UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
COMMISSION FILE NO. 0-11786
VILLAGE BANCORP, INC.
(Exact name of Registrant as specified in its charter)
CONNECTICUT 06-1076844
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
25 PROSPECT STREET RIDGEFIELD, CONNECTICUT 06877
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code (203) 438-9551
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.
YES __X__ NO _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT OCTOBER 31, 1997
----- -------------------------------
COMMON STOCK, $3.33 PAR VALUE 954,317 SHARES
<PAGE>
VILLAGE BANCORP, INC.
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION:
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
Sept. 30, 1997 and December 31, 1996 (unaudited) . . . . 1
Condensed Consolidated Statements of Income For The
Three Months Ended Sept. 30, 1997 and 1996 (unaudited)
Nine Months Ended Sept. 30, 1997 and 1996 (unaudited) . . 2
Condensed Consolidated Statements of Cash Flows For The
Nine Months Ended Sept. 30, 1997 and 1996 (unaudited) . . 3
Notes to Condensed Consolidated Financial Statements
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . 4
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 9
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 14
ITEM 2. Changes in Securities . . . . . . . . . . . . . . . . . 14
ITEM 3. Defaults Upon Senior Securities . . . . . . . . . . . . 14
ITEM 4. Results of votes of Security Holders . . . . . . . . . 14
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . 14
ITEM 6. (a). Exhibits . . . . . . . . . . . . . . . . . . . . 14
(b). Reports on Form 8-K . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
VILLAGE BANCORP, INC.
- --------------------------------------------------------------------------------
PART I. - FINANCIAL INFORMATION
<PAGE>
VILLAGE BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
ASSETS Sept. 30, 1997 Dec. 31, 1996
- ------ -------------- -------------
(Unaudited)
(In thousands)
Cash and due from banks $ 15,290 $ 8,545
Federal funds sold 5,750 6,600
--------- ---------
Total cash and cash equivalents 21,040 15,145
Securities:
Available-for-sale (at fair value) 12,640 15,706
Held-to-maturity (fair value of
$35,810 at Sept. 30, 1997 and
$17,135 at December 31, 1996) 35,730 17,198
Federal Home Loan Bank stock, at cost 782 712
Loans, net of deferred loan fees - Note C 139,793 126,836
Allowance for loan losses (1,328) (1,356)
--------- ---------
Loans - net 138,465 125,480
Loans held for sale -- 50
Bank premises and equipment - net 5,305 1,509
Accrued interest and other assets 2,908 3,750
--------- ---------
TOTAL ASSETS $ 216,870 $ 179,550
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Noninterest bearing $ 20,850 $ 15,125
Interest bearing 177,839 147,500
--------- ---------
Total deposits 198,689 162,625
Accrued interest payable 1,568 912
Other liabilities 842 716
--------- ---------
Total liabilities 201,099 164,253
--------- ---------
Stockholders' Equity:
Common stock, par value $3.33 per share;
authorized - 10,000,000 shares, issued
and outstanding, 952,317 at Sept. 30,
1997 and 952,117 at December 31, 1996 3,172 3,171
Additional paid-in capital 7,997 7,996
Retained earnings 4,584 4,143
Net unrealized gains (losses) on available-
for-sale securities, net of tax 18 (13)
--------- ---------
Total stockholders' equity 15,771 15,297
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 216,870 $ 179,550
========= =========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 1 -
<PAGE>
VILLAGE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
1997 1996 1997 1996
--------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 3,000 $ 2,633 $ 8,545 $ 7,836
Investment securities:
Taxable 539 456 1,486 1,465
Tax-exempt 91 33 199 92
Federal funds sold 87 43 292 227
--------- --------- --------- ---------
Total interest income 3,717 3,165 10,522 9,620
INTEREST EXPENSE ON DEPOSITS 1,611 1,170 4,406 3,727
--------- --------- --------- ---------
NET INTEREST INCOME 2,106 1,995 6,116 5,893
PROVISION FOR LOAN LOSSES 15 30 45 90
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,091 1,965 6,071 5,803
--------- --------- --------- ---------
OTHER INCOME:
Security gains/(losses) - net -- (7) -- (5)
Other operating income 149 124 419 371
--------- --------- --------- ---------
Total other income 149 117 419 366
--------- --------- --------- ---------
OTHER EXPENSES:
Salaries and employee benefits 919 768 2,594 2,274
Net occupancy 235 136 561 431
Furniture and equipment 95 67 215 202
Data processing services 159 137 438 398
Regulatory assessments 5 1 15 3
Printing, stationery and supplies 74 46 173 126
Other operating expenses 400 419 1,058 984
--------- --------- --------- ---------
Total other expenses 1,887 1,574 5,054 4,418
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 353 508 1,436 1,751
PROVISION FOR INCOME TAXES 122 50 481 480
--------- --------- --------- ---------
NET INCOME $ 231 $ 458 $ 955 $ 1,271
========= ========= ========= =========
PER SHARE DATA - Note E:
Cash dividends declared $ .18 $ .17 $ .54 $ .49
Net income $ .24 $ .48 $ .98 $ 1.33
Weighted average number of common
and common equivalent
shares outstanding 970,295 958,375 970,074 957,447
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 2 -
<PAGE>
VILLAGE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended Sept. 30,
1997 1996
-------- --------
OPERATING ACTIVITIES: (In thousands)
- ---------------------
<S> <C> <C>
Net income $ 955 $ 1,271
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 45 90
Provision for depreciation and amortization 227 183
(Accretion) amortization of investment security
premiums discounts - net (153) (224)
Net decrease in deferred loan fees (32) (8)
Increase (decrease) in accrued interest payable 656 (62)
Decrease (increase) in accrued int. and other assets 842 (1,159)
Increase in other liabilities 126 454
Origination of loans held for sale (2,376) (6,428)
Proceeds from sales of loans 2,426 6,830
-------- --------
Net cash provided by operating activities 2,716 947
-------- --------
INVESTING ACTIVITIES:
- ---------------------
Proceeds from sales of available-for-sale securities -- 2,177
Proceeds from maturities of avail.-for-sale securities 6,067 13,732
Proceeds from maturities of held-to-maturity securities 990 5,775
Purchases of available-for-sale securities (2,852) (8,207)
Purchases of held-to-maturity securities (19,487) (9,433)
Purchase of Federal Home Loan Bank stock (70) --
Net increase in loans (12,998) (5,782)
Purchases of premises and equipment (4,023) (155)
-------- --------
Net cash used in investing activities (32,373) (1,893)
-------- --------
FINANCING ACTIVITIES:
- ---------------------
Net increase (decrease) in deposits 36,064 (4,032)
Cash dividends (514) (466)
Net proceeds from issuance of common stock 2 15
-------- --------
Net cash provided by (used in) financing activities 35,552 (4,483)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,895 (5,429)
-------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 15,145 17,325
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,040 $ 11,896
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid on deposits $ 3,750 $ 3,789
Income tax payments 714 579
Change in net unrealized gains (losses) on
available-for-sale securities, net of tax 31 (87)
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
- ------------------------------------------------------------------
NOTE A - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments necessary, consisting only of
normal recurring accruals, to present fairly the financial position, the results
of operations, cash flows and the changes in financial position of Village
Bancorp, Inc. (the "Company") for the periods presented. In preparing such
financial statements, management is required to make estimates and assumptions
that effect the reported amounts. Actual results could differ significantly from
these estimates.
The Company's consolidated financial statements include the accounts of Village
Bancorp, Inc. and its wholly owned subsidiary The Village Bank & Trust Company
("Village" or the "Bank") and have been prepared in accordance with generally
accepted accounting principles and conform with predominant practices used
within the banking industry.
Village is engaged in the business of commercial banking and operates six branch
banking offices in Fairfield and Litchfield counties in Connecticut, and is
principally engaged in lending and deposit gathering activities within these
counties.
While management believes that the disclosures presented are adequate so as not
to make the information misleading, it is suggested that these financial
statements be read in conjunction with the consolidated financial statements and
notes included in the Company's 1996 annual report.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a fair value based method of accounting
for stock-based compensation plans and encourages, but does not require,
entities to adopt that method in place of the provisions of Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees," for all arrangements under which employees receive shares of stock
or other equity instruments of the employer or the employer incurs liabilities
to employees in amounts based on the price of the stock. SFAS No. 123 also
establishes fair value as the measurement basis for transactions in which an
entity acquires goods or services from non-employees in exchange for equity
instruments. The accounting provisions of SFAS No. 123 are effective for
transactions entered into after December 15, 1995. Effective January 1, 1996,
the Company adopted SFAS No. 123 and has decided that it will continue measuring
compensation cost for employee stock compensation plans in accordance with the
provisions of APB No. 25.
- 4 -
<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
- ------------------------------------------------------------------
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," specifies accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities and for distinguishing whether a transfer of financial assets in
exchange for cash or other consideration should be accounted for as a sale or as
a pledge of collateral in a secured borrowing. SFAS No. 125 is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, except for certain provisions (relating to
the accounting for secured borrowings and collateral and the accounting for
transfers and servicing of repurchase agreements, dollar rolls, securities
lending and similiar transactions) which have been deferred until January 1,
1998 in accordance with SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125." The adoption of these standards has not
and is not expected to have a material impact on the Bank's financial
statements.
On March 3, 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." SFAS No. 128 is effective for financial statements
issued for periods ending after December 31, 1997, including interim periods.
Earlier application is not permitted. Restatement of all prior-period earnings
per share ("EPS") data presented is required when SFAS No. 128 is implemented.
SFAS No. 128 establishes standards for computing and presenting "Basic" and
"Diluted" EPS. SFAS No. 128 states that the "Basic EPS" excludes dilution and is
computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period; "Diluted
EPS" reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that would then share in the earnings
of the entity. "Diluted EPS" is computed similiarly to "Fully Diluted EPS"
pursuant to Accounting Principles Board ("APB") Opinion No. 15.
In June 1997, the Financial Accounting Standards Board issued two new
accounting standards, SFAS No. 130 "Reporting Comprehensive Income" and SFAS No.
131 "Disclosures About Segments of an Enterprise and Related Information".
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. This statement requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as are the financial statments. Comprehensive income is defined as
"the change in equity (net assets) of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. It
includes all changes in equity during a period, except those resulting from
investments by owners and distributions to owners."
- 5 -
<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- ----------------------------------------------------------------
SFAS No. 131 establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosure about products and services,
geographic areas, and major customers. The statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and assess performance. The statement requires that public
business enterprises report a measure of segment profit or loss, certain
specific revenue and expense items and segment assets. It also requires that
information be reported about revenues derived from the enterprises' products or
services, or about the countries in which the enterprises earn revenues and
holds assets, and about major customers, regardless of whether that information
is used in making operating decisions. This statement is effective for financial
statements for periods beginning after December 31, 1997.
Both of these statements require disclosures that the Company must make in
its financial statements or notes thereto. Accordingly, implementation of these
statements will not have any significant effect on the results of operations or
financial condition, as currently reported by the Company.
NOTE B - SECURITIES
The amortized cost and the approximate fair values of securities were as follows
(in thousands):
<TABLE>
<CAPTION>
(Unaudited)
September 30, 1997
------------------------------------------------------
Amortized Unrealized Fair
Cost Gain (Losses) Value
--------- ------- ------- -------
<S> <C> <C> <C> <C>
SECURITIES HELD-TO-MATURITY
- ---------------------------
U.S. Treasury Securities $19,602 $ 24 $ (36) $19,590
Mortgage-backed securities of
U.S. Government agencies 6,739 17 (7) 6,749
Obligations of states and
political subdivision 9,389 104 (22) 9,471
------- ------- ------- -------
TOTAL $35,730 $ 145 $ (65) $35,810
======= ======= ======= =======
</TABLE>
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<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) (Continued)
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
- -----------------------------
U.S. Treasury Securities $12,195 $ 30 $ -- $12,225
Mortgage-backed Securities
of U.S. Government agencies 372 3 -- 375
Other 40 -- -- 40
------- ------- ------- -------
TOTAL $12,607 $ 33 $ -- $12,640
======= ======= ======= =======
<CAPTION>
December 31, 1996
------------------------------------------------------
Amortized Unrealized Fair
Cost Gain (Losses) Value
--------- ------- ------- -------
<S> <C> <C> <C> <C>
SECURITIES HELD-TO-MATURITY
- ---------------------------
U.S. Treasury Securities $ 9,824 $ 31 $ (96) $ 9,759
Mortgage-backed securities of
U.S. Government agencies 4,735 15 (34) 4,716
Obligations of states and
political subdivision 2,639 37 (16) 2,660
------- ------- ------- -------
TOTAL $17,198 $ 83 $ (146) $17,135
======= ======= ======= =======
SECURITIES AVAILABLE-FOR-SALE
- -----------------------------
U.S. Treasury Securities $15,250 $ 6 $ (27) $15,229
Mortgage-backed securities of
U.S. Government agencies 430 -- -- 430
Other 48 -- (1) 47
------- ------- ------- -------
TOTAL $15,728 $ 6 $ (28) $15,706
======= ======= ======= =======
</TABLE>
At September 30, 1997 and December 31, 1996 securities with a book value of
$1,136,000 and $1,140,000, respectively, were pledged to secure public deposits
and for other purposes as required by law and banking regulation.
NOTE C - LOANS
Sept. 30, 1997 Dec. 31, 1996
-------- --------
(In thousands)
Real estate $116,332 $104,561
Commercial and financial 15,230 12,621
Installment and consumer credit 8,462 9,917
Deferred loan fees (231) (263)
-------- --------
TOTAL $139,793 $126,836
======== ========
- 7 -
<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) (Continued)
- ------------------------------------------------------------------------------
The recorded investment in loans considered to be impaired at September 30, 1997
and December 31, 1996 was $1,181,000 and $1,576,000, respectively. Specific
valuation allowances for these loans was $192,000 and $215,000 at September 30,
1997 and December 31, 1996, respectively. Generally, the fair value of impaired
loans was determined using the fair value of the underlying collateral.
NOTE D - COMMITMENTS
On September 30, 1997, standby letters of credit approximated $1,879,000,
and unused lines of credit approximated $22,768,000.
During the year the Bank entered into a new lease for a branch office in
Westport, Connecticut. Rent expense on an annual basis for the branch
approximates $302,000.
NOTE E - STOCKHOLDERS' EQUITY
A $.15 per share cash dividend was distributed February 2, 1996 to
stockholders of record on January 19, 1996. A $.17 per share cash dividend was
distributed May 3, 1996 to stockholders of record on April 25, 1996. An $.18 per
share cash dividend was distributed August 2, 1996 to stockholders of record on
July 25, 1996.
An $.18 per share cash dividend was distributed February 7, 1997 to
stockholders of record on January 30, 1997. An $.18 per share cash dividend was
distributed May 2, 1997 to stockholders of record on April 25, 1997. An $.18 per
share cash dividend was distributed August 1, 1997 to stockholders of record on
July 25, 1997.
- 8 -
<PAGE>
VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
GENERAL
- -------
Village Bancorp, Inc. (the "Company") through its only subsidiary, The
Village Bank & Trust Company ("Village" or the "Bank") had total assets of
$216,870,000 on September 30, 1997 in comparison to total assets of $179,550,000
on December 31, 1996. This is an increase of $37,320,000 or 20.8%.
For the three month periods ended September 30, 1996 and 1997, the
Company's net income decreased from $458,000 for the 1996 period to $231,000 for
the 1997 period. Net interest income increased $111,000 (5.7%) from $1,995,000
for the 1996 period to $2,106,000 for the 1997 period.
For the nine month periods ended September 30, 1996 and 1997, the Company's
net income decreased from $1,271,000 for the 1996 period to $955,000 for the
1997 period. Net interest income increased $223,000 (3.8%) from $5,893,000 for
the 1996 period to $6,116,000 for the 1997 period.
ASSETS AND RELATED INCOME ANALYSIS (Nine Month Comparison)
- ----------------------------------
Loans outstanding on September 30, 1997 totaled $139,793,000 which is an
increase of $12,957,000 (10.2%) from the $126,836,000 outstanding at December
31, 1996. This increase in loans is primarily attributable to a combination of
factors. The Bank increased its marketing effort in this area and expanded its
adjustable rate product line with a new selection of choices. These new product
lines have been well received, and as the Bank generally retains adjustable rate
loans for its own portfolio, this contributed to the increase in the mortgage
loan area. Loan income increased $709,000 (9.0%) from $7,836,000 for the 1996
period to $8,545,000 for the 1997 period. This increase is due to an increase in
average outstanding loans from $120,469,000 in the 1996 period to $132,673,000
in the 1997 period offset by a decrease in the average rate earned from 8.67% in
the 1996 period to 8.59% in the 1997 period.
Securities, which consist of securities held-to-maturity and securities
available-for-sale, increased $15,466,000 (47.0%) from $32,904,000 at December
31, 1996 to $48,370,000 at September 30, 1997. Security income increased
$128,000 (8.2%) from $1,557,000 in the period ending September 30, 1996 to
$1,685,000 in the 1997 period. This increase was due to an increase in the
average dollar amount of securities held, from $35,823,000 in the 1996 period to
$39,918,000 in the 1997 period, offset by a decrease in the average rate earned
from 5.80% in the 1996 period to 5.63% in the 1997 period.
- 9 -
<PAGE>
VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
- --------------------------------------------------------------------------------
The Company holds securities held-to-maturity until maturity and does not trade
them. Securities classified as available-for-sale are used to compensate for
liquidity forecasting deviations.
Federal funds sold decreased $850,000 (12.9%) from $6,600,000 at December
31, 1996 to $5,750,000 at September 30, 1997. Federal funds sold income
increased $65,000 (28.6%) from $227,000 for the 1996 period to $292,000 for the
1997 period, primarily due to an increase in the average dollar amount
outstanding from $5,726,000 in the 1996 period to $7,309,000 in the 1997 period,
along with an increase in the average rate earned from 5.29% in the 1996 period
to 5.33% for the 1997 period.
LIABILITIES AND RELATED EXPENSE ANALYSIS (Nine Month Comparison)
- ----------------------------------------
Deposits increased $36,064,000 (22.2%) from $162,625,000 at December 31,
1996 to $198,689,000 at September 30, 1997. Interest on deposits increased
$679,000 (18.2%) from $3,727,000 for the 1996 period to $4,406,000 for the 1997
period. This increase was primarily attributable to an increase in the average
outstandings from $156,299,000 for the 1996 period to $176,536,000 for the 1997
period, coupled with an increase in the average rate paid from 3.18% in the 1996
period to 3.33% in the 1997 period.
Salary and employee benefit expense increased $320,000 (14.1%) from
$2,274,000 in the 1996 period to $2,594,000 in the 1997 period primarily as a
result of increased staff levels due to the growth of the Bank and staffing for
the two new branch offices.
Printing, stationery and supplies expense increased $47,000 (37.3%) from
$126,000 in the 1996 period to $173,000 in the 1997 period, net occupancy
expenses increased $130,000 (30.2%) from $431,000 in the 1996 period to $561,000
in the 1997 period primarily as a result of the opening of the two new branch
offices along with growth of the Bank.
Data processing expense increased $40,000 (10.1%) from $398,000 in the 1996
period to $438,000 in the 1997 period, as a result of increased use of services
along with the growth of the Bank.
ASSETS AND RELATED INCOME ANALYSIS (Three Month Comparison)
- ----------------------------------
Loans outstanding increased $7,598,000 (5.7%) during the three month period
ended September 30, 1997. This compares to the $6,897,000
- 10 -
<PAGE>
VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
- --------------------------------------------------------------------------------
increase in the 1996 period. Loan income increased $367,000 (13.9%) from
$2,633,000 for the 1996 period to $3,000,000 for the 1997 period. This increase
is due to an increase in the average outstanding loans from $122,734,000 for the
1996 period to $137,160,000 for the 1997 period along with an increase in the
average rate earned from 8.58% for the 1996 period to 8.75% for the 1997 period.
Securities, which consist of securities held-to-maturity and securities
available-for-sale, increased $7,100,000 (17.2%) during the 1997 period as
compared to a decrease of $1,915,000 (5.9%) for the 1996 period. Security income
increased from $489,000 for the 1996 period to $630,000 for the 1997 period,
primarily as a result of an increase in the average dollar amount of securities
held from $32,980,000 for the 1996 period to $45,012,000 for the 1997 period,
offset by a decrease in the average rate earned from 5.93% for the 1996 period
to 5.60% for the 1997 period.
Federal funds sold increased $1,400,000 (32.2%) during the 1997 period as
compared to a decrease of $5,450,000 (63.4%) for the 1996 period. Federal funds
sold income increased $44,000 (102.3%) from $43,000 in the 1996 period to
$87,000 in the 1997 period primarily as a result of an increase in the average
dollar amount outstanding from $3,244,000 for the 1996 period as compared to
$6,276,000 for the 1997 period coupled with an increase in the average rate
earned of 5.30% for the 1996 period as compared to 5.54% for the 1997 period.
LIABILITIES AND RELATED EXPENSE ANALYSIS (Three Month Comparison)
- ----------------------------------------
Deposits increased $20,561,000 (11.5%) during the 1997 period as compared
to a decrease of $1,274,000 (.8%) for the 1996 period. Interest on deposits
increased $441,000 (37.7%) from $1,170,000 for the 1996 period to $1,611,000 for
the 1997 period. This increase is mainly attributable to an increase in the
average dollar amount outstanding from $153,030,000 for the 1996 period to
$187,600,000 for the 1997 period coupled with an increase in the average rate
paid from 3.06% in the 1996 period to 3.43% in the 1997 period.
LIQUIDITY
- ---------
Liquidity is the ability to provide funds for loan requests, unexpected
deposit outflows and meeting other recurring financial obligations. Cash and
cash equivalents at September 30, 1997 were $21,040,000 or 9.7% of total assets
as compared to $15,145,000 or 8.4% of total assets at December 31, 1996. The
Bank also maintains excess
- 11 -
<PAGE>
VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
- --------------------------------------------------------------------------------
stored liquidity reserves to compensate for liquidity forecasting deviations.
These reserves are comprised of investment grade securities that are highly
marketable and liquid. The primary source of liquidity, cash and due from banks
and federal funds sold, have historically surpassed the liquidity needs of the
Company. Management closely monitors the Bank's liquidity/cash flow position and
does not anticipate any liquidity problems in the future.
CAPITAL RESOURCES
- -----------------
The table below lists the minimum capital requirements along with the
Company's capital position at September 30, 1997:
Capital Minimum Capital Company's Capital
Standard Requirement Position
-------- --------------- -----------------
Total capital to risk
weighted assets 8.00% 13.34%
Stockholders' equity to
risk weighted assets 4.00% 12.31%
Leverage ratio 3.0 - 5.0% 7.66%
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 September 30, 1997. 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 the
- 12 -
<PAGE>
VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
- --------------------------------------------------------------------------------
Company'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.
- 13 -
<PAGE>
VILLAGE BANCORP, INC.
- --------------------------------------------------------------------------------
PART II. - OTHER INFORMATION
<PAGE>
VILLAGE BANCORP, INC.
- --------------------------------------------------------------------------------
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults Upon Senior Securities Not Applicable
Item 4. Results of Votes of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the
three months ended September 30, 1997.
- 14 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Village Bancorp, Inc.
(Registrant)
Date: November 12, 1997 /s/ Robert V. Macklin
---------------------------------------
Robert V. Macklin - President
and Chief Executive Officer
Date: November 12, 1997 /s/ James R. Umbarger
---------------------------------------
James R. Umbarger - Executive Vice
President and Chief
Financial Officer
- 15 -
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