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, 1997
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 CORPORATE ISSUERS:
The number of shares outstanding of Orange National Bancorp as of November
12, 1997 is 1,966,171.
<PAGE>
ORANGE NATIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 9/30/97 12/31/96
(Unaudited) (Note*)
Time Certificates of Deposit 0 0
Securities Held to Maturity 10,160,561 11,111,231
Securities Available for Sale 8,972,225 28,899,373
Fed Funds Sold 36,500,000 26,800,000
Loans 137,942,097 120,360,458
LESS Allowance for Possible Credit Losses -1,564,858 -1,369,288
___________ ___________
Total Interest Earning Assets 192,010,025 185,801,774
Cash & Non-Interest Earning Assets 25,770,850 19,635,829
Bank Premises - At Cost
Building and Land 3,467,676 3,448,756
Leasehold Improvements 2,146,270 2,079,896
Furniture, Fixtures & Equipment 3,404,750 3,285,113
LESS Accumulated Depreciation & Amortization -3,912,043 -3,601,171
Accrued Interest Receivable 878,453 1,352,331
Other Assets 5,742,414 6,842,841
___________ ___________
TOTAL ASSETS 229,508,395 218,845,369
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
Demand, Non-Interest Bearing 80,293,382 77,828,911
Money Market & Now 92,859,951 92,176,073
Savings 12,190,560 10,935,397
Time Deposits of $100,000 or More 11,371,098 8,808,554
Other Time Deposits 10,267,259 8,614,818
___________ ___________
Total Deposits 206,982,250 198,363,753
Other Liabilities 1,720,484 1,525,629
___________ ___________
TOTAL LIABILITIES 208,802,734 199,889,382
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock - No Par Value
Authorized: 20,000,000 Shares
Issued and Outstanding: 1,963,546 Shares in 1997
1,952,671 Shares in 1996
7,796,147 7,675,505
Retained Earnings 13,077,005 11,403,180
Unrealized Gain(Loss)on Securities
Available for Sale, Net -67,491 -122,698
___________ ___________
TOTAL STOCKHOLDERS' EQUITY 20,805,661 18,955,987
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 229,508,395 218,845,369
</TABLE>
*NOTE: The balance sheet at December 31, 1996, has been taken from the
Audited Financial Statements. See Notes to Consolidated Financial Statements.
<PAGE>
ORANGE NATIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
QTR ENDED QTR ENDED YTD YTD
9/30/97 9/30/96 9/30/97 9/30/96
Interest Income:
Loans 3,457,470 2,740,815 9,671,533 8,264,931
Taxable Investment Securities 313,002 703,141 1,301,766 1,934,079
Fed Funds Sold 440,154 402,114 982,038 1,138,433
Total Interest Income 4,210,626 3,846,07011,955,33711,337,443
Interest Expense:
Time Deposits of $100,000 or more 131,151 95,452 338,540 270,364
Other Deposits 716,857 817,186 2,096,931 2,346,386
Total Interest Expense 848,008 912,638 2,435,471 2,616,750
NET INTEREST INCOME 3,362,618 2,933,432 9,519,866 8,720,693
Provision for Possible Credit Losses 15,000 60,000 90,000 195,000
Net Interest Income After Provision
for Possible Credit Losses 3,347,618 2,873,432 9,429,866 8,525,693
Other Income:
Service Charge on Deposit Accounts 259,682 264,171 839,103 805,825
Other 740,470 616,686 2,475,554 1,667,472
Total Other Income 1,000,152 880,857 3,314,657 2,473,297
Other Expense:
Salaries, Wages, Employee Benefits 1,522,185 1,433,439 4,538,078 4,436,961
Occupancy Expense of Bank Premises 286,316 304,788 852,913 863,657
Furniture & Equipment Expense 181,541 163,480 540,963 475,946
Other 946,225 960,846 2,998,660 2,965,461
Total Other Expense 2,936,267 2,862,553 8,930,614 8,742,025
Earnings Before Income Taxes 1,411,503 891,736 3,813,909 2,256,965
Applicable Income Taxes (Credits) 560,000 281,000 1,513,000 761,000
Net Earnings 851,503 610,736 2,300,909 1,495,965
Earnings Per Share $0.43 $0.31 $1.16 $0.77
Weighted average number of shares 2,002,582 1,970,120 1,990,691 1,942,800
</TABLE>
<PAGE>
ORANGE NATIONAL BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
QTR ENDED QTR ENDED YEAR TO DATE YEAR TO DATE
9/30/97 9/30/96 9/30/97 9/30/96
CASH FLOWS FROM OPERATING ACTIVITIES
1,563,642 975,595 4,548,560 2,379,332
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Furniture & Equipment
and Leasehold Improvements (17,303) (24,246) (282,550) (130,507)
NET (INCREASE) DECREASE IN:
Federal Funds Sold (11,500,000)(10,800,000) (9,700,000)(14,800,000)
Securities 2,356,040 4,493,175 20,933,025 (5,998,875)
Loans (2,054,494) (4,325,723) (17,476,069) 3,094,958
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (11,215,757)(10,656,794) (6,525,594)(17,834,424)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of Common Stock 45,132 63,700 120,642 142,211
Net Increase (decrease) in Deposits9,978,487 7,738,436 8,618,497 12,241,852
Dividends Paid (196,094) -0- (484,411) (484,411)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 9,827,525 7,802,136 8,112,055 11,899,652
INCREASE (DECREASE) IN CASH AND
NON-INTEREST EARNING DEPOSITS 175,410 (1,879,063) 6,135,021 (3,555,440)
CASH AND NON-INTEREST EARNING DEPOSITS
Beginning 25,595,440 21,253,283 19,635,829 22,929,660
End of Period 25,770,850 19,374,220 25,770,850 19,374,220
</TABLE>
<PAGE>
ORANGE NATIONAL BANCORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet of Orange National Bancorp and its
wholly-owned subsidiary, Orange National Bank, as of September 30, 1997, and
the consolidated statements of earnings and statements of cash flows for the
three and nine months ended September 30, 1997 and 1996, 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, 1997 and 1996, 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 1996,
annual report to shareholders. The results of the operations for the
periods ended September 30, 1997 and 1996, 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, 1997 and December 31, 1996
amounted to $336,843 and $1,906,580, respectively.
3.INCOME TAX MATTERS
The gross amounts of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred Tax Assets $1,035,000
Deferred Tax Liability -678,000
Valuation allowance for deferred tax assets
Net Deferred tax asset $357,000
</TABLE>
Management believes no valuation allowance is necessary. There has been
no change in the allowance during the quarter ended September 30, 1997.
<PAGE>
4.SECURITIES
The fair value of securities classified as held to maturity as of
September 30, 1997 was $10,138,215. The net unrealized losses of
available for sale securities net of unrealized gains and net of
applicable income taxes as of September 30, 1997 was $25,171. Net
unrealized losses on securities transferred from available for sale to
held to maturity securities net of applicable income taxes was $52,215.
5. ANALYSIS FOR CREDIT LOSS
Analysis of the change in the allowance for credit losses follows:
<TABLE>
<CAPTION>
<S> <C>
Beginning January 1, 1997 1,369,288
Charge offs -22,253
Recoveries 127,823
Provision for loan losses 90,000
Balance September 30, 1997 1,564,858
</TABLE>
At September 30, 1997, the bank has classified $805,992 of its loans as
impaired with a specific loan loss reserve of $264,905 and $215,793 of its
loans as impaired with no related specific loss reserve as determined in
accordance with this September Statement. The average recorded investment
in impaired loans during the quarter ended September 30, 1997 was
$1,037,000. 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, 1997 on loans classified
as impaired was $2,991 which equals the amount of cash payments received.
<PAGE>
ORANGE NATIONAL BANCORP AND 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>
09/30/97 Percent
a. Cash on Hand & Deposits with
Correspondent Banks $25,770,850 36.2%
b. Federal Funds Sold 36,500,000 51.2%
c. Marketable Securities 8,972,225 12.6%
(Available for Sale)
Total $71,243,075 100.0%
</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, 1997, was 66.6%, compared to
60.6% at December 31, 1996. 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 78.8% at September 30, 1997, compared to 65.2% at December 31, 1996.
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 13.35% at September 30, 1997, as compared to 13.3% as of
December 31, 1996. Primary capital to total loans was 15.1% at September
30, 1997 as compared to 15.8% as of December 31, 1996. On October 15,
1997 a $0.10 per share cash dividend was declared to shareholders of
record on November 14, 1997, payable on December 2, 1997, totaling
$196,617.
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 1997 Vs. 3rd Quarter 1996
September 30, 1997 September 30, 1996
Total interest income for the three months ended September 30, 1997,
increased $364,556 or 9.5%, over the three months ended September 30,
1996. Interest and fees on loans increased $716,655 or 26.1%, due to an
increase in the average loan portfolio. The average loan totals for the
three months ended September 30, 1997 was $136,322,916, compared to
$108,067,840 for the three months ended September 30, 1996. The loan
interest rates between the two periods remained the same at 10.06%.
Investment income decreased $352,099 or 31.9% over the prior period. This
decrease was caused by a 32.5% decrease in the investment accounts, plus
an increase in average yields. U.S. Government Agencies and Securities
represent 40.0% 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 6 basis points from 5.56%
to 5.61% as of September 30, 1997.
Total interest expense decreased $64,630 or 7.1% for the three months
ended September 30, 1997, compared to the same period ended September 30,
1996 as a result of a decrease in average interest-bearing accounts of
$9,606,412 or 7.3%. The cost of funds averaged 1 basis point more during
the current quarter than the compared quarter in 1996.
Net interest income (total interest income less total interest expense)
increased $429,186 or 11.2%, during the quarter ended September 30, 1997,
over the same period in 1996.
The loan loss provision decreased $45,000, or 75.0%, from $60,000 to
$15,000 as of September 30, 1997, due to the adequacy of the loan loss
reserve. At September 30, 1997, the reserve level was at 1.13% of total
loans as compared to 1.34% as September 1996. Total charge-offs in the
three months ended September 30, 1997 were $16,842 and recoveries were
$86,954 compared to $39,804 in charge-offs and $13,163 in recoveries in
the same period in 1996. At September 30, 1997, non performing loans were
$2,593,875 compared to $2,463,576 at December 31. 1996. Real Estate loans
totaling $2,214,608 represent 85.4% of non performing loans. Management
believes, based upon loan quality, that the current loan loss reserve of
$1,564,858 is adequate and is in conformance with established loan policy
and guidelines.
Other income increased $121,759 or 13.8%. No gains or losses were realized
on the sale of securities. Gains of $319,303 were realized on the sale of
Small Business Administration Loans during the quarter ended September 30,
1997. Gains of $164,960 were realized on the sale of Small Business
Administration Loans during the quarter ended September 30, 1996. No
gains were realized on the sale of equipment in the quarters ended
September 30, 1997 and 1996.
<PAGE>
Other expense increased $73,714, or 2.6% from $2,862,553 in the third
quarter of 1996, to $2,936,267 in the third quarter of 1997. This increase
was partially caused by an increase of $88,746 in salary and benefit costs
due to normal cost-of -living salary increases and the growth of the bank.
Operating profits before taxes for the quarter ended September 30, 1997
increased $519,767, or 58.3%, over the like period in 1996. This increase
in before tax profits occurred partially as a result of an increase in
average loans outstanding and an increase in average investment yields.
Net after taxes income for the three months ended September 30, 1997, was
$851,503 compared to $610,736 for the three months ended September 30,
1996.
<PAGE>
Results of Operations
Nine Months 1997 Vs. Nine Months 1996
September 30, 1997 September 30, 1996
Total interest income for the nine months ended September 30, 1997,
increased $617,894 or 5.5%, over the like period ended September 30, 1996.
Interest and fees on loans increased $1,406,602 or 17.0%, due to an
increase in the loan portfolio, plus a decrease in average loan interest
rates. The average loan totals for the nine months ended September 30,
1997 was $129,172,562, compared to $108,148,603 for the nine months ended
September 30, 1996. Because of the difference in loan interest rates
between the two periods, average yield decreased 21 basis points from
10.19% to 9.98% as of September 30, 1997. Investment income decreased
$788,708 or 25.7% over the prior period. This decrease was caused by a
decrease in investment accounts, plus an increase in average yields. U.S.
Government Agencies and Securities represent 53.7% of the Bank's
investment portfolio. Because of an increase in longer term investments
and short term interest rates between the two periods, average yield
increased 22 basis points from 5.52% to 5.74% as of September 30, 1997.
Total interest expense decreased $181,279 or 6.9% for the nine months
ended September 30, 1997, compared to the same period ended September 30,
1996 as a result of a decrease in average interest-bearing accounts of
$8,344,189 or 6.4%. The cost of funds averaged 2 basis points less during
the nine months ended September 30, 1997 over the same period in 1996.
Net interest income (total interest income less total interest expense)
increased $799,173 or 9.2%, during the nine months ended September 30,
1997, over the same period in 1996.
The loan loss provision decreased $105,000 or 53.8%, from $195,000 as of
September 30, 1996 to $90,000 as of September 30, 1997 based on the
amount necessary to provide for estimated losses. Management believes
that the level of reserve is adequate as of September 30, 1997, and it is
within the guidelines of the loan loss reserve policy as approved by the
Board of Directors.
Other income increased $841,360 or 34.0%. Gains of $1,250 and $12,953
were realized on the sale of securities during the nine months ended
September 30, 1997 and 1996, respectively. Gains of $1,109,911 and
$435,417 were realized on the sale of Small Business Administration Loans
during the nine months ended September 30, 1997 and 1996, respectively.
Gains of $4,769 were realized on the sale of equipment in the nine months
ended September 30, 1997. No gains were realized on the sale of equipment
in the nine months ended September 30, 1996.
Other expense increased $188,589 or 2.2% from $8,742,025 in the first nine
months of 1996, to $8,930,614 in the first nine months of 1997. This
increase was partially caused by a $165,052 increase in business referral
fees and a $77,700 decrease in legal fees and an increase in salary and
benefit costs due to normal cost of living increases and growth of the
bank.
<PAGE>
Operating profits before taxes for the first nine months of 1997 increased
$1,556,944 or 69.0% over the same period in 1996. This increase in before
tax profits occurred partially as the result of an increase in average
loans outstanding and an increase in average investment yields.
Net after taxes income for the nine months ended September 30, 1997, was
$2,300,909 compared to $1,495,965 for the nine months ended September 30,
1996.
<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 13, 1997
Kenneth J. Cosgrove Date
Chief Executive Officer
ROBERT W. CREIGHTON NOVEMBER 13, 1997
R.W. Creighton Date
Secretary & Chief Financial Officer
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 25771
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 36500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8972
<INVESTMENTS-CARRYING> 10161
<INVESTMENTS-MARKET> 10138
<LOANS> 137942
<ALLOWANCE> 1565
<TOTAL-ASSETS> 229508
<DEPOSITS> 206982
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1720
<LONG-TERM> 0
0
0
<COMMON> 7796
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<TOTAL-LIABILITIES-AND-EQUITY> 229508
<INTEREST-LOAN> 9672
<INTEREST-INVEST> 2284
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<INTEREST-TOTAL> 11955
<INTEREST-DEPOSIT> 2435
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<INTEREST-INCOME-NET> 9520
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8931
<INCOME-PRETAX> 3814
<INCOME-PRE-EXTRAORDINARY> 3814
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2301
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 8.75
<LOANS-NON> 2594
<LOANS-PAST> 594
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