-----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, WjdyiRfmSXvMlOvorQ6yAYGVCY/62U+T5xdTPrOws5amjMtvarVrse6QuUTTj7TS NJvMlrxAEe2WnjMYowed2g== 0000702700-96-000006.txt : 19960807 0000702700-96-000006.hdr.sgml : 19960807 ACCESSION NUMBER: 0000702700-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960806 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: 96604565 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 06/30/96 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 June 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 JULY 31, 1996 Common Stock 1,034,383 Exhibit Index at 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
June 30, December 31, 1996 1995* (Unaudited) ASSETS Cash and due from banks $ 4,965,000 $ 5,239,000 Federal funds sold 15,500,000 17,700,000 Total cash and equivalents 20,465,000 22,939,000 Interest-bearing deposits in other banks 200,000 200,000 Investments available for sale 19,548,000 15,286,000 Investment held to maturity 23,141,000 20,348,000 Loans, net 38,699,000 36,759,000 Other real estate owned 1,127,000 1,745,000 Premises and equipment 2,181,000 1,988,000 Other assets 1,587,000 1,232,000 TOTAL ASSETS $106,948,000 $100,497,000 ============ =========== LIABILITIES Deposits: Non-interest bearing $ 22,466,000 $ 20,410,000 Interest bearing 59,033,000 54,539,000 Total deposits 81,499,000 74,949,000 Federal funds purchased - 1,500,000 Other borrowings 13,449,000 12,087,000 Accrued expenses and other liabilities 715,000 904,000 TOTAL LIABILITIES 95,663,000 89,440,000 SHAREHOLDERS' EQUITY Common stock, no par value; Authorized: 20,000,000 shares; Issued and outstanding: 1,034,383 and 1,030,972 shares 4,449,000 4,427,000 Retained earnings 7,143,000 6,797,000 Unrealized loss on investments available for sale (307,000) (167,000) SHAREHOLDERS' EQUITY 11,285,000 11,057,000 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $106,948,000 $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 STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 INTEREST INCOME: Loans $ 989,000 $ 944,000 $1,972,000 $1,851,000 Investment securities 724,000 611,000 1,327,000 1,242,000 Federal funds sold 131,000 48,000 286,000 81,000 Total interest income 1,844,000 1,603,000 3,585,000 3,174,000 INTEREST EXPENSE: Deposits 650,000 608,000 1,268,000 1,182,000 Other 189,000 79,000 385,000 134,000 Total interest expense 839,000 687,000 1,653,000 1,316,000 NET INTEREST INCOME BEFORE CREDIT LOSSES 1,005,000 916,000 1,932,000 1,858,000 Credit for credit losses - - (50,000) - Net interest income after credit for credit losses 1,005,000 916,000 1,982,000 1,858,000 Other income 81,000 222,000 151,000 323,000 Other expense 727,000 803,000 1,449,000 1,523,000 INCOME BEFORE INCOME TAXES 359,000 335,000 684,000 658,000 Provision for income taxes 137,000 134,000 260,000 263,000 NET INCOME $ 222,000 $ 201,000 $ 424,000 $ 395,000 ========== ========== ========== ========== NET INCOME PER COMMON AND EQUIVALENT SHARE $0.20 $0.19 $0.38 $0.37 ========== ========== ========== ==========
See notes to consolidated condensed financial statements. 4 SARATOGA BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1996 1995 OPERATIONS: Net income $ 424,000 $ 395,000 Adjustments to reconcile net income to net cash provided by (used in)operating activities: Credit for credit losses (50,000) - Depreciation and amortization 84,000 137,000 Provision for OREO losses - 35,000 Other, net (544,000) 378,000 Net cash provided by (used in)operating activities (86,000) 945,000 INVESTING ACTIVITIES: Proceeds from sale of investments available for sale - 2,624,000 Proceeds from maturities of investments held to maturity 1,787,000 279,000 Proceeds from maturities of investments available for sale 4,794,000 - Purchase of securities available for sale (9,838,000) (387,000) Purchase of securities held to maturity (3,986,000) - Net increase in loans (1,854,000) (2,187,000) Purchases of premises and equipment (328,000) (26,000) Sale of premises and equipment 50,000 - Proceeds from sale of OREO 652,000 - Increase in other assets - (238,000) Net cash provided by (used in) investing activities (8,723,000) 65,000 FINANCING ACTIVITIES: Net (decrease) increase in deposits 6,550,000 (3,593,000) Payment of dividends (77,000) (52,000) Increase in other borrowings 1,362,000 2,251,000 Decrease in federal funds purchased (1,500,000) (1,500,000) Net cash provided by (used in)financing activities 6,335,000 (2,894,000) NET DECREASE IN CASH AND EQUIVALENTS (2,474,000) (1,884,000) Cash and equivalents at beginning of period 22,939,000 10,264,000 Cash and equivalents at end of period $20,465,000 $ 8,380,000 =========== =========== See notes to consolidated condensed financial statements. 5 SARATOGA BANCORP AND SUBSIDIARY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS QUARTERS ENDED JUNE 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 1,113,064 shares for the three and six month periods ended June 30, 1996 (1,058,326 shares and 1,058,695 shares for the comparable periods in 1995). 3. For the six months ended June 30, 1996 and 1995, cash paid for taxes was $367,000 and $75,000, respectively. For the six months ended June 30, 1996 and 1995, cash paid for interest was $1,263,000 and $1,144,000, 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 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. 7 SARATOGA BANCORP AND SUBSIDIARY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Summary of financial results At June 30, 1996, total assets were $106,948,000, a 6.4% increase from $100,497,000 at December 31, 1995. Net loans increased $1,940,000 (5.3%) from $36,759,000 at December 31, 1995 to $38,699,000 at June 30, 1996. The increase was primarily in the longer term real estate loan portfolio. Total deposits increased $6,550,000 (8.7%) from $74,949,000 at year end 1995 to $81,499,000 at June 30, 1996. Net income for the second quarter of 1996 was $222,000 or $.20 per share compared to $201,000 or $.19 per share for the comparable period in 1995. Net income for the first six months of 1996 was $424,000 or $.38 per share compared to $395,000 or $.37 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 SECOND QUARTER OF 1996 AND 1995 An analysis of the results of operations of the Company for the second quarter of 1996 compared to the second 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 June 30, 1996 1995 Average Average Average Average Balance Interest Yield(1) Balance Interest Yield(1) (In thousands, except percentages) Assets: Earning assets: Loans (2) $37,651 $ 989 10.5% $33,776 $ 944 11.2% Investment securities 44,795 724 6.5% 38,450 611 6.4% Federal funds sold 10,152 131 5.2% 3,296 48 5.8% Total interest earning assets 92,598 1,844 8.0% 75,522 1,603 8.5% Cash and due from banks 4,257 3,328 Other assets (3) 3,977 5,366 $100,832 $84,216 ======= ======= Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $30,197 265 3.5% $27,364 202 3.0% Time deposits 28,281 385 5.4% 27,240 406 6.0% Other borrowings 11,537 189 6.6% 4,463 79 7.1% Total interest- bearing liabilities 70,015 839 4.7% 59,067 687 4.7% Demand deposits 18,768 14,184 Other liabilities 777 946 Total liabilities 89,560 74,197 Shareholders' equity 11,272 10,019 $100,832 $84,216 ======= ======= Net interest income and margin $1,005 4.3% $916 4.9% ====== ======
(1) Annualized. (2) Loan interest income included loan fee income of $78,000 for each of the quarters ended June 30, 1996 and 1995, respectively. (3) Net of the average allowance for loan losses of $714,000 and $773,000 and deferred loan fees of $289,000 and $233,000 for the quarters ended June 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 second quarter of 1996 and 1995 the Bank did not record a provision for credit losses. There were $9,000 in loans charged- off and $12,000 in recoveries in the second quarter of 1996, as compared to $31,000 in loans charged-off and $8,000 in recoveries in the second quarter of 1995. At June 30, 1996, the allowance for credit losses was $711,000 or 1.8% of total loans, compared to $776,000 or 2.1% at December 31, 1995. There were no nonaccrual loans at June 30, 1996 or December 31, 1995. At June 30, 1996 there was one loan in the amount of $80,000 past due 90 days or more as to principal or interest and still accruing interest (none at December 31, 1995). The loan was paid off on July 10, 1996. There was one loan at June 30, 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 June 30, 1996, there were seven potential problem loans having a combined principal balance of $1,284,000 ($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 seven loans identified as potential problem loans are secured by real estate and personal property. Other Real Estate Owned totalled $1,127,000 at June 30, 1996 ($1,745,000 at December 31, 1995). Other Real Estate Owned 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. 9 Nonperforming loans and other real estate owned are summarized below:
June 30, 1996 December 31, 1995 Nonperforming loans: Past due 90 days or more $ 80,000 $ - Nonaccrual - - Total 80,000 - Other real estate owned 1,127,000 1,745,000 Total nonperforming loans and other real estate owned $1,207,000 $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 $24,000,000 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 continue to weaken. The effect of such events 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 $222,000 in the second quarter of 1995 to $81,000 in the second quarter of 1996. This decrease is primarily attributable to a gain on sale of securities of $32,000 which was realized in the second quarter of 1995 and a decrease in rental income on OREO property of $90,000. NONINTEREST EXPENSE Other expenses decreased from $803,000 in the second quarter of 1995 to $727,000 in the second quarter of 1996. The decrease is primarily attributable to a reduction in provision for OREO losses of $35,000 and a decrease in depreciation expense on assets acquired for lease. As a percentage of average earning assets, other expenses for the second quarter, on an annualized basis, decreased from 4.3% in 1995 to 3.1% in 1996. 10 SIX MONTHS ENDED JUNE 30, 1996 AND 1995 An analysis of the results of operations of the Company for the six month period ended June 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:
Six months ended June 30, 1996 1995 Average Average Average Average Balance Interest Yield(1) Balance Interest Yield(1) (In thousands, except percentages) (Unaudited) Earning assets: Loans (2) $37,599 $1,972 10.5% $33,205 $1,851 11.1% Investment securities 41,365 1,327 6.4% 38,604 1,242 6.4% Federal funds sold 11,016 286 5.2% 2,830 81 5.7% Total interest earning assets 89,980 3,585 8.0% 74,639 3,174 8.5% Cash and due from banks 4,097 3,655 Other assets (3) 4,107 5,346 $98,184 $83,640 ======= ======= Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $29,072 467 3.2% $28,469 426 3.0% Time deposits 27,789 801 5.8% 26,338 756 5.7% Other borrowings 11,816 385 6.5% 3,418 134 7.8% Total interest- bearing liabilities 68,677 1,653 4.8% 58,225 1,316 4.5% Demand deposits 17,529 14,630 Other liabilities 827 852 Total liabilities 87,033 73,707 Shareholders' equity 11,151 9,933 $98,184 $83,640 ======= ======= Net interest income and margin $1,932 4.3% $1,858 5.0% ====== ======
(1) Annualized. (2) Loan interest income included loan fee income of $146,000 and $160,000 for the six months ended June 30, 1996 and 1995, respectively. (3) Net of the average allowance for loan losses of $738,000 and $768,000, and deferred loan fees of $292,000 and $227,000 for the six months ended June 30, 1996 and 1995, respectively. 11 PROVISION FOR CREDIT LOSSES During the first six months of 1996 and 1995, the Bank did not provide any additional funds to the provision for credit losses. During the first six months of 1996, the Bank reversed $50,000 from the allowance for credit losses. There were $38,000 in loans charged off and $23,000 in recoveries for the six months ending June 30, 1996, compared to $36,000 charged off and $63,000 in recoveries for the first six 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 $323,000 in 1995 to $151,000 in 1996. The decrease is primarily attributable to a gain on sale of securities of $32,000 which was realized in 1995, a decrease in rental income on OREO property of $90,000 and a decrease in rental income on assets acquired for lease of $53,000. NONINTEREST EXPENSE Other expenses have decreased from $1,523,000 in 1995 to $1,449,000 in 1996 due primarily to a reduction in provision for OREO losses of $35,000 and a decrease in depreciation expense on assets acquired for lease. As a percentage of average earning assets, other expenses, on an annualized basis, decreased from 4.1% in 1995 to 3.2% 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 June 30, 1996 liquid assets as a percentage of deposits were 42% (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 $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 June 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 June 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 $15,500 - - - - $15,500 Interest bearing deposits in other banks $ 200 200 Municipal securities 165 - $ 230 $ 2,381 $ 772 3,548 U.S. Treasury and agency securities 3,909 1,988 590 10,152 20,074 36,713 FRB stock - - - - 2,428 2,428 Loans 20,255 3,636 2,773 5,531 7,502 39,697 Total earning assets $39,829 $ 5,824 $ 3,593 $18,064 $30,776 98,086 Interest bearing demand accounts $26,620 - - - - 26,620 Savings accounts 3,364 - - - - 3,364 Time certificates of deposit of $100,000 or more 4,564 $ 1,141 $ 2,578 $ 2,575 - 10,858 Other time deposits 3,505 3,929 6,119 4,638 - 18,191 Other borrowings - - - 4,231 $9,218 13,449 Total interest- bearing liabilities $38,053 $ 5,070 $ 8,697 $11,444 $9,218 72,482 Interest rate sensitivity gap $ 1,776 $ 754 $(5,104) $ 6,620 $21,558 $25,604 ======= ======= ======= ======= ======= ======= Cumulative interest rate sensitivity gap $ 1,776 $ 2,530 $(2,574) $ 4,046 $25,604 ======= ======= ======== ======= ======= Interest rate sensitivity gap ratio 1.05% 1.15% 0.41% 1.58% N/A Cumulative interest rate sensitivity gap ratio 1.05% 1.06% 0.95% 1.06% 1.35% 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 June 30, 1996, the Company's total risk-based capital ratio was approximately 21.7% (approximately 21.5% 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 June 30, 1996 and the year ended December 31, 1995. June 30, 1996 December 31, 1995 Leverage ratio 11.1% 11.7% Tier 1 capital ratio 20.1% 20.8% Total risk-based capital ratio 21.7% 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. 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 The shareholders of Saratoga Bancorp took the following action at the Annual Meeting of Shareholders held on May 23, 1996 at the Corporation's main office located at 12000 Saratoga-Sunnyvale Road, Saratoga, California: 1. Approved the election of management's slate of nominees for director, each of whom were incumbent directors, as follows: Votes For Withheld Victor Aboukhater 658,038 12,343 Neal A. Cabrinha 658,038 12,343 Robert G. Egan 658,038 12,343 William D. Kron 658,038 12,343 John F. Lynch, III 658,038 12,343 V. Ronald Mancuso 658,038 12,343 Richard L. Mount 656,661 13,720 2. Ratified appointment of Deloitte & Touche LLP as independent auditors of the corporation for the fiscal year ending 1996. VOTES FOR 665,393 AGAINST 660 ABSTAIN 4,328 17 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 Schedules (b) Reports on Form 8-K On May 29, 1996, Registrant filed a Current Report on Form 8-K, dated May 28, 1996 reporting under Item 5(Other Events) actions taken at the Annual Meeting of Shareholders of Registrant held on May 23, 1996. See Item 4 herein for additional information. 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: August 6, 1996 ------------------------- Richard L. Mount, President (Principal Executive Officer) 18 INDEX TO EXHIBITS Sequentially Numbered Number Exhibits Page 27.1 Financial Data Schedule 19 EX-27 2
9 1000 6-MOS DEC-31-1996 JUN-30-1996 4965 200 15500 0 19548 23141 22703 38699 711 106948 81499 0 715 13449 0 0 4449 6836 106948 1972 1327 286 3585 1268 1653 932 (50) 0 1449 684 424 0 0 424 .39 .38 8.0 0 80 195 1284 776 38 23 711 260 0 451
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