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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
* * * * *
Quarterly Report Pursuant to Section 13 or 15(d)
of Securities Exchange Act of 1934
FOR QUARTER ENDED: March 31, 1995
COMMISSION FILE NUMBER: 0-15365
ORANGE NATIONAL BANCORP
Incorporated under the laws of California I.R.S. Employer ID No. 33-0190684
1201 East Katella Avenue
Orange, California 92667
(714) 771-4000
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 twelve 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 ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by court.
YES NO .
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of Orange National Bancorp as of
March 31, 1995 is 1,839,116.
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ORANGE NATIONAL BANCORP
CONSOLIDATED BALANCE SHEET
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<CAPTION>
03/31/95 12/31/94
(UNAUDITED) (NOTE*)
<S> <C> <C>
ASSETS
TIME CERTIFICATES OF DEPOSIT $0 $0
SECURITIES
SECURITIES HELD TO MATURITY $21,949,757 $21,903,980
SECURITIES AVAILABLE FOR SALE $19,503,710 $19,247,771
FEDERAL FUNDS SOLD $26,445,000 $28,215,000
LOANS $114,117,553 $114,168,283
LESS ALLOWANCE FOR POSSIBLE
LOAN LOSSES $1,487,996 $1,465,000
TOTAL EARNINGS ASSETS $180,528,024 $182,070,034
CASH AND NON-INTEREST EARNING DEPOSITS $15,940,767 $15,394,879
BANK PREMISES - AT COST
BUILDING & LAND $3,418,450 $3,367,315
LEASEHOLD IMPROVEMENTS $1,895,061 $1,887,935
FURNITURE, FIXTURES & EQUIPMENT $2,851,127 $2,729,040
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION $2,713,674 $2,597,611
ACCRUED INTEREST RECEIVABLE $1,112,815 $1,068,744
OTHER ASSETS $4,058,861 $2,590,114
$207,091,431 $206,510,450
LIABILITIES & STOCKHOLDERS' EQUITY
DEPOSITS
DEMAND, NON-INTEREST BEARING $65,824,050 $68,358,671
MONEY MARKET AND NOW $100,008,339 $95,972,857
SAVINGS $13,390,023 $13,875,405
TIME DEPOSITS OF $100,000 OR MORE $4,379,154 $5,162,248
OTHER TIME $5,213,565 $7,036,672
TOTAL DEPOSITS $190,325,614 $190,405,853
OTHER LIABILITIES $1,368,552 $1,322,395
TOTAL LIABILITIES $191,694,166 $191,728,248
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY
COMMON STOCK - NO PAR VALUE
AUTHORIZED: 20,000,000 SHARES
ISSUE AND OUTSTANDING : 1,839,116
SHARES IN 1995 AND IN 1994 $6,848,120 $6,848,120
RETAINED EARNINGS $8,975,105 $8,513,693
UNREALIZED (LOSS) ON SECURITIES
AVAILABLE FOR SALE, NET ($425,960) ($579,611)
TOTAL STOCKHOLDERS' EQUITY $15,397,265 $14,782,202
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $207,091,431 $206,510,450
</TABLE>
*NOTE: THE BALANCE SHEET AT DECEMBER 31, 1994, HAS BEEN TAKEN FROM THE AUDITED
FINANCIAL STATEMENTS. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
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<CAPTION>
QTR ENDING QTR ENDING
03/31/95 03/31/94
<S> <C> <C>
INTEREST INCOME:
LOANS $2,954,699 $2,488,750
TAXABLE INVESTMENT SECURITIES $588,704 $373,757
NON TAXABLE INVESTMENT SECURITIES $0 $0
FEDERAL FUNDS SOLD & TIME
CERTIFICATES OF DEPOSIT $281,377 $113,858
TOTAL $3,824,780 $2,976,365
INTEREST EXPENSE ON DEPOSITS:
TIME DEPOSITS OF $100,000 OR MORE $44,912 $31,936
OTHER $682,993 $543,993
TOTAL $727,905 $575,929
NET INTEREST INCOME $3,096,875 $2,400,436
PROVISION FOR POSSIBLE CREDIT LOSSES $105,000 $50,000
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE CREDIT LOSSES $2,991,875 $2,350,436
OTHER INCOME:
SERVICE CHARGE ON DEPOSIT ACCOUNTS $250,444 $227,342
OTHER $882,715 $863,637
TOTAL $1,133,159 $1,090,979
OTHER EXPENSE:
SALARIES, WAGES, EMPLOYEE BENEFITS $1,603,199 $1,705,890
OCCUPANCY EXPENSE OF BANK PREMISES $278,269 $280,964
FURNITURE AND EQUIPMENT EXPENSE $169,773 $143,136
OTHER $1,117,453 $1,320,161
TOTAL $3,168,694 $3,450,151
EARNINGS BEFORE INCOME TAXES $956,340 ($8,736)
APPLICABLE INCOME TAXES (CREDITS) $311,000 ($10,070)
NET EARNINGS $645,340 $1,334
EARNINGS PER SHARE $0.35 $0
</TABLE>
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ORANGE NATIONAL BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
QTR ENDING QTR ENDING
03/31/95 03/31/94
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $572,859 ($86,910)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment
and leasehold improvements ($180,348) ($67,684)
NET (INCREASE) DECREASE IN:
Time certificates of deposits $0 $198,000
Federal funds sold $1,770,000 $11,115,000
Securities ($148,065) ($5,148,731)
Loans ($1,207,971) $4,138,254
NET CASH PROVIDED BY
INVESTING ACTIVITIES $233,616 $10,234,839
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase/(decrease) in deposits ($80,239) ($4,370,808)
Dividends Paid ($180,348) $0
Net Cash (Used In) Financing Activities ($260,587) ($4,370,808)
Increase in cash and non-interest
earning deposits $545,888 $5,777,121
CASH AND NONINTEREST EARNING DEPOSITS
Beginning $15,394,879 $13,385,346
End of period $15,940,767 $19,162,467
</TABLE>
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Orange National Bancorp and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet of Orange National Bancorp and its wholly-owned
subsidiaries, Orange National Bank and ONB Mortgage Corporation, as of
March 31, 1995, and the consolidated statements of earnings and statements of
cash flows for the three month periods ended March 31, 1995 and 1994, have
been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments (which include normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
March 31, 1995 and 1994, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Management believes that the
disclosures presented are adequate to make the information not misleading.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the consolidated financial statements and notes
thereto included in the Company's December 31, 1994, annual report to
shareholders. The results of the operations for the periods ended
March 31, 1995 and 1994, are not necessarily indicative of the operating
results for the full years.
2. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company enters into commitments to fund
loans and extend credit to its customers. These commitments are not reflected
in the accompanying condensed consolidated financial statements and management
does not expect any loss to result from such commitments. Standby letters of
credit at March 31, 1995, and December 31, 1994, amounted to $479,553 and
$477,000 respectively.
3. INCOME TAX MATTERS
There are no net deferred income tax assets or liabilities in the March 31,
1995 consolidated balance sheet. The gross amounts of deferred tax assets and
liabilities are as follows:
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Deferred tax assets $ 1,288,000
Deferred tax liability (640,000)
Valuation allowance for deferred tax asset (648,000)
Net deferred tax asset $ 0
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Management believes the valuation allowance is adequate. There has been no
change in the allowance during the quarter ending March 31, 1995.
4. SECURITIES
The fair value of securities classified as held to maturity as of March 31,
1995 is 20,946,675. The unrealized losses of securities available for sale
net of unrealized gains and net of applicable income taxes as of March 31,
1995 is 425,960.
5. SEGMENT INFORMATION
In 1994, the Company terminated its mortgage banking operations. The results
of operations in 1994 were not significant. Accordingly there are no mortgage
loans held for sale as of March 31, 1995.
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6. ADOPTION OF FASB STATEMENT
On January 1, 1995, the Company adopted Financial Accounting Standards Board
(FASB) Statement No. 114. This Statement generally requires impaired loans
to be measured on the present value of expected future cash flows discounted
at the loan's effective interest rate, or as an expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. A loan is impaired when it is probable the creditor
will be unable to collect all contractual principal and interest payments due
in accordance with the terms of the loan agreement. There was no material
effect upon adoption of this Statement.
An analysis of the change in the allowance for credit losses follows:
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<S> <C>
Beginning January 1, 1995 1,465,000
Charge offs (96,499)
Recoveries 14,495
Provision for loan losses 105,000
Balance March 31, 1995 1,487,996
</TABLE>
At March 31, 1995, the Bank has classified $1,890,835 of its loans as impaired
with a specific loan loss reserve of $277,893 and none of its loans as
impaired with no related loss reserve as determined in accordance with this
Statement. The average recorded investment in impaired loans during the quarter
ended March 31, 1995 was $2,540,000. The Bank recognizes interestincome on
impaired loans using both the cost-recovery method and cash-basis method,
depending in the economic substance of each impaired loan, which applies cash ]
payments to principal or interest as received. The amount of interest income
recognized during the quarter ended March 31, 1995 on loans classified as
impaired was $6,732 which equals the amount of cash payments received.
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ORANGE NATIONAL BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity
The Company maintains substantial liquid and other short-term assets to meet
increases in loan demand, deposit withdrawals and maturities. These assets
include:
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<S> <C> <C>
03/31/95 Percent
a. Cash on Hand & Deposits with
Correspondent Banks $15,940,767 25.8%
b. Federal Funds Sold $26,445,000 42.7%
c. Marketable Securities
(Available for Sale) $19,503,710 31.5%
Total $61,889,477 100.0%
</TABLE>
All of the Bank's installment loans require monthly payments, which provide a
steady return of cash funds. Liquidity needs can also be met through federal
funds purchased from correspondent banks and/or direct borrowing from the
Federal Reserve Bank. As of this date, no lines have been established,
and the Bank has never needed to use these facilities.
The loan-to-deposit ratio at March 31, 1995, was 60.0% compared to 60.0% at
December 31, 1994. The ratio of liquid assets (cash and due from banks, time
deposits with other banks, fed funds sold and investments with maturities of
one year or less) to non interest bearing demand deposits was 82.5% at
March 31, 1995, compared to 74.0% at December 31, 1994.
Capital Management
Capital management requires that sufficient capital be maintained for
anticipated growth and to provide depositors assurance that their funds are on
deposit with a solvent institution. The ratio of total capital (Shareholders'
equity plus reserve for loan losses) to risk adjusted assets equalled 12.15%
at March 31, 1995, as compared to 11.9% as of December 31, 1994. Primary
capital to total loans was 13.5% at March 31, 1995 as compared to 12.9% as of
December 31, 1994.
Management believes that the Company and its subsidiary Bank are properly and
adequately capitalized, as evidenced by these two ratios and the strong
liquidity position.
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Results of Operations
First Quarter 1995 vs. First Quarter 1994
March 31, 1995 March 31, 1994
Total interest income for the three-month period and quarter ending March 31,
1995, increased $848,415, or 28.5%, over the like period ending March 31, 1994.
Interest and fees on loans increased $465,949, or 18.7%, due to the increased
loan portfolio, plus an increase in average loan interest rates. The average
loan totals for the three months ended March 31, 1995 was $114,728,314,
compared to $113,989,577 for the three month period of the prior year.
Because of the difference in loan interest rates between the two periods,
average yield increased 157 basis points from 8.73% to 10.30% as of March 31,
1995. Investment income increased $382,466, or 78.4%, over the prior period.
This increase was caused by a 25.1% increase in the investment accounts, plus
an increase in average yields. U.S. Government Agencies and Securities
represent 66.7% of the Bank's investment portfolio. Because of an increase
in longer term investments and short term interest rates between the two
periods, average yields increased 169 basis points from 3.97% to 5.66% as of
March 31, 1995.
Total interest expense increased $151,976, or 26.4%, for the subject period
ended March 31, 1995, compared to the same period ended March 31, 1994, as a
result of the increase in overall cost of funds. Average interest bearing
accounts increased $8,172,475, or 7.0%. The cost of funds averaged 35 basis
points less during this current quarter than the compared quarter in 1994.
Net interest income (total interest income less interest expense) increased
$696,439, or 29.0%, during the first quarter ended March 31, 1995, over the
same period in 1994.
The loan loss provision increased $55,000, or 110.0%, from $50,000 as of
March 31, 1994 to $105,000 as of March 31, 1995, based on the amount necessary
to provide for estimated losses. At March 31, 1995, the reserve level was at
1.30% of total loans as compared to 1.36% at March 31, 1994. Total charge-offs
in the three month period ended March 31, 1995 were $96,499 and recoveries were
$14,495 compared to $58,556 in charge-offs and $5,076 in recoveries in the same
period in 1994. At March 31, 1995, nonperforming loans were $1,941,752 compared
to $3,215,000 at December 31, 1994. This decrease was caused by four Real
Estate Loans totalling $1,281,697 that were transferred to Real Estate Owned.
Real Estate loans totalling $1,580,149 represent 81.4% of non performing loans.
Management believes, based upon loan quality, that the current loan loss
reserve of $1,487,996 is adequate and is in conformance with established loan
policy and guidelines.
Other income increased $42,180, or 3.9%. No gains or losses were realized on
the sale of securities. Gains of $517,328 were realized on the sale of loans
during the first quarter ending March 31, 1995, compared to $446,669 in gains
in the same period in 1994. Gains of $4,000 were realized on the sale of
equipment during the first quarter ending March 31, 1995. Gains of $3,010 were
realized in the first quarter ending March 31, 1994.
Other expense decreased $281,457, or 8.2%, from $3,450,151 in the first quarter
of 1994, to $3,168,694 in the first quarter of 1995. Salary and benefit costs
decreased $102,691 due to the closure of the Mortgage Banking Division on
June 1, 1994. Other expense decreased $202,708 or 15.4% as a result of
decreases in other real estate owned expense at $83,240, legal
expense of $43,029 and business referral fees of $56,995 relating to the Small
Business Administration loan department.
Operating profits before taxes for the quarter ended March 31, 1995 increased
$965,076 from ($8,736) as of March 31, 1994 to $956,340 as of March 31, 1995,
due to an increase in average loan interest rates and an increase in average
investment yields and an increase in the average cost of funds.
Net after taxes income for the three month period and quarter ended March 31,
1995, was $645,340 compared to $1,334 for the three month period ending
March 31, 1994.
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PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
No change since 10-K.
ITEM 2 CHANGES IN SECURITIES
None to report
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 SUBMISSION OF MATTERS FOR VOTE OF SECURITIES HOLDERS
None to report
ITEM 5 OTHER INFORMATION
None to report
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None to report
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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.
ORANGE NATIONAL BANCORP
Registrant
May 3, 1995 Wayne F. Miller
Date Wayne F. Miller
Chief Executive Officer
May 3, 1995 Robert W. Creighton
Date Robert W. Creighton
Secretary & Chief Financial Officer
