<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JULY 31, 1998
UST CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 0-9623 04-2436093
(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF INCORPORATION) IDENTIFICATION NO.)
40 COURT STREET (617) 726-7000 02108
BOSTON, MASSACHUSETTS (REGISTRANT'S TELEPHONE NUMBER, (ZIP CODE)
(ADDRESS OF PRINCIPAL INCLUDING AREA CODE)
EXECUTIVE OFFICES)
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 2. ACQUISITION OF ASSETS.
Acquisition of Somerset Savings Bank
On December 9, 1997, UST Corp., (the "Company") executed an agreement
with Somerset Savings Bank ("Somerset") of Somerville, Massachusetts, pursuant
to which the Company agreed to acquire Somerset and merge Somerset with and into
USTrust, the Company's largest banking subsidiary (the "Somerset Merger"). On
July 20, 1998, the Company consummated the Somerset merger. Somerset, a
Massachusetts savings bank, operated a total of six branch offices located in
the communities of Somerville and Burlington. The transaction was structured as
a tax-free exchange of 0.19 shares of the Company's common stock for each share
of Somerset common stock and accounted for as a pooling of interests. As of the
closing date, the transaction was valued at approximately $88.9 million. A total
of 3.2 million shares of UST common stock were issued in exchange for the 16.9
million Somerset shares outstanding at the closing date.
The Company hereby files its Unaudited Pro Forma Combined Financial
Statements and Notes thereto in connection with the Somerset Merger, as of March
31, 1998:
ITEM 5. OTHER EVENTS
In connection with the acquisition of Somerset and pursuant to the
terms of the Affiliation Agreement related to the transaction, the Company
named a former Director of Somerset to the Board of Directors of UST Corp. The
individual so elected is James F. Drew.
Mr. Drew is a Senior Partner in the accounting firm of O'Connor and
Drew of Quincy, Massachusetts.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Historical financial statements of Somerset for the year ended December
31, 1997 (Incorporated by reference to UST Corp. and Somerset`s
Registration Statement on Form S-4 (Registration No. 333-45809) filed
with the Securities and Exchange Commission on April 27, 1998.
(b) Unaudited Pro Forma Condensed Combined Statements of Income for the
year ended December 31, 1997 (Incorporated by reference to UST Corp.
and Somerset's Registration Statement on Form S-4 (Registration No.
333-45809) filed with the Securities and Exchange Commission on April
27, 1998.
(c) Unaudited financial statements of Somerset for the three months ended
March 31, 1998 (Exhibit 99.2)
(d) Unaudited Pro Forma Combined Financial Statements and Notes thereto
(Exhibit 99.1)
(e) Exhibits
99.1 Unaudited Pro Forma Combined Financial Statements and Notes
thereto
99.2 Unaudited financial statements of Somerset for its three
months ended March 31, 1998.
99.3 Consent of Wolf & Company, P.C. Independent Auditors of
Somerset
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UST Corp.
---------------------------------------
James K. Hunt
Executive Vice President, Treasurer and
Chief Financial Officer
Dated: July 31, 1998
<PAGE> 1
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
UST CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
March 31, 1998
The following Unaudited Pro Forma Condensed Combining Balance Sheet
presents the combined financial position of UST Corp. ("UST") and subsidiaries
and Somerset Savings Bank and its subsidiaries ("Somerset") as of March 31,
1998, assuming the combination, which was consummated on July 20, 1998, had
occurred as of March 31, 1998.
The accompanying pro forma information is based on historical balance
sheet data of UST and Somerset as of March 31, 1998, giving effect to the
combination of UST and Somerset under the pooling of interests method of
accounting. The combination of Somerset with UST reflects the issuance of 0.19
shares of UST Common Stock in exchange for, and in cancellation of, each
outstanding share of Somerset Common Stock. The difference between the par value
of the UST Common Stock issued and the par value of the Somerset Common Stock
acquired ($14,741,000) has been recorded to Additional paid-in capital. The
Unaudited Pro Forma Condensed Combining Balance Sheet reflects an after-tax
charge for estimated merger and reorganization expenses of $5.3 million ($7.5
million pre-tax).
The Unaudited Pro Forma Condensed Combining Balance Sheet should be
read in conjunction with the Unaudited Pro Forma Condensed Combined Statements
of Income contained herein and the unaudited financial statements and notes
thereto of each of UST and Somerset. The unaudited financial statements of UST
are incorporated by reference in this Form 8-K. The unaudited statements of
Somerset are included as Exhibit 99.2 in this Form 8-K. The Unaudited Pro Forma
Condensed Combining Balance Sheet is presented for informational purposes only
and is not necessarily indicative of the combined financial position that would
have occurred if the combination of UST and Somerset had been consummated on
March 31, 1998, or at the beginning of the periods indicated or which may be
obtained in the near future.
<PAGE> 2
<TABLE>
<CAPTION>
UST Corp. and Subsidiaries
Unaudited Pro Forma Condensed
Combining Balance Sheet
March 31, 1998
(In thousands)
Historical Historical Adjustments Pro Forma
UST Somerset (Notes 1 & 2) Combined
<S> <C> <C> <C>
Cash and due from banks,
and interest-bearing deposits $ 101,914 $ 8,417 $ 110,331
Federal funds sold and
other short-term investments 28,821 7,490 36,311
Securities:
Available-for-sale.......... 689,605 689,605
Held-to-maturity............ 84,663 84,663
---------- --------- ----------
Total................... 689,605 84,663 774,268
Loans, net of reserve for
possible loan losses........ 2,839,129 408,427 3,247,556
Premises, furniture and
equipment, net.............. 63,947 12,372 76,319
Intangible assets, net......... 55,987 55,987
Other property owned, net...... 1,370 4,402 5,772
Other assets................... 54,082 7,249 61,331
---------- --------- ----------
Total assets.......... $3,834,855 $ 533,020 $ - $4,367,875
========== ========= ======== ==========
Deposits:
Noninterest bearing......... 657,672 22,748 680,420
Interest bearing:
NOW...................... 56,391 30,452 86,843
Money market............. 678,470 48,909 727,379
Regular savings.......... 703,330 69,838 773,168
Time deposits............ 862,215 280,530 1,142,745
---------- --------- ----------
Total deposits........ 2,958,078 452,477 3,410,555
Borrowings..................... 474,679 38,447 513,126
Other liabilities.............. 51,497 3,446 5,300 60,243
---------- --------- ----------- ----------
Total liabilities..... 3,484,254 494,370 5,300 3,983,924
Stockholders' investment:
Common stock................ 18,636 16,727 (14,741) 20,622
Additional paid-in capital.. 118,767 18,692 14,741 152,200
Retained earnings........... 210,633 3,231 (5,300) 208,564
Accumulated Other
Comprehensive Income..... 2,326 2,326
Deferred compensation and
other.................... 239 239
---------- --------- --------- ----------
Stockholders' investment.... 350,601 38,650 (5,300) 383,951
---------- --------- --------- ----------
Total liabilities and
stockholders'
investment........ $3,834,855 $ 533,020 $ - $4,367,875
========== ========= =========== ==========
See accompanying Notes to Unaudited Pro Forma Condensed Financial Information.
</TABLE>
<PAGE> 3
UST CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF INCOME SUMMARY
The following Unaudited Pro Forma Condensed Combined Statements of
Income give effect to UST's acquisition of Somerset by combining the results of
operations of UST for the three months ended March 31, 1998, with the results of
operations of Somerset for the three months ended March 31, 1998, on a pooling
of interests basis, assuming the combination, which was consummated on July 20,
1998, had occurred as of January 1, 1998. Income per weighted average common
share outstanding is based on the exchange ratio of 0.19 shares of UST for each
share of Somerset as specified in the Affiliation Agreement. The Unaudited Pro
Forma Condensed Combined Statements of Income should be read in conjunction with
the Unaudited Pro Forma Condensed Combining Balance Sheet appearing elsewhere in
this Form 8-K. The Unaudited Pro Forma Condensed Combining Balance Sheet
reflects an after-tax charge for estimated merger and reorganization expenses of
$5.3 million ($7.5 million pre-tax) for Somerset; however, since these expenses
are nonrecurring, they have not been reflected in the Unaudited Pro Forma
Condensed Combined Statements of Income. The pro forma combined statements of
income do not give effect to any anticipated cost savings in connection with the
combination. The Unaudited Pro Forma Condensed Combined Statements of Income are
presented for information purposes only and are not necessarily indicative of
the combined results of operations that would have occurred if the combination
of UST and Somerset had been consummated on January 1, 1998, or at the beginning
of the period indicated or which may be obtained in the future.
<PAGE> 4
<TABLE>
<CAPTION>
UST CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
Historical Historical Pro Forma
UST Somerset Combined
<S> <C> <C> <C>
Interest income:
Interest and fees on loans........... $ 62,421 $ 9,945 $ 72,366
Interest and dividends on securities 10,729 1,432 12,161
Interest on federal funds sold and
other................................ 966 55 1,021
-------- -------- --------
Total interest income............. 74,116 11,432 85,548
-------- -------- --------
Interest expense:
Interest on deposits................. 20,543 5,057 25,600
Interest on borrowings............... 5,945 600 6,545
-------- -------- --------
Total interest expense............ 26,488 5,657 32,145
-------- -------- --------
Net interest income.................... 47,628 5,775 53,403
Provision for possible loan losses..... 975 975
-------- -------- --------
Noninterest income..................... 46,653 5,775 52,428
-------- -------- --------
Asset management fees................ 3,728 3,728
Fees and charges..................... 3,952 143 4,095
Gain on sale of assets............... 9 9
Securities gains, net................ 1,441 1,441
Other................................ 2,200 246 2,446
-------- -------- --------
Total noninterest income.......... 11,321 398 11,719
-------- -------- --------
Noninterest expense:
Salary and employee benefits......... 19,279 1,827 21,106
Occupancy and equipment.............. 5,682 404 6,086
Data processing services ............ 1,378 152 1,530
Professional and consulting.......... 966 110 1,076
Foreclosed asset and workout expense. 156 343 499
Other................................ 9,696 653 10,349
-------- -------- --------
Total noninterest expense......... 37,157 3,489 40,646
-------- -------- --------
Income before income taxes............. 20,817 2,684 23,501
Income taxes........................... 7,961 19 7,980
-------- -------- --------
Net income............................. $ 12,856 $ 2,665 $ 15,521
======== ======== ========
Per share data:
Basic earnings per share............. $ 0.43 $ 0.16 $ 0.47
Diluted earnings per share........... $ 0.42 $ 0.16 $ 0.46
Basic weighted average shares 29,800,873 16,665,406 32,967,300
Diluted weighted average shares...... 30,369,848 16,964,174 33,593,041
See accompanying Notes to Unaudited Pro Forma Condensed Financial Information.
</TABLE>
<PAGE> 5
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
NOTE 1:
The combination has been accounted for as a pooling of interests.
Accordingly, pro forma financial information assumes that the
combination was consummated as of the beginning of the periods
indicated herein. Certain reclassifications have been made to the
accounts of Somerset in the accompanying Unaudited Pro Forma Condensed
Combining Balance Sheet and Unaudited Pro Forma Condensed Combined
Statements of Income to conform to UST presentation. Pro forma results
of operations do not reflect nonrecurring items of income and expense
relating directly from the combination.
The effect of estimated one-time, after-tax charges of $5.3 million
($7.5 million pre-tax) recorded in connection with the combination has
been reflected in the accompanying Unaudited Pro Forma Condensed
Combining Balance Sheet as a reduction in retained earnings, and an
increase in other liabilities, net of a 40 percent tax benefit of $2.2
million, after excluding $2.1 million of nondeductible expense. These
changes have not been reflected in the Unaudited Pro Forma Condensed
Combined Statements of Income since they are nonrecurring. The pro
forma financial information does not give effect to any cost savings in
connection with the combination.
NOTE 2:
The pro forma stockholders' investment accounts of UST and Somerset
have been adjusted in the accompanying Unaudited Pro Forma Condensed
Combining Balance Sheet to reflect the issuance of shares of UST Common
Stock in exchange for all of the outstanding shares of Somerset Common
Stock. The number of shares of UST Common Stock issued pursuant to the
acquisition of Somerset were based upon the number of Somerset shares
outstanding as of July 20, 1998 for Somerset. The exchange ratio of
0.19 shares of UST Common Stock for each share of Somerset Common Stock
is specified in the Affiliation Agreement. The differences between the
par value of the UST Common Stock issued ($0.625 per share) and the par
value of the Somerset Common Stock acquired ($1.00 per share) has been
recorded to Additional paid-in capital.
NOTE 3:
Pro forma earnings per share amounts in the accompanying Unaudited Pro
Forma Condensed Combined Statements of Income are based on the weighted
average number of common shares of the constituent companies
outstanding during each period assuming an exchange ratio of 0.19
shares of UST Common Stock for each share of Somerset Common Stock.
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 99.2
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Balance Sheets
MARCH 31, DECEMBER 31,
1998 1997
-------------- ------------
(Unaudited)
(In Thousands)
<S> <C> <C>
ASSETS
Cash, due from banks........................................................... $ 8,240 $ 7,731
Federal Home Loan Bank overnight deposits...................................... 7,490 2,805
Interest-bearing deposits in other banks....................................... 177 177
---------- ----------
Total cash and cash equivalents..................................... 15,907 10,713
---------- ----------
Investment securities-fair value $82,705,000 and $89,410,000................... 82,150 89,143
Loans, net of unearned income.................................................. 416,322 419,845
Allowance for loan losses...................................................... (7,895) (7,668)
---------- ----------
Loans, net.......................................................... 408,427 412,177
---------- ----------
Other real estate owned, net................................................... 4,402 5,711
Land, buildings and equipment, net............................................. 12,372 12,538
Accrued interest receivable ................................................... 2,921 2,994
Federal Home Loan Bank of Boston stock, at cost................................ 2,513 2,273
Deferred income taxes.......................................................... 2,700 2,700
Other assets................................................................... 1,628 1,423
---------- ----------
$ 533,020 $ 539,672
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Deposits....................................................................... $ 452,477 $ 455,886
Borrowed funds................................................................. 38,447 43,376
Other liabilities.............................................................. 3,446 4,533
---------- ----------
Total liabilities................................................... 494,370 503,795
---------- ----------
Commitments and contingencies (Note 2)
Stockholders' equity:
Serial preferred stock $1 par value; 5,000,000 shares authorized, none
issued and outstanding.....................................................
Common stock, $1.00 par value; 20,000,000 shares authorized, 16,726,856
and 16,659,356 shares issued and outstanding............................... 16,727 16,659
Additional paid-in capital..................................................... 18,692 18,652
Retained earnings.............................................................. 3,231 566
---------- ----------
Total stockholders' equity.......................................... 38,650 35,877
---------- ----------
$ 533,020 $ 539,672
========== ==========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Income
THREE MONTHS ENDED MARCH 31,
1998 1997
---- ----
(In Thousands, Except Per Share
Data)
(Unaudited)
<S> <C> <C>
Interest and dividend income:
Loans...................................................... $ 9,945 $ 8,843
Mortgage-backed securities................................. 1,370 1,333
Other debt securities...................................... 25 84
Equity securities.......................................... 37 68
Short-term investments..................................... 55 56
------- -------
Total interest and dividend income........... 11,432 10,384
------- -------
Interest expense:
Deposits................................................... 5,057 4,993
Borrowed funds............................................. 600 583
------- ------
Total interest expense....................... 5,657 5,576
------- ------
Net interest income.......................................... 5,775 4,808
Provision for loan losses.................................... 300
------- ------
Net interest income after provision for loan losses........ 5,775 4,508
------- ------
Other income:
Net gain on sales of loans................................. 9 6
Gain on sale of interest rate exchange agreement........... 158
Service charges on deposit accounts........................ 143 154
Miscellaneous income....................................... 88 122
------- ------
Total other income......................................... 398 282
------- ------
Operating expenses:
Salary and employee benefits............................... 1,827 1,710
Occupancy and equipment.................................... 404 390
Data processing............................................ 152 137
Legal and professional fees................................ 110 191
FDIC insurance assessments................................. 48 273
Costs associated with problem assets....................... 309 390
Net loss on other real estate owned........................ 34 63
Other general and administrative........................... 605 648
------- ------
Total operating expenses..................... 3,489 3,802
------- ------
Income before income taxes................................... 2,684 988
Income taxes................................................. 19
------- ------
Net income.................................. $ 2,665 $ 988
======== ========
Weighted average shares outstanding.......................... 16,665 16,652
======== ========
Weighted average shares outstanding outstanding-assuming
dilution..................................................... 16,964 16,832
======== ========
Basic earnings per share..................................... $ 0.16 $ 0.06
======== ========
Diluted earnings per share................................... $ 0.16 $ 0.06
======== ========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
SOMERSET SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED
MARCH 31, 1998 AND 1997
ACCUMULATED
ADDITIONAL RETAINED OTHER
COMPREHENSIVE COMMON PAID-IN EARNINGS COMPREHENSIVE
INCOME STOCK CAPITAL (DEFICIT) INCOME TOTAL
------------- -------- ---------- --------- ------------- --------
(IN THOUSANDS, UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997..... $ 16,659 $ 18,652 $ 566 $ 35,877
Comprehensive income:
Net income..................... $ 2,665 2,665 2,665
========
Compensation recognized on stock
option grants 15 15
Exercise of stock options 68 25 93
-------- -------- -------- --------
Balance March 31, 1998........... $ 16,727 $ 18,692 $ 3,231 $ - $ 38,650
======== ======== ======== =========== ========
Balance December 31, 1996........ $ 16,652 $ 18,597 $ (5,401) $ 29,848
Comprehensive income:
Net income..................... $ 988 988 988
======== -------- --------
Balance March 31, 1997........... $ 16,652 $ 18,597 $ (4,413) $ - $ 30,836
======== ======== ======== =========== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
SOMERSET SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
1998 1997
---- ----
(IN THOUSANDS,
UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................................................. $ 2,665 $ 988
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses.............................................................. 300
Loans originated for sale.............................................................. (5,334) (1,483)
Principal balance of loans sold........................................................ 5,334 1,483
Net amortization of premiums and discounts on investment securities.................... 17 7
Amortization of net deferred loan fees and unearned income............................. (744) (215)
Compensation recognized on stock option grants......................................... 15
Depreciation and amortization expense.................................................. 180 168
Net loss on other real estate owned.................................................... 34 63
(Increase) decrease in accrued interest receivable...................................... 73 (116)
(Increase) decrease in other assets..................................................... (205) 337
Decrease in other liabilities.......................................................... (1,087) (363)
------- --------
Net cash provided by operating activities....................................... 948 1,169
Cash flows from investing activities:
Proceeds from calls and maturities of investment securities.............................. 2,000 3,000
Purchase of investment securities........................................................ (3,951)
Principal payments received on mortgage-backed securities................................ 4,976 1,918
Purchase of Federal Home Loan Bank stock................................................. (240)
Redemption of Federal Home Loan Bank stock.............................................. 2,149
Loans purchased.......................................................................... (5,738)
Net (increase) decrease in loans......................................................... 9,630 (447)
Proceeds from sales and principal reductions of other real estate owned.................. 1,892 998
Improvements to other real estate owned.................................................. (15)
Purchase of equipment.................................................................... (14) (340)
------- --------
Net cash provided by investing activities....................................... 12,491 3,327
Cash flows from financing activities:
Net increase (decrease) in deposits..................................................... (3,409) 4,183
Net decrease in borrowings with maturities of less than three months.................... (5,929)
Proceeds from issuance of borrowings with maturities in excess of three months.......... 26,000
Repayment of borrowings with maturities in excess of three months....................... (25,000)
Exercise of stock options............................................................... 93
------- --------
Net cash provided by (used by) financing activities............................. (8,245) 4,183
------- --------
Net increase in cash and cash equivalents................................................ 5,194 8,679
Cash and cash equivalents at beginning of period........................................ 10,713 8,219
------- --------
Cash and cash equivalents at end of period.............................................. $ 15,907 $ 16,898
======== ========
Supplementary Cash Flow Information:
Interest paid on deposits............................................................. $ 5,025 $ 4,945
======== ========
Interest paid on borrowed funds....................................................... $ 669 $ 582
======== ========
Property acquired in settlement of loans.............................................. $ 602 $ 1,035
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE> 5
SOMERSET SAVINGS BANK AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1: BASIS OF PRESENTATION AND CONSOLIDATION
The consolidated interim financial statements of Somerset Savings Bank
and subsidiaries presented herein should be read in conjunction with
the consolidated financial statements of Somerset Savings Bank in the
annual report on Form 10-K for the year ended December 31, 1997.
In the opinion of management, the financial statements reflect all
adjustments (consisting solely normal recurring accruals) necessary for
a fair presentation of such information. Interim results are not
necessarily indicative of results to be expected for the entire year.
NOTE 2: COMMITMENTS AND CONTINGENCIES
At March 31, 1998, the Bank had outstanding commitments to originate
loans amounting to approximately $13.7 million, unadvanced funds on
construction loans and lines of credit amounting to approximately $9.4
million and $17.0 million, respectively, and standby letters of credit
amounting to $364,000.
NOTE 3: COMPREHENSIVE INCOME
In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997.
Accounting principles generally require that recognized revenue,
expenses, gains and losses be included in net income. Certain FASB
statements, however, require entities to report specific changes in
assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, as a separate component of the equity
section of the balance sheet. Such items, along with net income, are
components of comprehensive income. SFAS No. 130 requires that all
items of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
Additionally, SFAS No. 130 requires that the accumulated balance of
other comprehensive income be displayed separately from retained
earnings and additional paid-in capital in the equity section of the
balance sheet. The Bank adopted these disclosure requirements in the
first quarter of 1998 and has presented comparative disclosure for the
quarter ended March 31, 1997. The Bank had no other components of
comprehensive income other than net income.
NOTE 4: SEGMENTS AND RELATED INFORMATION
In June 1997, FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual and interim financial statements. It also
establishes standards for related disclosures about products and
services, geographic areas and major customers. Generally, financial
information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to
allocate resources to segments. The Statement also requires descriptive
information about the way that the operating segments were determined,
the products and services provided by the operating segments,
differences
<PAGE> 6
between the measurements used in reporting segment information and
those used by the enterprise in its general purpose financial
statements, and changes in the measurement of segment amounts from
period to period. The Bank has determined that its business is
comprised of a single segment and that SFAS No. 131, therefore, has no
impact on the consolidated financial statements.
NOTE 5: EARNINGS PER SHARE
In February 1997, FASB issued SFAS No. 128, "Earnings Per Share," which
requires that earnings per share be calculated on a basic and a
dilutive basis. Basic earnings per share represents income available to
common stock divided by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflects
additional common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to
income that would result from the assumed conversion. Potential common
shares that may be issued by the Bank relate solely to outstanding
stock options and are determined using the treasury stock method. The
assumed conversion of outstanding dilutive stock options would increase
shares outstanding but would not require an adjustment to income as a
result of the conversion. SFAS No. 128 is effective for interim and
annual periods ending after December 15, 1997, and requires the
restatement of all prior-period earnings per share data presented.
<PAGE> 1
EXHIBIT 99.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 8-K of our report dated January 23, 1998 included in
Registration Statement File No. 90278. It should be noted that we have not
audited any financial statements of the Company subsequent to December 31, 1997
or performed any audit procedures subsequent to the date of our report.
Wolf & Company, P.C.
Boston, Massachusetts
July 30, 1998
