-----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, qaZt0sz7BNLHX7mri0zdi7khGwt/e2AHpNOGpkSIoAJe9gVh3HimYUQGm67d1mRW hFCqTQHPdmdFh5ZpCHY9rg== 0000737213-95-000003.txt : 19950427 0000737213-95-000003.hdr.sgml : 19950427 ACCESSION NUMBER: 0000737213-95-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950426 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HNB FINANCIAL GROUP CENTRAL INDEX KEY: 0000737213 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 953865133 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-12752 FILM NUMBER: 95531307 BUSINESS ADDRESS: STREET 1: 16531 BOLSA CHICA ST STREET 2: P O BOX 2130 CITY: HUNTINGTON BEACH STATE: CA ZIP: 92649 BUSINESS PHONE: 7148404681 MAIL ADDRESS: STREET 2: 16531 BOLSA CHICA ST P O BOX 2130 CITY: HUNTINGTON BEACH STATE: CA ZIP: 92649 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1995 Commission File No. 0-12752 HNB FINANCIAL GROUP (Exact Name of Registrant as Specified in its Charter) CALIFORNIA 95-3865133 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Reorganization) Identification No.) 16531 BOLSA CHICA, HUNTINGTON BEACH, CALIFORNIA 92649 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number: (714) 840-4681 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 preceeding 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 Aggregate market value of voting stock held by non-affiliates of the registrant: $5,429,041 927,951 of Common Stock were outstanding on March 31, 1995 FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets (Unaudited) Consolidated Statements of Operations For Three Months (Unaudited) Consolidated Statements of Operations For Nine Months (Unaudited) Consolidated Statements of Cashflows (Unaudited) Notes to Consolidated Financial Statements (Unaudited) Management's Discussion and Analysis Other Items Consolidated Balance Sheets March 31, 1995 and March 31, 1994 (Unaudited)
3/31/95 3/31/94 ASSETS Cash and due from banks $ 5,125,000 $ 5,469,000 Interest bearing deposits 1,291,000 3,590,000 Investment securities (note 1) Held-to-maturity securities 11,514,000 4,534,000 Available for sale securities 0 6,241,000 Federal funds sold 7,450,000 5,550,000 Loans (note 2): Commercial 21,251,000 19,778,000 Instalment 11,714,000 12,942,000 Real Estate: Construction 2,609,000 4,841,000 Mortgage 29,895,000 27,323,000 ---------- ---------- Total Loans 65,469,000 64,884,000 Less allowance for losses 897,000 949,000 Less Deferred loan fees, net 550,000 452,000 ---------- ---------- Net loans and leases 64,022,000 63,483,000 ---------- ---------- Premises and equipment 360,000 472,000 Accrued Interest and other assets 982,000 1,978,000 Goodwill 510,000 562,000 ---------- ---------- $91,254,000 $91,879,000 ========== ========== LIABILITIES AND SHAREHOLDER'S EQUITY Deposits: Demand 23,469,000 24,239,000 Savings and Money Market 39,653,000 43,455,000 Time Certificates< $100,000 7,081,000 9,542,000 Time Certificates> $100,000 9,371,000 3,537,000 ----------- ----------- Total deposits 79,574,000 80,773,000 Accrued Interest and other liabilities 287,000 397,000 ----------- ----------- Total liabilities 79,861,000 81,170,000 ----------- ----------- Shareholder's equity: Capital Stock: 20,000,000 shares authorized; 928,180 shares issued 9,533,000 9,523,000 Retained Earnings 1,860,000 1,186,000 ----------- ----------- Total equity 11,393,000 10,709,000 ----------- ----------- $91,254,000 $91,879,000 =========== ===========
Consolidated Statements of Operations For the Three Months Ended March 31, 1995 and 1994 (Unaudited)
3/31/95 3/31/94 Interest Income: Loans, including fees $1,743,000 $1,491,000 Investments 185,000 145,000 Federal funds sold 81,000 65,000 --------- ---------- Total Interest Income 2,009,000 1,701,000 --------- ---------- Interest Expense: Savings and money market 369,000 286,000 Time certificates < $100,000 93,000 24,000 Time certificates > $100,000 115,000 105,000 --------- ---------- Total interest expense 577,000 415,000 --------- ---------- Net interest income 1,432,000 1,286,000 Provision for loan losses 100,000 240,000 --------- ---------- Net interest income after provision for loan losses 1,332,000 1,046,000 Other operating income: Service charges & other income 132,000 151,000 --------- ---------- Total operating income 1,464,000 1,197,000 --------- ---------- Other operating expenses: Salaries and benefits 529,000 508,000 Equipment and occupancy 245,000 268,000 Miscellaneous 544,000 562,000 --------- ---------- Total operating expenses 1,318,000 1,338,000 --------- ---------- Earnings before taxes 146,000 (141,000) Income taxes 66,000 (60,000) --------- ----------- Net earnings $ 80,000 $ (81,000) --------- ----------- Earnings per share $0.09 $(0.09) Weighted average number of shares 927,951 926,180
Consolidated Statements of Cashflows For the Three Months ended March 31, 1995 and 1994 (Unaudited)
3/31/95 3/31/94 Net cash flows from operating activities: Net earnings $ 80,000 ($ 81,000) Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for loan losses 100,000 240,000 Depreciation 53,000 68,000 Amortization of Goodwill 13,000 14,000 Loss on sale of OREO 0 57,000 Write down of investment securities 50,000 8,000 Net unrealized loss-AFS securities 0 32,000 Gain on sale of SBA loans 4,000 0 (Increase) decrease in deferred loan fees (31,000) 9,000 Decrease (increase) in accrued receivable and other assets 106,000 ( 918,000) Increase (decrease) in accrued payable and other liabilities 0 18,000 ---------- ---------- Net cash provided by operating activities 375,000 ( 553,000) ---------- ---------- Cash flows from investing activities: Net decrease (increase) in loans 446,000 1,465,000 Net (inc) dec in interest bearing deposits with banks, orig. mat. greater than 90 days 794,000 756,000 Proceeds from sale/matured securities 921,000 1,000,000 Purchase of investment securities 0 (2,018,000) Purchase of fixed assets ( 40,000) ( 42,000) ---------- ---------- Net cash (used in) provided by investing activities 2,121,000 1,161,000 ---------- ---------- Cashflows from financing activities: (Decrease) increase in non-interest demand deposits, net 646,000 1,086,000 (Decrease) increase in savings and money market deposits, net (1,160,000) (4,552,000) (Decrease) increase in time deposits 384,000 (4,463,000) Capital stock issued 10,000 0 ---------- ---------- Net cash (used in) provided by financing activities ( 120,000) (7,929,000) ---------- ---------- Net(decrease)increase in cash and cash equivalents 2,376,000 (7,321,000) Cash and cash equivalents at beginning of period 11,490,000 18,538,000 Cash and cash equivalents at end of period 13,866,000 11,217,000
Notes to Consolidated Financial Statements (Unaudited) PART I Item 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS HNB Financial Group (Company), a California corporation, was incorporated on August 4, 1983 for the purpose of acquiring all of the outstanding common shares of Huntington National Bank (Bank) through an exchange of one share of stock in the Company for each share of Bank stock outstanding. The exchange of stock occurred July 12, 1984 when 353,933 shares of stock of Huntington National Bank were exchanged. With the completion of this exchange, the Company became a one-bank holding company subject to regulation by the Federal Reserve Board. The bank is operated as an independent bank serving the greater Huntington Beach and Mid-Cities areas with a complete line of banking services. Services include checking accounts, savings accounts, money market accounts, certificates of deposit, bus iness and personal loans, and small business administration loans. On November 2, 1994, the Company entered into an agreement with First Banks, Inc. and HNB Acquisition Company ("Acquisition Co."), the wholly -owned subsidiary of First Banks pursuant to which (I) the Company will be the surviving entity following th e merger of Acquisition Co. with and into HNB Financial Group, and (ii) each outstanding share of Common Stock will be converted into the right to receive cash in the amount of $10.90. The Board of Directors of the Company and First Banks believe th at the transaction will be consummated by the end of April, 1995. The Board of Directors of the Company believe that once the merger with First Banks has been completed, First Banks intends to merge the Company with and into Commercial Center Bancorp. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany transactions have been eliminated in consolidation. 1 INVESTMENT SECURITIES Investment securities are carried at cost, increased by accretion of discounts and decreased by the amortization of premiums. A summary of carrying values and market values of investment securities as of March 31, 1995:
HELD-TO-MATURITY AVAILABLE FOR SALE Amortized Fair Amortized Fair Cost Value Cost Value US Treas Sec and Obligations of US Govt Corp and Agencies 10,054,000 9,845,000 0 0 Obligations of States and Political Subd 1,220,000 1,234,000 0 0 FRB Stocks 240,000 240,000 0 0 ---------- ---------- --------- --------- TOTALS 11,514,000 11,319,000 0 0 ---------- ---------- --------- ---------
2 LOANS Loans are stated at amounts advanced less payments received. Interest income on loans is accrued monthly as earned using the "simple interest" method. Except where reasonable doubt exists as to the collectibility of the interest, in which case the accrual of income is discontinued. Fees on loans, in excess of the estimated actual costs of processing, are deferred and amortized over the remaining life of the loan using either effective interest method or the straight-line method, whichever is applicable. The provision for possible loan losses is based on management's evaluation of the loan portfolio under current economic conditions and such other factors which, in management's best judgment, deserve current recognition in estimating possible losses. 3 PREMISES AND EQUIPMENT Premises and equipment are stated at cost, less accumulated depreciation which is charged to expense monthly on a straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, over the terms of the lea se, whichever is shorter. 4 STOCK OPTION PLANS The Board of Directors approved an amended stock option plan on November 19, 1987, which authorizes the issuance of options to acquire up to 192,532 shares (after giving retroactive effect for stock dividends) of the Company's unissued common stock t o officers and other key personnel. Expiration dates for the options granted under the plan range from one to not more than ten years after their grant. Options are granted with an exercise price equal to the fair market value of the common stock at the time of grant. Options to purchase 160,370 shares at a range of $5.65 to $6.60 per share were outstanding at March 31, 1995. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. CHANGES IN FINANCIAL POSITION At the end of the first quarter, total assets were at $91,294,000 compared to $91,879,000, a decrease of $585,000 from the same period last year. Deposits decreased by $1,199,000 to $79,574,000 compared to $80,773,000 in the first quarter last year. Both interest bearing and noninterest bearing deposits contributed to the decrease. Good loans remained very competitive among banks. However, as of the end of the first quarter, gross loans were at $65,469,000, $585,000 higher than the same period last year. Loan to deposit ratio at the end of the quarter was at 83.46%. Liquidity was adequate with maintenance of a good mix of short term U.S. government and agency securities, federal funds sold, and interest bearing certificates of deposit with other financial institutions. The Bank has a Federal Fund borrowing line with a major bank as a contingent funding source to meet unexpected decreases in deposits, and increases in funding needs. Tier 1 capital and total capital to risk weighted assets were 15.28% and 16.54%, respectively. Tier 1 Capital to Adjusted total assets was 12.64%. Based on these ratios, the Company is considered as "well-capitalized". The following table of rate-sensitive assets (RSA) and rate sensitive liabilities (RSL) reflects the Company's ability to withstand changes in market rates (in thousands).
3 mos or less 4-6 mos 7-12 mos 1-5 yrs over 5 yrs RSA 56,666 1,599 2,538 15,959 6,855 RSL 51,600 1,677 2,457 140 0 ------ ------ ------ ------ ------ Gap 5,066 ( 78) 81 15,819 6,855 ------ ------ ------ ------ ------ Gap/Assets 5.55% (0.08%) 0.09% 17.33% 7.51% ------ ------ ------ ------ ------
The majority of assets maturing in the over 5 year category are fully amortized installment loans. These loans, although long term in nature, have a historical record of being paid off within 3 to 3.5 years. The gap to assets ratios from zero to tw elve month time periods were within the maximum guideline range. The schedule above includes savings and money market accounts. CHANGES IN RESULTS OF OPERATIONS The Company recorded a first quarter profit of $80,000, twice as much as 1994's year to date loss of $81,000. Total interest income increased by $308,000 to $2,009,000, due largely to relatively higher interest rates and yields across all earning assets spectrum compared to 1994. Costs of funds likewise increased, albeit, the increase in interest expense was less than half the size of the increase in interest income. As a result, net interest income improved by $146,000 to $1,432,000 during the first quarter. Year to date loan loss provision was significantly lower than last year, $100,000 in 1995 versus $240,000 in 1994, respectively. There was no OREO at the end of the first quarter. This year's loss on sale of other assets owned (boats, autos and mobile homes) was twice the amount of last year, $24,000 in 1995 compared to $12,000 in 1994, respectively. No OREO related loss or expense was recorded in 1995 versus $87,000 OREO exp ense in 1994. A $50,000 investment loss provision was allocated to the Garden Grove Sanitation District and City of Placentia Municipal Securities who have invested funds in the infamous Orange County Investment Pool. This write down provision was undertaken as a n abundance of caution. However, based on recent communications with the principals of these two municipalities, it appeared that these two securities may be paid in full at maturity. The officers of these two municipalities have indicated that they intend to honor their obligations when due to preserve their rating. At least one of them have made necessary arrangement to do so. The $50,000 investment loss provision will likely be reversed during the second quarter when these securities matu re and are paid in full. Noninterest income decreased by $19,000, while noninterest expenses decreased by $20,000, offsetting the reduction in noninterest income. No nonrecurring adjustment was made during the second quarter. PART II Item 1. LEGAL PROCEEDINGS There are no material legal proceedings against the Company. 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) Exhibits Filed None required. (b) Reports of Form 8-K Not applicable. SIGNATURES The financial statements contained herein, in the opinion of management, reflect all adjustments which are necessary to present a fair statement of the results of operations for the period ended March 31, 1995. 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 thereto duly authorized. HNB Financial Group Dated: By: Kirk Bashore, President Dated: By: Robert Green, Executive Vice President -----END PRIVACY-ENHANCED MESSAGE-----