UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20547
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 June 30, 1998
-------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file Number 000-23419
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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
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(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 August 11, 1998 was 2,642,058.
<PAGE>
NMBT CORP
Form 10Q
June 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Consolidated Statements of Condition (Unaudited)
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations (Unaudited)
Six Months and Three Months Ended
June 30, 1998 and June 30, 1997 4
Consolidated Statements of Comprehensive Income (Unaudited)
Six Months and Three Months Ended
June 30, 1998 and June 30, 1997 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1998 and June 30, 1997 6
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Six Months Ended June 30, 1998 and June 30, 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)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATE
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------------------------
1998 1997
-------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $21,942 $18,737
Interest-bearing deposits 11,200 4,025
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 33,142 22,762
- ------------------------------------------------------------------------------------------------------------
Securities:
Available for sale, at fair value (amortized cost of $56,238 in 1998 56,718 48,129
and $47,556 in 1997)
Held to maturity, at amortized cost (fair value of $39,895 in 1998 39,554 35,876
and $36,240 in 1997)
- ------------------------------------------------------------------------------------------------------------
Total securities 96,272 84,005
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Loans 233,590 223,909
Less allowance for loan losses 3,659 3,537
- ------------------------------------------------------------------------------------------------------------
Loans, net 229,931 220,372
- ------------------------------------------------------------------------------------------------------------
Real estate owned, net 76 212
Premises and equipment, net 3,699 3,706
Excess of cost over fair value of net assets acquired, net 389 506
Accrued interest and other assets 5,690 5,003
- ------------------------------------------------------------------------------------------------------------
Total assets $369,199 $336,566
============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing checking $42,647 $36,999
Interest-bearing checking 96,645 88,501
Savings 66,616 60,782
Time deposits under $100 81,626 81,902
Time deposits $100 or more 17,567 17,411
- ------------------------------------------------------------------------------------------------------------
Total deposits 305,101 285,595
- ------------------------------------------------------------------------------------------------------------
Advances from Federal Home Loan Bank of Boston (FHLB) 34,905 23,145
Accrued interest and other liabilities 2,468 2,496
- ------------------------------------------------------------------------------------------------------------
Total liabilities 342,474 311,236
- ------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $0.01 par value
Shares authorized: 8,000,000
Shares outstanding: 1998 - 2,642,058; 1997 - 2,614,858 26 26
Additional paid-in capital 17,799 17,378
Retained earnings 8,583 7,548
Accumulated other comprehensive income 317 378
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 26,725 25,330
- ------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $369,199 $336,566
============================================================================================================
See notes to consolidated financial statements.
============================================================================================================
</TABLE>
3
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
DOLLARS, IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $8,979 $8,762 $4,511 $4,453
U.S. Treasury and agency securities 2,200 1,888 1,168 962
Municipal securities 411 245 212 133
Dividends on FHLB stock 57 51 29 27
Interest-bearing deposits 201 102 99 73
- ------------------------------------------------------------------------------------------------------------------
Total interest and dividend income 11,848 11,048 6,019 5,648
- ------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest-bearing checking 745 617 380 324
Savings 725 740 368 371
Time deposits under $100 2,140 2,152 1,063 1,088
Time deposits $100 or more 489 433 244 231
FHLB advances and capital leases 879 452 488 227
- ------------------------------------------------------------------------------------------------------------------
Total interest expense 4,978 4,394 2,543 2,241
- ------------------------------------------------------------------------------------------------------------------
Net interest and dividend income 6,870 6,654 3,476 3,407
Provision for loan losses 266 245 125 120
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Net interest and dividend income after provision for loan losses 6,604 6,409 3,351 3,287
- ------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Service charges on deposit accounts 489 513 247 264
Other service charges, commission and fees 181 182 92 100
Loan servicing fees 36 18 21 9
Gain on sale of securities 51 - - -
Net gain on sale of loans 395 152 250 88
Other income 55 55 29 27
- ------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,207 920 639 488
- ------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Compensation, payroll taxes and benefits 2,965 2,643 1,496 1,298
Occupancy 505 481 248 240
Furniture and equipment 376 481 188 247
Data processing 167 124 89 70
Stationery, printing and supplies 228 198 106 115
Marketing, advertising and investor relations 212 215 111 117
Legal and professional fees 77 141 29 78
Other general and administrative expense 747 640 359 357
- ------------------------------------------------------------------------------------------------------------------
Total general and administrative expense 5,277 4,923 2,626 2,522
Operations of real estate owned 49 62 48 29
Amortization of intangible assets 117 117 58 58
- ------------------------------------------------------------------------------------------------------------------
Total noninterest expense 5,443 5,102 2,732 2,609
- ------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 2,368 2,227 1,258 1,166
Provision for income taxes 886 896 472 469
- ------------------------------------------------------------------------------------------------------------------
Net income $1,482 $1,331 $786 $697
==================================================================================================================
Basic earnings per share $0.56 $0.51 $0.30 $0.27
Diluted earnings per share $0.53 $0.49 $0.28 $0.26
- ------------------------------------------------------------------------------------------------------------------
Average shares outstanding 2,637 2,590 2,637 2,590
Average shares and share equivalents outstanding 2,810 2,729 2,810 2,729
- ------------------------------------------------------------------------------------------------------------------
Cash dividends per share $0.17 $0.10 $0.09 $0.05
- ------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
==================================================================================================================
</TABLE>
4
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
In thousands
<TABLE>
<CAPTION>
SIX MONTHS ENDED Three Months Ended
JUNE 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $1,482 $1,331 $786 $697
Other comprehensive
Income, net of tax:
Unrealized gains (losses)
on securities:
Unrealized holding losses
arising during period ($27) ($39) $23 $177
Less: reclassification
adjustment for gains
included in net income (34) - - -
-------- ---------- --------- -----------
Other comprehensive income (61) (39) 23 177
---------- ----------- ---------- -----------
Comprehensive income $1,421 $1,292 $809 $874
========== =========== ========== ===========
See Notes To Consolidated Financial Statements.
====================================================================================================================================
</TABLE>
5
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
IN THOUSANDS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $1,482 $1,331
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization 380 484
Provision for loan losses 266 245
Net amortization of securities 102 65
Deferred income taxes 123 (46)
Realized securities gains, net (51) -
Loans originated for sale (35,400) (11,168)
Proceeds from loans sold, net 35,447 11,225
Gains from loan sales, net (395) (152)
Realized gains from real estate owned sales, net (27) (8)
Net increase in interest receivable (236) (248)
Net (increase) decrease in other assets (236) 164
Net increase in interest payable 60 27
Net increase (decrease) in other liabilities (109) 236
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,406 2,155
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of held to maturity (HTM) securities (15,000) (4,996)
Net loan originations (9,757) (7,590)
Purchases of available for sale (AFS) securities (20,898) (8,143)
Net purchases of premises and equipment (255) (339)
Proceeds from real estate owned sales 176 (10)
Proceeds from maturities of AFS securities 9,880 2,003
Proceeds from maturities of HTM securities 11,249 4,793
Proceeds from sales of AFS securities 2,370 -
Purchases of FHLB stock (13) (136)
- ------------------------------------------------------------------------------------------------------
Net cash used for investing activities (22,248) (14,418)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in advances from FHLB 11,760 (290)
Net increase (decrease) in time deposits (120) 6,557
Net increase in checking and savings deposits 19,626 10,200
Cash dividends (447) (259)
Net proceeds from exercise of stock options 421 52
Other (18) (36)
- ------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 31,222 16,224
- ------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 10,380 3,961
Cash and cash equivalents, beginning of period 22,762 23,990
- ------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $33,142 $27,951
======================================================================================================
CASH PAID DURING PERIOD
Interest to depositors and creditors $4,918 $4,367
Income taxes 994 728
NON-CASH TRANSFERS
Transfer of loans to real estate owned 25 482
Net change in unrealized gains (losses) on AFS securities (61) (39)
Financed portion of sales of real estate owned 12 129
See notes to consolidated financial statements.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
NMBT CORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
IN THOUSANDS
<TABLE>
<CAPTION>
Total Comprehensive Retained Accumulated Common Additional Shares
Income Earnings Other Stock Paid-In Outstanding
Comprehensive Capital
Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1997 $22,565 $5,195 $146 $26 $17,198 2,588
Net income 1,331 $1,331 1,331
Other comprehensive
Income, net of tax
unrealized losses on
securities (39) (39) (39)
Proceeds from exercise
of stock options 52 52 9
Cash Dividends (259) (259)
--------------------------------------------------------------------------------------------------------
JUNE 30, 1997 $23,650 $1,292 $6,267 $107 $26 $17,250 2,597
--------------------------------------------------------------------------------------------------------
JANUARY 1, 1998 $25,330 $7,548 $378 $26 $17,378 2,615
Net income 1,482 $1,482 1,482
Other comprehensive
Income, net of tax
unrealized losses on
Securities, Net
of reclassification
adjustment (61) (61) (61)
Proceeds from exercise 421 421 27
of stock options
Cash Dividends (447) (447)
--------------------------------------------------------------------------------------------------------
June 30, 1998 $26,725 $1,421 $8,583 $317 $26 $17,799 2,642
--------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
============================================================================================================================
</TABLE>
7
<PAGE>
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
June 30, 1998, and the results of its operations and its cash flows for the six
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 June 30, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------
Dollars in thousands AMORTIZED Gross Gross Estimated
COST Unrealized Unrealized Fair Value
Gains Losses
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency securities $34,066 $112 $12 $34,166
Municipal securities 18,810 372 13 19,169
Mortgage-backed securities 1,589 21 - 1,610
- -----------------------------------------------------------------------------------------------------
Total debt securities 54,465 505 25 54,945
FHLB Stock 1,773 - - 1,773
- -----------------------------------------------------------------------------------------------------
Total securities available for sale $56,238 $505 $25 $56,718
=====================================================================================================
</TABLE>
8
<PAGE>
NMBT CORP
Form 10Q
June 30, 1998
<TABLE>
<CAPTION>
DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------
DOLLARS IN THOUSANDS AMORTIZED GROSS GROSS ESTIMATED
COST UNREALIZED UNREALIZED FAIR VALUE
GAINS LOSSES
- ----------------------------------------------------------------------------------------------------
<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 June 30, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
JUNE 30, 1998
- --------------------------------------------------------------------------------------------
Dollars in thousands AMORTIZED Gross Gross Estimated
COST Unrealized Unrealized Fair Value
Gains Losses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency securities $21,395 $110 $5 $21,500
Mortgage-backed securities 18,159 239 3 18,395
- -------------------------------------------------------------------------------------------
Total securities held to maturity $39,554 $349 $8 $39,895
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------
Dollars in thousands AMORTIZED Gross Gross Estimated
COST Unrealized Unrealized Fair Value
Gains Losses
- ------------------------------------------------------------------------------------------
<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 June 30, 1998 and December 31, 1997,
respectively.
9
<PAGE>
NMBT CORP
Form 10Q
June 30, 1998
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
In thousands JUNE 30, 1998 DECEMBER 31, 1997
- -------------------------------------------------------------------------
LOANS
Real estate $198,646 $188,868
Commercial and industrial 16,446 17,818
Installment and education 7,879 8,994
Construction and development 9,825 7,299
Cash reserve and credit cards 794 930
- -------------------------------------------------------------------------
Total loans $233,590 $223,909
========================================================++++=============
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
-----------------------------------
In thousands JUNE 30, 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 266 582
Transfer to liability for estimated losses from off-balance
sheet credit instruments (40) (20)
Loan losses, net of recoveries (104) (237)
- -----------------------------------------------------------------------------------------------------
Allowance for loan losses at end of period $3,659 $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 $1.82 million and
$2.50 million at June 30, 1998 and December 31, 1997, respectively.
NOTE 4. 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 six-month periods ended June 30, 1998 and 1997 were
as follows:
SIX MONTHS ENDED
--------------------------------------
In thousands JUNE 30, 1998 JUNE 30, 1997
- ----------------------------------------------------------------------------
Weighted average common shares:
Basic 2,637 2,590
Effect of dilutive stock options 173 139
--------------------------------------
Diluted 2,810 2,729
--------------------------------------
10
<PAGE>
NMBT CORP
Form 10Q
June 30, 1998
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 June 30, 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>
JUNE 30, 1998 DECEMBER 31, 1997
----------------------------------------- -------------------------------------------
In thousands BEFORE TAX AFTER TAX BEFORE TAX AFTER TAX
TAX (EXPENSE)/ TAX (EXPENSE)/
BENEFIT BENEFIT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unrealized holding gains $531 ($180) $351 $573 ($195) $378
Reclassification adjustment (51) 17 (34) - - -
for gains included in net
income
- ----------------------------------------------------------------------------------------------------------------------------
Accumulated other $480 ($163) $317 $573 ($195) $378
comprehensive income
===========================================================================================================================
</TABLE>
11
<PAGE>
NMBT CORP
Form 10Q
June 30, 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 holding company
structure provides the Company with maximum flexibility in pursuing financial
opportunities. 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.
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 June 30, 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 increased 12.8% to $0.79 million, or $0.28 per diluted share for the
quarter ended June 30, 1998, as compared to net income of $0.70 million, or
$0.26 per diluted share for the second quarter of 1997. For the six months ended
June 30, 1998, net income was $1.48 million, or $0.53 per diluted share, an
increase of 11.3% over the same six-month period in 1997.
Net interest and dividend income for the quarter ended June 30, 1998 increased
by $0.07 million or 2.0%. Net interest and dividend income for the first half of
1998 increased by $0.22 million or 3.2%, from the first half 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 4.4% for the six
months ended June 30, 1998, and 4.8% for the six months ended June 30, 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.
12
<PAGE>
NMBT CORP
Form 10Q
June 30, 1998
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 loan losses for
the quarter ended June 30, 1998 was $0.13 million and for the first half of 1998
was $0.27 million as compared to $0.12 million and $0.25 million respectively
for the same periods 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 31.0%
increase in noninterest income comparing the first quarter of 1998 to the first
quarter of 1997, and an increase of 31.2% in noninterest income, comparing the
first half of 1998 to the first half of 1997, due to strong activity in the
mortgage banking area and increased fee income.
Noninterest expenses were up 4.7% from the first quarter of the previous year
and 6.7% from the first half 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 June 30, 1997 to June 30, 1998, total
assets have grown 14.2%, loans grew 6.7% and deposits have grown 7.8%. These
growth rates have contributed to increased overhead.
Total assets increased 9.7% to $369.20 million as of June 30, 1998 from $336.57
million as of December 31, 1997. Deposits grew by $19.51 million and Federal
Home Loan Bank net advances of $11.76 million were borrowed 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 had a negative impact 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 $3.55 million at
June 30, 1998, and $3.59 million at December 31, 1997, and consists of loans for
which an allowance of $0.39 million and $0.38 million, for the same periods
respectively, has been established. Income recorded on impaired loans during the
first six months of 1998 for the portion of this period that they were impaired
was $0.45 million, none of which was recognized on the cash basis. Average
investment in impaired loans during this same period of 1998 was $3.60 million
as compared to $2.99 million during the first half of 1997. Nonaccruing loans at
June 30, 1998, included $2.39 million of loans considered to be impaired, as
compared with $2.22 million at December 31, 1997.
13
<PAGE>
NMBT CORP
Form 10Q
June 30, 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 JUNE 30, 1998 DECEMBER 31, 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Total nonperforming loans $3,128 $3,208
Real estate owned 76 212
- ------------------------------------------------------------------------------
Total nonperforming assets $3,204 $3,420
==============================================================================
Total nonperforming loans/Total loans 1.34% 1.43%
Total nonperforming assets/Total assets 0.87% 1.02%
Allowance for loan losses/Total nonperforming loans 116.95% 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 June 30, 1998, the Company had $26.72 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 $0.06 million adjustment for the
decrease in unrealized gains on securities available for sale in accordance with
SFAS 115, proceeds of $0.42 million from the exercise of stock options, the
retention of $1.48 million in net earnings, less the cash dividends paid on
February 9, and May 13, 1998, totaling $0.45 million.
The following reflects the Company's capital ratios (which exclude intangible
assets and the SFAS 115 adjustment):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Dollars in thousands JUNE 30, 1998 DECEMBER 31, 1997 REGULATORY MINIMUM
- ------------------------------------------------------------------------------------------
Risk-based capital ratios:
<S> <C> <C> <C>
Tier 1 capital ratio 12.24% 12.19% 4.00%
Total capital ratio 13.50% 13.45% 8.00%
Leverage ratio 7.32% 7.36% 3.00%
Tier 1 capital $25,971 $24,428
Total risk-based capital $28,638 $26,948
Total risk-adjusted assets $212,135 $200,322
</TABLE>
There are no significant differences between the Company's and NMBT's capital
and capital ratios.
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
June 30, 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.
For further information about the Company's Year 2000 issues, 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.
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 June 30, 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 June 30, 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 June 30, 1998.
GAP ANALYSIS. There have been no material changes in the one-year cumulative
interest sensitivity gap as a percentage of total assets at June 30, 1998, from
December 31, 1997.
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 June 30, 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
June 30, 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
June 30, 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.
<TABLE>
NMBT CORP
------------------------------------------------------------------------------
(Registrant)
<S> <C>
August 12, 1998 s/ Jay C. Lent
- --------------------- ------------------------------------------------------------------------------
Date Jay C. Lent, Executive Vice President, Chief Financial Officer and Secretary
August 12, 1998 s/ Deborah L. Fish
- --------------------- ------------------------------------------------------------------------------
Date Deborah L. Fish, Treasurer
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S JUNE 30, 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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 21,942
<INT-BEARING-DEPOSITS> 11,200
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,718
<INVESTMENTS-CARRYING> 39,554
<INVESTMENTS-MARKET> 39,895
<LOANS> 233,590
<ALLOWANCE> 3,659
<TOTAL-ASSETS> 369,199
<DEPOSITS> 305,101
<SHORT-TERM> 7,700
<LIABILITIES-OTHER> 2,468
<LONG-TERM> 27,205
0
0
<COMMON> 26
<OTHER-SE> 26,699
<TOTAL-LIABILITIES-AND-EQUITY> 369,199
<INTEREST-LOAN> 8,979
<INTEREST-INVEST> 2,668
<INTEREST-OTHER> 201
<INTEREST-TOTAL> 11,484
<INTEREST-DEPOSIT> 4,099
<INTEREST-EXPENSE> 4,978
<INTEREST-INCOME-NET> 6,870
<LOAN-LOSSES> 266
<SECURITIES-GAINS> 51
<EXPENSE-OTHER> 5,443
<INCOME-PRETAX> 2,368
<INCOME-PRE-EXTRAORDINARY> 1,482
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,482
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 7.54
<LOANS-NON> 3,128
<LOANS-PAST> 88
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,537
<CHARGE-OFFS> 158
<RECOVERIES> 54
<ALLOWANCE-CLOSE> 3,659
<ALLOWANCE-DOMESTIC> 3,659
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
