<PAGE>
FORM 10-Q
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United States Securities and Exchange Commission
Washington, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1998
Commission File Number 001-13405
ALLIANCE BANCORP OF NEW ENGLAND, INC.
Incorporated in the State of Delaware
IRS Employer Identification Number 06-1495617
Address and Telephone:
348 Hartford Turnpike, Vernon, Connecticut 06066, (860) 875-2500
Securities registered pursuant to Section 12(b) of the Act: Common Stock -- $.01
par value, which is registered on the American Stock Exchange.
Alliance Bancorp of New England (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 12 months and (2) has been subject to such filing requirements for the
past 90 days.
As of May 10, 1998, Alliance Bancorp of New England had 1,661,794 shares of
common stock outstanding.
TABLE OF CONTENTS Page
Table Consolidated Selected Financial Data...............................2
Part I Financial Information..............................................3
Item 1 Financial Statements
Consolidated Balance Sheets....................................3
Consolidated Income Statements.................................4
Consolidated Statements of Changes in Shareholders' Equity.....5
Consolidated Statements of Cash Flows..........................6
Notes to Consolidated Financial Statements.....................7
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of Operations..............10
Special Note Regarding Forward-Looking Statements.............10
Item 3 Quantitative and Qualitative Disclosures About Market Risk........13
Part II Other Information.................................................13
Table Average Balance Sheet and Interest Rates .........................14
Signatures ..............................................................15
1
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Alliance Bancorp of New England, Inc.
Consolidated Selected Financial Data
<TABLE>
<CAPTION>
March 31,
-------------------------
1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
For the Quarter (in thousands)
Net interest income $ 2,088 $ 1,961
Provision for loan losses 145 74
Service charges and fees 247 260
Net gain on securities 435 -
Net gain on assets - -
Non-interest expense 1,744 1,577
Income before income taxes 881 570
Income tax expense 279 120
Net income $ 602 $ 450
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Per Share
Basic earnings $ .36 $ .29
Diluted earnings .35 .28
Dividends declared .05 .04
Book value 11.86 10.22
Common stock price:
High 21.38 12.09
Low 16.38 8.63
Close 21.00 10.69
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At Quarter End (in millions)
Total assets $ 247.3 $ 237.3
Total loans 158.4 146.2
Other earning assets 78.4 78.4
Deposits 220.7 208.7
Borrowings 5.7 11.9
Shareholders' equity 19.7 16.0
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Operating Ratios (in percent)
Return on average assets 1.00% .80%
Return on average equity 13.13 11.40
Equity % total assets (period end) 7.97 6.73
Net interest spread (fully taxable equivalent) 3.26 3.44
Net interest margin (fully taxable equivalent) 3.83 3.90
Dividend payout ratio 13.79 12.89
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</TABLE>
2
<PAGE>
Alliance Bancorp of New England, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(in thousands except share data) March 31, December 31,
1998 1997
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<S> <C> <C>
Assets
Cash and due from banks $ 5,961 $ 6,652
Short-term investments 19,980 14,765
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Total cash and cash equivalents 25,941 21,417
Securities available for sale (at fair value) 39,107 43,729
Securities held to maturity 19,331 19,949
Residential mortgage loans 40,766 39,319
Commercial mortgage loans 46,001 45,511
Other commercial loans 20,235 18,270
Consumer loans 29,712 29,504
Government guaranteed loans 21,668 24,846
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Total loans 158,382 157,450
Less: Allowance for loan losses (3,100) (3,000)
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Net loans 155,282 154,450
Premises and equipment, net 4,086 4,151
Foreclosed assets, net 769 617
Other assets 2,821 2,816
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Total assets $ 247,337 $ 247,129
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Liabilities and Shareholders' Equity
Demand deposits $ 20,268 $ 21,918
NOW deposits 20,430 22,260
Money market deposits 18,715 15,447
Savings deposits 34,333 34,677
Time deposits 126,977 127,431
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Total deposits 220,723 221,733
Borrowings 5,708 5,739
Other liabilities 1,197 854
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Total liabilities 227,628 228,326
Preferred stock, ( $.01 par value; 100,000 shares - -
authorized, none issued)
Common stock, ($.01 par value; authorized 4,000,000
shares; issued and outstanding 1,661,794 in 1998
and 1,636,269 in 1997 ) 16 16
Additional paid-in capital 11,306 11,073
Retained earnings 7,591 7,071
Unrealized gain on securities, net 796 643
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Total shareholders' equity 19,709 18,803
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Total liabilities and shareholders' equity $ 247,337 $ 247,129
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</TABLE>
See accompanying notes to financial statements
3
<PAGE>
Alliance Bancorp of New England, Inc.
Consolidated Income Statements
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------------
(in thousands except share data) 1998 1997
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<S> <C> <C>
Interest Income
Loans $ 3,188 $ 2,940
Debt Securities 642 823
Dividends on equity securities 315 268
Other earning assets 207 20
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Total interest and dividend income 4,352 4,051
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Interest Expense
Deposits 2,205 2,011
Borrowings 59 79
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Total interest expense 2,264 2,090
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2,088 1,961
Net interest income
Provision For Loan Losses 145 74
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Net interest income after provision for loan losses 1,943 1,887
Non-Interest Income
Service charges and fees 247 260
Net gain on securities 435 -
Net gain on assets - -
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Total non-interest income 682 260
Non-Interest Expense
Compensation and benefits 877 871
Occupancy 154 158
Equipment 75 64
Data processing services 144 166
Office, FDIC, & Insurance 140 135
Problem asset related expense 66 (30)
Other 288 213
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Total non-interest expense 1,744 1,577
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Income before income taxes 881 570
Income tax expense 279 120
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Net Income $ 602 $ 450
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Per Share Data
Basic earnings per share $ 0.36 $ 0.29
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Diluted earnings per share $ 0.35 $ 0.28
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Average basic shares outstanding 1,660,517 1,563,942
Average additional dilutive shares 59,534 42,053
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Average diluted shares outstanding 1,720,051 1,605,995
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</TABLE>
See accompanying notes to financial statements
4
<PAGE>
<TABLE>
<CAPTION>
Alliance Bancorp of New England, Inc.
Consolidated Statements of Changes in Shareholders' Equity
Accumulated
Additional other Total
Three Months Ended March 31 Common paid-In Retained comprehensive shareholders'
(in thousands except share data) stock capital earnings income equity
- -------------------------------------------------- -------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1997
Balance, December 31, 1996 $ 1,173 $ 8,918 $ 5,731 $ (233) $ 15,589
Net Income - - 450 - 450
Dividends declared and paid - (58) - (58)
Change in net unrealized gain (loss)
on securities - - - (1) (1)
- -------------------------------------------------- -------------- -------------- -------------- ------------- --------------
Balance, March 31, 1997 $ 1,173 $ 8,918 $ 6,123 $ (234) $ 15,980
- -------------------------------------------------- -------------- -------------- -------------- ------------- --------------
1998
Balance, December 31, 1997 $ 16 $ 11,073 $ 7,071 $ 643 $ 18,803
Net Income - - 602 - 602
Dividends declared and paid - - (82) - (82)
Issuance of shares pursuant to exercise of stock
options - 233 - - 233
Change in net unrealized gain (loss)
on securities - - - 153 153
- -------------------------------------------------- -------------- -------------- -------------- ------------- --------------
Balance, March 31, 1998 $ 16 $ 11,306 $ 7,591 $ 796 $ 19,709
- -------------------------------------------------- -------------- -------------- -------------- ------------- --------------
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
Alliance Bancorp of New England, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------
(in thousands) 1998 1997
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Operating Activities:
<S> <C> <C>
Net income $ 602 $ 450
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 145 74
Depreciation and amortization 139 125
Net investment security (gains) losses (435) -
Net asset losses (gains) - -
Increase (decrease) in other liabilities 343 25
Decrease (increase) in loans held for sale (1,138) 518
Decrease (increase) in other assets 19 294
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Net cash (used in) provided by operating activities (325) 1,486
Investing Activities:
Securities available for sale:
Proceeds from amortization and maturities 12,669 418
Proceeds from sales of securities 2,705 -
Purchases of securities (10,122) (6,899)
Securities held to maturity:
Proceeds from amortization and maturities 618 179
Proceeds from sales of securities - -
Purchases of securities - -
Net (increase) decrease in loans 53 (181)
(Increase) decrease in foreclosed assets, net (152) 25
Purchases of premises and equipment (32) (6)
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Net cash provided by (used in) investing activities 5,739 (6,464)
Financing Activities:
Net increase in interest-bearing deposits 640 4,958
Net increase in demand deposits (1,650) (1,834)
Net increase (decrease) in FHLB advances (31) 1,489
Net increase (decrease) in other borrowings - -
Stock options exercised 233 -
Cash dividends paid (82) (58)
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Net cash (used in) provided by financing activities (890) 4,555
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Net Change in cash and cash equivalents 4,524 (423)
Cash and cash equivalents at beginning of the period 21,417 12,563
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Cash and cash equivalents at end of the period $ 25,941 $ 12,140
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Supplemental Information On Cash Payments
Interest expense 2,247 2,078
Income taxes 180 70
Supplemental Information On Non-cash Transactions
Net loans transferred to foreclosed assets 153 -
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
Notes to Consolidated Financial Statements (unaudited)
Note 1. Basis of Presentation and Principles of Business and Consolidation
The consolidated financial statements have been prepared and presented in
conformity with generally accepted accounting principles. Unless otherwise
noted, all dollar amounts presented in the financial statements and note tables
are rounded to the nearest thousand dollars, except share data. Certain prior
period amounts have been reclassified to conform with current financial
statement presentation.
Alliance Bancorp of New England, Inc. ("Alliance" or the "Company") uses the
accrual method of accounting for all material items of income and expense. The
Company is required to make certain estimates and assumptions in preparing these
statements. The most significant estimates are those necessary in determining
the allowance for loan losses, the valuation of foreclosed assets, and the
determination of fair values of financial instruments. Factors affecting these
estimates include national economic conditions, the level and trend of interest
rates, local market conditions, and real estate trends and values.
The financial statements are unaudited. However, in the opinion of Management,
all material adjustments, consisting primarily of normal recurring accruals,
necessary for a fair presentation of the financial statements have been
included. Operating results for any interim period are not necessarily
indicative of results for any other interim period or for the entire year.
Management's Discussion and Analysis of Financial Condition and Results of
Operations accompany these financial statements. These consolidated interim
financial statements and notes should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
The Company is a one bank holding company, chartered in Delaware. Its bank
subsidiary is Tolland Bank, a Connecticut chartered savings bank with deposits
insured up to applicable limits by the Federal Deposit Insurance Corporation
("FDIC"). The Bank provides consumer and commercial banking services from its
seven offices located in Tolland County, Connecticut. Tolland Bank maintains a
wholly owned forclosed asset liquidation subsidiary named Asset Recovery
Systems, Inc. ("ARS"). The consolidated financial statements include the
Company, the Bank, and ARS. All significant intercompany accounts and
transactions have been eliminated in consolidation.
On June 17, 1997, the Company declared for a four-for-three common stock split
effected as a 33.33% stock dividend which was paid on July 17, 1997. All per
share information has been retroactively adjusted to reflect this stock
dividend. Additionally, as of October 3, 1997, the Company restated Common Stock
and Additional Paid-In Capital to reflect a change in the par value of common
stock from $1.00 to $.01 in conjunction with the completion of the formation of
Alliance Bancorp of New England, Inc. as the holding company for Tolland Bank.
7
<PAGE>
Note 2. Securities
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
March 31, 1998 (in thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale
U.S. Government and agency $ 14,752 21 $ (165) $ 14,608
U.S. Agency mortgage-backed 4,163 30 (5) 4,188
Other debt securities 175 1 - 176
Marketable equity 17,516 1,755 (12) 19,259
FHLB stock 876 - - 876
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Total available for sale $ 37,482 $ 1,807 $ (182) $ 39,107
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Securities held to maturity
U.S. Government and agency $ 2,907 $ 48 $ (4) $ 2,951
U.S. Agency mortgage-backed 15,425 74 (36) 15,463
Other debt securities 999 - (1) 998
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Total held to maturity $ 19,331 $ 122 $ (41) $ 19,412
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Amortized Unrealized Unrealized Fair
December 31, 1997 (in thousands) Cost Gains Losses Value
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Securities available for sale
U.S. Government and agency $ 18,081 27 $ (217) $ 17,891
U.S. Agency mortgage-backed 5,366 27 (2) 5,391
Other debt securities 1,312 9 - 1,321
Marketable equity 16,710 1,586 - 18,296
FHLBB stock 830 - - 830
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Total available for sale $ 42,299 $ 1,649 $ (219) $ 43,729
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Securities held to maturity
U.S. Government and agency $ 2,901 $ 45 $ (5) $ 2,941
U.S. Agency mortgage-backed 15,214 48 (38) 15,224
Other debt securities 1,834 25 (3) 1,856
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Total held to maturity $ 19,949 $ 118 $ (46) $ 20,021
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Note 3. Nonperforming Loans
<CAPTION>
(in thousands) March 31, December 31
1998 1997
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total nonaccruing loans $ 2,199 $ 2,133
Accruing loans past due 90 days or more 273 86
Impaired loans:
Impaired loans - valuation allowance required 1,576 1,607
Impaired loans - no valuation allowance required 1,439 1,576
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Total impaired loans $ 3,015 $ 3,183
Total valuation allowance on impaired loans 335 340
Restructured loans, all of which are performing 502 502
</TABLE>
8
<PAGE>
Note 4. Allowance for Loan Losses
<TABLE>
<CAPTION>
(in thousands) Quarter Ended Year Ended
March 31, December 31,
1998 1997
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance $ 3,000 $ 2,850
Charge-offs:
Residential mortgages (40) (108)
Consumer (18) (366)
Commercial (6) (294)
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Total Charge-offs (64) (768)
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Recoveries:
Residential mortgages - 11
Consumer 19 45
Commercial - 33
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Total Recoveries 19 89
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Net Charge-offs (45) (679)
Provision for losses 145 829
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Ending balance $ 3,100 $ 3,000
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</TABLE>
Note 5. Comprehensive Income
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") 130, Reporting Comprehensive Income, as of January 1, 1998.
SFAS 130 establishes standards for the reporting and display of comprehensive
income and its components (such as changes in unrealized investment gains and
losses). Comprehensive income includes net income and any changes in equity from
non-owner sources that are not included in the income statement. The purpose of
reporting comprehensive income is to report a measure of all changes in equity
of an enterprise that result from recognized transactions and other economic
events of the period other than transactions with owners in their capacity as
owners. Application of SFAS 130 has not impacted the amounts previously reported
for net income or effected the comparability of previously issued financial
statements.
The following table summarizes comprehensive income:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
(in thousands) 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 602 $ 450
Other comprehensive income, net of tax:
Unrealized gains on investments
Unrealized holding gain arising during the period
net of income tax expense of $258 and $7 for 1998 and 1997,
respectively 410 (1)
Less reclassification adjustment for gains included
in net income net of income tax expense of
$(178) and $0 for 1998 and 1997, respectively (257) -
--------------------------------------------------------------------------------------------------------------
Other comprehensive income 153 (1)
--------------------------------------------------------------------------------------------------------------
Comprehensive income $ 755 $ 449
--------------------------------------------------------------------------------------------------------------
</TABLE>
Note 6. Subsequent Event
On April 28, 1998 the Board of Directors approved a three-for-two split of the
common stock, to be effected as a stock dividend payable on May 26, 1998 to
shareholders of record as of May 12, 1998. The number of shares outstanding of
common stock will be 2,492,691 as of May 26, 1998.
9
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION &
RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
This report contains certain "forward-looking statements." These forward-looking
statements, which are included in Management's Discussion and Analysis, describe
future plans or strategies and include the Company's expectations of future
financial results. The words "believe," expect," "anticipate," "estimate,"
"project" and similar expressions identify forward-looking statements. The
Company's ability to predict results or the effect of future plans or strategies
or qualitative or quantitative changes based on market risk exposure is
inherently uncertain. Factors which could affect actual results include but are
not limited to changes in general market interest rates, general economic
conditions, legislative/regulatory changes, fluctuations of interest rates,
changes in the quality or composition of the Company's loan and investment
portfolios, deposit flows, competition, demand for financial services in the
Company's markets, and changes in the accounting principles, policies, and
guidelines. These factors should be considered in evaluating the forward-looking
statements, and undue reliance should not be placed on such statements.
SUMMARY
The Company reported a 34% increase in net income to $602 thousand for the first
quarter ended March 31, 1998 compared to net income of $450 thousand in last
year's first quarter.
The Board of Directors also approved a three-for-two split of the common stock
of Alliance Bancorp of New England, to be effected as a stock dividend payable
on May 26, 1998 to shareholders of record as of May 12, 1998.
The directors also retained the quarterly dividend at five cents per share
(based on pre-split shares) also payable on May 26, 1998 to shareholders of
record as of May 12, 1998.
Improved earnings in the quarter were attributable to both higher net interest
income and investment security gains. Interest income benefited from an 8.4%
increase in loan interest income due to loan growth. Investment gains reflected
an ongoing process of active investment portfolio management which has increased
the overall yield, as well as realizing the benefits of the strongly improving
market valuations.
As in earlier quarters, revenue gains offset additions to the allowance for loan
losses, which grew to $3.1 million at March 31, 1998, representing 1.96% of
loans outstanding. The allowance measured 141% of nonperforming loans; this
ratio was unchanged from year-end 1997.
Non-interest expense remained relatively unchanged or decreased in most major
categories, due to ongoing cost containment. Total expense increased from the
first quarter of 1997 due primarily to problem asset expense recoveries which
were recorded in 1997.
At March 31, 1998, the Company had total assets of $247.3 million and total
loans of $158.4 million. Total regular loans (excluding government guaranteed
loan certificates) increased at an annualized rate of 12.4% during the most
recent quarter. Total deposits were $220.7 million, having decreased during the
quarter at a 1.8% annualized rate. Shareholders' equity rose during the quarter
at a 19.3% annualized rate to $19.7 million, representing a book value per share
of $11.86. The Company's capital remained in excess of all regulatory
requirements.
10
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income: Net interest income increased by $127 thousand (6.5%) in
the first quarter of 1998 compared to the same period of 1997. This increase was
primarily due to an 8.4% rise in loan interest income, reflecting a 7.8%
increase in average loans from year to year. The fully taxable equivalent (FTE)
net interest margin declined from 3.90% to 3.83% due mostly to an increase in
the average cost of deposits. This resulted from higher time deposit costs
reflecting more competitive market conditions, as well as higher money market
deposit costs due to the promotion of this product to fund loan growth.
Additionally, the yield on assets declined due to investment securities called
during the quarter, which were reinvested in lower yielding short term
investments at March 31, 1998. The net interest margin for the most recent
quarter was higher than the previous two quarters as a result of stronger loan
growth.
Provision for Loan Losses: The provision is made to maintain the allowance for
loan losses at a level deemed adequate by management. The provision was $145
thousand in the most recent quarter, compared to $74 thousand in the same
quarter of 1997. During the most recent quarter, management decided to increase
the allowance from $3.0 million to $3.1 million, maintaining the coverage of
nonaccruing loans at 141%. Net chargeoffs during the most recent quarter were
$45 thousand, measuring .11% of average loans.
Non-Interest Income: First quarter service charge and fee income was $247
thousand in 1998, a decrease of 5.0% compared to $260 thousand in the same
quarter of the previous year. The decrease was due to lower loan related fees,
both in residential and commercial lending. Residential mortgage secondary
market fees declined due to a lower balance of loans held for sale at the
previous year-end. Commercial fees in the first quarter of 1997 included penalty
income related to one loan situation, which did not repeat in 1998.
During the first quarter of 1998, the Company recorded $435 thousand in net
gains realized on the sale of securities. Investment gains reflected an ongoing
process of active investment portfolio management which has increased the
overall yield, as well as realizing the benefits of the strongly improving
market valuations.
Non-Interest Expense and Tax Expense: Total non-interest expense increased by
$167 thousand (10.6%) in the first quarter of 1998 compared to the same quarter
of 1997. All major expense categories were flat or down except for the "other"
line item. The change in this line item was mostly due to collection expense
recoveries in 1997 related to two commercial loan situations, which did not
repeat in 1998. The effective tax rate rose to 31.7% for the quarter ended March
31, 1998 compared to 21.1% in 1997. 1997 results included the benefit from a
reduction in the valuation allowance for the deferred tax asset totaling $40
thousand; no such benefit was recorded in 1998.
Comprehensive Income: The notes to the financial statements include a discussion
of comprehensive income in accordance with SFAS 130. Comprehensive income for
the first quarter of 1998 was $755 thousand, compared to $449 thousand in the
same quarter of 1997. In addition to net income recorded in the Income
Statement, comprehensive income includes the net effect of unrealized gains on
securities available for sale during the quarter.
FINANCIAL CONDITION
Cash and Cash Equivalents: Short term investments increased by $5.2 million in
1998 due to funds from U.S. agency securities which were called. These funds
were being held in anticipation of further loan growth.
11
<PAGE>
Investment Securities: Securities available for sale (AFS) decreased by $4.6
million due primarily to a $3.3 million decrease in U.S. Agency securities.
These securities were called at par due to the effect of the decline in interest
rates. The total book value of securities sold was $2.7 million, consisting of
equity securities. The yield on AFS securities increased from 6.93% to 7.74%
from the fourth quarter of 1997 to the first quarter of 1998. The holding gains
on AFS securities totaled $630 thousand (1.44% of fair value) during the
quarter. Of this amount, $435 thousand was realized through the sale of
securities. The remainder was recorded in the net unrealized gain component of
shareholders' equity, which increased to $796 thousand at March 31, 1998.
Total Loans: Total loans increased by $900 thousand (2.4% annualized) during the
most recent quarter. All categories of regular loans increased, and total loans
in process at the end of the quarter increased. The Company initiated new home
equity line promotions, and promoted a free refinance program to the residential
mortgage market. Government guaranteed loans decreased by $3.2 million due to
higher refinancings prompted by the lower interest rates.
Nonperforming Assets: Nonaccruing loans increased to $2.2 million from $2.1
million during the quarter due to two real estate secured commercial loans. The
Company received favorable legal rulings in the collection processes related to
its two largest nonaccruing loans, both of which are secured. Foreclosed assets
increased to $769 thousand from $617 thousand due to the completion of
residential mortgage foreclosures.
Allowance for Loan Losses: The allowance for loan losses totaled $3.1 million
(2.27% of loans) at March 31, 1998. The allowance measured 141% of nonaccruing
loans, which was unchanged from the prior year-end. For the most recent quarter,
net loan charge-offs were $45 thousand, measuring 0.11% of average loans, which
was lower than the 0.46% average for 1997. The allowance was increased by $100
thousand during the quarter, which was offset by the securities gains mentioned
above.
Deposits and Borrowings: Total deposits decreased by $1.0 million (1.8%
annualized) during the most recent quarter, due to the runoff of seasonally high
transactions balances at year-end. During the quarter, money market deposits
continued to register strong growth of $3.3 million (84.6% annualized) due to
ongoing sales of the new money market account. Total borrowings were unchanged
at quarter-end.
Interest Rate Sensitivity: The Company has maintained an asset-sensitive one
year interest rate sensitivity profile. The positive one year gap declined to
$11 million at March 31, 1998 compared to $20 million at year-end 1997. During
the first quarter of 1998, interest rates decreased, leading to higher demand
for fixed rate loans. The resulting change in interest sensitivity of new loans
and repricing loans, together with continued strong growth of money market
deposit accounts, were the primary contributors to this change in the one year
interest rate gap. Although the positive gap had a downward influence on the net
interest margin, this was offset by the higher yield on earning assets, which
increased from 7.63% to 7.74% from the fourth quarter of 1997 to the first
quarter of 1998 as a result of higher loan bookings.
Liquidity and Cash Flows: For the first quarter of 1998, the primary source of
funds for Tolland Bank was prepayments on investment securities and government
guaranteed loans. The primary uses of funds were increases in short term
investments and originations of regular loans. Borrowings, time deposits, and
money market accounts are the primary sources of liquidity for additional
balance sheet growth. Short term investments, securities available for sale, and
government guaranteed loan certificates provide additional sources of liquidity.
The Company's primary source of funds is dividends from the Bank and its primary
use of funds is dividends to shareholders.
Capital Resources: During the first quarter of 1998, shareholders' equity
increased by $906 thousand (19.3% annualized) rate to $19.7 million,
representing a book value per share of $11.86. In addition to retained earnings
of $520 thousand, additional sources of growth were stock option exercises ($233
thousand) and the previously mentioned net increase in unrealized securities
gains ($153 thousand net of taxes). Equity increased to 7.97% of total assets
from 7.61% at year-end 1997. The Company's capital remained in excess of all
regulatory requirements. At March 31, 1998, Tolland Bank reported Tier 1 Capital
totaling $18.2 million, a Tier 1 Capital Ratio of 7.4%, and a Risk Based Capital
Ratio of 13.0%
12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See discussion and analysis of quantitative and qualitative disclosures about
market risk provided in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 filed March 27, 1998. There have been no material
changes in reported market risks faced by the Company since the end of 1997.
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings
other than ordinary routine litigation incidental to its business
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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 index
The exhibits listed below are included in this report or are
incorporated herein by reference to the identified document
previously filed with the Securities and Exchange Commission
as set forth parenthetically.
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the quarter
ended March 31, 1998.
13
<PAGE>
Average Balance Sheet and Interest Rates - Fully Taxable Equivalent (FTE)
<TABLE>
<CAPTION>
(dollars in thousands) Average Balance Rate (FTE Basis)
- ----------------------------------------------- ----------------------------------------------
Quarters ended March 31 1998 1997 1998 1997
- ----------------------------------------------------------- ------------------------- --------
<S> <C> <C> <C> <C>
Loans $ 157,134 $ 145,697 8.16% 8.09%
Securities available for sale 42,971 47,122 7.74 7.71
Securities held to maturity 19,657 20,604 5.91 5.94
Other earning assets 15,203 2,193 5.82 6.21
- ----------------------------------------------------------- ------------------------- --------
Total earning assets 234,965 215,616 7.74 7.79
Other assets 9,599 10,972
- ----------------------------------------------------------- ------------------------- --------
Total assets $ 244,564 $ 226,588
- ----------------------------------------------------------- ------------------------- --------
Interest bearing deposits $ 201,018 $ 187,587 4.45 4.31
Borrowings 3,763 5,182 6.39 6.10
- ----------------------------------------------------------- ------------------------- --------
Interest bearing liabilities 204,781 192,769 4.48 4.35
Other Liabilities 21,521 18,301
Shareholder's equity 18,262 15,518
- ----------------------------------------------------------- ------------------------- --------
Total liabilities and equity $ 244,564 $ 226,588
- ----------------------------------------------------------- ------------------------- --------
Net Interest Spread 3.26% 3.44%
Net Interest Margin 3.83% 3.90%
</TABLE>
14
<PAGE>
Signatures
Pursuant to the requirements to Section 13 or 15(d) 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.
ALLIANCE BANCORP OF NEW ENGLAND, INC.
Date: May 14, 1998 /s/ Joseph H. Rossi
-----------------------------------
Joseph H. Rossi
President/CEO
Date: May 14, 1998 /s/ David H. Gonci
----------------------------------
David H. Gonci
Vice President/
Chief Financial Officer/Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001046002
<NAME> ALLIANCE BANCORP OF NEW ENGLAND, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 5961
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 19980
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39107
<INVESTMENTS-CARRYING> 19331
<INVESTMENTS-MARKET> 19412
<LOANS> 158382
<ALLOWANCE> 3100
<TOTAL-ASSETS> 247337
<DEPOSITS> 220723
<SHORT-TERM> 2000
<LIABILITIES-OTHER> 1197
<LONG-TERM> 3708
16
0
<COMMON> 0
<OTHER-SE> 19693
<TOTAL-LIABILITIES-AND-EQUITY> 247337
<INTEREST-LOAN> 3188
<INTEREST-INVEST> 957
<INTEREST-OTHER> 207
<INTEREST-TOTAL> 4352
<INTEREST-DEPOSIT> 2205
<INTEREST-EXPENSE> 2264
<INTEREST-INCOME-NET> 2088
<LOAN-LOSSES> 145
<SECURITIES-GAINS> 435
<EXPENSE-OTHER> 1744
<INCOME-PRETAX> 881
<INCOME-PRE-EXTRAORDINARY> 881
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 602
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.35
<YIELD-ACTUAL> 3.83
<LOANS-NON> 2199
<LOANS-PAST> 273
<LOANS-TROUBLED> 663
<LOANS-PROBLEM> 1500
<ALLOWANCE-OPEN> 3000
<CHARGE-OFFS> 64
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 3100
<ALLOWANCE-DOMESTIC> 3100
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 724
</TABLE>
