-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WbsDePzN2WMnw0VgLBRiXaAIE3/LivzTwaBMpgC5zmdbqKUR9MbGwpSLtksAQ2lb fyyb9FXA74DKNat7W4ZLmw== 0000702147-95-000005.txt : 19950517 0000702147-95-000005.hdr.sgml : 19950516 ACCESSION NUMBER: 0000702147-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 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: 95537739 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 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - ----------------------------------------------------------------------------- FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------- For Quarter Ended Commission File Number 0-11117 March 31, 1995 SDNB FINANCIAL CORP. (Exact name of Registrant as specified in its charter) CALIFORNIA (State or jurisdiction of incorporation or organization) 95-3725079 (I.R.S. Employer Identification No.) 1420 Kettner Blvd. San Diego, CA 92101 (Address of principal executive offices) (Zip Code) (619) 231-4989 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required 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 Number of shares of Common Stock, no par value, outstanding at the close of the period covered by this report (March 31, 1995): 2,048,485. SDNB FINANCIAL CORP. INDEX PART I FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheet (unaudited) 1 March 31, 1995 and December 31, 1994 Consolidated Statements of Operations (unaudited) 2 Three months ended March 31, 1995 Three months ended March 31, 1994 Consolidated Statements of Cash Flows (unaudited) 3 Three months ended March 31, 1995 Three months ended March 31, 1994 Notes to Consolidated Financial Statements (unaudited) 4 March 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-13 PART II OTHER INFORMATION Item 1. Legal Proceedings 14 Item 2. Changes in Securities 14 Item 3. Defaults upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 - 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 PART I FINANCIAL INFORMATION Item 1. Financial Statements SDNB Financial Corp. and Subsidiaries Consolidated Balance Sheets (unaudited) (In thousands) March 31, December 31, Assets 1995 1994 Cash and due from banks $ 12,756 $ 11,936 Interest bearing deposits in other bank 2,072 1,381 Investment securities 15,413 17,321 Investment securities available-for-sale 10,642 9,910 Federal funds sold 21,600 24,000 Loans 93,819 97,058 Less allowance for loan losses 2,253 2,148 Net loans 91,566 94,910 Premises and equipment, net 10,910 11,089 Other real estate owned 816 268 Accrued interest receivable and other assets 2,250 2,370 Total assets $ 168,025 $ 173,185 Liabilities and Shareholders' Equity Liabilities: Deposits: Non-interest bearing $ 39,686 $45,693 Interest bearing 89,526 92,583 Total deposits 129,212 138,276 Securities sold under agreement to repurchase 14,333 12,285 Accrued interest payable and other liabilities 802 953 Notes payable 12,454 12,702 Total liabilities 156,801 164,216 Shareholders' equity: Common stock 16,648 14,585 Deficit (5,194) (5,256) Net unrealized holding losses on available-for-sale securities (230) (360) Total shareholders' equity 11,224 8,969 Total liabilities and shareholders' equity $ 168,025 $173,185 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) Three months ended March 31, 1995 1994 Interest income: Interest and fees on loans $ 2,581 $ 2,294 Interest on federal funds sold 200 91 Interest on investments 387 361 Total interest income 3,168 2,746 Interest expense: Interest on deposits 645 611 Interest on repurchase agreements 76 70 Interest on notes payable 15 7 Total interest expense 736 688 Net interest income 2,432 2,058 Provision for loan losses 300 300 Net interest income after provision for loan losses 2,132 1,758 Other operating income: Security gains, net 11 0 Building income 261 291 Other non-interest income 185 254 Total other operating income 457 545 Other operating expenses: Salaries and employee benefits 1,020 879 Occupancy 110 121 Professional fees 122 102 Building operating expenses 596 559 Other non-interest expenses 676 599 Total other operating expenses 2,524 2,260 Earnings before income tax 65 43 Income tax 3 0 Net earnings $ 62 $ 43 Net earnings per share $ 0.04 $ 0.03 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) Three months ended March 31, 1995 1994 OPERATING ACTIVITIES: Net earnings $ 62 $ 43 Adjustments to reconcile net earnings to net cash used by operating activities: Provision for loan losses 300 300 Provision for depreciation and amortization 320 314 Amortization of investment security discounts (5) (15) Other expense not utilizing (providing) cash 34 (41) Unearned loan fees 88 54 Taxes refundable (5) 0 Interest receivable and other assets (668) (407) Interest payable and other liabilities (146) (548) Total adjustments (82) (343) Net cash used by operating activities (20) (300) INVESTING ACTIVITIES: Proceeds from maturities of held-to-maturity securities 1,494 4,707 Proceeds from sales of held-to-maturity securities 395 0 Purchases of held-to-maturity securities 0 (4,997) Purchases of available-for-sale securities (600) 0 Net change in gross loans 3,070 4,079 Proceeds from sale of OREO properties 0 216 Purchases of OREO properties 0 (520) Purchases of premises and equipment (29) (77) Net cash provided by investing activities 4,330 3,408 FINANCING ACTIVITIES: Net change in deposits (9,064) 4,449 Net change in short-term borrowings 1,800 5,944 Proceeds from issuance of common stock (net) 2,065 0 Net cash provided (used) by financing activities (5,199) 10,393 Change in cash and cash equivalents (889) 13,501 Cash and cash equivalents at beginning of period 37,317 17,026 Cash and cash equivalents at end of period $36,428 $30,527 For the purpose of the statement of cash flows, the Company considers cash and cash equivalents to be as follows at March 31, 1995 1994 Cash and due from banks $12,756 $11,545 Interest-bearing deposits in other banks 2,072 1,682 Federal funds sold 21,600 17,300 Totals $36,428 $30,527 Supplemental cash flow information: 1995 1994 CASH PAID FOR: Interest $737 $688 Income Taxes $0 $0 Non-cash items: transfer of loans to OREO $553 $0 The accompanying notes are an integral part of the consolidated financial statements. SDNB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 1995 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 March 31, 1995, and the results of operations and cash flows for the three months ended March 31, 1995 and 1994. Certain prior year amounts have been reclassified to conform with the current year presentation. 2. Earnings per share for the three months ended March 31, 1995 and 1994 are based on 1,561,036 and 1,538,364 weighted average shares outstanding, respectively. 3. At March 31, 1995, approximately $3.4 million in securities were pledged to secure deposits. 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 The first quarter of 1995 reflects the beneficial effect of higher interest rates while also reflecting a continuation of some of the problems of a still depressed economy in which SDNB Financial Corp. (the "Company") operates. Net profit for the quarter ended March 31, 1995 is $62,000 compared to a profit of $43,000 for the comparable period of 1994. For the past several years, the Company and San Diego National Bank (the "Bank") have been adversely affected by a number of factors emanating primarily from the condition of the economy in San Diego. These factors include: a) The continued need for high loan loss provisions. b) OREO losses and expenses from higher than normal levels of OREO property. c) Reduction of the level of the loan portfolio resulting from continuing low loan demand. Additionally, the Company has incurred substantial expense in connection with legal fees and provision for additional costs from the Pioneer Mortgage litigation (see Report on Form 10-K for year ended December 31, 1994). While the Company reports a profit for the first quarter of 1995, there can be no assurances that the factors noted above, or other factors, will not continue to adversely impact the Company and the Bank. Discussion of the individual segments of the Company's operations is contained in subsequent sections of this report. LIQUIDITY AND ASSET/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 March 31, 1995, approximately 75% of the Bank's earning assets adjust immediately to changes in interest rates. Within three months, this increases to 84% of earning assets. Consequently, the Bank utilizes deposit liabilities that also adjust relatively quickly. Within the same three-month period, approximately 95% 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 decreased approximately $4.6 million, or 18 percent, from $26.0 million at December 31, 1994 to $21.4 million at March 31, 1995. This change is attributable primarily to decreases of $2.8 million in loans and $2.4 million in Federal funds sold. The offsetting decrease in liabilities is in demand deposits which are non-rate sensitive. During the current quarter the Bank has entered into an interest rate swap (which cost $40,000) 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. 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 maximizeincome while maintaining safety and providing for future liquidity. During the quarter ended March 31, 1995, cash and cash equivalents decreased $0.9 million. Approximately $4.3 million of cash was provided by investing activities. The two major components were net proceeds of $1.3 million from securities ($1.9 million of sales and maturities offset by purchases of $0.6 million) and decrease in gross loans totaling $3.1 million. Financing activities used $5.2 million of cash during the quarter. Deposits decreased $9.1 million while repurchase agreements increased $1.8 million. The issuance of new stock during the quarter provided a net amount of $2.1 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. See "CAPITAL RESOURCES" for a discussion of other factors that have affected liquidity in the quarter ended March 31, 1995 and will affect future liquidity. CAPITAL RESOURCES Since its initial capitalization in 1981, the Company has relied primarily on internally generated income to fund its growth and provide for depositor protection. During 1994 the Company concluded that additional capital would be beneficial and proposed a plan for additional capitalization which was approved by regulatory authorities on March 9, 1995, and by the shareholders of the Company on March 17, 1995. The plan encompasses the following steps: a. Sale of 510,121 newly issued shares of the Company's Common Stock to two limited partnerships managed by WHR Management Corp. ("WHR") at $4.34 per share for a gross amount of $2,213,925. This transaction was completed on March 28, 1995. b. A rights offering (the "Subscription Offering") to existing shareholders encompassing up to 769,582 shares of newly issued Common Stock at a subscription price of $4.34 per share for a gross potential amount of $3,339,986 if the offering is fully subscribed. The Company filed a registration statement on Form S-3 with the Securities and Exchange Commission on April 3, 1995 with respect to the subscription rights to be distributed and the Common Stock to be issued in connection with the Subscription Offering. c. Sale to WHR of up to an additional 255,193 newly issued shares of Common Stock at $4.34 per share for a gross amount of $1,107,538, if the Subscription Offering is fully subscribed or such lesser amount so that after such purchase WHR holds an aggregate of 24.9% of the outstanding Common Stock of the Company taking into account the shares issued in the Subscription Offering. Pursuant to the terms of the agreement negotiated by the Company and WHR, WHR does not have the right to participate in the Subscription Offering. The Company has used a portion of the proceeds of the first sale to WHR (item "a" above) to reduce notes payable and to pay certain of the expenses in connection with the plan for additional capitalization. The remaining proceeds from the first sale as well as any net proceeds from the subsequent Subscription Offering and second sale to WHR will be used for general corporate purposes, which may include investments in or extensions of credit to the Company's subsidiaries, reduction of existing debt or financing possible future acquisitions of other banking institutions or related businesses. At the present time the Company does not have any specific plans, agreements or understandings, written or oral, pertaining to the proposed acquisition of any banking institution or related business. As disclosed in the Company's 1994 Annual Report to Shareholders and Report on Form 10-K, the Bank is precluded from paying dividends to the Company. As further disclosed, the Company merged SDNB Development Corp. into itself effective July 1, 1993, thereby allowing cash flow from the San Diego National Bank Building Joint Venture ("JV") to come directly to the Company. During 1994 and the first three months of 1995, the JV cash flow provided the Company with sufficient funds to meet its normal ongoing obligations but was not sufficient to allow the payment of cash dividends, which would also require approval of the Federal Reserve Bank of San Francisco under terms of an agreement dated November 20, 1992. Subsequent to March 28, 1995, earnings from the net proceeds of the stock issuances referred to above will augment cash flow from the Joint Venture. 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 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 December 31, 1994 and March 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) March 31, 1995 December 31, 1994 Company Bank Company Bank Capital Components Tier 1 Capital $11,454 $11,913 $9,329 $11,667 Total Capital 12,963 13,682 10,868 13,081 Risk-weighted assets and off-balance sheet instruments 119,979 108,669 123,142 113,106 Regulatory Capital Tier 1 risk-based: Actual 9.55% 10.96% 7.59% 10.35% Required 4.00 6.00 4.00 6.00 Excess 5.55% 4.96% 3.59% 4.35% Total risk-based: Actual 10.80% 12.22% 8.85% 11.61% Required 8.00 10.00 8.00 10.00 Excess 2.80% 2.22% 0.85% 1.61% Leverage: Actual. 7.63% 7.94% 5.33% 7.09% Required 5.00 5.00 5.00 5.00 Excess 2.63% 2.94% 0.33% 2.09% INVESTMENT SECURITIES During the first quarter of 1995, the gross unrealized losses in the available-for-sale category declined from $360,000 to $230,000 and in the held-to-maturity category, declined from $680,000 to $400,000. 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 three months of 1995 and the same period of 1994. 1995 1994 Yield on average earning assets (taxable equivalent) 9.44% 7.31% Cost of funds 2.18% 1.81% Net interest spread 7.26% 5.51% 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 quarter of 1995 and the similar quarter of 1994 was impacted primarily by the significant increase in the prime interest rate (8.83% average in 1995 vs. 6.03% average in 1994) which was not matched by a proportionate similar increase in the cost of funds, off-set by the continuing decline in the amount of the loan portfolio. LOANS AND ALLOWANCE AND PROVISION FOR LOAN LOSSES A summary of the activity in the allowance for loan loss is as follows: (In thousands) Three months ended March 31, 1995 1994 Balance at beginning of period $2,148 $2,522 Provision charged to operating expenses 300 300 Loans charged off (257) (63) Recoveries 62 28 Balance at end of period $2,253 $2,787 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 Mar. 31, 1995 Dec. 31, 1994 Mar. 31, 1994 CURRENT AND NONCURRENT Non-accrual loans $3,523 $6,046 $5,213 Restructured loans (still accruing) 2,311 2,316 2,335 Loans 90 days past due 1 20 324 5,835 8,382 7,872 Other real estate owned 816 268 1,341 Total $6,651 $8,650 $9,213 NONCURRENT Non-accrual loans $1,223 $1,276 $3,636 Restructured loans (still accruing) 0 0 0 Loans 90 days past due 1 20 324 1,224 1,296 3,960 Other real estate owned 816 269 1,341 Total $2,040 $1,564 $5,301 Loans reported as nonperforming but which are current, as a percentage of total loans reported as nonperforming 79% 85% 50% OTHER OPERATING INCOME Other non-interest income declined between 1994 and 1995 primarily because higher interest rates resulted in a higher earnings credit on clients' deposit accounts which reduced the service charge income. OTHER OPERATING EXPENSES Salaries and employee benefits increased between 1994 and 1995 due to additions to staff and wage increases averaging approximately 4%. Other non-interest expenses increased between 1994 and 1995 primarily due to: a) Increase in legal fees in connection with Pioneer Mortgage litigation (see Report on Form 10-K for the year ended December 31, 1994) of approximately $50,000. b) Charge-off of an unrecovered account overdraft of approximately $43,000. SUBSIDIARY DATA San Diego National Bank The Bank earned $246,000 in the first quarter of 1995 compared to $130,000 for the same quarter of 1994. Return on average assets (ROA) was 0.66% and 0.31%, respectively. Return on average equity (ROE) was 8.20% and 4.44%, respectively. The reasons for the change in Bank earnings have been enumerated on the preceding pages. San Diego National Bank Building Joint Venture The JV recorded pre-consolidation gross building revenues of $500,000 and $537,000 in the first quarter of 1995 and 1994, respectively, resulting in pre-consolidation, pretax losses of $149,000 and $70,000, respectively. Depreciation and amortization expenses were $143,000 and $170,000 in 1995 and 1994, respectively. Building revenues declined as leases were renewed at lower rates due to competitive pressures. As disclosed in the 1994 Annual Report to Shareholders and Report on Form 10K, in November 1994 the existing first mortgage loan on the building was purchased by two limited partnerships managed by WHR Management Corp. (purchaser of the Company's Common Stock in 1995; see "CAPITAL RESOURCES"). In January 1995 the JV and WHR entered into a modification agreement which reduces the debt service requirement to $800,000 per year, all allocable to interest. This caused a short term increase in interest expense which will be offset later in 1995 when, absent such modification, the interest rate would have exceeded the rate being paid under the modification.
San Diego National Bank Static Gap Summary March 31, 1995 (In thousands) Immediately Non-rate Adjustable 1 Day 3 6 Sensitve Or 1 Day Through Through Through And Over Maturity 3 Months 6 Months 12 Months 12 Months Total Loans (net) 85,338 2,948 620 627 4,722 94,255 Investment securities - 9,087 2,255 2,491 11,622 25,455 Certificates of deposit in other banks - 886 198 - - 1,084 Federal funds sold 21,600 - - - - 21,600 Total interest earning assets 106,938 12,921 3,073 3,118 16,344 142,394 Non-interest earning assets - - - - 13,671 13,671 Total assets 106,938 12,921 3,073 3,118 30,015 156,065 Deposits: Savings, NOW accounts and money markets 72,393 - - - - 72,393 Time deposits - 11,772 2,453 2,930 127 17,282 Total deposits 72,393 11,772 2,453 2,930 127 89,675 Securities sold under agreement to repurchase 14,333 - - - - 14,333 Total interest bearing liabilities 86,726 11,772 2,453 2,930 127 104,008 Non-interest bearing liabilities - - - - 40,374 40,374 Shareholders' equity - - - - 11,683 11,683 Total liabilities and shareholders' equity 86,726 11,772 2,453 2,930 52,184 156,065 Interest rate sensitivity gap 20,212 1,149 620 188 (22,169) Cumulative interest rate sensitivity gap 20,212 21,361 21,981 22,169 -
SDNB Financial Corp Volume/Rate Variance Analysis Three months ended March 31, 1995 and 1994 (In thousands) 1995 compared to 1994 Volume Rate Total Increase(decrease) in interest on earning assets: Commercial loans $ (228) $ 370 $ 142 Real estate loans (96) 251 155 Installment loans (17) 8 (9) Ready Money (1) 0 (1) Total loans (342) 629 287 U.S. Treasury securities (34) 8 (26) Securities of government agencies 7 59 66 State and political obligations (42) (13) (55) Other securities 12 1 13 Total investment securities (57) 55 (2) Interest-bearing deposits in other banks (5) 8 3 Federal funds sold 8 101 109 Total interest income change (396) 793 397 Increase(decrease) in interest paid on liabilities: Savings accounts 7 (1) 6 NOW accounts 7 3 10 Super NOW accounts (2) 2 0 Money market accounts 22 35 57 Executive money market accounts (32) 42 10 Total savings deposits 2 81 83 Time deposits under $100,000 (78) 44 (34) Time deposits of $100,000 or above (44) 30 (14) Total time deposits (122) 74 (48) Federal funds purchased and securities sold under agreement to repurchase (10) 15 5 Short-term debt 3 16 19 Long-term debt (1) 41 40 Total interest expense change (128) 227 99 Net change in net interest income $ (268) $ 566 $ 298 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 See Item 3 of Report on Form 10-K for the year ended December 31, 1994. 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 1994 Annual Meeting of Shareholders was held March 17, 1995. (b) Directors elected: Margaret Costanza Charles I. Feurzeig Murray L. Galinson Karla J. Hertzog Robert B. Horsman Mark P. Mandell Patricia L. Roscoe Julius H. Zolezzi (c) Matters voted upon: (1) Proposal regarding stock issuances and other capital transactions: For 779,535 Against 29,705 Abstentions 13,725 (2) Approval of SDNB Financial Corp. 1994 Stock Option Plan: For 769,953 Against 39,403 Abstentions 10,068 (3) Ratification of appointment of Coopers & Lybrand L.L.P. as independent accountants: For 1,101,335 Against 3,366 Abstentions 4,794 (4) Election of Directors: Name For Withheld Margaret Costanza 1,097,683 11,812 Charles I. Feurzeig 1,085,312 24,183 Murray L. Galinson 1,096,863 12,632 Karla J. Hertzog 1,097,683 11,812 Robert B. Horsman 1,096,683 12,632 Mark P. Mandell 1,097,683 11,812 Patricia L. Roscoe 1,097,683 11,812 Julius H. Zolezzi 1,097,683 11,812 ITEM 5 Other Information None ITEM 6 Exhibits and Reports on Form 8-K A. Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 of Regulation S-K) 4(a) Form of Subscription Agent Agreement relating to the Subscription Offering (incorporated by reference from Exhibit 99(a) to the Registrant's Registration Statement on Form S-3, filed April 3, 1995, SEC File No. 33-58379). 4(b) Form of Subscription Warrant relating to the Subscription Offering (incorporated by reference from Exhibit 99(b) to the Registrant's Registration Statement on Form S-3, filed April 3, 1995, SEC File No. 33-58379). 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 SIGNATURES 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: May 12, 1995 SDNB FINANCIAL CORP. By: /s/Howard W. Brotman Howard W. Brotman, duly authorized officer and Chief Financial Officer INDEX OF EXHIBITS Exhibit Number Description 27 Financial Data Schedule EX-27 2
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS DEC-31-1995 MAR-31-1995 12,756 2,072 21,600 0 10,642 15,413 15,010 93,819 2,253 168,025 129,212 16,629 802 10,158 16,648 0 0 (5,424) 168,025 2,581 369 218 3,168 645 736 2,432 300 11 2,524 65 62 0 0 62 0.04 0.04 6.54 3,595 1 2,311 0 2,148 257 62 2,253 1,642 0 611
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