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 June 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 July 31, 1996: 3,076,737
<PAGE>
SDNB FINANCIAL CORP.
INDEX
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) 1
June 30, 1996 and December 31, 1995
Consolidated Statements of Operations (unaudited) 2
Three and six months ended June 30, 1996
Three and six months ended June 30, 1995
Consolidated Statements of Cash Flows (unaudited) 3
Three and six months ended June 30, 1996
Three and six months ended June 30, 1995
Notes to Consolidated Financial Statements (unaudited) 4
June 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 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SDNB Financial Corp. and Subsidiaries
Consolidated Balance Sheets (unaudited)
(In thousands)
June 30, December 31,
Assets 1996 1995
Cash and due from banks $ 11,486 $ 13,440
Interest bearing deposits in other banks 3,322 2,780
Investment securities held-to-maturity 5,887 7,408
Investment securities available-for-sale 28,957 27,033
Federal funds sold 30,115 24,700
Loans 100,772 92,331
Less allowance for loan losses 1,519 2,002
Net loans 99,253 90,329
Premises and equipment, net 10,808 10,975
Other real estate owned 379 181
Accrued interest receivable and other assets 1,590 1,726
Total assets $191,797 $178,572
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 48,399 $ 49,505
Interest bearing 112,395 90,904
Total deposits 160,794 140,409
Securities sold under agreement to repurchase 5,970 12,934
Accrued interest payable and other liabilities 377 554
Notes payable 7,922 7,989
Total liabilities 175,063 161,886
Shareholders' equity:
Common stock 20,301 20,314
Accumulated deficit (3,376) (3,587)
Net unrealized holding losses on
available-for-sale securities (191) (41)
Total shareholders' equity 16,734 16,686
Total liabilities and shareholders' equity $191,797 $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 6 months 6 months
ended ended ended ended
6/30/96 6/30/95 6/30/96 6/30/95
Interest income:
Interest and fees on loans $ 2,414 $ 2,562 $ 4,690 $ 5,143
Interest on federal funds sold 285 173 589 373
Interest on investments 495 418 979 805
Total interest income 3,194 3,153 6,258 6,321
Interest expense:
Interest on deposits 869 716 1,683 1,361
Interest on repurchase agreements 36 65 86 141
Interest on notes payable 0 9 0 24
Total interest expense 905 790 1,769 1,526
Net interest income 2,289 2,363 4,489 4,795
Provision for loan losses 0 150 (100) 450
Net interest income after
provision for loan losses 2,289 2,213 4,589 4,345
Other operating income:
Security gains, net 0 0 0 11
Building income 211 201 435 464
Other non-interest income 227 201 496 386
Total other operating income 438 402 931 861
Other operating expenses:
Salaries and employee benefits 1,116 925 2,283 1,945
Occupancy 139 125 295 237
Professional fees 129 210 229 332
Building operating expenses 539 623 1,055 1,219
Other non-interest expenses 691 667 1,439 1,343
Total other operating expenses 2,614 2,550 5,301 5,076
Income before income tax 113 65 219 130
Income tax 4 3 8 6
Net income $ 109 $ 62 $ 211 $ 124
Net income per share $ 0.04 $ 0.03 $ 0.07 $ 0.07
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)
Six months ended June 30,
1996 1995
OPERATING ACTIVITIES:
Net income $ 211 $ 124
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses (100) 450
Provision for depreciation and amortization 631 639
Amortization of investment security discounts (369) (50)
Other expense not utilizing cash 70 58
Unearned loan fees 40 68
Taxes refundable (7) (12)
Interest receivable and other assets (157) (677)
Interest payable and other liabilities (143) (153)
Total adjustments (35) 323
Net cash provided by operating activities 176 447
INVESTING ACTIVITIES:
Proceeds from maturities of
held-to-maturity securities 2,000 3,604
Proceeds from called held-to-maturity securities 0 395
Proceeds from maturities of
securities available-for-sale 16,375 3,494
Proceeds from called available-for-sale securities 1,000 0
Proceeds from sale of available-for-sale securities 0 530
Purchases of held-to-maturity securities (500) 0
Purchases of available-for-sale securities (19,070) (6,548)
Net change in gross loans (9,887) 2,587
Proceeds from OREO properties 851 43
Proceeds from sale of premises and equipment 35 25
Purchases of premises and equipment (318) (144)
Net cash provided (used) by investing activities (9,514) 3,986
FINANCING ACTIVITIES:
Net change in deposits 20,385 (12,978)
Net change in short-term borrowings (6,964) (6,202)
Payments of long-term borrowings (67) 0
Proceeds from issuance of common stock 0 2,215
Proceeds from exercise of stock options 12 0
Payments for costs associated with issuance
of common stock (25) (150)
Net cash provided (used) by financing activities 13,341 (17,115)
Change in cash and cash equivalents 4,003 (12,682)
Cash and cash equivalents at beginning of period 40,920 37,317
Cash and cash equivalents at end of period $44,923 $24,635
For the purpose of the statement of cash flows, the Company considers cash
and cash equivalents to be as follows at June 30, 1996 1995
Cash and due from banks $11,486 $13,464
Interest-bearing deposits in other banks 3,322 2,671
Federal funds sold 30,115 8,500
Totals $44,923 $24,635
Supplemental cash flow information for the
period ended June 30, 1996 1995
CASH PAID FOR:
Interest $1,769 $1,988
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)
June 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
June 30, 1996, and the results of operations and cash flows
for the three and six months ended June 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 six months ended June
30, 1996 and 1995 are based on the following weighted
average shares outstanding:
Three months ended :
June 30, 1996 3,074,461
June 30, 1995 2,048,485
Six months ended:
June 30, 1996 3,073,860
June 20, 1995 1,806,107
3. At June 30, 1996, approximately $25.3 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
effected by a number of factors emanating primarily from the
condition of the economy in San Diego. The first half of 1996
saw 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 the recovery of a portion of the
previously committed loan loss provisions during the quarter
ended March 31, 1996 and no provision for the quarter ended June
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 has 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 June 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 June 30, 1996, approximately 71% of the
Bank's earning assets adjust immediately to changes in interest
rates. Within three months, this increases to 86% of earning
assets. Consequently, the Bank utilizes deposit liabilities that
also adjust relatively quickly. Within the same three-month
period, approximately 90% 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 increased approximately $1.9 million, or 5 percent,
from $35.8 million at December 31, 1995 to $37.7 million at June
30, 1996. This change is attributable primarily to increases in
net loans of $7.8 million, in certificates of deposit of $1.5
million and in federal funds purchased of $5.4 million.
Offsetting these increases was a net increase in liabilities of
$10.5 million (increase in deposits of $17.5 million less a
decrease in securities sold under agreements to repurchase of $7
million) and a decrease in investment securities of $2.3 million.
Approximately $10 million of the increased deposits at June 30,
1996 consisted of a temporary deposit by one customer which was
withdrawn early in July.
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 six months ended June 30, 1996, cash and cash
equivalents increased $4 million. Approximately $9.5 million
cash was used by investing activities. The two major components
were net purchases of $200,000 of securities ($19.5 million of
purchases offset by maturities of $19.3 million) and increase in
gross loans of $9.9 million. Financing activities provided $13.3
million, (increase in deposits of $20.4 million offset by a
decrease in repurchase agreements of $7 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 June 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)
June 30, 1996 December 31, 1995
Company Bank Company Bank
Capital Components
Tier 1 Capital $16,925 $14,132 $16,726 $13,656
Total Capital 18,444 15,605 18,218 15,017
Risk-weighted assets
and off-balance sheet
instruments 128,237 117,768 117,967 107,310
Regulatory Capital
Tier 1 risk-based:
Actual 13.20% 12.00% 14.18% 12.73%
Required 4.00 6.00 4.00 6.00
Excess 9.20% 6.00% 10.18% 6.73%
Total risk-based:
Actual 14.38% 13.25% 15.43% 13.98%
Required 8.00 10.00 8.00 10.00
Excess 6.38% 3.25% 7.43% 3.98%
Leverage:
Actual 9.59% 8.52% 9.37% 8.43%
Required 5.00 5.00 5.00 5.00
Excess 4.59% 3.52% 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 June 30, 1996, the Bank had available for dividends to
the Company approximately $1,840,000 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 must obtain the approval of the
Reserve Bank prior to the declaration of any cash dividends.
INVESTMENT SECURITIES
During the first half of 1996, the gross unrealized losses in the
available-for-sale category increased from $41,000 to $191,000
and in the held-to-maturity category decreased from $75,000 to
$60,000. 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 six months of 1996 and the same period of 1995.
1996 1995
Yield on average earning assets
(taxable equivalent) 8.24% 9.23%
Cost of funds 2.33% 2.22%
Net interest spread 5.91% 7.01%
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 six months of 1996 and the
similar period of 1995 was impacted by the significant decrease
in the prime interest rate (8.29% average in 1996 vs. 8.91%
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)
Six months ended
June 30,
1996 1995
Balance at beginning of period $2,002 $2,148
Provision charged (credited) to operating expenses (100) 450
Loans charged off (400) (327)
Recoveries 17 223
Balance at end of period $1,519 $2,494
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
June 30, 1996 December 31, 1995 June 30, 1995
CURRENT AND NONCURRENT
Non-accrual loans $4,209 $6,969 $2,246
Restructured loans
(still accruing) 2,089 1,364 2,304
Loans 90 days past due 555 93 6
6,853 8,426 4,556
Other real estate owned 379 181 772
Total $ 7,232 $8,607 $5,328
NONCURRENT
Non-accrual loans $2,082 $3,160 $641
Restructured loans
(still accruing) 0 0 0
Loans 90 days past due 555 93 6
2,637 3,253 647
Other real estate owned 379 181 772
Total $3,016 $3,434 $1,419
Loans reported as
nonperforming but which are
current, as a percentage of
total loans reported as
nonperforming 62% 61% 86%
OTHER OPERATING INCOME
Other non-interest income increased in 1996 when bank service
charges increased as a result of lower earnings credit allowed on
customer account balances.
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.
SUBSIDIARY DATA
San Diego National Bank
The Bank earned $256,000 and $476,000 for the three and six
months ended June 30, 1996 respectively, compared to $304,000 and
$551,000, respectively, for the same periods of 1995. The return
on average assets (ROA) for the six month periods was .58% and
.74%, respectively. The return on equity (ROE) for the six month
periods was 6.89% and 9.13% respectively. The reasons for the
change in Bank earnings have been enumerated on the preceding
pages.
San Diego National Bank Building Joint Venture
3 months ended 6 months ended
June 30 June 30
1996 1995 1996 1995
Pre-consolidation
gross building $486,000 $450,000 $988,000 $950,000
revenues
Pre-consolidation,
pre-tax loss 188,000 229,000 336,000 325,000
Depreciation and
amortization expense 135,000 142,000 276,000 285,000
<PAGE>
<TABLE>
<CAPTION>
Table 1
San Diego National Bank
Static Gap Summary
June 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 89,954 2,369 1,083 2,895 4,471 100,772
Investment securities - 20,299 - 6,359 7,704 34,362
Certificates of deposit in
other banks - 1,488 1,386 50 - 2,924
Federal funds sold 30,115 - - - - 30,115
Total interest earning assets 120,069 24,156 2,469 9,304 12,175 168,173
Non-interest earning assets - - - - 12,966 12,966
Total assets 120,069 24,156 2,469 9,304 25,141 181,139
Deposits:
Savings, NOW accounts and
money markets 81,494 - - - - 81,494
Time deposits - 19,089 5,372 6,107 369 30,937
Total deposits 81,494 19,089 5,372 6,107 369 112,431
Securities sold under
agreement to repurchase 5,970 - - - - 5,970
Total interest bearing liabilities 87,464 19,089 5,372 6,107 369 118,401
Non-interest bearing liabilities - - - - 48,413 48,413
Shareholders' equity - - - - 14,325 14,325
Total liabilities and
shareholders' equity 87,464 19,089 5,372 6,107 63,107 181,139
Interest rate sensitivity gap 32,605 5,067 (2,903) 3,197 (37,966)
Cumulative interest rate
sensitivity gap 32,605 37,672 34,769 37,966 -
</TABLE>
<PAGE>
Table 2
SDNB Financial Corp.
Volume/Rate Variance Analysis
Six months ended June 30, 1996 and 1995
(In thousands)
1996 compared to 1995
Volume Rate Total
Increase(decrease) in interest on earning assets:
Commercial loans $ (70) $ (164) $ (234)
Real estate loans (51) (226) (277)
Installment loans 64 (6) 58
Ready Money (1) 1 0
Total loans (58) (395) (453)
U.S. Treasury securities 281 4 285
Securities of government agencies (101) 29 (72)
State and political obligations (41) (39) (80)
Other securities 0 3 3
Total investment securities 139 (3) 136
Interest-bearing deposits in other banks (3) 14 11
Federal funds sold 232 (16) 216
Total interest income change 310 (400) (90)
Increase(decrease) in interest paid on liabilities:
Savings accounts (13) 1 (12)
NOW accounts (10) (18) (28)
Super NOW accounts 2 (6) (4)
Money market accounts (58) (51) (109)
Executive money market accounts 172 (1) 171
Total savings deposits 93 (75) 18
Time deposits under $100,000 151 13 164
Time deposits of $100,000 or above 104 36 140
Total time deposits 255 49 304
Federal funds purchased and
securities sold under agreement to repurchase (50) (5) (55)
Short-term debt (59) (59) (118)
Long-term debt (96) 88 (8)
Total interest expense change 143 (2) 141
Net change in net interest income $ 167 $ (398) $ (231)
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
(a) The 1996 Annual Meeting of Shareholders
was held May 15, 1996.
(b) Directors elected:
Douglas E. Barnhart
Howard W. Brotman
Margaret Costanza
Murray L. Galinson
Karla J. Hertzog
Robert B. Horsman
Mark P. Mandell
Patricia L. Roscoe
Julius H. Zolezzi
(c) Matters voted upon:
(1) Ratification of appointment of Coopers
& Lybrand L.L.P. as independent accountants:
For 2,152,292
Against 5,694
Abstentions 3,495
(2) Election of Directors:
Name For Withheld
Douglas E. Barnhart 2,152,322 9,159
Howard W. Brotman 2,152,322 9,159
Margaret Costanza 2,152,322 9,159
Murray L. Galinson 2,152,322 9,159
Karla J. Hertzog 2,152,322 9,159
Robert B. Horsman 2,152,322 9,159
Mark P. Mandell 2,152,322 9,159
Patricia L. Roscoe 2,152,322 9,159
Julius H. Zolezzi 2,152,322 9,159
ITEM 5 Other Information
On July 15, 1996 SDNB Financial Corp., announced
it has 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
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: August 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 10-Q FOR QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 11486 11486
<INT-BEARING-DEPOSITS> 3322 3322
<FED-FUNDS-SOLD> 30115 30115
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 28957 28957
<INVESTMENTS-CARRYING> 5887 5887
<INVESTMENTS-MARKET> 5827 5827
<LOANS> 100772 100772
<ALLOWANCE> 1519 1519
<TOTAL-ASSETS> 191797 191797
<DEPOSITS> 160794 160794
<SHORT-TERM> 5970 5970
<LIABILITIES-OTHER> 377 377
<LONG-TERM> 7922 7922
0 0
0 0
<COMMON> 20301 20301
<OTHER-SE> (3376) (3376)
<TOTAL-LIABILITIES-AND-EQUITY> 191797 191797
<INTEREST-LOAN> 2414 4690
<INTEREST-INVEST> 495 979
<INTEREST-OTHER> 285 589
<INTEREST-TOTAL> 3194 6258
<INTEREST-DEPOSIT> 869 1683
<INTEREST-EXPENSE> 905 1769
<INTEREST-INCOME-NET> 2289 4489
<LOAN-LOSSES> 0 (100)
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 2614 5301
<INCOME-PRETAX> 113 219
<INCOME-PRE-EXTRAORDINARY> 113 219
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 109 211
<EPS-PRIMARY> 0.04 0.07
<EPS-DILUTED> 0.04 0.07
<YIELD-ACTUAL> 5.45 5.40
<LOANS-NON> 4209 4209
<LOANS-PAST> 555 555
<LOANS-TROUBLED> 4043 4043
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 1650 2002
<CHARGE-OFFS> 137 400
<RECOVERIES> 6 17
<ALLOWANCE-CLOSE> 1519 1519
<ALLOWANCE-DOMESTIC> 1029 1029
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 490 490
</TABLE>
