SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended: September 30, 1995 Commission
File Number: 0-10773
SUNRISE BANCORP
(Exact name of registrant as specified in its charter)
California 94-2819328
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Sierragate Plaza, Roseville, CA 95678
(Address of principal executive offices) (Zip code)
(916) 783-2800
(Registrant's telephone number, including area code)
Not Applicable
(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 Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES x No
Number of shares of Common Stock issued and outstanding as of October 31,
1995: 4,263,298 The total Number of pages in this Form 10-Q is 16
<PAGE>
SUNRISE BANCORP
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1 Financial Statements:
Consolidated Condensed Statements of Condition
September 30, 1995, and December 31, 1994 3
Consolidated Condensed Statements of Operations
for the three and nine months ended
September 30, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows for
the nine months ended September 30, 1995 and 1994 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 4 None 15
SIGNATURES 16
<PAGE>
<TABLE>
ITEM 1 FINANCIAL STATEMENTS
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Condensed Statements of Condition
September 30, 1995 and December 31, 1994
(dollar amounts in thousands except per share data)
<CAPTION>
Sept 30, December 31,
1995 1994
Assets (Unaudited)
----------- -----------
<S> <C> <C>
Cash and due from banks $3,543 $6,367
Federal funds sold and repurchase agreements 3,300 -
Investment securities held to maturity 46,105 54,040
(market value $44,866 at September 30, 1995
and $49,803 at December 31, 1994)
Loans 68,360 81,340
Less allowance for loan losses 2,959 4,151
-------- -------
Net loans 65,401 77,189
-------- --------
Premises and equipment 1,014 1,406
Other real estate owned 4,089 3,208
Other assets 2,645 4,290
-------- --------
$126,097 $146,500
======== ========
Liabilities and Shareholders' Equity
Deposit liabilities:
Noninterest bearing $14,848 $29,206
Interest bearing 93,105 87,737
-------- --------
Total deposit liabilities 107,953 116,943
Borrowings - 10,548
Other liabilities 234 1,000
------- -------
Total liabilities 108,188 128,491
Shareholders' equity:
Preferred stock, no par value. Authorized
20,000,000 shares; none issued - -
Common stock, no par value. Authorized
20,000,000 shares; issued 4,263,298 shares
in 1995 and 1994 18,327 18,327
Retained earnings (417) (318)
------ -------
Total shareholders' equity 17,909 18,009
------- -------
$126,097 $146,500
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Condensed Statements of Operations
For the three and nine months ended September 30, 1995 and 1994
(unaudited)
(dollar amounts in thousands, except per share data)
<CAPTION>
Three months Nine months
ended Sept 30 ended Sept 30
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income:
Interest on loans $1,779 $1,990 $5,547 $6,239
Interest on investment securities 690 802 2,140 2,375
Interest on federal funds sold and repos 36 23 156 387
Interest on mortgage loans held for sale - 28 - 494
----- ----- ----- -----
Total interest income 2,505 2,843 7,843 9,495
----- ----- ----- -----
Interest expense:
Interest on deposit liabilities 940 741 2,593 2,243
Interest on other borrowings 0 182 118 190
----- ----- ----- -----
Total interest expense 940 923 2,711 2,433
----- ----- ----- -----
Net interest income 1,565 1,920 5,132 7,062
Provision for loan losses - 100 - 2,508
----- ----- ----- -----
Net interest income
after provision for loan losses 1,565 1,820 5,132 4,554
----- ----- ----- -----
Other income:
Service charges and fees 104 107 313 537
Loan sales - 556 - 1,902
Other 13 1 15 100
----- ----- ----- -----
Total other income 117 664 328 2,539
----- ----- ----- -----
Other expenses:
Salaries and employee benefits 736 1,129 2,259 4,473
Occupancy 305 297 911 906
Furniture and equipment 142 221 441 747
Other 644 2,163 1,947 4,878
----- ----- ----- ------
Total other expenses 1,827 3,810 5,558 11,004
----- ----- ----- ------
Net income (loss) before provision
for income taxes (145) (1,326) (98) (3,911)
Provision (benefit) for income taxes (34) (420) 1 (1,376)
----- ------ ----- -------
Net income (loss) ($111) ($906) ($99) ($2,535)
====== ======= ======= =======
Net income (loss) per share ($0.03) ($0.21) ($0.02) ($0.59)
======= ======= ======= =======
<FN>
see accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
(unaudited)
(dollar amounts in thousands)
<CAPTION>
Nine months
ended September 30,
1995 1994
---- ----
<S> <C> <C>
Operating activities:
Net loss $(99) $(2,535)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Accretion of deferred loan fees and costs (104) (100)
Net change in mortgage loans held for sale - 35,812
Provision for loan and other real estate owned losses 225 3,008
Depreciation and amortization 570 908
Net change in other assets 1,659 2,149
Net change in other liabilities (766) (547)
----- ------
Net cash provided by operating activities 1,485 38,695
----- ------
Investing activities:
Purchases of investment securities - (4,027)
Maturities and repayments of investment securities 7,757 7,177
Net decrease in loans 8,492 17,287
Net sales of other real estate owned (2,280) 578
Net purchases of premises and equipment - (77)
------ ------
Net cash provided by investing activities 18,529 20,938
------ ------
Financing activities:
Decrease in deposit liabilities (8,990) (130,714)
Decrease in other borrowing (10,548) -
------- -------
Net cash provided (used) by financial
activities (19,538) (130,714)
------- -------
Increase in cash and cash equivalents 476 (71,081)
Cash and cash equivalents at beginning of period 6,367 90,426
----- ------
Cash and cash equivalents at end of period 6,843 19,345
===== ======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $2,732 $2,432
===== =====
Income taxes paid (refunded) 1,320 --
===== =====
Supplemental schedule of noncash investing and
financing activities:
Other real estate owned acquired through
foreclosure on assets securing loans $3,386 $1,532
===== =====
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED
1) Financial Statement Presentation
--------------------------------
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended September 30, 1995, are not necessarily indicative of the results
that may be expected for the year ended December 31, 1995.
The consolidated condensed financial statements include the accounts of
Sunrise Bancorp (the "Company") and its wholly-owned subsidiary, Sunrise Bank
of California (the "Bank"), with all material intercompany accounts and
transactions eliminated. For further information refer to the financial
statements and notes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1994.
2) Impaired Loans
--------------
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 114, Accounting by Creditors for Impairment of a
Loan, and SFAS 118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure. SFAS 114 requires that an impaired loan be
measured based on the present value of expected future cash flows discounted
at the loan's effective interest rate, or at the loan's observable market
price or the fair value of its collateral. SFAS 118 amends SFAS 114 to allow
a creditor to use existing methods for recognizing interest income on impaired
loans and requires certain disclosures.
A loan is impaired when, based upon current information and events, it is
possible that the Company will be unable to collect all amounts due according
to the contractual terms of the loan agreement. Loans are measured for
impairment as part of the Company's normal loan review process. Loss exposure
on impaired loans is included in the allowance for possible loan and lease
losses through a charge to the provision for loan losses. Because the Company
had previously calculated its allowance for possible loan and lease losses
using methods approximating those prescribed in SFAS 114, the adoption of SFAS
114 did not have a material impact on the Company's financial position or
results of operations.
Of total gross loans and leases at September 30, 1995, $4,595,900 were
considered to be impaired. The allowance for possible loan and lease losses
at such date, included $847,500 related to these loans. The average total
dollar amount of impaired loans during the three months ended September 30,
1995, was $6,021,000. Some impaired loans are not on nonaccrual provided
that the loans are not 90 days or more past due and the exposure to loss has
been adequately recognized in the allowance for laon losses. Conversely,
certain loans which have been restructured resulting in a forgiveness of a
portion of the original principal are considered impaired even though those
loans are current and no further loss is anticipated. Interest is recognized
on impaired loans where cash is received and the future collection of
principal is considered by management to be probable. The amount so
recognized was not material to operations during the third quarter of 1995.
<PAGE>
3) Contingent Liabilities
----------------------
The Company and its subsidiary are at times subject to threatened or filed
legal actions with regard to matters arising out of the conduct of their
businesses. It is the opinion of management, after consulting with legal
counsel, that the resulting liability, if any, as a result of these legal
actions are not currently anticipated to materially affect the consolidated
financial condition of the Company.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following information concerns the consolidated financial condition and
results of operations of the Company and relates primarily to the Bank. This
information should be read in conjunction with the Consolidated Financial
Statements and the 1994 Annual Report on Form 10-K.
Liquidity
- ---------
The objective of liquidity management is to maintain sufficient cash flow to
satisfy both changes in loan demand and deposit fluctuations while maximizing
the yield available from the instruments being used. Liquidity is managed
from both sides of the balance sheet. Liquid assets consist of cash and due
from banks, federal funds sold, securities purchased under repurchase
agreements and investment securities that can be used as collateral for other
borrowings. On the liability side of the balance sheet, liquidity is provided
by core deposits, lines of credit, and other borrowings.
Cash and cash equivalents equaled $6,843,000, at September 30, 1995, and
$6,367,000 at December 31, 1994, and investment securities equaled $46,105,000
and $54,040,000, respectively.
As an additional source of liquidity, the Bank is eligible to borrow funds on
an overnight basis from the Federal Reserve Bank of San Francisco and several
broker/dealers. The maximum available advance is dependent upon the amount of
the Bank's investment securities and loans pledged to collateralize such
borrowings. At September 30, 1995, the Bank had no borrowings against these
lines of credit.
Interest Rate Sensitivity
- -------------------------
As a result of industry deregulation, the Bank can vary the rates and, to a
limited degree, the terms of the deposits it offers in order to acquire the
funds necessary for lending and other operations. The rates paid on these
deposits vary, but generally are set at a slight premium over the rates paid
by large commercial banks. While the Bank cannot match each of its assets
with specific funding sources, it does monitor the aggregate maturities and
interest rate sensitivities of all its investments, loans and deposits within
specified time frames.
Management attempts to adjust the interest rates paid on various
rate-sensitive deposits in order to regulate the volume of such deposits in
maturity ranges that correspond to the Bank's needs and interest rate
expectations. In developing strategies to minimize interest rate risk and
maximize the net interest margin, management considers such external factors
as current and projected economic conditions.
Interest rate sensitivity is a measure of the relationship between a change in
market interest rates and a resultant change in net interest income due to the
repricing and/or maturity characteristics of the assets and liabilities of the
Bank. As shown in the table on page nine, the Bank is considered to be
liability sensitive, as there are more liabilities that reprice than do assets
in the time frame of one year or less. The table does not include
noninterest-bearing accounts as they involve no explicit payment of interest.
However, a majority of these balances do provide depositors an ability to
receive banking services based upon the profitability of the account
relationship that is driven by the general level of interest rates. The table
does not necessarily indicate the impact of general interest rate movement on
net interest income since the repricing of various categories of assets and
liabilities is subject to competitive pressures.
<PAGE>
The following table illustrates the cumulative repricing/maturity intervals of
all interest earning assets and interest bearing liabilities over several time
frames and the cumulative gap at September 30, 1995. Interest earning assets
include variable rate instruments which are presented in time frames that
correspond to the earlier of initial repricing dates or scheduled principal
amortization maturity dates, and fixed rate instruments are presented in time
frames that correspond to scheduled principal amortization or maturity dates.
All interest bearing liabilities, other than time deposits, have variable
rates of interest that are repriceable immediately. Time deposits are
presented in time frames that correspond to scheduled maturity dates.
<TABLE>
(dollar amounts in thousands)
<CAPTION>
3 months 3-12 1-5 After
September 30, 1995 One day or less months years 5 years Totals
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans $38,238 17,196 2,825 8,456 1,817 68,532
Investment securities 0 1,200 3,600 33,022 8,283 46,105
Federal funds sold and
repurchase agreements 3,300 0 0 0 0 3,300
----- ----- ----- ------ ----- ------
Total interest earning
assets 41,538 18,396 6,425 41,478 10,100 117,937
====== ====== ===== ====== ====== =======
Interest bearing liabilities:
Savings accounts $1,046 0 0 0 0 1,046
Interest checking accounts 33,639 0 0 0 0 33,639
Money market deposit accounts 27,030 0 0 0 0 27,030
Time deposits of $100,000
or more 0 3,393 6,100 711 0 10,204
Other time deposits 0 6,886 11,394 2,906 0 21,186
Other borrowings 0 0 0 0 0 0
------- ----- ------ ----- ----- ------
Total interest bearing
liabilities $61,715 10,279 17,494 3,617 0 93,105
======= ====== ====== ===== ====== ======
Current gap (20,177) 8,117 (11,069) 37,861 10,100 24,832
======= ====== ====== ====== ====== ======
Cumulative gap (20,177) (12,060) (23,129) 14,732 24,832 24,832
======= ====== ====== ====== ====== ======
</TABLE>
Capital Resources
- -----------------
The Federal Reserve Board and the FDIC have established risk-based and
leverage capital guidelines for bank holding companies and banks. The Federal
Reserve Board guidelines and FDIC regulations created a framework wherein
balance sheet assets and certain off-balance sheet commitments are weighted by
risk and compared to capital. Capital is assigned to tiers with common equity
included in Tier 1 capital and a portion of the allowance for credit losses
included in Tier 2 Capital or Total Capital. On September 30, 1995, the
minimum required ratio for qualifying Total Capital was 8.0%, of which 4.0%
must be Tier 1 Capital. Additionally a 3% minimum leverage ratio of Tier 1
capital to average total assets for the most recent quarter must be
maintained. Banking organizations anticipating significant asset growth or
which are not highly rated by their primary federal regulators are expected to
maintain leverage ratios 1% to 2% in excess of the minimum. Capital ratios
for both the Company and the Bank at September 30, 1995, exceeded the
requirements under current regulatory agreements.
<PAGE>
The following table illustrates various capital ratios of the Bank and the
Company (on a consolidated basis) as of September 30, 1995 and December 31,
1994:
<TABLE>
As of September 30, 1995 As of December 31, 1994
Bank Company Bank Company
<S> <C> <C> <C> <C>
Leverage ratio 13.39% 14.23% 8.42% 8.98%
Tier 1 Capital to risk-weighted assets 19.90% 21.56% 15.04% 16.02%
Total Capital to risk-weighted assets 21.14% 22.78% 16.28% 17.27%
</TABLE>
The Board of Directors is continuing to consider various strategies designed
to enhance shareholder value, including capital raising and merger
possibilities. From time to time, the Company considers informal expressions
of interest from third parties relative to a possible sale, merger or
consolidation transaction. No definitive written proposal is currently under
consideration. Consultants and other professionals advise the Board of
Directors in the process of determining the best interests of the Company and
the Company's shareholders with respect to such possible transactions.
Regulatory Matters
- ------------------
In May 1994, the Bank entered into a Memorandum of Understanding with the
Federal Deposit Insurance Corporation (the "FDIC") and an Agreement with the
Superintendent of Banks of the State of California (the "Superintendent") to
address certain matters arising from an examination conducted by the FDIC
dated October 1993. The Memorandum superseded the previous memorandum dated
April 14, 1993. Significant aspects of these agreements require commitments of
the Bank: (a) to retain qualified management; (b) to maintain capital at
prescribed levels; (c) to reduce classified assets to specified levels; (d) to
maintain an adequate allowance for loan losses; (e) to review, revise, adopt
and implement certain policies acceptable to the FDIC and the Superintendent;
(f) to file with the FDIC accurate consolidated reports of condition; (g) to
review compensation paid to executive officers; (h) to not pay cash dividends
without approval in advance by the FDIC; (i) to furnish quarterly written
progress reports to the FDIC and the Superintendent detailing the form and
manner of any actions taken to comply with the agreements; (j) to correct
apparent violations of law. The provisions of the agreements will remain
effective except to the extent that, and until such time as, any of its
provisions are modified, terminated, suspended or set aside by the FDIC and
Superintendent.
As a result of an examination of the Company conducted by the Federal Reserve
Bank ("FRB") as of December 31, 1993, the Company entered into a Memorandum of
Understanding with the Federal Reserve Bank. The FRB Memorandum requires the
Company: (i) to submit a policy for receiving dividends from the Bank; (ii) to
submit a capital plan; (iii) to submit a plan to manage the Company's and the
Bank's growth; (iv) to submit annual budgets; (v) to submit an explanation of
certain management and service fees; (vi) to obtain prior approval to declare
or pay any dividends; and (vii) to submit quarterly written progress reports.
Management believes the Company is in substantial compliance with the terms
and conditions of the Understandings with the FDIC and the FRB and the
Agreement with the Superintendent.
<PAGE>
Results of Operations
- ---------------------
The Company recorded a consolidated net loss of $111,000 ($.03 per share) for
the three months ended September 30, 1995, compared to net loss of $906,000
($.21 per share) for the three months ended September 30, 1994. For the nine
months ended September 30, 1995, the Company recorded a consolidated net loss
of $99,000 ($.02 per share), compared to a consolidated net loss of $2,535,000
($0.59 per share) for the nine months ending September 30, 1994.
The following table illustrates the net income (loss) for the three months and
nine months ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
(dollar amounts in thousands) 1995 1991 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Company $ (12) $( 36) $(51) $ 7
Bank (99) (870) (48) (2,542)
------ ------ ------ --------
Consolidated net income (loss) $(111) $(906) $(99) $(2,535)
</TABLE>
The decreased net loss for the nine months ended September 30, 1995 over the
same period in 1994 was due to decreased interest income and decreased
operations income and expenses related to the decrease of average assets of
$77,027,000.
Net Interest Income
- -------------------
Net interest income, the difference between interest earned on loans and other
investments and interest paid on deposits and other borrowings, is the most
significant component of the Company's revenues. The Company's net interest
income before provision for loan losses was $5,132,000 in the first nine
months ended September 30, 1995, compared to $7,062,000 for the nine months
ended September 30, 1994, which is a $1,930,000 (or 27%) decrease. The
decrease in net interest income was the result of a decrease in average
earning assets (see table below) of the Company of $62,634,000, or 33%,
partially offset by an increase in the net interest margin from 4.93% to
5.32%.
<PAGE>
The following table sets forth average assets, major deposit categories, other
liabilities and income earned and interest expense paid; average rates earned
and expensed and the net interest nine months ended September 30, 1995 and
1994:
<TABLE>
(dollar amounts in thousands)
<CAPTION>
1995 1994
Average Average Average Average
Balance Interest Yield Balance Interest Yield
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest earning assets:
Loans (1) $76,876 $5,547 9.65% $108,324 $6,238 7.70%
Mortgage loans held for sale 0 0 0.00% 10,292 494 6.42%
Investment securities 48,489 2,140 5.90% 58,093 2,376 5.47%
Federal funds sold and
securities purchased under
agreements to 3,633 156 5.74% 14,923 387 3.47%
Interest bearing deposits 0 0 0.00% 0 0 0.00%
Total interest earning
assets 128,998 $7,843 8.13% 191,632 $9,495 6.62%
Allowance for loan losses (3,857) (5,940)
Cash and due from banks 6,117 18,629
Premises and equipment and
other as 6,274 10,238
----- ------
$128,998 $7,843 $214,559
Liabilities and Shareholders' Equity:
Interest bearing liabilities:
Savings accounts $1,015 $20 2.63% $2,010 $40 2.66%
Interest checking accounts 35,313 721 2.73% 24,141 507 2.81%
Money market deposit
accounts 28,313 652 3.08% 47,694 867 2.43%
Time deposits 28,148 1,200 5.70% 27,704 829 4.00%
Other borrowings 2,882 118 5.47% 4,946 190 5.14%
Total interest bearing
liabilitities 95,671 2,711 3.79% 106,495 2,433 3.05%
Demand deposits 23,302 88,184
Other liabilities 590 706
Total liabilities 119,563 195,385
Shareholders' equity 17,969 19,174
$137,532 $214,559
Net interest income
and margin (2) $5,132 5.32% $7,062 4.93%
<fn1>
(1) Average loans include nonaccrual loans.
<fn2>
(2) Net interest margin is computed by dividing net interest income by total
average interest earning assets and is annualized.
</TABLE>
<PAGE>
The following table shows the approximate effect on net interest income of
volume and rate change for the nine months ended September 30, 1995 and 1994.
Changes which are the combined result of volume rate changes are allocated in
proportion to the volume and rate changes.
<TABLE>
(dollar amounts in thousands)
<CAPTION>
1995 vs. 1994
Volume Rate Total
<S> <C> <C> <C>
Increase (decrease) in interest income:
Loans ($2,056) $1,365 ($691)
Mortgage loans held for sale (494) 0 (494)
Investment securities ($414) $178 (236)
Federal funds sold ($396) $165 (231)
Interest bearing deposits $0 $0 0
(3,360) 1,708 (1,652)
Increase (decrease) in interest expense:
Savings accounts ($20) $0 (20)
Interest checking accounts $228 ($14) 214
Money market deposit accounts ($409) $194 (215)
Time deposits $13 $358 371
Other borrowings ($84) $12 (72)
---- ---- ---
(272) 550 278
--- ---- ---
Change in net interest income ($3,088) $1,158 ($1,930)
</TABLE>
<PAGE>
Provision for Loan Losses and Asset Quality
- -------------------------------------------
Management believes the allowance for loan losses at September 30, 1995,was
adequate to cover the risk in the loan portfolio and therefore no provision
for loan losses was considered necessary; however included in other expenses,
the Bank reserved $225,000 for possible other real estate owned losses. This
compares with a loan loss provision of $2,508,000 for the first nine months of
1994. Net loan charge-offs totaled $702,000 and $1,192,200 for the three and
nine months ended September 30, 1995, as compared to $898,000 and $2,676,000
in the same periods of 1994. The allowance for loan losses as a percentage of
outstanding loans (excluding mortgage loans held for sale) was 4.33% at
September 30, 1995, 5.10% at December 31, 1994, and 5.70% at September 30,
1994.
The following unaudited table sets forth certain information concerning
nonaccrual, past due and other real estate owned:
(dollar amounts in thousands, September 30, December 31, September 30,
except percentages) 1995 1994 1994
------------ ----------- ------------
Nonaccrual loans $3,107 $7,347 $9,066
Accruing loans past due 90
days or more 2,240 8 0
Other real estate owned
(including in-substance
foreclosures) 4,089 3,208 3,244
------ ------- -------
Total nonperforming assets $9,436 $10,563 $12,310
====== ======= =======
Percentage of average assets 6.68% 5.26% 5.74%
====== ======= =======
As of September 30, 1995, nonaccrual loans are comprised of loans to 18
borrowers. Twelve of the nonaccrual loans totaling $2,993,300, or 96% of
total nonaccrual loans, are real estate secured of which $953,400, or 31% of
total nonaccrual loans, are secured by residential real estate, and the
balance with commercial real estate. The remaining nonaccrual loans totaling
$113,700, or 4% of total nonaccrual loans, consist of loans to individuals and
commercial loans.
Accruing loans 90 days or more past due include two real estate secured loans
totaling $2,150,600 or 96% of accruing loans 90 days or more past due, were
current as to interest but had matured and were pending awaiting the receipt
of additional collateral and a revision in terms. Subsequent to September 30,
1995, these loans were renewed.
As of September 30, 1995, loans which were not included in nonperforming
assets, but possible credit problems of the borrowers cause management to have
doubts as to the ability of such borrowers to comply with present loan
repayment terms, total $546,100 and are principally comprised of real estate
secured loans.
The California economy and the Sacramento region, continues to be in a
recession and the Bank's loan portfolio, which includes approximately $36
million in real estate loans representing approximately 52% 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, although uncertain at this time, could result in an increase in
the level of nonperforming loans and the level of the allowance for loan
losses which could adversely affect the Company's and the Bank's future
growth and profitability.
<PAGE>
Other Income
- ------------
Other income decreased $547,000 (85%) in the third quarter of 1995 as compared
to the corresponding period in 1994. For the nine months ending September 30,
1995 other income decreased $2,211,000 (87%) from the same period in 1994.
The large decrease in other income is principally due to the absence of gains
on sales of loans, which was $1,902,000 for the nine months ending September
30, 1994, as the Bank's mortgage banking division is no longer originating
mortgage loans for sale.
Other income also includes loan servicing fees, service charges on deposit
accounts, and other customer service fees. The decrease in service charges in
1995 resulted from the decreased number of demand deposit accounts and
decreased loan sales and loan servicing fees.
Other Expenses
- --------------
Salaries and employee benefit expense decreased $393,000 (35%) for the three
months ended September 30, 1995, and decreased $2,214,000 (49%) for the nine
months ended September 30, 1995, as compared to the same periods in 1994.
This decrease in employee expense is principally due to the 1994 decrease in
the number of employees associated with the Bank's mortgage banking division,
and related decreases in benefit costs.
Occupancy expense and equipment expense decreased $71,000 (14%) for the three
months and $301,000 (18%) for the nine months ended September 30, 1995, as
compared to the same periods in 1994. These decreases are due primarily to
decreased depreciation expense.
In the third quarter of 1995, other expenses decreased $1,519,000 (70%) in
comparison to the third quarter of 1994. For the nine months ended September
30, 1995, other expenses decreased $2,931,000 (60%) as compared to the same
period in 1994. The components of other expenses are provided in the table
below for the first nine months of 1995 and 1994:
Nine months
(dollar amounts in thousands) ended
September 30
1995 1994
---- ----
Stationery and supplies $88 $211
Communications 180 467
Professional fees 348 667
Deposit insurance assessments 228 550
Outside service fees 471 713
Loan collection and OREO expense 339 629
Other 293 1,641
------ ------
$1,947 $4,878
====== ======
The principal reasons for the decrease in other expenses between 1994 and 1995
relates to decreased activity within the Bank's mortgage banking division and
other expense reductions in each category.
PART II OTHER INFORMATION
- --------------------------
Item 6b Reports on Form 8-K
- ---------------------------
None
<PAGE>
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.
SUNRISE BANCORP
November 9, 1995 By:
Date /s/ SARAH THOMPSON
Sarah Thompson
Senior Vice President and
Chief Financial Officer
(Signing on behalf of the registrant and as
principal financial officer and chief
accounting officer).
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