<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER #0-9517
BANK OF NEW HAMPSHIRE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 02-0346918
- - ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 FRANKLIN STREET
MANCHESTER, NEW HAMPSHIRE 03105
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(603) 624-6600
---------------------------------------------------
(Registrant's telephone number, including area code
NOT APPLICABLE
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of the issuer's common stock as of
April 29, 1994.
Common Stock, $2.50 stated value, no par value, 4,066,523 shares.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
<TABLE>
<CAPTION>
Page
INDEX Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets -
March 31, 1994 and December 31, 1993 3
Consolidated Statements of Income -
Quarters Ended March 31, 1994 and 1993. 4
Consolidated Statements of Cash
Flows - Quarters Ended March
31, 1994 and 1993. 5
Notes to Consolidated Financial
Statements. 6 - 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8 - 20
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders. 21
Item 6. Exhibits and Reports on Form 8-K. 22
SIGNATURES 22
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
BANK OF HAMPSHIRE CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31,
1994 1993
(Dollars in thousands,
ASSETS except per share amounts)
<S> <C> <C>
Cash and due from banks $ 51,533 $ 60,999
Federal funds sold and securities purchased under
agreements to resell 118,000 105,000
Total cash and cash equivalents 169,533 165,999
Securites:
U.S. Treasury and other U.S. Government agencies 255,077 256,380
State and municipal
Other 3,812 797
Total securities 262,106 258,392
Mortgages held for sale 1,978
Loans:
Commercial, financial and agricultural 53,569 55,430
Real estate - commercial 132,472 133,837
Real estate - construction 3,347 3,019
Real estate - residential 272,957 285,582
Installment 50,914 46,975
Total loans 513,259 524,843
Less: Allowance for possible loan losses 13,612 14,581
Net loans 499,647 510,262
Premises and equipment 11,203 11,366
Other real estate 12,888 13,393
Other assets 15,356 15,329
TOTAL ASSETS $970,733 $976,719
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $130,141 $148,784
Interest bearing 721,746 716,551
Total deposits 851,887 865,335
Federal funds purchased and securities sold under
agreements to repurchase 37,676 32,238
Other borrowed funds 2,720 3,028
Accrued expenses and other liabilities 8,728 7,876
Total liabilities 901,011 908,477
Shareholders' Equity:
Preferred stock - no par value
Authorized - 500,000 shares; none issued
Common Stock - stated value $2.50 per share
Authorized - 6,000,000 shares
Issued - 4,066,523 shares at March 31, 1994
and 4,066,943 shares at December 31, 1993 10,166 10,167
Surplus 27,339 27,320
Retained earnings 32,217 30,755
Total shareholders' equity 69,722 68,242
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $970,733 $976,719
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Quarters Ended March 31,
1994 1993
(In thousands, except
per share amounts)
<S> <C> <C>
Interest income:
Interest and fees on loans $ 11,088 $ 13,844
Interest on securities:
Subject to federal taxes 2,399 1,995
Exempt from federal taxes 23 28
Total interest on securities 2,422 2,023
Other interest income 743 427
Total interest income 14,253 16,294
Interest expense:
Deposits 4,923 5,621
Borrowings 155 191
Total interest expense 5,078 5,812
Net interest income 9,175 10,482
Provision for possible loan losses 400 1,500
Net interest income after provision
for possbile loan losses 8,775 8,982
Non-interest income:
Trust fees 999 774
Service charges on deposit accounts 783 739
Other 602 735
Total non-interest income 2,384 2,248
Non-interest expense:
Salaries and employee benefits 4,474 4,300
Net occupancy expense 862 816
Equipment expense 435 446
ORE expense 524 321
FDIC insurance expense 551 642
Other 2,043 1,869
Total non-interest expense 8,889 8,394
Income before income taxes 2,270 2,836
Income taxes 567 945
NET INCOME $ 1,703 $ 1,891
Average shares outstanding 4,067 3,379
Per share amounts:
Earnings per share $ .42 $ .56
Cash dividends declared $ .08 $ .00
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Quarters Ended March 31,
1994 1993
(In thousands)
<S> <C> <C>
Operating Activities:
Net Income $ 1,703 $ 1,891
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for possible loan losses 400 1,500
Depreciation, amortization and accretion 657 (27)
Net change in interest receivable and payable 290 110
Net gain on sales of mortgages (53) (235)
Losses on other real estate, net 70 157
Other, net 477 2,068
Net cash provided by operating activities 3,544 5,464
Investing Activities:
Maturities of securities held-to-maturity 25,832 68,756
Purchases of securities held-to-maturity (29,625) (68,226)
Proceeds from sales of mortgages 7,431 8,711
Proceeds from sales of other real estate 1,234 1,216
Net cash from loans 4,015 11,622
Purchases of premises and equipment (253) (460)
Net cash provided by investing activities 8,634 21,619
Financing Activities:
Net decrease in demand deposits,
NOW accounts, and savings accounts (8,713) (18,513)
Net decrease in certificates
of deposit (4,735) (7,400)
Net increase (decrease) in short-term borrowings 5,130 (4,141)
Cash dividends paid (326)
Net cash used by financing activities (8,644) (30,054)
Increase (decrease) in cash and cash equivalents 3,534 (2,971)
Cash and cash equivalents at January 1 165,999 126,584
Cash and cash equivalents at March 31 $169,533 $123,613
Income tax refund received $ -0- $ 400
Interest paid $ 4,816 $ 5,763
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The accompanying unaudited interim consolidated financial statements
of Bank of New Hampshire Corporation (the "Company") have been prepared in
accordance with generally accepted accounting principles. The balance sheet
at December 31, 1993 is from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of Management, all adjustments, consisting only of normal
recurring adjustments, necessary to present a fair presentation of the
information contained herein have been made. Results for the quarter ended
March 31, 1994 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1994. The accounting policies
followed by the Company are set forth below and in Note A to the consolidated
financial statements in the 1993 Annual Report on Form 10-K (Exhibit 1) and
should be read in conjunction with the information contained herein.
Note 2. Accounting Changes - In May 1993, the Financial Accounting Standards
Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
The Company adopted the new rules for investments held as of or acquired on or
after January 1, 1994. Accordingly, prior period financial statements have
not been restated to reflect the change in accounting principle.
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Company has
the positive intent and ability to hold the securities to maturity. Held-to-
maturity securities are reported at amortized cost. Debt securities not
classified as held-to-maturity, if any, and equity securities are classified
as available-for-sale. The Company has no trading securities. Available-for-
sale securities are reported at estimated fair value, with the unrealized
gains and losses, net of tax, reported in shareholders' equity. The amortized
cost of debt securities classified as held-to-maturity or available-for-sale
is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in interest income from investments.
Interest and dividends are included in interest income from investments.
Realized gains and losses, and declines in value judged to be other than
temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which presents new rules that require accrual
accounting for postemployment benefits, such as salary continuation benefits,
supplemental unemployment benefits, severance benefits and disability-related
benefits, instead of recognizing an expense for those benefits when paid. The
Company adopted the new rules as of January 1, 1994. There was no cumulative
effect on net income from adopting the new rules as of January 1, 1994.
Note 3. New Accounting Standard - In May, 1993, the FASB issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan." This statement will, in
connection with recent regulatory guidance, allow the Company to classify its
in-substance foreclosures as loans and disclose them as impaired loans. SFAS
114 will require the Company to identify impaired loans and generally value
them at the lower of either the present value of expected future cash flows
discounted at the loan's effective interest rate or at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. SFAS 114 is effective in 1995, with adoption required as of the
beginning of the year, although earlier adoption is allowed. The effect of
adopting the new rules in 1995 is not expected to have a significant effect on
<PAGE>
the Company's financial position or results of operations.
Note 4. Investments - There was no cumulative effect on net income from
adopting SFAS 115 as of January 1, 1994. The opening balance of shareholders'
equity was increased by $85,000 (net of $44,000 in deferred income taxes) to
reflect the net unrealized gains on marketable equity securities classified as
available-for-sale and previously carried at cost. The following is a summary
of held-to-maturity debt securities and available-for-sale equity securities
at March 31, 1994, in thousands.
<TABLE>
<CAPTION>
Held-to-Maturity
Debt Securities
Estimated
Amortized Fair
Cost Value
<S> <C> <C>
U.S. Treasury and other
U.S. Government agencies $255,077 $254,565
State and municipal 3,217 3,217
Other 472 575
$258,766 $258,357
</TABLE>
<TABLE>
<CAPTION>
Available-for-Sale Equity Securities
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Equity securities $ 3,211 $ 147 $ (18) $ 3,340
</TABLE>
During the quarters ended March 31, 1994 and 1993, there were no sales of
securities. The Company has no trading assets. The approximate market value
of securities was $261.7 million and $258.6 million as of March 31, 1994 and
December 31, 1993, respectively.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Net Income
For the first quarter of 1994, the Company recorded net income of $1.7
million, or $.42 per share, compared to net income of $1.9 million, or $.56
per share, for the first quarter of 1993. The Company issued 690,000 shares
of common stock on September 30, 1993 which had a dilutive effect of $.09 on
1994 first quarter earnings per share. The principal reason for the decrease
in net income for the first quarter of 1994 compared to the same period in
1993 was the decrease in net interest income of $1.3 million. This decrease
was offset somewhat by a $400,000 provision for possible loan losses recorded
during the 1994 first quarter compared to a $1.5 million provision recorded
during the first quarter of 1993, a decrease of $1.1 million.
The net interest margin declined by 72 basis points from 5.01% in the first
quarter of 1993 to 4.29% in the first quarter of 1994. Management anticipates
an increasing net interest margin for the remainder of 1994 due to the recent
inceases in both short-term and long-term interest rates. The Company's
investment portfolio yield will increase as investment securities rollover
into higher yielding instruments. In addition, Management anticipates that
projected loan growth will increase the net interest margin.
Regulatory Matters and Capitalization
During 1992, the Bank entered into a Memorandum of Understanding (the "MOU")
and a Capital Directive (the "Capital Directive") with the FDIC and the State
of New Hampshire Banking Department. The MOU and the Capital Directive
require, among other things, the attainment by the Bank of certain minimum
capital levels established under applicable regulations, as well as a leverage
ratio of 6.00% on or before June 30, 1994, which exceeds the minimum to which
the Bank would otherwise be subject under applicable regulations. As of March
31, 1994, the Bank had already exceeded the required June 30, 1994 leverage
ratio of 6.00% by forty-six basis points. Additionally, the Company believes
the Bank is currently in compliance with the other provisions of the MOU.
<PAGE>
The following Table presents the consolidated capital ratios of the Company at
March 31, 1994 and December 31, 1993.
<TABLE>
<CAPTION>
Regulatory March 31, December 31,
Minimum 1994 1993
<S> <C> <C> <C>
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 7.14% 6.78%
Tier 1 risk-based ratio 4.00 14.87 14.31
Total risk-based ratio 8.00 16.14 15.59
</TABLE>
The following Table presents the capital ratios of the Bank at March 31, 1994
and December 31, 1993.
<TABLE>
<CAPTION>
Regulatory March 31, December 31,
Minimum 1994 1993
<S> <C> <C> <C>
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 6.46% 6.09%
Tier 1 risk-based ratio 4.00 13.48 12.88
Total risk-based ratio 8.00 14.75 14.16
</TABLE>
(1) Under current regulations, all except the most highly rated institutions
are expected to exceed the minimum regulatory ratio by 100 to 200 basis
points or more.
Dividend Policy and Dividends
The Company's future dividend policy for its common stock will continue to be
reviewed quarterly by the Board of Directors. The long-term capacity of the
Company to pay dividends is conditioned upon the receipt of upstreamed
dividends from the Bank, which capacity is subject to federal and state
regulation. The regulators have indicated that, provided the Bank maintains a
leverage ratio of at least 6.00%, the Bank will have the capacity to upstream
dividends to the Company out of current earnings on a quarterly basis in
amounts determined in accordance with the current rules and regulations,
subject to approval by the Bank's independent Board of Directors. However,
the Regulators may prohibit banks and bank holding companies from paying
dividends if they deem such payment to be an unsafe or unsound practice.
On February 23, 1994, the Company's Board of Directors declared a quarterly
dividend of eight cents per share payable on March 15, 1994, to shareholders
of record at March 7, 1994. Such dividends totalled approximately $326,000
and did not require upstreaming of Bank earnings, in the form of a dividend,
to the Company.
<PAGE>
FINANCIAL CONDITION
Loans
As shown in the following Table, total loans at March 31, 1994 were $513.3
million, a decrease of $11.5 million from the 1993 year-end balance of $524.8
million. The decrease was primarily due to principal reductions, a decrease
in customer demand for new loans and, to a lesser extent, due to
reclassification to other real estate ($988,000) and loan losses ($1.6
million). At March 31, 1994, residential real estate loans totalled $273.0
million, or 53%, of the portfolio balance and included $257.9 million of loans
secured by 1 to 4 family residential properties. Sales of residential
mortgages amounted to $7.4 million and $8.5 million during the first quarter
of 1994 and 1993, respectively. The Company has no foreign loans or energy
loans, and agricultural loans totalled only $14,000 at March 31, 1994.
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
(In thousands)
<S> <C> <C>
Loan portfolio by category
Commercial, financial and agricultural $ 53,569 $ 55,430
Real estate - commercial 132,472 133,837
Real estate - construction 3,347 3,019
Real estate - residential 272,957 285,582
Installment 50,914 46,975
Total loans $513,259 $524,843
</TABLE>
A significant amount of the Company's commercial real estate loans have been
made to owner occupied businesses. Even though these loans are collateralized
by real estate, the primary repayment source for each such loan is the cash
flow generated by the related business. Additionally, it should be noted that
the diversification of the commercial real estate loan portfolio and the
magnitude of the potential loss exposure are such that a material adverse
impact on future operations of the Company is unlikely. See "Nonperforming
Assets," "Net Interest Income," and "Non-Interest Income."
The Company had no mortgage loans held-for-sale at March 31, 1994 and $2.0
million at December 31, 1993. During 1993, Management implemented a plan to
reduce the residential mortgage portfolio by selling qualified fixed rate
loans in the secondary market, to the extent necessary to adjust the loan
portfolio mix to desired levels. Management determined that, as of March 31,
1994, residential mortgages were at the prescribed level.
<PAGE>
Nonperforming Assets
The following Table provides information with respect to the Comany's past
due, restructured and nonaccrual loans and the components of nonperforming
assets for the periods indicated.
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
(Dollars in thousands)
<S> <C> <C>
Loans 90 days or more past due and
still accruing interest $ 4,144 $ 2,006
Loans whose terms are restructured 602 1,012
Nonaccrual loans 13,435 13,039
Total nonperforming loans 18,181 16,057
Other real estate (ORE) 12,888 13,393
Total nonperforming assets $31,069 $29,450
Nonperforming loans as a percent
of total loans 3.5% 3.1%
Nonperforming assets as a percent
of total loans plus ORE 5.9% 5.5%
</TABLE>
At March 31, 1994, loans 90 days past due and still accruing interest were
$4.1 million compared to $2.0 million at December 31, 1993, a $2.1 million
increase. This increase is due primarily to one well secured commercial real
estate loan wherein risk of loss of principal and accrued interest is
considered unlikely. Loans 90 days past due and still accruing interest at
March 31, 1994 included loans secured by real estate which totalled $3.5
million, commercial and industrial loans which totalled $400,000 and personal
installment debt of $258,000.
At March 31, 1994 and December 31, 1993, the nonaccrual loan balance of $13.4
million and $13.0 million, respectively, represented $3.3 million and $2.2
million in commercial loans, $10.1 million and $10.8 million in real estate
loans, and $41,000 and $37,000 in installment loans. Management will continue
to monitor the placement of past due loans in nonaccrual status and will
provide for possible loan losses as deemed necessary.
The ORE balance at March 31, 1994 of $12.9 million consists of $9.6 million in
properties actually foreclosed on with the remaining $3.3 million representing
"in-substance" foreclosures ("ISF"). The ORE balance consists of $6.5 million
of commercial properties, $4.3 million of residential properties, and $2.1
million of sub-divided lots and undeveloped land.
Although restructured loans have not been material, amounting to $602,000 as
of March 31, 1994, Management has encouraged restructurings when the
restructuring is likely to result in a paying credit for the remainder of the
restructured term.
<PAGE>
The following Table summarizes the real estate operations of property held for
sale for the quarters ended March 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Balance, January 1 $13,743 $16,424
Additions during the period 988 2,616
ORE losses (42) (611)
ORE sales (1,284) (1,292)
Other, net (189) (544)
13,216 16,593
Allowance for possible ORE losses (328) (39)
Balance, March 31 $12,888 $16,554
</TABLE>
An analysis of the changes in the allowance for possible ORE losses for the
quarters ended March 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Balance, January 1 $ 350 $ 568
ORE losses (22) (529)
Balance, March 31 $ 328 $ 39
</TABLE>
The following Table summarizes the components of ORE expense for the quarters
ended March 31, 1994, and 1993:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Valuation adjustments:
ORE losses $ 20 $ 82
Net loss on ORE sales 50 75
70 157
General carrying costs 454 164
ORE expense $ 524 $ 321
</TABLE>
General carrying costs include legal fees, real estate taxes, maintenance,
appraisals, insurance and miscellaneous other costs. See "Non-Interest
Expense."
Gross gains and losses for the quarters ended March 31, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Gross gains on ORE sales $ (36) $ (59)
Gross losses on ORE sales 86 134
Net loss on ORE sales $ 50 $ 75
</TABLE>
<PAGE>
Allowance for Possible Loan Losses ("APLL")
The APLL is available for future loan losses. The APLL totalled $13.6 million
at March 31, 1994, $1.0 million less than the 1993 year-end balance. The
ratio of the APLL to total loans was 2.65% at March 31, 1994, compared to the
1993 year-end ratio of 2.78%. The APLL as a percent of total nonperforming
assets was 44% at March 31, 1994 and 43% at March 31, 1993. The APLL as a
percent of nonaccrual and nonperforming loans was 101% and 75% and 97% and
78%, respectively, at March 31, 1994 and 1993, respectively. Management
believes the APLL is adequate as of March 31, 1994.
An analysis of the APLL for the quarters ended March 31, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Balance, January 1 $14,581 $16,619
Provision for possible loan losses 400 1,500
Loan losses:
Commercial, financial and
agricultural (401) (118)
Real estate - commercial (142) (404)
Real estate - residential (993) (1,097)
Installment (112) (444)
Total loan losses (1,648) (2,063)
Recoveries:
Commercial, financial and
agricultural 160 64
Real estate - commercial 6 60
Real estate - construction 14
Real estate - residential 15 15
Installment 84 68
Total recoveries 279 207
Net loan losses (1,369) (1,856)
Balance, March 31 $13,612 $16,263
</TABLE>
Securities
Securities totalled $262.1 million at March 31, 1994 and $258.4 million at
December 31, 1993. The portfolio consists principally of U.S. Treasury
instruments and high-grade municipal obligations with an overall average
maturity of thirteen months. Federal funds sold and securities purchased
under agreements to resell totalled $118.0 million at March 31, 1994, compared
to $105.0 million at year-end 1993, reflecting additional liquidity in the
Bank's balance sheet.
Held-to-maturity debt securities totalled $258.8 million in carrying value at
March 31, 1994, compared to an estimated fair value of $258.4 million
resulting in a net unrealized loss of $409,000. Equity securities classified
as available-for-sale had an estimated fair market value of $3.3 million on
March 31, 1994, including an unrealized gain of $129,000.
<PAGE>
Deposits
Deposits of $851.9 million at March 31, 1994 decreased $13.4 million from
$865.3 million at December 31, 1993. Interest bearing deposit balances at
March 31, 1994 totalled $721.7 million compared to $716.6 million at year-end
1993, an increase of $5.1 million. The increase occurred primarily in money
market accounts ($7.0 million) and savings deposits ($6.6 million) and was
offset somewhat by decreases in NOW accounts ($3.7 million) and certificates
of deposit ($4.7 million). Demand deposits decreased by $18.6 million, or
13%, through March 31, 1994 compared to the 1993 year-end balance of $148.8
million. This decrease is attributable to normal seasonal fluctuation.
The following Table presents the various types of deposit balances at March
31, 1994 and at December 31, 1993.
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
(In thousands)
<S> <C> <C>
Demand deposits $130,141 $148,784
NOW accounts 135,144 138,822
Savings deposits 303,812 297,205
Money market accounts 61,348 54,347
Time deposits of $100,000 or more 11,040 11,641
Other time deposits 210,402 214,536
Total deposits $851,887 $865,335
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
This discussion of net interest income should be read in conjunction with the
Tables on pages 17 through 20. All interest income, yields, rates, interest
rate spreads and net interest margins which follow in this discussion are
stated on a fully taxable equivalent ("FTE") basis using a tax rate of 34%.
First quarter net interest income decreased from $10.5 million in 1993 to $9.2
million in 1994. This decrease of $1.3 million is the result of lower average
balances in the loan portfolio and lower rates earned, in general, on interest
earning assets. The interest rate spread for the 1994 and 1993 first quarters
was 3.88% and 4.63%, respectively. The net interest margin was 4.29% and
5.01% for the 1994 and 1993 compared quarters, respectively.
Average interest earning assets totalled $871.3 million for the first quarter
of 1994, an increase of $17.8 million compared to the 1993 first quarter.
Average loans, however, totalled $519.6 million for the first quarter of 1994,
a decrease of $92.0 million compared to the 1993 first quarter. The increase
in average interest earning assets consists primarily of $71.9 million in
taxable investment securities and $38.0 million in federal funds sold and
securities purchased under agreements to resell, offset by the decrease in
average loans of $92.0 million. The yield on average interest earning assets
for the first quarter of 1994 equalled 6.65%, a decrease of 112 basis points
from the 1993 first quarter yield of 7.77%. The decrease in yield was offset
somewhat by lower interest rates paid on deposits and borrowings in the first
quarter of 1994 compared to 1993. Rates paid on deposits and borrowings
decreased from 3.14% in the 1993 first quarter to 2.77% in the comparable 1994
period. Average interest bearing liabilities totalled $742.7 million for the
1994 first quarter, a decrease of $7.9 million from the 1993 first quarter
total.
Provision for Possible Loan Losses
The amount of the provision for possible loan losses is recommended by
Management and is then reviewed and approved quarterly by the Board of
Directors of the Company based on its assessment of the size, composition and
quality of the loan portfolio and the adequacy of the APLL in relation to the
risks within the loan portfolio.
The provision for possible loan losses for the first quarter of 1994 was
$400,000 compared to $1.5 million during the first quarter of 1993. Net loans
charged off for the quarter ended March 31, 1994 and 1993 were $1.4 million
and $1.9 million, respectively. In connection with determining the
appropriate amount of the provision for possible loan losses for any period,
Management evaluates the current financial condition of specific borrowers,
the general economic climate, loan portfolio composition, concentration of
credits, loan loss history, adequacy of collateral, the trends and amounts of
nonaccrual and past due loans and estimation of future potential losses and
the level of the Company's APLL. Management will continue to utilize the
aforementioned criteria to monitor and analyze loan quality in future periods
and will provide for possible loan losses accordingly.
Non-Interest Income
Non-interest income increased $136,000 for the first quarter of 1994 over last
year's total of $2.3 million. The increase was primarily due to higher trust
fees ($225,000) and higher service charges on deposit accounts ($44,000).
Other non-interest income decreased by $133,000 primarily due to lower net
gains on mortgage sales of $182,000 which was somewhat offset by higher
miscellaneous other income.
<PAGE>
Non-Interest Expense
Non-interest expense increased $495,000 for the first quarter of 1994 compared
with last year's total for the comparable period of $8.4 million. Salaries
and employee benefits increased $174,000, or approximately 4%. Occupancy and
equipment costs remained level at $1.3 million for both the first quarter of
1994 and 1993. ORE expense increased by $203,000 compared to the prior year
first quarter total of $321,000. The 1994 and 1993 first quarter ORE expense
consists of general carrying costs of $454,000 and $164,000, respectively, and
further write-downs to fair value for various properties of $20,000 and
$82,000, respectively. Write-downs charged to the allowance for possible ORE
losses in the 1994 first quarter totalled $22,000. Write-downs charged to the
allowance for possible ORE losses during the first quarter of 1993 totalled
$529,000. There were no provisions for ORE losses in the first quarter of
1994 or 1993. FDIC insurance expense decreased by $91,000 for the first
quarter and reflects a decreased premium rate charged on applicable deposits.
Other non-interest expense increased by $174,000 due to higher legal and
professional fees ($104,000), real estate appraisal expenses ($43,000), and
other miscellaneous expenses.
Income Tax Expense
Income taxes for the first quarter of 1994 and 1993 totalled $567,000 and
$945,000, respectively on 1994 pre-tax income of $2.3 million and 1993 pre-tax
income of $2.8 million. The effective tax rate was 25% and 33% for the
quarters ended March 31, 1994 and 1993, respectively. The SFAS 109 valuation
allowance which totalled $198,000 at December 31, 1993, was reversed during
the 1994 first quarter resulting in a reduction in income tax expense.
<PAGE>
AVERAGE BALANCES AND RATES -
FULLY TAXABLE EQUIVALENT BASIS
QUARTERLY SUMMARY
<TABLE>
<CAPTION>
1994
1st Quarter
(In thousands) Avg Balance Rate
<S> <C> <C>
ASSETS
Interest earning assets:
Loans (1) $519,566 8.67%
Taxable securities 255,100 3.81
Non-taxable securities 2,168 6.55
Federal funds sold and securities
purchased under agreements to resell 94,487 3.19
Total interest earning assets 871,321 6.65
Non-interest earning assets:
Cash and due from banks 55,377
Premises and equipment, net 11,201
Other assets 28,866
Less allowance for possible loan losses 14,694
Total assets $952,071
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits $485,317 2.23
Certificates of deposit of $100,000
or more 11,517 3.70
Other time deposits 212,233 4.11
Federal funds purchased and securities
sold under agreements to repurchase 30,886 1.79
Other borrowed funds 2,785 2.77
Total interest bearing liabilities 742,738 2.77
Non-interest bearing liabilities:
Demand deposits 131,659
Other liabilities 8,801
Total liabilities 883,198
Shareholders' equity 68,873
Total liabilities and shareholders' equity $952,071
Interest rate spread 3.88%
Net interest margin 4.29%
</TABLE>
(1) For the calculation of rates earned on loans, nonaccrual and restructured
loans are included in the average balance.
<PAGE>
AVERAGE BALANCES AND RATES -
FULLY TAXABLE EQUIVALENT BASIS
QUARTERLY SUMMARY
<TABLE>
<CAPTION>
1993
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
(In thousands) Avg Balance Rate Avg Balance Rate Avg Balance Rate Avg Balance Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans (1) $533,943 8.94% $558,295 8.91% $590,420 9.06% $611,586 9.21%
Taxable securities 258,372 3.80 210,472 3.94 179,314 4.18 183,227 4.42
Non-taxable securities 2,492 6.53 2,566 6.65 2,569 6.87 2,227 7.65
Federal funds sold and securities
purchased under agreements to resell 102,127 3.04 98,903 3.05 79,753 3.01 56,495 3.07
Total interest earning assets 896,934 6.78 870,236 7.03 852,056 7.46 853,535 7.77
Non-interest earning assets:
Cash and due from banks 58,889 58,408 56,846 52,926
Premises and equipment, net 11,434 11,668 11,808 11,415
Other assets 29,587 32,066 32,065 34,061
Less allowance for possible loan losses 15,467 15,780 15,750 16,802
Total assets $981,377 $956,598 $937,025 $935,135
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits $491,194 2.34 $484,113 2.59 $476,539 2.61 $474,238 2.61
Certificates of deposit of $100,000
or more 13,209 3.57 13,087 3.58 12,939 3.63 12,348 3.71
Other time deposits 217,522 4.11 220,628 4.19 222,918 4.25 227,320 4.37
Federal funds purchased and securities
sold under agreements to repurchase 40,474 1.88 37,705 2.10 30,692 2.08 32,854 2.10
Other borrowed funds 2,494 3.18 3,727 2.34 4,002 2.10 3,891 2.19
Total interest bearing liabilities 764,893 2.84 759,260 3.04 747,090 3.09 750,651 3.14
Non-interest bearing liabilities:
Demand deposits 140,672 133,762 127,427 123,478
Other liabilities 8,298 8,914 9,451 9,466
Total liabilities 913,863 901,936 883,968 883,595
Shareholders' equity 67,514 54,662 53,057 51,540
Total liabilities and shareholders'
equity $981,377 $956,598 $937,025 $935,135
Interest rate spread 3.94% 3.99% 4.37% 4.63%
Net interest margin 4.36% 4.38% 4.75% 5.01%
</TABLE>
(1) For the calculation of rates earned on loans, nonaccrual and restructured
loans are included in the average balance.
<PAGE>
NONPERFORMING ASSETS
QUARTERLY SUMMARY
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
90 days or more past due
and still accruing $ 4,144 $ 2,006 $ 2,768 $ 2,609 $ 2,589
Restructured 602 1,012 963 1,505 1,576
Nonaccrual 13,435 13,039 15,004 15,030 16,796
Total nonperforming loans 18,181 16,057 18,735 19,144 20,961
Other real estate 12,888 13,393 14,149 16,982 16,554
Total nonperforming assets $31,069 $29,450 $32,884 $36,126 $37,515
Nonperforming loans as a
percent of total loans 3.54% 3.06% 3.43% 3.33% 3.48%
Nonperforming assets as a
percent of total loans 6.05% 5.61% 6.01% 6.28% 6.23%
Allowance for possible loan
losses as a percent of
nonperforming assets 44% 50% 45% 42% 43%
</TABLE>
<PAGE>
QUARTERLY INCOME SUMMARY -
FULLY TAXABLE EQUIVALENT BASIS
(In thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Interest income $14,286 $15,329 $15,429 $15,846 $16,347
Interest expense 5,078 5,477 5,827 5,754 5,812
Net interest income 9,208 9,852 9,602 10,092 10,535
Less tax equivalent adjustment 33 59 61 59 53
Provision for possible loan
losses 400 250 1,050 1,400 1,500
Non-interest income 2,384 2,471 2,384 2,721 2,248
Non-interest expense 8,889 9,592 8,862 9,095 8,394
Income before income taxes 2,270 2,422 2,013 2,259 2,836
Income taxes 567 785 661 747 945
Net income $ 1,703 $ 1,637 $ 1,352 $ 1,512 $ 1,891
Earnings per share $ .42 $ .40 $ .40 $ .45 $ .56
Dividends per share $ .08 $ .08 $ .00 $ .00 $ .00
Return on average assets (1) .73% .66% .56% .65% .82%
Return on average equity (1) 10.03% 9.62% 9.81% 11.43% 14.88%
</TABLE>
(1) Annualized
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
A. The 1994 Annual Meeting of Shareholders of the Company
was held on April 27, 1994.
B. The following matters were submitted to a vote of the
shareholders of the Company.
(1) To fix the number of Directors at seventeen.
VOTES: FOR: 3,510,219
AGAINST: 3,294
ABSTAINED: 7,815
(2) Election of Directors.
<TABLE>
<CAPTION>
Votes Votes
Nominee For Withheld
<S> <C> <C>
Robert L. Bailey 3,517,061 4,267
Robert P. Bass, Jr. 3,516,861 4,467
Arthur E. Comolli 3,518,061 3,267
Raymond G. Cote 3,517,861 3,467
Sidney Thurber Cox 3,517,561 3,767
Raymond J. Creteau 3,520,828 500
Robert B. Field, Jr. 3,521,328 -
Morton E. Goulder 3,517,461 3,867
Philip deG. Labombarde 3,516,661 4,667
Floyd A. Lamb 3,516,761 4,567
Daniel R.W. Murdock 3,517,261 4,067
Constance T. Prudden 3,517,461 3,867
Joseph G. Sakey 3,518,261 3,067
Paul R. Shea 3,516,961 4,367
Davis P. Thurber 3,518,331 2,997
George R. Walker; and 3,514,961 6,367
Richard S. West 3,521,328 -
All Nominees 3,463,760 2,967
</TABLE>
(3) Re-engagement of Independent Auditors.
VOTES: FOR: 3,505,801
AGAINST: 8,683
ABSTAINED: 6,844
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
March 31, 1994.
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.
BANK OF NEW HAMPSHIRE CORPORATION
Date: April 28, 1994
Davis P. Thurber, Chairman of the Board of
Directors and President
(Principal Executive Officer)
Date: April 28, 1994
Gregory D. Landroche, Senior Vice President/
Chief Financial Officer and Treasurer
(Principal Financial Officer)
