SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934.
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For Quarter Ended Commission File Number 0-11117
September 30, 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 October 31,
1995: 3,073,260.
<PAGE>
SDNB FINANCIAL CORP.
INDEX
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) 1
September 30, 1995 and December 31, 1994
Consolidated Statements of Operations (unaudited) 2
Three and nine months ended September 30, 1995
Three and nine months ended September 30, 1994
Consolidated Statements of Cash Flows (unaudited) 3
Nine months ended September 30, 1995
Nine months ended September 30, 1994
Notes to Consolidated Financial Statements (unaudited) 4
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 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)
September 30, December 31,
Assets 1995 1994
Cash and due from banks $ 14,305 $ 11,936
Interest bearing deposits in other banks 2,976 1,381
Investment securities 12,609 17,321
Investment securities available-for-sale 12,674 9,910
Federal funds sold 24,000 24,000
Loans 92,104 97,058
Less allowance for loan losses 2,133 2,148
Net loans 89,971 94,910
Premises and equipment, net 10,894 11,089
Other real estate owned 181 268
Accrued interest receivable and other assets 1,791 2,370
Total assets $169,401 $173,185
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 45,144 $ 45,693
Interest bearing 89,504 92,583
Total deposits 134,648 138,276
Securities sold under agreement to repurchase 8,674 12,285
Accrued interest payable and other liabilities 1,365 953
Notes payable 10,682 12,702
Total liabilities 155,369 164,216
Shareholders' equity:
Common stock 20,324 14,585
Stock subscription receivable (1,108) 0
Deficit (5,098) (5,256)
Net unrealized holding losses
on available-for-sale securities (86) (360)
Total shareholders' equity 14,032 8,969
Total liabilities and shareholders' equity $169,401 $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)
3 months 3 months 9 months 9 months
ended ended ended ended
9/30/95 9/30/94 9/30/95 9/30/94
Interest income:
Interest and fees on loans $ 2,609 $ 2,302 $ 7,752 $ 6,956
Interest on federal funds sold 200 183 573 475
Interest on investments 400 426 1,205 1,185
Total interest income 3,209 2,911 9,530 8,616
Interest expense:
Interest on deposits 756 621 2,117 1,845
Interest on repurchase agreements 52 98 193 276
Interest on notes payable 9 12 33 28
Total interest expense 817 731 2,343 2,149
Net interest income 2,392 2,180 7,187 6,467
Provision for loan losses (200) 250 250 1,150
Net interest income after provision
for loan loss 2,592 1,930 6,937 5,317
Other operating income:
Security gains, net 0 0 11 0
Building income 247 238 713 821
Other non-interest income 207 223 593 1,394
Total other operating income 454 461 1,317 2,215
Other operating expenses:
Salaries and employee benefits 1,033 946 2,978 2,695
Occupancy 122 117 361 388
Professional fees 232 142 564 372
Building operating expenses 622 601 1,841 1,729
Other non-interest expenses 1,001 569 2,344 1,954
Total other operating expenses 3,010 2,375 8,088 7,138
Earnings before income tax 36 16 166 394
Income tax 2 0 8 3
Net earnings $ 34 $ 16 $ 158 $ 391
Net earnings per share $ 0.02 $ 0.01 $ 0.08 $ 0.25
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)
Nine months ended September 30,
1995 1994
OPERATING ACTIVITIES:
Net earnings $ 158 $ 391
Adjustments to reconcile net earnings to net
cash used by operating activities:
Provision for loan losses 250 1,150
Provision for depreciation and amortization 930 957
Amortization of investment security discounts (85) (54)
Other expense not utilizing (providing) cash 76 (129)
Unearned loan fees 148 (80)
Taxes refundable (8) 0
Interest receivable and other assets (515) (276)
Interest payable and other liabilities (412) (532)
Total adjustments 1,208 1,036
Net cash provided by operating activities 1,366 1,427
INVESTING ACTIVITIES:
Proceeds from maturities of held-to-maturity securities 6,504 11,296
Proceeds from called held-to-maturity securities 395 0
Proceeds from maturities of available-for-sale securities 5,990 2,990
Proceeds from sales of available-for-sale securities 3,024 0
Purchases of held-to-maturity securities (2,000) (8,598)
Purchases of available-for-sale securities (11,466) (4,949)
Net change in gross loans 4,503 9,612
Proceeds from OREO properties 556 422
Purchases of premises and equipment (281) (184)
Net cash provided by investing activities 7,225 10,589
FINANCING ACTIVITIES:
Net change in deposits (3,628) (55)
Net change in short-term borrowings (5,630) 3,710
Proceeds from issuance of common stock (net) 4,631 0
Net cash provided (used) by financing activities (4,627) 3,655
Change in cash and cash equivalents 3,964 15,671
Cash and cash equivalents at beginning of period 37,317 17,026
Cash and cash equivalents at end of period $41,281 $32,697
For the purpose of the statement of cash flows, the Company considers cash
and cash equivalents to be as follows at September 30, 1995 1994
Cash and due from banks $14,305 $11,915
Interest-bearing deposits in other banks 2,976 1,282
Federal funds sold 24,000 19,500
Totals $41,281 $32,697
Supplemental cash flow information at September 30, 1995 1994
CASH PAID FOR:
Interest $3,050 $2,149
Income Taxes $0 $0
Non-cash items: transfer of loans to OREO $553 $570
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
SDNB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
September 30, 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 September 30, 1995, and the results of
operations for the three and nine months ended September 30, 1995
and 1994 and cash flows for the nine months ended September 30, 1995
and 1994. Certain prior year amounts have been reclassified to
conform with the current year presentation.
2. Earnings per share for the three and nine months ended September 30,
1995 and 1994 are based on the following weighted average shares
outstanding:
Three months ended:
September 30, 1995 2,092,219
September 30, 1994 1,538,364
Nine months ended:
September 30, 1995 1,902,526
September 30, 1994 1,538,364
3. At September 30, 1995, approximately $4.2 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 nine months of 1995 reflect the beneficial effect of higher
interest rates while also reflecting an abatement of some of the problems
of a still depressed economy in which SDNB Financial Corp. (the "Company")
operates. Net earnings for the three and nine months ended September 30,
1995 are $34,000 and $158,000, respectively, compared to $16,000 and
$391,000, for the comparable periods of 1994. The three and nine months
ended September 30, 1995 include a charge to income of $350,000 for
increased provision for litigation settlement (see OTHER OPERATING
EXPENSES). The nine months ended September 30, 1994 includes $712,500 of
non-recurring income (see OTHER OPERATING INCOME).
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 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 and Pioneer Liquidating Corporation litigation (see Report on Form
10-K for year ended December 31, 1994 and OTHER OPERATING EXPENSES).
While the Company reports a profit for the first nine months 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.
<PAGE>
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 September
30, 1995, approximately 75% of the Bank's earning assets adjust immediately
to changes in interest rates. Within three months, this increases to 83%
of earning assets. Consequently, the Bank utilizes deposit liabilities
that also adjust relatively quickly. Within the same three-month period,
approximately 94% 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 $1.0 million, or four percent, from $26.0
million at December 31, 1994 to $25.0 million at September 30, 1995.
Volume of assets and liabilities are both down from year-end; reduced
volumes of $5.4 million in loans and $1.3 million in securities are offset
by decreases of $2.6 million in deposits and $3.6 million in repurchase
agreements within the three month horizon.
During February 1995 the Bank entered into an interest rate swap to hedge
against the effects of falling interest rates on income. 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. To
date, there have been no payments received under this contract.
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 maximize income while maintaining
safety and providing for future liquidity.
During the nine months ended September 30, 1995, cash and cash equivalents
increased $4.0 million. Operating activities provided $1.4 million during
the period. Approximately $7.2 million was provided by investing
activities. The two major components were net proceeds of $2.4 million
from securities ($15.9 million of sales, maturities and calls offset by
purchases of $13.5 million) and decrease in gross loans totaling $4.5
million. Financing activities used $4.6 million during the period.
Deposits decreased $3.6 million while short-term borrowings decreased $5.6
million. The issuance of new stock during the period provided a net amount
of $4.6 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 period ended September 30, 1995 and will affect
future liquidity.
CAPITAL RESOURCES
Since its initial capitalization in 1981, the Company had 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 encompassed 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 to existing shareholders and, pursuant to a best-
efforts underwriting agreement, to third parties encompassing
769,582 shares of newly issued Common Stock at a subscription price
of $4.34 per share for a gross amount of $3,339,986. This
transaction was completed on September 28, 1995.
c. Sale to WHR of an additional 255,193 newly issued shares of Common
Stock at $4.34 per share for a gross amount of $1,107,538. This
transaction was completed on October 6, 1995.
The Company has used a portion of the proceeds to reduce notes payable, to
pay expenses in connection with the additional capitalization, to purchase
certain customer notes from the Bank (which notes were then assigned to the
San Diego National Bank Building Joint Venture ("JV")) and for advances to
the JV. The JV in turn assigned the notes and used a portion of the
advances as payment on the JV's second trust deed note payable. The
remaining proceeds 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 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.
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 as
capitalized, adequately capitalized, significantly undercapitalized or
critically capitalized. Under the Comptroller's 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. As of September 30,
1995 and December 31, 1994, the Bank was considered "well capitalized".
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 risk-based capital ratios and
leverage ratios of the Company and the Bank as of September 30, 1995 and
December 31, 1994 exceeded the fully phased-in regulatory risk-based
capital adequacy guidelines and the leverage standard.
Capital Components and Ratios
(dollars in thousands)
September 30, 1995 December 31, 1994
Company Bank Company Bank
Capital Components
Tier 1 Capital $14,118 $12,451 $9,329 $11,667
Total Capital 15,611 13,816 10,868 13,081
Risk-weighted assets
and off-balance sheet
instruments 115,294 108,410 123,142 113,106
Regulatory Capital
Tier 1 risk-based:
Actual 11.89% 11.49% 7.59% 10.35%
Required 4.00 6.00 4.00 6.00
Excess 7.89% 5.49% 3.59% 4.35%
Total risk-based:
Actual 13.14% 12.74% 8.85% 11.61%
Required 8.00 10.00 8.00 10.00
Excess 5.14% 2.74% 0.85% 1.61%
Leverage:
Actual 8.60% 8.10% 5.33% 7.09%
Required 5.00 5.00 5.00 5.00
Excess 3.60% 3.10% .33% 2.09%
INVESTMENT SECURITIES
During the first nine months of 1995, the gross unrealized losses in the
available-for-sale category declined from $360,000 to $86,000 and in the
held-to-maturity category, declined from $680,000 to $176,000. 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
nine months of 1995 and the same period of 1994.
1995 1994
Yield on average earning assets
(taxable equivalent) 9.37% 7.51%
Cost of funds 2.29% 1.86%
Net interest spread 7.08% 5.65%
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 nine
months of 1995 and the similar period of 1994 was affected primarily by
the significant increase in the prime interest rate (8.86% average in 1995
vs. 6.81% average in 1994) which was matched by only a proportionate
increase in the cost of funds, thus increasing the net interest spread.
The benefit of the increased net interest spread was offset by the reduced
loan balances between September 30, 1995 and 1994.
LOANS AND ALLOWANCE AND PROVISION FOR LOAN LOSSES
A summary of the activity in the allowance for loan loss is as follows:
(In thousands)
Nine months ended
September 30,
1995 1994
Balance at beginning of period $2,148 $2,522
Provision charged to operating expenses 250 1,150
Loans charged off (600) (1,024)
Recoveries 335 111
Balance at end of period $2,133 $2,759
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 Comptroller 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
September 30, 1995 December 31, 1994 September 30, 1994
CURRENT AND NONCURRENT
Non-accrual loans $3,720 $6,046 $6,366
Restructured loans
(still accruing) 1,370 2,316 2,325
Loans 90 days past due 981 20 332
6,071 8,382 9,023
Other real estate owned 181 268 628
Total $ 6,252 $8,650 $9,651
NONCURRENT
Non-accrual loans $467 $1,276 $2,435
Restructured loans
(still accruing) 0 0 0
Loans 90 days past due 981 20 332
1,448 1,296 2,767
Other real estate owned 181 269 628
Total $1,629 $1,564 $3,395
Loans reported as
nonperforming but
which are current, as a
percentage of total loans
reported as nonperforming 76% 85% 69%
OTHER OPERATING INCOME
Changes in other non-interest income include:
a) Building revenues declined in the nine months ended September 30,
1995 as leases were renewed at lower rates due to competitive
pressures.
b) Higher interest rates resulted in a higher earnings credit on
clients' deposit accounts which reduced the service charge income.
c) The nine months ended September 30, 1994, include in income
$712,500 received from the Bank's directors' and officers'
liability insurer in settlement of claims made by the Bank
(see Report on Form 10-K for year ended December 31, 1994).
OTHER OPERATING EXPENSES
Salaries and employee benefits increased between 1994 and 1995 due to
additions to staff and wage increases averaging approximately 4%.
Professional fees in connection with the Pioneer Liquidating Corporation
litigation (see Report on Form 10-K for year ended December 31, 1994)
were $177,000 and $437,000 for the three and nine months ended September
30, 1995 respectively, increases of $99,000 and $258,000, respectively
over the comparable periods of 1994. Also see the discussion of other
non-interest expenses below.
Building operating expenses increased primarily because of increased
interest expense, which, through January 1995, was based on a continuously
rising index. Additionally, 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. (purchasers of the Company's Common
Stock; 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, thus reducing the debt
service requirement.
Other non-interest expenses changed between 1995 and 1994 as follows:
Three months ended Nine months ended
September 30 September 30
1995 1994 1995 1994
OREO losses 78,000 9,000 78,000 333,000
Loan expense (including
loss on sale of customer
note in 1995) 120,000 121,000 380,000 266,000
Provision for litigation
settlement 350,000 0 350,000 0
SUBSIDIARY DATA
San Diego National Bank
The Bank earned $233,000 and $784,000 for the three and nine months ended
September 30, 1995, respectively, compared to $190,000 and $791,000,
respectively, for the same periods of 1994. The three and nine months
ended September 30, 1995 include a charge to income of $350,000 for
increased provision for litigation settlement (see OTHER OPERATING
EXPENSES). The nine months ended September 30, 1994 includes $712,500 of
non-recurring income (see OTHER OPERATING INCOME). The return on average
assets (ROA) for the nine month periods was .70% and .63%, respectively.
The return on equity (ROE) for the nine month periods was 8.59% and 8.88%
respectively. The reasons for the change in Bank earnings have been
enumerated on the preceding pages.
San Diego National Bank Building Joint Venture
Three months ended Nine months ended
September 30 September 30
1995 1994 1995 1994
Pre-consolidation
gross building revenues $497,000 $485,000 $1,447,000 $1,552,000
Pre-consolidation,
pre-tax loss 194,000 164,000 572,000 323,000
Depreciation and
amortization expense 151,000 151,000 437,000 484,000
<PAGE>
<TABLE>
<CAPTION>
San Diego National Bank
Static Gap Summary
September 30, 1995
(In thousands)
Immediately Non-rate
Adjustable 1 Day 3 6 Sensitive
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) 83,332 2,422 398 559 5,393 92,104
Investment securities - 8,240 4,458 2,423 10,119 25,240
Certificates of deposit in
other banks - 693 1,490 297 - 2,480
Federal funds sold 24,000 - - - - 24,000
Total interest earning assets 107,332 11,355 6,346 3,279 15,512 143,824
Non-interest earning assets - - - - 14,955 14,955
Total assets 107,332 11,355 6,346 3,279 30,467 158,779
Deposits:
Savings, NOW accounts and
money markets 72,011 - - - - 72,011
Time deposits - 13,013 3,955 2,371 117 19,456
Total deposits 72,011 13,013 3,955 2,371 117 91,467
Securities sold under
agreement to repurchase 8,674 - - - - 8,674
Total interest bearing liabilities 80,685 13,013 3,955 2,371 117 100,141
Non-interest bearing liabilities - - - - 46,273 46,273
Shareholders' equity - - - - 12,365 12,365
Total liabilities and
shareholders' equity 80,685 13,013 3,955 2,371 58,755 158,799
Interest rate sensitivity gap 26,647 (1,658) 2,391 908 (28,288)
Cumulative interest rate
sensitivity gap 26,647 24,989 27,380 28,288 -
</TABLE>
<PAGE>
SDNB Financial Corp
Volume/Rate Variance Analysis
Nine months ended September 30, 1995 and 1994
(In thousands)
1995 compared to 1994
Volume Rate Total
Increase(decrease) in interest on earning assets:
Commercial loans $ (644) $ 988 $ 344
Real estate loans (46) 507 461
Installment loans (22) 17 (5)
Ready Money (4) 0 (4)
Total loans (716) 1,512 796
U.S. Treasury securities (36) 33 (3)
Securities of government agencies (68) 111 43
State and political obligations (134) (6) (140)
Other securities 28 4 32
Total investment securities (210) 142 (68)
Interest-bearing deposits in other banks 14 34 48
Federal funds sold (146) 244 98
Total interest income change (1,058) 1,932 874
Increase(decrease) in interest paid on liabilities:
Savings accounts 19 0 19
NOW accounts 9 7 16
Super NOW accounts (3) 3 0
Money market accounts 13 108 121
Executive money market accounts (90) 143 53
Total savings deposits (52) 261 209
Time deposits under $100,000 (119) 119 0
Time deposits of $100,000 or above (66) 130 64
Total time deposits (185) 249 64
Federal funds purchased and
securities sold under agreement to repurchase (113) 29 (84)
Short-term debt (10) 30 20
Long-term debt (5) 140 135
Total interest expense change (365) 709 344
Net change in net interest income $ (693) $1,223 $ 530
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
None
ITEM 5 Other Information
None
ITEM 6 Exhibits and Reports on Form 8-K
A. Exhibits (listed by number corresponding to the
Exhibit Table of Item 601 of Regulation S-K)
10 Material contracts:
Rights Agent Warrant Purchase Agreement
(incorporated by reference from Exhibit B
to Exhibit 99(j) to Post Effective Amendment
Number 4 on form S-3 filed September 6, 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
SIGNATURE
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: November 13, 1995 SDNB FINANCIAL CORP.
By: /S/ HOWARD W. BROTMAN
Howard W. Brotman,
duly authorized officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<CASH> 14,305 14,305
<INT-BEARING-DEPOSITS> 2,976 2,976
<FED-FUNDS-SOLD> 24,000 24,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 12,674 12,674
<INVESTMENTS-CARRYING> 12,609 12,609
<INVESTMENTS-MARKET> 12,433 12,433
<LOANS> 92,104 92,104
<ALLOWANCE> 2,133 2,133
<TOTAL-ASSETS> 169,401 169,401
<DEPOSITS> 134,648 134,648
<SHORT-TERM> 8,674 8,674
<LIABILITIES-OTHER> 1,365 1,365
<LONG-TERM> 10,158 10,158
<COMMON> 19,216 19,216
0 0
0 0
<OTHER-SE> (5,098) (5,098)
<TOTAL-LIABILITIES-AND-EQUITY> 169,401 169,401
<INTEREST-LOAN> 2,609 7,752
<INTEREST-INVEST> 400 1,205
<INTEREST-OTHER> 200 573
<INTEREST-TOTAL> 3,209 9,530
<INTEREST-DEPOSIT> 756 2,117
<INTEREST-EXPENSE> 817 2,343
<INTEREST-INCOME-NET> 2,392 7,187
<LOAN-LOSSES> (200) 250
<SECURITIES-GAINS> 0 11
<EXPENSE-OTHER> 3,010 8,088
<INCOME-PRETAX> 36 166
<INCOME-PRE-EXTRAORDINARY> 36 166
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 34 158
<EPS-PRIMARY> 0.02 0.08
<EPS-DILUTED> 0.02 0.08
<YIELD-ACTUAL> 6.30 6.36
<LOANS-NON> 3,720 3,720
<LOANS-PAST> 981 981
<LOANS-TROUBLED> 1,370 1,370
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<ALLOWANCE-OPEN> 2,494 2,148
<CHARGE-OFFS> 272 599
<RECOVERIES> 111 334
<ALLOWANCE-CLOSE> 2,133 2,133
<ALLOWANCE-DOMESTIC> 1,210 1,210
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 923 923
</TABLE>
