FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2-91196
NORTHERN EMPIRE BANCSHARES
(Exact name of registrant as specified in its charter)
California 94-2830529
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 Fourth Street, Santa Rosa, California 95404
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 707-579-2265
NONE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and 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
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of class: Common Stock, no par value Outstanding shares as of April 30,
1997: 1,538,728
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NORTHERN EMPIRE BANCSHARES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
March 31, December 31,
1997 1996
<S> <C> <C>
ASSETS
Cash and equivalents:
Cash and due from banks $ $ $11,066
$6,960
Federal funds sold 22,323 22,724
- ---------------- - ----------------
Total cash and equivalents 29,283 33,790
Certificates of deposits in other financial institutions 2,774 3,368
Investment securities 8,558 16,132
Loans receivable, net 175,815 165,681
Leasehold improvements and equipment, net 577 620
Accrued interest receivable and other assets 5,165 5,202
- ---------------- - ----------------
Total assets $ 222,172 $ 224,793
= ================ = ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 206,015 $ 209,235
Accrued interest payable and other liabilities 1,115 1,220
- ---------------- - ----------------
Total liabilities 207,130 210,455
- ---------------- - ----------------
Commitments and contingencies (Note 10).
Shareholders' equity:
Preferred stock, no par value; authorized, 10,000,000 shares; none issued or
outstanding
Common stock, no par value; authorized, 20,000,000 shares; shares
issued and outstanding, 1,538,728 in 1997 and 1,534,470 in 1996 9,706 9,607
Retained earnings 5,336 4,731
- ---------------- - ----------------
Total shareholders' equity 15,042 14,338
- ---------------- - ----------------
Total liabilities and shareholders' equity $ 222,172 $ 224,793
= ================ = ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHERN EMPIRE BANCSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
for the three months ended March 31, 1997 and 1996
(Unaudited)
(dollars in thousands, except per share data) 1997 1996
<S> <C> <C>
Interest income:
Loans $ 4,319 $ 3,476
Certificates of deposits in other financial institutions 41 80
Federal funds sold and investment securities 352 280
- ---------------- - ----------------
Total interest income 4,712 3,836
Interest expense 2,134 1,675
- ---------------- - ----------------
Net interest income before provision for loan losses 2,578 2,161
Provision for loan losses 120 90
- ---------------- - ----------------
Net interest income after provision for loan losses 2,458 2,071
- ---------------- - ----------------
Other income:
Service charges on deposits 119 114
Gain on sale of loans 0 13
Other 155 144
- ---------------- - ----------------
Total other income 274 271
- ---------------- - ----------------
Other expenses:
Salaries and employee benefits 862 789
Occupancy 166 179
Equipment 83 76
Outside customer services 60 61
Deposit and other insurance 42 32
Professional fees 40 50
Advertising 73 60
Other 236 213
- ---------------- - ----------------
Total other expenses 1,562 1,460
- ---------------- - ----------------
Income before income taxes 1,170 882
Provision for income taxes 496 381
- ---------------- - ----------------
Net income $ 674 $ 501
= ================ = ================
Common stock earnings per share $ 0.42 $ 0.34
= ================ = ================
Average common shares outstanding for net income per share calculation 1,599,619 1,488,409
= ================ = ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHERN EMPIRE BANCSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 1997 and 1996
(Unaudited)
(dollars in thousands) 1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 674 $ 501
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 120 90
Depreciation, amortization and accretion 73 40
Net increase in deferred loan fees and discounts (125) (38)
Increase in interest receivable and other assets (132) (122)
Increase in accrued interest payable and other liabilities (104) 76
- ------------ ------------
Net cash provided by in operating activities 506 547
- ------------ ------------
Cash flows from investing activities:
Purchase of investment securities (4,426) (4,959)
Maturities of investment securities 12,000 10,000
Net decrease in deposits in other financial institutions 594 (207)
Net decrease (increase) in loans receivable (9,959) (3,155)
Purchase of leasehold improvements and equipment, net (30) (99)
- ------------ ------------
Net cash used in investing activities (1,821) 1,580
- ------------ ------------
Cash flows from financing activities:
Net increase in deposits (3,220) 6,147
Stock options exercised 28 1
- ------------ ------------
Net cash provided by financing activities (3,192) 6,148
- ------------ ------------
Net increase (decrease) in cash and cash equivalents (4,507) 8,275
Cash and cash equivalents at beginning of year 33,790 16,288
- ------------ ------------
Cash and cash equivalents at end of year $ 29,283 $ 24,563
= ============ ============
Other cash flow information:
Interest paid $ 2,130 $ 1,714
= ============ ============
Income taxes paid $ 250 $ 190
= ============ ============
Additions to Other Real Estate Owned $ 90 $ 77
= ============ ============
</TABLE>
<PAGE>
Northern Empire Bancshares and Subsidiary
Notes to Consolidated Financial Statements
March 31, 1997
Note 1 - Basis of Presentation
In the opinion of Management, the unaudited interim consolidated financial
statements contain all adjustments of a normal recurring nature, which are
necessary to present fairly the financial condition of Northern Empire
Bancshares and Subsidiary at March 31, 1997 and the results of operations for
the three months then ended.
Certain information and footnote disclosures presented in the Corporation's
annual consolidated financial statements are not included in these interim
financial statements. Accordingly, the accompanying unaudited interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Corporation's 1996 Annual Report on Form 10-KSB. The results of operations for
the three months ended March 31, 1997 are not necessarily indicative of the
operating results through December 31, 1997.
Note 2 - Net Income per Common and Common Equivalent Share Net income per common
and common equivalent share is calculated by using the weighted average number
of common shares outstanding, adjusted for stock dividends, during the period.
Note 3 - New and Pending Accounting Standards
See the Corporation's 1996 Annual Report on Form 10-KSB for a discussion of
new and pending accounting standards.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Northern Empire Bancshares (the "Corporation") is the bank holding company of
Sonoma National Bank (the "Bank"). Since the principal business of the
Corporation is the Bank, the following discussion pertains mainly to the Bank.
This report contains "forward-looking statements" as defined in section 27A of
the Securities Act of 1993, as amended, and section 21E of the Securities
Exchange Act of 1934, as amended, which includes statements such as projections,
plans and objectives and assumptions about the future, and such forward looking
statements are subject to the safe harbor created by these sections. Many
factors could cause the actual results, amounts or events to differ materially
from those the Corporation expects to achieve or occur, such as changes in
competition, market interest rates, economic conditions and regulations.
Although the Corporation has based its plans and projections on certain
assumptions, there can be no assurances that its assumptions will be correct, or
that its plans and projections can be achieved.
Total consolidated assets equaled $222,172,000 at March 31, 1997 compared to
$224,793,000 at December 31, 1996. At year end, the Bank's assets were increased
by a temporary deposit of $16 million. The majority of this deposit was
withdrawn by January 31, 1997. At December 31, 1996, those funds were invested
in liquid assets (Fed Funds and short term investments). Without this large
deposit the Bank would have grown $13.4 million during the first quarter. Net
loans, including loans held for sale and bankers acceptances, increased $10.1
million. Investments declined $7.6 million and cash and equivalents decreased
$4.5 million during the first quarter.
<PAGE>
Net Interest Income
The net income after tax for the first three months of 1997 equaled $674,000
compared to $501,000 for the comparable period of 1996, an increase of 35%. The
higher profit resulted from increases in net interest income due to loan growth
(a larger volume of high yielding earning assets) while controlling the Bank's
operating costs.
Net interest income of $2,578,000 for the first quarter of 1997 increased 24%
from $2,161,000 for the comparable period last year. This increase in net
interest income resulted from volume increases of $45.1 million in average
earning assets for the current quarter compared to the first quarter of 1996.
$42.1 million of that increase was in average loans outstanding which have the
highest yields. Average interest bearing deposits for the first quarter
increased $39.4 million over the same period last year.
The net interest margin equaled 5.09% during the first quarter of 1997 compared
to an average margin during 1996 of 5.30%. The yield on average loans equaled
9.98% in the first quarter compared to 10.14% during 1996, while the Bank's cost
of funds was unchanged at 4.96%. The yield on loans has been negatively impacted
by a 50 basis point charge applied to the guaranteed portion of Small Business
Administration (SBA) loans booked since October 1995. Since the guaranteed
portion of SBA loans subject to this fee has increased from $22 million at March
31, 1996 to $36 million as of March 31, 1997, it continues to have a larger
impact on interest income. The mix of loans also impacts the overall yield on
loans. During the first quarter of 1997, there was significant growth in real
estate loans, which have a lower yield than other types of loans. In addition,
the Bank invested excess liquidity in Bankers Acceptances which had an average
yield of 5.43% during the first quarter of 1997. Bankers Acceptances are
classified as loans; and therefore, affect the yield calculation. There were no
Banker Acceptances held during the first quarter of 1996.
Net interest margin is also affected by the level of loans relative to deposits.
The Bank's ratio of loans to deposits declined from an average of 87.9% in 1996
to 86.5% during the first quarter of 1997.
The Bank is considered asset sensitive and benefits from rate increases since
more of its assets reprice at a faster rate than deposits. The Prime lending
rate was 8.25% until March 26,1997 when it increased to 8.5% which has a
positive impact on interest margin. Of the Bank's loan portfolio totaling $177.8
million at March 31, 1997, $121.8 million or 68.5% of the loans are adjustable
rate loans which have not reached a floor or ceiling rate. Approximately $88.9
million are prime-based loans, of which $21.5 million reprice immediately and
$64.3 million reprice on a quarterly basis. Approximately $30.1 million of the
Bank's loan portfolio is periodically adjustable (generally every six months)
based upon the Eleventh District's cost of funds index. This index was 4.98% in
March 1996 and equaled 4.76% in March 1997.
Interest expense increased from $1,675,000 in the first quarter of 1996 to
$2,134,000 in 1997. The major factor was the increase of $39.1 million in
average interest bearing deposits when comparing the first quarter of 1996 to
1997. The average cost of interest bearing deposits was unchanged at 4.96% for
both periods.
Other Income
Other income is derived primarily from service charges on deposit accounts,
discount brokerage income, earnings on life insurance, SBA loan servicing, SBA
loan sales and sales of other real estate owned. Other income increased to
$274,000 from $271,000 when comparing the first quarter of 1997 to the same
period last year.
Service charges during the quarter increased to $119,000 from $114,000 during
the first quarter last year. This increase results primarily from growth in
transactions and analysis deposit customers.
There were no sales of SBA loans during the first quarter of 1997, compared to
sales of $132,000 resulting in a gain of $13,000 during the first quarter last
year. The Bank has recently retained the guaranteed portion of SBA loans to
realize the interest yield, rather than selling the guaranteed portion for a one
time gain and servicing fees. Management considers the Bank's liquidity needs
and the anticipates loans and deposit growth as a part of the decision to hold
SBA guaranteed loans versus selling them. There is an established market for SBA
guaranteed loans which the Bank can access to sell qualifying SBA guaranteed
loans.
<PAGE>
SBA servicing fees, which totaled $93,000 during the quarter, declined from
$100,000 for the same period of 1996. Higher than expected SBA loan payoffs had
a negative impact on servicing fees, since the unamortized portion of the excess
servicing fees recorded when a loan is sold must be reversed against current
servicing income. In addition, the pool of loans serviced, on which the Bank
receives a servicing fee, approximated the balance during the first quarter of
last year.
In 1997, the Bank sold a commercial building which had been recorded as other
real estate owned (OREO) realizing a gain of $15,000. There were no sales of
OREO in the first quarter of 1996.
Non-Interest Expenses
Deposits and loans have grown 33% and 28% respectively from March 31, 1996 to
March 31, 1997; however, the Bank has controlled the growth of non-interest
expenses to 7% during this period of time. The Bank's largest expense category
is salaries and benefits. There was an increased of 9% in this category due to
annual salary increases, three staff additions and increased benefit costs.
Occupancy expenses decreased 7%, which resulted from reduced rent due to the
renegotiation of the Oakmont branch lease and the reduced level of repairs and
maintenance on Bank premises. Equipment costs increased to $83,000 over $76,000
for the comparable quarter last year. This increase was due to additional
computer equipment and associated maintenance.
Deposit and other insurance of $42,000 increased $10,000 over the first quarter
of last year. Regulatory assessments and FDIC insurance cost grew $6,000 due the
new Financing Corporation (FICO) assessment which became effective January 1,
1997. The FDIC charged the minimum fee of $500 during the first quarter of 1997.
There is no assurance that the current FDIC assessment will continue at such a
low level. The cost of other insurance increased due to growth and additions to
the Bank's insurance coverage which resulted in higher premiums.
Advertising and business development costs increased to $73,000 up from $60,000
the first quarter of 1996. Professional fees declined by $10,000 from the first
quarter of 1996 to $40,000. Both of these expense categories vary significantly
based on activity throughout the year. Other expenses, which includes stationery
& supplies, telephone, postage, loan expenses, director fees, dues and
subscriptions and automobile costs, increased due to Bank growth.
Total non-interest expenses for the SBA lending department for the first quarter
was approximately $266,000 ($135,000 in personnel costs, $35,000 in occupancy
and equipment expenses, $17,000 in marketing/business development) compared to
$273,000 for the first quarter of 1996. Since March 31, 1996, the SBA loan
portfolio (serviced portion and Bank's portion) has increased 24% to $117
million, of which $43 million has been sold and is being serviced.
Income Taxes
The effective tax rate of 42% for the first quarter of 1997 approximated last
year's rate. The provision for the first quarter of 1996 was $496,000 versus
$381,000 for the same period last year. The increase resulted from the increase
in pre-tax income during the comparable quarters.
Liquidity and Investment Portfolio
Liquidity is a bank's ability to meet possible deposit withdrawals, to meet loan
commitments and increased loan demand, and to take advantage of other investment
opportunities as they arise. The Bank's liquidity practices are defined in both
the Asset and Liability Policy and the Investment Policy. These policies define
acceptable liquidity measures in terms of ratios to total assets, deposits,
liabilities and capital.
<PAGE>
Cash and due from banks, federal funds sold and certificates of deposit totaled
$32.1 million or 14.4% of total assets at March 31, 1997, compared to $37.2
million or 16.5% of total assets at December 31, 1996. Liquid assets were higher
than normal at year end due to a large deposit which was received at the end of
the year.
The Bank has several ways of providing additional liquidity. Special deposit
campaigns, which offer slightly higher than market rates, have been successful
in attracting new deposits to the Bank. The Bank also has the option of selling
SBA guaranteed loans. As of March 31, 1997, the Bank held $33.5 million in SBA
guaranteed loans which could be sold if liquidity was needed.
At March 31, 1997, the Bank had unused federal funds lines of credit totaling
$9,000,000. Management believes this amount of secondary liquidity is adequate
to meet any cash demands that may arise.
At present, the Corporation's primary sources of liquidity are from interest on
deposits, exercise of stock options and dividends from the Bank. The Bank's
ability to pay dividends to the Corporation is subject to the restrictions of
the national banking laws and, under certain circumstances, the approval of the
Comptroller of the Currency.
At March 31, 1997, the Corporation had non-interest and interest bearing cash
balances of $225,000, which management believes is adequate to meet the
Corporation's operational expenses.
The Corporation and the Bank do not engage in hedging transactions (interest
rate futures, caps, swap agreements, etc.).
Deposits
During the first quarter of 1997, deposits decreased 2% to $206 million.
Deposits at 1996 year end included a large deposit of $16 million which was on
deposit for approximately 30 days in money market rate accounts. Deposits would
have grown approximately 7% if the Bank's deposits had not included this short
term deposit at year end.
Money market rate deposits, excluding the large deposit, grew from $55.1 million
at year end to $62.5 million at the end of the quarter. This is a limited
transaction account with a floating rate which is tied to the 13 week treasury
bill less a margin of 50 basis points. The rate offered on this account has been
very attractive and many of the Bank's customers have held their funds in this
deposit product rather than locking a specific maturity. New customers continue
to find this deposit account attractive due to the immediate availability of the
funds versus a time certificate bearing a future maturity.
Certificates of deposits increased from $94 million at December 31, 1996 to $103
million as of March 31, 1997. During the first quarter, the Bank offered an
attractive rate on a nine month certificate, which accounts for the
majority of the growth in time deposits.
As of March 31, 1997, non-interest bearing deposits equaled $23.5 million
compared to $28.6 million at December 31, 1996 and $24.3 million on March
31, 1996. The Bank's transaction accounts have significant changes in daily
balances, mainly due to deposits held by title companies. This type of
deposit account has greater balance fluctuations than other types of
deposits based upon their business activity; however, they carry average
balances of between $2 and $3 million.
The low interest rate environment over the past few years and the increased
competition from the financial services industry has made it more difficult to
attract new deposits at favorable rates. The Bank continually monitors
competitors' rates, strives to be competitive in pricing deposits, and has
offered attractive time deposit rates to raise funds during a period of high
loan growth.
<PAGE>
Loans
Loans, net of discounts and reserves, equaled $175.8 million compared to
$165.7 million at December 31, 1996. Included in loans, at the end of the first
quarter, is $6 million in Bankers Acceptances (BA) while the Bank did not have
an investment in BAs at year end. The Bank places its excess liquidity in BAs
only when their yields exceed Fed Funds rates. BAs have short maturities and are
viewed as a short term investment by the Bank; however, they are classified as
loans for accounting purposes and by Bank regulators. Excluding the BAs net
loans increased $4.2 million in the first quarter of 1997. During that time, the
Bank experienced a higher volume of loan payoff which offset a portion of the
growth in the loan portfolio.
The SBA department continued to experience strong loan demand, especially
in the Arizona market, with SBA loans growing $5.2 million during the first
quarter. During the first quarter of 1996, the Bank experienced higher than
expected SBA loan payoffs. Many of the additional loan payoffs were of loans to
borrowers in Arizona, where property values have been increasing enabling
borrowers to refinance for additional loan proceeds. In California, the Bank is
competing with bank and non-bank lenders in a mature market. An improving
California economy may increase local SBA production. The majority of the Bank's
SBA loans are secured by real estate; however, are reported as commercial loans.
SBA loans have the same underwriting requirements as the Bank's other loans,
they are sometimes for longer terms (7 to 25 years) and have higher
loan-to-value ratios than the Bank typically accepts. The SBA loan program
remains subject to budget considerations at the Federal government level. Major
changes to the program could affect profitability and future SBA loan growth.
SBA loans available for sale increased 18% from $28.3 million to $33.5 million
during the first quarter of 1996.
The Bank continues to emphasize commercial and real estate lending. At
March 31, 1997, 51.5% of the loans held for investment were commercial loans and
47.6% were real estate and construction loans, compared to 50.1% and 46.6%
respectively at December 31, 1996. The Bank has increased the commercial and
commercial real estate portfolio through its reputation, in Sonoma and Marin
Counties, as an experienced business and real estate lender which facilitates
the successful negotiation of complex commercial loans. The Bank maintains high
credit qualifications with most real estate loans having 60-70% loan to value
ratios. Management is aware of the risk factors in making commercial and real
estate loans and is continually monitoring the local market place. A decline in
real estate values and/or demand could potentially have an adverse impact on the
loan portfolio, and on the financial condition of the Bank.
The Bank has a small portfolio of consumer loans and real estate
construction loans which equaled 0.9% of the total loan portfolio at March 31,
1997 and 1.2% at March 31, 1996. The Bank offers residential mortgage services
on a limited basis.
Allowance for Loan Losses
The allowance for loan losses equaled $1,989,000 at March 31, 1997,
compared to $1,767,000 at December 31, 1996. At March 31, 1997, the allowance
for loan losses equaled 1.5% of loans (net of loans available for sale and
bankers acceptances) compared to 1.5% at December 31, 1996. The allowance for
loan losses is reviewed on a monthly basis, based upon an allocation for each
loan category, plus an allocation for any outstanding loans which have been
classified by regulators or internally for the "Watch List". Each loan that has
been classified is individually analyzed for the risk involved with a specific
reserve allocation assigned according to the risk assessment.
At March 31, 1997, there were three loans on non-accrual totaling $130,000
with all nonaccrual loans collateralized by real estate and $106,000 was
guaranteed by the SBA. There was one loan for $290,000 past due 90 days or more
and still accruing interest which was secured by real estate and guaranteed by
the SBA. Loans past due 30 to 89 days totaled $1,017,000 of which $973,00 was
secured by real estate. On December 31, 1996, the Bank had $438,000 in
non-accrual loans, and there were no loans past due 90 or more days and still
accruing interest.
<PAGE>
During the first quarter of 1997, the Bank charged off unsecured loans to
one borrower which totaled $173,000 and has subsequently received a $30,000
recovery on that charge off. The Bank had reserved for this potential charge off
during 1996. The Bank has had very low charge off experience and continues to
have a low charge off rate compared to industry standards.
Capital Resources
Pursuant to regulations under the FDIC Improvement Act of 1991 (FDICIA),
five capital levels were prescribed as applicable for banks, ranging from
well-capitalized to critically under-capitalized. At March 31, 1997, the Bank
was considered " well capitalized." The Bank's total risk-based capital ratio
was 10.57%.
The Corporation declared a 5% stock dividend during the first quarter of
1996 with a record date of March 31, 1997. The financial statements have been
adjusted to include the impact of this dividend. In May 1996, the Corporation
declared a 5% stock dividend to shareholders of record on June 14, 1996.
<PAGE>
SCHEDULES
<TABLE>
<CAPTION>
LOANS HELD FOR INVESTMENT
March 31, December 31,
1997 1996
<S> <C> <C>
Type of Loan
(in thousands)
Commercial $92,466 $84,969
Real Estate Construction 2,125 1,533
Real Estate Other 83,377 81,008
Installment Loans to Individuals 1,715 2,218
TOTAL $179,683 $169,728
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
Quarter Ended
March 31, 1997
<S> <C>
Balance - Beginning of Period $2,042,000
Provision for Loan Losses 120,000
Charge Offs 173,000
Recoveries 0
Balance - End of the Period $1,989,000
</TABLE>
There were three loans on non-accrual at March 31, 1997, amounting to
$130,000, of which $130,000 were secured by real estate collateral, and $106,000
was guaranteed by the U.S. Government.
<PAGE>
GAP ANALYSIS
The following schedule represents interest rate sensitivity profile as of
March 31, 1997 of assets, liabilities and shareholders' equity classified by
earliest possible repricing opportunity or maturity date.
<TABLE>
<CAPTION>
Over 3 Over 1 year Non-rate
Balance Sheet Through 3 months through 5 Sensitive or Total
(in thousands) months through years Over 5 years
1 year
<S> <C> <C> <C> <C> <C>
Assets
Time Deposits-other financial institutions $2,279 $495 $2,774
Fed funds sold 22,323 22,323
Investment securities 4,003 1,950 $2,605 8,558
Loans (net of discounts) 95,859 35,928 $12,126 33,891 177,804
Non-interest-earning assets 10,713 10,713
(net of allowance for loan losses)
=============== ------------- ============= ------------- ===============
$124,464 $38,373 $12,126 $47,209 $222,172
=============== ------------- ============= ------------- ===============
Liabilities & Shareholders Equity
Time Deposits $100,000 and over $11,759 $15,219 $3,565 $30,543
All other interest-bearing deposits 98,045 42,470 11,484 $5 152,004
Non-interest bearing deposits 23,468 23,468
Other Liabilities & Shareholders' Equity 16,157 16,157
=============== ------------- ============= ------------- ===============
$109,804 $57,689 $15,049 $39,630 $222,172
=============== ------------- ============= ------------- ===============
Interest Rate Sensitivity (1) $14,660 $(19,316) $(2,923) $7,579
Cumulative Interest Rate Sensitivity $14,660 $(4,656) $(7,579) 0
=========================================== =============== ------------- ============= ------------- ===============
<FN>
(1) Interest rate sensitivity is the difference between interest rate
sensitive assets and interest rate sensitive liabilities within the above
time frames.
</FN>
</TABLE>
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None other than in the ordinary course of business.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On February 19, 1997 a 5% stock dividend was declared to shareholders of record
on March 31, 1997. The stock was distributed on April 15, 1997.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
(3) (a) Articles of Incorporation of the Corporation (filed as Exhibit 3.1
to the Corporation's S-1 Registration Statement, filed May 18, 1984 and
incorporated herein by this reference).
(b) Certificate of Amendment to Articles of Incorporation, filed January
17, 1989 (filed as exhibit (3)(b) to the Corporation's Annual Report on
Form 10-K for the Fiscal Year Ended December 31, 1988 and incorporated
herein by this reference).
(c) Bylaws of the Corporation, as amended (filed as Exhibit 3.2 to the
Corporation's S-2 Registration Statement, File No. 33-51906 filed September
11, 1992 and incorporated herein by this reference).
(d) Amendment to the Bylaws of the Corporation and revised Bylaws (filed as
Exhibit (3)(d) to the Corporation's Annual Report on Form 10-KSB for the
Fiscal Year Ended December 31, 1994 and incorporated herein by this
reference).
(27)(a) Financial Data Schedule
b. Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NORTHERN EMPIRE BANCSHARES
Date: May 13, 1997
/s/James B. Keegan, Jr. /s/Patrick R. Gallaher
James B. Keegan, Jr. Patrick R. Gallaher
Director & President Director & Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information from the Balance
Sheet, and Statement of Income, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,960
<INT-BEARING-DEPOSITS> 2,744
<FED-FUNDS-SOLD> 22,323
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,605
<INVESTMENTS-CARRYING> 5,953
<INVESTMENTS-MARKET> 5,952
<LOANS> 177,804
<ALLOWANCE> 1,989
<TOTAL-ASSETS> 222,172
<DEPOSITS> 206,015
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,116
<LONG-TERM> 0
0
0
<COMMON> 9,706
<OTHER-SE> 5,336
<TOTAL-LIABILITIES-AND-EQUITY> 222,172
<INTEREST-LOAN> 4,319
<INTEREST-INVEST> 72
<INTEREST-OTHER> 321
<INTEREST-TOTAL> 4,712
<INTEREST-DEPOSIT> 2,134
<INTEREST-EXPENSE> 2,134
<INTEREST-INCOME-NET> 2,578
<LOAN-LOSSES> 120
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,562
<INCOME-PRETAX> 1,170
<INCOME-PRE-EXTRAORDINARY> 1,170
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 674
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
<YIELD-ACTUAL> 9.32
<LOANS-NON> 130
<LOANS-PAST> 1,307
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,042
<CHARGE-OFFS> 173
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,989
<ALLOWANCE-DOMESTIC> 1,989
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 399
</TABLE>
