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, 1997 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 28, 1997
Common Stock 1,059,144
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,
1997 1996*
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,352,000 $ 4,543,000
Federal funds sold 7,200,000 18,300,000
Total cash and equivalents 11,552,000 22,843,000
Securities available for sale 19,075,000 17,949,000
Securities held to maturity 36,095,000 24,111,000
Loans, net 52,653,000 52,033,000
Other real estate owned - 1,252,000
Premises and equipment 2,070,000 2,135,000
Other assets 1,775,000 1,461,000
TOTAL ASSETS $123,220,000 $121,784,000
============ ============
LIABILITIES
Deposits:
Non-interest bearing $ 21,873,000 $ 22,823,000
Interest bearing 64,508,000 66,621,000
Total deposits 86,381,000 89,444,000
Federal funds purchased - 1,500,000
Other borrowings 23,094,000 18,201,000
Accrued expenses and
other liabilities 1,174,000 687,000
TOTAL LIABILITIES 110,649,000 109,832,000
SHAREHOLDERS' EQUITY
Common stock, no par value;
Authorized: 20,000,000 shares;
Issued and outstanding:
1,059,144 and 1,036,392 shares 4,509,000 4,461,000
Retained earnings 8,215,000 7,717,000
Net unrealized loss on investments
available for sale (153,000) (226,000)
TOTAL SHAREHOLDERS' EQUITY 12,571,000 11,952,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $123,220,000 $121,784,000
============ ============
</TABLE>
*Derived from the December 31, 1996 audited balance sheet included
in the Company's 1996 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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
INTEREST INCOME:
<S> <C> <C> <C> <C>
Loans $1,331,000 $ 989,000 $2,634,000 $1,972,000
Investment securities 853,000 724,000 1,445,000 1,327,000
Federal funds sold 107,000 131,000 331,000 286,000
Total interest income 2,291,000 1,844,000 4,410,000 3,585,000
INTEREST EXPENSE:
Deposits 697,000 650,000 1,428,000 1,268,000
Other 358,000 189,000 638,000 385,000
Total interest expense 1,055,000 839,000 2,066,000 1,653,000
NET INTEREST INCOME BEFORE
CREDIT FOR CREDIT LOSSES 1,236,000 1,005,000 2,344,000 1,932,000
Credit for credit
losses - - - (50,000)
Net interest income after
credit for credit losses 1,236,000 1,005,000 2,344,000 1,982,000
Other income 111,000 81,000 233,000 151,000
Other expenses 824,000 727,000 1,604,000 1,449,000
INCOME BEFORE INCOME TAXES 523,000 359,000 973,000 684,000
Provision for income taxes 199,000 137,000 370,000 260,000
NET INCOME $ 324,000 $ 222,000 $ 603,000 $ 424,000
========== ========== ========== ==========
NET INCOME PER COMMON
AND EQUIVALENT SHARE $ 0.27 $ 0.20 $ 0.51 $ 0.38
========== ========== ========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
OPERATIONS:
Net income $ 603,000 $ 424,000
Adjustments to reconcile net income to
net cash provided by (used in)operating
activities:
Credit for credit losses - (50,000)
Depreciation and amortization 89,000 84,000
Other, net 253,000 (544,000)
Net cash provided by (used in)operating
activities 945,000 (86,000)
INVESTING ACTIVITIES:
Proceeds from sale of investments
available for sale 8,084,000 -
Proceeds from maturities of investments
available for sale 1,434,000 4,794,000
Proceeds from maturities of investments
held to maturity 1,571,000 1,787,000
Purchase of securities available for sale (10,814,000) (9,838,000)
Purchase of securities held to maturity (13,450,000) (3,986,000)
Net increase in loans (620,000) (1,854,000)
Purchases of premises and equipment (24,000) (328,000)
Sale of premises and equipment - 50,000
Proceeds from sale of OREO 1,311,000 652,000
Net cash used in investing activities (12,509,000) (8,723,000)
FINANCING ACTIVITIES:
Net (decrease) increase in deposits (3,063,000) 6,550,000
Exercise of stock options 48,000 -
Payment of dividends (105,000) (77,000)
Increase in other borrowings 4,893,000 1,362,000
Decrease in federal funds purchased (1,500,000) (1,500,000)
Net cash provided by financing activities 273,000 6,335,000
NET DECREASE IN CASH AND EQUIVALENTS (11,291,000) (2,474,000)
Cash and equivalents, beginning of period 22,843,000 22,939,000
Cash and equivalents, end of period $11,552,000 $20,465,000
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 5
SARATOGA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
QUARTERS ENDED JUNE 30, 1997 AND 1996
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 1,048,447 shares and 1,042,453 shares for the three
and six month periods ended June 30, 1997 (1,113,064 shares for
the comparable three and six month periods in 1996). In February
1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). Earlier application is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires
a dual presentation of basic and diluted EPS. Basic EPS excludes
dilution and is computed by dividing net income by the weighted
average common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock.
If SFAS 128 had been in effect during the current and prior year
periods, basic EPS would have been $0.31 and $0.58 for the three
and six month periods ended June 30, 1997, respectively ($0.22
and $0.41 for the comparable prior year periods). Diluted EPS
under SFAS 128 would not have been significantly different than
EPS currently reported for the periods.
3. During the six months ended June 30, 1997 and 1996, cash paid
for income taxes was $155,000 and $367,000, respectively. For
the six months ended June 30, 1997 and 1996, cash paid for
interest was $2,056,000 and $1,263,000, respectively.
<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 June 30, 1997, total assets were $123,220,000, a 1.2% increase
from $121,784,000 at December 31, 1996. Net loans increased
$620,000 (1.2%) from $52,033,000 at December 31, 1996 to
$52,653,000 at June 30, 1997. Total deposits decreased
$3,063,000 (3.4%) from $89,444,000 at December 31, 1996 to
$86,381,000 at June 30, 1997.
Net income for the second quarter of 1997 was $324,000 or $.27
per share compared to $222,000 or $.20 per share for the
comparable period in 1996. Net income for the first six months
of 1997 was $603,000 or $.51 per share compared to $424,000 or
$.39 per share for the comparable period in 1996.
The increase in income resulted primarily from an increase in the
volume of earning assets, offset in part by an increase in
interest expense due to the increased volume of interest-bearing
liabilities.
RESULTS OF OPERATIONS
SECOND QUARTER OF 1997 AND 1996
Certain matters discussed or incorporated by reference in this
Quarterly Report on Form 10-Q are forward-looking statements that
are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks
and uncertainties include, but are not limited to, matters
described in Item 2 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Therefore, the
information set forth therein should be carefully considered when
evaluating the business prospects of the Company and the Bank.
An analysis of the results of operations of the Company for the
second quarter of 1997 compared to the second quarter of 1996 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:
<PAGE> 6
<TABLE>
<CAPTION>
Three months ended June 30,
1997 1996
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) $ 53,224 $1,331 10.0% $ 37,651 $ 989 10.5%
Investment
securities 54,419 853 6.3 44,795 724 6.5
Federal funds sold 7,340 107 5.8 10,152 131 5.2
Total interest
earning assets 114,983 2,291 8.0 92,598 1,844 8.0
Cash and due from
banks 4,697 4,257
Other assets (3) 3,993 3,977
$123,673 $100,832
======== ========
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $ 37,173 315 3.4 $ 30,197 265 3.5
Time deposits 28,981 382 5.3 28,281 385 5.4
Other borrowings 22,694 358 6.3 11,537 189 6.6
Total interest-
bearing
liabilities 88,848 1,055 4.7 70,015 839 4.7
Demand deposits 21,448 18,768
Other liabilities 1,054 777
Total liabilities 111,350 89,560
Shareholders' equity 12,323 11,272
$123,673 $100,832
======= =======
Net interest income and margin $1,236 4.3% $1,005 4.3%
====== ======
</TABLE>
(1) Annualized.
(2) Loan interest income includes loan fee income of $83,000 and
$78,000 for the quarters ended June 30, 1997 and 1996,
respectively.
(3) Net of the average allowance for loan losses of $625,000 and
$714,000 and deferred loan fees of $330,000 and $289,000
for the quarters ended June 30, 1997 and 1996, 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 1997 and 1996 the Bank did not record a
provision for credit losses. There were $5,000 in loans charged-
off and $10,000 in recoveries in the second quarter of 1997, as
compared to $9,000 in loans charged-off and $12,000 in recoveries
in the second quarter of 1996.
At June 30, 1997, the allowance for credit losses was $625,000 or
1.2% of total loans, compared to $628,000 or 1.2% at December 31,
1996. There were no nonaccrual loans at June 30, 1997 or
December 31, 1996.
At June 30, 1997 and December 31, 1996, 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, 1997 in the
amount of $106,000 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, 1997, there were four potential
problem loans having a combined principal balance of $757,000
($1,140,000 at December 31, 1996). 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 June 30, 1997, there was no Other Real Estate Owned
("OREO")($1,252,000 at December 31, 1996).
<PAGE> 9
Nonperforming loans and other real estate owned are summarized
below:
June 30, 1997 December 31, 1996
Nonperforming loans:
Past due 90 days or more $ - $ -
Nonaccrual - -
Total - -
Other real estate owned - 1,252,000
Total nonperforming loans and
other real estate owned $ - $1,252,000
========== ==========
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
$32,000,000 in real estate loans representing approximately 61%
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 increased from
$81,000 in the second quarter of 1996 to $111,000 in the second
quarter of 1997. This increase is primarily attributable to a
gain on sale of OREO of $7,000, an increase in rental income on
assets acquired for lease of $12,000 and an increase of $19,000
in service charges assessed on deposit accounts.
NONINTEREST EXPENSES
Other expenses increased from $727,000 in the second quarter of
1996 to $824,000 in the second quarter of 1997. The increase is
primarily attributable to a loss on sale of securities of $35,000
and an increase in salary expense of $16,000 and in advertising and
public relations expenses of $29,000. As a percentage of average earning
assets, other expenses for the second quarter, on an annualized basis,
decreased from 3.1% in 1996 to 2.9% in 1997.
<PAGE> 10
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
An analysis of the results of operations of the Company for the
six month period ended June 30, 1997 compared to the comparable
period in 1996 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,
1997 1996
Average Average Average Average
Balance Interest Yield(1) Balance Interest Yield(1)
(In thousands, except percentages)
Assets: (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans (2) $ 53,138 $2,634 9.9% $37,599 $1,972 10.5%
Investment
securities 48,024 1,445 6.0 41,365 1,327 6.4
Federal funds sold 12,529 331 5.3 11,016 286 5.2
Total interest
earning assets 113,691 4,410 7.8 89,980 3,585 8.0
Cash and due from
banks 4,573 4,097
Other assets (3) 3,999 4,107
$122,263 $98,184
======== =======
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $ 37,095 626 3.4 $29,072 467 3.2
Time deposits 30,340 802 5.3 27,789 801 5.8
Other borrowings 20,459 638 6.2 11,816 385 6.5
Total interest-
bearing
liabilities 87,875 2,066 4.7 68,677 1,653 4.8
Demand deposits 21,249 17,529
Other liabilities 927 827
Total liabilities 110,050 87,033
Shareholders' equity 12,193 11,151
$122,263 $98,184
======== =======
Net interest income and margin $2,344 4.1% $1,932 4.3%
====== ======
</TABLE>
(1) Annualized.
(2) Loan interest income includes loan fee income of $166,000
and $146,000 for the six months ended June 30, 1997 and
1996, respectively.
(3) Net of the average allowance for loan losses of $624,000 and
$738,000, and deferred loan fees of $325,000 and $292,000
for the six months ended June 30, 1997 and 1996,
respectively.
<PAGE> 11
PROVISION FOR CREDIT LOSSES
During the first six months of 1997, 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 $23,000 in loans charged
off and $20,000 in recoveries for the six months ended June 30,
1997, compared to $33,000 in loans charged off and $23,000 in
recoveries for the first six months of 1996.
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
$151,000 in 1996 to $233,000 in 1997. The increase is primarily
attributable to an increase in service charges assessed on
deposit accounts of $51,000, a gain on sale of loans of $12,000
and a gain on sale of OREO of $7,000.
NONINTEREST EXPENSES
Other expenses have increased from $1,449,000 in 1996 to
$1,604,000 in 1997 due primarily to a loss on sale of securities
of $35,000 and an increase in salary expense of $62,000 and legal
expenses of $35,000. As a percentage of average earning assets,
other expenses, on an annualized basis, decreased from 3.2% in
1996 to 2.8% in 1997.
<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, 1997 liquid assets as a
percentage of deposits were 35% (46% at December 31, 1996). 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 $11.0
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, 1997,
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 exposure to
interest rates through the next five years. 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, 1997
(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 $ 7,200 - - - - $ 7,200
Municipal
securities 405 - $ 200 $ 2,009 $ 2,651 5,265
U.S. Treasury
and agency
securities 3,347 - 2,993 17,765 21,485 45,590
FRB stock - - - - 4,315 4,315
Loans 29,250 1,188 2,943 7,858 12,398 53,637
Total
earning
assets $40,202 $ 1,188 $ 6,136 $27,632 $40,849 116,007
Interest
bearing
demand
accounts $33,240 - - - - 33,240
Savings
accounts 4,257 - - - - 4,257
Time
certificates
of deposit
of $100,000
or more 6,809 $ 1,800 $ 2,140 $ 2,169 - 12,918
Other time
deposits 3,487 4,275 4,076 2,255 - 14,093
Other
borrowings - - 5,000 7,082 $11,012 23,094
Total interest
-bearing
liabilities $47,793 $ 6,075 $ 11,216 $11,506 $11,012 87,602
Interest rate
sensitivity
gap $(7,591) $(4,887) $ (5,080) $16,126 $29,837 $28,405
======= ======= ======== ======= ======= =======
Cumulative
interest rate
sensitivity
gap $(7,591) $(12,478) $(17,558) $(1,432) $28,405
======= ======= ======== ======= =======
Interest rate
sensitivity
gap ratio 0.84% 0.20% 0.55% 2.40% N/A
Cumulative
interest rate
sensitivity
gap ratio 0.84% 0.77% 0.73% 0.98% 1.32%
</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 June 30, 1997, the Company's total risk-based
capital ratio was approximately 19.6% (approximately 18.6% for
the Bank) compared to approximately 18.0% (approximately 17.1%
for the Bank) at December 31, 1996.
The BGFRS and the OCC 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,
1997 and the year ended December 31, 1996.
June 30, 1997 December 31, 1996
Leverage ratio 10.3% 10.5%
Tier 1 capital ratio 18.7% 17.1%
Total risk-based capital ratio 19.6% 18.0%
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 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
The shareholders of Saratoga Bancorp took the following
action at the Annual Meeting of Shareholders held on May
22, 1997 at the Company's main office located at
12000 Saratoga-Sunnyvale Road, Saratoga, California:
1. Approved the election of management's slate of nominees
for directors, each of whom were incumbent directors, as
follows:
Votes
For Withheld
Victor Aboukhater 605,907 None
Robert G. Egan 605,907 None
William D. Kron 605,907 None
John F. Lynch, III 605,907 None
V. Ronald Mancuso 605,907 None
Richard L. Mount 605,907 None
2. Ratified appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal
year ending December 31, 1997.
VOTES
FOR 768,449
AGAINST 23,838
ABSTAIN 30,447
<PAGE> 17
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 May 28, 1997, Registrant filed a Current
Report on Form 8-K, dated May 28, 1997
reporting under Item 5 (Other Events)
detailing actions taken at the Annual Meeting
of Shareholders of Registrant held on May 22,
1997. 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: July 29, 1997 -------------------------
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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4352
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19075
<INVESTMENTS-CARRYING> 36095
<INVESTMENTS-MARKET> 36083
<LOANS> 52653
<ALLOWANCE> 625
<TOTAL-ASSETS> 123220
<DEPOSITS> 86381
<SHORT-TERM> 5000
<LIABILITIES-OTHER> 1174
<LONG-TERM> 18094
0
0
<COMMON> 4509
<OTHER-SE> 8062
<TOTAL-LIABILITIES-AND-EQUITY> 123220
<INTEREST-LOAN> 2634
<INTEREST-INVEST> 1445
<INTEREST-OTHER> 331
<INTEREST-TOTAL> 4410
<INTEREST-DEPOSIT> 1428
<INTEREST-EXPENSE> 2066
<INTEREST-INCOME-NET> 2344
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (34)
<EXPENSE-OTHER> 1570
<INCOME-PRETAX> 973
<INCOME-PRE-EXTRAORDINARY> 603
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 603
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.51
<YIELD-ACTUAL> 4.1
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 106
<LOANS-PROBLEM> 757
<ALLOWANCE-OPEN> 628
<CHARGE-OFFS> 23
<RECOVERIES> 20
<ALLOWANCE-CLOSE> 625
<ALLOWANCE-DOMESTIC> 368
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 257
</TABLE>
