined using Tier 1
capital divided by quarterly average total assets. The guidelines require a
minimum of 3.0%; however, banks experiencing high growth rates are expected
to maintain capital positions well above minimum supervisory levels.
19
In addition to the foregoing requirements, the Bank is also subject to a
capital requirement established by the California State Banking Department.
Under the regulatory consent order with the State Banking Department, the Bank
must maintain a minimum tangible equity-to-assets ratio of 6.5%. The Bank's
tangible equity-to-assets ratio at June 30, 1995 was 7.6%, compared with
6.5% at December 31, 1994 and 7.4% at June 30, 1994.
The Company and the Bank had capital ratios in excess of regulatory guidelines
as of June 30, 1995. Capital ratios for the Company are set forth below:
-----------------------------------------------------------------------------
June 30, December 31, June 30,
1995 1994 1994
-----------------------------------------------------------------------------
Total Risk-Based Capital Ratio 11.3% 10.1% 11.9%
Tier 1 Risk-Based Capital Ratio 10.0% 8.9% 10.6%
Tier 1 Leverage Ratio 8.7% 8.3% 8.1%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
The decrease in the Total and Tier 1 risk-based capital ratios from June to
December, 1994 was primarily the result of growth in total assets, loans and
commitments outstanding at year-end. Total assets were roughly the same at
June 30, 1995 as at year-end 1994, while outstanding loan balances decreased
during the first half of 1995 and shareholders' equity experienced a
substantial increase during this six month period. As a result, the
Company's Total and Tier 1 risk-based capital ratios improved to 11.3% and
10.0%, respectively, at June 30, 1995.
CURRENT OPERATING ENVIRONMENT
The National and California economies have slowed somewhat from the growth
experienced during 1994, resulting in a recent 25 basis point decline in the
target federal funds rate by the Federal Open Market Committee. This was the
first such reduction in the target rate since prior to 1994. If interest
rates throughout the remainder of the year remain little changed from June
30, 1995, the Company's net interest margin may decline modestly, reflecting
higher deposit costs.
The intense pace of technology company stock offerings by the Bank's clients
during the first half of 1995 has had a two-pronged effect on the Company.
It has resulted in more than $70 million of loan payoffs by these clients,
but it has also enabled the Company to exercise a number of stock warrants
from clients that completed public offerings. During the first half of 1995,
the disposition of stock warrants contributed $1.8 million to the Company's
pre-tax earnings. Between July 1 and August 4, 1995, the Bank realized
approximately $3.8 million in warrant-related income. Management anticipates
that these trends related to the capital market activities of technology
companies will continue during the second half of 1995. See, "RESULTS OF
OPERATIONS -- Net Interest Income and Margin, and Noninterest Income,"
respectively, for additional related information.
The Company remains subject to the regulatory consent orders discussed in
Note 6. While the Company cannot predict the effect of any specific
requirement of these actions, the Company believes that continued compliance
with these actions will not have a significant adverse impact on the business
of the Bank, its clients or the Company.
Current financial results should not be considered to be an indicator of
future financial performance, and investors should not use historical trends
to anticipate results or trends in future periods.
20
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
Certain lawsuits and claims arising in the ordinary course of business have
been filed or are pending against the Bank and/or the Company. Based upon
information available to the Company, its review of such claims to date, and
consultation with its counsel, Management believes the liability relating to
these actions, if any, will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES
---------------------
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
a) The Annual Meeting of Shareholders was held on May 23, 1995.
Each of the persons named in the Proxy Statement as a nominee for
director was elected; amendments to the Silicon Valley Bancshares
1989 Stock Option Plan were approved; and the appointment of KPMG
Peat Marwick, LLP as the Company's independent auditors was ratified.
The following are the voting results on each of these matters:
1) Election of Directors: In Favor Withheld
---------------------- --------- --------
Gary K. Barr 5,563,847 97,560
James F. Burns, Jr. 5,606,817 54,590
John C. Dean 5,607,051 54,356
Clarence J. Ferrari, Jr., Esq. 5,593,250 68,157
Henry M. Gay 5,589,016 72,391
Daniel J. Kelleher (1) 5,556,259 105,148
James R. Porter 5,607,647 53,760
Michael Roster, Esq. (2) 5,607,596 53,811
Roger V. Smith (3) 5,589,911 71,496
Ann R. Wells 5,588,679 72,728
<FN>
(1) Chair-Elect of the Company Board and the Bank Board
(2) Vice Chair-Elect of the Company Board and the Bank Board
(3) Pursuant to an agreement among the Company, the Bank,
and Mr. Smith, the Company has agreed to nominate Mr.
Smith as a director of the Company in 1995.
21
In Favor Opposed Abstained
--------- ------- ---------
2) Amendments to the Silicon
Valley Bancshares
1989 Stock Option Plan 5,194,909 406,308 60,190
3) Ratification of the
appointment of KPMG
Peat Marwick, LLP as the
Company's independent
auditors for 1995 5,621,295 11,931 28,181
ITEM 5. OTHER INFORMATION
-----------------
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
a) Exhibits:
Sequentially
Numbered
Exhibit Number Exhibit Page
-------------- ------- ----
10.19 Agreement not to Stand for Re-election as
Director of Silicon Valley Bancshares and
Silicon Valley Bank and Mutual General
Release of Claims between Dr. Allan C.
Kramer and Silicon Valley Bancshares and
Silicon Valley Bank 1
10.20 Agreement not to Stand for Re-election as
Director of Silicon Valley Bancshares and
Silicon Valley Bank and Mutual General
Release of Claims between Barry A. Turkus and
Silicon Valley Bancshares and Silicon Valley
Bank 5
10.21 Separation Agreement and General Release
between Allyn C. Woodward, Jr. and Silicon
Valley Bancshares and Silicon Valley Bank 9
10.22 Restricted Stock Bonus and Non-Compete
Agreement between Allyn C. Woodward, Jr. and
Silicon Valley Bancshares and Silicon Valley
Bank 20
10.23 Amendment and Restatement of Silicon
Valley Bancshares 1989 Stock Option Plan 23
b) No reports on Form 8-K have been filed by the Registrant during the three
months ended June 30, 1995.
22
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILICON VALLEY BANCSHARES
-------------------------
(Registrant)
Date: August 9, 1995 By: (s) Dennis G. Uyemura
----------------------- -----------------------
Dennis G. Uyemura
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
23