UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
COMMISSION FILE NO. 0-11786
VILLAGE BANCORP, INC.
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(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
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 April 30, 1999
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Common Stock, $3.33 Par Value 1,973,034
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VILLAGE BANCORP, INC.
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998 (unaudited).....................1
Condensed Consolidated Statements of Income For The
Three Months Ended March 31, 1999 and 1998 (unaudited)...............2
Condensed Consolidated Statements of Comprehensive Income For The
Three Months Ended March 31, 1999 and 1998 (unaudited)...............3
Condensed Consolidated Statements of Cash Flows For The
Three Months Ended March 31, 1999 and 1998 (unaudited)...............4
Notes to Condensed Consolidated Financial Statements (unaudited).......5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................10
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.
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PART I. - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
VILLAGE BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
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ASSETS Mar. 31, 1999 Dec. 31, 1998
- ------ ------------- --------------
(in thousands)
<S> <C> <C>
Cash and due from banks $ 16,357 $ 13,092
Federal funds sold 22,050 18,150
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Total cash and cash equivalents 38,407 31,242
Securities:
Available-for-sale (at fair value) 14,625 12,726
Held-to-maturity (fair value of $28,403 at
March 31, 1999, and $34,421 at Dec. 31, 1998 28,020 33,936
Federal Home Loan Bank stock, at cost 901 901
Loans, net of deferred loan fees 147,216 149,386
Allowance for credit losses (1,153) (1,178)
- ---------------------------------------------------------------------------------------------------------------------
Loans, net 146,063 148,208
Loans held for sale 718 1,874
Bank premises and equipment - net 5,132 5,230
Accrued income and other assets 3,269 3,039
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TOTAL ASSETS $ 237,135 $ 237,156
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 23,120 $ 22,162
Interest bearing 193,399 195,015
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Total deposits 216,519 217,177
Accrued interest payable 1,117 1,302
Other liabilities 1,336 1,148
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 218,972 219,627
Stockholders' Equity:
Common stock, par value $3.33 per share;
authorized - 10,000,000 shares, issued and
outstanding, 1,959,034 at March 31, 1999
and 1,946,534 at December 31, 1998 6,523 6,482
Additional paid-in capital 5,088 4,998
Retained earnings 6,546 6,002
Accumulated other comprehensive income 6 47
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Total stockholders' equity 18,163 17,529
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 237,135 $ 237,156
=====================================================================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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VILLAGE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
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Three Months Ended March 31,
(in thousands, except share data)
1999 1998
------ ------
INTEREST INCOME:
Loans, including fees $3,104 $3,184
Securities:
Taxable 472 551
Tax-exempt 122 123
Federal funds sold 156 69
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Total interest income 3,854 3,927
INTEREST EXPENSE 1,341 1,585
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NET INTEREST INCOME 2,513 2,342
PROVISION FOR LOAN LOSSES -- 30
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,513 2,312
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OTHER INCOME:
Other operating income 165 145
Security gains, net -- 43
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Total other income 165 188
OTHER EXPENSES:
Salaries and employee benefits 883 1,003
Net occupancy 233 251
Furniture and equipment 92 100
Data processing services 177 195
Regulatory assessments 6 6
Printing, stationery and supplies 15 65
Other operating expenses 291 336
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Total other expenses 1,697 1,956
INCOME BEFORE PROVISION FOR INCOME TAXES 981 544
PROVISION FOR INCOME TAXES 262 62
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NET INCOME $ 719 $ 482
================================================================================
PER SHARE DATA
Cash dividends paid $ .09 $ .09
Net income - basic earnings .37 .25
Net income - diluted earnings .36 .24
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
VILLAGE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - (UNAUDITED)
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Three Months Ended March 31,
(in thousands)
1999 1998
------ ------
Net income $719 $482
Other comprehensive income, net of tax:
Unrealized holding gains (losses)on securities
available-for-sale arising during the period (41) 14
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Reclassification adjustment, net of tax, for
net gains realized on available-for-sale
securities that were held at the beginning
of the year -- (26)
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Other comprehensive loss (41) (12)
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Comprehensive income $678 $470
================================================================================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
VILLAGE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
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Three Months Ended
March 31,
(in thousands)
1999 1998
-------- --------
OPERATING ACTIVITIES:
Net income $ 719 $ 482
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses -- 30
Provision for depreciation and amortization 111 107
Accretion of security discounts - net (88) (95)
Security gains - net -- (43)
Decrease in deferred loan fees (5) (23)
Decrease in accrued interest payable (185) (233)
(Increase) decrease in accrued income and other assets (155) 366
Increase (decrease) in other liabilities 188 (595)
Origination of loans held for sale (5,730) (3,192)
Proceeds from sales of loans 6,886 4,628
- -------------------------------------------------------------------------------
Net cash provided by operating activities 1,741 1,432
INVESTING ACTIVITIES:
Proceeds from sales of available-for-sale securities -- 1,279
Proceeds from maturities of available-for-sale securities 2,035 3,020
Proceeds from maturities of held-to-maturity securities 5,936 6,027
Purchases of available-for-sale securities (3,934) (988)
Purchases of held-to-maturity securities -- (3,946)
Purchase of Federal Home Loan Bank stock -- (119)
Net decrease (increase) in loans, net 2,102 (341)
Purchases of premises and equipment (13) (174)
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Net cash provided by investing activities 6,126 4,758
FINANCING ACTIVITIES:
Net decrease in time deposits (8,704) (1,708)
Net increase in other deposits 8,046 8,058
Cash dividends (175) (172)
Net proceeds from issuance of common stock 131 55
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Net cash (used in) provided by financing activities (702) 6,233
INCREASE IN CASH AND CASH EQUIVALENTS 7,165 12,423
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CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 31,242 11,153
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 38,407 $ 23,576
===============================================================================
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid on deposits $ 1,156 $ 1,110
Income tax payments 85 65
Change in net unrealized gain on available-
for-sale securities, net of tax (41) (12)
Transfer of loan to other real estate owned 48 --
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
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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 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
those 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"), 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. Village also operates a trust department and offers trust services.
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 1998 Annual Report on Form 10-K.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires, among other things, that all derivatives be recognized in the
statement of condition, either as assets or liabilities, and be measured at
their fair value and that changes in a derivative's fair value be recognized in
current earnings unless specific hedge accounting criteria are met. For the
Company, SFAS No. 133 will be effective January 1, 2000. The Company does not
anticipate that adoption of this statement will have a material impact on its
financial position or results of operations.
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<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
- --------------------------------------------------------------------------------
NOTE B - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair
values of securities were as follows (in thousands):
<TABLE>
<CAPTION>
March 31, 1999
--------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SECURITIES HELD-TO-MATURITY
U.S. Treasury Securities $ 13,359 $ 98 $ (12) $ 13,445
Mortgage-backed securities
of U.S. Government agencies 4,349 23 (1) 4,371
Obligations of states and
political suddivisions 10,312 277 (2) 10,587
- ------------------------------------------------------------------------------------------------------------------------
TOTAL $ 28,020 $ 398 $ (15) $ 28,403
========================================================================================================================
SECURITIES AVAILABLE-FOR-SALE
U.S. Treasury securities $ 14,448 $ 40 $ (31) $ 14,457
Mortgage-backed securities
of U.S. Government agencies 153 1 - 154
Other 14 - - 14
- ------------------------------------------------------------------------------------------------------------------------
TOTAL $ 14,615 $ 41 $ (31) $ 14,625
========================================================================================================================
December 31, 1998
-----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SECURITIES HELD-TO-MATURITY
U.S. Treasury Securities $ 18,801 $ 183 $ (4) $ 18,980
Mortgage-backed securities
of U.S. Government agencies 4,377 35 (3) 4,409
Obligations of states and
political suddivisions 10,758 275 (1) 11,032
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TOTAL $ 33,936 $ 493 $ (8) $ 34,421
========================================================================================================================
SECURITIES AVAILABLE-FOR-SALE
U.S. Treasury securities $ 12,446 $ 98 $ (22) $ 12,522
Mortgage-backed securities
of U.S. Government agencies 186 2 - 188
Other 16 - - 16
- ------------------------------------------------------------------------------------------------------------------------
TOTAL $ 12,648 $ 100 $ (22) $ 12,726
========================================================================================================================
</TABLE>
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VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) (Continued)
- --------------------------------------------------------------------------------
At March 31, 1999 and December 31, 1998, securities with a book value of
$1,127,000 and $1,129,000, respectively, were pledged to secure public deposits
and for other purposes as required by law and banking regulation.
NOTE C - LOANS
The composition of the loan portfolio is summarized as follows:
<TABLE>
<CAPTION>
March 31, 1999 Dec. 31, 1998
---------------- ----------------
(in thousands)
<S> <C> <C>
Real estate $ 120,373 $ 121,814
Commercial and financial 20,736 19,312
Installment and consumer credit 6,231 8,389
Deferred loan fees (124) (129)
- -------------------------------------------------------------------------------------------
TOTAL $ 147,216 $ 149,386
===========================================================================================
</TABLE>
The recorded investment in loans considered to be impaired at March 31, 1999 and
December 31, 1998 was $1,615,000 and $1,275,000, respectively. Specific
valuation allowances for these loans were $263,000 and $179,000 at March 31,
1999 and December 31, 1998, respectively. Generally the fair value of impaired
loans was determined using the fair value of the underlying collateral.
NOTE D - COMMITMENTS
On March 31, 1999, standby letters of credit approximated $1,992,000.
NOTE E - STOCKHOLDERS' EQUITY
A $.09 per share cash dividend was distributed February 5, 1999 to
stockholders of record on January 29, 1999.
A $.09 per share cash dividend was distributed February 6, 1998 to
stockholders of record on January 30, 1998.
Stock options exercised during the three month period ended March 31, 1999,
totaled 12,500 shares at prices ranging from $9.50 to $13.50. There were no
stock options granted during this three month period.
-7-
<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) (Continued)
- --------------------------------------------------------------------------------
NOTE F - EARNINGS PER SHARE
SFAS No. 128, "Earnings Per Share", requires that "Basic EPS" exclude
dilution and be computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for that 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. A summary of the basic and diluted earnings per share
calculations for March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Income Shares Per Share
------ ------ ---------
<S> <C> <C> <C>
1999
Basic EPS $719,000 1,949,684 $.37
Effect of Dilutive Securities - Stock Options 46,035
Diluted EPS $719,000 1,995,719 $.36
1998
Basic EPS $482,000 1,915,027 $.25
Effect of Dilutive Securities - Stock Options 60,785
Diluted EPS $482,000 1,975,812 $.24
</TABLE>
NOTE G - REPORTING COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income", establishes standards for
the reporting and display of comprehensive income and its components in a full
set of general purpose financial statements, 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 statements. 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."
NOTE H - PENDING ACQUISITION
On November 11, 1998, the Company and Webster Financial Corporation
("Webster") announced that they had reached a definitive agreement, whereby
Webster would acquire the Company, for the equivalent of $23.50 per share in a
tax-free, stock-for-stock exchange valued at approximately $46.4 million, with
stockholders permitted to elect to receive cash-in-lieu of Webster stock for up
to 20% of the Company's shares.
-8-
<PAGE>
VILLAGE BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) (Continued)
- --------------------------------------------------------------------------------
The definitive agreement, has been approved by the boards of directors of
both companies, the Company's stockholders at a special meeting held May 4,
1999, and all of the appropriate regulatory authorities. The transaction is
expected to close on May 19, 1999.
Due to directors and management's contracts that include, among other
things, change of control clauses, it is expected that such directors and
members of Village management would in the aggregrate, be paid $1,364,000 upon
consummation of the merger and that those members of management receiving
payments would no longer be employed by Village.
-9-
<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
$237,135,000 on March 31, 1999 in comparison to total assets of $237,156,000 on
December 31, 1998, a decrease of $21,000.
For the three month periods ended March 31, 1999 and 1998, the Company's
net income increased from $482,000 for the 1998 period to $719,000 for the 1999
period. Net interest income increased $171,000 (7.3%) from $2,342,000 for the
1998 period to $2,513,000 for the 1999 period.
ASSETS AND RELATED INCOME ANANLYSIS
Loans outstanding on March 31, 1999 totaled $147,216,000, which is a
decrease of $2,170,000 (1.5%) from the $149,386,000 outstanding at December 31,
1998. Loan income decreased $80,000 (2.5%) from $3,184,000 for the 1998 period
to $3,104,000 for the 1999 period. This decrease is due to a decrease in the
average rate earned from 8.58% for the 1998 period to 8.30% for the 1999 period,
offset by a slight increase in average outstanding loans, from $148,455,000 in
the 1998 period to $149,678,000 for the 1999 period.
Securities, which consists of securities held-to-maturity and securities
available-for-sale, decreased $4,017,000 (8.6%) from $46,662,000 at December 31,
1998 to $42,645,000 at March 31, 1999. Security income decreased $80,000 (11.9%)
from $674,000 in the period ending March 31, 1998 to $594,000 for the 1999
period. This decrease was due to a decrease in the average dollar amount of
securities held, from $48,738,000 for the 1998 period to $46,330,000 in the 1999
period, coupled with a decrease in the average rate earned from 5.53% in the
1998 period to 5.13% in the 1999 period. The Bank has the positive intent and
ability to hold securities designated as held-to-maturity until maturity and
does not engage in trading activities. Securities classified as
available-for-sale are used to compensate for liquidity forecasting deviations.
Federal funds sold increased $3,900,000 from $18,150,000 at December 31,
1998 to $22,050,000 at March 31, 1999. Federal funds sold income increased
$87,000 (126.1%) from $69,000 for the 1998 period to $156,000 for the 1999
period, primarily due to an increase in the average dollar amount outstanding
from $5,211,000 in the 1998 period to $13,599,000 in the 1999 period, offset by
a decrease in the average rate earned from 5.30% in the 1998 period to 4.59% in
the 1999 period.
LIABILITIES AND RELATED EXPENSE ANALYSIS
Deposits decreased $658,000 (.3%) from $217,177,000 at December 31, 1998 to
$216,519,000 at March 31, 1999. Interest on deposits decreased $244,000 (15.4%)
from $1,585,000 for the 1998 period to $1,341,000 for the 1999 period. This
decrease was primarily attributable to a decrease in the average rate paid from
3.14% in the 1998 period to 2.56% in the 1999 period, offset by an increase in
the average outstandings, from $201,878,000 for the 1998 period to $209,930,000
in the 1999 period.
-10-
<PAGE>
VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
- --------------------------------------------------------------------------------
Salary and employee benefits expense decreased $120,000 (12.0%) from
$1,003,000 in the 1998 period to $883,000 in the 1998 period.
Net occupancy expenses decreased $18,000 (7.2%) from $251,000 in the 1998
period to $233,000 in the 1999.
Furniture and equipment expense decreased $8,000 (8.0%) from $100,000 in
the 1998 period to $92,000 in the 1999 period.
Data processing services expense decreased $18,000 (9.2%) from $195,000 in
the 1998 period to $177,000 in the 1999 period and other operating expenses
decreased $45,000 (13.4%) from $336,000 in the 1998 period to $291,000 in the
1999 period.
All of the items above decreased due to the positive effect of an ongoing
cost containment program.
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 March 31, 1999 were $38,407,000 or 16.2% of total assets as
compared to $31,242,000 or 13.2% of total assets at December 31, 1998. The Bank
also maintains excess 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 foreseeable future.
CAPITAL RESOURCES
The table below lists the minimum capital requirements along with the
Company's capital position at March 31, 1999:
Capital Minimum Capital Company's Capital
Standard Requirement Position
-------- ----------- --------
Total Capital to risk
weighted assets 8.00% 14.43%
Stockholders' equity to
risk weighted assets 4.00% 13.56%
Leverage ratio 3.0 - 5.0% 7.83%
-11-
<PAGE>
VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
- --------------------------------------------------------------------------------
YEAR 2000
The Company and the Bank are aware of the significant impact that Year 2000
("Y2K") will have on financial service companies, as such, the Bank has
established a program to address Y2K issues. The Board of Directors established
a Y2K Committee to oversee activities of management and others in dealing with
Y2K issues. This committee reports to the Board on a regular basis. The Board
monitors the project and its ongoing implementation. The potential problem with
year 2000 concerns the inability of information systems, primarily software
programs, to properly recognize and process date sensitive information for the
year 2000 and beyond.
The Bank utilizes the services of third party service bureau for its
primary data processing needs. This service bureau is well on its way to
addressing the Y2K project and has completed the first and second phase of
testing of its processing system. The Bank has also completed its first two
phases of testing on all applications that are provided by the third party. This
first phase tested the actual change of dates from December, 1999 to January,
2000. The second phase tested month end, quarter end and odd date (i.e. February
29, 2000) processing.
The Bank has developed contingency plans to deal with the possibility that
our third party processor will not be Y2K compliant on January 1, 2000. One plan
takes into account our role in the contingency plan that has been adopted by our
processor. The second plan which the Bank has developed will deal with
processing if our third party processor is not able to.
The Bank has completed the planned upgrade of the teller and platform
systems in all branch offices. This upgrade included enhancements to the back
office operational areas as well. All of these upgrades were Y2K compliant. All
personal computers currently in use at the Bank have been tested to ensure Y2K
compliance. In addition, all critical systems software used at the Bank not
directly involved with system processing by the Bank's third party processor
have been verified as being Y2K compliant.
Another risk for the Company would be the temporary business disruptions of
its large borrowers due to their failure to be prepared for Y2K. The Company has
already polled these customers to determine their readiness for year 2000, and
has independently assessed their readiness.
The worst case Y2K scenario would involve the breakdown of utility service,
critical system failure and Federal Reserve, Automated Clearing House and
Clearing House failure. In this case, the Bank would have difficulty continuing
operations in a manner approaching normal. The Company has not yet developed a
contingency plan for this scenario, other than for the critical system failure.
It is expected that utilities, the Federal Reserve and the Clearing Houses will
be Y2K compliant. All of these items will be closely monitored and a contingency
plan is expected to be completed prior to the end of the second quarter of 1999.
The Federal Deposit Insurance Corporation ("FDIC") is responsible for
supervising efforts by banks to prepare for the Y2K date change. The FDIC has
been conducting special examinations of insured banks to make sure they are
taking necessary steps to get ready for the Y2K date change. The FDIC is also
closely monitoring the progress that the Bank is making to complete critical
steps as required by Y2K plans.
-12-
<PAGE>
VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
- --------------------------------------------------------------------------------
The costs associated with the implementation of changes to deal with Y2K issues
is not expected to have a material impact on the Company's consolidated
financial statements. Costs are being expensed as incurred. Expenses recorded to
date are $57,000. While every effort is being made to ensure the Bank is Y2K
compliant, there can be no assurances that Y2K will not to some degree affect
the operations of the Bank.
FORWARD-LOOKING STATEMENTS
The Company has made, and may continue to make, various forward-looking
statements with respect to earnings, credit quality and other financial and
business matters for periods subsequent to March 31, 1998. The Company cautions
that these forward-looking statements are subject to numerous assumptions, risks
and uncertainties, and that statements relating to subsequent periods
increasingly are subject to greater uncertainty because of the increased
likelihood of changes in underlying factors and assumptions. Actual results
could differ materially from forward-looking statements.
In addition to those factors previously disclosed by the Company and those
factors identified elsewhere herein, the following factors could cause actual
results to differ materially from such forward-looking statements; competitive
pressures on loan and deposit product pricing; other actions of competitors;
changes in economic conditions; the extent and timing of actions of the Federal
Reserve Board; customer deposit disintermediation; changes in customers'
acceptance of the 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
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
(a) A Special Meeting of Stockholders was held on May 4, 1999 at the
Radisson Hotel, 42 Lake Avenue Extension, Danbury, Connecticut, 06811. There
were no solicitations in opposition to any of management's motions acted on at
the meeting.
(b) To approve and adopt an Agreement and Plan of Merger, dated as of
November 11, 1998, between Webster Financial Corporation and Village Bancorp,
Inc., the merger provided for therein, pursuant to which Village Bancorp, Inc.
will be acquired by Webster Financial Corporation, and the other transactions
contemplated by the Agreement and Plan of Merger.
Votes Cast: For 1,381,923
Against 42,602
Abstain 10,767
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 March 31, 1999.
-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: May 14, 1999 /s/ Robert V. Macklin
------------ ----------------------
Robert V. Macklin - President
and Chief Executive Officer
Date: May 14, 1999 /s/ James R. Umbarger
------------ ---------------------
James R. Umbarger - Executive Vice
President and Chief Financial Officer
-15-
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