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, 1995 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to __________
Commission file number 2-77519-LA
SARATOGA BANCORP
(Exact name of registrant as specified in its charter)
California 94-2817587
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12000 Saratoga-Sunnyvale Road
Saratoga, California 95070
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (408) 973-1111
NONE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by 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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable date.
CLASS SHARES OUTSTANDING AT AUGUST 4, 1995
Common Stock 1,030,972
Page 1 of 21 pages
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1995 1994*
<S> (Unaudited)
ASSETS <C> <C)
Cash and due from banks $3,280,000 $6,514,000
Federal funds sold 5,100,000 3,500,000
Short-term interest bearing
deposits in other banks - 250,000
Total cash and equivalents 8,380,000 10,264,000
Investments available for sale 13,468,000 14,810,000
Investment held to maturity 23,297,000 23,963,000
Loans, net 34,234,000 32,803,000
Other real estate owned 2,404,000 1,717,000
Premises and equipment 2,084,000 2,195,000
Other assets 1,902,000 1,784,000
TOTAL ASSETS $85,769,000 $87,536,000
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing $14,399,000 $19,555,000
Interest bearing 55,880,000 54,317,000
Total deposits 70,279,000 73,872,000
Federal funds purchased - 1,500,000
Other borrowings 4,251,000 2,000,000
Accrued expenses and
other liabilities 874,000 537,000
TOTAL LIABILITIES 75,404,000 77,909,000
SHAREHOLDERS' EQUITY
Common stock, no par value;
Authorized: 20,000,000 shares;
Issued and outstanding:
1,030,972 shares 4,427,000 4,427,000
Retained earnings 6,362,000 6,019,000
Unrealized loss on investments
available for sale (424,000) (819,000)
SHAREHOLDERS' EQUITY 10,365,000 9,627,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $85,769,000 $87,536,000
=========== ===========
<FN>
*Derived from the December 31, 1994 audited balance sheet included
in the Company's 1994 Annual Report on Form 10-K.
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S>
INTEREST INCOME: <C> <C> <C> <C>
Loans $ 944,000 $837,000 $1,851,000 $1,712,000
Investment securities 611,000 386,000 1,242,000 794,000
Federal funds sold 48,000 82,000 81,000 115,000
Total interest income 1,603,000 1,305,000 3,174,000 2,621,000
INTEREST EXPENSE:
Deposits 608,000 464,000 1,182,000 913,000
Other 79,000 2,000 134,000 3,000
Total interest expense 687,000 466,000 1,316,000 916,000
NET INTEREST INCOME 916,000 839,000 1,858,000 1,705,000
Provision for credit losses - (196,000) - (396,000)
Net interest income after
provision for credit losses 916,000 1,035,000 1,858,000 2,101,000
Other income 222,000 101,000 323,000 204,000
Other expense 803,000 906,000 1,523,000 1,795,000
INCOME BEFORE INCOME TAXES 335,000 230,000 658,000 510,000
Provision for income taxes 134,000 79,000 263,000 175,000
NET INCOME $201,000 $151,000 $395,000 $335,000
========== ========== ========== ==========
NET INCOME PER COMMON
AND EQUIVALENT SHARE $0.19 $0.14 $0.37 $0.29
========== ========== ========== ==========
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
Six Months Ended
June 30,
<S> 1995 1994
OPERATIONS: <C> <C>
Net income $395,000 $335,000
Adjustments to reconcile net income to
net cash provided by (used by)operating
activities:
Provision(credit) for credit losses - (396,000)
Depreciation and amortization 137,000 71,000
Provision for OREO losses 35,000 260,000
Other, net 378,000 (925,000)
Net cash provided by (used in)operating
activities 945,000 (655,000)
INVESTING ACTIVITIES:
Proceeds from sale of investments
available for sale 2,624,000 2,161,000
Proceeds from maturities of investments
held to maturity 279,000 155,000
Purchase of investment securities (387,000) (1,000,000)
Proceeds from maturities of longer term
deposits in other banks - 397,000
Net (increase) decrease in loans (2,187,000) 1,635,000
Purchases of premises and equipment (26,000) (6,000)
Proceeds from sale of OREO - 529,000
Increase in other assets (238,000) -
Net cash provided by investing activities 65,000 3,871,000
FINANCING ACTIVITIES:
Net (decrease) increase in deposits (3,593,000) 4,295,000
Repurchase of common stock - (670,000)
Cash dividend paid (52,000) -
Increase in other borrowings 2,251,000 -
Decrease in federal funds purchased (1,500,000) (2,000,000)
Net cash provided by financing activities (2,894,000) 1,625,000
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS (1,884,000) 4,841,000
Cash and equivalents at beginning of period 10,264,000 11,292,000
Cash and equivalents at end of period $8,380,000 $16,133,000
=========== ===========
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
SARATOGA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The unaudited consolidated condensed financial statements
reflect all adjustments (which include only normal recurring
adjustments) which are, in the opinion of management, necessary to
state fairly the results for the periods presented. The results
for the periods are not necessarily indicative of the results to be
expected for the full fiscal year.
2. Per share amounts are calculated using the weighted average
shares outstanding plus the dilutive effect of shares issuable
under stock options. The number of shares used to compute income
per share was 1,058,326 shares and 1,058,695 shares for the three
and six month periods ended June 30, 1995 (1,111,544 shares and
1,138,544 shares for the comparable periods in 1994).
3. For the six months ended June 30, 1995 and 1994, cash paid for
taxes was $75,000 and $525,000, respectively. For the six months
ended June 30, 1995 and 1994, cash paid for interest was $1,144,000
and $900,000, respectively.
4. In May, 1993, the FASB issued SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No. 115
became effective in the first quarter of 1994 and requires the
Company to classify debt and equity securities into one of three
categories at acquisition: held-to-maturity, trading or available-for-sale.
Investments in debt securities shall be classified as
held-to-maturity and measured at amortized cost only if the Company
has the positive intent and ability to hold such securities to
maturity. All other investments in debt and equity securities that
have readily determinable fair values shall be classified either as
trading securities, which are bought and held principally for the
purpose of selling them in the near term and are carried at market
value with a corresponding recognition of unrealized holding gain
or loss in results of operations, or as available-for-sale
securities, which are all other securities and are carried at
market value with a corresponding recognition of the unrealized
holding gain or loss as a net amount in a separate component of
shareholders' equity until realized.
5. On January 31, 1995, the Company adopted SFAS Statement No.
114, "Accounting by Creditors for Impairment of a Loan." This
standard was further modified by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan----Income Recognition and
Disclosures." SFAS No. 114 and 118 require the Company to measure
impaired loans based upon the present value of expected future cash
flows discounted at the loan's effective interest rate, except as
<PAGE>
a practical expedient, a creditor may measure impairment based on
a loan's observable market price, or the fair value of the
collateral if the loan is collateral-dependent. A loans is
impaired when, based upon current information and events, it is
probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Applying
the provisions of these statements did not have a material effect
on the Company's financial position or results of operations.
<PAGE>
SARATOGA BANCORP AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Summary of financial results
- ----------------------------
At June 30, 1995, total assets were $85,769,000, a 2.0% decrease
from $87,536,000 at December 31, 1994. Net loans increased
$1,431,000 (4.4%) from $32,803,000 at December 31, 1994 to
$34,234,000 at June 30, 1995. The increase was primarily in the
longer term real estate loan portfolio. Total deposits decreased
$3,593,000 (4.9%) from $73,872,000 at year end 1994 to $70,279,000
at June 30, 1995.
Net income for the second quarter of 1995 was $201,000 or $.19 per
share compared to $151,000 ($.14 per share) for the comparable
period in 1994. Net income for the first six months of 1995 was
$395,000 or $.37 per share compared to $335,000 or $.29 per share
for the comparable period in 1994.
The increase in income resulted primarily from an increase in the
volume and yield of earning assets and a reduction in provisions
for OREO losses, offset in part by an increase in interest expense
due to the increased volume of interest-bearing liabilities and a
credit provision to the reserve for credit losses in 1994.
RESULTS OF OPERATIONS
- ---------------------
SECOND QUARTER OF 1995 AND 1994
- -------------------------------
An analysis of the results of operations of the Company for the
second quarter of 1995 compared to the second quarter of 1994 is
presented below:
<PAGE>
Net interest income
- -------------------
Net interest income, the difference between interest earned on
loans and investments and interest paid on deposits, is the
principal component of the Bank's earnings. The components of net
interest income are as follows:
<TABLE>
<CAPTION>
Three months ended June 30,
1995 1994
Average Average Average Average
Balance Interest Yield(1) Balance Interest Yield(1)
<S> (In thousands, except percentages)
Assets:
Earning assets: <C> <C> <C> <C> <C> <C>
Loans (2) $33,776 $ 944 11.2% $34,499 $ 837 9.7%
Investment
securities 38,450 611 6.4% 28,814 394 5.5%
Federal funds sold 3,296 48 5.8% 7,670 74 3.9%
Total interest
earning assets 75,522 1,603 8.5% 70,983 1,305 7.4%
Cash and due from
banks 3,328 4,707
Other assets (3) 5,366 3,526
$84,216 $79,216
======= =======
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $27,364 202 3.0% $27,697 181 2.6%
Time deposits 27,240 406 6.0% 23,835 283 4.7%
Other borrowings 4,463 79 7.1% 176 2 4.5%
Total interest-
bearing
liabilities 59,067 687 4.7% 51,708 466 3.6%
Demand deposits 14,184 16,375
Other liabilities 946 804
Total liabilities 74,197 68,887
Shareholders' equity 10,019 10,329
$84,216 $79,216
======= =======
Net interest income and margin $916 4.9% $839 4.7%
====== ======
<FN>
(1) Annualized.
(2) Loan interest income included loan fee income of $78,000 and
$93,000 for the quarters ended June 30, 1995 and 1994, respectively.
(3) Net of the average allowance for loan losses of $773,000 and
$1,079,000 and deferred loan fees of $233,000 and $224,000
for the quarters ended June 30, 1995 and 1994, respectively.
<PAGE>
Provision for credit losses
- ---------------------------
The Bank maintains an allowance for possible credit losses which is
based, in part, on the Bank's historical loss experience, the
impact of forecasted economic conditions within the Bank's market
area, and, as applicable, the State of California, the value of the
underlying collateral, loan performance and inherent risks in the
loan portfolio. The allowance is reduced by charge-offs and
increased by provisions for credit losses charged to operating
expense and recoveries of previously charged-off loans. During the
second quarter of 1995 the Bank did not provide any additional
funds to the provision for credit losses. During the second quarter
of 1994 the Bank reversed $146,000 from the allowance for credit
losses. There were $31,000 in loans charged-off and $8,000 in
recoveries in the second quarter of 1995, as compared to $4,000 in
loans charged-off and $34,000 in recoveries in the second quarter
of 1994.
At June 30, 1995, the allowance for credit losses was $765,000 or
2.2% of total loans, compared to $738,000 or 2.2% at December 31,
1994. There were no nonaccrual loans at June 30, 1995 ($707,000 at
December 31, 1994).
At June 30, 1995 and December 31, 1994, there were no loans past
due 90 days or more as to principal or interest and still accruing
interest. There was one loan at June 30, 1995 in the amount of
$204,000 which was a troubled debt restructuring as defined in
Statement of Financial Accounting Standards No. 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructuring." At June
30, 1995, there were six potential problem loans having a combined
principal balance of $971,000 ($1,030,000 at December 31, 1994).
Potential problem loans are loans which are generally current as to
principal and interest but have been identified by the Company as
potential problem loans due either to a decrease in the underlying
value of the property securing the credit or some other
deterioration in the creditworthiness of the borrower. All of the
six loans identified as potential problem loans are secured by real
estate and personal property.
Other Real Estate Owned totalled $2,404,000 at June 30, 1995
($1,717,000 at December 31, 1994). Other Real Estate Owned
consisted of a single family residence, a commercial building and
a 12 lot subdivision all with appraised values in excess of the
Bank's carrying values. The Company does not intend to hold the
properties but will actively market the properties as market
conditions improve.
<PAGE>
Nonperforming loans and other real estate owned are summarized
below:
</TABLE>
<TABLE>
<CAPTION>
<S> June 30, 1995 December 31, 1994
Nonperforming loans: <C> <C>
Past due 90 days or more $ - $ -
Nonaccrual - 707,000
Total - 707,000
Other real estate owned 2,404,000 1,717,000
Total nonperforming loans and
other real estate owned $2,404,000 $2,424,000
========== ==========
</TABLE>
Management is of the opinion that the allowance for credit losses
is maintained at an adequate level for known and currently
anticipated future risks inherent in the loan portfolio. However,
the California economy has continued to demonstrate signs of
weakness since the third quarter of 1990 and into 1995 and the
period covered by this report, and the Bank's loan portfolio, which
includes approximately $21,000,000 in real estate loans
representing approximately 60% of the portfolio, could be adversely
affected if California economic conditions and the real estate
market in the Bank's market area continue to weaken. The effect of
such events, although uncertain at this time, has resulted, and
could continue to result in an increase in the level of
nonperforming loans and OREO and the level of the allowance for
loan losses which could adversely affect the Company's and the
Bank's future growth and profitability.
Noninterest income
- ------------------
Other income consists of service charges on deposit accounts,
income from assets acquired for lease and fees for other
miscellaneous services. Total other income increased from $101,000
in the second quarter of 1994 to $222,000 in the second quarter of
1994. This increase is primarily attributable to a gain on sale of
securities of $32,000 and rental income on OREO property of
$90,000.
Noninterest expense
- -------------------
Other expenses decreased from $906,000 in the second quarter of
1994 to $804,000 in the second quarter of 1995. The decrease is
primarily attributable to a $161,000 loss on sale of securities
realized in the second quarter of 1994. As a percentage of average
earning assets, other expenses for the second quarter, on an
annualized basis, decreased from 4.8% in 1994 to 4.3% in 1995.
<PAGE>
The FDIC adopted a regulation pursuant to Section 302 (a) of the
Federal Deposit Insurance Corporation Improvement Act of 1991,
effective on November 2, 1993, amending its regulations on
insurance assessments to, among other matters, adopt a
recapitalization schedule for the Bank Insurance Fund and establish
a transitional risk-based insurance system to replace the uniform
assessment rate system previously applicable to insured financial
institution members of the Bank Insurance Fund. The annual
assessment rate for each insured institution continued at the rate
of $0.23 per $100 of deposits through year end December 31, 1992.
Commencing January 1, 1993, the assessment rate was based upon a
risk assessment schedule with rates ranging from $0.23 to $0.31 per
$100 of deposits. On June 25, 1993, the FDIC adopted a permanent
risk-based insurance system without substantial modification. FDIC
premiums were $39,000 or 4.9% of non-interest expense, for the
second quarter of 1995, as compared to $59,000 or 6.5% for the
second quarter of 1994. Based upon the risk assessment rate system
and the Bank's current level of deposits, the Bank estimates that
its annual non-interest assessment expense will not increase
materially during 1995. The Company and the Bank cannot predict
whether additional increases in assessment rates may continue as
part of the recapitalization of the Bank Insurance Fund. The
effect of any such increases in assessments will be to increase the
noninterest expense of the Company and the Bank.
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
- ---------------------------------------
An analysis of the results of operations of the Company for the six
month period ended June 30, 1995 compared to the comparable period
in 1994 is as follows:
<PAGE>
Net interest income
- -------------------
Net interest income, the difference between interest earned on
loans and investments and interest paid on deposits, is the
principal component of the Bank's earnings. The components of net
interest income are as follows:
<TABLE>
<CAPTION>
Six months ended June 30,
1995 1994
Average Average Average Average
Balance Interest Yield(1) Balance Interest Yield(1)
<S> (In thousands, except percentages)
Assets: (Unaudited)
Earning assets: <C> <C> <C> <C> <C> <C>
Loans (2) $33,205 $1,851 11.1% $34,928 $1,712 9.8%
Investment
securities 38,604 1,242 6.4% 29,406 794 5.4%
Federal funds sold 2,830 81 5.7% 6,562 115 3.5%
Total interest
earning assets 74,639 3,174 8.5% 70,896 2,621 7.4%
Cash and due from
banks 3,655 4,449
Other assets (3) 5,346 3,314
$83,640 $78,659
======= =======
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $28,469 426 3.0% $27,643 377 2.7%
Time deposits 26,338 756 5.7% 23,364 536 4.6%
Other borrowings 3 418 134 7.8% 155 3 3.9%
Total interest-
bearing
liabilities 58,225 1,316 4.5% 51,162 916 3.6%
Demand deposits 14,630 16,234
Other liabilities 852 802
Total liabilities 73,707 68,198
Shareholders' equity 9,933 10,461
$83,640 $78,659
======= =======
Net interest income and margin $1,858 5.0% $1,705 4.8%
====== ======
<FN>
(1) Annualized.
(2) Loan interest income included loan fee income of $160,000 and
$210,000 for the six months ended June 30 1995 and 1994,
respectively.
(3) Net of the average allowance for loan losses of $768,000 and
$1,134,000, and deferred loan fees of $227,000 and $211,000
for the six months ended June 30, 1995 and 1994, respectively.
<PAGE>
Provision for credit losses
- ---------------------------
During the first six months of 1995, the Bank did not provide any
additional funds to the provision for credit losses. During the
first six months of 1994, the Bank reversed $346,000 from the
allowance for credit losses. There were $36,000 in loans charged
off and $63,000 in recoveries for the six months ending June 30,
1995, compared to $29,000 charged off and $57,000 in recoveries for
the first six months of 1994.
Noninterest income
- ------------------
Other income consists of service charges on deposit accounts,
income on assets acquired for lease and fees for other
miscellaneous services. Total other income increased from $203,000
in 1994 to $323,000 in 1995. The increase is primarily attributable
to a gain on sale of securities of $32,000 and rental income on
OREO property of $90,000.
Noninterest expense
- -------------------
Other expenses have decreased from $1,795,000 in 1994 to $1,523,000
in 1995 due primarily to a $161,000 loss on sale of securities
realized in 1994. As a percentage of average earning assets, other
expenses, on an annualized basis, decreased from 4.9% in 1994 to
4.1% in 1995.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Bank manages its liquidity to provide adequate funds at an
acceptable cost to support borrowing requirements and deposit flows
of its customers. At June 30, 1995 liquid assets as a percentage
of deposits were 31% (34% at December 31, 1994). In addition to
cash and due from banks, liquid assets include short-term time
deposits with other banks, Federal funds sold and investment
securities available for sale. The Bank has $8.9 million in
Federal funds lines of credit available with correspondent banks to
meet liquidity needs.
Management regularly reviews general economic and financial
conditions, both external and internal, and determines whether the
positions taken with respect to liquidity and interest rate
sensitivity continue to be appropriate. The Bank also utilizes a
monthly "Gap" report which identifies rate sensitivity over the
short- and long-term.
The following table sets forth the distribution of repricing
opportunities, based on contractual terms, of the Company's earning
assets and interest-bearing liabilities at June 30, 1995, the
interest rate sensitivity gap (i.e. interest rate sensitive assets
less interest rate sensitive liabilities), the cumulative interest
rate sensitivity gap, the interest rate sensitivity gap ratio (i.e.
interest rate sensitive assets divided by interest rate sensitive
liabilities) and the cumulative interest rate sensitivity gap
ratio.
Based on the contractual terms of its assets and liabilities, the
Bank is currently liability sensitive in terms of its short-term
exposure to interest rates. In other words, the Bank's liabilities
reprice faster than its assets in the short-term.
<PAGE>
</TABLE>
<TABLE>
DISTRIBUTION OF REPRICING OPPORTUNITIES
At June 30, 1995
(Dollars in thousands)
<CAPTION>
After Three After Six After One
Within Months But Months But Year But After
Three Within Six Within One Within Five
Months Months Year Five Years Years Total
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $ 5,100 - - - - $ 5,100
Municipal securities - $200 - $ 2,184 $ 718 3,102
U.S. Treasury and
agency securities 4,467 - $ 4,686 10,579 13,145 32,877
FRB stock - - - - 786 786
Loans 22,721 $ 1,058 1,396 7,476 2,590 35,241
Total earning assets $32,288 $ 1,258 $ 6,082 $20,239 $17,239 77,106
Interest bearing
demand accounts 23,225 - - - - 23,225
Savings accounts 4,983 - - - - 4,983
Time certificates of
deposit of $100,000
or more 2,446 $1,810 $2,318 $2,183 - 8,757
Other time deposits 3,776 5,966 2,725 6,448 - 18,915
Other borrowings - - 3,570 288 $393 4,251
Total interest-bearing
liabilities 34,430 7,776 $ 8,613 $ 8,919 $393 60,131
Interest rate
sensitivity gap $(2,142) $(6,518) $(2,531) $11,320 $16,846 $16,975
======= ======= ======= ======= ======= =======
Cumulative interest
rate sensitivity
gap $(2,142) $(8,660) $(11,191) $ 129 $16,975
======= ======= ======== ======= =======
Interest rate
sensitivity gap
ratio 0.94% 0.16% 0.71% 2.27% N/A
Cumulative interest
rate sensitivity
gap ratio 0.94% 0.79% 0.78% 1.00% 1.29%
</TABLE>
<PAGE>
The Company and the Bank are subject to capital adequacy guidelines
issued by the Board of Governors of the Federal Reserve System (the
"BGFRS") and the Office of the Comptroller of the Currency ("OCC").
The Company and the Bank are required to maintain total capital
equal to at least 8% of assets and commitments to extend credit,
weighted by risk, of which at least 4% must consist primarily of
common equity including retained earnings (Tier 1 capital) and the
remainder may consist of subordinated debt, cumulative preferred
stock or a limited amount of loan loss reserves. Certain assets
and commitments to extend credit present less risk than others and
will be assigned to lower risk-weighted categories requiring less
capital allocation than the 8% total ratio. For example, cash and
government securities are assigned to a 0% risk-weighted category,
most home mortgage loans are assigned to a 50% risk-weighted
category requiring a 4% capital allocation and commercial loans are
assigned to a 100% risk-weighted category requiring an 8% capital
allocation. As of June 30, 1995, the Company's total risk-based
capital ratio was approximately 22.3% (approximately 21.0% for the
Bank) compared to approximately 22.2% (approximately 21.6% for the
Bank) at December 31, 1994.
The BGFRS adopted a 3% minimum leverage ratio for banking
organizations as a supplement to the risk-weighted capital
guidelines. The minimum leverage ratio is intended to limit the
ability of banking organizations to leverage their equity capital
base by increasing assets and liabilities without increasing
capital proportionately. The 3% minimum leverage ratio constitutes
a minimum ratio for well-run banking organizations. Organizations
experiencing or anticipating significant growth or failing to meet
certain BGFRS standards will be required to maintain a minimum
leverage ratio ranging from 100 to 200 basis points in excess of
the 3% ratio.
The following table reflects the Company's leverage, Tier 1 and
total risk-based capital ratios for the quarter ended June 30, 1995
and the year ended December 31, 1994.
June 30, 1995 December 31, 1994
Leverage ratio 12.2% 12.2%
Tier 1 capital ratio 21.1% 20.9%
Total risk-based capital ratio 22.3% 22.2%
On December 19, 1991, the President signed the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"). The
FDICIA, among other matters, substantially revised banking
regulations and established a framework for determination of
capital adequacy of financial institutions. Under the FDICIA,
financial institutions are placed into one of five capital adequacy
catagories as follows: (1) "Well capitalized" - consisting of
<PAGE>
institutions with a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater and a
leverage ratio of 5% or greater, and the institution is not subject
to an order, written agreement, capital directive or prompt
corrective action directive; (2) "Adequately capitalized" -
consisting of institutions with a total risk-based capital ratio of
8% or greater, a Tier 1 risk-based capital ratio of 4% or greater
and a leverage ratio of 4% or greater, and the institution does not
meet the definition of a "well capitalized" institution; (3)
"Undercapitalized" - consisting of institutions with a total risk-based capital
ratio less than 8%, a Tier 1 risk-based capital ratio
of less than 4%, or a leverage ratio of less than 4%; (4)
"Significantly undercapitalized" - consisting of institutions with
a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital
ratio of less than 3%, or a leverage ratio of less
than 3%; (5) "Critically undercapitalized" - consisting of an
institution with a ratio of tangible equity to total assets that is
equal to or less than 2%.
Financial institutions classified as undercapitalized or below are
subject to various limitations including, among other matters,
certain supervisory actions by bank regulatory authorities and
restrictions related to (i) growth of assets, (ii) payment of
interest on subordinated indebtedness, (iii) payment of dividends
or other capital distributions, and (iv) payment of management fees
to a parent holding company. The FDICIA requires bank regulatory
authorities to initiate corrective action regarding financial
institutions which fail to meet minimum capital requirements. Such
action may result in orders to, among other matters, augment
capital and reduce total assets. Critically undercapitalized
financial institutions may also be subject to appointment of a
receiver or implementation of a capitalization plan.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The shareholders of Saratoga Bancorp took the following
action at the Annual Meeting of Shareholders held on May
25, 1995 at the Corporation's main office located at
12000 Saratoga-Sunnyvale Road, Saratoga, California:
1. Approved the election of management's slate of nominees
for director, each of whom were incumbent directors, as
follows:
Votes
For Withheld
Victor Aboukhater 641,311 250
Neal A. Cabrinha 641,311 250
Robert G. Egan 641,311 250
William D. Kron 641,311 250
John F. Lynch, III 641,311 250
V. Ronald Mancuso 641,311 250
Richard L. Mount 639,934 1,627
<PAGE>
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) (3) Exhibits
27.1 Financial Data Schedules
(b) Reports on Form 8-K
On June 13, 1995, Registrant filed a Current Report on
Form 8-K, dated May 25, 1995 reporting under Item 5
(Other Events) actions taken at the Annual Meeting of
Shareholders of Registrant held on May 25, 1995. See
Item 4 herein for additional information.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
SARATOGA BANCORP
Mary Page Rourke
Date: August 11, 1995 -------------------------
Mary Page Rourke, Treasurer
(Principal Financial and
Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Number Exhibits Page
27.1 Financial Data Schedule 21
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> JUN-30-1995 DEC-31-1994
<CASH> 3280 6514
<INT-BEARING-DEPOSITS> 0 250
<FED-FUNDS-SOLD> 5100 3500
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 13468 14810
<INVESTMENTS-CARRYING> 23297 23963
<INVESTMENTS-MARKET> 23314 22930
<LOANS> 34234 32803
<ALLOWANCE> 765 738
<TOTAL-ASSETS> 85769 87536
<DEPOSITS> 70279 73872
<SHORT-TERM> 0 1500
<LIABILITIES-OTHER> 874 537
<LONG-TERM> 4251 2000
<COMMON> 4427 4427
0 0
0 0
<OTHER-SE> 5938 5200
<TOTAL-LIABILITIES-AND-EQUITY> 85769 87536
<INTEREST-LOAN> 1851 1712
<INTEREST-INVEST> 1242 794
<INTEREST-OTHER> 81 115
<INTEREST-TOTAL> 3174 2621
<INTEREST-DEPOSIT> 1182 913
<INTEREST-EXPENSE> 1316 916
<INTEREST-INCOME-NET> 1858 1705
<LOAN-LOSSES> 0 (396)
<SECURITIES-GAINS> 1 (206)
<EXPENSE-OTHER> 1523 1795
<INCOME-PRETAX> 658 510
<INCOME-PRE-EXTRAORDINARY> 658 510
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 395 335
<EPS-PRIMARY> .38 .29
<EPS-DILUTED> .37 .29
<YIELD-ACTUAL> 8.50 7.40
<LOANS-NON> 0 707
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 204 209
<LOANS-PROBLEM> 971 1030
<ALLOWANCE-OPEN> 738 1339
<CHARGE-OFFS> 36 73
<RECOVERIES> 63 108
<ALLOWANCE-CLOSE> 765 738
<ALLOWANCE-DOMESTIC> 366 595
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 399 143
</TABLE>
