SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------- to ----------
Commission File Number 0-1627
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Hometown Bancorporation, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 06-1199559
-------- ----------
(State or other jurisdiction of
incorporation or organization) (IRS Employer Identification No.)
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. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $18,085,728 on February 29, 1996. On that date 1,706,481shares
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 1996
Annual Meeting of Stockholders Parts I and III
<PAGE>
TABLE OF CONTENTS
Part I. Page
- ------- ----
Item 1 - Business 4
Item 2 - Properties 7
Item 3 - Legal Proceedings 8
Item 4 - Submission of Matters to a Vote of Security Holders 8
Item 4A - Executive Officers of the Registrant 8
Part II.
- --------
Item 5 - Markets for the Company's Common Stock and Related
Stockholder Matters 9
Item 6 - Selected Financial Data 10
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 8 - Financial Statements and Supplementary Data 22
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 47
Part III.
- ---------
Item 10 - Directors and Executive Officers of Registrant 47
Item 11 - Executive Compensation 47
Item 12 - Security Ownership of Certain Beneficial Owners
and Management 47
Item 13 - Certain Relationships and Related Transactions 47
Part IV.
- --------
Item 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K 48
<PAGE>
4
Part I
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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>
5
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, 1995, 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 (the "Commissioner") and the FDIC. Effective in January, 1996,
the Bank became party to an informal agreement among itself, the Commissioner
and the FDIC. The agreement requires, among other things, the submission of
written plans to the Commissioner and the FDIC and periodic written progress
reports. At this time all such plans have been submitted.
Under Connecticut law, state bank and trust companies and other
banking institutions are no longer prohibited from opening offices in Darien.
Connecticut law permits the acquisition of Connecticut banks or Connecticut
bank holding companies by out-of-state bank holding companies with the prior
approval of the 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
<PAGE>
6
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 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, 1995 were 16.36% and 15.46%, respectively.
There are no concentrations of the Bank's loans within a single
industry or group of related industries. However, approximately 71% and 15%
of the Bank's loans outstanding at December 31, 1995 were collateralized by
residential and commercial real estate, respectively.
There are no major concentrations of the Bank's deposits made by an
individual or small group of individuals such that the loss of any one of
which would have a material adverse effect on the Bank's financial position
and/or liquidity.
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, accounts
receivable financing, 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 or purchased 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.
<PAGE>
7
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 credit cards, have variable interest rates. Consumer
loans account for approximately 5% 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 $30,000, $1,000 and $16,000 on market research during
the years ended December 31, 1995, 1994 and 1993, 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 89. 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.
Item 2 - Properties
- -------------------
The Bank leases a building at 20 West Avenue, Darien, Connecticut,
for a term ending in May, 2010. The building serves as the headquarters of the
Company and the Bank, and as the Darien banking office. The Company and the
Bank currently lease approximately 18,250 square feet. The Company and the
Bank occupy approximately 13,500 square feet and sublease approximately 4,750
square feet at $21 per square foot.
The Bank leases a portion of a building at 90 Post Road East,
Westport, Connecticut, for a ten-year period with an option for two successive
terms of five years each. The lease, which began in November, 1989, is for the
Bank's Westport Regional Branch Office and covers approximately 4,000 square
feet.
<PAGE>
8
Item 3 - Legal Proceedings
- --------------------------
There are no material pending legal proceedings to which the Company
or the Bank is a party or of which any of their property is subject.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
During the fourth quarter of 1995, no matter was submitted to a vote
of stockholders of the Company.
Item 4A - Executive Officers of the Registrant
- ----------------------------------------------
The following table sets forth the names of all executive officers
of the Company or the Bank, their ages and all positions held by them with the
Company or the Bank.
Name Age Title
- ---- --- -----
Douglas D. Milne, III 44 Chairman of the Board of the Company and
the Bank
Kevin E. Gage 36 President and Chief Executive Officer of
the Company and the Bank
Peter T. Hovey 48 Senior Vice President and Senior Lending
Officer of the Bank
Albert T. Jaronczyk 44 Senior Vice President, Treasurer and Chief
Financial Officer of the Company and the Bank
Christine J. Scholtz 44 Senior Vice President and Senior Credit
Officer of 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 1996 Annual Meeting of Stockholders (the "1996 Proxy") and
is incorporated herein by reference.
Prior to becoming Senior Vice President and Senior Lending Officer
of the Bank in January, 1996, Mr. Hovey served as Vice President with National
Westminster Bank in Connecticut for more than five 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.
Ms. Scholtz has been employed by the Bank for more than 5 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
Messrs. Jaronczyk and Hovey who were elected to their positions by the Boards
of Directors of the Company and the Bank in August, 1995 and January, 1996,
respectively. 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.
<PAGE>
9
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 401(f) of Regulation
S-K of the Securities and Exchange Commission.
Part II
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Item 5 - Market for the Company's Common Stock and Related Stockholder
Matters
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The Company's Common Stock is included in the NASDAQ National Market
System (symbol: HTWN). The following table sets forth for the periods
indicated the range of high and low sales prices by quarter as reported by
NASDAQ. The Company did not pay any dividends on its common stock during 1995
or 1994. The Company has approximately 485 stockholders of record.
1995 Low High 1994 Low High
---- --- ---- ---- --- ----
First Quarter $ 9.50 $11.75 First Quarter $10.00 $14.50
Second Quarter 9.50 12.625 Second Quarter 12.00 14.50
Third Quarter 10.00 13.00 Third Quarter 12.00 13.875
Fourth Quarter 12.25 14.25 Fourth Quarter 9.25 14.00
During 1990, the Company adopted a Common Shares Rights Agreement
designed to protect stockholders of the Company from abusive takeover tactics
by declaring a dividend of one right on each outstanding share of Common
Stock.
Subject to certain conditions, the rights will be exercisable only if
a person or a group (an "Acquiring Person") (i) acquires or obtains the right
to acquire 14.5% or more of the outstanding Common Stock of the Company, or
(ii) commences or announces an intention to make a tender offer or exchange
offer that will result in the Acquiring Person's obtaining 14.5% or more of
the outstanding Common Stock of the Company. Upon the occurrence of any of the
foregoing events, each holder of a right will be entitled to purchase from the
Company one share of its Common Stock at an exercise price of $20.00 per
share, subject to adjustment ( the "Purchase Price"). Before that time, the
rights trade with the Common Stock but thereafter they become separately
tradeable.
Subsequently, in the event (i) the Company is the surviving
corporation in a merger with an Acquiring Person and its Common Stock is not
changed or exchanged, (ii) an Acquiring Person engages in a specified "self-
dealing" transaction such as certain preferential sales, transfers or
exchanges of Company assets or securities, special compensation or unfair
loans, (iii) a person obtains 15% or more of the Common Stock of the Company
other than pursuant to a tender offer deemed fair by the Board of Directors or
(iv) an Acquiring Person's ownership is increased by more than 1% by any
event, then the holder of a right, other than those held by an Acquiring
Person, will be entitled to purchase from the Company for the Purchase Price a
number of shares of Common Stock of the Company with a market value equal to
twice the Purchase Price. Similarly, in the event (i) the Company is acquired
in a merger or other business combination in which the Company is not the
survivor or in which the outstanding Common Stock of the Company is changed or
exchanged or (ii) 50% or more of the consolidated assets or earning power of
the Company is sold other than in transactions in the ordinary course of
business, each holder of a right, other than those held by an Acquiring
Person, will be entitled to purchase from the corporation acquiring the
Company, for the Purchase Price, a number of shares of common stock of the
acquiring corporation with a market value equal to twice the
<PAGE>
10
Purchase Price.
The rights are redeemable at the option of the Company for one cent
per right (subject to adjustment) up to the tenth day (or such later date
determined by the Board of Directors) after the accumulation of 14.5% or more
of the Company's shares by an Acquiring Person if such redemption is approved
by both the Board of Directors of the Company and the majority of the Board of
Directors of the Company not affiliated with an Acquiring Person. The rights
expire on the earliest of September 20, 2000, the redemption or exchange of
the rights or the consummation of an acquisition of the Company satisfying
certain conditions.
Item 6 - Selected Financial Data
- --------------------------------
Set forth below is selected financial data for the Company for the
years ended December 31, 1995, 1994, 1993, 1992 and 1991.
Hometown Bancorporation, Inc.
Selected Financial Data
(thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
For the Year Ended December 31, 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest and dividend revenue $15,080 $12,702 $11,304 $11,097 $9,445
Interest expense 7,668 5,813 4,995 5,236 5,281
Net interest income 7,412 6,889 6,309 5,861 4,164
Provision for loan losses 75 75 360 1,258 800
Net investment securities gains 26 46 27 367 375
Before cumulative effect:
Net income (loss) 1,309 1,049 1,239 605 (173)
Net income (loss) per share .75 .60 .72 .37 (.11)
After cumulative effect:
Net income (loss) 1,309 1,049 2,364 861 (173)
Net income (loss) per share .75 .60 1.38 .53 (.11)
- -----------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------
Assets $229,220 $213,991 $201,352 $187,235 $118,902
Loans, net 103,407 74,940 85,461 85,322 60,786
Allowance for loan losses 2,883 3,004 3,640 3,111 1,825
Deposits 178,000 182,731 159,641 154,721 107,617
Average shares outstanding 1,752,523 1,750,988 1,708,207 1,629,710 1,597,194
- -----------------------------------------------------------------------------------------
</TABLE>
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
The Company earned $1,309,000 or $.75 per share for the year ended
December 31, 1995. This compares to earnings of $1,049,000 or $.60 per share
and $2,364,000 or $1.38 per share for the years ended December 31, 1994 and
1993, 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.
<PAGE>
11
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 and investments, the results of 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.
Net interest income
Net interest income increased $523,000 or 7.6% during 1995 versus
1994 due to an increase in net average interest earning assets and an
improvement in net interest margin to 3.58% in 1995 compared to 3.44% in 1994.
The improvement in net interest margin for 1995 was the result of an improved
rate spread and increase in net non-interest bearing liabilities and capital.
Net interest income increased $580,000 or 9.2% during 1994 versus 1993, due to
an increase in net average interest earning assets offset by a decrease of net
interest margins to 3.44% in 1994, from 3.59% in 1993.
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>
<TABLE>
12
Hometown Bancorporation, Inc.
Rate Volume Analysis
(thousands of dollars)
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<CAPTION>
1995 1994 Fluctuations In Interest
Interest Interest Income/Expense(3)
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(2) $81,948 $ 7,625 9.30% $85,968 $6,912 8.04% $(374) $1,087 $713
Taxable investment securities(4) 124,325 7,403 5.96% 112,713 5,739 5.09% 692 972 1,664
Federal funds sold 990 52 5.25% 1,573 51 3.24% (31) 32 1
- ------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 207,263 15,080 7.28% 200,254 12,702 6.34% 287 2,091 2,378
- ------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 7,288 6,952
Allowance for loan losses (2,990) (3,267)
Other 7,130 8,292
- ----------------------------------------------------------------------
Total Assets $218,691 $212,231
======================================================================
Interest Bearing Liabilities:
NOW deposits $25,448 $364 1.43% $26,586 $387 1.46% 16 7 23
Money market deposits 50,100 1,896 3.78% 51,578 1,520 2.95% 56 (432) (376)
Savings deposits 13,304 292 2.20% 15,834 337 2.13% 56 (11) 45
Time deposits 66,830 3,463 5.18% 54,860 2,215 4.04% (620) (628) (1,248)
Other 24,444 1,653 6.76% 25,568 1,354 5.30% 76 (375) (299)
- ------------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities 180,126 7,668 4.26% 174,426 5,813 3.33% (416) (1,439) (1,855)
Demand deposits 22,209 20,259
Other 947 2,367
Stockholders' equity 15,409 15,179
- ----------------------------------------------------------------------
Total liabilities and equity $218,691 $212,231
======================================================================
Net interest income $7,412 $6,889 $(129) $652 $523
========================================================================================================================
Net interest margin 3.58% 3.44%
========================================================================================================================
<CAPTION>
1994 1993 Fluctuations In Interest
Interest Interest Income/Expense(3)
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(2) $85,968 $6,912 8.04% $91,043 $6,596 7.24% $(412) $728 $316
Taxable investment securities(4) 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 interest margin 3.44% 3.59%
========================================================================================================================
</TABLE>
(1) 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.
(2) Includes non-accruing loans.
(3) Favorable/(unfavorable) fluctuations.
(4) Yields are calculated at historical cost and excludes the effect of
unrealized gain or (loss) on Investment Available-for-Sale.
<PAGE>
13
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 1995 the Company provided to the allowance for loan losses
$75,000 or .03% of average total assets as compared to $75,000 or .04 % of
average total assets and $360,000 or .19% of average total assets during 1994
and 1993, respectively. Improved loan portfolio performance and reserve
coverage enabled the Company to reduce the level of the provision for loan
losses from 1993 to 1994.
At December 31, 1995, non-performing loans were $1,475,000 or 1.39%
of total gross loans as compared to $851,000 or 1.09% of gross loans and
$1,583,000 or 1.78% of gross loans at December 1994 and 1993, respectively.
Net loan charge-offs for the years ended December 31, 1995, 1994 and 1993 were
$227,000 or .28% of average loans, $711,000 or 0.83% of average loans and
$280,000 or 0.31% of average loans, respectively.
On December 31, 1995, 1994 and 1993 restructured and non-performing
loans were $544,000, $865,000 and $1,238,000, respectively. Performing loans
past due 90 days or more as to principal and or interest at December 31, 1995,
1994 and 1993 were $2,000, $11,000 and $475,000, respectively.
The ratio of the Company's allowance for loan losses to total loans
at December 31, 1995, 1994 and 1993 was 2.71%, 3.85% and 4.09%, respectively.
The Company's ratio of the allowance for loan losses to nonperforming loans at
December 31, 1995, 1994 and 1993 was 195%, 353% and 230%, respectively. The
Company's ratio of the allowance for loan losses to nonperforming assets at
December 31, 1995, 1994 and 1993 was 139%, 161% and 128%, respectively.
<PAGE>
14
The following schedule reflects the allocation of the allowance for
loan losses at December 31, 1995 and 1994.
Hometown Bancorporation, Inc.
Allocation of the Allowance for Loan Losses
(thousands of dollars)
- -------------------------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------------------------
% of Loans % of Loans
in Each in Each
Balance at end of year Category to Category to
applicable to: Amount Total Loans Amount Total Loans
- -------------------------------------------------------------------------
Real estate mortgage $1,807 85% $2,337 82%
Commercial 841 9% 541 11%
Installment 225 5% 108 6%
Real estate construction 10 1% 18 1%
- -------------------------------------------------------------------------
$2,883 100% $3,004 100%
=========================================================================
- -------------------------------------------------------------------------
Other operating income
Deposit and other service charge income decreased $22,000 or 3% to
$687,000 in 1995 compared to 1994 and increased $8,000 or 1% to $709,000
during 1994. The decrease in deposit and other service charge income reflects
decreased deposit account activity in 1995.
Mortgage origination fees (fees generated from mortgages originated
and sold to the secondary market) during 1995, 1994 and 1993 were $459,000,
$507,000 and $893,000, respectively. The decreases during years 1995 and 1994
were due to the decrease in mortgage origination volume as a result of the
increase in interest rates throughout the period which discouraged mortgage
refinancing activity.
Other income included in other operating income was $248,000 which
reflected a $113,000, or 84%, increase over 1994. This increase is primarily
due to $98,000 in net gains on the disposal of other real estate owned during
1995. The remaining increase results from increased service charge revenues on
the Company's Merchant program. The Merchant program provides efficient and
cost effective credit card processing services to the Company's retail
merchant customers.
Other operating expenses
A 3% increase in salary and benefit expense for 1995 in the amount
of $94,000 is attributed to an increase in the number of full-time equivalent
employees during 1995 and normal scheduled employee raises. This compares with
a $362,000 or 14% increase in 1994 as compared to 1993, which primarily
related to an increase in medical
<PAGE>
15
insurance premiums and other benefits, and to an increase in the number of
full-time equivalent employees during 1994. The average number of full-time
equivalent employees at December 31, 1995, 1994 and 1993 were 80, 79 and 77,
respectively.
Professional fees increased by $558,000 to $663,000 in 1995 from
$105,000 in 1994. This increase is attributed to fees that were incurred in
connection with the Company's internal investigation during 1995 related to
certain accounting errors and irregularities which led to a restatement of
earnings for the years ended 1992 through 1994. During 1994, professional fees
increased $4,000 or 4%, from $101,000 for 1993, and reflects the normal level
of business expense for those periods.
FDIC insurance premiums decreased $176,000 or 46% during 1995 to
$210,000, from $386,000 during 1994. During 1994, premiums decreased $17,000
or 4% from $403,000 during 1993. Effective June, 1995, The FDIC reduced
premiums charged to its member banks as a result of the Bank Insurance Fund's
meeting certain mandated recapitalization requirements. The decline in premium
expense for 1995 relates primarily to this reduction in the Bank Insurance
Fund premium rate assessed the Company, net of premiums on a net increase in
deposit balances outstanding on average for 1995. The decrease during 1994 was
due to a decrease in the premium amounts charged by the FDIC due to the Bank's
improved capital classification.
Depreciation and amortization expense decreased $75,000, or 19%
during 1995, from $396,000 in 1994. The decrease during 1995 was due to fixed
assets which were fully depreciated in excess of new fixed asset additions
for 1995. 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.
Advertising and marketing expenses increased $12,000 or 5% from
$250,000 in 1994 to $262,000 in 1995. The increase during 1995 was due to
increased advertising and marketing programs for the Bank's loan products
during our 10th Anniversary year. Programs were geared to celebrate the
anniversary and improve name recognition in the communities served. During
the period from 1993 to 1994 Advertising and marketing expenses increased
$50,000 or 25% from $200,000 in 1993. The increase during 1994 was also
related to increased advertising and marketing aimed at the Company's loan
products.
<PAGE>
16
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 1995, foreclosure expenses
and the cost of other real estate owned increased $23,000 or 19% from $120,000
in 1994 to $143,000 in 1995. The increase reflects the increased costs of
holding OREO property in inventory and the costs associated with maintenance,
marketing and disposal of such properties. The significant period to period
decline in such properties held at year end and positive earnings previously
reported on the disposals of such properties validate the increased costs to
carry such inventory. During 1994, foreclosure expenses and the cost of other
real estate owned declined $63,000 or 34% from $183,000 in 1993 to $120,000
during 1994.
Other expense included in Other operating expenses increased
$143,000 or 11% to $1,478,000 in 1995 as compared with $1,335,000 for 1994.
Increased costs relating to consultants fees, software maintenance expense for
systems upgrades and director fees account for the increase in 1995. Other
operating expenses - other increased $213,000 or 19% to $1,335,000 during
1994. The increase is attributable to variable expenses such as data
processing and postage which increased as a result of the Bank's 14% growth in
assets during 1994.
Income Taxes
The Company recorded income tax provisions of $497,000, $593,000 and
$800,000 for the years ended December 31, 1995, 1994 and 1993, 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.
Note 10 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 $229 million at December
31, 1995, a $15 million or 7% increase from December 31, 1994 when total
assets were $214 million. Total loans were $106 million at December 31, 1995,
a $28 million increase from December 31, 1994 when total loans were $78
million.
<PAGE>
17
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.
The growth in assets during 1995 was funded by a $16 million
increase in short-term borrowings from the FHLBB and offset by a $4.7 million
decline in deposits during 1994.
The Company's funding sources consisted principally of deposits from
individuals and businesses in its service area. Total deposits at December
31, 1995 were $178.0 million, a $4.7 million or 3% decrease in deposits from
December 31, 1994.
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 portfolio 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 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 future
time periods as of December 31, 1995 and the principal period in which they
mature (or which, in the case of mortgage-backed securities, they are expected
to be repaid) or the period in which their rates are 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. The maturity schedules included in Notes 3, 4
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 anticipates that its short and long-term liquidity and net
interest income will not be adversely affected by changes
<PAGE>
18
in the interest rate environment due to the relatively short-term maturity and
repricing of its investment, loan and deposit portfolios.
Hometown Bancorporation, Inc.
Repricing Schedule
(thousands of dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Less Three Six Months Greater
Than Three to Six to Than
December 31, 1995 Months Months One Year One Year Total
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Earning Assets
Loans (1) $39,698 $7,505 $14,957 $42,655 $104,815
Investment securities 71,283 10,763 21,320 5,751 109,117
- ------------------------------------------------------------------------------------
Total interest earning assets 110,981 18,268 36,277 48,406 213,932
- ------------------------------------------------------------------------------------
Interest Bearing Liabilities
Savings deposits 1,286 2,572 3,857 5,143 12,858
Money market and NOW accounts 6,920 13,840 20,760 27,680 69,200
Certificates of deposit of
$100 and over 3,451 2,992 2,992 1,301 10,736
Other fixed rate time deposits 19,929 23,777 8,219 3,199 55,124
Variable rate certificates of
deposit of $100 and over 218 - - - 218
Other variable rate certificates
of deposit 3,800 - - - 3,800
FHLBB advances 27,116 5,000 - - 32,116
- ------------------------------------------------------------------------------------
Total interest bearing
liabilities 62,720 48,181 35,828 37,323 184,052
Net interest rate swaps 1,000 - (17,500) 16,500 -
- ------------------------------------------------------------------------------------
Gap 49,261 (29,913) (17,051) 27,583 29,880
- ------------------------------------------------------------------------------------
Cumulative gap 49,261 19,348 2,297 29,880
====================================================================================
Gap to total assets 1.21 .87 .93 1.12
====================================================================================
Cumulative gap to total assets 1.21 1.08 1.01 1.13
====================================================================================
(1) Non-accruing loans of $1,475,000 are not included 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 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. In December, 1995 the Company reclassified
$21,776,000 in Investments-Held-To-Maturity to Investments-Available-for-Sale
as described in note 4 to the Financial Statements.
The Company's investment portfolio decreased $14,331,000 to
$108,796,000 at December 31, 1995, an 11.6% decrease from December 31, 1994,
when total investments were $123,127,000. The decrease in investments
reflects a shift of funds
<PAGE>
19
into loans during 1995. 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 AA 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 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, 1995 and 1994 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>
<TABLE>
20
Hometown Bancorporation, Inc.
Investment Tables
(thousands of dollars)
<CAPTION>
1995 1994
Amortized Estimated Average Amortized Estimated Average
Investments held-to-maturity Cost Fair 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%
- ------------------------------------------------------------------------------------------------------------------
Subtotal - - - 1,013 999 6.32%
- ------------------------------------------------------------------------------------------------------------------
U.S. Agency Mortgage-Backed Securities
Due in 1 year or less 2,994 2,987 5.41% 5,509 5,415 5.30%
Due after 1 but within 5 years 2,711 2,718 6.70% 9,494 9,216 5.58%
Due after 5 years but within 10 years - - - 5,771 5,622 4.33%
Due after 10 years - - - 4,117 4,002 5.38%
- ------------------------------------------------------------------------------------------------------------------
Subtotal 5,705 5,705 6.02% 24,891 24,255 5.10%
- ------------------------------------------------------------------------------------------------------------------
Other U.S. Agency Obligations
Due after 1 but within 5 years 2,946 2,880 6.19% 10,404 9,973 6.75%
- ------------------------------------------------------------------------------------------------------------------
Subtotal 2,946 2,880 6.19% 10,404 9,973 6.75%
- ------------------------------------------------------------------------------------------------------------------
Other Mortgage-Backed Securities
Due after 1 but within 5 years 2,239 2,137 5.56% 9,068 8,840 6.09%
Due after 5 but within 10 years 4,210 4,041 6.95% 897 898 5.02%
- ------------------------------------------------------------------------------------------------------------------
Subtotal 6,449 6,178 6.47% 9,965 9,738 5.99%
- ------------------------------------------------------------------------------------------------------------------
Total investments held-to-maturity $15,100 $14,763 6.25% $46,273 $44,965 5.69%
==================================================================================================================
<CAPTION>
1995 1994
Amortized Estimated Average Amortized Estimated Average
Investments available-for-sale Cost Fair Value Yield Cost Fair Value Yield
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Due in 1 year or less $3,016 $3,019 5.52% $ 1,025 $ 1,012 5.08%
Due after 1 but within 5 years - - - 2,066 2,007 4.76%
- ------------------------------------------------------------------------------------------------------------------
Subtotal 3,016 3,019 5.52% 3,091 3,019 4.86%
- ------------------------------------------------------------------------------------------------------------------
U.S. Agency Mortgage-Backed Securities
Due in 1 year or less 134 133 7.03% 13,925 13,300 4.60%
Due after 1 but within 5 years 51,751 51,808 6.55% 14,028 13,494 4.77%
Due after 5 years but within 10 years 9,115 8,855 6.05% 11,796 11,310 5.30%
Due after 10 years 1,985 1,919 6.27% 12,142 11,240 5.01%
- ------------------------------------------------------------------------------------------------------------------
Subtotal 62,985 62,715 6.47% 51,891 49,344 4.90%
- ------------------------------------------------------------------------------------------------------------------
Other U.S. Agency Obligations
Due after 1 but within 5 years 3,478 3,564 7.27% - - -
- ------------------------------------------------------------------------------------------------------------------
Subtotal 3,478 3,564 7.27% - - -
- ------------------------------------------------------------------------------------------------------------------
Other Mortgage-Backed Securities
Due after 1 but within 5 years 19,520 19,422 6.68% 20,028 19,946 6.48%
Due after 5 but within 10 years 3,301 3,259 8.82% 3,030 2,828 6.71%
- ------------------------------------------------------------------------------------------------------------------
Subtotal 22,821 22,681 7.09% 23,058 22,774 6.51%
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Stock 1,717 1,717 6.70% 1,717 1,717 7.69%
- ------------------------------------------------------------------------------------------------------------------
Total investments available-for-sale $ 94,017 $ 93,696 6.62% $79,757 $76,854 5.42%
==================================================================================================================
TABLE>
<PAGE>
21
Equipment and leasehold improvements
Equipment and leasehold improvements, as reflected in Note 5 to the
Consolidated Financial Statements, decreased $171,000 to $1,456,000 at
December 31, 1995, from $1,627,000 at December 31, 1994. The decrease is
primarily due to the normal levels of depreciation expense net of fixed asset
acquisitions.
Stockholders' equity
The increase in stockholders' equity of $4,281,000 to $16,818,000 at
December 31, 1995, reflects the improvement in the unrealized loss on
investments available-for-sale of $2,716,000 and net income in the amount of
$1,309,000 earned during 1995. Listed below are the Bank's Tier 1 leverage
and risk-based capital ratios as of December 31, 1995 and the regulatory
minimum.
The Bank Regulatory
of Darien Minimum
Tier 1 Leverage Capital Ratio 7.46% 4.00%
Risk-Based Capital Ratio 15.85% 8.00%
Short-term borrowings
Short-term borrowings from the FHLB in the amount of $32.1 million
at December 31, 1995 (maximum amount outstanding at any month end during 1995)
with a weighted average rate of 6.38%, have a weighted maturity of 1.0 months.
The average amount outstanding during 1995 was $24.4 million. See note 7 to
the Financial Statements.
Recent developments
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"). The Company adopted FAS 114 and FAS 118
effective January 1, 1995 and the adoption thereof was immaterial. See note 3
to the Financial Statements.
In March 1995, the FASB issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("FAS 121") which is effective for fiscal
years beginning after December 15, 1995. This statement addresses situations
where information indicates that a company might be unable to recover, through
future operations or sales, the carrying amount of long-lived assets,
identifiable intangibles, and goodwill related to those assets. A company must
first determine whether existing conditions indicate an impairment might
<PAGE>
22
exist. If an indicator of impairment should exist, the company must determine
if impairment exists using undiscounted cash flow analysis. If impairment
exists, the company must determine the amount of impairment using discounted
cash flow analysis. The Cmpany adopted this standard prospectively on January
1, 1996. The adoption of FAS No. 121 is not expected to have a material impact
on the Company, since the Company's existing policies for determining
impairment of assets are similar to the new standard.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123") which
is effective for fiscal years beginning after December 15, 1995. This
statement defines a fair-value based method of accounting for employee stock
options or similar equity instruments and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, it also allows an entity to continue to measure compensation for
those plans using the intrinsic value based method currently prescribed by
Accounting Principles Board Opinion No. 25 provided certain pro forma
disclosures are made that disclose what the impact on net earning would have
been had the company adopted the accounting provisions of FAS 123. The
Company plans to continue the current accounting and make the disclosures
required by FAS No. 123. Therefore, there will be no impact on the Company's
financial position on results of operations from adopting this standard.
In January, 1996, the Bank became party to an informal agreement
among itself, the Commissioner and the FDIC. The agreement requires, among
other things, the submission of written plans to the Commissione and the FDIC
and periodic written progress reports. At this time all such plans have been
submitted. The Company does not expect any material impact upon its Balance
Sheet or Statement of Operations from such agreement.
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 13 - Quarterly Financial Data (Unaudited)" and
"Supplementary Financial Data."
<PAGE>
23
Hometown Bancorporation, Inc.
Consolidated Balance Sheet
(thousands of dollars except par value amounts)
- -----------------------------------------------------------------------------
December 31, 1995 1994
- -----------------------------------------------------------------------------
Assets
Cash and due from banks $ 9,891 $ 8,549
Investments available-for-sale, at fair value 93,696 76,854
Investments held-to-maturity
(fair value: $14,763 in 1995 and $44,965 in 1994) 15,100 46,273
Loans, less allowance for loan losses of
$2,883 in 1995 and $3,004 in 1994 103,407 74,940
Equipment and leasehold improvements, net of
accumulated depreciation of $1,897 in 1995 and
$1,576 in 1994 1,456 1,627
Other real estate owned, net 603 1,016
Accrued interest and other assets 5,067 4,732
- -----------------------------------------------------------------------------
Total Assets $229,220 $213,991
=============================================================================
Liabilities and Stockholders' Equity
Deposits:
Demand deposit accounts $ 26,064 $24,932
NOW and money market accounts 69,200 77,050
Savings accounts 12,858 14,369
Certificates of deposit of $100 and over 10,954 9,351
Time deposits 58,924 57,029
- -----------------------------------------------------------------------------
Total deposits 178,000 182,731
Short-term borrowings 32,116 16,681
Accrued interest and other liabilities 2,286 2,042
- -----------------------------------------------------------------------------
Total Liabilities 212,402 201,454
- -----------------------------------------------------------------------------
Commitments and contingent liabilities (Notes 8 & 9) - -
Stockholders' Equity
Preferred stock, par value $1; 2,000,000
shares authorized, none issued - -
Common stock, par value $1; 10,000,000
shares authorized, 1,833,381 and 1,833,351
issued and outstanding 1,833 1,833
Surplus 14,123 13,960
Retained earnings 1,784 534
Treasury stock, 126,935 and 153,255 shares
in 1995 and 1994, respectively, at cost (735) (887)
Unrealized loss on investments
available-for-sale, net of applicable taxes (187) (2,903)
- -----------------------------------------------------------------------------
Total Stockholders' Equity 16,818 12,537
- -----------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $229,220 $213,991
=============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
24
</TABLE>
<TABLE>
Hometown Bancorporation, Inc.
Consolidated Statement of Income
(thousands of dollars except per share amounts)
<CAPTION>
- ----------------------------------------------------------------------------------------
For the year Ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and Dividend Income:
Loans including fees $ 7,625 $ 6,912 $ 6,596
Investment securities:
Obligations of U.S. government agencies 5,267 3,491 3,094
Other 2,002 2,139 1,407
Federal funds sold 52 51 110
Dividends 134 109 97
- ----------------------------------------------------------------------------------------
Total interest and dividend income 15,080 12,702 11,304
- ----------------------------------------------------------------------------------------
Interest Expense:
Deposits 6,171 4,459 3,823
Short-term borrowings 1,497 1,354 1,172
- ----------------------------------------------------------------------------------------
Total interest expense 7,668 5,813 4,995
- ----------------------------------------------------------------------------------------
Net interest income 7,412 6,889 6,309
Provision for loan losses 75 75 360
Provision for other real estate owned losses 95 290 60
- ----------------------------------------------------------------------------------------
Net interest income after provisions for loan
and other real estate owned losses 7,242 6,524 5,889
Other Operating Income:
Deposit and other service charges 687 709 701
Mortgage origination fees 459 507 893
Net investment securities gains 26 46 27
Other 248 135 199
- ----------------------------------------------------------------------------------------
Net interest and operating income 8,662 7,921 7,709
- ----------------------------------------------------------------------------------------
Other Operating Expenses:
Salaries and benefits 3,067 2,973 2,611
Occupancy expense 561 569 564
Professional fees 663 105 101
FDIC insurance 210 386 403
Depreciation and amortization 321 396 345
Advertising and marketing 262 250 200
Foreclosure expenses and costs of other
real estate owned 143 120 183
Equipment expense 101 95 91
Amortization of goodwill 50 50 50
Other 1,478 1,335 1,122
- ----------------------------------------------------------------------------------------
Total other operating expenses 6,856 6,279 5,670
- ----------------------------------------------------------------------------------------
Income before taxes and cumulative effect
of an accounting change 1,806 1,642 2,039
Provision for federal and state income taxes 497 593 800
- ----------------------------------------------------------------------------------------
Income before cumulative effect of an
accounting change 1,309 1,049 1,239
Cumulative effect of an accounting
change - FAS 109 - - 1,125
- ----------------------------------------------------------------------------------------
Net income $ 1,309 $ 1,049 $ 2,364
=======================================================================================
Earnings per share
Income before cumulative effect of an
accounting change $0.75 $0.60 $0.72
Cumulative effect of an accounting
change - FAS 109 - - 0.66
- ----------------------------------------------------------------------------------------
Net income $0.75 $0.60 $1.38
=======================================================================================
Average shares outstanding 1,752,523 1,750,988 1,708,207
=======================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
25
Hometown Bancorporation, Inc.
Consolidated Statement of Changes in Stockholders' Equity
(thousands of dollars)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Unrealized
Gain (Loss)
Retained On
Shares Issued Treasury Earnings Investments
and Common Stock (Accumulated Available-for-
Outstanding Stock At Cost Surplus Deficit) Sale ("IAFS") Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 1,833,206 $1,833 $(1,360) $13,959 $(2,887) $ - $11,545
Net income 2,364 2,364
Stock options exercised 352 29 381
Employee stock awards 90 1 1
Cumulative effect of
adopting FAS 115 163 163
- --------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 1,833,296 1,833 (1,008) 13,960 (494) 163 14,454
- --------------------------------------------------------------------------------------------------------------------------
Net income 1,049 1,049
Stock options exercised 121 (21) 100
Employee stock awards 55 -
Change on IAFS, net (3,066) (3,066)
- --------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 1,833,351 1,833 (887) 13,960 534 (2,903) 12,537
- --------------------------------------------------------------------------------------------------------------------------
Net income 1,309 1,309
Stock options exercised 152 163 (59) 256
Employee stock awards 30 -
Change on IAFS, net 2,716 2,716
- --------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1995 1,833,381 $1,833 $(735) $14,123 $1,784 $(187) $16,818
==========================================================================================================================
</TABLE>
<PAGE>
26
<TABLE>
Hometown Bancorporation, Inc.
Consolidated Statement of Cash Flows
(thousands of dollars)
<CAPTION>
For the Year Ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $1,309 $1,049 $2,364
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization, net 627 552 501
Provisions for loan and OREO losses 170 365 420
Net investment securities gains (26) (46) (27)
Decrease (increase) in other assets (641) 381 (2,053)
(Decrease) increase in other liabilities 244 (216) 1,288
- ------------------------------------------------------------------------------
Net cash provided by operating activities 1,683 2,085 2,493
- ------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Proceeds from maturities of investments
held-to-maturity 9,397 15,545 13,803
Purchase of investments held-to-maturity - (23,513) (35,500)
Proceeds from the sale of investments (1) - - 7,738
Proceeds from maturities of investments
available-for-sale 14,766 17,282 -
Purchase of investments available-for-sale (27,656) (52,763) -
Proceeds from the sale of investments
available-for-sale 20,566 10,620 -
Decrease (increase) in loans (28,542) 11,157 (668)
Proceeds from sale of OREO 318 (35) 1,100
Purchase of equipment and leasehold
improvements (150) (194) (630)
- ------------------------------------------------------------------------------
Net cash used in investing activities (11,301) (21,901) (14,157)
- ------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net (decrease) increase in demand deposits,
NOW accounts, money market accounts and
savings accounts (8,229) (725) 5,866
Net increase (decrease) in certificates of
deposit and other time deposits 3,498 23,815 (946)
(Decrease) increase in short term borrowings 15,435 (8,319) 5,000
Proceeds from exercise of stock options 256 100 381
- ------------------------------------------------------------------------------
Net cash provided by financing activities 10,960 14,871 10,301
- ------------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents 1,342 (4,945) (1,363)
Cash and cash equivalents at the beginning
of the year 8,549 13,494 14,857
- ------------------------------------------------------------------------------
Cash and cash equivalents at the end of
the year $9,891 $8,549 $13,494
==============================================================================
Cash paid during the year for:
Income taxes $647 $73 $230
==============================================================================
Interest $7,550 $5,648 $4,995
==============================================================================
</TABLE>
(1) Prior to the adoption of FAS 115 on December 31, 1993
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
27
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Hometown Bancorporation,
Inc. (the "Company") and its subsidiary conform to generally accepted
accounting principles and general practices within the banking industry. The
following footnotes describe the most significant of these policies.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported assets
and liabilities as of the date of the consolidated balance sheet. The same is
true of revenues and expenses reported for the period. Actual results could
differ significantly from those estimates.
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
<PAGE>
28
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
specific identification method. Securities transactions are recorded on a
trade date basis.
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
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 as provision for other real estate owned losses. 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.
Loans held for sale which are included in Other Assets are carried
at the lower of cost or market value.
Allowance for Loan Losses
<PAGE>
29
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
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 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 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. 91 ("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 Company's derivative activities are all end-user related and the Company
has no transactions classified as trading. The periodic net settlements on
interest rate swap agreements are recorded as an adjustment to interest
income on investments on an accrual basis.
<PAGE>
30
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
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, and interest
bearing deposits in banks with original maturities 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 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. Deferred
tax assets are reduced, through a valuation allowance, if necessary, by the
amount of such benefits that is not expected to be realized based on current
available evidence. 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 10.
Earnings Per Share Calculations
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.
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 not available for investment purposes. At December 31, 1995 and 1994 the
Company maintained $3,157,000 and $3,070,000, respectively, at the Federal
Reserve Bank.
<PAGE>
31
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
NOTE 3 - LOANS
Major classifications of loans at December
31, 1995 and 1994 were as follows:
December 31, 1995 1994
- ---------------------------------------------------------------------------
(thousands of dollars)
Real estate mortgage $90,545 $64,203
Commercial 9,214 8,597
Real estate construction 1,060 754
Installment 5,471 4,390
- ---------------------------------------------------------------------------
106,290 77,944
Allowance for loan losses (2,883) (3,004)
- ---------------------------------------------------------------------------
$103,407 $74,940
===========================================================================
The estimated fair market value of loans at December 31, 1995 and
1994 was $103.1 million and $73.4 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 approximate 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, 1995 were as follows:
Within One to After
One Five Five
Year Years Years Total
- ------------------------------------------------------------------------------
(thousands of dollars)
Real estate mortgage $12,012 $11,614 $66,919 $90,545
Commercial 4,517 3,083 1,614 9,214
Real estate construction 772 288 - 1,060
Installment 159 3,119 2,193 5,471
- ------------------------------------------------------------------------------
$17,460 $18,104 $70,726 $106,290
==============================================================================
Loans at fixed interest rates $2,746 $4,514 $9,619 $16,879
Loans at variable interest rates 14,714 13,590 61,107 89,411
- ------------------------------------------------------------------------------
$17,460 $18,104 $70,726 $106,290
==============================================================================
At December 31, 1995 and 1994 the Company was not accruing interest
on loans having outstanding balances of $1,475,000 and $851,000 or 1.39% and
1.09% of the respective year's gross loan balance. Had these non-accrual
loans been current, including any portion charged-off during 1995, gross
income on these loans for 1995 and
<PAGE>
32
1994 would have been $167,000 and $99,000, respectively. Interest income
actually recorded on these loans totaled $22,000 and $61,000, respectively.
Loans to officers, employees and directors (and companies in which
they have a 10 percent or more beneficial ownership) aggregated $2,246,000
and $1,675,000 at December 31, 1995 and 1994, respectively. During 1995,
aggregate additions and paydowns to related party loans were $1,019,000 and
$448,000, 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,
1995.
Transactions in the allowance for loan losses during 1995, 1994 and
1993 are summarized as follows:
December 31, 1995 1994 1993
- ----------------------------------------------------------------------
(thousands of dollars)
Balance at beginning of period $3,004 $3,640 $3,111
Charge-offs:
Commercial loans (23) (44) (22)
Real estate mortgage loans (302) (693) (264)
Installment loans (22) (6) (39)
- ----------------------------------------------------------------------
Total charge-offs (347) (743) (325)
- ----------------------------------------------------------------------
Recoveries:
Commercial loans 15 18 21
Real estate mortgage loans 93 4 17
Installment loans 12 10 7
- ----------------------------------------------------------------------
Total recoveries 120 32 45
- ----------------------------------------------------------------------
Net charge-offs (227) (711) (280)
- ----------------------------------------------------------------------
Provision for loan losses 75 75 360
Loan purchase 31 - 449
- ----------------------------------------------------------------------
Balance at end of period $2,883 $3,004 $3,640
======================================================================
Net charge-offs to average loans 0.28% 0.83% 0.31%
======================================================================
The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting for Creditors for Impairment of a Loan," ("FAS 114")and
Statement of Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures," ("FAS 118")as
of January 1, 1995. FAS 114 requires that certain impaired loans be measured
based on the present value of expected future cash flows discounted at the
loan's original effective interest rate. As a practical expedient, impairment
may be measured based on the loan's observable market price or the fair value
of the collateral. If the value of the loan is less than the recorded
investment, the impairment is recorded through a valuation allowance.
<PAGE>
33
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
The Company had previously measured the allowance for loan losses
for impaired loans using methods similar to those prescribed in FAS 114 and
FAS 118. As a result of adopting these statements, no additional allowance
for loan losses was required as of January 1, 1995. Impaired loans having
recorded book value of $2,989,000 at December 31, 1995 and $2,947,000 at
December 31, 1994 have been recognized in conformity with FAS 114 as amended
by FAS 118. The average recorded investment in impaired loans during 1995 and
1994 was $2,961,000 and $3,562,000, respectively. The total allowance for
loan losses related to these loans was $823,000 and $762,000 at December 31,
1995 and 1994, respectively. This allowance is included in the allowance for
loan losses on the Balance Sheet. Interest income on impaired loans of
$162,000 and $192,000 were recognized for cash payments received in 1995 and
1994, respectively.
Loans having carrying values of $268,000 and $442,000 were
transferred to other real estate owned in 1995 and 1994, respectively.
The Company is not committed to lend additional funds to debtors
whose loans have been modified or are considered impaired.
<PAGE>
34
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, 1995 and 1994, are shown below:
<TABLE>
<CAPTION>
Gross Gross
December 31, 1995 (thousands of dollars) Amortized Unrealized Unrealized Fair
Investments held-to-maturity Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Agency Mortgage-Backed Securities $ 5,705 $ 27 $ 27 $ 5,705
Other U.S. Agency Obligations 2,946 - 66 2,880
Other Mortgage-Backed Securities 6,449 - 271 6,178
- -------------------------------------------------------------------------------------------------------
$15,100 $ 27 364 $14,763
=======================================================================================================
<CAPTION>
Gross Gross
December 31, 1995 (thousands of dollars) Amortized Unrealized Unrealized Fair
Investments available-for-sale Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 3,016 $ 4 $ 1 $ 3,019
U.S. Agency Mortgage-Backed Securities 62,985 361 631 62,715
Other U.S. Agency Obligations 3,478 86 - 3,564
Other Mortgage-Backed Securities 22,821 70 210 22,681
Federal Home Loan Bank Stock 1,717 - - 1,717
- -------------------------------------------------------------------------------------------------------
$94,017 $ 521 $ 842 $ 93,696
=======================================================================================================
<CAPTION>
Gross Gross
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
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
=======================================================================================================
</TABLE>
The Company realized net securities gains of $26,000, $46,000 and
$27,000 in 1995, 1994, and 1993, respectively. Cost for investments sold was
determined on a specific identification basis.
At December 31, 1995 and December 31, 1994 there was $2,923,000 and
$2,484,000, respectively, in U.S. Treasury and other securities pledged to
secure municipal deposits as required by law.
On November 15, 1995, the FASB issued a special report entitled, "A
Guide to Implementation of Statement No. 115 on Accounting for Certain
Investments in Debt and Equity Securities, Questions and Answers" ("the
Guide"). The Guide permitted a one-time reassessment and related
reclassifications from the held-to-maturity category (no later than December
31, 1995) that will not call into question the intent of the enterprise to
hold other debt securities until maturity in the future. On December 21, 1995,
the Company performed a reassessment of its investment and mortgage-backed
securities portfolio which resulted in a reclassification of $21,776,000 of
investment securities from held-to-maturity to available-for-sale. The impact
upon the Company's financial condition resulting from this transfer was not
material. There was no impact on the Company's results from operations
resulting from this transfer.
<PAGE>
35
The amortized cost and estimated fair value of investment securities
at December 31, 1995, by maturity, are presented in the table below.
Mortgaged backed securities are reported by the average life to maturity.
December 31, 1995 (thousands of dollars)
===============================================================================
Amortized Estimated Average
Investments held-to-maturity Cost Fair Value Yield
- -------------------------------------------------------------------------------
U.S. Agency Mortgage-Backed Securities
Due in 1 year or less $ 2,994 $ 2,987 5.41%
Due after 1 but within 5 years 2,711 2,718 6.70%
- -------------------------------------------------------------------------------
Subtotal 5,705 5,705 6.02%
- -------------------------------------------------------------------------------
Other U.S. Agency Obligations
Due after 1 but within 5 years 2,946 2,880 6.19%
- -------------------------------------------------------------------------------
Subtotal 2,946 2,880 6.19%
- -------------------------------------------------------------------------------
Other Mortgage-Backed Securities
Due after 1 but within 5 years 2,239 2,137 5.56%
Due after 5 but within 10 years 4,210 4,041 6.95%
- -------------------------------------------------------------------------------
Subtotal 6,449 6,178 6.47%
- -------------------------------------------------------------------------------
Total investments held-to-maturity $15,100 $14,763 6.25%
===============================================================================
Amortized Estimated Average
Investments available-for-sale Cost Fair Value Yield
- -------------------------------------------------------------------------------
U.S. Treasury Securities
Due in 1 year or less $3,016 $3,019 5.52%
- -------------------------------------------------------------------------------
Subtotal 3,016 3,019 5.52%
- -------------------------------------------------------------------------------
U.S. Agency Mortgage-Backed Securities
Due in 1 year or less 134 133 7.03%
Due after 1 but within 5 years 51,751 51,808 6.55%
Due after 5 years but within 10 years 9,115 8,855 6.05%
Due after 10 years 1,985 1,919 6.27%
- -------------------------------------------------------------------------------
Subtotal 62,985 62,715 6.47%
- -------------------------------------------------------------------------------
Other U.S. Agency Obligations
Due after 1 but within 5 years 3,478 3,564 7.27%
- -------------------------------------------------------------------------------
Subtotal 3,478 3,564 7.27%
- -------------------------------------------------------------------------------
Other Mortgage-Backed Securities
Due after 1 but within 5 years 19,520 19,422 6.68%
Due after 5 but within 10 years 3,301 3,259 8.82%
- -------------------------------------------------------------------------------
Subtotal 22,821 22,681 7.09%
- -------------------------------------------------------------------------------
Federal Home Loan Bank Stock 1,717 1,717 6.70%
- -------------------------------------------------------------------------------
Total investments available-for-sale $ 94,017 $ 93,696 6.62%
===============================================================================
<PAGE>
36
NOTE 5-EQUIPMENT AND LEASEHOLD IMPROVEMENTS
The major components of fixed assets at December 31, 1995 and 1994
were as follows:
December 31, 1995 1994
- -----------------------------------------------------------------------------
(thousands of dollars)
Leasehold improvements $1,523 $1,491
Furniture and equipment 1,830 1,712
- -----------------------------------------------------------------------------
3,353 3,203
Less: Accumulated depreciation and amortization (1,897) (1,576)
- -----------------------------------------------------------------------------
$1,456 $1,627
=============================================================================
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, 1995 and 1994 are as follows:
December 31, 1995 1994
- -----------------------------------------------------------------------------
(thousands of dollars)
Three months or less $3,669 $5,203
Over three, through six months 2,992 3,287
Over six, through twelve months 2,993 461
Over twelve months 1,300 400
- -----------------------------------------------------------------------------
$10,954 $9,351
=============================================================================
Interest expense incurred on deposits during 1995, 1994, and 1993
was as follows:
For the Year Ended December 21, 1995 1994 1993
- -----------------------------------------------------------------------------
(thousands of dollars)
NOW and money market accounts $2,261 $1,907 $1,869
Other time deposits 2,853 1,941 1,368
Certificates of deposit of $100 or over 609 274 242
Savings 448 337 344
- -----------------------------------------------------------------------------
$6,171 $4,459 $3,823
=============================================================================
The estimated fair value of total deposits at December 31, 1995 and
1994 was $177.9 million and $183.1 million, respectively. The estimated fair
value of demand deposits, savings accounts and money market deposits is the
amount payable on demand at December 31, 1995 and 1994. The estimated fair
value of fixed-maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities.
<PAGE>
37
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
NOTE 7 - SHORT-TERM BORROWINGS
Short-term Borrowings consist of federal funds purchased (variable
rate overnight advances) and fixed rate term advances from the Federal Home
Loan Bank ("FHLB"). At December 31, 1995 and 1994, the Company had federal
funds purchased outstanding of $22,116,000 and $11,681,000, respectively. The
interest rates on these overnight advances at December 31, 1995 and 1994 were
6.40% and 6.16%, resectively.
Fixed rate term advances from the FHLB consist of the following at
December 31, 1995 and 1994:
Maturity Date Interest Rate 1995 1994
- --------------------------------------------------------------------------
May 3, 1995 4.22% $ - $5,000,000
February 23, 1996 6.30% 5,000,000 -
May 23, 1996 6.39% 5,000,000 -
- --------------------------------------------------------------------------
Totals $10,000,000 $5,000,000
==========================================================================
The weighted average rate for total short-term borrowings was 6.21%
and 5.30% on average daily outstanding balances of $23,638,000 and $25,568,000
for the year ended December 31, 1995 and 1994, respectively. The estimated
value of short-term borrowings is based upon the outstanding borrowings
discounted at current market rates.
NOTE 8 - 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, 1995 under the
leases are as follows:
Due in the year ending 1996 $671
December 31, 1997 653
(thousands of dollars) 1998 650
1999 644
2000 and after 5,490
- ----------------------------------------------------------------------
$8,108
======================================================================
Effective May 1, 1995, the Company entered into a lease modification
agreement with its landlord concerning its home office location in Darien,
Connecticut. 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,
2010. 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.
<PAGE>
38
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
Total occupancy and equipment rental expense was $617,000, $610,000,
and $603,000 for the years ended December 31, 1995, 1994, and 1993,
respectively
NOTE 9-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 contractual amount or notional value of off-
balance-sheet financial instruments as of December 31, 1995 and 1994 is as
follows:
December 31, 1995 1994
- ---------------------------------------------------------------------------
(thousands of dollars)
Interest rate swap agreements $34,000 $34,000
Commitments to extend credit:
Unused lines of credit 12,614 10,905
Commercial real estate 1,486 874
Other 11,284 8,673
Standby letters of credit 108 102
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, 1995 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
<PAGE>
39
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, at
December 31, 1995 and 1994 were $(127,000), $(683,000), respectively.
Financial instruments, such as commitments to extend credit and Standby
Letters of Credit, generally are not sold or traded, and estimated fair
values are not readily available. However, the fair value of commitments
to extend credit and standby letters of credit is based on fees charged to
enter into similar agreements with comparable credit risks and the current
creditworthiness of the counterparties. Commitments to extend credit issued
by the Company are generally short-term in nature and, if drawn upon, are
issued under current market terms and conditions for credits with
comparable risks.
At December 31, 1995 and 1994, there was no significant unrealized
appreciation or depreciation on these financial instruments.
NOTE 10-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.
Income tax expense for the three years ended December 31, 1995, 1994
and 1993 consisted of the following components:
December 31, 1995 1994 1993(a)
- -----------------------------------------------------------------------------
(thousands of dollars)
Current
Federal $379 $435 $416
State 135 137 120
Deferred
Federal (87) (37) 144
State 70 58 120
- -----------------------------------------------------------------------------
$497 $593 $800
=============================================================================
(a) Excludes the cumulative effect of the adoption of FAS 109.
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:
<PAGE>
40
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
- ----------------------------------------------------------------------------
December 31, 1995 1994 1993
- ----------------------------------------------------------------------------
U.S. statutory rate 34.0% 34.0% 34.0%
State income tax, net of federal benefit 7.5% 7.8% 7.8%
Release of valuation allowance (14.9%) (11.6%) (2.7%)
Goodwill amortization 1.0% 1.0% 1.0%
Other, net - 4.9% (0.9%)
- ----------------------------------------------------------------------------
27.6% 36.1% 39.2%
============================================================================
Deferred tax asset and liabilities included in other assets at
December 31, 1995 and 1994 consist of the following:
Net deferred tax asset: December 31, 1995 1994
(thousands of dollars)
Loan loss reserve $702 $817
OREO reserves 40 139
Net deferred loan fees 6 48
Depreciation 48 48
Foreclosure costs 26 51
Unrealized loss on IAFS 133 -
Other, net 60 27
- ----------------------------------------------------------------------
1,015 1,130
Valuation allowance (100) (290)
- ----------------------------------------------------------------------
Net deferred tax asset $915 $840
=======================================================================
<PAGE>
41
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
NOTE 11-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, 1995 1994
- ----------------------------------------------------------------------
(thousands of dollars)
Assets
Cash due from Bank $473 $348
Investment in subsidiary 16,257 12,195
Other assets 95 -
- ----------------------------------------------------------------------
Total assets $16,825 $12,543
======================================================================
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities 6 6
- ----------------------------------------------------------------------
Total stockholders' equity 16,819 12,537
- ----------------------------------------------------------------------
Total liabilities and stockholders' equity $16,825 $12,543
======================================================================
Hometown Bancorporation, Inc. (parent company only) Statement of Income
- ------------------------------------------------------------------------------
December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
(thousands of dollars except per share amounts)
Equity in undistributed income of subsidiary $1,346 $1,139 $2,465
- ------------------------------------------------------------------------------
Total income 1,346 1,139 2,465
Legal expenses 8 30 21
Other expenses 29 60 80
- ------------------------------------------------------------------------------
Total expenses 37 90 101
- ------------------------------------------------------------------------------
Net income $1,309 $1,049 $2,364
- ------------------------------------------------------------------------------
Net income per share $ .75 $ .60 $ 1.38
==============================================================================
Hometown Bancorporation, Inc. (parent company only) Statement of Cash Flows
- ------------------------------------------------------------------------------
December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
(thousands of dollars)
Cash Flows From Operating Activities:
Net income $1,309 $1,049 $2,364
Equity in undistributed income of subsidiary (1,346) (1,139) (2,465)
Net change in other liabilities - 6 -
Net change in other assets (95) 20 (14)
Other, net - 2 2
- ------------------------------------------------------------------------------
Net cash used in operating activities (132) (62) (113)
- ------------------------------------------------------------------------------
Cash Flows From Financing Activities
Proceeds from exercise of stock options 257 98 381
- ------------------------------------------------------------------------------
Net cash provided by financing activities 257 98 381
- ------------------------------------------------------------------------------
Net increase in cash 125 36 268
Cash at the beginning of the year 348 312 44
- ------------------------------------------------------------------------------
Cash at the end of the year $ 473 $ 348 $ 312
==============================================================================
<PAGE>
42
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
NOTE 12-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, 1995, 1994 and 1993 are summarized as
follows:
- ------------------------------------------------------------------------------
Average
Shares Option Price
- ------------------------------------------------------------------------------
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
Granted 19,500 $11.00
Exercised (26,300) $3.65
Cancelled or expired (12,200) $10.43
- ------------------------------------------------------------------------------
Options outstanding at December 31, 1995 129,600 $5.14
- ------------------------------------------------------------------------------
In 1995, the Company adopted the 1995 Omnibus Stock Incentive
Program pursuant to which an additional 100,000 shares of authorized but
unissued Common Stock were reserved. Under this program, incentive stock
options, non-qualified stock options, stock appreciation rights and stock
awards may be granted. Options would become exercisable between six months
from the date of grant and the date determined at the time of grant. Under the
program, 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, and the option price of non-qualified options shall not be less than
85% of such fair market value. As of December 31, 1995, no benefits had been
awarded under this program.
At December 31, 1995, options for 105,370 shares were exercisable
and 111,400 shares were available for granting additional options under the
two current plans combined.
<PAGE>
43
Hometown Bancorporation, Inc.
Notes to the Consolidated Financial Statements
(continued)
NOTE 13-QUARTERLY FINANCIAL DATA (UNAUDITED) (A)
- -----------------------------------------------------------------------------
1995 Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31 Total
(thousands of dollars except
per share amounts)
Interest income $3,710 $3,830 $3,812 $3,728 $15,080
Net interest income 1,844 1,857 1,868 1,843 7,412
Provision for loan losses 25 - 25 25 75
Net income 370 476 13 450 1,309
Net income per share $.21 $.27 $.01 $.26 $.75
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 $.22 $.17 $.19 $.02 $.60
(A) See note 16 below.
NOTE 14-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.
- -----------------------------------------------------------------------------
December 31, 1995 1994
- -----------------------------------------------------------------------------
Carring Fair Carrying Fair
(thousands of dollars) Amount Value Amount Value
- -----------------------------------------------------------------------------
Financial Assets:
Cash and due from banks $9,891 $9,891 $8,549 $8,549
Investments available-for-sale
(Note 4) 93,823 93,823 76,854 76,854
Investments held-to-maturity
(Note 4)(A) 15,100 14,763 46,273 44,965
Net loans (Note 3) 103,407 103,138 73,474 73,474
Financial Liabilities:
Deposits (Note 6) 178,000 177,935 182,731 183,075
Short-term borrowings (Note 7) 32,116 32,064 16,681 16,726
Off-Balance Sheet (Note 8):
Interest rate swap agreements (127) (127) - (683)
Commitments to extend credit - - - -
Standby letters of credit - - - -
(A) Excludes effect of interest rate swap agreements.
NOTE 15 - 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 $3,000 per employee, per
<PAGE>
44
year. The plan covers substantially all full-time employees. Bank
contributions to the plan amounted to $35,613, $35,056, and $22,239 for 1995,
1994, and 1993 respectively.
NOTE 16 - RESTATEMENT OF FINANCIAL STATEMENTS
On August 25, 1995 the Audit Committee of the Company concluded an
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 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.
Earnings per share before extraordinary credit and cumulative effect
of accounting change was reduced by $.54, $.08, and $.16 for 1994, 1993 and
1992, respectively. Earnings per share after extraordinary credit and
cumulative effect of accounting change and extraordinary credit was reduced by
$.54, $.10, and $.28 for 1994, 1993 and 1992, respectively.
<PAGE>
45
1177 Avenue of the Americas Telephone 212 596 7000
New York, NY 10036 Facsimile 212 596 8910
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
January 25, 1996
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, after the restatement discussed in Note 16, present fairly, in all
material respects, the financial position of Hometown Bancorporation, Inc. and
its subsidiary (the "Company") at December 31, 1995 and 1994, and the results
of their operations and cash flows for each of the three years in the period
ended December 31, 1995, 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
<PAGE>
46
<TABLE>
HOMETOWN BANCORPORATION, INC.
Supplementary Financial Data
(thousands of dollars except per share)
<CAPTION>
For the Year Ended December 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Total interest income $15,080 $12,702 $11,304 $11,097 $9,445
Total interest expense 7,668 5,813 4,995 5,236 5,281
- ---------------------------------------------------------------------------------------------------------------------
Net interest income 7,412 6,889 6,309 5,861 4,164
Provision for loan losses 75 75 360 1,258 800
Provision for losses on
other real estate owned 95 290 60 212 145
Other operating income 1,420 1,397 1,820 1,534 812
Other operating expenses 6,856 6,279 5,670 5,046 4,204
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) before taxes,
extraordinary credit and cumulative
effect of an accounting change 1,806 1,642 2,039 879 (173)
Provision for federal and state
income taxes 497 593 800 274 -
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) before extraordinary
credit and cumulative effect of an
accounting change 1,309 1,049 1,239 605 (173)
Extraordinary credit - - - 256 -
Cumulative effect of an accounting
change - FAS 109 - - 1,125 - -
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) $1,309 $1,049 $2,364 $861 $(173)
=====================================================================================================================
Per Share Data:
Before extraordinary credit and an
accounting change:
Net income (loss) $.75 $.60 $.72 $.37 $(.11)
After extraordinary credit and an
accounting change
Net income (loss) $.75 $.60 $1.38 $.53 $(.11)
Stockholders' equity $9.60 $7.16 $8.46 $7.08 $6.69
Average common shares outstanding 1,752,523 1,750,988 1,708,207 1,629,710 1,597,194
Common shares outstanding 1,833,381 1,680,096 1,659,141 1,598,251 1,597,231
Year End Balance Sheet Data:
Total assets $229,220 $213,991 $201,352 $187,235 $118,902
Loans, net 103,407 74,940 85,461 85,322 60,786
Investments held-to-maturity 15,100 46,273 40,060 79,869 47,727
Investments available-for-sale 93,696 76,854 54,016 - -
Total deposits 178,000 182,731 159,641 154,721 107,617
Total stockholders' equity 16,818 12,537 14,454 11,545 10,682
Financial Ratios:
Net income (loss) before extraordinary
credit and an accounting change to
average:
Total assets 0.60% 0.49% 0.65% 0.38% (0.16)%
Stockholders' equity 8.50% 6.91% 9.06% 5.40% (1.63)%
Net income (loss) after extraordinary
credit and an accounting change to
average:
Total assets 0.60% 0.49% 1.24% 0.54% (0.16)%
Stockholders' equity 8.50% 6.91% 17.28% 57.68% (1.63)%
Year End:
Gross loans to total assets 46.37% 36.42% 44.25% 47.23% 51.12%
Gross loans to deposits 59.71% 42.66% 55.81% 57.16% 56.48%
Risk-based capital to assets 16.37% 15.46% 14.10% 12.07% 14.37%
Primary capital to total assets 8.60% 8.50% 8.75% 7.70% 10.36%
Tier one capital to assets 15.10% 13.44% 11.76% 9.37% 8.98%
Average stockholders' equity to average
total assets 7.05% 7.15% 7.16% 6.98% 9.82%
Nonperforming assets to total assets 0.91% 0.87% 1.42% 2.86% 4.72%
Nonperforming loans to gross loans 1.39% 1.09% 1.78% 3.38% 4.51%
</TABLE>
<PAGE>
47
Item 9 - Changes in and Diagreements with Accountants on
Accounting and Financial Disclosure
There is no event reportble under this item, except as has been
previously reported (as defined in Rule 12b-2 under the Securities Exchange
Act of 1934) in the Company's Current Report on Form 8-K dated March 5, 1996.
PART III
ITEM 10 - Directors and Executive Officers of the Registrant
Directors of the Company.
The information required by this item appears under the caption
"Election of Directors" in the 1996 Proxy. Such information is incorporated
by reference and made a part hereof.
Executive Officers of the Company
The information required by this item apppears in Item 4A hereof.
Item 11 - Executive Compensation
The information required by this item appears under the caption,
"Compensation of Directors and Executive Officers" in the 1996 Proxy. Such
information is incorporated herein by reference and made a part hereof.
Since the Company qualifies as a "small business issuer," as defined
by Item 10 (a)(1) of Regulation S-B, information incorporated by reference to
the 1996 Proxy in response to this item contains the disclosure required by
paragraphs (b), (c)(1), (c)(2)(i)-(v), (d), (e), (g), (h), (i)(1) and (2) of
Item 402 of Regulation S-K.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The information required by this item appears under the caption
"Voting Securities and Principal Holders" in the 1996 Proxy. Such information
is incorporated herein by reference and made a part hereof.
Item 13 - Certain Relationships and Related Transactions
The information required by this item appears under the caption
"Certain Relationships and Related Transactions" in the 1996 Proxy. Such
information is incorporated herein by reference and made a part hereof.
<PAGE>
48
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
Form 10-K
Consolidated Balance Sheet as of December 31, 1995 and 1994 23
Consolidated Statement of Income for the Years Ended
December 31, 1995, 1994 and 1993 24
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1995, 1994 and 1993 25
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 26
Notes to the Consolidated Financial Statements 27
Report of Independent Accountants 44
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable.
(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 Current
Report on Form 8-K dated September 20, 1990 [Commission File
Number 0-16272]).
<PAGE>
49
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]).
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]).
<PAGE>
50
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.
24 Powers of Attorney
27 Financial Data Schedule.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Hometown Bancorporation, Inc.
By: /s/ Kevin E. Gage
--------------------------------------
Kevin E. Gage
President and Chief Executive Officer
Dated: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<PAGE>
51
Name Title
- ---- -----
Douglas D. Milne, III Chairman of the Board )
and Director )
)
Kevin E. Gage President and Chief )
Executive Officer and )
Director )
)
Richard A. Allen Director )
)
Louis T. Hagopian Director )
)
Arnold H. Libner Director ) By /s/ Kevin E. Gage
) ------------------
) Kevin E. Gage
Joseph G. McIntyre, Jr. Director ) Attorney-in-Fact
)
Robert O. White Director ) March 29, 1995
)
Albert T. Jaronczyk Senior Vice President )
and Chief Financial )
Officer (Principal )
Accounting Officer) )
<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 Current
Report on 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]).
<PAGE>
2
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]).
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.
24 Powers of Attorney
27 Financial Data Schedule.
<PAGE>
Exhibit 11
Hometown Bancorporation, Inc.
Earnings Per Share Earnings Per Share
(thousands of dollars, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 1994 1993
<S> <C> <C> <C>
Earnings per share:
Shares used in computing earnings per
share:
Weighted average number of shares
outstanding 1,684,753 1,673,036 1,650,236
Incremental shares attributed to
outstanding options 105,370 110,250 111,997
Weighted average number of shares
respurchased (37,600) (32,298) (54,026)
---------- ---------- ----------
1,752,523 1,750,988 1,708,207
========= ========= =========
Earnings:
Net Income $1,309 $1,049 $2,364
===== ===== =====
- -------------------------------------------------------------------------------------
Earnings per common and common
equivalent share $0.75 $0.60 $1.38
==== ==== =====
</TABLE>
1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-20287) of Hometown Bancorporation, Inc. of
our report dated January 25, 1996 appearing on page 45 of the Annual
Report on Form 10-K of Hometown Bancorporation, Inc. for the year ended
December 31, 1995.
PRICE WATERHOUSE LLP
New York, New York
March 29, 1996
EXHIBIT 24
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of HOMETOWN BANCORPORATION, INC., a Delaware corporation,
which is filing with the Securities and Exchange Commission under the
provisioins of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K for the year ended December 31, 1995, hereby
constitutes and appoints Kevin E. Gage and Albert T. Jaronczyk, and each
of them, as the true and lawful attorneys-in-fact and agents, for the
undersigned, with the power to act either jointly or severally for him
in his name, place and stead, in any and all capacities to sign such
anual report on Form 10-K and any and all amendments thereto, and to
file such annual report on Form 10-K and each such amendment or
amendments thereto, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission
hereby granting unto said attorneys-in-fact and agents, and each of
them, the full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand and seal as of the 26th day of March 1996.
/S/ DOUGLAS D. MILNE, III (L.S.)
Douglas D. Milne, III
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of HOMETOWN BANCORPORATION, INC., a Delaware corporation,
which is filing with the Securities and Exchange Commission under the
provisioins of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K for the year ended December 31, 1995, hereby
constitutes and appoints Kevin E. Gage and Albert T. Jaronczyk, and each
of them, as the true and lawful attorneys-in-fact and agents, for the
undersigned, with the power to act either jointly or severally for him
in his name, place and stead, in any and all capacities to sign such
anual report on Form 10-K and any and all amendments thereto, and to
file such annual report on Form 10-K and each such amendment or
amendments thereto, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission
hereby granting unto said attorneys-in-fact and agents, and each of
them, the full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand and seal as of the 26th day of March 1996.
/S/ KEVIN E. GAGE (L.S.)
Kevin E. Gage
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of HOMETOWN BANCORPORATION, INC., a Delaware corporation,
which is filing with the Securities and Exchange Commission under the
provisioins of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K for the year ended December 31, 1995, hereby
constitutes and appoints Kevin E. Gage and Albert T. Jaronczyk, and each
of them, as the true and lawful attorneys-in-fact and agents, for the
undersigned, with the power to act either jointly or severally for him
in his name, place and stead, in any and all capacities to sign such
anual report on Form 10-K and any and all amendments thereto, and to
file such annual report on Form 10-K and each such amendment or
amendments thereto, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission
hereby granting unto said attorneys-in-fact and agents, and each of
them, the full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand and seal as of the 25th day of March 1996.
/S/ RICHARD A. ALLEN (L.S.)
Richard A. Allen
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of HOMETOWN BANCORPORATION, INC., a Delaware corporation,
which is filing with the Securities and Exchange Commission under the
provisioins of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K for the year ended December 31, 1995, hereby
constitutes and appoints Kevin E. Gage and Albert T. Jaronczyk, and each
of them, as the true and lawful attorneys-in-fact and agents, for the
undersigned, with the power to act either jointly or severally for him
in his name, place and stead, in any and all capacities to sign such
anual report on Form 10-K and any and all amendments thereto, and to
file such annual report on Form 10-K and each such amendment or
amendments thereto, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission
hereby granting unto said attorneys-in-fact and agents, and each of
them, the full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand and seal as of the 25th day of March 1996.
/S/ LOUIS T. HAGOPIAN (L.S.)
Louis T. Hagopian
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of HOMETOWN BANCORPORATION, INC., a Delaware corporation,
which is filing with the Securities and Exchange Commission under the
provisioins of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K for the year ended December 31, 1995, hereby
constitutes and appoints Kevin E. Gage and Albert T. Jaronczyk, and each
of them, as the true and lawful attorneys-in-fact and agents, for the
undersigned, with the power to act either jointly or severally for him
in his name, place and stead, in any and all capacities to sign such
anual report on Form 10-K and any and all amendments thereto, and to
file such annual report on Form 10-K and each such amendment or
amendments thereto, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission
hereby granting unto said attorneys-in-fact and agents, and each of
them, the full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand and seal as of the 26th day of March 1996.
/S/ ARNOLD H. LIBNER (L.S.)
Arnold H. Libner
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of HOMETOWN BANCORPORATION, INC., a Delaware corporation,
which is filing with the Securities and Exchange Commission under the
provisioins of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K for the year ended December 31, 1995, hereby
constitutes and appoints Kevin E. Gage and Albert T. Jaronczyk, and each
of them, as the true and lawful attorneys-in-fact and agents, for the
undersigned, with the power to act either jointly or severally for him
in his name, place and stead, in any and all capacities to sign such
anual report on Form 10-K and any and all amendments thereto, and to
file such annual report on Form 10-K and each such amendment or
amendments thereto, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission
hereby granting unto said attorneys-in-fact and agents, and each of
them, the full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand and seal as of the 25th day of March 1996.
/S/ JOSEPH G. MCINTYRE, JR. (L.S.)
Joseph G. McIntyre, Jr.
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of HOMETOWN BANCORPORATION, INC., a Delaware corporation,
which is filing with the Securities and Exchange Commission under the
provisioins of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K for the year ended December 31, 1995, hereby
constitutes and appoints Kevin E. Gage and Albert T. Jaronczyk, and each
of them, as the true and lawful attorneys-in-fact and agents, for the
undersigned, with the power to act either jointly or severally for him
in his name, place and stead, in any and all capacities to sign such
anual report on Form 10-K and any and all amendments thereto, and to
file such annual report on Form 10-K and each such amendment or
amendments thereto, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission
hereby granting unto said attorneys-in-fact and agents, and each of
them, the full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand and seal as of the 26th day of March 1996.
/S/ ROBERT O. WHITE (L.S.)
Robert O. White
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of HOMETOWN BANCORPORATION, INC., a Delaware corporation,
which is filing with the Securities and Exchange Commission under the
provisioins of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K for the year ended December 31, 1995, hereby
constitutes and appoints Kevin E. Gage and Albert T. Jaronczyk, and each
of them, as the true and lawful attorneys-in-fact and agents, for the
undersigned, with the power to act either jointly or severally for him
in his name, place and stead, in any and all capacities to sign such
anual report on Form 10-K and any and all amendments thereto, and to
file such annual report on Form 10-K and each such amendment or
amendments thereto, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission
hereby granting unto said attorneys-in-fact and agents, and each of
them, the full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand and seal as of the 25th day of March 1996.
/S/ ALBERT T. JARONCZYK (L.S.)
Albert T. Jaronczyk
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE COMPANY AS OF DECEMBER 31, 1995 AND FOR THE YEAR
THEN STATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 9,891
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 93,696
<INVESTMENTS-CARRYING> 15,100
<INVESTMENTS-MARKET> 14,763
<LOANS> 106,290
<ALLOWANCE> 2,883
<TOTAL-ASSETS> 229,220
<DEPOSITS> 178,000
<SHORT-TERM> 32,116
<LIABILITIES-OTHER> 2,286
<LONG-TERM> 0
0
0
<COMMON> 1,833
<OTHER-SE> 14,985
<TOTAL-LIABILITIES-AND-EQUITY> 229,220
<INTEREST-LOAN> 7,625
<INTEREST-INVEST> 7,403
<INTEREST-OTHER> 52
<INTEREST-TOTAL> 15,080
<INTEREST-DEPOSIT> 6,171
<INTEREST-EXPENSE> 7,668
<INTEREST-INCOME-NET> 7,412
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 26
<EXPENSE-OTHER> 6,856
<INCOME-PRETAX> 1,806
<INCOME-PRE-EXTRAORDINARY> 1,309
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,309
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.74
<YIELD-ACTUAL> 7.28
<LOANS-NON> 1,475
<LOANS-PAST> 2
<LOANS-TROUBLED> 544
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,004
<CHARGE-OFFS> 347
<RECOVERIES> 120
<ALLOWANCE-CLOSE> 2,883
<ALLOWANCE-DOMESTIC> 2,883
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
