UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 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: 0-11771
SJNB FINANCIAL CORP.
(Exact name of small business issuer as specified in its charter)
California 77-0058227
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE NORTH MARKET STREET, SAN JOSE, CALIFORNIA 95113
(Address of principal executive offices) (Zip Code)
(408) 947-7562
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address and fiscal year, if changed, since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 2,489,952
shares of common stock outstanding as of April 30, 1997
Transitional Small Business Disclosure Format; Yes No X
<PAGE>
PART I - FINANCIAL INFORMATION
Page
Item 1. - FINANCIAL STATEMENTS
SJNB FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 7-19
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 20
Item 2. CHANGES IN SECURITIES 20
Item 3. DEFAULTS UPON SENIOR SECURITIES 20
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 20
Item 5. OTHER INFORMATION 20
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES 23
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SJNB FINANCIAL CORP. AND SUBSIDIARY
<TABLE>
<CAPTION>
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
March 31, December 31,
Assets 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $16,844 $20,208
Money market investments 27,619 19,800
Investment securities:
Available for sale 47,457 48,044
Held to maturity (Fair value: $15,231 at March 31, 1997
and $15,231 at December 31, 1996) 15,090 15,072
- ----------------------------------------------------------------------------------------------------------
Total investment securities 62,547 63,116
- ----------------------------------------------------------------------------------------------------------
Loans 204,164 198,627
Allowance for possible loan losses (4,015) (4,005)
- ----------------------------------------------------------------------------------------------------------
Loans, net 200,149 194,622
- ----------------------------------------------------------------------------------------------------------
Premises and equipment, net 3,978 4,001
Other real estate owned 454 454
Accrued interest receivable and other assets 4,792 2,737
Intangibles, net of accumulated amortization of $860 at
March 31, 1997 and $735 at December 31, 1996 4,348 4,465
- ----------------------------------------------------------------------------------------------------------
Total $320,731 $309,403
==========================================================================================================
Liabilities and Shareholders' Equity
- ----------------------------------------------------------------------------------------------------------
Deposits:
Noninterest-bearing $67,802 $80,774
Interest-bearing 210,595 163,865
- ----------------------------------------------------------------------------------------------------------
Total deposits 278,397 244,639
- ----------------------------------------------------------------------------------------------------------
Other short-term borrowings 6,580 29,688
Accrued interest payable and other liabilities 5,911 3,871
- ----------------------------------------------------------------------------------------------------------
Total liabilities 290,888 278,198
- ----------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock, no par value; authorized, 20,000 shares;
issued and outstanding, 2,507 shares at March 31, 1997
and 2,571 shares at December 31, 1996 19,064 20,880
Retained earnings 10,941 10,263
Net unrealized gain (loss) on securities available for sale (162) 62
- ----------------------------------------------------------------------------------------------------------
Total shareholders' equity 29,843 31,205
- ----------------------------------------------------------------------------------------------------------
Commitments and contingencies ---- ----
- ----------------------------------------------------------------------------------------------------------
Total $320,731 $309,403
==========================================================================================================
<FN>
See accompanying Notes to Unaudited Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
SJNB FINANCIAL CORP. AND SUBSIDIARY
<TABLE>
<CAPTION>
Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
Quarter ended
March 31,
-----------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------------------
Interest income:
<S> <C> <C>
Interest and fees on loans $5,074 $4,914
Interest on money market investments 279 30
Interest and dividends on investment securities available for sale 737 682
Interest on investment securities held to maturity 244 226
Other interest and investment income (2) (2)
- --------------------------------------------------------------------------------------------------------------------
Total interest income 6,332 5,850
- --------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest expense on interest-bearing deposits:
Certificates of deposit over $100 686 621
Other 1,438 1,308
- --------------------------------------------------------------------------------------------------------------------
Total interest expense 2,124 1,929
- --------------------------------------------------------------------------------------------------------------------
Net interest income 4,208 3,921
- --------------------------------------------------------------------------------------------------------------------
Provision for possible loan losses ---- 20
- --------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
possible loan losses 4,208 3,901
- --------------------------------------------------------------------------------------------------------------------
Other income:
Service charges on deposits 134 133
Other operating income 134 127
- --------------------------------------------------------------------------------------------------------------------
Total other income 268 260
- --------------------------------------------------------------------------------------------------------------------
Other expenses:
Salaries and benefits 1,411 1,402
Occupancy 180 171
Other 796 900
- --------------------------------------------------------------------------------------------------------------------
Total other expenses 2,387 2,473
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 2,089 1,688
Income taxes 884 729
- --------------------------------------------------------------------------------------------------------------------
Net income $1,205 $959
====================================================================================================================
Net income per share $0.45 $0.37
====================================================================================================================
Weighted average shares 2,675 2,578
====================================================================================================================
<FN>
See accompanying Notes to Unaudited Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
SJNB FINANCIAL CORP. AND SUBSIDIARY
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Quarter ended
March 31,
------------------------------------
1997 1996
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $1,205 $959
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses ---- 20
Depreciation and amortization 128 118
Amortization on intangibles 117 125
Amortization of premium on investment securities, net (5) (2)
Increase in deferred tax benefit (1,535) ----
Increase in accrued interest receivable and other assets (412) (1,172)
Increase (decrease) in accrued interest payable and other liabilities 2,081 (193)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 1,579 (145)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of securities available for sale 3,182 1,079
Purchase of securities available for sale (2,981) (7,251)
Cash and equivalents used to acquire Astra Financial Corp. ---- (650)
Loans, net (5,527) (7,045)
Capital expenditures (106) (151)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,432) (14,018)
- ---------------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Deposits, net 33,758 7,045
Other short-term borrowings (repayments) (23,108) 7,567
Cash dividends (526) (365)
Stock buyback (1,881) ----
Proceeds from stock options exercised 65 83
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 8,308 14,330
- ---------------------------------------------------------------------------------------------------------------------
Net increase in cash and equivalents 4,455 167
Cash and equivalents at beginning of period 40,008 15,774
- ---------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $44,463 $15,941
=====================================================================================================================
Other cash flow information:
Interest paid $2,144 $4,398
====================================
Income taxes paid ---- $965
=====================================================================================================================
Noncash transactions:
Unrealized loss on securities available for sale, net of tax $(234) $(307)
=====================================================================================================================
<FN>
See accompanying Notes to Unaudited Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
SJNB FINANCIAL CORP. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Note A Unaudited Condensed Consolidated Financial Statements
The unaudited consolidated financial statements of SJNB Financial
Corp. (the "Company") and its subsidiary, San Jose National Bank, are
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q. In the opinion of management, all adjustments necessary for a
fair presentation of the financial position, results of operations
and cash flows for the periods have been included and are normal and
recurring. The results of operations and cash flows are not
necessarily indicative of those expected for the full fiscal year.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report to Shareholders
for the year ended December 31, 1996.
Note B Net Income Per Share of Common Stock
The weighted average number of common stock shares and common stock
equivalent shares used in computing net income per share of common
stock are set forth below for the periods indicated:
Weighted Average Number of Shares Outstanding
--------------------------------------------------------------------
Quarter ended
March 31,
-----------------------
1997 1996
--------------------------------------------------------------------
Weighted average number of shares
outstanding during the period 2,559 2,426
Common stock equivalents 115 152
-----------------------
Total 2,674 2,578
====================================================================
Statement of Financial Accounting Standards No. 128, Earnings per
Share, was issued in February 1997 ("SFAS No. 128") and is effective
for years ending after December 15, 1997. The Statement specifies the
computation, presentation and disclosure requirements for earnings
per share ("EPS"). This Statement's objective is to simplify the
computation of earnings per share and to make the U.S. standard for
computing earnings per share more compatible with the EPS standards
of other countries and with that of the International Accounting
Standards Committee. Under this approach, EPS is to be calculated and
reported as two separate calculations: Basic EPS, similar to the
previous primary earnings per share excluding common stock
equivalents; and, Diluted EPS, similar to the previous fully diluted
earnings per share. Earnings per share as if calculated under the
provisions of SFAS No. 128 for the first quarter of 1997 is as
follows:
March 31,
1997 1996
--------------------------------------------------------------------
Basic earnings per share $0.49 $.39
Diluted earning per share $0.45 $.37
====================================================================
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SJNB Financial Corp. (the "Company") is the holding company for San Jose
National Bank ("SJNB" and the "Bank"), San Jose, California. This discussion
focuses primarily on the results of operations of the Company on a consolidated
basis for the three months ended March 31, 1997 and the liquidity and financial
condition of the Company and SJNB as of March 31, 1997 and December 31, 1996.
All dollar amounts in the text in Item 2 are in thousands, except per share
amounts or as otherwise indicated.
Certain matters discussed in this report are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements. Such risks
and uncertainties include, but are not limited to, the competitive environment
and its impact on the Company's net interest margin, changes in interest rates,
asset quality risks, concentrations of credit and the economic health of Santa
Clara County (particularly the health of the semiconductor industry), volatility
of rate sensitive deposits, asset/liability matching risks, the dilutive impact
which might occur upon the issuance of new shares of common stock, and liquidity
risks. Therefore, the matters set forth below should be carefully considered
when evaluating the Company's business and prospects. For additional information
concerning these risks and uncertainties, please refer to the Company's Annual
Report or Form 10-KSB for the year ended December 31, 1996.
The following presents selected financial data and ratios as of and for the
three months ended March 31, 1997 and 1996:
SELECTED FINANCIAL DATA AND RATIOS
- --------------------------------------------------------------------------------
For the quarters
ended March 31,
--------------------
SELECTED ANNUALIZED OPERATING RATIOS: 1997 1996
- --------------------------------------------------------------------------------
Return on average equity 15.86% 14.42%
Return on average tangible equity 20.32 20.13
Return on average assets 1.61 1.50
Net chargeoffs to average loans (recoveries) (.02) .13
Average equity to average assets 10.12 10.37
Average tangible equity to average tangible assets 8.80 8.56
================================================================================
At March 31, At December 31,
PER SHARE DATA: 1997 1996
- --------------------------------------------------------------------------------
Shareholders' equity per share $11.90 $12.14
Tangible equity per share $10.17 $10.40
SELECTED FINANCIAL POSITION RATIOS:
- --------------------------------------------------------------------------------
Leverage capital ratio 8.50% 9.28%
Nonperforming loans to total loans .60 .27
Nonperforming assets to total assets .52 .32
Allowance for possible loan losses to total loans 1.97 2.02
Allowance for possible loan losses
to nonperforming loans 327 733
Allowance for possible loan losses
to nonperforming assets 239 401
================================================================================
<PAGE>
Summary of Financial Results
The Company reported net income of $1,205 or $.45 per share for the quarter
ended March 31, 1997, compared with net income of $959 or $.37 per share for the
first quarter of 1996. The improvement in earnings is due primarily to an
increase in the net interest income due to the growth in volume and a decrease
in non-interest expense and taxes.
Net Interest Income
Net interest income for the quarter ended March 31, 1997 increased $287 as
compared to the same quarter a year ago. The Bank's average earning assets for
the same period increased by $42 million, primarily as the result of the
significant growth in the Bank's loan portfolio.
Net interest margin for the first quarter of 1997 was 6.17% as compared to 6.71%
for the same quarter in 1996. This decrease was primarily related to a decline
in the yield on interest-bearing assets from 9.99% in the first quarter of 1996
to 9.26% in 1997. This was mainly attributable to the decline of yields on loans
from 10.85% for the first quarter of 1996 to 10.14% in 1997. Offsetting this
decline in interest income earned on earning assets was the decline in the
Bank's cost of funds. Such funds had an average cost of 3.41% for the first
quarter of 1996 as compared to 3.19% for the same period in 1997. This was
mainly due to the increase in the levels of non-interest bearing deposits, which
increased from 24.7% of total average deposits in 1996 to 26.4% in 1997. See
"Funding."
Although economic conditions in Northern California have remained strong in
1997, the competitive environment within the Bank's marketplace continues to be
aggressive and the competition between lenders for additional loan growth has
caused more competitive pricing; as reflected in the 1997's first quarter
results.
Due to the nature of the Company's target market in which loans are generally
tied to the prime rate, management believes modest increases in interest rates
should positively affect the Company's net interest margin. Conversely,
Management believes stable or declining rates will tend to have an adverse
impact on net interest margin. The Bank utilizes various vehicles to hedge its
interest rate position. See "Loans" and "Asset/Liability Management."
<PAGE>
<TABLE>
<CAPTION>
The following table shows the composition of average earning assets and average
funding sources, average yields and rates and the net interest margin, on an
annualized basis, for the three months ended March 31, 1997 and 1996.
AVERAGE BALANCES, RATES AND YIELDS
Fully Taxable Equivalent
(dollars in thousands) Quarter ended March 31,
---------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------------------
Average Average Average Average
Assets Balance Interest Yield (1) Balance Interest Yield (1)
- --------------------------------------------------------------------------------------------------------------------
Interest earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans, net (2) $194,558 $5,074 10.58% $173,495 $4,914 11.52%
Securities available for sale (3) 47,851 737 6.25 45,480 682 6.10
Securities held to maturity:
Taxable (4) 12,447 212 6.91 12,195 190 6.34
Nontaxable (5) 2,633 53 8.21 3,059 60 7.98
Money market investments 20,685 279 5.47 2,373 30 5.14
Interest rate hedging instruments ---- (2) ---- ---- (2) ----
- ---------------------------------------------------------------- ---------------------------
Total interest-earning assets 278,174 6,353 9.26 236,602 5,874 9.99
- ---------------------------------------------------------------- ---------------------------
Allowance for possible loan losses (4,011) (3,965)
Cash and due from banks 19,097 13,785
Other assets 6,733 6,561
Core deposit intangibles and
goodwill, net 4,399 5,099
- ---------------------------------------------------- ---------------
Total $304,392 $258,082
==================================================== ===============
Liabilities and Shareholders' equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand $42,943 287 2.71 $37,330 261 2.84
Money market and savings 79,013 705 3.62 53,092 406 3.11
Certificates of deposit:
Less than $100 15,501 205 5.36 14,273 195 5.56
$100 or more 49,479 686 5.62 43,414 621 5.82
- ---------------------------------------------------------------- ---------------------------
Total certificates of deposits 64,980 891 5.56 57,687 816 5.75
- ---------------------------------------------------------------- ---------------------------
Other borrowings 16,696 241 5.85 30,403 446 5.97
- ---------------------------------------------------------------- ---------------------------
Total interest-bearing liabilities 203,632 2,124 4.23 178,512 1,929 4.35
- ---------------------------------------------------------------- ---------------------------
Noninterest-bearing demand 67,145 48,457
Accrued interest payable and
other liabilities 2,809 4,355
- ---------------------------------------------------- ---------------
Total liabilities 273,586 231,324
- ---------------------------------------------------- ---------------
Shareholders' equity 30,806 26,758
- ---------------------------------------------------- ---------------
Total $304,392 $258,082
====================================================------------ ===============------------
Net interest income and margin (6) $4,229 6.17% $3,945 6.71%
========================================= ========================= ========================
<FN>
(1) Rates are presented on an annualized basis.
(2) Includes loan fees of $248 for 1997, and $240 for 1996. Nonperforming loans
have been included in average loan balances.
(3) Includes dividend income of $58 and $54 received in 1997 and 1996.
(4) Includes dividend income of $8 received in 1997 and 1996.
(5) Adjusted to a fully taxable equivalent basis using the federal statutory
rate ($21 in 1997 and $24 in 1996).
(6) The net interest margin represents the fully taxable equivalent net
interest income as a percentage of total average earning assets.
</FN>
</TABLE>
<PAGE>
The following table shows the effect on the interest differential of volume and
rate changes for the quarters months ended March 31, 1997 and 1996. Changes not
solely attributable to volume or rates are allocated to volume and rate in
proportion to the relationship to the absolute dollar amounts of changes in
each.
VOLUME/RATE ANALYSIS
(dollars in thousands)
Quarter ended March 31, 1997 vs.
Quarter ended March 31, 1996
--------------------------------------
Increase (decrease)
due to change in
- --------------------------------------------------------------------------------
Average Average Total
Volume Rate Change
- --------------------------------------------------------------------------------
Interest income:
Loans (1) $653 $(493) $160
Securities:
Available for sale 37 18 55
Taxable 4 18 22
Nontaxable (9) 2 (7)
Money market investments 232 17 249
- --------------------------------------------------------------------------------
Total interest income 917 (438) 479
- --------------------------------------------------------------------------------
Interest expense:
Interest checking 40 (14) 26
Money market and savings 200 99 299
Certificates of deposits:
Less than $100 18 (8) 10
$100 or greater 89 (24) 65
Other short-term borrowings (200) (5) (205)
- --------------------------------------------------------------------------------
Total interest expense 147 48 195
- --------------------------------------------------------------------------------
Interest rate hedging instruments ----
Change in net interest income $770 $(486) $284
================================================================================
(1) The effect of the change in loan fees is included as an adjustment to the
average rate.
Provision for Possible Loan Losses
The level of the allowance for possible loan losses and the related provision,
if any, reflect management's judgment as to the inherent risk of loss associated
with the loan and lease portfolios as of March 31, 1997. Based on management's
evaluation of such risks, no addition was made to the allowance for possible
loan losses for the first quarter ended March 31, 1997, as compared to $20 for
the first quarter ended March 31, 1996. See "Loan Portfolio"
<PAGE>
Other Income
The following table sets forth the components of other income and the percentage
distribution of such income for the quarters ended March 31, 1997 and 1996:
OTHER INCOME
(dollars in thousands)
Quarter ended March 31,
----------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Amount Percent Amount Percent
- --------------------------------------------------------------------------------
Depositor service charges $134 50.00% $133 51.15%
Other operating income 134 50.00 127 48.85
- --------------------------------------------------------------------------------
Total $268 100.00% $260 100.00%
================================================================================
Other Expenses
The following schedule summarizes the major categories of expense as a
percentage of average assets on an annualized basis:
OTHER EXPENSES AS A PERCENT OF AVERAGE ASSETS
(dollars in thousands)
Quarter ended March 31,
--------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Amount Percent* Amount Percent*
- --------------------------------------------------------------------------------
Salaries and benefits $1,411 1.85% $1,402 2.17%
Amortization of core deposit
intangibles and goodwill 118 .16 125 .19
Data processing 104 .14 127 .20
Furniture and equipment 97 .13 89 .14
Business promotion 91 .12 98 .15
Occupancy 83 .11 82 .13
Client services paid by bank 79 .10 49 .08
Sundry losses 66 .09 3 .01
Directors' fees and costs 57 .07 58 .09
Stationery and supplies 48 .06 47 .07
Advertising 43 .06 60 .09
Regulators assessments 26 .03 18 .03
Loan and collection 12 .02 59 .09
Legal and professional fees (5) (.01) 119 .18
Net cost of foreclosed property (5) (.01) 5 .01
Other 163 .22 132 .20
- --------------------------------------------------------------------------------
Total $2,388 3.14% $2,473 3.83%
================================================================================
* The percentages are calculated by annualizing the quarterly expenses, and
comparing that amount to average assets for the respective periods ended March
31, 1997 and 1996.
Total other expenses for the first quarter of 1997 decreased $85 from the same
period a year ago. The decrease relates primarily to a reduction in an estimate
of $135 for litigation fees offset by an increase in management and staff
educational costs and sundry losses relating to alleged forgeries.
<PAGE>
Income Tax Provision
The effective tax rate of 42% for the three months ended March 31, 1997 is
affected by several items, the most significant of which are the amortization of
the intangibles, tax exempt income and the California Franchise Tax Enterprise
Tax Zone Credit. The effective tax rate for the year ended December 31, 1996 was
43%. The reduction in the rate is mainly due to the decline in amortization of
intangibles.
Financial Condition and Earning Assets
Consolidated assets increased to $321 million at March 31, 1997 compared to $309
million at December 31, 1996. The increase consisted primarily of money market
investments and loans and was funded principally by an increase in the Bank's
core interest-bearing money market deposits. See "Funding."
Money Market Investments
Money market investments, which include federal funds sold were $27.6 million at
March 31, 1997 as compared to $19.8 million at December 31, 1996. This increase
is related to the significant increases in the Bank's money market deposits. See
"Funding."
Securities
<TABLE>
<CAPTION>
The following table shows the composition of the securities portfolio at March
31, 1997 and December 31, 1996. There were no issuers of securities for which
the book value of specific securities held by the Bank exceeded 10% of the
Company's shareholders' equity, except U.S. Government Securities.
SECURITIES PORTFOLIO
(dollars in thousands)
March 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
Cost Gain (Loss) Value Cost Gain (Loss) Value
- --------------------------------------------------------------------------------------------------------------------
Securities available for sale:
<S> <C> <C> <C> <C> <C> <C>
U. S. Treasury $3,988 $(34) $3,954 $3,989 $16 $4,005
U. S. Government Agencies 34,068 (41) 34,027 34,099 186 34,285
Mortgage backed 5,653 (51) 5,602 5,835 33 5,868
Mutual funds 4,032 (158) 3,874 4,018 (132) 3,886
- --------------------------------------------------------------------------------------------------------------------
Total available for sale 47,741 (284) 47,457 47,941 103 48,044
- --------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
U. S. Treasury 1,979 5 1,984 1,975 28 2,003
U. S. Government Agencies 7,469 (14) 7,455 7,463 60 7,523
State and municipal (nontaxable) 2,632 (3) 2,629 2,635 18 2,653
Mortgage backed 2,492 13 2,505 2,481 53 2,534
- --------------------------------------------------------------------------------------------------------------------
Total held to maturity 14,572 1 14,573 14,554 159 14,713
- --------------------------------------------------------------------------------------------------------------------
Federal Reserve Bank Stock 518 ---- 518 518 ---- 518
- ---------------------------------------------------------------------------------------------------------------------
Total 15,090 1 15,091 15,072 159 15,231
- ---------------------------------------------------------------------------------------------------------------------
Total investment securities portfolio $62,831 $(283) $62,548 $63,013 $262 $63,275
=====================================================================================================================
</TABLE>
Unrealized gains result from the impact of current market rates being less than
those rates in effect at the time in which the Bank purchased the securities.
The unrealized loss on securities available for sale as of March 31, 1997 was
$284 as compared to an unrealized gain of $103 as of December 31, 1996. The
change in the unrealized gain or loss from December 31, 1996 is a result of an
increase in interest rates during the quarter ended March 31, 1997 The Bank's
weighted average maturity of the available for sale portfolio was approximately
1.53 years as of March 31, 1997. It is estimated by management that for each 1%
change in interest rates the value of the Company's available for sale
securities will change by .97%.
<PAGE>
Unrealized gains on securities held to maturity were $1 as of March 31, 1997 as
compared to an unrealized gain of $159 as of December 31, 1996. The Bank's
weighted average maturity of the held to maturity investment portfolio was
approximately 1.86 years as of March 31, 1997. It is estimated by management
that for each 1% change in interest rates, the value of the Company's securities
held to maturity will change by approximately 1.88%.
<TABLE>
<CAPTION>
The maturities and yields of the investment portfolio at March 31, 1997 are
shown below:
MATURITY AND YIELDS OF INVESTMENT SECURITIES At March 31, 1997 (dollars in
thousands)
Maturity
-------------------------------------------------------------------
After one year
Carrying Within one year within five years After ten years
Value Amount Yield Amount Yield Amount Yield
- --------------------------------------------------------------------------------------------------------------------
Securities available for sale:
<S> <C> <C> <C> <C> <C> <C> <C>
U. S. Treasury $3,954 ---- ---- $3,954 6.02% ---- ----
U.S. Government Agencies 34,027 $9,105 5.79% 24,922 6.30 ---- ----
Mortgage backed 5,602 ---- ---- 5,596 6.56 $6 ----
Mutual funds 3,874 3,874 6.21 ---- ---- ---- ----
- ----------------------------------------------------------- ------------ -----------
Total 47,457 12,979 34,472 6
- ----------------------------------------------------------- ------------ -----------
Securities held to maturity:
U. S. Treasury 1,979 ---- ---- 1,979 6.71 ---- ----
U. S. Government Agencies 7,469 2,990 7.29 4,479 6.05 ---- ----
State and municipal 2,632 451 7.43 2,181 7.75 ---- ----
Mortgage backed 2,492 ---- ---- 2,492 7.90 ---- ----
Other 518 ---- ---- ---- ---- 518 6.00%
- ----------------------------------------------------------- ------------ -----------
Total 15,090 3,441 11,131 518
- ----------------------------------------------------------- ------------ -----------
Total $62,547 $16,420 6.21% $45,603 6.17% $524 5.93%
====================================================================================================================
</TABLE>
Loan Portfolio
The following table provides a breakdown of the Company's consolidated loans by
type of loan or borrower:
LOAN PORTFOLIO
(dollars in thousands)
March 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------
Percentage Percentage
Total of Total Total of Total
Amount Loans Amount Loans
- --------------------------------------------------------------------------------
Commercial $84,403 41.34% $77,335 38.93%
Real estate construction 14,515 7.11 15,451 7.78
Real estate-other 78,806 38.60 74,713 37.62
Consumer 8,212 4.02 8,622 4.34
Other 18,938 9.28 23,174 11.67
Unearned fee income (710) (.35) (668) (.34)
- --------------------------------------------------------------------------------
Total loans $204,164 100.00% $198,627 100.00%
================================================================================
<PAGE>
Consolidated loans increased to $204 million at March 31, 1997 from $199 million
at December 31, 1996. Management believes the increase in the loan portfolio can
be primarily attributed to the success of the Bank's business development
efforts in regards to commercial loans and improvement in the economic
environment in the Bank's market area which has created greater demand for loans
in general.
Approximately 44% of the loan portfolio is directly related to real estate or
real estate interests, including real estate construction loans, real
estate-other, real estate equity lines (2%) (included in the Consumer category),
mortgage warehouse line (.3%) and loans to real estate developers for short-term
investment purposes (.3%) and loans for real estate investments purposes made to
non-developers (3%). The latter three types are included in the Other category.
Approximately 41% of the loan portfolio is made up of commercial loans; however,
no particular industry represents a significant portion of such loans.
<TABLE>
<CAPTION>
The following table shows the maturity and interest rate sensitivity of
commercial, real estate-other and real estate construction loans at March 31,
1997. Approximately 82% of the commercial and real estate loan portfolio is
priced with floating interest rates which limits the exposure to interest rate
risk on long-term loans.
COMMERCIAL AND REAL ESTATE LOAN MATURITY AND INTEREST RATE SENSITIVITY
(dollars in thousands)
Balances maturing Interest Rate Sensitivity
---------------------------------------------------------------------
Predeter-
Balances at One mined Floating
March 31, One year year to Over interest interest
1997 or less five years five years rates rates
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial $84,403 $38,966 $33,961 $11,476 $3,316 $81,087
====================================================================================================================
Real estate construction $14,515 $12,203 $2,113 $199 ---- $14,515
====================================================================================================================
Real estate-other $78,806 $7,289 $35,241 $36,276 $24,082 $54,724
====================================================================================================================
</TABLE>
The Company utilizes a method of assigning a minimum and maximum loss ratio for
each grade of loan within each category of loans (commercial, real estate-other,
real estate construction, etc.). Loans are graded on a ranking system based on
management's assessment of the loan's credit quality. The assigned loss ratio is
based upon the Company's prior experience, industry experience, delinquency
trends and the level of nonaccrual loans. Loans secured by real estate are
evaluated on the basis of their underlying collateral in addition to using the
assigned loss ratios. The methodology also considers (and assigns a risk factor
for) current economic conditions, off-balance sheet risk (including SBA
guarantees and servicing and letters of credit) and concentrations of credit. In
addition, each loan is evaluated on the basis of whether it is impaired and for
such loans, the expected cash flow is discounted on the basis of the loan's
interest rate. The methodology provides a systematic approach for the
measurement of the possible existence of future loan losses. Management and the
Board of Directors evaluate the allowance and determine the desired level of the
allowance considering objective, in addition to subjective measures, such as
knowledge of the borrowers' business, valuation of collateral and exposure to
potential losses. The allowance for possible loan losses was approximately $4.0
million at March 31, 1997, or 1.97% of total loans outstanding. Management
believes that the allowance for possible loan losses, determined as described
above, was adequate for foreseeable losses at March 31, 1997.
The allowance for possible loan losses is a general reserve available against
the total loan portfolio and off-balance sheet credit exposure. While management
uses available information to recognize losses on loans, future additions to the
allowance may be necessary based on changes in economic conditions or other
factors. In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for possible
losses on loans. Such agencies may require the Bank to provide additions to the
allowance based on their judgment of information available to them at the time
of their examination.
<PAGE>
<TABLE>
<CAPTION>
The following schedule provides an analysis of the allowance for possible loan
losses:
ALLOWANCE FOR POSSIBLE LOAN LOSSES
(dollars in thousands)
Quarter ended Year ended
March 31, December 31,
-------------------------------------------
1997 1996 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of the period $4,005 $3,847 $3,847
Charge-offs by loan category:
Commercial ---- 50 233
Real estate-other ---- 21 70
Consumer ---- 12 22
Other ---- 93 93
- --------------------------------------------------------------------------------------------------
Total charge-offs 176 418
- --------------------------------------------------------------------------------------------------
Recoveries by loan category:
Commercial 6 84 258
Real estate-other 4 4 13
Consumer ---- 30 65
- --------------------------------------------------------------------------------------------------
Total recoveries 10 118 336
- --------------------------------------------------------------------------------------------------
Net charge-offs (recoveries) (10) 58 82
- --------------------------------------------------------------------------------------------------
Provision charged to expense ---- 20 190
Allowance relating to Astra Financial Corp. ---- 50 50
- --------------------------------------------------------------------------------------------------
Balance, end of the period $4,015 $3,859 $4,005
==================================================================================================
Ratios:
Net charge-offs (recoveries) to average loans, annualized (.02%) .13% .04%
Allowance to total loans at the end of the period 1.97 2.15 2.02
Allowance to nonperforming loans at end of the period 327 802 733
==================================================================================================
During the three months ended March 31, 1997, the Company did not charge off any
loans while in the first quarter of 1996 charge-offs totaled $176. The Bank
recovered $10 and $118 for the respective quarters on loans previously charged
off. Management does not believe there were any trends indicated by the detail
of the aggregate charge-offs for any of the periods discussed. The allowance for
possible loan losses was 327% of nonperforming loans at March 31, 1997 compared
to 733% at December 31, 1996.
This decrease relates mainly to the increase of nonperforming loans.
Nonperforming Loans
Loans for which the accrual of interest has been suspended and other loans with
principal or interest contractually past due 90 days or more are set forth in
the following table.
NONPERFORMING LOANS
(dollars in thousands)
March 31, December 31,
1997 1996
- --------------------------------------------------------------------------------
Loans accounted for on a non-accrual basis $1,149 $457
Loans restructured and in compliance with modified terms 79 $89
Other loans with principal or interest contractually past
due 90 days or more 1 ----
- --------------------------------------------------------------------------------
Total $1,229 $546
================================================================================
</TABLE>
<PAGE>
As of March 31, 1997, the Company had approximately $1,229 of nonperforming
loans, consisting of 11 loans, of which, $1,045 is secured by commercial or
residential real estate and/or SBA guarantees with estimated fair values or
guarantees of $2,092. At December 31, 1996, nonperforming loans totaled
approximately $546.
Management conducts an ongoing evaluation and review of the loan portfolio in
order to identify potential nonperforming loans. Management considers loans
which are classified for regulatory purposes, loans which are graded as
classified by the Bank's outside loan review consultant and internal personnel,
as to whether they (i) represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity, or capital resources, or (ii) represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms. Based on such reviews as of March 31, 1997, management has identified two
borrowers with an aggregate loan balance of $536 (which is subject to collateral
with a value of approximately $457) with respect to which known information
causes management to have doubts about the borrower's abilities to comply with
present repayment terms, such that the loans might subsequently be classified as
nonperforming. Changes in general or local economic conditions or specific
industry segments, rising interest rates, declines in real estate values and
acts of nature could have an adverse effect on the ability of borrowers to repay
outstanding loans and the value of real estate and other collateral securing
such loans.
Funding
The following table provides a breakdown of deposits by category as of the dates
indicated:
DEPOSIT CATEGORIES
(dollars in thousands)
March 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------
Percentage Percentage
Total of Total Total of Total
Amount Deposits Amount Deposits
- --------------------------------------------------------------------------------
Noninterest-bearing demand $67,802 24.35% $80,774 33.02%
Interest-bearing demand 45,290 16.27 40,113 16.40
Money market and savings 95,750 34.39 60,684 24.80
Certificates of deposit:
Less than $100 15,973 5.74 15,535 6.35
$100 or more 53,582 19.25 47,533 19.43
- --------------------------------------------------------------------------------
Total $278,397 100.00% $244,639 100.00%
================================================================================
Deposits as of March 31, 1997, were $278 million compared to $245 million at
December 31, 1996. The most significant growth in deposits has occurred in the
area of interest-bearing core deposits which increased approximately $40
million. Management believes this growth in interest-bearing core deposits has
been due to unusual activity by several of the Bank's customers which might not
be sustained and to the business development efforts of the Bank's business
development officers. Because of this high level of unusual activity, the Bank
has maintained significant short-term liquidity. See "Liquidity."
Asset/Liability Management
The Company's balance sheet position is asset-sensitive (based upon the
significant amount of variable rate loans and the repricing characteristics of
its deposit accounts). This balance sheet position generally provides a hedge
against rising interest rates, but has a detrimental effect during times of
interest rate decreases. Net interest revenues are negatively impacted by a
decline in interest rates.
<PAGE>
To counter its asset sensitive interest rate position, the Bank entered into an
interest rate "floor" in the amount of $10 million which expires in May 1999.
The Bank has paid a fixed premium of $47 for which it will receive the amount of
interest on $10 million based on the difference of 7% and prime when prime is
less than 7%. This protects the Bank against decreases in its net income when
the prime decreases to less than 7%. Settlement is done quarterly and the Bank
records the impact of this hedge on an accrual basis.
During 1995 and 1996, the Bank purchased U.S. Agency and mortgage backed
securities for an aggregate cost of approximately $30 million which were
financed through the use of repurchase agreements. Subsequently these repurchase
agreement have been reduced to approximately $4.6 million at March 31, 1997. The
repurchase agreements are shown as short-term borrowings on the Company's
balance sheet. The securities are fixed rate and $7.1 million matures in
November 1997, $10 million matures in May 1998, $7 million matures in July 1998,
$1.4 million in November 2000, $2.3 million in June 2001 and $2.2 million in
September 2001. The repurchase agreement's interest rate is 5.4% and matures in
May, 1997. It is anticipated based on current markets if this repurchase
agreement was renewed it would renew at a rate of approximately 6%.
Capital and Liquidity
Capital
The Federal Reserve Board's risk-based capital guidelines require that total
capital be in excess of 8% of total assets on a risk-weighted basis. Under the
guidelines for a bank holding company capital requirements are based upon the
composition of the Company's asset base and the risk factors assigned to those
assets. The guidelines characterize an institution's capital as being "Tier 1"
capital (defined to be principally shareholders' equity less intangible assets)
and "Tier 2" capital (defined to be principally the allowance for loan losses,
limited to one and one-fourth percent of gross risk weighted assets). The
guidelines require the Company to maintain a risk-based capital target ratio of
8%, one-half or more of which should be in the form of Tier 1 capital.
The Comptroller of the Currency also requires SJNB to maintain adequate capital.
The Comptroller's current regulations require national banks to maintain Tier 1
leverage capital ratio equal to at least 3% to 5% of total assets, depending on
the Comptroller's evaluation of the Bank. The Comptroller also has adopted
risk-based capital requirements. Similar to the Federal Reserve's guidelines,
the amount of capital the Comptroller requires a bank to maintain is based upon
the composition of its asset base and risk factors assigned to those assets. The
guidelines require the Bank to maintain a risk-based capital target ratio of 8%,
one-half or more of which should be in the form of Tier 1 capital. The capital
ratios of the Bank are similar to the capital ratios of the Company.
<PAGE>
<TABLE>
<CAPTION>
The capital of the Company and SJNB exceed the amount required by the various
capital guidelines. The table below summarizes the various capital ratios of the
Company at March 31, 1997 and December 31, 1996.
Risk-based and Leverage Capital Ratios
(dollars in thousands)
Company March 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------------------------------------------
Risk-based Amount Ratio Amount Ratio
-----------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 capital $25,500 10.07% $26,533 11.91%
Tier 1 capital minimum requirement 10,126 4.00 8,910 4.00
-----------------------------------------------------
Excess $15,374 6.07% $17,623 7.91%
=====================================================
Total capital $28,675 11.33% $29,333 13.17%
Total capital minimum requirement 20,252 8.00 17,819 8.00
-----------------------------------------------------
Excess $8,423 3.33% $11,513 5.17%
=====================================================
Risk-adjusted assets $253,148 $222,744
============= ==============
Leverage
Tier 1 capital $25,500 8.50% $26,533 9.28%
Minimum leverage ratio requirement 12,002 4.00 11,438 4.00
-----------------------------------------------------
Excess $13,498 4.50% $15,095 5.28%
-----------------------------------------------------
Average total assets $300,044 $285,952
====================================================================================================================
</TABLE>
Liquidity
Management strives to maintain a level of liquidity sufficient to meet customer
requirements for loan funding and deposit withdrawals in an economically
feasible manner. Liquidity requirements are evaluated by taking into
consideration factors such as deposit concentrations, seasonality and
maturities, loan demand, capital expenditures, and prevailing and anticipated
economic conditions. SJNB's business is generated primarily through customer
referrals and employee business development efforts; however the Bank utilizes
purchased deposits to satisfy temporary liquidity needs.
The Bank's source of liquidity consists of its deposits with other banks,
overnight funds sold to correspondent banks, short-term securities held to
maturity and securities available for sale less short-term borrowings. At March
31, 1997, consolidated net liquid assets totaled $89 million or 30% of
consolidated total assets as compared to $64 million or 22% of consolidated
total assets at December 31, 1996. In addition to the liquid asset portfolio,
SJNB also has available $12 million in lines of credit with five major
commercial banks, a collateralized repurchase agreement with a maximum limit of
$40 million (of which approximately $5 million has been utilized at March 31,
1997), and a credit facility with the Federal Reserve Bank based on loans
secured by real estate for approximately $7 million.
SJNB is primarily a business and professional bank and, as such, its deposit
base may be more susceptible to economic fluctuations than other potential
competitors. Accordingly, management strives to maintain a balanced position of
liquid assets to volatile and cyclical deposits. Commercial clients in their
normal course of business maintain balances in large certificates of deposit,
the stability of which hinge upon, among other factors, market conditions,
interest rates and business' seasonality. Large certificates of deposit amounted
to 19% of total deposits on March 31, 1997 and December 31, 1996.
Liquidity is also affected by portfolio maturities and the effect of interest
rate fluctuations on the marketability of both assets and liabilities. The loan
portfolio consists primarily of floating rate, short-term loans. On March 31,
1997, approximately 35% of total consolidated assets had maturities under one
year and 85% of total consolidated loans had floating rates tied to the prime
rate or similar indexes. The short-term nature of the loan portfolio, and loan
agreements which generally require monthly interest payments, provide the
Company with an additional secondary source of liquidity. There are no material
commitments for capital expenditures in 1997, except for the acquisition of a
new data processing system for the Bank at a cost of approximately $600 which
will be amortized over a period of five years.
<PAGE>
Effects of Inflation
The most direct effect of inflation on the Company is higher interest rates.
Because a significant portion of the Bank's deposits are represented by
non-interest-bearing demand accounts, changes in interest rates have a direct
impact on the financial results of the Bank. See the discussion regarding
asset/liability management. Another effect of inflation is the upward pressure
on the Company's operating expenses. Inflation did not have a material effect on
the Bank's operations in 1996 or the first quarter of 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Company nor the Bank is a party to any material pending legal
proceedings other than as previously disclosed. Material legal proceedings were
reported in the Form 10KSB for the year ended December 31, 1996.
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) Exhibits
The following exhibits are filed as part of this report:
(3) a. The Certificate of Amendment to Articles of Incorporation filed June 17,
1988 and restated Articles of Incorporation are hereby incorporated by
reference to Exhibit (3) b. of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988.
(3) b. Amendments to the Registrant's bylaws dated February 28, 1996 and the
Registrant's restated bylaws as of February 28, 1996 are hereby
incorporated by reference to Exhibit (3) b. of the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended June 30, 1996.
*(10)a. The Registrant's Stock Option Plan is hereby incorporated by reference
from Exhibit 4.1 of the Registrant's Registration Statement on Form S-8, as
filed on October 4, 1989 and amended January 24,1992 under Registration No.
33-31392.
*(10)b. The form of Incentive Stock Option Agreement being utilized under the
Stock Option Plan is hereby incorporated by reference from Exhibit 4.2 of
Amendment No. 1 to the Registrant's Registration Statement on Form S-8, as
filed on January 24, 1992, under Registration No. 33-31392.
*(10)c. The form of Stock Option Agreement being utilized under the Stock
Option Plan is hereby incorporated by reference from Exhibit 4.3 of
Amendment No. 1 to the Registrant's Registration Statement on Form S-8, as
filed on January 24, 1992, under Registration No. 33-31392.
*(10)d. Amendment No. 3 to the Stock Option Plan is hereby incorporated by
reference from Exhibit 4.4 of Amendment No. 1 to the Registrant's
Registration Statement on Form S-8, as filed on January 24, 1992, under
Registration No. 33-31392.
*(10)e. Amendment No. 4 to the Stock Option Plan is hereby incorporated by
reference from Exhibit 4.5 of Amendment No. 2 to the Registrant's
Registration Statement on Form S-8, as filed on June 22, 1992, under
Registration No. 33-31392.
*(10)f. The Registrant's 1992 Employee Stock Option Plan is hereby incorporated
by reference from Exhibit 4.1 of the Registrant's Registration Statement on
Form S-8, as filed on September 4, 1992, under Registration No. 33-51740.
*(10)g. Amendment No. 1 to the 1992 Employee Stock Option Plan is hereby
incorporated by reference to Exhibit (10) f. of the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended June 30, 1995.
*(10)h. The form of Incentive Stock Option Agreement being utilized under the
1992 Employee Stock Option Plan is hereby incorporated by reference from
Exhibit 4.2 of the Registrant's Registration Statement on Form S-8, as
filed on September 4, 1992, under Registration No. 33-51740.
*(10)i. The form of Stock Option Agreement being utilized under the 1992
Employee Stock Option Plan is hereby incorporated by reference from Exhibit
4.3 of the Registrant's Registration Statement on Form S-8, as filed on
September 4, 1992, under Registration No. 33-51740.
*(10)j. The Registrant's 1992 Director Stock Option Plan is hereby incorporated
by reference from Exhibit (10) i. of the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1992.
*(10)k. Amendment No. 1 to the 1992 Director Stock Option Plan is hereby
incorporated by reference to Exhibit (10) i. of the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended June 30, 1995.
*(10)l. The form of Stock Option Agreement being utilized under the 1992
Director Stock Option Plan is hereby incorporated by reference from Exhibit
(10) j. of the Registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1992.
*(10)m. The Registrant's 1996 Stock Option Plan is incorporated by reference to
exhibit 99.1 of the Registrant's Form S-8 filed July 30, 1996.
*(10)n. Agreement between James R. Kenny and SJNB Financial Corp. and San Jose
National Bank dated March 27, 1996 is hereby incorporated by reference to
Exhibit (10) m. of the Registrant's Quarterly Form 10-QSB for the quarterly
period ended March 31, 1996.
*(10)o. Agreement between Eugene E. Blakeslee and SJNB Financial Corp. and San
Jose National Bank dated March 27, 1996 is hereby incorporated by reference
to Exhibit (10) n. of the Registrant's Quarterly Form 10-QSB for the
quarterly period ended March 31, 1996.
(10) p. Systems Management Services Agreement by and between Systematics, Inc.
and San Jose National Bank dated March 1, 1990, and amendments dated April
5, 1990, July 10, 1990 and January 27, 1992 are hereby incorporated by
reference from Exhibit (10) g. of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1991.
(10) q. Agreement for Item Processing Services by and between Datatronix
Financial Services and San Jose National Bank dated April 13, 1992 is
hereby incorporated by reference from Exhibit (10) m. of the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1992.
(10) r. Sublease dated April 5, 1982, for premises at 95 South Market Street,
San Jose, CA is hereby incorporated by reference to Exhibit (10) n. of the
Registrant's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994.
(10) s. Sublease by and between McWhorter's Stationary and San Jose National
Bank, dated July 6, 1995, and as amended August 11, 1995 and September 21,
1995, for premises at 95 South Market Street, San Jose CA is hereby
incorporated by reference to Exhibit (10) o. of the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended September 30, 1995.
(10) t. Sublease by and between Greater Unified Management Businesses, Inc.
(d.b.a. as Logistics) and SJNB Financial Corp., dated January 15, 1996, and
as amended March 19, 1996, for premises at 95 South Market Street, San Jose
CA is hereby incorporated by reference to Exhibit (10) s. of the
Registrant's Quarterly Form 10-QSB for the quarterly period ended March 31,
1996.
(27) Financial Data Schedule.
* Indicates management contract or compensation plan or arrangement.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SJNB FINANCIAL CORP.
(Registrant)
Date: May 6, 1997 S/J. Kenny
James R. Kenny
President and Chief Executive Officer
Date: May 6, 1997 S/E. Blakeslee
Eugene E. Blakeslee
Executive Vice President and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000721161
<NAME> SJNB FINANCIAL CORP.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<EXCHANGE-RATE> 1
<CASH> 16,844
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,619
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 47,457
<INVESTMENTS-CARRYING> 15,090
<INVESTMENTS-MARKET> 15,091
<LOANS> 204,164
<ALLOWANCE> 4,015
<TOTAL-ASSETS> 320,731
<DEPOSITS> 278,397
<SHORT-TERM> 6,580
<LIABILITIES-OTHER> 5,911
<LONG-TERM> 0
<COMMON> 19,064
0
0
<OTHER-SE> 10,779
<TOTAL-LIABILITIES-AND-EQUITY> 320,731
<INTEREST-LOAN> 5,074
<INTEREST-INVEST> 244
<INTEREST-OTHER> (2)
<INTEREST-TOTAL> 5,316
<INTEREST-DEPOSIT> 1,883
<INTEREST-EXPENSE> 2,124
<INTEREST-INCOME-NET> 3,192
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,387
<INCOME-PRETAX> 2,089
<INCOME-PRE-EXTRAORDINARY> 2,089
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,205
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
<YIELD-ACTUAL> .061
<LOANS-NON> 1,149
<LOANS-PAST> 1
<LOANS-TROUBLED> 79
<LOANS-PROBLEM> 536
<ALLOWANCE-OPEN> 4,005
<CHARGE-OFFS> 0
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 4,015
<ALLOWANCE-DOMESTIC> 4,015
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNA^^^|^TED> 627
</TABLE>
