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, 1997
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 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
March 31, 1997 is 1,960,921.
<PAGE>
ORANGE NATIONAL BANCORP
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 3/31/97 12/31/96
(Unaudited) (Note*)
Time Certificates of Deposit 0 0
Securities Held to Maturity 10,840,611 11,111,231
Securities Available for Sale 20,735,830 28,899,373
Fed Funds Sold 28,700,000 26,800,000
Loans 122,665,576 120,360,459
Less Allowance for Possible Credit Losses 1,414,123 1,369,289
____________ ____________
Total Interest Earning Assets $181,527,894 $185,801,774
Cash & Non-Interest Earning Assets 21,230,949 19,635,829
Bank Premises - At Cost
Building and Land 3,449,992 3,448,756
Leasehold Improvements 2,127,000 2,079,896
Furniture, Fixtures and Equipment 3,336,947 3,285,113
Less Accumulated Depreciation and Amortization
3,712,254 3,601,171
Accrued Interest Receivable 1,080,429 1,352,331
Other Assets 6,273,626 6,842,841
____________ _____________
TOTAL ASSETS $215,314,583 $218,845,369
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
Demand, Non-Interest Bearing 71,017,596 77,828,911
Money Market & Now 95,993,405 92,176,073
Savings 11,317,903 10,935,397
Time Deposits of $100,000 or More 7,597,410 8,808,554
Other Time Deposits 9,013,503 8,614,818
____________ ____________
Total Deposits $194,939,817 $198,363,753
Other Liabilities 1,179,596 1,525,629
____________ ____________
TOTAL LIABILITIES $196,119,413 $199,889,382
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock - No Par Value
Authorized: 20,000,000 Shares
Issued and Outstanding: 1,960,921 Shares in 1997
1,937,646 Shares in 1996
7,751,015 7,675,505
Retained Earnings 11,661,632 11,403,180
Unrealized Gain(Loss) on Securities
Available for Sale, Net (217,477) (122,698)
___________ ___________
TOTAL STOCKHOLDERS' EQUITY 19,195,170 18,955,987
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $215,314,583 $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>
<TABLE>
<CAPTION>
ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<S> <C> <C>
QTR ENDING QTR ENDING
3/31/97 3/31/96
Interest Income:
Loans 2,976,289 $2,785,651
Taxable Investment Securities 564,652 561,570
Fed Funds Sold 242,180 374,636
Total Interest Income 3,783,121 3,721,857
Interest Expense:
Time Deposits of $100,000 or more 103,680 81,111
Other Deposits 666,921 750,970
Total Interest Expense 770,601 832,081
NET INTEREST INCOME 3,012,520 2,889,776
Provision For Possible Credit Losses 35,000 70,000
Net Interest Income After Provision for
Possible Credit Losses 2,977,520 2,819,776
Other Income:
Service Charge on Deposit Accounts 296,170 276,944
Other 857,064 588,957
Total Other Income 1,153,234 865,901
Other Expense:
Salaries, Wages, Employee Benefits 1,511,487 1,536,641
Occupancy Expense of Bank Premises 284,012 267,331
Furniture & Equipment Expense 191,493 155,439
Other 1,002,320 1,101,771
Total Other Expense 2,989,312 3,061,182
Earnings Before Income Taxes 1,141,442 624,495
Applicable Income Taxes (Credits) 452,000 209,000
Net Earnings 689,442 415,495
Earnings Per Share $0.35 $0.21
Weighted Average Number of Shares 1,983,840 1,950,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORANGE NATIONAL BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
QTR ENDING QTR ENDING
3/31/97 3/31/96
CASH FLOWS FROM OPERATING ACTIVITIES 1,356,579 509,435
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment and leasehold improvements
(126,144) (73,246)
NET (INCREASE) DECREASE IN:
Fed Funds Sold (1,900,000) (7,500,000)
Securities 8,339,384 (7,135,552)
Loans (2,295,283) 8,029,754
____________ ____________
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
4,017,957 (6,679,074)
____________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Sale of Common Stock 75,510 34,693
Net Increase (decrease) in deposits (3,423,936) 5,553,301
Dividends Paid (430,990) (484,411)
____________ ____________
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
(3,779,416) 5,103,583
____________ ____________
INCREASE (DECREASE) IN CASH AND NON-INTEREST EARNING DEPOSITS
1,595,120 (1,066,056)
CASH AND NON-INTEREST EARNING DEPOSITS
Beginning 19,635,829 22,929,660
___________ ____________
End of Period 21,230,949 21,863,604
=========== ============
</TABLE>
<PAGE>
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, 1997, and the consolidated statements of
earnings and statements of cash flows for the three month periods ended
March 31, 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 March 31, 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 31, 1996, annual report to shareholders. The results
of the operations for the periods ended March 31, 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 March 31, 1997, and December
31, 1996, amounted to $286,680 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)
___________
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 ending March 31, 1997.
4. SECURITIES
The fair value of securities classified as held to maturity as of March
31, 1997 is $10,649,452. The unrealized losses of securities available
for sale net of unrealized gains and net of applicable income taxes as
of March 31, 1997 is $217,477.
<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, 1997 1,369,288
Charge offs (2,910)
Recoveries 12,745
Provision for loan losses 35,000
Balance March 31, 1997 1,414,123
</TABLE>
At March 31, 1997, the Bank has classified $922,398 of its loans as
impaired with a specific loan loss reserve of $246,327 and $180,181 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, 1997 was $1,086,000.
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 March 31, 1997 on loans classified
as impaired was $5,888 which equals the amount of cash payments
received.
<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C> <C>
03/31/97 Percent
a. Cash on Hand & Deposits with
Correspondent Banks $21,230,949 30.0%
b. Federal Funds Sold $28,700,000 40.6%
c. Marketable Securities (Available for Sale)
$20,735,830 29.4%
____________ _______
Total $70,666,779 100.0%
</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 March 31, 1997, was 62.9% 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 73.1% at March 31, 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 risk adjusted
assets equaled 13.57% at March 31, 1997, as compared to 13.30% as of
December 31, 1996. Primary capital to total loans was 15.6% at March
31, 1997 as compared to 15.8% as of December 31, 1996.
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
First Quarter 1997 vs. First Quarter 1996
March 31, 1997 March 31, 1996
Total interest income for the three-month period and quarter ending
March 31, 1997, increased $61,264, or 1.6%, over the like period ending
March 31, 1996. Interest and fees on loans increased $190,638, or 6.8%,
due to an increase in the loan portfolio, with a decrease in average
loan interest rates. The average loan totals for the three months ended
March 31, 1997 was $120,853,553, compared to $108,653,508 for the three
month period of the prior year. Because of the difference in loan
interest rates between the two periods, average yield decreased 29 basis
points from 10.28% to 9.99% as of March 31, 1997. Investment income
decreased $129,374, or 13.8%, over the prior period. This decrease was
caused by a 19.1% decrease in the investment accounts, with an increase
in average yields. U.S. Government Agencies and Securities represent
65.6% 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 42 basis points from 5.44% to 5.86% as
of March 31, 1997.
Total interest expense decreased $61,480 or 7.4%, for the subject period
ended March 31, 1997, compared to the same period ended March 31, 1996,
as a result of a decrease in average interest bearing accounts of
$7,519,793 or 6.0%. The cost of funds averaged 2 basis points less
during this current quarter than the compared quarter in 1996.
Net interest income (total interest income less interest expense)
increased $122,744, or 4.2%, during the first quarter ended March 31,
1997, over the same period in 1996.
The loan loss provision decreased $35,000, or 50.0%, from $70,000 as of
March 31, 1996 to $35,000 as of March 31, 1997, based on the amount
necessary to provide for estimated losses. At March 31, 1997, the
reserve level was at 1.15% of total loans as compared to 1.40% at March
31, 1996. Total charge-offs in the three month period ended March 31,
1997 were $2,910 and recoveries were $12,746 compared to $106,766 in
charge-offs and $10,057 in recoveries in the same period in 1996. At
March 31, 1997, nonperforming loans were $2,271,866 compared to
$2,463,576 at December 31, 1996. Real Estate loans totaling $1,817,316
represent 80.0% of non performing loans. Management believes, based
upon loan quality, that the current loan loss reserve of $1,414,124 is
adequate and is in conformance with established loan policy and
guidelines.
Other income increased $287,333, or 33.2%. Gains of $1,250 and losses
of $1,563 were realized on the sale of securities. Gains of $407,555
were realized on the sale of loans during the first quarter ending March
31, 1997, compared to $203,593 in gains in the same period in 1996.
Gains of $4,769 were realized on the sale of equipment during the first
quarter ending March 31, 1997. No gains were realized in the first
quarter ending March 31, 1996.
<PAGE>
Other expense decreased $71,870, or 2.3%, from $3,061,182 in the first
quarter of 1996, to $2,989,312 in the first quarter of 1997, as a result
of decreases in data processing expense of $21,607 and decreases in
legal expenses of $44,428.
Operating profits before taxes for the quarter ended March 31, 1997
increased $516,947 from $624,495 as of March 31, 1996 to $1,141,442 as
of March 31, 1997, due to an increase in the loan portfolio plus a
decrease in average loan interest rates and an increase in average
investment yields and a decrease in average interest bearing accounts.
Income Tax expense as a percentage of pre-tax income was more in 1997
due to the utilization of alternative minimum tax credit carry forwards
in 1996.
Net after taxes income for the three month period and quarter ended
March 31, 1997, was $689,442 compared to $415,495 for the three month
period ending March 31, 1996.
Current Accounting Development
Effective for financial statements issued after December 15, 1997, the
Company will be required to implement FASB Statement No. 128, Earnings
per Share. The Statement establishes standards for computing and
presenting earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. It replaces the
presentation of primary EPS with a presentation of basic EPS and also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures. The
Company has not yet determined the effect this Statement will have on
its 1998 financial statements.
<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 MAY 8, 1997
Kenneth J. Cosgrove Date
Chief Executive Officer
ROBERT W. CREIGHTON MAY 8, 1997
R. W. Creighton Date
Secretary & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 21231
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 28700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20736
<INVESTMENTS-CARRYING> 10841
<INVESTMENTS-MARKET> 10649
<LOANS> 122666
<ALLOWANCE> 1414
<TOTAL-ASSETS> 215315
<DEPOSITS> 194940
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1180
<LONG-TERM> 0
0
0
<COMMON> 7751
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 215315
<INTEREST-LOAN> 2976
<INTEREST-INVEST> 807
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3783
<INTEREST-DEPOSIT> 771
<INTEREST-EXPENSE> 771
<INTEREST-INCOME-NET> 3012
<LOAN-LOSSES> 35
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2989
<INCOME-PRETAX> 1141
<INCOME-PRE-EXTRAORDINARY> 1141
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 690
<EPS-PRIMARY> $0.35
<EPS-DILUTED> $0.35
<YIELD-ACTUAL> 8.63
<LOANS-NON> 2272
<LOANS-PAST> 97
<LOANS-TROUBLED> 1359
<LOANS-PROBLEM> 1243
<ALLOWANCE-OPEN> 1369
<CHARGE-OFFS> 3
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 1414
<ALLOWANCE-DOMESTIC> 1414
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
