SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 registrant 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
------------------------------
(Registrant's telephone number, including area code)
Not Applicable
------------------------------
(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 the issuer's classes of common
stock, as of the latest practicable date: 3,677,594 shares of common stock
outstanding as of May 5, 2000.
<PAGE>
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1.- FINANCIAL STATEMENTS
SJNB FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statement of Operations 4
Condensed Consolidated Statements of Shareholders' Equity 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 22
PART II - OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS 23
Item 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS 23
Item 3. - DEFAULTS UPON SENIOR SECURITIES 23
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 23
Item 5. - OTHER INFORMATION 23
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K 23
SIGNATURES 27
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
SJNB FINANCIAL CORP. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
March 31,
2000 December 31,
Assets (Unaudited) 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $24,529 $18,938
Interest-bearing deposits in other banks 1,743 2,042
Federal funds sold 26,500 7,000
Money market investments 29,757 5,651
Investment securities:
Available for sale 87,715 90,878
Held to maturity (Fair value: $20,998 at March 31, 2000
and $20,708 at December 31, 1999) 21,954 22,196
- -----------------------------------------------------------------------------------------------------------------------------
Total investment securities 109,669 113,074
- -----------------------------------------------------------------------------------------------------------------------------
Loans and leases 403,095 403,318
Allowance for loan and lease losses (6,551) (6,412)
- -----------------------------------------------------------------------------------------------------------------------------
Loans and leases, net 396,544 396,906
- -----------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net 5,539 5,564
Accrued interest receivable 3,247 3,202
Intangibles, net of accumulated amortization of $2,730 at
March 31, 2000 and $2,620 at December 31, 1999 3,507 3,617
Other assets 15,299 12,087
- -----------------------------------------------------------------------------------------------------------------------------
Total Assets $616,334 $568,081
=============================================================================================================================
Liabilities and Shareholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------
Deposits:
Noninterest-bearing $109,412 $94,687
Interest-bearing 414,300 379,046
- -----------------------------------------------------------------------------------------------------------------------------
Total deposits 523,712 473,733
- -----------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank advances 20,450 22,503
Other borrowings 12,411 11,022
Accrued interest payable 2,151 1,720
Other liabilities 4,631 5,884
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 563,355 514,862
- -----------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, no par value, authorized, 5,000 shares;
none issued or outstanding in 2000 or 1999. ---- ----
Common stock, no par value; authorized, 20,000 shares;
issued and outstanding, 3,618 shares at March 31, 2000
and 3,593 shares at December 31, 1999. 20,990 20,769
Retained earnings 33,683 33,942
Accumulated other comprehensive losses (1,694) (1,492)
- -----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 52,979 53,219
- -----------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies ---- ----
- -----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $616,334 $568,081
=============================================================================================================================
<FN>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
SJNB FINANCIAL CORP. AND SUBSIDIARY
Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended
March 31,
------------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
Interest income:
<S> <C> <C>
Interest and fees on loans and leases $10,334 $8,216
Interest on money market investments 405 268
Interest on time deposits 25 27
Interest and dividends on investment securities available for sale 1,458 957
Interest on investment securities held to maturity 300 306
Other interest and investment income/expense 2 (14)
- ----------------------------------------------------------------------------------------------------------------------------
Total interest income 12,524 9,760
- ----------------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits:
Interest-bearing demand 559 506
Money market and savings 1,411 779
Certificates of deposit over $100 1,516 1,158
Certificates of deposits less than $100 712 523
Federal Home Loan Bank advances 332 336
Other borrowings 198 56
- ----------------------------------------------------------------------------------------------------------------------------
Total interest expense 4,728 3,358
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income 7,796 6,402
- ----------------------------------------------------------------------------------------------------------------------------
Provision for loan and lease losses 250 140
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan and lease losses 7,546 6,262
- ----------------------------------------------------------------------------------------------------------------------------
Other income:
Service charges on deposits 274 212
Other operating income 233 439
- ----------------------------------------------------------------------------------------------------------------------------
Total other income 507 651
- ----------------------------------------------------------------------------------------------------------------------------
Other expenses:
Salaries and benefits 2,298 2,163
Occupancy 353 340
Merger related costs, nonrecurring 3,424 ----
Other 1,375 1,344
- ----------------------------------------------------------------------------------------------------------------------------
Total other expenses 7,450 3,847
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 603 3,066
Income taxes 288 1,268
- ----------------------------------------------------------------------------------------------------------------------------
Net income $315 $1,798
============================================================================================================================
Net income per share - basic $0.09 $0.51
============================================================================================================================
Net income per share - diluted $0.08 $0.48
============================================================================================================================
<FN>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
SJNB FINANCIAL CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Shareholders' Equity
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) Total
on Securities Share-
Common Retained Available holders'
Three months ended March 31, 1999 Shares Stock Earnings for Sale Equity
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1998 3,590 $21,461 $28,997 $282 $50,740
-------------
Net income 1,798 1,798
Other comprehensive income - Unrealized losses
on securities held for sale, net (301) (301)
-------------
Comprehensive income 1,497
-------------
Common stock repurchased (144) (3,291) (488) (3,779)
Stock options exercised 13 144 144
Cash dividends (503) (503)
- ----------------------------------------------------------------------------------------------------------------------------
Balances, March 31, 1999 3,459 $18,314 $29,804 ($19) $48,099
============================================================================================================================
Three months ended March 31, 2000
- ----------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1999 3,593 $20,769 $33,942 ($1,492) $53,219
-------------
Net income 315 315
Other comprehensive income - Unrealized losses
on securities held for sale, net (202) (202)
-------------
Comprehensive income 113
-------------
Stock options exercised 25 221 221
Cash dividends (574) (574)
- ----------------------------------------------------------------------------------------------------------------------------
Balances, March 31, 2000 3,618 $20,990 $33,683 ($1,694) $52,979
============================================================================================================================
<FN>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
SJNB FINANCIAL CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended
March 31,
-----------------------------------
2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $315 $1,798
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan and lease losses 250 140
Depreciation and amortization 206 224
Gain on sale of leased assets ---- 33
Amortization on intangibles 110 113
Amortization of (premium) discount on investment securities, net (29) 1
Increase in intangibles assets ---- (45)
Increase in accrued interest receivable and other assets (3,064) (1,580)
(Decrease) increase in accrued interest payable and other liabilities (824) (155)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (3,036) 529
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale/maturity of securities available for sale 3,421 3,825
Maturities of securities held to maturity 290 1,328
Purchase of securities available for sale (625) (7,190)
Purchase of securities held to maturity (35) (1,400)
Loans and leases, net 101 (20,251)
Proceeds from sale of premises and equipment ---- 350
Capital expenditures (180) (403)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 2,972 (23,741)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Deposits, net 49,979 17,252
Other borrowings 1,889 ----
Decrease in federal funds purchased (500) (2,000)
Decrease in Federal Home Loan Bank borrowings (2,053) (42)
Cash dividends (574) (503)
Stock repurchase ---- (3,779)
Proceeds from stock options exercised 221 144
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 48,962 11,072
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 48,898 (12,140)
Cash and equivalents at beginning of year 33,631 56,312
- -----------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $82,529 $44,172
=============================================================================================================================
Other cash flow information:
Interest paid $4,297 $3,289
===================================
Income taxes paid $3,480 $3,395
=============================================================================================================================
Noncash transactions:
Unrealized loss on securities available for sale, net of tax $(202) $(301)
=============================================================================================================================
</TABLE>
<PAGE>
SJNB FINANCIAL CORP. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Note A Unaudited Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements of SJNB
Financial Corp. (the "Company") and its subsidiary, San Jose National
Bank, and its subsidiary, Epic Funding Corp., are prepared in
accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. The condensed
consolidated financial statements presents the combined results of the
Company and Saratoga Bancorp on a pooling of interests basis, as if
the combination had been consummated at the beginning of the earliest
period presented. 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, 1999.
Note B Net Income Per Share of Common Stock
The reconciliation of the numerators and denominators of the basic and
diluted earnings per share (EPS) computations are as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Quarter ended Quarter ended
March 31, 2000 March 31, 1999
--------------------------------------------------------------------------------------------------------------------
Net Per Share Net Per Share
Income Shares Amounts Income Shares Amounts
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income and basic EPS $315 3,594 $0.09 $1,798 3,545 $0.51
============ =====================
Effect of stock option dilutive shares 229 230
------------------------ ------------------------
Diluted earnings per share $315 3,822 $0.08 $1,798 3,775 $0.48
==============================================================================
</TABLE>
Note C Business Combination
On January 5, 2000, the Company acquired Saratoga Bancorp, the parent
company of Saratoga National Bank, pursuant to a merger of Saratoga
Bancorp with and into the Company. Saratoga National Bank,
headquartered in Saratoga, California, operated three branches and as
of the acquisition date had $142 million in assets and $103 million in
deposits. Saratoga's San Jose office, which was located near SJNB's
San Jose office was consolidated into SJNB's San Jose office in
January 2000. The shareholders of Saratoga received 0.70 shares of the
Company's common stock for each outstanding share of Saratoga common
stock. Total shares issued were 1,175,743. Based on the closing price
of the Company's stock on January 5, 2000 of $29.125 the transaction
is valued at approximately $34.2 million, excluding the value of any
unexercised options, and each Saratoga shareholder received SJNB
common stock valued at $20.39 per share. The merger has been accounted
for as a pooling of interests. The condensed consolidated financial
statements and selected financial data present the combined results of
the Company and Saratoga Bancorp on a pooling of interests basis, as
if the combination had been consummated on January 1 of each of the
periods presented.
The results of operations previously reported by the separate
companies and the combined amounts presented in the accompanying
unaudited condensed consolidated financial statements are summarized
below:
<TABLE>
<CAPTION>
For the quarter ended March 31, 1999
SJNB Saratoga Combined
------ -------- --------
<S> <C> <C> <C>
Net interest income $4,983 $1,419 $6,402
Net income 1,329 469 1,798
=================================================================
</TABLE>
<PAGE>
Note D Segment Reporting
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, requires certain information about the operating segments
of the Company. The objective of requiring disclosures about segments
of an enterprise and related information is to provide information
about the different types of business activities in which an
enterprise engages and the different economic environments in which it
operates to help users of financial statements better understand its
performance; better assess its prospects for future cash flows and
make more informed judgments about the enterprise as a whole. The
Company has determined it has three segments, general commercial
banking, leasing, and factoring/asset based financing. Neither leasing
nor factoring and asset based financing meet the required thresholds
for disagregation and therefore the disclosures and related
information about such segments has not been included in the
consolidated financial statements. At such time these segments meet
the required thresholds, such disclosures and other information will
be included.
Note E Other Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement requires that an
entity recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments at
fair value. In June 1999, the FASB issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities-Deferral of Effective
Date. This Statement deferred the effective date to the fiscal
quarters of fiscal years beginning after June 15, 2000. The Company
expects to adopt this Statement on January 1, 2001. Management
believes the Statement should not have a significant effect on the
Company's consolidated financial position or its consolidated
statement of operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- RESULTS OF OPERATIONS
SJNB Financial Corp. (the "Company") is the holding company for San Jose
National Bank ("SJNB" or the "Bank"), and the Bank's subsidiary, Epic Funding
Corp. ("Epic"). The Company and the Bank are headquartered in San Jose,
California and Epic is headquartered in Danville , California. This discussion
focuses primarily on the results of operations of the Company on a consolidated
basis for the three months ended March 31, 2000 and 1999 and the liquidity and
financial condition of the Company, SJNB and Epic as of March 31, 2000 and
December 31, 1999.
All dollar amounts in the text in Item 2 are in thousands, except per share
amounts or as otherwise indicated.
Forward-looking Information
- ---------------------------
This Quarterly Report on Form 10-Q includes forward-looking information which is
subject to the "safe harbor" created by Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements (which involve the Company's plans,
beliefs and goals, refer to estimates or use similar terms) involve certain
risks and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. Such risks and uncertainties
include, but are not limited to, the following factors: competitive pressure in
the banking industry; changes in the interest rate environment; a potential
declining health of the economy, either nationally or regionally; the
deterioration of credit quality, which could cause an increase in the provision
for loan and lease losses; changes in the regulatory environment; changes in
business conditions, particularly in Santa Clara County real estate and
technology industries; certain operational risks involving data processing
systems or fraud; volatility of rate sensitive deposits; asset/liability
matching risks and liquidity risks; and changes in the securities markets. The
Company undertakes no obligation to revise or publicly release the results of
any revision to these forward-looking statements. For additional information
concerning risks and uncertainties related to the Company and its operations
please refer to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999. See also the discussion of other risk factors discussed
elsewhere in this Report.
Current Developments
- --------------------
On January 5, 2000, the Company acquired Saratoga Bancorp, the parent company of
Saratoga National Bank, pursuant to a merger of Saratoga Bancorp with and into
the Company. See Note C to Notes to Unaudited Condensed Consolidated Financial
Statements.
Selected Financial Data
- -----------------------
<PAGE>
The following presents selected financial data and ratios as of and for the
quarter ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA AND RATIOS
- -----------------------------------------------------------------------------------------------------------------------------
For the quarters
SELECTED ANNUALIZED OPERATING RATIOS ended March 31,
-----------------------------------
EXCLUDING MERGER RELATED COSTS, NET OF TAX: 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Return on average equity 18.58% 14.45%
Return on average tangible equity 20.79 16.68
Return on average assets 1.68 1.48
Net chargeoffs (recoveries) to average loans and leases 0.11 (0.03)
Average equity to average assets 9.06 10.24
Average tangible equity to average tangible assets 8.51 9.51
PER SHARE DATA:
Net income per share - basic $0.09 $0.51
Net income per share - diluted 0.08 0.48
Excluding merger related costs, net of tax
Net income per share - basic 0.69 0.51
Net income per share - diluted 0.64 0.48
Net income per share - (core) - diluted (1) 0.67 0.51
Dividends per share 0.16 0.14
=============================================================================================================================
At March 31, At March 31,
SHAREHOLDERS' EQUITY 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
Shareholders' equity per share $14.64 $13.91
Tangible equity per share 13.67 12.76
SELECTED FINANCIAL POSITION RATIOS:
- -----------------------------------------------------------------------------------------------------------------------------
Leverage capital ratio 8.65% 8.93%
Total risk based capital ratio 11.63 11.98
Nonperforming loans and leases to total loans and leases 0.34 0.11
Nonperforming assets to total assets 0.22 0.08
Allowance for loan and lease losses to total loans 1.63 1.59
Allowance for loan and lease losses
to nonperforming loans and leases 485.00 1,422.00
Allowance for loan and lease losses
to nonperforming assets 485.00 1,422.00
=============================================================================================================================
<FN>
(1) Excludes after-tax effect of goodwill and core deposit intangible amortization.
</FN>
</TABLE>
Summary of Financial Results
- ----------------------------
The Company reported net income of $315 or $0.08 per share - diluted for the
quarter ended March 31, 2000. After excluding merger related costs, net of tax,
diluted net income was $2,463 or $0.64 per share. This compares with net income
of $1,798 or $0.48 per share - diluted for the first quarter of 1999. The
increase in operating net income (which is net income excluding the merger
related costs, net of tax) compared to the quarter ended March 31, 1999 was
primarily the result of the increase in net interest income, offset somewhat, by
an increase in the loan loss provision, decrease in other income and an increase
in other expense. See the specific sections below for details regarding these
changes.
Net Interest Income
- -------------------
Net interest income for the quarter ended March 31, 2000, increased $1.4 million
as compared to the same quarter a year ago. The Bank's average earning assets
for the same period increased by $88 million, as the result of growth in the
Bank's loan and lease portfolio of $59 million and investments of $23 million.
In addition, the net interest margin increased slightly.
Net interest margin for the first quarter of 2000 was 5.88% as compared to 5.79%
for the same quarter in 1999. This increase was the result of interest rate
increases during late 1999 and early 2000. During the first quarter of 1999 the
prime rate averaged 7.75% while in the first quarter of 2000 it averaged 8.69%
while cost of interest-bearing liabilities increased from 3.98% in 1999 to 4.46%
in 2000.
Due to the nature of the Company's lending markets, in which loans are generally
tied to the Prime Rate, it is believed an increase in interest rates should
positively affect the Company's future earnings, while a decline in interest
rates would have a negative impact. Should interest rates decline in the future,
management believes that net interest income could be negatively impacted and it
is not feasible to provide an accurate measure of such a change because of the
many factors (many of which are uncontrollable) influencing the result.
<PAGE>
Economic conditions in Northern California have remained relatively strong in
the first three months of 2000, although there are indications that this
economic strength could be threatened by the tightening of the skilled labor
force in Santa Clara County and the potential for the real estate market to slow
down. During the last several weeks the domestic equity markets have shown an
increase in volatility and a decrease in the overall market capitalization,
affecting all companies, but more significantly the high technology companies
involved in internet technology. The impact of this volatility and valuation
adjustment is not certain at this time but could affect the equity wealth factor
of those who have investments in such companies and the future infusion of
venture capital. Both of these factors could have a serious effect on the
economic conditions of Santa Clara County. In addition, the competitive
environment within the Bank's marketplace continues to be aggressive and the
competition among banks for additional loans, leases and deposits has caused
more competitive pricing.
The following tables 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, 2000 and 1999.
<TABLE>
<CAPTION>
AVERAGE BALANCES, RATES AND YIELDS
Fully Taxable Equivalent
(dollars in thousands)
Quarter ended March 31,
-----------------------------------------------------------------------------
2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
Average Average Average Average
Assets Balance Interest Yield (1) Balance Interest Yield (1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans and leases, net (2) $402,621 $10,334 10.32% $343,557 $8,216 9.70%
Securities available for sale (3) 89,386 1,458 6.56 65,610 957 5.92
Securities held to maturity:
Taxable (4) 4,237 68 6.45 8,907 145 6.60
Nontaxable (5) 17,829 387 8.72 13,833 268 7.86
Money market investments 27,858 405 5.85 22,317 268 4.87
Interest-bearing deposits in other banks 2,005 25 5.01 1,789 27 6.12
Interest rate hedging instruments ---- 2 ---- ---- (14) ----
- -------------------------------------------------------------------------- --------------------------
Total interest-earning assets 543,936 12,679 9.37 456,013 9,867 8.78
- -------------------------------------------------------------------------- --------------------------
Allowance for loan and lease losses (6,126) (5,579)
Cash and non-interest bearing due from banks 23,244 21,272
Other assets 23,840 17,195
Intangibles 3,554 3,965
- ------------------------------------------------------------- -------------
Total Assets $588,448 $492,866
============================================================= =============
Liabilities and Shareholders' equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand $81,233 559 2.77 $78,378 506 2.62
Money market and savings 144,223 1,411 3.93 102,739 779 3.08
Certificates of deposit:
Less than $100 50,615 712 5.66 41,285 523 5.14
$100 or more 117,179 1,516 5.20 93,196 1,158 5.04
- -------------------------------------------------------------------------- --------------------------
Total certificates of deposits 167,794 2,228 5.34 134,481 1,681 5.07
- -------------------------------------------------------------------------- --------------------------
Other borrowings 33,462 530 6.37 26,660 392 5.96
- -------------------------------------------------------------------------- --------------------------
Total interest-bearing liabilities 426,712 4,728 4.46 342,258 3,358 3.98
- -------------------------------------------------------------------------- --------------------------
Noninterest-bearing demand 101,064 92,577
Accrued interest payable and
other liabilities 7,359 7,582
- ------------------------------------------------------------- -------------
Total liabilities 535,135 442,417
- ------------------------------------------------------------- -------------
Shareholders' equity 53,313 50,449
- ------------------------------------------------------------- -------------
Total Liabilities and Shareholders' $588,448 $492,866
equity
=============================================================------------- =============-------------
Net interest income and margin (6) $7,951 5.88% $6,509 5.79%
================================================ ========================= ==========================
<FN>
(1) Rates are presented on an annualized basis.
(2) Includes loan fees of $508 for 2000, and $524 for 1999. Nonperforming loans
and leases have been included in average loan and lease balances.
(3) Includes dividend income of $79 and $77 received in 2000 and 1999.
(4) Includes dividend income of $49 received in 2000 and $36 in 1999.
(5) Adjusted to a fully taxable equivalent basis using the federal statutory
rate of 34% ($155 in 2000 and $107 in 1999).
(6) The net interest margin represents the fully taxable equivalent net
interest income as a percentage of average interest earning assets.
</FN>
</TABLE>
Provision for Loan and Lease Losses
- -----------------------------------
The level of the allowance for loan and lease losses and the related provision
reflect management's judgment as to the inherent risk of loss associated with
the loan and lease portfolios as of March 31, 2000 and 1999 based on information
available to management as of said dates. Based on management's evaluation of
such risks, an addition of $250 was made to the allowance for loan and lease
losses in the three months ended March 31, 2000 as compared to an addition of
$140 for the first quarter of 1999. See "Loan and Lease Portfolio."
Other Income
- ------------
The following table sets forth the components of other income and the percentage
distribution of such income for the three month periods ended March 31, 2000 and
1999:
<TABLE>
<CAPTION>
OTHER INCOME
(dollars in thousands)
Quarter ended March 31,
----------------------------------------------------------------------
2000 1999
Amount Percent Amount Percent
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service charges on deposits $274 54.04% $212 32.57%
Other operating income 233 45.96 439 67.43
- -----------------------------------------------------------------------------------------------------------------------------
Total $507 100.00% $651 100.00%
=============================================================================================================================
</TABLE>
The increase in the service charges on deposits of $62 for the three months
ended March 31, 2000, as compared to the three months ended March 31, 1999 is
due mainly to a change in the method of assessing certain service charges on
deposit accounts. The decrease in other operating income of $206 for the three
months of 2000 compared to the three months of 1999 is mainly due to the
one-time reversal during the first quarter of 1999 of a specific reserve
established for an acquired SBA loan on the date the loan was purchased in prior
years and which was paid in full.
Other Expenses
- --------------
The following schedule summarizes the major categories of expense as a
percentage of average assets on an annualized basis:
<TABLE>
<CAPTION>
OTHER EXPENSES AS A PERCENT OF AVERAGE ASSETS
(dollars in thousands)
Quarter ended March 31,
---------------------------------------------------------------------
2000 1999
Amount Percent (1) Amount Percent (1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and benefits $2,298 1.56% $2,163 1.76%
Occupancy 185 0.13 200 0.16
Furniture and equipment 168 0.11 140 0.11
Data processing 167 0.11 183 0.15
Client services paid by Bank 143 0.10 144 0.12
Directors' and shareholders' costs 141 0.10 155 0.13
Legal and professional fees 137 0.09 164 0.13
Business promotion 132 0.09 97 0.08
Amortization of core deposit
intangibles and goodwill 110 0.07 113 0.09
Merger costs 3,424 2.33 ----- -----
Other 545 0.37 488 0.40
- -----------------------------------------------------------------------------------------------------------------------------
Total $7,450 5.06% $3,847 3.12%
=============================================================================================================================
<FN>
(1) The percentages are calculated by annualizing the expenses and comparing
that amount to the average assets for the respective three month periods
ended March 31, 2000 and 1999.
</FN>
</TABLE>
Total other expenses for the first quarter of 2000 increased $3.6 million from
the same period a year ago, primarily as a result of nonrecurring merger costs
of $3.4 million, in addition to increased incentive accruals and salary
increases necessitated by the competitive environment for personnel. As a
percent of average assets, excluding nonrecurring merger costs, actual expenses
were 2.73% in the first quarter 2000 as compared to 3.12% in the first quarter
of 1999. This is mainly due to the combination of SJNB and Saratoga National
Bank on January 5, 2000.
Income Tax Provision
- --------------------
The effective tax rate for the three months ended March 31, 2000 was 48% and for
year ended December 31, 1999 it was 41%. The rate in the first quarter 2000 was
affected by the amount of merger expenses which were not considered deductible.
If these costs are excluded the rate is estimated to be 39%. The rate is also
impacted by several other items, the most significant of which were the
amortization of intangibles, tax exempt income, the California Franchise tax,
the California Franchise Tax Enterprise Tax Zone Credit and the impact of the
Bank's investment in Low Income Housing Tax Credit funds.
Financial Condition and Earning Assets
- --------------------------------------
Consolidated assets increased to $616 million at March 31, 2000 compared to $568
million at December 31, 1999. The increase related primarily to an increase in
Federal funds sold and Money market investments and was funded principally by an
increase in deposits. See "Funding."
Federal Funds Sold and Money Market Investments
- -----------------------------------------------
Federal funds sold and money market investments were $56.3 million at March 31,
2000 as compared to $12.7 million at December 31, 1999. This increase resulted
primarily from the increase in the Bank's deposits. See "Funding."
Securities
- ----------
The following table shows the composition of the securities portfolio at March
31, 2000 and December 31, 1999. There were no issuers of securities (except U.S.
Government Securities) for which the book value of securities of any issuer held
by the Bank exceeded 10% of the Company's shareholders' equity.
<TABLE>
<CAPTION>
SECURITIES PORTFOLIO
(dollars in thousands)
March 31, 2000 December 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
Cost Gain (Loss) Value Cost Gain (Loss) Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
U. S. Treasury $1,496 $(11) $1,485 $2,496 $3 $2,499
U. S. Government Agencies 31,514 (738) 30,776 37,337 (724) 36,613
State and municipal (nontaxable) 625 (33) 592 ---- ---- ----
Mortgage-backed 41,982 (804) 41,178 38,560 (564) 37,996
Asset-backed 2,000 (54) 1,946 2,000 (22) 1,978
Trust-preferred 7,059 (518) 6,541 7,062 (479) 6,583
Mutual funds 5,647 (450) 5,197 5,646 (437) 5,209
- -----------------------------------------------------------------------------------------------------------------------------
Total available for sale 90,323 (2,608) 87,715 93,101 (2,223) 90,878
- -----------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
U. S. Government Agencies 499 ---- 499 499 3 502
State and municipal (nontaxable) 17,833 (963) 16,870 17,828 (1,504) 16,324
Mortgage-backed 375 7 382 657 13 670
- -----------------------------------------------------------------------------------------------------------------------------
Total held to maturity 18,707 (956) 17,751 18,984 (1,488) 17,496
Federal Home Loan Bank stock 2,598 ---- 2,598 2,563 ---- 2,563
Federal Reserve Bank stock 649 ---- 649 649 ---- 649
- -----------------------------------------------------------------------------------------------------------------------------
Total 21,954 (956) 20,998 22,196 (1,488) 20,708
- -----------------------------------------------------------------------------------------------------------------------------
Total investment securities portfolio $112,277 $(3,564) $108,713 $115,297 $(3,711) $111,586
=============================================================================================================================
</TABLE>
Unrealized losses generally result from the impact of current market rates being
greater than those rates in effect at the time the Bank purchased the
securities. The unrealized loss on securities available for sale as of March 31,
2000 was $2.6 million as compared to an unrealized loss of $2.2 million as of
December 31, 1999. The increase in the unrealized loss was due to further
interest rate increases in the first quarter of 2000. The Bank's weighted
average maturity of the available for sale portfolio was approximately 6.7 years
as of March 31, 2000, and at December 31, 1999. 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 approximately 3.50%.
The unrealized loss on securities held to maturity was $956 as of March 31,
2000, as compared to an unrealized loss of $1.5 million as of December 31, 1999.
Contrary to the above, the State and municipal securities appreciated in value
in the first quarter of 2000 as interest rates continued to increase. This is
due to several reasons, the most significant is the impact of the inverted yield
curve (where rates on longer term instruments are less than those of shorter
duration) and a heavy demand for California and its subdivisions issues which
make up the most significant portion of the state and municipal security
portfolio. The Bank's weighted average maturity of the held to maturity
investment portfolio was approximately 8.5 years as of March 31, 2000, while at
December 31, 1999 it was 10.4 years. 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 5.60%.
The maturities and yields of the investment portfolio at March 31, 2000 are
shown below:
<TABLE>
<CAPTION>
MATURITY AND YIELDS OF INVESTMENT SECURITIES
- -----------------------------------------------------------------------------------------------------------------------------
At March 31, 2000
(dollars in thousands)
Available for Sale Held to Maturity
--------------------------------------------------------------------------------------------
FTE FTE
Amortized Estimated Average Amortized Estimated Average
Cost Fair Value Yield (1) Cost Fair Value Yield (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U. S. Treasury:
After 1 year within 5 years $1,496 $1,485 6.25% ----- ----- -----
----------------------------------------------
Totals 1,496 1,485 6.25 ----- ----- -----
----------------------------------------------
U.S. Government Agencies:
Within 1 year 9,184 9,149 5.88 ----- ----- -----
After 1 year within 5 years 19,331 18,795 6.04 $499 $499 6.78%
After 5 years within 10 years 2,999 2,832 6.13 ----- ----- -----
--------------------------------------------------------------------------------------------
Totals 31,514 30,776 6.01 499 499 6.78
--------------------------------------------------------------------------------------------
State and municipal:
Within 1 year ----- ----- ----- 1,457 1,459 7.72
After 1 year within 5 years ----- ----- ----- 1,957 1,947 7.57
After 5 years within 10 years ----- ----- ----- 1,421 1,391 7.89
After 10 years 625 592 9.03 12,998 12,073 7.89
--------------------------------------------------------------------------------------------
Totals 625 592 9.03 17,833 16,870 7.84
--------------------------------------------------------------------------------------------
Mortgage backed
Within 1 year ----- ----- ----- 375 382 7.90
After 1 year within 5 years 2,830 2,804 6.82 ----- ----- -----
After 5 years within 10 years 10,359 9,996 6.15 ----- ----- -----
After 10 years 12,166 11,966 6.84 ----- ----- -----
--------------------------------------------------------------------------------------------
Totals 25,355 24,766 6.55 375 382 7.90
--------------------------------------------------------------------------------------------
CMO's
Within 1 year 1,772 1,749 6.71 ----- ----- -----
After 1 year within 5 years 13,961 13,780 6.68 ----- ----- -----
After 5 years within 10 years 894 883 6.43 ----- ----- -----
--------------------------------------------------------------------------------------------
Totals 16,627 16,412 6.67 ----- ----- -----
--------------------------------------------------------------------------------------------
Asset backed
After 1 year within 5 years 2,000 1,946 6.60 ----- ----- -----
----------------------------------------------
Totals 2,000 1,946 6.60 ----- ----- -----
----------------------------------------------
Trust-preferred
After 10 years 7,059 6,541 7.91 ----- ----- -----
----------------------------------------------
Totals 7,059 6,541 7.91 ----- ----- -----
----------------------------------------------
Mutual funds:
----------------------------------------------
Within 1 year 5,647 5,197 5.50 ----- ----- -----
----------------------------------------------
Other
----------------------------------------------
After 10 years ----- ----- ----- 3,247 3,247 6.00
--------------------------------------------------------------------------------------------
Total investment securities 90,323 $87,715 6.44% $21,954 $20,998 7.41%
=============================================================================
Net unrealized loss on
securities available for sale (2,608)
---------------
Total investment securities,
net carrying value $87,715
===============
<FN>
(1) Fully taxable equivalent.
</FN>
</TABLE>
Loan and Lease Portfolio
- ------------------------
The following table provides a breakdown of the Company's consolidated loans and
leases by type of borrower:
<TABLE>
<CAPTION>
LOAN AND LEASE PORTFOLIO
(dollars in thousands)
March 31, 2000 December 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------
Percentage Percentage
Total of Total Total of Total
Amount Loans Amount Loans
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial and other $121,778 30.2% $123,873 30.7%
SBA 48,965 12.1 49,949 12.4
Leasing 26,872 6.7 20,837 5.2
Factoring/Asset based 14,584 3.6 9,901 2.5
Real estate construction 45,377 11.3 48,410 12.0
Real estate term 134,526 33.4 139,103 34.5
Consumer 12,074 3.0 12,448 3.1
Unearned fee income (1,081) (0.3) (1,203) (0.3)
- -----------------------------------------------------------------------------------------------------------------------------
Total loans and leases $403,095 100.0% $403,318 100.0%
=============================================================================================================================
</TABLE>
End of period balances for consolidated loans and leases remained level at March
31, 2000 and December 31, 1999, although, average balances increased to $403
million from $385 million. Several large unanticipated payoffs occurred late in
the quarter. The payoffs were due to several causes, completion of real estate
construction projects and their related sale, and refinancing of term real
estate and SBA loans. The growth in leasing and factoring/asset based loans
represent continued development of these lines of businesses. The Bank has
elected not to aggressively seek or renew fixed rate loans (other than leasing)
or loans where, in management's opinion, the Bank's underwriting criteria is not
satisfied; this has caused a slow down in real estate term loan production and
an increase in payoffs when the Bank has not met competitive pressures.
Approximately 49% of the loan and lease portfolio is directly related to real
estate or real estate interests, including real estate construction loans, real
estate term, mortgage warehouse lines (0.3%, included in the Commercial and
other category), real estate equity lines (1.2%, included in the Consumer
category), loans to real estate developers for short-term investment purposes
(1.8%) and loans for real estate investment purposes made to non-developers
(1%). The latter two types of loans are included in the Commercial and other
category. Approximately 30% of the loan and lease portfolio is made up of
commercial loans; however, in management's view, no particular industry
represents a significant portion of such loans.
The following table shows the maturity and interest rate sensitivity of
commercial, real estate construction and real estate term loans at March 31,
2000. Approximately 80% of the commercial, SBA and real estate loan portfolio
have floating interest rates which, in management's opinion, generally limits
the exposure to interest rate risk on long-term loans and leases but can have a
negative impact when rates decline.
<TABLE>
<CAPTION>
COMMERCIAL AND REAL ESTATE LOAN MATURITY AND INTEREST RATE SENSISTIVITY
(dollars in thousands) Balances maturing Interest Rate Sensitivity
-------------------------------------------------------------------------
Predeter-
Balances at One year mined Floating
March 31, One year to five Over five interest interest
2000 or less years years rates rates
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial and other $121,778 $80,887 $32,284 $8,607 $23,694 $98,084
SBA 48,965 2,866 10,496 35,604 1,884 47,081
Real estate construction 45,377 43,548 ----- 1,829 2,886 42,491
Real estate term 134,526 13,809 34,250 86,467 43,380 91,146
=============================================================================================================================
</TABLE>
The Company utilizes a method of assigning a minimum and maximum loss ratio to
each grade of loan or lease within each category of borrower (commercial, real
estate term, real estate construction, factoring/asset-based lending, consumer,
SBA, etc.) and leases. Loans and leases are graded on a ranking system based on
management's assessment of the loan's or lease's credit quality. The assigned
loss ratio is based upon, among other things, the Company's prior experience,
industry experience, delinquency trends and the level of nonaccrual loans and
leases. 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 and
lease is evaluated on the basis of whether or not it is impaired. For impaired
loans and leases, the expected cash flow is discounted on the basis of the
loan's interest rate. The methodology provides a systematic approach believed by
management to measure the risk of possible future loan and lease losses.
Management and the Board of Directors evaluate the allowance and determine the
desired level of the allowance considering objective and subjective measures,
such as knowledge of the borrowers' business, valuation of collateral and
exposure to potential losses. The allowance for loan and lease losses was
approximately $6.6 million at March 31, 2000, or 1.63% of total loans and leases
outstanding on such date. Based on information available as of the date of this
Report, management believes the allowance for loan and lease losses, determined
as described above, is adequate for potential losses foreseeable at March 31,
2000.
The allowance for loan and lease losses is a general reserve available against
the total loan and lease portfolio and off-balance sheet credit exposure. While
management uses available information to recognize losses on loans and leases,
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 loan and lease losses. 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.
The following schedule provides an analysis of the allowance for loan and lease
losses:
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN AND LEASE LOSSES
(dollars in thousands)
Quarter Ended Year Ended
March 31, December 31,
-----------------------------------------------------
2000 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of the period $6,412 $5,494 $5,494
Charge-offs by loan or lease category:
Commercial ---- ---- 108
SBA ---- ---- 18
Real estate-construction 376 ----
Real estate term ---- ---- 4
Consumer 7 20 35
- -----------------------------------------------------------------------------------------------------------------------------
Total charge-offs 383 20 165
- -----------------------------------------------------------------------------------------------------------------------------
Recoveries by loan or lease category:
Commercial 12 32 150
SBA ---- 1 5
Real estate-construction 254 1 4
Real estate term ---- ---- 4
Consumer 6 11 59
- -----------------------------------------------------------------------------------------------------------------------------
Total recoveries 272 45 222
- -----------------------------------------------------------------------------------------------------------------------------
Net charge-offs (recoveries) 111 (25) (57)
- -----------------------------------------------------------------------------------------------------------------------------
Provision charged to expense 250 140 861
- -----------------------------------------------------------------------------------------------------------------------------
Balance, end of the period $6,551 $5,659 $6,412
=============================================================================================================================
Ratios:
Net charge-offs (recoveries) to average loans and leases, annualized .11% (.03%) (.02%)
Allowance to total loans and leases at the end of the period 1.63 1.59 1.59
Allowance to nonperforming loans and leases at end of the period 485.00 1,422.00 296.00
=============================================================================================================================
</TABLE>
During the first quarter of 2000, the bank wrote-off $383 in loans and had
recoveries of $272 for a total of $111 in net charge-offs. During the first
quarter of 1999, the bank wrote-off $20 in loans and had recoveries of $45 for a
total of $25 in net recoveries. In 2000, the single most significant charge-off
was related to a real estate construction project, of which, $254 was recovered
in the same period. See "Nonperforming Loans and Leases." It is expected by
management the remaining balance will recovered. The allowance for loan and
lease losses was 485% of nonperforming loans and leases at March 31, 2000
compared to 296% at December 31, 1999. The increase in the percentage of
allowance for loan and lease losses to nonperforming loans and leases was due to
the reduction in nonperforming loans. See "Nonperforming Loans and Leases."
Nonperforming Loans and Leases
- ------------------------------
Nonperforming loans and leases consist of loans and leases for which the accrual
of interest has been suspended, restructured loans and leases and other loans
and leases with principal or interest contractually past due 90 days or more and
still accruing. At March 31, 2000, there was approximately $1,352 in loans for
which the accrual of interest had been suspended. At December 31, 1999 there was
approximately $2,148 in loans for which the accrual of interest had been
suspended plus $15 with principal or interest contractually past due 90 days or
more and still accruing for a total of $2,163 in nonperforming loans and leases.
As of March 31, 2000, nonperforming loans and leases consisted of three loans.
The three loans are secured by real estate and one has an SBA guarantee.
Management does not consider the loss exposure on these loans to be significant.
Management conducts an ongoing evaluation and review of the loan and lease
portfolio in order to identify potential nonperforming loans and leases.
Management considers loans and leases which are classified for regulatory
purposes, and loans and leases 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 credit information about which management
is aware 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, 2000, management has not identified any significant loans or leases
not mentioned above with respect to which known information causes management to
have serious doubts about the borrowers' abilities to comply with present
repayment terms, such that the loans and leases might subsequently be classified
as nonperforming. Changes in world, national or local economic conditions or
specific industry segments (including declining exports), rising interest rates,
declines in real estate values, declines in securities markets and acts of
nature could have an adverse effect on the ability of borrowers to repay
outstanding loans and leases and the value of real estate and other collateral
securing such loans and leases.
The Bank is committed on a letter of credit in the amount of $650, which relates
to the real estate loan which was written off during the first quarter of 2000.
The letter of credit supports the necessary required infrastructure relating to
the real estate project. It is estimated that 80% of such infrastructure has
been completed. The estimated exposure for this letter of credit has been
specifically identified in the allowance for loan and lease losses.
Funding
- -------
The following table provides a breakdown of deposits by category as of the dates
indicated:
<TABLE>
<CAPTION>
DEPOSIT CATEGORIES
(dollars in thousands)
March 31, 2000 December 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------
Percentage Percentage
Total of Total Total of Total
Amount Deposits Amount Deposits
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest-bearing demand $109,412 20.9% $94,687 20.0%
Interest-bearing demand 81,894 15.6 78,523 16.6
Money market and savings 158,562 30.3 140,871 29.8
Certificates of deposit:
Less than $100 60,794 11.6 54,172 11.4
$100 or more 113,050 21.6 105,480 22.3
- -----------------------------------------------------------------------------------------------------------------------------
Total $523,712 100.0% $473,733 100.0%
=============================================================================================================================
</TABLE>
Deposits as of March 31, 2000 were $524 million compared to $474 million at
December 31, 1999. The source of deposit growth for the first three months of
2000 was due to several factors: 1) the growth in noninterest-bearing demand of
approximately $15 million, interest-bearing demand of approximately $3 million
and money market and savings deposits of approximately $18 million were all due
to increased business activity; 2) the growth of certificates of deposit of less
than $100, was due to the addition of a three year, $5 million brokered
certificate of deposit; and 3) the growth of certificates of deposit of greater
than $100 of approximately $8 million was mainly due to increased business
activity.
Management believes that non-interest bearing deposits could decrease as a
percent of the total, in part, due to competitive pressures and changes in the
deposit products being utilized by some of the Bank's customers, which has
caused a shift to interest-bearing products. See "Capital and
Liquidity-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 income is negatively impacted in the short
term by a decline in interest rates. Conversely, an increase in interest rates
should have a short-term positive impact on net interest income.
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.
The table below summarizes the various capital ratios of the Company and the
Bank at March 31, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
Risk-based and Leverage Capital Ratios
(dollars in thousands)
March 31, 2000 December 31, 1999
----------------------------------------------------------------------
Company-Risk-based Amount Ratio Amount Ratio
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tier 1 capital $50,896 10.38% $50,371 11.08%
Tier 1 capital minimum requirement 19,620 4.00 18,177 4.00
----------------------------------------------------------------------
Excess $31,276 6.38% $32,194 7.08%
======================================================================
Total capital $57,033 11.63% $56,060 12.34%
Total capital minimum requirement 39,370 8.00 36,354 8.00
----------------------------------------------------------------------
Excess $17,793 3.63% $19,706 4.34%
======================================================================
Risk-adjusted assets $490,501 $454,429
================= =================
Company-Leverage
Tier 1 capital $50,896 8.65% $50,371 8.88%
Minimum leverage ratio requirement 23,538 4.00 22,685 4.00
----------------------------------------------------------------------
Excess $27,358 4.65% $27,686 4.88%
======================================================================
Average total assets $588,448 $567,130
================= =================
Bank-Risk-based
Tier 1 capital $48,841 10.03% $48,050 10.57%
Tier 1 capital minimum requirement 19,481 4.00 18,180 4.00
----------------------------------------------------------------------
Excess $29,360 6.03% $29,870 6.57%
======================================================================
Total capital $54,935 11.28% $53,740 11.82%
Total capital minimum requirement 38,962 8.00 36,360 8.00
----------------------------------------------------------------------
Excess $15,973 3.28% $17,380 3.82%
======================================================================
Risk-adjusted assets $487,030 $454,503
================= =================
Bank-Leverage
Tier 1 capital $48,841 8.32% $48,050 8.47%
Minimum leverage ratio requirement 23,485 4.00 22,679 4.00
----------------------------------------------------------------------
Excess $25,356 4.32% $25,371 4.47%
======================================================================
Average total assets $587,126 $566,978
================= =================
</TABLE>
Liquidity
- ---------
Management strives to maintain a level of liquidity sufficient to meet customer
requirements for loan and lease 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 and lease 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
could utilize 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 and other short-term investments,
short-term securities held to maturity, and securities available for sale less
short-term borrowings. At March 31, 2000, consolidated net liquid assets totaled
$142 million or 28% of consolidated total assets as compared to $93 million or
22% of consolidated total assets at December 31, 1999. In addition to the liquid
asset portfolio, SJNB also has available $22 million in lines of credit with
three major commercial banks, a collateralized repurchase agreement with a
maximum limit of $30 million, the guaranteed portion of the SBA loan portfolio
of approximately $31 million, and a credit facility with the Federal Reserve
Bank based on loans secured by real estate for approximately $8.5 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 22% of total deposits on March 31, 2000 and December 31, 1999.
Liquidity is also affected by portfolio maturities and the effect of interest
rate fluctuations on the marketability of both assets and liabilities. The loan
and lease portfolio consists primarily of floating rate, short-term loans. On
March 31, 2000, approximately 36% of total consolidated assets had maturities
under one year and 67% of total consolidated loans and leases had floating rates
tied to the prime rate or similar indexes. The short-term nature of the loan and
lease portfolio, and loan and lease agreements which generally require monthly
interest payments, provide the Company with a secondary source of liquidity.
There are no material commitments for capital expenditures in 2000.
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 "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
1999 or the first three months of 2000.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company defines interest rate sensitivity as the measurement of the mismatch
in repricing characteristics of assets, liabilities and off balance sheet
instruments at a specified point in time. This mismatch (known as interest rate
sensitivity gap) represents the potential mismatch in the change in the rate of
interest income and interest expense that would result from a change in interest
rates. Mismatches in interest rate repricing among assets and liabilities arise
primarily from the interaction of various customer businesses (i.e., types of
loans and leases versus the types of deposits maintained) and from management's
discretionary investment and funds gathering activities. The Company attempts to
manage its exposure to interest rate sensitivity. However, due to its size and
direct competition from the major banks, the Company must offer products which
are competitive in the market place, even if less than optimum with respect to
its interest rate exposure.
The Company's balance sheet position at March 31, 2000 was asset-sensitive on a
short-term basis, based upon the significant amount of variable rate loans and
the repricing characteristics of its deposit accounts. This position 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. The interest rate gap is a measure of interest rate
exposure and is based upon the known repricing dates of certain assets and
liabilities and assumed repricing dates of others. Management believes there has
been no significant change in the Bank's market risk exposures disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Summary of Financial Results - Net Interest Income."
Commencing in the third quarter of 1999, the Federal Open Market Committee
("FOMC") began a process of increasing interest rates to offset the possible
increase in inflation and to slow down consumer spending. Through May 5, 2000,
the FOMC had increased interest rates 125 basis points. During this period the
Bank has experienced an increase in its net interest margin. For the quarters
ended June 30, 1999, September 30, 1999, December 31, 1999, and March 31, 2000
net interest margins on a fully taxable equivalent basis were 5.54%, 5.63%,
5.64% and 5.88%, respectively. The effect of possible interest rate changes is
not precisely determinable due to the many factors influencing the Bank's net
interest margin, including repricing of deposits, a change in mix of the loan,
lease and deposit portfolios and other borrowings, changes in relative volumes,
the speed in which fixed rate loans and leases are repriced, discretionary
investment activities and other factors. Although, there is a positive change in
the Bank's net interest margin, during this period the Bank also experienced
significant growth in its higher cost funding sources, such as money market
savings and certificates of deposits. The growth in these deposits had the
impact of offsetting a portion of the increase in the net interest margin.
In evaluating the Company's exposure to interest rate risk, certain shortcomings
inherent in the method of analysis must be considered. For example, although
certain assets and liabilities may have similar maturities or periods to
reprice, they may react in different degrees to changes in market interest
rates. Additionally, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market interest rates.
Further, certain earning assets have features, which restrict changes in
interest rates on a short-term basis and over the life of the asset. The Company
considers the anticipated effects of these various factors when implementing its
interest rate risk management activities, including the utilization of certain
interest rate hedges.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Company nor the Bank is a party to any material pending legal
proceeding, nor is their property the subject of any material pending legal
proceeding, except ordinary routine legal proceedings arising in the ordinary
course of the Bank's business and incidental to its business, none of which are
expected to have a material adverse impact upon the Company's or the Bank's
business, financial position or results of operations.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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:
Exhibit Number
(2)a. Agreement and Plan of Merger by and among the Registrant,
Saratoga Bancorp and Saratoga National Bank, dates as of
August 27, 1999, is hereby incorporated by reference to
Exhibit 2.1 of the Registrant's Registration Statement on
Form S-4 as filed on October 14, 1999, under Registration
No. 333-89013.
(3)(i). The Registrant's Restated Articles of Incorporation, as
amended are hereby incorporated by reference to Exhibit (3)
i. of the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1999.
(3)(ii). The Registrant's Restated Bylaws as of February 23, 2000
are hereby incorporated by reference to Exhibit 3 (ii) of
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.
*(10)a. The Registrant's 1992 Employee Stock Option Plan is hereby
incorporated by reference from Exhibit 4.1 of the
Registrant's on Form S-8, as filed on September 4, 1992,
under Registration No. 33-51740.
*(10)b. Amendment No. 1 to the 1992 Employee Stock Option Plan is
hereby incorporated by reference from Exhibit (10) b. of the
Registrants Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
*(10)c. 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)d. 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)e. The Registrant's Amended 1996 Stock Option Plan is
incorporated by reference to Exhibit 99.1 of the
Registrant's Form S-8 filed June 15, 1999, under
Registration No. 333-80683.
*(10)f. The form of Nonstatutory Stock Option Agreement for outside
Directors being utilized under the Amended 1996 Stock Option
Plan is hereby incorporated by reference to Exhibit (10) f.
of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.
*(10)g. The form of Nonstatutory Stock Option Agreement for
Employees being utilized under the Amended 1996 Stock Option
Plan is hereby incorporated by reference to Exhibit (10) g.
of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.
*(10) h. The form of Incentive Stock Option Agreement being utilized
under the Amended 1996 Stock Option Plan is hereby
incorporated by reference to Exhibit (10) h. of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
*(10) i. The Saratoga Bancorp 1982 Stock Option Plan is hereby
incorporated by reference to Exhibit (10) i. of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999.
*(10)j. The S aratoga Bancorp 1994 Stock Option Plan (Amended) is
hereby incorporated by reference to Exhibit (10) i. of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999.
*(10)k . Forms of Incentive Stock Option Agreement, Non-Statutory
Stock Option Agreement and Non-Statutory Stock Option
Agreement for Outside Directors is hereby incorporated by
reference to Exhibit (10) i. of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1999.
*(10)l. 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 Report on Form 10-QSB for the
quarterly period ended March 31, 1996.
*(10)m. 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 Report on Form 10-QSB for the
quarterly period ended March 31, 1996.
(10)n. 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)o. 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)p. Agreement of Purchase and Sale dated July 27, 1988 for 12000
Saratoga-Sunnyvale Road, Saratoga, CA is hereby incorporated
by reference to Exhibit (10) i. of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1999.
*(10)q. Form of Director Supplemental Compensation Agreement dated
September 24, 1998 between Saratoga National Bank and Robert
G. Egan, John F. Lynch III and V. Ronald Mancuso,
respectively is hereby incorporated by reference to Exhibit
(10) i. of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
*(10)r. Form of Director Life Insurance Endorsement Method Split
Dollar Plan Agreement dated September 24, 1998 between
Saratoga National Bank and Robert G. Egan, John F. Lynch III
and V. Ronald Mancuso, respectively is hereby incorporated
by reference to Exhibit (10) i. of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1999.
*(10)s. Form of Director Surrogate Supplemental Compensation
Agreement dated September 24, 1998 between Saratoga National
Bank and Victor E. Aboukhater and William D. Kron,
respectively is hereby incorporated by reference to Exhibit
(10) i. of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
*(10)t. Form of Director Surrogate Life Insurance Endorsement Method
Split Dollar Plan Agreement dated September 24, 1998 between
Saratoga National Bank and Victor E. Aboukhater and William
D. Kron, respectively is hereby incorporated by reference to
Exhibit (10) i. of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
*(10)u. Form of Officer Supplemental Compensation Agreement dated
September 24, 1998 between Saratoga National Bank and Earl
Lanna, Mary Rourke, Sandra Swenson, Barbara Resop and Cathe
Franklin, respectively is hereby incorporated by reference
to Exhibit (10) i. of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
*(10)v. Form of Officer Life Insurance Endorsement Method Split
Dollar Plan Agreement dated September 24, 1998 between
Saratoga National Bank and Earl Lanna, Mary Rourke, Sandra
Swenson, Barbara Resop and Cathe Franklin, respectively is
hereby incorporated by reference to Exhibit (10) i. of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999.
*(10)w. Richard L. Mount Executive Supplemental Compensation
Agreement dated September 24, 1998 is hereby incorporated by
reference to Exhibit (10) i. of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1999.
*(10)x. Richard L. Mount Life Insurance Endorsement Method Split
Dollar Plan Agreement dated September 24, 1998 is hereby
incorporated by reference to Exhibit (10) i. of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999.
*(10)y. Richard L. Mount Executive Benefits Agreement dated June
18, 1999 is hereby incorporated by reference to Exhibit (10)
i. of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
* Indicates management contract or compensation plan or arrangement.
(b) Reports on Form 8-K
None
<PAGE>
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.
SJNB FINANCIAL CORP.
(Registrant)
Date: May 5, 2000 /s/ James R. Kenny
------------------------------------
James R. Kenny
President and
Chief Executive Officer
Date: May 5, 2000 /s/ Eugene E. Blakeslee
------------------------------------
Eugene E. Blakeslee
Executive Vice President and
Chief Financial Officer (Chief Accounting Officer)
<PAGE>
SJNB Financial Corp.
Form 10-Q
Exhibits
March 31, 2000
The following exhibits are filed as part of this report:
(2)a. Agreement and Plan of Merger by and a mong the Registrant, Saratoga
Bancorp and Saratoga National Bank, dated as of August 27, 1999, is
hereby incorporated by reference to Exhibit 2.1 of the Registrant's
Registration Statement on Form S-4 as filed on October 14, 1999, under
Registration No. 333-89013.
(3)(i). The Registrant's restated Articles of Incorporation are hereby
incorporated by reference from Exhibit (3) (i) of the Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1999.
(3)(ii). The Registrant's Restated Bylaws as of February 23, 2000 are hereby
incorporated by reference to Exhibit 3 (ii) of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
*(10)a. 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)b. Amendment No. 1 to the 1992 Employee Stock Option Plan is hereby
incorporated by reference to Exhibit (10) b. of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
*(10)c. 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)d. 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)e. The Registrant's Amended 1996 Stock Option Plan is hereby
incorporated by reference to Exhibit 99.1 of the Registrant's Form S-8
filed June 15, 1999, under Registration No. 333-80683
*(10)f. The form of Nonstatutory Stock Option Agreement for outside Directors
being utilized under the Amended 1996 Stock Option Plan is hereby
incorporated by reference to Exhibit (10) f. of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
*(10)g. The form of Nonstatutory Stock Option Agreement for Employees being
utilized under the Amended 1996 Stock Option Plan is hereby
incorporated by reference to Exhibit (10) g. of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
*(10)h. The form of Incentive Stock Option Agreement being utilized under
the Amended 1996 Stock Option Plan is hereby incorporated by reference
to Exhibit (10) h. of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998.
*(10)i. The Saratoga Bancorp 1982 Stock Option Plan is hereby incorporated
by reference to Exhibit (10) i. of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999.
*(10)j. The Saratoga Bancorp 1994 Stock Option Plan (Amended) is hereby
incorporated by reference to Exhibit (10) i. of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1999.
*(10)k. Forms of Incentive Stock Option Agreement, Non-Statutory Stock Option
Agreement and Non-Statutory Stock Option Agreement for Outside
Directors is hereby incorporated by reference to Exhibit (10) i. of
the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
*(10)l. 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 Report on Form 10-QSB
for the quarterly period ended March 31, 1996.
*(10)m. 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 Report on
Form 10-QSB for the quarterly period ended March 31, 1996.
(10)n. 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)o. 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)p. Agreement of Purchase and Sale dated July 27, 1988 for 12000 Saratoga-
Sunnyvale Road, Saratoga, CA is hereby incorporated by reference to
Exhibit (10) i. of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
*(10)q. Form of Director Supplemental Compensation Agreement dated September
24, 1998 between Saratoga National Bank and Robert G. Egan, John F.
Lynch III and V. Ronald Mancuso, respectively is hereby incorporated
by reference to Exhibit (10) i. of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999.
*(10)r. Form of Director Life Insurance Endorsement Method Split Dollar Plan
Agreement dated September 24, 1998 between Saratoga National Bank and
Robert G. Egan, John F. Lynch III and V. Ronald Mancuso, respectively
is hereby incorporated by reference to Exhibit (10) i. of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
*(10)s. Form of Director Surrogate Supplemental Compensation Agreement
dated September 24, 1998 between Saratoga National Bank and Victor E.
Aboukhater and William D. Kron, respectively is hereby incorporated by
reference to Exhibit (10) i. of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
*(10)t. Form of Director Surrogate Life Insurance Endorsement Method Split
Dollar Plan Agreement dated September 24, 1998 between Saratoga
National Bank and Victor E. Aboukhater and William D. Kron,
respectively is hereby incorporated by reference to Exhibit (10) i. of
the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
*(10)u. Form of Officer Supplemental Compensation Agreement dated September
24, 1998 between Saratoga National Bank and Earl Lanna, Mary Rourke,
Sandra Swenson, Barbara Resop and Cathe Franklin, respectively is
hereby incorporated by reference to Exhibit (10) i. of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
*(10)v. Form of Officer Life Insurance Endorsement Method Split Dollar Plan
Agreement dated September 24, 1998 between Saratoga National Bank and
Earl Lanna, Mary Rourke, Sandra Swenson, Barbara Resop and Cathe
Franklin, respectively is hereby incorporated by reference to Exhibit
(10) i. of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.
*(10)w. Richard L. Mount Executive Supplemental Compensation Agreement
dated September 24, 1998 is hereby incorporated by reference to
Exhibit (10) i. of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
*(10)x. Richard L. Mount Life Insurance Endorsement Method Split Dollar Plan
Agreement dated September 24, 1998 is hereby incorporated by reference
to Exhibit (10) i. of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
*(10)y. Richard L. Mount Executive Benefits Agreement dated June 18, 1999
is hereby incorporated by reference to Exhibit (10) i. of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
*Indicates management contract or compensation plan or arrangement.
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