<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report October 13, 1998
----------------
PNB FINANCIAL GROUP
---------------------------------
(Exact name of registrant as specified in its charter)
California 2-78580 95-3847640
---------------------- ----------------- ----------------
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
4665 MacArthur Court
Newport Beach, Ca. 92660
-----------------
(Address of principal executive offices)
Registrant's telephone number, including area code (949) 851-1033
--------------
________________________________________________________________________________
(Former name or former address, if changed since last report)
================================================================================
<PAGE>
Item 5. Other Events
- --------------------
On October 12, the Registrant issued a press release announcing third quarter
earnings. A copy of the press release is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
- -----------------------------------------
Exhibit No. Description
99.1 Press Release issued October 12, 1998
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereon as duly authorized.
DATED: October 13, 1998 PNB FINANCIAL GROUP,
a California corporation
By: /s/ Doug L. Heller
-------------------------------------
Doug L. Heller
Chief Financial Officer
<PAGE>
EXHIBIT 99.1
PNB FINANCIAL GROUP FOR ADDITIONAL INFORMATION CALL:
4665 MacArthur Court Doug Heller, Executive Vice President and
Newport Beach, CA 92660 Chief Financial Officer
(949-851-1033)
P R E S S R E L E A S E
PACIFIC NATIONAL BANK REPORTS RECORD
THIRD QUARTER EARNINGS, UP 64%.
NEWPORT BEACH, California, October 12, 1998 - Pacific National Bank's ("PNB")
parent Company, PNB Financial Group (Nasdaq - PNBF), reported a 64% increase
in third quarter 1998 net income over third quarter 1997. The Company reported
Record net income of $2,025,000 for the three months ended September 30, 1998,
an increase over the net income of $1,235,000 for the three months ended
September 30, 1997. These earnings bring the Company's net income for the nine
months ended September 30, 1998 to a record $5,536,000, a 66% increase over the
net income of $3,329,000 for the same period in 1997. Annualized, the first
nine month earnings equate to a 26% return on average shareholder's equity
(ROAE) and 3.0% return on average assets. This compares to annualized ROAE for
the nine months ended September 30, 1997 and for the year ended December 31,
1997 of 21.4% and 23.5%, respectively.
The Company's fully diluted earnings per share were $0.70 and $1.93 for the
three and nine months ended September 30, 1998 compared to $0.44 and $1.25 for
the same period in 1997. As of September 30, 1998, the Company's diluted book
value per share was $11.70. Per share and book value figures are based on
shares outstanding after a fifteen percent (15%) stock dividend which was paid
on April 15, 1998.
In addition, the Company's total assets increased 20% from $229.5 million at
September 30, 1997 to $275.0 million at September 30, 1998. Total commercial
loans increased 20.8% from 113.6 million at September 30, 1997 to 137.1 million
at September 30, 1998, while core deposits increased 5% during the same period.
The increase in loans and deposits is due in part to the strong economic growth
in the Southern California market place. The Company's nonperforming assets
dropped 50% from 1.0% of total assets as of September 30, 1997 to 0.5% of total
assets as of September 30, 1998. At September 30, 1998, the Company's tier I
and total risk weighted capital ratios were 16.7% and 17.8% respectively, while
its leverage capital ratio was 12.3%.
PNB's residential mortgage loan department funded $380 million in residential
mortgage loans during the three months ended September 30, 1998, a 23.5%
increase over the same period in 1997. For the nine months ended September 30,
1998 PNB funded $1.12 billion in residential mortgage loans, a 41.1% increase
over the $792 million in the same period in 1997. The increase in mortgage
lending was in part due to the lower interest rate environment and an increase
in loan refinancing. Over 95% of loans funded were "A" quality loans. PNB
sells substantially all of its mortgage loans on a service released basis and
holds no volatile servicing assets. Further, PNB does not securitize its
mortgage assets and therefore retains no residual or other liability interest in
the loans. Finally, PNB sells its mortgage loan on a non recourse basis except
in the event the mortgage loan documents contain fraudulent information. The
residential mortgage division accounted for approximately 47% of the Company's
profits during the nine months ended September 30, 1998 compared to
approximately 52% during the nine months ended September 30, 1997.
On October 7, 1998 the Company announced the signing of a definitive agreement
to merge with Western Bancorp ("Western") (Nasdaq - WEBC). The Company's
shareholders will receive one share of Western for each outstanding share of
the Company in a transaction expected to qualify as a tax free exchange. The
acquisition is expected to close in the first quarter of 1999. Both companies
have completed their due diligence. Completion of the transaction is
conditional upon the receipt of shareholder and applicable regulatory approvals.
It is the intention of Western to merge PNB into Southern California Bank, a
wholly owned subsidiary of Western, following the consummation of the
acquisition
This merger allows the Company to align itself with a larger, more diversified
and fast growing banking institution which the Company believes is better
positioned to take advantage of the current Southern California economy. The
Company believes that PNB's customers should enjoy numerous new services while
continuing to work with many of
<PAGE>
the same lending officers and staff.
Pro forma with the pending acquisitions of the Company, Peninsula Bank of San
Diego and Bank of Los Angeles, Western will have approximately $3.0 billion in
assets and three banking subsidiaries: Peninsula Bank operating in San Diego,
Southern California Bank operating primarily in Orange County and Santa Monica
Bank operating in Los Angeles County.
PNB operates three commercial business offices located in Newport Beach,
Orange, and Beverly Hills. PNB also operates an SBA Loan Department, a
Financial Services Department, a Commercial Real Estate Lending Department, and
a Construction Loan Department, all in Newport Beach, along with Residential
Mortgage Loan Operations in Irvine, San Diego, Santa Ana and Dublin, California
with several other smaller satellite offices in Arizona.
Forward-Looking Statements
This Press release includes forward-looking statements that involve inherent
risks and uncertainties. The Company caution readers that a number of important
factors could cause actual results to differ materially from those in the
forward-looking statements. These factors include economic conditions and
competition in the geographic and business areas which the Company and Western
operate, inflation, fluctuations in interest rates, legislation and governmental
regulation and the consummation of the merger with Western and the integration
of PNB with Western's subsidiaries.
<PAGE>
PNB FINANCIAL GROUP
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
AS OF %
BALANCE SHEET 9/30/96 9/30/97 CHANGE
- ----------------------------------------------------------------
<S> <C> <C> <C>
CASH & DUE FROM BANKS $ 29,191 $ 19,369 50.7%
INVESTMENT SECURITIES 6,093 7,000 -13.0%
FEDERAL FUNDS SOLD 2,500 0 N/A
MORTGAGE LOANS HELD FOR SALE 95,137 86,697 9.7%
PORTFOLIO LOANS 137,142 113,561 20.8%
LOANS LOSS RESERVE (2,061) (2,405) -14.3%
-------- --------
NET LOANS 135,061 111,156 21.5%
OTHER REAL ESTATE OWNED 759 563 34.8%
INVESTMENT IN REIT 2,500 0 N/A
OTHER ASSETS 3,756 4,735 -20.7%
TOTAL ASSETS $275,017 $229,520 19.8%
======== ========
CUSTOMERS DEPOSITS $200,456 $190,882 5.0%
BROKERED DEPOSITS 15,000 7,000 114.3%
-------- --------
TOTAL DEPOSITS 215,456 197,882 8.9%
SHORT-TERM BORROWING 22,855 6,000 280.9%
OTHER LIABILITIES 5,200 3,095 68.0%
-------- --------
TOTAL EQUITY 31,506 22,543 39.8%
TOTAL LIABILITIES & EQUITY $275,017 $229,520 19.8%
======== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPT 30, % SEPT 30, %
AVERAGE BALANCE SHEET 1996 1997 CHANGE 1996 1997 CHANGE
- ------------------------------------------------------------------ -----------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH & DUE FROM BANKS $ 9,368 $ 14,114 -33.6% $ 11,747 $ 12,923 -9.1%
INVESTMENT SECURITIES 8,560 7,092 20.7% 7,793 7,240 7.6%
FEDERAL FUNDS SOLD 8,854 3,883 128.0% 7,303 5,227 39.7%
MORTGAGE LOANS HELD FOR SALE 91,669 72,969 25.6% 90,617 80,535 49.7%
PORTFOLIO LOANS 128,592 109,323 17.6% 122,927 105,746 16.2%
LOANS LOSS RESERVE (1,904) (1,879) 1.3% (1,709) (1,816) -5.9%
-------- -------- -------- --------
NET LOANS 126,688 107,444 17.9% 121,218 103,930 16.6%
OTHER REAL ESTATE OWNED 1,006 2,529 -60.2% 1,112 3,422 -67.5%
INVESTMENT IN REIT 2,500 0 N/A 2,500 0 N/A
OTHER ASSETS 5,257 3,388 55.2% 4,748 3,433 38.3%
TOTAL ASSETS $253,902 $211,419 20.1% $247,038 $196,710 25.6%
======== ======== ======== ========
CUSTOMER DEPOSITS $195,368 $176,454 10.7% $186,521 $164,932 13.1%
BROKERED DEPOSITS 15,004 7,166 109.4% 22,509 6,122 267.7%
-------- -------- -------- --------
TOTAL DEPOSITS 210,392 183,620 14.6% 209,030 171,054 22.2%
SHORT-TERM BORROWING 7,427 2,742 170.9% 6,014 2,413 149.2%
OTHER LIABILITIES 5,042 2,886 74.7% 3,641 2,524 44.3%
-------- -------- -------- --------
TOTAL LIABILITIES 222,861 189,248 17.8% 218,685 175,991 24.3%
TOTAL EQUITY 31,041 22,171 40.0% 28,353 20,719 36.8%
TOTAL LIABILITIES & EQUITY $253,902 $211,419 20.1% $247,O38 $196,710 25.6%
======== ======== ======== ========
</TABLE>
<PAGE>
PNB FINANCIAL GROUP
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPT 30, % SEPT 30, %
INCOME STATEMENT 1998 1997 CHANGE 1998 1997 CHANGE
---------------- --------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
TOTAL INTEREST & FEE INCOME $5,234 $4,276 22.4% $15,014 $11,824 27.0%
TOTAL INTEREST EXPENSE 1,384 1,082 27.9% 4,111 2,915 41.0%
PROVISION FOR LOAN LOSSES 225 570 -60.5% 575 765 -24.8%
------ ------ ------- -------
NET INTEREST INCOME AFTER PROVISION 3,625 2,624 38.1% 10,328 8,144 26.8%
OTHER INCOME:
SBA SALES PREMIUM 108 129 -16.3% 312 415 -24.8%
SERVICE CHARGES, FEE & OTHER 243 402 -39.6% 898 963 -6.7%
------ ------ ------- -------
TOTAL OTHER INCOME 351 531 -33.9% 1,210 1,378 -12.2%
OTHER EXPENSES:
SALARIES AND BENEFITS 969 1,006 -3.7% 2,962 3,246 -8.7%
OCCUPANCY 303 327 -7.3% 903 1,043 -13.4%
OTHER EXPENSES 935 830 12.7% 2,662 2,539 4.8%
------ ------ ------- -------
TOTAL NONINTEREST EXPENSES 2,207 2,163 2.0% 6,527 6,828 -4.4%
INCOME FROM BANK OPERATIONS 1,769 992 78.3% 5,011 2,694 86.0%
RESIDENTIAL MORTGAGE LENDING:
INCOME 6,114 3,779 61.8% 16,627 10,437 59.3%
EXPENSES 4,393 2,678 64.0% 12,095 7,461 62.1%
------ ------ ------- -------
INCOME FROM MORTGAGE OPERATION 1,721 1,101 56.3% 4,532 2,976 52.3%
INCOME BEFORE INCOME TAXES 3,490 2,093 66.7% 9,543 5,670 68.3%
INCOME TAXES 1,465 858 70.7% 4,007 2,341 71.2%
------ ------ ------- -------
NET INCOME $2,025 $1,235 64.0% $ 5,536 $ 3,329 66.3%
====== ====== ======= =======
PER SHARE DATA
- --------------
NET INCOME (BASIC) $ 0.73 $ 0.48 52.1% $2.04 $1.33 53.4%
NET INCOME (DILUTED) 0.70 0.44 59.1% 1.93 1.25 54.4%
BOOK VALUE 11.70 8.75 33.7%
MARKET VALUE, NASDAQ-PNBF 30.00 14.35 109.1%
COMMON SHARES OUTSTANDING (END OF PERIOD) 2,779,733 2,611,118 2,779,733 2,611,118
FULLY DILUTED AVERAGE SHARES OUTSTANDING 2,909,520 2,780,857 2,865,098 2,672,996
KEY RATIOS & OTHER INFORMATION
- ------------------------------
RETURN ON AVERAGE ASSETS 3.19% 2.34% 36.5% 2.99% 2.26% 32.4%
RETURN ON AVERAGE EQUITY 26.09% 22.28% 17.1% 26.03% 21.42% 21.5%
MORTGAGE VOLUME 379,686 307,354 23.5% 1,117,142 791,664 41.1%
MORTGAGE INCOME/VOLUME 0.45% 0.36% 26.5% 0.41% 0.38% 7.9%
NONPERFORMING ASSETS 1,273 2,399 -46.9%
NONPERFORMING ASSETS/TOTAL ASSETS 0.46% 1.05% -55.7%
LOAN LOSS RESERVE/TOTAL LOANS 1.50% 2.12% -29.0%
EQUITY CAPITAL TO ASSETS 11.46% 9.82% 16.6%
</TABLE>
