Back to GetFilings.com
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended June 30, 2003
Commission file number: 0-49892
-------------------------------
PACIFIC STATE BANCORP
(Exact Name of Registrant as Specified in its Charter)
California 61-1407606
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1889 W. March Lane, Stockton, CA 95207
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (209) 943-7400
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 [ ] No [X]
Indicate the number of shares outstanding of each of the registrant issuer's
classes of common stock, as of the latest practicable date:
Title of Class Shares outstanding as of August 11, 2003
Common Stock
No Par Value 841,820
PART I
ITEM 1. FINANCIAL STATEMENTS
PACIFIC STATE BANCORP
Consolidated Balance Sheet
June 30, December 31,
Assets 2003 2002
- ------ ------------ ------------
(Unaudited)
Cash and due from banks $ 8,483,793 $ 18,465,668
Federal funds sold 717,000 5,000,000
Investment securities (market value of $13,323,342 in 2003
and $12,764,300 in 2002) 13,325,284 12,767,400
Loans, less allowance for loan losses of $1,465,952 in 2003
and $1,306,309 in 2002 151,976,795 133,965,914
Other real estate 129,866 48,704
Bank premises and equipment, net 7,449,370 6,429,899
Accrued interest receivable and other assets 3,463,277 3,462,899
------------ ------------
Total assets $185,545,385 $180,140,484
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Non-interest bearing $ 36,453,277 $ 30,697,547
Interest bearing 125,638,519 127,442,460
------------ ------------
Total deposits 162,091,796 158,140,007
Borrowed funds 5,000,000 5,000,000
Accrued interest payable and other liabilities 1,147,933 680,615
Mandatorily redeemable cumulative trust preferred securities
of subsidiary grantor trust 5,000,000 5,000,000
------------ ------------
Total liabilities 173,239,729 168,820,622
Shareholders' equity
- --------------------
Preferred stock - no par value; 2,000,000 shares authorized;
none issued and outstanding -- --
Common stock - no par value; 12,000,000 shares authorized;
shares issued and outstanding 837,820 in 2003 and 806,437
in 2002 6,917,686 6,915,534
Retained earnings 5,286,056 4,404,078
Accumulated other comprehensive income 101,914 250
------------ ------------
Total shareholders' equity 12,305,656 11,319,862
============ ============
Total liabilities and shareholders' equity $185,545,385 $180,140,484
============ ============
See notes to unaudited consolidated financial statements
2
Pacific State Bancorp
Statement of Income
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Interest income:
Interest and fees on loans $2,576,354 $2,092,674 $4,963,138 $3,938,082
Interest on federal funds sold 25,346 10,430 68,261 25,160
Interest on investment securities
Taxable 58,887 124,935 129,174 216,222
Exempt from Federal income taxes 52,657 55,755 100,642 127,719
---------- ---------- ---------- ----------
Total interest income 2,713,244 2,283,794 5,261,215 4,307,183
Interest expense:
Interest on deposits 609,841 707,542 1,273,948 1,415,283
Interest on mandatorily redeemable
Redeemable trust preferred securities 60,566 -- 118,200 --
Interest on short-term borrowings 31,688 -- 63,028 338
---------- ---------- ---------- ----------
Total interest expense 702,095 707,542 1,455,176 1,415,621
---------- ---------- ---------- ----------
Net interest income 2,011,149 1,576,252 3,806,039 2,891,562
Provision for loan losses 138,000 81,500 260,000 158,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,873,149 1,494,752 3,546,039 2,733,562
---------- ---------- ---------- ----------
Non-interest income:
Service charges 156,591 131,200 308,149 237,806
Other fee income 158,310 104,517 304,380 246,983
Rental income from other real estate 4,860 4,860 9,720 9,720
Gain from sale of securities -- 26,334 -- 26,334
Gain from sale of loans 74,710 166,687 308,549 309,759
---------- ---------- ---------- ----------
Total non-interest income 394,471 433,598 930,798 830,602
Other expenses:
Salaries and employee benefits 709,916 580,782 1,478,077 1,166,590
Occupancy 174,760 130,927 329,157 262,865
Furniture and equipment 115,795 151,640 239,087 296,218
Professional fees 125,866 98,255 225,831 193,667
Postage, stationary and supplies 40,869 48,459 99,191 89,167
Other 359,810 380,279 735,116 713,417
---------- ---------- ---------- ----------
Total other expenses 1,527,016 1,390,342 3,106,459 2,721,924
---------- ---------- ---------- ----------
Income before income taxes 740,604 538,008 1,370,378 842,240
Income tax expense 264,600 186,500 488,400 290,500
---------- ---------- ---------- ----------
Net income $ 476,004 $ 351,508 $ 881,978 $ 551,740
========== ========== ========== ==========
Basic earnings per share $ 0.57 $ 0.43 $ 1.06 $ 0.70
========== ========== ========== ==========
Diluted earnings per share $ 0.55 $ 0.41 $ 1.03 $ 0.66
========== ========== ========== ==========
Weighted average common shares outstanding 840,996 810,115 829,180 791,012
Weighted average common and common equivalent
shares outstanding 867,114 855,009 853,282 834,742
See notes to unaudited consolidated financial statements
3
Pacific State Bancorp and Subsidiaries
Statement of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
---------------------------
2003 2002
------------ ------------
Cash flows from operating activities:
Net income $ 881,978 $ 551,740
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 260,000 158,000
Deferred loan origination fees and costs, net (20,210) (65,590)
Depreciation and amortization 243,720 60,213
OREO write-downs charged to expense -- 20,000
Increase in accrued interest receivable and
other assets (139,820) (752,860)
Increase in accrued interest payable and
other liabilities 467,318 386,034
------------ ------------
Net cash provided by operating activities 1,692,986 357,537
------------ ------------
Cash flows from investing activities:
Proceeds from matured and called available-for-sale
investment securities 150,000 3,115,000
Purchase of available-for-sale investment securities (1,000,000) (12,006,599)
Proceeds from principal repayments from available-for-sale
mortgage-backed securities 336,953 79,929
Proceeds from principal repayments from held-to-maturity
mortgage-backed securities 88,897 35,036
Net increase in loans (18,316,309) (9,039,622)
Proceeds from sale of other real estate (81,285) --
Purchases of bank premises and equipment (1,100,058) (513,421)
Net liabilities assumed in the acquisition of
CB&T branch -- 13,805,923
------------ ------------
Net cash used in investing activities (19,921,802) (4,523,754)
------------ ------------
Cash flows from financing activities:
Net increase in demand, interest-bearing
and savings deposits 2,669,743 10,946,108
Net change in time deposits 1,282,046 (2,838,268)
Issuance of mandatorily redeemable cumulative trust
preferred securities of subsidiary grantor trust -- 5,000,000
Repurchase of common stock (170,546) --
Proceeds from stock options exercised 172,698 119,486
------------ ------------
Net cash provided by financing activities 3,953,941 13,227,326
------------ ------------
(Decrease) Increase in cash and cash equivalents (14,274,875) 9,061,109
Cash and cash equivalents at beginning of year 23,465,668 6,825,720
------------ ------------
Cash and cash equivalents at end of period $ 9,190,793 $ 15,886,829
============ ============
See notes to unaudited consolidated financial statements
4
Pacific State Bancorp
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
1. CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the consolidated financial position of Pacific State
Bancorp (the "Company") at June 30, 2003 and December 31, 2002, and the results
of its operations and its cash flows for the month periods ended June 30, 2003
and 2002.
Certain disclosures normally presented in the notes to the financial statements
prepared in accordance with generally accepted accounting principles have been
omitted. These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 2002 Annual Report to Shareholders. The results of
operations for the three month and six month periods ended June 30, 2003 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 and lease losses, the provision for
taxes and the estimated fair value of investment securities.
2. STOCK-BASED COMPENSATION
A June 30, 2003, the Company had* two stock-based employee compensation plans,
the Pacific State Bancorp 1997 Stock Option Plan and the Pacific State Bancorp
1987 Stock Option Plan (the "Plans"). The Company accounts for these plans under
the recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under these
plans had an exercise price equal to the market value of the underlying common
stock on the date of grant.
Pro forma adjustments to the Company's consolidated net earnings and earnings
per share are disclosed during the years in which the options become vested. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of FASB Statement
No. 123, Accounting for Stock-Based Compensation, to stock-based employee
compensation.
For the Three Months Ended For the Six Months Ended
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net income, as reported $ 476,004 $ 351,508 $ 881,978 $ 551,740
Deduct: Total stock-based employee
compensation expense determined
under the fair value method
for all awards, net of related tax effects 9,552 7,477 19,104 14,954
----------- ----------- ----------- -----------
$ 466,452 $ 344,031 $ 862,874 $ 536,786
=========== =========== =========== ===========
Basic earning per share - as reported $ 0.56 $ 0.43 $ 1.06 $ 0.70
Basic earning per share - pro forma $ 0.57 $ 0.42 $ 1.04
Diluted earnings per share - as reported $ 0.55 $ 0.41 $ 1.03 $ 0.66
Diluted earnings per share - pro forma $ 0.54 $ 0.41 $ 1.01
5
3. EARNINGS PER SHARE COMPUTATION
Basic earnings per share is computed by dividing net income by the weighted
average common shares outstanding for the period. Diluted earnings per share
reflect the potential dilution that could occur if outstanding stock options
were exercised. Diluted earnings per share is computed by dividing net income by
the weighted average common shares outstanding for the period plus the dilutive
effect of options
4. COMPREHENSIVE INCOME
Comprehensive income is reported in addition to net income for all periods
presented. Comprehensive income is made up of net income plus other
comprehensive income (loss). Other comprehensive income (loss), net of taxes,
was comprised of the unrealized gains (losses) on available-for-sale investment
securities of $(102,000) for the six month period ended June 30, 2003 and $3,400
for the six month period ended June 30, 2002. Comprehensive income was $476,000
for the three month period ended June 30, 2003 and $352,000 for the three month
period ended June 30, 2002. Comprehensive income was $882,000 for the six month
period ended June30, 2003 and $552,000 for the six month period ended June 30,
2002.
5. 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 $35,998,000 and letters of credit of $459,000
at June 30, 2003. However, all such commitments will not necessarily culminate
in actual extensions of credit by the Company during 2003.
Approximately $11,315,000 of the loan commitments outstanding at June 30, 2003
are for real estate loans and 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 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.
6. ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for
Stock-Based Compensation--Transition and Disclosure--an amendment of SFAS
Statement No. 123. This Statement amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
transition guidance and annual disclosure provisions of SFAS No. 148 are
effective for fiscal years ending after December 15, 2002. The interim
disclosure provisions are effective for financial reporting containing financial
statements for interim periods beginning after December 15, 2002. Because the
Company accounts for the compensation cost associated with its stock option plan
under the intrinsic value method, the alternative methods of transition will not
apply to the Company. The additional disclosure requirements of the Statement
are included in these consolidated financial statements. In management's
opinion, the adoption of this Statement did not have a material impact on the
Company's consolidated financial position or results of operations.
On April 30, 2003, the FASB issued Statement SFAS No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. This Statement
amends and clarifies the accounting for derivative instruments by providing
6
guidance related to circumstances under which a contract with a net investment
meets the characteristics of a derivative as discussed in Statement 133. The
Statement also clarifies when a derivative contains a financing component. The
Statement is intended to result in more consistent reporting for derivative
contracts and must be applied prospectively for contracts entered into or
modified after June 30, 2003, except for hedging relationships designated after
June 30, 2003. In management's opinion, adoption of this statement is not
expected to have a material effect on the Company's consolidated financial
position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). This Statement is effective
for financial instruments entered into or modified by the Company after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The Company has previously accounted for its
mandatorily redeemable cumulative trust preferred securities in a manner
consistent with the Statement and, in management's opinion, adoption of this
Statement did not have a material effect on the Company's consolidated financial
position or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF PACIFIC STATE BANCORP
The following is management's discussion and analysis of the significant changes
in Pacific State Bancorp (the "Company") balance sheet accounts between June
30,2003 and December 31, 2002 and its income and expense accounts for the three
and six-month periods ended June 30, 2003 and 2002. The discussion is designed
to provide a better understanding of significant trends related to the Company's
financial condition, results of operations, liquidity, capital resources and
interest rate sensitivity.
In addition to the historical information contained herein, this report on Form
10-Q contains certain forward-looking statements. The reader of this report
should understand that all such forward-looking statements are subject to
various uncertainties and risks that could affect their outcome. The Company's
actual results could differ materially from those suggested by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, variances in the actual versus
projected growth in assets, return on assets, loan losses, expenses, changes in
the interest rate environment including interest rates charged on loans, earned
on securities investments and paid on deposits, competition effects, fee and
other noninterest income earned, general economic conditions, nationally,
regionally and in the operating market areas of the Company and its
subsidiaries, changes in the regulatory environment, changes in business
conditions and inflation, changes in securities markets, data processing
problems, a decline in real estate values in the Company's market area, the
effects of terrorism, the threat of terrorism or the impact of potential
military conflicts and the conduct of the war on terrorism by the United States
and its allies, 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 the Company's annual report on
Form 10-K for the year ended December 31, 2002.
Interest income and net interest income are presented on a fully
taxable equivalent basis (FTE) within management's discussion and analysis.
Nature of Operations
On June 24, 2002, Pacific State Bancorp ("Bancorp") commenced operations as a
bank holding company by acquiring all of the outstanding shares of Pacific State
Bank (the "Bank") in a one bank holding company reorganization. The new
corporate structure gives Bancorp and the Bank greater flexibility in terms of
operation, expansion, and diversification. The reorganization was approved by
the Bank's shareholders on May 9, 2002, and all required regulatory approvals or
non-disapprovals with respect to the reorganization were obtained.
Pacific State Bancorp's subsidiaries include the Bank and Pacific State
Statutory Trust I, a Delaware statutory business trust which was formed in June
2002 for the exclusive purpose of issuing and selling trust preferred
securities.
7
The Bank commenced operations in 1987 and is a California state-chartered member
bank of the Federal Reserve System. The Bank operates seven branches in
California, including two branches in Stockton and branches in Modesto,
Groveland, Arnold, Angels Camp and Tracy. The Bank's primary source of revenue
is providing interest paid on loans to customers who are predominately small and
middle-market businesses and individuals.
Earnings Summary
- ----------------
The Company reported net income for the second quarter of 2003 of $476,004 or
$0.57 basic earnings per common share or $0.55 diluted earnings per common
equivalent share, compared to net income of $351,508 or $0.43 basic earnings per
common and $0.41 diluted earnings per common equivalent share, reported for the
same period in 2002. Return on average assets annualized for the six months
ended June 30, 2003 and 2002 were .97 % and .81%, respectively. Net earnings
increased by 35.2% for the three months ended June 30, 2003 compared to the same
period in 2002 due mostly to an increase in net interest income of 27.5%. Net
earnings increased by 60.0% for the six months ended June 30, 2003 compared to
the six months ended June 30, 2002. Return on average common equity annualized
was 15.73% for the second quarter of 2003, compared with 13.58% for the second
quarter of 2001.
Interest income for the six months ended June 30, 2003 was $5.3 million compared
to $4.3 million for the same period in 2002, an increase of 22%. The increase
was due to an increase in loan interest income of $900,000 as well as an
increase in loan fees of $99,000. The increase in loan interest income is due to
growth within the loan portfolio. Interest expense increase slightly by 3% for
the six months ended June 30, 2003 compared to June 30, 2002 due to growth in
deposits.
Non-interest income increased slightly from $831,000 to $931,000 for the six
months ended June 30, 2003. The increase was primarily due to increase of
$70,000 in service charge income as a result of the growth in deposits and an
increase of $57,000 in other fee income. Gain on sale of loans decreased
slightly from $310,000 to $309,000 for the six months ended June 30, 2002 and
2003, respectively. The gain on sale of loans was projected and anticipated in
the normal course of the Bank's operations.
Non-interest expense increased from $2.7 million in 2002 to $3.1 million in 2003
or 14%. Salaries and benefits increased 27% from $1.2 million for the first two
quarters in 2002 to $1.5 million in the first two quarters of 2003. Occupancy
and equipment also increased $66,000 from second quarter end 2002 to second
quarter end 2003 during the same periods. The 14% increase in non-interest
expense is consistent with the 17% increase in total assets from the second
quarter end 2002 to second quarter end 2003 and the related growth in the Bank's
loan portfolio.
Balance Sheet Analysis
- ----------------------
Total assets increased by 3% from December 31, 2002 to June 30, 2003. The
increase in total assets was a result of an increase in deposits from $158.1
million to $162.0 million. Net loans during this period increased from $134.0
million to $151.9 million and investments increased from $12.8 million to $13.3
million.
Non-performing assets (including nonaccrual loans, loans 90 days past due and
other real estate owned) totaled $260,000 at June 30, 2003, compared to $248,000
on December 31, 2002 and $537,000 on June 30, 2002. The ratio of non-performing
assets to total loans was .17% at June 30, 2003, .14% at December 31, 2002 and
..47% at June 30, 2002.
The allowance for loan losses was $1.5 million at June 30, 2003, compared to
$1.3 million at December 31, 2002 and $1.2 million at June 30, 2002. The
provision for loan losses was $260,000 for the six months ended June 30, 2003
versus $158,000 for the same period in 2002. Net charge-offs were $100,000 for
the first six months of 2003, compared to $110,000 for the first six months of
2001. The ratio of the allowance for loan losses to non-performing assets was
568.8% at June 30, 2003, compared to 242.09% at December 31, 2002 and 223.5% at
June 30, 2002.
Income Taxes
- ------------
The Bank accrued $488,400 in income taxes for the six months ending June 30,
2003 compared to $290,500 for the same period in 2002. The Bank accrued $264,000
in income taxes for the quarter ended June 30, 2003 compared to $186,500 for the
same period in 2002. These increases are consistent with the increase in income
before taxes.
8
Liquidity
- ---------
Liquidity represents the Bank's ability to meet the requirements of customers'
borrowing needs as well as fluctuations in core deposits, which include demand,
savings and interest bearing demand accounts, money market accounts and time
deposits. Total deposits averaged $160.8 million during the six months ended
June 30, 2003 compared to $136.4 million in 2002. Principal sources of liquidity
are cash and due from banks, Federal funds sold and investment securities. At
quarter end June 30, 2003 these items represented $22.3 million or 13.8% of
total deposits compared to $35.6 million or 25.2% at December 31, 2002. Other
sources of liquidity are maturing loans, a borrowing line from the Federal
Reserve Discount Window and Federal funds borrowing lines from correspondent
banks. It is the opinion of management that these sources of liquidity are
sufficient to meet the needs of the Bank at present levels.
Shareholders' equity increased $986,000 million to $12.3 million, or 6.6% of
assets, at June 30, 2003, from $11.3 million or 6.3% of assets at December 31,
2002. The increase in the ratio was due to net income for the six months ended
June 30, 2003, the exercise of 16,315 stock options and an increase in
accumulated other comprehensive income resulting from unrealized gains on
investment securities available for sale.
LOANS
Outstanding loans are summarized below:
June 30, December 31,
2003 2002
------------- -------------
Commercial 41,335,229 $ 30,938,399
Agriculture 12,014,081 9,287,655
Real estate 61,284,462 53,159,804
Real estate-construction 27,696,020 33,887,183
Installment 10,827,762 7,734,199
Total loans 153,157,554 135,007,240
Deferred loan fees 285,193 264,983
Allowance for loan losses (1,465,952) (1,306,309)
------------- -------------
Total net loans $ 151,976,795 $ 133,965,914
============= =============
Changes in the allowance for loan losses were as follows:
Six Months Ended
--------------------------------
June 30, December 31,
2003 2002
----------- -----------
Balance, beginning of year $ 1,306,309 $ 1,171,608
Provision charged to operations 260,000 158,000
Losses charged to allowance (101,383) (110,463)
Recoveries 1,026 --
----------- -----------
Balance, end of period $ 1,465,952 $ 1,219,145
=========== ===========
The following table summarizes non-performing assets of the Bank for the periods
indicated:
9
June 30, December 31,
2003 2002
-------- ------------
Non-performing Assets:
Non-accrual loans $130,000 $199,000
Accruing loans past due 90 days or more -- --
-------- --------
Total non-performing loans 130,000 199,000
Other real estate owned 130,000 49,000
-------- --------
Total non-performing assets $260,000 $248,000
Non-performing assets as a percentage of:
Total loans .17% .15%
Total assets .14% .14%
DEPOSITS
Deposits consisted of the following:
June 30, December 31,
2003 2002
------------ ------------
Non-interest bearing $ 36,453,277 $ 30,697,547
Savings 5,482,018 6,574,174
Money markets 35,758,492 35,964,405
NOW Accounts 13,852,557 15,640,384
Time, $100,000 or more 38,156,020 37,589,426
Other time 32,389,432 31,674,071
------------ ------------
$162,091,796 $158,140,007
============ ============
Regulatory Capital
- ------------------
The Company's and the Bank's capital amounts (in thousands) and risk-based
capital ratios are presented below.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- --------------------- --------------------
Minimum Minimum Minimum Minimum
Amount Ratio Amount Ratio Amount Ratio
--------- ----- --------- ------- ------- -------
Company
As of June 30, 2003:
Total capital
(to risk weighted assets) $ 15,848 10.86% $ 11,671 8.00% N/A N/A
Tier I capital
(to risk weighted assets) $ 14,429 9.89% $ 5,835 4.00% N/A N/A
Tier I capital
(to average assets) $ 14,429 7.96% $ 7,254 4.00% N/A N/A
As of December 31, 2002:
Total capital
(to risk weighted assets) $ 16,497 11.4% $ 11,558 8.00% N/A N/A
Tier I capital
(to risk weighted assets) $ 13,588 9.4% $ 5,779 4.00% N/A N/A
Tier I capital
(to average assets) $ 13,588 8.1% $ 6,693 4.00% N/A N/A
Bank
As of June 30, 2003:
Total capital
(to risk weighted assets) $ 16,755 10.3% $ 13,055 8.00% $ 16,319 10.00%
Tier I capital
(to risk weighted assets) $ 15,289 9.4% $ 6,528 4.00% $ 9,791 6.00%
Tier I capital
(to average assets) $ 15,289 8.6% $ 7,092 4.00% $ 8,865 5.00%
As of December 31, 2002:
Total capital
(to risk weighted assets) $ 16,293 11.4% $ 11,529 8.00% $ 14,412 10.00%
Tier I capital
(to risk weighted assets) $ 14,617 10.1% $ 5,765 4.00% $ 8,706 6.00%
Tier I capital
(to average assets) $ 14,617 8.9% $ 6,690 4.00% $ 8,400 5.00%
* The leverage ratio consists of Tier I capital divided by quarterly average
assets. The minimum leverage ratio is 3 percent for banking organizations that
do not anticipate significant growth and that have well-diversified risk,
excellent asset quality and in general, are considered top-rated banks.
10
ITEM 4. Controls and Procedures
The Company's Chief Executive Officer and Acting Chief Financial Officer, based
on their evaluation within 90 days prior to the date of this report of the
Company's disclosure controls and procedures (as defined in Exchange Act Rule
13a--14(c15(e) or 15d-15(e))), have concluded that the Company's disclosure
controls and procedures are designed to ensure that information required to be
disclosed by the Company in its periodic SEC filings is recorded, processed and
reported within the time periods specified in the SEC's rules and forms. Based
upon that evaluation, the Chief Executive Officer and Acting Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) required to be included in the
Company's periodic SEC filings. There are inherent limitations to the
effectiveness of any system of disclosure controls and procedures, including
cost limitations, judgments used in decision making, assumptions regarding the
likelihood of future events, soundness of internal controls, fraud, the
possibility of human error and the circumvention or overriding of the controls
and procedures. Accordingly, even effective disclosure controls and procedures
can provide only reasonable, and not absolute, assurance of achieving their
control objectives are adequate and effective for purposes of Rule 13a--14(c) in
timely alerting them to material information relating to the Company required to
be included in the Company's filings with the SEC under the Securities Exchange
Act of 1934.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of their evaluation.
Part II - Other Information
Item 1. Legal Proceedings
There are no material proceedings to which the Bank Company is a party of which
any of its property is subject.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
The Bank held its annual shareholders meeting on May 8, 2003 at the Bank's
office on 6. So. El Dorado St., Stockton, CA. 94501. The Shareholders approved
the following:
For (1) Elected to the Board of Directors, the shareholders elected: Michael
Dalton, Maxwell Freeman, Dr. Harold Hand, Dr. Patricia Hatton, Steven Kikuchi,
Yosh Mataga, Steven A. Rosso, Gary A. Stewart, Kathleen Verner and Phillip
Wallace. [MUST REPORT THE VOTE FOR, AGAINST AND ABSTAINING AS TO EACH
CANDIDATE.]
11
(2) Approved the Pacific State Bancorp 1997 Stock Option Plan. [MUST DISCLOSE
VOTE.]
(3) Voted to increase the number of shares reserved and available for issuance
under the Pacific State Bancorp 1997 Stock Option Plan by 114,533 shares. [MUST
DISCLOSE VOTE.]
The formation of a holding company, Pacific State Bancorp. 550,687 shares
approved the Plan of Reorganization, 2,000 shares voted to disapprove and 4,320
shares abstained.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) See the List of Exhibits, which is incorporated here by reference.
(b) No reports on Form 8-K were filed during the period covered by this
report.
SIGNATURES
Pursuant to the requirements of Securities and Exchange Act of 1934, the Bank
duly caused this report to be signed by the undersigned thereunto duly
authorized.
Date: August 14, 2003 BY: /s/ STEVEN A. ROSSO
------------------------------------------
Steven A. Rosso
President and Chief Executive Officer
12
LIST OF EXHIBITS
31 Certification pursuant to section 302 of the Sarbanes-Oxley Act.
32 Certification pursuant to section 906 of the Sarbanes-Oxley Act.
13