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, 1996
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 92867
(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 September 30,
1996 is 1,950,046.
<PAGE>
<TABLE>
<CAPTION>
ORANGE NATIONAL BANCORP
CONSOLIDATED BALANCE SHEET
<S> <C> <C>
ASSETS 9/30/96 12/31/95
(Unaudited) (Note*)
Time Certificates of Deposit 0 0
Securities Held to Maturity 11,387,740 12,652,817
Securities Available for Sale 34,500,966 26,908,298
Fed Funds Sold 33,300,000 18,500,000
Loans 110,923,278 114,236,578
LESS Allowance for Possible Credit Losses -1,489,202 -1,512,544
___________ ___________
Total Interest Earning Assets 188,622,782 170,785,149
Cash & Non-Interest Earning Assets 19,374,220 22,929,660
Bank Premises - At Cost
Building and Land 3,442,555 3,413,100
Leasehold Improvements 2,079,896 2,071,545
Furniture, Fixtures & Equipment 3,199,525 3,132,999
LESS Accumulated Depreciation & Amortization -3,470,730 -3,091,067
Accrued Interest Receivable 1,044,495 1,167,707
Other Assets 6,248,938 7,518,931
___________ ___________
TOTAL ASSETS 220,541,681 207,928,024
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits: Demand, Non-Interest Bearing 68,598,362 70,237,126
Money Market & Now 104,854,293 91,698,505
Savings 11,338,705 12,456,884
Time Deposits of $100,000 or More 7,593,209 6,632,038
Other Time Deposits 8,848,653 7,966,817
___________ ___________
Total Deposits 201,233,222 188,991,370
Other Liabilities 1,315,108 1,674,757
___________ ___________
TOTAL LIABILITIES 202,548,330 190,666,127
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock - No Par Value
Authorized: 20,000,000 Shares
Issued and Outstanding: 1,950,046 Shares in 1996
1,933,571 Shares in 1995
7,652,099 7,509,888
Retained Earnings 10,698,100 9,920,549
Unrealized Gain(Loss)on Securities
Available for Sale, Net -356,848 -168,540
___________ ___________
TOTAL STOCKHOLDERS' EQUITY 17,993,351 17,261,897
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 220,541,681 207,928,024
</TABLE>
*NOTE: The balance sheet at December 31, 1995, has been taken from the Audited
Financial Statements. See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<S> <C> <C> <C> <C>
QTR ENDINGQTR ENDING YTD YTD
9/30/96 9/30/95 9/30/96 9/30/95
Interest Income:
Loans 2,740,815 3,132,437 8,264,931 9,310,709
Taxable Investment Securities 703,141 656,417 1,934,079 1,881,763
Fed Funds Sold 402,114 259,215 1,138,433 784,789
Total Interest Income 3,846,070 4,048,06911,337,44311,977,261
Interest Expense:
Time Deposits of $100,000 or more 95,452 61,948 270,364 154,160
Other Deposits 817,186 740,808 2,346,386 2,147,683
Total Interest Expense 912,638 802,756 2,616,750 2,301,843
NET INTEREST INCOME 2,933,432 3,245,313 8,720,693 9,675,418
Provision for Possible Credit Losses 60,000 75,000 195,000 305,000
Net Interest Income After Provision
for Possible Credit Losses 2,873,432 3,170,313 8,525,693 9,370,418
Other Income:
Service Charge on Deposit Accounts 264,171 265,816 805,825 797,345
Other 616,686 396,526 1,667,472 1,829,266
Total Other Income 880,857 662,342 2,473,297 2,626,611
Other Expense:
Salaries, Wages, Employee Benefits 1,433,439 1,397,001 4,436,961 4,476,221
Occupancy Expense of Bank Premises 304,788 276,669 863,657 844,343
Furniture & Equipment Expense 163,480 180,520 475,946 529,172
Other 960,846 1,109,029 2,965,461 3,413,468
Total Other Expense 2,862,553 2,963,219 8,742,025 9,263,204
Earnings Before Income Taxes 891,736 869,436 2,256,965 2,733,825
Applicable Income Taxes (Credits) 281,000 281,000 761,000 869,000
Net Earnings 610,736 588,436 1,495,965 1,864,825
Earnings Per Share $0.31 $0.30 $0.77 $0.96
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORANGE NATIONAL BANCORP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<S> <C> <C> <C> <C>
QTR ENDING QTR ENDING YEAR TO DATE YEAR TO DATE
9/30/96 9/30/95 9/30/96 9/30/95
CASH FLOWS FROM OPERATING ACTIVITIES 975,595 1,049,554 2379,332 2,829,489
CASH FLOWS FROM INVESTING ACTIVITIES
Puchase of Furniture & Equipment
and Leasehold Improvements (24,246) (191,601) (130,507) (479,187)
NET (INCREASE) DECREASE IN:
Federal Funds Sold (10,800,000) (16,632,000) (14,800,000) (2,067,000)
Securities 4,493,175 8,889,724 (5,998,875) 4,223,580
Loans (4,325,723) (664,055) 3,094,958 (1,889,499)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (10,656,794) (8,597,932) (17,834,424) (212,106)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of Common Stock 63,700 -0- 142,211 -0-
Net Increase (decrease) in Deposits 7,738,436 7,771,314 12,241,852 2,875,946
Dividends Paid -0- -0- (484,411) (183,912)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 7,802,136 7,771,314 11,899,652 2,692,034
INCREASE (DECREASE) IN CASH
AND NON-INTEREST EARNING DEPOSITS (1,879,063) 222,936 (3,555,440) 5,309,417
CASH AND NON-INTEREST EARNING DEPOSITS
Beginning 21,253,283 20,481,360 22,929,660 15,394,879
End of Period 19,374,220 20,704,296 19,374,220 20,704,296
</TABLE>
<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, 1996, and the consolidated statements of earnings and statements of cash
flows for the three month and nine month periods ended September 30, 1996 and
1995, 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, 1996 and 1995, 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 1995, annual report to shareholders. The results of the
operations for the periods ended September 30, 1996 and 1995, 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, 1996, and December 31, 1995 amounted to $2,011,743 and
$1,533,373 respectively.
3.INCOME TAX MATTERS
There are no net deferred income tax assets or liabilities in the September 30,
1996 consolidated balance sheet. The gross amounts of deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred Tax Assets $1,106,000
Deferred Tax Liability -632,000
Valuation allowance for deferred tax assets -165,000
Net Deferred tax asset $309,000
</TABLE>
Management believes the valuation allowance is adequate. There has been no
change in the allowance during the quarter ending September 30, 1996.
<PAGE>
4.SECURITIES
The fair value of securities classified as held to maturity as of September 30,
1996 is $11,020,788. The unrealized losses of securities available for sale net
of unrealized gains and net of applicable income taxes as of September 30, 1996
is $284,449. Net unrealized losses on securities transferred from available for
sale to held to maturity is $72,399.
5. ANALYSIS FOR CREDIT LOSS
Analysis of the change in the allowance for credit losses follows:
<TABLE>
<CAPTION>
<S> <C>
Beginning January 1, 1996 1,512,544
Charge offs -252,486
Recoveries 34,144
Provision for loan losses 195,000
Balance September 30, 1996 1,489,202
</TABLE>
At September 30, 1996, the bank has classified $1,453,616 of its loans as
impaired with a specific loan loss reserve of $385,691 and none 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, 1996 was $1,484,000. 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, 1996 on loans
classified as impaired was $7,911 which equals the amount of cash payments
received.
<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>
<CAPTION>
<S> <C> <C>
09/30/96 Percent
a. Cash on Hand & Deposits with
Correspondent Banks $19,374,220 22.2%
b. Federal Funds Sold $33,300,000 38.2%
c. Marketable Securities $34,500,966 39.6%
(Available for Sale)
Total $87,175,186 100.0%
</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, 1996, was 55.1%, compared to 60.4% at
December 31, 1995. 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 95.0% at September 30,
1996, compared to 67.5% at December 31, 1995.
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 equaled 13.72% at September 30, 1996, as compared to 12.8% as of
December 31, 1995. Primary capital to total loans was 16.4% at
September 30, 1996 as compared to 15.1% as of December 31, 1995. On
September 18, 1996 a $0.12 per share cash dividend was declared to
shareholders of record on October 11, 1996, payable on October 31, 1996,
totalling $234,005.
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>
Results of Operations
3rd Quarter 1996 Vs. 3rd Quarter 1995
September 30, 1996 September 30, 1995
Total interest income for the three month period & quarter ending September 30,
1996, decreased $201,999 or 5.0%, over the like period ending
September 30, 1995. Interest and fees on loans decreased $391,622 or 12.5%,
due to a decrease in the average loan portfolio, plus a decrease in average
loan interest rates. The average loan totals for the three months ended
September 30, 1996 was $108,067,840, compared to $114,780,710 for the
three-month period of the prior year. Because of the difference in loan
interest rates between the two periods, average yield decreased 77 basis
points from 10.83% to 10.06% as of September 30, 1996. Investment income
increased $189,623 or 20.7% over the prior period. This increase was caused
by a 23.6% increase in the investment accounts, plus a decrease in average
yields. U.S. Government Agencies and Securities represent 60.7% of the
Bank's investment portfolio. Because of a decrease in the longer term
investments and short term interest rates between the two periods, average
yield decreased 13 basis points from 5.69% to 5.56% as of September 30, 1996.
Total interest expense increased $109,882 or 13.7% for the subject period ended
September 30, 1996, compared to the same period ended September 30, 1995 as a
result of the increase in overall cost of funds. Average interest-bearing
accounts increased $6,682,737 or 5.3%. The cost of funds averaged 21 basis
points more during the current quarter than the compared quarter in 1995.
Net interest income (total interest income less total interest expense)
decreased $311,881 or 9.6%, during the quarter ended September 30, 1996, over
the same period in 1995.
The loan loss provision decreased $15,000, or 20.0%, from $75,000 to $60,000
as of September 30, 1996, due to the adequacy of the loan loss reserve. At
September 30, 1996, the reserve level was at 1.34% of total loans as compared to
1.49% as September 1995. Total charge-offs in the three-month period ended
September 30, 1996 were $39,804 and recoveries were $13,163 compared to $25,573
in charge-offs and $26,389 in recoveries in the same period in 1995. At
September 30, 1996, non performing loans were $2,155,470 compared to $3,055,000
at December 31. 1995. Real Estate loans totaling $1,858,143 represent 86.2% of
non performing loans. Management believes, based upon loan quality, that the
current loan loss reserve of $1,489,202 is adequate and is in conformance with
established loan policy and chatelaines.
Other income increased $218,515 or 33.0%. Gains of $12,953 were realized on the
sale of securities during the quarter ending September 30, 1996. Gains of
$40,385 were realized in the quarter ending September 1995. Gains of $164,960
were realized on the sale of Small Business Administration Loans during the
Quarter ending September 30, 1996. No gains were realized on the sale of Small
Business Administration Loans during the quarter ending September 30, 1995. No
gains were realized on the sale of equipment in the quarter ending
September 30, 1996. Gains of $1,787 were realized on the sale of equipment
in the quarter ending September 30, 1995.
<PAGE>
Other expense decreased $100,666, or 3.4% from $2,963,219 in the third quarter
of 1995, to $2,862,553 in third quarter of 1996. This decrease was partially
caused by a decrease of $168,830 in expenses relating to Other Real Estate Owned
and an increase in salary and benefit costs of $36,438 due to normal
cost-of-living salary increases.
Operating profits before taxes for the quarter ended September 30, 1996
increased $22,300, or 2.6%, over the like period in 1995. This increase in
before tax profits occurred partially as a result of an increase in other
income and a decrease in other expense.
Net after taxes income for the three month period and quarter ended September
30, 1996, was $610,736 compared to $588,436 for the three month period and
quarter ended September 30, 1995.
<PAGE>
Results of Operations
Nine Months 1996 Vs. Nine Months 1995
September 30, 1996 September 30, 1995
Total interest income for the nine months ended September 30, 1996, decreased
$639,818 or 5.3%, over the like period ending September 30, 1995. Interest and
fees on loans decreased $1,045,778 or 11.2%, due to a decrease in the loan
portfolio, plus a decrease in average loan interest rates. The average loan
totals for the nine months ended September 30, 1996 was $108,148,603, compared
to $115,298,347 for the nine-month period of the prior year. Because of the
difference in loan interest rates between the two periods, average yield
decreased 58 basis points from 10.77% to 10.19% as of September 30, 1996.
Investment income increased $405,960 or 15.2% over the prior period. This
increase was caused by a 19.0% increase in investment accounts, plus a decrease
in average yields. U.S. Government Agencies and Securities represent 57.7% of
the Bank's investment portfolio. Because of a decrease in longer term
investments between the two periods, average yield decreased 18 basis points
from 5.70% to 5.52% as of September 30, 1996.
Total interest expense increased $314,907 or 13.7% for the subject period ended
September 30, 1996, compared to the same period ended September 30, 1995 as a
result of an increase in overall cost of funds. Average interest-bearing
accounts increased $4,497,291 or 3.6%. The cost of funds averaged 24 basis
points more during the nine month period ending September 30, 1996 over the same
period in 1995.
Net interest income (total interest income less total interest expense)
decreased $954,725 or 9.9%, during the nine months ended September 30, 1996,
over the same period in 1995.
The loan loss provision decreased $110,000 or 36.1%, from $305,000 as of
September 30, 1995 to $195,000 as of September 30, 1996 based on the amount
necessary to provide for estimated losses. Management believes that the level
of reserve is adequate as of September 30, 1996, and it is within the guidelines
of the loan loss reserve policy as approved by the Board of Directors.
Other income decreased $153,314 or 5.8%. Gains of $12,953 were realized on the
sale of securities during the nine months ending September 30, 1996. Gains of
$40,385 were realized in the nine months ending September 30, 1995. Gains of
$435,417 were realized on the sale of Small Business Administration Loans during
the nine months ending September 30, 1996. Gains of $658,054 were realized in
the nine months ending September 30, 1995. No gains were realized on the sale
of equipment in the nine months ending September 30, 1996. Gains of $8,555 were
realized on the sale of equipment in the nine months ending September 30, 1995.
Other expense decreased $521,179 or 5.6% from $9,263,204 in the first nine
months of 1995, to $8,742,025 in the first nine months of 1996. This decrease
was partially caused by a $39,260, or 0.88% decrease in salary and benefit
costs due to a decrease in staff due to a reorganizational study in the second
half of 1994. Other expense decreased $448,007 or 13.1% as a result of
decreases in data processing expenses of $142,782 relating to a new data
processing contract in the second quarter of 1995, decreases in life insurance
expense of $26,669 and decreases in other real estate owned expenses of
$294,768.
<PAGE>
Operating profits before taxes for the first nine months of 1996 decreased
$476,860 or 17.4% over the same period in 1995. This decrease in before tax
profits occurred partially as the result of a decrease in average loan interest
rates and a decrease in average investment yields and an increase in the average
cost of funds.
Net after taxes income for the nine month period ending September 30, 1996, was
$1,495,965 compared to $1,864,825 for the nine month period ending September 30,
1995.
<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>
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.
KENNETH J. COSGROVE NOVEMBER 12, 1996
Kenneth J. Cosgrove Date
Chief Executive Officer
ROBERT W. CREIGHTON NOVEMBER 12, 1996
R.W. Creighton Date
Secretary & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 19374
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 33300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34501
<INVESTMENTS-CARRYING> 11388
<INVESTMENTS-MARKET> 10985
<LOANS> 110923
<ALLOWANCE> 1489
<TOTAL-ASSETS> 220542
<DEPOSITS> 201233
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1315
<LONG-TERM> 0
0
0
<COMMON> 7652
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 220542
<INTEREST-LOAN> 8265
<INTEREST-INVEST> 3072
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 11337
<INTEREST-DEPOSIT> 2617
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 8721
<LOAN-LOSSES> 195
<SECURITIES-GAINS> (11)
<EXPENSE-OTHER> 8742
<INCOME-PRETAX> 2257
<INCOME-PRE-EXTRAORDINARY> 1496
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1496
<EPS-PRIMARY> $0.77
<EPS-DILUTED> $0.77
<YIELD-ACTUAL> 8.01
<LOANS-NON> 2155
<LOANS-PAST> 194
<LOANS-TROUBLED> 1326
<LOANS-PROBLEM> 1885
<ALLOWANCE-OPEN> 1512
<CHARGE-OFFS> 252
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<ALLOWANCE-CLOSE> 1489
<ALLOWANCE-DOMESTIC> 1489
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</TABLE>
