SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
- ---- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
X SECURITIES EXCHANGE ACT OF 1934
- ----
For the quarterly period ended March 31, 1998
--------------------------------------------
OR
- ---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
- ----
For the transition period from to
----------------------- -----------------
Commission file number 34-0-25158
---------------------------------
BANCORP CONNECTICUT, INC.
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(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 May 5, 1998 was 5,105,808.
(Excluding treasury shares)
<PAGE>
BANCORP CONNECTICUT, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements (unaudited)
<S> <C> <C>
(a) Consolidated Condensed Balance Sheets - March 31, 1998 and December
31, 1997 1
(b) Consolidated Condensed Statements of Income - Three months ended
March 31, 1998 and 1997 2
(c) Consolidated Condensed Statements of Changes in Capital Accounts -
three months ended March 31, 1998 and 1997 4
(d) Consolidated Condensed Statements of Cash Flows three months ended
March 31, 1998 and 1997 5
(e) Notes to the Consolidated Condensed Financial Statements - March
31, 1998 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
</TABLE>
<TABLE>
<CAPTION>
PART II. OTHER INFORMATION
- ---------------------------
<S> <C> <C>
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CONDITION
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
(unaudited)
<S> <C> <C>
Assets:
Cash and due from banks $6,041 $7,370
Federal funds sold 1,050 1,500
------------- -------------
Cash and cash equivalents 7,091 8,870
Trading account securities 358 612
Investment securities:
Available-for-sale (at market value) 204,282 166,712
Loans 262,484 261,681
Less: Allowance for loan losses (5,385) (5,306)
Deferred loan fees (905) (950)
------------- -------------
256,194 255,425
Federal Home Loan Bank stock 2,365 2,094
Bank premises and equipment 3,445 3,151
Accrued income receivable 2,982 2,760
Other real estate owned 874 1,178
Deferred taxes 1,459 1,512
Other assets 726 711
------------- -------------
Total assets $479,776 $443,025
============= =============
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand and Now $60,624 $50,698
Savings 110,532 95,760
Time 165,206 169,095
------------- -------------
336,362 315,553
Advances from Federal Home Loan Bank 15,630 20,630
Federal funds purchased and securities sold
under agreements to repurchase 75,328 55,368
Mortgagors' escrow accounts 918 1,746
Accrued taxes, expenses and other liabilities 3,378 2,781
------------- -------------
Total liabilities 431,616 396,078
------------- -------------
Shareholders' Equity:
Preferred stock -- --
Common stock 5,619 5,612
Additional paid-in capital 17,137 17,051
Retained earnings 29,232 28,149
Unrealized gain on investment securities, net 1,916 1,879
Treasury stock, at cost, 519,498 shares in 1998 and 1997 (5,744) (5,744)
------------- -------------
48,160 46,947
------------- -------------
Total liabilities and shareholders' equity $479,776 $443,025
============= =============
See notes to unaudited consolidated condensed financial statements.
</TABLE>
-1-
<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
---- ----
<S> <C> <C>
Interest Income:
Interest and fees on loans $5,620 $5,368
Interest and dividends on securities:
U.S. Government and agency securities 1,853 1,427
Other bonds and notes 123 39
Marketable equity securities 838 768
---------- -----------
2,814 2,234
Interest on trading account --- 18
Interest on Federal funds sold 121 56
Other interest and dividend income 34 33
---------- -----------
Total interest income 8,589 7,709
---------- -----------
Interest Expense:
Interest on NOW deposits 212 65
Interest on savings deposits 728 623
Interest on time deposits 2,239 2,341
---------- -----------
3,179 3,029
Interest on borrowed funds 1,308 932
---------- -----------
Total interest expense 4,487 3,961
---------- -----------
Net interest income 4,102 3,748
Provision for loan losses 100 150
---------- -----------
Net interest income after
provision for loan losses 4,002 3,598
Other Income:
Net securities gains 474 161
Net trading account gains 26 21
Trust fees 141 101
Service charges on deposit accounts 155 125
Other 198 76
---------- -----------
994 484
---------- -----------
Other Expenses:
Salaries and employee benefits 1,254 1,123
Occupancy 125 142
Furniture and equipment expense 99 96
Data processing 218 169
FDIC assessments 9 9
Legal expense 39 42
OREO expense (10) (13)
Advertising expense 103 55
Other 473 356
---------- -----------
2,310 1,979
---------- -----------
Income before taxes 2,686 2,103
Provision for income taxes 941 688
---------- -----------
Net income $1,745 $1,415
========== ===========
</TABLE>
-2-
<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - CONTINUED
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
---- ----
Basic:
<S> <C> <C>
Average shares 5,095,589 5,129,286
Net income per share $0.34 $0.28
Diluted:
Average shares & common stock equivalents 5,557,818 5,439,042
Net income per share $0.31 $0.26
Cash dividend per share $0.130 $0.103
</TABLE>
Average shares outstanding and per share data have been restated for all periods
presented to reflect a 2-for-1 stock split effected in the form of a stock
dividend paid on December 1, 1997.
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>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME TOTAL
COMMON PAID-IN RETAINED UNREALIZED TREASURY SHAREHOLDERS'
STOCK CAPITAL EARNINGS GAINS(LOSSES) STOCK EQUITY
------------ ------------ ------------ --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $2,768 $19,189 $24,609 $504 ($4,339) $42,731
Net income -- -- 1,415 -- -- 1,415
Change in unrealized gains(losses) -- -- -- (258) -- (258)
------------ ------------ ------------ --------------- ----------- --------------
Total comprehensive income -- -- 1,415 (258) -- 1,157
Stock options exercised 15 164 -- -- -- 179
Cash dividends declared -- -- -- -- -- --
($.103 per share) -- -- (528) -- -- (528)
Treasury stock purchased -- -- -- -- (561) (561)
Tax benefits related to common stock -- -- -- -- -- --
option exercises and restricted stock -- 63 -- -- -- 63
------------ ------------ ------------ --------------- ----------- --------------
Balance at March 31, 1997 $2,783 $19,416 $25,496 $246 ($4,900) $43,041
============ ============ ============ =============== =========== ==============
Balance at December 31, 1997 $5,612 $17,051 $28,149 $1,879 ($5,744) $46,947
Net income -- -- 1,745 -- -- 1,745
Change in unrealized gains(losses) -- -- -- 37 -- 37
------------ ------------ ------------ --------------- ----------- --------------
Total comprehensive income -- -- 1,745 37 -- 1,782
Stock options exercised 7 58 -- -- -- 65
Cash dividends declared -- -- -- -- -- --
($.13 per share) -- -- (662) -- -- (662)
Tax benefits related to common stock -- -- -- -- -- --
option exercises and restricted stock -- 28 -- -- -- 28
------------ ------------ ------------ --------------- ----------- --------------
Balance at March 31, 1998 $5,619 $17,137 $29,232 $1,916 ($5,744) $48,160
============ ============ ============ =============== =========== ==============
</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>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,745 $1,415
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation/amortization expense 102 114
Deferred income tax benefit (provision) 28 (5)
Gain on sale of OREO (62) (79)
Net (accretion) and amortization of bond
premium and discount (71) 45
Provision for loan losses 100 150
Provision for foreclosed real estate losses 25 37
Amortization of deferred loan points (63) (41)
Realized gains on held-for-sale securities (474) (161)
Net trading account gains (26) (21)
Decrease in trading account 280 2,381
Increase in accrued income receivable (222) (99)
Increase in accrued expenses payable and other
liabilities 582 211
Increase in other assets (14) (76)
-------------- ---------------
Total adjustments 185 2,456
-------------- ---------------
Net cash provided by operating activities 1,930 3,871
-------------- ---------------
Cash flows from investing activities:
Purchases of securities held-to-maturity -- (6,042)
Purchases of securities available-for-sale (58,323) (9,494)
Proceeds from sales of securities available-for-sale 9,247 9,515
Proceeds from maturities of securities 8,049 6,255
Paydowns on mortgage-backed securities 4,063 1,944
Purchases of Federal Home Loan Bank stock (271) (55)
Net increase in loans (870) (36)
Purchases of premises and equipment, net (396) (105)
Proceeds from sale of foreclosed real estate, net 449 342
-------------- ---------------
Net cash provided by (used in) investing activities (38,052) 2,324
-------------- ---------------
Cash flows from financing activities:
Net decrease in time deposits (3,889) (4,502)
Net increase (decrease) in other deposits 24,697 (1,833)
Net decrease in mortgagors' escrow (828) (789)
Proceeds from borrowings 5,000 6,800
Repayment of borrowings (10,000) (3,000)
Net decrease in Federal funds purchased (550) (1,500)
Net increase (decrease) in repurchase agreements 20,509 (1,303)
Repurchase of common stock -- (561)
Proceeds from exercise of stock options 66 179
Cash dividends paid (662) (527)
-------------- ---------------
Net cash provided by (used in) financing activities 34,343 (7,036)
-------------- ---------------
Net decrease in cash and cash equivalents (1,779) (841)
-------------- ---------------
Cash and cash equivalents at beginning of period 8,870 9,154
-------------- ---------------
Cash and cash equivalents at end of period $7,091 $8,313
============== ===============
Schedule of noncash investing and financing activities:
Change in unrealized gain on investment securities 37 (258)
Transfer of loans to other real estate owned 108 96
Foreclosed real estate sales financed -- 54
</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 "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 March 31, 1998 and the results of
operations and cash flows for the three month periods ended March 31, 1998 and
1997. The results of its operations for the periods shown are not necessarily
indicative of the results to be expected for the full year.
Certain 1997 amounts have been reclassified to conform with the 1998
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 March 31, 1998 and December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
Available-for-sale
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(000's) March 31, 1998 Cost Gains Losses Value
- ------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
United States Government
obligations $45,361 $140 $(91) $45,410
Municipal bonds 3,340 79 (1) 3,418
Mortgage-backed securities 72,972 380 (134) 73,218
Capital preferred securities 4,794 318 -- 5,112
Marketable equity securities 60,086 2,597 (82) 62,601
Mutual funds 14,522 38 (37) 14,523
--------- ------ ----- ---------
$ 201,075 $3,552 $(345) $ 204,282
========= ====== ===== =========
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Available-for-sale
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(000's) December 31, 1997 Cost Gains Losses Value
- ------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
United States Government
obligations $27,577 $106 $(67) $27,616
Municipal bonds 3,342 91 (1) 3,432
Mortgage-backed securities 64,988 574 (66) 65,496
Capital preferred securities 3,750 303 -- 4,053
Marketable equity securities 59,595 2,319 (99) 61,815
Mutual funds 4,314 9 (23) 4,300
--------- ------ ----- ---------
$ 163,566 $3,402 $(256) $ 166,712
========= ====== ===== =========
</TABLE>
NOTE 3. Activity in the Allowance for Loan Losses
<TABLE>
<S> <C> <C>
(dollars in thousands) 1998 1997
------ ------
Balance at beginning of year $5,306 $4,875
Provision for loan losses 100 150
Charge-offs (62) (85)
Recoveries 41 28
------ ------
Balance at March 31, $5,385 $4,968
====== ======
NOTE 4. Nonperforming Assets
March 31, December 31,
(dollars in thousands) 1998 1997
---------------------- -------- ------------
Nonaccrual loans
Residential real estate $ 2,070 $ 1,988
Commercial real estate 255 258
Commercial 179 387
Consumer 183 228
------- -------
Total nonaccrual loans 2,687 2,861
Accruing loans past due 90 days or more -- --
Total nonperforming loans 2,687 2,861
Other real estate owned 874 1,178
------- -------
Total nonperforming assets $ 3,561 $ 4,039
======= =======
Nonperforming loans as percentage
of total loans 1.02% 1.09%
======= =======
Nonperforming assets as a percentage
of total assets .74% .91%
======= =======
</TABLE>
-7-
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. Earnings Per Share
Effective December 31, 1997, the Corporation adopted the provisions of Statement
of Financial Standards No. 128, "Earnings per Share" ("SAS 128"). SFAS 128
establishes standards for computing and presenting earnings per share ("EPS").
It replaces the presentation of primary earnings per share with a presentation
of basic earnings per share. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures. The statement was effective for financial statements issued
for the periods ending after December 31, 1997 and has been applied for all
periods presented.
Basic earnings per share is computed using the weighted average common shares
outstanding during the period presented. The computation of diluted earnings per
share is similar to the computation of basic earnings per share except the
denominator is increased to include the number of additional common shares that
would have been outstanding if dilutive potential common shares had been issued.
The shares used in the computations for the quarterly periods ended March 31
were as follows:
<TABLE>
<CAPTION>
Quarter ended
March 31,
---------
<S> <C> <C>
(in thousands) 1998 1997
----- ----
Basic 5,096 5,129
Effect of dilutive stock options 462 310
----- -----
Diluted 5,558 5,439
===== =====
</TABLE>
The number of common shares used in the calculation have been restated for all
periods presented to reflect a 2-for-1 stock split effected in the form of a
stock dividend on December 1, 1997.
NOTE 6. Recent Accounting Pronouncements
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" (SFAS 130). SFAS 130 establishes standards for reporting and display of
comprehensive income, which is defined as the change in net equity of a business
enterprise during a period from non-owner sources. The Corporation adopted of
SFAS. The adoption of SFAS 130 had no impact of the Corporation's financial
condition or its results of operations.
-8-
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. Continued
The following table represents the components and the related tax effects
allocated to other comprehensive income for the first quarter of 1998:
<TABLE>
<CAPTION>
Before Tax Net of
Tax (Expense) Tax
Amount Benefit Amount
------ ------- ------
<S> <C> <C> <C>
Net unrealized gains (losses) on
securities arising during the period $ 535 $ (215) $ 320
Less: reclassification adjustment for
gain realized in net income $ 474 $ (191) $ 283
------ ------- ------
Net unrealized gains (losses) on
securities $ 61 $ (24) $ 37
====== ======= ======
</TABLE>
The following table represents components and the related tax effects allocated
to other comprehensive income for the first quarter of 1997:
<TABLE>
<CAPTION>
Before Tax Net of
Tax (Expense) Tax
Amount Benefit Amount
------ ------- ------
<S> <C> <C> <C>
Net unrealized gains (losses) on
securities arising during the period $ (276) $ 113 $ (163)
Less: reclassification adjustment for
gain realized in net income $ 161 $ (66) $ 95
------ ------- ------
Net unrealized gains (losses) on
securities $ (437) $ 179 $ (258)
====== ======= ======
</TABLE>
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, 1997 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.
First Quarter Ended March 31, 1998
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 investment securities increased from $166,712,000 as of December 31, 1997
to $204,282,000 as of March 31, 1998 due primarily to the investment of funds
acquired from a large business deposit. In addition, management implemented a
$10 million leveraging strategy involving the purchase of U.S. Government
obligations and agency securities including mortgage participation certificates
funded by broker repurchase agreements to provide a positive spread. Investment
in U.S. Goverment obligations, mortgage backed securities and mututal funds
increased $17,800,000, $7,722,000 and $10,223,000, respectively.
Deposits
Total deposits increased by $20,809,000 or 6.6% during the first quarter of 1998
as compared to December 31, 1997 due to the promotion of the Bank's money fund
checking product as well as the receipt of a large business money market
account.
Borrowings
Advances from the Federal Home Loan Bank of Boston decreased by $5,000,000 or
24.2% during the quarter ended March 31, 1998 as compared to December 31, 1997
due to the prepayment of advances with a weighted average interest rate of
6.10%. Also during the quarter, federal funds purchased and securities sold
under agreements to repurchase increased approximately $20 million or 36.0% due
to the financing of the above mentioned hedging strategy as well as an increase
in retail repurchase agreements.
-10-
<PAGE>
Changes in Results of Operation
Earnings
Net income for the quarter ended March 31, 1998 was $1,745,000 as compared to
$1,415,000 for the first quarter of 1997, an increase of 23.3%. Increases in net
interest income, net investment securities gains and other noninterest income
were the primary reasons for the higher earnings. The annualized return on
average assets for the quarter ended March 31, 1998 was 1.49% as compared to
1.36% for the quarter ended March 31, 1997.
Net Interest Income
Net interest income increased $354,000 or 9.4% for the first quarter of 1998 as
compared to the same quarter of 1997. Interest income increased $880,000 for the
first quarter of 1998 primarily from an increase in average interest earning
assets of $48,775,000 or 12.0% as compared to the prior year's quarter. The tax
equivalent yield on earning assets decreased to 7.84% for the current quarter as
compared to 7.92% for the same quarter of 1997. Interest expense increased
$526,000 or 13.3%, primarily from a $40,942,000 or 11.6% increase in average
interest bearing liabilities as compared to the prior year's quarter. The
overall cost of interest bearing liabilities increased to 4.57% for the first
quarter of 1998 as compared to 4.50% for the same quarter of 1997 and included a
penalty of $21,000 for the prepayment of $5 million in Federal Home Loan Bank
advances.
Provision for Loan Losses
The provision for loan losses decreased to $100,000 for the first quarter of
1998 as compared to $150,000 for the same quarter of 1997. The decrease is
commensurate with the reduction in nonperforming loans to $2,687,000 or 1.02% of
total loans as of March 31, 1998 as compared to $3,439,000 or 1.36% on March 31,
1997.
The allowance for loan losses as a percentage of nonperforming loans was 200.4%
as of March 31, 1998 as compared to 144.5% on March 31, 1997. Net loan
charge-offs for the first quarter of 1998 were $22,000 as compared to $57,000
for the first quarter of 1997.
Nonperforming assets decreased slightly to $3,561,000 or .7% of total assets as
of March 31, 1998 as compared to $4,039,000 or 1.1% as of December 31, 1997, a
decrease of 11.8%. (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.)
-11-
<PAGE>
Other Income
Noninterest income was $994,000 for the first quarter of 1998 as compared to
$484,000 for the same quarter of 1997, an increase of 105.4%. The increase was
primarily due to net securities gains of $474,000 in the current quarter as
compared to $161,000 for the same quarter of 1997. In addition commissions on
brokerage services increased $64,000 or 378.5% due to higher sales and the
renegotiation of the contract with the Bank's third party provider. Trust fees
also increased $40,000 or 39.6% due to a higher volume of assets under
management.
Other Expenses
Noninterest expenses increased by $331,000 or 16.7% for the first quarter of
1998 as compared to the same quarter of 1997. Salaries and employee benefits
increased $131,000 or 11.7% during the current quarter as compared to the same
quarter of last year due to normal merit adjustments, an increase in the Bank's
profit sharing contribution and the addition of the Bank's investment brokerage
counselor to the Bank's payroll. Under a previous arrangement, the brokerage
counselor's salary had been paid for by the Bank's third party provider of
brokerage services. Data processing services increased $49,000 or 29.0% during
the quarter due a higher volume of accounts serviced and the conversion to check
image processing. Advertising expenses also increased $48,000 or 87.3% due to
promotion of the Bank's demand deposit image statements and money fund checking
product.
Income Taxes
Estimated income taxes for the first quarter of 1998 were $941,000 as compared
to $688,000 for the same quarter of 1997. The increase was primarily due to the
generation of income before taxes of $2,686,000 through March 31, 1998 as
compared to $2,103,000 for the same period of 1997. The effective tax rate for
the first quarter of 1998 was 35.0% as compared to 32.7% for the same period of
1997. The increased effective rate for the current quarter reflects the smaller
impact that the Federal and State dividends received deduction had on reducing
taxable income for the current quarter as compared to the same quarter in 1997.
-12-
<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 1998 Compared to 1997
March 31, 1997 March 31, 1997 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 $260,722 $5,620 8.62% $250,351 $5,368 8.58% $223 $29 $252
Taxable investment securities (at cost) 179,839 3,096 6.89% 145,419 2,542 6.99% 593 (39) 554
Municipal bonds 3,341 59 7.06% 3,251 58 7.14% 2 (1) 1
Federal funds sold 9,076 121 5.33% 4,305 56 5.20% 64 1 65
Other interest-earning assets 2,491 34 5.46% 3,368 33 3.92% (10) 11 1
-------------------- ----------------- --------------------------
Total interest-earning assets 455,469 8,930 7.84% 406,694 8,057 7.92% 872 1 873
-------------------- ----------------- --------------------------
Noninterest-earning assets:
Cash and due from banks 6,888 4,910
Premises and equipment, net 3,243 3,100
Other assets 7,978 6,453
Less loan loss allowance (5,343) (4,902)
----------- ---------
TOTAL ASSETS $468,235 $416,255
=========== =========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
NOW and savings deposits $130,913 $934 2.85% $109,597 $682 2.49% $144 $108 $252
Time deposits 168,122 2,239 5.33% 174,076 2,341 5.38% (79) (23) (102)
Mortgagors' escrow deposits 1,030 6 2.33% 849 6 2.83% 1 (1) 0
FHLB of Boston advances 23,066 356 6.17% 23,556 348 5.91% (7) 15 8
Federal funds purchased and securities
sold under agreement to repurchase 69,881 952 5.45% 43,992 584 5.31% 352 16 368
-------------------- ----------------- --------------------------
Total interest-bearing
liabilities 393,012 4,487 4.57% 352,070 3,961 4.50% 411 115 526
-------------------- ----------------- --------------------------
Noninterest-bearing liabilities:
Demand deposits 26,403 20,441
Other 1,472 1,247
Stockholders' equity 47,348 42,497
-------- --------
TOTAL LIABILITIES AND EQUITY $468,235 $416,255
======== ========
Net interest income before Federal
tax equivalent adjustment 4,443 4,096 $461 ($114) $347
======================
Federal tax equivalent adjustment (341) (348)
------ ------
Net interest income $4,102 $3,748
====== ======
Net interest spread (tax equivalent basis) 3.27% 3.42%
======= ======
Net interest margin (tax equivalent basis) 3.90% 4.03%
======= ======
</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
-13-
<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.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C> <C>
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).
</TABLE>
-14-
<PAGE>
<TABLE>
<S> <C> <C>
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).
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
(Incorporated by reference to Exhibit 10.6 to the
Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997).
27 Financial Data Schedule
(b) Reports on Form 8-K.
</TABLE>
The Registrant did not file any Report on Form 8-K during the first
quarter of 1998.
-15-
<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.
<TABLE>
<S> <C>
BANCORP CONNECTICUT, INC.
---------------------------------------------
(Registrant)
Date: May 8, 1998 By: /s/ Robert D. Morton
----------------- -----------------------------------------
Robert D. Morton
Its President and Chief Executive
Officer (A duly authorized officer)
Date: May 8, 1998 By: /s/ Anthony Priore, Jr.
----------------- -----------------------------------------
Anthony Priore, Jr.
Its Treasurer and Secretary
(Chief Accounting Officer)
</TABLE>
<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
(Incorporated by reference to Exhibit 10.6 to the
Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997).
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Statements of Condition at March 31, 1998 (unaudited) and
the Consolidated Condensed Statements of Income for the Three Months Ended March
31, 1998 (unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,041
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,050
<TRADING-ASSETS> 358
<INVESTMENTS-HELD-FOR-SALE> 204,282
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 262,484
<ALLOWANCE> (5,385)
<TOTAL-ASSETS> 479,776
<DEPOSITS> 336,362
<SHORT-TERM> 51,448
<LIABILITIES-OTHER> 4,296
<LONG-TERM> 39,510
0
0
<COMMON> 5,619
<OTHER-SE> 42,541
<TOTAL-LIABILITIES-AND-EQUITY> 479,776
<INTEREST-LOAN> 5,620
<INTEREST-INVEST> 2,814
<INTEREST-OTHER> 155
<INTEREST-TOTAL> 8,589
<INTEREST-DEPOSIT> 3,179
<INTEREST-EXPENSE> 4,487
<INTEREST-INCOME-NET> 4,102
<LOAN-LOSSES> 100
<SECURITIES-GAINS> 474
<EXPENSE-OTHER> 2,310
<INCOME-PRETAX> 2,686
<INCOME-PRE-EXTRAORDINARY> 2,686
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,745
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.31
<YIELD-ACTUAL> 7.54
<LOANS-NON> 2,687
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,771
<ALLOWANCE-OPEN> 5,306
<CHARGE-OFFS> 62
<RECOVERIES> 40
<ALLOWANCE-CLOSE> 5,385
<ALLOWANCE-DOMESTIC> 3,448
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,936
</TABLE>
