SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
----------------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 34-0-25158
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BANCORP CONNECTICUT, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 061394443
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
121 Main Street, Southington, CT 06489
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 860-628-0351
-------------------
Indicate by a check 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 such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date. The number of shares of common
stock, par value $1.00 per share, outstanding on October 28, 1996 was 2,641,449.
(Excluding treasury shares)
<PAGE>
BANCORP CONNECTICUT, INC.
INDEX TO FORM 10-Q
------------------
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Financial Statements (unaudited)
(a) Consolidated Condensed Balance Sheets -
September 30, 1996 and December 31, 1995 1
(b) Consolidated Condensed Statements of
Income - Three months and nine months
ended September 30, 1996 and 1995 2
(c) Consolidated Condensed Statements of
Changes in Capital Accounts - Nine
months ended September 30, 1996 and 1995 4
(d) Consolidated Condensed Statements of
Cash Flows - Nine months ended September
30, 1996 and 1995 5
(e) Notes to the Consolidated Condensed
Financial Statements - September 30, 1996 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security
Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CONDITION
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
(unaudited)
<S> <C> <C>
Assets:
Cash and due from banks $ 4,511 $ 6,572
Federal funds sold 500 4,100
--------- ---------
Cash and cash equivalents 5,011 10,672
Trading account securities 250 391
Investment securities:
Available-for-sale (at market value) 101,495 106,889
Held-to-maturity 36,509 23,661
--------- ---------
138,004 130,550
Loans 252,020 237,154
Less: Allowance for loan losses (4,961) (5,488)
Deferred loan fees (1,009) (960)
--------- ---------
246,050 230,706
Federal Home Loan Bank stock 2,040 1,978
Bank premises and equipment 3,084 3,388
Other real estate owned 2,040 872
Accrued income receivable 2,781 2,520
Deferred taxes 2,564 2,425
Other assets 573 476
--------- ---------
Total assets $ 402,397 $ 383,978
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand and Now $ 35,245 $ 33,924
Savings 95,452 99,967
Time 168,418 160,944
--------- ---------
299,115 294,835
Mortgagors' escrow accounts 798 1,653
Advances from Federal Home Loan Bank 18,600 19,990
Federal funds purchased 1,350 675
Securities sold under agreements to repurchase 36,496 21,553
Accrued taxes, expenses and other liabilities 2,390 2,062
--------- ---------
Total liabilities 358,749 340,768
--------- ---------
Shareholders' Equity:
Common stock 2,756 2,263
Additional paid-in capital 19,006 18,862
Retained earnings 23,869 21,576
Unrealized gain (loss) on investment securities, net 15 509
Treasury stock, at cost, 91,300 shares (1,998) --
--------- ---------
43,648 43,210
--------- ---------
Total liabilities and shareholders' equity $ 402,397 $ 383,978
========= =========
</TABLE>
See notes to unaudited consolidated condensed financial statements.
-1-
<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 5,360 $ 4,920 $ 15,663 $ 14,192
Interest and dividends on securities:
U.S. Government and agency securities 1,405 1,414 4,088 3,992
Other bonds and notes 39 36 114 105
Marketable equity securities 703 587 2,028 1,777
-------- -------- -------- --------
2,147 2,037 6,230 5,874
Interest on trading account 5 3 25 8
Interest on Federal funds sold 34 29 204 99
Other interest and dividend income 33 34 98 105
-------- -------- -------- --------
Total interest income 7,579 7,023 22,220 20,278
-------- -------- -------- --------
Interest Expense:
Interest on NOW deposits 63 61 190 179
Interest on savings deposits 654 620 1,984 1,826
Interest on time deposits 2,316 2,274 6,901 6,180
-------- -------- -------- --------
3,033 2,955 9,075 8,185
Interest on borrowed funds 799 603 2,177 1,715
-------- -------- -------- --------
Total interest expense 3,832 3,558 11,252 9,900
-------- -------- -------- --------
Net interest income 3,747 3,465 10,968 10,378
Provision for loan losses 125 70 300 130
-------- -------- -------- --------
Net interest income after
provision for loan losses 3,622 3,395 10,668 10,248
Other Income:
Net securities gains 65 8 307 74
Net trading account gains (losses) (67) (18) (3) (17)
Trust fees 150 91 342 258
Service charges on deposit accounts 135 131 405 385
Other 102 73 255 181
-------- -------- -------- --------
385 285 1,306 881
-------- -------- -------- --------
Other Expenses:
Salaries and employee benefits 1,173 1,061 3,393 3,112
Occupancy 119 122 397 368
Furniture and equipment expense 89 82 258 235
Data processing 161 150 472 435
FDIC assessments 0 (16) 1 300
Legal expense 56 48 215 158
OREO expense 33 61 120 104
Advertising expense 68 87 226 193
Other 415 395 1,322 1,220
-------- -------- -------- --------
2,114 1,990 6,404 6,125
-------- -------- -------- --------
Income before taxes 1,893 1,690 5,570 5,004
Provision for income taxes 610 529 1,813 1,600
-------- -------- -------- --------
Net income $ 1,283 $ 1,161 $ 3,757 $ 3,404
======== ======== ======== ========
</TABLE>
-2-
<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - CONTINUED
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average shares & common stock equivalents 2,860,726 2,779,434 2,851,230 2,776,394
Net income per share $ 0.45 $ 0.42 $ 1.32 $ 1.23
Cash dividend per share $0.190 $0.146 $0.540 $0.429
</TABLE>
Average shares outstanding and per share data have been restated for all periods
presented to reflect a 6-for-5 stock split effected in the form of a stock
dividend paid on June 19, 1996.
See notes to unaudited consolidated condensed financial statements.
-3-
<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN CAPITAL ACCOUNTS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
COMMON PAID-IN RETAINED INVESTMENT TREASURY
STOCK CAPITAL EARNINGS SECURITIES STOCK
------ ------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $2,248 $18,704 $18,870 ($2,465) $0
Net income 3,404
Stock options exercised 13 93
Cash dividends declared
($.429 per share) (1,160)
Decrease in net unrealized loss
on investment securities 2,528
------ ------- -------- ------- -------
Balance at September 30, 1995 $2,261 $18,797 $21,114 $63 $0
====== ======= ======== ======= =======
Balance at December 31, 1995 $2,263 $18,862 $21,575 $509 $0
Net income 3,757
Stock options exercised 51 366
Cash dividends declared
($.54 per share) (1,463)
6-for-5 stock split effected in the form
of a stock dividend 442 (442)
Treasury stock purchased (1,998)
Decrease in net unrealized gain
on investment securities (494)
Tax benefits related to common stock
option exercises and restricted stock 220
------ ------- -------- ------ --------
Balance at September 30, 1996 $2,756 $19,006 $23,869 $15 ($1,998)
====== ======= ======== ====== ========
</TABLE>
See notes to unaudited consolidated condensed financial statements
4
<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1996 1995
--------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,757 $ 3,404
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation/amortization expense 341 318
Deferred income tax benefit (provision) 205 (118)
Gain on sale of OREO (85) (44)
Net accretion and (amortization) of bond
premium and discount 100 (357)
Provision for loan losses 300 130
Provision for foreclosed real estate losses 89 41
Amortization of deferred loan points (123) (92)
Realized gains on held-for-sale securities (307) (74)
Net trading account losses (3) (17)
Decrease (increase) in trading account 143 (778)
Increase in accrued income receivable (261) (318)
Increase in accrued expenses payable and other
liabilities 328 192
Increase in other assets (97) (7)
-------- --------
Total adjustments 630 (1,124)
-------- --------
Net cash provided by operating activities 4,387 2,280
-------- --------
Cash flows from investing activities:
Purchases of securities held-to-maturity (18,741) (11,304)
Purchases of securities available-for-sale (29,171) (27,156)
Proceeds from sales of securities available-for-sale 14,388 13,805
Proceeds from maturities of securities 17,000 18,000
Paydowns on mortgage-backed securities 8,440 3,811
Purchases of Federal Home Loan Bank stock (61) 0
Net increase in loans (18,521) (13,359)
Purchases of premises and equipment, net (8) (229)
Proceeds from sale of foreclosed real estate, net 2,018 539
-------- --------
Net cash used in investing activities (24,656) (15,893)
-------- --------
Cash flows from financing activities:
Net increase in time deposits 7,717 20,686
Net decrease in other deposits (3,438) (11,227)
Net decrease in mortgagors' escrow (855) (638)
Proceeds from borrowings 30,971 10,622
Repayment of borrowings (32,361) (16,896)
Net increase in Federal funds purchased 675 0
Net increase in repurchase agreements 14,943 15,155
Repurchase of common stock (1,998) 0
Proceeds from exercise of stock options 417 106
Cash dividends paid (1,463) (1,160)
-------- --------
Net cash provided by financing activities 14,608 16,648
-------- --------
Net (decrease) increase in cash and cash equivalents (5,661) 3,035
-------- --------
Cash and cash equivalents at beginning of period 10,672 6,050
-------- --------
Cash and cash equivalents at end of period $ 5,011 $ 9,085
======== ========
Schedule of noncash investing and financing activities:
Change in unrealized loss on investment securities ($ 494) $ 2,528
Transfer of loans to other real estate owned 2,890 919
Foreclosed real estate sales financed 622 229
Transfer of In-substance foreclosures to loans -- 3,292
</TABLE>
See notes to unaudited consolidated condensed financial statements.
-5-
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
In the opinion of Bancorp Connecticut, Inc. (the "Registrant"), the
accompanying unaudited consolidated condensed financial statements
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its financial position as
of September 30, 1996 and the results of operations and cash flows
for the three and nine month periods ended September 30, 1996 and
1995. The results of its operations for the periods shown are not
necessarily indicative of the results to be expected for the full
year.
Certain 1995 amounts have been reclassified to conform with the
1996 presentation. These reclassifications had no impact on net
income.
NOTE 2. Investment Securities
The amortized cost, gross unrealized gains and losses and estimated
market values of investment securities as of September 30, 1996 and
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Held-to-Maturity
--------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(000's), September 30, 1996 Cost Gains Losses Value
- ------------------------------------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
United States Government
agency obligations $22,648 $111 $(277) $22,482
Municipal bonds 3,254 69 (16) 3,307
Mortgage-backed securites 10,607 0 (288) 10,319
------- ---- ------ -------
$36,509 $180 $(581) $36,108
======= ==== ====== =======
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Available-for-sale
--------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(000's), September 30, 1996 Cost Gains Losses Value
- ------------------------------------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
United States Government
obligations $ 15,973 $ 75 $ (7) $ 16,041
Mortgage-backed securities 31,974 221 (257) 31,938
Marketable equity securities 45,752 542 (446) 45,848
Mutual funds 7,771 6 (109) 7,668
-------- ---- ------ --------
$101,470 $844 $(819) $101,495
======== ==== ====== ========
Held-to-Maturity
--------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(000's), December 31, 1995 Cost Gains Losses Value
- ------------------------------------------- -------------- --------------- --------------- --------------
United States Government
agency obligations $17,947 $251 $(24) $18,174
Municipal bonds 3,022 112 (5) 3,129
Mortgage-backed securities 2,692 27 0 2,719
------- ---- ---- -------
$23,661 $390 $(29) $24,022
======= ==== ==== =======
Available-for-Sale
--------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- --------------- --------------- --------------
United States Government
obligations $ 22,917 $ 205 $ (12) $ 23,110
Mortgage-backed securities 38,888 497 (120) 39,265
Marketable equity securities 36,375 665 (201) 36,839
Mutual funds 7,846 0 (171) 7,675
-------- ------ ----- --------
$106,026 $1,367 $(504) $106,889
======== ====== ===== ========
NOTE 3. Activity in the Allowance for Loan Losses
<CAPTION>
(dollars in thousands) 1996 1995
---- ----
<S> <C> <C>
Balance at beginning of year $5,488 $6,136
Provision for loan losses 300 130
Charge-offs (964) (833)
Recoveries 137 175
------ ------
Balance at September 30, $4,961 $5,608
====== ======
</TABLE>
7
<PAGE>
NOTE 4. Nonperforming Assets
September 30, December 31,
(dollars in thousands) 1996 1995
---- ----
Nonaccrual loans
Residential real estate $2,635 $3,650
Commercial real estate 575 1,134
Commercial 262 1,062
Consumer 341 410
------ ------
Total nonaccrual loans 3,813 6,256
Accruing loans past due 90 days or more -- --
Total nonperforming loans 3,813 6,256
Other real estate owned 2,040 872
------ ------
Total nonperforming assets $5,853 $7,128
====== ======
Nonperforming loans as percentage
of total loans 1.51% 2.64%
====== ======
Nonperforming assets as a percentage
of total assets 1.45% 1.86%
====== ======
FOR FURTHER INFORMATION AND FOR ASSISTANCE IN READING THIS REPORT, REFER TO
THE FINANCIAL STATEMENTS AND FOOTNOTES INCLUDED IN THE REGISTRANT'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND TO THE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION INCLUDED IN THIS REPORT.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Third Quarter Ended September 30, 1996
Bancorp Connecticut, Inc. ("the Registrant") is the holding company of
Southington Savings Bank (the "Bank"). Since the Bank is the Registrant's sole
subsidiary, the Registrant's earnings and financial condition are predicated
almost entirely on the performance of the Bank.
Changes in Financial Condition
Investments
- -----------
Total investments increased from $130,550,000 at December 31, 1995 to
$138,004,000 at September 30, 1996. The increase was primarily due to the
purchase of mortgage-backed securities in the held-to- maturity portfolio which
was primarily funded by proceeds from sales of available-for-sale securities.
Loans
- -----
Gross loans increased from $237,154,000 at December 31, 1995 to $252,020,000 at
September 30, 1996 due to an increase in volume of residential mortgage
originations as a result of favorable rates, an increase in commercial loans
(including commercial real estate) due to a concentration of efforts in this
area and an increase in consumer loans due to the continuation of the automobile
loan purchase program initiated in the fourth quarter of 1995.
Other Real estate owned
- -----------------------
Other real estate owned increased by $1,168,000 from December 31, 1995 to
September 30, 1996 primarily as a result of the settlement of a lawsuit during
the first quarter of 1996 which enabled the Bank to take possession of
properties that collateralized various loans which were involved in the
litigation.
Deposits
- --------
Total deposits increased $4,280,000 or 1.5% from December 31, 1995
9
<PAGE>
to September 30, 1996 primarily as a result of CD promotions and a free checking
account program during the year which brought new money into the Bank.
Shareholder's equity
- --------------------
On June 19, 1996, the Registrant issued a six-for-five stock split effected in
the form of a stock dividend. In connection with the split, common stock was
credited and additional paid in capital was charged for the aggregate par value
of the shares that were issued. In addition, the Registrant has repurchased
approximately 91,300 shares into treasury between December 31, 1995 and
September 30, 1996 which is accounted for by the cost method.
Changes in Results of Operations
Earnings
- --------
Net income for the quarter ended September 30, 1996 was $1,283,000 as compared
to $1,161,000 for the third quarter of 1995, an increase of 10.5%. The increase
was primarily due to higher net interest income, and to a lesser extent, an
increase in noninterest income. The annualized return on average assets for the
quarter ended September 30, 1996 was 1.27% as compared to 1.25% for the quarter
ended September 30, 1995.
Net income for the nine months ended September 30, 1996 was $3,757,000 as
compared to $3,404,000 for the same period of 1995. The increase was primarily
due to higher net interest income, a higher level of net securities gains and
increased noninterest income as well as a substantial reduction in FDIC
insurance premiums which took effect during the latter part of 1995. The
annualized return on average assets for the nine months ended September 30, 1996
was 1.26% as compared to 1.25% for nine months ended September 30, 1995.
Net Interest Income
- -------------------
Net interest income increased $282,000 or 8.1% for the third quarter of 1996 as
compared to the same quarter of 1995. Interest income increased $556,000 or 7.9%
for the three month period ended September 30, 1996 as compared to the same
period in 1995,
10
<PAGE>
primarily as a result of an increase in average interest earning assets of
$28,315,000 or 7.8% as compared to the prior year's quarter. The tax equivalent
yield on earning assets increased to 8.03% for the current quarter as compared
to 7.98% for the same quarter of 1995. Interest expense increased $274,000 or
7.7%, primarily from an increase in average interest bearing liabilities of
$25,943,000 or 8.3% as compared to the prior year's quarter. The Bank's cost of
funds decreased to 4.52% for the current quarter as compared to 4.54% for the
same quarter of 1995.
Net interest income increased $590,000 or 5.7% for the nine months ended
September 30, 1996 as compared to the same period in 1995. Interest income
increased $1,942,000 or 9.6% as compared to the same nine month period of 1995
primarily due to an increase in average interest earning assets of 8.5% during
the period. The tax equivalent yield on earning assets increased to 7.96% as
compared to 7.87% for the same nine month period in 1995. Interest expense
increased $1,352,000 or 13.7% for the first nine months of 1996 as compared to
the first nine months of 1995. Average interest bearing liabilities increased
8.8% as compared to the prior year's period, while the Bank's cost of funds
increased to 4.49% for the first nine months of 1996 compared to 4.30% for the
same period of 1995.
Provision for Loan Losses
- -------------------------
The provision for loan losses increased to $125,000 for the third quarter of
1996 as compared to $70,000 for the same quarter of 1995 in response to an
increase in commercial loans during 1996. As of September 30, 1996,
nonperforming loans totaled $3,813,000 or 1.51% of total loans as compared to
$6,808,000 or 2.93% on September 30, 1995. This reduction is due to the
settlement of foreclosure actions during the first quarter of 1996 which
resulted in the transfer of approximately $3 million from non-performing loans
to other real estate owned.
The allowance for loan losses as a percentage of nonperforming loans was 130.1%
as of September 30, 1996 as compared to 82.4% on September 30, 1995. Net loan
charge-offs for the third quarter of 1996 were $66,000 as compared to $225,000
for the same quarter of 1995.
For the nine months ended September 30, 1996, the provision for
11
<PAGE>
loan losses was $300,000 as compared to $130,000 for the same period in 1995.
Net charge-offs for the first nine months of 1996 totaled $827,000 as compared
to $658,000 for the same period in 1995 and include the nonrecoverable amount
from the settlement of the foreclosure actions mentioned previously.
Nonperforming assets declined to $5,853,000 or 1.5% of total assets as of
September 30, 1996 as compared to $7,683,000 or 2.0% as of September 30, 1995, a
decline of 23.8%. (See note 4 to the unaudited consolidated financial
statements.)
Management believes the allowance for loan losses is maintained at a level that
is adequate to absorb losses within the loan portfolio. (See notes 3 and 4 to
the unaudited consolidated financial statements.)
Other Income
- ------------
Noninterest income was $385,000 for the third quarter of 1996 as compared to
$285,000 for the same quarter of 1995, an increase of 35.1%. The increase was
primarily due to a $59,000 or 64.8% rise in Trust department revenues which was
generated by both a higher level of assets under management and estate
settlements. In addition, other income increased by $29,000 or 39.7% primarily
as a result of a gain on the sale of property owned by the Bank.
Noninterest income for the nine months ended September 30, 1996 totaled
$1,306,000 as compared to $881,000 for the same period in 1995, an increase of
48.2%. The primary reason for the increase was an increase in net securities and
trading account gains to $304,000 for the nine month period ended September 30,
1996 from $57,000 for the same period of 1995. In addition, trust fees increased
$84,000 or 32.6% for the nine month period ended September 30, 1996 as compared
to the same period of 1995 due to an increase in assets under management as well
as estate fees.
Other Expenses
- --------------
Noninterest expenses increased $124,000 or 6.2% for the third quarter of 1996 as
compared to the same quarter of 1995. Salaries and benefits increased $112,000
or 10.6% during the third quarter of 1996 in comparison to the same quarter of
1995 as a result of normal compensation adjustments and the inception of a
supplemental
12
<PAGE>
pension plan for selected senior officers.
Noninterest expenses increased $279,000 or 4.6% for the nine months ended
September 30, 1996 as compared to the same period in 1995. Salaries and benefits
increased $281,000 or 9.0% for the nine months ended September 30, 1996 as
compared to the same period in 1995 due to normal compensation adjustments and
the inception of supplemental pension plan during the third quarter of 1996. In
addition, legal expense increased $57,000 or 36.1% for the nine month period
ended September 30, 1996 as compared to the same period in 1995 due primarily to
additional costs resulting from the settlement of a lawsuit during the period.
Finally, advertising costs increased by $33,000 or 17.1% due to an extended
checking account campaign, the introduction of 24 hour telephone banking and
additional advertising for loan products during 1996. These increases were
partially offset by a reduction in FDIC insurance premiums from 0.23% of
deposits to the minimum of $1,000 semiannually which resulted in a decrease in
premiums of $299,000 for the nine months ended September 30, 1996 as compared to
the same period in 1995.
Income Taxes
- ------------
Estimated income taxes for the third quarter of 1996 were $610,000 as compared
to $529,000 for the same quarter of 1995. The increase was primarily due to the
generation of income before taxes of $1,893,000 for the quarter ended September
30, 1996 as compared to $1,690,000 for the same quarter of 1995. The effective
tax rate for the third quarter of 1996 was 32.2% as compared to 31.3% for the
same quarter of 1995, and is lower than the expected statutory rate due to the
Federal and State dividends received deduction.
Estimated income taxes for the nine months ended September 30, 1996 were
$1,813,000 as compared to $1,600,000 for the same period in 1995. The increase
was primarily due to the generation of income before taxes of $5,570,000 for the
nine months ended September 30, 1996 as compared to $5,004,000 for the same
period in 1995. The effective rate for the first nine months of 1996 was 32.5%
as compared to 32.0% for the same period of 1995.
13
<PAGE>
Average Balances, Interest, Yields and Rates (Fully Taxable Equivalent Basis)
(2)
- --------------------------------------------------------------------------------
The following table presents daily average statements of condition, which
include nonaccrual loans, the components of net interest income and selected
statistical data on a fully taxable equivalent basis.
<TABLE>
<CAPTION>
Three months ended Three months ended 1996 Compared to 1995
September 30, 1996 September 30, 1995 Increase (Decrease) Due to
------------------------------ -------------------------------- ---------------------------
Average Yield/ Average Yield/
(dollars in thousands) Balance Interest Rate Balance Interest Rate Volume Rate Net(1)
- ---------------------- ------- -------- ---- ------- -------- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans $247,367 $5,360 8.67% $229,614 $4,921 8.57% $384 $55 $439
Taxable investment securities
(at cost) 137,805 2,412 7.00% 128,119 2,247 7.02% 170 (5) 165
Municipal bonds 3,148 $57 7.24% 2,924 53 7.25% 4 0 4
Federal funds sold 2,630 $34 5.17% 1,991 29 5.83% 9 (4) 5
Other interest-earning assets 2,554 $33 5.17% 2,541 34 5.35% 0 (1) (1)
------------------- -------------------- ------------------------
Total interest-earning assets 393,504 7,896 8.03% 365,189 7,284 7.98% 567 45 612
------------------- -------------------- ------------------------
Noninterest-earning assets:
Cash and due from banks 5,223 4,036
Premises and equipment, net 3,406 3,640
Other assets 6,855 4,858
Less loan loss allowance (4,911) (5,728)
--------- ----------
TOTAL ASSETS $404,077 $371,995
========= ==========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
NOW and savings deposits $111,385 $711 2.55% $109,430 $678 2.48% $12 $21 $33
Time deposits 168,583 2,316 5.50% 159,912 2,273 5.69% 121 (78) 43
Mortgagors' escrow deposits 919 6 2.61% 902 4 1.77% 0 2 2
FHLB of Boston advances
and other borrowings 17,883 259 5.79% 15,550 211 5.43% 33 15 48
Securities sold under agreements
to repurchase 40,574 540 5.32% 27,607 392 5.68% 174 (26) 148
------------------- -------------------- ------------------------
Total interest-bearing
liabilities 339,344 3,832 4.52% 313,401 3,558 4.54% 340 (66) 274
------------------- -------------------- ------------------------
Noninterest-bearing liabilities:
Demand deposits 21,011 16,753
Other 1,086 719
Stockholders' equity 42,636 41,122
--------- ----------
TOTAL LIABILITIES AND EQUITY $404,077 $371,995
========= ==========
Net interest income before Federal
tax equivalent adjustment $4,064 $3,726 $227 $111 $338
========================
Federal tax equivalent adjustment (317) (261)
-------- --------
Net interest income $3,747 $3,465
======== ========
Net interest spread
(tax equivalent basis) 3.51% 3.44%
======== ========
Net interest margin
(tax equivalent basis) 4.13% 4.08%
======== ========
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
(2) - Fully taxable equivalent income was calculated based on statutory federal
and state tax rates
14
<PAGE>
Average Balances, Interest, Yields and Rates (Fully Taxable Equivalent Basis)
(2)
- --------------------------------------------------------------------------------
The following table presents daily average statements of condition, which
include nonaccrual loans, the components of net interest income and selected
statistical data on a fully taxable equivalent basis.
<TABLE>
<CAPTION>
Nine months ended Nine months ended 1996 Compared to 1995
September 30, 1996 September 30, 1995 Increase (Decrease) Due to
------------------------------- ------------------------------- ---------------------------
Average Yield/ Average Yield/
(dollars in thousands) Balance Interest Rate Balance Interest Rate Volume Rate Net(1)
- ---------------------- ------- -------- ---- ------- -------- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans $241,563 $15,663 8.65% $223,961 $14,192 8.45% $757 $224 $981
Taxable investment securities 134,810 7,000 6.92% 125,702 6,520 6.92% 315 5 320
Municipal bonds 3,115 168 7.19% 2,853 154 7.20% 9 0 9
Federal funds sold 5,240 204 5.19% 2,241 99 5.89% 79 (9) 70
Other interest-earning assets 2,756 97 4.69% 2,259 105 6.20% 14 (19) (5)
------------------- --------------------- --------------------------
Total interest-earning assets 387,484 23,132 7.96% 357,016 21,070 7.87% 1,174 201 1,375
------------------- --------------------- --------------------------
Noninterest-earning assets:
Cash and due from banks 4,659 4,192
Premises and equipment, net 3,447 3,651
Other assets 6,797 4,014
Less loan loss allowance (5,125) (5,853)
--------- ----------
TOTAL ASSETS $397,262 $363,020
========= ==========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
NOW and savings deposits $112,830 $2,152 2.54% $112,503 $1,988 2.36% $4 $105 $109
Time deposits 166,257 6,901 5.53% 152,957 6,179 5.39% 366 116 482
Mortgagors' escrow deposits 1,012 22 2.90% 988 18 2.43% 0 2 2
FHLB of Boston advances
and other borrowings 18,915 788 5.55% 14,154 565 5.32% 132 17 149
Securities sold under agreements
to repurchase 35,192 1,389 5.26% 26,580 1,150 5.77% 231 (72) 159
------------------- --------------------- ------------------------
Total interest-bearing
liabilities 334,206 11,252 4.49% 307,182 9,900 4.30% 733 168 901
------------------- --------------------- ------------------------
Noninterest-bearing liabilities:
Demand deposits 19,145 15,451
Other 1,062 806
Stockholders' equity 42,849 39,581
--------- ----------
TOTAL LIABILITIES AND EQUITY $397,262 $363,020
========= ==========
Net interest income before Federal
tax equivalent adjustment $11,880 $11,170 $441 $33 $474
========================
Federal tax equivalent adjustment (912) (792)
--------- ---------
Net interest income $10,968 $10,378
========= =========
Net interest spread
(tax equivalent basis) 3.47% 3.57%
====== ======
Net interest margin
(tax equivalent basis) 4.09% 4.17%
====== ======
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
(2) - Fully taxable equivalent income was calculated based on statutory federal
and state tax rates
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
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.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits Required by Item 601 of Regulation S-K.
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation of Registrant
(Incorporated by reference to Exhibit 3.1
to the Registrant's Registration Statement
on Form S-4 (Registration No. 33-77696)
(the "Registration Statement")).
3.2 Bylaws of Registrant (Incorporated by
reference to Exhibit 3.2 to the
Registration Statement).
3.3 Certificate of Amendment of Certificate of
Incorporation dated May 20, 1996
(Incorporated by reference to Exhibit 3.3
to the 10-Q as of June 30, 1996).
16
<PAGE>
4 Instruments defining the rights of
security holders (Included in Exhibits 3.1
and 3.2).
10.1 Employment Agreement dated as of January
1, 1994, by and between the Bank and
Robert D. Morton (Incorporated by
reference to Exhibit 10.1 to the
Registration Statement).
10.2 Southington Savings Bank 1986 Stock Option
Plan (Incorporated by reference to Exhibit
10.2 to the Registration Statement).
10.3 Southington Savings Bank 1993 Stock Option
Plan (Incorporated by reference to Exhibit
10.3 to the Registration Statement).
10.4 Pension Plan of Southington Savings Bank,
as amended (Incorporated by reference to
Exhibit 10.4 to the Registration
Statement).
10.5 Southington Savings Bank Supplemental
Retirement Plan.
11.1 Statement re computation of per share
earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Registrant did not file any Report on Form 8-K during the
third quarter of 1996.
17
<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.
BANCORP CONNECTICUT, INC.
------------------------------------------------
(Registrant)
Date: November 12, 1996 By: /s/ Robert D. Morton
--------------------- -------------------------------------------
Robert D. Morton
Its President and Chief Executive
Officer (A duly authorized officer)
Date: November 12, 1996 By: /s/ Anthony Priore, Jr.
--------------------- -------------------------------------------
Anthony Priore, Jr.
Its Treasurer and Secretary
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation of
Registrant (Incorporated by reference
to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-4
(Registration No. 33-77696) (the
"Registration Statement")).
3.2 Bylaws of Registrant (Incorporated by
reference to Exhibit 3.2 to the
Registration Statement).
3.3 Certificate of Amendment of Certificate of
Incorporation dated May 20, 1996 (Incorporated
by reference to Exhibit 3.3 to the 10-Q as of
June 30, 1996).
4 Instruments defining the rights of
security holders (Included in Exhibits
3.1 and 3.2).
10.1 Employment Agreement dated as of January 1,
1994, by and between the Bank and Robert D.
Morton (Incorporated by reference to
Exhibit 10.1 to the Registration Statement).
10.2 Southington Savings Bank 1986 Stock Option
Plan (Incorporated by reference to Exhibit
10.2 to the Registration Statement).
10.3 Southington Savings Bank 1993 Stock Option
Plan (Incorporated by reference to Exhibit
10.3 to the Registration Statement).
10.4 Pension Plan of Southington Savings Bank,
as amended (Incorporated by reference to
Exhibit 10.4 to the Registration Statement).
10.5 Southington Savings Bank Supplemental
Retirement Plan.
<PAGE>
11.1 Statement re computation of
per share earnings
27 Financial Data Schedule
<PAGE>
Exhibit 11.1: Computation of Per Share Earnings
<TABLE>
<CAPTION>
Quarter ended Nine months ended
(dollar amounts in thousands except September 30, September 30,
per share) ------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income - primary and fully diluted $1,283 $1,161 $3,757 $3,404
------ ------ ------ ------
Weighted Average Common Stock
and Common Equivalent Stock
Weighted average common stock outstanding 2,691 2,701 2,704 2,696
Assumed conversion (as of the beginning of
each period or upon issuance during a
period) of stock options outstanding at
the end of each period 170 78 147 80
------ ------ ------ ------
Weighted average common stock outstanding -
primary 2,861 2,779 2,851 2,776
------ ------ ------ ------
Weighted average common stock outstanding 2,691 2,701 2,704 2,696
Assumed conversion (as of the beginning of
each period or upon issuance during a
period) of stock options outstanding at
the end of each period 174 94 162 91
------ ------ ------ ------
Weighted average common stock outstanding -
fully diluted 2,865 2,795 2,866 2,787
------ ------ ------ ------
Earnings per Weighted Average Common Share $0.477 $0.430 $1.389 $1.263
------ ------ ------ ------
Earnings per Common and Common Equivalent Share
Primary $0.448 $0.418 $1.318 $1.226
------ ------ ------ ------
Fully Diluted $0.448 $0.415 $1.311 $1.221
------ ------ ------ ------
</TABLE>
Average shares outstanding and per share data have been restated to reflect a
6-for-5 split effected in the form of a stock dividend paid on June 19, 1996
<PAGE>
Bancorp Connecticut, Inc.
Exhibit 27
Financial Data Schedule
Nine months
ended
Item Description Sept. 30, 1996
- ---------------- --------------
Cash and due from banks 4,511
Interest-bearing deposits 0
Federal funds sold - purchased securities for resale 500
Trading account assets 250
Investment and mortgage backed securities held for sale 101,495
Investment and mortgage backed securites held to maturity -
carrying value 36,509
Investment and mortgage backed securites held to maturity -
market value 36,108
Loans 252,020
Allowance for losses (4,961)
Total assets 402,397
Deposits 299,115
Short-term borrowings 38,686
Other liabilities 3,188
Long-term debt 17,760
Preferred stock - mandatory redemption 0
Preferred stock - no mandatory redemption 0
Common stocks 2,756
Other stockholders' equity 40,892
Total liabilities and stockholders' equity 402,397
Interest and fees on loans 15,663
Interest and dividends on investments 6,230
Other interest income 327
Total interest income 22,220
Interest on deposits 9,075
Total interest expense 11,252
Net interest income 10,968
Provison for loan losses 300
Investment securities gains/losses 307
Other expenses 6,404
Income/loss before income tax 5,570
Income/loss before extraordinary items 5,570
Extraordinary items, less tax 0
Cumulative change in accounting principles 0
Net income or loss 3,757
Earnings per share - primary 1.32
Earnings per share - fully diluted 1.31
Net yield - interest earning assets - actual 7.65
Loans on non-accrual 3,813
Accruing loans past due 90 days or more 0
Troubled debt restructuring 1,280
Potential problem loans 11,711
Allowance for loan losses - beginning of period 5,488
Total chargeoffs 964
Total recoveries 137
Allowance for loan loss - end of period 4,961
Loan loss allowance allocated to domestic loans 3,486
Loan loss allowance allocated to foreign loans 0
Loan loss allowance - unallocated 1,475
Exhibit 10.5
SOUTHINGTON SAVINGS BANX
SUPPLEMENTAL RETIREMENT PLAN
This instrument is executed by Southington Savings Bank to record its
adoption of a Supplemental Retirement Plan for the benefit of certain of its
employees, effective as of January l, 1996, on-the terms and conditions
hereinafter set forth.
RECITALS
--------
Southington Savings Bank maintain for the benefit of certain employees
a retirement plan known as the Southington Savings Bank Defined Benefit Pension
Plan (That retirement plan, together with any subsequent amendments and future
restatements, is referred to herein as the "Retirement Plan").
According to Section 40l(a)(17) of the Internal Revenue Code, effective
for tax years beginning after December 31, 1988, the Retirement Plan may not
take into account annual compensation of any employee that exceeds $200,000 as
adjusted for years prier to 1994, and $150,000 as adjusted for years thereafter
(such limit for each such year being hereafter referred to as the "401(a)(17)
Cap").
Section 415 of the Internal Revenue Code also imposes limitations on
the benefit payable to certain Participants of the Retirement Plan (the "Section
415 Limitations").
The Employer wishes to supplement the retirement benefits of certain
Participants of the Retirement Plan so as to compensate for the reduction in
those retirement benefits by reason of the
<PAGE>
imposition of the Section 401(a) (17) Cap and the Section 415 Limitations.
In view of the foregoing the Employer hereby adopts the Southington
Savings Bank Supplemental Retirement Plan (the "Plan"), effective immediately,
on the following terms and conditions:
1. Covered Employees. This Plan applies to those employees of the
employer who are Participants in the Retirement Plan and who have been expressly
named by the Compensation Committee of the Board of Directors for coverage by
this Plan. The Compensation Committee shall name only employees who are highly
compensated or management employees. At the present time, Robert D. Morton is
the only Participant named for coverage by this Plan.
2. Retirement Benefits. When payment of a retirement benefit,
including a survivor benefit, under the Retirement Plan is to commence, if such
benefit is less than it would have been if (~) annual compensation exceeding the
401(a)(17) Cap was considered, and (ii) the Section 415 Limitations were
ignored, the Employer will pay a supplemental benefit to the Participant,
surviving spouse or other beneficiary, as the case may be. The supplemental
benefit shall equal the amount by which the benefit payable under the Retirement
Plan is in fact less than it would have been if calculated in accordance with
items (i) and (ii) of the preceding sentence.
2
<PAGE>
3. Death Benefits. Except for the payment of the survivor benefit, if
any, under section 2 of the Plan, no other death benefits shall be paid under
this Plan.
4. Manner of Payment of Retirement Benefits. Retirement benefits
payable under this Plan shall be paid in (l) any form permitted under the
Retirement Plan, (2) a lump sum payment, or (3) a fixed number of substantially
equal annual installments, commencing when the Participant begins receipt of his
or her benefits under the Retirement Plan, which in the aggregate constitute the
actuarial equivalent (as determined using the assumptions set forth on Schedule
A hereto) of the benefits payable hereunder in accordance with Section 2 hereof.
Benefits hereunder will be paid to the same person as is receiving the benefits
under the Retirement Plan. The Participant must irrevocably elect the manner of
payment at least thirteen months before he or she commences his or her benefits
under this Plan.
5. Fundinq of Benefits. Benefits under this Plan will be paid out of
the general assets of the Employer. The Employer may not prefund benefits under
this Plan by means of any trust fund (other than a Rabbi Trust), annuity
contract or funded reserve. Any accrual of liabilities under this Plan on the
books of the Employer is for accounting purposes only and shall not be construed
as indicative of any prefunding or earmarking of assets or revenues for use in
discharge of liabilities under this Plan.
6. Nonalienation of Benefits. Neither the Participant nor his or her
Beneficiary or heirs shall have any right to commute,
3
<PAGE>
sell, transfer, assign, or otherwise convey the right to receive any payments
under the terms of this Agreement.
7. Administration. This Plan shall be administered by the Compensation
Committee of the Board of Directors of the Bank. The Compensation Committee may
allocate any administrative responsibility under the Plan to any member of such
Committee or any other individual or group of individuals.
8. Cancellation of Benefit for Cause. No benefit will be payable under
this Plan, and any benefits already in payment status will cease, if the
Employer determines that the Employee has engaged in any activity in the
Employee's dealings with the Employer which, if proved in a criminal proceeding,
could result in conviction for a felony under Connecticut law.
9. Amendment and Termination. This Plan may be amended or terminated at
any time by the Compensation Committee of the Board of Directors. Any such
action shall be effective prospectively and shall not serve to reduce any right
to a benefit earned under this Plan up to the date of such action.
10. Definitions. Terms used herein shall have the same meanings as in
the Retirement Plan
IN WITNESS WHEREOF, the Employer has executed this document this 30th
day of July, 1996.
SOUTHINGTON SAVINGS BANK
By: /s/ Donna Schaefer
--------------------------------------
Its V.P. & Director of Human Resources
4
<PAGE>
Schedule A
For purposes of Section 3, the PBGC Annuity Rate as set forth from time
to time, shall be utilized. For all other purposes, the Retirement Plan
assumptions shall be utilized.
