<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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 OCTOBER 29, 1996
Common Stock 1,035,820
The Index to Exhibits appears on 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>
September 30, December 31,
1996 1995*
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,077,000 $ 5,239,000
Federal funds sold 20,500,000 17,700,000
Total cash and equivalents 23,577,000 22,939,000
Interest-bearing deposits
in other banks 200,000 200,000
Investments available-for-sale 14,430,000 15,286,000
Investments held-to-maturity 22,664,000 20,348,000
Loans, net 43,957,000 36,759,000
Other real estate owned 1,202,000 1,745,000
Premises and equipment 2,163,000 1,988,000
Other assets 1,512,000 1,232,000
TOTAL ASSETS $109,705,000 $100,497,000
============ ============
LIABILITIES
Deposits:
Non-interest bearing $ 17,610,000 $ 20,410,000
Interest bearing 65,625,000 54,539,000
Total deposits 83,235,000 74,949,000
Federal funds purchased - 1,500,000
Other borrowings 14,062,000 12,087,000
Accrued expenses and
other liabilities 901,000 904,000
TOTAL LIABILITIES 98,198,000 89,440,000
SHAREHOLDERS' EQUITY
Common stock, no par value;
Authorized: 20,000,000 shares;
Issued and outstanding:
1,035,820 and 1,030,972 shares 4,458,000 4,427,000
Retained earnings 7,342,000 6,797,000
Unrealized loss on investments
available for sale (293,000) (167,000)
TOTAL SHAREHOLDERS' EQUITY 11,507,000 11,057,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $109,705,000 $100,497,000
============ ============
</TABLE>
*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
<TABLE>
<CAPTION>
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED INCOME STATEMENTS (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $1,179,000 $ 950,000 $3,151,000 $2,801,000
Investment securities 655,000 572,000 1,982,000 1,814,000
Federal funds sold 232,000 134,000 518,000 215,000
Total interest income 2,066,000 1,656,000 5,651,000 4,830,000
INTEREST EXPENSE:
Deposits 714,000 640,000 1,982,000 1,822,000
Other 218,000 94,000 603,000 228,000
Total interest expense 932,000 734,000 2,585,000 2,050,000
NET INTEREST INCOME BEFORE
CREDIT FOR CREDIT LOSSES 1,134,000 922,000 3,066,000 2,780,000
Credit for credit losses - - (50,000) -
Net interest income after
credit for credit losses 1,134,000 922,000 3,116,000 2,780,000
Other income 88,000 182,000 239,000 505,000
Other expenses 735,000 793,000 2,184,000 2,316,000
INCOME BEFORE INCOME TAXES 487,000 311,000 1,171,000 969,000
Provision for income taxes 185,000 125,000 445,000 388,000
NET INCOME $302,000 $186,000 $726,000 $581,000
========== ========== ========== ==========
NET INCOME PER COMMON
AND EQUIVALENT SHARE $0.26 $0.17 $0.63 $0.54
========== ========== ========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
OPERATIONS:
Net income $ 726,000 $ 581,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Credit for credit losses (50,000) -
Depreciation and amortization 125,000 204,000
Provision for OREO losses - 35,000
Other, net (283,000) 693,000
Net cash provided by operating
activities 518,000 1,513,000
INVESTING ACTIVITIES:
Proceeds from sale of investments
available-for-sale 2,496,000 2,624,000
Proceeds from maturities of investments
available-for-sale 6,558,000 -
Proceeds from maturities of investments
held-to-maturity 3,411,000 4,537,000
Purchase of securities available-for-sale (9,913,000) (2,639,000)
Purchase of securities held-to-maturity (4,136,000) -
Net increase in loans (7,228,000) (1,788,000)
Purchases of premises and equipment (433,000) (39,000)
Sale of premises and equipment 133,000 -
Proceeds from sale of OREO 652,000 735,000
Increase in other assets - (238,000)
Net cash (used in)provided by investing
activities (8,460,000) 3,192,000
FINANCING ACTIVITIES:
Net increase(decrease) in deposits 8,286,000 (1,741,000)
Payment of dividends (181,000) (103,000)
Increase in other borrowings 1,975,000 5,586,000
Decrease in federal funds purchased (1,500,000) (1,500,000)
Net cash provided by financing
activities 8,580,000 2,242,000
NET INCREASE IN CASH AND EQUIVALENTS 638,000 6,947,000
Cash and equivalents at beginning of period 22,939,000 10,264,000
Cash and equivalents at end of period $23,577,000 $17,211,000
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 5
SARATOGA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
QUARTERS ENDED SEPTEMBER 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 1,158,932 shares and 1,157,060 shares for the three
and nine month periods ended September 30, 1996 (1,075,230 shares
and 1,060,254 shares for the comparable periods in 1995).
3. For the nine months ended September 30, 1996 and 1995, cash
paid for taxes was $636,000 and $75,000, respectively. For the
nine months ended September 30, 1996 and 1995, cash paid for
interest was $3,112,000 and $1,763,000, 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,
net of income taxes, 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> 6
SARATOGA BANCORP AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Summary of financial results
At September 30, 1996, total assets were $109,705,000, a 9.2%
increase from $100,497,000 at December 31, 1995. Net loans
increased $7,198,000 (19.6%) from $36,759,000 at December 31,
1995 to $43,957,000 at September 30, 1996. The increase was
primarily in the longer term real estate loan portfolio. Total
deposits increased $8,286,000 (11.1%) from $74,949,000 at
December 31, 1995 to $83,235,000 at September 30, 1996.
Net income for the third quarter of 1996 was $302,000 or $.26 per
share compared to $186,000 ($.17 per share) for the comparable
period in 1995. Net income for the first nine months of 1996 was
$726,000 or $.63 per share compared to $581,000 or $.54 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 on earning assets and an increase in interest expense due
to the increased volume of interest-bearing liabilities.
RESULTS OF OPERATIONS
THIRD QUARTER OF 1996 AND 1995
An analysis of the results of operations of the Company for the
third quarter of 1996 compared to the third 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>
<CAPTION>
Three months ended September 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) $43,291 $1,179 10.9% $34,371 $ 950 11.1%
Investment
securities 39,535 655 6.6% 35,882 572 6.4%
Federal funds sold 17,636 232 5.3% 9,336 134 5.7%
Total interest
earning assets 100,462 2,066 8.2% 79,589 1,656 8.3%
Cash and due from
banks 4,088 3,584
Other assets (3) 3,798 5,232
$108,348 $88,405
======= =======
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $34,212 281 3.3% $28,637 218 3.0%
Time deposits 29,920 433 5.8% 27,675 422 6.1%
Other borrowings 14,024 218 6.2% 5,088 94 7.4%
Total interest-
bearing
liabilities 78,156 932 4.8% 61,400 734 4.8%
Demand deposits 18,042 15,509
Other liabilities 896 1,015
Total liabilities 97,094 77,924
Shareholders' equity 11,254 10,481
$108,348 $88,405
======= =======
Net interest income and margin $1,134 4.5% $922 4.6%
====== ======
</TABLE>
(1) Annualized.
(2) Loan interest income includes loan fee income of $122,000
and $86,000 for the quarters ended September 30, 1996 and
1995, respectively.
(3) Includes the average allowance for credit losses of $716,000
and $768,000 and deferred loan fees of $344,000 and $242,000
for the quarters ended September 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 third quarter of 1996 and 1995 the Bank did not record a
provision for credit losses. There were no loans charged-off and
$9,000 in recoveries in the third quarter of 1996, as compared to
$9,000 in loans charged-off and $13,000 in recoveries in the
third quarter of 1995.
At September 30, 1996, the allowance for credit losses was
$720,000 or 1.6% of total loans, compared to $776,000 or 2.1% at
December 31, 1995. There were no nonaccrual loans at September
30, 1996 or December 31, 1995.
At September 30, 1996 and December 31, 1995, there were no loans
past due 90 days or more as to principal or interest and still
accruing interest. There was one loan at September 30, 1996 in
the amount of $192,000 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 September 30, 1996, there were four potential
problem loans having a combined principal balance of $1,022,000
($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 four loans
identified as potential problem loans are secured by real estate
and personal property. At September 30, 1996, there were no loan
concentrations other than Real Estate loans which represents
approximately 64% of the portfolio.
OREO totalled $1,202,000 at September 30, 1996 ($1,745,000 at
December 31, 1995). OREO at September 30, 1996 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>
Nonperforming loans and other real estate owned are summarized
below:
<PAGE> 9
September 30, 1996 December 31, 1995
Nonperforming loans:
Past due 90 days or more $ - $ -
Nonaccrual - -
Total - -
Other real estate owned 1,202,000 1,745,000
Total nonperforming loans and
other real estate owned $1,202,000 $1,745,000
========== ==========
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
$28,000,000 in real estate loans representing approximately 64%
of the portfolio, could be adversely affected if California
economic conditions and the real estate market in the Bank's
market area were to weaken. The effect of such events, although
uncertain at this time, 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
$182,000 in the third quarter of 1995 to $88,000 in the third
quarter of 1996. This decrease is primarily attributable to a
gain on sale of OREO of $55,000 realized in the third quarter of
1995 and a decrease in rental income on OREO property.
NONINTEREST EXPENSES
Other expenses decreased from $793,000 in the third quarter of
1995 to $735,000 in the third quarter of 1996. This decrease is
primarily attributable to a decrease in legal expense and OREO
expense. As a percentage of average earning assets, other
expenses for the third quarter, on an annualized basis, decreased
from 4.0% in 1995 to 2.9% in 1996.
<PAGE> 10
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
An analysis of the results of operations of the Company for the
nine month period ended September 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>
Nine months ended September 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) $39,495 $3,151 10.6% $33,596 $2,801 11.1%
Investment
securities 40,751 1,982 6.5% 37,689 1,814 6.4%
Federal funds sold 13,239 518 5.2% 5,022 215 5.7%
Total interest
earning assets 93,485 5,651 8.1% 76,307 4,830 8.4%
Cash and due from
banks 4,094 3,631
Other assets (3) 4,007 5,315
$101,586 $85,253
======= =======
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $ 30,756 748 3.2% $28,534 644 3.0%
Time deposits 28,505 1,234 5.8% 26,789 1,178 5.9%
Other borrowings 12,557 603 6.4% 3,981 228 7.6%
Total interest-
bearing
liabilities 71,818 2,585 4.8% 59,304 2,050 4.6%
Demand deposits 17,678 14,930
Other liabilities 852 906
Total liabilities 90,348 75,140
Shareholders' equity 11,238 10,113
$101,586 $85,253
======== =======
Net interest income and margin $3,066 4.4% $2,780 4.9%
====== ======
</TABLE>
(1) Annualized.
(2) Loan interest income included loan fee income of $268,000
and $245,000 for the nine months ended September 30, 1996
and 1995, respectively.
(3) Includes the average allowance for loan losses of $730,000
and $768,000, and deferred loan fees of $309,000 and
$232,000 for the nine months ended September 30, 1996 and
1995, respectively.
<PAGE> 11
PROVISION FOR CREDIT LOSSES
During the first nine months of 1996, the Bank reversed $50,000
from the allowance for credit losses. During the first nine
months of 1995, the Bank did not record a provision for credit
losses. There were $38,000 in loans charged off and $32,000 in
recoveries for the nine months ending September 30, 1996,
compared to $45,000 charged off and $73,000 in recoveries for the
first nine 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
$505,000 in the first nine months of 1995 to $239,000 in the
first nine months of 1996. The decrease is primarily attributable
to a gain on sale of securities of $42,000 and a gain on sale of
OREO of $55,000 realized during 1995 and a decrease in rental
income on OREO property of $78,000.
NONINTEREST EXPENSES
Other expenses decreased from $2,316,000 in the first nine months
of 1995 to $2,184,000 in the first nine months of 1996. The
decrease is primarily attributable to a decrease in OREO expense,
legal expense and FDIC insurance expense. As a percentage of
average earning assets, other expenses, on an annualized basis,
decreased from 4.0% in 1995 to 3.1% 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 September 30, 1996 liquid assets as a
percentage of deposits were 37% (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 $10.0
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 September 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 September 30, 1996
(Dollars in thousands)
<TABLE>
<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 $20,500 $ - $ - $ - $ - $20,500
Interest
bearing
deposits in
other banks 200 - - - - 200
Municipal
securities - - 230 2,616 536 3,382
U.S. Treasury
and agency
securities 2,912 - 591 9,733 17,788 31,024
FRB stock - - - - 2,688 2,688
Loans 24,100 2,893 1,783 6,142 10,115 45,033
Total earning
assets $47,712 $ 2,893 $ 2,604 $18,491 $31,127 $102,827
Interest
bearing demand
deposits $32,017 $ - $ - $ - $ - $32,017
Savings
accounts 4,426 - - - - 4,426
Time
certificates
of deposit
of $100,000
or more 4,970 1,701 3,127 2,737 - 12,535
Other time
deposits 4,630 3,233 4,605 4,178 - 16,646
Other
borrowings - - - 4,872 9,190 14,062
Total interest-
bearing
liabilities $46,043 $4,934 $ 7,732 $11,787 $9,190 $79,686
Interest rate
sensitivity
gap $ 1,669 $(2,041) $(5,128) $ 6,704 $21,937 $23,141
======= ======= ======= ======= ======= =======
Cumulative
interest rate
sensitivity
gap $ 1,669 $ (372) $(5,500) $ 1,204 $23,141
======= ======= ======= ======= =======
Interest rate
sensitivity
gap ratio 1.04% 0.59% 0.34% 1.57% N/A
Cumulative
interest rate
sensitivity
gap ratio 1.04% 0.99% 0.91% 1.02% 1.29%
</TABLE>
<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 September 30, 1996, the Company's total risk-
based capital ratio was approximately 20.1% (approximately 19.3%
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 September
30, 1996 and the year ended December 31, 1995.
September 30, 1996 December 31, 1995
Leverage ratio 10.5% 11.7%
Tier 1 capital ratio 18.9% 20.8%
Total risk-based capital ratio 20.1% 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.
OTHER MATTERS
From time to time, the Company's Board of Directors reviews and
consults with advisors, including investment banking, accounting
and legal advisors, regarding banking industry trends and
developments, as well as internal and external opportunities to
maximize shareholder value. Such reviews and consultations
include evaluating and comparing internal results of operations
projections and external opportunities for mergers, acquisitions,
reorganizations, or other transactions with third parties which
may be in the interests of the Company's shareholders. The
Company's Board of Directors considers such periodic review and
consultation to be important as part of their analysis of the
Company's value and prospects in the changing banking environment
and in view of the current consolidation activity within the
banking industry.
<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
Not applicable
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 Schedule
<PAGE> 17
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: November 8, 1996 -------------------------
Mary Page Rourke, Treasurer
(Principal Financial and
Accounting 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3077
<INT-BEARING-DEPOSITS> 200
<FED-FUNDS-SOLD> 20500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14430
<INVESTMENTS-CARRYING> 22664
<INVESTMENTS-MARKET> 22013
<LOANS> 43957
<ALLOWANCE> 720
<TOTAL-ASSETS> 109705
<DEPOSITS> 83235
<SHORT-TERM> 0
<LIABILITIES-OTHER> 901
<LONG-TERM> 14062
0
0
<COMMON> 4458
<OTHER-SE> 7049
<TOTAL-LIABILITIES-AND-EQUITY> 109705
<INTEREST-LOAN> 3151
<INTEREST-INVEST> 1982
<INTEREST-OTHER> 518
<INTEREST-TOTAL> 5651
<INTEREST-DEPOSIT> 1982
<INTEREST-EXPENSE> 2585
<INTEREST-INCOME-NET> 3066
<LOAN-LOSSES> (50)
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 2184
<INCOME-PRETAX> 1171
<INCOME-PRE-EXTRAORDINARY> 726
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 726
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.63
<YIELD-ACTUAL> 8.20
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 192
<LOANS-PROBLEM> 1022
<ALLOWANCE-OPEN> 776
<CHARGE-OFFS> 38
<RECOVERIES> 32
<ALLOWANCE-CLOSE> 720
<ALLOWANCE-DOMESTIC> 465
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 255
</TABLE>
