SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) of THE
SECURITIES EXCHANGE ACT OF 1934
FOR the quarter ended September 30, 1994
or
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-10396
NBB BANCORP,INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2997971
State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
174 Union Street, New Bedford, Massachusetts 02740
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 996-5000
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
At November 9, 1994, there were 8,674,594 shares of common stock,
par value $.10, issued and outstanding.
<PAGE>
NBB Bancorp, Inc. and Subsidiary
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1.
Consolidated Balance Sheets at September 30,
1994 and December 31, 1993 3
Consolidated Statements of Income for the
three months ended September 30, 1994 and 1993 4
Consolidated Statements of Income for the
nine months ended September 30, 1994 and 1993 5
Consolidated Statements of Changes in
Stockholders' Equity for the nine months
ended September 30, 1994 and 1993 6
Consolidated Statements of Cash Flows for
the nine months ended September 30, 1994 and 1993 7
Notes to Consolidated Financial Statements 8-9
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-26
PART II - OTHER INFORMATION 27
SIGNATURES 28
EXHIBITS
Exhibit 11 Computation of Per Share Earnings
FINANCIAL DATA SCHEDULES
<PAGE>
NBB Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
(In Thousands, Except Share Data, Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
<S> <C> <C>
ASSETS:
Cash and due from banks $ 67,115 $ 65,876
Federal funds sold and overnight deposits 15,000 11,000
Total cash and cash equivalents 82,115 76,876
Securities available-for-sale:
(cost of $642,034 and $576,790) 625,758 588,442
Securities held-to-maturity:
market value of $361,109 and $409,713 367,886 399,453
Loans 1,341,099 1,319,287
Allowance for loan losses (27,190) (29,596)
Loans, net 1,313,909 1,289,691
Banking premises and equipment, net 22,396 22,794
Accrued interest receivable 16,563 18,949
Other real estate owned 14,095 21,236
Goodwill, core deposit and other intangibles 13,490 15,451
Segregated assets 5,753 8,922
Other assets 27,575 8,922
Total assets $2,489,540 $2,450,736
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits $2,214,503 $2,169,256
Mortgagors' escrow payments 6,101 5,621
Accrued interest payable 6,108 5,946
Accrued income taxes payable 0 7,202
Accrued expenses and other liabilities 9,209 7,761
Total liabilities 2,235,921 2,195,786
Stockholders' equity:
Serial preferred stock, $0.10 par value,
10,000,000 shares authorized; none issued -- --
Common stock, $0.10 par value, 40,000,000
shares authorized; 9,537,627 and 9,529,430
shares issued and outstanding 954 953
Additional paid-in capital 134,373 134,240
Retained earnings 137,777 122,926
Treasury stock, at cost, 873,433 shares (9,941) (9,941)
263,163 248,178
Net unrealized gain/(loss) on securities
available-for-sale (9,544) 6,772
Total stockholders' equity 253,619 254,950
Total liabilities and stockholders' equity $2,489,540 $2,450,736
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NBB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data, Unaudited)
<TABLE>
<S> <C> <C>
Three Months Ended September 30, 1994 1993
Interest and dividend income:
Interest and fees on loans $27,285 $28,238
Interest and dividends on securities 14,475 14,506
Other interest 187 120
Total interest and dividend income 41,947 42,864
Interest expense:
Interest on deposits 18,185 18,108
Total interest expense 18,185 18,108
Net interest income 23,762 24,756
Provision for loan losses 100 600
Net interest income after provision
for loan losses 23,662 24,156
Non-interest income:
Deposit and other banking fees 1,425 1,485
Gain on sales of securities, net 667 753
Other income 252 477
Total non-interest income 2,344 2,715
Operating expenses:
Salaries and employee benefits 5,394 5,763
Occupancy and equipment 952 1,293
Deposit insurance 1,254 1,233
Data processing 918 802
Amortization of goodwill, core deposit
and other intangibles 654 793
Professional fees 1,334 738
Office supplies, postage and
telephone 586 472
Customer account servicing 315 333
Marketing 270 210
Insurance 164 178
Other 717 355
Total operating expenses 12,558 12,170
Other expenses:
OREO expense 508 1,582
Equity in income of
unconsolidated subsidiary 0 (8)
Total other expenses 508 1,574
Total expenses 13,066 13,744
Income before income taxes 12,940 13,127
Provision for income taxes 5,139 5,822
Net income $ 7,801 $ 7,305
Earnings per share $0.90 $0.85
Dividends per common share 0.30 0.26
Weighted average common shares
outstanding 8,662,718 8,608,142
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NBB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data, Unaudited)
<TABLE>
<S> <C> <C>
Nine Months Ended September 30, 1994 1993
Interest and dividend income:
Interest and fees on loans $ 80,665 $ 86,388
Interest and dividends on securities 43,511 42,021
Other interest 429 372
Total interest and dividend income 124,605 128,781
Interest expense:
Interest on deposits 51,778 56,152
Total interest expense 51,778 56,152
Net interest income 72,827 72,629
Provision for loan losses 450 2,800
Net interest income after provision
for loan losses 72,377 69,829
Non-interest income:
Deposit and other banking fees 4,258 4,331
Gain on sales of securities, net 278 2,281
Other income 856 893
Total non-interest income 5,392 7,505
Operating expenses:
Salaries and employee benefits 16,379 16,411
Occupancy and equipment 3,358 4,471
Deposit insurance 3,755 3,643
Data processing 2,690 2,369
Amortization of goodwill, core deposit
and other intangibles 1,961 2,378
Professional fees 3,063 2,268
Office supplies, postage and
telephone 1,855 1,650
Customer account servicing 860 989
Marketing 842 591
Insurance 462 604
Other 1,493 1,329
Total operating expenses 36,718 36,703
Other expenses:
OREO expense 2,695 3,762
Equity in income of
unconsolidated subsidiary (21) (120)
Total other expenses 2,674 3,642
Total expenses 39,392 40,345
Income before income taxes 38,377 36,989
Provision for income taxes 15,732 16,483
Net income $22,645 $20,506
Earnings per share $2.61 $2.38
Dividends per common share 0.90 0.76
Weighted average common shares
outstanding 8,660,658 8,605,030
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NBB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Appreciation/
(Depreciation)
Additional Unearned on Securities
Common Paid-in Retained Treasury Compensation- Available for
Stock Capital Earnings Stock ESOP Sale Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993 $953 $134,240 $122,926 ($9,941) $-- $6,772 $254,950
Net income -- -- 22,645 -- -- -- 22,645
Issuance of
common stock
under stock
option plan
(8,197 shares) 1 133 -- -- -- -- 134
Cash dividends
paid ($.90 per
share) -- -- (7,794) -- -- -- (7,794)
Decrease in
net unrealized
appreciation
on securities
available-for-
sale, net of
income tax
benefit
of $13,503 -- -- -- -- -- (16,316) (16,316)
Balance at
September 30,
1994 $954 $134,373 $137,777 ($9,941) $-- ($9,544) $253,619
Balance at
December 31,
1992 $946 $133,274 $103,798 ($9,941) ($283) $-- $227,794
Net income -- -- 20,506 -- -- -- 20,506
Issuance of
common stock
under stock
option plan
(22,203 shares) 3 289 -- -- -- -- 292
Cash dividends
paid ($.76 per
share) -- -- (6,541) -- -- -- (6,541)
Balance at
September 30,
1993 $949 $133,563 $117,763 ($9,941) ($283) $-- $242,051
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
NBB Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<S> <C> <C>
(In Thousands)
Nine Months Ended September 30, 1994 1993
Cash Flows from Operating Activities:
Net income $ 22,645 $ 20,506
Adjustments to reconcile net income to
net cash provided by
operating activities:
Provision for loan losses 450 2,800
Provision for OREO losses 1,451 2,741
Gain on sales of securities, net (278) (2,280)
Net accretion of investments,
loans and deposits (3,758) (443)
Accretion of deferred loan fees (1,910) (1,739)
Amortization of goodwill,
core deposit and
other intangibles 1,961 2,378
Depreciation expense 919 946
Increase in accrued interest
receivable and other assets, net (1,488) (4,203)
Increase in mortgagors' escrow payments 480 656
Decrease in accrued expenses and other
liabilities, net (5,592) (4,273)
Net cash provided by
operating activities 14,880 17,089
Cash Flows from Investing Activities:
Purchase of securities
available-for-sale (389,340) (216,249)
Proceeds from sales of
securities available-for-sale 305,016 174,280
Proceeds from maturities,
calls and paydowns of
securities available-for-sale 22,531 12,272
Purchase of securities
held-to-maturity (28,261) (115,538)
Proceeds from sales of
securities held-to-maturity -- 6,487
Proceeds from maturities,
calls and paydowns of
securities held-to-maturity 59,926 28,843
Decrease (increase) in loans, net (23,627) 26,279
Proceeds from loans sold 647 1,787
Additions to banking premises
and equipment (521) (5,324)
Decrease in other real estate owned 5,690 2,685
Net cash used in investing activities (47,939) (84,478)
Cash Flows from Financing Activities:
Net increase in deposits 45,958 57,752
Proceeds from issuance of common stock 134 292
Dividends paid on common stock (7,794) (6,541)
Net cash provided by
financing activities 38,298 51,503
Net increase (decrease) in cash
and cash equivalents 5,239 (15,886)
Cash and cash equivalents
at beginning of year 76,876 73,635
Cash and cash equivalents
at end of period $ 82,115 $ 57,749
Supplementary Cash Flow Information:
Interest paid on deposits $52,327 $56,249
Income taxes paid, net 25,871 17,775
Non-cash Investing Activities:
Foreclosures and in-substance
foreclosures 6,222 10,294
Unrealized depreciation on securities
available-for-sale (16,316) --
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
NBB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim consolidated financial statements of NBB
Bancorp, Inc. (the Company) and Subsidiary presented herein should be
read in conjunction with the consolidated financial statements of NBB
Bancorp, Inc. and Subsidiary for the year ended December 31, 1993
filed on Form 10-K.
In the opinion of management, all of the adjustments (consisting of
normal recurring accruals, unless otherwise indicated) necessary for a
fair statement of the results of operations have been included in the
accompanying consolidated financial statements. Interim results are
not necessarily indicative of results to be expected for the entire
year.
2.SECURITIES AVAILABLE-FOR-SALE AND HELD-TO-MATURITY
Securities classified as available-for-sale are reported at fair
value, with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity net of
related tax. Debt securities that the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity and
reported at amortized cost.
3.EARNINGS PER SHARE
The earnings per share calculation for the three and nine-month
periods ended September 30, 1994 and 1993 are based on weighted
average shares outstanding. Weighted average shares outstanding is
computed based on common stock issued less treasury stock held. The
effect of outstanding stock options granted is not material.
4.COMMITMENTS
At September 30, 1994, firm commitments to grant loans amounted to
$8.6 million, commitments under standby letters of credit amounted to
$120 thousand, unadvanced funds under construction loans amounted to
$15.3 million, and unadvanced funds under commercial and home equity
lines of credit amounted to $27.9 million. There were no commitments
to sell loans at September 30, 1994.
5.DIVIDENDS
On October 20, 1994, the Company announced that a $.30 per share
dividend would be paid on November 10, 1994 to stockholders of record
on October 30, 1994.
6.RECENT DEVELOPMENT
The Company entered into an Agreement and Plan of Merger
with Fleet Financial Group, Inc. (Fleet) dated as of May 9, 1994, as
amended and restated as of August 26, 1994 (the Merger Agreement),
pursuant to which the Company will be merged with and into Fleet
in a transaction in which Fleet will be the surviving entity.
See the Form 8-K dated as of August 26, 1994 filed for the Company
which includes the full text of the Merger Agreement.
<PAGE>
6.RECENT DEVELOPMENT (Continued)
On October 28, 1994, the Company distributed to stockholders a Notice
of Special Meeting of Stockholders to be held on December 15, 1994 at
11:00 a.m. at the Hawthorne Country Club, 970 Tucker Road, North
Dartmouth, Massachusetts and a Proxy Statement-Prospectus dated
October 26, 1994. The purpose of the meeting is (i) to consider and
vote upon a proposal to approve and adopt the Merger Agreement and
each of the transactions contemplated thereby, pursuant to which the
Company will be merged with and into Fleet, upon the terms (including
the provision for use of an alternative structure under certain
circumstances) and subject to the conditions set forth in the Merger
Agreement, as more fully described in the Proxy-Statement Prospectus,
and (ii) transact such other business as may properly be brought
before the Special Meeting, or any adjournments or postponements
thereof.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of the consolidated results of
operations and financial condition of the Company should be read in
conjunction with the consolidated financial statements and related notes
included in the 1993 Annual Report to Stockholders.
Comparison of Results of Operations for the Three Months Ended
September 30, 1994 and 1993
OVERVIEW
Net income for the third quarter of 1994 was $7.8 million or $0.90 per
share, compared to $7.3 million or $0.85 per share earned in the third
quarter of 1993.
Net interest margin was 4.06% for the current quarter compared to 4.32% for
the same quarter last year. Net interest income is $994 thousand less for the
current quarter compared to the same quarter of 1993. Deposit costs were flat
for the quarters ended September 30, 1994 and 1993 while yields on securities
and loans decreased due to securities portfolio restructuring in 1994 and loan
refinancings and commercial loan run-off. Average earning assets increased by
$49.6 million reflecting deposit and equity growth during the twelve-month
period ended September 30, 1994.
The provision for loan losses declined by $500 thousand from the third
quarter of 1993 due to continued improvement in nonperforming assets. Improved
asset quality, reflected in the reduction in nonperforming assets from $37.9
million at September 30, 1993 to $25.1 million at September 30, 1994, continued
to have a positive impact on the results of operations through a reduction in
the provision for loan losses and OREO expense.
Total operating expenses amounted to $12.6 million for the quarter ended
September 30, 1994 compared to $12.2 million for the same quarter last year.
This increase is primarily due to expenses for professional fees related to the
merger with Fleet.
NET INTEREST INCOME
Net interest income is the difference between interest and fees earned on
the Company's loan and investment portfolios and the interest paid on deposits.
Net interest income decreased $994 thousand from the same quarter last
year, to $23.8 million, for the third quarter of 1994. The decrease of 26 basis
points in the net interest margin reflects the fact that the yields on loans and
securities have been reduced since the third quarter of 1993. The reduction in
the yield on securities is due to the shortening of the securities portfolio
accomplished during the second and third quarters of 1994. The reduction in the
yield on loans reflects the refinancing of residential mortgage loans in the
last twelve months and the run-off of higher yielding commercial loans.
Commercial loans have become a smaller percentage of interest-earning assets due
to the run-off of certain loans acquired as part of the Attleboro Pawtucket
acquisition in August, 1992. That bank was acquired under a loss-sharing
agreement with the FDIC and the loan run-off has been in line with expectations.
<PAGE>
The following table presents an analysis of average balances of
interest-earning assets and interest-bearing liabilities, yields earned and
rates paid:
CONSOLIDATED AVERAGE BALANCE SHEETS AND YIELDS EARNED AND RATES PAID
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30, 1994 December 31, 1993 September 30, 1993
Average Average Average
Balance Rate Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $1,346,500 8.09% $1,316,056 8.14% $1,328,173 8.49%
Securities 931,724 5.80 914,485 5.95 898,811 6.06
Mortgage-backed
securities 58,855 6.61 68,129 6.34 60,627 5.90
Federal funds sold and
overnight deposits 16,471 4.50 11,402 3.01 16,329 2.90
Total interest-
earning assets 2,353,550 7.12% 2,310,072 7.19% 2,303,940 7.44%
Allowance for loan
losses (28,760) -- (30,043) -- (33,277) --
Noninterest-earning
assets 150,897 -- 158,257 -- 160,050 --
Total assets $2,475,687 -- $2,438,286 -- $2,430,713 --
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings deposits $1,030,812 2.48% $1,055,915 2.54% $1,058,960 2.56%
Time certificates
of deposit 1,097,895 4.25 1,040,624 4.13 1,041,535 4.30
Long-term debt -- -- 94 -- 283 --
Total interest-
bearing liabilities 2,128,707 3.39% 2,096,633 3.33% 2,100,778 3.42%
Noninterest-bearing
liabilities 95,216 -- 97,968 -- 92,062 --
Total liabilities 2,223,923 -- 2,194,601 -- 2,192,840 --
Stockholders' equity 251,764 -- 243,685 -- 237,873 --
Total liabilities and
stockholders' equity $2,475,687 -- $2,438,286 -- $2,430,713 --
Interest rate spread 3.73% 3.86% 4.02%
Net interest margin 4.06% 4.17% 4.32%
</TABLE>
RATE/VOLUME ANALYSIS
The following table shows the change in interest and dividend income, and
interest expense, for each major category of interest-earning assets and
interest-bearing liabilities. The amount of the change due to volume and rate
has been allocated proportionately to volume and rate for the periods indicated.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1994 Compared to 1993
Increase Increase
(Decrease) (Decrease)
Due to Due to
(In Thousands) Volume Rate Total
<S> <C> <C> <C>
Interest, fees and dividend income:
Loans $401 $(1,354) $(953)
Securities 462 (493) (31)
Other 1 66 67
Total interest and dividend income 864 (1,781) (917)
Interest expense:
Savings deposits (179) (215) (394)
Time certificates of deposit 604 (133) 471
Total interest expense 425 (348) 77
Net interest income $439 $(1,433) $(994)
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses for the third quarter of 1994 was $100
thousand, a $500 thousand decrease from the amount provided in the third quarter
of 1993. In determining the amount to provide for loan losses, the key factor is
the adequacy of the allowance for loan losses. In making its decision,
management considers a number of factors, including prior experience relative to
the loan portfolio mix, economic conditions, especially regional economic
trends, internal analysis and the results of examinations conducted by bank
regulatory authorities. During the past twelve months, the Company experienced
a substantial decrease in nonperforming loans. This decrease resulted in the
Company's decision to reduce its provision for loan losses compared to prior
periods. In spite of this reduction in the provision, the Company maintains
strong asset-quality ratios. As of September 30, 1994, the allowance for loan
losses was $27.2 million or 2.03% of total loans, compared to $30.2 million or
2.29% at September 30, 1993. Nonperforming loans represented .82% and 1.14% of
the total loan portfolio at September 30, 1994 and 1993, respectively.
NON-INTEREST INCOME
The decrease in non-interest income from the third quarter of 1993 to the
third quarter of 1994, excluding securities gains, was primarily due to the
recording of $227 thousand in gains on the sale of OREO in other income in the
third quarter of 1993.
During the third quarter of 1994 the sale of equity securities resulted in
the reduction of $9.6 million in the equity securities portfolio. This
reduction, which is part of an overall plan to reduce that portion of the
securities portfolio, resulted in $725 thousand in net gains, while net losses
on the sale of debt securities available-for-sale totaled $58 thousand.
OPERATING EXPENSES
Operating expenses totaled $12.6 million for the third quarter of 1994
compared to $12.2 million in the third quarter of 1993. This increase came
primarily as a result of acquisition related professional fees. The
<PAGE>
overhead ratio for the third quarter of 1994 was 2.01%, two basis points
higher than for the third quarter of 1993. Certain nonrecurring expenses and
charges, totaling approximately $1.0 million, were incurred in the third quarter
of 1994 as a result of the pending acquisition of the Company by Fleet and the
sale of the Company's interest in DMS, the Bank's data processing servicer.
The $369 thousand decrease in compensation was primarily the result of a
reduction in the number of employees since the third quarter of 1993,
particularly in the number of officer level employees, a corresponding decrease
in payroll tax expense and a reduction in the compensation expense related to
the Company's ESOP. Professional fees increased as a result of legal fees
related to the pending acquisition of the Bancorp by Fleet. The reductions in
occupancy and equipment as well as insurance expense were the result of branch
closings. Data processing increased as a result of growth and the need for
additional reporting capabilities. Amortization of goodwill, core deposit and
other intangibles decreased as the core deposit intangibles created as a result
of the two most recent acquisitions amortize on accelerated methods that
triggered more expense in the earlier years. Office supplies, postage and
telephone increased primarily due to the increased usage of office supplies
during the current quarter while expenditures for postage and telephone remained
comparable with the same quarter last year. Marketing increased as more
resources were expended to better promote the products offered throughout the
Bank's market area. Other expense increased due to the $390 thousand loss on the
sale of the Company's interest in DMS, the Bank's data processing servicer.
OTHER EXPENSES
OREO consists of properties acquired through foreclosure or substantively
foreclosed properties as well as an investment in a condominium project from a
previous acquisition. OREO expense decreased $1.1 million from the third quarter
of 1993 to $508 thousand in the third quarter of 1994. Provisions for losses on
OREO properties totaled $432 thousand, a decrease of $842 thousand compared to
the same period last year. Operating expenses for OREO properties decreased by
$232 thousand for the third quarter of 1994 compared to the same period last
year. The decrease in the provision for OREO losses is a result of the analysis
of the risk of loss in the OREO holdings and the determination of the allowance
necessary for that risk. The decrease in OREO operating expenses is a result of
the timing of foreclosures and the receipt of rental income on foreclosed
properties which offsets the operating expenses.
INCOME TAX EXPENSE
The effective income tax rate for the third quarter of 1994 was 39.7%
compared to 44.4% for the same quarter in 1993. During the fourth quarter of
1993, the Bank formed two securities corporations to manage portions of the
Bank's investment portfolio. These subsidiaries are Massachusetts securities
corporations which receive favorable tax treatment under Massachusetts tax laws.
The reduction in the effective tax rate for the current quarter is the result of
the reduced tax rate on the income of these corporations.
<PAGE>
Comparison of Results of Operations for the Nine Months Ended September 30,
1994 and 1993
OVERVIEW
Net income for the nine-month period ended September 30, 1994 was $22.6
million or $2.61 per share, 10% greater than the $20.5 million or $2.38 per
share earned from operations in the first nine months of 1993. Lower deposit
costs combined with increased average earning assets due to deposit growth was
a major factor in the favorable variance. In addition, improved asset quality
continued to have a positive impact on the results of operations. The provision
for loan losses was substantially decreased in 1994 compared to the nine-month
period ended September 30, 1993.
Net interest margin was 4.16% for the current nine-month period compared to
4.26% for the same period last year. Average earning assets increased by $63.1
million reflecting deposit and equity growth during the twelve-month period
ended September 30, 1994.
The provision for loan losses declined by $2.4 million in 1994 from the
nine months ended September 30, 1993 due to continued improvement in
nonperforming loans.
Total operating expenses amounted to $36.7 million for both the nine-month
periods ended September 30, 1994 and 1993.
NET INTEREST INCOME
Net interest income increased $198 thousand from the same nine-month period
last year, to $72.8 million, for the nine months ended September 30, 1994, due
to the increase in average earning assets and the reduction in the cost of
deposits offset by the reduction in the yield on earning assets. The decrease of
10 basis points in the net interest margin reflects the reduction in the yield
on loans and securities since September 30, 1993. The reduction in the yield on
securities is due to the portfolio restructuring accomplished in the second and
third quarters of 1994. The reduction in the yield on loans reflects the
refinancing of residential mortgage loans in the last twelve months and the
run-off of higher yielding commercial loans. Loans were a smaller percentage of
interest-earning assets due to the run-off of certain loans acquired as part of
the Attleboro Pawtucket acquisition in August, 1992. As noted above, that bank
was acquired under a loss-sharing agreement with the FDIC and the loan run-off
has been in line with expectations.
The following table presents an analysis of average balances of
interest-earning assets and interest-bearing liabilities, yields earned and
rates paid:
<PAGE>
CONSOLIDATED AVERAGE BALANCE SHEETS AND YIELDS EARNED AND RATES PAID
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1994 September 30, 1993
Average Average
Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans $1,337,708 8.04% $1,338,684 8.61%
Securities 919,900 5.86 869,691 6.10
Mortgage-backed
securities 61,368 6.65 45,708 6.45
Federal funds sold and
overnight deposits 14,880 3.86 16,718 2.98
Total interest-
earning assets 2,333,856 7.12% 2,270,801 7.56%
Allowance for loan
losses (29,159) -- (34,174) --
Noninterest-earning
assets 152,800 -- 160,675 --
Total assets $2,457,497 -- $2,397,302 --
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings deposits $1,046,921 2.44% $1,050,809 2.81%
Time certificates
of deposit 1,063,455 4.10 1,023,234 4.45
Long-term debt -- -- 283 --
Total interest-
bearing liabilities 2,110,376 3.28% 2,074,326 3.62%
Noninterest-bearing
liabilities 95,382 -- 89,745 --
Total liabilities 2,205,758 -- 2,164,071 --
Stockholders' equity 251,739 -- 233,231 --
Total liabilities and
stockholders' equity $2,457,497 -- $2,397,302 --
Interest rate spread 3.84% 3.94%
Net interest margin 4.16% 4.26%
</TABLE>
RATE/VOLUME ANALYSIS
The following table shows the change in interest and dividend income, and
interest expense, for each major category of interest-earning assets and
interest-bearing liabilities. The amount of the change due to volume and rate
has been allocated proportionately to volume and rate for the periods indicated.
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1994 Compared to 1993
Increase Increase
(Decrease) (Decrease)
Due to Due to
(In Thousands) Volume Rate Total
<S> <C> <C> <C>
Interest, fees and dividend income:
Loans $ (108) $(5,615) $(5,723)
Securities 3,023 (1,533) 1,490
Other (44) 101 57
Total interest and dividend income 2,871 (7,047) (4,176)
Interest expense:
Savings deposits (82) (2,855) (2,937)
Time certificates of deposit 1,307 (2,744) (1,437)
Total interest expense 1,225 (5,599) (4,374)
Net interest income $1,646 $(1,448) $ 198
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses for the first nine months of 1994 was $450
thousand, a $2.4 million decrease from the amount provided in the first nine
months of 1993. The reduction in nonperforming loans and modest loan growth has
resulted in the Company's decision to reduce its provision for loan losses
compared to prior periods.
NON-INTEREST INCOME
Non-interest income, excluding securities gains, for the first nine months
of 1994 was $110 thousand less than the same period last year primarily due to
the reduction in loan servicing fees. Certain pools of loans serviced for the
RTC, as a result of the Sentry Savings Bank, FSB acquisition in 1991, were
transferred to other RTC servicers resulting in reduced fee income.
Net gains on sales of securities for the nine-month period ended September
30, 1994 were $278 thousand compared to $2.3 million for the nine-month period
ended September 30, 1993. Net losses of $841 thousand were realized in the
second quarter of 1994 due to restructuring in order to shorten the maturities
in the debt securities portfolios.
OPERATING EXPENSES
Operating expenses totaled $36.7 million for both nine-month periods ended
September 30, 1994 and 1993. Variances in individual components did occur as
discussed below. The overhead ratio for the first nine months of 1994 was 2.00%
compared to 2.05% for the same period in 1993.
The decrease in compensation was primarily the result of a slight reduction
in staff since September 30, 1993. Deposit insurance increased due to the
increase in the overall deposit base during the last twelve-month period. The
reductions in occupancy and equipment and insurance expense are the result of
four branch closings during 1993. Professional fees increased as a result of
investment banker and legal fees related to the pending acquisition of the
Bancorp by Fleet. Data processing increased as a result of growth and the need
for additional reporting capabilities. Amortization of goodwill, core
<PAGE>
deposit and other intangibles decreased as the core deposit intangibles
created as a result of the two most recent acquisitions amortize on accelerated
methods that triggered more expense in the earlier years. Office supplies,
postage and telephone increased due to the costs related to the installation of
an updated phone system. Marketing increased as more resources were expended to
better promote the products offered throughout the Company's market area. Other
expense increased due to the $390 thousand loss on the sale of the Company's
interest in DMS, the Bank's data processing servicer.
OTHER EXPENSES
Total OREO expense decreased $1.1 million for the nine-month period ended
September 30, 1994 compared to the same period in 1993. Provisions for OREO
properties totaled $1.5 million, a decrease of $1.3 million compared to the same
period last year. Operating expenses for OREO properties increased by $222
thousand for the nine months ended September 30, 1994 compared to the same
period last year. Larger provisions were considered necessary to cover expected
exposure in the first nine months of 1993 than in the current period. Certain
expenses were incurred on several large commercial OREO properties during 1994
causing operating expenses to be higher in the current period than in the
comparable period in 1993.
INCOME TAX EXPENSE
The effective income tax rate for the first nine months of 1994 was 41.0%
compared to 44.6% for the same period in 1993. This reduction, as noted above in
the discussion of the reduction for the comparable quarters, is due to the
formation of two securities corporations to manage portions of the Bank's
investment portfolio which receive favorable tax treatment under Massachusetts
tax laws.
FINANCIAL CONDITION
Total assets and deposits increased by $38.8 million and $45.2 million,
respectively, from December 31, 1993. The increase in deposits since December
31, 1993 exceeded the increase in loans for the same period causing a slight
increase in federal funds and overnight deposits as well as securities. The
improvement in nonperforming assets and changes made in the securities portfolio
have contributed to maintaining a strong, highly liquid balance sheet at
September 30, 1994. Return on average assets was 1.25% for the current quarter
and 1.23% for the first nine months of 1994. Return on average equity was
12.29% and 12.03% for those same periods, respectively.
SECURITIES
Securities increased $5.8 million since December 31, 1993 as excess funds
from deposit inflows have exceeded loan demand. Securities were 42.3% of earning
assets at September 30, 1994 compared to 42.6% at December 31, 1993. The Company
adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," as of December 31, 1993. At September 30, 1994, securities
classified as available-for-sale totaled $625.8 million, or 63.0% of securities.
Securities available-for-sale provide liquidity, facilitate interest rate
sensitivity management, and enhance the Company's ability to respond
<PAGE>
quickly to the customers' needs should loan demand increase and/or deposit
growth slow. The trend in interest rates prompted investment changes which
resulted in a shortening of the average maturity of the portfolio during the
third quarter of 1994. The shortening of the portfolio is evident from the
impact on the one year interest rate sensitivity decreasing from 16.1% at
March 31, 1994 to 9.9% at September 30, 1994.
Securities held-to-maturity, which totaled $367.9 million or 37.0% of
securities at September 30, 1994, are those securities which the Company has the
positive intent and ability to hold to maturity.
LOANS
Total loans, as well as loans as a percentage of earning assets, increased
since December 31, 1993. The increase is the result of more demand in
residential loans. Commercial loans continued to decrease. This decrease is
driven by the dynamics of the loan portfolio acquired as part of the Attleboro
Pawtucket Savings Bank (APSB) acquisition. Since the acquisition of APSB, there
has been an inherent loss in commercial loans outstanding which impacts the
overall potential for loan growth.
Former APSB mortgage, second mortgage, home equity and commercial loans
which become nonperforming are reclassified as Segregated Assets until they are
resolved, thus immediately reducing the appropriate loan category. In addition,
APSB was lending to certain lines of business which the Company had chosen not
to enter, or, in some cases, has chosen to reduce total exposure, which meant
that certain segments of the portfolio were intentionally not being replaced.
Commercial loan balances have declined but residential loan balances have
increased since December 31, 1993.
ASSET QUALITY
Because of some of the unique elements of the agreement between New Bedford
Institution for Savings (NBIS) and the FDIC in conjunction with the APSB
transaction, the discussion of asset quality is divided into two sections. The
first pertains to NBIS and includes, where applicable, performing loans from
the APSB portfolio and related reserves. It excludes, however, any APSB
nonperforming loans covered by the loss-sharing agreement. As a result of this,
certain ratios related to nonperforming assets and loans have been favorably
impacted. APSB nonperforming loans which fall under the loss-sharing agreement
have been designated as Segregated Assets throughout the consolidated financial
statements and are, along with the associated allowances, charge-offs and
recoveries, discussed separately under that caption. Because of the structure of
the agreement, there have been very few APSB nonperforming assets that are not
covered by the agreement (nonperforming consumer loans totaling $27 thousand),
so for discussion purposes, the term "shared-loss" will not be used when
discussing APSB nonperforming loans or Segregated Assets.
Under the terms of the three-year loss-sharing agreement which commenced in
August of 1992, the FDIC reimburses NBIS for 80% of any losses, net of
recoveries, associated with all commercial, commercial real estate, residential
mortgage and home equity loans that occur during the three years following the
acquisition. Effectively, only consumer loans are
<PAGE>
excluded from the loss sharing. The agreement also provides for reimbursement
of carrying costs on nonperforming assets at a previously agreed upon rate of
interest, as well as 80% of direct collection costs for nonperforming assets.
During the fourth and fifth years following the acquisition, the Bank will
pay to the FDIC an amount equal to 80% of the gross amount of recoveries during
such period on charge-offs of commercial, commercial real estate, residential
mortgage and home equity loans that occur during the three years following the
acquisition. If, at the end of the five-year period, total net charge-offs
exceed $49 million, the FDIC will pay the Bank an amount equal to 15% of the
difference between total net charge-offs and $49 million. Net charge-offs on
shared-loss assets since the acquisition total $9.5 million, of which the
Company's share is 20%, or $1.9 million.
NONPERFORMING ASSETS
For the ninth consecutive quarter, the Company had a decrease in the level
of nonperforming assets. The level at September 30, 1994 of $25.1 million
decreased $6.7 million and $11.6 million compared to June 30, 1994 and December
31, 1993, respectively.
<PAGE>
The following table shows the composition of nonperforming assets:
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1994 1993
<S> <C> <C>
Nonperforming Loans:
Residential real estate $ 4,320 $ 6,307
Commercial 6,610 9,096
Consumer 43 67
Total nonperforming loans 10,973 15,470
Other Real Estate Owned:
Real estate acquired by foreclosure 12,722 17,861
Real estate substantively foreclosed 560 2,375
Investment in condominium project 813 1,000
Total other real estate owned 14,095 21,236
Total nonperforming assets $25,068 $36,706
Total nonperforming assets as
a percentage of total assets 1.0% 1.5%
Allowance for loan losses
as a percentage of total non-
performing loans 248% 191%
Restructured loans that are performing
and not included above $2,336 $6,182
</TABLE>
Foregone interest on nonperforming and restructured loans totaled approximately
$382 thousand for the nine months ended September 30, 1994 compared to
$1.2 million for the same period in 1993.
While real estate values appear to have stabilized, weakness of the regional
economy leaves open the possibility of additional provisions for losses
being required in the future.
ALLOWANCE FOR LOAN LOSSES
The Company's methodology for determining the adequacy of the allowance for
loan losses is based on recurring evaluations of a number of factors, including
the composition of the portfolio, historic loan loss experience for categories
of loans, current and anticipated economic conditions, nonperforming loan
levels and trends, specific credit reviews, and the results of regulatory
examinations, as well as subjective factors. Since the allowance is established,
in part, as a result of an analysis of the risk elements of the various parts of
the portfolio, an allocation of the allowance to various loan categories
results from the process. However, while that allocation represents management's
best judgement as to risk, it should be understood that the allowance itself is
available as a single unallocated allowance to address any problems that may
occur in the portfolio.
<PAGE>
The tables below present average loans, total loans and an analysis of the
allowance for loan losses, including charge-offs and recoveries for the three
and nine month periods as noted:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1994 1993
(In thousands)
<S> <C> <C>
Average loans outstanding during
the period $1,346,500 $1,328,173
Loans outstanding, end of period 1,341,099 1,321,185
Allowance for loan losses,
beginning of period 28,646 33,441
Loans charged off:
Commercial (1,583) (3,924)
Real estate-residential (85) (174)
Consumer (21) (48)
Total (1,689) (4,146)
Recoveries:
Commercial 153 128
Real estate-residential 61 21
Consumer 36 20
Total 250 169
Net loans charged off (1,439) (3,977)
Transfer from (to) segregated assets (117) 131
Provision for loan losses 100 600
Allowance for loan losses
end of period $27,190 $30,195
Net loans charged off as a percent-
age of average loans outstanding (annualized) .43% 1.20%
Nine Months Ended September 30, 1994 1993
(In thousands)
Average loans outstanding during
the period $1,337,708 $1,338,684
Loans outstanding, end of period 1,341,099 1,321,185
Allowance for loan losses,
beginning of period 29,596 34,588
Loans charged off:
Commercial (2,271) (7,419)
Real estate-residential (984) (806)
Consumer (91) (272)
Total (3,346) (8,497)
Recoveries:
Commercial 631 771
Real estate-residential 98 199
Consumer 62 83
Total 791 1,053
Net loans charged off (2,555) (7,444)
Transfer from (to) segregated assets (301) 251
Provision for loan losses 450 2,800
Allowance for loan losses
end of period $27,190 $30,195
<PAGE>
Net loans charged off as a
percentage of average loans outstanding
(annualized) .25% .74%
</TABLE>
The decline in nonperforming loans, coupled with the decline in commercial
loans as a percentage of the loan portfolio, allowed the Company to decrease the
total allowance from $30.2 million at September 30, 1993 to $27.2 million at
September 30, 1994 while maintaining strong asset quality ratios. The allowance
totaled 2.03% of total loans at September 30, 1994 compared to 2.29% on the same
date last year, while the allowance equaled 248% of nonperforming loans compared
to 201%, respectively, for those same dates.
SEGREGATED ASSETS
Because of the loss-sharing agreement with the FDIC, APSB assets acquired
that are covered by the loss-sharing agreement are disclosed separately on the
Company's balance sheets under the caption, "Segregated Assets." Included in
these amounts are nonperforming loans, OREO and in-substance foreclosures, net
of an allowance for losses which is deemed adequate to cover Segregated Assets
as indicated in the table below.
An analysis of Segregated Assets at September 30, follows:
(In thousands)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Nonperforming loans $4,281 $ 5,311
In-substance foreclosures 719 4,969
Acquired by foreclosure 1,428 561
6,428 10,841
Allowance for losses (675) (1,085)
Total $5,753 $ 9,756
</TABLE>
At September 30, 1994, $6.4 million of Segregated Assets represented an
exposure to the Company of $1.3 million. An allowance of $675 thousand was
considered adequate by management. During the quarter, $117 thousand of
allowance for loan losses was transferred to the allowance for segregated
assets losses due to the level of charge-offs on segregated assets during the
quarter. Year-to-date losses to the Bank totaled $614 thousand. The credit loss
experience to date on the APSB portfolio has been satisfactory and it appears
that the allowance established as part of the APSB transaction is adequate to
cover both shared losses and the Company's exposure after the agreement expires.
OTHER ASSETS
Goodwill, core deposit and other intangibles decreased $2.0 million due to
amortization of the components since December 31, 1993. The other asset category
increased primarily due to the $13.5 million deferred income tax impact of the
market value change in securities available-for-sale.
DEPOSITS
Deposits increased by $45.2 million from December 31, 1993. This increase
is the result of providing competitive rates and products within the Bank's
market area.
<PAGE>
STOCKHOLDERS' EQUITY
As a result of complying with SFAS No. 115, stockholders' equity was decreased
by $9.5 million, as of September 30, 1994, representing the unrealized loss on
securities available-for-sale, less applicable income taxes. As of
December 31, 1993, stockholders' equity was increased by approximately $6.8
million, representing the net unrealized gain on securities available-for-sale,
less applicable income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to a Bank's ability to meet funding needs for operations,
deposit outflows, loan growth and other commitments on a timely and cost
effective basis. The Bank's principal sources of liquidity are deposits, loan
payments and income and investment maturities and sales. In addition, the Bank
is a member of the Federal Home Loan Bank of Boston (FHLB), where it has access
to a pre-approved line of credit as well as additional borrowing capacity. The
Bank has had no borrowings from the FHLB since 1990. The marketability of
certain assets, such as loans, that can be sold or securitized provides another
potential source of liquidity. During the last three years, through a
combination of acquisitions, limited loan growth due to the recession, and the
run-off of higher risk loans that were acquired, the Bank has become
increasingly liquid. At September 30, 1994 and December 31, 1993 the ratio of
loans to deposits were 60.6% and 60.8%, respectively. Average deposits and
stockholders' equity were 90.4% and 10.8% of average earning assets,
respectively, for the first nine months of 1994 compared to 91.3% and 10.3% for
the nine months of 1993. The Company's source of liquidity is dividends from
the Bank.
Total capital was $253.6 million at September 30, 1994, compared to $255.0
million at December 31, 1993. All capital ratios at September 30, 1994, of both
the Company and the Bank exceed the regulatory minimums and are presented below:
<TABLE>
<CAPTION>
Minimum
Regulatory
Company Bank Requirement
<S> <C> <C> <C>
Tier 1 Capital ratio
to risk-weighted assets 21.6% 21.5% 4.0%
Total Risk-based Capital ratio 22.6% 22.5% 8.0%
Leverage Capital ratio 10.0% 10.0% 3.0 to 5.0%
</TABLE>
ASSET AND LIABILITY MANAGEMENT
Financial institutions are subject to interest rate risk to the extent that
their interest-bearing liabilities mature and reprice more or less frequently
than their interest earning assets. The Bank's largest category of interest
earning assets are fixed rate mortgage loans which are held in its own
portfolio. Historically, these loans have had an actual life that was
substantially less than contractual maturity. At September 30, 1994, the Bank's
one year liability sensitive gap of $247.1 million represented 9.9% of total
assets, a reduction from the 12.4% at June 30, 1994 and 17.8% at September 30,
1993 as Management took steps to counteract recent rate increases and continued
uncertainty regarding rates.
<PAGE>
The following table sets forth maturity and repricing information relating
to interest-sensitive assets and liabilities at September 30, 1994. Fixed-rate
loans and pass-through certificates are shown in the table in the time periods
corresponding to principal amortization which has been computed based on their
respective weighted average maturities and weighted average rates.
Adjustable-rate loans and securities are allocated to the period in which the
rates would be next adjusted. The table does not reflect partial or full
prepayment of loans and certain securities prior to final contractual maturity.
Analysis of the Bank's non-certificate deposit accounts in 1993 shows that only
a portion of savings, money market deposit and NOW accounts are rate sensitive.
Deposit balances have been distributed accordingly in the 0 to 5-year time
bands. In accordance with the proposed Federal Reserve guidelines for risk-based
capital standards which account for interest rate risk, no amounts related to
such deposit accounts are placed beyond five years. A deficiency of
rate-sensitive assets over rate-sensitive liabilities will generally result in
increased net interest income during a period of falling interest rates and in
decreased net interest income during a period of rising interest rates.
<TABLE>
<CAPTION>
UP TO 1-3 3-5 5-10
1 YEAR YEARS YEARS YEARS THEREAFTER TOTAL
<S> <C> <C> <C> <C> <C> <C>
Interest
sensitive
assets:
Federal
funds
sold $ 15,000 $ - $ - $ - $ - $15,000
U. S. Government,
U. S. agency
and other bond
obligations 387,340 242,727 255,471 34,317 - 919,855
Mortgage-backed
securities 4,738 6,846 7,154 19,013 18,134 55,885
Residential
mortgage loans:
Adjustable-rate
loans 208,583 82,961 2,215 - - 293,759
Fixed-rate loan
amortization 18,339 40,101 45,181 138,816 485,256 727,693
Construction mortgage loans:
Adjustable-rate
loans 513 1,359 192 - - 2,064
Fixed-rate
loan amortization 128 286 331 1,077 9,313 11,135
Home equity
loans 43,082 - 21 - - 43,103
Second mortgage
loans 2,949 2,650 2,324 4,901 1,455 14,279
Consumer
loans 20,617 5,558 1,271 496 18 27,960
Commercial loans:
Adjustable-rate
loans 188,320 2,278 140 124 314 191,176
Fixed-rate loan
amortization 20,314 9,044 1,425 1,681 828 33,292
Commercial
construction
loans:
Adjustable-rate
loans 485 - - - - 485
Fixed-rate loan
amortization 1,253 - - - - 1,253
Total $911,661 $393,810 $315,725 $200,425 $515,318 $2,336,939
Interest
sensitive
liabilities:
Money market
deposits $109,381 $175,008 $153,132 $- $- $437,521
Time
certificates 889,093 238,742 1,754 3 10 1,129,602
NOW 22,020 82,024 65,109 - - 169,153
Other savings 138,271 98,766 158,025 - - 395,062
Total $1,158,765 $594,540 $378,020 $3 $10 $2,131,338
<PAGE>
UP TO 1-3 3-5 5-10
1 YEAR YEARS YEARS YEARS THEREAFTER TOTAL
Excess (deficiency)
of rate sensitive
assets over rate
sensitive
liabilities $(247,104) $(200,730) $(62,295) $200,422 $515,308 $205,601
Cumulative excess
(deficiency) of
rate sensitive
assets over rate
sensitive
liabilities $(247,104) $(447,834) $(510,129) $(309,707) $205,601
Cumulative
excess
(deficiency)
as a percentage
of total assets (9.9)% (18.0)% (20.5)% (12.4)% 8.3%
</TABLE>
<PAGE>
RECENT ACCOUNTING DEVELOPMENTS
In November 1992, the FASB issued SFAS No.112, "Employers' Accounting for
Postemployment Benefits." This new accounting standard became effective for the
Company on January 1, 1994 and requires accrual for postemployment benefits
during either employees' service lives or at the time a liability is incurred.
Postemployment benefits include salary continuation, supplemental unemployment
benefits, severance benefits,disability- related benefits, job training and
counseling, and continuation of benefits such as health care and life insurance.
The implementation of SFAS No. 112 did not have a material effect on the
Company's consolidated financial statements.
In May 1993, the FASB issued Statement No. 114, "Accounting by Creditors
for Impairment of a Loan," which was amended by SFAS No. 118 "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures." These
statements are effective for the Company on January 1, 1995. Generally, the
quantification of the impairment of a loan under these statements require the
discounting of expected future cash flows at the loan's original effective rate
as opposed to the utilization of a market rate. In addition, the criteria for
classifying a loan as an in-substance foreclosure was modified so that such
classification applies only when a creditor has taken possession of the loan
collateral. The effect of adopting these statements has not been fully
determined but is not expected to have a material adverse effect on the
Company's consolidated financial statements.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and its subsidiary are not involved in any pending
legal proceedings other than those in the ordinary course of
their businesses. Management believes that the resolution of
these matters will not materially affect their businesses or
the consolidated financial condition of Bancorp and its
subsidiary.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
DIVIDEND
A dividend of $.30 per common share was paid on August 12, 1994
to shareholders of record on July 30, 1994.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits - Exhibit 11 Computation of Per Share Earnings
b. Reports on Form 8-K - A report on Form 8-K dated as of
August 26, 1994 was filed to report that the Company and
Fleet Financial Group, Inc. had amended and restated the
Agreement and Plan of Merger dated as of May 9, 1994 to
provide that if the average closing price of Fleet common
stock is equal to or less than $29.50, the Merger would be
completed using an alternative structure. NBB stockholders
are entitled to receive the consideration described in the
Merger Agreement, regardless of whether the Merger or
Alternative Merger is consummated.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NBB Bancorp, Inc.
(Registrant)
Date: November 14, 1994 By (signature of Robert McCarter)
Robert McCarter
Chairman, President and CEO
Date: November 14, 1994 By (signature of Irving J. Goss)
Irving J. Goss
Senior Vice President, Treasurer and CFO
(Principal Financial and Accounting Officer)
Exhibit 11
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
For the Quarter and Nine-Month Periods Ended September 30, 1994
(Dollars in thousands except per share amounts)
The information below is presented to comply with Regulation S-K Item 601.
The computation is not used or required in the consolidated statements of income
as its dilutive effect on simple earnings per share is less than 3%.
For the quarter ended September 30, 1994
<TABLE>
<CAPTION>
Primary EPS Fully Diluted EPS
<S> <C> <C>
Weighted average shares 8,662,718 8,662,718
Common Stock Equivalents (CSE)
Stock options 150,307 150,307
Primary weighted average shares 8,813,025 8,813,025
Additional CSE 41,101
Fully diluted weighted average shares 8,854,126
Net Income $7,801 $7,801
Earnings Per Share $0.89 $0.88
For the nine-month period ended September 30, 1994
Primary EPS Fully Diluted EPS
Weighted average shares 8,660,658 8,660,658
Common Stock Equivalents (CSE)
Stock options 153,458 153,458
Primary weighted average shares 8,814,116 8,814,116
Additional CSE 39,975
Fully diluted weighted average shares 8,854,091
Net Income $22,645 $22,645
Earnings Per Share $2.57 $2.56
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $ 67,115
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 625,758
<INVESTMENTS-CARRYING> 367,886
<INVESTMENTS-MARKET> 361,109
<LOANS> 1,341,099
<ALLOWANCE> (27,190)
<TOTAL-ASSETS> 2,489,540
<DEPOSITS> 2,214,503
<SHORT-TERM> 0
<LIABILITIES-OTHER> 21,418
<LONG-TERM> 0
<COMMON> 954
0
0
<OTHER-SE> 252,665
<TOTAL-LIABILITIES-AND-EQUITY> 2,489,540
<INTEREST-LOAN> 80,665
<INTEREST-INVEST> 43,511
<INTEREST-OTHER> 429
<INTEREST-TOTAL> 124,605
<INTEREST-DEPOSIT> 51,778
<INTEREST-EXPENSE> 51,778
<INTEREST-INCOME-NET> 72,827
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 278
<EXPENSE-OTHER> 39,392
<INCOME-PRETAX> 38,377
<INCOME-PRE-EXTRAORDINARY> 22,645
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $ 22,645
<EPS-PRIMARY> $2.57
<EPS-DILUTED> $2.56
<YIELD-ACTUAL> 7.12
<LOANS-NON> 10,973
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,336
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 29,596
<CHARGE-OFFS> 3,346
<RECOVERIES> 791
<ALLOWANCE-CLOSE> 27,190
<ALLOWANCE-DOMESTIC> 21,017
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,173
</TABLE>
