UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
********
Quarterly Report Under 13 or 15(d)
of Securities Exchange Act of 1934
FOR QUARTER ENDED: September 30, 1995
COMMISSION FILE NUMBER: 0-15365
ORANGE NATIONAL BANCORP
Incorporated under the laws I.R.S. Employer ID No.
of California 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 a court. YES NO .
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of Orange National Bancorp as of
November 7, 1995 is 1,933,571.
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<PAGE>
ORANGE NATIONAL BANCORP
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
09/30/95 12/31/94
ASSETS (UNAUDITED) (NOTE*)
<S> <C> <C>
TIME CERTIFICATES OF DEPOSIT 0 0
SECURITIES:
SECURITIES HELD TO MATURITY 19969105 21903980
SECURITIES AVAILABLE FOR SALE 17535527 19247771
FEDERAL FUNDS SOLD 30282000 28215000
LOANS 114789348 114168283
LESS ALLOWANCE FOR POSSIBLE CREDIT LOSSES
-1709937 -1465000
TOTAL EARNING ASSETS 180866043 182070034
CASH AND NON-INTEREST EARNING DEPOSITS
20704296 15394879
BANK PREMISES - AT COST
BUILDING & LAND 3405386 3367315
LEASEHOLD IMPROVEMENTS 2076597 1887935
FURNITURE, FIXTURES & EQUIPMENT 2981494 2729040
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION
-2928954 -2597611
ACCRUED INTEREST RECEIVABLE 1150751 1068744
OTHER ASSETS 2952114 2590114
211207727 206510450
LIABILITIES & STOCKHOLDERS' EQUITY
DEPOSITS
DEMAND, NON-INTEREST BEARING 66205095 68358671
MONEY MARKET AND NOW 102347946 95972857
SAVINGS 12340693 13875405
TIME DEPOSITS OF $100,000 OR MORE 4943086 5162248
OTHER TIME 7444979 7036672
TOTAL DEPOSITS 193281799 190405853
OTHER LIABILITIES 1079192 1322395
TOTAL LIABILITIES 194360991 191728248
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY
COMMON STOCK - NO PAR VALUE
AUTHORIZED: 20,000,000 SHARES
ISSUED AND OUTSTANDING : 1,933,571
SHARES IN 1995 AND IN 1994 7491811 6848120
RETAINED EARNINGS 9550921 8513693
UNREALIZED GAIN(LOSS) ON SECURITIES
AVAILABLE FOR SALE, NET -195996 -579611
TOTAL STOCKHOLDERS' EQUITY 16846736 14782202
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
211207727 206510450
*NOTE: THE BALANCE SHEET AT DECEMBER 31, 1994, HAS BEEN TAKEN FROM THE
AUDITED FINANCIAL
STATEMENTS. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<PAGE>
ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
QTR ENDING QTR ENDING YEAR TO DATE YEAR TO DATE
09/30/95 09/30/94 09/30/95 09/30/94
<S> <C> <C> <C> <C>
INTEREST INCOME:
LOANS AND LEASES
3132437 2925565 9310709 8265688
TAXABLE INVESTMENT SECURITIES
656417 402167 1881763 1162906
NONTAXABLE INVESTMENT SECURITIES
$0 $0 $0 $0
FEDERAL FUNDS SOLD & TIME CERTIFICATES OF DEPOSIT
259215 198318 784789 457698
TOTAL 4048069 3526050 11977261 9886292
INTEREST EXPENSE ON DEPOSITS:
TIME DEPOSITS OF $100,000 OR MORE
61948 54745 154160 120277
OTHER 740808 586200 2147683 1679590
TOTAL 802756 640945 2301843 1799867
NET INTEREST INCOME
3245313 2885105 9675418 8086425
PROVISION FOR POSSIBLE CREDIT LOSSES
75000 60000 305000 195000
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE CREDIT LOSSES
3170313 2825105 9370418 7891425
OTHER INCOME:
SERVICE CHARGE ON DEPOSIT ACCOUNTS
265816 248405 797345 718961
OTHER 396526 669402 1829266 2139973
TOTAL 662342 917807 2626611 2858934
OTHER EXPENSE:
SALARIES, WAGES, EMPLOYEE BENEFITS
1397001 1621968 4476221 5005684
OCCUPANCY EXPENSE OF BANK PREMISES
276669 286640 844343 848034
FURNITURE AND EQUIPMENT EXPENSE
180520 145639 529172 454004
OTHER 1109029 1046623 3413468 3608762
TOTAL 2963219 3100870 9263204 9916484
EARNINGS BEFORE INCOME TAXES
869436 642042 2733825 833875
APPLICABLE INCOME TAXES (CREDITS)
281000 256178 869000 325026
NET EARNINGS 588436 385864 1864825 508849
EARNINGS PER SHARE 0.3 0.2 0.96 0.26
</TABLE>
<PAGE>
<PAGE>
ORANGE NATIONAL BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR TO DATE YEAR TO DATE
09/30/95 09/30/94
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
2829489 1120845
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment and leasehold improvements
-479187 -235310
NET (INCREASE) DECREASE IN:
Time certificates of deposits 0 198000
Federal funds sold -2067000 1695000
Securities 4223580 -4451497
Loans -1889499 1671311
Federal Reserve Bank Stock 0 0
NET CASH (USED IN) INVESTING ACTIVITIES
-212106 -1122496
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 2875946 3022103
Dividends Paid -183912 0
NET CASH PROVIDED BY FINANCING ACTIVITIES
2692034 3022103
Increase (decrease) in cash and non-interest earning deposits
5309417 3020452
CASH AND NONINTEREST EARNING DEPOSITS
Beginning 15394879 13385346
End of period 20704296 16405798
</TABLE>
<PAGE>
<PAGE>
Orange National Bancorp & Subsidiary
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
September 30, 1995, and the consolidated statements of earnings and statements
of cash flows for the three month and nine month periods ended
September 30, 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 September 30, 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, 1994, annual report to shareholders. The
results of the operations for the periods ended September 30, 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 September 30, 1995, and December 31, 1994 amounted to $1,247,000
and $477,000 respectively.
3.INCOME TAX MATTERS
There are no net deferred income tax assets or liabilities in the
September 30, 1995 consolidated balance sheet. The gross amounts of deferred
tax assets and liabilities are as follows:
<TABLE>
<S> <C>
Deferred Tax Assets $1,288,000
Deferred Tax Liability (640,000)
Valuation allowance for deferred tax asset (648,000)
Net Deferred tax asset 0
</TABLE>
Management believes the valuation allowance is adequate. There has been no
change in the allowance during the quarter ending September 30, 1995.
<PAGE>
<PAGE>
4.SECURITIES
The fair value of securities classified as held to maturity as of
September 30, 1995 is $19,602,628. The unrealized losses of securities
available for sale net of unrealized gains and net of applicable income taxes
as of September 30, 1995 is $195,996.
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 September 30, 1995.
6. ANALYSIS FOR CREDIT LOSS
Analysis of the change in the allowance for credit losses follows:
<TABLE>
<S> <C>
Beginning January 1, 1995 1,465,000
Charge offs (159,318)
Recoveries 99,255
Provision for loan losses 305,000
Balance September 30, 1995 1,709,937
</TABLE>
At September 30, 1995, the bank has classified $2,749,622 of its loans as
impaired with a specific loan loss reserve of $526,029 and $627,144 of its
loans as impaired with no related loss reserve as determined in accordance
with this September Statement. The average recorded investment in impaired
loans during the quarter ended September 30, 1995 was $3,067,000. The Bank
recognizes interest income 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
September 30, 1995 on loans classified as impaired was $10,094 which equals the
amount of cash payments received.
<PAGE>
<PAGE>
ORANGE NATIONAL BANCORP & SUBSIDIARY
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:
<TABLE>
<S> <C> <C>
09/30/95 Percent
a. Cash on Hand & Deposits with
Correspondent Banks $20,704,296 30.2%
b. Federal Funds Sold $30,282,000 44.2%
c. Marketable Securities $17,535,527 25.6%
(Available for Sale)
Total $68,521,823 100.0%
</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, the Bank has never needed to use
these facilities.
The loan-to-deposit ratio at September 30, 1995, was 59.4%, 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 90.6% at
September 30, 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 total risk adjusted
assets equalled 13.17% at September 30, 1995, as compared to 11.9% as of
December 31, 1994. Primary capital to total loans was 14.7% at
September 30, 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.
<PAGE>
<PAGE>
Results of Operations
3rd Quarter 1995 Vs. 3rd Quarter 1994
September 30, 1995 September 30, 1994
Total interest income for the three month period & quarter ending
September 30, 1995, increased $522,019 or 14.8%, over the like period ending
September 30, 1994. Interest and fees on loans increased $206,872 or 7.1%,
due to a decrease in the average loan portfolio, plus an increase in average
loan interest rates. The average loan totals for the three months ended
September 30, 1995 was $114,780,710, compared to $118,282,891 for the three
month period of the prior year. Because of the difference in loan interest
rates between the two periods, average yield increased 103 basis points from
9.89% to 10.92% as of September 30, 1995. Investment income increased $315,147
or 52.5% over the prior period. This increase was caused by a 25.0% increase in
the investment accounts, plus an increase in average yields. U.S. Government
Agencies and Securities represent 55.3% of the Bank's investment portfolio.
Because of an increase in the longer term investments and short term
interest rates between the two periods, average yield increased 103 basis points
from4.71% to 5.74% as of September 30, 1995.
Total interest expense increased $161,811 or 25.3% for the subject period ended
September 30, 1995, compared to the same period ended September 30, 1994 as a
result of an increase in overall cost of funds. Average interest bearing
accounts increased $5,443,037 or 4.5%. The cost of funds averaged 43 basis
points more during the current quarter than the compared quarter in 1994.
Net interest income (total interest income less total interest expense)
increased $360,208 or 12.5%, during the quarter ended September 30, 1995,
over the same period in 1994.
The loan loss provision increased $15,000, or 25.0%, from $60,000 to $75,000
as of September 30, 1995, due to the adequacy of the loan loss reserve. At
September 30, 1995, the reserve level was at 1.49% of total loans as compared
to 1.33% as September 1994. Total charge-offs in the three month period
ended September 30, 1995 were $25,573 and recoveries were $26,389 compared to
$187,582 in charge-offs and $48,968 in recoveries in the same period in 1994.
At September 30, 1995, non performing loans were $4,340,048 compared to
3,215,000 at December 31. 1994, This increase was caused by a net increase
of 7 loans to the non performing category. Real Estate loans totaling
$3,690,641 represent 85.0% of non performing loans. Management believes, based
upon loan quality, that the current loan loss reserve of $1,709,937 is adequate
and is in conformance with established loan policy and quidelines.
Other income decreased $255,465 or 27.8%. Gains of $40,385 were realized on the
sale of securities during the quarter ending September 30, 1995, No gains were
realized in the quarter ending September 1994. No Gains were realized on the
sale of Small Business Administration Loans during the Quarter ending
September 30, 1995. Gains of $188,162 were realized on the sale of Small
Business Administration Loans during the quarter ending September 30, 1994.
Gains of $1,787 were realized on the sale of equipment in the quarter ending
September 30, 1995. No gains were realized on the sale of equipment in the
quarter ending September 30, 1994.
<PAGE>
Other expense decreased $137,651, or 4.4% from $3,100,870 in the third quarter
of 1994, to $2,963,219 in third quarter of 1995. Salary and benefit costs
decreased $224,967 due to the closure of the Mortgage Banking Division on
June 1, 1994 and a decrease in staff due to a reorganizational study in the
second half of 1994. Other expense increased $62,406 or 6.0% as a result of
increases in other real estate owned expense of $205,246, and a decrease in Data
Processing expense of $60,146 relating to a new data processing contract in
the second quarter of 1995, and a decrease in promotion expense of $41,102 as
a result of the closure of the Mortgage Banking Division on June 1, 1994.
Operating profits before taxes for the quarter ended September 30, 1995
increased $227,394, or 35.4%, over the like period in 1994. This increase in
before tax profits occurred partially as a result of an increase in average loan
interest rates and an increase in average investment yields and a decrease
in other expense.
Net after taxes income for the three month period and quarter ended
September 30, 1995, was $588,436 compared to $385,864 for the three month period
and quarter ended September 30, 1994.
<PAGE>
<PAGE>
Results of Operations
Nine Months 1995 Vs. Nine Months 1994
September 30, 1995 September 30, 1994
Total interest income for the nine months ended September 30, 1995, increased
$2,090,969 or 21.2%, over the like period ending September 30, 1994. Interest
and fees on loans increased $1,045,021 or 12.6%, due to the increased loan
portfolio, plus an increase in average loan interest rates. The average loan
totals for the nine months ended September 30, 1995 was $115,298,347, compared
to $114,691,947 for the nine month period of the prior year. Because of the
difference in loan interest rates between the two periods, average yield
increased 116 basis points from 9.61% to 10.77% as of September 30, 1995.
Investment income increased $1,045,948 or 64.5% over the prior period. This
increase was caused by a 25.7% increase in investment accounts, plus an increase
in average yields. U.S. Government Agencies and Securities represent 65.3% of
the Bank's investment portfolio. Because of an increase in longer term
investments between the two periods, average yield increased 135 basis points
from 4.35% to 5.70% as of September 30, 1995.
Total interest expense increased $501,976 or 27.9% for the subject period ended
September 30, 1995, compared to the same period ended September 30, 1994 as a
result of an increase in overall cost of funds. Average interest bearing
accounts increased $8,145,753 or 7.0%. The cost of funds averaged 40 basis
points more during the nine month period ending September 30, 1995 over the
same period in 1994.
Net interest income (total interest income less total interest expense)
increased $1,588,993 or 19.7%, during the nine months ended September 30, 1995,
over the same period in 1994.
The loan loss provision increased $110,000 or 56.4%, from $195,000 as of
September 30, 1994 to $305,000 as of September 30, 1995 based on the amount
necessary to provide for estimated losses. Management believes that the level
of reserve is adequate as of September 30, 1995, and it is within the quidelines
of the loan loss reserve policy as approved by the Board of Directors.
Other income decreased $232,323 or 8.1%. Gains of $40,385 were realized on the
sale of securities during the nine months ending September 30, 1995. No gains
were realized in the nine months ending September 30, 1994. Gains of $658,054
were realized on the sale of Small Business Administration Loans during the nine
months ending September 30, 1995. Gains of $642,856 were realized in the nine
months ending September 30, 1994. Gains of $8,555 were realized on the sale of
equipment in the nine months ending September 30, 1995. No gains were realized
on the sale of equipment in the nine months ending September 30, 1994. No
mortgage brokerage fees were realized in the nine months ending
September 30, 1995. Mortgage brokerage fees of $193,267 were realized in the
nine months ending September 30, 1994.
Other expense decreased $653,290 or 6.6% from $9,916,484 in the first nine
months of 1994, to $9,263,204 in the first nine months of 1995. This decrease
was partially caused by a $529,463, or 10.6% decrease in salary and benefit
costs due to the closure of the Mortgage Banking Division on June 1, 1994, and a
decrease in staff due to a reorganizational study in the second half of 1994.
Furniture and Equipment expense increased $75,158 or 16.6% as a result of the
expansion of the Bank's Information Systems Department. Other expense decreased
$195,294 or 5.4% as a result of decreases in legal fees of $92,902, decreases
in promotion expense of $88,072, increases in other real estate owned expense of
$268,034, decreases in Broker Premium expense of $98,237, all relating to the
growth of the bank and the closure of the Mortgage Banking Division on
June 1, 1994.
Operating profits before taxes for the first nine months of 1995 increased
$1,899,950 or 227.8% over the same period in 1994. This increase in before tax
profits occurred partially as the result of an increase in average loan interest
rates and an increase in average investment yields and a decrease in other
expense.
Net after taxes income for the nine month period ending September 30, 1995, was
$1,864,825 compared to $508,849 for the nine month period ending
September 30, 1994.
<PAGE>
<PAGE>
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.
<PAGE>
<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.
Wayne F. Miller November 14, 1995
Wayne F. Miller Date
Chief Executive Officer
Robert W. Creighton November 14, 1995
R.W. Creighton Date
Secretary & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 20704296
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 30282000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17535527
<INVESTMENTS-CARRYING> 19969105
<INVESTMENTS-MARKET> 19617000
<LOANS> 114789348
<ALLOWANCE> 1709937
<TOTAL-ASSETS> 211207727
<DEPOSITS> 193281799
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1079192
<LONG-TERM> 0
<COMMON> 7491811
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 211207727
<INTEREST-LOAN> 9310709
<INTEREST-INVEST> 2666552
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 11977261
<INTEREST-DEPOSIT> 2301843
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 9675418
<LOAN-LOSSES> 305000
<SECURITIES-GAINS> 11000
<EXPENSE-OTHER> 9263204
<INCOME-PRETAX> 2733825
<INCOME-PRE-EXTRAORDINARY> 1864825
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1864825
<EPS-PRIMARY> $0.96
<EPS-DILUTED> $0.96
<YIELD-ACTUAL> 8.83
<LOANS-NON> 4340048
<LOANS-PAST> 3300
<LOANS-TROUBLED> 914000
<LOANS-PROBLEM> 988000
<ALLOWANCE-OPEN> 1465000
<CHARGE-OFFS> 164000
<RECOVERIES> 104000
<ALLOWANCE-CLOSE> 1710000
<ALLOWANCE-DOMESTIC> 1710000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
