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
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 JULY 31, 1996
Common Stock 1,034,383
Exhibit Index at Page 18
Page 1 of 19 pages
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995*
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,965,000 $ 5,239,000
Federal funds sold 15,500,000 17,700,000
Total cash and equivalents 20,465,000 22,939,000
Interest-bearing deposits
in other banks 200,000 200,000
Investments available for sale 19,548,000 15,286,000
Investment held to maturity 23,141,000 20,348,000
Loans, net 38,699,000 36,759,000
Other real estate owned 1,127,000 1,745,000
Premises and equipment 2,181,000 1,988,000
Other assets 1,587,000 1,232,000
TOTAL ASSETS $106,948,000 $100,497,000
============ ===========
LIABILITIES
Deposits:
Non-interest bearing $ 22,466,000 $ 20,410,000
Interest bearing 59,033,000 54,539,000
Total deposits 81,499,000 74,949,000
Federal funds purchased - 1,500,000
Other borrowings 13,449,000 12,087,000
Accrued expenses and
other liabilities 715,000 904,000
TOTAL LIABILITIES 95,663,000 89,440,000
SHAREHOLDERS' EQUITY
Common stock, no par value;
Authorized: 20,000,000 shares;
Issued and outstanding:
1,034,383 and 1,030,972 shares 4,449,000 4,427,000
Retained earnings 7,143,000 6,797,000
Unrealized loss on investments
available for sale (307,000) (167,000)
SHAREHOLDERS' EQUITY 11,285,000 11,057,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $106,948,000 $100,497,000
============ ============
*Derived from the December 31, 1995 audited balance sheet included
in the Company's 1995 Annual Report on Form 10-K.
See notes to consolidated condensed financial statements.
<PAGE> 3
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 989,000 $ 944,000 $1,972,000 $1,851,000
Investment securities 724,000 611,000 1,327,000 1,242,000
Federal funds sold 131,000 48,000 286,000 81,000
Total interest income 1,844,000 1,603,000 3,585,000 3,174,000
INTEREST EXPENSE:
Deposits 650,000 608,000 1,268,000 1,182,000
Other 189,000 79,000 385,000 134,000
Total interest expense 839,000 687,000 1,653,000 1,316,000
NET INTEREST INCOME
BEFORE CREDIT LOSSES 1,005,000 916,000 1,932,000 1,858,000
Credit for credit
losses - - (50,000) -
Net interest income after
credit for credit losses 1,005,000 916,000 1,982,000 1,858,000
Other income 81,000 222,000 151,000 323,000
Other expense 727,000 803,000 1,449,000 1,523,000
INCOME BEFORE INCOME TAXES 359,000 335,000 684,000 658,000
Provision for income taxes 137,000 134,000 260,000 263,000
NET INCOME $ 222,000 $ 201,000 $ 424,000 $ 395,000
========== ========== ========== ==========
NET INCOME PER COMMON
AND EQUIVALENT SHARE $0.20 $0.19 $0.38 $0.37
========== ========== ========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
OPERATIONS:
Net income $ 424,000 $ 395,000
Adjustments to reconcile net income to
net cash provided by (used in)operating
activities:
Credit for credit losses (50,000) -
Depreciation and amortization 84,000 137,000
Provision for OREO losses - 35,000
Other, net (544,000) 378,000
Net cash provided by (used in)operating
activities (86,000) 945,000
INVESTING ACTIVITIES:
Proceeds from sale of investments
available for sale - 2,624,000
Proceeds from maturities of investments
held to maturity 1,787,000 279,000
Proceeds from maturities of investments
available for sale 4,794,000 -
Purchase of securities available for sale (9,838,000) (387,000)
Purchase of securities held to maturity (3,986,000) -
Net increase in loans (1,854,000) (2,187,000)
Purchases of premises and equipment (328,000) (26,000)
Sale of premises and equipment 50,000 -
Proceeds from sale of OREO 652,000 -
Increase in other assets - (238,000)
Net cash provided by (used in) investing
activities (8,723,000) 65,000
FINANCING ACTIVITIES:
Net (decrease) increase in deposits 6,550,000 (3,593,000)
Payment of dividends (77,000) (52,000)
Increase in other borrowings 1,362,000 2,251,000
Decrease in federal funds purchased (1,500,000) (1,500,000)
Net cash provided by (used in)financing
activities 6,335,000 (2,894,000)
NET DECREASE IN CASH AND EQUIVALENTS (2,474,000) (1,884,000)
Cash and equivalents at beginning of period 22,939,000 10,264,000
Cash and equivalents at end of period $20,465,000 $ 8,380,000
=========== ===========
See notes to consolidated condensed financial statements.
<PAGE> 5
SARATOGA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
QUARTERS ENDED JUNE 30, 1996 AND 1995
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 1,113,064 shares for the three and six month
periods ended June 30, 1996 (1,058,326 shares and 1,058,695
shares for the comparable periods in 1995).
3. For the six months ended June 30, 1996 and 1995, cash paid
for taxes was $367,000 and $75,000, respectively. For the six
months ended June 30, 1996 and 1995, cash paid for interest was
$1,263,000 and $1,144,000, respectively.
4. The Company classifies 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. The Company measures impaired loans based upon the present
value of expected future cash flows discounted at the loan's
effective interest rate, except as 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 loan 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.
<PAGE> 7
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, 1996, total assets were $106,948,000, a 6.4% increase
from $100,497,000 at December 31, 1995. Net loans increased
$1,940,000 (5.3%) from $36,759,000 at December 31, 1995 to
$38,699,000 at June 30, 1996. The increase was primarily in the
longer term real estate loan portfolio. Total deposits increased
$6,550,000 (8.7%) from $74,949,000 at year end 1995 to
$81,499,000 at June 30, 1996.
Net income for the second quarter of 1996 was $222,000 or $.20
per share compared to $201,000 or $.19 per share for the
comparable period in 1995. Net income for the first six months
of 1996 was $424,000 or $.38 per share compared to $395,000 or
$.37 per share for the comparable period in 1995.
The increase in income resulted primarily from an increase in the
volume of earning assets, offset in part by a decrease in the
yield of earning assets and an increase in interest expense due
to the increased volume of interest-bearing liabilities.
RESULTS OF OPERATIONS
SECOND QUARTER OF 1996 AND 1995
An analysis of the results of operations of the Company for the
second quarter of 1996 compared to the second quarter of 1995 is
presented below:
<PAGE> 7
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>
<TABLE>
<CAPTION>
Three months ended June 30,
1996 1995
Average Average Average Average
Balance Interest Yield(1) Balance Interest Yield(1)
(In thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Earning assets:
Loans (2) $37,651 $ 989 10.5% $33,776 $ 944 11.2%
Investment
securities 44,795 724 6.5% 38,450 611 6.4%
Federal funds sold 10,152 131 5.2% 3,296 48 5.8%
Total interest
earning assets 92,598 1,844 8.0% 75,522 1,603 8.5%
Cash and due from
banks 4,257 3,328
Other assets (3) 3,977 5,366
$100,832 $84,216
======= =======
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $30,197 265 3.5% $27,364 202 3.0%
Time deposits 28,281 385 5.4% 27,240 406 6.0%
Other borrowings 11,537 189 6.6% 4,463 79 7.1%
Total interest-
bearing
liabilities 70,015 839 4.7% 59,067 687 4.7%
Demand deposits 18,768 14,184
Other liabilities 777 946
Total liabilities 89,560 74,197
Shareholders' equity 11,272 10,019
$100,832 $84,216
======= =======
Net interest income and margin $1,005 4.3% $916 4.9%
====== ======
</TABLE>
(1) Annualized.
(2) Loan interest income included loan fee income of $78,000
for each of the quarters ended June 30, 1996 and 1995,
respectively.
(3) Net of the average allowance for loan losses of $714,000 and
$773,000 and deferred loan fees of $289,000 and $233,000
for the quarters ended June 30, 1996 and 1995, respectively.
<PAGE> 8
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 1996 and 1995 the Bank did not record a
provision for credit losses. There were $9,000 in loans charged-
off and $12,000 in recoveries in the second quarter of 1996, as
compared to $31,000 in loans charged-off and $8,000 in recoveries
in the second quarter of 1995.
At June 30, 1996, the allowance for credit losses was $711,000 or
1.8% of total loans, compared to $776,000 or 2.1% at December 31,
1995. There were no nonaccrual loans at June 30, 1996 or
December 31, 1995.
At June 30, 1996 there was one loan in the amount of $80,000 past
due 90 days or more as to principal or interest and still
accruing interest (none at December 31, 1995). The loan was paid
off on July 10, 1996. There was one loan at June 30, 1996 in the
amount of $195,000 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, 1996, there were seven potential
problem loans having a combined principal balance of $1,284,000
($1,161,000 at December 31, 1995). 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 seven loans
identified as potential problem loans are secured by real estate
and personal property.
Other Real Estate Owned totalled $1,127,000 at June 30, 1996
($1,745,000 at December 31, 1995). Other Real Estate Owned
consisted of a 12 lot subdivision with an appraised value in
excess of the Bank's carrying value. The Company is actively
marketing the property.
<PAGE> 9
<TABLE>
Nonperforming loans and other real estate owned are summarized
below:
<CAPTION>
<S> <C> <C>
June 30, 1996 December 31, 1995
Nonperforming loans:
Past due 90 days or more $ 80,000 $ -
Nonaccrual - -
Total 80,000 -
Other real estate owned 1,127,000 1,745,000
Total nonperforming loans and
other real estate owned $1,207,000 $1,745,000
========== ==========
</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 Bank's loan portfolio, which includes approximately
$24,000,000 in real estate loans representing approximately 62%
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 could
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 decreased from
$222,000 in the second quarter of 1995 to $81,000 in the second
quarter of 1996. This decrease is primarily attributable to a
gain on sale of securities of $32,000 which was realized in the
second quarter of 1995 and a decrease in rental income on OREO
property of $90,000.
NONINTEREST EXPENSE
Other expenses decreased from $803,000 in the second quarter of
1995 to $727,000 in the second quarter of 1996. The decrease is
primarily attributable to a reduction in provision for OREO
losses of $35,000 and a decrease in depreciation expense on
assets acquired for lease. As a percentage of average earning
assets, other expenses for the second quarter, on an annualized
basis, decreased from 4.3% in 1995 to 3.1% in 1996.
<PAGE> 10
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
An analysis of the results of operations of the Company for the
six month period ended June 30, 1996 compared to the comparable
period in 1995 is as follows:
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,
1996 1995
Average Average Average Average
Balance Interest Yield(1) Balance Interest Yield(1)
(In thousands, except percentages)
<S> (Unaudited)
Earning assets: <C> <C> <C> <C> <C> <C>
Loans (2) $37,599 $1,972 10.5% $33,205 $1,851 11.1%
Investment
securities 41,365 1,327 6.4% 38,604 1,242 6.4%
Federal funds sold 11,016 286 5.2% 2,830 81 5.7%
Total interest
earning assets 89,980 3,585 8.0% 74,639 3,174 8.5%
Cash and due from
banks 4,097 3,655
Other assets (3) 4,107 5,346
$98,184 $83,640
======= =======
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $29,072 467 3.2% $28,469 426 3.0%
Time deposits 27,789 801 5.8% 26,338 756 5.7%
Other borrowings 11,816 385 6.5% 3,418 134 7.8%
Total interest-
bearing
liabilities 68,677 1,653 4.8% 58,225 1,316 4.5%
Demand deposits 17,529 14,630
Other liabilities 827 852
Total liabilities 87,033 73,707
Shareholders' equity 11,151 9,933
$98,184 $83,640
======= =======
Net interest income and margin $1,932 4.3% $1,858 5.0%
====== ======
</TABLE>
(1) Annualized.
(2) Loan interest income included loan fee income of $146,000
and $160,000 for the six months ended June 30, 1996 and
1995, respectively.
(3) Net of the average allowance for loan losses of $738,000 and
$768,000, and deferred loan fees of $292,000 and $227,000
for the six months ended June 30, 1996 and 1995,
respectively.
<PAGE> 11
PROVISION FOR CREDIT LOSSES
During the first six months of 1996 and 1995, the Bank did not
provide any additional funds to the provision for credit losses.
During the first six months of 1996, the Bank reversed $50,000
from the allowance for credit losses. There were $38,000 in
loans charged off and $23,000 in recoveries for the six months
ending June 30, 1996, compared to $36,000 charged off and $63,000
in recoveries for the first six months of 1995.
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 decreased from
$323,000 in 1995 to $151,000 in 1996. The decrease is primarily
attributable to a gain on sale of securities of $32,000 which was
realized in 1995, a decrease in rental income on OREO property of
$90,000 and a decrease in rental income on assets acquired for
lease of $53,000.
NONINTEREST EXPENSE
Other expenses have decreased from $1,523,000 in 1995 to
$1,449,000 in 1996 due primarily to a reduction in provision for
OREO losses of $35,000 and a decrease in depreciation expense on
assets acquired for lease. As a percentage of average earning
assets, other expenses, on an annualized basis, decreased from
4.1% in 1995 to 3.2% in 1996.
<PAGE> 12
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, 1996 liquid assets as a
percentage of deposits were 42% (48% at December 31, 1995). 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 $8.0
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, 1996,
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> 13
DISTRIBUTION OF REPRICING OPPORTUNITIES
At June 30, 1996
(Dollars in thousands)
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
Federal funds
sold $15,500 - - - - $15,500
Interest
bearing
deposits
in other
banks $ 200 200
Municipal
securities 165 - $ 230 $ 2,381 $ 772 3,548
U.S. Treasury
and agency
securities 3,909 1,988 590 10,152 20,074 36,713
FRB stock - - - - 2,428 2,428
Loans 20,255 3,636 2,773 5,531 7,502 39,697
Total earning
assets $39,829 $ 5,824 $ 3,593 $18,064 $30,776 98,086
Interest
bearing
demand
accounts $26,620 - - - - 26,620
Savings
accounts 3,364 - - - - 3,364
Time
certificates
of deposit
of $100,000
or more 4,564 $ 1,141 $ 2,578 $ 2,575 - 10,858
Other time
deposits 3,505 3,929 6,119 4,638 - 18,191
Other
borrowings - - - 4,231 $9,218 13,449
Total
interest-
bearing
liabilities $38,053 $ 5,070 $ 8,697 $11,444 $9,218 72,482
Interest
rate
sensitivity
gap $ 1,776 $ 754 $(5,104) $ 6,620 $21,558 $25,604
======= ======= ======= ======= ======= =======
Cumulative
interest
rate
sensitivity
gap $ 1,776 $ 2,530 $(2,574) $ 4,046 $25,604
======= ======= ======== ======= =======
Interest
rate
sensitivity
gap ratio 1.05% 1.15% 0.41% 1.58% N/A
Cumulative
interest rate
sensitivity
gap ratio 1.05% 1.06% 0.95% 1.06% 1.35%
<PAGE> 14
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, 1996, the Company's total risk-based
capital ratio was approximately 21.7% (approximately 21.5% for
the Bank) compared to approximately 22.0% (approximately 21.7%
for the Bank) at December 31, 1995.
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,
1996 and the year ended December 31, 1995.
June 30, 1996 December 31, 1995
Leverage ratio 11.1% 11.7%
Tier 1 capital ratio 20.1% 20.8%
Total risk-based capital ratio 21.7% 22.0%
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 institutions with a total risk-based capital ratio
of 10% or greater, a Tier 1 risk-based capital ratio of 6% or
<PAGE> 15
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> 16
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
23, 1996 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 658,038 12,343
Neal A. Cabrinha 658,038 12,343
Robert G. Egan 658,038 12,343
William D. Kron 658,038 12,343
John F. Lynch, III 658,038 12,343
V. Ronald Mancuso 658,038 12,343
Richard L. Mount 656,661 13,720
2. Ratified appointment of Deloitte & Touche LLP as
independent auditors of the corporation for the fiscal
year ending 1996.
VOTES
FOR 665,393
AGAINST 660
ABSTAIN 4,328
<PAGE> 17
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) (3) Exhibits
(3.1) Articles of Incorporation, as amended,
are incorporated by reference herein to
Exhibit 3.1 of Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1988, as filed with the
Securities and Exchange Commission on
March 27, 1989.
(3.2) By-laws, as amended, are incorporated by
reference herein to Exhibit 3.2 of
Registant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, as
filed with the Securities and Exchange
Commission on March 29, 1994.
(27.1) Financial Data Schedules
(b) Reports on Form 8-K
On May 29, 1996, Registrant filed a Current
Report on Form 8-K, dated May 28, 1996
reporting under Item 5(Other Events) actions
taken at the Annual Meeting of Shareholders of
Registrant held on May 23, 1996. 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
RICHARD L. MOUNT
Date: August 6, 1996 -------------------------
Richard L. Mount, President
(Principal Executive Officer)
<PAGE> 18
INDEX TO EXHIBITS
Sequentially
Numbered
Number Exhibits Page
27.1 Financial Data Schedule 19
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4965
<INT-BEARING-DEPOSITS> 200
<FED-FUNDS-SOLD> 15500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19548
<INVESTMENTS-CARRYING> 23141
<INVESTMENTS-MARKET> 22703
<LOANS> 38699
<ALLOWANCE> 711
<TOTAL-ASSETS> 106948
<DEPOSITS> 81499
<SHORT-TERM> 0
<LIABILITIES-OTHER> 715
<LONG-TERM> 13449
0
0
<COMMON> 4449
<OTHER-SE> 6836
<TOTAL-LIABILITIES-AND-EQUITY> 106948
<INTEREST-LOAN> 1972
<INTEREST-INVEST> 1327
<INTEREST-OTHER> 286
<INTEREST-TOTAL> 3585
<INTEREST-DEPOSIT> 1268
<INTEREST-EXPENSE> 1653
<INTEREST-INCOME-NET> 932
<LOAN-LOSSES> (50)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1449
<INCOME-PRETAX> 684
<INCOME-PRE-EXTRAORDINARY> 424
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 424
<EPS-PRIMARY> .39
<EPS-DILUTED> .38
<YIELD-ACTUAL> 8.0
<LOANS-NON> 0
<LOANS-PAST> 80
<LOANS-TROUBLED> 195
<LOANS-PROBLEM> 1284
<ALLOWANCE-OPEN> 776
<CHARGE-OFFS> 38
<RECOVERIES> 23
<ALLOWANCE-CLOSE> 711
<ALLOWANCE-DOMESTIC> 260
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 451
</TABLE>
