SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1995 Commission File Number 0-14018
BNH BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
CONNECTICUT 06-1126899
(State of incorporation (I.R.S. Employer Identification
or organization) Number)
209 CHURCH STREET, NEW HAVEN, CONNECTICUT 06510
(Address of principal executive offices)
Registrant's telephone number, including area code (203) 498-3500
Former name, former address and former fiscal year, if changed since
last report NONE
Indicate by check mark whether the registrant (1) has filed all reports
required be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS May 12, 1995
Common Stock (no par value) 14,726,650
<PAGE>
<TABLE>
<CAPTION>
BNH BANCSHARES, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
<S> <C> <C>
ASSETS March 31, 1995 Dec. 31, 1994
______________ _____________
Cash and due from banks $ 15,213,746 $ 22,011,625
Federal funds sold 3,575,000
Investment securities:
Held to Maturity, at amortized cost 36,692,542 38,799,457
Available for Sale, at fair value 28,184,076 29,155,531
Loans less unearned discount 208,071,411 206,985,544
Less allowance for loan losses (7,403,980) (6,827,374)
___________ ___________
Loans - net 200,667,431 200,158,170
Property and equipment-net 4,106,483 4,139,386
Accrued interest receivable 2,128,641 2,140,277
Other real estate owned 1,453,181 1,852,068
Other assets 1,288,629 918,672
___________ ___________
TOTAL $293,309,729 $299,175,186
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand deposits $ 46,654,634 $ 59,232,645
NOW accounts 37,920,551 39,869,769
Money market accounts 24,633,967 23,095,704
Savings deposits 32,422,516 36,169,539
Time deposits under $100,000 113,739,240 108,055,465
Time deposits $100,000 or more 13,239,953 11,293,040
___________ ____________
Total deposits 268,610,861 277,716,162
Federal funds purchased and
securities sold under
repurchase agreements 1,541,328 3,561,134
FHLB Advances 9,036,368 4,692,180
Accrued interest payable 390,602 304,815
Other liabilities 565,934 545,236
___________ ___________
Total liabilities 280,145,093 286,819,527
Shareholders' equity:
Common stock, $.01, stated value;
issued 14,745,756, shares
Authorized 30,000,000 147,458 147,458
Capital surplus 47,523,492 47,523,492
Undivided losses (33,170,694) (33,392,619)
Net unrealized losses on investment
securities available for sale (1,088,449) (1,675,501)
Treasury stock (19,106, shares) (247,171) (247,171)
_____________ _____________
Total shareholders' equity 13,164,636 12,355,659
_____________ _____________
TOTAL $293,309,729 $299,175,186
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
BNH BANCSHARES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
1995 1994
INTEREST INCOME:
<S> <C> <C>
Loans $4,592,305 $3,954,654
Investment securities:
Held to maturity 503,388 489,645
Available for sale 467,028 355,836
Federal funds sold 7,900 11,594
__________ __________
Total interest income 5,570,621 4,811,729
INTEREST EXPENSE:
Time deposits $100,000 or more 139,488 99,034
Time deposits under $100,000 1,359,861 1,091,699
Other deposits 550,214 541,493
Other borrowings 187,340 40,451
__________ __________
Total interest expense 2,236,903 1,772,677
__________ __________
NET INTEREST INCOME 3,333,718 3,039,052
PROVISION FOR LOAN LOSSES (1,394,000) (827,400)
__________ __________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,939,718 2,211,652
OTHER INCOME:
Service charges 535,345 390,831
Other income 153,512 302,215
Net loss on investment securities 0 (6,000)
__________ __________
Total other income 688,857 687,046
__________ __________
OPERATING EXPENSES:
Salaries and employee benefits 1,361,539 1,370,857
Occupancy 335,140 352,873
Advertising and promotion 113,519 105,047
Office stationery and supplies 53,433 68,814
Examination and professional fees 148,229 194,406
Insurance 265,653 264,404
Other real estate owned 168,854 365,845
Other 445,784 486,715
__________ __________
Total operating expenses 2,892,151 3,208,961
NET LOSS BEFORE INCOME TAXES (263,576) (310,263)
(BENEFIT)PROVISION FOR INCOME TAXES (485,500) 15,480
__________ __________
NET PROFIT (LOSS) $ 221,924 $ (325,743)
NET PROFIT(LOSS) PER COMMON SHARE $0.02 ($0.02)
Weighted average number of common
shares outstanding during the period 14,726,650 14,726,650
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
BNH BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
March 31, 1995 March 31, 1994
______________ ______________
<S> <C> <C>
SHAREHOLDERS' EQUITY
at beginning of period $12,355,659 $20,206,348
UNDIVIDED LOSSES:
Net income(loss) 221,924 (325,743)
Change in unrealized depreciation
on marketable equity securities 12,959
NET UNREALIZED LOSSES ON SECURITIES:
Change in unrealized depreciation on
investment securities available
for sale 587,053 (239,035)
___________ ___________
SHAREHOLDERS' EQUITY at end of period $13,164,636 $19,654,529
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BNH BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1995 1994
_____________________________
<S> <C> <C>
OPERATING ACTIVITIES
Net profit(loss) $ 221,924 $ (325,743)
Adjustments for items not affecting cash:
Provision for loan losses 1,394,000 827,400
Depreciation and amortization of
property and equipment 132,498 135,878
(Amortization)accretion of
bond premiums and discounts (27,803) 51,819
Deferred tax benefit (504,000)
Loss from the sale of available for
sale securities 6,000
Loss/writedown on other real estate owned 144,844 281,378
Decrease in interest receivable 11,636 135,516
Increase(Decrease)in interest payable 85,787 (5,608)
Other,net 115,094 (92,173)
_________ _________
Net cash provided by operating activities 1,573,980 1,014,467
_________ _________
FINANCING ACTIVITIES
Net decrease in demand, NOW, money market and
savings accounts (16,735,989) (2,460,177)
Net increase(decrease) in time deposits 7,630,688 (1,467,393)
Net (decrease)increase in federal funds
purchased and securities sold under
repurchase agreements (2,019,806) 1,007,497
Proceeds from FHLB advances 4,344,188 1,000,000
___________ __________
Net cash used by financing activities (6,780,919) (1,920,073)
___________ __________
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold (3,575,000) 4,344,848
Maturities of securities held to maturity 2,100,000 3,005,000
Maturities of securities available for sale 2,031,401 341,826
Purchase of securities available for sale (443,300)
Proceeds from the sale of available for
sale securities 1,998,000
Net loans originated and matured (1,900,919) (6,139,094)
Proceeds from sale of other real estate owned 296,473 435,379
Purchase of property and equipment (99,595) (70,664)
___________ ___________
Net cash (used) provided by investing
activities (1,590,940) 3,915,295
(Decrease) increase in cash (6,797,879) 3,009,689
Cash and due from banks at beginning of year 22,011,625 12,349,091
___________ ___________
Cash and due from banks at end of period $15,213,746 $15,358,780
Cash paid for:
Interest expense $ 2,151,116 $ 1,778,285
Income taxes $ 18,500 $ 15,480
</TABLE>
There were no non-cash transfers from loans receivable to other real
estate owned for the three months ending March 31, 1995 and 1994,
respectively.
Non-cash transfers from other real estate owned to loans receivable were
$77,800 and $354,134, for the three months ending March 31, 1995 and
1994, respectively.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
BNH BANCSHARES, INC.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements are unaudited and
include the accounts of BNH Bancshares, Inc. (the "Company") and its
subsidiaries, The Bank of New Haven (the "Bank") and Northeastern Capital
Corporation. The financial statements reflect, in management's opinion,
all appropriate adjustments consisting of normal recurring adjustments
necessary for a fair presentation of the Company's financial position,
the results of its operations and the change in 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 1994 Annual Report to Shareholders.
2. Loan Portfolio
<TABLE>
<CAPTION> March 31, Dec. 31, March 31,
1995 1994 1994
_________ ________ _________
(dollars in thousands)
<S> <C> <C> <C>
Commercial $ 67,426 $ 67,418 $ 73,058
Real estate:
Commercial mortgage 57,047 57,097 69,671
Residential mortgage 38,658 36,605 30,598
Consumer 44,940 45,866 30,150
________ ________ ________
Total loans 208,071 206,986 203,477
Allowance for loan losses (7,404) (6,827) (9,495)
________ ________ ________
Loans - net $200,667 $200,159 $193,982
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 114
("SFAS 114"), "Accounting by Creditors For Impairment of a Loan",
effective January 1, 1995. The new accounting standard requires that
impaired loans, which are defined as loans where it is probable that a
creditor will not be able to fully collect both the contractual interest
and principal payments, be measured at the present value of expected
future cash flows discounted at the loan's effective interest rate or, as
a practical expedient, at the loan's observable market price or the fair
value of the collateral, if the loan is collateral dependent, when
assessing the need for a loss accrual. As of March 31, 1995, the
recorded investment in loans that are considered to be impaired under
SFAS 114 was $8,705,000, of which $8,002,000 were on a nonaccrual status.
The related allowance for loan losses on impaired loans was $3,861,000.
The average aggregate balance of impaired loans was $8,420,000 for the
three month period ended March 31, 1995. The Company recognized $19,700
of accrued interest income on impaired loans for the three month period
ended March 31, 1995. All impaired nonaccrual loans recognize cash
payments as a reduction to principal. Below is an analysis of the
allowance for loan losses for the three month period ended March 31, 1995.
<PAGE>
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(dollars in thousands)
March 31, 1995
______________
Balance beginning of period $6,827
Provision charged to income 1,394
Loans charged off:
Commercial 666
Real Estate:
Commercial Mtg. 134
Residential Mtg. 40
Consumer 89
______
Total Loans Charged-off 929
Recoveries 112
______
Net loans charged off 817
______
Balance, end of period $7,404
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company earned net income for the three months ended March 31, 1995
of $222,000 as compared to a net loss of $326,000 for the same 1994
period. The improvement in the Company's earnings for the three month
period ending March 31, 1995 as compared to the same 1994 period, can be
primarily attributed to an increase in net interest income of $295,000
and a reduction in total operating expenses of $317,000. These
improvements were offset by an increase in the provision for loan losses
of $567,000 from $827,400 for the three month period ended March 31, 1994
to $1,394,000 for the three month period ended March 31, 1995. The
increase in the provision for loan losses is primarily related to the
Company's adoption of Financial Accounting Standards Board Statement No.
114 ("SFAS 114"),"Accounting by Creditors for Impairment of a Loan". In
addition, as a result of the Company's improving profitability and its
available net operating loss carryforwards, the Company recognized
noncurrent deferred tax benefits of $504,000 during the quarter ended
March 31, 1995.
The return on average assets was 0.30% for the three months ended March
31, 1995 compared to (0.46%) for the same 1994 period. Net income was
$.02 per share for the three months ended March 31, 1995 compared to a
net loss of $.02 per share for the three months ended March 31, 1994.
In addition, the Federal Deposit Insurance Corporation ("FDIC") has
recommended the removal of its Order to Cease and Desist issued on
October 7, 1991 when the Bank experienced significant asset quality,
liquidity and capital adequacy problems. After completion of a joint
examination of the Bank with the Connecticut Banking Department, the FDIC
recommended, and the Bank agreed to enter into, a significantly less
stringent "Memorandum of Understanding".
REGULATORY MATTERS
The FDIC, after completion of a joint examination of the Bank with the
Connecticut Banking Department as of February 6, 1995, has recommended
the removal of its Cease and Desist Order ("Order") issued in 1991. The
Order required the Bank to take a series of actions designed to improve
its financial condition and operating results and augment its capital
position. At the conclusion of its regulatory examination, the FDIC,
based on the Bank's improved overall financial condition, recommended the
issuance of a less stringent Memorandum of Understanding (the
"Memorandum"). The Bank voluntarily agreed to enter into the
Memorandum which will be effective in the near future. The Memorandum
will require, among other things, that the Bank achieve certain Tier 1
leverage and total risk based capital requirements. The Bank must
improve its Tier 1 leverage capital ratio to 5% by June 30, 1996 and to
6% by June 30, 1997. If these thresholds are not achieved the Bank will
be required to submit a written capital plan to increase its Tier 1
leverage capital to the required level. Also, the Bank must maintain a
total risk-based capital ratio of at least 8% throughout the existence of
the Memorandum. As of March 31, 1995,the Bank's Tier 1 leverage capital
and total risk-based capital ratios were 4.8% and 8.2%, respectively.
The Company anticipates that it will achieve the minimum Tier 1 leverage
capital ratio requirements through future earnings. See "Capital
Adequacy" for further discussion. The Memorandum will also require the
Bank to charge-off certain loans and develop and implement a written
problem loan reduction program to continue to reduce its level of problem
loans. In addition, the Memorandum will prohibit the payment of
dividends without prior FDIC consent and will require the Bank to review,
monitor and update certain loan and liquidity policies.
NET INTEREST INCOME
Net interest income is the difference between the interest earned on
loans and investments and the interest paid on deposits and other
borrowings.
Net interest income was $3,334,000 for the three month period ended March
31, 1995 compared to $3,039,000 for the same 1994 period, representing an
increase of $295,000, or 10%. The increase in net interest income for
the comparative three month periods was primarily attributed to an
increase in earning assets and their associated interest rates and
partially offset by an increase in the cost of average paying
liabilities. Although the Company's net interest income increased on a
comparative basis from March 31, 1994 to March 31, 1995, the level of
nonperforming assets continues to impact negatively net interest income.
Interest income increased to $5,571,000 for the three months ended March
31, 1995 from $4,812,000 for the same 1994 period, an increase of
$759,000, or 16%. The Company's average earning assets increased from
$265,418,000 for the three months ended March 31, 1994 to $277,076,000
for the same 1995 period, or 4%. The growth in interest income can be
primarily attributed to an increase in the average loan portfolio from
$200,307,000 during the quarter ended March 31, 1994 to $208,084,000
during the same 1995 period and an increase in the corresponding loan
yield of 94 basis points from 8.01% for the three months ended March 31,
1994 to 8.95% for the same 1995 period. Interest income was negatively
impacted by the level of nonperforming assets(nonaccrual loans and OREO)
of $9,554,000, $8,895,000 and $14,013,000 as of March 31, 1995, December
31, 1994 and March 31, 1994, respectively. If nonperforming assets had
earned interest in accordance with their original terms, the Company
would have earned additional interest of approximately $230,000 for the
first three months of 1995 as compared to $319,000 for the same 1994
period.
Interest expense increased to $2,237,000 for the three months ended March
31, 1995 from $1,773,000 for the same 1994 period, an increase of
$464,000, or 26%. This increase reflects the rise in average paying
liabilities and their associated interest rates from March 31, 1994 to
March 31, 1995. Average paying liabilities increased from $220,643,000
for the quarter ended March 31, 1994 to $229,646,000 for the same period
in 1995, an increase of $9,003,000, or 4%. The growth in average paying
liabilities is primarily related to an increase in higher cost time
deposits and other borrowings. Average time deposits increased
$8,959,000 and average other borrowings increased $8,205,000 for the
three months period ended March 31, 1995 compared to the same 1994
period. Average interest bearing core deposits (NOW, money market and
savings accounts) as a percentage of total average paying liabilities
declined from 46% as of March 31, 1994 to 41% as of March 31, 1995. The
Company's average interest rate on paying liabilities increased 69 basis
points from 3.26% for the three months ended March 31, 1994 to 3.95% for
the three months ended March 31, 1995. The Company anticipates that
upward pressure on market interest rates for deposits during the last
half 1994 and the first quarter of 1995 will increase the Company's
overall cost of funding during the remainder of 1995 .
The net interest margins for the three month periods ended March 31, 1995
and 1994 were 4.88% and 4.64%, respectively, an increase of 24 basis
points.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1995
(in thousands of dollars)
(Unaudited)
<S> <C> <C> <C>
Average Average
Balance Interest Yield
________ ________ _______
ASSETS
________________________________________
Investments:
Held to Maturity, at amortized cost $ 37,791 $ 504 5.41%
Available for Sale<F2> 30,667 467 6.18%
Federal funds sold 534 8 6.08%
Loans - net<F1> 208,084 4,592 8.95%
________ ______ ____
Total average earning assets <F1> $277,076 $5,571 8.15%
INTEREST BEARING LIABILITIES
_______________________________________
Deposits:
NOW accounts $ 38,043 $ 165 1.76%
Money markets 22,723 155 2.77%
Savings deposits 33,633 231 2.79%
Time deposits under $100,000 110,981 1,360 4.97%
Time deposits over $100,000 or more 11,727 139 4.81%
________ ______ _____
Total interest bearing deposits $217,107 $2,050 3.83%
Other borrowings 12,539 187 6.05%
________ ______ _____
Total interest bearing deposits and
other borrowings $229,646 $2,237 3.95%
Net interest income $3,334
Interest rate spread <F1> 4.20%
Net interest margin <F1> 4.88%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1994
(in thousands of dollars)
(Unaudited)
<S> <C> <C> <C>
Average Average
Balance Interest Yield
________ ________ _______
ASSETS
________________________________________
Investments:
Held to Maturity, at amortized cost $ 37,665 $ 490 5.28%
Available for Sale <F2> 26,040 356 5.54%
Federal funds sold 1,406 11 3.17%
Loans - net <F1> 200,307 3,955 8.04%
________ ______ ____
Total average earning assets <F1> $265,418 $4,812 7.35%
INTEREST BEARING LIABILITIES
_______________________________________
Deposits:
NOW accounts $ 41,853 $ 184 1.78%
Money markets 28,746 160 2.26%
Savings deposits 31,961 198 2.51%
Time deposits under $100,000 103,441 1,092 4.28%
Time deposits over $100,000 or more 10,308 99 3.90%
________ ______ _____
Total interest bearing deposits $216,309 $1,733 3.25%
Other borrowings 4,334 40 3.74%
________ ______ _____
Total interest bearing deposits and
other borrowings $220,643 $1,773 3.26%
Net interest income $3,039
Interest rate spread <F1> 4.09%
Net interest margin <F1> 4.64%
</TABLE>
<F1> Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing
demand accounts), and net interest margin represents net interest income
as a percentage of average interest-earning assets, including the average
daily amount of non-performing loans.
<F2> The average balance and related weighted average yield calculations
are based on average historical amortized cost for the period presented.
<TABLE>
<CAPTION>
FOR THE YEAR TO DATE PERIOD
SUMMARY OF AVERAGE INTEREST BEARING
LIABILITIES AND DEMAND DEPOSITS
(dollars
(in thousands) March 31, 1995 December 31, 1994 March 31, 1994
Amount % Amount % Amount %
_______________ _________________ ________________
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 49,610 17.8% $ 46,290 17.0% $ 42,608 16.2%
NOW accounts 38,043 13.6% 41,048 15.1% 41,853 15.9%
Money market accounts 22,723 8.1% 27,955 10.2% 28,746 10.9%
Savings deposits 33,633 12.1% 34,512 12.7% 31,961 12.1%
Time deposits
under $100,000 110,981 39.7% 105,067 38.5% 103,441 39.4%
Time deposits
$100,000 or more 11,727 4.2% 10,444 3.8% 10,308 3.9%
_______ ______ _______ ______ _______ _____
Total deposits 266,717 95.5% 265,316 97.3% 258,917 98.4%
Other borrowings 12,539 4.5% 7,362 2.7% 4,334 1.6%
________ ______ ________ ______ ________ ______
Average deposits and
other borrowings $279,256 100.0% $272,678 100.0% $263,251 100.0%
</TABLE>
OTHER INCOME
Other income remained stable at $689,000 for the three months ended March
31, 1995 compared to $687,000 for the same 1994 period. Service fees
related to NOW and demand accounts increased from $391,000 for the three
months ended March 31, 1994 to $535,000 for the same 1994 period. This
increase is primarily due to the additional fees collected relating to
checking account overdrafts charges. Mortgage placement fees, which are
fees the Company earns for originating residential first mortgage
applications, declined $77,000 for the three months ending March 31, 1995
as compared the same 1994 period due to a slowdown in residential
mortgage business.
PROVISION FOR LOAN LOSSES
The provision for loan losses charged to operations reflects management's
analysis of the loan portfolio and determination of an adequate allowance
for loan losses to provide for probable losses in the loan portfolio.
The potential for loss in the portfolio reflects the risks and
uncertainties inherent in the extension of credit.
The determination of the adequacy of the allowance for loan loss is based
upon management's assessment of risk elements in the portfolio, factors
affecting loan quality and assumptions about the economic environment in
which the Company operates. The Company utilizes a loan grading system,
based upon FDIC parameters, and utilizes that assessment of the overall
quality of the loan portfolio in the process of determining an adequate
allowance for loan loss level. This system involves an ongoing review of
the commercial and real estate loan portfolios, with added emphasis on
the Company's larger commercial credits and nonperforming loans. Various
factors are involved in determining the loan grade, including the cash
flow and financial status of the borrower, the existence and nature of
collateral, and general economic conditions and their impact on the
borrower's industry. These reviews are dependent upon estimates,
appraisals and judgments, which can change quickly due to economic
conditions and the Company's perceptions as to how these conditions
affect the collateral securing its current and past due loans as well as
the borrower's economic prospects. In each reporting period, the
allowance for loan losses is reviewed based on the most recent loan
grading data and is adjusted to the amount deemed necessary, in the
Company's judgment, to maintain adequate allowance for loan loss levels.
The provision for loan losses charged against earnings in the first three
months of 1995 was $1,394,000 compared with $827,000 in the same 1994
period. Net loan charge-offs for the three months ended March 31, 1995
and 1994 were $817,000 and $829,000, respectively. The Company's
adoption of SFAS 114 requires that impaired loans, which are defined as
loans where it is probable that a creditor will not be able to collect
both the contractual interest and principal payments, be measured at the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral, if the loan
is collateral dependent, when assessing the need for a loss accrual. The
adoption of SFAS 114 resulted in an additional provision for loan losses
of approximately $500,000 during the first quarter of 1995. The Company
anticipates that second and third quarter 1995 net charge-offs could
approximate $1,300,000 to $1,500,000. Net charge-offs for the fourth
quarter of 1995 should not exceed the level experienced by the Company
during the first quarter of 1995. However, the Company anticipates that
provision for loan losses for each of the remaining three quarterly
periods of 1995 should not exceed the level experienced by the Company
during the first quarter of 1995.
In establishing the allowance for loan losses, management has considered
the possible deterioration of the collateral securing its past due loans.
As of March 31, 1995, the Company's allowance for loan losses was
$7,404,000, or 3.56% of total loans, as compared to $9,495,000, or 4.65%
of total loans, as of March 31, 1994. The allowance for loan losses was
$6,827,000, or 3.30% as of December 31, 1994. The ratio of the allowance
for loan losses to nonaccrual and restructured loans and accruing loans
past due 90 days or more was 66.1% as of March 31, 1995 as compared to
69.3% and 39.3% as of December 31, 1994 and March 31, 1994, respectively.
As of March 31, 1995, nonaccrual loans were $8,101,000 as compared with
$7,043,000 as of December 31, 1994, and $8,836,000 as of March 31, 1994.
The increase in nonaccrual loans during the first quarter of 1995 can be
partially attributed to the Company's adoption of SFAS 114. The
Company's SFAS 114 loan impairment analysis identified $812,000 of
accruing loans(delinquent less than 90 days) as impaired and it was
necessary, in management's judgment, to transfer these loans to a
nonaccrual status during the first quarter of 1995. As of March 31,
1995, approximately $5,274,000 of the loans in the nonaccrual portfolio
were collateralized partially by commercial or residential real estate or
business assets and approximately $2,827,000 of nonaccrual loans were
unsecured. The largest unsecured portion consists of 3 loan
relationships that migrated to nonaccrual status during last half of 1994
which total $1,334,000. The Company is actively pursuing a workout plan
for the orderly disposition of these loans. The Company believes that
its allowance for loan losses is adequate to absorb any potential
reduction of the net carrying value in the nonaccrual portfolio. The
ratio of nonaccrual loans to total loans declined from 4.34% at March 31,
1994 to 3.89% at March 31, 1995.
Accruing loans past due 90 days or more were $360,000 as of March 31,
1995, $357,000 as of December 31, 1994 and $1,207,000 as of March 31,
1994. The Company's nonaccrual policy states that any commercial or
mortgage loan attaining a 90-day past due status is placed on nonaccrual
unless such loan is well secured and in the process of collection.
Exceptions to placement on nonaccrual status that extend beyond 120 days
must be approved by the Board of Directors' Loan Committee. Any
installment or consumer loan that attains a 180-day past due status will
be placed on nonaccrual regardless of collateral value or collection
proceedings. At March 31, 1995, loans totaling $103,000 were accruing
past due 120-180 days.
The Company has identified potential problem loans in the amount of
$1,879,000 as of March 31, 1995. Potential problem loans are defined as
loans where known information about possible credit problems of borrowers
causes management to have serious doubts as to the ability of such
borrowers to comply with the present loan repayment terms. These
accruing commercial loans have experienced frequent delinquency problems.
Twelve accruing loans with a principal balance of $759,000 have
experienced 2 or more delinquencies between 60-89 days during the last
five quarterly periods. In addition, twelve accruing loans with a
principal balance of $1,120,000 have been delinquent 3 or more times
between 30-59 days and at least once over 60 days during 1994. However,
they continue to be less than 90 days delinquent as of March 31, 1995.
If these credits continue to have financial difficulties, they could be
classified as nonaccrual loans or become potential loan charge-offs in
future quarterly periods.
At March 31, 1995, December 31, 1994 and March 31, 1994, the Company had
restructured loans of $2,740,000, $2,448,000 and $14,115,000,
respectively. Interest income recorded on these loans during the three
month periods ending March 31, 1995 and 1994 was $55,000 and $275,000,
respectively. The weighted average yield on restructured loans was 6.96%
and 6.52% during the three months ending March 31, 1995 and 1994,
respectively. If these loans had earned interest in accordance with
their original terms, interest income for the first three months of 1995
and 1994 would have been $9,000 and $82,000 higher, respectively.
Management, after careful consideration of the above factors, is of the
opinion that the allowance for loan losses as of March 31, 1995 is
adequate. However, because the economic recovery in Connecticut appears
to be progressing slower than in the nation, as a whole, it is difficult
to predict how the future economy may impact the Company's loan
customers. If economic conditions continue to slowly improve during
1995, management believes that the level of its nonaccrual loans could
gradually decline during the next several quarterly periods. However,
the level of the Company's nonperforming assets will continue to
negatively impact the Company's profitability in future quarterly
periods. The nature of the Connecticut economy will continue to
influence the levels of loan charge-offs, nonaccrual loans and the
allowance for loan losses, and management will appropriately adjust the
allowance as considered necessary to reflect future changes in risk.
The following tables set forth quarterly information on nonperforming
assets, restructured loans, accruing loans past due 90 days or more and
loans charged-off for the quarterly periods from March 31, 1994 to March
31, 1995.
<PAGE>
<TABLE>
<CAPTION>
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
Quarter Ended
(dollars in thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
1995 1994 1994 1994<F1> 1994
_________ ________ _________ ________ _________
<S> <C> <C> <C> <C> <C>
Balance beginning
of period $6,827 $6,695 $7,155 $9,495 $9,497
Provision charged
to income 1,394 757 564 7,051 827
Loans charged off:
Commercial 666 529 1,131 3,208 696
Real Estate:
Commercial Mtg. 134 173 189 5,656 147
Residential Mtg. 40 0 0 574 0
Consumer 89 58 41 46 42
______ ______ ______ ______ _______
Total Loans
Charged-off 929 760 1,361 9,484 885
Recoveries 112 135 337 93 56
______ ______ _______ ______ _______
Net loans
charged-off 817 625 1,024 9,391 829
______ ______ ______ ______ ______
Balance,
end of period $7,404 $6,827 $6,695 $7,155 $9,495
Ratios:
Net loans
charged-off to
avg. loans 0.39% 0.30% 0.50% 4.59% 0.42%
Allowance for
loan losses to
total loans 3.56% 3.30% 3.22% 3.60% 4.65%
</TABLE>
<F1> The Company incurred loan charge-offs of approximately $6,500,000 in
connection with a sale of problem loans that was completed in the third
quarter of 1994.
<PAGE>
<TABLE>
<CAPTION>
NONACCRUAL LOANS, RESTRUCTURED LOANS AND OTHER REAL ESTATE OWNED
(in thousands)
QUARTER ENDED March 31, Dec. 31, Sept. 30, June 30, March 31,
1995 1994 1994 1994 1994
______________ _________ ________ _________ ________ ________
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial $ 3,368 $ 3,712 $ 3,595 $ 4,873 $ 4,210
Real Estate:
Commercial 4,032 3,129 3,748 2,834 4,176
Residential 556 190 161 114 390
Consumer 145 12 60 60 60
______ ______ ______ ______ ______
Total nonaccrual
loans 8,101 7,043 7,564 7,881 8,836
Other Real Estate
Owned - net 1,453 1,852 2,105 3,169 5,177
_______ ______ ______ _______ _______
Total
nonperforming
assets 9,554 8,895 9,669 11,050 14,013
Restructured
loans 2,740 2,448 4,806 5,148 14,115
_______ _______ _______ _______ _______
Total
nonperforming
assets and
restructured
loans $12,294 $11,343 $14,475 $16,198 $28,128
Accruing loans
past due 90 days
or more:
Commercial 164 88 240 66 1,046
Real Estate:
Construction 0 0 0 0 0
Commercial 0 0 132 0 0
Residential 0 0 0 49 0
Consumer 196 269 292 231 161
______ ______ ______ ______ ______
Total accruing
loans past due
90 day or more $ 360 $ 357 $ 664 $ 346 $ 1,207
Allowance for
loan losses $ 7,404 $ 6,827 $ 6,695 $ 7,155 $ 9,495
SFAS 114
impaired loans $ 8,705
Ratio of
nonperforming
assets to total
assets 3.3% 3.0% 3.3% 3.8% 4.9%
Ratio of
nonperforming
assets, restructured
loans and accruing
loans past due 90
days or more to
total assets 4.3% 3.9% 5.2% 5.7% 10.3%
Ratio of
nonperforming
assets to total
loans and OREO 4.6% 4.3% 4.6% 5.5% 6.7%
Ratio of
nonperforming
assets, restructured
loans, and accruing
loans past due 90
days or more to
total loans and OREO 6.0% 5.6% 7.3% 8.3% 14.1%
Ratio of allowance
for loan losses to
nonaccrual loans,
restructured loans
and accruing loans
past due 90 days
or more 66.1% 69.3% 51.4% 53.5% 39.3%
Ratio of nonaccrual
loans, restructured
loans and accruing
past due 90 days or
more to shareholders'
equity and allowance
for loan losses 54.5% 51.3% 67.9% 68.1% 82.9%
</TABLE>
<PAGE>
OTHER REAL ESTATE OWNED
Other Real Estate Owned (OREO) expense was $169,000 for the three month
period ended March 31, 1995 as compared to $366,000 for the three months
ended March 31, 1994. These expenses reflect losses on sales and
writedowns on OREO properties and associated direct holding costs, such
as property taxes, insurance and utilities. OREO holding costs were
$24,000 and $85,000 for the three month periods ended March 31, 1995 and
1994, respectively.
The OREO balance as of March 31, 1995 is $1,453,000 and was comprised of
10 properties. The OREO portfolio consists of 2 residential properties,
representing 12% of the total OREO portfolio, and 4 commercial properties
which constitutes 50% of the total OREO portfolio. In addition, the
Company has 4 parcels of land which total $555,000 which includes a
$439,000 approved residential subdivision.
OREO properties are carried at the lower of carrying value of the related
loan or fair value of the foreclosed property at date acquired through
foreclosure less the cost to dispose. Fair value of OREO properties is
determined using the Company's most recent appraisal or a more recent
broker's valuation. In order to facilitate the sale and ultimate
disposition of OREO, the Bank may finance the sale of a property at
market rates to qualified, credit-worthy borrowers. The Company values
its OREO properties based on an asset by asset review and on the
assumption that an active market exists for those properties. The
Company's primary valuation technique is to derive values from available
comparable sales data and not from other evaluation criteria such as
discounted cash flows. In making the assumption that an active market
exists for OREO properties, the Company has made the determination that
the properties are salable within approximately one year, and has valued
each property at an amount which the Company anticipates will permit the
sale of such property within approximately one year. Although the
Company actively markets all OREO properties for sale, no assurance can
be given that properties will actually sell in approximately one year,
such sales being dependent upon relevant market conditions which will
vary from property to property, and include such factors as the number of
comparable properties available for purchase at the time, the
availability of financing and the stability or trends of real estate
values in the area. The following table reflects OREO activity for the
last five quarterly periods.
<PAGE>
<TABLE>
<CAPTION>
OTHER REAL ESTATE OWNED
QUARTERLY ANALYSIS
(dollars in thousands)
QUARTER ENDED
<S> <C> <C> <C> <C> <C>
DESCRIPTION 03/31/95 12/31/94 09/30/94 06/30/94 03/31/94
_______________________ ________ ________ ________ ________ ________
Beginning book value $1,852 $2,105 $3,169 $5,177 $5,993
Properties added 42 101 23 305 86
Proceeds from OREO sold (296) (186) (590) (2,005) (435)
Gains(losses) on
properties sold 14 (35) (24) (5) (12)
Other activity (8) (157) (129) (186)
Property writedowns (159) (125) (316) (174) (269)
_______ _______ _______ _______ _______
Ending book value $1,453 $1,852 $2,105 $3,169 $5,177
</TABLE>
OPERATING EXPENSES
Operating expenses decreased $317,000, or 10%, from $3,209,000 for the
three months ending March 31, 1994 to $2,892,000 for the same 1995
period. OREO expense and examination and professional fees were
primarily responsible for the decrease in operating expenses during the
first three months of 1995 as compared to the same 1994 period.
OREO expense comprised of losses on sales and writedowns on OREO
properties and associated direct holding costs declined $197,000, or 54%,
from $366,000 for the three months ended March 31, 1994 to $169,000 for
the same 1995 period. Examination and professional fees decreased
$46,000, or 24%, from $194,000 as of March 31, 1994 to $148,000 for the
same 1995 period which resulted from lower legal expenses related to
problem assets. Salaries and employee benefits remained flat at
$1,371,000 for the first three months of 1994 as compared to $1,362,000
for the same 1995 period. The Company's full-time equivalent positions
as of March 31, 1995 is 140 as compared to 142 as of March 31, 1994.
PROVISION(BENEFIT) FOR INCOME TAXES
The Company accounts for income taxes in accordance with the provisions
of the Statement of Financial Accounting Standard No. 109 "Accounting for
Income Taxes" ("SFAS 109"). As a result of the Company's net operating
losses in prior years, it has federal and state tax net operating loss
carryforwards of approximately $20.6 million and $30.8 million as of
March 31, 1995, respectively. Such net operating loss carryforwards can
be used to offset future taxable income based upon management's estimate
of the amount of taxable income to be generated in future periods. Gross
deferred tax assets and gross deferred tax liabilities were $14.7 million
and $0.6 million, respectively, as of March 31, 1995. A valuation
allowance has been established of $13.6 million for a portion of deferred
tax assets. The deferred tax assets after the valuation allowance were
$504,000 as of March 31, 1995 and included in other assets. Management
believes that it is "more likely than not" that these deferred tax assets
will be realized from the utilization of tax benefit carryforwards in
future periods. The federal tax net operating loss carryforwards expire
in the years from 1997 to 2009 and the state tax net operating loss
carryforwards expire from 1995 to 1999. The income tax benefit of
$504,000 was offset by state and alternative minimum federal taxes of
$18,500 for the three months ended March 31, 1995.
CAPITAL ADEQUACY
The Company and the Bank are subject to the capital adequacy rules of
several regulators. Effective December 19, 1992, each federal banking
agency issued final rules to carry out the "prompt corrective action"
provisions of the Federal Deposit Insurance Corporation Improvement Act
of 1991 (the "Improvement Act"). The regulations adopted, among other
things, defined capital measures and the capital thresholds for each of
the five capital categories established in the statute and established a
uniform schedule for filing of capital restoration plans by
undercapitalized institutions. The following table identifies generally
the capital measures and thresholds defined under the FDIC and Federal
Reserve Board rules.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Tier 1 Tier 1
Risk-Based Risk-Based Leverage
Ratio Ratio Ratio
______________ _____________ _________
Well Capitalized 10% or above & 6% or above & 5% or above
Adequately Capitalized 8% or above & 4% or above & 4% or above
Undercapitalized Under 8% or Under 4% or Under 4%
Significantly Undercapitalized Under 6% or Under 3% or Under 3%
Critically Undercapitalized A ratio of
tangible
equity to
total
assets
equal to or
under 2%
</TABLE>
To fall within the well capitalized or adequately capitalized capital
category, the financial institution must meet the requirements of all
three capital measurements. Undercapitalized and significantly
undercapitalized institutions will be categorized as such if the
institution falls within any of those three capital measurements. The
risk-based capital guidelines establish a measurement of capital adequacy
by relating a banking organization's capital to its financial risks, both
on- and off-balance sheet. As of March 31, 1995, December 31, 1994 and
March 31, 1994, the Company's total risk-based capital ratio was 8.3%,
8.1%, 10.7%, respectively. The second capital measure is the Tier 1
risk-based ratio, which includes only core capital as it measures the
relationship to risk-weighted assets. As of March 31, 1995, December 31,
1994 and March 31, 1994, the Company's Tier 1 risk-based ratio was 7.0%,
6.8%, and 9.4%, respectively. The third capital adequacy measure is the
Tier 1 (or core) leverage capital (using the same definition of capital
as used in the risk-based guidelines) to average total assets. The
Company's Tier 1 leverage ratio was 4.8%, 4.7%, and 6.9% as of March 31,
1995, December 31, 1994 and March 31, 1994, respectively. As of March
31, 1995, based on the above criteria, the Company falls within the
adequately capitalized category.
As of March 31, 1995, December 31, 1994 and March 31, 1994, the Bank's
total risk-based capital ratio was 8.2%, 8.0% and 10.4%, respectively,
while its Tier 1 risk-based capital ratio was 6.9%, 6.8% and 9.1%,
respectively, and its Tier 1 leverage ratio was 4.8%, 4.7%, and 6.7%,
respectively. As of March 31, 1995, based on the above criteria, the
Bank falls within the adequately capitalized category.
The reporting of debt and equity securities (not held for trading
activities or to maturity) for the purposes of calculating Tier 1 capital
for the Company and the Bank differs from reporting under SFAS 115.
Under final FDIC regulations, net unrealized losses for equity securities
that are available for sale are included in the calculation of Tier 1
capital. All other net unrealized gains or losses on available for sale
securities are excluded from the definition of Tier 1 capital. As of
March 31, 1995, Tier 1 capital was reduced $218,000 to reflect the
unrealized depreciation on the Company's equity securities held as
available for sale.
At the conclusion of its regulatory examination, the FDIC, based on the
Bank's improved overall financial condition, has recommended the removal
of the Order and will issue a less stringent Memorandum of Understanding.
See "Regulatory Matters" for further discussion. The Company's principal
subsidiary, The Bank of New Haven, voluntarily agreed to enter into the
Memorandum effective in the near future. The Memorandum will require,
among other things, the Bank to achieve certain Tier 1 leverage and total
risk-based capital requirements. The Bank must improve its Tier 1
leverage capital ratio to 5% by June 30, 1996 and to 6% by June 30, 1997.
If these thresholds are not achieved, the Bank will be required to submit
a written capital plan to increase its Tier 1 leverage capital to the
required level. Also, the Bank will be required to maintain a total
risk-based capital ratio of at least 8% throughout the existence of the
Memorandum. The Bank's Tier 1 leverage ratio is currently below the
Memorandum's minimum level of 5%, but it exceeds the total risk-based
capital ratio requirement. The Company anticipates that it will achieve
the minimum Tier 1 leverage capital ratio requirements through future
earnings.
The Improvement Act also requires each federal banking agency to revise
its risk-based capital standards for insured institutions to ensure that
those standards take adequate account of interest rate risk,
concentration of credit risk, and risks of nontraditional activities and
reflect the actual performance and expected risk of loss on multi-family
residential loans. While the FDIC has published proposed regulations for
the purpose of amending its risk-based capital standards, the Company
cannot predict what may be required under any final regulations that may
be adopted. Such regulations could, however, further increase the
regulatory capital requirements which are applicable to the Company and
the Bank.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The liquidity process is monitored by the Company's Asset Liability
Committee ("ALCO"), which meets regularly to implement its
asset/liability and funds management policy. ALCO's role is to evaluate
liquidity and interest rate risk and their impact on earnings. The
Committee developed a reporting system that integrates the current
interest rate environment of the national and local economy with the
maturities and the repricing schedules of both the assets and liabilities
of the Company. The objective of ALCO is to manage the Company's assets
and liabilities to provide an optimum and stable net interest margin and
to facilitate a constant level of net interest income.
The primary focus of the Company's liquidity management is appropriately
to match cash inflows and outflows with funds provided by the Company's
market for deposits and loans. The Company's objective is to maintain
adequate cash which is invested in federal funds. During the first three
months of 1995, the average balance of federal funds sold was $534,000.
In the event the Company needs to borrow cash to manage its overnight
position or short-term position, the Company can borrow up to 2% of its
assets, $5,980,000 as of March 31, 1995, on an overnight basis from the
Federal Home Loan Bank of Boston. As of March 31,1995, the Company had
no overnight borrowings outstanding from the Federal Home Loan Bank of
Boston. In addition, the Company has access to $7,000,000 in short-term
funds via reverse repurchase agreements with two brokerage firms. The
Company's investment portfolio also provides a secondary source of
liquidity.
At March 31, 1995, the Company's liquidity ratio as defined by FDIC
criteria was 25.2% compared to 25.9% and 26.5% as of December 31, 1994
and March 31, 1994. The liquidity ratio is defined as the total of net
cash, short-term investments and other marketable assets, divided by
total net deposits and short-term liabilities. Management believes that
its liquidity position is adequate as of March 31, 1995.
Effective January 1, 1994, the Company adopted the provisions of the
Statement of Financial Accounting Standard No. 115 ("SFAS 115"),
"Accounting for Certain Investments in Debt and Equity Securities".
Under SFAS 115, debt securities classified as held to maturity are
reported at amortized cost. Debt and equity securities (not held for
trading activities or to maturity) are reported at fair value with
unrealized gains or losses excluded from income and reported as a
separate component of shareholders' equity. In order to classify
securities as held to maturity, management must have the positive intent
and ability to hold the securities to maturity. The adoption and ongoing
compliance with SFAS 115 on January 1, 1994 has not had an adverse effect
on the Company's net interest margin, regulatory capital ratios or
ability to meet its liquidity obligations.
The Company generated a negative aggregate cash flow of $6,798,000 for
the three months ended March 31, 1995, as compared to a positive
aggregate cash flow of $3,010,000 for the same 1994 period. Cash flows
provided by operating activities were $1,574,000 and $1,014,000 for the
three months ending March 31, 1995 and March 31, 1994, respectively.
This was due in part to significant non-cash charges for the provision
for loan losses and writedowns on OREO. Net cash used by financing
activities was $6,781,000 and $1,920,000 for the three months ending
March 31, 1995 and 1994, respectively. Net cash used by financing
activities was primarily due to an aggregate decrease in core deposits
and federal funds purchased and offset by an increase in time deposits
and FHLB Advances for the three month period ending March 31, 1995. For
the three month period ending March 31, 1994, net cash used by financing
activities was primarily due to decreases in core and time deposits and
were offset by proceeds from federal funds purchased and FHLB Advances.
Net cash used by investing activities were $1,591,000 for the three
months ending March 31, 1995 as compared net cash provided of $3,915,000
for the three months ended March 31, 1994. The cash used by investing
activities for the three months ended March 31, 1995 was primarily due to
an increase in net loans originated and federal funds sold and offset by
maturities of investment securities. For the three months ended March
31, 1994, cash provided by investing activities was due to an decrease in
federal funds sold and investment securities maturities and offset by a
increase in net loans originated.
The Company concentrates its efforts on evaluating interest rate risk and
appropriately adjusts for changes in rates and maturities of its assets
and liabilities. The Company's objective is to provide stable net
interest income. The table below illustrates the ratio of rate sensitive
assets to rate sensitive liabilities as they mature and/or reprice within
the indicated periods. As of March 31, 1995, the Company's rate
sensitive assets repricing or maturing approximately equalled its rate
sensitive liabilities during the first ninety days. This results from
having approximately 42% of the Company's loan portfolio available to
reprice within thirty days. In an increasing rate environment, asset
sensitivity enhances earnings potential, whereas liability sensitivity
would negatively impact earnings. In contrast, in a declining rate
environment, asset sensitivity would negatively impact earnings, whereas
liability sensitivity enhances earnings potential. The Company is
"liability sensitive" between the periods of six to twelve months and
beyond one year which is primarily due to its demand and savings
accounts, which are considered relatively stable and not easily
influenced by changes in interest rates. At March 31, 1995, the amount
of the Company's cumulative gap with respect to assets and liabilities
maturing or repricing within one year was $7,235,000 more liabilities
than assets repricing (a negative gap position), representing a negative
3% cumulative gap to total rate sensitive assets. ALCO manages the gap
position on an ongoing basis to assure an interest rate risk not to
exceed more than a 3% change in net interest income for a one year
period. If interest rates were to immediately increase by 200 basis
points, the negative impact on the Company would be within ALCO's
tolerance level.
The following table sets forth the distribution of the repricing of the
Company's earning assets and interest bearing liabilities at a single
point in time, as of March 31, 1995. The table shows the interest rate
sensitivity gap (i.e., interest rate sensitive assets less interest rate
sensitive liabilities), the cumulative interest rate sensitivity gap, the
interest rate sensitivity gap ratio (i.e., interest rate sensitive assets
divided by interest rate sensitive liabilities) and the cumulative
interest rate sensitivity gap ratio. The table also sets forth the time
periods in which interest earning assets and interest bearing liabilities
will mature or may reprice in accordance with their contractual terms.
However, the table does not necessarily indicate the impact of general
interest rate movements on the net interest margin since the Company's
repricing of various categories of assets and liabilities is subject to
competitive pressures and the needs of the Company's customers. The
Company's interest rate sensitivity position is adjusted as ALCO's
assessment of the interest rate outlook and other factors are modified.
As the Company increases its total assets, the overall business plan
provides for matching its assets and liabilities to reduce interest rate
risk and liquidity risk.
<TABLE>
<CAPTION>
INTEREST - RATE SENSITIVITY TABLE
(dollars in thousands)
<S> <C> <C> <C>
March 31, 1995 Month 1 Month 2 Month 3
______________________ _______ _______ _______
Rate Sensitive Assets:
Loans <F1> $84,450 $4,045 $2,421
Investments 8,592 2,995 3,346
_______ ______ ______
Total Rate
Sensitive Assets 93,042 7,040 5,767
Rate Sensitive
Liabilities:
Time deposits 12,525 9,891 8,438
Other deposits 70,156<F2> 2,000 0
_______ ______ ______
Total Rate
Sensitive Liabilities 82,681 11,891 8,438
Net Gap 10,361 (4,851) (2,671)
______ ______ ______
Cumulative Gap 10,361 5,510 2,839
Net Gap as % of total
rate sensitive assets 4% -2% -1%
Cumulative Gap as %
of total rate sensitive
assets 4% 2% 1%
</TABLE>
<TABLE>
<CAPTION>
INTEREST - RATE SENSITIVITY TABLE
(dollars in thousands)
<S> <C> <C> <C> <C>
March 31, 1995 Months Months Over Total
4-6 7-12 1 Year
______________________ ______ ______ ______ _____
Rate Sensitive Assets:
Loans <F1> $ 8,872 $23,799 $ 76,384 $199,971
Investments 9,453 9,020 35,046 68,452
_______ _______ ________ ________
Total Rate Sensitive Assets: 18,325 32,819 111,430 268,423
Rate Sensitive Liabilities:
Time deposits 11,115 44,603 39,728 126,300
Other deposits 2,500 3,000 75,233<F3> 152,889
_______ _______ ________ ________
Total Rate Sensitive
Liabilities: 13,615 47,603 114,961 279,189
Net Gap 4,710 (14,784) (3,531) (10,766)
_______ _______ _______ ________
Cumulative Gap 7,549 (7,235) (10,766) (10,766)
Net Gap as % of total
rate sensitive assets 2% -6% -1% -4%
Cumulative Gap as %
of total rate sensitive
assets 3% -3% -4% -4%
</TABLE>
<F1> Excludes nonaccrual loans.
<F2> The Company has assumed that 100% of money market and NOW accounts
will reprice within 30 days based on local market conditions.
<F3> The Company has assumed that 90% of demand and savings deposits will
not be withdrawn in less than one year based on its analysis of Bank and
industry experiences for the rate of runoff of such deposits.
<PAGE>
PART II - OTHER INFORMATION
ITEMS 1-5 Not applicable.
ITEM 6 Exhibits and Reports on Form 8-K:
(a) Exhibits-Exhibit 27 Financial Data Schedule
(b) Form 8-K: None
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.
Date: May 12, 1995 /s/ F. Patrick McFadden, Jr.
________________________________
F. Patrick McFadden, Jr.
President/Chief Executive Officer
Date: May 12, 1995 /s/ John F. Trentacosta
________________________________
John F. Trentacosta
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains Summary Financial Information extracted from the
Quarterly Report on Form 10-Q for the period ended 03/31/95 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 15,214
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,575
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,184
<INVESTMENTS-CARRYING> 36,693
<INVESTMENTS-MARKET> 0<F1>
<LOANS> 208,071
<ALLOWANCE> 7,404
<TOTAL-ASSETS> 293,310
<DEPOSITS> 268,611
<SHORT-TERM> 1,541
<LIABILITIES-OTHER> 957
<LONG-TERM> 9,036
<COMMON> 148
0
0
<OTHER-SE> 13,017
<TOTAL-LIABILITIES-AND-EQUITY> 293,310
<INTEREST-LOAN> 4,592
<INTEREST-INVEST> 971
<INTEREST-OTHER> 8
<INTEREST-TOTAL> 5,571
<INTEREST-DEPOSIT> 2,050
<INTEREST-EXPENSE> 2,237
<INTEREST-INCOME-NET> 3,334
<LOAN-LOSSES> 1,394
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,892
<INCOME-PRETAX> (264)
<INCOME-PRE-EXTRAORDINARY> (264)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 222
<EPS-PRIMARY> 0.2
<EPS-DILUTED> 0.2
<YIELD-ACTUAL> 4.88
<LOANS-NON> 8,101
<LOANS-PAST> 360
<LOANS-TROUBLED> 2,740
<LOANS-PROBLEM> 1,879
<ALLOWANCE-OPEN> 6,827
<CHARGE-OFFS> 929
<RECOVERIES> 112
<ALLOWANCE-CLOSE> 7,404
<ALLOWANCE-DOMESTIC> 7,404
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Not reported on a quarterly basis.
</FN>
</TABLE>
