SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934.
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For Quarter Ended Commission File Number 0-11117
June 30, 1995
SDNB FINANCIAL CORP.
(Exact name of Registrant as specified in its charter)
CALIFORNIA
(State or jurisdiction of incorporation or organization)
95-3725079
(I.R.S. Employer Identification No.)
1420 Kettner Blvd.
San Diego, CA 92101
(Address of principal executive offices) (Zip Code)
(619) 231-4989
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 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 [ ]
Number of shares of Common Stock, no par value, outstanding at
the close of the period covered by this report (June 30, 1995):
2,048,485.
SDNB FINANCIAL CORP.
INDEX
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) 1
June 30, 1995 and December 31, 1994
Consolidated Statements of Operations (unaudited) 2
Three and six months ended June 30, 1995
Three and six months ended June 30, 1994
Consolidated Statements of Cash Flows (unaudited) 3
Six months ended June 30, 1995
Six months ended June 30, 1994
Notes to Consolidated Financial Statements (unaudited) 4
June 30, 1995
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SDNB Financial Corp. and Subsidiaries
Consolidated Balance Sheets (unaudited)
(In thousands)
June 30, December 31,
Assets 1995 1994
Cash and due from banks $ 13,464 $ 11,936
Interest bearing deposits in other banks 2,671 1,381
Investment securities 13,381 17,321
Investment securities available-for-sale 12,738 9,910
Federal funds sold 8,500 24,000
Loans 94,282 97,058
Less allowance for loan losses 2,494 2,148
Net loans 91,788 94,910
Premises and equipment, net 10,786 11,089
Other real estate owned 772 268
Accrued interest receivable and other assets 2,196 2,370
Total assets $156,296 $173,185
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 40,121 $ 45,693
Interest bearing 85,177 92,583
Total deposits 125,298 138,276
Securities sold under agreement to repurchase 6,586 12,285
Accrued interest payable and other liabilities 800 953
Notes payable 12,198 12,702
Total liabilities 144,882 164,216
Shareholders' equity:
Common stock 16,648 14,585
Deficit (5,132) (5,256)
Net unrealized holding losses
on available-for-sale securities (102) (360)
Total shareholders' equity 11,414 8,969
Total liabilities and shareholders' equity $156,296 $173,185
The accompanying notes are an integral part of the consolidated
financial statements.
SDNB Financial Corp. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(In thousands, except amounts per share)
3 months 3 months 6 months 6 months
ended ended ended ended
6/30/95 6/30/94 6/30/95 6/30/94
Interest income:
Interest and fees on loans $ 2,562 $ 2,359 $ 5,143 $ 4,654
Interest on federal funds sold 173 202 373 292
Interest on investments 418 398 805 759
Total interest income 3,153 2,959 6,321 5,705
Interest expense:
Interest on deposits 716 613 1,361 1,223
Interest on repurchase agreements 65 108 141 179
Interest on notes payable 9 9 24 16
Total interest expense 790 730 1,526 1,418
Net interest income 2,363 2,229 4,795 4,287
Provision for loan losses 150 600 450 900
Net interest income after provision
for loan loss 2,213 1,629 4,345 3,387
Other operating income:
Security gains, net 0 0 11 0
Building income 205 292 466 583
Other non-interest income 201 917 386 1,171
Total other operating income 406 1,209 863 1,754
Other operating expenses:
Salaries and employee benefits 925 870 1,945 1,749
Occupancy 129 150 239 271
Professional fees 210 128 332 230
Building operating expenses 623 569 1,219 1,128
Other non-interest expenses 667 786 1,343 1,385
Total other operating expenses 2,554 2,503 5,078 4,763
Earnings before income tax 65 335 130 378
Income tax 3 3 6 3
Net earnings $ 62 $ 332 $ 124 $ 375
Net earnings per share $ 0.03 $ 0.22 $ 0.07 $ 0.24
The accompanying notes are an integral part of the consolidated
financial statements.
SDNB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Six months ended June 30,
1995 1994
OPERATING ACTIVITIES:
Net earnings $ 124 $ 375
Adjustments to reconcile net earnings to net
cash used by operating activities:
Provision for loan losses 450 900
Provision for depreciation and amortization 639 642
Amortization of investment security discounts (50) (18)
Other expense not utilizing (providing) cash 58 (84)
Unearned loan fees 68 (62)
Taxes refundable (12) 0
Interest receivable and other assets (677) (415)
Interest payable and other liabilities (153) (564)
Total adjustments 323 399
Net cash provided by operating activities 447 774
INVESTING ACTIVITIES:
Proceeds from maturities of held-to-maturity securities 3,604 8,387
Proceeds from called held-to-maturity securities 395 0
Proceeds from maturities of available-for-sale securities 3,494 1,011
Proceeds from sales of available-for-sale securities 530 0
Purchases of held-to-maturity securities 0 (6,984)
Purchases of available-for-sale securities (6,548) (4,455)
Net change in gross loans 2,587 9,645
Proceeds from OREO properties 43 520
Purchases of OREO properties 0 (570)
Purchases of premises and equipment (119) (128)
Net cash provided by investing activities 3,986 7,426
FINANCING ACTIVITIES:
Net change in deposits (12,978) (3,599)
Net change in short-term borrowings (6,202) 5,620
Proceeds from issuance of common stock (net) 2,065 0
Net cash provided (used) by financing activities (17,115) 2,021
Change in cash and cash equivalents (12,682) 10,221
Cash and cash equivalents at beginning of period 37,317 17,026
Cash and cash equivalents at end of period $24,635 $27,247
For the purpose of the statement of cash flows, the Company considers cash
and cash equivalents to be as follows at June 30, 1995 1994
Cash and due from banks $13,464 $12,461
Interest-bearing deposits in other banks 2,671 1,286
Federal funds sold 8,500 13,500
Totals $24,635 $27,247
Supplemental cash flow information: 1995 1994
CASH PAID FOR:
Interest $1,988 $1,418
Income Taxes $0 $0
Non-cash items: transfer of loans to OREO $553 $570
The accompanying notes are an integral part of the consolidated
financial statements.
SDNB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1995
1. In the opinion of Management, the accompanying unaudited
interim consolidated financial statements contain all
adjustments (which are of a normal recurring nature)
necessary to present fairly the financial position as of
June 30, 1995, and the results of operations for the three
and six months ended June 30, 1995 and 1994 and cash flows
for the six months ended June 30, 1995 and 1994. Certain
prior year amounts have been reclassified to conform with
the current year presentation.
2. Earnings per share for the three and six months ended June
30, 1995 and 1994 are based on the following weighted
average shares outstanding:
Three months ended:
June 30, 1995 2,048,485
June 30, 1994 1,538,364
Six months ended:
June 30, 1995 1,806,107
June 30, 1994 1,538,364
3. At June 30, 1995, approximately $4.3 million in securities
were pledged to secure deposits.
SDNB FINANCIAL CORP.
Form 10-Q
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
The first six months of 1995 reflect the beneficial effect of
higher interest rates while also reflecting an abatement of some
of the problems of a still depressed economy in which SDNB
Financial Corp. (the "Company") operates. Net earnings for the
three and six months ended June 30, 1995 are $62,000 and
$124,000, respectively, compared to $332,000 and $375,000,
respectively, for the comparable periods of 1994. The 1994
periods include $712,500 of non-recurring income (see OTHER
OPERATING INCOME).
For the past several years, the Company and San Diego National
Bank (the "Bank") have been adversely affected by a number of
factors emanating primarily from the condition of the economy in
San Diego. These factors include:
a) The need for high loan loss provisions.
b) OREO losses and expenses from higher than normal levels
of OREO property.
c) Reduction of the level of the loan portfolio
resulting from continuing low loan demand; however, the
loan balance at June 30, 1995 has increased by
approximately $463,000 since March 31, 1995.
Additionally, the Company has incurred substantial expense in
connection with legal fees and provision for additional costs
from the Pioneer Mortgage and Pioneer Liquidating Corporation
litigation (see Report on Form 10-K for year ended December 31,
1994).
While the Company reports a profit for the first six months of
1995, there can be no assurances that the factors noted above, or
other factors, will not continue to adversely impact the Company
and the Bank. Discussion of the individual segments of the
Company's operations is contained in subsequent sections of this
report.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
By the nature of its commercial/wholesale focus, the Bank has
moderate interest-rate risk exposure in a declining-rate
environment. This phenomenon can be seen in the "Static Gap
Summary" (Table 1). At June 30, 1995, approximately 72% of the
Bank's earning assets adjust immediately to changes in interest
rates. Within three months, this increases to 82% of earning
assets. Consequently, the Bank utilizes deposit liabilities that
also adjust relatively quickly. Within the same three-month
period, approximately 92% of the Bank's interest-bearing
liabilities (mostly deposits) adjust to current rates.
The Bank's cumulative gap position at the three month repricing
interval has decreased approximately $3.7 million, or 14 percent,
from $26.0 million at December 31, 1994 to $22.3 million at June
30, 1995. This change is reflective of the general downsizing
occuring in the Bank's interest earning assets and interest
bearing liabilities. Interest earning assets within the three
month repricing interval are down $19 million while interest
bearing liabilities within the same repricing interval are down
$15 million. Within the three-month horizon, interest bearing
deposits declined $9.7 million and repurchase agreements
declined $5.7 million, offset by reductions in federal funds sold
of $15.5 million and loans of $3.7 million.
During February 1995 the Bank entered into an interest rate swap
to hedge against the effects of falling interest rates on income.
If the prime interest rate falls below eight percent during the
life of the contract, the Bank will receive payments amounting to
the difference between the then existing prime rate and eight
percent on the contract amount of $20 million. These payments
continue while the prime interest rate stays below eight percent
or until expiration of the contract, February 3, 1998. This
contract helps to stabilize the Bank's net interest spread which,
absent any hedge, decreases during periods of rapidly falling
interest rates.
The Bank's liquidity needs are projected by comparing anticipated
funding needs against current resources and anticipated deposit
growth. Any current surplus of funds is invested to maximize
income while maintaining safety and providing for future
liquidity.
During the six months ended June 30, 1995, cash and cash
equivalents decreased $12.7 million. Operating activities
provided $447,000 during the period. Approximately $3.9 million
was provided by investing activities. The two major components
were net proceeds of $1.5 million from securities ($8.0 million
of sales and maturities offset by purchases of $6.5 million) and
decrease in gross loans totaling $2.6 million. Financing
activities used $17.1 million during the period. Deposits
decreased $13.0 million while repurchase agreements decreased
$5.7 million. The issuance of new stock during the period
provided a net amount of $2.1 million.
Liquidity is provided on a daily basis by federal funds sold and
on a longer-term basis by the structuring of the Bank's
investment portfolio to provide a steady stream of maturing
issues. Additionally, the Bank may raise additional funds from
time to time through money desk operations or via the sale of
loans to another institution.
The Bank has never purchased high-yield securities or
participated in highly-leveraged transactions.
See "CAPITAL RESOURCES" for a discussion of other factors that
have affected liquidity in the six months ended June 30, 1995 and
will affect future liquidity.
CAPITAL RESOURCES
Since its initial capitalization in 1981, the Company has relied
primarily on internally generated income to fund its growth and
provide for depositor protection. During 1994 the Company
concluded that additional capital would be beneficial and
proposed a plan for additional capitalization which was approved
by regulatory authorities on March 9, 1995, and by the
shareholders of the Company on March 17, 1995. The plan
encompasses the following steps:
a. Sale of 510,121 newly issued shares of the Company's Common
Stock to two limited partnerships managed by WHR Management
Corp. ("WHR") at $4.34 per share for a gross amount of
$2,213,925. This transaction was completed on March 28, 1995.
b. A rights offering (the "Subscription Offering") to existing
shareholders encompassing up to 769,582 shares of newly
issued Common Stock at a subscription price of $4.34 per
share for a gross potential amount of $3,339,986 if the
offering is fully subscribed. The Company filed a
registration statement on Form S-3 with the Securities and
Exchange Commission on April 3, 1995 with respect to the
subscription rights to be distributed and the Common Stock to
be issued in connection with the Subscription Offering. The
Subscription Offering became effective on May 30, 1995. As
of July 21, 1995, the previous expiration date of the
Subscription Offering, 23,279 shares had been subscribed.
The Company has extended the Subscription Offering to
September 21, 1995 and will pay a 5% commission on
subscriptions exercised through qualified brokers or dealers.
c. Sale to WHR of up to an additional 255,193 newly issued
shares of Common Stock at $4.34 per share for a gross amount
of $1,107,538, if the Subscription Offering is fully
subscribed or such lesser amount so that after such purchase
WHR holds an aggregate of 24.9% of the outstanding Common
Stock of the Company taking into account the shares issued in
the Subscription Offering. Pursuant to the terms of the
agreement negotiated by the Company and WHR, WHR does not
have the right to participate in the Subscription Offering.
The Company has used a portion of the proceeds of the first sale
to WHR (item "a" above) to reduce notes payable, to pay certain
of the expenses in connection with the plan for additional
capitalization and for advances to the San Diego National Bank
Building Joint Venture ("JV"), which in turn used a portion to
make payment on the JV's second trust deed note payable. The
remaining proceeds from the first sale as well as any net
proceeds from the subsequent Subscription Offering and second
sale to WHR will be used for general corporate purposes, which
may include investments in or extensions of credit to the
Company's subsidiaries, reduction of existing debt or financing
possible future acquisitions of other banking institutions or
related businesses. At the present time the Company does not
have any specific plans, agreements or understandings, written or
oral, pertaining to the proposed acquisition of any banking
institution or related business.
As disclosed in the Company's 1994 Annual Report to Shareholders
and Report on Form 10-K, the Bank is precluded from paying
dividends to the Company. As further disclosed, the Company
merged SDNB Development Corp. into itself effective July 1, 1993,
thereby allowing cash flow from the JV to come directly to the
Company. During 1994 and the first three months of 1995, the JV
cash flow provided the Company with sufficient funds to meet its
normal ongoing obligations but was not sufficient to allow the
payment of cash dividends, which would also require approval of
the Federal Reserve Bank of San Francisco under terms of an
agreement dated November 20, 1992. Subsequent to March 28, 1995,
earnings from the net proceeds of the stock issuance referred to
in item "a" above will augment cash flow.
The Comptroller of the Currency (Comptroller) has established a
framework for supervisory requirements of national banks based
upon capital ratios. Based upon this framework, a bank's
capitalization is defined as well as capitalized, adequately
capitalized, significantly undercapitalized or critically
capitalized. Under the Comptroller's framework, a bank is well
capitalized if its ratios are greater than or equal to 6% and 10%
for tier 1 capital and risk weighted capital, respectively. As
of June 30, 1995 and December 31, 1994, the Bank was considered
"well capitalized".
The Federal Reserve Board (Reserve Board), as the regulatory body
of the Company, has capital ratio requirements. Under the
Reserve Board's Capital Adequacy Guidelines, all bank holding
companies should meet a minimum ratio of qualifying total capital
to weighted-risk assets of 8 percent, of which at least 4.0
percentage points should be in the form of tier 1 capital.
The Reserve Board and the Comptroller have also imposed a
leverage standard to supplement their risk based ratios. This
leverage standard focuses on a banking institution's ratio of
Tier 1 capital to average total assets adjusted for goodwill and
other certain items. Under these guidelines, banking
institutions that meet certain criteria, including excellent
asset quality, high liquidity, low interest rate exposure and
good earnings, and have received the highest regulatory rating
must maintain a ratio of Tier 1 capital to total assets of at
least 3%. Institutions not meeting this criteria, as well as
institutions with supervisory, financial or operational
weaknesses, along with those experiencing or anticipating
significant growth are expected to maintain a Tier 1 capital to
total assets ratio equal to at least 4% to 5%.
As reflected in the following table, the risk-based capital
ratios and leverage ratios of the Company and the Bank as of June
30, 1995 and December 31, 1994 exceeded the fully phased-in
regulatory risk-based capital adequacy guidelines and the
leverage standard.
Capital Components and Ratios
(dollars in thousands)
June 30, 1995 December 31, 1994
Company Bank Company Bank
Capital Components
Tier 1 Capital $11,414 $12,115 $9,329 $11,667
Total Capital 12,890 13,547 10,868 13,081
Risk-weighted assets
and off-balance sheet
instruments 117,067 106,230 123,142 113,106
Regulatory Capital
Tier 1 risk-based:
Actual 9.75% 11.40% 7.59% 10.35%
Required 4.00 6.00 4.00 6.00
Excess 5.75% 5.40% 3.59% 4.35%
Total risk-based:
Actual 11.01% 12.67% 8.85% 11.61%
Required 8.00 10.00 8.00 10.00
Excess 3.01% 2.67% 0.85% 1.61%
Leverage:
Actual. 7.15% 8.18% 5.33% 7.09%
Required 5.00 5.00 5.00 5.00
Excess 2.15% 3.18% .33% 2.09%
INVESTMENT SECURITIES
During the first six months of 1995, the gross unrealized losses
in the available-for-sale category declined from $360,000 to
$102,000 and in the held-to-maturity category, declined from
$680,000 to $185,000. Management continues to believe that there
is sufficient liquidity and available sources of liquidity to
allow all such securities (which are fully guaranteed by United
States Government instrumentalities as to principal) to mature
and thus avoid realization of any material amount of the
presently unrealized losses.
NET INTEREST INCOME/NET INTEREST MARGIN
The following is a comparison of the net interest spread between
the first six months of 1995 and the same period of 1994.
1995 1994
Yield on average earning assets
(taxable equivalent) 9.23% 7.43%
Cost of funds 2.22% 1.83%
Net interest spread 7.01% 5.60%
In addition to interest rates, changes in the volumes of assets
and liabilities also affect net interest income. The volume/rate
variance analysis (Table 2) shows the change in net interest
income that is attributable to changes in volume versus changes
in rates. As reflected in Table 2, the comparison of net
interest income between the first six months of 1995 and the
similar period of 1994 was affected primarily by the significant
increase in the prime interest rate (8.91% average in 1995 vs.
6.45% average in 1994) which was matched by a proportionate
increase in the cost of funds, thus increasing the net interest
spread. The benefit of the increased net interest spread was
offset by the reduced loan balance between June 30, 1995 and
1994.
LOANS AND ALLOWANCE AND PROVISION FOR LOAN LOSSES
A summary of the activity in the allowance for loan loss is as
follows:
(In thousands)
Six months ended
June 30,
1995 1994
Balance at beginning of period $2,148 $2,522
Provision charged to operating expenses 450 900
Loans charged off (327) (627)
Recoveries 223 78
Balance at end of period $2,494 $2,873
Management employs a 'migration analysis method' to establish the
required amount of loan loss allowance. This process tracks
realized loan losses back through the prior two years to estimate
loss exposure on the classified and unclassified loan portfolios.
Additionally, loss experience is tracked in pools of loans with
similar characteristics to estimate the loss exposure unique to
various loan types. The measured loss exposure is then applied
to the current loan portfolio and further adjusted for
'qualitative factors'.
This method of establishing loan loss reserves complies with the
policies of the Comptroller as reflected in Banking Circular 201,
revised, dated February 20, 1992, and in Banking Bulletin 93-60,
dated December 21, 1993. The Company began testing this new
method during 1992 and comparing its results to results reached
by the previously existing procedures employed by the Company.
The test proved that the two methods were comparable, and the
Company adopted the new migration analysis method during 1993.
Accordingly, the Company believes its method for establishing the
loan loss allowance is sound. But no method, however valid, can
consistently predict future events with complete accuracy. In
recent years, several factors used by the Bank to establish loan
loss allowances have been subject to considerable volatility, and
this in turn has affected the volatility of nonperforming loans,
charge-offs, and the coverage ratio. In addition, the Bank's
method of reporting, particularly its conservative listing of
loans as nonperforming, is not always an accurate indicator of
actual future losses. These issues are explained in greater
detail below.
The economy in San Diego suffered a sharp downturn in recent
years, particularly in the real estate market. The Bank is a
community bank with a relatively small loan portfolio comprised
of mostly commercial/real estate loans that tend to be
individually larger in amount than loans made by retail banks.
As a result of these and other factors, the Bank can experience
large swings in nonperforming loans, charge-offs, and the
coverage ratio when one or a few loans are transferred from one
category to another. These factors are not reasons for changing
a valid method of determining loan loss allowances and are not
always accurate predictors of losses, but they do have short-term
effect on those allowances and related reported figures.
The volatility of "non-performing" loans is illustrated in
the following chart:
ASSETS REPORTED AS NONPERFORMING
(In thousands)
At At At
June 30, 1995 Dec. 31, 1994 June 30, 1994
CURRENT AND NONCURRENT
Non-accrual loans $2,246 $6,046 $3,994
Restructured loans (still accruing) 2,304 2,316 2,330
Loans 90 days past due 6 20 1,851
4,556 8,382 8,176
Other real estate owned 772 268 1,000
Total $5,328 $8,650 $9,176
NONCURRENT
Non-accrual loans $ 641 $1,276 $3,071
Restructured loans (still accruing) 0 0 0
Loans 90 days past due 6 20 1,851
647 1,296 4,922
Other real estate owned 772 269 1,000
Total $1,419 $1,564 $5,922
Loans reported as nonperforming but
which are current, as a percentage of
total loans reported as nonperforming 86% 85% 40%
OTHER OPERATING INCOME
Changes in other non-interest income include:
a) Building revenues declined in 1995 as leases were renewed at
lower rates due to competitive pressures.
b) Higher interest rates resulted in a higher earnings credit
on clients' deposit accounts which reduced the service
charge income.
c) The three and six months ended June 30, 1994, include in
income $712,500 received from the Bank's directors' and
officers' liability insurer in settlement of claims made by
the Bank (see Report on Form 10-K for year ended December
31, 1994).
OTHER OPERATING EXPENSES
Salaries and employee benefits increased between 1994 and 1995
due to additions to staff and wage increases averaging
approximately 4%.
Professional fees in connection with the Pioneer Liquidating
Corporation litigation (see Report on Form 10-K for year ended
December 31, 1994) were $174,000 and $260,000 for the three and
six months ended June 30, 1995 respectively, increases of
$110,000 and $159,000, respectively over the comparable period of
1994.
Building operating expenses increased primarily because of
increased interest expense, which, through January 1995, was
based on a continuously rising index. Additionally, as disclosed
in the 1994 Annual Report to Shareholders and Report on Form 10K,
in November 1994 the existing first mortgage loan on the building
was purchased by two limited partnerships managed by WHR
Management Corp. (purchasers of the Company's Common Stock; see
"CAPITAL RESOURCES"). In January 1995 the JV and WHR entered
into a modification agreement which reduces the debt service
requirement to $800,000 per year, all allocable to interest.
This caused a short term increase in interest expense which will
be offset later in 1995 when, absent such modification, the
interest rate would have exceeded the rate being paid under the
modification.
Other non-interest expenses changed between 1995 and 1994 as
follows:
3 months ended 6 months ended
June 30 June 30
1995 1994 1995 1994
OREO losses 0 324,000 0 324,000
Loan expense (including loss on
sale of customer note) 136,000 7,000 260,000 145,000
Charge-off of an
unrecovered account
overdraft-net 0 0 38,000 0
SUBSIDIARY DATA
San Diego National Bank
The Bank earned $304,000 and $551,000 for the three and six
months ended June 30, 1995, respectively, compared to $471,000
and $601,000, respectively, for the same periods of 1994. The
1994 periods include $712,500 of non-recurring income (see OTHER
OPERATING INCOME). The return on average assets (ROA) for the
six month periods was .74% and .71%, respectively. The return on
equity (ROE) for the six month periods was 9.13% and 10.49%
respectively. The reasons for the change in Bank earnings have
been enumerated on the preceding pages.
San Diego National Bank Building Joint Venture
3 months ended 6 months ended
June 30 June 30
1995 1994 1995 1994
Pre-consolidation
gross building revenues $450,000 $529,000 $950,000 $1,066,000
Pre-consolidation, pre-
tax loss 229,000 89,000 325,000 158,000
Depreciation and
amortization expense 142,000 162,000 285,000 333,000
San Diego National Bank
Static Gap Summary
June 30, 1995
(In thousands)
Immediately Non-rate
Adjustable 1 Day 3 6 Sensitive
Or 1 Day Through Through Through And Over
Maturity 3 Months 6 Months 12 Months 12 Months Total
Loans (net) 86,019 1,402 693 607 5,561 94,282
Investment securities - 10,505 998 3,911 10,629 26,043
Certificates of deposit in
other banks - 396 594 693 - 1,683
Federal funds sold 8,500 - - - - 8,500
Total interest earning assets 94,519 12,303 2,285 5,211 16,190 130,509
Non-interest earning assets - - - - 14,296 14,296
Total assets 94,519 12,303 2,285 5,211 30,485 144,804
Deposits:
Savings, NOW accounts and
money markets 66,987 - - - - 66,987
Time deposits - 10,946 3,578 3,358 361 18,243
Total deposits 66,987 10,946 3,578 3,358 361 85,230
Securities sold under
agreement to repurchase 6,586 - - - - 6,586
Total interest bearing liabilities 73,573 10,946 3,578 3,358 361 91,816
Non-interest bearing liabilities - - - - 40,873 40,873
Shareholders' equity - - - - 12,115 12,115
Total liabilities and
shareholders' equity 73,573 10,946 3,578 3,358 53,349 144,804
Interest rate sensitivity gap 20,946 1,357 (1,293) 1,853 (22,863)
Cumulative interest rate
sensitivity gap 20,946 22,304 21,011 22,863 -
SDNB Financial Corp.
Volume/Rate Variance Analysis
Six months ended June 30, 1995 and 1994
(In thousands)
1995 compared to 1994
Volume Rate Total
Increase(decrease) in interest on earning assets:
Commercial loans $ (420) $ 651 $ 231
Real estate loans (111) 390 279
Installment loans (28) 10 (18)
Ready Money (2) (1) (3)
Total loans (561) 1,050 489
U.S. Treasury securities (25) 24 (1)
Securities of government agencies (15) 83 68
State and political obligations (91) (3) (94)
Other securities 26 0 26
Total investment securities (105) 104 (1)
Interest-bearing deposits in other banks 12 7 19
Federal funds sold (66) 147 81
Total interest income change (720) 1,308 588
Increase(decrease) in interest paid on liabilities:
Savings accounts 14 0 14
NOW accounts 10 7 17
Super NOW accounts (1) 2 1
Money market accounts 29 79 108
Executive money market accounts (89) 96 7
Total savings deposits (37) 184 147
Time deposits under $100,000 (68) 45 (23)
Time deposits of $100,000 or above (62) 76 14
Total time deposits (130) 121 (9)
Federal funds purchased and
securities sold under agreement to repurchase (66) 28 (38)
Short-term debt 0 26 26
Long-term debt (4) 96 92
Total interest expense change (237) 455 218
Net change in net interest income $ (483) $ 853 $ 370
1) Interest income on state and political obligations has been adjusted
for tax effect at current rates. Interest expense on short- and long-term
debt is included in Building Operating Expenses in the Consolidated
Statement of Earnings.
2) Change in interest income or expense can be attributed to (a) changes
in volume (change in volume times old rate), (b) changes in rates (change
in rate times old volume), and (c) changes in rate/volume (change in rate
times the change in volume). The rate/volume variances are allocated
proportionally between the rate and volume variances based on their
absolute values.
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
See Item 3 of Report on Form 10-K for the year
ended December 31, 1994.
ITEM 2 Changes in Securities
None
ITEM 3 Defaults Upon Senior Securities
None
ITEM 4 Submission of Matters to a Vote of Security
Holders
None
ITEM 5 Other Information
None
ITEM 6 Exhibits and Reports on Form 8-K
A. Exhibit (listed by number corresponding to
the Exhibit Table of Item 601 of Regulation S-K)
27 Financial Data Schedule (submitted only
in electronic format and omitted from
paper copies pursuant to Paragraph (c)
(v) of Regulation S-K (17 CFR 220.601(c)
(v)) and Note 2 to Paragraph (c) (1) (vi)
of Regulation S-K (17 CFR 229.601(c) (1)(vi)).
B. Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: August 11, 1995 SDNB FINANCIAL CORP.
By:/S/ HOWARD W. BROTMAN
Howard W. Brotman,
duly authorized officer
and Chief Financial Officer
INDEX OF EXHIBITS
Exhibit Number Description
27 Financial Data Schedule