SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-23322
CASCADE BANCORP
(Name of registrant as specified in its charter)
| Oregon (State of incorporation) |
93-1034484 (IRS Employer Identification #) |
| 1100 NW Wall Street, Bend, Oregon (Address of principal executive offices) |
97701 (Zip Code) |
(541) 385-6205
(Registrant’s telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
(Title of Class)
Indicate by check mark whether the registrant: (1) 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x]
State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. $173,704,551 aggregate market value as of February 28, 2003, based on the average bid and asked price.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 12,563,072 shares of no par value Common Stock on February 28, 2003.
DOCUMENTS INCORPORATED BY REFERENCE
Part III is incorporated by reference from the issuer’s definitive proxy statement for the annual meeting of shareholders to be held on April 21, 2003.
CASCADE BANCORP
FORM 10-K
ANNUAL REPORT
TABLE OF CONTENTS
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PART I |
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PART II |
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MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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PART III |
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PART IV |
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EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K |
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PART I
Item 1. BUSINESS
Company
Cascade Bancorp (Bancorp) is an Oregon chartered Financial Holding Company formed in 1990 and headquartered in Bend, Oregon, with its principal subsidiary Bank of the Cascades (the Bank). Together these entities are referred to as (“the Company”). At December 31, 2002 the Company had total consolidated assets of approximately $578 million, net loans of approximately $492 million and deposits of approximately $502 million.
Bank of the Cascades
The Bank was chartered as an Oregon State bank in March 1976 and opened for business in February 1977. The Bank is a community bank offering the full range of financial services to its business and consumer clients, including residential mortgage, trust and investments. The Bank has a total of twelve branches, nine of which are located in Central Oregon, while three offices are in the Salem/Keizer communities of Oregon. Two additional offices are currently under construction; one in West Salem which is expected to open in mid-2003 and the other in the Old Mill district of Bend which is expected to open early 2004. In Deschutes County, its largest market concentration, the Company is the market share leader in customer deposits, holding over 32% market share. The Bank also is the market share leader in construction and commercial real estate lending as well as in residential mortgage origination. Over the past decade the population of Deschutes County has grown at a rate among the fastest of all counties in the United States. This rapid growth has been driven by in-migration of persons seeking a higher quality of life. The Region is ranked in the “Six Best Vacation Destinations and Hometowns” by Time Magazine and as one of the “Five Best Places to Retire” and the “Fourth Best Place for Families to Recreate in the United States” by Money Magazine. With this growth has come increasing real estate, service, healthcare, professional, and tourism/recreational industries. The Bank’s headquarters are located in Bend, Oregon.
With a personal-touch relationship banking strategy, the Bank offers a broad range of commercial and retail banking services to its customers. Lending activities serve small to medium-sized business, professional and consumer accounts. The Bank provides commercial real estate loans, real estate construction and development loans, commercial and industrial loans as well as consumer installment, line-of-credit, credit card, and home equity loans. Due to the continued expansion of the local population, real estate lending represents approximately 71% of total loans. The Bank originates and services residential mortgage loans that are typically sold on the secondary market. The Bank provides consumer and business deposit services including checking, money market, and time deposit accounts and related payment services such as cash management, lock box, internet banking and electronic bill payment.
In mid-1999 the Company began offering Trust and Investment services. Trust services focus on the personal trust needs of clients by providing living and testamentary trust, asset and financial management, and fiduciary services. Investment services are provided by a licensed on-site broker through a broker/dealer and agent relationship.
Employees
The Company views its employees as an integral resource in achieving its strategies and long term goals, and considers its relationship with its employees to be good. Bancorp has no employees other than its executive officers, who are also employees of the Bank. The Company had 238 full-time employees as of December 31, 2002, up from 207 at the prior year end. None of the employees of the Company are subject to a collective bargaining agreement.
Business Strategy
The Company is the dominant market-share bank in its main Deschutes County (Oregon) market, growing to over 32% share of deposits and a leadership position in commercial real estate, construction, consumer and residential mortgage lending. Deschutes County is a fast growing market, with county population growth rate in the 98th percentile in the U.S. during the past decade. The Company has established the following key performance goals: 1) Consistently exceed 18% return on equity, 2) Consistently exceed 10% growth in earnings per share, 3)
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Identify and prudently manage credit and business risk and 4) Strive to profitably diversify revenue and 5) Continuously seek efficiency improvements in all its activities.
For a quarter of a century, the Bank has focused on personal-touch relationship banking, delivering competitive financial products and premier customer service. The Company is committed to providing “customer choice” in accessing banking products, including traditional branches, ATMs, Internet banking, and telephonic access, and is committed to the application of advanced technology for the convenience of customers. Importantly, the Company strives to recruit and retain the best in-market bankers for competitive advantage.
In a recent nationwide peer analysis, the Company was recognized by American Banker magazine as being among the highest return on equity banks in the country over the past five years. While the Company has achieved strong and profitable growth in past years, there can be no assurance as to the ongoing achievement of these goals due to the inherent uncertainty of future events, competitive forces, the vitality of the local, regional and national economy and other unforeseen circumstances.
In addition to targeting growth and increased market share in its existing locations, the Company may also consider future expansion by de novo branching when it identifies market opportunities. The Company initiated such a strategy in Salem, Oregon in 1999 and will open its fourth office in the Salem area in mid-2003. The Company may also consider strategic partnerships or business acquisitions to expand its market opportunities.
Within the Company’s risk management objectives are to implement loan policies and underwriting practices designed to prudently manage credit risk. Funding policies are designed to maintain an appropriate volume and mix of core relationship deposits augmented by time deposit balances to efficiently fund its loan and investment activities. The Company may utilize borrowings or other wholesale funding from reliable counterparties such as the Federal Home Loan Bank and the Federal Reserve Bank. The Company monitors and manages its sensitivity to changing interest rates by utilizing simulation analysis and scenario modeling
Factors That May Affect Future Results
Competition
Commercial and consumer banking in Central Oregon, as well as in the State of Oregon and the nation as a whole, is highly competitive. The Company competes principally with other commercial banks, savings and loan associations, credit unions, mortgage companies, brokers and other non-bank financial service providers. In addition to price competition for deposits and loans, competition exists with respect to the scope and type of services offered, customer service levels, convenience as well as in fees and service charges. In addition, improvements in technology, communications and the Internet have intensified delivery channel competition. Competitor behavior may result in heightened competition for banking and financial services and thus affect future profitability.
The Company competes for customers principally through its commitment to customer service, the relative attractiveness of its products and services, and by ensuring customer convenience and functionality in accessing those products and services. The Company believes its community banking philosophy, technology investments and focus on small and medium-sized business, professional and consumer accounts enables it to compete effectively with other financial service providers. In addition, the Company’s lending officers and senior managers have significant experience in their respective marketplaces. This enables them to maintain close working relationships with their customers. To serve customers whose borrowing requirements exceed its lending limits, the Bank may participate loans to other financial institutions.
Geographic Concentration
The Company generates substantially all of its loans and deposits from customers located within the Company’s Central Oregon and Salem service areas. Approximately 81% of total loans and 89% of deposits are attributable to its Central Oregon business, while the remaining 19% and 11%, respectively, stem from Salem area business. The Company is thus subject to and is directly affected by the trends and changes in the economic vitality of these regions. Because of the rapid population growth of Central Oregon over the past decade, and the tourism and service nature of the economy in its primary Central Oregon market, the Bank loan concentration has historically been in real estate construction and commercial real estate loans.
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Effects of Government Monetary Policy
The earnings and growth of the Company are affected not only by general economic conditions, but also by the fiscal and monetary policies of the federal government, particularly the Federal Reserve. The Federal Reserve can and does implement national monetary policy for such purposes as curbing inflation and combating recession, by its open market operations in U.S. Government securities, control of the discount rate applicable to borrowings from the Federal Reserve, and establishment of reserve requirements against certain deposits. These activities influence growth of bank loans, investments and deposits, and also affect interest rates charged on loans or paid on deposits. Future changes in monetary policies and their impact on the Company cannot be predicted with certainty.
SUPERVISION AND REGULATION
Bancorp and the Bank are extensively regulated under Federal and Oregon law. These laws and regulations are primarily intended to protect depositors and the deposit insurance fund, not shareholders of the Company. To the extent that the following information describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory or regulatory provisions. Any change in applicable laws or regulations may have a material effect on the business and prospects of the Company. The operations of the Company may be affected by legislative changes and by the policies of various regulatory authorities. Management is unable to predict the nature or the extent of the effects on its business and earnings that fiscal or monetary policies, economic control or new Federal or State legislation may have in the future.
Federal Bank Holding Company Regulation
The Company is a one-bank financial holding company within the meaning of the Bank Holding Company Act (Act), and as such, it is subject to regulation, supervision and examination by the Federal Reserve Bank (FRB). The Company has been designated a Financial Holding Company as defined in the 1999 Gramm-Leach-Bliley Act (see description below). The Company is required to file annual reports with the FRB and to provide the FRB such additional information as the FRB may require.
The Act requires every bank holding company to obtain the prior approval of the FRB before (1) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares); (2) acquiring all or substantially all of the assets of another bank or bank holding company; or (3) merging or consolidating with another bank holding company. The FRB will not approve any acquisition, merger or consolidation that would have a substantial anticompetitive result, unless the anticompetitive effects of the proposed transaction are clearly outweighed by a greater public interest in meeting the convenience and needs of the community to be served. The FRB also considers capital adequacy and other financial and managerial factors in reviewing acquisitions or mergers.
With certain exceptions, the Act also prohibits a bank holding company from acquiring or retaining direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities, which by statute or by FRB regulation or order, have been identified as activities closely related to the business of banking or of managing or controlling banks. In making this determination, the FRB considers whether the performance of such activities by a bank holding company can be expected to produce benefits to the public such as greater convenience, increased competition or gains in efficiency in resources, which can be expected to outweigh the risks of possible adverse effects such as decreased or unfair competition, conflicts of interest or unsound banking practices.
USA Patriot Act
Under the USA Patriot Act of 2001, adopted by the U.S. Congress on October 26, 2001 to combat terrorism, FDIC insured banks and commercial banks will be required to increase their due diligence efforts for correspondent accounts and private banking customers. The USA Patriot Act requires the Bank to engage in additional record keeping or reporting, requiring identification of owners of accounts, or of the customers of foreign banks with accounts, and restricting or prohibiting certain correspondent accounts.
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Financial Moderniation Act
On November 12, 1999 the Gramm-Leach-Bliley Act became law, repealing the 1933 Glass-Steagall Act’s separation of the commercial and investment banking industries. The Gramm-Leach-Bliley Act expands the range of nonbanking activities a bank holding company may engage in, while reserving existing authority for bank holding companies to engage in activities that are closely related to banking. The new legislation creates a new category of holding company called a “Financial Holding Company,” a subset of bank holding companies that satisfy the following criteria:
• All of the depository institution subsidiaries must be well capitalized and well managed;
• The holding company must file a declaration with the Federal Reserve Board that it elects to be a financial holding company to engage in activities that would not have been permissible before the Gramm-Leach-Bliley Act; and
• All of the depository institution subsidiaries must have a Community Reinvestment Act rating of “satisfactory” or better.
Financial holding companies may engage in any activity that (i) is financial in nature or incidental to such financial activity (ii) is complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. The Gramm-Leach-Bliley Act specifies certain activities that are financial in nature. These activities include:
• acting as a principal, agent or broker for insurance;
• underwriting, dealing in or making a market in securities; and
• providing financial and investment advice.
The Federal Reserve Board and the Secretary of the Treasury have authority to decide whether other activities are also financial in nature or incidental to financial activity, taking into account changes in technology, changes in the banking marketplace, competition for banking services and so on.
The Company became a designated “Financial Holding Company” in 2000, but does not expect such designation to have a material effect on its financial condition or results of operations.
Federal and State Bank Regulation
The Bank, as a Federal Deposit Insurance Corporation (FDIC) insured bank which is not a member of the Federal Reserve System, is subject to the supervision and regulation of the State of Oregon Department of Consumer and Business Services, Division of Finance and Corporate Securities, and to the supervision and regulation of the FDIC. These agencies may prohibit the Bank from engaging in what they believe constitute unsafe or unsound banking practices.
The Community Reinvestment Act (CRA) requires that, in connection with examinations of financial institutions within their jurisdiction, the FRB or the FDIC evaluate the record of the financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of those banks. These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or facility. The Bank’s current CRA rating is “Satisfactory”.
The Bank is also subject to certain restrictions imposed by the Federal Reserve Act on extensions of credit to executive officers, directors, principal shareholders or any related interest of such persons. Extensions of credit (I) must be made on substantially the same terms, collateral and following credit underwriting procedures that are not less stringent than those prevailing at the time for comparable transactions with persons not described above, and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. The Bank is also subject to certain lending limits and restrictions on overdrafts to such persons. A violation of these restrictions may result in the assessment of substantial civil monetary penalties on the Bank or any officer, director, employee, agent or other person participating in the conduct of the affairs of the Bank, the imposition of a cease and desist order, and other regulatory sanctions.
Under the Federal Deposit Insurance Corporation Improvement Act (FDICIA), each Federal banking agency is required to prescribe by regulation, non-capital safety and soundness standards for institutions under its authority.
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These standards are to cover internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings and stock valuation. An institution, which fails to meet these standards, must develop a plan acceptable to the agency, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions. The Company believes that the Bank already meets substantially all the standards that are likely to be adopted, and therefore does not believe that the implementation of these regulatory standards will materially affect the Company’s business operations.
Interstate Banking Legislation
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Act”), bank holding companies are permitted to acquire banks located in any state regardless of the state law in effect at the time. The Interstate Act also provides for the nationwide interstate branching of banks. Under the Interstate Act, both national and state chartered banks, including Oregon banks, are permitted to merge across state lines and thereby create interstate branch networks.
Deposit Insurance
As a member institution of the FDIC, the deposits of the Bank are currently insured to a maximum of $100,000 per depositor through the Bank Insurance Fund (“BIF”), and the Bank is required to pay semiannual deposit insurance premium assessments to the FDIC.
The Deposit Insurance Funds Act of 1996 (“Funds Act”) eliminated the statutorily imposed minimum assessment amount, effective January 1, 1997. The Funds Act also authorizes assessments on Bank Insurance Fund-assessable deposits and stipulates that the rate of assessment must equal one-fifth the Financing Corporation assessment rate that is applied to deposits assessable by the Savings Association Insurance Fund. The Financing Corporation assessment rate for Bank Insurance Fund-assessable deposits is 1.296 cents per $100 of deposits per year. The Bank’s FDIC insurance expense for 2002 was approximately $73,000.
Regulatory Capital
The Federal bank regulatory agencies use capital adequacy guidelines in their examination and regulation of bank holding companies and banks. If the capital falls below the minimum levels established by these guidelines, the bank holding company or bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open facilities. At December 31, 2002 the Company is considered “well capitalized” according to these regulatory capital guidelines. See footnote 17 to the Financial Statements in this report.
The FRB and FDIC promulgate risk-based capital guidelines for banks and bank holding companies. Risk-based capital guidelines are designed to make capital requirements sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the FRB has noted that bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain ratios well in excess of the minimum. The current guidelines require all bank holding companies and banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital.
Tier 1 capital for bank holding companies includes common stockholders’ equity, qualifying perpetual preferred stock (up to 25% of total Tier 1 capital, if cumulative; under a FRB rule, redeemable perpetual preferred stock may not be counted as Tier 1 capital unless the redemption is subject to the prior approval of the FRB) and minority interests in equity accounts of consolidated subsidiaries, less intangibles. Tier 2 capital includes: (i) the allowance for loan losses of up to 1.25% of risk-weighted assets; (ii) any qualifying perpetual preferred stock which exceeds the amount which may be included in Tier 1 capital; (iii) hybrid capital instrument; (iv) perpetual debt; (v) mandatory convertible securities and (vi) subordinated debt and intermediate term preferred stock of up to 50% of Tier 1 capital. Total capital is the sum of Tier 1 and Tier 2 capital less reciprocal holdings of other banking organizations, capital instruments and investments in unconsolidated subsidiaries.
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Banks’ and bank holding companies’ assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are given credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations result in the total risk-weighted assets.
Loans are generally assigned to the 100% risk category, except for first mortgage loans fully secured by residential property, which carry a 50% rating. The Company’s investment securities, mainly U.S. Government sponsored agency obligations, are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of or obligations fully guaranteed by the United States Treasury or United States Government, which have 0% risk-weight. Off-balance sheet items, direct credit substitutes, including general guarantees and standby letters of credit backing financial obligations, are given a 100% conversion factor. Transaction related contingencies such as bid bonds, other standby letters of credit and undrawn commitments, including commercial credit lines with an initial maturity of more than one year, have a 50% conversion factor. Short-term, self-liquidating trade contingencies are converted at 20%, and short-term commitments have a 0% factor.
The FRB also has implemented a leverage ratio, which is Tier 1 capital as a percentage of average total assets less intangibles, to be used as a supplement to risk-based guidelines. The principal objective of the leverage ratio is to place a constraint on the maximum degree to which a bank holding Company may leverage its equity capital base. The FRB requires a minimum leverage ratio of 3%. However, for all but the most highly rated bank holding companies and for bank holding companies seeking to expand, the FRB expects an additional cushion of at least 1% to 2%.
At December 31, 2002, the Company’s Tier 1, total risked-based capital and leverage ratios were 9.94%, 11.24% and 8.88%, respectively.
The FDICIA also created a new statutory framework of supervisory actions indexed to the capital level of the individual institution. Under regulations adopted by the FDIC, an institution is assigned to one of five capital categories depending on its total risk-based capital ratio, Tier 1 risk-based capital ratio, and leverage ratio, together with certain subjective factors. Institutions that are deemed “undercapitalized”, depending on the category to which they are assigned, are subject to certain mandatory supervisory corrective actions. At December 31, 2002, the Company is considered “Well-capitalized”.
State Regulations Concerning Cash Dividends
The principal source of Bancorp’s cash revenues have been provided from dividends received from the Bank. The Oregon banking laws impose the following limitations on the payment of dividends by Oregon state chartered banks. The amount of the dividend shall not be greater than its unreserved retained earnings, deducting there from, to the extent not already charged against earnings or reflected in a reserve, the following: (1) all bad debts, which are debts on which interest is past due and unpaid for at least six months, unless the debt is fully secured and in the process of collection; (2) all other assets charged off as required by the Director of the Department of Consumer and Business Services or a state or federal examiner; (3) all accrued expenses, interest and taxes of the institution.
In addition, the appropriate regulatory authorities are authorized to prohibit banks and bank holding companies from paying dividends, which would constitute an unsafe or unsound banking practice. The Bank and Bancorp are not currently subject to any regulatory restrictions on their dividends other than those noted above.
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Item 2. PROPERTIES
At December 31, 2002, the Company conducted banking services in twelve locations. Nine located in Central Oregon and three in the Salem/Keizer communities of Oregon. All offices are free standing buildings except one location, which is leased space in a supermarket. The main office and five other branch buildings are owned and are situated on leased land. The Bank owns land and building at two branch locations. The Bank leases land and buildings at four branch locations. In addition, the Bank leases space for its Information Systems/Operation Center and Mortgage Center, located in Bend, Oregon. All leases include multiple renewal options. In addition, The Bank owns property on the two additional offices currently under construction, West Salem and the Old Mill district of Bend
The Bank’s Main Office is located at 1100 NW Wall Street, Bend, Oregon, and consists of approximately 15,000 square feet. The building is owned by the Bank and is situated on leased land. The ground lease term is for 30 years and commenced June 1, 1989. There are ten renewal options of five years each. Monthly rental is $5,290 per month with adjustments every five years by mutual agreement of landlord and tenant. The main bank branch occupies the ground floor. Human resources, trust & investments and credit functions occupy approximately 8,400 square feet. A separate drive-up facility is also located on site. In 1999 the Bank acquired a 3,000 square foot adjacent building and land for future expansion.
In the opinion of management all of the Bank’s properties are adequately insured.
Item 3. LEGAL PROCEEDINGS
The Company is from time to time a party to various legal actions arising in the normal course of business. Management believes that there are no threatened or pending proceedings against the Company, which, if determined adversely, would have a material effect on the business or financial position of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders during the fourth quarter of 2002.
PART II
Item 5. MARKET FOR CASCADE BANCORP’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Cascade Bancorp common stock trades on The NASDAQ Small Cap Market tier of The NASDAQ Stock Market under the symbol CACB. The primary market makers are: RBC Dain Rauscher, Wells Fargo Investments-Ragen MacKenzie Division, D.A. Davidson & Co., Hoefer & Arnett Inc., Pacific Crest Securities Inc., Herzog, Heine, Geduld, Inc., and Keefe, Bruyette & Woods, Inc.
The high and low sales prices shown below are retroactively adjusted for stock dividends and splits and are based on actual trade statistical information provided by The NASDAQ Stock Market for the periods indicated.
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Fourth Quarter |
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| 2002 |
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| High |
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$12.30 |
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$18.38 |
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$18.09 |
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$15.25 |
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| Low |
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$10.40 |
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$12.47 |
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$13.51 |
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$12.42 |
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| 2001 |
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| High |
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$ 8.96 |
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$ 9.72 |
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$11.21 |
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$10.97 |
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| Low |
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$ 7.43 |
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$ 7.55 |
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$ 8.43 |
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$ 8.65 |
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The Company declared a 50% (3:2) stock split in May 2002 and a 20% (6:5) stock split in May 2001. The Company announced the establishment of regular quarterly cash dividends in 1997. The dividends declared and paid listed below have been retroactively adjusted for past stock dividends and stock splits.
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Dividends Declared and Paid
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Fourth Quarter |
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| 2003 |
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$.08 |
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N/A |
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N/A |
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N/A |
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| 2002 |
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$.06 |
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$ .06 |
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$ .07 |
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$ .07 |
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| 2001 |
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$.05 |
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$ .05 |
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$ .05 |
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$ .05 |
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At February 28, 2003, the Company had 12,563,072 shares of common stock outstanding held by approximately 3,300 shareholders of record.
Item 6. SELECTED FINANCIAL DATA
Cautionary Information Concerning Forward-Looking Statements
The following section contains forward-looking statements which are not historical facts and pertain to our future operating results. These statements include, but are not limited to, our plans, objectives, expectations and intentions and are not statements of historical fact. When used in this report, the word “expects,” “believes,” “anticipates” and other similar expressions are intended to identify forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Specific risks and uncertainties include, but are not limited to, general business and economic conditions, changes in interest rates including timing or relative degree of change, and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business conditions, strategies and decisions, and such assumptions are subject to change.
Results may differ materially from the results discussed due to changes in business and economic conditions that negatively affect credit quality, which may be exacerbated by our concentration of operations in the areas of Central Oregon and Salem/Keizer, Oregon. Likewise, competition or changes in interest rates could negatively affect the net interest margin, as could other factors listed from time to time in the Company’s SEC reports. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof.
The following tables present certain financial and statistical information with respect to the Company for the periods indicated. Most of the information is required by Guide 3, “Statistical Disclosure by Bank Holding Companies”, published by the SEC. At the beginning of each table, information is presented as to the nature of data disclosed in the table.
Critical Accounting Policies
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our most critical accounting policy upon which our financial condition depends, and which involve the most complex or subjective decisions or assessments is as follows:
Reserve for Loan Losses: Arriving at an appropriate level of reserve for loan losses involves a high degree of judgment. The Company’s reserve for loan losses provides for probable losses based upon evaluations of known and inherent risks in the loan portfolio. Management uses historical information to assess the adequacy of the reserve for loan losses as well as the prevailing business environment; as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. The reserve for loan losses is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off. For a full discussion of the Company’s methodology of assessing the adequacy of the reserve for loan losses, see Management’s Discussion and Analysis of Financial Condition and Results of Operation.
10
The following selected financial data should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes, which are included in this Annual Report on Form 10-K, (in thousands, except per share data and ratios; unaudited):
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Years ended December 31, |
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2002 |
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2001 |
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2000 |
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1999 |
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1998 |
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| Balance Sheet Data (at period end) |
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| Investment securities |
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$ |
28,571 |
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$ |
25,885 |
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$ |
24,293 |
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$ |
30,136 |
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$ |
49,422 |
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| Loans, gross |
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500,924 |
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423,172 |
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358,674 |
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280,103 |
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208,163 |
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| Total assets |
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578,359 |
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488,753 |
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423,293 |
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347,904 |
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300,774 |
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| Total deposits |
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501,962 |
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425,258 |
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358,198 |
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285,313 |
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270,863 |
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| Non-interest bearing deposits |
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209,524 |
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162,676 |
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128,249 |
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107,188 |
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115,532 |
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| Core Deposits (1) |
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483,505 |
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391,443 |
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333,150 |
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271,240 |
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261,553 |
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| Total shareholders’ equity (2) |
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51,188 |
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41,680 |
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34,981 |
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29,571 |
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26,922 |
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| Income Statement Data |
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