UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
--------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file Number 000-23419
-------------------------------------------------------
NMBT CORP
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 06-1496548
- -------------------------------------------------------------- --------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
55 Main Street, New Milford, Connecticut 06776-2400
- -------------------------------------------------------------- --------------------------------
(Address of principal executive offices) (ZIP Code)
</TABLE>
Registrant's telephone number, including area code (860) 355-1171
------------------------------
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 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. [ X ] Yes [ ] No
The number of shares of Common Stock, par value $.01 per share, outstanding
as of April 11, 1998 was 2,640,258.
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Condition (Unaudited)
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 1998 and March 31, 1997 4
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended March 31, 1998 and March 31, 1997 5
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1998 and March 31, 1997 6
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Three Months Ended March 31, 1998 and March 31, 1997 7
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
</TABLE>
2
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
<TABLE>
<CAPTION>
--------------------- ---------------------
MARCH 31, DECEMBER 31,
--------------------- ---------------------
1998 1997
--------------------- ---------------------
Dollars in thousands, except share data
ASSETS
<S> <C> <C>
Cash and due from banks $22,796 $18,737
Interest-bearing deposits 11,565 4,025
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 34,361 22,762
- ---------------------------------------------------------------------------------------------------------------------------
Securities:
Available for sale, at fair value (amortized cost of $46,062 in 1998 46,508 48,129
and $47,556 in 1997)
Held to maturity, at amortized cost (fair value of $40,084 in 1998 39,849 35,876
and $36,240 in 1997)
- ---------------------------------------------------------------------------------------------------------------------------
Total securities 86,357 84,005
- ---------------------------------------------------------------------------------------------------------------------------
Loans 224,442 223,909
Less allowance for loan losses 3,680 3,537
- ---------------------------------------------------------------------------------------------------------------------------
Loans, net 220,762 220,372
- ---------------------------------------------------------------------------------------------------------------------------
Real estate owned, net 51 212
Premises and equipment, net 3,717 3,706
Excess of cost over fair value of net assets acquired, net 447 506
Accrued interest and other assets 5,341 5,003
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $351,036 $336,566
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing checking $40,408 $36,999
Interest-bearing checking 88,325 88,501
Savings 62,389 60,782
Time deposits under $100 81,922 81,902
Time deposits $100 or more 19,170 17,411
- ---------------------------------------------------------------------------------------------------------------------------
Total deposits 292,214 285,595
- ---------------------------------------------------------------------------------------------------------------------------
Advances from Federal Home Loan Bank of Boston (FHLB) 30,236 23,145
Accrued interest and other liabilities 2,453 2,496
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 324,903 311,236
- ---------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $0.01 par value
Shares authorized: 8,000,000
Shares outstanding: 1998 - 2,640,258; 1997 - 2,614,858 26 26
Additional paid-in capital 17,779 17,378
Retained earnings 8,034 7,548
Accumulated other comprehensive income 294 378
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 26,133 25,330
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $351,036 $336,566
===========================================================================================================================
</TABLE>
See notes to financial statements.
3
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
MARCH 31, 1998 MARCH 31, 1997
--------------------- ---------------------
Dollars in thousands, except per share data
INTEREST AND DIVIDEND INCOME
<S> <C> <C>
Interest and fees on loans $4,468 $4,309
U.S. Treasury and agency securities 1,032 926
Municipal securities 199 112
Dividends on FHLB stock 28 24
Interest-bearing deposits 102 29
- ---------------------------------------------------------------------------------------------------------------------------
Total interest and dividend income 5,829 5,400
- ---------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest-bearing checking 365 293
Savings 357 369
Time deposits under $100 1,077 1,064
Time deposits $100 or more 245 202
FHLB advances and capital leases 391 225
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense 2,435 2,153
- ---------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income 3,394 3,247
Provision for loan losses 141 125
- ---------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income after provision for loan losses 3,253 3,122
- ---------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Service charges on deposit accounts 242 249
Other service charges, commission and fees 89 82
Loan servicing fees 15 9
Gain on sale of securities 51 -
Net gain on sale of loans 145 64
Other income 26 28
- ---------------------------------------------------------------------------------------------------------------------------
Total noninterest income 568 432
- ---------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Compensation, payroll taxes and benefits 1,469 1,345
Occupancy 257 241
Furniture and equipment 188 234
Data processing 78 54
Stationery, printing and supplies 122 83
Marketing, advertising and investor relations 101 98
Legal and professional fees 48 63
Other general and administrative expense 388 283
- ---------------------------------------------------------------------------------------------------------------------------
Total general and administrative expense 2,651 2,401
Operations of real estate owned 1 33
Amortization of intangible assets 59 59
- ---------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,711 2,493
- ---------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 1,110 1,061
Provision for income taxes 414 427
- ---------------------------------------------------------------------------------------------------------------------------
Net income $696 $634
===========================================================================================================================
Basic earnings per share $0.26 $0.24
Diluted earnings per share $0.25 $0.23
- ---------------------------------------------------------------------------------------------------------------------------
Average shares outstanding 2,632 2,588
Average shares and share equivalents outstanding 2,807 2,718
- ---------------------------------------------------------------------------------------------------------------------------
Cash dividends per share $0.08 $0.05
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
4
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
In thousands MARCH 31, 1998 MARCH 31, 1997
- ------------------------------------------------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net Income $696 $634
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding losses arising during period ($50) ($216)
Less: reclassification adjustment for gains included in
net income (34) -
------------- -------------
Other comprehensive income (84) ($216)
------------- -------------
Comprehensive income $612 $418
============= =============
</TABLE>
See notes to financial statements.
5
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
MARCH 31, 1998 MARCH 31, 1997
--------------------- ---------------------
In thousands
OPERATING ACTIVITIES
<S> <C> <C>
Net Income $696 $634
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization 189 241
Provision for loan losses 141 125
Net amortization of securities 47 33
Realized securities gains, net (51) -
Loans originated for sale (11,425) (4,752)
Proceeds from loans sold, net 11,801 4,994
Gains from loans sold, net (145) (64)
Realized gains from real estate owned, net (21) (8)
Net increase in interest receivable (13) (267)
Net (increase) decrease in other assets (172) 112
Net increase in interest payable 63 39
Net increase (decrease) in other liabilities (97) 369
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,013 1,456
- ---------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of held to maturity (HTM) securities (10,000) (2,996)
Net loan originations (860) (285)
Purchases of available for sale (AFS) securities (8,552) (3,869)
Net purchases of premises and equipment (142) (103)
Proceeds from sales of real estate owned 170 (10)
Proceeds from maturities of AFS securities 7,712 256
Proceeds from maturities of HTM securities 5,995 1,046
Proceeds from sales of AFS securities 2,370 -
Purchases of FHLB stock - (136)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (3,307) (6,097)
- ---------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in advances from FHLB 7,091 256
Net increase in time deposits 1,779 6,326
Net increase (decrease) in checking and savings deposits 4,840 (2,316)
Cash dividends (210) (129)
Net proceeds from exercise of stock options 401 -
Other (8) (17)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 13,893 4,120
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 11,599 (521)
Cash and cash equivalents, beginning of period 22,762 23,990
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $34,361 $23,469
===========================================================================================================================
CASH PAID DURING PERIOD
Interest to depositors and creditors $2,372 $2,115
Income taxes 449 -
NON-CASH TRANSFERS
Transfer of loans to real estate owned - 350
Net change in unrealized gains (losses) on AFS securities (672) (216)
Financed portion of sales of real estate owned 12 129
</TABLE>
See notes to financial statements.
6
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER ADDITIONAL
COMPREHENSIVE RETAINED COMPREHENSIVE COMMON PAID-IN SHARES
In thousands TOTAL INCOME EARNINGS INCOME STOCK CAPITAL OUTSTANDING
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1997 $22,565 $5,195 $146 $26 $17,198 2,588
Comprehensive income
Net income 634 $634 634
Other comprehensive
income, net of tax
Unrealized losses on (216) (216)
securities
------------
Other comprehensive
income (216) (216)
============
Comprehensive income $418
============
Cash dividends (129) (129)
-------------- --------------------------------------------------------------------------
MARCH 31, 1997 $22,854 $5,700 ($70) $26 $17,198 2,588
============== ==========================================================================
JANUARY 1, 1998 $25,330 $7,548 $378 $26 $17,378 2,615
Comprehensive income
Net income 696 $696 696
Other comprehensive
income, net of tax
Unrealized losses
securities, net of
reclassification
adjustment (see
disclosure) (84) (84)
------------
Other comprehensive
income (84) (84)
------------
Comprehensive income $612
============
Proceeds from exercise
of stock options 401 401 25
Cash dividends (210) (210)
-------------- --------------------------------------------------------------------------
MARCH 31, 1998 $26,133 $8,034 $294 $26 $17,779 2,640
============== ==========================================================================
DISCLOSURE OF RECLASSIFICATION AMOUNT:
Unrealized holding losses arising during period ($50)
Less: reclassification adjustment for gains included in net income (34)
--------------
Net unrealized losses on securities ($84)
==============
</TABLE>
See notes to financial statements.
7
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
NMBT CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
NMBT CORP (the Company), a Delaware Corporation formed in November, 1997, is the
bank holding company for NMBT (formerly The New Milford Bank & Trust Company), a
state-chartered commercial bank. The Company's activity is currently limited to
the holding of NMBT's outstanding common stock.
The interim unaudited consolidated financial statements of the Company have been
prepared in conformity with generally accepted accounting principles. Certain
financial information that is normally included in the financial statements
prepared in accordance with generally accepted accounting principles, but which
is not required for interim reporting purposes, has been condensed or omitted.
In preparing the interim financial statements, Management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ significantly from those estimates.
In the opinion of Management, the accompanying interim unaudited consolidated
financial statements contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the Company's financial position as of
March 31, 1998, and the results of its operations and its cash flows for the
three months then ended. The results of operations for the periods shown are not
necessarily indicative of the results to be expected for the year ending
December 31, 1998. The accompanying interim unaudited consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's 1997 Annual Report.
NOTE 2. SECURITIES
The aggregate amortized cost and estimated fair values of securities available
for sale at March 31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARCH 31, 1998
- ------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
Dollars in thousands COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency securities $24,058 $77 $19 $24,116
Municipal securities 18,488 378 14 18,852
Mortgage-backed securities 1,756 24 - 1,780
- ------------------------------------------------------------------------------------------------------------------
Total debt securities 44,302 479 33 44,748
FHLB Stock 1,760 - - 1,760
- ------------------------------------------------------------------------------------------------------------------
Total securities available for sale $46,062 $479 $33 $46,508
==================================================================================================================
</TABLE>
8
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
Dollars in thousands COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency securities $24,615 $99 $19 $24,695
Municipal securities 16,968 418 1 17,385
Mortgage-backed securities 4,213 80 4 4,289
- ------------------------------------------------------------------------------------------------------------------
Total debt securities 45,796 597 24 46,369
FHLB Stock 1,760 - - 1,760
==================================================================================================================
Total securities available for sale $47,556 $597 $24 $48,129
==================================================================================================================
</TABLE>
The aggregate amortized cost and estimated fair values of securities held to
maturity at March 31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARCH 31, 1998
- ------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
Dollars in thousands COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency securities $19,395 $84 $104 $19,375
Mortgage-backed securities 20,454 262 7 20,709
- ------------------------------------------------------------------------------------------------------------------
Total securities held to maturity $39,849 $346 $111 $40,084
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
Dollars in thousands COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency securities $13,492 $96 $33 $13,555
Mortgage-backed securities 22,384 310 9 22,685
- ------------------------------------------------------------------------------------------------------------------
Total securities held to maturity $35,876 $406 $42 $36,240
==================================================================================================================
</TABLE>
Securities with a carrying value of $3.0 million and $5.0 million were pledged
as collateral for public deposits as of March 31, 1998 and December 31, 1997,
respectively.
9
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
In thousands MARCH 31, 1998 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------
LOANS
<S> <C> <C>
Real estate $188,918 $188,868
Commercial and industrial 16,686 17,818
Installment and education 8,476 8,994
Construction and development 9,588 7,299
Cash reserve and credit cards 774 930
- ------------------------------------------------------------------------------------------------------
Total Loans $224,442 $223,909
======================================================================================================
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
In thousands MARCH 31, 1998 DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Allowance for loan losses at beginning of year $3,537 $3,212
Provision for loan losses charged against income 141 582
Transfer to liability for estimated losses from off-balance - (20)
sheet credit instruments
Loan losses, net of recoveries 2 (237)
- ----------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of period $3,680 $3,537
======================================================================================================================
</TABLE>
Loans to executive officers, principal stockholders, directors, companies of
which directors are principal owners, and individuals directly related to or
affiliated with directors and executive officers aggregated $3.10 million and
$2.50 million at March 31, 1998 and December 31, 1997, respectively.
NOTE 4. EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings Per Share". SFAS establishes
standards for computing and presenting earnings per share. SFAS 128 is
applicable to all United States entities with publicly held common stock or
potential common stock. The statement requires disclosure of basic earnings per
share (i.e. common stock equivalents are not considered) and diluted earnings
per share (i.e. common stock equivalents are considered using the treasury stock
method) on the face of the statement of operations, along with a reconciliation
of the numerator and denominator of basic and diluted earnings per share. SFAS
128 replaces Accounting Principles Board No. 15, issued by the American
Institute of Certified Public Accountants, as the authoritative guidance for
calculation and disclosure of earnings per share.
Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding during the period. The computation
of diluted earnings per share is similar to the computation of basic earnings
per share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the dilutive
potential common shares, consisting solely of stock options, had been issued.
Weighted average common shares outstanding used to calculate basic and diluted
earnings per share for the
10
<PAGE>
three-month periods ended March 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
In thousands MARCH 31, 1998 MARCH 31, 1997
--------------------------------------------------- ---------------------- ----------------------
Weighted average common shares:
<S> <C> <C>
Basic 2,632 2,588
Effect of stock options 175 130
Diluted 2,807 2,718
</TABLE>
NOTE 5. COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income". SFAS 130
requires the reporting of comprehensive income in addition to net income from
operations. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income.
The Company held securities classified as available for sale at March 31, 1998
and December 31, 1997, which had unrealized gains. The before-tax and after-tax
amounts for these unrealized gains, as well as the tax (expense)/benefits, are
summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
TAX TAX
BEFORE (EXPENSE)/ BEFORE (EXPENSE)/
In thousands TAX BENEFIT AFTER TAX TAX BENEFIT AFTER TAX
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unrealized holding gains $497 ($169) $328 $573 ($195) $378
Reclassification adjustment
for gains included in net
income (51) 17 (34) - - -
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated other
comprehensive income $446 ($152) $294 $573 ($195) $378
================================================================================================================================
</TABLE>
11
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
- -------
The Company, a Delaware corporation formed in 1997, is the registered bank
holding company for NMBT (formerly The New Milford Bank & Trust Company), a
wholly owned subsidiary. NMBT, headquartered in New Milford, Connecticut, is a
state-chartered bank and trust company founded in 1975. The Company's activity
is currently limited to the holding of NMBT's outstanding common stock. NMBT is
the Company's only subsidiary and its primary investment. The net income of the
Company is presently derived entirely from the business of NMBT.
On November 25, 1997, NMBT completed a change in its corporate structure with
the formation of its parent holding company, NMBT CORP. The Company provides the
capability to offer comprehensive banking services through NMBT and may provide,
through NMBT and any other subsidiaries that NMBT CORP may acquire, additional
banking and other permissible non-banking services. The holding company
structure provides the Company with maximum flexibility in pursuing financial
opportunities.
FORWARD-LOOKING STATEMENTS
- --------------------------
The Company has made, and may continue to make, various forward-looking
statements with respect to earnings, credit quality and other financial and
business matters for periods subsequent to March 31, 1998. The Company cautions
that these forward-looking statements are subject to numerous assumptions, risks
and uncertainties, and that statements relating to subsequent periods
increasingly are subject to greater uncertainty because of the increased
likelihood of changes in underlying factors and assumptions. Actual results
could differ materially from forward-looking statements.
In addition to those factors previously disclosed by the Company and those
factors identified elsewhere herein, the following factors could cause actual
results to differ materially from such forward-looking statements: competitive
pressures on loan and deposit product pricing; other actions of competitors;
changes in economic conditions; the extent and timing of actions of the Federal
Reserve Board; customer deposit disintermediation; changes in customers'
acceptance of NMBT's products and services; and the extent and timing of
legislative and regulatory actions and reform.
The Company's forward-looking statements speak only as of the date on which such
statements are made. By making any forward-looking statements, the Company
assumes no duty to update them to reflect new, changing or unanticipated events
or circumstances.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
- ---------------------------------------------
Net income for the three months ended March 31, 1998 increased 9.7% to $0.69
million, or $0.25 diluted earnings per share, as compared to net income of $0.63
million, or $0.23 diluted earnings per share, for the three months ended March
31, 1997. Basic earnings per share was $0.26 for the quarter ended March 31,
1998, as compared to $0.24 for the same period in 1997. All earnings per share
amounts reflect a change in accounting principle adopted during the quarter
ended December 31, 1997.
Net interest and dividend income (interest and dividend income less interest
expense) before provision for estimated loan losses for the first quarter of
1998 increased by $0.15 million or 4.5%, from the first quarter of 1997. The net
interest spread, the difference between the yield earned on loans and
investments and the rate paid on deposits and borrowings, was 4.5% for the three
months ended March 31, 1998, and 4.8% for the three months
12
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
ended March 31, 1997. The increase in net interest income is a reflection of
growth in interest-earning assets and was accomplished despite a contraction in
the interest rate spread caused by seasonal factors, customer demand for fixed
rate loans and increased price competition for loans and deposits.
Management estimates the allowance for loan losses based on an evaluation of the
Company's past loan experience, known and inherent risks in the portfolio,
estimated value of underlying collateral, and current economic conditions.
Establishing the allowance for loan losses involves significant management
judgments utilizing the best information available at the time. Those judgments
are subject to further review by various sources, including the Company's
regulators. Adjustments to the allowance for loan losses may be necessary in the
future based on changes in economic and real estate market conditions, further
information obtained regarding known problem loans, the identification of
additional problem loans, and other factors. The provision for estimated loan
losses for the first quarter of 1998 was $0.14 million as compared to a $0.12
million provision for the same period in 1997. The increased provision is due to
growth in the loan portfolio. In management's judgment the allowance for loan
losses is adequate to absorb probable losses in the existing portfolio.
Also contributing to the Company's improved financial performance was a 31.3%
increase in noninterest income, comparing the first quarter of 1998 to the first
quarter of 1997, due to strong activity in the mortgage banking area and
increased fee income.
Noninterest expenses were up 8.7% from the first quarter of the previous year,
due principally to the opening of the Southbury Office and formation of the
holding company. In addition, the bank has added staff to handle increasing
mortgage volume. This increased mortgage activity has been an important factor
in the continued growth in the Company's overall prosperity. From March 31, 1997
to March 31, 1998, total assets have grown 13.0%, loans grew 6.1% and deposits
have grown 8.2%. These growth rates have contributed to increased overhead.
Total assets increased 4.3% to $351.04 million as of March 31, 1998 from $336.57
million as of December 31, 1997. Deposits grew by $6.62 million and Federal Home
Loan Bank net advances of $7.09 million were taken enabling the continuation of
the Company's leverage strategy.
In late 1997, NMBT opened its tenth full service office in Southbury,
Connecticut. This is the bank's first office in New Haven County and NMBT
intends to look for other Fairfield County and New Haven County locations for
further expansion. The opening of the Southbury Office and the completion of the
reorganization to a holding company structure have caused a temporary drag on
earnings as the cost of these changes are absorbed. It is anticipated that the
Southbury Office will be profitable within the next twelve months.
IMPAIRED LOANS
- --------------
The recorded investment in loans considered to be impaired was $4.05 million at
March 31, 1998, and $3.59 million at December 31, 1997, and consists of loans
for which an allowance of $0.43 million and $0.38 million, for the same periods
respectively, has been established. Income recorded on impaired loans during the
first three months of 1998 for the portion of this period that they were
impaired was $0.03 million, none of which was recognized on the cash basis.
Average investment in impaired loans during this same period of 1998 was $4.07
million as compared to $3.15 million during the first quarter of 1997.
Nonaccruing loans at March 31, 1998, included $2.50 million of loans considered
to be impaired, as compared with $2.22 million at December 31, 1997.
13
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
NONPERFORMING ASSETS
- --------------------
Nonperforming loans consist principally of residential and commercial loans
collateralized by real estate and real estate acquired through foreclosures
(real estate owned). Nonperforming assets and relevant ratios were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Dollars in thousands MARCH 31, 1998 DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total nonperforming loans $3,280 $3,208
Real estate owned 51 212
- ---------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $3,331 $3,420
===========================================================================================================================
Total nonperforming loans/Total loans 1.46% 1.43%
Total nonperforming assets/Total assets 0.95% 1.02%
Allowance for loan losses/Total nonperforming loans 112.19% 110.23%
</TABLE>
LIQUIDITY MANAGEMENT
- --------------------
For information about the Company's liquidity position, see Management's
Discussion and Analysis in its 1997 Annual Report to Stockholders, which was
also incorporated into the Company's Annual Report to the Securities and
Exchange Commission on Form 10K. There has been no material change in that data
since it was reported.
CAPITAL
- -------
At March 31, 1998, the Company had $26.13 million in stockholders' equity,
compared with $25.33 million at December 31, 1997. The growth in stockholders'
equity from the end of 1997 reflected a $0.08 million adjustment for the
decrease in unrealized gains on securities available for sale in accordance with
SFAS 115, proceeds of $0.40 million from the exercise of stock options, the
retention of $0.69 million in net earnings, less the cash dividends paid on
February 9, 1998, totaling $0.21 million.
The following reflects the Company's capital ratios (which exclude intangible
assets and the SFAS 115 adjustment):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Dollars in thousands MARCH 31, 1998 DECEMBER 31, 1997 REGULATORY MINIMUM
- ------------------------------------------------------------------------------------------------------------------------
Risk-based capital ratios:
<S> <C> <C> <C>
Tier 1 capital ratio 12.36% 12.19% 4.00%
Total capital ratio 13.62% 13.45% 8.00%
Leverage ratio 7.56% 7.36% 3.00%
Tier 1 capital $25,363 $24,428
Total risk-based capital $27,945 $26,948
Total risk-adjusted assets $205,217 $200,322
</TABLE>
For further information about the Company's capital, see Management's Discussion
and Analysis in its 1997 Annual Report to Stockholders, which was also
incorporated into the Company's Annual Report to the Securities and Exchange
Commission on Form 10K.
14
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
YEAR 2000
- ---------
The Company continues with its current plans to address the Year 2000 compliance
requirements. Management believes it remains on its current schedule to be at
the proper stage of assessment, remediation and testing to be Year 2000
compliant, by year-end 1998. Further, management does not anticipate that it
will incur expenses in excess of $100,000, although it may also need to replace
certain hardware and software, which costs would be capitalized.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Quantitative and qualitative disclosure about market risk is presented at
December 31, 1997 in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1998. There have been no
material changes in the Company's market risk at March 31, 1998, compared to
December 31, 1997. The following is an update of the discussion provided
therein:
GENERAL. The Company's largest component of market risk continues to be interest
rate risk. Virtually all of this risk continues to reside at the bank level.
NMBT still is not subject to foreign currency exchange or commodity price risk.
At March 31, 1998, neither the Company nor NMBT owned any trading assets, nor
did they utilize hedging transactions such as interest rate swaps and caps.
ASSETS, DEPOSIT LIABILITIES AND BORROWINGS. There have been no material changes
in the composition of assets, deposit liabilities or borrowings from December
31, 1997 to March 31, 1998.
GAP ANALYSIS. The one-year cumulative interest sensitivity gap as a percentage
of total assets was $(28.8) million, or -8.22%, at March 31, 1998, down from
$(42.7) million, or -12.68%, at December 31, 1997, due principally to an
increase in cash and short-term assets which was funded by an increase in
noninterest-bearing deposits.
INTEREST RATE RISK COMPLIANCE. NMBT continues to monitor the impact of interest
rate volatility upon net interest income in the same manner as at December 31,
1997. There have been no changes in the board approved limits of acceptable
variance in net interest income and net portfolio value at March 31, 1998, and
the projected changes continue to fall within the board approved limits at all
levels of potential interest rate volatility.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NMBT is a defendant in certain claims and legal actions that arose in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, these proceedings, in the aggregate, are not expected to
have a materially adverse effect on the financial position, results of
operations or liquidity of the Company.
15
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Stockholders was held on May 5, 1998. There were no
solicitations in opposition to any of the Board of Directors' nominees for the
Board of Directors or other motions acted on at the Meeting. The following
matters were considered and voted on, as certified by the Judge of Election at
the Meeting:
1. Ruth Henderson, Terry C. Pellegrini and Arthur C. Weinshank were each
elected to serve as Directors until the Annual Meeting of Stockholders to
be held in the year 2001 who, with the six Directors, Kevin L. Dumas, Louis
A. Funk, Jr., Lawrence Greenhaus, Robert W. X. Martin, Walter G. Southworth
and Harry H. Taylor, Jr., whose terms of office did not expire at the
Meeting, constitute the full Board. All nominees received at least
2,202,745, or 96.47%, votes cast FOR.
2. An Amendment to the 1994 Stock Option Plan of the Company's operating
subsidiary, NMBT, increasing the number of shares issuable thereunder to
600,000 was approved. Votes cast FOR this amendment were 1,755,293.
3. The Directors' appointment of Deloitte & Touche LLP as the Company's
independent auditors for the year ending December 31, 1998 was ratified by
2,238,283 votes cast FOR.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit 27. Financial Data Schedule (included only with EDGAR
filing).
(B) REPORTS ON FORM 8-K
None
16
<PAGE>
NMBT CORP
Form 10Q
March 31, 1998
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.
NMBT CORP
-----------------------------------------------
(Registrant)
April 13, 1998 s/ Jay C. Lent
- --------------------------- -----------------------------------------------
Date Jay C. Lent, Executive Vice President, Chief
Financial Officer and Secretary
April 13, 1998 s/ Deborah L. Fish
- --------------------------- -----------------------------------------------
Date Deborah L. Fish, Treasurer
17
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S MARCH 31, 1998 UNAUDITED STATEMENT OF CONDITION, STATEMENT
OF OPERATION AND STATEMENT OF CASH FLOWS, AND NOTES THERETO, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-M0S
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 22,796
<INT-BEARING-DEPOSITS> 11,565
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,508
<INVESTMENTS-CARRYING> 39,849
<INVESTMENTS-MARKET> 40,084
<LOANS> 224,442
<ALLOWANCE> 3,680
<TOTAL-ASSETS> 351,036
<DEPOSITS> 292,214
<SHORT-TERM> 5,900
<LIABILITIES-OTHER> 2,453
<LONG-TERM> 24,336
<COMMON> 26
0
0
<OTHER-SE> 26,107
<TOTAL-LIABILITIES-AND-EQUITY> 351,036
<INTEREST-LOAN> 4,468
<INTEREST-INVEST> 1,259
<INTEREST-OTHER> 102
<INTEREST-TOTAL> 5,829
<INTEREST-DEPOSIT> 2,044
<INTEREST-EXPENSE> 2,435
<INTEREST-INCOME-NET> 3,394
<LOAN-LOSSES> 141
<SECURITIES-GAINS> 51
<EXPENSE-OTHER> 2,711
<INCOME-PRETAX> 1,110
<INCOME-PRE-EXTRAORDINARY> 696
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 696
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 7.68
<LOANS-NON> 3,280
<LOANS-PAST> 269
<LOANS-TROUBLED> 260
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,537
<CHARGE-OFFS> 9
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 3,680
<ALLOWANCE-DOMESTIC> 3,680
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
