SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-25418
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CENTRAL COAST BANCORP
- ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 77-0367061
---------- ----------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
301 Main Street, Salinas, California 93901
- ------------------------------------ -----
(Address of principal executive offices) (Zip code)
(831) 422-6642
---------------------------
(Registrant's telephone number,
including area code)
not applicable
-----------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
No par value Common Stock - 9,001,986 shares outstanding at April 23, 2002.
Page 1 of 23
1
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
CENTRAL COAST BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
March 31, December 31,
(Dollars in thousands) 2002 2001
---- ----
Assets
Cash and due from banks $ 45,710 $ 55,245
Federal funds sold 34,821 -
------------- ------------
Total cash and equivalents 80,531 55,245
Available-for-sale securities - at fair value 132,652 137,153
Loans:
Commercial 175,031 199,761
Real estate-construction 90,612 85,314
Real estate-other 340,148 306,622
Consumer 14,875 15,653
Deferred loan fees, net (1,086) (1,050)
------------- ------------
Total loans 619,580 606,300
Allowance for loan losses (12,144) (11,753)
------------- ------------
Net Loans 607,436 594,547
------------- ------------
Premises and equipment, net 2,860 2,962
Accrued interest receivable and other assets 12,589 12,359
------------- ------------
Total assets $ 836,068 $ 802,266
============= ============
Liabilities and Shareholders' Equity
Deposits:
Demand, noninterest bearing $ 198,983 $ 231,501
Demand, interest bearing 124,633 105,949
Savings 150,096 122,861
Time 280,646 264,551
------------- ------------
Total Deposits 754,358 724,862
Accrued interest payable and other liabilities 13,405 12,068
------------- ------------
Total liabilities 767,763 736,930
------------- ------------
Commitments and contingencies (Note 2)
Shareholders' Equity:
Preferred stock - no par value; authorized 1,000,000 shares; no shares issued
Common stock - no par value; authorized 25,000,000 shares;
issued and outstanding: 8,991,928 shares at March 31, 2002
and 8,963,780 shares at December 31, 2001 51,036 50,898
Shares held in deferred compensation trust (299,048 at March 31, 2002
and December 31, 2001), net of deferred obligation - -
Retained earnings 17,590 14,855
Accumulated other comprehensive (loss) - net of taxes
of $228 at March 31, 2002 and $297 at December 31, 2001 (321) (417)
------------- ------------
Total shareholders' equity 68,305 65,336
------------- ------------
Total liabilities and shareholders' equity $ 836,068 $ 802,266
============= ============
See notes to Consolidated Condensed Financial Statements
2
CENTRAL COAST BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three Months Ended March 31, 2002 2001
---- ----
Interest Income
Loans (including fees) $ 10,092 $ 11,025
Investment securities 1,746 2,203
Other 69 192
--------------- --------------
Total interest income 11,907 13,420
--------------- --------------
Interest Expense
Interest on deposits 3,533 4,834
Other 92 92
--------------- --------------
Total interest expense 3,625 4,926
--------------- --------------
Net Interest Income 8,282 8,494
Provision for Loan Losses 223 120
--------------- --------------
Net Interest Income after
Provision for Loan Losses 8,059 8,374
--------------- --------------
Noninterest Income 767 650
--------------- --------------
Noninterest Expenses
Salaries and benefits 2,751 3,002
Occupancy 421 437
Furniture and equipment 424 455
Other 989 1,045
--------------- --------------
Total noninterest expenses 4,585 4,939
--------------- --------------
Income Before Provision for Income Taxes 4,241 4,085
Provision for Income Taxes 1,505 1,526
--------------- --------------
Net Income $ 2,736 $ 2,559
=============== ==============
Basic Earnings per Share $ 0.30 $ 0.28
Diluted Earnings per Share $ 0.29 $ 0.26
See Notes to Consolidated Condensed Financial Statements
3
CENTRAL COAST BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended March 31, 2002 2001
---- ----
Cash Flows from Operations:
Net income $ 2,736 $ 2,559
Reconciliation of net income to net cash provided
by operating activities:
Provision for loan losses 223 120
Depreciation 312 349
Amortization and accretion 220 (9)
Loss on sale of securities - 2
Loss on sale of fixed assets 5 1
(Increase) decrease in accrued interest receivable and other assets (361) 223
Increase (decrease) in accrued interest payable and other liabilities 666 (1,667)
Increase in deferred loan fees 36 226
------------- --------------
Net cash provided by operations 3,837 1,804
------------- --------------
Cash Flows from Investing Activities:
Purchases of available-for-sale securities (34,589) (67,195)
Proceeds from maturities
of available-for-sale securities 39,098 33,805
Proceeds from sale of available-for-sale securities - 39,213
Net increase in loans (13,148) (8,504)
Purchases of equipment (215) (150)
------------- --------------
Net cash used in investing activities (8,854) (2,831)
------------- --------------
Cash Flows from Financing Activities:
Net increase (decrease) in deposit accounts 29,496 (8,541)
Net increase (decrease) in other borrowings 762 (73)
Cash received for stock options exercised 45 2
Cahs paid for shares repurchased - (1,998)
------------- --------------
Net cash provided (used) by financing activities 30,303 (10,610)
------------- --------------
Net increase (decrease) in cash and equivalents 25,286 (11,637)
Cash and equivalents, beginning of period 55,245 74,492
------------- --------------
Cash and equivalents, end of period $ 80,531 $ 62,855
============= ==============
Other Cash Flow Information:
Interest paid $ 3,817 $ 4,914
Income taxes paid 1,454 5,970
See Notes to Consolidated Condensed Financial Statements
4
CENTRAL COAST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited consolidated condensed
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
Company's consolidated financial position at March 31, 2002 and
December 31, 2001, the results of operations and cash flows for the
three month periods ended March 31, 2002 and 2001.
Certain disclosures normally presented in the notes to the annual
financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have
been omitted. These interim consolidated condensed financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
2001 Annual Report to Shareholders. The results of operations for
the three-month periods ended March 31, 2002 and 2001 may not
necessarily be indicative of the operating results for the full
year.
In preparing such financial statements, management is required to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and
revenues and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that are
particularly susceptible to significant changes in the near term
relate to the determination of the allowance for loan losses.
Management has determined that since all of the commercial banking
products and services offered by the Company are available in each
branch of the Community Bank of Central California, its bank
subsidiary (the "Bank"), all branches are located within the same
economic environment and management does not allocate resources
based on the performance of different lending or transaction
activities, it is appropriate to aggregate the Bank branches and
report them as a single operating segment.
Stock split - On January 28, 2002, the Board of Directors approved
a five-for-four stock split, which was distributed on February 28,
2002, to shareholders of record as of February 14, 2002. All share
and per share data have been retroactively adjusted to reflect the
stock split.
2. COMMITMENTS AND CONTINGENCIES
In the normal course of business there are outstanding various
commitments to extend credit which are not reflected in the
financial statements, including loan commitments of approximately
$198,224,000 and standby letters of credit of approximately
$3,616,000 at March 31, 2002. However, all such commitments will
not necessarily culminate in actual extensions of credit by the
Company.
Approximately $54,183,000 of loan commitments outstanding at March
31, 2002 relate to real estate construction loans that are expected
to fund within the next twelve months. The remaining commitments
primarily relate to revolving lines of credit or other commercial
loans, and many of these commitments are expected to expire without
being drawn upon. Therefore, the total commitments do not
necessarily represent future cash requirements. Each potential
borrower and the necessary collateral are evaluated on an
individual basis. Collateral varies, but may include real
property, bank deposits, debt or equity securities or business
assets.
Stand-by letters of credit are commitments written to guarantee the
performance of a customer to a third party. These guarantees are
issued primarily relating to purchases of inventory by commercial
customers and are typically short-term in nature. Credit risk is
similar to that involved in extending loan commitments to customers
and accordingly, evaluation and collateral requirements similar to
those for loan commitments are used. Virtually all such
commitments are collateralized.
5
3. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the
weighted average common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur
if options or other contracts to issue common stock were exercised
and converted into common stock.
There was no difference in the numerator used in the calculation of
basic earnings per share and diluted earnings per share. The
denominator used in the calculation of basic earnings per share and
diluted earnings per share for each of the years ended March 31 is
reconciled as follows:
In thousands (expect per share data) 2002 2001
---- ----
Basic Earnings Per Share
Net income $ 2,736 $ 2,559
Weighted average common shares outstanding 8,975 9,198
------- -------
Basic earnings per share $ 0.30 $ 0.28
======= =======
Diluted Earnings Per Share
Net Income $ 2,736 $ 2,559
Weighted average common shares outstanding 8,975 9,198
Dilutive effect of outstanding options 415 367
------- -------
Weighted average common shares outstanding - Diluted 9,390 9,565
------- -------
Diluted earnings per share $ 0.29 $ 0.26
======= =======
4. COMPREHENSIVE INCOME
Three Months Ended March 31,
(In thousands) 2002 2001
---- ----
Net Earnings $ 2,736 $ 2,559
Other comprehensive income (loss) - net unrealized
gain on available-for-sale securities 96 1,250
Reclassification adjustment for losses included in
income, net of taxes of $1 for the three
month period ended March 31, 2001 - 1
------- -------
Total comprehensive earnings $ 2,832 $ 3,810
======= =======
5. STOCK REPURCHASE PLAN
The Board of Directors has authorized a stock repurchase program
under which repurchases will be made from time to time by the
Company in the open market, or in block purchases, or in privately
negotiated transactions, in compliance with Securities and Exchange
Commission rules. The Company has not repurchased any shares in
2002. As of March 31, 2002, there were approximately 279,900
shares remaining under the program for repurchase by the Company.
6
6. BUSINESS COMBINATIONS AND GOODWILL AND OTHER INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" which addresses the elimination of pooling accounting
treatment in business combinations and the financial accounting and
reporting for acquired goodwill and other intangible assets at
acquisition and SFAS No. 142, "Goodwill and Other Intangible
Assets" which addresses financial accounting and reporting for
acquired goodwill and other intangible assets at acquisition in
transactions other than business combinations covered by SFAS No.
141, and the accounting treatment of goodwill and other intangible
assets after acquisition and initial recognition in the financial
statements. The adoption of these statements did not have any
impact on the Company's consolidated financial position, results of
operations, or cash flows as the Company had no goodwill as of
January 1, 2002 and all of the Company's intangible assets have
finite lives and are continuing to be amortized.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------
In addition to the historical information contained herein, this
report on Form 10-Q contains certain forward-looking statements
that are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Changes to such
risks and uncertainties, which could impact future financial
performance, include, among others, (1) competitive pressures in
the banking industry; (2) changes in the interest rate environment;
(3) general economic conditions, nationally, regionally and in
operating market areas, including a decline in real estate values
in the Company's market areas; (4) the effects of terrorism,
including the events of September 11, 2001 and thereafter; (5)
changes in the regulatory environment; (6) changes in business
conditions and inflation; (7) changes in securities markets; (8)
data processing compliance problems; (9) the California energy
problems; (10) variances in the actual versus projected growth in
assets; (11) return on assets; (12) loan losses; (13) expenses;
(14) rates charged on loans and earned on securities investments;
(15) rates paid on deposits; and (16) fee and other noninterest
income earned, as well as other factors. This entire report should
be read to put such forward-looking statements in context. To gain
a more complete understanding of the uncertainties and risks
involved in the Company's business this report should be read in
conjunction with Central Coast Bancorp's annual report on Form 10-K
for the year ended December 31, 2001.
Critical Accounting Policies
- ----------------------------
General
Central Coast Bancorp's financial statements are prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP). The financial information
contained within our statements is, to a significant extent,
financial information that is based on measures of the financial
effects of transactions and events that have already occurred. We
use historical loss factors as one factor in determining the
inherent loss that may be present in our loan portfolio. Actual
losses could differ significantly from the historical factors that
we use. Other estimates that we use are related to the expected
useful lives of our depreciable assets. The Company accounts for
its stock based awards using the intrinsic value method in
accordance with Accounting Principles Board ("APB") Opinion No. 25
and related interpretations. Since the Company's Stock Option
Plans provide for the issuance of options at a price of no less than
the fair market value at the date of the grant, no compensation
expense has been recognized in the financial statements. In
addition GAAP itself may change from one previously acceptable
method to another method. Although the economics of our
transactions would be the same, the timing of events that would
impact our transactions could change.
Allowance for Loan Losses
The allowance for loan losses is an estimate of the losses that may
be sustained in our loan portfolio. The allowance is based on two
basic principles of accounting. (1) Statement of Financial
Accountings Standards (SFAS) No. 5 "Accounting for Contingencies",
which requires that losses be accrued when they are probable of
occurring and estimable and (2) SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan", which requires that losses be
accrued based on the differences between the value of collateral,
present value of future cash flows or values that are observable in
the secondary market and the loan balance.
Our allowance for loan losses has three basic components: the
formula allowance, the specific allowance and the unallocated
allowance. Each of these components is determined based upon
estimates that can and do change when the actual events occur. The
formula allowance uses an historical loss view as an indicator of
future losses and as a result could differ from the loss incurred
in the future. However, since this history is updated with the
most recent loss information, the errors that might otherwise occur
are mitigated. The specific allowance uses various techniques to
arrive at an estimate of loss. Historical loss information, and
8
fair market value of collateral are used to estimate those losses.
The use of these values is inherently subjective and our actual
losses could be greater or less than the estimates. The
unallocated allowance captures losses that are attributable to
various economic events, industry or geographic sectors whose
impact on the portfolio have occurred but have yet to be recognized
in either the formula or specific allowances. For further
information regarding our allowance for credit losses, see page 16.
Business Organization
- ---------------------
Central Coast Bancorp (the "Company") is a California corporation
organized in 1994, and is the parent company for Community Bank of
Central California, a state-chartered bank, headquartered in
Salinas, California (the "Bank"). Its investment in the Bank
comprises the major business activity of the Company. Upon prior
notification to the Board of Governors, the Company is authorized
to engage in a variety of activities, which are deemed closely
related to the business of banking. The Company is engaged in
certain lending activities related to the purchase of certain tax
advantaged loans from the Bank.
The Bank offers a full range of commercial banking services,
including a diverse range of traditional banking products and
services to individuals, merchants, small and medium-sized
businesses, professionals and agribusiness enterprises. Its
principal markets are located in the counties of Monterey, San
Benito, Santa Clara and Santa Cruz, which are in the central
coastal area of California.
Overview
- --------
Central Coast Bancorp reported record net income of $2,736,000 for
the quarter ended March 31, 2002. The earnings represent a 6.9%
increase over the $2,559,000 reported in the first quarter of
2001. Diluted earnings per share for the first quarter of 2002
increased 11.5% to $0.29 from $0.26 in the prior year period. The
earnings per share for the 2001 quarter have been adjusted for the
25% stock split distributed in February 2002.
The Company continued its strong asset growth in first quarter of
2002 as assets grew to $836,068,000 at March 31, 2002, up
$33,802,000 (4.2%) from year-end. At quarter end, loans totaled
$619,580,000, up $13,280,000 (2.2%) from year-end and up
$137,971,000 (28.6%) from March 31, 2001. Deposits also had very
strong growth in the first quarter as they increased $29,496,000
(4.1%) from year-end to $754,358,000 at March 31, 2002. The
increase in deposits at March 31, 2002 was accomplished in spite of
the maturity of a $10,000,000 State of California certificate of
deposit, which was included in the 2001 year-end balance.
For the first quarter 2002, the Company realized a return on
average equity of 16.4% and a return on average assets of 1.37%, as
compared to 16.9% and 1.52% in the first quarter of 2001. Central
Coast Bancorp ended the first quarter of 2002 with a Tier 1 capital
ratio of 9.9% and a total risk-based capital ratio of 11.1% versus
11.0% and 12.3%, respectively at the end of the first quarter of
2001.
Within the Management's Discussion and Analysis, interest income,
net interest income, net interest margin and the efficiency ratio
are presented on a fully taxable equivalent basis (FTE).
9
The following table provides a summary of the major elements of
income and expense for the periods indicated.
Condensed Comparative Income Statement Percentage
Change
Three months ended March 31, Increase
In thousands (except percentages) 2002 2001 (Decrease)
---- ---- ----------
Interest income (1) $ 12,188 $ 13,678 -11%
Interest expense 3,625 4,926 -26%
--------- --------- --------
Net interest income 8,563 8,752 -2%
Provision for loan losses 223 120 86%
--------- --------- --------
Net interest income after
provision for loan losses 8,340 8,632 -3%
Noninterest income 767 650 18%
Noninterest expense 4,585 4,939 -7%
--------- --------- --------
Income before income taxes 4,522 4,343 4%
Income taxes 1,505 1,526 -1%
Tax equivalent adjustment 281 258 9%
--------- --------- --------
Net income $ 2,736 $ 2,559 7%
========= ========= ========
1) Interest on tax-free securities is reported on tax equivalent basis.
10
Net interest income
- -------------------
Net interest income, the difference between interest earned on
loans and investments and interest paid on deposits and other
borrowings, is the principal component of the Bank's earnings. The
following table provides a summary of the components of net
interest income and the changes within the components for the
periods indicated. The second table sets forth a summary of the
changes in interest income and interest expense from changes in
average asset and liability balances (volume) and changes in
average interest rates.
(Unaudited)
Three months ended March 31,
(Taxable Equivalent Basis) 2002 2001
Average Average Average Avg
(In thousands, except percentages) Balance Interest Yield Balance Interest Yield
------- -------- ----- ------- -------- -----
Assets:
Earning Assets
Loans (1) (2) $ 594,056 $ 10,092 6.89% $ 461,548 $ 11,025 9.69%
Taxable investments 90,040 1,183 5.33% 102,607 1,687 6.67%
Tax-exempt securities (tax equiv. basis) 49,616 844 6.90% 45,666 774 6.87%
Federal funds sold 17,874 69 1.57% 13,495 192 5.77%
---------- --------- ---------- ---------
Total Earning Assets 751,586 $ 12,188 6.58% 623,316 $ 13,678 8.90%
Cash & due from banks 45,270 --------- 41,674 ---------
Other assets 14,909 15,733
---------- ----------
$ 811,765 $ 680,723
========== ==========
Liabilites & Shareholders'
Equity:
Interest bearing liabilities:
Demand deposits $ 111,617 $ 271 0.98% $ 88,591 $ 328 1.50%
Savings 138,942 760 2.22% 120,812 1,086 3.65%
Time deposits 288,902 2,488 3.49% 233,062 3,420 5.95%
Other borrowings 6,739 106 6.38% 5,708 92 6.54%
---------- --------- ---------- ---------
Total interest bearing
liabilities 546,200 3,625 2.69% 448,173 4,926 4.46%
Demand deposits 192,027 --------- 163,674 ---------
Other Liabilities 5,938 7,627
---------- ----------
Total Liabilities 744,165 619,474
Shareholders' Equity 67,600 61,249
---------- ----------
$ 811,765 $ 680,723
========== ==========
Net interest income & margin (3) $ 8,563 4.62% $ 8,752 5.69%
========= =========
- ----------------------------------------------------------------------------------------------------------------------
1) Loan interest income includes fee income of $386,000 and $332,000 for the three month periods ended March 31, 2002
and 2001, respectively.
2) Includes the average allowance for loan losses of $11,954,000 and $9,413,000 and average deferred loan fees of
$1,058,000 and $875,000 for the three months ended March 31, 2002 and 2001, respectively.
3) Net interest margin is computed by dividing net interest income by the total average earning assets.
11
Volume/Rate Analysis
(in thousands) Three Months Ended March 31, 2002 over 2001
Increase (decrease) due to change in: Net
Volume Rate (4) Change
------ -------- ------
Interest-earning assets:
Net Loans (1)(2) $ 3,166 $ (4,099) $ (933)
Taxable investment securities (207) (297) (504)
Tax-exempt investment securities (3) 67 3 70
Federal funds sold 62 (185) (123)
-------- --------- ---------
Total 3,088 (4,578) (1,490)
-------- --------- ---------
Interest-bearing liabilities:
Demand deposits 85 (142) (57)
Savings deposits 163 (489) (326)
Time deposits 819 (1,751) (932)
Other borrowings 17 (3) 14
-------- --------- ---------
Total 1,084 (2,385) (1,301)
-------- --------- ---------
Interest differential $ 2,004 $ (2,193) $ (189)
======== ========= =========
1) Loan interest income includes fee income of $386,000 and $332,000 for the three month periods ended March 31, 2002
and 2001, respectively.
2) The average balance of non-accruing loans is immaterial as a percentage of total loans and, as such, has been included in
net loans.
3) Includes taxable-equivalent adjustments that relate to income on certain securities that is exempt from
federal income taxes. The effective federal statutory tax rate was 34% for 2002 and 2001.
4) The rate / volume variance has been included in the rate variance.
Net interest income for the first quarter of 2002 was $8,563,000, a
$189,000 (2.2%) decrease from first quarter of 2001. Interest
income was down $1,490,000 (10.9%) from the first quarter of 2001
even with an increase in average loan balances of $132,508,000
(28.7%), which added $3,166,000 to interest income. The increase
in average earning assets was more than offset by the significant
decreases in the interest rates during 2001. The prime rate was
lowered 150 basis points during the first quarter of 2001 and an
additional 325 basis points over the remainder of 2001. The
combination of these rate changes resulted in the average yield on
loans decreasing 280 basis points from 9.69% in the first quarter
of 2001 to 6.89% in the first quarter of 2002 resulting in a
decrease in interest income on loans of $4,099,000. Rates on the
other earning assets also decreased with a resultant decrease of
$479,000 in interest income.
Interest expense was lower by $1,301,000 (26.4%) in the first
quarter of 2002 from the prior year period. At the end of 2000 and
early in 2001, the Bank's rates on time certificates of deposit
(CDs) were over 6%. As the interest rates declined throughout
2001, rates paid on all deposits were adjusted accordingly. The
average rate paid on CDs decreased 246 basis points from 5.95% in
the first quarter of 2001 to 3.49% in the first quarter of 2002.
This difference in rates lowered interest expense on CDs by
$1,751,000. Lower rates on interest-bearing checking and savings
accounts decreased interest expense an additional $631,000 on a
quarter-over-quarter basis. Over the same period, growth in
deposits increased the average balances of interest-bearing
liabilities by $98,027,000 (21.9%), which added $1,084,000 to
interest expense.
The quarter ended March 31, 2002 is the first quarter that the
Federal Reserve Board has not decreased interest rates since the
fourth quarter of 2000. During that period, the net interest
margin for the Bank has decreased 131 basis points from 5.93% for
the fourth quarter of 2000 to 4.62% for the first quarter of 2002
which, as discussed above, had a significant negative impact on
interest income. If interest rates remain stable, the net
interest margin is expected to show a slight improvement as higher
rate CDs continue to reprice. In a rising rate environment the net
interest margin is expected to improve, as the Bank's variable rate
assets will reprice more quickly than the interest-bearing
liabilities.
12
Provision for Loan Losses
- -------------------------
The Bank provided $223,000 for loan losses in the first quarter of
2002 as compared to $120,000 in the first quarter of 2001. The
provision for loan losses that has been recorded is based on
factors which consider the loan growth, changes in the level of
nonperforming and classified assets, changing portfolio mix and
prevailing local and national economic conditions to establish the
required level of loan loss reserves. At March 31, 2002,
nonperforming and restructured loans totaled $2,271,000 as compared
to $1,478,000 at March 31, 2001. The ratios of the allowance for
loan losses to nonperforming loans at each quarter end were 535%
and 638%, respectively. The ratio of the allowance for loan losses
to total loans was 1.96% at each quarter end and was 1.94% at
December 31, 2001. (See the "Credit Risk" and "Allowance for Loan
Losses" sections for additional discussion.)
Noninterest Income
- ------------------
Noninterest income consists primarily of service charges on deposit
accounts and fees for miscellaneous services, which were primarily
responsible for the overall increases in noninterest income.
Noninterest income totaled $767,000 in the first quarter of 2002,
up $117,000 (18.0%) over the same period in 2001. Service charges
on deposit accounts were up $70,000 due to volume increases and
certain selective fee increases. Other fees and miscellaneous
income were up $47,000 on higher volumes.
Noninterest Expense
- -------------------
Noninterest expenses decreased $354,000 (7.2%) to $4,585,000 in the
first quarter of 2002 versus the first quarter 2001. Salary and
benefit expenses for the quarter of $2,751,000 were down $251,000
from the first quarter of 2001. Salary expense increased $132,000
due to staffing increases and normal salary progression. Benefit
and other payroll costs decreased $383,000 of which $260,000 was
the result of a one time reduction to employee health care costs.
Premises and equipment costs were down $47,000 (5.3%) due in most
part to lower depreciation expenses. Other expenses decreased
$56,000 to $989,000. The efficiency ratio for the period ended
March 31, 2002 improved to 49.1% from 52.5% for the same period in
the prior year.
Provision for Income Taxes
- --------------------------
The Company recorded income tax expense of $1,505,000 in the first
quarter of 2002 versus $1,526,000 in the first quarter of 2001.
The effective tax rate for the three months ended March 31, 2002
was 35.5% compared to 37.4% for the same period in the prior
year. The effective tax rate was lower in the first quarter of 2002
due to the increased effect of investments in tax exempt
securities and loans.
Securities
- ----------
At March 31, 2001, available-for-sale securities had a market value
of $132,652,000 with an amortized cost basis of $133,201,000. The
pretax unrealized loss of $549,000 at March 31, 2002 decreased
$164,000 from the $713,000 unrealized loss at December 31, 2001.
The increase in securities valuation resulted from slightly lower
interest rates in the securities markets at the end of the first
quarter of 2002.
Loans
- -----
Ending loan balances at March 31, 2002 were $619,580,000, which was
an increase of $13,280,000 (2.2%) from year-end 2001 balances. The
first quarter 2002 loan growth was slightly higher than the 1.7%
growth in the first quarter of 2001. The March 31, 2002 loan
balances were $137,971,000 (28.6%) higher than the year earlier
balances with increases in commercial loans of 5.5%; construction
loans of 30.0%; and real estate-other loans of 47.2%. The balances
at March 31, 2002 for these loan categories were $175,031,000,
$90,612,000 and $340,148,000, respectively. Loan demand is
expected to remain steady heading into the second quarter of 2002.
13
Credit Risk
- -----------
The Bank assesses and manages credit risk on an ongoing basis
through stringent credit review and approval policies, extensive
internal monitoring and established formal lending policies.
Additionally, the Bank contracts with an outside loan review
consultant to periodically examine new loans and to review the
existing loan portfolio. Management believes its ability to
identify and assess risk and return characteristics of the
Company's loan portfolio is critical for profitability and
growth. Management strives to continue the historically low level
of loan losses by continuing its emphasis on credit quality in the
loan approval process, active credit administration and regular
monitoring. With this in mind, management has designed and
implemented a comprehensive loan review and grading system that
functions to continually assess the credit risk inherent in the
loan portfolio.
Ultimately, the credit quality of the Bank's loans may be
influenced by underlying trends in the national and local economic
and business cycles. The Bank's business is mostly concentrated in
Monterey County. The County's economy is highly dependent on the
agricultural and tourism industries. The agricultural industry is
also a major driver of the economies of San Benito County and the
southern portions of Santa Cruz and Santa Clara Counties, which
represent the additional market areas for the Bank. As a result,
the Bank lends money to individuals and companies dependent upon the
agricultural and tourism industries.
The Company has significant extensions of credit and commitments to
extend credit which are secured by real estate, totaling
approximately $506 million at March 31, 2002. Although management
believes this real estate concentration has no more than the normal
risk of collectibility, a substantial decline in the economy in
general, or a decline in real estate values in the Bank's primary
market areas in particular, could have an adverse impact on the
collectibility of these loans. The ultimate recovery of these
loans is generally dependent on the successful operation, sale or
refinancing of the real estate. The Bank monitors the effects of
current and expected market conditions and other factors on the
collectibility of real estate loans. When, in management's
judgment, these loans are impaired, an appropriate provision for
losses is recorded. The more significant assumptions management
considers involve estimates of the following: lease, absorption and
sale rates; real estate values and rates of return; operating
expenses; inflation; and sufficiency of collateral independent of
the real estate including, in limited instances, personal
guarantees. Notwithstanding the foregoing, abnormally high rates of
impairment due to general/local economic conditions could adversely
affect the Company's future prospects and results of operations.
In extending credit and commitments to borrowers, the Bank
generally requires collateral and/or guarantees as security. The
repayment of such loans is expected to come from cash flow or from
proceeds from the sale of selected assets of the borrowers. The
Bank's requirement for collateral and/or guarantees is determined
on a case-by-case basis in connection with management's evaluation
of the creditworthiness of the borrower. Collateral held varies
but may include accounts receivable, inventory, property, plant and
equipment, income-producing properties, residences and other real
property. The Bank secures its collateral by perfecting its
interest in business assets, obtaining deeds of trust, or outright
possession among other means. Loan losses from lending
transactions related to real estate and agriculture compare
favorably with the Bank's loan losses on its loan portfolio as a
whole.
Management believes that its lending policies and underwriting
standards will tend to mitigate losses in an economic downturn;
however, there is no assurance that losses will not occur under
such circumstances. The Bank's loan policies and underwriting
standards include, but are not limited to, the following: 1)
maintaining a thorough understanding of the Bank's service area and
limiting investments outside of this area, 2) maintaining a
thorough understanding of borrowers' knowledge and capacity in
their field of expertise, 3) basing real estate construction loan
approval not only on salability of the project, but also on the
borrowers' capacity to support the project financially in the event
it does not sell within the original projected time period, and 4)
maintaining conforming and prudent loan to value and loan to cost
ratios based on independent outside appraisals and ongoing
inspection and analysis by the Bank's construction lending
officers. In addition, the Bank strives to diversify the risk
inherent in the construction portfolio by avoiding concentrations
to individual borrowers and on any one project.
14
Nonaccrual, Past Due and Restructured Loans
- -------------------------------------------
Management generally places loans on nonaccrual status when they
become 90 days past due, unless the loan is well secured and in the
process of collection. When a loan is placed on nonaccrual status,
the accrued and unpaid 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. Generally, a loan
may be returned to accrual status when all delinquent interest and
principal become current in accordance with the terms of the loan
agreement and remaining principal is considered collectible or when
the loan is both well secured and in the process of collection.
Loans are charged off when, in the opinion of management,
collection appears unlikely. The following table sets forth
nonaccrual loans, loans past due 90 days or more, and restructured
loans performing in compliance with modified terms at March 31,
2002 and December 31, 2001:
March 31, December 31,
In thousands (except percentages) 2002 2001
-------------- -------------
Past due 90 days or more and still accruing interest:
Commercial $ 82 $ 68
Real estate - -
Consumer and other 12 12
-------------- ------------
94 80
-------------- ------------
Nonaccrual:
Commercial 631 702
Real estate 592 592
Consumer and other - -
-------------- ------------
1,223 1,294
-------------- ------------
Restructured (in compliance with modified
terms) - Commercial 951 955
-------------- ------------
Total nonperforming and restructured loans $ 2,268 $ 2,329
============== ============
Allowance for loan losses as a percentage of nonperforming loans 535% 505%
Nonperforming loans to total loans 0.37% 0.38%
Nonperforming loans decreased $61,000 during the first quarter of
2002 compared to December 31, 2001. While the agricultural economy
in the Bank's service area has not been materially affected by the
national economic slow down, tourism in the Monterey Bay area has
seen a reduction in occupancy rates and general level of activity.
Management continues to closely monitor the loan portfolio for any
indications of weakness that could manifest into loan problems. At
quarter end, the nonperforming loans were 0.27% of total assets and
0.37% of total loans compared to 0.29% and 0.38% at December 31,
2001. The decrease in nonperforming loans coupled with the
quarterly provision in the allowance for loan losses resulted in
the improvement in the coverage ratio of the allowance for loan
losses to nonperforming loans from 505% at year-end to 535% at
March 31, 2002.
A loan is impaired when, based on 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. Impaired loans are 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 value of the collateral if the
loan is collateral-dependent.
At March 31, 2002, the recorded investment in loans that are
considered impaired was $2,785,000 of which $1,223,000 is included in
nonaccrual loans, and $951,000 is included in restructured loans
above. Impaired loans had a valuation allowance of $1,030,000. At
December 31, 2001, the recorded investment in loans considered
15
impaired was $2,418,000, including $1,294,000 of nonaccrual loans
above and $955,000 of restructured loans performing in compliance
with modified terms. Impaired loans had a valuation allowance of
$536,000. Management is not aware of any potential problem loans,
other than the impaired loans disclosed above, which were accruing
and current at March 31, 2002, where serious doubt exists as to the
ability of the borrower to comply with the present repayment terms.
Allowance for Loan Losses
- -------------------------
The Bank maintains an allowance for loan losses to absorb losses
inherent in the loan portfolio. The allowance is based on our
regular assessments of the probable estimated losses inherent in
the loan portfolio and to a lesser extent, unused commitments to
provide financing. Determining the adequacy of the allowance is a
matter of careful judgment, which reflects consideration of all
significant factors that affect the collectibility of the portfolio
as of the evaluation date. Our methodology for measuring the
appropriate level of the allowance relies on several key elements,
which include the formula allowance, specific allowances for
identified problem loans and the unallocated reserve. The
unallocated allowance contains amounts that are based on
management's evaluation of conditions that are not directly measured
in the determination of the formula and specific allowances.
The formula allowance is calculated by applying loss factors to
outstanding loans and certain unused commitments, in each case
based on the internal risk grade of such loans and commitments.
Changes in risk grades of both performing and nonperforming loans
affect the amount of the formula allowance. Loss factors are based
on our historical loss experience and may be adjusted for
significant factors that, in management's judgment, affect the
collectibility of the portfolio as of the evaluation date. At
March 31, 2002, the formula allowance was $9,140,000 compared to
$9,043,000 at December 31, 2001. The increase in the formula
allowance was primarily a result of the growth in loan and loan
commitment balances and the change in the mix of loans in this category
of $46,864,000 in the first quarter of 2002.
In addition to the formula allowance calculated by the application
of the loss factors to the standard loan categories, certain
specific allowances may also be calculated. Quarterly, all
criticized loans are analyzed individually based on the source and
adequacy of repayment and specific type of collateral, and an
assessment is made of the adequacy of the formula reserve relative
to the individual loan. A specific allocation higher than the
formula reserve will be calculated based on the higher than normal
probability of loss and/or a collateral shortfall. At March 31,
2002, the specific allowance was $1,435,000 on a loan base of
$17,473,000 compared to a specific allowance of $1,678,000 on a
loan base of $18,922,000 at December 31, 2001. The decrease in the
specific allowance in the first quarter of 2002 was primarily
attributable to reclassifying the loans of one borrower from the
specific allowance to a category within the formula allowance.
The unallocated allowance contains amounts that are based on
management's evaluation of conditions that are not directly
measured in the determination of the formula and specific
allowances. The evaluation of the inherent loss with respect to
these conditions is subject to a higher degree of uncertainty
because they are not identified with specific problem loans or
portfolio segments. At March 31, 2002, the unallocated allowance
was $1,569,000 compared to $1,032,000 at December 31, 2001. The
conditions evaluated in connection with the unallocated allowance
include the following at the balance sheet date:
o The current national and local economic and business
conditions, trends and developments, including the condition of
various market segments within our lending area;
o Changes in lending policies and procedures, including
underwriting standards and collection, charge-off, and recovery
practices;
o Changes in the nature, mix, concentrations and volume of the
loan portfolio;
o The effect of other external factors such as competition and
legal and regulatory requirements on the level of estimated
credit losses in the Bank's current portfolio.
There can be no assurance that the adverse impact of any of these
conditions on the Bank will not be in
16
excess of the unallocated
allowance as determined by management at March 31, 2002 and set
forth in the preceding paragraph.
The allowance for loan losses totaled $12,144,000 or 1.96% of total
loans at March 31, 2002 compared to $11,753,000 or 1.94% at
December 31, 2001 and $9,427,000 or 1.96% of total loans at March
31, 2001. At these dates, the allowance represented 535%, 505% and
638% of nonperforming loans.
It is the policy of management to maintain the allowance for loan
losses at a level adequate for risks inherent in the loan
portfolio. Based on information currently available to analyze
loan loss potential, including economic factors, overall credit
quality, historical delinquency and a history of actual
charge-offs, management believes that the loan loss provision and
allowance are adequate. However, no prediction of the ultimate
level of loans charged off in future periods can be made with any
certainty.
The following table summarizes activity in the allowance for loan
losses for the periods indicated:
(In thousands, except percentages) Three months ended March 31,
2002 2001
------------ ------------
Beginning balance $ 11,753 $ 9,371
Provision charged to expense 223 120
Loans charged off (53) (87)
Recoveries 221 23
------------ ------------
Ending balance $ 12,144 $ 9,427
============ ============
Ending loan portfolio $ 619,580 $ 481,609
============ ============
Allowance for loan losses as percentage of ending loan portfolio 1.96% 1.96%
Liquidity
- ---------
Liquidity management refers to the Company's ability to provide
funds on an ongoing basis to meet fluctuations in deposit levels as
well as the credit needs and requirements of its clients. Both
assets and liabilities contribute to the Company's liquidity
position. Federal funds lines, short-term investments and
securities, and loan repayments contribute to liquidity, along with
deposit increases, while loan funding and deposit withdrawals
decrease liquidity. The Bank assesses the likelihood of projected
funding requirements by reviewing historical funding patterns,
current and forecasted economic conditions and individual client
funding needs. Commitments to fund loans and outstanding standby
letters of credit at March 31, 2002, were approximately
$198,224,000 and $3,616,000, respectively. Such loans relate
primarily to revolving lines of credit and other commercial loans,
and to real estate construction loans.
The Company's sources of liquidity consist of overnight funds sold
to correspondent banks, unpledged marketable investments, loans
pledged to the Federal Home Loan Bank of San Francisco ("FHLB-SF")
and sellable SBA loans. On March 31, 2002, consolidated liquid
assets totaled $156.7 million or 18.7% of total assets as compared
to $110.0 million or 13.7% of total consolidated assets on December
31, 2001. In addition to liquid assets, the Bank maintains
short-term lines of credit with correspondent banks. At March 31,
2002, the Bank had $80,000,000 available under these credit lines.
Informal agreements are also in place with various other banks to
purchase participations in loans, if necessary. The Company serves
primarily a business and professional customer base and, as such,
its deposit base is susceptible to economic fluctuations.
Accordingly, management strives to maintain a balanced position of
liquid assets to volatile and cyclical deposits.
17
Capital Resources
- -----------------
The Company's total shareholders' equity was $68,305,000 at March
31, 2002 compared to $65,336,000 at December 31, 2001.
The Company and the Bank are subject to regulations issued by the
Board of Governors and the FDIC, which require maintenance of a
certain level of capital. Under the regulations, capital
requirements are based upon the composition of an institution's
asset base and the risk factors assigned to those assets. The
guidelines characterize an institution's capital as being "Tier 1"
capital (defined to be principally shareholders' equity less
intangible assets) and "Tier 2" capital (defined to be principally
the allowance for loan losses, limited to one and one-fourth
percent of gross risk weighted assets). The guidelines require the
Company and the Bank to maintain a risk-based capital target ratio
of 8%, one-half or more of which should be in the form of Tier 1
capital.
The following table shows the Company's and the Bank's actual
capital amounts and ratios at March 31, 2002 and December 31, 2001
as well as the minimum capital ratios for capital adequacy and well
capitalized classifications under the regulatory framework:
To Be Categorized
Well Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions
Company Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of March 31, 2002
- --------------------
Total Capital (to Risk Weighted Assets): 76,794,000 11.1% 55,136,000 8.0% N/A
Tier 1 Capital (to Risk Weighted Assets): 68,135,000 9.9% 27,568,000 4.0% N/A
Tier 1 Capital (to Average Assets): 68,135,000 8.4% 32,440,000 4.0% N/A
As of December 31, 2001:
- ------------------------
Total Capital (to Risk Weighted Assets): 73,518,000 11.1% 52,971,000 8.0% N/A
Tier 1 Capital (to Risk Weighted Assets): 65,198,000 9.9% 26,486,000 4.0% N/A
Tier 1 Capital (to Average Assets): 65,198,000 8.4% 30,896,000 4.0% N/A
Community Bank
As of March 31, 2002:
- ---------------------
Total Capital (to Risk Weighted Assets): 68,226,000 10.0% 54,375,000 8.0% 67,979,000 10.0%
Tier 1 Capital (to Risk Weighted Assets): 59,685,000 8.8% 27,187,000 4.0% 40,787,000 6.0%
Tier 1 Capital (to Average Assets): 59,685,000 7.4% 32,071,000 4.0% 40,089,000 5.0%
As of December 31, 2001:
- ------------------------
Total Capital (to Risk Weighted Assets): 65,318,000 10.0% 52,202,000 8.0% 65,252,000 10.0%
Tier 1 Capital (to Risk Weighted Assets): 57,117,000 8.8% 26,101,000 4.0% 39,151,000 6.0%
Tier 1 Capital (to Average Assets): 57,117,000 7.5% 30,470,000 4.0% 38,088,000 5.0%
The Bank meets the "well capitalized" ratio measures at both March
31, 2002 and December 31, 2001.
18
Item 3. MARKET RISK MANAGEMENT
Overview
- --------
The goal for managing the assets and liabilities of the Bank is to
maximize shareholder value and earnings while maintaining a high
quality balance sheet without exposing the Bank to undue interest
rate risk. The Board of Directors has overall responsibility for
the Company's interest rate risk management policies. The Bank has
an Asset and Liability Management Committee (ALCO), which
establishes and monitors guidelines to control the sensitivity of
earnings to changes in interest rates.
Asset/Liability Management
- --------------------------
Activities involved in asset/liability management include but are
not limited to lending, accepting and placing deposits, investing
in securities and issuing debt. Interest rate risk is the primary
market risk associated with asset/liability management.
Sensitivity of earnings to interest rate changes arises when yields
on assets change in a different time period or in a different
amount from that of interest costs on liabilities. To mitigate
interest rate risk, the structure of the balance sheet is managed
with the goal that movements of interest rates on assets and
liabilities are correlated and contribute to earnings even in
periods of volatile interest rates. The asset/liability management
policy sets limits on the acceptable amount of variance in net
interest margin and market value of equity under changing interest
environments. The Bank uses simulation models to forecast
earnings, net interest margin and market value of equity.
Simulation of earnings is the primary tool used to measure the
sensitivity of earnings to interest rate changes.
Using computer modeling techniques, the Company is able to estimate
the potential impact of changing interest rates on earnings. A
balance sheet forecast is prepared using inputs of actual loan,
securities and interest bearing liabilities (i.e.
deposits/borrowings) positions as the beginning base. The forecast
balance sheet is processed against three interest rate scenarios.
The scenarios include a 200 basis point rising rate forecast, a
flat rate forecast and a 200 basis point falling rate forecast
which take place within a one year time frame. The net interest
income is measured during the first year of the rate changes and in
the year following the rate changes. The latest simulation
forecast using February 28, 2002 balances and measuring against a
flat rate environment, calculated that in a one-year horizon an
increase in interest rates of 200 basis points would result in an
increase of $3,053,000 in net interest income. Conversely, a 200
basis point decrease would result in a decrease of $3,659,000 in
net interest income. The basic structure of the balance sheet has
not changed significantly from the last simulation run.
The simulations of earnings do not incorporate any management
actions, which might moderate the negative consequences of interest
rate deviations. Therefore, they do not reflect likely actual
results, but serve as conservative estimates of interest rate
risk. The risk profile of the Bank has not changed materially from
that at year-end 2001.
Other Matters
- -------------
The terrorist actions on September 11, 2001 and thereafter have had
significant adverse effects upon the United States economy.
Whether the terrorist activities in the future and the actions of
the United States and its allies in combating terrorism on a
worldwide basis will adversely impact the Company and the extent of
such impact is uncertain. However, such events have had and may
continue to have an adverse effect on the economy in the Company's
market areas. Such continued economic deterioration could
adversely affect the Company's future results of operations by,
among other matters, reducing the demand for loans and other
products and services offered by the Company, increasing
nonperforming loans and the amounts reserved for loan losses, and
causing a decline in the Company's stock price.
19
PART II - OTHER INFORMATION
Item 1. Legal proceedings.
None.
Item 2. Changes in securities.
None.
Item 3. Defaults upon senior securities.
None.
Item 4. Submission of matters to a vote of security holders.
None.
Item 5. Other information.
None.
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits
(2.1) Agreement and Plan of Reorganization and Merger by
and between Central Coast Bancorp, CCB Merger
Company and Cypress Coast Bank dated as of
December 5, 1995, incorporated by reference from
Exhibit 99.1 to Form 8-K, filed with the Commission
on December 7, 1995.
(3.1) Articles of Incorporation, as amended, incorporated
by reference from Exhibit 10.18 to the Registrant's
2001 Annual Report on Form 10-K filed with the
Commission on March 26, 2002.
(3.2) Bylaws, as amended, incorporated by reference from
Exhibit 3.2 to Form 10-Q, filed with the Commission
on August 13, 2001.
(4.1) Specimen form of Central Coast Bancorp stock
certificate, incorporated by reference
from the Registrant's 1994 Annual Report on Form
10-K filed with the Commission on March 31, 1995.
(10.1) Lease agreement dated December 12, 1994,
related to 301 Main Street, Salinas, California
incorporated by reference from the Registrant's 1994
Annual Report on Form 10-K filed with the Commission
on March 31, 1995.
(10.2) King City Branch Lease incorporated by
reference from Exhibit 10.3 to Registration
Statement on Form S-4, No. 33-76972, filed with the
Commission on March 28, 1994.
(10.3) Amendment to King City Branch Lease, incorporated by
reference from Exhibit 10.4 to Registration Statement
on Form S-4, No. 33-76972, filed with the Commission
on March 28, 1994.
*(10.4) 1982 Stock Option Plan, as amended,
incorporated by reference from Exhibit 4.2 to
20
Registration Statement on Form S-8, No. 33-89948,
filed with the Commission on March 3, 1995.
*(10.5) Form of Nonstatutory Stock Option Agreement under
the 1982 Stock Option Plan incorporated by reference
from Exhibit 4.6 to Registration Statement on Form
S-8, No. 33-89948, filed with the Commission on
March 3, 1995.
*(10.6) Form of Incentive Stock Option Agreement under the
1982 Stock Option Plan incorporated by reference from
Exhibit 4.7 to Registration Statement on Form S-8,
No. 33-89948, filed with the Commission on March 3, 1995.
*(10.7) 1994 Stock Option Plan, as amended and restated, incorporated
by reference from Exhibit 9.9 to Registration Statement on Form
S-8, No. 33-89948, filed with the Commission on
November 15, 1996.
*(10.8) Form of Nonstatutory Stock Option Agreement under the 1994
Stock Option Plan incorporated by reference from Exhibit 4.3 to
Registration Statement on Form S-8, No. 33-89948,
filed with Commission on March 3, 1995.
*(10.9) Form of Incentive Stock Option Agreement under the 1994 Stock
Option Plan incorporated by reference from Exhibit 4.4 to
Registration Statement on Form S-8, No. 33-89948,
filed with the Commission on March 3, 1995.
*(10.10) Form of Director Nonstatutory Stock Option Agreement under the
1994 Stock Option Plan incorporated by reference from Exhibit
4.5 to Registration Statement on Form S-8, No.
33-89948, filed with the Commission on March 3, 1995.
*(10.11) Form of Bank of Salinas Indemnification Agreement for directors
and executive officers incorporated by reference from Exhibit
10.9 to Amendment No. 1 to Registration Statement on Form
S-4, No. 33-76972, filed with the Commission on
April 15, 1994.
*(10.12) 401(k) Pension and Profit Sharing Plan Summary Plan Description
incorporated by reference from Exhibit 10.8 to Registration
Statement on Form S-4, No. 33-76972, filed with the
Commission on March 28, 1994.
*(10.13) Form of Employment Agreement incorporated by reference from
Exhibit 10.13 to the Company's 1996 Annual Report on Form 10-K
filed with the Commission on March 31, 1997.
*(10.14) Form of Executive Salary Continuation Agreement incorporated by
reference from Exhibit 10.14 to the Company's 1996 Annual
Report on Form 10-K filed with the Commission on
March 31, 1997.
*(10.15) Form of Indemnification Agreement incorporated by reference from
Exhibit D to the Proxy Statement filed with the Commission
on September 3, 1996, in connection with
Registrant's 1996 Annual Shareholders' Meeting held
on September 23, 1996.
(10.16) Purchase and Assumption Agreement for the Acquisition of Wells
Fargo Bank Branches incorporated by reference from Exhibit
10.17 to the Registrant's 1996 Annual Report on Form
10-K filed with the Commission on March 31, 1997.
(10.17) Lease agreement dated November 27, 2001 related
to 491 Tres Pinos Road, Hollister, California
incorporated by reference from Exhibit 10.17 to the
Registrant's 2001 Annual Report on Form 10-K filed
with the Commission on March 26, 2002.
21
(10.18) Lease agreement dated February 11, 2002,
related to 761 First Street, Gilroy, California
incorporated by reference from Exhibit 10.18 to the
Registrant's 2001 Annual Report on Form 10-K filed
with the Commission on March 26, 2002.
(21.1) The Registrant's only subsidiary is its wholly-owned
subsidiary, Community Bank of Central California.
*Denotes management contracts, compensatory plans or
arrangements.
(b) Reports on Form 8-K.
A current report on Form 8-K was filed with the
Commission on April 22, 2002, reporting a press release
dated April 16, 2002 regarding the Company's operating
results for the quarter ended March 31, 2002.
22
SIGNATURES
- ---------------------------------------------------------------------
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
April 23, 2002 CENTRAL COAST BANCORP
By:/s/ ROBERT M. STANBERRY
-----------------------
Robert M. Stanberry
(Chief Financial Officer
and Principal Accounting
Officer)
23