______________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FROM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_______________
Date of Report (Date of earliest event reported):
June 24, 1994
CVB Financial Corp.
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation)
1-10394
(Commission File Number)
95-3629339
(IRS Employer Identification No.)
701 North Haven Avenue, Suite 350, Ontario, California 91764
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:
(909) 980-4030
Not Applicable
(Former name or former address, if changed since last report)
__________________________________________________
THIS REPORT INCLUDES A TOTAL OF 37 PAGES
EXHIBIT INDEX ON PAGE 31
Item 1. Changes in Control of Registrant.
None.
Item 2. Acquisition or Disposition of Assets.
On June 24, 1994, CVB Financial Corp. (the "Company"),
acquired Western Industrial National Bank, which was merged into
Chino Valley Bank, the Company's wholly owned subsidiary pursuant
to the Agreement and Plan of Reorganization, as amended
(the "Agreement") by and between CVB Financial Corp., Chino
Valley Bank and Western Industrial National Bank. Pursuant to
the Agreement, the purchase price was $14,796,738.00, and the
funds used to consummate the acquisition were derived from a
cash dividend paid to the Company by Chino Valley Bank.
Item 3. Bankruptcy or Receivership.
None.
Item 4. Changes in Registrant's Certifying Accountant.
None.
Item 5. Other Events.
None.
Item 6. Resignations of Registrant's Directors.
None.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Index to Consolidated Financial Statements Page
Independent Auditors Report 4
Consolidated Statements of Financial Condition 5
December 31, 1993 and 1992
Consolidated Statements of Income 6
Years Ended December 31, 1993 and 1992
Consolidated Statement of Changes in Shareholders' Equity 7
Years Ended December 31, 1993 and 1992
Consolidated Statements of Cash Flows 8
Years Ended December 31, 1993 and 1992
Notes to Consolidated Financial Statements 10
Unaudited Statements of Financial Condition
March 31, 1994 23
Unaudited Consolidated Statements of Income
Three Months Ended March 31, 1994 and 1993 24
Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31, 1994 and 1993 25
Independent Auditors' Report
To Board of Directors and Shareholders
Western Industrial National Bank
South El Monte, California
We have audited the accompanying consolidated statements of
financial condition of Western Industrial National Bank and
subsidiary as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in shareholders'
equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of Western Industrial National Bank and subsidiary
as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
As discussed in Notes 1 and 8 to the consolidated financial
statements, Western Industrial National Bank changed its
method of accounting for income taxes for the year ended
December 31, 1993.
/s/Deloitte & Touche
--------------------
Deloitte & Touche
January 17, 1994
Los Angeles, California
WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1993 AND 1992
1993 1992
ASSETS
EARNING ASSETS:
Federal funds sold $ 1,000,000 $ 5,000,000
Interest-bearing deposits in other financial institutions 3,055,000 2,362,000
Investment securities - market value of $523,533 (1993)
and $529,672 (1992) (Note 2) 523,372 525,014
Loans, net (Notes 3 and 6) 36,188,739 35,988,561
------------ -----------
Total earning assets 40,767,111 43,875,575
Cash and due from banks 2,222,562 4,514,864
Premises and equipment, net (Note 4) 1,101,980 1,189,734
Real estate owned 446,029
Accrued interest receivable and other assets 247,804 249,376
----------- -----------
TOTAL $44,785,486 $49,829,549
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits: (Note 5)
Noninterest-bearing $13,356,812 $15,770,624
Interest-bearing 22,922,146 26,451,895
----------- -----------
Total deposits 36,278,958 42,222,519
Accrued interest payable and other liabilities 93,721 127,612
----------- -----------
Total Liabilities 36,372,679 42,350,131
----------- -----------
SHAREHOLDERS' EQUITY(Notes 7, 9 and 10):
Common stock, $5 par value; 500,000 shares authorized;
issued and outstanding, 374,134 shares in 1993 and 1992 1,870,670 1,870,670
Additional paid-in capital 2,333,221 2,333,221
Retained earnings 4,208,916 3,275,527
----------- -----------
Total shareholders' equity 8,412,807 7,479,418
----------- -----------
TOTAL $44,785,486 $49,829,549
=========== ===========
See notes to consolidated financial statements.
WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993 AND 1992
INTEREST INCOME:
Loans, including origination fees $3,807,258 $3,950,511
Investment securities 25,012 21,188
Federal funds sold 99,244 236,793
Deposits in financial institutions 133,901 35,857
---------- ---------
Total interest income 4,065,415 4,244,349
INTEREST EXPENSE ON DEPOSITS (Note 5) 669,575 938,102
----------- ----------
NET INTEREST INCOME BEFORE PROVISION FOR
CREDIT LOSSES 3,395,840 3,306,247
PROVISION FOR CREDIT LOSSES (Note 5) 330,000 180,000
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 3,065,840 3,126,247
OTHER OPERATING REVENUE -
Service charges and other fees 997,352 1,025,431
Salaries and related benefits 1,292,054 1,326,137
Occupancy (Note 6) 225,805 234,519
Data processing 243,190 258,722
Directors 118,500 126,000
FDIC assessments 90,733 89,297
Professional fees 130,554 97,781
Other 297,037 290,365
---------- ----------
Total other operating expenses 2,379,873 2,422,821
---------- ----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 1,683,319 1,728,857
INCOME TAXES (Note 8) 693,200 724,350
---------- ---------
NET INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES 990,119 1,004,507
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES (Note 8) (56,730)
---------- ----------
NET INCOME $ 933,389 $1,004,507
========= ==========
EARNINGS PER SHARE:
Net earnings before cumulative effect of
change in accounting for income taxes $ 2.60 $ 2.65
Cumulative effect of change in accounting
for income taxes (0.15)
-------- --------
TOTAL EARNINGS PER SHARE $ 2.45 $ 2.65
======= ========
See notes to consolidated financial statements.
WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993 AND 1992
Common Stock
Number of Additional
Shares Paid-in Retained
Outstanding Amount Capital Earnings Total
BALANCE, JANUARY 1, 1992 373,036 $1,865,180 $2,331,211 $2,271,020 $6,467,411
Stock options exercised 1,098 5,490 2,010 7,500
Net income 1,004,507 1,004,507
------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1992 374,134 1,870,670 2,333,221 3,275,527 7,479,418
Net income 933,389 933,389
------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1993 374,134 $1,870,670 $2,333,221 $4,208,916 $8,412,807
======= ========== ========== ========== ==========
See notes to consolidated financial statements.
WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $3,991,458 $4,147,138
Other fees and charges 997,352 1,025,432
Interest paid (672,886) (958,519)
Cash paid to suppliers and employees (2,488,378) (2,531,317)
Income taxes paid (789,702) (849,653)
------------ -----------
Net cash provided by operating activities 1,037,844 833,081
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of
investment securities 250,000 250,000
Purchase of investment securities (250,100) (359,808)
Net increase in interest-bearing deposits
with other financial institutions (693,000) (2,362,000)
Net increase in loans (694,727) (190,133)
Net increase in premises and equipment (5,461)
Net decrease (increase) in other assets 1,242 (10,939)
----------- ------------
Net cash used in investing activities (1,386,585) (2,678,341)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand, NOW and
savings deposits (5,094,911) 3,287,362
Net decrease in certificates of deposit (848,650) (2,196,310)
Proceeds from exercise of stock options 7,500
------------ ------------
Net cash (used in) provided by financing
activities (5,943,561) 1,098,552
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,292,302) (746,708)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 9,514,864 10,261,572
----------- ----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $3,222,562 $9,514,864
========== ==========
NONCASH ACTIVITIES -
Transfer of loans to real estate owned 446,029
==========
See notes to consolidated financial statements.
(Continued)
WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 933,389 $ 1,004,507
---------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Premium amortization (discount accretion)
on investments 1,742 (4,397)
Provision for credit losses 330,000 180,000
Accretion of deferred loan fees and costs (281,480) (331,726)
Depreciation and amortization 87,754 93,150
Decrease in accrued interest receivable 330 27,812
Cumulative effect in change in accounting
for income taxes 56,730
Decrease in accrued interest payable (3,311) (20,417)
Deferred tax benefit (121,321) (83,104)
Increase (decrease) in accrued taxes on income 24,819 (42,199)
Increase in other liabilities 9,192 9,455
---------- ---------
Total adjustments 104,455 (171,426)
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $1,037,844 $ 833,081
========== =========
See notes to consolidated financial statements.
(Concluded)
WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Western
Industrial National Bank (the "Bank") conform with
generally accepted accounting principles and general
practices within the banking industry. The following
are descriptions of the more significant of those
policies adopted by the Bank:
Principles of Consolidation - The accompanying
consolidated financial statements include the accounts
of Western Industrial National Bank and its wholly owned
subsidiary, Western WIN Corporation, after appropriate
intercompany eliminations.
Investment Securities - Investment securities are
carried at cost, adjusted for amortization of premiums
and accretion of discounts on a straight-line basis.
Gains and losses on the sale of investment securities
are determined using the specific identification method.
It is management's intent to hold investment securities
until maturity.
In May 1993, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This
statement addresses the accounting and reporting for
investments in equity securities that have readily
determinable fair values and all investments in debt
securities. Under this statement, debt securities will
be classified into three categories as follows:
Held-to-Maturity Securities - Debt securities that
the Bank has the positive intent and ability to hold
to maturity. These securities are to be reported at
amortized cost.
Trading Securities - Debt and equity securities that
are bought and held principally for the purpose of
selling them in the near term. These securities are
to be reported at fair value with unrealized gains
and losses included in earnings.
Available-for-Sale Securities - Debt and equity
securities not classified as either held-to-maturity
or trading securities. These securities are to be
reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a
separate component of stockholders' equity (net of
tax effects).
The Bank must adopt this standard by 1994. The Bank has
determined the impact of the adoption of this statement
to be immaterial to its financial statements.
Loans - Loans are reported at the principal amounts
outstanding, net of unearned income, net deferred loan
origination fees and allowance for credit losses.
Interest income on loans is accrued monthly on a simple-
interest basis on the daily balance of the principal
amounts outstanding. Interest income is not recognized
on loans receivable if collection of the interest is
deemed by management to be unlikely.
Nonrefundable fees and certain direct costs associated
with the origination or purchase of loans are deferred
and netted against outstanding loan balances. The net
deferred fees and costs are recognized in interest
income over the loan term using methods that generally
produce a level yield on the unpaid loan balance.
Provision and Allowance for Credit Losses - The
allowance for credit losses is based on estimates, and
ultimate losses may vary from current estimates. These
estimates are revised periodically, and, as adjustments
become necessary, they are reported in earnings in the
periods in which they become known. The allowance is
increased by provisions charged to expense and reduced
by net charge-offs. Management makes periodic credit
reviews of the loan portfolio and considers current
economic conditions, historical loan loss experience and
other factors in determining the adequacy of the
allowance.
In May 1993, the FASB issued SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan." This statement
prescribes that a loan is impaired when it is probable
that a creditor will be unable to collect all amounts
due (principal and interest) according to the
contractual terms of the loan agreement. Measurement of
the impairment can be based on the expected future cash
flows of an impaired loan, which are to be discounted at
the loan's effective interest rate, or impairment can be
measured by reference to an observable market price, if
one exists, or the fair value of the collateral for a
collateral-dependent loan. Creditors may select the
measurement method on a loan-by-loan basis, except that
collateral-dependent loans for which foreclosure is
probable must be measured at the fair value of the
collateral. Additionally, the statement prescribes
measuring impairment of a restructured loan by
discounting the total expected future cash flows at the
loan's effective rate of interest in the original loan
agreement. Finally, the impact of initially applying
the statement is reported as a part of the provision for
credit losses. The Bank must adopt this standard by
1995. The Bank has not yet determined the impact of the
adoption of this statement, or when the Bank will adopt
this statement.
Real Estate Owned - Real estate owned, which represents
real estate acquired through foreclosure in satisfaction
of commercial and real estate loans, is stated at the
lower of cost or the estimated fair value of the real
estate less cost to sell. Loan balances in excess of
fair value of the real estate acquired at the date of
acquisition are charged against the allowance for credit
losses. Any subsequent operating expenses or income,
reduction in estimated values, and gains or losses on
disposition of such properties are charged to current
operations.
Premises and Equipment - Premises and equipment are
carried at cost, less accumulated depreciation and
amortization. Depreciation is computed on the straight-
line method over the estimated useful lives of the
assets. Amortization is computed on the straight-line
method over the useful lives of the leasehold
improvements or the term of the lease, whichever is
shorter.
Income Taxes - Effective January 1, 1993, the Bank
adopted SFAS No. 109, "Accounting for Income Taxes."
Accordingly, income tax expense for 1993 was computed
using the liability method, which recognizes a liability
or asset representing the tax effects, based on current
tax law, of future deductible or taxable amounts
attributable to events that have been recognized in the
consolidated financial statements. The principal
temporary differences relate to different methods used
for tax and financial reporting purposes to account for
credit losses and depreciation.
For years prior to 1993, the provision for income taxes
is based on income reported for consolidated financial
statement purposes and differs from the amount of taxes
currently paid or payable. Prior years' financial
statements have not been restated for the accounting
change.
Earnings per Share - Earnings per share are computed
based on the weighted average number of common shares
outstanding during each year, including the dilutive
effect of common stock options accounted for under the
treasury stock method. The weighted average number of
shares used in the computation was 380,902 and 379,758
for 1993 and 1992, respectively.
Statements of Cash Flows - Cash and cash equivalents as
reported in the statements of cash flows include cash
and due from banks and federal funds sold.
2. INVESTMENT SECURITIES
The book and market values of investment securities were
as follows:
December 31
------------------------------------------------
1993 1992
-------------------- ------------------------
Book Market Book Market
Value Value Value Value
U.S. Treasury securities $ 247,222 $ 247,049 $ 248,964 $ 249,288
Federal Reserve Bank stock 126,150 126,150 126,050 126,050
Municipal securities 150,000 150,334 150,000 154,334
--------- --------- --------- ---------
$ 523,372 $ 523,533 $ 525,014 $ 529,672
========= ========= ========= =========
At December 31, 1993, the gross unrealized loss on U.S.
Treasury securities was $173 and the gross unrealized
gain on municipal securities was $334. At December 31,
1992, gross unrealized gains on U.S. Treasury securities
and on municipal securities were $324 and $4,334,
respectively. There were no sales of investment
securities in 1993 or 1992. At December 31, 1993, U.S.
Treasury securities held mature within one year, and
municipal securities held mature in one to two years.
At December 31, 1993, certain U.S. Treasury securities
carried at $247,222 were pledged as collateral for
public funds on deposit with the Bank.
3. LOANS
The loan portfolio consisted of the following:
December 31
-----------------------
1993 1992
Commercial $ 5,704,646 $ 5,105,367
Real estate 22,587,430 19,900,764
Installment 4,656,544 6,144,052
Equity lines of credit 4,321,238 5,663,940
----------- ------------
37,269,858 36,814,123
Allowance for credit losses (875,668) (614,465)
Deferred loan fees, net of costs (205,451) (211,097)
----------- ------------
Net loans $36,188,739 $35,988,561
=========== ===========
The Bank primarily grants commercial, consumer and real
estate loans to light industrial companies in South El
Monte, California and adjoining cities. A substantial
portion of the borrowers' ability to honor their debts
is dependent on the economy in this region, which has
recently experienced adverse conditions. Additional
declines in the economy may result in higher levels of
loan losses and larger provisions to the allowance for
loan losses. Although management believes the allowance
at December 31, 1993 is adequate, the allowance is an
estimate which is inherently uncertain and depends on
the outcome of future events that cannot reasonably be
predicted.
An analysis of the activity in the allowance for credit
losses is as follows:
Year Ended
December 31
-------------------------
1993 1992
Balance, beginning of year $ 614,465 $ 536,386
Recoveries on loans previously charged off 26,635 21,648
Provision for credit losses 330,000 180,000
Loans charged off (95,432) (123,569)
---------- ----------
Balance, end of year $ 875,668 $ 614,465
========== =========
Loans past due but still accruing interest were
approximately as follows at December 31, 1993:
Past Due Past Due
30-89 day 90 or More
Commercial $500,657 $34,684
Installment 68,452 2,553
Equity lines of credit 417,603
-------- -------
$986,712 $37,237
======== =======
Loans on nonaccrual status at December 31, 1993 and 1992
totaled $196,000 and $222,454, respectively. Interest
income not recognized in the consolidated financial
statements for loans on nonaccrual status at
December 31, 1993 and 1992 was $17,096 and $19,764,
respectively.
Certain officers, directors and employees of the Bank,
and companies with which directors of the Bank are
associated, had loans outstanding of $3,067,604 and
$2,858,411 at December 31, 1993 and 1992, respectively.
These loans were made in the ordinary course of the
Bank's business and, in management's opinion, were made
at prevailing rates and terms.
An analysis of the activity for such loans is as
follows:
Balance, beginning of year $2,858,411
Payments received (208,091)
Disbursements 417,284
-----------
Balance, end of year $3,067,604
===========
4. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
December 31
---------------------
1993 1992
Land $ 294,000 $ 294,000
Furniture, fixtures and equipment 664,003 664,003
Leasehold improvements 64,729 64,729
Building 934,123 934,123
--------- ----------
1,956,855 1,956,855
Accumulated depreciation and amortization (854,875) (767,121)
---------- ----------
$1,101,980 $1,189,734
========== ==========
The amount of depreciation included in operating
expenses was $87,754 and $93,150 in 1993 and 1992,
respectively, and is based on the following estimated
asset lives:
Furniture, fixtures and equipment 5 years
Leasehold improvements 40 years
Building 40 years
5. DEPOSITS
Deposits of the Bank included time certificates of
deposit greater than $100,000 of $5,388,681 and
$5,883,556 at December 31, 1993 and 1992, respectively.
Interest expense for such deposits totaled $186,147 in
1993 and $313,164 in 1992.
6. COMMITMENTS AND CONTINGENCIES
The Bank leases land under its main branch under an
operating lease that, including renewal options, extends
through 2026. Lease expense was approximately $41,915
in 1993 and 1992. At December 31, 1993, future annual
lease commitments were as follows:
Year Ending
December 31
1994 $ 41,915
1995 41,915
1996 41,915
1997 41,915
1998 41,915
Thereafter 1,135,200
----------
$1,344,775
==========
The Bank is a party to financial instruments with off-
balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These
financial instruments include commitments to extend
credit. When viewed in terms of the maximum exposure,
those instruments may involve, to varying degrees,
credit and interest rate risk in excess of the amount
recognized in the statement of financial condition. At
December 31, 1993, the Bank had commitments to extend
credit of $1,389,000 and to disburse $2,487,763 of
additional funds for existing loans. In addition, the
Bank had obligations under standby letters of credit of
$512,500.
In the normal course of business, the Bank occasionally
becomes a party to litigation. In the opinion of
management, after consultation with legal counsel,
pending or threatened litigation involving the Bank will
not have a material adverse effect on the Bank's
consolidated financial condition or results of
operations.
7. SHAREHOLDERS' EQUITY
The Bank has a stock option plan, divided into two parts
(A and B), that authorizes the issuance of up to 30,250
shares (as adjusted for the effect of stock dividends)
of common stock and expires November 3, 1992. Options
are granted at an exercise price not less than the fair
market value or par value, whichever is greater, at the
date of grant. Options granted under parts A and B of
the plan were exercisable beginning in 1984 and 1987,
respectively, in installments as determined by the Board
of Directors. All options expire ten years after the
date of grant. Upon a change in control of the Bank all
options become fully vested.
Activity in the stock option plan for the two years
ended December 31, 1993 was as follows:
Options Price Options
Balance - January 1, 1992 9,184 $ 6.83 to $15.00 18,455
Options granted (4,600) $20.00 4,600
Options exercised $6.83 (1,098)
Options canceled 2,577 $10.52 to $13.64 (2,577)
Plan termination (7,161) -------
Balance - December 31, 1992 $ 6.83 to $20.00 19,380
Options canceled $ 6.83 to $20.00 (2,386)
------
Balance - December 31, 1993 $ 6.83 to $20.00 16,994
======
At December 31, 1993, 7,739 of the shares currently
under option are exercisable at prices varying from
$6.83 to $15.00. An additional 1,997 options become
exercisable in 1994 at prices varying from $6.83 to
$20.00 per share.
8. INCOME TAXES
On January 1, 1993, the Bank adopted SFAS No. 109,
"Accounting for Income Taxes." Under the provisions of
SFAS No. 109, the Bank elected not to restate prior year
financial statements.
The provision for income taxes consisted of the
following:
Year Ended
December 31
1993 1992
Income taxes currently paid or payable:
Federal $ 579,400 $ 595,241
State 235,121 212,213
--------- ---------
814,521 807,454
--------- ---------
Deferred taxes (benefit) applicable to temporary differences:
Federal (92,646) (57,241)
State (28,675) (25,863)
--------- ---------
(121,321) (83,104)
--------- ---------
$ 693,200 $724,350
========= ========
The net income tax liability (asset) comprised the
following:
Year Ended
December 31
-------------------
1993 1992
Current
Federal $ 40,612 $ 7,203
State (12,027) (3,435)
-------- -------
$ 28,585 $ 3,768
======== =======
Deferred:
Federal $(17,692) 45,039
State 12,288 14,148
-------- -------
$(5,404) $59,187
======== =======
The components of the net deferred tax liability (asset)
are as follows:
Year Ended
December 31,
------------------
1993 1992
Federal:
Deferred tax liabilities
Depreciation $ 59,545 $66,568
Provision for credit losses 56,624
-------- -------
Gross deferred tax liability 59,545 123,192
Deferred tax assets:
California franchise tax (75,833) (78,153)
Provision for credit losses (1,404)
--------- --------
Gross deferred tax assets (77,237) (78,153)
-------- --------
Net deferred tax liability(asset) federal $(17,692) $45,039
======== =======
State:
Deferred Tax liabilities:
Depreciation $14,925 $ 7,603
Provision for credit losses 6,545
------- -------
Gross deferred tax liability 14,925 14,148
-------- -------
Deferred tax assets -
Provision for credit losses (2,637)
-------- -------
Gross deferred tax assets (2,637)
-------- -------
Net deferred tax liability - state $12,288 $14,148
======== =======
No valuation allowance under SFAS No. 109 is required.
Deferred tax assets can be fully realized as an offset
against reversing temporary differences, which create
net future tax liabilities, or through loss carrybacks.
Therefore, even if no future income was expected,
deferred tax assets would still be fully realized.
The provision for income taxes differs from the federal
statutory tax rates for the following reasons:
Year Ended December 31
-----------------------------------------
1993 1992
Amount Percent Amount Percent
Provision for income taxes at
statutory rate 572,328 34.0% $587,811 34.0%
State franchise tax, net of
federal tax benefit 136,254 8.1% 125,688 7.3%
Other, net (15,382) (0.9)% 10,851 0.6%
---------- ----- -------- -----
$ 693,200 41.2% 724,350 41.9%
========== ===== ======== =====
9. REGULATORY MATTERS
All depository institutions are required by law to
maintain reserves on transaction accounts and
nonpersonal time deposits in the form of cash balances
at the Federal Reserve Bank. These reserve requirements
can be offset by cash balances held at the Bank. At
December 31, 1993, the Bank's cash balance was
sufficient to offset the Federal Reserve requirement.
The Bank is required by federal regulations to meet
certain capital standards. The risk-based capital
standard requires the Bank to achieve a minimum ratio of
total capital to risk-weighted assets of 8% (of which at
least 4% must contain Tier 1 capital, which consists
primarily of common stock and retained earnings, less
goodwill). At December 31, 1993, the Bank had risk-
weighted and Tier 1 ratios of 20.8% and 19.6%,
respectively.
The Bank is also required to achieve a minimum leverage
ratio of 4%, based on Tier 1 capital divided by average
total assets. The leverage ratio operates in
conjunction with the above risk-based capital
guidelines. The Bank met both the risk-based capital
standard and the minimum leverage ratio at December 31,
1993 and 1992, and management believes that the Bank
will continue to meet all capital standards for 1994.
At December 31, 1993, the Bank had a leverage ratio of
17.8%.
10. ACQUISITION
The Bank entered into a definitive agreement in December
1993 with another financial institution pursuant to
which the Bank will be purchased by the other financial
institution. The definitive agreement requires the
approval of the Bank's shareholders and the regulatory
authorities. The financial statements have been
prepared on a going concern basis, and therefore no
adjustments have been made for the proposed
acquisitions.
11. SUBSEQUENT EVENT
In January 1994, the Greater Los Angeles area was
seriously affected by a major earthquake and attendant
aftershocks centered in the San Fernando Valley.
Although the Bank's main operations and customers are
not located in the most seriously affected areas,
management has initiated, but not completed, efforts to
evaluate the effect of the earthquake on the Bank's
operations and customers.
However, based on the Bank's evaluations to date,
management believes the effects of the earthquake will
not be material to the Bank.
The Bank's facilities and other real estate owned
suffered no significant damage as a result of the
earthquake.
* * * * *
WESTERN INDUSTRIAL NATIONAL BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1994
(unaudited)
dollar amounts in thousands
ASSETS
EARNING ASSETS
Federal funds sold $ 1,500
Interest-bearing deposits in other
financial institutions 2,168
Investment securities - market
value of $454 454
Loans, net 34,849
----------
Total earning assets 38,971
Cash and due from banks 4,730
Premises and equipment, net 1,082
Real estate owned, net 445
Accrued interest receivable and other assets 262
----------
TOTAL $ 45,490
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 14,542
Interest-bearing 22,249
----------
36,791
Accrued interest payable and other
liabilities 123
----------
36,914
Stockholders' Equity:
Common stock, $5 par value; 500,000
shares authorized;
issued and outstanding;
374,134 shares 1,871
Additional paid-in capital 2,333
Retained earnings 4,372
----------
Total shareholders' equity 8,576
----------
TOTAL $ 45,490
==========
WESTERN INDUSTRIAL NATIONAL BANK
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
dollar amounts in thousands, except per share
For the Three Months Ended
March 31,
1994 1993
INTEREST INCOME:
Loans, including fees $ 859 $ 925
Investment securities 6 6
Federal funds sold 10 36
Deposits with other financial
institutions 25 24
-------- -----
Total interest income 900 991
INTEREST EXPENSE ON DEPOSITS 135 176
------- -----
NET INTEREST INCOME BEFORE
PROVISION
FOR CREDIT LOSSES 765 815
PROVISION FOR CREDIT LOSSES 190 75
------ -----
NET INTEREST INCOME AFTER
PROVISION FOR
CREDIT LOSSES 575 740
------ -----
OTHER OPERATING INCOME
Service charges and other fees 239 241
------ -----
OTHER OPERATING EXPENSES:
Salaries and related benefits 287 346
Occupancy 53 56
Data processing 81 64
Directors 27 32
FDIC assessments 20 23
Professional fees 33 26
Other 33 49
------ -----
Total other operating expenses 534 596
------ -----
INCOME BEFORE TAXES 280 385
INCOME TAXES 116 159
------ -----
NET INCOME $ 164 $ 226
====== =====
Earnings per common share $0.43 $0.59
====== =====
WESTERN INDUSTRIAL NATIONAL BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
dollar amounts in thousands
For the Three Months Ended
March 31,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 891 $ 975
Service charges and other fees received 239 241
Interest paid (134) (176)
Cash paid to suppliers and employees (543) (560)
Income taxes paid (67) (7)
--------- -------
386 473
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the maturity of investment securities 170 250
Purchase of investment securities (100) (250)
Net decrease (increase) in interest-
bearing deposits with other
financial institutions 887 (1,079)
Net decrease in loans 1,165 1,004
Net decrease (increase) in other assets (13) (42)
------- ------
2,109 (117)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in transaction deposits 210 1,076
Net increase (decrease) in time deposits 302 (535)
------- ------
512 541
NET DECREASE IN CASH AND CASH EQUIVALENTS 3,007 897
CASH AND CASH EQUIVALENTS, beginning of year 3,223 9,515
------- -------
CASH AND CASH EQUIVALENTS, March 31 $ 6,230 $ 10,412
======= ========
WESTERN INDUSTRIAL NATIONAL BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
dollar amounts in thousands
For the Three Months
Ended March 31,
1994 1993
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 164 $ 226
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Discount accretion (2) (2)
Provision for credit losses 190 75
Accretion of deferred loan fees and costs (21) (21)
Loan origination costs capitalized (8) (6)
Depreciation and amortization 20 22
Change in accrued interest receivable 14 7
Change in other assets and liabilities 29 172
------- ------
222 247
------- ------
$ 386 $ 473
======= ======
(b) Pro Forma Financial Information.
On June 24, 1994, the Company consummated the Agreement and
Plan of Reorganization by and between CVB Financial Corp.,
Chino Valley Bank and Western Industrial National Bank.
Index to Pro Forma Financial Information Page
Pro Forma Condensed Balance Sheet
March 31, 1994 28
Pro Forma Condensed Statements of Income
Year Ended December 31, 1993 29
Pro Forma Condensed Statements of Income
Three Month Ended March 31, 1994 30
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1994
dollar amounts in thousands
Company Western Adjustments Pro Forma
ASSETS
Investment securities held-to-maturity
(market value of $9,915) $ 9,911 $ 0 $ 9,911
Investment securities
available-for-sale
(market values of $167,541
and $454) 167,541 454 167,995
Federal funds sold and
interest-bearing deposits
with other financial institutions 8,099 3,668 11,767
Loans and lease finance
receivables, net 429,871 34,849 464,720
-------- -------- ----------
Total earning assets 615,422 38,971 654,393
Cash and due from banks 51,843 4,730 (14,547) 42,026
Premises and equipment, net 9,621 1,082 10,703
Other real estate owned, net 9,862 445 10,307
Goodwill 2,024 5,971 7,995
Other assets 11,289 262 11,551
-------- -------- ---------- ----------
$700,061 $ 45,490 $ (8,576) $ 736,975
======== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $220,716 $ 14,542 $235,258
Interest-bearing 408,324 22,249 430,573
-------- -------- --------
629,040 36,791 665,831
Demand note issued to U.S. Treasury 6,444 0 6,444
Long-term capitalized lease 508 0 508
Other liabilities 3,943 123 4,066
-------- ------- --------
639,935 36,914 676,849
Stockholders' Equity:
Preferred stock (authorized 20,000,000
shares without par; none issued
or outstanding) 0 0 0
Common stock (authorized, 50,000,000
shares without par; issued and
outstanding 7,283,682 and 7,274,582) 20,683 4,204 (4,204) 20,683
Retained earnings 40,972 4,372 (4,372) 40,972
Net unrealized gains(losses)
on investment securities
available-for-sale (1,529) 0 (1,529)
------- ------ ------ --------
60,126 8,576 (8,576) 60,126
-------- ------- ------- --------
$700,061 $45,490 $(8,576) $736,975
======== ======= ======== ========
Adjustments:
Purchase price
Excess purchase price over asset value
Elimination of Western capital accounts
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
December 31, 1993
dollar amounts in thousands, except per share
Company Western Pro Forma
Loans, including fees $ 37,036 $ 3,807 $40,843
Investment securities:
Taxable 8,188 17 8,205
Tax-advantaged 131 9 140
-------- ------ -------
8,319 26 8,345
Federal funds sold and
interest bearing deposits
with other financial institutions 455 232 687
-------- ------ --------
45,810 4,065 49,875
Interest expense:
Deposits 9,658 670 10,328
Other borrowings 220 0 220
-------- ----- -------
9,878 670 10,548
--------- ----- -------
Net interest income 35,932 3,395 39,327
Provision for credit losses 1,720 330 2,050
--------- ----- -------
Net interest income after
provision for credit losses 34,212 3,065 37,277
Other operating income:
Service charges on
deposit accounts 5,215 896 6,111
(Losses) Gains on sale of
investment securities 3,721 0 3,721
Gains on sale of other
real estate owned 6 0 6
Other 1,762 101 1,863
--------- ----- -------
10,704 997 11,701
Other operating expenses:
Salaries and employee benefits 14,439 1,292 15,731
Deposit insurance premiums 1,178 91 1,269
Occupancy 2,170 172 2,342
Equipment 1,527 53 1,580
Provision for losses on
other real estate owned 2,830 0 2,830
Other 7,210 771 7,981
-------- ------ ------
29,354 2,379 31,733
-------- ------ ------
Earnings before income taxes 15,562 1,683 17,245
Provision for income taxes 6,040 750 6,790
-------- ------ --------
Net earnings $ 9,522 $ 933 $ 10,455
======== ====== ========
Earnings per common share $ 1.27 $ 2.45 $ 1.39
======== ====== ========
Cash dividends per common share $ 0.29 $ 0.00 $ 0.29
======== ====== ========
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the three months ended
March 31, 1994
dollar amounts in thousands, except per share
Company Western Pro Forma
Interest income:
Loans, including fees $ 9,591 859 $ 10,450
Investment securities:
Taxable 2,092 4 2,096
Tax-advantaged 72 2 74
-------- ------ -------
2,164 6 2,170
Federal funds sold and
interest bearing deposits
with other financial institutions 85 35 120
-------- ----- -------
11,840 900 12,740
Interest expense:
Deposits 2,345 135 2,480
Other borrowings 71 0 71
------- ----- -------
2,416 135 2,551
------- ----- -------
Net interest income 9,424 765 10,189
Provision for credit losses 50 190 240
------- ----- -------
Net interest income after
provision for credit losses 9,374 575 9,949
Other operating income:
Service charges on deposit accounts 1,248 222 1,470
(Losses) Gains on sale of
investment securities (128) 0 (128)
Gains on sale of other real
estate owned 5 0 5
Other 328 17 345
------- ----- ------
1,453 239 1,692
Other operating expenses:
Salaries and employee benefits 3,576 287 3,863
Deposit insurance premiums 312 20 332
Occupancy 596 42 638
Equipment 458 11 469
Provision for losses on
other real estate owned 200 0 200
Other 1,958 174 2,132
------- ----- ------
7,100 534 7,634
------- ----- ------
Earnings before income taxes 3,727 280 4,007
Provision for income taxes 1,506 116 1,622
------- ------- --------
Net earnings $ 2,221 $ 164 $ 2,385
======= ======= ========
Earnings per common share $ 0.29 $ 0.43 $ 0.31
======= ======= ========
Cash dividends per common share $ 0.08 $ 0.00 $ 0.08
======= ======= ========
(c) Exhibits. Page
10.24 Agreement and Plan of Reorganization by
and between CVB Financial Corp., Chino
Valley Bank and Western Industrial
National Bank, dated November 16, 1993.
(Filed as Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, Commission
File Number 1-10394, which is incorporated *
herein by this reference.) ---
10.24.1 Amendment No. 1 to Agreement and Plan
of Reorganization by and between CVB
Financial Corp., Chino Valley Bank and
Western Industrial National Bank, dated 33
February 14, 1994. ----
10.24.2 Amendment No. 2 to Agreement and Plan
of Reorganization by and between CVB
Financial Corp., Chino Valley Bank and
Western Industrial National Bank, dated 35
June 23, 1994. ----
37
23 Consent of Independent Auditors ----
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has dully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CVB FINANCIAL CORP.
-------------------
(Registrant)
Date: July 8, 1994
/s/ Robert J. Schurheck
------------------------
Robert J. Schurheck
Chief Financial Officer
EXHIBIT 10.24.1
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
By And Between
CVB FINANCIAL CORP., CHINO VALLEY BANK
And
WESTERN INDUSTRIAL NATIONAL BANK
February 14, 1994
This Amendment (the "Amendment") to the Agreement and Plan of
Reorganization dated November 16, 1993 (the "Agreement") by
and between CVB FINANCIAL CORP. ("CVB"), CHINO VALLEY BANK
("Chino Valley") and WESTERN INDUSTRIAL NATIONAL BANK ("Western")
(collectively, the "Parties"), is made and entered into this 14th
day of February, 1994 by and between the Parties. Terms not
otherwise defined herein shall have the meaning ascribed to such
terms in the Agreement.
R E C I T A L S
WHEREAS, the Agreement provides, among other things, for the
acquisition by CVB of all of the outstanding shares of Western
Stock and the merger of Chino Valley with and into Western
with Chino Valley as the surviving entity;
WHEREAS, the Parties have decided to amend certain of the terms
of the Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and other
valuable consideration the receipt and sufficiency of which
is hereby acknowledged, the Parties hereby agree as follows:
1. Section 8.2(t) shall be amended to read in its entirety as follows:
"As of the Determination Date and immediately prior to the
Effective Time of the Consolidation and the Effective Time
of the Merger, the Contingent Reserve shall equal that number
which is equal to 20% of the principal amount of the Contingent
Loans at the Effective Time of the Merger; provided, however,
that such reserve shall not exceed $400,000."
2. Section 10.1(i) shall be amended to read in its entirety as follows:
"Shareholder Non-Approval. By CVB and Chino Valley, at any time,
if the approval of the shareholders of Western to all of the matters
referred to in Section 6.7 is not obtained prior to April 10, 1994."
3. This Amendment may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed
by each party hereto and delivered to each party hereto.
IN WITNESS WHEREOF, the parties to this Amendment have duly
executed this Amendment as of the day and year first above written.
CVB FINANCIAL CORP.
By /s/ D. Linn Wiley
President and Chief Executive Officer
ATTEST:
/s/ Donna Marchesi
Secretary
CHINO VALLEY BANK
By /s/ D. Linn Wiley
President and Chief Executive Officer
ATTEST:
/s/ Donna Marchesi
Secretary
WESTERN INDUSTRIAL NATIONAL BANK
By /s/ Thomas A. Walker
President and Chief Executive Officer
ATTEST:
/s/ Noel Castellon
Secretary
EXHIBIT 10.24.2
AMENDMENT NO. 2 TO
AGREEMENT AND PLAN OF REORGANIZATION
By And Between
CVB FINANCIAL CORP., CHINO VALLEY BANK
And
WESTERN INDUSTRIAL NATIONAL BANK
June 23, 1994
This Amendment (the "Amendment") to the Agreement and Plan of
Reorganization dated November 16, 1993 (the "Agreement") by and
between CVB FINANCIAL CORP. ("CVB"), CHINO VALLEY BANK
("Chino Valley") and WESTERN INDUSTRIAL NATIONAL BANK ("Western")
(collectively, the "Parties"), is made and entered into this 23rd
day of June, 1994 by and between the Parties. Terms not otherwise
defined herein shall have the meaning ascribed to such terms in
the Agreement.
R E C I T A L S
WHEREAS, the definition of "Contingent Reserve", provides that
such reserve shall be equal to 20% of the principal amount of
the Contingent Loans; provided, however, that the amount of
the reserve shall not exceed $400,000;
WHEREAS, certain of the Contingent Loans have been paid in full
and are no longer outstanding (the "Extinguished Loans");
WHEREAS, the Parties have agreed to change the composition of
the Contingent Reserve by substituting certain loans of Western
outstanding as of the date hereof for the Extinguished Loans;
WHEREAS, in connection with the aforementioned change to the
Contingent Reserve, the Parties have decided to amend certain
provisions of the Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and other
valuable consideration the receipt and sufficiency of which
is hereby acknowledged, the Parties hereby agree as follows:
1. The definition of "Contingent Reserve" set forth in Article I
of the Agreement is amended in its entirety as follows:
"'Contingent Reserve' shall mean a special loan loss reserve
established by Western with respect to the Contingent Loans
which shall equal $400,000."
1.A. Section 8.2(t) is amended in its entirety as follows:
"As of the Determination Date and immediately prior to the
Effective Time of the Consolidation and the Effective Time of
the Merger, the Contingent Reserve shall equal $400,000."
2. The definition of "Contingent Loans" set forth in Article I of
the Agreement is amended in its entirety as follows:
"'Contingent Loans' shall mean the loans of Western described
on Schedule 1.1(A)."
3. This Amendment may be executed in one or more counterparts, all
of which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed
by each party hereto and delivered to each party hereto.
IN WITNESS WHEREOF, the parties to this Amendment have duly
executed this Amendment as of the day and year first above written.
CVB FINANCIAL CORP.
By /s/ D. Linn Wiley
President and Chief Executive Officer
ATTEST:
/s/ Donna Marchesi
Secretary
CHINO VALLEY BANK
By /s/ D. Linn Wiley
President and Chief Executive Officer
ATTEST:
/s/ Donna Marchesi
Secretary
WESTERN INDUSTRIAL NATIONAL BANK
By /s/ Thomas A. Walker
President and Chief Executive Officer
ATTEST:
/s/ Noel Castellon
Secretary
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the 1981 Stock Option
Plan Registration Statement No. 2-76121 on Form S-8, the 1991 Stock
Option Plan Registration Statement No. 33-41318 on Form S-8 and the Key
Employee Stock Grant Plan Registration Statment No. 33-50442 on Form S-8
of CVB Financial Corp. of our report dated January 17, 1994 on the
Annual Report of Western Industrial National Bank, appearing on page 4
in this current Report on Form 8-K of CVB Financial Corp.
/s/ Deloitte & Touche
- - ---------------------
Deloitte & Touche
Los Angeles, California
July 8, 1994