UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-11117
SDNB FINANCIAL CORP.
(Exact name of Registrant as Specified in its Charter)
Incorporated in California - IRS Employer I.D. No. 95-3725079
1420 Kettner Boulevard, San Diego, California 92101
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number including area code: 619-233-1234
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of Common Stock outstanding as of the close
of business on October 31, 1996: 3,080,609
<PAGE>
SDNB FINANCIAL CORP.
INDEX
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) 1
September 30, 1996 and December 31, 1995
Consolidated Statements of Operations (unaudited) 2
Three and nine months ended September 30, 1996
Three and nine months ended September 30, 1995
Consolidated Statements of Cash Flows (unaudited) 3
Nine months ended September 30, 1996
Nine months ended September 30, 1995
Notes to Consolidated Financial Statements (unaudited) 4
September 30, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
<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 1996 1995
Cash and due from banks $ 10,659 $ 13,440
Interest bearing deposits in other banks 2,728 2,780
Investment securities held-to-maturity 14,699 7,408
Investment securities available-for-sale 23,484 27,033
Federal funds sold 26,110 24,700
Loans 103,655 92,331
Less allowance for loan losses 1,621 2,002
Net loans 102,034 90,329
Premises and equipment, net 10,638 10,975
Other real estate owned 232 181
Accrued interest receivable and other assets 1,646 1,726
Total assets $ 192,230 $ 178,572
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 49,506 $ 49,505
Interest bearing 106,900 90,904
Total deposits 156,406 140,409
Securities sold under agreement to
repurchase 10,525 12,934
Accrued interest payable and other
liabilities 539 554
Notes payable 7,892 7,989
Total liabilities 175,362 161,886
Shareholders' equity:
Common stock 20,314 20,314
Accumulated deficit (3,308) (3,587)
Net unrealized holding losses on
available-for-sale securities (138) (41)
Total shareholders' equity 16,868 16,686
Total liabilities and shareholders' equity $ 192,230 $ 178,572
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
9/30/96 9/30/95 9/30/96 9/30/95
Interest income:
Interest and fees on loans $ 2,574 $ 2,609 $ 7,264 $ 7,752
Interest on federal funds sold 361 200 950 573
Interest on investments 545 400 1,524 1,205
Total interest income 3,480 3,209 9,738 9,530
Interest expense:
Interest on deposits 950 756 2,633 2,117
Interest on repurchase agreements 59 52 145 193
Interest on notes payable 0 9 0 33
Total interest expense 1,009 817 2,778 2,343
Net interest income 2,471 2,392 6,960 7,187
Provision for loan losses 100 (200) 0 250
Net interest income after
provision for loan losses 2,371 2,592 6,960 6,937
Other operating income:
Security gains, net 3 0 3 11
Building income 183 245 618 709
Other non-interest income 268 207 764 593
Total other operating income 454 452 1,385 1,313
Other operating expenses:
Salaries and employee benefits 1,209 1,033 3,492 2,978
Occupancy 155 120 450 357
Professional fees 178 232 407 564
Building operating expenses 557 622 1,612 1,841
Other non-interest expenses 655 1,001 2,094 2,344
Total other operating expenses 2,754 3,008 8,055 8,084
Income before income tax 71 36 290 166
Income tax 3 2 11 8
Net income $ 68 $ 34 $ 279 $ 158
Net income per share $ 0.02 $ 0.02 $ 0.09 $ 0.08
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,
1996 1995
OPERATING ACTIVITIES:
Net income $ 279 $ 158
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 0 250
Provision for depreciation and amortization 685 930
Amortization of investment security discounts (576) (85)
Other expense not utilizing cash 102 76
Unearned loan fees 5 148
Taxes refundable (4) (8)
Interest receivable and other assets (76) (515)
Interest payable and other liabilities (485) 412
Total adjustments (349) 1,208
Net cash provided (used) by operating
activities (70) 1,366
INVESTING ACTIVITIES:
Proceeds from maturities of held-to-maturity
securties 2,000 6,504
Proceeds from called held-to-maturity securities 2,243 395
Proceeds from maturities of available-for-sale 28,750 5,990
Proceeds from called available-for-sale
securities 1,000 0
Proceeds from sale of available-for-sale
securities 375 3,024
Purchases of held-to-maturity securities (11,353) (2,000)
Purchases of available-for-sale securities (25,803) (11,466)
Net change in gross loans (12,802) 4,503
Proceeds from OREO properties 1,041 556
Proceeds from sale of premises and equipment 35 25
Purchases of premises and equipment (360) (306)
Net cash provided (used) by investing
activities (14,874) 7,225
FINANCING ACTIVITIES:
Net change in deposits 15,997 (3,628)
Net change in short-term borrowings (2,409) (5,630)
Payments of long-term borrowings (97) 0
Proceeds from issuance of common stock 0 5,553
Proceeds from exercise of stock options 25 0
Payments for costs associated with issuance of
common stock (25) (922)
Net cash provided (used) by financing
activities 13,491 (4,627)
Change in cash and cash equivalents (1,453) 3,964
Cash and cash equivalents at beginning of period 40,920 37,317
Cash and cash equivalents at end of period $39,467 $41,281
For the purpose of the statement of cash flows, the Company considers cash
and cash equivalents to be as follows at September 30, 1996 1995
Cash and due from banks $10,629 $14,305
Interest-bearing deposits in other banks 2,728 2,976
Federal funds sold 26,110 24,000
Totals $39,467 $41,281
Supplemental cash flow information for the period ended September 30,
1996 1995
CASH PAID FOR:
Interest $3,715 $3,050
Income Taxes $16 $0
Non-cash items: transfer of loans to OREO $1,034 $553
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, 1996
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, 1996, the results of operations for the three
and nine months ended September 30, 1996 and 1995, and cash
flows for the nine months ended September 30, 1996 and 1995.
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, 1996 and 1995 are based on the following
weighted average shares outstanding:
Three months ended :
September 30, 1996 3,077,528
September 30, 1995 2,092,219
Nine months ended:
September 30, 1996 3,075,092
September 30, 1995 1,902,526
3. At September 30, 1996, approximately $15.3 million in
securities were pledged to secure deposits and other
liabilities.
<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
For the past several years, SDNB Financial Corp. (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. The first nine months of
1996 has seen a cessation of the impact of most of those factors.
Loan loss provisions have been exceptionally high over the last
several years but a substantial reduction in the amount of
classified loans has allowed for a minimal provision in the third
quarter of 1996, which offset the recovery of a portion of the
previously committed loan loss provisions during the quarter
ended March 31, 1996, resulting in no net provision for the nine
months ended September 30, 1996.
The level of OREO property peaked in 1991 and has been generally
declining since that time, therefore reducing losses and expenses
in connection therewith.
Additionally, the Company had incurred substantial expense in
connection with legal fees and the provision for additional costs
from the Pioneer Mortgage litigation which was settled late in
1995.
The Bank had also suffered from a reduction in the level of the
loan portfolio resulting from continuing low loan demand;
however, the level of the loan portfolio has increased
significantly between December 31, 1995 and September 30, 1996.
Discussion of the individual segments of the Company's operations
is contained in subsequent sections of this report.
LIQUIDITY AND ASSETS/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, 1996, approximately 69% of
the Bank's earning assets adjust immediately to changes in
interest rates. Within three months, this increases to 78% of
earning assets. Consequently, the Bank utilizes deposit
liabilities that also adjust relatively quickly. Within the same
three-month period, approximately 93% 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 $12.6 million, or 35
percent, from $35.8 million at December 31, 1995 to $23.1 million
at September 30, 1996. This change is attributable primarily to
a net increase in liabilities of $12.8 million (increase in
deposits of $15.2 million less a decrease in securities sold
under agreements to repurchase of $2.4 million) offset by a net
increase in assets of $0.1 million (an increase in net loans of
$8.7 million, in certificates of deposit of $1.9 million and in
federal funds purchased of $1.4 million, offset by a decrease in
investment securities of $11.8 million.)
During February 1995, the Bank entered into an interest rate swap
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. 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, 1996, cash and cash
equivalents decreased $1.5 million. Approximately $14.9 million
cash was used by investing activities. The two major components
were net purchases of $2.8 million of securities ($37.2 million
of purchases offset by maturities of $34.4 million) and increase
in gross loans of $12.8 million. Financing activities provided
$13.5 million, (increase in deposits of $16 million offset by a
decrease in repurchase agreements of $2.4 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.
CAPITAL RESOURCES
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'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.
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 September 30, 1996 and December 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)
September 30, 1996 December 31,1995
Company Bank Company Bank
Capital Components
Tier 1 Capital $17,005 $14,412 $16,726 $13,656
Total Capital 18,626 15,912 18,218 15,017
Risk-weighted assets
and off-balance sheet
instruments 130,002 119,904 117,967 107,310
Regulatory Capital
Tier 1 risk-based:
Actual 13.08% 12.02% 14.18% 12.73%
Required 4.00 6.00 4.00 6.00
Excess 9.08% 6.02% 10.18% 6.73%
Total risk-based:
Actual 14.33% 13.27% 15.44% 13.99%
Required 8.00 10.00 8.00 10.00
Excess 6.33% 3.27% 7.44% 3.99%
Leverage:
Actual. 9.11% 8.06% 9.37% 8.43%
Required 5.00 5.00 5.00 5.00
Excess 4.11% 3.06% 4.37% 3.43%
Funds available for the payment of dividends by the Company would
be obtained from the Bank. There are legal limitations on the
ability of the Bank to provide funds for the Company. Under
federal banking law, dividends declared by the Bank in any
calendar year may not, without the approval of the Comptroller of
the Currency, exceed its net income, as defined, for that year
combined with its retained net income for the preceding two
years. At September 30, 1996, the Bank had available for
dividends to the Company approximately $2,120,000 without
approval of the Comptroller. Federal banking law also restricts
the Bank from extending credit to the Company in excess of 10% of
capital stock and surplus, as defined, of the Bank. Any such
extensions of credit are subject to strict collateral
requirements.
The Company and the Federal Reserve Bank of San Francisco
("Reserve Bank") entered into an agreement on November 20, 1992,
pursuant to which the Company was required to obtain the approval
of the Reserve Bank prior to the declaration of any cash
dividends. Such agreement and requirement were terminated by the
Reserve Bank in September, 1996. The Agreement and Plan of
Merger between the Company and FBOP Corporation (see Part II Item
5), however, precludes declaration of any dividends prior to the
closing of the transaction.
INVESTMENT SECURITIES
During the first nine months of 1996, the gross unrealized losses
in the available-for-sale category increased from $41,000 to
$138,000 and in the held-to-maturity category from $75,000 to
$117,000. 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 1996 and the same period of 1995.
1996 1995
Yield on average earning assets
(taxable equivalent) 8.24% 9.37%
Cost of funds 2.35% 2.29%
Net interest spread 5.89% 7.08%
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 1996 and the
similar period of 1995 was impacted by the significant decrease
in the prime interest rate (8.28% average in 1996 vs. 8.86%
average in 1995) coupled with a shift in an increased proportion
of lower earning investments as opposed to higher earning loans.
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,
1996 1995
Balance at beginning of period $2,002 $2,148
Provision charged to operating expenses 0 250
Loans charged off (406) (600)
Recoveries 25 335
Balance at end of period $1,621 $2,133
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 had suffered a sharp downturn in past
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, December 31, September 30,
1996 1995 1995
CURRENT AND NONCURRENT
Non-accrual loans $4,367 $6,969 $3,720
Restructured loans
(still accruing) 2,076 1,364 1,370
Loans 90 days past due 1,232 93 981
7,675 8,426 6,071
Other real estate owned 232 181 181
Total $ 7,907 $8,607 $6,252
NONCURRENT
Non-accrual loans $3,848 $3,160 $467
Restructured loans
(still accruing) 0 0 0
Loans 90 days past due 1,232 93 981
5,080 3,253 1,448
Other real estate owned 232 181 181
Total $5,312 $3,434 $1,629
Loans reported as
nonperforming but which
are current, as a
percentage of total
loans reported as
nonperforming 33% 61% 76%
OTHER OPERATING INCOME
Building income declined in 1996 due to renegotiation of some
tenant leases during 1995 and temporary vacancies in 1996.
Virtually all vacant space has been rerented by October, 1996.
Other non-interest income increased in 1996 when bank service
charges increased as a result of lower earnings credit allowed on
customer account balances and by fees generated by the Bank's new
International Department.
OTHER OPERATING EXPENSES
Salaries and employee benefits and occupancy expense increased
between 1995 and 1996 primarily because of the opening of the
Bank's South Bay office and International Department late in
1995.
Professional fees and other non-interest expenses declined in
1996 because both three and nine month periods of 1995 include
attorneys fees and settlement costs in connection with litigation
against the Bank.
Building operating expenses declined in 1996 largely due to
refinancing of the building late in 1995 which reduced interest
paid to non-consolidated creditors.
SUBSIDIARY DATA
San Diego National Bank
The Bank earned $281,000 and $757,000 for the three and nine
months ended September 30, 1996 respectively, compared to
$233,000 and $784,000, respectively, for the same periods of
1995. The return on average assets (ROA) for the nine month
periods was .60% and .70%, respectively. The return on equity
(ROE) for the six month periods was 7.23% and 8.59% 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
1996 1995 1996 1995
Pre-consolidation
gross building
revenues $458,000 $497,000 $1,446,000 $1,447,000
Pre-consolidation,
pre-tax loss 237,000 194,000 573,000 572,000
Depreciation and
amortization
expense 131,000 151,000 407,000 437,000
<PAGE>
<TABLE>
Table 1
San Diego National Bank
Static Gap Summary
September 30, 1996
(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 90,716 2,486 2,662 2,688 5,103 103,655
Investment securities - 10,744 8,389 11,219 7,719 38,071
Certificates of deposit in
other banks - 1,881 399 50 - 2,330
Federal funds sold 26,110 - - - - 26,110
Total interest earning assets 116,826 15,111 11,450 13,957 12,822 170,166
Non-interest earning assets - - - - 11,768 11,768
Total assets 116,826 15,111 11,450 13,957 24,590 181,934
Deposits:
Savings, NOW accounts and
money markets 74,305 - - - - 74,305
Time deposits - 23,972 4,858 3,450 509 32,789
Total deposits 74,305 23,972 4,858 3,450 509 107,094
Securities sold under
agreement to repurchase 10,525 - - - - 10,525
Total interest bearing liabilities 84,830 23,972 4,858 3,450 509 117,619
Non-interest bearing liabilities - - - - 50,040 50,040
Shareholders' equity - - - - 14,275 14,275
Total liabilities and
shareholders' equity 84,830 23,972 4,858 3,450 64,824 181,934
Interest rate sensitivity gap 31,996 (8,861) 6,592 10,507 (40,234)
Cumulative interest rate
sensitivity gap 31,996 23,135 29,727 40,234 -
</TABLE>
<PAGE>
Table 2
SDNB Financial Corp.
Volume/Rate Variance Analysis
Nine months ended September 30, 1996 and 1995
(In thousands)
1996 compared to 1995
Volume Rate Total
Increase(decrease) in interest on earning assets:
Commercial loans $ 75 $ (282) $ (207)
Real estate loans (55) (333) (388)
Installment loans 117 (10) 107
Ready Money 0 0 0
Total loans 137 (625) (488)
U.S. Treasury securities 437 6 443
Securities of government agencies (105) 42 (63)
State and political obligations (66) (51) (117)
Other securities 12 (5) 7
Total investment securities 278 (8) 270
Interest-bearing deposits in other banks 25 (14) 11
Federal funds sold 457 (80) 377
Total interest income change 897 (727) 170
Increase(decrease) in interest paid on liabilities:
Savings accounts (17) 0 (17)
NOW accounts (7) (24) (31)
Super NOW accounts 2 (8) (6)
Money market accounts (71) (76) (147)
Executive money market accounts 224 (6) 218
Total savings deposits 131 (114) 17
Time deposits under $100,000 266 20 286
Time deposits of $100,000 or above 179 34 213
Total time deposits 445 54 499
Federal funds purchased and securities sold
under agreement to repurchase (46) (2) (48)
Short-term debt (84) (84) (168)
Long-term debt (146) 136 (10)
Total interest expense change 300 (10) 290
Net change in net interest income $ 597 $ (717) $ (120)
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
None
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
On July 15, 1996, SDNB Financial Corp. announced
it had entered into an Agreement and Plan of
Merger with FBOP Acquisition Company and FBOP
Corporation. Pursuant to the terms of that
Agreement, which is subject to shareholder and
regulatory approval, shareholders of the Company
will receive cash for their shares and the Company
would cease to exist.
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)
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
A report on Form 8-K was filed on July
22, 1996 describing the Agreement and Plan of
merger disclosed in Item 5, above.
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 12, 1996 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
FORM-10Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996 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-31-1996 DEC-31-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 10659 10659
<INT-BEARING-DEPOSITS> 2728 2728
<FED-FUNDS-SOLD> 26110 26110
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 23484 23484
<INVESTMENTS-CARRYING> 14699 14699
<INVESTMENTS-MARKET> 14583 14583
<LOANS> 103655 103655
<ALLOWANCE> 1621 1621
<TOTAL-ASSETS> 192230 192230
<DEPOSITS> 156406 156406
<SHORT-TERM> 10525 10525
<LIABILITIES-OTHER> 539 539
<LONG-TERM> 7892 7892
0 0
0 0
<COMMON> 20314 20314
<OTHER-SE> (3308) (3308)
<TOTAL-LIABILITIES-AND-EQUITY> 192230 192230
<INTEREST-LOAN> 2574 7264
<INTEREST-INVEST> 545 1524
<INTEREST-OTHER> 361 950
<INTEREST-TOTAL> 3480 9738
<INTEREST-DEPOSIT> 950 2633
<INTEREST-EXPENSE> 1009 2778
<INTEREST-INCOME-NET> 2471 6960
<LOAN-LOSSES> 100 0
<SECURITIES-GAINS> 3 3
<EXPENSE-OTHER> 2754 8055
<INCOME-PRETAX> 71 290
<INCOME-PRE-EXTRAORDINARY> 71 290
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 68 279
<EPS-PRIMARY> 0.02 0.09
<EPS-DILUTED> 0.02 0.09
<YIELD-ACTUAL> 5.39 5.39
<LOANS-NON> 4367 4367
<LOANS-PAST> 1232 1232
<LOANS-TROUBLED> 2076 2076
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 1519 2002
<CHARGE-OFFS> 6 406
<RECOVERIES> 8 25
<ALLOWANCE-CLOSE> 1621 1621
<ALLOWANCE-DOMESTIC> 1138 1138
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 482 482
</TABLE>
