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 June 30, 1997
-------------------------------------------------
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 July 24, 1997 was 2,533,716.
(Excluding treasury shares)
<PAGE>
BANCORP CONNECTICUT, INC.
INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Financial Statements (unaudited)
(a) Consolidated Condensed Balance Sheets - June 30, 1997
and December 31, 1996 1
(b) Consolidated Condensed Statements of Income - Three
months and six months ended June 30, 1997 and 1996 2
(c) Consolidated Condensed Statements of Changes in
Capital Accounts - six months ended June 30,
1997 and 1996 4
(d) Consolidated Condensed Statements of Cash Flows -
Six months ended June 30, 1997 and 1996 5
(e) Notes to the Consolidated Condensed Financial Statements -
June 30, 1997 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
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)
June 30, December 31,
1997 1996
----------- ------------
(unaudited)
Assets:
Cash and due from banks $ 6,644 $ 8,454
Federal funds sold 3,600 700
-------- --------
Cash and cash equivalents 10,244 9,154
Trading account securities 252 2,430
Investment securities:
Available-for-sale (at market value) 106,864 105,515
Held-to-maturity 44,715 44,096
-------- --------
151,579 149,611
Loans 260,743 252,144
Less: Allowance for loan losses (5,145) (4,875)
Deferred loan fees (981) (995)
-------- --------
254,617 246,274
Federal Home Loan Bank stock 2,094 2,040
Bank premises and equipment 3,021 3,084
Accrued income receivable 2,771 2,717
Other real estate owned 954 1,367
Deferred taxes 2,075 2,196
Other assets 755 525
-------- --------
Total assets $428,362 $419,398
======== ========
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand and Now $ 43,539 $ 38,385
Savings 95,600 96,070
Time 172,685 175,372
-------- --------
311,824 309,827
Advances from Federal Home Loan Bank 25,630 21,000
Federal funds purchased and securities sold
under agreements to repurchase 42,976 41,879
Mortgagors' escrow accounts 1,748 1,687
Accrued taxes, expenses and other liabilities 2,298 2,274
-------- --------
Total liabilities 384,476 376,667
-------- --------
Shareholders' Equity:
Preferred stock -- --
Common stock 2,793 2,768
Additional paid-in capital 19,589 19,189
Retained earnings 26,431 24,609
Unrealized gain on investment securities, net 817 504
Treasury stock, at cost, 259,749 shares in 1997 and
197,552 shares in 1996 (5,744) (4,339)
-------- --------
43,886 42,731
-------- --------
Total liabilities and shareholders' equity $428,362 $419,398
======== ========
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 Six Months Ended
June 30, June 30,
------------------------------------------------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 5,570 $ 5,180 $ 10,938 $ 10,303
Interest and dividends on securities:
U.S. Government and agency securities 1,441 1,336 2,869 2,683
Other bonds and notes 81 38 120 75
Marketable equity securities 845 691 1,613 1,325
---------- ---------- ---------- ----------
2,367 2,065 4,602 4,083
Interest on trading account 1 16 19 20
Interest on Federal funds sold 37 64 93 170
Other interest and dividend income 34 33 67 64
---------- ---------- ---------- ----------
Total interest income 8,009 7,358 15,719 14,640
---------- ---------- ---------- ----------
Interest Expense:
Interest on NOW deposits 96 63 161 127
Interest on savings deposits 641 669 1,264 1,330
Interest on time deposits 2,332 2,296 4,673 4,585
---------- ---------- ---------- ----------
3,069 3,028 6,098 6,042
Interest on borrowed funds 987 695 1,919 1,378
---------- ---------- ---------- ----------
Total interest expense 4,056 3,723 8,017 7,420
---------- ---------- ---------- ----------
Net interest income 3,953 3,635 7,702 7,220
Provision for loan losses 200 100 350 175
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 3,753 3,535 7,352 7,045
Other Income:
Net securities gains 175 41 336 242
Net trading account gains 28 50 50 64
Trust fees 108 97 209 192
Service charges on deposit accounts 132 136 257 270
Other 108 67 184 153
---------- ---------- ---------- ----------
551 391 1,036 921
---------- ---------- ---------- ----------
Other Expenses:
Salaries and employee benefits 1,169 1,125 2,293 2,220
Occupancy 131 128 274 278
Furniture and equipment expense 97 84 193 169
Data processing 167 155 336 311
FDIC assessments 10 0 19 1
Legal expense 42 84 84 159
OREO expense (5) 5 (18) 87
Advertising expense 113 105 168 158
Other 396 485 752 906
---------- ---------- ---------- ----------
2,120 2,171 4,101 4,289
---------- ---------- ---------- ----------
Income before taxes 2,184 1,755 4,287 3,677
Provision for income taxes 690 565 1,379 1,203
---------- ---------- ---------- ----------
Net income $ 1,494 $ 1,190 $ 2,908 $ 2,474
========== ========== ========== ==========
-2-
<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - CONTINUED
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Primary:
Average shares & common stock equivalents 2,715,662 2,864,839 2,726,552 2,865,245
Net income per share $0.55 $0.42 $1.07 $0.86
Fully Diluted:
Average shares & common stock equivalents 2,733,407 2,898,096 2,748,300 2,885,637
Net income per share $0.55 $0.41 $1.06 $0.86
Cash dividend per share $0.220 $0.179 $0.425 $0.350
</TABLE>
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, 1995 $ 2,263 $ 18,862 $21,575 $509 $ 0
Net income 2,474
Stock options exercised 23 171
Cash dividends declared
($.35 per share) (956)
6-for-5 stock split effected in the form
of a stock dividend 444 (444)
Treasury stock purchased (1,591)
Decrease in net unrealized gain
on investment securities (605)
Tax benefits related to common stock
option exercises 111
------- -------- ------- ----- -------
Balance at June 30, 1996 $ 2,730 $ 18,700 $23,093 ($96) ($1,591)
======= ======== ======= ===== =======
Balance at December 31, 1996 $ 2,768 $ 19,189 $24,609 $504 ($4,339)
Net income 2,908
Stock options exercised 25 297
Cash dividends declared
($.425 per share) (1,086)
Treasury stock purchased (1,405)
Decrease in net unrealized gain
on investment securities $313
Tax benefits related to common stock
option exercises 103
------- -------- ------- ----- -------
Balance at June 30, 1997 $ 2,793 $ 19,589 $26,431 $817 ($5,744)
======= ======== ======= ===== =======
</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)
SIX MONTHS ENDED
JUNE 30,
------------------
1997 1996
------- -------
Cash flows from operating activities:
Net income $ 2,908 $ 2,474
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation/amortization expense 229 226
Deferred income tax (provision) benefit (78) 369
Gain on sale of OREO (149) (29)
Net accretion and amortization of bond
premium and discount 99 57
Provision for loan losses 350 175
Provision for foreclosed real estate losses 75 51
Amortization of deferred loan points (92) (89)
Realized gains on available-for-sale securities (336) (242)
Net trading account gains (50) (64)
Decrease in trading account 2,228 0
Increase in accrued income receivable (54) (173)
Increase (decrease) in accrued expenses payable
and other liabilities 23 (203)
Increase in other assets (231) (678)
------- -------
Total adjustments 2,014 (600)
------- -------
Net cash provided by operating activities 4,922 1,874
------- -------
Cash flows from investing activities:
Purchases of securities held-to-maturity (6,042) (18,616)
Purchases of securities available-for-sale (25,163) (24,016)
Proceeds from sales of securities available-for-sale 15,090 5,794
Proceeds from maturities of securities 11,255 16,000
Paydowns on mortgage-backed securities 3,643 5,996
Purchases of Federal Home Loan Bank stock (55) (61)
Net increase in loans (8,703) (10,895)
Purchases of premises and equipment, net (146) (238)
Proceeds from sale of foreclosed real estate, net 673 1,269
------- -------
Net cash used in investing activities (9,448) (24,767)
------- -------
Cash flows from financing activities:
Net (decrease) increase in time deposits (2,687) 7,178
Net increase (decrease) in other deposits 4,684 (190)
Net increase in mortgagors' escrow 61 55
Proceeds from borrowings 9,735 14,703
Repayment of borrowings (5,105) (16,693)
Net (decrease) increase in Federal funds purchased (400) 325
Net increase in repurchase agreements 1,497 16,983
Repurchase of common stock (1,405) (1,591)
Proceeds from exercise of stock options 322 194
Cash dividends paid (1,086) (948)
------- -------
Net cash provided by financing activities 5,616 20,016
------- -------
Net increase (decrease) in cash and cash equivalents 1,090 (2,877)
------- -------
Cash and cash equivalents at beginning of period 9,154 10,672
------- -------
Cash and cash equivalents at end of period $10,244 $ 7,795
======= =======
Schedule of noncash investing and financing activities:
Change in unrealized gain on investment securities $ 313 ($ 605)
Transfer of loans to other real estate owned 158 2,719
Foreclosed real estate sales financed 212 316
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 "Corporation"), 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 June 30, 1997 and the results of
operations and cash flows for the three month and six month period ended June
30, 1997 and 1996. The results of its operations for the periods shown are not
necessarily indicative of the results to be expected for the full year.
Certain 1996 amounts have been reclassified to conform with the 1997
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 June 30, 1997 and December 31, 1996 are as
follows:
Held-to-Maturity
-------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(000's), June 30, 1997 Cost Gains Losses Value
- ---------------------- --------- ---------- ---------- --------
United States Government
agency obligations $ 19,158 $ 60 $ (217) $ 19,001
Municipal bonds 3,247 71 (8) 3,310
Mortgage-backed securities 22,310 13 (192) 22,131
-------- -------- -------- --------
$ 44,715 $ 144 $ (417) $ 44,442
======== ======== ======== ========
Available-for-sale
-------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- --------
United States Government
obligations $ 9,983 $ 41 $ -- $ 10,024
Mortgage-backed securities 29,775 345 (119) 30,001
Capital trust securities 2,000 -- -- 2,000
Marketable equity securities 55,993 1,353 (222) 57,124
Mutual funds 7,745 49 (79) 7,715
-------- -------- -------- --------
$105,496 $ 1,788 $ (420) $106,864
======== ======== ======== ========
-6-
<PAGE>
Held-to-Maturity
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(000's), December 31, 1996 Cost Gains Losses Value
- -------------------------- --------- ---------- ---------- ---------
United States Government
agency obligations $ 22,651 $ 152 $ (123) $ 22,680
Municipal bonds 3,252 88
(6) 3,334
Mortgage-backed securities 18,193 6 (240) 17,959
-------- -------- -------- --------
$ 44,096 $ 246 $ (369) $ 43,973
======== ======== ======== ========
Available-for-sale
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
United States Government
obligations $ 14,977 $ 92 $ (2) $ 15,067
Mortgage-backed securities 26,063 298 (144) 26,216
Marketable equity securities 55,848 944 (262) 56,531
Mutual funds 7,771 9 (79) 7,701
-------- -------- -------- --------
$104,659 $ 1,343 $ (487) $105,515
======== ======== ======== ========
NOTE 3. Activity in the Allowance for Loan Losses
(dollars in thousands) 1997 1996
------- -------
Balance at beginning of year $ 4,875 $ 5,488
Provision for loan losses 350 175
Charge-offs (188) (834)
Recoveries 108 74
------- -------
Balance at June 30, $ 5,145 $ 4,903
======= =======
-7-
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. Nonperforming Assets
June 30, December 31,
(dollars in thousands) 1997 1996
---------------------- ------- -----------
Nonaccrual loans
Residential real estate $2,644 $2,060
Commercial real estate 565 337
Commercial 326 306
Consumer 206 236
------ ------
Total nonaccrual loans 3,741 2,939
Accruing loans past due 90 days or more 408 --
------ ------
Total nonperforming loans 4,149 2,939
Other real estate owned 954 1,367
------ ------
Total nonperforming assets $5,103 $4,306
====== ======
Nonperforming loans as percentage
of total loans 1.59% 1.17%
====== ======
Nonperforming assets as a percentage
of total assets 1.19% 1.03%
====== ======
NOTE 5. Earnings Per Share
In February, 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128 provides accounting and
reporting standards for the calculation of earnings per share intended to
simplify the computation by replacing the presentation of primary earnings per
share with a presentation of basic earnings per share. The Corporation will be
required to adopt SFAS 128 in the fourth quarter of 1997. The following
indicates what the earnings per share would have been if computed in accordance
with SFAS 128 for the periods indicated:
Quarter ended Six months ended
June 30, June 30,
------------------- ---------------
1997 1996 1997 1996
---- ---- ---- ----
Basic earnings per share $0.59 $0.44 $1.14 $0.92
Diluted earnings per share 0.55 0.42 1.07 0.86
-8-
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("ASB") also issued
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure." This pronouncement establishes standards for the
disclosure of information about an entity's capital structure and is effective
for financial statements issued for periods ending after December 15, 1997. The
adoption of this pronouncement is expected to have no impact on the financial
statements of the Bank.
In June of 1997, the FASB issued two pronouncements, Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," (SFAS No. 130)
and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131). SFAS No. 130 establishes standards for reporting
and display of comprehensive income, which is defined as the change in equity of
a business enterprise during a period from nonowner sources. SFAS No. 130 is
effective for years beginning after December 15, 1997 and requires
reclassification of financial statements for all prior years presented. The
adoption of SFAS No. 130 is expected to impact the presentation of financial
information only.
SFAS No. 131 requires public companies to report financial and descriptive
information about operating segments in their financial statements and requires
selected information about operating segments to be reported in interim
financial reports issued to shareholders. Operating segment financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and allocation of resources. SFAS No. 131 is
effective for financial statements for periods beginning after December 15, 1997
and requires presentation of comparative information for prior periods
presented. The adoption of SFAS No. 131 is expected to have no impact on the
financial statements of the Bank.
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, 1996 AND TO THE MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION INCLUDED
IN THIS REPORT.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Second Quarter Ended June 30, 1997
Bancorp Connecticut, Inc. ("the Corporation") is the holding company of
Southington Savings Bank (the "Bank"). Since the Bank is the Corporation's sole
subsidiary, the Corporation's earnings and financial condition are predicated
almost entirely on the performance of the Bank.
Changes in Financial Condition
Investments
- -----------
Total investments increased from $149,611,000 at December 31, 1996 to
$151,579,000 at June 30, 1997. The increase was primarily due to the purchase of
capital trust securities and mortgage backed securities in the
available-for-sale category. Additionally, the unrealized gain on
available-for-sale securities increased by $512,000 during the period due to
market conditions.
Loans
- -----
Total loans increased from $252,144,000 at December 31, 1996 to $260,743,000 at
June 30, 1997 primarily as a result of an increase in consumer home equity loans
and automobile loans as well as owner-occupied commercial real estate loans.
Other real estate owned
- -----------------------
Other real estate owned decreased by $413,000 or 30.2% from December 31, 1996 to
June 30, 1997 due to disposition of certain properties held by the Bank.
Borrowings
- ----------
Advances from Federal Home Loan Bank of Boston increased by $4,630,000 or 22.0%
from December 31, 1996 to June 30, 1997 primarily to fund loan growth during the
period.
Changes in Results of Operations
Earnings
- --------
Net income for the quarter ended June 30, 1997 was $1,494,000 as compared to
$1,190,000 for the second quarter of 1996, an increase of 25.5%. The increase
was primarily due to higher net interest income, and to a lesser extent,
increases in noninterest income and net securities gains and a decrease in
noninterest expense. The annualized return on average assets for the quarter
ended June 30, 1997
10
<PAGE>
was 1.42% as compared to 1.20% for the quarter ended June 30, 1996.
Net income for the six months ended June 30, 1997 was $2,908,000 as compared to
$2,474,000 for the same period of 1996. 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 reduction in noninterest expense. The annualized
return on average assets for the six months ended June 30, 1997 was 1.39% as
compared to 1.26% for six months ended June 30, 1996.
Net Interest Income
- -------------------
Net interest income increased $318,000 or 8.7% for the second quarter of 1997 as
compared to the same quarter of 1996. Interest income increased $651,000 or 8.8%
for the three month period ended June 30, 1997 as compared to the same period in
1996, primarily as a result of an increase in average interest earning assets of
$26,934,000 or 7.0% as compared to the prior year's quarter. The tax equivalent
yield on earning assets increased to 8.12% for the current quarter as compared
to 7.95% for the same quarter of 1996. Interest expense increased $333,000 or
8.9%, primarily from an increase in average interest bearing liabilities of
$22,212,000 or 6.6% as compared to the prior year's quarter. The Bank's cost of
funds increased to 4.55% for the current quarter as compared to 4.45% for the
same quarter of 1996.
Net interest income increased $482,000 or 6.7% for the six months ended June 30,
1997 as compared to the same period in 1996. Interest income increased
$1,079,000 or 7.4% as compared to the same six month period of 1996. The tax
equivalent yield on earning assets increased to 8.03% as compared to 7.93% for
the same six month period in 1996. In addition, average interest earning assets
rose 6.6% during the period. Interest expense increased $597,000 or 8.0% for the
first six months of 1997 as compared to the first six months of 1996. The Bank's
cost of funds increased to 4.53% for the first six months of 1997 compared to
4.48% for the same period of 1996. Average interest bearing liabilities
increased 6.8% as compared to the prior year's period.
Provision for Loan Losses
- -------------------------
The provision for loan losses increased to $200,000 for the second quarter of
1997 as compared to $100,000 for the same quarter of 1996 in response to an
increase in nonperforming loans since December 31, 1997. As of June 30, 1997,
nonperforming loans totaled $4,149,000 or 1.59% of total loans as compared to
$3,850,000 or 1.57% on June 30, 1996.
The allowance for loan losses as a percentage of nonperforming loans was 124.0%
as of June 30, 1997 as compared to 127.4% on June 30, 1996. Net loan charge-offs
for the second quarter of 1997 were $23,000 as compared to $267,000 for the same
quarter of 1996.
For the six months ended June 30, 1997, the provision for loan losses was
$350,000 as compared
11
<PAGE>
to $175,000 for the same period in 1996. Net charge-offs for the first six
months of 1997 totaled $80,000 as compared to $760,000 for the same period in
1996.
Nonperforming assets increased to $5,103,000 or 1.2% of total assets as of June
30, 1997 as compared to $4,306,000 or 1.0% as of December 31, 1996. (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 $551,000 for the second quarter of 1997 as compared to
$391,000 for the same quarter of 1996, an increase of 40.9%. The increase was
primarily due to net securities and trading account gains of $203,000 in the
current quarter as compared to $91,000 for the same quarter of 1996.
Noninterest income for the six months ended June 30, 1997 totaled $1,036,000 as
compared to $921,000 for the same period in 1996, an increase of 12.5%. The
primary reason for the increase was an increase in net securities and trading
account gains to $386,000 for the six month period ended June 30, 1997 from
$306,000 for the same period of 1996. In addition, there was income from option
call premiums of $26,000 for the six months ended June 30, 1997 which the Bank
did not participate in during 1996. Finally, brokerage fees increased by $24,000
or 72% on a year to date basis compared to 1996.
Other Expenses
- --------------
Noninterest expenses decreased $51,000 or 2.3% for the second quarter of 1997 as
compared to the same quarter of 1996. Salaries and benefits increased $44,000 or
3.9% during the second quarter of 1997 in comparison to the same quarter of 1996
as a result of normal compensation adjustments. Other expenses declined by
$89,000 or 18.4% due primarily to tighter expense control in 1997.
Noninterest expenses decreased $188,000 or 4.4% for the six months ended June
30, 1997 as compared to the same period in 1996. Salaries and benefits increased
$73,000 or 3.3% for the six months ended June 30, 1997 as compared to the same
period in 1996 due to normal compensation adjustments and additional staffing.
Consulting fees decreased by $83,000 or 68% on a year to date basis in 1997 as
compared to 1996 as there were non-recurring consulting fees relating to a
technology assessment in 1996. In addition, legal expense decreased $75,000 or
47.2% for the six month period ended June 30, 1997 as compared to the same
period in 1996 due primarily to additional costs resulting from the settlement
of a lawsuit during 1996. Finally, there was income
12
<PAGE>
from OREO of $18,000 for the first six months of 1997 as compared to expense of
$87,000 for the same period in 1996 due to gains on sales of certain OREO
properties during 1997.
Income Taxes
- ------------
Estimated income taxes for the second quarter of 1997 were $690,000 as compared
to $565,000 for the same quarter of 1996. The increase was primarily due to the
generation of income before taxes of $2,184,000 for the quarter ended June 30,
1997 as compared to $1,755,000 for the same quarter of 1996. The effective tax
rate for the second quarter of 1997 was 31.6% as compared to 32.2% for the same
quarter of 1996, and is lower than the expected statutory rate due to the
Federal and State dividends received deduction.
Estimated income taxes for the six months ended June 30, 1997 were $1,379,000 as
compared to $1,203,000 for the same period in 1996. The increase was primarily
due to the generation of income before taxes of $4,287,000 for the six months
ended June 30, 1997 as compared to $3,677,000 for the same period in 1996. The
effective rate for the first six months of 1997 was 32.2% as compared to 32.7%
for the same period of 1996.
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 1997 Compared to 1996
June 30, 1997 June 30, 1996 Increase (Decrease) Due to
------------------------- ------------------------- -------------------------
(dollars in thousands) Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Volume Rate Net(1)
------- -------- ---- ------- -------- ---- ------ ---- ------
ASSETS
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $254,630 $5,570 8.75% $239,791 $5,180 8.64% $ 324 $ 66 $ 390
Taxable investment securities (at cost) 149,467 2,683 7.18% 135,340 2,338 6.91% 251 94 345
Municipal bonds 3,249 55 6.77% 3,132 56 7.15% 2 (3) (1)
Federal funds sold 2,790 37 5.30% 4,171 65 6.23% (19) (9) (28)
Other interest-earning assets 2,637 35 5.31% 3,405 33 3.88% (8) 10 2
----------------- ----------------- -----------------------
Total interest-earning assets 412,773 8,380 8.12% 385,839 7,672 7.95% 550 158 708
----------------- ----------------- -----------------------
Noninterest-earning assets:
Cash and due from banks 4,992 4,994
Premises and equipment, net 3,060 3,450
Other assets 5,882 7,617
Less loan loss allowance (5,048) (5,023)
-------- --------
TOTAL ASSETS $421,659 $396,877
======== ========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
NOW and savings deposits $114,520 $727 2.54% $113,962 $722 2.53% $4 $1 $5
Time deposits 172,078 2,332 5.42% 166,786 2,296 5.51% 72 (36) 36
Mortgagors' escrow deposits 1,348 10 2.97% 1,318 10 3.03% 0 0 0
FHLB of Boston advances and
other borrowings 25,001 375 6.00% 20,044 275 5.49% 73 27 100
Securities sold under agreements
to repurchase 43,604 612 5.61% 32,229 420 5.21% 158 34 192
----------------- ----------------- -----------------------
Total interest-bearing
liabilities 356,551 4,056 4.55% 334,339 3,723 4.45% 307 26 333
----------------- ----------------- -----------------------
Noninterest-bearing liabilities:
Demand deposits 21,191 18,660
Other 1,212 1,112
Stockholders' equity 42,705 42,766
-------- --------
TOTAL LIABILITIES AND EQUITY $421,659 $396,877
======== ========
Net interest income before Federal
tax equivalent adjustment 4,324 3,949 $243 $132 $375
======================
Federal tax equivalent adjustment (371) (314)
------ ------
Net interest income $3,953 $3,635
====== ======
Net interest spread (tax equivalent basis) 3.57% 3.50%
==== ====
Net interest margin (tax equivalent basis) 4.19% 4.09%
==== ====
</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>
Six months ended Six months ended 1997 Compared to 1996
June 30, 1997 June 30, 1996 Increase (Decrease) Due to
------------------------- ------------------------- -------------------------
(dollars in thousands) Average Yield/ Average Yield/
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 $252,502 $10,938 8.66% $238,628 $10,303 8.64% $ 601 $ 34 $ 635
Taxable investment securities 147,453 5,215 7.07% 133,297 4,589 6.89% 498 128 626
Municipal bonds 3,250 114 7.02% 3,097 111 7.17% 5 (2) 3
Federal funds sold 3,543 93 5.25% 6,559 170 5.18% (79) 2 (77)
Other interest-earning assets 3,002 86 5.73% 2,859 64 4.48% 3 19 22
----------------- ----------------- -----------------------
Total interest-earning assets 409,750 16,446 8.03% 384,440 15,237 7.93% 1,028 181 1,209
----------------- ----------------- -----------------------
Noninterest-earning assets:
Cash and due from banks 4,952 4,375
Premises and equipment, net 3,080 3,467
Other assets 6,165 6,764
Less loan loss allowance (4,975) (5,233)
-------- --------
TOTAL ASSETS $418,972 $393,813
======== ========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
NOW and savings deposits $112,072 $1,410 2.52% $113,561 $1,441 2.54% ($ 19) (12) ($ 31)
Time deposits 173,071 4,673 5.40% 165,082 4,585 5.55% 218 (130) 88
Mortgagors' escrow deposits 1,100 15 2.73% 1,058 16 3.02% 1 (2) (1)
FHLB of Boston advances
and other borrowings 24,282 748 6.16% 19,438 530 5.45% 143 75 218
Securities sold under agreements
to repurchase 43,797 1,171 5.35% 32,472 848 5.22% 302 21 323
----------------- ----------------- -----------------------
Total interest-bearing
liabilities 354,322 8,017 4.53% 331,611 7,420 4.48% 645 (48) 597
----------------- ----------------- -----------------------
Noninterest-bearing liabilities:
Demand deposits 20,818 18,200
Other 1,232 1,044
Stockholders' equity 42,600 42,958
-------- --------
TOTAL LIABILITIES AND EQUITY $418,972 $393,813
======== ========
Net interest income before Federal
tax equivalent adjustment $8,429 $7,817 $383 $229 $612
======================
Federal tax equivalent adjustment (727) (597)
------ ------
Net interest income $7,702 $7,220
====== ======
Net interest spread (tax equivalent basis) 3.50% 3.45%
==== ====
Net interest margin (tax equivalent basis) 4.11% 4.07%
==== ====
</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.
a. Wednesday, May 14, 1997 - Annual Meeting
b. Directors elected at this meeting:
Andrew J. Meade
Frank R. Miller
Robert D. Morton
Dennis J. Stanek
c. Directors whose term of office as director continued after this
meeting:
Norbert H. Beauchemin
Walter J. Hushak
Michael J. Karabin
David P. Kelley
Frederick E. Kuhr
Joseph J. LaPorte
Ralph G. Mann
Anthony S. Pizzitola
c.1. The election of four directors for a three year term who, with the
eight directors whose term of office do not expire at this
meeting, will constitute the full Board of Directors.
For Withheld
--------- -------
Andrew J. Meade 1,767,655 117,875
Frank R. Miller 1,769,315 116,215
Robert D. Morton 1,769,315 116,215
Dennis J. Stanek 1,767,323 118,207
16
<PAGE>
2. The approval of the Corporation's 1997 Stock Option Plan
For Against Abstain
--------- ------- -------
Total Votes 1,346,925 226,215 28,287
3. The ratification of the appointment of Coopers & Lybrand, L.L.P.
as independent public accountants for the fiscal year ending
December 31, 1997
For Against Abstain
--------- ------- -------
Total Votes 1,867,641 9,322 8,567
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 Quarterly Report
on Form 10-Q for the quarterly period ended 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, 1997,
by and between the Bank and Robert D. Morton
(Incorporated by reference to Exhibit 10.1 to the
Registrant's Annual Report on Form 10-K).
17
<PAGE>
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 (Incorporated by reference to Exhibit 10.5 to
the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1996).
10.6 Bancorp Connecticut, Inc. 1997 Stock Option 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 second quarter
of 1997.
18
<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: August 12, 1997 By: /s/ Robert D. Morton
------------------------- -----------------------------------------
Robert D. Morton
Its President and Chief Executive
Officer (A duly authorized officer)
Date: August 12, 1997 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 for the quarterly period ended 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, 1997, by and between
the Bank and Robert D. Morton (Incorporated by reference to
Exhibit 10.1 to the Registrant=s 1996 Annual Report on Form
10-K).
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
(Incorporated by reference to Exhibit 10.5 to the Registrant=s
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996).
10.6 Bancorp Connecticut, Inc. 1997 Stock Option Plan
11.1 Statement re computation of per share earnings
27 Financial Data Schedule
BANCORP CONNECTICUT, INC.
1997 STOCK OPTION PLAN
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the Bancorp Connecticut, Inc. 1997 Stock Option
Plan is to provide an incentive to key Employees and Directors of Bancorp
Connecticut, Inc. (the "Corporation") and its subsidiaries, including
Southington Savings Bank (the "Bank"), who are in a position to contribute
materially to the long-term success of the Corporation and the Bank, to increase
their interest in the Corporation's and Bank's welfare, and to aid in attracting
and retaining employees of outstanding ability.
2. Definitions. Unless the context clearly indicates otherwise, the following
terms shall have the meanings set forth below:
(a) "Bank" shall mean Southington Savings Bank, a Connecticut stock
savings bank.
(b) "Board" shall mean the Board of Directors of the Corporation.
(c) "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
(d) "Corporation" shall mean Bancorp Connecticut, Inc., a Delaware
corporation.
(e) "Directors" shall mean members of the Board.
(f) "Disability" shall mean a medically determinable physical or mental
condition which causes an Employee or Director to be unable to engage
in any substantial gainful activity and which can be expected to
result in death or to be of long-continued and indefinite duration.
(g) "Employee" shall mean any common law employee, including officers, of
the Corporation or the Bank as determined under the Code and the
Treasury Regulations thereunder.
(h) "Fair Market Value" on any day shall mean (i) the closing price for
one share of Stock or (ii) the average of the highest reported bid and
lowest reported asked price for one share of Stock as furnished by The
Nasdaq Stock Market or a similar organization, in each case on such
day. For example, if the highest reported bid were $8 per share and
the lowest reported asked price were $10 per share, the Fair Market
Value would be $9 per share.
(i) "Grantee" shall mean an Employee or Director granted a Stock Option
under this Plan.
<PAGE>
(j) "Incentive Stock Option" shall mean an option granted pursuant to the
Incentive Stock Option provisions as set forth in Part II of this
Plan.
(k) "Non-Qualified Stock Option" shall mean an option granted pursuant to
the Non-Qualified Stock Option provisions as set forth in Part III of
this Plan.
(l) "Plan" shall mean the Bancorp Connecticut, Inc. 1997 Stock Option Plan
as set forth herein and as amended from time to time.
(m) "Stock" shall mean authorized but unissued shares of the Common Stock
of the Corporation or reacquired shares of the Corporation's Common
Stock.
(n) "Stock Option" shall mean an option granted pursuant to this Plan to
purchase shares of Stock.
(o) "Ten Percent Shareholder" shall mean an Employee who at the time a
Stock Option is granted owns stock possessing more than ten percent
(10%) of the total combined voting power of all stock of the
Corporation or of its parent or subsidiary corporation.
3. Shares of Stock Subject to this Plan. Subject to the provisions of Section
2 of Part IV, the Stock which may be issued or transferred pursuant to Stock
Options granted under this Plan and the Stock which is subject to outstanding
but unexercised Stock Options under this Plan shall not exceed 303,810 shares in
the aggregate. If a Stock Option shall expire or terminate for any reason, in
whole or in part, without being exercised, the number of shares of Stock as to
which such expired or terminated Stock Option shall not have been exercised may
again become available for the grant of Stock Options. There shall be no terms
and conditions in a Stock Option which provide that the exercise of an Incentive
Stock Option reduces the number of shares of Stock for which an outstanding
Non-Qualified Stock Option may be exercised; and there shall be no terms and
conditions in a Stock Option which provide that the exercise of a Non-Qualified
Stock Option reduces the number of shares of Stock for which an outstanding
Incentive Stock Option may be exercised.
4. Administration of this Plan. This Plan shall be administered by the Board.
Subject to the express provisions of this Plan, the Board shall have authority
to interpret this Plan, to prescribe, amend, and rescind rules and regulations
relating to it, to determine the terms and provisions of Stock Option
agreements, and to make all other determinations necessary or advisable for the
administration of this Plan. Any controversy or claim arising out of or related
to this Plan shall be determined unilaterally by and at the sole discretion of
the Board.
5. Amendment or Termination. The Board may, at any time, alter, amend,
suspend, discontinue, or terminate this Plan; provided, however, that such
action shall not adversely affect the right of Grantees to Stock Options
previously granted and no amendment, without the approval
-2-
<PAGE>
of the stockholders of the Corporation, shall increase the maximum number of
shares which may be awarded under this Plan in the aggregate, or modify the
purchase price of shares under this Plan or the eligibility requirements for
participation in this Plan.
6. Effective Date and Duration of this Plan. Subject to the approval of the
stockholders of the Corporation on or before such date, this Plan shall become
effective on May 15, 1997. This Plan shall terminate at the close of business on
May 14, 2007 and no Stock Option may be granted under this Plan thereafter, but
such termination shall not affect any Stock Option theretofore granted.
II. INCENTIVE STOCK OPTIONS
1. Granting of Incentive Stock Options.
(a) Only Employees shall be eligible to receive Incentive Stock Options
under this Plan.
(b) The purchase price of each share of Stock subject to an Incentive
Stock Option shall not be less than 100% of the Fair Market Value of a
share of the Stock on the date the Incentive Stock Option is granted;
provided, however, that the purchase price of each share of Stock
subject to an Incentive Stock Option granted to a Ten Percent
Shareholder shall not be less than 110% of the Fair Market Value of a
share of the Stock on the date the Incentive Stock Option is granted.
(c) No Incentive Stock Option shall be exercisable more than ten years
from the date such Incentive Stock Option is granted; provided,
however, that an Incentive Stock Option granted to a Ten Percent
Shareholder shall not be exercisable more than five years from the
date the Incentive Stock Option was granted.
(d) The Board shall determine and designate from time to time those
Employees who are to be granted Incentive Stock Options and specify
the number of shares of Stock subject to each Incentive Stock Option.
(e) The Board, in its sole discretion, shall determine whether any
particular Incentive Stock Option shall become exercisable in one or
more installments, specify the installment dates, and, within the
limitations herein provided, determine the total period during which
the Incentive Stock Option is exercisable. Further, the Board may make
such other provisions as may appear generally acceptable or desirable
to the Board or necessary to qualify its grants under the provisions
of Section 422 of the Code.
(f) The Board may grant at any time new Incentive Stock Options to an
Employee who has previously received Incentive Stock Options or other
options, whether such prior Incentive Stock Options or other options
are still outstanding, have previously been exercised in whole or in
part, or are canceled in connection with the issuance
-3-
<PAGE>
of new Incentive Stock Options. The exercise price of the new
Incentive Stock Options may be established by the Board without regard
to the existing Incentive Stock Options or other options.
(g) Notwithstanding any other provisions hereof, the aggregate Fair Market
Value (determined at the time the option is granted) of the Stock with
respect to which Incentive Stock Options are exercisable for the first
time by any Employee during any calendar year (under all such plans of
the Corporation and the Bank and any parent or subsidiary corporation
of either) shall not exceed $100,000. To the extent that such $100,000
limit shall be exceeded in any calendar year, any such Stock Options
exercisable for the first time in excess of such limitation shall be
treated as Non-Qualified Stock Options.
-4-
<PAGE>
2. Exercise of Incentive Stock Options. The exercise price of an Incentive
Stock Option shall be payable on exercise of the option (i) in cash or by check,
bank draft or postal or express money order, (ii) by the surrender of Stock then
owned by the Grantee, or (iii) partially in accordance with clause (i) and
partially in accordance with clause (ii) of this Section. Shares of Stock so
surrendered in accordance with clause (ii) or (iii) shall be valued at the Fair
Market Value thereof on the date of exercise, surrender of such Stock to be
evidenced by delivery of the certificate(s) representing such shares in such
manner, and endorsed in such form, or accompanied by stock powers endorsed in
such form, as the Corporation may determine.
3. Termination of Employment.
(a) If a Grantee's employment is terminated other than by Disability or
death, the term(s) of any then outstanding Incentive Stock Option(s)
held by the Grantee shall extend for a period ending on the earlier of
(i) the date established by the Board at the time of grant or (ii)
three months after such termination of employment, and such Incentive
Stock Option shall be exercisable to the extent it was exercisable as
of the date of termination of employment.
(b) If a Grantee's employment is terminated by reason of Disability, the
term of any then outstanding Incentive Stock Option held by the
Grantee shall extend for a period ending on the earlier of (i) the
date established by the Board at the time of grant or (ii) twelve
months after the Grantee's last date of employment, and such Incentive
Stock Option shall be exercisable to the extent it was exercisable as
of such last date of employment.
(c) If a Grantee's employment is terminated by reason of death, the
representative of the Grantee's estate or beneficiaries thereof to
whom the Incentive Stock Option has been transferred shall have the
right, during the period ending on the earlier of (i) the date
established by the Board at the time of grant or (ii) twelve months
after the date of the Grantee's death, to exercise any then
outstanding Incentive Stock Options in whole or in part. If a Grantee
dies without having fully exercised any then outstanding Incentive
Stock Options, the representative of the Grantee's estate or
beneficiaries thereof to whom the Incentive Stock Options have been
transferred shall have the right to exercise such Incentive Stock
Options in whole or in part until such Incentive Stock Options expire.
III. NON-QUALIFIED STOCK OPTIONS
1. Granting of Non-Qualified Stock Options.
(a) Employees shall be eligible to receive Non-Qualified Stock
Options under this Plan. Directors who are not also Employees
shall also be eligible to receive Non-Qualified Stock Options.
-5-
<PAGE>
(b) The purchase price of each share of Stock subject to a
Non-Qualified Stock Option shall not be less than 100% of the
Fair Market Value of a share of the Stock on the date the
Non-Qualified Stock Option is granted.
(c) No Non-Qualified Stock Option shall be exercisable more than ten
years from the date such Non-Qualified Stock Option is granted.
(d) The Board shall determine and designate from time to time those
Employees and Directors who are to be granted Non-Qualified Stock
Options and specify the number of shares of Stock subject to each
Non-Qualified Stock Option.
(e) The Board, in its sole discretion, shall determine whether any
particular Non-Qualified Stock Option shall become exercisable in
one or more installments, specify the installment dates, and,
within the limitations herein provided, determine the total
period during which the Non-Qualified Stock Option is
exercisable. Further, the Board may make such other provisions as
may appear generally acceptable or desirable to the Board.
(f) The Board may grant at any time new Non-Qualified Stock Options
to an Employee or Director who has previously received
Non-Qualified Stock Options or other options, whether such prior
Non-Qualified Stock Options or other options are still
outstanding, have previously been exercised in whole or in part,
or are canceled in connection with the issuance of new
Non-Qualified Stock Options.
2. Exercise of Non-Qualified Stock Options. The exercise price of a
Non-Qualified Stock Option shall be payable on exercise of the option (i) in
cash or by check, bank draft or postal or express money order, (ii) by the
surrender of Stock then owned by the Grantee, or (iii) partially in accordance
with clause (i) and partially in accordance with clause (ii) of this Section.
Shares of Stock so surrendered in accordance with clause (ii) or (iii) shall be
valued at the Fair Market Value thereof on the date of exercise, surrender of
such Stock to be evidenced by delivery of the certificate(s) representing such
shares in such manner, and endorsed in such form, or accompanied by stock powers
endorsed in such form, as the Corporation may determine. In addition, payment
may be made by surrender of shares of Stock issuable upon the exercise of the
Non-Qualified Stock Option. If a Grantee elects this method of payment, the
number of shares of Stock issuable upon the exercise of the Non-Qualified Stock
Option shall be computed in accordance with the following formula:
X = Y(A-B)
------
A
The following definitions apply:
X shall mean the number of shares of Stock to be issued
-6-
<PAGE>
Y shall mean the number of Non-Qualified Stock Options to be exercised A
shall mean the Fair Market Value of a share of Stock on the date of
exercise B shall mean the per share exercise price for the Non-Qualified
Stock Options to be exercised
3. Termination of Employment/Cessation of Directorship.
(a) If a Grantee's employment is terminated or a Director Grantee ceases
to be a Director (other than by Disability or death), the term(s) of
any then outstanding Non-Qualified Stock Option(s) held by the Grantee
shall extend for a period ending on the earlier of (i) the date
established by the Board at the time of grant or (ii) three months
after such termination of employment or cessation of being a Director,
and such Non-Qualified Stock Option shall be exercisable to the extent
it was exercisable as of the date of termination of employment or
cessation of being a Director.
(b) If a Grantee's employment is terminated by reason of Disability or a
Director Grantee ceases to be a Director by reason of Disability, the
term of any then outstanding Non-Qualified Stock Option held by the
Grantee shall extend for a period ending on the earlier of (i) the
date established by the Board at the time of grant or (ii) twelve
months after the Grantee's last date of employment or cessation of
being a Director, and such Non-Qualified Stock Option shall be
exercisable to the extent it was exercisable as of such last date of
employment or cessation of being a Director.
(c) If a Grantee's employment is terminated by reason of death or a
Director Grantee ceases to be a Director by reason of death, the
representative of the Grantee's estate or beneficiaries thereof to
whom the Non-Qualified Stock Option has been transferred shall have
the right, during the period ending on the earlier of (i) the date
established by the Board at the time of grant or (ii) twelve months
after the date of the Grantee's death, to exercise any then
outstanding Non-Qualified Stock Options in whole or in part. If a
Grantee dies without having fully exercised any then outstanding
Non-Qualified Stock Options, the representative of the Grantee's
estate or beneficiaries thereof to whom the Non-Qualified Stock
Options have been transferred shall have the right to exercise such
Non-Qualified Stock Options in whole or in part until such
Non-Qualified Stock Options expire.
IV. GENERAL PROVISIONS
1. Substitution of Options. In the event of a corporate merger or
consolidation, or the acquisition by the Corporation of property or stock of an
acquired corporation or any reorganization or other transaction qualifying under
Section 424 of the Code, the Board may, in accordance with the provisions of
such Section 424, substitute Stock Options under this Plan for stock options
under
-7-
<PAGE>
the plan of the acquired corporation provided (i) the excess of the
aggregate fair market value of the shares subject to the new Stock Options
immediately after the substitution over the aggregate exercise price of such
Stock Options is not more than the similar excess immediately before such
substitution and (ii) the new Stock Option does not give the Employee or
Director additional benefits, including without limitation any extension of the
exercise period.
2. Adjustment Provisions.
(a) If a dividend shall be declared upon the Stock payable in shares of
the Corporation's common stock, the number of shares of Stock then
subject to any Stock Option outstanding under this Plan and the number
of shares reserved for the grant of Stock Options pursuant to this
Plan shall be adjusted by adding to each such share the number of
shares which would be distributable in respect thereof if such shares
had been outstanding on the date fixed for determining the
stockholders of the Corporation entitled to receive such share
dividend.
(b) If the shares of Stock outstanding are changed into or exchanged for a
different number or kind of shares or other securities of the
Corporation or of another corporation, whether through reorganization,
recapitalization, split-up, reverse stock split, combination of
shares, merger, or consolidation, then there shall be substituted for
each share of Stock subject to any such Stock Option and for each
share of Stock reserved for the grant of Stock Options pursuant to
this Plan the number and kind of shares or other securities into which
each outstanding share of Stock shall have been so changed or for
which each such share shall have been exchanged.
(c) If there shall be any change, other than as specified above in this
Section 2, in the number or kind of outstanding shares of Stock or of
any shares or other securities into which such shares shall have been
changed or for which they shall have been exchanged, then if the Board
shall, in its sole discretion, determine that such change equitably
requires an adjustment in the number or kind of shares theretofore
reserved for the grant of Stock Options pursuant to this Plan and of
the shares then subject to Stock Options, such adjustment shall be
made by the Board and shall be effective and binding for all purposes
of this Plan and of each Stock Option outstanding thereunder.
(d) In the case of any such substitution or adjustment as provided for in
this Section 2, the exercise price set forth in each outstanding Stock
Option for each share covered thereby prior to such substitution or
adjustment will be the exercise price for all shares or other
securities which shall have been substituted for such share or to
which such share shall have been adjusted pursuant to this Section 2,
and such exercise price per share shall be adjusted accordingly.
(e) No adjustment or substitution provided for in this Section 2 shall
require the Corporation to sell a fractional share, and the total
substitution or adjustment
-8-
<PAGE>
with respect to each outstanding Stock Option shall be limited
accordingly.
(f) Upon any adjustment made pursuant to this Section 2 the Corporation
will, upon request, deliver to the Grantee a certificate setting forth
the exercise price thereafter in effect and the number and kind of
shares or other securities thereafter purchasable on the exercise of
such Stock Option.
3. General.
(a) Each Stock Option shall be evidenced by a written instrument
containing such terms and conditions, not inconsistent with this Plan,
as the Board shall approve.
(b) The granting of a Stock Option in any year shall not give the Grantee
any right to similar grants in future years or any right to be
retained in the employ of the Corporation or any of it subsidiaries,
and all Employees shall remain subject to discharge to the same extent
as if this Plan were not in effect.
(c) No Grantee, and no beneficiary or other person claiming under or
through such Grantee, shall have any right, title or interest by
reason of any Stock Option to any particular assets of the
Corporation, or any shares of Stock allocated or reserved for the
purposes of this Plan or subject to any Stock Option except as set
forth herein. The Corporation shall not be required to establish any
fund or make any other segregation of assets to assure the payment of
any Stock Option.
(d) No right under this Plan shall be subject to anticipation, sale,
assignment, pledge, encumbrance, or charge except by will or the laws
of descent and distribution, and a Stock Option shall be exercisable
during the Grantee's lifetime only by the Grantee or the Grantee's
conservator.
(e) Notwithstanding any other provision of this Plan or agreements made
pursuant thereto, the Corporation's obligation to issue or deliver any
certificate or certificates for shares of Stock under a Stock Option,
and the transferability of Stock acquired by exercise of a Stock
Option, shall be subject to all of the following conditions:
(i) The effectiveness of any registration or other qualification of
such shares under any state or federal law or regulation, or the
maintaining in effect of any such registration or other
qualification which the Board shall, in its absolute discretion
upon the advice of counsel, deem necessary or advisable;
(ii) The obtaining of any other consent, approval, or permit from any
state or federal governmental agency which the Board shall, in
its absolute discretion upon the advice of counsel, determine to
be necessary or advisable; and
(iii) Each stock certificate issued pursuant to a Stock Option shall
bear the following legend:
-9-
<PAGE>
"The transferability of this certificate and the shares of Stock
represented hereby are subject to restrictions, terms and
conditions contained in the Bancorp Connecticut, Inc. 1997 Stock
Option Plan, and an Agreement between the registered owner of
such Stock and Bancorp Connecticut, Inc. A copy of the Plan and
Agreement are on file in the office of the Secretary of Bancorp
Connecticut, Inc."
(f) All payments to Grantees or to their legal representatives shall
be subject to any applicable tax, community property, or other
statutes or regulations of the United States or of any state
having jurisdiction thereof. The Grantee may be required to pay
to the Corporation the amount of any withholding taxes which the
Corporation is required to withhold with respect to a Stock
Option or its exercise. If such payment is not made when due, the
Corporation shall have the right to deduct, to the extent
permitted by law, from any payment of any kind otherwise due to
such person all or part of the amount required to be withheld.
(g) In the case of a grant of a Stock Option to any Employee of a
subsidiary of the Corporation, the Corporation may, if the Board
so directs, issue or transfer the shares, if any, covered by the
Stock Option to the subsidiary, for such lawful consideration as
the Board may specify, upon the condition or understanding that
the subsidiary will transfer the shares to the Employee in
accordance with the terms of the Stock Option specified by the
Board pursuant to the provisions of this Plan. For purposes of
this Section 3(g), a subsidiary shall mean any subsidiary
corporation of the Corporation as defined in Section 424 of the
Code.
(h) A Grantee entitled to Stock as a result of the exercise of a
Stock Option shall not be deemed for any purpose to be, or have
rights as, a stockholder of the Corporation by virtue of such
exercise, except to the extent a stock certificate is issued
therefor and then only from the date such certificate is issued.
No adjustments shall be made for dividends or distributions or
other rights for which the record date is prior to the date such
stock certificate is issued. The Corporation shall issue any
stock certificates required to be issued in connection with the
exercise of a Stock Option with reasonable promptness after such
exercise.
(i) The grant or exercise of Stock Options granted under this Plan
shall be subject to, and shall in all respects comply with,
applicable Connecticut law relating to such grant or exercise, or
to the number of shares which may be beneficially owned or held
by any Grantee.
-10-
Exhibit 11.1: Computation of Per Share Earnings
<TABLE>
<CAPTION>
Quarter ended Six months ended
(dollar amounts in thousands except June 30, June 30,
per share) ------------------- -------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income - primary and fully diluted $1,494 $1,190 $2,908 $2,474
====== ====== ====== ======
Weighted Average Common Stock
and Common Equivalent Stock
Weighted average common stock outstanding 2,540 2,684 2,552 2,700
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 176 181 175 165
------ ------ ------ ------
Weighted average common stock outstanding -
primary 2,716 2,865 2,727 2,865
====== ====== ====== ======
Weighted average common stock outstanding 2,540 2,684 2,552 2,700
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 193 214 196 186
------ ------ ------ ------
Weighted average common stock outstanding -
fully diluted 2,733 2,898 2,748 2,886
====== ====== ====== ======
Earnings per Weighted Average Common Share $0.588 $0.443 $1.139 $0.916
------ ------ ------ ------
Earnings per Common and Common Equivalent Share
Primary $0.550 $0.415 $1.066 $0.864
------ ------ ------ ------
Fully Diluted $0.547 $0.411 $1.058 $0.857
------ ------ ------ ------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,644
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,600
<TRADING-ASSETS> 252
<INVESTMENTS-HELD-FOR-SALE> 106,864
<INVESTMENTS-CARRYING> 44,715
<INVESTMENTS-MARKET> 44,442
<LOANS> 260,743
<ALLOWANCE> (5,145)
<TOTAL-ASSETS> 428,362
<DEPOSITS> 311,824
<SHORT-TERM> 41,276
<LIABILITIES-OTHER> 2,298
<LONG-TERM> 27,330
0
0
<COMMON> 2,793
<OTHER-SE> 41,093
<TOTAL-LIABILITIES-AND-EQUITY> 428,362
<INTEREST-LOAN> 10,938
<INTEREST-INVEST> 4,602
<INTEREST-OTHER> 179
<INTEREST-TOTAL> 15,719
<INTEREST-DEPOSIT> 6,098
<INTEREST-EXPENSE> 8,017
<INTEREST-INCOME-NET> 7,702
<LOAN-LOSSES> 350
<SECURITIES-GAINS> 336
<EXPENSE-OTHER> 4,101
<INCOME-PRETAX> 4,287
<INCOME-PRE-EXTRAORDINARY> 4,287
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,908
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.06
<YIELD-ACTUAL> 7.67
<LOANS-NON> 3,741
<LOANS-PAST> 408
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 11,117
<ALLOWANCE-OPEN> 4,875
<CHARGE-OFFS> 188
<RECOVERIES> 108
<ALLOWANCE-CLOSE> 5,145
<ALLOWANCE-DOMESTIC> 3,371
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,774
</TABLE>
