-----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, LP1oGJYm+7+PkuXLl66KQXqMvJPU5bAYTXzSrkEafBLl8y2nYoLW1nVngpQpKxw3 4EMvEXGQmUm5+gJB9v423Q== 0000702700-96-000004.txt : 19960506 0000702700-96-000004.hdr.sgml : 19960506 ACCESSION NUMBER: 0000702700-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960503 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: 96556347 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 03/31/96 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 March 31, 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 APRIL 30, 1996 Common Stock 1,030,972 Page 1 of 17 pages PART I - FINANCIAL INFORMATION Item 1. Consolidated Condensed Financial Statements
SARATOGA BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED BALANCE SHEETS March 31, December 31, 1996 1995* (Unaudited) ASSETS Cash and due from banks $ 4,788,000 $ 5,239,000 Federal funds sold 10,200,000 17,700,000 Total cash and equivalents 14,988,000 22,939,000 Interest-bearing deposits in other banks 200,000 200,000 Securities available for sale 23,498,000 15,286,000 Securities held to maturity 23,800,000 20,348,000 Loans, net 35,508,000 36,759,000 Other real estate owned 1,764,000 1,745,000 Premises and equipment 2,239,000 1,988,000 Other assets 1,399,000 1,232,000 TOTAL ASSETS $103,396,000 $100,497,000 =========== =========== LIABILITIES Deposits: Non interest-bearing $ 21,615,000 $ 20,410,000 Interest-bearing 56,749,000 54,539,000 Total deposits 78,364,000 74,949,000 Federal funds purchased - 1,500,000 Other borrowings 13,061,000 12,087,000 Accrued expenses and other liabilities 858,000 904,000 TOTAL LIABILITIES 92,283,000 89,440,000 SHAREHOLDERS' EQUITY Common stock, no par value; Authorized: 20,000,000 shares; Issued and outstanding: 1,030,972 shares 4,427,000 4,427,000 Retained earnings 6,922,000 6,797,000 Unrealized loss on investments available for sale (236,000) (167,000) SHAREHOLDERS' EQUITY 11,113,000 11,057,000 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $103,396,000 $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.
SARATOGA BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED INCOME STATEMENTS (unaudited) Three Months Ended March 31, 1996 1995 ------------ ------------ INTEREST INCOME: Loans $ 983,000 $ 907,000 Investment securities 603,000 631,000 Federal funds sold 155,000 33,000 ----------- ----------- Total interest income 1,741,000 1,571,000 ----------- ----------- INTEREST EXPENSE: Deposits 618,000 574,000 Other 196,000 55,000 ----------- ----------- Total interest expense 814,000 629,000 ----------- ----------- NET INTEREST INCOME BEFORE CREDIT LOSSES 927,000 942,000 Credit for credit losses (50,000) - ----------- ----------- Net interest income after credit for credit losses 977,000 942,000 Other income 70,000 101,000 Other expenses 722,000 720,000 ----------- ----------- INCOME BEFORE INCOME TAXES 325,000 323,000 Provision for income taxes 123,000 129,000 ----------- ----------- NET INCOME $ 202,000 $ 194,000 =========== =========== NET INCOME PER COMMON AND EQUIVALENT SHARE $0.18 $0.18 =========== ===========
See notes to consolidated condensed financial statements.
SARATOGA BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 1996 1995 OPERATIONS: Net income $ 202,000 $ 194,000 Adjustments to reconcile net income to net cash provided by (used in)operating activities: Credit for credit losses (50,000) - Depreciation and amortization 42,000 69,000 Other, net (234,000) (50,000) Net cash provided by (used in) operating activities (40,000) 213,000 INVESTING ACTIVITIES: Proceeds from maturities of investments held to maturity 533,000 147,000 Purchase of securities available for sale (8,321,000) Purchase of securities held to maturity (3,986,000) (373,000) Net increase (decrease) in loans 1,340,000 (752,000) Purchases of premises and equipment (293,000) (25,000) Net cash used in investing activities (10,727,000) (1,003,000) FINANCING ACTIVITIES: Net (decrease) increase in deposits 3,415,000 (4,267,000) Payment of dividends (77,000) - Net increase in other borrowings 974,000 2,270,000 Decrease in federal funds purchased (1,500,000) (1,500,000) Net cash provided by (used in) financing activities 2,812,000 (3,497,000) NET DECREASE IN CASH AND EQUIVALENTS (7,951,000) (4,287,000) Cash and equivalents beginning of period 22,939,000 10,264,000 Cash and equivalents end of period $14,988,000 $ 5,977,000 =========== ===========
See notes to consolidated condensed financial statements. SARATOGA BANCORP AND SUBSIDIARY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS QUARTERS ENDED MARCH 31, 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 1,089,378 shares for the three month period ended March 31, 1996 (1,058,588 shares for the comparable period in 1995). 3. For the three months ended March 31, 1996, cash paid for taxes was $209,000. There was no cash paid for taxes for the three months ended March 31, 1995. For the three months ended March 31, 1996 and 1995, cash paid for interest was $606,000 and $564,000, respectively. 4. In May, 1993, the FASB issued SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 became effective in the first quarter of 1994 and requires the Company to classify 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 as a net amount in a separate component of shareholders' equity until realized. 5. On January 1, 1995, the Company adopted SFAS Statement No. 114, "Accounting by Creditors for Impairment of a Loan." This standard was further modified by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan----Income Recognition and Disclosures." SFAS No. 114 and 118 require the Company to measure 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. Applying the provisions of these statements did not have a material effect on the Company's financial position or results of operations. SARATOGA BANCORP AND SUBSIDIARY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Summary of financial results At March 31, 1996, total assets were $103,396,000, an increase of $2,899,000 (2.9%) from $100,497,000 at December 31, 1995. Net loans decreased $1,251,000 (3.4%) from $36,759,000 at December 31, 1995 to $35,508,000 at March 31, 1996. Total deposits increased $3,415,000 (4.5%) from $74,949,000 at year-end 1995 to $78,364,000 at March 31, 1996. Net income for the first quarter of 1996 was $202,000 or $.18 per share compared to $194,000 ($.18 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 of earning assets and an increase in interest expense due to the increased volume of interest-bearing liabilities. RESULTS OF OPERATIONS FIRST QUARTER OF 1996 AND 1995 An analysis of the results of operations of the Company for the first quarter of 1996 compared to the first quarter of 1995 is presented below: 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 March 31, 1996 1995 Average Average Average Average Balance Interest Yield(1) Balance Interest Yield(1) (In thousands, except percentages) Assets: Earning assets: Loans (2) $37,547 $ 983 10.5% $32,627 $ 907 11.1% Securities 37,961 603 6.4% 38,768 631 6.5% Federal funds sold 11,880 155 5.2% 2,359 33 5.6% Total interest earning assets 87,388 1,741 8.0% 73,754 1,571 8.5% Cash and due from banks 3,937 3,985 Other assets (3) 4,204 5,305 $95,529 $83,044 ======= ======= Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $24,163 202 3.3% $24,902 134 2.2% Time deposits 31,051 416 5.4% 30,256 440 5.8% Other borrowings 12,095 196 6.5% 2,362 55 9.3% Total interest- bearing liabilities 67,309 814 4.8% 57,520 629 4.4% Demand deposits 16,237 14,910 Other liabilities 877 767 Total liabilities 84,423 73,197 Shareholders' equity 11,106 9,847 $95,529 $83,044 ======= ======= Net interest income and margin $927 4.2% $942 5.1% ====== ======
(1) Annualized. (2) Loan interest income includes loan fee income of $77,000 and $81,000 for the quarters ended March 31, 1996 and 1995, respectively. (3) Other assets include the average allowance for credit losses of $761,000 and $762,000 and deferred loan fees of $295,000 and $221,000 for the quarters ended March 31, 1996 and 1995, respectively. 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 first quarter of 1996 the Bank reversed $50,000 from the allowance for credit losses due to the continued significant over reserve in the allowance. During the first quarter of 1995 the Bank did not record a provision for credit losses. There were $29,000 in loans charged-off and $11,000 in recoveries in the first quarter of 1996, as compared to $5,000 in loans charged-off and $55,000 in recoveries in the first quarter of 1995. At March 31, 1996, the allowance for credit losses was $708,000 or 2.0% of total loans, compared to $776,000 or 2.1% at December 31, 1995. There were no nonaccrual loans at March 31, 1996 or December 31, 1995. At March 31, 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 March 31, 1996 in the amount of $195,000 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 March 31, 1996, there were six potential problem loans having a combined principal balance of $1,142,000 ($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 six loans identified as potential problem loans are secured by real estate and personal property. OREO totalled $1,764,000 at March 31, 1996 ($1,745,000 at December 31, 1995). OREO consisted of a single family residence and a 12 lot subdivision with appraised values in excess of the Bank's carrying values. The Company does not intend to hold the properties but will actively market the properties as market conditions improve. Nonperforming loans and other real estate owned are summarized below: March 31, 1996 December 31, 1995 Nonperforming loans: Past due 90 days or more $ - $ - Nonaccrual - - Total - - Other real estate owned 1,764,000 1,745,000 Total nonperforming loans and other real estate owned $1,764,000 $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 $22,000,000 in real estate loans representing approximately 62% 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 $101,000 in the first quarter of 1995 to $70,000 in the first quarter of 1996. This decrease is primarily attributable to a decrease in income on assets acquired for lease. Noninterest expense - ------------------- Other expenses did not change significantly and were $720,000 in the first quarter of 1995 and $722,000 in the first quarter of 1996. As a percentage of average earning assets, other expenses for the first quarter, on an annualized basis, were 3.9% and 3.3% in 1995 and 1996, respectively. 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 March 31, 1996 liquid assets as a percentage of deposits were 51% (48% at December 31, 1995). In addition to cash and due from banks, liquid assets include interest bearing time deposits with other banks, Federal funds sold and investment securities available for sale. The Bank has $8.0 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 March 31, 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. DISTRIBUTION OF REPRICING OPPORTUNITIES At March 31, 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 $10,200 - - - - $10,200 Interest-bearing deposits in other banks - - $ 200 - - 200 Municipal securities - $165 - $ 2,612 $ 771 3,548 U.S. Treasury and agency securities 7,649 1,003 1,981 9,407 21,346 41,386 FRB/FHLB stock - - - - 2,364 2,364 Loans 20,693 $ 1,266 3,871 5,276 5,397 36,503 Total earning assets $38,542 $ 2,434 $ 6,052 $17,295 $29,878 $94,201 Interest bearing demand deposits $26,083 - - - - $26,083 Savings deposits 3,344 - - - - 3,344 Time certificates of deposit of $100,000 or more 4,123 $ 1,227 $ 2,024 $ 3,275 - 10,649 Other time deposit 2,542 2,829 6,198 5,104 - 16,673 Other borrowings 1,570 - - - $11,491 13,061 Total interest- bearing liabilities $37,662 $4,056 $ 8,222 $ 8,379 $11,491 $69,810 Interest rate sensitivity gap 880 $(1,622) $(2,170) $ 8,916 $18,387 $24,391 ======= ======= ======= ======= ======= ======= Cumulative interest rate sensitivity gap $ 880 $ (742) $(2,912) $ 6,004 $24,391 ======= ======= ======= ======= ======= Interest rate sensitivity gap ratio 1.02% 0.60% 0.74% 2.06% 2.60% Cumulative interest rate sensitivity gap ratio 1.02% 0.98% 0.94% 1.10% 1.35% 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 March 31, 1996, the Company's total risk-based capital ratio was approximately 22.4% (approximately 22.2% 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 March 31, 1996 and the year ended December 31, 1995. March 31, 1996 December 31, 1995 Leverage ratio 11.3% 11.7% Tier 1 capital ratio 21.1% 20.8% Total risk-based capital ratio 22.4% 22.0% On December 19, 1991, the President signed the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). FDICIA, among other matters, substantially revised banking regulations and established a framework for determination of capital adequacy of financial institutions. Under 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 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. 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. 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 27.1 Financial Data Schedule (b) Reports on Form 8-K On February 7, 1996, Registrant filed a Current Report on Form 8-K, dated January 27, 1996, reporting under Item 5 (Other Events) declaration of a seven and one half cent ($0.075) cash dividend on the outstanding shares of common stock of Saratoga Bancorp to be payable March 29, 1996 to shareholders of record at the close of business February 23, 1996. 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 /Richard L. Mount/ Date: May 3, 1996 ------------------------- Richard L. Mount, President (Principal Executive Officer) INDEX TO EXHIBITS Sequentially Numbered Number Exhibits Page 27.1 Financial Data Schedule 17
EX-27 2
9 1000 3-MOS DEC-31-1996 MAR-31-1996 4788 200 10200 0 23498 23800 23744 35508 708 103396 78364 0 858 13061 0 0 4427 6686 103396 983 603 155 1741 618 196 927 (50) 0 722 325 202 0 0 202 .18 .18 8.0 0 0 195 1142 708 29 11 0 708 0 440
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