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 Quarter Ended June 30, 1996 Commission File Number 0-14550
NEW ENGLAND COMMUNITY BANCORP, INC.
DELAWARE 06-1116165
OLD WINDSOR MALL
P.O. BOX 130
WINDSOR, CONNECTICUT, 06095
Telephone: (860) 688-5251
Indicate by check mark whether 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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
------ ------
The number of shares of common stock of the registrant outstanding as of August
12, 1996 was 3,633,166.
The total number of pages in this report is 20.
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<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
Consolidated Balance Sheet - June 30, 1996 and 1995
(unaudited) and December 31, 1995 4
Consolidated Statement of Income - six months
ended June 30, 1996 and 1995 (unaudited) 5
Consolidated Statement of Cash Flows - six months
ended June 30, 1996 and 1995 (unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 17
SIGNATURES 18
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<PAGE>
Part I--FINANCIAL INFORMATION
Item 1. Financial Statements
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<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
<TABLE>
<CAPTION>
June 30, June 30, December 31,
1996 1995 1995
(Unaudited) (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 16,262 $ 11,453 $ 14,495
Interest-bearing demand deposits with other banks 55
Federal funds sold 9,097 4,975 9,075
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 25,359 16,428 23,625
Interest-bearing time deposits with other banks 3,000
Investment securities:
Securities held-to-maturity 5,594 8,514 7,066
Securities available-for-sale 77,264 39,777 75,063
FHLBB Stock 1,176 810 1,176
Loans Outstanding 215,722 137,165 222,235
Less: allowance for loan losses (4,454) (2,415) (4,446)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loans 211,268 134,750 217,789
Mortgages held-for-sale 2,730 511 788
Accrued interest receivable 2,475 1,610 2,538
Premises and equipment 7,539 5,817 6,960
Other real estate owned 436 341 728
Other assets 2,919 1,201 2,828
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $336,760 $209,759 $341,561
===================================================================================================================================
LIABILITIES
Deposits
Noninterest bearing $ 54,294 $ 36,231 $ 59,945
Interest bearing 241,954 151,974 247,216
- -----------------------------------------------------------------------------------------------------------------------------------
Total deposits 296,248 188,205 307,161
Short-term borrowings 6,940 800 540
Other liabilities 2,204 864 3,380
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 305,392 189,869 311,081
- -----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value, authorized 10,000,000 shares, June 30, 1995
outstanding 2,080,692; December 31, 1995
and June 30, 1996 outstanding 3,084,309 308 208 308
Surplus 21,522 12,115 21,522
Retained earnings 9,957 7,692 8,492
Net unrealized (loss) gain on securities available-for-sale (419) (125) 158
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 31,368 19,890 30,480
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $336,760 $209,759 $341,561
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
(thousands of dollars; except per share data)
Six Months Ended Three Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $10,524 $5,873 $5,105 $2,984
Investment securities:
Taxable interest 1,979 1,258 1,037 615
Interest exempt from federal income taxes 52 22 28 10
Dividends 216 79 46 49
Federal funds sold 207 204 121 92
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income 12,978 7,436 6,337 3,750
Interest expense:
Deposits 4,693 2,457 2,298 1,320
Borrowed funds 46 17 36 8
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense 4,739 2,474 2,334 1,328
Net interest income 8,239 4,962 4,003 2,422
Provision for possible loan losses 1,034 280 502 150
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 7,205 4,682 3,501 2,272
Noninterest income:
Service charges, fees and commissions 783 687 372 360
Investment securities losses (gains) (5) (4) 3
Gain on the sales of loans 137 48 117 42
Other 191 65 181 49
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,106 800 666 454
Noninterest expense:
Salaries and employee benefits 3,139 2,042 1,581 1,019
Occupancy 558 348 301 188
Furniture and equipment 398 316 211 153
Outside services 216 151 99 75
Postage and supplies 235 199 113 102
Insurance and assessments 72 295 36 147
Losses, writedowns, expenses - other real estate owned 160 79 113 16
Other 789 647 326 302
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 5,567 4,077 2,780 2,002
- ------------------------------------------------------------------------------------------------------------------------------------
Income before taxes 2,744 1,405 1,387 724
Income taxes 878 498 444 256
NET INCOME $ 1,866 $ 907 $ 943 $ 468
====================================================================================================================================
Net income per share $ 0.61 $ 0.44 $ 0.31 $ 0.22
Weighted average shares outstanding of common stock 3,084 2,081 3,084 2,081
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(thousands of dollars)
Six months ended June 30, 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income $ 1,866 $ 907
Adjustment for noncash charges (credits):
Provision for depreciation and amortization 329 221
Losses from sale or disposal and provisions to reduce the carrying value
of other real estate owned, net 114 56
Investment securities (losses) gains, net (6) 0
Accretion of discounts and amortization of premiums on bonds, net 113 129
Provision for possible loan losses 1,034 280
Decrease in accrued interest income and other assets, net (28) 617
Increase in loans held-for-sale (1,942) (511)
(Decrease) increase in accrued interest and other liabilities, net (1,176) 319
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 304 2,018
- -----------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Net decrease in noninterest-bearing accounts (5,651) (11,092)
Net (decrease) increase in interest-bearing accounts (5,262) 2,425
Increase (decrease) in short-term borrowings, net 6,400 0
Cash dividends paid (346) (208)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (4,859) (8,875)
- -----------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Principal collections, net of originations 4,657 (5,197)
Proceeds from sales of loans 313 0
Decrease in interest-bearing time deposits 3,000 0
Purchases of securities available-for-sale (32,025) (13,385)
Proceeds from sales of securities available-for-sale 12,850 3,046
Proceeds from maturities of securities available-for-sale 15,009 7,765
Purchases of securities held-to-maturity (1,144) (247)
Proceeds from maturities of securities held-to-maturity 4,000 3,446
Proceeds from sales of other real estate owned 537 402
Purchases of premises and equipment, net (908) (361)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 6,289 (4,530)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,734 (11,387)
Cash and cash equivalents, beginning of period 23,625 27,815
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $25,359 $16,428
===================================================================================================================================
Schedule of noncash investing and financing activities:
Loans charged off, net of recoveries 1,384 429
Real estate acquired through foreclosure 433 227
Real estate owned charged to valuation adjustment 93
Income tax paid 1,228 11
Interest paid 5,001 2,478
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed interim financial statements are unaudited and
include the accounts of New England Community Bancorp, Inc. (the "Company" or
"NECB") and its subsidiaries, New England Bank and Trust Company ("NEBT") and
The Equity Bank ("EQBK"). These financial statements reflect, in the opinion of
Management, all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the Company's financial position and the
results of its operations and its cash flows for the periods presented. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's 1995 Annual Report on Form 10-K.
NOTE 2 - PURCHASE ACCOUNTING
On November 30, 1995, the Company consummated a reorganization with EQBK by
issuing 1,003,617 shares of the Company's Common Stock in exchange for all of
the outstanding common shares (less 69,486 shares not exchanged by dissenting
shareholders) of EQBK. The merger was accounted for as a purchase, and thus, the
results of operations for EQBK are only included since the date of the
reorganization.
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<PAGE>
Part I--FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Page -8-
<PAGE>
FINANCIAL CONDITION
Total assets at June 30, 1996 were $336,761,000, a decrease of $4,800,000, or
1.4%, from $341,561,000 at December 31, 1995. Total deposits which constitute
the primary funding source of the Company's assets, decreased $10,913,000 or
3.6% from December 31, 1995 and amounted to $296,248,000 at June 30, 1996.
Borrowed funds increased by $6,400,000 which partially offset the decrease in
deposits. Accrued interest payable and other liabilities decreased $1,176,000.
Federal funds sold were virtually unchanged and stood at $9,097,000 at June 30,
1996. Federal funds, overnight loans to other banks, represent excess reserves
which are the Company's most liquid assets and as such are available to meet
short term cash flow needs. During the first six months of 1996, loans
outstanding decreased $6,513,000 or 2.9% to $215,722,000. Management believes
that the general increase in interest rates has made variable rate loans more
attractive to borrowers and, as these loans are not sold in the secondary
market, should help increase outstanding loans in the third quarter. Investment
securities were essentially unchanged and ended the quarter at $84,034,000.
Securities held-to-maturity decreased from $7,066,000 at December 31, 1995 to
$5,594,000 at June 30, 1996. This represents a decrease of $1,472,000.
Conversely, securities available-for-sale increased $2,201,000 from $75,063,000
to $77,264,000 during the period. Total shareholders' equity was $31,368,000 at
June 30, 1996, an increase of $888,000 over December 31, 1995. The change
included a $577,000 increase in net unrealized losses (net of related tax
effect) on securities available-for-sale and a $1,465,000 increase in retained
earnings.
SECURITIES HELD-TO-MATURITY
Securities held-to-maturity are shown in the Company's balance sheets on an
amortized cost basis. Amortized cost is the original cost adjusted for the
effect of accumulated amortization of premiums and accretion of discounts.
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amortized Amortized
Cost Fair Cost Fair
(in thousands) Basis Value Basis Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities issued by ...
...the U.S. Treasury and other U.S. government agencies $3,003 $2,946 $5,501 $5,560
...states of the United States and political subdivisions
of the states 2,591 2,578 1,565 1,629
- ------------------------------------------------------------------------------------------------------------------------------------
$5,594 $5,524 $7,066 $7,189
====================================================================================================================================
</TABLE>
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale are shown in the Company's balance sheets at fair
value. The unrealized gain or loss resulting from such valuation, reduced by the
effect of income taxes, is reflected as a separately disclosed component of
shareholders' equity. At June 30, 1996, the net unrealized loss on securities
available-for-sale was $743,000 while at December 31, 1995 the net unrealized
gain was $270,000, representing an increase in net unrealized losses of
$1,013,000.
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<PAGE>
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amortized Amortized
Cost Fair Cost Fair
(in thousands) Basis Value Basis Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable equity securities $10,635 $10,735 $15,115 $15,201
Debt securities issued by...
...the U.S. Treasury and other U.S. government agencies 46,340 45,616 38,734 38,806
Corporate debt securities 8,737 8,699 9,688 9,668
Mortgage-backed securities 12,295 12,214 11,256 11,388
- ------------------------------------------------------------------------------------------------------------------------------------
$78,007 $77,264 $74,793 $75,063
====================================================================================================================================
</TABLE>
NONPERFORMING ASSETS
The following table sets forth information pertaining to the Company's
nonperforming assets and the level of the allowance for possible loan losses
relative to those assets.
<TABLE>
<CAPTION>
(in thousands) June 30, 1996 December 31,1995
- ------------------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans $4,625 $4,725
Other real estate owned 436 728
- ------------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $5,061 $5,453
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans past due in excess of ninety days and accruing interest $ 160 $ 273
Ratio of nonperforming assets to total loans and OREO 2.3% 2.5%
Ratio of nonperforming assets and loans past due in excess of
ninety days and accruing interest to total loans and OREO 2.4% 2.6%
Ratio of allowance for loan losses to total loans 2.1% 2.0%
Ratio of allowance for loan losses to nonperforming assets and
loans in excess of ninety days past due and accruing interest 85.3% 77.6%
Ratio of nonperforming assets and loans in excess of ninety days
past due and accruing interest to total shareholders' equity 16.6% 18.8%
</TABLE>
Total nonperforming assets decreased $392,000 to $5,061,000 at June 30, 1996
from $5,453,000 at December 31, 1995. During this period nonperforming assets
were increased by $3,202,000 loans newly classified as nonaccruing and decreased
by $581,000 from sales of foreclosed properties--net of gains/losses on their
sale--$1,216,000 from loans charged off and written-down, $416,000 in loans
returned to performing status and $1,381,000 in repayments. Nonperforming loans
may be returned to performing status when they have regained compliance with
their original terms and the borrower demonstrates an ongoing ability to
continue performing as agreed.
The Company's total allowance for possible loan losses was $4,454,000 at June
30, 1996, as compared to $4,446,000 at December 31, 1995. Activity in the
allowance for possible loan losses for the six months since December 31, 1995
was as follows:
<TABLE>
<CAPTION>
(in thousands)
Six months ended June 30, 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance beginning of period $4,446 $2,565
Provisions charged to operations 1,034 280
Recoveries on loans previously charged-off 73 84
Loans charged-off (1,098) (514)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance end of period $4,454 $2,415
===================================================================================================================================
</TABLE>
Provisions for possible loan losses charged to operations for the first six
months of 1996 were $1,034,000, representing an increase of $754,000 from the
same period of 1995. EQBK's provision of $592,000 represents approximately
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<PAGE>
three-quarters of this increase as it is included for the first time. The
increased provisions also relate to loan growth, anticipated to result from the
recent openings of branches in the towns of Canton and West Hartford,
Connecticut by the Company's subsidiary, New England Bank,. During the six month
period, charge-offs increased $584,000. As with the change in provisions, this
increase is largely due to the inclusion of EQBK's operations for the first
time. Management's assessment of the adequacy of the allowance is based upon the
composition of the loan portfolio, past due experience, current economic
conditions and other factors deemed appropriate. Management analyzes the
subsidiaries loan portfolios as part of its risk management process to ascertain
the potential for loss from possible nonpayment by some of the Banks' borrowers
as well as the risk of loss inherent in the portfolio. Reserves are assigned to
specific loans and classes of loans, and then aggregated to determine the total
level needed. The adequacy of the allowance is also evaluated in light of
prevailing economic conditions and other factors.
CAPITAL
Under currently applicable Federal Reserve Board regulations, the Company must
maintain a minimum risk based capital ratio of 8.0% of which 4.0% must be Tier 1
capital and a minimum leverage capital ratio of between 4.0% and 5.0%. In
addition, under FDIC regulations, the Company's subsidiaries must meet these
same minimum risk-based and leverage capital ratios. These requirements are
minimum ratios and banks may be required to maintain higher ratios.
Total shareholders' equity of the Company at June 30, 1996 was $31,368,000
compared to $30,480,000 at December 31, 1995. The Company's Tier 1 leverage
capital ratio was 9.56% at June 30, 1996. The capital ratios of the Company and
each of its subsidiaries were in compliance with all applicable regulatory
requirements.
Along with the regulatory minimums, the table below summarizes the Company's
leverage and risk-based ratios as well as those of its subsidiaries at June 30,
1996:
<TABLE>
<CAPTION>
MINIMUM LEVEL EQBK NEBT NECB
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leverage 4% 8.98% 7.73% 9.50%
Tier 1 Risk-Based 4% 12.49% 11.09% 13.68%
Total Risk-Based 8% 13.75% 12.35% 14.79%
</TABLE>
The FDIC Improvement Act (FDICIA) categorizes banks, according to their capital
levels, into one of five categories ranging from "well capitalized" to
"critically undercapitalized." Each category serves to determine a bank's
deposit insurance premium as well as any mandated restrictive regulatory
actions. As of June 30, 1996, NECB's subsidiary banks were categorized as "well
capitalized," which specifies for minimum Leverage, Tier 1, and Total Capital,
ratios of 5%, 6% and 10%, respectively.
LIQUIDITY
It is management's objective to ensure the continuous ability to meet cash needs
as they arise. Such needs may occur from time to time as a result of seasonal
declines in deposit levels, response to changes in interest rates paid on
deposits and interest rates charged for loans and fluctuations in the demand for
the Banks' various loan products. Accordingly, the Company maintains liquidity
that provides the flexibility to meet its cash needs. The liquidity objective is
achieved through the maintenance of readily marketable assets as well as a
balanced flow of asset maturities and prudent pricing on loan and deposit
agreements. The Company has alternative sources of liquidity, including
repurchase agreements and lines of credits provided by the FHLBB to both
subsidiaries, which together provide the Company with flexibility in managing
its liquidity position. The maturities of investment securities and cash flows
from the repayments of outstanding loans are expected to provide the Company
with adequate liquidity over the coming months.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996
Note: On November 30, 1995, the Company completed its merger EQBK which was
accounted for using the purchase method of accounting. Thus, the results of
operations for EQBK are only included since the date of the reorganization.
Net income for the three months ended June 30, 1996, was $943,000 or $0.31 per
share as compared to $468,000 or $0.22 per share for the same period of 1995. An
important factor in these results was a $1,581,000 increase in net interest
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<PAGE>
income to $4,003,000 for the three months ended June 30, 1996, from $2,422,000
for the same period one year earlier. This increase was supplemented by a
$212,000 increase in noninterest revenue and partly offset by a $778,000
increase in noninterest expenses.
NET INTEREST INCOME
As with the previous quarter the increase in net interest income resulted from
two factors: 1) the inclusion of EQBK's operations for the first time, and, to a
lesser degree, 2) the net interest margin (net yield on average earning assets),
increased during the second quarter of the year. As shown in the following
table, the net interest margin (on a tax-equivalent basis) for the three months
ended June 30, 1996 was 5.28% compared to 5.17% for the same period one year
ago. The average rate paid on interest bearing liabilities during the second
quarter of 1996 was 3.85% compared to 3.57% for the same period in 1995. At the
same time, the average rate earned on earning assets was 8.29% for the quarter
ended June 30, 1996 from 7.97% in the same period in 1995.
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<PAGE>
AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST RATES
The table below presents the Company's average balance sheets (computed on a
daily basis), net interest income, and interest rates for the quarters ended
June 30, 1996 and June 30, 1995. The table reports nonaccruing loans as part of
average loans outstanding and interest income is presented on a tax-equivalent
basis which reflects a federal tax rate of 34% for all periods presented.
<TABLE>
<CAPTION>
Quarter ended June 30, 1996 June 30, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average
(in thousands) Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Federal funds sold $ 9,884 $121 4.92% $ 6,345 $92 5.82%
Investment securities:
Held-to-maturity 5,812 91 6.03% 9,054 110 4.87%
Available-for-sale 74,524 1,099 5.93% 37,556 594 6.34%
Mortgages held for sale 3,058 58 7.63% 286 0 0%
Loans 217,836 5,047 9.32% 137,010 2,984 8.74%
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 311,114 6,416 8.29% 190,251 3,704 7.97%
Allowance for loan losses (4,537) (2,361)
Cash & due from banks 13,997 9,127
Other assets 13,045 8,792
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $333,619 $205,809
====================================================================================================================================
LIABILITIES
Regular savings deposits $68,779 $368 2.15% $ 48,174 $260 2.16%
NOW account deposits 30,619 116 1.52% 20,551 64 1.25%
Money market deposits 5,527 14 1.02% 5,184 16 1.24%
- ------------------------------------------------------------------------------------------------------------------------------------
Total savings deposits 104,925 498 1.91% 73,909 340 1.85%
Time deposits 136,339 1,800 5.31% 74,792 981 5.26%
Borrowed funds 2,809 36 5.15% 585 8 5.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 244,073 2,334 3.85% 149,286 1,329 3.57%
Demand deposits 54,483 35,907
Other liabilities 3,920 1,039
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 302,476 186,232
Equity 31,143 19,577
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities & Equity $333,619 $205,809
====================================================================================================================================
Net interest income (tax equivalent basis) $4,082 $2,451
Less adjustment for tax-exempt income (79) (29)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income $4,003 $2,422
====================================================================================================================================
Net interest spread 4.45% 4.40%
Net interest margin 5.28% 5.17%
</TABLE>
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<PAGE>
RATE VOLUME ANALYSIS
The following table, which is presented on a tax-equivalent basis, reflects the
changes, for the quarter ended June 30, 1996 when compared to the quarter ended
June 30, 1995, in net income arising from changes in interest rates and from
asset and liability volume, including mix. The change in interest due to both
rate and volume has been allocated to rate and volume changes in proportion to
the relationship of the absolute dollar amounts of the changes in each.
<TABLE>
<CAPTION>
Change due to
CHANGE IN:
Increase ---------------------
(in thousands) (DECREASE) RATE VOLUME
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST EARNED ON:
<S> <C> <C> <C>
Federal funds sold $ 29 $(14) $ 43
Investment securities:
Held-to-maturity (19) 32 (51)
Available-for-sale 505 (39) 544
Mortgages held for sale 58 5 53
Loans 2,063 198 1,865
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $2,636 $182 $2,454
INTEREST PAID ON:
Regular savings deposits $ 108 $ (2) $ 110
NOW account deposits 52 14 38
Money market deposits (2) (3) 1
- -----------------------------------------------------------------------------------------------------------------------------------
Total savings deposits 158 10 148
Time deposits 819 9 810
Borrowed funds 28 0 28
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 1,005 18 987
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income change $1,631 $164 $1,467
===================================================================================================================================
</TABLE>
As the above table indicates, for the quarter ended June 30, 1996 net interest
income (on a fully tax equivalent basis) rose $1,631,000. Of this amount,
$164,000 resulted from changes to interest rates earned on earning assets and
paid on on interest bearing liabilities. The remaining portion of the increase,
$1,467,000 was dervived from changes in volume of average assets and
liabilites--primarily from the inclusion of EQBK in the 1996 results.
NONINTEREST INCOME
The $212,000 increase realized in noninterest revenue is largely due to volume
increases in loans originated for sale and an increase in certain credits
received during the quarter.
NONINTEREST EXPENSE
As noted, noninterest expenses increased $778,000 to $2,780,000 from $2,002,000
during the same quarter last year. For most part, the increase was both due to
and proportionate to the inclusion of EQBK's operations in the Company's
financial statements for the first time. In addition to this, a $100,000
decrease in insurance and assessments (is due to a decrease in FDIC premiums
along with savings from combining certain insurance policies following the
merger. The increase OREO related expenses reflects management's continued
effort to dispose of non-earning assets as soon as practicable after they have
been acquired.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996
Net income for the six months of 1996 amounted to $1,866,000, or $0.61 per
share. This represents an increase of $959,000 compared to $907,000, or $0.44
per share through the first six months of 1995. This increase is primarily the
result of an $3,277,000 increase in net interest income. This increase was added
to a $306,000 increase in noninterest income and partially offset by $1,490,000
increase in noninterest expenses during six months ended June 30, 1996.
Page -14-
<PAGE>
NET INTEREST INCOME
Net interest income totaled $8,239,000. This was an increase of $3,277,000, or
66%, when compared to the $4,962,000 from the same period a year earlier. The
increase in net interest income resulted primarily from the inclusion of EQBK's
operations for the first time and to an increase in the net interest margin (net
yield on average earning assets) during the first half of the year.
NONINTEREST INCOME
Noninterest income through the first six months of 1996 increased $306,000 to
$1,106,000 from $306,000 in the first six months of 1995. This increase included
the first time effect of the merger with EQBK and an $89,000 increase in gains
on loans originated for sale.
NONINTEREST EXPENSE
Noninterest expenses amounted to $5,567,000 during the first half of 1996. This
represents a $1,490,000 increase, or 36%, over the $4,077,000 reported during
the first six months of 1995 and is largely the result of the inclusion of EQBK
for the first time. Beyond the effect of the merger, expenses increased
moderately in salaries and benefits, occupancy, losses and writedowns on OREO
and other expenses while insurance and assessments decreased. Salaries and
benefit expense rose in response to both merit increases and higher employee
benefit expense. The increase in occupancy expense is related to additional
lease expense for new facilities and the associated amortization of leasehold
improvements and increased depreciation expense on the Company's new Technology
Center--which was acquired in December 1995. Expenses related to furniture and
equipment and outside services also rose during the period, when compared to
1995. Finally, losses and writedowns on OREO property increased to $160,000 at
June 30, 1996.
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<PAGE>
Part II: Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Default Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of New England Community Bancorp, Inc.
was held on Tuesday, May 21, 1996. Shareholders voted on and approved each of
the following proposals:
1. To elect the following twelve (12) individuals to the Company's
Board of Directors until the next Annual Meeting and the election
and qualification of their successors:
Number of Number of Shares
Individual Shares for Withholding Authority
---------- ---------- ---------------------
Tadeus J. Buczkowski 2,149,131 10,615
John C. Carmon 2,136,133 23,613
John A. Coccomo, Sr. 2,147,887 11,859
George A. Colli, Jr. 2,134,789 24,957
Gary J. DeNino 2,147,755 11,991
Frank A. Falvo 2,147,644 12,102
Dominic J. Ferraina 2,149,131 10,615
Charles D. Gersten 2,149,131 10,615
John R. Harvey 2,149,231 10,515
David A. Lentini 2,149,123 10,623
Angelina J. McGillivray 2,147,987 11,759
Edward J. Szewczyk 2,149,131 10,615
2. To ratify the resolution adopted by the Board of Directors
appointing the independent public accounting firm of Shatswell,
MacLeod & Company, P.C. as independent auditors of the Company for
the fiscal year ended December 31, 1996.
For Approval Against Approval Abstain
------------ ---------------- -------
2,139,988 5,112 14,646
3. To approve the 1996 Incentive and Nonqualified Compensatory Stock
Option Plan (the "Stock Option Plan") which permits stock options
to be granted from the Stock Option Plan for a term of up to ten
(10) years until January 31, 2006. The Board of Directors of the
Company believes that stock ownership by key managerial employees
enables the Company to attract and retain such employees.
Accordingly, the purpose of the Stock Option Plan is to stimulate
key employees of the Company and its subsidiaries, who are in a
position to materially contribute to the long-term success of the
Company, by allowing such individuals to acquire or increase their
proprietary interest in the Company. Options for up to an
aggregate of 750,000 shares of NECB's Common Stock may be issued
under the Stock Option Plan. On January 31, 1996, subject to
shareholder approval, the committee (as defined in the Stock
Option Plan) granted aggregate options to acquire 140,000 shares
to five (5) key employees.
For Approval Against Approval Abstain Non-votes
------------ ---------------- ------- ---------
1,547,912 123,323 28,070 460,441
Item 5 Other Information
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<PAGE>
A) On July 11, 1996 the Company completed its previously
announced merger with Manchester State Bank. Pursuant to the
terms of the Plan and Agreement of Reorganization, dated as
of December 19, 1995 (the "Reorganization Agreement") by and
among New England Community Bancorp, Inc. ("NECB"), New
England Bank and Trust Company ("NEBT") and Manchester State
Bank ("MSB"), NECB acquired all of the outstanding shares of
MSB Common Stock. Pursuant to the Reorganization Agreement,
MSB's operations have been merged with and into NECB's
wholly-owned subsidiary, New England Bank & Trust Company.
The Reorganization became effective on Friday, July 12, 1996
at 12:01 a.m. (the "Effective Time").
At the Effective Time, each share of MSB Common Stock issued
and outstanding immediately prior to the Effective Time was
converted into the right to receive 5.493 shares of NECB's
Common Stock and $35.20 in cash.
The total cash consideration paid by NECB for fractional
shares was $5,316.44 which was available from NECB's
operations. The total number of shares of NECB Common stock
issued in exchange for MSB Common Stock was 548,857.
B) On June 10, 1996, NEBT opened its ninth office at 55
South Main Street in West Hartford, Connecticut.
Item 6. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Exhibits
Exhibit Number Exhibit
27 Financial Data Schedule
(b) Form 8-K; Current Reports. The following reports were filed
with the Securities and Exchange Commission during the quarter ended June 30,
1996:
(i) On May 31, 1996, NECB filed a report on Form 8-K which
detailed the results of the Company's Annual Meeting of Shareholders held on May
21, 1996.
Page -17-
<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW ENGLAND COMMUNITY BANCORP, INC.
Date: August 13, 1996 By: /S/ ANSON C. HALL
-----------------------------
Anson C. Hall
Vice President and Treasurer
Page -18-
<PAGE>
Exhibit 27, Financial Data Schedule
New England Community Bancorp, Inc.
Item Number Item Description Amount
- ------------------------------------------------------------------------------
New England Community Bancorp, Inc.
Multiplier 1,000
Currency U.S.
Table
S
Fiscal year-end Dec-31-1995
Period end June-30-1996
Period type 6-mos
9-03(1) Cash 16,262
9-03(2) Int-Bearing-Deposits 241,954
9-03(3) Fed-Funds-Sold 9,097
9-03(4) Trading-Assets 0
9-03(6) Investments-Held-For-Sale 0
9-03(6) Investments-Carrying 77,264
9-03(6) Investments-Market 78,007
9-03(7) Loans 215,722
9-03(7)(2) Allowance 4,454
9-03(11) Total-Assets 336,760
9-03(12) Deposits 296,248
9-03(13) Short-Term 6,940
9-03(15) Liabilities-Other 2,204
9-03(16) Long -Term 0
9-03(19) Preferred-Mandatory 0
9-03(20) Preferred Stock - no mandatory redemption 0
9-03(21) Common stocks 308
9-03(22) Other shareholders' equity 31,060
9-03(23) Total liabilities and shareholders equity 336,760
9-04(1) Interest and fees on loans 10,524
9-04(2) Interest and dividends on investments 2,247
9-04(4) Other interest income 207
9-04(5) Total interest income 12,978
9-04(6) Interest on deposits 4,693
9-04(9) Total interest expense 4,739
9-04(10) Net interest income 8,239
9-04(11) Provision for loan losses 1,034
9-04(13)(h) Investment securities gains/losses (5)
9-04(14) Other expenses 5,567
9-04(15) Income before income tax 2,744
9-04(17) Income before extraordinary items 2,744
9-04(18) Extraordinary items, less tax 0
9-04(19) Cumulative change in accounting principles 0
9-04(20) Net income or loss 1,866
9-04(21) Earnings per share - primary 0.61
9-04(21) Earnings per share - fully diluted 0.61
I.B.5 Net yield - interest earning assets - actual 8.29
III.C.1(a) Loans on nonaccrual 4,625
III.C.1(b) Accruing loans past due 90 days or more 160
III.C.1(c) Troubled debt restructuring 0
III.C.2 Potential problem loans 10,096
IV.A.1 Allowance for loan losses - beginning of period 4,446
IV.A.2 Total chargeoffs 1,098
IV.A.3 Total recoveries 73
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<PAGE>
IV.A.4 Allowance for loan losses - end of period 4,454
IV.B.1 Loan loss allowance allocated to domestic loans 4,454
IV.B.2 Loan loss allowance allocated to foreign loans 0
IV.B.3 Loan loss allowance - unallocated 0
Page -20-
