UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 23, 1996
---------------
Commission file number 33-47248
--------
WEETAMOE BANCORP
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3061936
- --------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Slade's Ferry Avenue 02726
Somerset, Massachusetts -------
- ------------------------- (Zip Code)
(Address of Principal Executive Offices)
(508)675-2121
---------------------
(Registrant's Telephone Number, including Area Code)
- -------------------------------------------------------------------------------
(Former Name or Former Address, if changed since last report)
Item 7. Financial Statements and Exhibits
- -----------------------------------------
(a) Financial Statements of business acquired.
------------------------------------------
(1) Fairbank, Inc. and Subsidiary Consolidated Balance Sheets
as of June 30, 1996 and 1995 (Unaudited);
(2) Fairbank, Inc. and Subsidiary Consolidated Statements of
Income for the Periods Ended June 30, 1996 and 1995
(Unaudited);
(3) Fairbank, Inc. and Subsidiary Consolidated Statements of
Changes in Stockholders' Equity for the Periods Ended June
30, 1996 and 1995 (Unaudited);
(4) Fairbank, Inc. and Subsidiary Consolidated Statements of
Cash Flows for the Periods Ended June 30, 1996 and 1995
(Unaudited);
(5) Fairbank, Inc. and Subsidiary Notes to Consolidated
Financial Statements for Six Months Ended June 30, 1996
and 1995 (Unaudited);
(6) Report of Independent Auditor;
(7) Fairbank, Inc. and Subsidiary Consolidated Audited
Financial Statements as of December 31, 1995 and 1994:
* Consolidated Balance Sheets
* Consolidated Statements of Income
* Consolidated Statements of Changes in Stockholders' Equity
* Consolidated Statements of Cash Flows
* Notes to Consolidated Financial Statements
(b) Pro Forma Financial Statements.
(1) Weetamoe Bancorp Pro Forma Consolidated Balance
Sheet as of June 30, 1996 (Unaudited);
(2) Weetamoe Bancorp Pro Forma Condensed Combined
Statement of Income for the Twelve Months Ended December
31, 1995 (Unaudited);
(3) Weetamoe Bancorp Pro Forma Condensed Combined
Statement of Income for the Six Months Ended June 30, 1996
(Unaudited).
ITEM 7(a)1
FAIRBANK INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
1996 1995
--------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 3,635,207 $ 2,561,471
Interest bearing time deposits in banks 42,079 40,550
Federal funds sold 14,900,000 13,550,000
Investments in available-for-sale securities
(at fair value) 8,574,806 6,094,416
Investments in held-to-maturity securities 1,802,632 2,878,254
Federal Home Loan Bank stock, at cost 171,100 0
Federal Reserve Bank stock, at cost 93,600 93,600
Loans, net 34,159,160 35,577,277
Premises and equipment 1,705,482 1,725,699
Goodwill 675,613 704,240
Other real estate owned 216,849 217,509
Other assets 677,344 756,981
--------------------------
Total Assets $66,653,872 $64,199,997
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits 59,486,399 57,323,812
Notes payable 1,293,013 1,447,000
Other liabilities 191,044 275,423
--------------------------
Total liabilities $60,970,456 $59,046,235
--------------------------
Stockholders' Equity:
Preferred stock, no par value, 100 shs authorized;
issued and outstanding 10 shs 1,000 1,000
Common stock, no par value, 70,000 shs authorized;
issued and outstanding 44,275 shs 6,248,390 6,248,390
Accumulated deficit (465,309) (1,025,748)
Net unrealized holding loss on available-for-sale
securities (100,665) (69,880)
--------------------------
Total Stockholders' Equity 5,683,416 5,153,762
--------------------------
Total Liabilities and Stockholders' Equity $66,653,872 $64,199,997
==========================
</TABLE>
ITEM 7(a)2
FAIRBANK INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
PERIODS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
1996 1995
------------------------
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans $1,754,213 $1,754,996
Interest and dividends on securities:
Taxable 286,095 284,898
Tax-exempt 2,074 3,286
Interest on federal funds sold 398,895 281,207
------------------------
Total interest and dividend income $2,441,277 $2,324,387
------------------------
Interest expense:
Interest on deposits 913,963 852,347
Interest on notes payable 65,209 68,591
------------------------
Total interest expense $ 979,172 $ 920,938
------------------------
Net interest and dividend income 1,462,105 1,403,449
Provision for possible loan losses 70,000 10,000
------------------------
Net interest and dividend income after provision
for loan losses $1,392,105 $1,393,449
------------------------
Other income:
Service charges on deposit accounts 44,689 46,154
Gain on sale of other real estate owned, net 0 47,957
Other income 111,315 90,364
Securities gains (net) 0 526
------------------------
Total other income $ 156,004 $ 185,001
------------------------
Other expenses:
Salaries and employee benefits 552,907 569,712
Occupancy expense 87,690 82,174
Equipment expense 79,891 111,481
Provision for loss on other real estate owned 20,000 0
Other expenses 532,393 445,046
------------------------
Total other expenses $1,272,881 $1,208,413
------------------------
Income before income taxes 275,228 370,037
Income taxes 55,000 161,008
------------------------
Net Income $ 220,228 $ 209,029
========================
</TABLE>
ITEM 7(a)3
FAIRBANK INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
PERIODS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
Net
Unrealized
Gain (Loss)
Preferred Common Accumulated on AFS
Stock Stock Deficit Securities Total
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 2,000 $6,248,390 $(1,234,677) $(235,370) $4,780,343
Net income 209,029 209,029
Preferred stock cash dividend (100) 100
Net change in unrealized holding loss on
available-for-sale securities 165,490 165,490
Retirement of preferred stock (1,000) (1,000)
----------------------------------------------------------------
Balance, June 30, 1995 1,000 6,248,390 (1,025,748) (69,880) 5,153,762
Net income 340,211 340,211
Net change in unrealized holding loss on
available-for-sale securities 44,308 44,308
----------------------------------------------------------------
Balance, December 31, 1995 1,000 6,248,390 (685,537) (25,572) 5,538,281
Net income 220,228 220,228
Net change in unrealized holding loss on
available-for-sale securities (75,093) (75,093)
----------------------------------------------------------------
Balance, June 30, 1996 $ 1,000 $6,248,390 $ (465,309) $(100,665) $5,683,416
================================================================
</TABLE>
ITEM 7(a)4
FAIRBANK INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Periods Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
1996 1995
--------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 220,228 $ 209,029
Adjustments to reconcile net income to net cash provided by
operating activities:
Securities gains, net 0 (526)
Depreciation and amortization 100,434 113,480
Provision for loan losses 70,000 10,000
Provision for loss on other real estate owned 20,000 0
Gain on sales of other real estate owned, net 0 (47,957)
Increase (decrease) in taxes payable (5,691) 59,559
(Increase) decrease in interest receivable (41,408) 41,019
Decrease in interest payable (19,098) (17,079)
Increase (decrease) in accrued expenses (43,103) (18,304)
(Increase) decrease in prepaid expenses 46,145 (11,218)
(Decrease) increase in other liabilities 27,648 52,869
Amortization (accretion) of securities, net 5,589 7,188
Decrease (increase) in other assets 1,643 71,114
Change in unearned income (3,504) (2,540)
--------------------------
Net cash provided by operating activities $ 378,883 $ 466,634
--------------------------
Cash flows from investment activities:
(Increase) decrease in interest bearing time deposits in banks (767) (563)
Purchases of available-for-sale securities (2,109,137) (1,449,352)
Proceeds from sales of available-for-sale securities 0 432,160
Proceeds from maturities of available-for-sale securities 827,572 974,066
Purchases of held-to-maturity securities (775,193) (405,296)
Proceeds from maturities of held-to-maturity securities 76,393 850,000
Net (increase) decrease in loans 2,377,554 (38,403)
Capital expenditures (4,470) (16,225)
Recoveries of previously charged-off loans 9,096 7,443
Increase in federal funds sold (2,600,000) (5,950,000)
Proceeds from sales of other real estate owned 0 235,650
--------------------------
Net cash used in investing activities $(2,198,952) $(5,360,520)
--------------------------
</TABLE>
FAIRBANK INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Periods Ended June 30, 1996 and 1995
(Continued)
<TABLE>
1996 1995
------------------------
<S> <C> <C>
Cash flows from financing activities:
Dividends paid $ 0 $ (100)
Net increase in demand deposits, NOW,
money market and savings accounts 2,011,459 1,079,508
Net increase (decrease) in time deposits (665,964) 3,727,806
Repayment of notes payable (103,987) 0
Retirement of preferred stock 0 (1,000)
------------------------
Net cash provided by financing activities $1,241,508 $4,806,214
------------------------
Net decrease in cash and cash equivalents (578,561) (87,672)
Cash and cash equivalents at beginning of period 4,213,768 2,649,143
------------------------
Cash and cash equivalents at end of period $3,635,207 $2,561,471
========================
Supplemental disclosures:
Loans originating from sales of other real estate owned $ 0 $ 0
Interest paid 998,270 938,017
Income taxes paid 60,691 101,449
</TABLE>
ITEM 7(a)5
FAIRBANK INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Six Months Ended June 30, 1996 and 1995
(Unaudited)
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and accordingly do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of the management of Fairbank, Inc. ("Company"), all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included.
Note B - Accounting Policies
- ----------------------------
The accounting principles followed by the Company and the methods of
applying these principles which materially affect the determination of
financial position, results of operations and changes in financial position
are consistent throughout.
ITEM 7(a)6
SHATSWELL, MacLEOD & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
83 PINE STREET
WEST PEABODY, MASSACHUSETTS 01960-3635
(508) 535-0206
The Board of Directors
Fairbank Inc.
Fairhaven, Massachusetts
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying consolidated balance sheets of Fairbank
Inc. and Subsidiary as of December 31, 1995 and 1994 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the over-all consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Fairbank Inc. and Subsidiary as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
/s/ SHATSWELL, MacLEOD & COMPANY, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
January 9, 1996
ITEM 7(a)7
FAIRBANK INC. AND SUBSIDIARY
----------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
December 31, 1995 and 1994
--------------------------
<TABLE>
1995 1994
--------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,213,768 $ 2,649,143
Interest bearing time deposits in banks 41,312 39,987
Federal funds sold 12,300,000 7,600,000
Investments in available-for-sale securities (at fair value) (Note 3) 7,423,144 5,783,330
Investments in held-to-maturity securities (fair value of $1,076,533 as of
December 31, 1995 and $3,164,650 as of December 31, 1994) (Note 3) 1,103,832 3,309,276
Federal Home Loan Bank stock, at cost 171,100
Federal Reserve Bank stock, at cost 93,600 93,600
Loans, net (Note 4) 36,612,306 35,553,777
Premises and equipment (Note 5) 1,787,135 1,926,580
Goodwill 689,925 718,555
Other real estate owned 236,849 405,202
Accrued interest receivable 315,903 344,899
Other assets 318,599 517,871
--------------------------
$65,307,473 $58,942,220
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 6) $58,140,904 $52,516,499
Notes payable (Note 7) 1,397,000 1,447,000
Other liabilities 231,288 198,378
--------------------------
Total liabilities 59,769,192 54,161,877
--------------------------
Commitments and contingent liabilities (Notes 10 and 11)
Stockholders' equity:
Preferred stock, no par value, 100 shares authorized; issued and
outstanding 10 shares in 1995 and 20 shares in 1994 1,000 2,000
Common stock, no par value, 70,000 shares authorized; issued and
outstanding 44,275 shares 6,248,390 6,248,390
Accumulated deficit (685,537) (1,234,677)
Net unrealized holding loss on available-for-sale securities (25,572) (235,370)
--------------------------
Total stockholders' equity 5,538,281 4,780,343
--------------------------
$65,307,473 $58,942,220
==========================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
FAIRBANK INC. AND SUBSIDIARY
----------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Years Ended December 31, 1995 and 1994
--------------------------------------
<TABLE>
1995 1994
------------------------
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans $3,590,790 $3,299,925
Interest and dividends on securities:
Taxable 550,519 371,244
Tax-exempt 30,243 112,275
Other interest 633,441 301,887
------------------------
Total interest and dividend income 4,804,993 4,085,331
------------------------
Interest expense:
Interest on deposits (Note 6) 1,802,031 1,220,589
Interest on notes payable (Note 7) 136,255 225,257
------------------------
Total interest expense 1,938,286 1,445,846
------------------------
Net interest and dividend income 2,866,707 2,639,485
Provision for loan losses (Note 4) 76,000 75,000
------------------------
Net interest and dividend income after provision
for loan losses 2,790,707 2,564,485
------------------------
Other income:
Service charges on deposit accounts 89,991 109,391
Gain on sales of other real estate owned, net 47,957 2,654
Return item fees 99,907 127,783
Gain on sale of fixed assets 2,903 189,065
Other income 78,800 79,760
------------------------
Total other income 319,558 508,653
------------------------
Other expense:
Salaries and employee benefits (Note 9) 1,196,723 1,235,917
Occupancy expense 172,685 155,931
Equipment expense 187,198 271,110
Securities losses, net 2,491 232
Provision for loss on other real estate owned 20,659 50,000
Data processing expenses 98,288 98,244
Audit and tax service expense 50,204 57,310
FDIC insurance expense 75,092 126,913
Bank insurance expense 40,279 55,951
Publicity and advertising expense 67,489 80,989
Professional and consulting expense 72,926 35,985
Other expense 548,646 518,535
------------------------
Total other expense 2,532,680 2,687,117
------------------------
Income before income taxes (benefit) 577,585 386,021
Income taxes (benefit) (Note 8) 28,345 (43,115)
------------------------
Net income $ 549,240 $ 429,136
========================
Earnings per share:
Net income per share $ 12.41 $ 9.69
========================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
FAIRBANK INC. AND SUBSIDIARY
----------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
Years Ended December 31, 1995 and 1994
--------------------------------------
<TABLE>
Net Unrealized
Holding Gain
(Loss) On
Preferred Common Accumulated Available-For-
Stock Stock Deficit Sale Securities Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 2,000 $6,248,390 $(1,663,613) $ 41,680 $4,628,457
Net income 429,136 429,136
Preferred stock cash dividend (200) (200)
Net change in unrealized
holding gain on available-
for-sale securities (277,050) (277,050)
--------------------------------------------------------------------
Balance, December 31, 1994 2,000 6,248,390 (1,234,677) (235,370) 4,780,343
Net income 549,240 549,240
Preferred stock cash dividend (100) (100)
Net change in unrealized
holding loss on available-
for-sale securities 209,798 209,798
Retirement of preferred stock (1,000) (1,000)
--------------------------------------------------------------------
Balance, December 31, 1995 $ 1,000 $6,248,390 $ (685,537) $ (25,572) $5,538,281
====================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
FAIRBANK INC. AND SUBSIDIARY
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Years Ended December 31, 1995 and 1994
--------------------------------------
<TABLE>
1995 1994
--------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 549,240 $ 429,136
Adjustments to reconcile net income to net cash provided by operating
activities:
Securities losses, net 2,491 232
Gain on sales of fixed assets (2,903) (189,065)
Depreciation and amortization 218,744 252,700
Provision for loan losses 76,000 75,000
Provision for loss on other real estate owned 20,659 50,000
Gain on sales of other real estate owned, net (47,957) (2,654)
Decrease in taxes payable (202,858) (254,037)
Deferred tax benefit 213,973 154,698
Decrease in interest receivable 28,996 31,388
Decrease in interest payable (9,216) (11,020)
Increase (decrease) in accrued expenses 82,924 (10,981)
(Increase) decrease in prepaid expenses 1,134 (17,697)
Amortization (accretion) of securities, net (32,616) 4,777
Change in unearned income (2,059) 24,337
--------------------------
Net cash provided by operating activities 896,552 536,814
--------------------------
Cash flows from investing activities:
(Increase) decrease in interest bearing time deposits in banks (1,325) 536,350
Purchases of available-for-sale securities (5,245,211) (2,535,602)
Proceeds from sales of available-for-sale securities 3,655,277 1,156,506
Proceeds from maturities of available-for-sale securities 1,801,062 3,082,505
Purchases of held-to-maturity securities (1,351,265) (3,328,176)
Proceeds from maturities of held-to-maturity securities 2,102,734 25,360
Purchase of Federal Home Loan Bank stock (171,100)
Net (increase) decrease in loans (1,254,695) 1,032,384
Capital expenditures (50,669) (253,724)
Recoveries of previously charged-off loans 17,876 41,946
Increase (decrease) in other liabilities (5,559) 19,872
Increase in federal funds sold (4,700,000) (1,600,000)
Decrease (increase) in other assets (5,260) 190,784
Proceeds from sales of fixed assets 2,903 762,893
Proceeds from sales of other real estate owned 300,000 241,525
Proceeds from paydowns on in-substance foreclosed assets 12,780
Rent received on other real estate owned 2,800
Other real estate owned expenditure capitalized (43,500)
--------------------------
Net cash used in investing activities (4,905,232) (655,297)
--------------------------
</TABLE>
FAIRBANK INC. AND SUBSIDIARY
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Years Ended December 31, 1995 and 1994
--------------------------------------
(continued)
<TABLE>
1995 1994
-------------------------
<S> <C> <C>
Cash flows from financing activities:
Dividends paid (100) (200)
Net increase (decrease) in demand deposits, NOW, money market
and savings accounts 2,757,654 (909,355)
Net increase in time deposits 2,866,751 2,590,702
Repayment of notes payable (50,000) (3,020,333)
Proceeds from notes payable 1,447,000
Retirement of preferred stock (1,000)
-------------------------
Net cash provided by financing activities 5,573,305 107,814
-------------------------
Net increase (decrease) in cash and cash equivalents 1,564,625 (10,669)
Cash and cash equivalents at beginning of year 2,649,143 2,659,812
-------------------------
Cash and cash equivalents at end of year $4,213,768 $2,649,143
=========================
Supplemental disclosures:
Loans originating from sales of other real estate owned $ $ 123,500
Interest paid 1,947,502 1,456,866
Income taxes paid 17,230 56,224
Held-to-maturity securities transferred to available-for-sale securities 1,504,470
Loans transferred to other real estate owned 104,349
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
FAIRBANK INC. AND SUBSIDIARY
----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Years Ended December 31, 1995 and 1994
--------------------------------------
NOTE 1 - NATURE OF OPERATIONS
- -----------------------------
Fairbank Inc. (Company) is a Massachusetts corporation that was organized in
1984 to become the holding company of National Bank of Fairhaven (Bank).
The Company's primary activity is to act as the holding company for the
Bank. The Bank is a federally chartered bank which was incorporated in 1831
and is headquartered in Fairhaven, Massachusetts. The Bank operates its
business from two banking offices located in Massachusetts. The Bank is
engaged principally in the business of attracting deposits from the general
public and investing those deposits in residential and real estate loans,
and in consumer and small business loans.
NOTE 2 - ACCOUNTING POLICIES
- ----------------------------
The accounting and reporting policies of the Company and its Subsidiary
conform to generally accepted accounting principles and predominant
practices within the banking industry. The consolidated financial
statements of the Company and its Subsidiary were prepared using the accrual
basis of accounting. The significant accounting policies of the Company and
its Subsidiary are summarized below to assist the reader in better
understanding the financial statements and other data contained herein.
PERVASIVENESS OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from the estimates.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, the Bank. All significant
intercompany accounts and transactions have been eliminated in the
consolidation.
CASH AND CASH EQUIVALENTS:
For the purposes of reporting cash flows, cash and cash equivalents
include cash on hand, cash items, and due from banks.
SECURITIES:
Investments in debt securities are adjusted for amortization of
premiums and accretion of discounts computed on the straight-line
method which has substantially the same effect as using the interest
method. Gains or losses on sales of investment securities are
computed on a specific identification basis.
The Company classifies debt and equity securities into one of three
categories: held-to-maturity, available-for-sale, or trading. This
security classification may be modified after acquisition only under
certain specified conditions. In general, securities may be
classified as held-to-maturity only if the Company has the positive
intent and ability to hold them to maturity. Trading securities are
defined as those bought and held principally for the purpose of
selling them in the near term. All other securities must be
classified as available-for-sale.
-- Held-to-maturity securities are measured at amortized cost
in the balance sheet. Unrealized holding gains and losses are
not included in earnings or in a separate component of capital.
-- Available-for-sale securities are carried at fair value on
the balance sheet. Unrealized holding gains and losses are not
included in earnings, but are reported as a net amount (less
expected tax) in a separate component of capital until
realized.
-- Trading securities are carried at fair value on the balance
sheet. Unrealized holding gains and losses for trading
securities are included in earnings.
LOANS:
Loans receivable that management has the intent and ability to hold
for the foreseeable future or until maturity or payoff are reported at
their outstanding principal balances reduced by amounts due to
borrowers on unadvanced loans, any charge-offs, the allowance for loan
losses and any deferred fees or costs on originated loans, or
unamortized premiums or discounts on purchased loans.
Interest on loans is generally recognized on a simple interest basis.
Interest on loans is generally not accrued when loans become 90 days
or more overdue.
Loan origination and commitment fees and certain direct origination
costs are deferred, and the net amount amortized as an adjustment of
the related loan's yield. The Company is generally amortizing these
amounts over the contractual life of the related loans.
Cash receipts of interest income on impaired loans is credited to
principal to the extent necessary to eliminate doubt as to the
collectibility of the net carrying amount of the loan. Some or all of
the cash receipts of interest income on impaired loans is recognized
as interest income if the remaining net carrying amount of the loan is
deemed to be fully collectible. When recognition of interest income
on an impaired loan on a cash basis is appropriate, the amount of
income that is recognized is limited to that which would have been
accrued on the net carrying amount of the loan at the contractual
interest rate. Any cash interest payments received in excess of the
limit and not applied to reduce the net carrying amount of the loan
are recorded as recoveries of charge-offs until the charge-offs are
fully recovered.
ALLOWANCE FOR POSSIBLE LOAN LOSSES:
An allowance is available for losses which may be incurred in the
future on loans in the current portfolio. The allowance is increased
by provisions charged to current operations and is decreased by loan
losses, net of recoveries. The provision for loan losses is based on
management's evaluation of current and anticipated economic
conditions, changes in the character and size of the loan portfolio,
and other indicators. The balance in the allowance for possible loan
losses is considered adequate by management to absorb any reasonably
foreseeable loan losses.
As of January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan," as amended by SFAS No. 118. According to SFAS No. 114, a
loan is impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. The
Statement requires that impaired loans be measured on a loan by loan
basis by either the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's
observable market price, or the fair value of the collateral if the
loan is collateral dependent.
The Statement is applicable to all loans, except large groups of
smaller balance homogeneous loans that are collectively evaluated for
impairment, loans that are measured at fair value or at the lower of
cost or fair value, leases, and convertible or nonconvertible
debentures and bonds and other debt securities.
The financial statement impact of adopting the provisions of this
Statement was not material.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost, less accumulated
depreciation and amortization. Cost and related allowances for
depreciation and amortization of premises and equipment retired or
otherwise disposed of are removed from the respective accounts with
any gain or loss included in income or expense. Depreciation and
amortization are calculated principally on the straight-line method
over the estimated useful lives of the assets.
OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES:
Other real estate owned includes properties acquired through
foreclosure and properties classified as in-substance foreclosures in
accordance with Financial Accounting Standards Board Statement No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructuring."
These properties are carried at the lower of cost or estimated fair
value less estimated costs to sell. Any writedown from cost to
estimated fair value required at the time of foreclosure or
classification as in-substance foreclosure is charged to the allowance
for possible loan losses. Expenses incurred in connection with
maintaining these assets are included in other expense.
Beginning in 1995, in accordance with Statement of Financial
Accounting Standards No. 114 "Accounting by Creditors for Impairment
of a Loan," the Company classifies loans as in-substance repossessed
or foreclosed if the Company receives physical possession of the
debtor's assets regardless of whether formal foreclosure proceedings
take place.
INCOME TAXES:
The Company recognizes income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities are
established for the temporary differences between the accounting basis
and the tax basis of the Company's assets and liabilities at enacted
tax rates expected to be in effect when the amounts related to such
temporary differences.
GOODWILL:
Goodwill arising from the aquisition of the Bank is reported net of
accumulated amortization. Goodwill is being amortized on a straight-
line basis over a period of forty years.
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires that the Company
disclose estimated fair value for its financial instruments. Fair
value methods and assumptions used by the Company in estimating its
fair value disclosures are as follows:
Cash and cash equivalents: The carrying amounts reported in the
balance sheet for cash and federal funds sold approximate those
assets' fair values.
Securities (including mortgage-backed securities): Fair values for
securities are based on quoted market prices, where available. If
quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently and
with no significant change in credit risk, fair values are based on
carrying values. The fair values for other loans are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. The carrying amount of accrued interest approximates its
fair value.
Deposit liabilities: The fair values disclosed for demand deposits
(e.g., interest and non-interest checking, passbook savings, and money
market accounts) are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). Fair
values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Off-balance sheet instruments: The fair value of commitments to
originate loans is estimated using the fees currently charged to enter
similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties.
For fixed-rate loan commitments and the unadvanced portion of loans,
fair value also considers the difference between current levels of
interest rates and the committed rates. The fair value of letters of
credit is based on fees currently charged for similar agreements or on
the estimated cost to terminate them or otherwise settle the
obligation with the counterparties at the reporting date.
NOTE 3 - SECURITIES
- -------------------
Investments in available-for-sale securities are carried at fair value on
the balance sheet and are summarized as follows as of December 31, 1995:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
--------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies $4,880,969 $3,595 $39,512 $4,845,052
Debt securities issued by states of the United States and
political subdivisions of the states 362,336 5,213 357,123
Debt securities issued by foreign governments 1,000 1,000
Mortgage-backed securities 2,222,300 4,460 6,791 2,219,969
--------------------------------------------------
$7,466,605 $8,055 $51,516 $7,423,144
==================================================
</TABLE>
Information about the contractual maturities of investments in debt
securities classified as available-for-sale is summarized as follows as of
December 31, 1995:
<TABLE>
Amortized
Cost Fair
Basis Value
------------------------
<S> <C> <C>
Due within one year $ 300,909 $ 298,096
Due after one year through five years 3,713,740 3,683,699
Due after five years through ten years 952,971 943,813
Due after ten years 276,685 277,567
Mortgage-backed securities 2,222,300 2,219,969
------------------------
$7,466,605 $7,423,144
========================
</TABLE>
In 1995, the Bank transferred at fair value certain debt securities
classified as held-to-maturity to securities classified as available-for-
sale. The unrealized holding gain of $1,032 ($1,788 less tax effect) at the
date of transfer has been recognized as a separate component of
stockholders' equity. The transfer was a result of a reassessment of the
appropriateness of the classification of all securities held as of December
31, 1995. In accordance with a special report of the Financial Accounting
Standards Board regarding SFAS No. 115 this transfer will not call into
question the intent of the Bank to hold other debt securities to maturity in
the future.
During 1995, proceeds from sales of available-for-sale securities amounted
to $3,655,277. Gross realized gains and gross realized losses on those
sales amounted to $24,563 and $27,054, respectively.
Investments in available-for-sale securities are carried at fair value on
the balance sheet and are summarized as follows as of December 31, 1994:
<TABLE>
Gross
Amortized Unrealized
Cost Holding Fair
Basis Losses Value
--------------------------------------
<S> <C> <C> <C>
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies $4,925,750 $308,227 $4,617,523
Debt securities issued by states of the United States
and political subdivisions of the states 788,814 37,276 751,538
Corporate debt securities 1,000 1,000
Mortgage-backed securities 475,518 62,249 413,269
--------------------------------------
$6,191,082 $407,752 $5,783,330
======================================
</TABLE>
During 1994, proceeds from sales of available-for-sale securities amounted
to $1,156,506. Gross realized gains and gross realized losses on those
sales amounted to $9,011 and $9,243, respectively.
Investments in held-to-maturity securities are carried at amortized cost on
the balance sheet and are summarized as follows as of December 31, 1995:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
----------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies $ 347,703 $ $ 6,079 $ 341,624
Mortgage-backed securities 756,129 2,780 24,000 734,909
----------------------------------------------------
$1,103,832 $2,780 $30,079 $1,076,533
====================================================
</TABLE>
Information about the contractual maturities of investments in debt
securities classified as held-to-maturity is summarized as follows as of
December 31, 1995:
<TABLE>
Amortized
Cost Fair
Basis Value
------------------------
<S> <C> <C>
Due after five years through ten years $ 169,575 $ 166,610
Due after ten years 178,128 175,014
Mortgage-backed securities 756,129 734,909
------------------------
$1,103,832 $1,076,533
========================
</TABLE>
Investments in held-to-maturity securities are carried at amortized cost on
the balance sheet and are summarized as follows as of December 31, 1994:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
----------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies $2,250,447 $1,804 $ 40,179 $2,212,072
Debt securities issued by states of the United States
and political subdivisions of the states 100,000 100,000
Mortgage-backed securities 958,829 106,251 852,578
----------------------------------------------------
$3,309,276 $1,804 $146,430 $3,164,650
====================================================
</TABLE>
There were no securities of issuers whose aggregate carrying amount exceeded
10% of stockholders' equity as of December 31, 1995.
A total par value of $2,985,000 and $3,085,000 of debt securities was
pledged to secure treasury tax and loan, public funds on deposit and
Bankruptcy court deposits of the U.S. District Court as of December 31, 1995
and 1994, respectively.
NOTE 4 - LOANS
- --------------
Loans consisted of the following as of December 31:
<TABLE>
1995 1994
--------------------------
<S> <C> <C>
Commercial, financial and agricultural $16,031,622 $11,667,866
Real estate - construction and land development 209,018 256,869
Real estate - residential 11,405,671 12,840,674
Real estate - commercial 7,879,202 9,927,285
Consumer 1,299,679 1,343,669
Tax exempt obligations 308,648 371,868
Other 94,608 8,732
--------------------------
37,228,448 36,416,963
Allowance for possible loan losses (503,570) (744,353)
Unearned income (112,572) (118,833)
--------------------------
Net loans $36,612,306 $35,553,777
==========================
</TABLE>
Information with respect to nonaccrual and past due loans is as follows as
of December 31:
<TABLE>
1995 1994
----------------------
<S> <C> <C>
Nonaccrual loans $1,227,496 $938,682
Accruing loans past due 90 days or more 15,420 2,295
----------------------
$1,242,916 $940,977
======================
</TABLE>
The amount of interest income recorded during 1995 and 1994 on nonaccrual
loans outstanding as of December 31, 1995 and 1994 amounted to $17,125 and
$10,430, respectively. Had these loans performed under their original terms,
the amount recorded would have been $137,532 and $125,958 in 1995 and 1994,
respectively.
Certain directors and executive officers of the Company and companies in
which they have significant ownership interest were customers of the Bank
during 1995. Total loans to such persons and their companies amounted to
$3,456,045 as of December 31, 1995 and $2,507,702 as of December 31, 1994.
During 1995, principal payments totaled $578,883 and principal advances
amounted to $1,527,226.
Changes in the allowance for possible loan losses were as follows for the
years ended December 31:
<TABLE>
1995 1994
----------------------
<S> <C> <C>
Balance at beginning of period $ 744,353 $ 952,084
Loans charged off (334,659) (324,677)
Provision for loan losses 76,000 75,000
Recoveries of loans previously charged off 17,876 41,946
----------------------
Balance at end of period $ 503,570 $ 744,353
======================
</TABLE>
Information about loans that meet the definition of an impaired loan in
Statement of Financial Accounting Standards No. 114 is as follows as of
December 31, 1995:
<TABLE>
Recorded Related
Investment Allowance
In Impaired For Credit
Loans Losses
------------------------
<S> <C> <C>
Loans for which there is a related allowance for credit losses $ 611,093 $114,922
Loans for which there is no related allowance for credit losses 418,759
----------------------
Totals $1,029,852 $114,922
----------------------
Average recorded investment in impaired loans during the year
ended December 31, 1995 $1,142,552
----------
Related amount of interest income recognized during the time, in
the year ended December 31, 1995, that the loans were impaired
Total recognized $ 0
----------
Amount recognized using a cash-basis method of accounting $ 0
----------
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
- -------------------------------
The following is a summary of premises and equipment as of December 31:
<TABLE>
1995 1994
---------------------------
<S> <C> <C>
Land $ 380,000 $ 380,000
Buildings 1,842,154 1,828,160
Furniture and equipment 1,057,793 1,028,171
---------------------------
3,279,947 3,236,331
Accumulated depreciation and amortization (1,492,812) (1,309,751)
---------------------------
$ 1,787,135 $ 1,926,580
===========================
</TABLE>
Depreciation and amortization expense amounted to $190,114 and $218,572 for
the years ended December 31, 1995 and 1994, respectively.
NOTE 6 - DEPOSITS
- -----------------
Deposits consisted of the following as of December 31:
<TABLE>
1995 1994
--------------------------
<S> <C> <C>
Demand deposits $11,390,997 $10,425,503
Regular savings 4,978,497 5,294,947
NOW accounts 14,435,762 12,119,739
Money market accounts 5,632,731 5,840,144
Time deposits, $100,000 and over 6,496,564 6,721,365
Other time deposits 15,206,353 12,114,801
--------------------------
$58,140,904 $52,516,499
==========================
</TABLE>
Interest on deposits classified by type is as follows for the years ended
December 31:
<TABLE>
1995 1994
------------------------
<S> <C> <C>
Regular savings $ 143,472 $ 147,912
NOW accounts 276,462 272,837
Money market accounts 170,152 141,315
Time deposits 1,211,945 658,525
------------------------
$1,802,031 $1,220,589
========================
</TABLE>
NOTE 7 - NOTES PAYABLE
- ----------------------
Notes payable consisted of the following as of December 31:
<TABLE>
1995 1994
-----------------------
<S> <C>
Note payable by the Company to Fleet National Bank. Minimum quarterly
principal payments of $25,000 are payable on the last business day of each
calendar quarter beginning on September 30, 1995. The interest rate on
$1,150,000 of the loan is fixed at 120 basis points over Fleet's 5-year cost of
funds. The $25,000 principal payments are applied to the $1,150,000 fixed
rate portion. Additional principal is required in accordance with a cash flow
recapture clause and those payments are to be applied to the $247,000 floating
rate portion of the loan until such time as it is paid in full. Interest on the
floating rate portion is at Prime plus 1%. Under the cash flow recapture
clause, the Bank has agreed to pay in the form of dividends 40% of its
quarterly net income to the Company to service the loan. In the event that
the dividend exceeds the minimum quarterly payment of principal and interest,
the excess funds will be applied as an additional principal payment to the
floating rate portion of the loan, subject to CFR-60 and Regulatory non-
disturbance. Interest payments are due quarterly and the term of the loan
is five years from the closing date of November 25, 1994. The purpose of
the loan was to refinance a portion of a previously existing $2,847,000 loan. $1,397,000 $1,447,000
========================
</TABLE>
As of December 31, 1995 the Company has pledged to Fleet National Bank, as
collateral for the $1,397,000 loan, 100% of the stock of the Bank.
Violation by the Company of certain financial covenants constitute an event
of default.
The ability of the Company to repay the note payable in the amount of
$1,397,000 is dependent on the ability of the Bank to pay dividends and pass
tax benefits to the Company (see Notes 8 and 13).
The maturity requirements of the note payable are as follows based on
minimum quarterly principal payments of $25,000 as described above as of
December 31, 1995:
<TABLE>
<S> <C>
1996 $ 100,000
1997 100,000
1998 100,000
1999 1,097,000
----------
$1,397,000
----------
</TABLE>
Interest expense on notes payable for the years ended December 31, 1995 and
1994 totaled $136,255, and $225,257, respectively.
NOTE 8 - INCOME TAXES (BENEFIT)
- ------------------------------
The components of income taxes (benefit) are as follows for the years ended
December 31:
<TABLE>
1995 1994
----------------------
<S> <C> <C>
Current:
Federal $ 53,628 $
State 49,445 25,247
----------------------
103,073 25,247
----------------------
Deferred:
Federal 163,973 97,933
State 50,000 56,765
----------------------
213,973 154,698
----------------------
Benefit of operating loss carryforward (53,628)
----------------------
Provision for income taxes before change in valuation allowance 263,418 179,945
Change in the valuation allowance (235,073) (223,060)
----------------------
Total income taxes (benefit) $ 28,345 $ (43,115)
======================
</TABLE>
The following reconciles the income tax provision from the statutory rate to
the amount reported in the consolidated statements of income for the years
ended December 31:
<TABLE>
% of % of
1995 Income 1994 Income
------------------------------------------
<S> <C> <C> <C> <C>
Federal income tax at statutory rate $ 196,379 34.0% $ 131,092 34.0%
Increase (decrease) in tax resulting from:
Tax-exempt interest (8,446) (1.5) (9,273) (2.4)
Change in valuation allowance (235,073) (40.7) (223,060) (57.8)
Nondeductible goodwill 9,734 1.7 9,734 2.5
Other 1,816 .3 (5,737) (1.5)
State tax, net of federal tax benefit 63,935 11.1 54,129 14.0
------------------------------------------
$ 28,345 4.9% $ (43,115) (11.2)%
==========================================
</TABLE>
The major components of deferred income tax expense attributable to income
are as follows for the years ended December 31:
<TABLE>
1995 1994
---------------------
<S> <C> <C>
Allowance for loan losses $133,391 $219,408
Loan origination fees 2,647 (10,290)
Loan interest applied to principal 28,005 16,867
Valuation of other real estate owned (8,624) 8,347
Net operating loss carryforwards 53,628 (36,672)
Tax depreciation 4,805 (42,962)
Other adjustments 121
---------------------
$213,973 $154,698
=====================
</TABLE>
The Company had gross deferred tax assets and a gross deferred tax liability
as follows as of December 31:
<TABLE>
1995 1994
------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 43,850 $ 177,241
Loan origination fees 47,591 50,238
Loan interest applied to principal 56,229 84,234
Valuation of other real estate owned 36,308 27,684
Net operating loss carryforwards 539,023 592,651
Other adjustments 161 608
Net unrealized holding loss on available-for-sale securities 17,889 173,994
------------------------
Gross deferred tax asset 741,053 1,106,650
Valuation allowance (370,437) (607,453)
------------------------
370,616 499,197
------------------------
Deferred tax liability:
Excess tax depreciation (188,521) (183,716)
------------------------
Gross deferred tax liability (188,521) (183,716)
------------------------
Net deferred tax asset $ 182,095 $ 315,481
========================
</TABLE>
The Company had operating loss and tax credit carryovers for tax purposes as
follows as of December 31, 1995:
<TABLE>
Expiration
Amount Date
-------------------------------
<S> <C> <C>
Operating loss carryovers:
Generated year ending 12/31/87 $ 569,797 December 31, 2002
Generated year ending 12/31/89 19,528 December 31, 2004
Generated year ending 12/31/90 585,481 December 31, 2005
Generated year ending 12/31/91 377,948 December 31, 2006
----------
$1,552,754
==========
Tax credit carryovers:
Generated year ending 12/31/87 $ 4,826 December 31, 1999
Generated year ending 12/31/89 12,728 December 31, 2000
----------
$ 17,554
==========
</TABLE>
On December 10, 1991 the Company consummated a new stock offering which
resulted in a cumulative change in the stock ownership of the Company as
defined by Section 382 of the Internal Revenue Code. When there has been a
cumulative change in ownership of more than 50 percentage points within a
three year period, I.R.C. Sec. 382 places an annual limitation on the
utilization of net operating loss carryforwards. For both regular tax and
alternative minimum tax purposes, the unlimited portion of the net operating
loss carryforwards available for use by the Company in 1996 is $698,919.
The available carryforwards will increase by $186,268 each year.
NOTE 9 - EMPLOYEE BENEFITS
- --------------------------
The Company has a contributory 401K plan covering substantially all
employees. Under the plan, the Company's contribution is five percent of
the participant's salary for the previous year. Amounts charged to expense
were $43,951 and $44,593 in 1995 and 1994, respectively.
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES
- ------------------------------------------------
The Company is obligated under various lease agreements covering a branch
and equipment. These agreements are considered to be operating leases. The
terms expire between 1998 and 2014. The total minimum rental due in future
periods under these lease agreements is as follows as of December 31, 1995:
<TABLE>
<S> <C>
1996 $ 27,191
1997 27,191
1998 27,093
1999 21,743
2000 16,690
Years thereafter 228,214
--------
Total minimum lease payments $348,122
========
</TABLE>
The total rental expense amounted to $29,785 for 1995 and $5,864 for 1994.
NOTE 11 - FINANCIAL INSTRUMENTS
- -------------------------------
The Company is party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to originate loans, standby
letters of credit and unadvanced funds on loans. The instruments involve,
to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheets. The contract amounts of those 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 loan commitments and standby
letters of credit is represented by the contractual amounts of those
instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.
Commitments to originate loans are agreements to lend to a customer provided
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the borrower.
Collateral held varies, but may include secured interests in mortgages,
accounts receivable, inventory, property, plant and equipment and income-
producing properties.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance by a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. Of the total standby
letters of credit outstanding as of
December 31, 1995, $29,200 is secured by passbooks and certificates of
deposit held by the Bank.
The provisions of Statement of Financial Accounting Standards No. 107
"Disclosures about Fair Value of Financial Instruments," as amended by SFAS
No. 119, became effective for the Company as of December 31, 1995.
The new disclosures are the estimated fair values of the Company's financial
instruments, all of which are held or issued for purposes other than
trading, which are as follows as of December 31, 1995:
<TABLE>
Carrying Fair
Amount Value
--------------------------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 4,213,768 $ 4,213,768
Interest bearing time deposits 41,312 41,312
Federal funds sold 12,300,000 12,300,000
Available-for-sale securities 7,423,144 7,423,144
Held-to-maturity securities 1,103,832 1,076,533
Federal Home Loan Bank stock 171,100 171,100
Federal Reserve Bank stock 93,600 93,600
Loans 36,612,306 36,700,000
Accrued interest receivable 315,903 315,903
Financial liabilities:
Deposits 58,140,904 58,213,000
Notes payable 1,397,000 1,504,000
</TABLE>
The carrying amounts of financial instruments shown in the above table are
included in the consolidated balance sheet under the indicated captions.
Notional amounts of financial instrument liabilities with off-balance sheet
credit risk are as follows as of December 31:
<TABLE>
1995 1994
------------------------
<S> <C> <C>
Commitments to originate loans $1,105,000 $1,350,000
Standby letters of credit 126,624 131,200
Unadvanced portions of consumer loans 490,553 440,383
Unadvanced portions of commercial real estate loans 389,889 468,393
Unadvanced portions of home equity loans 222,347 342,416
Unadvanced portions of commercial lines of credit 2,006,199 2,137,082
</TABLE>
There is no material difference between the notional amount and the
estimated fair value of the above off-balance sheet liabilities as of
December 31, 1995.
The Company has no derivative financial instruments subject to the
provisions of SFAS No. 119, "Disclosure About Derivative Financial
Instruments and Fair Value of Financial Instruments."
NOTE 12 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
- ---------------------------------------------------------
Most of the Company's business activity is with customers located within the
state. There are no concentrations of credit to borrowers that have similar
economic characteristics. The majority of the Company's loan portfolio is
comprised of loans collateralized by real estate located in the state of
Massachusetts.
NOTE 13 - REGULATORY CAPITAL
- ----------------------------
Bank regulators have established Risk Based and Leverage Capital
requirements that establish the minimum level of capital. Under the
requirements a minimum level of capital will vary among banks based on
safety and soundness of operations. As of December 31, 1995 the minimum
regulatory capital level for Risk Based Capital was 4% for Tier 1 capital,
8% for total capital and Leverage Capital was 4%. As of December 31, 1995
the actual Risk Based Capital of National Bank of Fairhaven was 13.28% for
Tier 1 and 14.54% for total capital and the Leverage Capital was 8.08%. The
Bank, as a National Bank is subject to the dividend restrictions set forth
by the Comptroller of the Currency. Under such restrictions, the Bank may
not, without the prior approval of the Comptroller of the Currency, declare
dividends in excess of the sum of the current year's earnings plus the
retained earnings from the prior two years. As of December 31, 1995 the
amount of dividends the Bank could declare was $718,870.
NOTE 14 - RECLASSIFICATION
- --------------------------
Certain amounts in the prior year have been reclassified to be consistent
with the current year's statement presentation.
Item 7(b)1
WEETAMOE BANCORP
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
-----------------------------------------------------------
JUNE 30, 1996
-----------------------------------------------------------
Weetamoe Fairbank Transaction
Bancorp Inc. Adjustments Pro Forma
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 8,101,808 $ 3,677,286 $ 0 $ 11,779,094
Federal Funds Sold 13,000,000 14,900,000 (8,558,800)(G) 19,324,716
(16,484)(H)
Investment in Held to Maturity Securities 18,839,576 1,802,632 20,642,208
Investment in Available for Sale Securities 28,159,522 8,574,806 36,734,328
Federal Home Loan Bank Stock 495,400 171,100 666,500
Federal Reserve Bank Stock 93,600 93,600
Loans, Net 155,072,051 34,159,160 (57,000)(B) 189,174,211
Premises and Equipment 3,595,884 1,705,482 5,301,366
Other Real Estate Owned 350,000 216,849 566,849
Accrued Interest Receivable 1,599,306 303,880 1,903,186
Goodwill 675,613 (675,613)(A) 3,607,436
3,607,436 (E)
Other Assets 2,732,353 373,464 3,105,817
-----------------------------------------------------------
TOTAL ASSETS $231,945,900 $66,653,872 $(5,700,461) $292,899,311
===========================================================
Liabilities & Capital:
Deposits $210,980,336 $59,486,399 $ (9,000)(C) $270,457,735
Notes Payable 1,293,013 (8,045)(D) 1,284,968
Short Term Borrowings 1,558,299 1,558,299
Other Liabilities 1,073,667 191,044 1,264,711
-----------------------------------------------------------
TOTAL LIABILITIES $213,612,302 $60,970,456 $ (17,045) $274,565,713
-----------------------------------------------------------
Stockholder's Equity:
Preferred Stock 1,000 (1,000)(I)
Common Stock 27,627 6,248,390 (6,248,390)(J) 27,627
Paid in Capital 14,388,643 14,388,643
Retained Earnings 4,355,170 (465,309) (16,484)(H) 4,355,170
8,615,239 (M)
(39,955)(F)
(8,558,800)(G)
(675,613)(A)
1,140,922 (K)
Net Unrealized Gain (Loss) on Investments
in Available for Sale Securities (437,842) (100,665) 100,665 (L) (437,842)
-----------------------------------------------------------
Total Stockholder's Equity $ 18,333,598 $ 5,683,416 $(5,683,416) $ 18,333,598
-----------------------------------------------------------
Total Liabilities and Stockholder's Equity $231,945,900 $66,653,872 $(5,700,461) $292,899,311
===========================================================
Shares Outstanding $ 2,757,051 $ 44,275 (44,275) $ 2,757,051
Book Value per share $ 6.65 $ 128.37 $ 6.65
Tangible Book Value/per share $ 6.65 $ 113.11 $ 5.34
Tangible Equity/Assets 7.90% 7.51% 5.03%
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
A) Represents elimination of goodwill to Fairbank's equity of $675,613.
B) Represents a decrease to reflect fair value of Fairbank's loans acquired
with a corresponding decrease to Fairbank's equity of $57,000.
C) Represents a decrease to reflect fair value of Fairbank's deposits
acquired with a corresponding increase to Fairbank's equity of $9,000.
D) Represents a decrease to reflect fair value of Fairbank's note payable
acquired with a corresponding increase to Fairbank's equity of $8,045.
E) Represents excess purchase price over value of tangible net assets
acquired after a cash payment of $8,558,800 for 44,275 shares
outstanding of Fairbank, Inc. at $193.31 per share and $16,484 of fees
and expenses related to the transaction for a total value of $8,575,284.
<TABLE>
<S> <C> <C> <C>
Total purchase price $8,575,284
Net assets of Fairbank, Inc. $5,683,416
Fairbank, Inc.'s Goodwill (675,613)
----------
Net tangible assets of Fairbank, Inc. 5,007,803
Purchase accounting adjustments:
Loans $(57,000)
Deposits 9,000
Notes payable 8,045 (39,955)
-------- ----------
Tangible assets after purchase
accounting adjustments 4,967,848
----------
Excess of purchase price over value
of tangible net assets acquired $3,607,436
==========
</TABLE>
F) Adjustments to Fairbank, Inc. equity reflecting fair value of assets and
liabilities:
<TABLE>
<S> <C>
Decrease in loans $(57,000) (B)
Decrease in deposits 9,000 (C)
Decrease in notes payable 8,045 (D)
--------
$(39,955)
========
</TABLE>
G) Represents payment of $8,558,800 for 44,275 shares of Fairbank, Inc. at
$193.31 per share.
H) Represents payment of $16,484 for fees and expenses related to the
transaction.
I) Represents elimination of preferred stock of Fairbank, Inc. of $1,000.
J) Represents elimination of common stock of Fairbank, Inc. of $6,248,390.
K) Represents elimination of retained earnings of Fairbank, Inc. of
$(1,140,922) after elimination of Goodwill.
L) Represents elimination of unrealized loss on investments in available
for sale securities of Fairbank, Inc. of $(100,665).
M) Represents additional paid in capital as shown:
<TABLE>
<S> <C>
Elimination of net unrealized loss on available for sale securities $ (100,665) (L)
Elimination of equity (1,140,922) (K)
Elimination of preferred stock 1,000 (I)
Elimination of common stock 6,248,390 (J)
Excess of purchase price paid 3,607,436 (E)
-----------
$ 8,615,239
===========
</TABLE>
ITEM 7(b)2
WEETAMOE BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
Weetamoe
Bancorp & Fairbank Inc. Pro Forma Combined
Subsidiary & Subsidiary Adjustments Pro Forma
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $16,541,200 $4,804,993 11,400 (B) $21,357,593
Interest expense 7,764,273 1,938,286 3,000 (C)
2,680 (D) 9,708,239
-----------------------------------------------------------
Net interest income 8,776,927 2,866,707 5,720 11,649,354
Provision for loan losses 550,000 76,000 626,000
-----------------------------------------------------------
Net interest income after
provision for loan losses 8,226,927 2,790,707 5,720 11,023,354
Noninterest income 1,055,959 319,558 1,375,517
Noninterest expense 6,631,527 2,532,680 240,500 (A) 9,376,107
(28,600)(E)
-----------------------------------------------------------
Income before taxes 2,651,359 577,585 (206,180) 3,022,764
Income taxes 1,005,772 28,345 1,034,117
-----------------------------------------------------------
Net income $ 1,645,587 $ 549,240 $(206,180) $ 1,988,647
===========================================================
Earnings per share:
Average shares outstanding 2,607,781 44,275 (44,275) 2,607,781
Net income per share $ 0.63 $ 12.41 $ 0.76
</TABLE>
Notes to Unaudited Pro Forma Condensed Statement of Income
- ----------------------------------------------------------
A) Represents amortization of $240,500 related to the excess of purchase
price over the value of net assets acquired of $3,607,436, using a
life of 15 years.
B) Represents accretion of $11,400 related to the loan value adjustment of
$57,000, utilizing a weighted average expected life of five years.
C) Represents amortization of $3,000 related to the premium on acquired
deposits of $9,000, utilizing a weighted average contractual maturity
of three years.
D) Represents amortization of $2,680 related to the premium on acquired
notes payable of $8,045, utilizing a weighted average contractual
maturity of three years.
E) Represents amortization of $28,600 related to Fairbank, Inc. intangible
assets amortized using a life of 40 years, eliminated at merger.
ITEM 7(b)3
WEETAMOE BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
Weetamoe
Bancorp & Fairbank Inc. Pro Forma Combined
Subsidiary & Subsidiary Adjustments Pro Forma
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $8,872,473 $2,441,277 5,700 (B) $11,319,450
Interest expense 4,251,713 979,172 1,500 (C)
1,340 (D) 5,233,725
-----------------------------------------------------------
Net interest income 4,620,760 1,462,105 2,860 6,085,725
Provision for loan losses 300,000 70,000 370,000
-----------------------------------------------------------
Net interest income after
provision for loan losses 4,320,760 1,392,105 2,860 5,715,725
Noninterest income 641,516 156,004 797,520
Noninterest expense 3,237,058 1,272,881 120,250 (A) 4,615,889
(14,300)(E)
-----------------------------------------------------------
Income before taxes 1,725,218 275,228 (103,090) 1,897,356
Income taxes 650,664 55,000 705,664
-----------------------------------------------------------
Net income $1,074,554 $ 220,228 $(103,090) $ 1,191,692
===========================================================
Earnings per share:
Average shares outstanding 2,757,051 44,275 (44,275) 2,757,051
Net income per share $ 0.39 $ 4.97 $ 0.43
</TABLE>
Notes to Unaudited Pro Forma Condensed Statement of Income
- ----------------------------------------------------------
A) Represents amortization of $120,250 related to the excess of purchase
price over the value of net assets acquired of $3,607,436, using a
life of 15 years.
B) Represents accretion of $5,700 related to the loan value adjustment of
$57,000, utilizing a weighted average expected life of five years.
C) Represents amortization of $1,500 related to the premium on acquired
deposits of $9,000, utilizing a weighted average contractual maturity
of three years.
D) Represents amortization of $1,340 related to the premium on acquired
notes payable of $8,045, utilizing a weighted average contractual
maturity of three years.
E) Represents amortization of $14,300 related to Fairbank, Inc. intangible
assets amortized using a life of 40 years, eliminated at merger.
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 hereto duly authorized.
WEETAMOE BANCORP
----------------------------------------
(Registrant)
November 6, 1996 By /s/ Ralph S. Borges
- ---------------- --------------------------------------
(Date) (Signature) Ralph S. Borges, Treasurer
