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 September 30, 1998 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) 610-3600
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 October
31, 1998 was 7,027,554.
The total number of pages in this report is 19.
Page -1-
<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets--September 30, 1998 (unaudited)
and December 31, 1997 3
Consolidated Statements of Income--three and nine months
ended September 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows--nine months ended
September 30, 1998 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
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 16
Item 6. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 16
SIGNATURES 18
Page -2-
<PAGE>
Part I--FINANCIAL INFORMATION
Item 1. Financial Statements
NEW ENGLAND COMMUNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(thousands of dollars) (Unaudited)
============================================================================================================
<S> <C> <C>
ASSETS:
Cash and due from banks $ 36,696 $ 44,338
Short-term investments 3,027 8,252
Federal funds sold 5,057 8,725
---------- ----------
Cash and cash equivalents 44,780 61,315
Interest bearing deposits with banks 693 594
Securities held-to-maturity 6,634 14,315
Securities available-for-sale 175,330 163,265
Federal Home Loan Bank stock 4,881 4,881
Loans outstanding 523,744 538,182
Less: allowance for possible loan losses (10,292) (12,081)
---------- ----------
Net loans 513,452 526,101
Loans held-for-sale 9,999 2,966
Accrued interest receivable 5,689 5,480
Premises and equipment 13,957 13,301
Other real estate owned 1,936 3,196
Goodwill 4,944 5,238
Other assets 8,390 7,300
---------- ----------
Total Assets $ 790,685 $ 807,952
========== ==========
LIABILITIES:
Deposits:
Noninterest bearing $ 144,931 $ 152,951
Interest bearing 512,620 541,995
---------- ----------
Total deposits 657,551 694,946
Short-term borrowings 28,991 18,469
Long-term debt 27,441 20,112
Other liabilities 4,542 5,039
---------- ----------
Total Liabilities 718,525 738,566
SHAREHOLDERS' EQUITY:
Common Stock--$0.10 par value, authorized 20,000,000 shares:
September 30, 1998, 7,027,554 outstanding; authorized
10,000,000 shares: 7,042,799 outstanding 703 704
Additional paid-in capital 61,749 62,322
Retained earnings 7,719 4,974
Net unrealized gain on securities available-for-sale 1,989 1,386
---------- ----------
Total Shareholders' Equity 72,160 69,386
---------- ----------
Total Liabilities & Shareholders' Equity $ 790,685 $ 807,952
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
Page -3-
<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
CONSOLIDATED INCOME STATEMENTS (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
(thousands of dollars; except per share data) 1998 1997 1998 1997
==============================================================================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 36,027 $ 31,863 $ 11,829 $ 10,904
Securities:
Taxable interest 8,192 7,653 2,727 2,567
Interest exempt from federal income taxes 339 146 200 56
Dividends 138 294 47 143
Federal funds sold and other interest 327 442 99 162
--------- --------- -------- -------
Total interest income 45,023 40,398 14,902 13,832
INTEREST EXPENSE:
Deposits 15,229 13,326 4,938 4,561
Borrowed funds 1,984 1,098 755 450
--------- --------- -------- -------
Total interest expense 17,213 14,424 5,693 5,011
Net interest income 27,810 25,974 9,209 8,821
Provision for possible loan losses 1,192 1,327 387 559
--------- --------- -------- -------
Net interest income after provision for possible loan losses 26,618 24,647 8,822 8,262
NONINTEREST INCOME:
Service charges, fees and commissions 3,047 2,756 1,013 913
Investment securities gains, net 1,504 207 87 8
Gain on the sales of loans, net 2,280 613 913 198
Other 211 247 46 65
--------- --------- -------- -------
Total noninterest income 7,042 3,823 2,059 1,184
NONINTEREST EXPENSE:
Salaries and employee benefits 11,749 9,950 3,942 3,329
Occupancy 2,086 2,157 675 700
Furniture and equipment 1,474 1,453 487 584
Outside services 1,571 1,449 573 264
Postage and supplies 854 777 242 236
Insurance and assessments 326 259 99 87
Losses, writedowns, expenses - other real estate owned (100) 397 14 185
Amortization of goodwill 294 236 99 79
Loss on sale of portfolio loans 715
Acquisition expense 3,593 1,253 3,593 1,253
Other 2,756 2,590 651 900
--------- --------- -------- -------
Total noninterest expense 25,318 20,521 10,375 7,617
--------- --------- -------- -------
Income before taxes 8,342 7,949 506 1,829
Income taxes 3,637 3,180 426 876
--------- --------- -------- -------
Net Income $ 4,705 $ 4,769 $ 80 $ 953
========= ========= ======== =======
Net income per share--Basic $ 0.67 $ 0.69 $ 0.01 $ 0.14
Net income per share--Diluted $ 0.65 $ 0.69 $ 0.01 $ 0.14
Weighted average shares of
Common Stock outstanding--Basic 7,046 6,950 7,038 6,969
Weighted average shares of
Common Stock outstanding--Diluted 7,218 6,950 7,147 6,969
</TABLE>
The accompanying notes are an integral part of these statements.
Page -4-
<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(thousands of dollars) 1998 1997
- - ---------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 4,705 $ 4,769
Adjustment for noncash charges (credits):
Provision for depreciation and amortization 1,173 1,095
Losses from sale or disposal and provisions to reduce the carrying value
of other real estate owned, net (257) 145
Securities gains, net (1,504) (208)
Accretion of discounts and amortization of premiums on bonds, net 180 58
Accretion, net of amortization, of purchase accounting adjustments 9 (160)
Amortization of goodwill and other intangibles 294 236
Provision for possible loan losses 1,192 1,327
(Gain) loss on sale of portfolio loans, net 715
(Increase) decrease in accrued interest income and other assets, net (1,479) 283
Decrease (increase) in loans held-for-sale (7,033) 531
(Decrease) increase in accrued interest payable and other liabilities, net (1,182) (2,537)
-------- --------
Net cash provided by (used for) operating activities (3,187) 5,539
-------- --------
FINANCING ACTIVITIES:
Net decrease in noninterest-bearing accounts (8,020) 9,581
Net (decrease) increase in interest-bearing accounts (29,333) (5,907)
Net increase in short-term borrowings 10,522 8,637
Net increase in long-term borrowings 7,340 14,423
Proceeds from issuance of common stock 437 126
Cash dividends paid (1,595) (1,130)
-------- --------
Net cash used for financing activities (20,649) 25,730
INVESTING ACTIVITIES:
Loans originated, net of principal collections (2,604) (21,487)
Proceeds from sale of portfolio loans 11,988 38
Net (increase) decrease in interest-bearing time deposits (99) 168
Purchases of Federal Home Loan Bank Stock (829)
Purchases of securities available-for-sale (70,773) (62,904)
Proceeds from sales of securities available-for-sale 21,355 31,228
Proceeds from maturities of securities available-for-sale 41,591 19,265
Purchases of securities held-to-maturity (1,026)
Proceeds from maturities of securities held-to-maturity 4,701 3,644
Proceeds from sales of other real estate owned 3,123 3,667
Purchases of premises and equipment, net (1,755) (859)
Sales of premises and equipment 49
Capitalization of expenditures on other real estate owned (275) (97)
-------- --------
Net cash provided by (used for) investing activities 7,301 (29,192)
-------- --------
Increase (decrease) in cash and cash equivalents (16,535) 2,077
Cash and cash equivalents, beginning of period 61,315 50,633
-------- --------
Cash and cash equivalents, end of period $ 44,780 $ 52,710
======== ========
Schedule of noncash investing and financing activities
Loans charged off, net of recoveries $2,981 $642
Real estate acquired through foreclosure 1,331 1,376
Loans originated to facilitate sales of other real estate owned 104
Income tax paid 3,097 1,166
Interest paid 17,173 14,612
</TABLE>
Page -5-
<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 ("New England
Bank"), The Equity Bank ("Equity Bank"), Community Bank ("Community Bank"), and
Olde Port Bank (together the "Subsidiaries"). The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to SEC
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
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 1997 Annual Report on Form 10-K.
NOTE 2 - MERGERS AND ACQUISITIONS
- - ---------------------------------
On December 31, 1997, NECB acquired Community Bank (formally known as
Community Savings Bank) by paying $4,832,000 in cash for all of the outstanding
common shares of Community Bank. The acquisition of Community Bank was accounted
for as a purchase. Accordingly, the consolidated financial statements of the
Company do not include prior operating results of Community Bank.
During the third quarter of 1998, NECB completed two acquisitions. On, July
10, 1998, Olde Port Bank & Trust Company ("Olde Port"), a New Hampshire
state-chartered bank and trust company, became NECB's fourth wholly owned
banking subsidiary. NECB acquired Olde Port by issuing 585,986 shares of the
Company's common stock for all of the outstanding common shares of Olde Port and
all fully vested and exercisable stock options.
On August 14, 1998, NECB acquired Bank of South Windsor ("South Windsor"),
of South Windsor, Connecticut, by issuing 1,270,720 shares of the Company's
common stock for all of the outstanding common shares of South Windsor. In
conjunction with the transaction, shares of South Windsor common stock
beneficially owned by NECB were cancelled and retired.
The acquisitions of Olde Port and South Windsor were accounted for as
poolings of interests and, as such, all prior period results have been restated
as though the companies had been combined as of the earliest period presented.
Page -6-
<PAGE>
NOTE 3 - DISCLOSURE FOR STATEMENTS OF CASH FLOWS
- - ------------------------------------------------
Schedule of noncash investing and financing activities:
Loans charged off, net of recoveries $2,981 $642
Real estate acquired through foreclosure 1,331 1,376
Income tax paid 3,097 1,166
Interest paid 17,173 14,612
Part I--FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
- - --------
The Company's earnings are largely dependent upon net interest income and
noninterest income from its community banking operations--with net interest
income providing the majority of the Company's revenues. Net interest income is
the difference between interest earned on the loan and investment portfolios and
interest paid on deposits and other sources of funds. Noninterest revenue is
primarily derived from service charges, fees and commissions related to deposit
accounts and the Company's serviced loan portfolio. As noted in Note 2 above,
the acquisitions of Olde Port and South Windsor were accounted for as pooling of
interests. As such, all prior period results have been restated as though the
companies had been combined as of the earliest period presented.
NECB reported record net operating income--net income before applying
onetime charges related to mergers--for the third quarter of 1998 of $2,707,000,
or $0.38 per diluted share, compared to net income of $2,145,000, or $0.31 per
diluted share, reported in the same quarter in 1997. This is an increase of
$562,000 or 26% over net operating income reported in the previous year. On an
earnings per share basis, third quarter 1998 net income increased 23% over the
third quarter of 1997. Two important measures of performance also increased
significantly when compared to the same period last year. Excluding the onetime
charges, the ROA and ROE for the third quarter of 1998 were 1.39% and 14.75%,
respectively, compared to 1.20% and 12.82%, respectively, for the third quarter
of 1997.
The onetime charges related to the acquisitions of Olde Port and South
Windsor amounted to $2,627,000, net of related tax benefits. Similarly, during
the quarter ended September 30, 1997, NECB took a net charge of $1,192,000 in
connection with completing its purchase of First Bank of West Hartford ("First
Bank"). Charges to net income for mergers and acquisitions result from
post-closing restructuring costs and costs associated with completing the
transactions--including fees paid to advisors, attorneys and expenses related to
proxy and registration statements. For the third quarter of 1998, net income was
$80,000, or $0.01 per diluted share compared to $953,000, or $0.14 per diluted
share, a year earlier. These events are summarized below:
(Amounts in thousands)
Quarter-ended September 30,
1998 1997
------- --------
Results as reported........................... $ 80 $ 953
Less: merger related charges
(tax effected).... 2,627 1,192
------- --------
Net income form operations................ $ 2,707 $ 2,145
======= ========
Net interest income on a fully-taxable equivalent ("FTE") basis totaled
$9,357,000 for 1998 compared to $8,854,000 in 1997. Despite the continuing trend
toward lower market rates during much of 1998 (e.g., the benchmark 30-year
Treasury declined 94 basis points from 5.92% in December 1997 to 4.98% in
September 1998), NECB's consolidated net interest margin remains strong. In the
third quarter of 1998 the margin was 5.23% compared to 5.35% achieved during the
third quarter of 1997.
The provisions for possible loan losses in the third quarter of 1998 were
$387,000 compared to $559,000 in the comparable period in 1997. While loan
performance was virtually unchanged from last year, the increased use of
government guaranteed loan programs slowed the need for new loan loss reserves
in quarter ended September 30, 1998 compared to last year. With regard to loan
performance, the ratio of nonperforming assets to total assets remained below
one percent of total assets and equaled 0.98% of total assets at September 30,
1998 compared to 0.95% a year earlier.
Noninterest income rose sharply in the third quarter of 1998 and totaled
$2,059,000 in 1998 compared to $1,184,000 in the period in 1997--an increase of
$875,000, or 74%. Noteworthy increases occurred in gains from the sale of
mortgage loans, and service charges, fees and commissions which rose $715,000
and $100,000, respectively. Significantly, in the aggregate, noninterest sources
of income accounted for 18% of operating income (net interest income plus
noninterest income) in the third quarter compared to 12% for the same quarter in
1997.
Page -7-
<PAGE>
Noninterest expense totaled $10,375,000 in the third quarter of 1998
compared to $7,617,000 in 1997. The increase primarily resulted from the onetime
charges--accounting for $2,340,000 of the $2,758,000 increase--and the addition
of Community Bank. Gross acquisition-related expense totaled $3,593,000 in the
quarter ended September 30, 1998 compared to $1,253,000 in same period a year
earlier. Excluding these charges, NECB's efficiency ratio, which measures how
much a dollar of revenue costs to produce, equaled 59.2% for the third quarter
of 1998 compared to 61.0% for the same period in 1997.
Through the first nine months of 1998, NECB reported operating net income
of $7,332,000 or $1.02 diluted share, an increase of $1,371,000 compared to
$5,961,000 or $0.86 per diluted share for the same period last year. Excluding
onetime charges, returns on average assets and average equity for the nine
months ended September 30, 1998 were 1.24% and 13.66%, respectively, compared to
1.15% and 12.22%, respectively, for the same period a year earlier. Including
the onetime charges, net income amounted to $4,705,000, or $0.65 per diluted
share, compared to $4,769,000, or $0.69 per diluted share, during the same
period last year.
During the first nine months of 1998, net interest income on a fully
taxable-equivalent basis totaled $28,162,000 compared to $26,088,000 in 1997.
Provisions for loan losses were reduced to $1,192,000 from $1,327,000 during the
same period in 1997. Noninterest income increased $3,219,000, or more than 84%
above last year's total, and amounted to $7,042,000 compared to $3,823,000 for
the same period in 1997. Gains from the sale of securities and gains for the
sale of mortgage loans each increased significantly compared to a year ago.
Noninterest expense totaled $25,318,000 in 1998 compared to $20,521,000 in 1997.
Total assets at September 30, 1998 were $790,685,000 compared to
$807,952,000 at December 31, 1997. Total loans at September 30, 1998 amounted to
$523,744,000 compared to $538,182,000 at December 31, 1997. The effect of the
bulk loan sale completed at the end of the first quarter of 1998, which totaled
approximately $12 million, accounts for much of the decrease in loans
outstanding. Total deposits amounted to $657,551,000 at September 30, 1998
compared to $694,946,000 at December 31, 1997. During the year, NECB increased
its use of alternative funding sources by increasing its long-term debt
outstanding during the year to $27,441,000 at September 30, 1998 compared to
$20,112,000 at year-end 1997. Short-term borrowings (primarily repurchase
agreements) also increased substantially totaling $28,991,000 compared to
$18,469,000 at December 31, 1997.
Shareholders' equity increased $2,774,000 from $69,386,000 at December 31,
1997 to $72,160,000 at quarter-end. At September 30, 1998, the ratio of equity
to total assets equaled 9.13%. When goodwill resulting from the Equity Bank,
Manchester State Bank and Community Bank acquisitions is excluded, tangible
equity capital is reduced to $67,216,000,or 8.50% of total assets. The resulting
tangible book value per share amounted to $9.58 at September 30, 1998 compared
to $9.11 at December 31, 1997.
RESULTS OF OPERATIONS--THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
- - ---------------------------------------------------------------------
For the three months ended September 30, 1998, the Company reported net
operating income of $80,000, or $0.01 per diluted share, compared to $953,000,
or $0.14 per diluted share, for the same period of 1997.
Growth in net income and earnings per share reflects, in part, the
additional revenue and savings achieved in conjunction with the Company's
acquisition of First Bank (completed in August, 1997) and Community Bank
together with strong growth in noninterest income. For the quarter ended
September 30, 1998, noninterest income increased 74% over the same quarter in
1997. Also showing improvement was net interest income, which on an FTE basis
increased $503,000, or 5.7%, from the same period in 1997. Onetime charges, the
acquisition of Community Bank, increased commission payments and expenses
related to systems and technology upgrades served to increase noninterest
expense by $2,758,000, or 36%, to $10,375,000 in the third quarter of 1998
compared to 1997.
NET INTEREST INCOME
- - -------------------
The principal earning asset of the Company is its loan portfolio--which is
comprised of loans to finance operations of businesses located primarily within
its market area, mortgage loans to finance the purchase or improvement of
properties used by businesses and mortgage and personal loans to individuals.
Representing approximately a quarter of the Company's earning assets, NECB's
investment portfolio also plays an important part in the management of the
Company's balance sheet. While providing a source of revenue, these funds are
used to provide reserves and meet the liquidity needs of the Company. Excess
reserves are available to meet the borrowing needs of the communities NECB
serves. For the following discussion, interest income is presented on a fully
taxable-equivalent ("FTE") basis. FTE interest income restates reported interest
income on tax exempt loans and securities as if such interest were taxed at the
statutory Federal income tax rate of 34% for all periods presented.
Page -8-
<PAGE>
(Amounts in thousands)
THREE MONTHS ENDED SEPTEMBER 30, 1998 1997 % CHANGE
- - -------------------------------------------------------------------------------
Interest income (financial statements) $ 14,902 $ 13,832 7.7%
Tax equivalent adjustment 148 33 348.5
--------- --------
Total interest income (on an FTE basis) 15,050 13,865 8.5
Interest expense (5,693) (5,011) 13.6
--------- --------
Net interest income (on an FTE basis) $ 9,357 $ 8,854 5.7
========= ========
For the third quarter of 1998, net interest income on an FTE basis was
$9,357,000, a 5.7% increase over the $8,854,000 in the comparable period in
1997. A key factor in the $503,000 increase in 1998 was the increase in average
loans outstanding. Internal growth and the acquisition of Community Bank (which
provided an additional $55,000,000 in loans outstanding) served to increase
interest income on portfolio loans by $833,000 during the third quarter of 1998
compared to the same period a year earlier.
The net interest margin measures the difference in the yield on
interest-earning assets and interest-bearing liabilities. As shown in the table
below, the margin for the quarter ended September 30, 1998 decreased to 5.23%
from 5.33% in 1997. The yield on the loan portfolio was virtually unchanged and
equaled 9.08% in the quarter ended September 30, 1998 compared to 9.09% for the
same period a year ago. Meanwhile, the yield on the Company's investment
portfolio increased to 6.74% in the quarter ended September 30, 1998 from 6.53%
last year. The yield on interest-bearing liabilities increased 19 basis points
and equaled 4.04% for the quarter ended September 30, 1998 compared to 3.85% a
year earlier. The acquisition of Community Bank, which typically paid depositors
among the highest rates in its market area, served to increase NECB's
consolidated yield on interest-bearing liabilities.
Page -9-
<PAGE>
CONSOLIDATED AVERAGE BALANCES/INTEREST EARNED OR PAID/RATES
- - -----------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- - -----------------------------------------------------------------------------------------------------------------
Average Average Average Average
(Amounts in thousands) Balance Interest Rate Balance Interest Rate
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Federal funds sold $ 7,335 $ 99 5.36% $ 12,276 $ 162 5.24%
Investment securities 183,752 3,122 6.74 170,133 2,799 6.53
Mortgages held for sale 7,890 130 6.54 2,031 38 7.42
Loans (A) 511,185 11,699 9.08 474,221 10,866 9.09
--------- ------- --------- -------
Total interest-earning assets 710,162 15,050 8.41% 658,661 13,865 8.35
Allowance for loan losses (9,658) (9,733)
Cash and due from banks 39,657 30,800
Other assets 38,176 30,454
--------- ---------
Total Assets $ 778,337 $710,182
========= ========
LIABILITIES:
Regular savings deposits $ 160,693 $ 964 2.37% $ 153,101 $ 781 2.02%
NOW account deposits 66,696 200 1.19 71,749 228 1.26
Money market deposits 2,052 13 2.51 3,811 21 2.19
--------- ------- --------- -------
Total savings deposits 229,441 1,172 2.03 228,667 1,030 1.79
Time deposits 275,064 3,766 5.43 254,467 3,531 5.51
Short-term borrowings 25,950 312 4.77 21,002 263 4.97
Long-term borrowings 28,140 443 6.25 12,353 187 6.01
--------- ------- --------- -------
Total interest-bearing liabilities 558,595 5,693 4.04 516,483 5,011 3.85
Demand deposits 136,926 122,042
Other liabilities 9,424 4,727
--------- ---------
Total Liabilities 704,946 643,269
Equity 73,391 66,913
--------- ---------
Total Liabilities & Equity $ 778,337 $ 710,182
========= =========
Net interest income--FTE basis $9,357 $8,854
====== ======
Net interest margin 5.23% 5.33%
Net interest spread 4.36% 4.50%
</TABLE>
(A) AVERAGE LOANS INCLUDE NONACCRUING LOANS.
RATE/VOLUME ANALYSIS
- - --------------------
Changes in net interest income are divided into two components--the changes
resulting from the changes in average balances of earning assets and
interest-bearing liabilities (or "volume") and the changes in the rates earned
or paid on those balances. The changes in interest income and interest expense
attributable to changes in both volume and rate, which cannot be segregated,
have been allocated proportionately to the absolute values of the changes due to
volume and rate. The following table, which compares the three months ended
September 30, 1998 to September 30, 1997, is presented on a FTE basis.
Page -10-
<PAGE>
<TABLE>
<CAPTION>
Change due to
Total Change in:
Increase -------------------------
(Amounts in thousands) (Decrease) Rate Volume
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST EARNED ON:
Federal funds sold $ (63) $ 4 $ (67)
Investment securities 323 94 229
Mortgages held for sale 92 (5) 97
Loans 833 (13) 846
-------- -------- -------
Total interest-earning assets 1,185 79 1,106
-------- -------- -------
INTEREST PAID ON:
Regular savings deposits $ 178 $ 138 $ 40
NOW account deposits (28) (12) (16)
Money market deposits (8) 3 (11)
-------- -------- -------
Total savings deposits 142 128 14
Time deposits 235 (48) 283
Short-term borrowings 49 (11) 60
Long-term borrowings 256 7 249
-------- -------- -------
Total interest-bearing liabilities 682 77 605
-------- -------- -------
Net interest income change $ 503 $ (2) $ 501
======== ========= =======
</TABLE>
NONINTEREST INCOME
- - ------------------
For the quarter ended September 30, 1998, noninterest income increased
$875,000 and totaled $2,059,000, compared to the third quarter in 1997. Much of
this increase, $715,000, was the result of increased revenues from origination
and sale of mortgage loans. New England Community Mortgage Corp., a wholly-owned
subsidiary of New England Bank, was formed earlier in the year to take better
advantage of the Company's ability to originate residential loans within the
communities served by its affiliates, while allowing expansion into other
communities not served by our community banks. With a focus strategy of
efficiently serving the home buying public, the mortgage subsidiary quickly
established itself has one of the top originators in Connecticut.
Also contributing to the growth in noninterest income was service charges,
fees and commissions. While the acquisitions have served to increase noninterest
income, NECB's broader, more comprehensive product choices, delivered with a
commitment to service, have allowed the Company to forge many new small business
relationships. Reflecting the combined effect of the acquisitions and new and
expanded relationships, service charges, fees and commissions rose $100,000, or
11%, to $1,013,000 in the quarter ended September 30, 1998 compared to a year
earlier.
NONINTEREST EXPENSE
- - -------------------
Noninterest expenses amounted to $10,375,000 during the third quarter of
1998. This is a $2,758,000 increase, or 36%, over $7,617,000 reported during the
same quarter in 1997. Of this increase, $2,340,000 is related to charges for
acquisitions. Excluding these charges, noninterest expenses increased $418,000,
or 6.6%, over the quarter ended September 30, 1997. The acquisition of Community
Bank, increased commission payments--related to growth in both the mortgage
subsidiary and mutual fund sales.
RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1998
- - -----------------------------------------------------------
Through the first nine months of 1998, NECB reported operating net income
of $7,332,000 or $1.02 diluted share, an increase of $1,371,000 compared to
$5,961,000 or $0.86 per diluted share for the same period last year. Growth in
net operating income and earnings per share during the first nine months of 1998
reflects new revenues and cost savings achieved in conjunction with the
Company's acquisitions and strong growth in noninterest income. In particular,
gains from the sale of mortgage loans and gains from investment securities rose
sharply compared to the previous year. Provisions for loan losses decreased
modestly from 1997 and totaled $1,192,000 in 1998 compared to $1,327,000 a year
earlier. Noninterest expense totaled $25,318,000 in 1998 compared to $20,521,000
in 1997. Including the onetime charges, net income amounted to $4,705,000, or
$0.67 per diluted share, compared to $4,769,000, or $0.69 per diluted share,
during the same period last year.
During the first nine months of 1998, net interest income on a fully
taxable-equivalent basis increased $2,074,000 and totaled $28,162,000 compared
to $26,088,000 in 1997.
Page -11-
<PAGE>
Net Interest Income
(amounts in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998 1997 % CHANGE
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income (financial statements) $45,023 $40,398 11.45%
Tax equivalent adjustment 352 114 208.77%
--------- ---------
Total interest income (on an FTE basis) 45,375 40,512 12.00%
Interest expense (17,213) (14,424) 19.33%
--------- ---------
Net interest income (fully taxable equivalent) $ 28,162 $ 26,088 7.95%
========= =========
</TABLE>
NONINTEREST INCOME
- - ------------------
Through the first nine months of 1998, noninterest income increased sharply
and totaled $7,042,000, compared to $3,823,000 reported for the same period in
1997. Aided by moderate interest rates (with the bellwether 30-year bond dipping
below 5% in the third quarter), demand for home purchase financing remained
strong and enabled NECB's subsidiary to originate a record number of loans
during the first nine months of 1998. With the vast majority of these loans
being fixed rate, gains from their sale increased accordingly. Compared to first
nine months of 1997, gains form the sale of mortgage loans more than tripled and
totaled $2,280,000. Gains from the sale of securities also increase sharply
compared to a year ago. During the first nine months of 1998, NECB realized
gains from the sale of securities of $1,504,000. In addition to gains recorded
by the Subsidiaries, the parent company recorded a gain of $898,000 from the
sale of its own investment securities.
Service charges, fees and commissions also increased substantially,
totaling $3,047,000 through the nine month period ending September 30, 1998.
This represents a $291,000, or 11%, increase compared to the $2,756,000 recorded
through the first nine months of 1997. This increase resulted from several
factors: (i) the inclusion of Community Bank (which, as noted earlier, was
accounted for as a purchase), (ii) selected price increases and (iii) increased
volume of services provided to our growing base of customers all contributed to
this increase.
NONINTEREST EXPENSE
- - -------------------
Noninterest expenses amounted to $25,318,000 during the first nine months
of 1998. Excluding the charge of $715,000 related to the bulk sale of loans
(completed at the end of the first quarter) and the acquisition-related charges
in both 1998 and 1997, other noninterest expenses increased by $1,742,000 or
9.04% from the same period in 1997. The inclusion of the expenses of Community
Bank, for the first time, accounted for $1,316,000 of this increase. The
remaining $426,000 increase represented a modest 2% on a year to year basis and
was achieved through gaining efficiencies following the acquisitions of First
Bank and Community Bank within the last 12 months.
FINANCIAL CONDITION
- - -------------------
Total assets at September 30, 1998 stood at $790,685,000, compared to
$807,952,000 at year-end. During the first nine months of 1998 loan production
remained strong, especially residential mortgage loans. These loans are
typically sold in the secondary market upon closing and, as such, do not serve
to increase loans outstanding. With the downward trend in interest rates in
1998--the majority of which occurred in third quarter--the Company experienced a
moderate rise in prepayments which was accurately forecasted by NECB's internal
interest rate risk models. Loan demand typically softens during the summer
months, and this taken together with increased prepayments, served to reduce
loans outstanding. On a year to date basis, when the effect of the March 30,
1998 bulk loan sale is excluded, loans outstanding decreased by $2,438,000.
Loans consisted of the following:
(Amounts in thousands)
September 30, December 31,
1998 1997
- - -------------------------------------------------------------------------------
Commercial and financial $ 152,293 $ 156,686
Real estate:
Construction 22,069 23,914
Residential 129,344 132,124
Commercial 169,157 175,347
Consumer 50,881 50,111
----------- -----------
Gross loans outstanding $ 523,744 $ 538,182
=========== ===========
Securities available-for-sale increased from December 31, 1997 and ended
the third quarter at $175,330,000 while held-to-maturity decreased and totaled
$6,634,000 at quarter end. This compares to $163,265,000 and $14,315,000 for
available-for-sale and
Page -12-
<PAGE>
held-to-maturity, respectively, at year-end. The increase in available-for-sale
resulted from the onetime re-class of securities held-to-maturity to
available-for-sale in conjunction with the acquisitions of Olde Port and South
Windsor. In addition, proceeds from the bulk loan sale were largely invested in
available-for-sale securities.
Federal funds decreased $3,668,000 and totaled $5,057,000 at quarter-end
compared to $8,725,000 at December 31, 1997. Federal funds--which are overnight
loans to other banks--represent excess reserves that are the Company's most
liquid assets and as such are available to meet short-term cash flow needs of
the Company and its customers.
The $1,260,000 reduction in other real estate owned brought this account
down to $1,936,000, or 0.25% of total assets, at September 30, 1998. During the
first nine months of the year the Company acquired properties with a value of
$1,623,000 through foreclosure and disposed of properties with a market value of
$2,883,000.
Total deposits, which constitute the principal funding source of the
Company's assets, decreased $37,395,000 from December 31, 1997 and amounted to
$657,551,000 at September 30, 1998. Seasonal cash flows of NECB's deposit
customers (especially noninterest bearing deposits) along with the effect of
repricing acquired deposits--for example, Community Bank typically paid
depositors higher rates than NECB's other affiliates--caused some depositors to
reduce their balances.
Total shareholders' equity was $72,160,000 at September 30, 1998, an
increase of $2,774,000 over December 31, 1997. Equity was increased by
$4,705,000 in net income, $312,000 from issuance of common stock in conjunction
with employee benefit plans and $603,000 from change in unrealized holding gains
on securities available-for-sale. Equity was reduced by $1,833,000 in dividends
paid to shareholders and $1,016,000 from common stock retired in connection with
the acquisition of South Windsor.
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. As
summarized in the table below, investments in securities held-to-maturity
decreased from $14,315,000 at December 31, 1997 to $6,634,000 at September 30,
1998.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
- - -----------------------------------------------------------------------------------------------------------------
Amortized Amortized
Cost Fair Cost Fair
(Amounts 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 $ 2,399 $ 2,425 $ 8,798 $ 8,811
Debt securities issued by states and
political subdivisions of the states 2,839 2,978 2,841 2,944
Mortgage-backed securities 1,131 1,141 2,461 2,460
Other debt securities 265 271 215 219
--------- --------- --------- ---------
$ 6,634 $ 6,815 $ 14,315 $ 14,434
========= ========= ========= =========
</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 September 30, 1998, the net unrealized gain on
securities available-for-sale was $3,286,000, while at December 31, 1997 the
unrealized gain was $2,346,000, representing an increase in unrealized gains of
$940,000. As shown in the table below, investments in securities
available-for-sale totaled $172,044,000 at September 30, 1998 versus
$160,919,000 at December 31, 1997:
Page -13-
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30 1998 DECEMBER 31, 1997
- - -----------------------------------------------------------------------------------------------------------------
Amortized Amortized
Cost Fair Cost Fair
(amounts in thousands) Basis Value Basis Value
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable equity securities $ 14,196 $ 14,163 $ 11,214 $ 12,323
Debt securities issued by the U.S. Treasury
and other U.S. government agencies 99,847 101,981 104,364 105,185
Corporation debt securities 10,612 10,870 10,873 10,928
Asset-based securities 9,311 9,496 527 527
Mortgage-backed securities 38,078 38,820 33,941 34,293
---------- ---------- ---------- ----------
$ 172,044 $ 175,330 $ 160,919 $ 163,265
========== ========== ========== ==========
</TABLE>
Note: During the second quarter of 1998 management reclassified short-term
investments (e.g., money market funds) to cash and cash equivalents from
securities available-for-sale. These short-term instruments (with original
maturities of three months or less) are highly liquid and readily convertible to
known amounts of cash.
NONPERFORMING ASSETS
- - --------------------
Nonperforming assets ("NPAs") are assets on which income recognition in the
form of principal and/or interest has either ceased or is limited, thereby
reducing the Company's earnings. Maintaining a low level of NPAs is important to
the ongoing success of NECB. The Company's comprehensive credit review and
approval process is critical to the ability to minimize NPAs on a long-term
basis. In addition to the negative impact on net interest income and credit
losses, NPAs also increase operating expenses due to the costs associated with
collection efforts.
NPAs include nonaccrual loans and other real estate owned ("OREO").
Generally, loans are placed in nonaccrual status when they are past due greater
than ninety days or the repayment of interest or principal is considered to be
in doubt. OREO consists of properties acquired through foreclosure proceedings.
These properties are recorded at the lower of the carrying value of the related
loans or the estimated fair market value less estimated selling costs. Charges
to the allowance for loan losses are made to reduce the carrying amount of loans
to the fair market value of the properties less estimated selling expenses upon
reclassification as OREO. Subsequent reductions, if needed, are charged to
operating income. In addition to NPAs, the asset quality of the Company can be
measured by the amount of the provision, charge-offs and several credit quality
ratios presented in the discussion concerning "Provision and Allowance for Loan
Losses."
(Amounts in thousands)
SEPTEMBER 30, 1998 DECEMBER 31,1997
- - --------------------------------------------------------------------------------
Nonaccrual loans $ 5,799 $ 9,729
OREO 1,936 3,196
---------- ----------
Total Nonperforming assets $ 7,735 $ 12,925
========== ==========
Loans past due in excess of ninety
days and accruing interest $ 1,205 $ 1,060
NPAs decreased $5,190,000 or 40% in the nine months ended September 30,
1998. Significantly, at quarter-end NPAs represented less than one percent of
total assets and equaled 0.98% compared to 1.60% of total assets at December 31,
1997. This decrease in nonperforming assets primarily resulted from a bulk sale
of loans completed at the end of the first quarter. Taking advantage of a
favorable secondary market for such loans, NECB sold $11,988,000 of problem
assets to an investor that specializes in workout loans. The majority of the
assets sold had been obtained in several recent acquisitions (e.g., the
Community Bank acquisition brought with it approximately $4,209,000 in NPAs).
The sale had two positive effects upon NECB: (i) net interest income was helped
by the reemployment of the sale proceeds and (ii) certain costs related to the
effort to work-out and/or collect these loans was avoided.
OREO consists of properties acquired through foreclosure proceedings. These
properties are recorded at the lower of the carrying value of the related loans
or the estimated fair market value less estimated selling costs. Charges to the
allowance for possible loan losses are made to reduce the carrying amount of
such loans to the fair market value of the properties less estimated selling
expenses upon reclassification as OREO. Subsequent reductions, when necessary,
are charged to operating income.
Page -14-
<PAGE>
Activity in Nonperforming Assets
(Amounts in thousands)
NINE MONTHS ENDING SEPTEMBER 30, 1998 1997
- - -----------------------------------------------------------------------------
December 31, 1997 and 1996 $ 12,925 $ 11,701
Additions 7,183 3,149
Reductions:
Payments (868) (2,991)
Charge-offs and writedowns (4,056) (1,483)
Sales, net (7,449) (3,517)
--------- ---------
Ending Balance, September 30,
1998 and 1997 $ 7,735 $ 6,859
========= =========
PROVISION AND ALLOWANCE FOR LOAN POSSIBLE LOSSES
- - ------------------------------------------------
NECB's allowance for possible loan losses represents amounts available for
future credit losses. Management continually assesses the adequacy of the
allowance for loan losses in response to current and anticipated economic
conditions, specific problem loans, historical net charge-offs and the overall
risk profile of the loan portfolio. Management allocates specific allowances to
individual problem loans based upon its analysis of the potential for loss
perceived to exist related to such loans. In addition to the specific allowances
for individual loans, a portion of the allowance is maintained as a general
allowance. The amount of the general allowance is determined through
management's analysis of the potential for loss inherent in those loans not
considered problem loans. Among the factors considered by management in this
analysis are the number and type of loans, nature and amount of collateral
pledged to secure such loans and current economic conditions. The allowance for
possible loan losses is not a precise amount but is derived from judgments based
on the above factors.
The following table summarizes the activity in the allowance for possible
loan losses for the quarters ended September 30, 1998 and 1997. The allowance is
maintained at a level consistent with identified loss potential and the
perceived risk in the portfolio.
(In thousands)
NINE MONTHS ENDED SEPTEMBER 30, 1998 1997
- - -----------------------------------------------------------------------------
Balance beginning of period $ 12,081 $ 9,355
Provisions charged to operations 1,192 1,327
Recoveries on loans previously charged-off 675 601
Charge-offs taken in conjunction with bulk loan
sale (i.e., specific allocated reserves) (1,392) 0
Loans charged-off (2,264) (1,243)
------- --------
Balance end of period $ 10,292 $ 10,040
======== =========
Provisions for possible loan losses charged to operations for the first
nine months of 1998 were $135,000 less than a year earlier and totaled
$1,192,000 compared to $1,327,000 for the same period in 1997. During the
nine-month period, total charge-offs increased by $2,413,000 and are largely due
to the bulk loan sale and the addition of Community Bank.
CAPITAL
- - -------
The Company endeavors to maintain an optimal amount of capital upon which
an attractive return to shareholders will be realized over the short and long
run while meeting all regulatory requirements for minimum levels of capital.
As of September 30, 1998, the Company exceeded all regulatory capital
ratios and the subsidiaries were categorized as "well capitalized." The various
capital ratios of the Company for September 30, 1998 and 1997 were:
MINIMUM LEVEL 1998 1997
------------- ---- ----
Total Risk-Based...................... 8% 12.06% 13.78%
Tier 1 Risk-Based..................... 4% 13.31% 12.52%
Leverage.............................. 4% 8.37% 8.78%
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 the
Subsidiaries, which together provide the Company with flexibility in managing
its liquidity position. The maturities of investment securities and
Page -15-
<PAGE>
cash flows from the repayments of outstanding loans are expected to provide the
Company with adequate liquidity over the coming months.
THE YEAR 2000 PROBLEM
- - ---------------------
NECB, like all institutions that utilize computer technology, is facing
challenges associated with the possibility that some existing computer systems
will be unable to process time-sensitive data accurately beyond the year 1999
(referred to as the "Year 2000 Problem"). The Year 2000 Problem is the result of
computer programs using two digits rather than four in date fields that define
the year. Any computer programs used by NECB that have time-sensitive software
may recognize a date field using "00" as the year 1900 rather than the year
2000. If not modified or replaced, these programs could cause system failures or
miscalculations, which could adversely affect NECB's ability to process customer
transactions or provide customer service.
NECB is performing a comprehensive review of both its information
technology ("IT") and non-IT systems (e.g., embedded technology such as
micro-controllers) to identify those systems that could be affected by the Year
2000 Problem. Further, NECB is developing a comprehensive multi-phase project
management process to modify or replace all affected IT systems and test them
for Year 2000 compliance. Thus far, NECB has completed detailed written testing
strategies and plans and begun testing.
NECB relies upon third-party providers for its IT software. NECB is
monitoring the activities of its providers to ensure that appropriate
development and implementation plans to address the Year 2000 Problem are in
place. NECB has taken steps to identify alternative vendors in the event that
one or more of these providers fail to become Year 2000 compliant. While NECB
expects its Year 2000 plan to be completed on a timely basis (to allow for
adequate testing in late 1998 and 1999), there can be no assurance that the
systems of other companies on which NECB's systems may rely also will be
completed in a timely fashion. In addition, NECB exchanges data with a number of
other entities, such as credit bureaus and governmental entities. The failure of
these entities to adequately address the Year 2000 Problem could adversely
affect NECB's ability to conduct its business.
Costs associated with modifying existing system applications have been and
will continue to be expensed as incurred. While some analysis remains to be
completed, NECB does not expect incremental costs associated with any IT systems
modifications and/or IT equipment for Year 2000 compliance to be material.
FORWARD LOOKING STATEMENTS
- - --------------------------
Certain statements contained in this Quarterly Report on Form 10-Q,
including those contained in this Item 1, are forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and are thus
prospective. Such forward looking statements are subject to risks, uncertainties
and other factors which could cause actual results to differ materially from
future results express or implied by such statements. Such factors include, but
are not limited to: changes in interest rates, regulation, competition and the
local and regional economy.
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 Special Meeting of Stockholders of New England Community Bancorp, Inc.
was held on Tuesday, April 21, 1998. Stockholders voted on and approved each of
the following proposals:
1. To adopt a plan and agreement of merger, dated as of March 19, 1998, by
and among NECB and Bank of South Windsor and the issuance of shares of NECB
common stock pursuant thereto:
FOR APPROVAL AGAINST APPROVAL ABSTAIN
------------ ---------------- -------
2,221,661 38,999 27,548
Item 5. Other Information - None
Item 6. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Exhibits
Page -16-
<PAGE>
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 September 30,
1998:
(i) Olde Port Acquisition
On July 17, 1998 it was reported, under Item 5, that NECB had
completed its acquisition of Olde Port on July 10, 1998. Under the terms of the
merger agreement, each share of Olde Port Common Stock outstanding was converted
into the right to receive 8.6674 shares of NECB common stock for each share of
OPBT common stock owned. The resulting transaction value totaled $13.7 million.
Olde Port continues its corporate existence as a New Hampshire state-chartered
bank and trust company and became NECB's fourth wholly owned banking subsidiary.
(ii) South Windsor Acquisition
On August 26, 1998, it was reported under Item 2, that NECB has
completed its purchase of South Windsor on August 14, 1998. Pursuant to the
terms of the merger agreement, each share of South Windsor Common Stock
outstanding (excluding shares held by NECB) was converted into the right to
receive 1.3539 shares of NECB common stock. Each share of South Windsor common
stock which was beneficially owned by NECB was been cancelled and retired. The
amount of consideration paid was $27,533,000 based upon approximately 986,000
shares of South Windsor common stock outstanding and the closing price of
$20.625 for NECB common stock. South Windsor was merged with and into NECB's New
England Bank subsidiary.
(iii) South Windsor Acquisition
On October 19, 1998, NECB amended its Current Report on Form 8-K (filed
on August 26, 1998 presenting the financial statements and proforma financial
information. The 8-K/A also amended the Original Form 8-K by reflecting the
completion of the acquisition by NECB of Olde Port Bank. Item 7 (b) (ProForma
Financial Statements) reflected the mergers of both South Windsor and Olde Port
with NECB.
(iv) South Windsor Acquisition
On October 21, 1998, NECB reported, under Item 5, presented the
combined financial results for the Company and its subsidiaries, including South
Windsor for the quarter ended September 30, 1998--which includes the 30 day
period following the acquisition.
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: October 13, 1998 By: s/s ANSON C. HALL
-------------------------------
Anson C. Hall
Vice President and Treasurer
Page-18-
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000752324
<NAME> New England Community Bancorp, Inc.
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 44,780
<INT-BEARING-DEPOSITS> 693
<FED-FUNDS-SOLD> 5,057
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 175,330
<INVESTMENTS-CARRYING> 6,634
<INVESTMENTS-MARKET> 6,815
<LOANS> 533,743
<ALLOWANCE> 10,292
<TOTAL-ASSETS> 790,685
<DEPOSITS> 657,551
<SHORT-TERM> 28,991
<LIABILITIES-OTHER> 4,542
<LONG-TERM> 27,441
0
0
<COMMON> 703
<OTHER-SE> 71,457
<TOTAL-LIABILITIES-AND-EQUITY> 790,685
<INTEREST-LOAN> 11,829
<INTEREST-INVEST> 2,974
<INTEREST-OTHER> 99
<INTEREST-TOTAL> 14,902
<INTEREST-DEPOSIT> 4,938
<INTEREST-EXPENSE> 5,693
<INTEREST-INCOME-NET> 9,209
<LOAN-LOSSES> 387
<SECURITIES-GAINS> 87
<EXPENSE-OTHER> 10,375
<INCOME-PRETAX> 506
<INCOME-PRE-EXTRAORDINARY> 506
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<YIELD-ACTUAL> 5.23
<LOANS-NON> 5,799
<LOANS-PAST> 1,205
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 19,245
<ALLOWANCE-OPEN> 12,081
<CHARGE-OFFS> 3,656
<RECOVERIES> 675
<ALLOWANCE-CLOSE> 10,292
<ALLOWANCE-DOMESTIC> 10,292
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
