-----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, Dqhc2TfmF3F3+dKYyNGQXVpK2nO9/7CUi7KxYC62kVpzeGi+8J0lyqTkoPHhZC+k Vcq+A89GBzJqHwxo/2Muig== 0000702700-96-000008.txt : 19961113 0000702700-96-000008.hdr.sgml : 19961113 ACCESSION NUMBER: 0000702700-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SARATOGA BANCORP CENTRAL INDEX KEY: 0000702700 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 942817587 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-77519-LA FILM NUMBER: 96657726 BUSINESS ADDRESS: STREET 1: 12000 SARATOGA SUNNYVALE RD CITY: SARATOGA STATE: CA ZIP: 95070 BUSINESS PHONE: 4089731111 10-Q 1 10-Q FOR PERIOD ENDED 09/30/96 1 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 September 30, 1996 or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to __________ Commission file number 2-77519-LA SARATOGA BANCORP (Exact name of registrant as specified in its charter) California 94-2817587 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12000 Saratoga-Sunnyvale Road Saratoga, California 95070 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (408) 973-1111 NONE (Former name, former address and former fiscal year, if changed since last report) 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 Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. CLASS SHARES OUTSTANDING AT OCTOBER 29, 1996 Common Stock 1,035,820 The Index to Exhibits appears on Page 18 Page 1 of 19 pages 2 PART I - FINANCIAL INFORMATION Item 1. Consolidated Condensed Financial Statements SARATOGA BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, December 31, 1996 1995* (Unaudited) ASSETS Cash and due from banks $ 3,077,000 $ 5,239,000 Federal funds sold 20,500,000 17,700,000 Total cash and equivalents 23,577,000 22,939,000 Interest-bearing deposits in other banks 200,000 200,000 Investments available-for-sale 14,430,000 15,286,000 Investments held-to-maturity 22,664,000 20,348,000 Loans, net 43,957,000 36,759,000 Other real estate owned 1,202,000 1,745,000 Premises and equipment 2,163,000 1,988,000 Other assets 1,512,000 1,232,000 TOTAL ASSETS $109,705,000 $100,497,000 ============ ============ LIABILITIES Deposits: Non-interest bearing $ 17,610,000 $ 20,410,000 Interest bearing 65,625,000 54,539,000 Total deposits 83,235,000 74,949,000 Federal funds purchased - 1,500,000 Other borrowings 14,062,000 12,087,000 Accrued expenses and other liabilities 901,000 904,000 TOTAL LIABILITIES 98,198,000 89,440,000 SHAREHOLDERS' EQUITY Common stock, no par value; Authorized: 20,000,000 shares; Issued and outstanding: 1,035,820 and 1,030,972 shares 4,458,000 4,427,000 Retained earnings 7,342,000 6,797,000 Unrealized loss on investments available for sale (293,000) (167,000) TOTAL SHAREHOLDERS' EQUITY 11,507,000 11,057,000 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $109,705,000 $100,497,000 ============ ============
*Derived from the December 31, 1995 audited balance sheet included in the Company's 1995 Annual Report on Form 10-K. See notes to consolidated condensed financial statements. 3
SARATOGA BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED INCOME STATEMENTS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 INTEREST INCOME: Loans $1,179,000 $ 950,000 $3,151,000 $2,801,000 Investment securities 655,000 572,000 1,982,000 1,814,000 Federal funds sold 232,000 134,000 518,000 215,000 Total interest income 2,066,000 1,656,000 5,651,000 4,830,000 INTEREST EXPENSE: Deposits 714,000 640,000 1,982,000 1,822,000 Other 218,000 94,000 603,000 228,000 Total interest expense 932,000 734,000 2,585,000 2,050,000 NET INTEREST INCOME BEFORE CREDIT FOR CREDIT LOSSES 1,134,000 922,000 3,066,000 2,780,000 Credit for credit losses - - (50,000) - Net interest income after credit for credit losses 1,134,000 922,000 3,116,000 2,780,000 Other income 88,000 182,000 239,000 505,000 Other expenses 735,000 793,000 2,184,000 2,316,000 INCOME BEFORE INCOME TAXES 487,000 311,000 1,171,000 969,000 Provision for income taxes 185,000 125,000 445,000 388,000 NET INCOME $302,000 $186,000 $726,000 $581,000 ========== ========== ========== ========== NET INCOME PER COMMON AND EQUIVALENT SHARE $0.26 $0.17 $0.63 $0.54 ========== ========== ========== ==========
See notes to consolidated condensed financial statements. 4 SARATOGA BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1996 1995 OPERATIONS: Net income $ 726,000 $ 581,000 Adjustments to reconcile net income to net cash provided by operating activities: Credit for credit losses (50,000) - Depreciation and amortization 125,000 204,000 Provision for OREO losses - 35,000 Other, net (283,000) 693,000 Net cash provided by operating activities 518,000 1,513,000 INVESTING ACTIVITIES: Proceeds from sale of investments available-for-sale 2,496,000 2,624,000 Proceeds from maturities of investments available-for-sale 6,558,000 - Proceeds from maturities of investments held-to-maturity 3,411,000 4,537,000 Purchase of securities available-for-sale (9,913,000) (2,639,000) Purchase of securities held-to-maturity (4,136,000) - Net increase in loans (7,228,000) (1,788,000) Purchases of premises and equipment (433,000) (39,000) Sale of premises and equipment 133,000 - Proceeds from sale of OREO 652,000 735,000 Increase in other assets - (238,000) Net cash (used in)provided by investing activities (8,460,000) 3,192,000 FINANCING ACTIVITIES: Net increase(decrease) in deposits 8,286,000 (1,741,000) Payment of dividends (181,000) (103,000) Increase in other borrowings 1,975,000 5,586,000 Decrease in federal funds purchased (1,500,000) (1,500,000) Net cash provided by financing activities 8,580,000 2,242,000 NET INCREASE IN CASH AND EQUIVALENTS 638,000 6,947,000 Cash and equivalents at beginning of period 22,939,000 10,264,000 Cash and equivalents at end of period $23,577,000 $17,211,000 =========== ===========
See notes to consolidated condensed financial statements. 5 SARATOGA BANCORP AND SUBSIDIARY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995 1. The unaudited consolidated condensed financial statements reflect all adjustments (which include only normal recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the periods presented. The results for the periods are not necessarily indicative of the results to be expected for the full fiscal year. 2. Per share amounts are calculated using the weighted average shares outstanding plus the dilutive effect of shares issuable under stock options. The number of shares used to compute income per share was 1,158,932 shares and 1,157,060 shares for the three and nine month periods ended September 30, 1996 (1,075,230 shares and 1,060,254 shares for the comparable periods in 1995). 3. For the nine months ended September 30, 1996 and 1995, cash paid for taxes was $636,000 and $75,000, respectively. For the nine months ended September 30, 1996 and 1995, cash paid for interest was $3,112,000 and $1,763,000, respectively. 4. The Company classifies debt and equity securities into one of three categories at acquisition: held-to-maturity, trading or available-for-sale. Investments in debt securities shall be classified as held-to-maturity and measured at amortized cost only if the Company has the positive intent and ability to hold such securities to maturity. All other investments in debt and equity securities that have readily determinable fair values shall be classified either as trading securities, which are bought and held principally for the purpose of selling them in the near term and are carried at market value with a corresponding recognition of unrealized holding gain or loss in results of operations, or as available-for-sale securities, which are all other securities and are carried at market value with a corresponding recognition of the unrealized holding gain or loss, net of income taxes, as a net amount in a separate component of shareholders' equity until realized. 5. The Company measures impaired loans based upon the present value of expected future cash flows discounted at the loan's effective interest rate, except as a practical expedient, a creditor may measure impairment based on a loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. A loan is impaired when, based upon current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. 6 SARATOGA BANCORP AND SUBSIDIARY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Summary of financial results At September 30, 1996, total assets were $109,705,000, a 9.2% increase from $100,497,000 at December 31, 1995. Net loans increased $7,198,000 (19.6%) from $36,759,000 at December 31, 1995 to $43,957,000 at September 30, 1996. The increase was primarily in the longer term real estate loan portfolio. Total deposits increased $8,286,000 (11.1%) from $74,949,000 at December 31, 1995 to $83,235,000 at September 30, 1996. Net income for the third quarter of 1996 was $302,000 or $.26 per share compared to $186,000 ($.17 per share) for the comparable period in 1995. Net income for the first nine months of 1996 was $726,000 or $.63 per share compared to $581,000 or $.54 per share for the comparable period in 1995. The increase in income resulted primarily from an increase in the volume of earning assets, offset in part by a decrease in the yield on earning assets and an increase in interest expense due to the increased volume of interest-bearing liabilities. RESULTS OF OPERATIONS THIRD QUARTER OF 1996 AND 1995 An analysis of the results of operations of the Company for the third quarter of 1996 compared to the third quarter of 1995 is presented below: 7 Net interest income Net interest income, the difference between interest earned on loans and investments and interest paid on deposits, is the principal component of the Bank's earnings. The components of net interest income are as follows:
Three months ended September 30, 1996 1995 Average Average Average Average Balance Interest Yield(1) Balance Interest Yield(1) (In thousands, except percentages) Assets: Earning assets: Loans (2) $43,291 $1,179 10.9% $34,371 $ 950 11.1% Investment securities 39,535 655 6.6% 35,882 572 6.4% Federal funds sold 17,636 232 5.3% 9,336 134 5.7% Total interest earning assets 100,462 2,066 8.2% 79,589 1,656 8.3% Cash and due from banks 4,088 3,584 Other assets (3) 3,798 5,232 $108,348 $88,405 ======= ======= Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $34,212 281 3.3% $28,637 218 3.0% Time deposits 29,920 433 5.8% 27,675 422 6.1% Other borrowings 14,024 218 6.2% 5,088 94 7.4% Total interest- bearing liabilities 78,156 932 4.8% 61,400 734 4.8% Demand deposits 18,042 15,509 Other liabilities 896 1,015 Total liabilities 97,094 77,924 Shareholders' equity 11,254 10,481 $108,348 $88,405 ======= ======= Net interest income and margin $1,134 4.5% $922 4.6% ====== ======
(1) Annualized. (2) Loan interest income includes loan fee income of $122,000 and $86,000 for the quarters ended September 30, 1996 and 1995, respectively. (3) Includes the average allowance for credit losses of $716,000 and $768,000 and deferred loan fees of $344,000 and $242,000 for the quarters ended September 30, 1996 and 1995, respectively. 8 PROVISION FOR CREDIT LOSSES The Bank maintains an allowance for possible credit losses which is based, in part, on the Bank's historical loss experience, the impact of forecasted economic conditions within the Bank's market area, and, as applicable, the State of California, the value of the underlying collateral, loan performance and inherent risks in the loan portfolio. The allowance is reduced by charge-offs and increased by provisions for credit losses charged to operating expense and recoveries of previously charged-off loans. During the third quarter of 1996 and 1995 the Bank did not record a provision for credit losses. There were no loans charged-off and $9,000 in recoveries in the third quarter of 1996, as compared to $9,000 in loans charged-off and $13,000 in recoveries in the third quarter of 1995. At September 30, 1996, the allowance for credit losses was $720,000 or 1.6% of total loans, compared to $776,000 or 2.1% at December 31, 1995. There were no nonaccrual loans at September 30, 1996 or December 31, 1995. At September 30, 1996 and December 31, 1995, there were no loans past due 90 days or more as to principal or interest and still accruing interest. There was one loan at September 30, 1996 in the amount of $192,000 which was a troubled debt restructuring as defined in Statement of Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring." At September 30, 1996, there were four potential problem loans having a combined principal balance of $1,022,000 ($1,161,000 at December 31, 1995). Potential problem loans are loans which are generally current as to principal and interest but have been identified by the Company as potential problem loans due either to a decrease in the underlying value of the property securing the credit or some other deterioration in the creditworthiness of the borrower. All of the four loans identified as potential problem loans are secured by real estate and personal property. At September 30, 1996, there were no loan concentrations other than Real Estate loans which represents approximately 64% of the portfolio. OREO totalled $1,202,000 at September 30, 1996 ($1,745,000 at December 31, 1995). OREO at September 30, 1996 consisted of a 12 lot subdivision with an appraised value in excess of the Bank's carrying value. The Company is actively marketing the property. Nonperforming loans and other real estate owned are summarized below: 9 September 30, 1996 December 31, 1995 Nonperforming loans: Past due 90 days or more $ - $ - Nonaccrual - - Total - - Other real estate owned 1,202,000 1,745,000 Total nonperforming loans and other real estate owned $1,202,000 $1,745,000 ========== ========== Management is of the opinion that the allowance for credit losses is maintained at an adequate level for known and currently anticipated future risks inherent in the loan portfolio. However, the Bank's loan portfolio, which includes approximately $28,000,000 in real estate loans representing approximately 64% of the portfolio, could be adversely affected if California economic conditions and the real estate market in the Bank's market area were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and OREO and the level of the allowance for loan losses which could adversely affect the Company's and the Bank's future growth and profitability. NONINTEREST INCOME Other income consists of service charges on deposit accounts, income from assets acquired for lease and fees for other miscellaneous services. Total other income decreased from $182,000 in the third quarter of 1995 to $88,000 in the third quarter of 1996. This decrease is primarily attributable to a gain on sale of OREO of $55,000 realized in the third quarter of 1995 and a decrease in rental income on OREO property. NONINTEREST EXPENSES Other expenses decreased from $793,000 in the third quarter of 1995 to $735,000 in the third quarter of 1996. This decrease is primarily attributable to a decrease in legal expense and OREO expense. As a percentage of average earning assets, other expenses for the third quarter, on an annualized basis, decreased from 4.0% in 1995 to 2.9% in 1996. 10 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 An analysis of the results of operations of the Company for the nine month period ended September 30, 1996 compared to the comparable period in 1995 is as follows: NET INTEREST INCOME Net interest income, the difference between interest earned on loans and investments and interest paid on deposits, is the principal component of the Bank's earnings. The components of net interest income are as follows:
Nine months ended September 30, 1996 1995 Average Average Average Average Balance Interest Yield(1) Balance Interest Yield(1) (In thousands, except percentages) Assets: Earning assets: Loans (2) $39,495 $3,151 10.6% $33,596 $2,801 11.1% Investment securities 40,751 1,982 6.5% 37,689 1,814 6.4% Federal funds sold 13,239 518 5.2% 5,022 215 5.7% Total interest earning assets 93,485 5,651 8.1% 76,307 4,830 8.4% Cash and due from banks 4,094 3,631 Other assets (3) 4,007 5,315 $101,586 $85,253 ======= ======= Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $ 30,756 748 3.2% $28,534 644 3.0% Time deposits 28,505 1,234 5.8% 26,789 1,178 5.9% Other borrowings 12,557 603 6.4% 3,981 228 7.6% Total interest- bearing liabilities 71,818 2,585 4.8% 59,304 2,050 4.6% Demand deposits 17,678 14,930 Other liabilities 852 906 Total liabilities 90,348 75,140 Shareholders' equity 11,238 10,113 $101,586 $85,253 ======== ======= Net interest income and margin $3,066 4.4% $2,780 4.9% ====== ======
(1) Annualized. (2) Loan interest income included loan fee income of $268,000 and $245,000 for the nine months ended September 30, 1996 and 1995, respectively. (3) Includes the average allowance for loan losses of $730,000 and $768,000, and deferred loan fees of $309,000 and $232,000 for the nine months ended September 30, 1996 and 1995, respectively. 11 PROVISION FOR CREDIT LOSSES During the first nine months of 1996, the Bank reversed $50,000 from the allowance for credit losses. During the first nine months of 1995, the Bank did not record a provision for credit losses. There were $38,000 in loans charged off and $32,000 in recoveries for the nine months ending September 30, 1996, compared to $45,000 charged off and $73,000 in recoveries for the first nine months of 1995. NONINTEREST INCOME Other income consists of service charges on deposit accounts, income on assets acquired for lease and fees for other miscellaneous services. Total other income decreased from $505,000 in the first nine months of 1995 to $239,000 in the first nine months of 1996. The decrease is primarily attributable to a gain on sale of securities of $42,000 and a gain on sale of OREO of $55,000 realized during 1995 and a decrease in rental income on OREO property of $78,000. NONINTEREST EXPENSES Other expenses decreased from $2,316,000 in the first nine months of 1995 to $2,184,000 in the first nine months of 1996. The decrease is primarily attributable to a decrease in OREO expense, legal expense and FDIC insurance expense. As a percentage of average earning assets, other expenses, on an annualized basis, decreased from 4.0% in 1995 to 3.1% in 1996. 12 LIQUIDITY AND CAPITAL RESOURCES The Bank manages its liquidity to provide adequate funds at an acceptable cost to support borrowing requirements and deposit flows of its customers. At September 30, 1996 liquid assets as a percentage of deposits were 37% (48% at December 31, 1995). In addition to cash and due from banks, liquid assets include short- term time deposits with other banks, Federal funds sold and investment securities available for sale. The Bank has $10.0 million in Federal funds lines of credit available with correspondent banks to meet liquidity needs. Management regularly reviews general economic and financial conditions, both external and internal, and determines whether the positions taken with respect to liquidity and interest rate sensitivity continue to be appropriate. The Bank also utilizes a monthly "Gap" report which identifies rate sensitivity over the short- and long-term. The following table sets forth the distribution of repricing opportunities, based on contractual terms, of the Company's earning assets and interest-bearing liabilities at September 30, 1996, the interest rate sensitivity gap (i.e. interest rate sensitive assets less interest rate sensitive liabilities), the cumulative interest rate sensitivity gap, the interest rate sensitivity gap ratio (i.e. interest rate sensitive assets divided by interest rate sensitive liabilities) and the cumulative interest rate sensitivity gap ratio. Based on the contractual terms of its assets and liabilities, the Bank is currently liability sensitive in terms of its short-term exposure to interest rates. In other words, the Bank's liabilities reprice faster than its assets in the short-term. 13 DISTRIBUTION OF REPRICING OPPORTUNITIES At September 30, 1996 (Dollars in thousands)
After Three After Six After One Within Months But Months But Year But After Three Within Six Within One Within Five Months Months Year Five Years Years Total Federal funds sold $20,500 $ - $ - $ - $ - $20,500 Interest bearing deposits in other banks 200 - - - - 200 Municipal securities - - 230 2,616 536 3,382 U.S. Treasury and agency securities 2,912 - 591 9,733 17,788 31,024 FRB stock - - - - 2,688 2,688 Loans 24,100 2,893 1,783 6,142 10,115 45,033 Total earning assets $47,712 $ 2,893 $ 2,604 $18,491 $31,127 $102,827 Interest bearing demand deposits $32,017 $ - $ - $ - $ - $32,017 Savings accounts 4,426 - - - - 4,426 Time certificates of deposit of $100,000 or more 4,970 1,701 3,127 2,737 - 12,535 Other time deposits 4,630 3,233 4,605 4,178 - 16,646 Other borrowings - - - 4,872 9,190 14,062 Total interest- bearing liabilities $46,043 $4,934 $ 7,732 $11,787 $9,190 $79,686 Interest rate sensitivity gap $ 1,669 $(2,041) $(5,128) $ 6,704 $21,937 $23,141 ======= ======= ======= ======= ======= ======= Cumulative interest rate sensitivity gap $ 1,669 $ (372) $(5,500) $ 1,204 $23,141 ======= ======= ======= ======= ======= Interest rate sensitivity gap ratio 1.04% 0.59% 0.34% 1.57% N/A Cumulative interest rate sensitivity gap ratio 1.04% 0.99% 0.91% 1.02% 1.29%
14 The Company and the Bank are subject to capital adequacy guidelines issued by the Board of Governors of the Federal Reserve System (the "BGFRS") and the Office of the Comptroller of the Currency ("OCC"). The Company and the Bank are required to maintain total capital equal to at least 8% of assets and commitments to extend credit, weighted by risk, of which at least 4% must consist primarily of common equity including retained earnings (Tier 1 capital) and the remainder may consist of subordinated debt, cumulative preferred stock or a limited amount of loan loss reserves. Certain assets and commitments to extend credit present less risk than others and will be assigned to lower risk-weighted categories requiring less capital allocation than the 8% total ratio. For example, cash and government securities are assigned to a 0% risk-weighted category, most home mortgage loans are assigned to a 50% risk-weighted category requiring a 4% capital allocation and commercial loans are assigned to a 100% risk-weighted category requiring an 8% capital allocation. As of September 30, 1996, the Company's total risk- based capital ratio was approximately 20.1% (approximately 19.3% for the Bank) compared to approximately 22.0% (approximately 21.7% for the Bank) at December 31, 1995. The BGFRS adopted a 3% minimum leverage ratio for banking organizations as a supplement to the risk-weighted capital guidelines. The minimum leverage ratio is intended to limit the ability of banking organizations to leverage their equity capital base by increasing assets and liabilities without increasing capital proportionately. The 3% minimum leverage ratio constitutes a minimum ratio for well-run banking organizations. Organizations experiencing or anticipating significant growth or failing to meet certain BGFRS standards will be required to maintain a minimum leverage ratio ranging from 100 to 200 basis points in excess of the 3% ratio. The following table reflects the Company's leverage, Tier 1 and total risk-based capital ratios for the quarter ended September 30, 1996 and the year ended December 31, 1995. September 30, 1996 December 31, 1995 Leverage ratio 10.5% 11.7% Tier 1 capital ratio 18.9% 20.8% Total risk-based capital ratio 20.1% 22.0% On December 19, 1991, the President signed the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). The FDICIA, among other matters, substantially revised banking regulations and established a framework for determination of capital adequacy of financial institutions. Under the FDICIA, financial institutions are placed into one of five capital adequacy catagories as follows: (1) "Well capitalized" - consisting of institutions with a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or 15 greater and a leverage ratio of 5% or greater, and the institution is not subject to an order, written agreement, capital directive or prompt corrective action directive; (2) "Adequately capitalized" - consisting of institutions with a total risk-based capital ratio of 8% or greater, a Tier 1 risk- based capital ratio of 4% or greater and a leverage ratio of 4% or greater, and the institution does not meet the definition of a "well capitalized" institution; (3) "Undercapitalized" - consisting of institutions with a total risk-based capital ratio less than 8%, a Tier 1 risk-based capital ratio of less than 4%, or a leverage ratio of less than 4%; (4) "Significantly undercapitalized" - consisting of institutions with a total risk- based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3%, or a leverage ratio of less than 3%; (5) "Critically undercapitalized" - consisting of an institution with a ratio of tangible equity to total assets that is equal to or less than 2%. Financial institutions classified as undercapitalized or below are subject to various limitations including, among other matters, certain supervisory actions by bank regulatory authorities and restrictions related to (i) growth of assets, (ii) payment of interest on subordinated indebtedness, (iii) payment of dividends or other capital distributions, and (iv) payment of management fees to a parent holding company. The FDICIA requires bank regulatory authorities to initiate corrective action regarding financial institutions which fail to meet minimum capital requirements. Such action may result in orders to, among other matters, augment capital and reduce total assets. Critically undercapitalized financial institutions may also be subject to appointment of a receiver or implementation of a capitalization plan. OTHER MATTERS From time to time, the Company's Board of Directors reviews and consults with advisors, including investment banking, accounting and legal advisors, regarding banking industry trends and developments, as well as internal and external opportunities to maximize shareholder value. Such reviews and consultations include evaluating and comparing internal results of operations projections and external opportunities for mergers, acquisitions, reorganizations, or other transactions with third parties which may be in the interests of the Company's shareholders. The Company's Board of Directors considers such periodic review and consultation to be important as part of their analysis of the Company's value and prospects in the changing banking environment and in view of the current consolidation activity within the banking industry. 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities Not applicable Item 3. Defaults upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) (3) Exhibits (3.1) Articles of Incorporation, as amended, are incorporated by reference herein to Exhibit 3.1 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, as filed with the Securities and Exchange Commission on March 27, 1989. (3.2) By-laws, as amended, are incorporated by reference herein to Exhibit 3.2 of Registant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, as filed with the Securities and Exchange Commission on March 29, 1994. (27.1) Financial Data Schedule 17 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. SARATOGA BANCORP MARY PAGE ROURKE Date: November 8, 1996 ------------------------- Mary Page Rourke, Treasurer (Principal Financial and Accounting Officer) 18 INDEX TO EXHIBITS Sequentially Numbered Number Exhibits Page 27.1 Financial Data Schedule 19 EX-27 2
9 1000 9-MOS DEC-31-1996 SEP-30-1996 3077 200 20500 0 14430 22664 22013 43957 720 109705 83235 0 901 14062 0 0 4458 7049 109705 3151 1982 518 5651 1982 2585 3066 (50) (4) 2184 1171 726 0 0 726 0.65 0.63 8.20 0 0 192 1022 776 38 32 720 465 0 255
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