SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- -----------------------------------------------------------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934.
- -----------------------------------------------------------------------------
For Quarter Ended Commission File Number 0-11117
March 31, 1995
SDNB FINANCIAL CORP.
(Exact name of Registrant as specified in its charter)
CALIFORNIA
(State or jurisdiction of incorporation or organization)
95-3725079
(I.R.S. Employer Identification No.)
1420 Kettner Blvd.
San Diego, CA 92101
(Address of principal executive offices) (Zip Code)
(619) 231-4989
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required 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
Number of shares of Common Stock, no par value, outstanding at the close of
the period covered by this report (March 31, 1995): 2,048,485.
<PAGE>
SDNB FINANCIAL CORP.
INDEX
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) 1
March 31, 1995 and December 31, 1994
Consolidated Statements of Operations (unaudited) 2
Three months ended March 31, 1995
Three months ended March 31, 1994
Consolidated Statements of Cash Flows (unaudited) 3
Three months ended March 31, 1995
Three months ended March 31, 1994
Notes to Consolidated Financial Statements (unaudited) 4
March 31, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14 - 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SDNB Financial Corp. and Subsidiaries
Consolidated Balance Sheets (unaudited)
(In thousands)
March 31, December 31,
Assets 1995 1994
Cash and due from banks $ 12,756 $ 11,936
Interest bearing deposits in other bank 2,072 1,381
Investment securities 15,413 17,321
Investment securities available-for-sale 10,642 9,910
Federal funds sold 21,600 24,000
Loans 93,819 97,058
Less allowance for loan losses 2,253 2,148
Net loans 91,566 94,910
Premises and equipment, net 10,910 11,089
Other real estate owned 816 268
Accrued interest receivable and other assets 2,250 2,370
Total assets $ 168,025 $ 173,185
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 39,686 $45,693
Interest bearing 89,526 92,583
Total deposits 129,212 138,276
Securities sold under agreement to repurchase 14,333 12,285
Accrued interest payable and other liabilities 802 953
Notes payable 12,454 12,702
Total liabilities 156,801 164,216
Shareholders' equity:
Common stock 16,648 14,585
Deficit (5,194) (5,256)
Net unrealized holding losses on
available-for-sale securities (230) (360)
Total shareholders' equity 11,224 8,969
Total liabilities and shareholders' equity $ 168,025 $173,185
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
SDNB Financial Corp. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(In thousands, except amounts, per share)
Three months ended March 31,
1995 1994
Interest income:
Interest and fees on loans $ 2,581 $ 2,294
Interest on federal funds sold 200 91
Interest on investments 387 361
Total interest income 3,168 2,746
Interest expense:
Interest on deposits 645 611
Interest on repurchase agreements 76 70
Interest on notes payable 15 7
Total interest expense 736 688
Net interest income 2,432 2,058
Provision for loan losses 300 300
Net interest income after provision
for loan losses 2,132 1,758
Other operating income:
Security gains, net 11 0
Building income 261 291
Other non-interest income 185 254
Total other operating income 457 545
Other operating expenses:
Salaries and employee benefits 1,020 879
Occupancy 110 121
Professional fees 122 102
Building operating expenses 596 559
Other non-interest expenses 676 599
Total other operating expenses 2,524 2,260
Earnings before income tax 65 43
Income tax 3 0
Net earnings $ 62 $ 43
Net earnings per share $ 0.04 $ 0.03
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
SDNB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Three months ended
March 31,
1995 1994
OPERATING ACTIVITIES:
Net earnings $ 62 $ 43
Adjustments to reconcile net earnings to net
cash used by operating activities:
Provision for loan losses 300 300
Provision for depreciation and amortization 320 314
Amortization of investment security discounts (5) (15)
Other expense not utilizing (providing) cash 34 (41)
Unearned loan fees 88 54
Taxes refundable (5) 0
Interest receivable and other assets (668) (407)
Interest payable and other liabilities (146) (548)
Total adjustments (82) (343)
Net cash used by operating activities (20) (300)
INVESTING ACTIVITIES:
Proceeds from maturities of held-to-maturity securities 1,494 4,707
Proceeds from sales of held-to-maturity securities 395 0
Purchases of held-to-maturity securities 0 (4,997)
Purchases of available-for-sale securities (600) 0
Net change in gross loans 3,070 4,079
Proceeds from sale of OREO properties 0 216
Purchases of OREO properties 0 (520)
Purchases of premises and equipment (29) (77)
Net cash provided by investing activities 4,330 3,408
FINANCING ACTIVITIES:
Net change in deposits (9,064) 4,449
Net change in short-term borrowings 1,800 5,944
Proceeds from issuance of common stock (net) 2,065 0
Net cash provided (used) by financing activities (5,199) 10,393
Change in cash and cash equivalents (889) 13,501
Cash and cash equivalents at beginning of period 37,317 17,026
Cash and cash equivalents at end of period $36,428 $30,527
For the purpose of the statement of cash flows, the Company considers cash
and cash equivalents to be as follows at March 31, 1995 1994
Cash and due from banks $12,756 $11,545
Interest-bearing deposits in other banks 2,072 1,682
Federal funds sold 21,600 17,300
Totals $36,428 $30,527
Supplemental cash flow information: 1995 1994
CASH PAID FOR:
Interest $737 $688
Income Taxes $0 $0
Non-cash items: transfer of loans to OREO $553 $0
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
SDNB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
March 31, 1995
1. In the opinion of Management, the accompanying unaudited interim
consolidated financial statements contain all adjustments (which are of
a normal recurring nature) necessary to present fairly the financial
position as of March 31, 1995, and the results of operations and cash
flows for the three months ended March 31, 1995 and 1994. Certain prior
year amounts have been reclassified to conform with the current year
presentation.
2. Earnings per share for the three months ended March 31, 1995 and 1994
are based on 1,561,036 and 1,538,364 weighted average shares
outstanding, respectively.
3. At March 31, 1995, approximately $3.4 million in securities were pledged
to secure deposits.
<PAGE>
SDNB FINANCIAL CORP.
Form 10-Q
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
The first quarter of 1995 reflects the beneficial effect of higher interest
rates while also reflecting a continuation of some of the problems of a still
depressed economy in which SDNB Financial Corp. (the "Company") operates.
Net profit for the quarter ended March 31, 1995 is $62,000 compared to a
profit of $43,000 for the comparable period of 1994.
For the past several years, the Company and San Diego National Bank (the
"Bank") have been adversely affected by a number of factors emanating
primarily from the condition of the economy in San Diego. These factors
include:
a) The continued need for high loan loss provisions.
b) OREO losses and expenses from higher than normal levels of OREO
property.
c) Reduction of the level of the loan portfolio resulting from
continuing low loan demand.
Additionally, the Company has incurred substantial expense in connection with
legal fees and provision for additional costs from the Pioneer Mortgage
litigation (see Report on Form 10-K for year ended December 31, 1994).
While the Company reports a profit for the first quarter of 1995, there can
be no assurances that the factors noted above, or other factors, will not
continue to adversely impact the Company and the Bank. Discussion of the
individual segments of the Company's operations is contained in subsequent
sections of this report.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
By the nature of its commercial/wholesale focus, the Bank has moderate
interest-rate risk exposure in a declining-rate environment. This phenomenon
can be seen in the "Static Gap Summary" (Table 1). At March 31, 1995,
approximately 75% of the Bank's earning assets adjust immediately to changes
in interest rates. Within three months, this increases to 84% of earning
assets. Consequently, the Bank utilizes deposit liabilities that also adjust
relatively quickly. Within the same three-month period, approximately 95% of
the Bank's interest-bearing liabilities (mostly deposits) adjust to current
rates.
The Bank's cumulative gap position at the three month repricing interval has
decreased approximately $4.6 million, or 18 percent, from $26.0 million at
December 31, 1994 to $21.4 million at March 31, 1995. This change is
attributable primarily to decreases of $2.8 million in loans and $2.4 million
in Federal funds sold. The offsetting decrease in liabilities is in demand
deposits which are non-rate sensitive.
During the current quarter the Bank has entered into an interest rate swap
(which cost $40,000) to hedge against the effects on income of falling
interest rates. If the prime interest rate falls below eight percent during
the life of the contract, the Bank will receive payments amounting to the
difference between the then existing prime rate and eight percent on the
contract amount of $20 million. These payments continue while the prime
interest rate stays below eight percent or until expiration of the contract,
February 3, 1998. This contract helps to stabilize the Bank's net interest
spread which, absent any hedge, decreases during periods of rapidly falling
interest rates.
The Bank's liquidity needs are projected by comparing anticipated funding
needs against current resources and anticipated deposit growth. Any current
surplus of funds is invested to maximizeincome while maintaining safety and
providing for future liquidity.
During the quarter ended March 31, 1995, cash and cash equivalents decreased
$0.9 million. Approximately $4.3 million of cash was provided by investing
activities. The two major components were net proceeds of $1.3 million from
securities ($1.9 million of sales and maturities offset by purchases of $0.6
million) and decrease in gross loans totaling $3.1 million. Financing
activities used $5.2 million of cash during the quarter. Deposits decreased
$9.1 million while repurchase agreements increased $1.8 million. The
issuance of new stock during the quarter provided a net amount of $2.1
million.
Liquidity is provided on a daily basis by federal funds sold and on
a longer-term basis by the structuring of the Bank's investment portfolio to
provide a steady stream of maturing issues. Additionally, the Bank may raise
additional funds from time to time through money desk operations or via the
sale of loans to another institution.
The Bank has never purchased high-yield securities or participated in highly-
leveraged transactions. See "CAPITAL RESOURCES" for a discussion of other
factors that have affected liquidity in the quarter ended March 31, 1995 and
will affect future liquidity.
CAPITAL RESOURCES
Since its initial capitalization in 1981, the Company has relied primarily on
internally generated income to fund its growth and provide for depositor
protection. During 1994 the Company concluded that additional capital would
be beneficial and proposed a plan for additional capitalization which was
approved by regulatory authorities on March 9, 1995, and by the shareholders
of the Company on March 17, 1995. The plan encompasses the following steps:
a. Sale of 510,121 newly issued shares of the Company's Common Stock to two
limited partnerships managed by WHR Management Corp. ("WHR") at $4.34 per
share for a gross amount of $2,213,925. This transaction was completed on
March 28, 1995.
b. A rights offering (the "Subscription Offering") to existing shareholders
encompassing up to 769,582 shares of newly issued Common Stock at a
subscription price of $4.34 per share for a gross potential amount of
$3,339,986 if the offering is fully subscribed. The Company filed a
registration statement on Form S-3 with the Securities and Exchange
Commission on April 3, 1995 with respect to the subscription rights to be
distributed and the Common Stock to be issued in connection with the
Subscription Offering.
c. Sale to WHR of up to an additional 255,193 newly issued shares of Common
Stock at $4.34 per share for a gross amount of $1,107,538, if the
Subscription Offering is fully subscribed or such lesser amount so that
after such purchase WHR holds an aggregate of 24.9% of the outstanding
Common Stock of the Company taking into account the shares issued in the
Subscription Offering. Pursuant to the terms of the agreement negotiated
by the Company and WHR, WHR does not have the right to participate in the
Subscription Offering.
The Company has used a portion of the proceeds of the first sale to WHR (item
"a" above) to reduce notes payable and to pay certain of the expenses in
connection with the plan for additional capitalization. The remaining
proceeds from the first sale as well as any net proceeds from the subsequent
Subscription Offering and second sale to WHR will be used for general
corporate purposes, which may include investments in or extensions of credit
to the Company's subsidiaries, reduction of existing debt or financing
possible future acquisitions of other banking institutions or related
businesses. At the present time the Company does not have any specific
plans, agreements or understandings, written or oral, pertaining to the
proposed acquisition of any banking institution or related business.
As disclosed in the Company's 1994 Annual Report to Shareholders and Report
on Form 10-K, the Bank is precluded from paying dividends to the Company. As
further disclosed, the Company merged SDNB Development Corp. into itself
effective July 1, 1993, thereby allowing cash flow from the San Diego
National Bank Building Joint Venture ("JV") to come directly to the Company.
During 1994 and the first three months of 1995, the JV cash flow provided the
Company with sufficient funds to meet its normal ongoing obligations but was
not sufficient to allow the payment of cash dividends, which would also
require approval of the Federal Reserve Bank of San Francisco under terms of
an agreement dated November 20, 1992. Subsequent to March 28, 1995, earnings
from the net proceeds of the stock issuances referred to above will augment
cash flow from the Joint Venture.
The Comptroller of the Currency (Comptroller) has established a framework for
supervisory requirements of national banks based upon capital ratios. Based
upon this framework, a bank's capitalization is defined as well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized or
critically capitalized. Under the Comptroller framework, a bank is well
capitalized if its ratios are greater than or equal to 6% and 10% for tier 1
capital and risk weighted capital, respectively.
The Federal Reserve Board (Reserve Board), as the regulatory body of the
Company, has capital ratio requirements. Under the Reserve Board's Capital
Adequacy Guidelines, all bank holding companies should meet a minimum ratio
of qualifying total capital to weighted-risk assets of 8 percent, of which at
least 4.0 percentage points should be in the form of tier 1 capital.
The Reserve Board and the Comptroller have also imposed a leverage standard
to supplement their risk based ratios. This leverage standard focuses on a
banking institution's ratio of Tier 1 capital to average total assets
adjusted for goodwill and other certain items. Under these guidelines,
banking institutions that meet certain criteria, including excellent asset
quality, high liquidity, low interest rate exposure and good earnings, and
have received the highest regulatory rating must maintain a ratio of Tier 1
capital to total assets of at least 3%. Institutions not meeting this
criteria, as well as institutions with supervisory, financial or operational
weaknesses, along with those experiencing or anticipating significant growth
are expected to maintain a Tier 1 capital to total assets ratio equal to at
least 4% to 5%.
As reflected in the following table, the capital and leverage ratios of the
Company as of December 31, 1994 and March 31, 1995 exceeded the fully phased-
in regulatory risk-based capital adequacy guidelines and the leverage
standard. As also reflected, at both dates the Bank exceeded the capital and
leverage ratios for a "well capitalized" institution.
Capital Components and Ratios
(dollars in thousands)
March 31, 1995 December 31, 1994
Company Bank Company Bank
Capital Components
Tier 1 Capital $11,454 $11,913 $9,329 $11,667
Total Capital 12,963 13,682 10,868 13,081
Risk-weighted assets
and off-balance sheet
instruments 119,979 108,669 123,142 113,106
Regulatory Capital
Tier 1 risk-based:
Actual 9.55% 10.96% 7.59% 10.35%
Required 4.00 6.00 4.00 6.00
Excess 5.55% 4.96% 3.59% 4.35%
Total risk-based:
Actual 10.80% 12.22% 8.85% 11.61%
Required 8.00 10.00 8.00 10.00
Excess 2.80% 2.22% 0.85% 1.61%
Leverage:
Actual. 7.63% 7.94% 5.33% 7.09%
Required 5.00 5.00 5.00 5.00
Excess 2.63% 2.94% 0.33% 2.09%
INVESTMENT SECURITIES
During the first quarter of 1995, the gross unrealized losses in the
available-for-sale category declined from $360,000 to $230,000 and in the
held-to-maturity category, declined from $680,000 to $400,000. Management
continues to believe that there is sufficient liquidity and available sources
of liquidity to allow all such securities (which are fully guaranteed by
United States Government instrumentalities as to principal) to mature and
thus avoid realization of any material amount of the presently unrealized
losses.
NET INTEREST INCOME/NET INTEREST MARGIN
The following is a comparison of the net interest spread between the first
three months of 1995 and the same period of 1994.
1995 1994
Yield on average earning assets
(taxable equivalent) 9.44% 7.31%
Cost of funds 2.18% 1.81%
Net interest spread 7.26% 5.51%
In addition to interest rates, changes in the volumes of assets and
liabilities also affect net interest income. The volume/rate variance
analysis (Table 2) shows the change in net interest income that is
attributable to changes in volume versus changes in rates. As reflected in
Table 2, the comparison of net interest income between the first quarter of
1995 and the similar quarter of 1994 was impacted primarily by the
significant increase in the prime interest rate (8.83% average in 1995 vs.
6.03% average in 1994) which was not matched by a proportionate similar
increase in the cost of funds, off-set by the continuing decline in the
amount of the loan portfolio.
LOANS AND ALLOWANCE AND PROVISION FOR LOAN LOSSES
A summary of the activity in the allowance for loan loss is as follows:
(In thousands)
Three months ended
March 31,
1995 1994
Balance at beginning of period $2,148 $2,522
Provision charged to operating expenses 300 300
Loans charged off (257) (63)
Recoveries 62 28
Balance at end of period $2,253 $2,787
Management employs a "migration analysis method" to establish the required
amount of loan loss allowance. This process tracks realized loan losses back
through the prior two years to estimate loss exposure on the classified and
unclassified loan portfolios. Additionally, loss experience is tracked in
pools of loans with similar characteristics to estimate the loss exposure
unique to various loan types. The measured loss exposure is then applied to
the current loan portfolio and further adjusted for "qualitative factors".
This method of establishing loan loss reserves complies with the policies of
the Office of the Comptroller of the Currency as reflected in Banking
Circular 201, revised, dated February 20, 1992, and in Banking Bulletin 93-
60, dated December 21, 1993. The Company began testing this new method during
1992 and comparing its results to results reached by the previously existing
procedures employed by the Company. The test proved that the two methods
were comparable, and the Company adopted the new migration analysis method
during 1993.
Accordingly, the Company believes its method for establishing the loan loss
allowance is sound. But no method, however valid, can consistently predict
future events with complete accuracy. In recent years, several factors used
by the Bank to establish loan loss allowances have been subject to
considerable volatility, and this in turn has affected the volatility of
nonperforming loans, charge-offs, and the coverage ratio. In addition, the
Bank's method of reporting, particularly its conservative listing of loans as
nonperforming, is not always an accurate indicator of actual future losses.
These issues are explained in greater detail below.
The economy in San Diego suffered a sharp downturn in recent years,
particularly in the real estate market. The Bank is a community bank with a
relatively small loan portfolio comprised of mostly commercial/real estate
loans that tend to be individually larger in amount than loans made by retail
banks. As a result of these and other factors, the Bank can experience large
swings in nonperforming loans, charge-offs, and the coverage ratio when one
or a few loans are transferred from one category to another. These factors
are not reasons for changing a valid method of determining loan loss
allowances and are not always accurate predictors of losses, but they do have
short-term effect on those allowances and related reported figures.
The volatility of "non-performing" loans is illustrated in the following
chart:
ASSETS REPORTED AS NONPERFORMING
(In thousands)
At At At
Mar. 31, 1995 Dec. 31, 1994 Mar. 31, 1994
CURRENT AND NONCURRENT
Non-accrual loans $3,523 $6,046 $5,213
Restructured loans (still accruing) 2,311 2,316 2,335
Loans 90 days past due 1 20 324
5,835 8,382 7,872
Other real estate owned 816 268 1,341
Total $6,651 $8,650 $9,213
NONCURRENT
Non-accrual loans $1,223 $1,276 $3,636
Restructured loans (still accruing) 0 0 0
Loans 90 days past due 1 20 324
1,224 1,296 3,960
Other real estate owned 816 269 1,341
Total $2,040 $1,564 $5,301
Loans reported as nonperforming but
which are current, as a percentage of
total loans reported as nonperforming 79% 85% 50%
OTHER OPERATING INCOME
Other non-interest income declined between 1994 and 1995 primarily because
higher interest rates resulted in a higher earnings credit on clients'
deposit accounts which reduced the service charge income.
OTHER OPERATING EXPENSES
Salaries and employee benefits increased between 1994 and 1995 due to
additions to staff and wage increases averaging approximately 4%.
Other non-interest expenses increased between 1994 and 1995 primarily due to:
a) Increase in legal fees in connection with Pioneer Mortgage
litigation (see Report on Form 10-K for the year ended
December 31, 1994) of approximately $50,000.
b) Charge-off of an unrecovered account overdraft of approximately
$43,000.
SUBSIDIARY DATA
San Diego National Bank
The Bank earned $246,000 in the first quarter of 1995 compared to $130,000
for the same quarter of 1994. Return on average assets (ROA) was 0.66% and
0.31%, respectively. Return on average equity (ROE) was 8.20% and 4.44%,
respectively. The reasons for the change in Bank earnings have been
enumerated on the preceding pages.
San Diego National Bank Building Joint Venture
The JV recorded pre-consolidation gross building revenues of $500,000 and
$537,000 in the first quarter of 1995 and 1994, respectively, resulting in
pre-consolidation, pretax losses of $149,000 and $70,000, respectively.
Depreciation and amortization expenses were $143,000 and $170,000 in 1995 and
1994, respectively.
Building revenues declined as leases were renewed at lower rates due to
competitive pressures.
As disclosed in the 1994 Annual Report to Shareholders and Report on Form
10K, in November 1994 the existing first mortgage loan on the building was
purchased by two limited partnerships managed by WHR Management Corp.
(purchaser of the Company's Common Stock in 1995; see "CAPITAL RESOURCES").
In January 1995 the JV and WHR entered into a modification agreement which
reduces the debt service requirement to $800,000 per year, all allocable to
interest. This caused a short term increase in interest expense which will
be offset later in 1995 when, absent such modification, the interest rate
would have exceeded the rate being paid under the modification.
<PAGE>
<TABLE>
<CAPTION>
San Diego National Bank
Static Gap Summary
March 31, 1995
(In thousands)
Immediately Non-rate
Adjustable 1 Day 3 6 Sensitve
Or 1 Day Through Through Through And Over
Maturity 3 Months 6 Months 12 Months 12 Months Total
<S> <C> <C> <C> <C> <C> <C>
Loans (net) 85,338 2,948 620 627 4,722 94,255
Investment securities - 9,087 2,255 2,491 11,622 25,455
Certificates of deposit
in other banks - 886 198 - - 1,084
Federal funds sold 21,600 - - - - 21,600
Total interest earning
assets 106,938 12,921 3,073 3,118 16,344 142,394
Non-interest earning assets - - - - 13,671 13,671
Total assets 106,938 12,921 3,073 3,118 30,015 156,065
Deposits:
Savings, NOW accounts and
money markets 72,393 - - - - 72,393
Time deposits - 11,772 2,453 2,930 127 17,282
Total deposits 72,393 11,772 2,453 2,930 127 89,675
Securities sold under agreement
to repurchase 14,333 - - - - 14,333
Total interest bearing
liabilities 86,726 11,772 2,453 2,930 127 104,008
Non-interest bearing
liabilities - - - - 40,374 40,374
Shareholders' equity - - - - 11,683 11,683
Total liabilities and
shareholders' equity 86,726 11,772 2,453 2,930 52,184 156,065
Interest rate
sensitivity gap 20,212 1,149 620 188 (22,169)
Cumulative interest rate
sensitivity gap 20,212 21,361 21,981 22,169 -
</TABLE>
<PAGE>
SDNB Financial Corp
Volume/Rate Variance Analysis
Three months ended March 31, 1995 and 1994
(In thousands)
1995 compared to 1994
Volume Rate Total
Increase(decrease) in interest on earning assets:
Commercial loans $ (228) $ 370 $ 142
Real estate loans (96) 251 155
Installment loans (17) 8 (9)
Ready Money (1) 0 (1)
Total loans (342) 629 287
U.S. Treasury securities (34) 8 (26)
Securities of government agencies 7 59 66
State and political obligations (42) (13) (55)
Other securities 12 1 13
Total investment securities (57) 55 (2)
Interest-bearing deposits in other banks (5) 8 3
Federal funds sold 8 101 109
Total interest income change (396) 793 397
Increase(decrease) in interest paid on liabilities:
Savings accounts 7 (1) 6
NOW accounts 7 3 10
Super NOW accounts (2) 2 0
Money market accounts 22 35 57
Executive money market accounts (32) 42 10
Total savings deposits 2 81 83
Time deposits under $100,000 (78) 44 (34)
Time deposits of $100,000 or above (44) 30 (14)
Total time deposits (122) 74 (48)
Federal funds purchased and securities
sold under agreement to repurchase (10) 15 5
Short-term debt 3 16 19
Long-term debt (1) 41 40
Total interest expense change (128) 227 99
Net change in net interest income $ (268) $ 566 $ 298
1) Interest income on state and political obligations has been adjusted for
tax effect at current rates. Interest expense on short- and long-term debt
is included in Building Operating Expenses in the Consolidated Statement of
Earnings.
2) Change in interest income or expense can be attributed to (a) changes in
volume (change in volume times old rate), (b) changes in rates (change in
rate times old volume), and (c) changes in rate/volume (change in rate times
the change in volume). The rate/volume variances are allocated
proportionally between the rate and volume variances based on their absolute
values.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
See Item 3 of Report on Form 10-K for the year ended
December 31, 1994.
ITEM 2 Changes in Securities
None
ITEM 3 Defaults Upon Senior Securities
None
ITEM 4 Submission of Matters to a Vote of Security Holders
(a) The 1994 Annual Meeting of Shareholders
was held March 17, 1995.
(b) Directors elected:
Margaret Costanza
Charles I. Feurzeig
Murray L. Galinson
Karla J. Hertzog
Robert B. Horsman
Mark P. Mandell
Patricia L. Roscoe
Julius H. Zolezzi
(c) Matters voted upon:
(1) Proposal regarding stock issuances and
other capital transactions:
For 779,535
Against 29,705
Abstentions 13,725
(2) Approval of SDNB Financial Corp. 1994
Stock Option Plan:
For 769,953
Against 39,403
Abstentions 10,068
(3) Ratification of appointment of Coopers
& Lybrand L.L.P. as independent accountants:
For 1,101,335
Against 3,366
Abstentions 4,794
(4) Election of Directors:
Name For Withheld
Margaret Costanza 1,097,683 11,812
Charles I. Feurzeig 1,085,312 24,183
Murray L. Galinson 1,096,863 12,632
Karla J. Hertzog 1,097,683 11,812
Robert B. Horsman 1,096,683 12,632
Mark P. Mandell 1,097,683 11,812
Patricia L. Roscoe 1,097,683 11,812
Julius H. Zolezzi 1,097,683 11,812
ITEM 5 Other Information
None
ITEM 6 Exhibits and Reports on Form 8-K
A. Exhibits (listed by numbers corresponding to the
Exhibit Table of Item 601 of Regulation S-K)
4(a) Form of Subscription Agent Agreement
relating to the Subscription Offering
(incorporated by reference from Exhibit
99(a) to the Registrant's Registration
Statement on Form S-3, filed April 3,
1995, SEC File No. 33-58379).
4(b) Form of Subscription Warrant relating
to the Subscription Offering
(incorporated by reference from Exhibit
99(b) to the Registrant's Registration
Statement on Form S-3, filed April 3,
1995, SEC File No. 33-58379).
27 Financial Data Schedule (submitted only
in electronic format and omitted from
paper copies pursuant to Paragraph (c)
(v) of Regulation S-K (17 CFR 220.601(c)
(v)) and Note 2 to Paragraph (c) (1) (vi)
of Regulation S-K (17 CFR 229.601(c) (1) (vi)).
B. Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 12, 1995 SDNB FINANCIAL CORP.
By: /s/Howard W. Brotman
Howard W. Brotman,
duly authorized officer
and Chief Financial Officer
<PAGE>
INDEX OF EXHIBITS
Exhibit Number Description
27 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REPORT
ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 12,756
<INT-BEARING-DEPOSITS> 2,072
<FED-FUNDS-SOLD> 21,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,642
<INVESTMENTS-CARRYING> 15,413
<INVESTMENTS-MARKET> 15,010
<LOANS> 93,819
<ALLOWANCE> 2,253
<TOTAL-ASSETS> 168,025
<DEPOSITS> 129,212
<SHORT-TERM> 16,629
<LIABILITIES-OTHER> 802
<LONG-TERM> 10,158
<COMMON> 16,648
0
0
<OTHER-SE> (5,424)
<TOTAL-LIABILITIES-AND-EQUITY> 168,025
<INTEREST-LOAN> 2,581
<INTEREST-INVEST> 369
<INTEREST-OTHER> 218
<INTEREST-TOTAL> 3,168
<INTEREST-DEPOSIT> 645
<INTEREST-EXPENSE> 736
<INTEREST-INCOME-NET> 2,432
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 2,524
<INCOME-PRETAX> 65
<INCOME-PRE-EXTRAORDINARY> 62
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
<YIELD-ACTUAL> 6.54
<LOANS-NON> 3,595
<LOANS-PAST> 1
<LOANS-TROUBLED> 2,311
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,148
<CHARGE-OFFS> 257
<RECOVERIES> 62
<ALLOWANCE-CLOSE> 2,253
<ALLOWANCE-DOMESTIC> 1,642
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 611
</TABLE>
