-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LnTqJsXnB+rmq3Kx/vINBjkO7hiFnkrC5meed+A1qZ1EvzQqEYFDAly5vJbHm+ic SkE1ZczEGt4ip0ojrPBR+Q== 0000702147-96-000008.txt : 19960813 0000702147-96-000008.hdr.sgml : 19960813 ACCESSION NUMBER: 0000702147-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SDNB FINANCIAL CORP CENTRAL INDEX KEY: 0000702147 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 953725079 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11117 FILM NUMBER: 96608537 BUSINESS ADDRESS: STREET 1: 1420 KETTNER BLVD CITY: SAN DIEGO STATE: CA ZIP: 92101 BUSINESS PHONE: 6192331234 MAIL ADDRESS: STREET 1: P O BOX 12605 CITY: SAN DIEGO STATE: CA ZIP: 92112-3605 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-11117 SDNB FINANCIAL CORP. (Exact name of Registrant as Specified in its Charter) Incorporated in California - IRS Employer I.D. No. 95-3725079 1420 Kettner Boulevard, San Diego, California 92101 (Address of Principal Executive Office) (Zip Code) Registrant's Telephone Number including area code: 619-233-1234 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of Common Stock outstanding as of the close of business on July 31, 1996: 3,076,737 SDNB FINANCIAL CORP. INDEX PART I FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheet (unaudited) 1 June 30, 1996 and December 31, 1995 Consolidated Statements of Operations (unaudited) 2 Three and six months ended June 30, 1996 Three and six months ended June 30, 1995 Consolidated Statements of Cash Flows (unaudited) 3 Three and six months ended June 30, 1996 Three and six months ended June 30, 1995 Notes to Consolidated Financial Statements (unaudited) 4 June 30, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-12 PART II OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 PART I FINANCIAL INFORMATION Item 1. Financial Statements SDNB Financial Corp. and Subsidiaries Consolidated Balance Sheets (unaudited) (In thousands) June 30, December 31, Assets 1996 1995 Cash and due from banks $ 11,486 $ 13,440 Interest bearing deposits in other banks 3,322 2,780 Investment securities held-to-maturity 5,887 7,408 Investment securities available-for-sale 28,957 27,033 Federal funds sold 30,115 24,700 Loans 100,772 92,331 Less allowance for loan losses 1,519 2,002 Net loans 99,253 90,329 Premises and equipment, net 10,808 10,975 Other real estate owned 379 181 Accrued interest receivable and other assets 1,590 1,726 Total assets $191,797 $178,572 Liabilities and Shareholders' Equity Liabilities: Deposits: Non-interest bearing $ 48,399 $ 49,505 Interest bearing 112,395 90,904 Total deposits 160,794 140,409 Securities sold under agreement to repurchase 5,970 12,934 Accrued interest payable and other liabilities 377 554 Notes payable 7,922 7,989 Total liabilities 175,063 161,886 Shareholders' equity: Common stock 20,301 20,314 Accumulated deficit (3,376) (3,587) Net unrealized holding losses on available-for-sale securities (191) (41) Total shareholders' equity 16,734 16,686 Total liabilities and shareholders' equity $191,797 $178,572 The accompanying notes are an integral part of the consolidated financial statements. SDNB Financial Corp. and Subsidiaries Consolidated Statements of Operations (unaudited) (In thousands, except amounts per share) 3 months 3 months 6 months 6 months ended ended ended ended 6/30/96 6/30/95 6/30/96 6/30/95 Interest income: Interest and fees on loans $ 2,414 $ 2,562 $ 4,690 $ 5,143 Interest on federal funds sold 285 173 589 373 Interest on investments 495 418 979 805 Total interest income 3,194 3,153 6,258 6,321 Interest expense: Interest on deposits 869 716 1,683 1,361 Interest on repurchase agreements 36 65 86 141 Interest on notes payable 0 9 0 24 Total interest expense 905 790 1,769 1,526 Net interest income 2,289 2,363 4,489 4,795 Provision for loan losses 0 150 (100) 450 Net interest income after provision for loan losses 2,289 2,213 4,589 4,345 Other operating income: Security gains, net 0 0 0 11 Building income 211 201 435 464 Other non-interest income 227 201 496 386 Total other operating income 438 402 931 861 Other operating expenses: Salaries and employee benefits 1,116 925 2,283 1,945 Occupancy 139 125 295 237 Professional fees 129 210 229 332 Building operating expenses 539 623 1,055 1,219 Other non-interest expenses 691 667 1,439 1,343 Total other operating expenses 2,614 2,550 5,301 5,076 Income before income tax 113 65 219 130 Income tax 4 3 8 6 Net income $ 109 $ 62 $ 211 $ 124 Net income per share $ 0.04 $ 0.03 $ 0.07 $ 0.07 The accompanying notes are an integral part of the consolidated financial statements. SDNB Financial Corp. and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (In thousands) Six months ended June 30, 1996 1995 OPERATING ACTIVITIES: Net income $ 211 $ 124 Adjustments to reconcile net income to net cash provided (used) by operating activities: Provision for loan losses (100) 450 Provision for depreciation and amortization 631 639 Amortization of investment security discounts (369) (50) Other expense not utilizing cash 70 58 Unearned loan fees 40 68 Taxes refundable (7) (12) Interest receivable and other assets (157) (677) Interest payable and other liabilities (143) (153) Total adjustments (35) 323 Net cash provided by operating activities 176 447 INVESTING ACTIVITIES: Proceeds from maturities of held-to-maturity securities 2,000 3,604 Proceeds from called held-to-maturity securities 0 395 Proceeds from maturities of securities available-for-sale 16,375 3,494 Proceeds from called available-for-sale securities 1,000 0 Proceeds from sale of available-for-sale securities 0 530 Purchases of held-to-maturity securities (500) 0 Purchases of available-for-sale securities (19,070) (6,548) Net change in gross loans (9,887) 2,587 Proceeds from OREO properties 851 43 Proceeds from sale of premises and equipment 35 25 Purchases of premises and equipment (318) (144) Net cash provided (used) by investing activities (9,514) 3,986 FINANCING ACTIVITIES: Net change in deposits 20,385 (12,978) Net change in short-term borrowings (6,964) (6,202) Payments of long-term borrowings (67) 0 Proceeds from issuance of common stock 0 2,215 Proceeds from exercise of stock options 12 0 Payments for costs associated with issuance of common stock (25) (150) Net cash provided (used) by financing activities 13,341 (17,115) Change in cash and cash equivalents 4,003 (12,682) Cash and cash equivalents at beginning of period 40,920 37,317 Cash and cash equivalents at end of period $44,923 $24,635 For the purpose of the statement of cash flows, the Company considers cash and cash equivalents to be as follows at June 30, 1996 1995 Cash and due from banks $11,486 $13,464 Interest-bearing deposits in other banks 3,322 2,671 Federal funds sold 30,115 8,500 Totals $44,923 $24,635 Supplemental cash flow information for the period ended June 30, 1996 1995 CASH PAID FOR: Interest $1,769 $1,988 Income Taxes $16 $0 Non-cash items: transfer of loans to OREO $1,034 $553 The accompanying notes are an integral part of the consolidated financial statements. SDNB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) June 30, 1996 1. In the opinion of Management, the accompanying unaudited interim consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary to present fairly the financial position as of June 30, 1996, and the results of operations and cash flows for the three and six months ended June 30, 1996 and 1995. Certain prior year amounts have been reclassified to conform with the current year presentation. 2. Earnings per share for the three and six months ended June 30, 1996 and 1995 are based on the following weighted average shares outstanding: Three months ended : June 30, 1996 3,074,461 June 30, 1995 2,048,485 Six months ended: June 30, 1996 3,073,860 June 20, 1995 1,806,107 3. At June 30, 1996, approximately $25.3 million in securities were pledged to secure deposits and other liabilities. SDNB FINANCIAL CORP. Form 10-Q PART I - FINANCIAL INFORMATION (continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW For the past several years SDNB Financial Corp. (the "Company") and San Diego National Bank (the "Bank") have been adversely effected by a number of factors emanating primarily from the condition of the economy in San Diego. The first half of 1996 saw a cessation of the impact of most of those factors. Loan loss provisions have been exceptionally high over the last several years but a substantial reduction in the amount of classified loans has allowed for the recovery of a portion of the previously committed loan loss provisions during the quarter ended March 31, 1996 and no provision for the quarter ended June 30, 1996. The level of OREO property peaked in 1991 and has been generally declining since that time, therefore reducing losses and expenses in connection therewith. Additionally, the Company has incurred substantial expense in connection with legal fees and the provision for additional costs from the Pioneer Mortgage litigation which was settled late in 1995. The Bank had also suffered from a reduction in the level of the loan portfolio resulting from continuing low loan demand; however, the level of the loan portfolio has increased significantly between December 31, 1995 and June 30, 1996. Discussion of the individual segments of the Company's operations is contained in subsequent sections of this report. LIQUIDITY AND ASSETS/LIABILITY MANAGEMENT By the nature of its commercial/wholesale focus, the Bank has moderate interest-rate risk exposure in a declining-rate environment. This phenomenon can be seen in the "Static Gap Summary" (Table 1). At June 30, 1996, approximately 71% of the Bank's earning assets adjust immediately to changes in interest rates. Within three months, this increases to 86% of earning assets. Consequently, the Bank utilizes deposit liabilities that also adjust relatively quickly. Within the same three-month period, approximately 90% of the Bank's interest-bearing liabilities (mostly deposits) adjust to current rates. The Bank's cumulative gap position at the three month repricing interval has increased approximately $1.9 million, or 5 percent, from $35.8 million at December 31, 1995 to $37.7 million at June 30, 1996. This change is attributable primarily to increases in net loans of $7.8 million, in certificates of deposit of $1.5 million and in federal funds purchased of $5.4 million. Offsetting these increases was a net increase in liabilities of $10.5 million (increase in deposits of $17.5 million less a decrease in securities sold under agreements to repurchase of $7 million) and a decrease in investment securities of $2.3 million. Approximately $10 million of the increased deposits at June 30, 1996 consisted of a temporary deposit by one customer which was withdrawn early in July. During February 1995, the Bank entered into an interest rate swap to hedge against the effects on income of falling interest rates. If the prime interest rate falls below eight percent during the life of the contract, the Bank will receive payments amounting to the difference between the then existing prime rate and eight percent on the contract amount of $20 million. These payments continue while the prime interest rate stays below eight percent or until expiration of the contract, February 3, 1998. This contract helps to stabilize the Bank's net interest spread which, absent any hedge, decreases during periods of rapidly falling interest rates. To date, there have been no payments received under this contract. The Bank's liquidity needs are projected by comparing anticipated funding needs against current resources and anticipated deposit growth. Any current surplus of funds is invested to maximize income while maintaining safety and providing for future liquidity. During the six months ended June 30, 1996, cash and cash equivalents increased $4 million. Approximately $9.5 million cash was used by investing activities. The two major components were net purchases of $200,000 of securities ($19.5 million of purchases offset by maturities of $19.3 million) and increase in gross loans of $9.9 million. Financing activities provided $13.3 million, (increase in deposits of $20.4 million offset by a decrease in repurchase agreements of $7 million). Liquidity is provided on a daily basis by federal funds sold and on a longer-term basis by the structuring of the Bank's investment portfolio to provide a steady stream of maturing issues. Additionally, the Bank may raise additional funds from time to time through money desk operations or via the sale of loans to another institution. The Bank has never purchased high-yield securities or participated in highly-leveraged transactions. CAPITAL RESOURCES The Comptroller of the Currency ("Comptroller") has established a framework for supervisory requirements of national banks based upon capital ratios. Based upon this framework, a bank's capitalization is defined as well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized or critically capitalized. Under the Comptroller's framework, a bank is well capitalized if its ratios are greater than or equal to 6% and 10% for tier 1 capital and risk weighted capital, respectively. The Federal Reserve Board ("Reserve Board"), as the regulatory body of the Company, has capital ratio requirements. Under the Reserve Board's Capital Adequacy Guidelines, all bank holding companies should meet a minimum ratio of qualifying total capital to weighted-risk assets of 8 percent, of which at least 4.0 percentage points should be in the form of tier 1 capital. The Reserve Board and the Comptroller have also imposed a leverage standard to supplement their risk based ratios. This leverage standard focuses on a banking institution's ratio of Tier 1 capital to average total assets adjusted for goodwill and other certain items. Under these guidelines, banking institutions that meet certain criteria, including excellent asset quality, high liquidity, low interest rate exposure and good earnings, and have received the highest regulatory rating must maintain a ratio of Tier 1 capital to total assets of at least 3%. Institutions not meeting this criteria, as well as institutions with supervisory, financial or operational weaknesses, along with those experiencing or anticipating significant growth are expected to maintain a Tier 1 capital to total assets ratio equal to at least 4% to 5%. As reflected in the following table, the capital and leverage ratios of the Company as of June 30, 1996 and December 31, 1995 exceeded the fully phased-in regulatory risk-based capital adequacy guidelines and the leverage standard. As also reflected, at both dates the Bank exceeded the capital and leverage ratios for a "well capitalized" institution. Capital Components and Ratios (dollars in thousands) June 30, 1996 December 31, 1995 Company Bank Company Bank Capital Components Tier 1 Capital $16,925 $14,132 $16,726 $13,656 Total Capital 18,444 15,605 18,218 15,017 Risk-weighted assets and off-balance sheet instruments 128,237 117,768 117,967 107,310 Regulatory Capital Tier 1 risk-based: Actual 13.20% 12.00% 14.18% 12.73% Required 4.00 6.00 4.00 6.00 Excess 9.20% 6.00% 10.18% 6.73% Total risk-based: Actual 14.38% 13.25% 15.43% 13.98% Required 8.00 10.00 8.00 10.00 Excess 6.38% 3.25% 7.43% 3.98% Leverage: Actual 9.59% 8.52% 9.37% 8.43% Required 5.00 5.00 5.00 5.00 Excess 4.59% 3.52% 4.37% 3.43% Funds available for the payment of dividends by the Company would be obtained from the Bank. There are legal limitations on the ability of the Bank to provide funds for the Company. Under federal banking law, dividends declared by the Bank in any calendar year may not, without the approval of the Comptroller of the Currency, exceed its net income, as defined, for that year combined with its retained net income for the preceding two years. At June 30, 1996, the Bank had available for dividends to the Company approximately $1,840,000 without approval of the Comptroller. Federal banking law also restricts the Bank from extending credit to the Company in excess of 10% of capital stock and surplus, as defined, of the Bank. Any such extensions of credit are subject to strict collateral requirements. The Company and the Federal Reserve Bank of San Francisco ("Reserve Bank") entered into an agreement on November 20, 1992, pursuant to which the Company must obtain the approval of the Reserve Bank prior to the declaration of any cash dividends. INVESTMENT SECURITIES During the first half of 1996, the gross unrealized losses in the available-for-sale category increased from $41,000 to $191,000 and in the held-to-maturity category decreased from $75,000 to $60,000. Management continues to believe that there is sufficient liquidity and available sources of liquidity to allow all such securities (which are fully guaranteed by United States Government instrumentalities as to principal) to mature and thus avoid realization of any material amount of the presently unrealized losses. NET INTEREST INCOME/NET INTEREST MARGIN The following is a comparison of the net interest spread between the first six months of 1996 and the same period of 1995. 1996 1995 Yield on average earning assets (taxable equivalent) 8.24% 9.23% Cost of funds 2.33% 2.22% Net interest spread 5.91% 7.01% In addition to interest rates, changes in the volumes of assets and liabilities also affect net interest income. The volume/rate variance analysis (Table 2) shows the change in net interest income that is attributable to changes in volume versus changes in rates. As reflected in Table 2, the comparison of net interest income between the first six months of 1996 and the similar period of 1995 was impacted by the significant decrease in the prime interest rate (8.29% average in 1996 vs. 8.91% average in 1995) coupled with a shift in an increased proportion of lower earning investments as opposed to higher earning loans. LOANS AND ALLOWANCE AND PROVISION FOR LOAN LOSSES A summary of the activity in the allowance for loan loss is as follows: (In thousands) Six months ended June 30, 1996 1995 Balance at beginning of period $2,002 $2,148 Provision charged (credited) to operating expenses (100) 450 Loans charged off (400) (327) Recoveries 17 223 Balance at end of period $1,519 $2,494 Management employs a 'migration analysis method' to establish the required amount of loan loss allowance. This process tracks realized loan losses back through the prior two years to estimate loss exposure on the classified and unclassified loan portfolios. Additionally, loss experience is tracked in pools of loans with similar characteristics to estimate the loss exposure unique to various loan types. The measured loss exposure is then applied to the current loan portfolio and further adjusted for 'qualitative factors'. This method of establishing loan loss reserves complies with the policies of the Office of the Comptroller of the Currency as reflected in Banking Circular 201, revised, dated February 20, 1992, and in Banking Bulletin 93-60, dated December 21, 1993. The Company began testing this new method during 1992 and comparing its results to results reached by the previously existing procedures employed by the Company. The test proved that the two methods were comparable, and the Company adopted the new migration analysis method during 1993. Accordingly, the Company believes its method for establishing the loan loss allowance is sound. But no method, however valid, can consistently predict future events with complete accuracy. In recent years, several factors used by the Bank to establish loan loss allowances have been subject to considerable volatility, and this in turn has affected the volatility of nonperforming loans, charge-offs, and the coverage ratio. In addition, the Bank's method of reporting, particularly its conservative listing of loans as nonperforming, is not always an accurate indicator of actual future losses. These issues are explained in greater detail below. The economy in San Diego suffered a sharp downturn in recent years, particularly in the real estate market. The Bank is a community bank with a relatively small loan portfolio comprised of mostly commercial/real estate loans that tend to be individually larger in amount than loans made by retail banks. As a result of these and other factors, the Bank can experience large swings in nonperforming loans, charge-offs, and the coverage ratio when one or a few loans are transferred from one category to another. These factors are not reasons for changing a valid method of determining loan loss allowances and are not always accurate predictors of losses, but they do have short-term effect on those allowances and related reported figures. The volatility of "non-performing" loans is illustrated in the following chart: ASSETS REPORTED AS NONPERFORMING (In thousands) At At At June 30, 1996 December 31, 1995 June 30, 1995 CURRENT AND NONCURRENT Non-accrual loans $4,209 $6,969 $2,246 Restructured loans (still accruing) 2,089 1,364 2,304 Loans 90 days past due 555 93 6 6,853 8,426 4,556 Other real estate owned 379 181 772 Total $ 7,232 $8,607 $5,328 NONCURRENT Non-accrual loans $2,082 $3,160 $641 Restructured loans (still accruing) 0 0 0 Loans 90 days past due 555 93 6 2,637 3,253 647 Other real estate owned 379 181 772 Total $3,016 $3,434 $1,419 Loans reported as nonperforming but which are current, as a percentage of total loans reported as nonperforming 62% 61% 86% OTHER OPERATING INCOME Other non-interest income increased in 1996 when bank service charges increased as a result of lower earnings credit allowed on customer account balances. OTHER OPERATING EXPENSES Salaries and employee benefits and occupancy expense increased between 1995 and 1996 primarily because of the opening of the Bank's South Bay office and International Department late in 1995. SUBSIDIARY DATA San Diego National Bank The Bank earned $256,000 and $476,000 for the three and six months ended June 30, 1996 respectively, compared to $304,000 and $551,000, respectively, for the same periods of 1995. The return on average assets (ROA) for the six month periods was .58% and .74%, respectively. The return on equity (ROE) for the six month periods was 6.89% and 9.13% respectively. The reasons for the change in Bank earnings have been enumerated on the preceding pages. San Diego National Bank Building Joint Venture 3 months ended 6 months ended June 30 June 30 1996 1995 1996 1995 Pre-consolidation gross building $486,000 $450,000 $988,000 $950,000 revenues Pre-consolidation, pre-tax loss 188,000 229,000 336,000 325,000 Depreciation and amortization expense 135,000 142,000 276,000 285,000
Table 1 San Diego National Bank Static Gap Summary June 30, 1996 (In thousands) Immediately Non-rate Adjustable 1 Day 3 6 Sensitive Or 1 Day Through Through Through And Over Maturity 3 Months 6 Months 12 Months 12 Months Total Loans 89,954 2,369 1,083 2,895 4,471 100,772 Investment securities - 20,299 - 6,359 7,704 34,362 Certificates of deposit in other banks - 1,488 1,386 50 - 2,924 Federal funds sold 30,115 - - - - 30,115 Total interest earning assets 120,069 24,156 2,469 9,304 12,175 168,173 Non-interest earning assets - - - - 12,966 12,966 Total assets 120,069 24,156 2,469 9,304 25,141 181,139 Deposits: Savings, NOW accounts and money markets 81,494 - - - - 81,494 Time deposits - 19,089 5,372 6,107 369 30,937 Total deposits 81,494 19,089 5,372 6,107 369 112,431 Securities sold under agreement to repurchase 5,970 - - - - 5,970 Total interest bearing liabilities 87,464 19,089 5,372 6,107 369 118,401 Non-interest bearing liabilities - - - - 48,413 48,413 Shareholders' equity - - - - 14,325 14,325 Total liabilities and shareholders' equity 87,464 19,089 5,372 6,107 63,107 181,139 Interest rate sensitivity gap 32,605 5,067 (2,903) 3,197 (37,966) Cumulative interest rate sensitivity gap 32,605 37,672 34,769 37,966 -
Table 2 SDNB Financial Corp. Volume/Rate Variance Analysis Six months ended June 30, 1996 and 1995 (In thousands) 1996 compared to 1995 Volume Rate Total Increase(decrease) in interest on earning assets: Commercial loans $ (70) $ (164) $ (234) Real estate loans (51) (226) (277) Installment loans 64 (6) 58 Ready Money (1) 1 0 Total loans (58) (395) (453) U.S. Treasury securities 281 4 285 Securities of government agencies (101) 29 (72) State and political obligations (41) (39) (80) Other securities 0 3 3 Total investment securities 139 (3) 136 Interest-bearing deposits in other banks (3) 14 11 Federal funds sold 232 (16) 216 Total interest income change 310 (400) (90) Increase(decrease) in interest paid on liabilities: Savings accounts (13) 1 (12) NOW accounts (10) (18) (28) Super NOW accounts 2 (6) (4) Money market accounts (58) (51) (109) Executive money market accounts 172 (1) 171 Total savings deposits 93 (75) 18 Time deposits under $100,000 151 13 164 Time deposits of $100,000 or above 104 36 140 Total time deposits 255 49 304 Federal funds purchased and securities sold under agreement to repurchase (50) (5) (55) Short-term debt (59) (59) (118) Long-term debt (96) 88 (8) Total interest expense change 143 (2) 141 Net change in net interest income $ 167 $ (398) $ (231) 1) Interest income on state and political obligations has been adjusted for tax effect at current rates. Interest expense on short- and long-term debt is included in Building Operating Expenses in the Consolidated Statement of Earnings. 2) Change in interest income or expense can be attributed to (a) changes in volume (change in volume times old rate), (b) changes in rates (change in rate times old volume), and (c) changes in rate/volume (change in rate times the change in volume). The rate/volume variances are allocated proportionally between the rate and volume variances based on their absolute values. PART II - OTHER INFORMATION ITEM 1 Legal Proceedings None ITEM 2 Changes in Securities None ITEM 3 Defaults Upon Senior Securities None ITEM 4 Submission of Matters to a Vote of Security Holders (a) The 1996 Annual Meeting of Shareholders was held May 15, 1996. (b) Directors elected: Douglas E. Barnhart Howard W. Brotman Margaret Costanza Murray L. Galinson Karla J. Hertzog Robert B. Horsman Mark P. Mandell Patricia L. Roscoe Julius H. Zolezzi (c) Matters voted upon: (1) Ratification of appointment of Coopers & Lybrand L.L.P. as independent accountants: For 2,152,292 Against 5,694 Abstentions 3,495 (2) Election of Directors: Name For Withheld Douglas E. Barnhart 2,152,322 9,159 Howard W. Brotman 2,152,322 9,159 Margaret Costanza 2,152,322 9,159 Murray L. Galinson 2,152,322 9,159 Karla J. Hertzog 2,152,322 9,159 Robert B. Horsman 2,152,322 9,159 Mark P. Mandell 2,152,322 9,159 Patricia L. Roscoe 2,152,322 9,159 Julius H. Zolezzi 2,152,322 9,159 ITEM 5 Other Information On July 15, 1996 SDNB Financial Corp., announced it has entered into an Agreement and Plan of Merger with FBOP Acquisition Company and FBOP Corporation. Pursuant to the terms of that Agreement, which is subject to shareholder and regulatory approval, shareholders of the Company will receive cash for their shares and the Company would cease to exist. ITEM 6 Exhibits and Reports on Form 8-K A. Exhibits (listed by number corresponding to the Exhibit Table of Item 601 of Regulation S-K) 27 Financial Data Schedule (submitted only in electronic format and omitted from paper copies pursuant to Paragraph (c) (v) of Regulation S-K (17 CFR 220.601(c) (v)) and Note 2 to Paragraph (c) (1) (vi) of Regulation S-K (17 CFR 229.601(c) (1)(vi)). B. Reports on Form 8-K None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 12, 1996 SDNB FINANCIAL CORP. By: /S/ HOWARD W. BROTMAN Howard W. Brotman, duly authorized officer and Chief Financial Officer EX-27 2
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS 6-MOS DEC-31-1996 DEC-31-1996 JUN-30-1996 JUN-30-1996 11486 11486 3322 3322 30115 30115 0 0 28957 28957 5887 5887 5827 5827 100772 100772 1519 1519 191797 191797 160794 160794 5970 5970 377 377 7922 7922 0 0 0 0 20301 20301 (3376) (3376) 191797 191797 2414 4690 495 979 285 589 3194 6258 869 1683 905 1769 2289 4489 0 (100) 0 0 2614 5301 113 219 113 219 0 0 0 0 109 211 0.04 0.07 0.04 0.07 5.45 5.40 4209 4209 555 555 4043 4043 0 0 1650 2002 137 400 6 17 1519 1519 1029 1029 0 0 490 490
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