UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the Quarter ended June 30, 2003 Commission file number 0-10997 |
WEST COAST BANCORP
| Oregon | 93-0810577 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
| 5335 Meadows Road – Suite 201 | ||
| Lake Oswego, Oregon | 97035 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (503) 684-0884
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
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 o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No o
The number of shares of Registrant’s Common Stock outstanding on July 31, 2003 was 15,191,150.
WEST COAST BANCORP
FORM 10-Q
Table of Contents
| PART I. Financial Information | ||||||||
| Item 1. | Financial Statements (unaudited) | Page | ||||||
Consolidated Balance Sheets -
June 30, 2003 and December 31, 2002 |
3 | |||||||
Consolidated Statements of Income -
Three and six months ended June 30, 2003 and 2002 |
4 | |||||||
Consolidated Statements of Cash Flows -
Six months ended June 30, 2003 and 2002 |
5 | |||||||
Consolidated Statements of Changes in Stockholders’ Equity -
Six months ended June 30, 2003 and year ended December 31, 2002 |
6 | |||||||
Notes to Consolidated Financial Statements |
7 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
14 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
27 | ||||||
| Item 4. | Controls and Procedures |
27 | ||||||
| PART II. Other Information | ||||||||
| Item 1. | Legal Proceedings |
27 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K |
27 | ||||||
| Signatures | 28 | |||||||
2
PART I. Financial Information
Item 1. Financial Statements
WEST COAST BANCORP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| June 30, | December 31, | ||||||||||
| (Dollars in thousands) | 2003 | 2002 | |||||||||
ASSETS: |
|||||||||||
Cash and cash equivalents: |
|||||||||||
Cash and due from banks |
$ | 71,321 | $ | 55,026 | |||||||
Interest-bearing deposits in other banks |
1,995 | 2,316 | |||||||||
Federal funds sold |
3,343 | 391 | |||||||||
Total cash and cash equivalents |
76,659 | 57,733 | |||||||||
Trading assets |
859 | 967 | |||||||||
Investment securities available for sale, at fair value
(amortized cost: $247,610 and $257,954) |
253,130 | 266,407 | |||||||||
Loans held for sale |
8,860 | 10,924 | |||||||||
Loans |
1,211,778 | 1,159,915 | |||||||||
Allowance for loan losses |
(17,843 | ) | (16,838 | ) | |||||||
Loans, net |
1,193,935 | 1,143,077 | |||||||||
Premises and equipment, net |
26,630 | 26,609 | |||||||||
Intangible assets, net |
1,040 | 1,218 | |||||||||
Bank owned life insurance |
14,062 | 1,757 | |||||||||
Other assets |
18,369 | 23,635 | |||||||||
Total assets |
$ | 1,593,544 | $ | 1,532,327 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||||
Deposits: |
|||||||||||
Demand |
$ | 291,014 | $ | 275,724 | |||||||
Savings and interest-bearing demand |
649,145 | 619,502 | |||||||||
Certificates of deposit |
384,403 | 371,227 | |||||||||
Total deposits |
1,324,562 | 1,266,453 | |||||||||
Short-term borrowings |
17,572 | 9,902 | |||||||||
Long-term borrowings |
83,000 | 98,000 | |||||||||
Mandatorily redeemable trust preferred securities |
12,500 | 12,500 | |||||||||
Other liabilities |
18,234 | 12,085 | |||||||||
Total liabilities |
1,455,868 | 1,398,940 | |||||||||
Commitments and contingent liabilities (note 8) |
|||||||||||
STOCKHOLDERS’ EQUITY: |
|||||||||||
Preferred stock: no par value, none issued;
10,000,000 shares authorized |
|||||||||||
Common stock: no par value, 55,000,000 shares
authorized; 15,178,657and 15,325,937 shares issued
and outstanding, respectively |
18,973 | 19,158 | |||||||||
Additional paid-in capital |
69,247 | 72,279 | |||||||||
Retained earnings |
45,415 | 38,047 | |||||||||
Deferred compensation |
(1,479 | ) | (671 | ) | |||||||
Accumulated other comprehensive income |
5,520 | 4,574 | |||||||||
Total stockholders’ equity |
137,676 | 133,387 | |||||||||
Total liabilities and stockholders’ equity |
$ | 1,593,544 | $ | 1,532,327 | |||||||
See notes to consolidated financial statements.
3
WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| (Dollars and shares in thousands | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
| except per shares data) | 2003 | 2002 | 2003 | 2002 | ||||||||||||||
INTEREST INCOME: |
||||||||||||||||||
Interest and fees on loans |
$ | 19,693 | $ | 20,567 | $ | 39,187 | $ | 41,036 | ||||||||||
Interest on taxable investment securities |
1,984 | 2,372 | 4,195 | 4,636 | ||||||||||||||
Interest on nontaxable investment securities |
818 | 887 | 1,649 | 1,791 | ||||||||||||||
Interest on deposits in other banks |
8 | 19 | 12 | 34 | ||||||||||||||
Interest on federal funds sold |
20 | 14 | 28 | 20 | ||||||||||||||
Total interest income |
22,523 | 23,859 | 45,071 | 47,517 | ||||||||||||||
INTEREST EXPENSE: |
||||||||||||||||||
Savings and interest-bearing demand |
1,204 | 1,829 | 2,492 | 3,729 | ||||||||||||||
Certificates of deposit |
2,802 | 3,638 | 5,701 | 7,606 | ||||||||||||||
Short-term borrowings |
107 | 79 | 246 | 200 | ||||||||||||||
Long-term borrowings |
912 | 1,349 | 2,174 | 2,848 | ||||||||||||||
Manditorily redeemable trust preferred securities |
264 | 118 | 526 | 229 | ||||||||||||||
Total interest expense |
5,289 | 7,013 | 11,139 | 14,612 | ||||||||||||||
NET INTEREST INCOME |
17,234 | 16,846 | 33,932 | 32,905 | ||||||||||||||
Provision for loan losses |
850 | 1,442 | 1,700 | 2,319 | ||||||||||||||
Net interest income after provision for loan losses |
16,384 | 15,404 | 32,232 | 30,586 | ||||||||||||||
NONINTEREST INCOME: |
||||||||||||||||||
Service charges on deposit accounts |
1,777 | 1,556 | 3,449 | 3,112 | ||||||||||||||
Other service charges, commissions and fees |
1,712 | 1,392 | 3,104 | 2,541 | ||||||||||||||
Trust revenue |
445 | 446 | 860 | 907 | ||||||||||||||
Gain on sales of loans |
1,572 | 980 | 2,714 | 2,072 | ||||||||||||||
Bank owned life insurance |
196 | — | 305 | — | ||||||||||||||
Other |
138 | 136 | 199 | 1,092 | ||||||||||||||
Gain on sales of securities |
— | — | 192 | — | ||||||||||||||
Total noninterest income |
5,840 | 4,510 | 10,823 | 9,724 | ||||||||||||||
NONINTEREST EXPENSE: |
||||||||||||||||||
Salaries and employee benefits |
8,063 | 7,170 | 15,893 | 14,715 | ||||||||||||||
Equipment |
1,245 | 1,165 | 2,461 | 2,497 | ||||||||||||||
Occupancy |
1,174 | 1,157 | 2,355 | 2,310 | ||||||||||||||
Check and other transaction processing |
717 | 645 | 1,392 | 1,263 | ||||||||||||||
Professional fees |
640 | 424 | 1,141 | 785 | ||||||||||||||
Courier and postage |
519 | 486 | 1,028 | 962 | ||||||||||||||
Marketing |
678 | 497 | 967 | 889 | ||||||||||||||
Other loan expense |
440 | 313 | 887 | 693 | ||||||||||||||
Communications |
310 | 299 | 597 | 594 | ||||||||||||||
Other taxes and insurance |
181 | 188 | 363 | 382 | ||||||||||||||
Printing and office supplies |
196 | 190 | 336 | 361 | ||||||||||||||
Other noninterest expense |
664 | 553 | 1,090 | 1,600 | ||||||||||||||
Total noninterest expense |
14,827 | 13,087 | 28,510 | 27,051 | ||||||||||||||
INCOME BEFORE INCOME TAXES |
7,397 | 6,827 | 14,545 | 13,259 | ||||||||||||||
PROVISION FOR INCOME TAXES |
2,398 | 2,303 | 4,826 | 4,492 | ||||||||||||||
NET INCOME |
$ | 4,999 | $ | 4,524 | $ | 9,719 | $ | 8,767 | ||||||||||
Basic earnings per share |
$ | 0.33 | $ | 0.29 | $ | 0.64 | $ | 0.56 | ||||||||||
Diluted earnings per share |
$ | 0.32 | $ | 0.28 | $ | 0.62 | $ | 0.54 | ||||||||||
Weighted average common shares |
15,076 | 15,640 | 15,111 | 15,749 | ||||||||||||||
Weighted average diluted shares |
15,586 | 16,133 | 15,604 | 16,222 | ||||||||||||||
See notes to consolidated financial statements.
4
WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six months ended June 30, | |||||||||||
| (Dollars in thousands) | 2003 | 2002 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||||||||
Net income |
$ | 9,719 | $ | 8,767 | |||||||
Adjustments to reconcile net income to cash
provided by operating activities: |
|||||||||||
Depreciation of premises and equipment |
1,380 | 1,685 | |||||||||
Deferred income tax expense benefit |
(155 | ) | (33 | ) | |||||||
Write-down of premises and equipment |
— | 613 | |||||||||
Amortization of intangibles |
178 | 180 | |||||||||
Provision for loan losses |
1,700 | 2,319 | |||||||||
Decrease (increase) in interest receivable |
123 | (24 | ) | ||||||||
Decrease in other assets |
4,993 | 33 | |||||||||
Gain on sale of securities |
(192 | ) | — | ||||||||
Gains on sales of loans |
2,714 | 2,072 | |||||||||
Origination of loans held for sale |
(53,513 | ) | (45,836 | ) | |||||||
Proceeds from sales of loans held for sale |
52,863 | 49,441 | |||||||||
Decrease in interest payable |
(276 | ) | (198 | ) | |||||||
Increase (decrease) in other liabilities |
6,425 | (4,951 | ) | ||||||||
Stock based compensation expense |
332 | 255 | |||||||||
Tax benefit associated with stock options |
54 | 133 | |||||||||
Decrease in trading assets |
108 | 37 | |||||||||
Net cash provided by operating activities |
26,453 | 14,493 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||||||
Proceeds from maturities of available for sale securities |
60,207 | 31,238 | |||||||||
Proceeds from sales of securities |
4,188 | — | |||||||||
Purchase of available for sale securities |
(49,980 | ) | (35,397 | ) | |||||||
Purchase of bank owned life insurance |
(12,000 | ) | — | ||||||||
Loans made to customers greater than principal collected on loans |
(52,558 | ) | (52,346 | ) | |||||||
Net capital expenditures |
(1,401 | ) | (812 | ) | |||||||
Net cash used in investing activities |
(51,544 | ) | (57,317 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||||||||
Net increase in demand, savings and interest
bearing transaction accounts |
44,933 | 29,783 | |||||||||
Net increase in certificates of deposit |
13,176 | 22,863 | |||||||||
Proceeds from issuance of trust preferred securities |
— | 7,500 | |||||||||
Proceeds from issuance of long-term borrowings |
— | 35,000 | |||||||||
Repayment of long-term borrowings |
(15,000 | ) | (20,000 | ) | |||||||
Net (decrease) increase in short-term borrowings |
7,670 | (5,315 | ) | ||||||||
Redemption and repurchase of common stock |
(5,520 | ) | (6,520 | ) | |||||||
Net proceeds from issuance of common stock |
1,109 | 564 | |||||||||
Dividends paid and cash paid for fractional shares |
(2,351 | ) | (2,298 | ) | |||||||
Net cash provided by financing activities |
44,017 | 61,577 | |||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
18,926 | 18,753 | |||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
57,733 | 52,961 | |||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 76,659 | $ | 71,714 | |||||||
Supplemental cash flow information: |
|||||||||||
Cash paid in the period for: |
|||||||||||
Interest |
$ | 11,415 | $ | 14,810 | |||||||
Income taxes |
$ | 6,075 | $ | 1,273 | |||||||
See notes to consolidated financial statements.
5
WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Accumulated | </ | |||||||||||||||||||||||||||||