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: June 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
June 30, 1996 is 1,942,896.
<PAGE>
<TABLE>
<CAPTION>
ORANGE NATIONAL BANCORP
CONSOLIDATED BALANCE SHEET
ASSETS 6/30/96 12/31/95
(Unaudited) (Note*)
<S> <C> <C>
Time Certificates of Deposit 0 0
Securities Held to Maturity 11,752,200 12,652,817
Securities Available for Sale 38,038,050 26,908,298
Fed Funds Sold 22,500,000 18,500,000
Loans 106,624,197 114,236,578
Less Allowance for Possible Credit Losses 1,455,844 1,512,544
____________ ____________
Total Interest Earning Assets $177,458,603 $170,785,149
Cash & Non-Interest Earning Assets 21,253,283 22,929,660
Bank Premises - At Cost
Building and Land 3,439,822 3,413,100
Leasehold Improvements 2,079,896 2,071,545
Furniture, Fixtures and Equipment 3,204,187 3,132,999
Less Accumulated Depreciation and Amortization
3,363,661 3,091,067
Accrued Interest Receivable 1,306,498 1,167,707
Other Assets 6,758,366 7,518,931
____________ _____________
TOTAL ASSETS $212,136,994 $207,928,024
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
Demand, Non-Interest Bearing 64,376,247 70,237,126
Money Market & Now 98,777,266 91,698,505
Savings 12,963,267 12,456,884
Time Deposits of $100,000 or More 8,705,934 6,632,038
Other Time Deposits 8,672,072 7,966,817
____________ ____________
Total Deposits $193,494,786 $188,991,370
Other Liabilities 1,163,897 1,674,757
____________ ____________
TOTAL LIABILITIES $194,658,683 $190,666,127
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock - No Par Value
Authorized: 20,000,000 Shares
Issued and Outstanding: 1,942,896 Shares in 1996
1,933,571 Shares in 1995
7,588,399 7,509,888
Retained Earnings 10,321,367 9,920,549
Unrealized Gain(Loss) on Securities
Available for Sale, Net (431,455) (168,540)
___________ ___________
TOTAL STOCKHOLDERS' EQUITY $17,478,311 17,261,897
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $212,136,994 $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 ENDING QTR ENDING YTD YTD
6/30/96 6/30/95 6/30/96 6/30/95
Interest Income:
Loans $2,738,465 $3,223,573 $5,524,116 $6,178,272
Taxable Investment Securities 669,368 636,642 1,230,938 1,225,346
Fed Funds Sold 361,683 244,197 736,319 525,574
Total Interest Income $3,769,516 $4,104,412 $7,491,373 $7,929,192
Interest Expense:
Time Deposits of $100,000 or more 93,802 47,300 174,912 92,212
Other Deposits 778,230 723,882 1,529,200 1,406,875
Total Interest Expense 872,032 771,182 1,704,112 1,499,087
NET INTEREST INCOME $2,897,484 $3,333,230 $5,787,261 $6,430,105
Provision For Possible Credit Losses 65,000 125,000 135,000 230,000
Net Interest Income After Provision for
Possible Credit Losses $2,832,484 $3,208,230 $5,652,261 $6,200,105
Other Income:
Service Charge on Deposit Accounts 267,314 281,085 541,654 531,529
Other 459,225 550,025 1,050,786 1,432,740
Total Other Income $726,539 $831,110 $1,592,440 $1,964,269
Other Expense:
Salaries, Wages, Employee Benefits 1,466,880 1,476,021 3,003,522 3,079,220
Occupancy Expense of Bank Premises 291,538 289,405 558,869 567,674
Furniture & Equipment Expense 157,027 178,879 312,466 348,652
Other 902,844 1,186,986 2,004,615 2,304,439
Total Other Expense 2,818,289 3,131,291 5,879,472 6,299,985
Earnings Before Income Taxes 740,734 908,049 1,365,229 1,864,389
Applicable Income Taxes (Credits) 271,000 277,000 480,000 588,000
Net Earnings 469,734 631,049 885,229 1,276,389
Earnings Per Share $0.24 $0.34 $0.46 $0.69
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORANGE NATIONAL BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C> <C> <C>
TR ENDING QTR ENDING YTD YTD
6/30/96 6/30/95 6/30/96 6/30/95
CASH FLOWS FROM OPERATING ACTIVITIES 894,302 1,203,512 1,403,737 1,776,371
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment (33,015) (107,238) (106,261) (287,586)
and leasehold improvements
NET (INCREASE) DECREASE IN:
Fed Funds Sold 3,500,000 12,795,000 (4,000,000) 14,565,000
Securities (3,356,498) (4,518,079)(10,492,050) (4,666,144)
Loans (609,043) (17,473) 7,420,681 (1,225,444)
___________ ___________ ___________ ___________
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (498,556) 8,152,210 (7,177,630) 8,385,826
___________ ___________ ___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Sale of Common Stock 43,818 - 78,511 -
Net Increase (decrease) in deposits (1,049,885) (4,815,129) 4,503,416 (4,895,368)
Dividends Paid - - (484,411) (180,348)
___________ ___________ ___________ ___________
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (1,006,067) (4,815,129) 4,097,516 (5,075,716)
___________ ___________ ___________ ___________
INCREASE (DECREASE) IN CASH
AND NON-INTEREST EARNING DEPOSITS (610,321) 4,540,593 (1,676,377) 5,086,481
CASH AND NON-INTEREST EARNING DEPOSITS
Beginning 21,863,604 15,940,767 22,929,660 15,394,879
End of Period 21,253,283 20,481,360 21,253,283 20,481,360
</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
June 30, 1996, and the consolidated statements of earnings and statements of
cash flows for the three month and six month periods ended June 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 June
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 June 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 June 30, 1996, and December 31, 1995, amounted to
$2,071,543 and $1,533,373 respectively.
3.INCOME TAX MATTERS
There are no net deferred income tax assets or liabilities in the June 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 asset (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 June 30, 1996.
4.SECURITIES
The fair value of securities classified as held to maturity as of June 30,
1996 is $11,279,974. The unrealized losses of securities available for sale
net of unrealized gains as of June 30, 1996 is $621,070.
<PAGE>
5. ANALYSIS FOR CREDIT LOSSES
An analysis of the change in the allowance for credit losses follows:
<TABLE>
<CAPTION>
<S> <C>
Beginning January 1, 1996 1,512,544
Charge offs (212,681)
Recoveries 20,981
Provision for loan losses 135,000
Balance June 30, 1996 1,455,844
</TABLE>
At June 30, 1996, the Bank has classified $1,268,337 of its loans as impaired
with a specific loan loss reserve of $326,657 and $211,799 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 June 30, 1996 was $1,599,400. 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 June 30, 1996 on loans
classified as impaired was $8,021 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>
6/30/96 Percent
a. Cash on Hand & Deposits with
Correspondent Banks $21,253,283 26.0%
b. Federal Funds Sold $22,500,000 27.5%
c. Marketable Securities
(Available for Sale) $38,038,050 46.5%
Total $81,791,333 100.0%
</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 June 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 87.4% at June
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 risk adjusted assets
equalled 13.71% at June 30, 1996, as compared to 12.8% as of December 31,
1995. Primary capital to total loans was 16.4% at June 30, 1996, as compared
to 15.1% as of December 31, 1995.
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
2nd Quarter 1996 Vs. 2nd Quarter 1995
June 30, 1996 June 30, 1995
Total interest income for the three-month period and quarter ending June 30,
1996, decreased $334,896 or 8.2%, over the like period ending June 30, 1995.
Interest and fees on loans decreased $485,108 or 15.0%, due to a decrease in the
loan portfolio, plus a decrease in average loan interest rates. The average
loan totals for the three months ended June 30, 1996 was $107,725,349, compared
to $116,077,693 for the three month period of the prior year. Because of the
difference in loan interest rates between the two periods, average yield
decreased 91 basis points from 11.11% to 10.20% as of June 30, 1996.
Investment income increased $150,212 or 17.1% over the prior period. This
increase was caused by a 23.6% increase in investment accounts, plus a
decrease in average yields. U. S. Government Agencies and Securities
represent 68.6% of the Bank's investment portfolio. Because of a decrease in
longer term investments and short term interest rates between the two
periods, average yield decreased 28 basis points from 5.81% to 5.53% as of
June 30, 1996.
Total interest expense increased $100,850 or 13.1% for the subject period ended
June 30, 1996, compared to the same period ended June 30, 1995, as a result of
the increase in overall cost of funds. Average interest bearing accounts
increased $5,523,437 or 4.4%. The cost of funds averaged 21 basis points more
during this current quarter than the compared quarter in 1995.
Net interest income (total interest income less total interest expense)
decreased $375,746 or 11.7%, during the quarter ended June 30, 1996, over the
same period in 1995.
The loan loss provision decreased $60,000 or 48.0%, from $125,000 to $65,000 as
of June 30, 1996, based on the amount to provide for estimated losses. At
June 30, 1996, the reserve level was at 1.37% of total loans and leases as
compared to 1.43% at June 30, 1995. Total charge-offs in the three month
period ended June 30, 1996 were $105,915 and recoveries were $10,924 compared
to $37,246 in charge-offs and $58,371 in recoveries in the same period in
1995. At June 30, 1996, non performing loans were $2,297,022 compared to
$3,055,000 at December 31, 1995. Real Estate loans totaling $1,997,376
represent 87.0% of non performing loans. Management believes, based upon
loan quality, that the current loan loss reserve of $1,455,844 is adequate
and is in conformance with established loan policy and guidelines.
Other income decreased $104,571 or 12.6%. No gains or losses were realized on
the sale of securities. Gains of $66,864 were realized on the sale of Small
Business Administration Loans during the quarter ending June 30, 1996, compared
to $140,726 in gains in the same period in 1995. No gains were realized on the
sale of equipment during the quarter ending June 30, 1996. No gains were
realized in the quarter ending June 30, 1995.
Other expense decreased $313,002 or 10.0% from $3,131,291 in the second quarter
of 1995, to $2,818,289 in the second quarter of 1996. This decrease was
partially caused by a $96,474 or 29.1%, decrease in data processing expense
relating to a new data processing contract in the second quarter of 1995, a
decrease of $111,763 in expenses relating to other real estate owned and a
decrease of $63,000 in life insurance expense.
Operating profits before taxes for the quarter ended June 30, 1996 decreased
$167,315 or 18.4% over the like 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 three month period and quarter ended June 30,
1996, was $469,734 compared to $631,049 for the three month period ending
June 30, 1995.
<PAGE>
Results of Operations
First Half 1996 Vs. First Half 1995
June 30, 1996 June 30, 1995
Total interest income for the six months ended June 30, 1996, decreased $437,819
or 5.5%, over the like period ending June 30, 1995. Interest and fees on loans
decreased $654,156 or 10.6%, due to a decrease in the loan portfolio, plus a
decrease in average loan interest rates. The average loan totals for the
six-months ended June 30, 1996 was $108,189,428, compared to $115,561,456 for
the six month period of the prior year. Because of the difference in loan
interest rates between the two periods, average yield decreased 38 basis points
from 10.69% to 10.31% as of June 30, 1996. Investment income increased
$216,337 or 12.4% over the prior period. This increase was caused by a 16.6%
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 longer-term investments
between the two periods, average yield decreased 12 basis points from 5.67%
to 5.55% as of June 30, 1996.
Total interest expense increased $205,025 or 13.7% for the subject period ended
June 30, 1996, compared to the same period ended June 30, 1995, as a result of
the increase in overall cost of funds. Average interest bearing accounts
increased $3,377,731 or 2.7%. The cost of funds averaged 19 basis points
more during the six month period ending June 30, 1996, over the same period
in 1995.
Net interest income (total interest income less total interest expense)
decreased $642,844 or 10.0%, during the six months ended June 30, 1996, over the
same period in 1995.
The loan loss provision decreased $95,000, or 41.3%, from $230,000 as of
June 30, 1995 to $135,000 as of June 30, 1996, based on the amount necessary to
provide for estimated losses. Management believes that the level of reserve
is adequate as of June 30, 1996, and it is within the guidelines of the loan
loss reserve policy as approved by the Board of Directors.
Other income decreased $371,829 or 18.9%. No gains or losses were realized on
the sale of securities. Gains of $270,456 were realized on the sale of Small
Business Administration Loans during the six months ending June 30, 1996.
Gains of $658,054 were realized in the six months ending June 30, 1995. No
gains were realized on the Sale of equipment during the six months ending
June 30, 1996. Gains of $6,768 were realized on the sale of equipment during
the six months ending June 30, 1995.
Other expense decreased $420,513, or 6.7% from $6,299,985 in the first half of
1995, to $5,879,472 in the first half of 1996. This decrease was partially
caused by a $75,698, or 2.5% 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 $299,824 or 13.0% as a result of decreases in data
processing expenses of $147,209 relating to a new data processing contract in
the second quarter of 1995, decreases in life insurance expense of $63,544 and
decreases in other real estate owned expenses of $125,859.
Operating profits before taxes for the first half of 1996, decreased $499,160,
or 26.8%, over the same period in 1995. This decrease in before tax profits
occurred partially as a 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 six-month period ending June 30, 1996, was
$885,229 compared to $1,276,389 for the six month period ending June 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.
A. Annual meeting held at Orange National Bank May 20, 1996.
B. Meeting resulted in the election of the below-listed
Directors for one-year term:
William Frantz Charles R. Foulger
Michael W. Abdalla Gerald R. Holte
Fred Barrera James E. Mahoney
Michael J. Christianson Wayne F. Miller
Kenneth J. Cosgrove Harlan Smith
Robert W. Creighton San E. Vacarro
Armand Durante
All votes by proxy, resulting in total management
nominees elected. Secondly, there was no solicitation
in opposition to management's nominees.
C. Meeting resulted in the ratification of the appointment
of McGladrey & Pullen as independent public accountant
for Bancorp and its subsidiaries, Orange National Bank
and ONB Mortgage Corporation for the year 1996 by a vote
of 1,380,432 for and 0 against the ratification.
ITEM 5. Other information.
None to report.
ITEM 6. Exhibits and reports on Form 8-K.
A. Exhibits: Proxy Report, which is incorporated herein by
reference filed on 4/22/96.
<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 August 13, 1996
Kenneth J. Cosgrove Date
Chief Executive Officer
ROBERT W. CREIGHTON August 13, 1996
R.W. Creighton Date
Secretary & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 21253
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 22500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 38038
<INVESTMENTS-CARRYING> 11752
<INVESTMENTS-MARKET> 11280
<LOANS> 106624
<ALLOWANCE> 1456
<TOTAL-ASSETS> 212137
<DEPOSITS> 193495
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1163
<LONG-TERM> 0
0
0
<COMMON> 7588
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 212137
<INTEREST-LOAN> 5524
<INTEREST-INVEST> 1967
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7491
<INTEREST-DEPOSIT> 1704
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 5787
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5879
<INCOME-PRETAX> 1365
<INCOME-PRE-EXTRAORDINARY> 885
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 885
<EPS-PRIMARY> $0.46
<EPS-DILUTED> $0.46
<YIELD-ACTUAL> 8.31
<LOANS-NON> 2297
<LOANS-PAST> 262
<LOANS-TROUBLED> 1337
<LOANS-PROBLEM> 2805
<ALLOWANCE-OPEN> 1513
<CHARGE-OFFS> 213
<RECOVERIES> 22
<ALLOWANCE-CLOSE> 1456
<ALLOWANCE-DOMESTIC> 1456
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
