SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition perior from __________ to __________
Commission File Number 0-16272
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HOMETOWN BANCORPORATION, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1199559
-------- ----------
(State or other jurisdiction (IRS Employer Identification No.
of incorporation or organization)
20 West Avenue, Darien, Connecticut 06820-0513
----------------------------------------------
(Address of Principal executive offices, including zip code)
(203) 656-2265
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of each exchange on which registered
-------------- -----------------------------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
---------------------------------------
Common Stock Purchase Rights
----------------------------
(Title of Class)
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate maket value of the voting stock held by non-affiliates of the
registrant was $14,858,841 on January 31, 1995. On that date 1,681,126 shares
of Common Stock, par value $1.00 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of 10-K into which incorporated
-------- ------------------------------------
Proxy Statement for 1995 Part I
Annual Meeting of Stockholders
<PAGE>
1
EXPLANATORY NOTE
This Amendment No. 1 to the Annual Report on Form 10-K of Hometown
Bancorporation, Inc. is being filed principally to provide restated financial
information for the years 1994, 1993 and 1992. Certain other information has
also been updated to a more recent date.
TABLE OF CONTENTS
Part I. Page
- ------- ----
Item 1 - Business 2
Item 4A - Executive Officers of the Registrant 6
Part II.
- --------
Item 6 - Selected Financial Data 6
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 8 - Financial Statements and Supplementary Data 20
Part IV.
- --------
Item 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K 43
<PAGE>
2
Part I
------
Item 1 - Business
- -----------------
Hometown Bancorporation, Inc. (the "Company") was incorporated under
the laws of the State of Delaware on April 14, 1987 to operate principally as
a bank holding company for The Bank of Darien (the "Bank"). On July 21, 1987,
each share of the Bank's outstanding common stock was exchanged for one share
of Common Stock, par value $1.00, of the Company. In 1987, the Company sold
1,285,000 shares of common stock to the public. Net proceeds from the
offering totalled $10,962,000. The Bank is the sole subsidiary of the
Company. The business of the Company consists of ownership of the capital
stock of the Bank.
The Bank began operations in 1985. On December 1, 1989, the second
office of the Bank opened in Westport, Connecticut.
In April 1992, the Bank assumed all of the deposits and purchased
certain assets of the Norwalk Bank which had been declared insolvent and
for which the Federal Deposit Insurance Corporation (the "FDIC") had been
appointed as receiver.
The Bank engages in the commercial banking business tailored to meet
the needs of the residents and businesses of Darien and Westport, Connecticut,
and the surrounding areas. The Bank offers a broad range of deposit accounts
with emphasis on serving the needs of individuals, small and medium-sized
businesses and professionals. The Bank does not currently offer trust
services or international banking services.
The Bank faces strong competition from numerous existing Connecticut
and out-of-state bank holding companies, commercial banks, savings banks and
savings and loan associations which have been in business for many years and
have established customer bases and which may provide a greater range of
services than the Bank. Competition also comes from other businesses which
provide financial services, including consumer finance companies, credit
unions, factors, mortgage brokers, insurance companies, securities brokerage
firms, money market mutual funds and private lenders. Many of these
competitors are substantially larger than the Bank and have greater lending
limits, serve larger geographic markets and have larger customer bases than
the Bank.
Over time, intense market demands, economic pressures and
significant legislative and regulatory actions have eroded banking industry
classifications which were once clearly defined and have increased competition
among banks as well as other financial institutions. This increase in
competition has forced banks and other financial service institutions to
diversify their services and become more cost effective as a result of
competition with one another and with new types of financial service
companies, including non-bank competitors. These events have resulted in
increasing homogeneity in the financial services offered by banks and other
financial institutions.
<PAGE>
3
The Company is registered as a bank holding company under the Bank
Holding Company Act of 1956, which regulates and limits the activities of the
Company. In general, the Company and its subsidiaries are prohibited from
engaging in or acquiring direct or indirect control of any company engaged in
nonbanking activities unless such activities are so closely related to banking
as to be a proper incident thereto. In addition, the Company must obtain the
prior approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") to acquire control of any bank; to acquire, with
certain exceptions, more than 5% of the outstanding voting stock of any other
company; or to merge or consolidate with another bank holding company.
Federal antitrust laws also place limitations on the acquisition of
additional banks and other businesses.
The Company is an "affiliate" of the Bank, within the meaning of the
Federal Reserve Act and of FDIC regulations, which impose certain restrictions
on loans by the Bank to affiliates, on investments in their stock or
securities, and on taking their stock or securities as collateral for loans to
any borrower. The Company and the Bank are subject to examination by the
Federal Reserve Board.
The FDIC's enforcement powers have been significantly expanded under
the Federal Deposit Insurance Corporation Improvements Act of 1991 ("FDICIA"),
many provisions of which became effective as of December 19, 1992. The types
of actions which may be taken by the FDIC under the statute vary depending
upon, among other things, the institution's placement in one of five
categories, based on capital position, ranging from "well capitalized" to
"critically undercapitalized," and on its financial condition and prospects
generally. As of December 31, 1994, the Bank believes that it was "well
capitalized" within the meaning of FDICIA.
The Bank is subject to federal and state laws applicable to banks
and is subject to regulation and examination by the Banking Commissioner of
Connecticut and the FDIC.
Under Connecticut law, state bank and trust companies and other
banking institutions are no longer prohibited from opening offices in Darien.
In 1990, Connecticut law was amended to permit the acquisition of Connecticut
banks or Connecticut bank holding companies by out-of-state bank holding
companies with the prior approval of the Connecticut Banking Commissioner. In
1994, federal legislation was passed which would permit nationwide branching
by banks beginning in 1996. While state legislatures can elect not to have
this statute apply to their states, the Connecticut legislature has not, as of
the date hereof, taken any action which would prevent the new federal law from
applying in Connecticut. The Company cannot assess the impact of this
legislation or the action of the banking authorities on the Bank but
anticipates that it will likely result in increased competition.
On January 27, 1989, the Federal Reserve Board issued its final risk
based capital guidelines for banks and bank holding companies. The rule
currently requires a
<PAGE>
4
minimum ratio of total capital to risk weighted assets of 8%. The Company's
consolidated and the Bank's ratios of total capital to risk weighted assets at
December 31, 1994 were 15.46% and 14.78%, respectively.
There is not a material portion of the Bank's loans concentrated
within a single industry or group of related industries. However,
approximately 64% and 19% of the Bank's loans outstanding at December 31, 1994
were collateralized by residential and commercial real estate, respectively.
There has been no material portion of the Bank's deposits obtained
from a single person or a few persons, the loss of any one of which would have
a material adverse effect on the business of the Bank.
The Bank offers a broad range of consumer and commercial banking
services, with emphasis on serving the needs of individuals, small and medium-
sized businesses and professionals in its service area. The deposit accounts,
both consumer and commercial, which the Bank offers include checking accounts,
interest-bearing "NOW" accounts, insured money market accounts, certificates
of deposit, savings accounts, Individual Retirement Accounts and Keogh
Accounts. Other services include credit cards, money orders, travelers'
checks and access to an automated teller network.
The Bank offers real estate loans to individuals including
mortgages, home improvement, bridge loans and home equity lines of credit.
Other personal loans include overdraft lines of credit and loans for
automobiles, boats, tuition and for the purchase of marketable securities.
Loans offered to small and medium-sized businesses include unsecured and
secured loans to service companies, manufacturers, wholesalers, retailers and
professionals doing business in the region.
The Bank offers both fixed rate and adjustable rate mortgages for
the purchase or refinancing of residences. The Bank's adjustable rate
mortgages have generally provided for annual adjustments of interest based on
an index of U.S. government securities. The maximum interest rate increase
per year on the Bank's variable rate mortgages is 2% and the maximum increase
over the life of the mortgage is 6%. Both the fixed rate and the adjustable
rate mortgages offered by the Bank generally have terms of either fifteen or
thirty years, although the Bank will consider any other maturity requested by
the borrower. Mortgages may be sold to the secondary market.
The Bank makes commercial loans to smaller and medium-sized local
businesses and professionals, generally for working capital purposes or to
finance the purchase of real estate or equipment. Such loans are usually made
at a floating interest rate based on the Bank's "prime rate." The interest
rate on such loans changes whenever the prime rate changes.
The Bank makes a variety of types of personal loans, including
automobile, boat, credit card and other installment loans. While the Bank
offers fixed rates on some of its consumer loans, most of its consumer loans,
with the exception of
<PAGE>
5
credit cards, have variable interest rates. Consumer loans account for
approximately 6% of the Bank's loan portfolio.
The Bank has developed relationships with other banks to provide
services requested by the Bank's customers which the Bank does not currently
make available. The Bank will request other banks to participate in loans to
customers where the loan amounts exceed the Bank's policies or legal lending
limits.
The Bank's market for deposits is concentrated in Darien, Norwalk,
Stamford and Westport, Connecticut. Its lending area includes principally
the cities of Stamford and Norwalk, Connecticut and the towns of Darien,
Greenwich, Westport, New Canaan, Wilton and Weston, Connecticut.
The Bank has no material patents, trademarks or licenses.
The Bank spent $1,000, $16,000 and $3,000 on market research during
the years ended December 31, 1994, 1993 and 1992, respectively.
Compliance by the Bank with federal, state and local provisions
which have been enacted or adopted regulating or otherwise relating to the
discharge of materials into the environment is not expected to have any
material effect upon the capital expenditures, earnings and competitive
position of the Bank.
The number of persons employed by the Bank is 87. The Company has
no employees who are not also employees of the Bank.
While the business of the Bank is generally not seasonal, there may
be times of the year when mortgage origination activity is stronger than at
other times.
The Bank does not engage in material operations in foreign countries
and a material portion of its revenues is not derived from customers in
foreign countries.
<PAGE>
6
Item 4A - Executive Officers of the Registrant
- ----------------------------------------------
The following table sets forth the names of all executive officers
of the Company or its wholly owned subsidiary, The Bank of Darient (the
"Bank"), their ages and all positions held by them with the Company or the
Bank.
Name Age Title
- ---- --- -----
Douglas D. Milne, III 43 Chairman of the Board of the Company and
the Bank
Kevin E. Gage 35 President and Chief Executive Officer of
the Company and the Bank
Christine J. Scholtz 43 Senior Vice President and Senior Lending
Officer of the Bank
Albert T. Jaronczyk 43 Senior Vice President and Chief Financial
Officer of the Company and the Bank
Information concerning the business experience of Messrs. Milne and
Gage is included under "Election of Directors" in the Company's Proxy
Statement for its 1995 Annual Meeting of Stockholders (the "1995 Proxy") and
is incorporated herein by reference.
Ms. Scholtz has been employed by the Bank for more than 5 years.
Prior to becoming Senior Vice President and Chief Financial Officer
of the Company and the Bank in August, 1995, Mr. Jaronczyk served as Chief
Financial Officer of The Bank of Great Neck for more than five years.
All of the executive officers were elected at the organization
meeting of the Board of Directors of the Company in May, 1995 except for Mr.
Jaronczyk who was elected to his position by the Boards of Directors of the
Company and the Bank in August, 1995. The term of office of each extends
until the organization meeting of the Board of Directors of the Company or the
Bank, as the case may be, following the next annual meeting of shareholders.
None of the executive officers has been elected pursuant to any arrangement
with any other person.
There is no family relationship between any executive officer and
another executive officer. None of the executive officers is involved in any
legal proceeding requiring disclosure pursuant to Item 404(f) of Regulation
S-K of the Securities and Exchange Commission.
Item 6 - Selected Financial Data
- --------------------------------
Set forth below is selected financial data for the Company for the
years ended December 31, 1994, 1993, 1992, 1992 and 1990.
<PAGE>
7
<TABLE>
Hometown Bancorporation, Inc.
Selected Financial Data
(thousands of dollars except per share amounts)
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992 1991 1990
For the Year Ended December 31, (Restated) (Restated) (Restated)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest and dividend revenue $12,702 $11,304 $11,097 $9,445 $9,264
Interest expense 5,813 4,995 5,236 5,281 5,417
Net interest income 6,889 6,309 5,861 4,164 3,847
Provision for loan losses 75 360 1,258 800 3,175
Net investment securities gains 46 27 367 375 27
Before extraordinary credit and cumulative effect:
Net income (loss) 1,049 1,239 605 (173) (3,389)
Net income (loss) per share - primary .60 .72 .37 (.11) (1.95)
Net income (loss) per share - fully diluted .60 .72 .37 (.11) (1.95)
After extraordinary credit and cumulative effect:
Net income (loss) 1,049 2,364 861 (173) (3,389)
Net income (loss) per share - primary .60 1.38 .53 (.11) (1.95)
Net income (loss) per share - fully diluted .60 1.38 .53 (.11) (1.95)
- ----------------------------------------------------------------------------------------------------------------
December 31, 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------
Assets $213,991 $201,352 $187,235 $118,902 $97,339
Loans, net 74,940 85,461 85,322 60,786 54,580
Allowance for loan losses 3,004 3,640 3,111 1,825 1,916
Deposits 182,731 159,641 154,721 107,617 86,112
Average shares outstanding - primary 1,750,988 1,708,207 1,629,710 1,597,194 1,737,864
Average shares outstanding - fully diluted 1,750,988 1,719,066 1,629,710 1,597,194 1,737,864
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Item 7 - Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations (Restated)
----------------------------------------------
The Bank, a wholly owned subsidiary of the Company, was formed in 1984
as a commercial bank and commenced operations on October 7, 1985.
The Company was formed as a one bank holding company in April 1987, and
on July 21, 1987, exchanged on a one for one basis, a share of the Company's
common stock for each share of the Bank's outstanding common stock.
This Management's Discussion and Analysis has been prepared on the basis
of restated financial statements for the years ended December 31, 1994, 1993
and 1992. Refer to Note 15 of the restated financial statements.
The Company earned $1,049,000 or $.60 per share - fully diluted for the
year ended December 31, 1994. This compares to earnings of $2,364,000 or
$1.38 per
<PAGE>
8
share and $861,000 or $.53 per share for the years ended December
31, 1993 and 1992, respectively. The results for 1993 included the one-time
cumulative effect of the adoption of the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109"), of $1,125,000
or $.66 per share.
On April 24, 1992 as a result of an action instituted by the Banking
Commissioner of the State of Connecticut, The Norwalk Bank, Norwalk,
Connecticut (the "Failed Bank") was declared insolvent and the FDIC was
appointed the Receiver (the "Receiver") of the Failed Bank. As of the close
of business on Friday, April 24, 1992, the Bank assumed all of the deposits
and other liabilities in the amount of $73.9 million and purchased assets
in the amount of $34.5 million at a net discount of $353,000. The assets
acquired consisted primarily of single family residential mortgage loans,
home equity loans, other consumer loans and U.S. Treasury and U.S.
government agency securities.
On June 12, 1992 the Bank closed the Failed Bank's 20,000 square foot
banking office which was its only banking office. However, the Bank's
Westport, Connecticut office, which is less than two miles from the Failed
Bank's Norwalk office, services many of the Failed Bank's former customers.
Results of operations
The Company's results of operations depend primarily on enhancing net
interest income, limiting credit losses as reflected through the provision for
loan losses, maximizing other operating income and controlling other operating
expenses. The Company's other operating income is generated primarily from
fees and service charges, net gains on the sale of investment securities and
fees generated from mortgages originated and sold to the secondary market.
The Company's principal operating expenses are salaries and benefits,
occupancy, FDIC insurance, depreciation, advertising and marketing expenses
and other general and administrative expenses. The Company's results of
operations are also significantly affected by prevailing economic conditions,
particularly changes in market interest rates and government policies and
regulations concerning, among other things, monetary and fiscal affairs,
housing and financial institutions.
Net interest income is the difference between the income earned on loans,
investments and interest rate swaps and interest expense on deposits and
borrowings. Interest income on loans and investments is a function of the
balances outstanding during the period, the rates earned on such loans and
investments and the amortization of fees earned on loans recorded. Interest
expense is a function of the amount of deposits and borrowings outstanding
during the period and the rates paid on such amounts.
<PAGE>
9
Net interest income
Net interest income increased $580,000 or 9% during 1994 versus 1993 due
to an increase in net average interest earning assets, offset by a decrease
from net interest margins to 3.44% in 1994, from 3.59% in 1993. Net interest
income increased $448,000 or 8% during 1993 versus 1992 despite a decline in
net interest margins from 3.88% during 1992 to 3.59% during 1993. The increase
in net interest income was due primarily to an increase in average interest
earning assets.
The following tables set forth for the periods indicated, the average
balances of interest earning assets and interest bearing liabilities and the
interest earned or paid thereon expressed in dollars and rates, with the
changes for each category analyzed as to the impact of rates and volume.
<PAGE>
10
Hometown Bancorporation, Inc.
Rate Volume Analysis
(Restated)
(thousands of dollars)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
- -
<CAPTION>
1994 1993 Fluctuations In
Interest
Interest Interest Income/Expense<F3>
Average Income/ Average Average Income/ Average Due To Change In:
For the Year Ended December 31, Balance Expense Rate Balance Expense Rate Volume Rate
Total
- ------------------------------------------------------------------------------------------------------------------------
- -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans<F2> $85,968 $6,912 8.04% $91,043 $6,596 7.24% $(412) $728 $316
Taxable investment securities 112,713 5,739 5.09% 80,875 4,598 5.69% 1,626 (485) 1,141
Federal funds sold 1,573 51 3.24% 3,839 110 2.87% (73) 14
(59)
- ------------------------------------------------------------------------------------------------------------------------
- -
Total interest earning assets 200,254 12,702 6.34% 175,757 11,304 6.43% 1,141 257 1,398
- ------------------------------------------------------------------------------------------------------------------------
- -
Cash and due from banks 6,952 6,669
Allowance for loan loses (3,267) (3,353)
Other 8,292 12,074
- ---------------------------------------------------------------------------
Total Assets $212,231 $191,147
===========================================================================
Interest Bearing Liabilities:
NOW deposits $26,586 $387 1.46% $24,635 $488 1.98% (27) 128 101
Money market deposits 51,578 1,520 2.95% 50,228 1,381 2.75% (39) (100)
(139)
Savings deposits 15,834 337 2.13% 14,535 343 2.36% (28) 34 6
Time deposits 54,860 2,215 4.04% 43,033 1,610 3.74% (476) (129)
(605)
Other 25,568 1,354 5.30% 24,170 1,173 4.85% (72) (109)
(181)
- ------------------------------------------------------------------------------------------------------------------------
- -
Total interest bearing liabilities 174,426 5,813 3.33% 156,601 4,995 3.19% (642) (176)
(818)
Demand deposits 20,259 17,701
Other 2,367 3,163
Stockholders' equity 15,179 13,682
- --------------------------------------------------------------------------
Total liabilities and equity $212,231 $191,147
==========================================================================
Net interest income $6,889 $6,309 $499 $81 $580
========================================================================================================================
==
Net yield 3.44% 3.59%
========================================================================================================================
==
<CAPTION>
1993 1992 Fluctuations In
Interest
Interest Interest Income/Expense<F3>
Average Income/ Average Average Income/ Average Due To Change In:
For the Year Ended December 31, Balance Expense Rate Balance Expense Rate Volume Rate
Total
- ------------------------------------------------------------------------------------------------------------------------
- -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans<F2> $91,043 $6,596 7.24% $82,924 $6,834 8.24% $591 $(829)
$(238)
Taxable investment securities 80,875 4,598 5.69% 63,710 4,112 6.46% 977 (490) 486
Federal funds sold 3,839 110 2.87% 4,502 151 3.35% (19) (22)
(41)
- ------------------------------------------------------------------------------------------------------------------------
- --
Total interest earning assets 175,757 11,304 6.43% 151,136 11,097 7.34% 1,549 (1,341) 207
- ------------------------------------------------------------------------------------------------------------------------
- --
Cash and due from banks 6,669 5,898
Allowance for loan loses (3,353) (2,702)
Other 12,074 6,548
- -----------------------------------------------------------------------------
Total assets $191,147 $160,880
=============================================================================
Interest Bearing Liabilities:
NOW deposits $24,635 $488 1.98% $18,120 $551 3.04% (129) 192 63
Money market deposits 50,228 1,381 2.75% 44,935 1,589 3.54% (147) 355 208
Savings deposits 14,535 343 2.36% 12,217 382 3.13% (55) 94 39
Time deposits 43,033 1,610 3.74% 45,757 2,145 4.69% 99 43 535
Other 24,170 1,173 4.85% 11,299 569 5.04% (625) 21
(604)
- ------------------------------------------------------------------------------------------------------------------------
- --
Total interest bearing liabilities 156,601 4,995 3.19% 132,328 5,236 3.96% (857) 1,097 241
Demand deposits 17,701 16,096
Other 3,163 1,221
Stockholders' equity 13,682 11,235
- -----------------------------------------------------------------------------
Total liabilities and equity $191,147 $160,880
=============================================================================
Net interest income $6,309 $5,861 $692 $(244) $448
========================================================================================================================
=
Net yield 3.59% 3.88%
========================================================================================================================
=
<F1> The rate volume analysis reflects the changes in net interest income arising from changes in interest rates and
from asset and liability volume, including mix. The change in interest attributable to volume includes changes
in interest attributable to mix.
<F2> Includes non-accruing loans
<F3> Favorable/(unfavorable) fluctuations.
</TABLE>
<PAGE>
11
Provision for loan losses and allowance for loan losses
The Company maintains an allowance for loan losses. The allowance is
recorded through a periodic provision for loan losses, which is charged to
operations based on management's assessment of such loan related factors as
risk, including collateral and liquidation value of that collateral, loan
type, economic conditions and other pertinent factors.
The Company, in its assessment of the allowance for loan losses, utilizes
a risk rating system. This system involves an ongoing review of the loan
portfolio that culminates in loans being assigned a risk factor based upon
various credit criteria. If the review indicates a possibility that some
portion of the loan may result in a loss, a specific allowance is established
for the amount of the estimated loss. If the review indicates that it is
probable that some portion of the loan will result in a loss, that portion of
the loan is charged-off as a reduction of the loan and the allowance for loan
losses balance. In determining the allowance for loan losses for the balance
of the portfolio, loans are classified as to industry and collateral type with
risk assessments made for each category of loans. Reserve requirements are then
established for each category and provided for in the allowance for loan losses.
During 1994 the Company provided to the allowance for loan losses $75,000
or .04% of average total assets as compared to $360,000 or .19% of average
total assets and $1,258,000 or .78% of average total assets during 1993 and
1992, respectively.
At December 31, 1994, nonperforming loans were $851,000 or 1.09% of total
gross loans as compared to $1,583,000 or 1.78% of gross loans and $2,993,000 or
3.39% of gross loans at December 1993 and 1992, respectively. Net loan charge-
offs for the years ended December 31, 1994, 1993 and 1992 were $711,000 or .83%
of average loans, $280,000 or 0.31% of average loans and $894,000 or 1.08% of
average loans, respectively.
On December 31, 1994, 1993 and 1992 restructured and performing loans
were $865,000, $1,238,000 and $3,982,000, respectively. Performing loans past
due 90 days or more as to principal and interest at December 31, 1994, 1993
and 1992 were $11,000, $475,000 and $491,000, respectively.
The ratio of the Company's allowance for loan losses to total loans at
December 31, 1994, 1993 and 1992 was 3.85%, 4.09% and 3.52%, respectively. The
Company's ratio of the allowance for loan losses to nonperforming loans at
December 31, 1994, 1993 and 1992 was 353%, 230% and 104%, respectively. The
Company's ratio of the allowance for loan losses to nonperforming assets at
December 31, 1994, 1993 and 1992 was 161%, 128% and 58%, respectively.
<PAGE>
12
The following schedule reflects the allocation of the allowance for loan
losses at December 31, 1994 and 1993.
Hometown Bancorporation, Inc.
Allocation of the Allowance for Loan Losses
(thousands of dollars)
- -------------------------------------------------------------------------------
December 31, 1994 1993
- -------------------------------------------------------------------------------
% of Loan % of Loans
in Each in Each
Balance at end of Category to Category to
year applicable to: Amount Total Loans Amount Total Loans
- -------------------------------------------------------------------------------
Real estate mortgage $2,337 82% $3,109 87%
Commercial 541 11% 425 7%
Installment 108 6% 73 3%
Real estate construction 18 1% 33 3%
- ------------------------------------------------------------------------------
$3,004 100% $3,640 100%
==============================================================================
- ------------------------------------------------------------------------------
Other operating income
Deposit and other service charge income increased $8,000 or 1% to $709,000
in 1994 compared to 1993 and increased $149,000 or 27% to $701,000 during 1993.
The increase in deposit and other service charge income reflects increased
deposit account volume in 1994 and 1993.
Mortgage origination fees (fees generated from mortgages originated and
sold to the secondary market) during 1994, 1993 and 1992 were $507,000,
$893,000 and $383,000, respectively. The decrease during 1994 was due to the
decrease in mortgage origination volume as a result of the increase in
interest rates during 1994.
Other operating expenses
The Company has instituted a variety of cost control programs in an
effort to improve the Company's overhead expense to total assets ratio and,
ultimately, its return on assets. In addition, the 1992 FDIC-assisted
transaction resulted in increasing assets and deposits substantially without
adding significant fixed overhead expense. As a result of the cost control
programs and added volume attributable to the FDIC-assisted transaction,
total operating expenses as a percentage of total average assets has declined
from 3.90% at December 31, 1991 to 2.96% at December 31, 1994.
Salaries and benefits increased $362,000 to 14% from $2,611,000 during
1993 to $2,973,000 during 1994. The increase in expense was primarily
attributable to an increase in medical insurance premiums and other benefits,
and to an increase in the number of full-time equivalent employees during
1994. Salaries and benefits expense increased to $2,611,000 during 1993, up
$425,000 or 19% from 1992 when salaries and
<PAGE>
13
benefits expense was $2,186,000. The increase during 1993 was attributable to
the full year effect of the increased staffing needs as a result of the FDIC-
assisted transaction.
The average number of full-time equivalent employees at December 31, 1994,
1993 and 1992 were 79, 77 and 68, respectively.
FDIC insurance premiums decreased $17,000 or 4% during 1994 to $386,000,
from $403,000 during 1993. During 1993, premiums increased $137,000 or 52% from
$266,000 during 1992. The decrease during 1994 was due to a decrease in the
premium amounts charged by the FDIC due to the Bank's improved capital
position. The increase during 1993 was due to increased deposit balances.
Depreciation and amortization expense increased to $396,000 during 1994, up
$51,000 or 15% from 1993 when total depreciation and amortization expense was
$345,000. The increase during 1994 was primarily attributable to fixed asset
expenditures required to upgrade the Bank's computer systems. Depreciation and
amortization expense increased $54,000 or 19% during 1993 from $291,000 during
1992. The increase during 1993 was due to fixed asset expenditures.
Foreclosure expenses and the cost of other real estate owned consist of
legal, property management and appraisal expenses relating to the foreclosure of
property securing loans and the maintenance of other real estate owned acquired
through foreclosure. During 1994, foreclosure expenses and the cost of other
real estate owned declined $63,000 or 34% from $183,000 during 1993 to $120,000
during 1994. During 1993, foreclosure expenses and the cost of other real
estate owned declined $38,000 or 17% from 1992 when foreclosure costs were
$221,000. The decline was due to a reduction in problem assets and an overall
improvement in the loan portfolio during 1994 and 1993.
Advertising and marketing expenses increased $50,000 or 25% from $200,000
in 1993 to $250,000 in 1994. Advertising and marketing expenses remained level
for the years ended December 31, 1993 and 1992. The increase during 1994 was
due to increased advertising and marketing programs for the Bank's loan
products.
Other operating expenses - other increased $209,000 or 17% to $1,453,000
during 1994. Other operating expenses - other increased $31,000 or 3% to
$1,244,000 during 1993 from $1,213,000 during 1992. The increases are
attributable to variable expenses such as data processing equipment and
postage which have increased as a result of the Bank's 14% growth in assets
during the last two years.
Income Taxes
The Company recorded income tax provisions of $593,000, $800,000 and
$274,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
Net income for the year ended December 31, 1993 included the cumulative effect
of an accounting change of $1,125,000 or $.66 per share fully-diluted due to the
adoption of FAS 109. The Company recorded an extraordinary credit of $256,000
during 1992 as a result of utilizing operating loss carryforwards.
<PAGE>
14
Note 9 to the Consolidated Financial Statements contains additional income
tax information.
Liquidity and capital resources
An important element in evaluating the Company's performance and potential
performance is its liquidity position and the maturity of its short- and long-
term assets and liabilities. Asset liquidity is achieved through the continuous
maturity of earning assets. Liability liquidity is available through deposit
growth, maturity structure and access to borrowed funds.
Total assets of the Company increased to $214 million at December 31,
1994, a $13 million or 6% increase from December 31, 1993 when total assets
were $201.4 million. Total loans were $75 million at December 31, 1994, a
$10 million decrease from December 31, 1993 when total loans were $85 million.
The growth in assets during 1994 was funded by the $233 million growth in
deposits and offset by an $8 million decline in FHLBB advances during 1994.
The Company's funding sources consisted principally of deposits from
individuals and businesses in its service area. Total deposits at December 31,
1994 were $182.7 million, a $23.1 million or 14.5% increase in deposits from
December 31, 1993. Core deposits (total deposits less certificates of deposit
greater than $100,000) increased $20.2 million or 13% to $173.4 million at
December 31, 1994, up from $153.2 million at December 31, 1993.
The Bank is a member of the Federal Home Loan Bank of Boston (the "FHLBB").
As a member of the FHLBB, the Bank has access to a flexible source of short-
and long-term liquidity (approximately $80 million) and to interest rate risk
management programs. In addition, the FHLBB's Triple-A status make it a
financially stable and reliable provider of wholesale correspondent banking
services.
Asset and liability management
As part of the Company's asset and liability management policy, the
Company, through the Bank's Asset and Liability Management Committee, has
strived to minimize its interest rate and liquidity risk. Interest rate risk
is minimized by entering into variable rate loans and investments. Commercial,
real estate mortgage and real estate construction loans are predominately
floating rate loans tied to changes in the prime rate of interest. Residential
mortgages held in the Company's portfolio generally reprice annually if there is
a shift in the underlying United States Treasury Securities Index, subject to
a two percentage point maximum increase or decrease at each reprice date.
Generally, fixed rate loans are funded through matched deposits. The
investment portifolio maintains a position in U.S. Agency ARM securities
which also reprice with the Constant Maturity Treasury (CMT) index. These
securities are subject to periodic two percentage point limits on changes from
the then current coupon. Finally, interest rate risk is controlled on a total
portfolio basis striving to manage the "gap" position of the Company, the
difference
<PAGE>
15
between interest sensitive assets and liabilities repricing within a given
time frame. Liquidity risk is managed through the matching of investment,
loan and deposit maturities and through accessing other funding sources for
short-term liquidity needs.
The following table illustrates the repricing schedule of the Company's
interest earning assets and interest bearing liabilities for all future time
periods as of December 31, 1994. The principal period in which it matures (or
which, in the case of mortgage-backed securities, it is expected to be repaid)
or the period in which its rate is eligible to reprice. The repricing schedule
of mortgage-backed securities is an estimate of when such securities will be
repaid based upon past repayment rates experienced by the Company. In preparing
the table, it was assumed that prime rate commercial loans will reprice
immediately. In addition, based upon the Bank's historical correlation analysis
of the movement of short-term market rates and the change in the Bank's deposit
account rates, it was determined and reflected in this table that money market
accounts were 100% correlated to changes in short-term rates and that savings
and NOW accounts were 75% correlated. The maturity schedules included in Notes
3 and 6 to the Consolidated Financial Statements reflect contractual maturity
only, without consideration of anticipated prepayment of mortgage-backed
securities and the periodic repricing of variable rate loans and investments.
The Company's short- and long-term liquidity and net interest income will not be
adversely affected by changes in the interest rate environment due to the
relative short-term maturity and repricing of its investment, loan and deposit
portfolios.
<PAGE>
16
Hometown Bancorporation, Inc.
Repricing Schedule
(thousands of dollars)
<TABLE>
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
<CAPTION>
Less Three Six Months Greater
Than Three to Six to Than
December 31, 1994 Months Months One Year One Year Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Earning Assets
Loans<F1> $41,943 $11,222 $11,810 $12,118 $77,093
Investment security 24,791 23,747 43,079 31,510 123,127
- ---------------------------------------------------------------------------------------------------------
Total interest earning assets 66,734 34,969 54,889 43,628 200,220
- ---------------------------------------------------------------------------------------------------------
Interest Bearing Liabilities
Savings deposits 10,777 - - 3,592 14,369
Money market and NOW accounts 71,063 - - 5,987 77,050
Certificates of deposit of $100 and over 4,900 2,732 1,139 277 9,048
Other fixed rate time deposits 15,173 17,882 11,198 6,573 50,826
Variable rate certificates of deposit
of $100 and over 303 - - - 303
Other variable rate certificates of deposit 6,203 - - - 6,203
FHLBB advances 11,681 5,000 - - 16,681
- ---------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 120,100 25,614 12,337 16,429 174,480
Net interest rate swaps 1,000 - - (1,000) -
- ---------------------------------------------------------------------------------------------------------
Gap $(52,366) $ 9,355 $42,552 $26,199 $25,740
Cumulative gap $(52,366) $(43,011) $ (459) $25,740 $25,740
=========================================================================================================
Gap to total assets (24.47)% 4.37% 19.88% 12.24% 12.03%
=========================================================================================================
Cumulative gap to total assets (24.47)% (20.10)% (0.21)% 12.03% 12.03%
=========================================================================================================
<F1> Non-accruing loans of $851,000 are not including in loan balances.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Investments
-----------
The Company adopted FAS 115, Accounting for Certain Investments in
Debt and Equity Securities, as of December 31, 1993, which requires the
classification of debt and equity securities into one of three categories:
held-to-maturity; available-for-sale; or trading. Held-to-maturity securities
are reported at amortized cost and available-for-sale securities are reported at
fair market value, with unrealized gains and losses excluded from earnings and
reported in a separate component of stockholders' equity. The Company does not
have a trading portfolio and does not anticipate creating a trading portfolio in
the near future.
The Company's investment portfolio increased $29,051,000 to $123,127,000
at December 31, 1994, a 31% increase from December 31, 1993, when total
investments were $94,076,000. The increase in investments reflects added
liquidity for the Company due to the increase in deposits as discussed earlier.
Currently, the Company invests in taxable U.S. government and U.S. government
agency securities (primarily mortgage-backed securities, collaterialized
mortgage obligations and U.S. government agency bonds) as well as other
mortgage-backed securities rated Double-A or better.
It is the Company's policy to maintain asset and liability interest
sensitivity matching through adjustments to the investment portfolio and to
provide for the liquidity
<PAGE>
17
needs of the Company. The policy also provides for balancing return while
minimizing risks.
The amortized cost and fair values of investment securities together
with average yield by maturity at December 31, 1994 and 1993 are shown below.
Mortgage backed securities are not reported by their contractual maturities as
they are subject to prepayment. These securities are reported by their average
life to maturity.
The fair market value of investments is based on quoted market prices
and/or dealer quotes.
<PAGE>
18
Hometown Bancorporation, Inc.
Investment Tables
(thousands of dollars)
(Restated)
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994
Estimated 1993
Amortized Fair Average Amortized Estimated Average
Investments held-to-maturity Cost Value Yield Cost Fair Value Yield
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Due after 1 but within 5 years $1,013 $ 999 6.32% $1,022 $1,068 6.71%
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 1,013 999 6.32% 1,022 1,068 6.71%
- -----------------------------------------------------------------------------------------------------------------------
U.S. Agency Mortgage-Backed Securities
Due in 1 year or less 5,509 5,415 5.30% - - -
Due after 1 but within 5 years 9,494 9,216 5.58% 24,980 25,306 5.79%
Due after 5 years but within 10 years 5,771 5,622 4.33% 2,173 2,189 6.17%
Due after 10 years 4,117 4,002 5.38% - - -
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 24,891 24,255 5.10% 27,153 27,495 5.83%
- -----------------------------------------------------------------------------------------------------------------------
Other U.S. Agency Obligations
Due after 1 but within 5 years 10,404 9,973 6.75% 1,050 1,124 7.26%
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 10,404 9,973 6.75% 1,050 1,124 7.26%
- -----------------------------------------------------------------------------------------------------------------------
Other Mortgage-Backed Securities
Due after 1 but within 5 years 9,068 8,840 6.09% 10,835 10,873 4.76%
Due after 5 but within 10 years 897 898 5.02% - - -
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 9,965 9,738 5.99% 10,835 10,873 4.76%
- -----------------------------------------------------------------------------------------------------------------------
Total investments held-to-maturity $46,273 $44,965 5.69% $40,060 $40,560 5.60%
=======================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994
Estimated 1993
Amortized Fair Average Amortized Estimated Average
Investments available-for-sale Cost Value Yield Cost Fair Value Yield
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Due in 1 year or less $1,025 $1,012 5.08% $3,531 $3,502 3.20%
Due after 1 but within 5 years 2,066 2,007 4.76% - - -
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 3,091 3,019 4.86% 3,531 3,502 3.20%
- -----------------------------------------------------------------------------------------------------------------------
U.S. Agency Mortgage-Backed Securities
Due in 1 year or less 13,925 13,300 4.60% - - -
Due after 1 but within 5 years 14,028 13,494 4.77% 22,538 22,764 3.98%
Due after 5 years but within 10 years 11,796 11,310 5.30% 1,990 2,022 3.63%
Due after 10 years 12,142 11,240 5.01% - - -
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 51,891 49,344 4.90% 24,528 24,786 3.95%
- -----------------------------------------------------------------------------------------------------------------------
Other Mortgage-Backed Securities
Due after 1 but within 5 years 20,028 19,946 6.48% 20,771 20,809 6.04%
Due after 5 but within 10 years 3,030 2,828 6.71% 3,581 3,575 4.40%
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 23,058 22,774 6.51% 24,352 24,384 5.80%
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Stock 1,717 1,717 7.69% 1,344 1,344 6.90%
- -----------------------------------------------------------------------------------------------------------------------
Total investments available-for-sale $79,757 $76,854 5.42% $53,755 $54,016 4.83%
=======================================================================================================================
</TABLE>
<PAGE>
19
Equipment and leasehold improvements
Equipment and leasehold improvements, as reflected in Note 5 to the
Consolidated Financial Statements, decreased $154,000 to $1,627,000 at December
31, 1994, from $1,781,000 at December 31, 1993. The decrease is primarily due
to the normal levels of depreciation expense net of fixed asset acquisitions.
Stockholders' equity
The decrease in stockholders' equity of $1,917,000 to $12,537,000 at
December 31, 1994, primarily reflects the unrealized loss on investments
available-for-sale of $2,903,000 offset by net income of $1,049,000 during
1994. Listed below are the Bank's Tier 1 leverage and risk-based capital
ratios as of December 31, 1994 and the regulatory minimum.
The Bank Regulatory
of Darien Minimum
Tier 1 Leverage Capital Ratio 6.83% 4.00%
Risk-Based Capital Ratio 15.46% 8.00%
FHLBB advances
FHLBB advances in the amount of $16.7 million at December 31, 1994
with an average rate of 5.46%, have a weighted maturity of 1.5 months. The
average amount outstanding during 1994 was $25.6 million.
Recent developments
The Financial Accounting Standards Board (the "FASB") issued, in
October 1994, its Statement of Financial Accounting Standards No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments" ("FAS 119"). The Company adopted FAS 119 in the fourth quarter
of 1994; however, the impact of FAS 119 is not significant to the Company.
The FASB issued in May 1993, its Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("FAS 115"). The Company adopted FAS 115 in the fourth
quarter of 1993.
The Company adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("FAS 109") in the first quarter of 1993.
In May 1993, the FASB issued its Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan"
("FAS 114"), and in October 1994 its Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures" ("FAS 118").
<PAGE>
20
The Company did adopt FAS 114 and FAS 118 effective January 1,
1995 and the adoption thereof was immaterial.
In November 1992, the FASB issued its Statement of Accounting
Standards No. 112, "Employers Accounting for Postemployment Benefits," which
was effective for fiscal years beginning after December 15, 1993. This
statement has no impact on the Company.
Effects of inflation
During the period of the Company's operations, the effects of inflation
have not been significant.
Item 8 - Financial Statements and Supplementary Data
- ----------------------------------------------------
Set forth below are the consolidated financial statements required by
this item. The supplementary data required by this item is set forth under the
caption"Note 12 - Quarterly Financial Data (Unaudited)" and "Supplementary
Financial Data."
<PAGE>
21
Hometown Bancorporation, Inc.
Consolidated Balance Sheet
(thousands of dollars except par value amounts)
<TABLE>
- -----------------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1994 1993
- -----------------------------------------------------------------------------------------------------
Assets (Restated) (Restated)
<S> <C> <C>
Cash and due from banks $ 8,549 $ 7,124
Federal funds sold - 6,370
Investments held-to-maturity (fair value: $44,965 in 1994 and
$40,560 in 1993) 46,273 40,060
Investments available-for-sale at fair value 76,854 54,016
Loans, less allowance for loan losses of $3,004 in 1994 and
$3,640 in 1993 74,940 85,461
Equipment and leasehold improvements, net of accumulated
depreciation of $1,576 in 1994 and $1,578 in 1993 1,627 1,781
Other real estate owned, net 1,016 1,271
Accrued interest and other assets 4,732 5,269
- -----------------------------------------------------------------------------------------------------
Total Assets $213,991 $201,352
=====================================================================================================
Liabilities and Stockholders' Equity
Deposits:
Demand deposit accounts 24,932 22,995
NOW and money market accounts 77,050 78,806
Savings accounts 14,369 15,275
Certificates of deposit of $100 and over 9,351 6,426
Time deposits 57,029 36,139
- -----------------------------------------------------------------------------------------------------
Total deposits 182,731 159,641
FHLBB advances 16,681 25,000
Accrued interest and other liabilities 2,042 2,257
- -----------------------------------------------------------------------------------------------------
Total Liabilities 201,454 186,898
- -----------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stock, par value $1; 2,000,000
shares authorized, none issued - -
Common stock, par value $1; 10,000,000 shares authorized,
1,680,096 and 1,659,141 issued and outstanding in 1994
and 1993, respectively 1,833 1,833
Surplus 13,960 13,960
Retained earnings (accumulated deficit) 534 (494)
Treasury stock: 153,255 and 174,155 shares in 1994 and 1993,
respectively, at cost (887) (1,008)
- -----------------------------------------------------------------------------------------------------
Unrealized (loss) gain on investments available-for-sale, net (2,903) 163
- -----------------------------------------------------------------------------------------------------
Total Stockholders' Equity 12,537 14,454
- -----------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $213,991 $201,352
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
22
<TABLE>
Hometown Bancorporation, Inc.
Consolidated Statement of Income
(thousands of dollars except per share amounts)
<CAPTION>
For the Year Ended December 31, 1994 1993 1992
- -------------------------------------------------------------------------------------------
(Restated) (Restated) (Restated)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and Dividend Revenue:
Interest and fees on loans $6,912 $6,596 $6,834
Interest on investment securities:
Obligations of U.S. government agencies 3,491 3,094 3,057
Other 2,139 1,407 992
Interest on federal funds sold 51 110 151
Dividends 109 97 63
- -------------------------------------------------------------------------------------------
Total interest and dividend revenue 12,702 11,304 11,097
- -------------------------------------------------------------------------------------------
Interest Expense:
Deposits 4,459 3,823 4,667
Other 1,354 1,172 569
- -------------------------------------------------------------------------------------------
Total interest expense 5,813 4,995 5,236
- -------------------------------------------------------------------------------------------
Net interest income 6,889 6,309 5,861
Provision for loan losses 75 360 1,258
Write-down of other real estate owned 290 60 212
- -------------------------------------------------------------------------------------------
Net interest income after provision for loan
losses and write-down of other real estate 6,524 5,889 4,391
Other Operating Income:
Deposit and other service charges 709 701 552
Mortgage origination fees 507 893 383
Net investment securities gains 46 27 367
Other 135 199 232
- -------------------------------------------------------------------------------------------
Net interest and operating income 7,921 7,709 5,925
- -------------------------------------------------------------------------------------------
Other Operating Expenses:
Salaries and benefits 2,973 2,611 2,186
Occupancy expense 569 564 554
FDIC insurance 386 403 266
Depreciation and amortization 396 345 291
Advertising and marketing 250 200 200
Stationery and office supplies 132 120 115
Foreclosure expenses and costs of other real
estate owned 120 183 221
Other 1,453 1,244 1,213
- -------------------------------------------------------------------------------------------
Total other operating expenses 6,279 5,670 5,046
- -------------------------------------------------------------------------------------------
Income before taxes, extraordinary credit
and cumulative effect of an accounting change 1,642 2,039 879
Provision for federal and state income taxes 593 800 274
- -------------------------------------------------------------------------------------------
Income before extraordinary credit and cumulative
effect of an accounting change 1,049 1,239 605
Extraordinary credit-utilization of operating
loss carryforwards - - 256
Cumulative effect of an accounting change - FAS 109 - 1,125 -
- -------------------------------------------------------------------------------------------
Net income $1,049 $2,364 $861
============================================================================================
Earnings per share
Primary:
Earnings per share before extraordinary
credit and cumulative effect of an
accounting change $0.60 $0.72 $0.37
Extraordinary credit-utilization of operating
loss carryforwards - - 0.16
Cumulative effect of an accounting change -
FAS 109 - 0.66 -
- -------------------------------------------------------------------------------------------
Net primary earnings per share $0.60 $1.38 $0.53
============================================================================================
Average number of shares outstanding 1,750,988 1,708,207 1,629,710
============================================================================================
Fully diluted:
Earnings per share before extraordinary
credit and cumulative effect of an
accounting change $0.60 $0.72 $0.37
Extraordinary credit-utilization of operating
loss carryforwards - - 0.16
Cumulative effect of an accounting change
- FAS 109 - 0.66 -
- -------------------------------------------------------------------------------------------
Net fully diluted earnings per share $0.60 $1.38 $0.53
============================================================================================
Average number of shares outstanding 1,750,988 1,719,066 1,629,710
============================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
23
<TABLE>
Hometown Bancorporation, Inc.
Consolidated Statement of Changes in Stockholders' Equity
(thousands of dollars)
(Restated)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unrealized
Gain (Loss)
Shares Common Retained On
Issued Stock Treasury Earnings Investments
and Par Stock (Accumulated Available for
Outstanding Value Cost Surplus (Deficit) Sale ("IAFS") Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991 1,597,231 $1,833 $(1,366) $13,959 $(3,744) $ - $10,682
Net income 861 861
Stock options exercised 1,000 6 (4) 2
Employee stock awards 20 -
- ------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1992 1,598,251 1,833 (1,360) 13,959 (2,887) 11,545
- ------------------------------------------------------------------------------------------------------------------------
Net income 2,364 2,364
Stock options exercised 60,800 352 29 381
Employee stock awards 90 1 1
Unrealized gain on IAFS, net 163 163
- ------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 1,659,141 1,833 (1,008) 13,960 (494) 163 14,454
- ------------------------------------------------------------------------------------------------------------------------
Net income 1,049 1,049
Stock options exercised 20,900 121 (21) 100
Employee stock awards 55
Unrealized loss on IAFS, net (3,066) (3,066)
- ------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 1,680,096 $1,833 $(887) $13,960 $534 $(2,903) $12,537
========================================================================================================================
</TABLE>
<PAGE>
24
<TABLE>
Hometown Bancorporation, Inc.
Consolidated Statement of Cash Flows
(thousands of dollars)
<CAPTION>
For the Year Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
(Restated) (Restated) (Restated)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $1,049 $2,364 $861
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization, net 552 501 447
Provision for loan losses and writedown of OREO 365 420 1,470
Net investment securities gains (46) (27) (367)
Decrease (increase) in other assets 381 (2,053) (2,411)
(Decrease) increase in other liabilities (216) 1,288 366
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,085 2,493 366
- ---------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Proceeds from the maturity of investments held-to-maturity 15,545 13,803 11,256
Purchase of investments held-to-maturity (23,513) (35,500) (55,139)
Proceeds from the sale of investments<F1> - (7,738) 17,333
Proceeds from the maturity of investments available-for-sale 17,282 - -
Purchase of investments available-for-sale (52,763) - -
Proceeds from the sale of investments available-for-sale 10,620 - -
Decrease (increase) in loans 11,157 (668) 1,232
(Increase) decrease in OREO (35) 1,100 278
Purchase of equipment and leasehold improvements (194) (630) (48)
Assets acquired in FDIC-assisted transaction (32,372)
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (21,901) (14,157) (57,460)
- ---------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net (decrease) increase in demand deposits, NOW accounts,
money market accounts and savings accounts (725) 5,866 38,084
Net increase (decrease) in certificates of deposit, and other
time deposits 23,815 (946) 9,020
(Decrease) increase in FHLBB advances (8,319) 5,000 20,000
Proceeds from exercise of stock options 100 381 2
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 14,871 10,301 67,106
- ---------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (4,945) (1,363) 10,012
Cash and cash equivalents at the beginning of the year 13,494 14,857 4,845
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year $8,549 $13,494 $14,857
=========================================================================================================
Cash paid during the year for:
Income taxes $73 $230 $1,888
=========================================================================================================
Interest $5,648 $4,995 $5,135
=========================================================================================================
<F1> Prior to the adoption of FAS 115 on December 31, 1993
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
25
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been adopted by Hometown
Bancorporation, Inc. (the "Company") and followed to the extent applicable
in the preparation of the accompanying consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, The Bank of Darien (the "Bank").
All significant intercompany balances and transactions have been eliminated
in consolidation.
Investment Securities
In May 1993, the Financial Accounting Standards Board (the "FASB")
issued Statement No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"). Prior to December 31, 1993, all investment
securities were carried at historical cost adjusted for amortization of
premiums and accretion of discounts. The Company adopted FAS 115 effective
December 31, 1993.
Investment securities for which management has the positive intent and
ability to hold to maturity are classified as "held-to-maturity" and are carried
at cost net of unamortized premiums and discounts.
Investments not classified as "held-to-maturity" (investments that may
be sold prior to maturity as part of asset/liability management, liquidity or
in response to other factors) are classified as "available-for-sale" and are
carried at fair value, with the change in fair value excluded from earnings and
reported as a separate component of stockholders' equity.
The Company does not have a trading portfolio and does not anticipate
creating a trading portfolio in the near future.
Gains and losses on sales of investment securities are reported as a
separate component of the Consolidated Statement of Income and are computed
using the specific identification method.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are carried at cost less
accumulated depreciation and amortization. Depreciation is computed based on
estimated useful lives of equipment using straight line methods. Leasehold
<PAGE>
26
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
improvements are amortized ratably over the shorter of estimated service lives
or the terms of the leases. Major renewals and betterments are capitalized and
recurring repairs and maintenance are charged to income. Gains and losses on
dispositions of assets are included in income as realized.
Other Real Estate Owned
Real estate acquired in foreclosure (or considered to be in-substance
foreclosure) of loans is valued at the lower of the loan value or fair value
less estimated selling costs. At the time of foreclosure the excess, if any,
of the loan value over the fair value less estimated selling costs is charged
to the allowance for loan losses. Subsequent to the time of foreclosure, a
decline in the value of the foreclosed properties is recognized through charges
to writedown of other real estate owned. Other expenditures not recoverable
from the anticipated sale are charged to foreclosure expenses and costs of
other real estate owned, as incurred.
Loans
Loans are reflected at the principal amount outstanding net of
unearned income and the allowance for loan losses. Interest on loans is
calculated by using the simple-interest method on the daily balances of the
principal amounts outstanding.
Accrual of interest on loans is generally discontinued when a loan
becomes contractually past-due by 90 days or more with respect to principal or
interest, or earlier when full, timely collection of interest and principal
becomes uncertain. When a loan is placed on nonaccrual status, all interest
previously accrued but not collected is generally reversed against income. When
a loan is placed on nonaccrual status, all interest is then recognized only to
the extent the cash is received, provided in the judgment of management, the
loan is estimated to be fully collectible as to both principal and interest.
Allowance for Loan Losses
The allowance for loan losses is established through charges against
income and is maintained at a level considered adequate to provide for potential
loan losses based on management's evaluation of inherent risks in the loan
portfolio. When a loan, or a portion of a loan, is considered uncollectible it
is charged against the allowance for loan losses. Recoveries of loans
previously charged-off are credited to the allowance for loan losses when cash
is received.
Management's evaluation of the allowance for loan losses is based on a
continuing review of the loan portfolio, which includes many factors, including
identification and review of individual problem situations that may affect the
borrower's
<PAGE>
27
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
ability to repay the loan; review of overall portfolio quality through an
analysis of current charge-offs, delinquency, and nonperforming loan data;
review of regulatory authority examinations and their evaluation of loans;
an assessment of current and expected economic conditions; and changes in the
size and character of the loan portfolio.
Loan Commitment and Origination Fees and Costs
Fees and certain direct origination costs of loans and mortgage-backed
securities are deferred and the net fee or cost is recognized in interest
income using the level yield method in accordance with Statement of Financial
Accounting Standards No. 92 ("FAS 91"). Net deferred fees and costs applicable
to prepayments are recognized in interest income at the time of prepayment.
Disclosure About Fair Values of Financial Instruments
The estimated fair values of financial instruments as presented
throughout the footnotes, have been determined by management using available
market information and appropriate valuation methodologies. However,
considerable judgment is necessary to interpret market data to develop the
estimates of fair value. Accordingly the estimates presented herein are not
necessarily indicative of the amounts the Bank could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
Derivatives
The Company enters into interest rate swap transactions as a means of
reducing its interest rate exposure on specific assets or liabilities. The
periodic net settlement on interest rate swap agreements is recorded as an
adjustment to interest income on investments on an accrual basis.
Statement of Cash Flows
For purposes of reporting cash flows, the Company defines cash and
cash equivalents as cash and due from banks, federal funds sold, interest
bearing deposits in banks and investments, and term federal funds sold with
original maturities to the Company of three months or less.
Income Taxes
In February 1992, the FASB issued Statement No. 109, "Accounting for
Income Taxes" ("FAS 109"). FAS 109 requires that income taxes be accounted for
under the asset and liability method. Under the asset and liability method,
deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences
<PAGE>
28
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the settlement date. The Company prospectively adopted FAS 109 effective
January 1, 1993 and the effect of the adoption is discussed in Note 9.
Earnings Per Share Calculations
Primary net income per common share is computed by dividing net income
by the weighted average number of common shares outstanding for each period
presented plus the dilution effect of stock options.
Fully diluted net income per common share is computed by dividing net
income by the weighted average common shares outstanding plus the shares
representing the dilutive effect of stock options outstanding that are currently
exercisable.
Dividends
The Company does not currently pay dividends. However, if the Company
were to pay dividends Connecticut law restricts the payment of dividends by the
Bank to the Company except from "net profits" (as defined). Although the
restriction does not apply to the payment of dividends by the bank holding
company, the Company's ability to pay dividends is dependent on its receiving
dividends from the Bank.
NOTE 2 - RESTRICTED CASH BALANCES
Regulations of the Federal Reserve Board require depository
institutions to maintain a portion of their deposits in the form of either cash
or deposits with the Federal Reserve Bank which are noninterest bearing and
which are not available for investment purposes. At December 31, 1994 and 1993
the Company maintained $3,070,000 and $2,023,000, respectively, at the Federal
Reserve Bank.
<PAGE>
29
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
NOTE 3 - LOANS
Major classifications of loans at December
31, 1994 and 1993 were as follows:
December 31, 1994 1993
- ---------------------------------------------------------------------
(thousands of dollars)
Real estate mortgage $64,203 $77,670
Commercial 8,597 6,012
Real estate construction 754 2,554
Installment 4,390 2,865
- ---------------------------------------------------------------------
77,944 89,101
Allowance for loan losses (3,004) (3,640)
- ---------------------------------------------------------------------
$74,940 $85,461
=====================================================================
The estimated fair market value of loans at December 31, 1994 and 1993
was $73.4 million and $85.8 million, respectively. The estimated fair market
value of loans is estimated based on present values using applicable risk-
adjusted spreads to the U.S. Treasury curve to approximately current entry-value
interest rates. No adjustment was made to the entry value interest rates for
changes in credit of performing commercial loans for which there are no known
credit concerns.
Management segregates loans in appropriate risk categories.
Management believes that the risk factor embedded in the entry-value interest
rates, along with the general reserves applicable to the performing commercial
loan portfolio, for which there are no known credit concerns, results in a fair
valuation of such loans on an entry-value basis.
Final contractual loan maturities and rate sensitivity of the loan
portfolio at December 31, 1994 were as follows:
Within One to After
One Five Five
Year Years Years Total
- -----------------------------------------------------------------------------
Real estate mortgage $13,846 $10,498 $39,859 $64,203
Commercial 3,975 2,922 1,700 8,597
Real estate construction 754 - - 754
Installment 1,027 755 2,608 4,390
- -----------------------------------------------------------------------------
$19,602 $14,175 $44,167 $77,944
=============================================================================
Loans at fixed interest rates $ 2,041 $ 4,230 $ 7,489 $13,760
Loans at variable interest rates 17,561 9,945 36,678 64,184
- -----------------------------------------------------------------------------
$19,602 $14,175 $44,167 $77,944
=============================================================================
At December 31, 1994 and 1993 the Company was not accruing interest on
loans having outstanding balances of $851,000 and $1,583,000 or 1.09% and 1.78%
of the respective year's gross loan balance. Had these non-accrual loans been
current, including any portion charged-off during 1994, gross income on these
loans for 1994 and
<PAGE>
30
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
1993 would have been $99,000 and $148,000, respectively. Interest income
actually recorded on these loans totaled $61,000 and $24,000, respectively.
Loans to officers, employees and directors (and companies in which
they have a 10 percent or more beneficial ownership) aggregated $1,675,000 and
$2,828,000 at December 31, 1994 and 1993, respectively. During 1994, aggregate
additions and paydowns to related party loans were $129,000 and $1,282,000,
respectively. These loans were made in the ordinary course of business as to
the loan amount, rate of interest and payment terms. All loans to officers,
employees and directors were current as of December 31, 1994.
Transactions in the allowance for loan losses during 1994, 1993 and
1992 are summarized as follows:
December 31, 1994 1993 1992
- ----------------------------------------------------------------------------
(thousands of dollars)
Balance at beginning of period $3,640 $3,111 $1,825
Charge-offs:
Commercial loans (44) (22) (101)
Real estate mortgage loans (693) (264) (941)
Installment loans (6) (39) (30)
- ----------------------------------------------------------------------------
Total charge-offs (743) (325) (1,072)
- ----------------------------------------------------------------------------
Recoveries:
Commercial loans 18 21 6
Real estate mortgage loans 4 17 167
Installment loans 10 7 5
- ----------------------------------------------------------------------------
Total recoveries 32 45 178
- ----------------------------------------------------------------------------
Net charge-offs (711) (280) (894)
- ----------------------------------------------------------------------------
Provision charged to operations 75 360 1,258
Acquisition reserve FDIC-assisted
transaction - - 922
Acquisition reserve - loan purchase<F1> - 449 -
- ----------------------------------------------------------------------------
Balance at end of period $3,004 $3,640 $3,111
============================================================================
Net charge-offs to average loans 0.85% 0.31% 1.08%
============================================================================
<F1> Due to purchase of approximately $2.7 million in loans from the FDIC
at a 25% discount.
<PAGE>
31
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
NOTE 4-INVESTMENT SECURITIES
The amortized cost and estimated fair values of investments held-to-
maturity and available-for-sale together with gross unrealized gains and
losses at December 31, 1994 and 1993, are shown below:
<TABLE>
<CAPTION>
Gross Gross Estimated
December 31, 1994 (thousands of dollars) Amortized Unrealized Unrealized Fair
Investments held-to-maturity Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 1,013 $ - $ 14 $ 999
U.S. Agency Mortgage-Backed Securities 24,891 5 641 24,255
Other U.S. Agency Obligations 10,404 8 439 9,973
Other Mortgage-Backed Securities 9,965 7 234 9,738
- -------------------------------------------------------------------------------------------------------------
$46,273 $ 20 $1,328 $44,965
=============================================================================================================
<CAPTION>
Gross Gross Estimated
December 31, 1994 (thousands of dollars) Amortized Unrealized Unrealized Fair
Investments available-for-sale Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 3,091 $ - $ 72 $3,019
U.S. Agency Mortgage-Backed Securities 51,891 - 2,547 49,344
Other Mortgage-Backed Securities 23,058 49 333 22,774
Federal Home Loan Bank Stock 1,717 - - 1,717
- -------------------------------------------------------------------------------------------------------------
$79,757 $49 $2,952 $76,854
=============================================================================================================
<CAPTION>
Gross Gross Estimated
December 31, 1994 (thousands of dollars) Amortized Unrealized Unrealized Fair
Investments held-to-maturity Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 1,022 $46 $ - $ 1,068
U.S. Agency Mortgage-Backed Securities 27,153 393 51 27,495
Other U.S. Agency Obligations 1,050 74 - 1,124
Other Mortgage-Backed Securities 10,835 38 - 10,873
- -------------------------------------------------------------------------------------------------------------
$40,060 $551 $51 $40,560
=============================================================================================================
<CAPTION>
Gross Gross Estimated
December 31, 1994 (thousands of dollars) Amortized Unrealized Unrealized Fair
Investments available-for-sale Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 3,531 $ 3 $ 32 $ 3,502
U.S. Agency Mortgage-Backed Securities 24,528 290 32 24,786
Other Mortgage-Backed Securities 24,352 86 54 24,384
Federal Home Loan Bank Stock 1,344 - - 1,344
- -------------------------------------------------------------------------------------------------------------
$53,755 $379 $118 $54,016
=============================================================================================================
</TABLE>
The Company realized net securities gains of $46,000, $27,000 and $367,000
in 1994, 1993, and 1992, respectively. Cost for investments sold was determined
on a specific identification basis.
At December 31, 1994 and December 31, 1993 there was $2,484,000 and
$500,000, respectively, in U.S. Treasury and other securities pledged to secure
municipal deposits as required by law.
<PAGE>
32
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
NOTE 5-EQUIPMENT AND LEASEHOLD IMPROVEMENTS
The major components of fixed assets at December 31, 1994 and 1993
were as follows:
December 31, 1994 1993
- ---------------------------------------------------------------------------
(thousands of dollars)
Leasehold improvements $1,491 $1,491
Furniture and equipment 1,712 1,868
- ---------------------------------------------------------------------------
3,203 3,359
Less: Accumulated depreciation and amortization (1,576) (1,578)
- ---------------------------------------------------------------------------
$1,627 $1,781
===========================================================================
NOTE 6-DEPOSITS
Included in total interest bearing deposits are certificates of deposit
in amounts of $100,000 and over. These certificates and their remaining
maturities at December 31, 1994 and 1993 are as follows:
December 31, 1994 1993
- ---------------------------------------------------------------------------
(thousands of dollars)
Three months or less $5,203 $4,376
Over three, through six months 3,287 1,220
Over six, through twelve months 461 422
Over twelve months 400 408
- ---------------------------------------------------------------------------
$9,351 $6,426
===========================================================================
Interest expense incurred on deposits during 1994, 1993, and 1992 was
as follows:
For the Year Ended December 21, 1994 1993 1992
- ---------------------------------------------------------------------------
(thousands of dollars)
NOW and money market accounts $1,907 $1,869 $2,140
Other time deposits 1,941 1,368 1,855
Certificates of deposit of $100 or over 274 242 290
Savings 337 343 382
- ---------------------------------------------------------------------------
$4,459 $3,822 $4,667
===========================================================================
The estimated fair value of total deposits at December 31, 1994 and
1993 was $183.1 million and $159.7 million, respectively. The estimated fair
value of demand deposits, savings accounts and money market deposits is the
amount payable on demand at December 31, 1994 and 1993. The estimated fair
value of fixed-maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities.
<PAGE>
33
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
NOTE 7-COMMITMENTS AND RENTAL EXPENSE
The Company leases its premises and other property under noncancelable
agreements requiring minimum monthly rentals through their remaining terms. The
total minimum commitment at December 31, 1994 under the leases was $7,603,000
and $8,776,000 after a lease modification dated May 1, 1995 which is due as
follows:
Due in the year ending 1995 $686
December 31, 1996 661
(thousands of dollars) 1997 645
1998 646
1999 and after 6,138
- ------------------------------------------------------------------------
$8,776
========================================================================
Effective May 1, 1995, the Company entered into a lease modification
agreement with its landlord concerning its head office location in Darien.
The modification reduced annual rentals by $38,000 per annum effective
June 1, 1995, and extends the term of the lease 37 months to May 31, 2000.
The net increase in lease outlay in current dollars over the term of the
lease is $1,173,000. This modification is reflected in the above summary.
Total occupancy and equipment rental expense was $610,000, $603,000,
and $585,000 for the years ended December 31, 1994, 1993, and 1992, respectively
NOTE 8-FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-
sheet-risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These financial instruments include commitments to extend credit, standby
letters of credit, and interest rate swaps. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the Consolidated Financial Statements. The contractual or
notional amounts of these instruments reflect the extent of involvement the
Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual or notional
amount of those instruments. For interest rate swap transactions, the
contractual or notional amounts do not represent exposure to credit loss. The
Company manages the credit risk of its interest rate swap agreements through
credit approvals, limits, and monitoring procedures.
A summary of the notional value of off-balance-sheet financial
instruments as of December 31, 1994 and 1993 is as follows:
<PAGE>
34
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
December 31, 1994 1993
- -------------------------------------------------------------------------
(thousands of dollars)
Interest rate swap agreements $34,000 $31,500
Commitments to extend credit 874 950
Standby letters of credit 102 217
Interest rate swap agreements are used by the Company to manage its
interest rate risk. These agreements involve the exchange of fixed and variable
interest rate payments based upon a notional principal amount and maturity
date. The risk associated with these agreements arises from the potential
of the counterparties' failure to meet the terms of the agreements. However,
the Company does not anticipate nonperformance by the counterparties.
Commitments to extend credit are agreements to lend to a customer
provided there is no violation of any condition in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since it is possible that some of the commitments
could expire without being drawn upon, the total commitment amounts outstanding
at December 31, 1994 do not necessarily represent future cash requirements. The
Company evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Company upon extension
of credit is based on management's credit evaluation of the customer.
Standby letters of credit are obligations to make payments under
certain conditions to meet contingencies related to customers' contractual
agreements and are subject to the same risk, credit review, and approval process
as loans. Letters of credit are primarily used to enhance credit for private
borrowing arrangements and to guarantee a customer's financial performance. The
credit risk involved in issuing standby letters of credit is essentially the
same as that involved in extending loan facilities to customers.
The estimated fair value of interest rate swap agreements, commitments
to extend credit and standby letters of credit at December 31, 1994 were
$(683,000), $9,000, and $1,000, respectively, as compared to $508,000, $10,000
and $2,000 at December 31, 1993, respectively.
<PAGE>
35
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
NOTE 9-INCOME TAXES
The Company adopted FAS 109 effective January 1, 1993 and the
cumulative effect of this change is reported in the 1993 Consolidated Income
Statement. Prior years' financial statements have not been restated to apply to
the provisions of FAS 109.
Income tax expense for the three years ended December 31, 1994, 1993
and 1992 consisted of the following components:
December 31, 1994 1993(a) 1992(b)
- -------------------------------------------------------------------------
(thousands of dollars)
Current
Federal $435 $416 $18
State 137 120 -
Deferred
Federal (37) 144 -
State 58 120 -
- -------------------------------------------------------------------------
$593 $800 $18
=========================================================================
(a) Excludes the cumulative effect of the adoption of FAS 109.
(b) Net of the extraordinary credit for the utilization of operating
loss carryforwards.
A reconciliation setting forth the differences between the effective
tax rate of the Company and the U.S. statutory federal tax rate is as follows:
- -------------------------------------------------------------------------
December 31, 1994 1993 1992
- -------------------------------------------------------------------------
U.S. statutory rate 34.0% 34.0% 34.0%
State income tax, net of federal benefit 7.8% 7.8% -
FAS 109 valuation adjustment (11.6%) (2.7%) -
Benefit of loss carryforward recognized - - (35.6%)
Alternative minimum tax - - 2.0%
Goodwill amortization 1.0% 1.0% 1.0%
Other, net 4.9% (0.9%) 0.6%
- -------------------------------------------------------------------------
36.1% 39.2% 2.0%
=========================================================================
The net deferred tax asset, including the valuation reserve as of
December 31, 1994 is listed below. The remaining valuation reserve of
$290,000 relates to tax benefits which are subject to tax law limitations
on realization. At this time, the Company believes that realization of
these benefits would not currently be in accordance with FAS 109.
<PAGE>
36
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
Net deferred tax asset: December 31, 1994 1993
(thousands of dollars)
Loan loss reserve $817 $873
OREO reserves 139 253
Net deferred loan fees 48 90
Depreciation 48 67
Foreclosure costs 51 56
Unrealized gain on IAFS - (98)
Other, net 27 (17)
- ---------------------------------------------------------------------
1,130 1,224
Valuation allowance (290) (363)
- ---------------------------------------------------------------------
Net deferred tax asset $840 $861
=====================================================================
<PAGE>
37
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
NOTE 10-PARENT COMPANY ONLY FINANCIAL STATEMENTS
Presented below are the condensed financial statements of Hometown
Bancorporation, Inc. (parent company). The consolidated financial statements
should be read in conjunction with these statements.
- -------------------------------------------------------------------------------
Hometown Bancorporation, Inc. (parent company only) Balance Sheet
- -------------------------------------------------------------------------------
December 31, 1994 1993
- -------------------------------------------------------------------------------
(thousands of dollars)
Assets
Cash due from Bank $ 348 $ 312
Investment in subsidiary 12,195 14,122
Other assets - 20
- -------------------------------------------------------------------------------
Total assets $12,543 $14,454
================================================================================
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities 6 -
- -------------------------------------------------------------------------------
Total stockholders' equity 12,537 14,454
- -------------------------------------------------------------------------------
Total liabilities and stockholders' equity $12,543 $14,454
================================================================================
Hometown Bancorporation, Inc. (parent company only) Statement of Income
- -------------------------------------------------------------------------------
December 31, 1994 1993 1992
- -------------------------------------------------------------------------------
(thousands of dollars except per share amounts)
Equity in undistributed income of subsidiary $1,139 $2,465 $970
- -------------------------------------------------------------------------------
Total income 1,139 2,465 970
Legal and accounting expenses 30 21 30
Other expenses 60 80 79
- -------------------------------------------------------------------------------
Total expenses 90 101 109
- -------------------------------------------------------------------------------
Net income $1,049 $2,364 $861
================================================================================
Income per share - primary $ .60 $ 1.38 $.53
================================================================================
Income per share - fully diluted $ .60 $ 1.38 $.53
================================================================================
Hometown Bancorporation, Inc. (parent company only) Statement of Cash Flows
- -------------------------------------------------------------------------------
December 31, 1994 1993 1992
- -------------------------------------------------------------------------------
(thousands of dollars)
Cash Flows From Operating Activities:
Net income $1,049 $2,364 $861
Equity in undistributed income of
subsidiary (1,139) (2,465) (970)
Net change in other liabilities 6 - 23
Net change in other assets 20 (14) -
Other, net 2 2 4
- -------------------------------------------------------------------------------
Net cash used in operating activities (62) (113) (82)
- -------------------------------------------------------------------------------
Cash Flows From Financing Activities
Proceeds from exercise of stock options 98 381 -
- -------------------------------------------------------------------------------
Net cash provided by financing activities 98 381 -
- -------------------------------------------------------------------------------
Net increase (decrease) in cash 36 268 (82)
Cash at the beginning of the year 312 44 126
- -------------------------------------------------------------------------------
Cash at the end of the year $ 348 $ 312 $ 44
================================================================================
<PAGE>
38
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
NOTE 11-STOCK OPTION PLAN
On April 14, 1987, the Company adopted an incentive and non-qualified
stock option plan under which 250,000 shares of common stock were reserved.
Options granted become exercisable between the grant date and five years after
the grant date and expire 10 years after the grant date. Under the plan, the
option price of incentive options shall not be less than 100% of the fair market
value of the Company's Common Stock on the date the option is granted. The
number of shares under option, the exercise price per share and the aggregate
thereof outstanding, granted, exercised and cancelled or expired during the
years ended December 31, 1994, 1993 and 1992 are summarized as follows:
- -----------------------------------------------------------------------------
Average
Shares Option Price
- -----------------------------------------------------------------------------
Options outstanding at December 31, 1991 190,000 $4.54
Granted 27,500 $3.25
Exercised (1,000) $2.75
Cancelled or expired (5,500) $3.27
- -----------------------------------------------------------------------------
Options outstanding at December 31, 1992 211,000 $4.41
Granted 16,000 $7.50
Exercised (60,800) $6.38
Cancelled or expired (7,200) $6.41
- -----------------------------------------------------------------------------
Options outstanding at December 31, 1993 159,000 $3.93
Granted 13,500 $12.50
Exercised (20,900) $4.73
Cancelled or expired (3,000) $6.42
- -----------------------------------------------------------------------------
Options outstanding at December 31, 1994 148,600 $4.54
- -----------------------------------------------------------------------------
At December 31, 1994, options for 112,950 shares were exercisable and 18,700
shares were available for granting additional options.
- -----------------------------------------------------------------------------
<PAGE>
39
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
NOTE 12-QUARTERLY FINANCIAL DATA
(UNAUDITED)
- --------------------------------------------------------------------------------
1994 Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31 Total
(thousands of dollars except per share amounts)
Interest income $2,842 $3,048 $3,380 $3,432 $12,702
Net interest income 1,670 1,704 1,805 1,710 6,889
Provision for loan losses 25 - 25 25 75
Net income 387 290 329 43 1,049
Net income per share - primary<F1> $.22 $.17 $.19 $.02 $.60
Net income per share - fully
diluted<F1> $.22 $.17 $.19 $.02 $.60
1993 Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31 Total
(thousands of dollars except per share amounts)
Interest income $2,778 $2,805 $2,820 $2,901 $11,304
Net interest income 1,508 1,548 1,573 1,680 6,309
Provision for loan losses 185 125 25 25 360
Before extraordinary credit and cumulative effect:
Net income 194 247 361 437 1,239
Net income per share - primary<F1> $.12 $.15 $.21 $.25 $.72
Net income per share - fully
diluted<F1> $.12 $.14 $.21 $.25 $.72
After extraordinary credit and cumulative effect
Net income 1,319 247 361 437 2,364
Net income per share - primary<F1> $.79 $.15 $.21 $.25 $1.38
Net income per share - fully
diluted<F1> $.79 $.14 $.21 $.25 $1.38
<F1> Individual per share amounts do not total due to changes in the number of
shares outstanding.
NOTE 13-FAIR VALUE OF FINANCIAL INSTRUMENTS
The following is a summary of the fair values of financial instruments
which are disclosed throughout the footnotes to the Consolidated Financial
Statements.
<PAGE>
40
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(Restated)
(continued)
- -------------------------------------------------------------------------------
December 31, 1994 1993
- -------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(thousands of dollars) Amount Value Amount Value
- -------------------------------------------------------------------------------
Financial Assets:
Cash and due from banks $8,549 $8,549 $7,124 $7,124
Federal funds sold - - 6,370 6,370
Investments available-for-sale (Note 4) 76,854 76,854 54,016 54,016
Investments held-to-maturity (Note 4) 46,273 44,965 40,060 40,558
Net loans (Note 3) 74,940 73,474 85,461 85,790
Financial Liabilities:
Deposits (Note 6) 182,731 183,075 159,641 159,672
FHLBB advances 16,681 16,726 25,000 25,087
Off Balance Sheet (Note 8):
Interest rate swap agreements - (683) - 508
Commitments to extend credit - 9 - 10
Standby letters of credit - 1 - 2
NOTE 14 - EMPLOYEE BENEFIT PLAN
The Bank maintains a qualified deferred compensation plan under
Section 401(k) of the Internal Revenue Code. Under the plan, employees may
elect to defer up to 17% of their salary, subject to Internal Revenue Code
limits. The Bank contributes a matching 100% of the first 1% of employee
contributions and 25% of the next 5% of employee contributions to a combined
maximum match of $2,000 per employee, per year. The plan covers substantially
all full-time employees. Bank contributions to the plan amounted to $35,056,
$22,239, and $20,880 for 1994, 1993, and 1992 respectively.
NOTE 15 - SUBSEQUENT EVENTS
On August 25, 1995 the Audit Committee of the Company concluded its
investigation of accounting errors and irregularities which were initially
discovered in July 1995. Based upon the findings of the investigation, the
Board of Directors of the Company has concluded that the errors and
irregularities resulted from the activities of a former employee who manipulated
records and circumvented controls. The results of such actions required the
restatement of financial statements for the years ended December 31, 1992
through 1994. The cumulative after-tax effects of these adjustments reduced
shareholders' equity as of December 31, 1994 by $1,368,000.
Fully diluted earnings per share before extraordinary credit and
cumulative effect of accounting change was reduced by $.49, $.05 and $.16 for
1994, 1993 and 1992, respectively. Fully diluted earnings per share after
extraordinary credit and cumulative effect of accounting change and
extraordinary credits was reduced by $.49, $.05, and $.28 for 1994, 1993 and
1992, respectively.
<PAGE>
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
August 25, 1995
To the Stockholders and Board of Directors of Hometown Bancorporation, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and
of cash flows present fairly, in all material respects, the financial
position of Hometown Bancorporation, Inc. and its subsidiary (the "Company")
at December 31, 1994 and 1993, and the results of their operations and cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
the opinion expressed above.
As discussed in Note 1 to the Consolidated Financial Statements, the Company
changed its method of accounting for investment securities and income taxes
in 1993.
PRICE WATERHOUSE LLP
-41-
<PAGE>
42
<TABLE>
HOMETOWN BANCORPORATION, INC.
Supplementary Financial Data
(thousands of dollars except per share)
<CAPTION>
For the Year Ended December 31, 1994 1993 1992 1991 1990
(Restated) (Restated) (Restated)
Summary of Operations:
<S> <C> <C> <C> <C> <C>
Total interest income $12,702 $11,304 $11,097 $9,445 $9,264
Total interest expense 5,813 4,995 5,236 5,281 5,417
- ----------------------------------------------------------------------------------------------------
Net interest income 6,889 6,309 5,861 4,164 3,847
Provision for loan losses 75 360 1,258 800 3,175
Write-down of other real estate
owned 290 60 212 145 252
Other operating income 1,397 1,820 1,534 812 385
Other operating expenses 6,279 5,670 5,046 4,204 4,194
- ----------------------------------------------------------------------------------------------------
Net income (loss) before taxes,
extraordinary credit and
cumulative effect of an accounting
change 1,642 2,039 879 (173) (3,389)
Provision for federal and state
income taxes 593 800 274 - -
- ----------------------------------------------------------------------------------------------------
Net income (loss) before
extraordinary credit and
cumulative effect of an
accounting change 1,049 1,239 605 (173) (3,389)
Extraordinary credit - - 256 - -
Cumulative effect of an accounting
change - FAS 109 - 1,125 - - -
- ----------------------------------------------------------------------------------------------------
Net income (loss) $1,049 $2,364 $861 $(173) $(3,389)
====================================================================================================
Per Share Data:
Before extraordinary credit and
an accounting change:
Net income (loss) - primary $.60 $.72 $.37 $(.11) $(1.95)
Net income (loss) - fully
diluted $.60 $.72 $.37 $(.11) $(1.95)
After extraordinary credit and
an accounting change
Net income (loss) - primary $.60 $1.38 $.53 $(.11) $(1.95)
Net income (loss) - fully
diluted $.60 $1.38 $.53 $(.11) $(1.95)
Stockholders' equity - primary $7.16 $8.46 $7.08 $6.69 $6.80
Stockholders' equity - fully
diluted $7.16 $8.46 $7.08 $6.69 $6.80
Average common shares outstanding -
primary 1,750,988 1,708,207 1,629,710 1,597,194 1,737,864
Average common shares outstanding
- fully diluted 1,750,988 1,719,066 1,629,710 1,597,194 1,737,864
Common shares outstanding 1,680,096 1,659,141 1,598,251 1,597,231 1,597,156
Year End Balance Sheet Data:
Total assets $213,991 $201,352 $187,235 $118,902 $97,339
Loans, net 74,940 85,461 85,322 60,786 54,580
Investments held-to-maturity 46,273 40,060 79,869 47,727 29,442
Investments available-for-sale 76,854 54,016 - - -
Total deposits 182,731 159,641 154,721 107,617 86,112
Total stockholders' equity 12,537 14,454 11,545 10,682 10,855
Financial Ratios:
Net income (loss) before extraordinary
credit and an accounting change to
average:
Total assets 0.49% 0.65% 0.38% (0.16)% (3.52)%
Stockholders' equity 6.91% 9.08% 5.40% (1.63)% (25.26)%
Net income (loss) after extraordinary
credit and an accounting change to
average:
Total assets 0.49% 1.24% 0.54% (0.16)% (3.52)%
Stockholders' equity 6.91% 14.32% 57.68% (1.63)% (25.26)%
Year End:
Gross loans to total assets 36.42% 44.25% 47.23% 51.12% 56.07%
Gross loans to deposits 42.66% 55.81% 57.16% 56.48% 63.38%
Risk-based capital to assets 15.46% 14.10% 12.07% 14.37% 16.17%
Primary capital to total assets 8.50% 8.75% 7.70% 10.36% 12.87%
Tier one capital to assets 13.44% 11.76% 9.37% 8.98% 11.15%
Average stockholders' equity to
average total assets 7.15% 7.16% 6.98% 9.82% 13.96%
Nonperforming assets to total assets 0.87% 1.42% 2.86% 4.72% 6.29%
Nonperforming loans to gross loans 1.09% 1.78% 3.38% 4.51% 8.11%
</TABLE>
<PAGE>
43
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report and
appear on the pages indicated.
(1) Financial Statements:
Page in this
Amendment No. 1
to Form 10-K
---------------
Consolidated Balance Sheet as of December 31, 1994 and 1993 21
Consolidated Statement of Income for the Years Ended
December 31, 1994, 1993 and 1992 22
Consolidated Statement of Changes in Stockholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992 23
Consolidated Statement of Cash Flows for the Years
Ended December 31, 1994, 1993 and 1992 24
Notes to the Consolidated Financial Statements 25
Report of Independent Accountants 41
(2) Financial Statement Schedules
Report of Independent Accountants Page 47 in this
Amendment No. 1
to Form 10-K
Schedule I - Loans to Related Parties For Page 48 in this
the Year Ended December 31, 1994 Amendment No. 1
to Form 10-K
All other Schedules are omittted because they are
not applicable.
<PAGE>
44
(3) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 The Company's Certificate of Incorporation (incorporated by reference
to Exhibit 3(a) the Company's Registration Statement on Form S-4
[Commission File Number 33-13466] filed on June 15, 1987).
3.2 By-laws of the Company (incorporated by reference to Exhibit 3(b) to
the Company's Registration Statement on Form S-4 [Commission File
Number 33-13466] filed on June 15, 1987).
4 Common Shares Rights Agreement dated as of September 20, 1990
(incorporated by reference to Exhibit 4 to the Company's Form 8-K
dated September 20, 1990 [Commission File Number 0-16272]).
10.1 Hometown Bancorporation, Inc. 1987 Stock Option Plan (incorporated
by reference to Exhibit 10(iii)(A)(b) to the Company's Registration
Statement on Form S-4 [Commission File Number 33-13466] filed on June
15, 1987).
10.2 Hometown Bancorporation, Inc. 1995 Omnibus Stock Incentive Program
(incorporated by reference to Exhibit 10(1) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 [Commission
File Number 0-16272]).
10.3 Lease dated as of January 29, 1987 between NJM Realty Limited
Partnership and the Bank (incorporated by reference to Exhibit
10(ii)(D)(b) to the Company's Registration Statement on Form S-4
[Commission File Number 33-13466] filed on June 15, 1987).
10.4 Lease Modification Agreement dated as of May 1, 1995, between NJM
Realty Limited Partnership and the Bank (incorporated by reference
to Exhibit 10(3) to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995 [Commission File Number 0-16272].
10.5 Lease dated as of June 8, 1989 beetween Old Town Hall, Inc. and
the Bank (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1989 [Commission File Number 0-16272]).
<PAGE>
45
10.6 Description of the Bank's Officer Incentive Plan (incorporated
by reference to Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1989 [Commission File
Number 0-16272]).
10.7 Employment Agreement executed January 2, 1991 between the Bank
and Kevin E. Gage, as amended by Amendment No. 1 thereto dated
as of November 18, 1993 (incorporated by reference to Exhibit
10.6 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 [Commission File Number 0-16272]).
10.8 Amendment No. 2, dated as of June 16, 1995, to Employment
Agreement dated as of January 2, 1991 among the Company, the
Bank and Kevin E. Gage (incorporated by reference to Exhibit 10(2)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 [Commission File Number 0-16272]).
11 Statement of Computation of Earnings Per Share.
21 Subsidiaries of the Company (incorporated by reference to Exhibit
21 to the Company's Annual Reporton Form 10-K for the year ended
December 31, 1993 [Commission File Number 0-16272]).
23 Consent of Independent Accountants.
27 Financial Data Schedule.
<PAGE>
46
Signatures(1)
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1943, the registrant has duly caused this amendment to its
report to be signed on its behalf by the undersigned, thereunto duly authorized.
HOMETOWN BANCORPORATION, INC.
By: /s/ KEVIN E. GAGE
Kevin E. Gage
President and Chief
Executive Officer
Dated: November 22, 1995
(1) This amendment has been executed in the same manner as a Form 8 would
have been executed prior to the rescission of Form 8. See, Part V.F.2.
of Release 34-31905 (February 23, 1993).
<PAGE>
REPORT ON INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
-----------------------------------------------------------------
August 25, 1995
To the Shareholders and Board of Directors
of Hometown Bancorporation, Inc.
Our audits of the consolidated financial statements referred to in our report
dated August 25, 1995 appearing on page 41 of Amendment No. 1 to the Annual
Report on Form 10-K of Hometown Bancorporation, Inc. for the year ended
December 31, 1994 also included an audit of the Financial Statement Schedule
I on page 48 of Amendment No. 1 to the Annual Report on Form 10-K of Hometown
Bancorporation, Inc. for the year ended December 31, 1994. In our opinion,
the Financial Statement Schedule presents fairly, in all material respects,
the information set forth when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE LLP
-47-
<PAGE>
48
HOMETOWN BANCORPORATION, INC.
SCHEDULE I
LOANS TO RELATED PARTIES
FOR THE YEAR ENDED
DECEMBER 31, 1994
Balance
Beginning Reclassifications Reclassifications Balance
Name of Debtor of Year and Additions and Payments End of Year
- -------------- --------- ----------------- --------------- -----------
Stephen Zangrillo $ 107,500 $0 $107,500 $0
Arnold Libner 1,221,889 0 8,487 1,213,402
484 Post Road
Associates 881,153 0 881,153 0
Greenport Assoc. 261,000 0 261,000 0
Fine Arts Realty 341,828 0 6,536 335,292
Other 15,000 128,887 17,821 126,066
--------- ------- ------- ---------
Totals $2,828,370 $128,887 $1,282,497 $1,674,760
========= ======= ========= =========
<PAGE>
Exhibit Index
Exhibit No. Description
- ---------- -----------
3.1 The Company's Certificate of Incorporation (incorporated by reference
to Exhibit 3(a) the Company's Registration Statement on Form S-4
[Commission File Number 33-13466] filed on June 15, 1987).
3.2 By-laws of the Company (incorporated by reference to Exhibit 3(b)
to the Company's Registration Statement on Form S-4 [Commission
File Number 33-13466] filed on June 15, 1987).
4 Common Shares Rights Agreement dated as of September 20, 1990
(incorporated by reference to Exhibit 4 to the Company's Form 8-K
dated September 20, 1990 [Commission File Number 0-16272]).
10.1 Hometown Bancorporation, Inc. 1987 Stock Option Plan (incorporated
by reference to Exhibit 10(iii)(A)(b) to the Company's Registration
Statement on Form S-4 [Commission File Number 33-13466] filed on
June 15, 1987).
10.2 Hometown Bancorporation, Inc. 1995 Omnibus Stock Incentive Program
(incorporated by reference to Exhibit 10(1) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 [Commission
File Number 0-16272]).
10.3 Lease dated as of January 29, 1987 between NJM Realty Limited
Partnership and the Bank (incorporated by reference to Exhibit
10(ii)(D)(b) to the Company's Registration Statement on
Form S-4 [Commission File Number 33-13466] filed on June 15, 1987).
10.4 Lease Modification Agreement dated as of May 1, 1995, between NJM
Realty Limited Partnership and the Bank (incorporated by reference
to Exhibit 10(3) to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995 [Commission File Number 0-16272].
10.5 Lease dated as of June 8, 1989 beetween Old Town Hall, Inc. and
the Bank (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1989 [Commission File Number 0-16272]).
<PAGE>
2
10.6 Description of the Bank's Officer Incentive Plan (incorporated by
reference to Exhibit 10.5 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989 [Commission File Number
0-16272]).
10.7 Employment Agreement executed January 2, 1991 between the Bank and
Kevin E. Gage, as amended by Amendment No. 1 thereto dated as of
November 18, 1993 (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1993 [Commission File Number 0-16272]).
10.8 Amendment No. 2, dated as of June 16, 1995, to Employment Agreement
dated as of January 2, 1991 among the Company, the Bank and Kevin
E. Gage (incorporated by reference to Exhibit 10(2) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
[Commission File Number 0-16272]).
11 Statement of Computation of Earnings Per Share.
.
21 Subsidiaries of the Company (incorporated by reference to Exhibit 21
to the Company's Annual Reporton Form 10-K for the year ended
December 31, 1993 [Commission File Number 0-16272]).
23 Consent of Independent Accountants.
27 Financial Data Schedule.
Exhibit 11
Hometown Bancorporation, Inc.
Earnings Per Share and Fully Diluted Earnings Per Share
(thousands of dollars, except per share data)
Restated
----------------------------------
Year Ended December 31, 1994 1993 1992
- ----------------------- ---- ---- ----
Primary Earnings per Share:
Shares used in computing earnings per
share:
Weighted average number of shares
outstanding 1,673,036 1,650,236 1,598,089
Incremental shares attributed to
outstanding options 110,250 111,997 81,589
Weighted average number of
shares repurchased (32,298) (54,026) (49,968)
------------------------------------
1,750,988 1,708,207 1,629,710
====================================
Earnings:
Net Income $1,049 $2,364 $861
====================================
Earnings per common and common
equivalent share $0.60 $1.38 $0.53
====================================
Earnings per share - assuming
full dilution:
Shares used in computing earnings
per share:
Weighted average number of
shares outstanding 1,673,036 1,650,236 1,598,089
Incremental shares attributed
to outstanding options 110,250 111,997 81,589
Weighted average number of
shares repurchased (32,298) (43,167) (49,968)
-------------------------------------
1,750,988 1,719,066 1,629,710
=====================================
Earnings:
Net income $1,049 $2,364 $861
=====================================
Earnings per common and common
equivalent share $0.60 $1.38 $0.53
====================================
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (No. 33-20287)
of Hometown Bancorporation, Inc. of our report dated August 25, 1995
appearing on page 41 of Amendment No. 1 to the Annual Report on Form 10-K
of Hometown Bancorporation, Inc. for the year ended December 31, 1994. We
also consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 47 of Amendment No. 1 to the Annual
Report on Form 10-K of Hometown Bancorporation, Inc. for the year ended
December 31, 1994.
PRICE WATERHOUSE LLP
New York, New York
November 21, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
RESTATED FINANCIAL STATEMENTS OF THE COMPANY AS OF DECEMBER 31, 1994 AND
1993 AND FOR THE TWELVE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-END> DEC-31-1994 DEC-31-1993
<CASH> 8,549 7,124
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 0 6,370
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 76,854 54,016
<INVESTMENTS-CARRYING> 46,273 40,060
<INVESTMENTS-MARKET> 44,965 40,558
<LOANS> 77,944 89,101
<ALLOWANCE> 3,004 3,640
<TOTAL-ASSETS> 213,991 201,352
<DEPOSITS> 182,731 159,641
<SHORT-TERM> 16,681 25,000
<LIABILITIES-OTHER> 2,042 2,257
<LONG-TERM> 0 0
<COMMON> 1,833 1,833
0 0
0 0
<OTHER-SE> 10,704 12,621
<TOTAL-LIABILITIES-AND-EQUITY> 213,991 201,352
<INTEREST-LOAN> 6,912 6,596
<INTEREST-INVEST> 5,739 4,598
<INTEREST-OTHER> 51 110
<INTEREST-TOTAL> 12,702 11,304
<INTEREST-DEPOSIT> 4,459 3,823
<INTEREST-EXPENSE> 5,813 4,995
<INTEREST-INCOME-NET> 6,889 6,309
<LOAN-LOSSES> 75 360
<SECURITIES-GAINS> 46 27
<EXPENSE-OTHER> 6,279 5,670
<INCOME-PRETAX> 1,642 2,039
<INCOME-PRE-EXTRAORDINARY> 1,049 2,364
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,049 2,364
<EPS-PRIMARY> 0.60 1.38
<EPS-DILUTED> 0.60 1.38
<YIELD-ACTUAL> 6.34 6.43
<LOANS-NON> 851 1,583
<LOANS-PAST> 11 475
<LOANS-TROUBLED> 865 1,348
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 3,640 3,111
<CHARGE-OFFS> 743 325
<RECOVERIES> 32 45
<ALLOWANCE-CLOSE> 3,004 3,640
<ALLOWANCE-DOMESTIC> 3,004 3,640
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
