SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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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
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BANCORP CONNECTICUT, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 061394443
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
121 Main Street, Southington, CT 06489
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 860-628-0351
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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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date. The number of shares of common
stock, par value $1.00 per share, outstanding on October 30, 1998 was 5,122,268.
(Excluding treasury shares)
<PAGE>
BANCORP CONNECTICUT, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C> <C>
Item 1. Financial Statements (unaudited)
(a) Consolidated Condensed Balance Sheets - September 30, 1998
and December 31, 1997 1
(b) Consolidated Condensed Statements of Income - Three months
and nine months ended September 30, 1998 and 1997 2
(c) Consolidated Condensed Statements of Changes in Capital
Accounts - nine months ended September 30, 1998 and 1997 4
(d) Consolidated Condensed Statements of Cash Flows -
nine months ended September 30, 1998 and 1997 5
(e) Notes to the Consolidated Condensed Financial Statements -
September 30, 1998 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
<CAPTION>
PART II. OTHER INFORMATION
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<S> <C> <C>
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
</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>
September 30, December 31,
1998 1997
------------------- -------------------
(unaudited)
<S> <C> <C>
Assets:
Cash and due from banks $ 8,874 $ 7,379
Federal funds sold 0 1,500
------------------- -------------------
Cash and cash equivalents 8,874 8,879
Trading account securities 382 612
Investment securities:
Available-for-sale (at market value) 225,926 166,712
Loans 270,621 261,704
Less: Allowance for loan losses (5,534) (5,306)
Deferred loan fees (859) (950)
------------------- -------------------
264,228 255,448
Federal Home Loan Bank stock 2,832 2,094
Bank premises and equipment 4,607 3,151
Accrued income receivable 3,186 2,760
Other real estate owned 533 1,178
Deferred taxes 1,928 1,512
Other assets 1,773 679
------------------- -------------------
Total assets $514,269 $443,025
=================== ===================
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand and NOW $ 63,172 $ 50,698
Savings 100,065 97,506
Time 163,805 169,095
------------------- -------------------
327,042 317,299
Advances from Federal Home Loan Bank 45,022 20,630
Federal funds purchased and securities sold
under agreements to repurchase 89,342 55,368
Accrued taxes, expenses and other liabilities 3,719 2,781
------------------- -------------------
Total liabilities 465,125 396,078
------------------- -------------------
Shareholders' Equity:
Preferred stock -- --
Common stock 5,636 5,612
Additional paid-in capital 17,317 17,051
Retained earnings 31,133 28,149
Accumulated other comprehensive income 802 1,879
Treasury stock, at cost, 519,498 shares in 1998 and 1997 (5,744) (5,744)
------------------- -------------------
49,144 46,947
------------------- -------------------
Total liabilities and shareholders' equity $514,269 $443,025
=================== ===================
</TABLE>
See notes to unaudited consolidated condensed financial statements.
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<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ -----------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $5,629 $5,653 $16,857 $16,575
Interest and dividends on securities:
U.S. Government and agency securities 2,260 1,412 6,108 4,281
Other bonds and notes 177 91 439 211
Marketable equity securities 786 792 2,442 2,405
---------------- ---------------- ---------------- ----------------
3,223 2,295 8,989 6,897
Interest on trading account 4 9 7 28
Interest on Federal funds sold 63 32 224 125
Other interest and dividend income 42 35 114 102
---------------- ---------------- ---------------- ----------------
Total interest income 8,961 8,024 26,191 23,727
---------------- ---------------- ---------------- ----------------
Interest Expense:
Interest on NOW deposits 246 130 697 291
Interest on savings deposits 633 635 1,995 1,899
Interest on time deposits 2,148 2,343 6,567 7,016
---------------- ---------------- ---------------- ----------------
3,027 3,108 9,259 9,206
Interest on borrowed funds 1,737 944 4,467 2,863
---------------- ---------------- ---------------- ----------------
Total interest expense 4,764 4,052 13,726 12,069
---------------- ---------------- ---------------- ----------------
Net interest income 4,197 3,972 12,465 11,658
Provision for loan losses 50 150 218 500
---------------- ---------------- ---------------- ----------------
Net interest income after
provision for loan losses 4,147 3,822 12,247 11,158
Other Income:
Net securities gains 354 268 1,166 604
Net trading account (loss) gain (178) 24 (137) 74
Trust fees 160 134 440 343
Service charges on deposit accounts 178 133 504 394
Other 248 4 761 200
---------------- ---------------- ---------------- ----------------
762 563 2,734 1,615
---------------- ---------------- ---------------- ----------------
Other Expenses:
Salaries and employee benefits 1,598 1,193 4,298 3,486
Occupancy 129 121 385 400
Furniture and equipment expense 261 146 504 384
Data processing 166 142 536 422
Legal expense 43 42 126 126
OREO expense 17 (5) (1) (23)
Advertising expense 114 91 328 259
Other 527 452 1,462 1,229
---------------- ---------------- ---------------- ----------------
2,855 2,182 7,638 6,283
---------------- ---------------- ---------------- ----------------
Income before taxes 2,054 2,203 7,343 6,490
Provision for income taxes 525 696 2,318 2,075
---------------- ---------------- ---------------- ----------------
Net income $1,529 $1,507 $ 5,025 $ 4,415
================ ================ ================ ================
</TABLE>
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<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - CONTINUED
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Basic:
Average shares 5,115,183 5,077,022 5,106,080 5,095,344
Net income per share $0.30 $0.30 $0.98 $0.87
Diluted:
Average shares & common stock equivalents 5,538,043 5,462,980 5,555,980 5,430,162
Net income per share $0.28 $0.28 $0.90 $0.81
Cash dividend per share $0.135 $0.125 $0.400 $0.338
</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.
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<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) $42,731
Net income -- -- 4,415 -- -- 4,415
Change in unrealized gains(losses) -- -- -- 926 -- 926
------ ------- -------- ------- ------- --------
Total comprehensive income -- -- 4,415 926 -- 5,341
Stock options exercised 35 416 -- -- -- 451
Cash dividends declared -- -- -- -- -- --
($.338 per share) -- -- (1,720) -- -- (1,720)
Treasury stock purchased -- -- -- -- (1,405) (1,405)
Tax benefits related to common stock -- -- -- -- -- --
option exercises and restricted stock -- 160 -- -- -- 160
------ ------- -------- ------- ------- --------
Balance at September 30, 1997 $2,803 $19,765 $27,304 $1,430 ($5,744) $45,558
====== ======= ======== ======= ======= ========
Balance at December 31, 1997 $5,612 $17,051 $28,149 $ 1,879 ($5,744) $46,947
Net income -- -- 5,025 -- -- 5,025
Change in unrealized gains(losses) -- -- -- (1,077) -- (1,077)
------ ------- -------- ------- ------- --------
Total comprehensive income -- -- 5,025 (1,077) -- 3,948
Stock options exercised 24 184 -- -- -- 208
Cash dividends declared -- -- -- -- -- --
($.40 per share) -- -- (2,041) -- -- (2,041)
Tax benefits related to common stock -- -- -- -- -- --
option exercises and restricted stock -- 82 -- -- -- 82
------ ------- -------- ------- ------- --------
Balance at September 30, 1998 $5,636 $17,317 $31,133 $ 802 ($5,744) $49,144
====== ======= ======== ======= ======= ========
</TABLE>
See notes to unaudited consolidated condensed financial statements
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<PAGE>
BANCORP CONNECTICUT, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------------
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,025 $ 4,415
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation/amortization expense 404 342
Deferred income tax provision (benefit) 325 (121)
Gain on sale of OREO (123) (196)
Net accretion and amortization of bond
premium and discount (475) 64
Provision for loan losses 218 500
Provision for foreclosed real estate losses 53 94
Amortization of deferred loan points (220) (113)
Realized gains on available-for-sale securities (1,166) (604)
Net trading account losses (gains) 137 (74)
Decrease in trading account 94 2,308
Increase in accrued income receivable (426) (182)
Increase (decrease) in accrued expenses payable and
other liabilities 1,020 (24)
Increase in other assets (1,041) (385)
------------------ ------------------
Total adjustments (1,200) 1,609
------------------ ------------------
Net cash provided by operating activities 3,825 6,024
------------------ ------------------
Cash flows from investing activities:
Purchases of securities held-to-maturity -- (8,142)
Purchases of securities available-for-sale (147,584) (41,494)
Proceeds from sales of securities available-for-sale 56,481 31,056
Proceeds from maturities of securities 13,088 20,260
Paydowns on mortgage-backed securities 18,623 5,772
Purchases of Federal Home Loan Bank stock (737) (55)
Net increase in loans (8,908) (11,988)
Purchases of premises and equipment, net (1,831) (152)
Proceeds from sale of foreclosed real estate, net 762 925
------------------ ------------------
Net cash used in investing activities (70,106) (3,818)
------------------ ------------------
Cash flows from financing activities:
Net decrease in time deposits (5,290) (4,546)
Net increase in other deposits 15,034 4,954
Proceeds from borrowings 148,668 32,361
Repayment of borrowings (124,276) (25,731)
Net decrease in Federal funds purchased (2,015) (625)
Net increase (decrease) in repurchase agreements 35,989 (4,814)
Repurchase of common stock -- (1,405)
Proceeds from exercise of stock options 208 451
Cash dividends paid (2,042) (1,720)
------------------ ------------------
Net cash (used in) provided by financing activities 66,276 (1,075)
------------------ ------------------
Net (decrease) increase in cash and cash equivalents (5) 1,131
------------------ ------------------
Cash and cash equivalents at beginning of period 8,879 9,336
------------------ ------------------
Cash and cash equivalents at end of period $ 8,874 $ 10,467
================== ==================
Schedule of noncash investing and financing activities:
Change in unrealized loss on investment securities ($1,077) $926
Transfer of loans to other real estate owned 131 158
Foreclosed real estate sales financed -- 212
</TABLE>
See notes to unaudited consolidated condensed financial statements.
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<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 September 30, 1998 and the results
of operations and cash flows for the three month and nine month periods ended
September 30, 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 September 30, 1998 and December 31, 1997
are as follows:
<TABLE>
<CAPTION>
Available-for-sale
--------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(000's) September 30, 1998 Cost Gains Losses Value
- ------------------------------------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
United States Government and
federal agency obligations $ 43,903 $ 843 $ (9) $ 44,737
Municipal bonds 3,586 118 -- 3,704
Mortgage-backed securities 98,077 688 (49) 98,716
Capital preferred securities 10,903 154 (204) 10,853
Marketable equity securities 60,641 1,110 (1,197) 60,554
Mutual funds 7,487 -- (125) 7,362
-------- ------ ------- --------
$224,597 $2,913 $(1,584) $225,926
======== ====== ======= ========
</TABLE>
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<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 and
federal agency 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>
<CAPTION>
(dollars in thousands) 1998 1997
------ ------
<S> <C> <C>
Balance at beginning of year $5,306 $4,875
Provision for loan losses 218 500
Charge-offs (85) (264)
Recoveries 95 142
------ ------
Balance at September 30, $5,534 $5,253
====== ======
</TABLE>
NOTE 4. Nonperforming Assets
<TABLE>
<CAPTION>
September 30, December 31,
(dollars in thousands) 1998 1997
---------------------- ------ ------
<S> <C> <C>
Nonaccrual loans
Residential real estate $1,142 $1,988
Commercial real estate 64 258
Commercial 619 387
Consumer 242 228
------ ------
Total nonaccrual loans 2,067 2,861
Accruing loans past due 90 days or more 37 --
------ ------
Total nonperforming loans 2,104 2,861
Other real estate owned 533 1,178
------ ------
Total nonperforming assets $2,637 $4,039
====== ======
Nonperforming loans as percentage
of total loans .78% 1.09%
====== ======
Nonperforming assets as a percentage
of total assets .51% .91%
====== ======
</TABLE>
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<PAGE>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED 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 15, 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 and nine month periods
ended September 30, were as follows:
<TABLE>
<CAPTION>
Quarter ended Nine months ended
September 30, September 30,
------------------------ -----------------------
(in thousands) 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic 5,115 5,077 5,106 5,095
Effect of dilutive stock options 423 386 450 335
----- ----- ----- -----
Diluted 5,538 5,463 5,556 5,430
===== ===== ===== =====
</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 Financial Accounting Standards Board (FASB) issued Statement
No. 130, "Reporting Comprehensive Income" (FAS 130). FAS 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 FAS 130 as of January 1, 1998. The
Corporation's one source of comprehensive income is the unrealized gain(loss) on
investment securities.
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<PAGE>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 6. Continued
The following table represents the components and the related tax effects
allocated to other comprehensive income for the nine months ended September 30,
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 $ (637) $ 256 $ (381)
Less: reclassification adjustment for
gains realized in net income $ 1,166 $(470) $ 696
------- ----- -------
Net unrealized gains (losses) on
securities $(1,803) $ 726 $(1,077)
======= ===== =======
</TABLE>
The following table represents components and the related tax effects allocated
to other comprehensive income for the nine months ended September 30, 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 $ 2,172 $(889) $ 1,283
Less: reclassification adjustment for
gains realized in net income $ 604 $(247) $ 357
------- ----- -------
Net unrealized gains (losses) on
securities $ 1,568 $(642) $ 926
======= ===== =======
</TABLE>
On June 15, 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133).
FAS 133 is effective for all fiscal years beginning after June 15, 1999 (January
1, 2000 for the Corporation). FAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in the fair value
of derivative instruments are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. Management
anticipates that, due to its limited use of derivative instruments, the adoption
of FAS 133 will not have a significant effect on the Corporation's results of
operations or its financial position.
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<PAGE>
NOTE 7. Establishment of New Subsidiary
On April 23, 1998, the Bank began operation of a new subsidiary, BCIF Financial.
The primary function of BCIF Financial is to act as an auto finance sales
company. The operation of the new subsidiary had minimal impact on the financial
statements of the Corporation for the three month and nine month periods ended
September 30, 1998.
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.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Third Quarter Ended September 30, 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 $225,926,000 as of September 30, 1998 primarily due to the implementation of
approximately $43 million in leveraging strategies involving the purchase of U.
S. Government obligations and agency securities including mortgage participation
certificates. The investments were funded by broker repurchase agreements and
Federal Home Loan Bank borrowings to provide a positive net interest spread. An
$11.6 million growth in retail repurchase agreements since the beginning of the
year was also primarily invested in these securities as well as capital trust
preferred securities. Investment in U.S. Government obligations and agency
securities, mortgage backed securities and capital trust preferred securities
increased $16,326,000, $33,089,000 and $7,153,000, respectively from year end
1997.
Loans
Loans increased $8,917,000 or 3.4% during the first nine months of 1998
primarily due to a higher volume of commercial real estate loans originated and
loans closed by the Bank's auto loan financing subsidiary, BCI Financial.
Bank Premises and Equipment
Bank premises and equipment increased to $4,607,000 on September 30, 1998 as
compared to $3,151,000 on December 31, 1997 or 46.2% due to the capitalization
of hardware and software costs associated with bringing the Bank's core
processing system "in-house" from the service bureau environment it was
operating on. The conversion to the new core processing system was completed in
July, 1998. Fixed assets also increased due to leasehold improvements and
furniture and equipment costs incurred in the opening of a new branch office in
August, 1998.
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<PAGE>
Deposits
Total deposits increased by $9,743,000 or 3.1% during the first nine months of
1998 as compared to December 31, 1997 due to the promotion of the Bank's money
fund checking product as well as increases in both commercial and consumer
checking accounts.
Borrowings
Federal funds purchased and securities sold under agreements to repurchase
increased approximately $34 million or 61.4% due to the financing of the above
mentioned leveraging strategies as well as an increase in retail repurchase
agreements. Advances from the Federal Home Loan Bank of Boston also increased
$24 million to fund securities growth as well as loan growth.
.
Changes in Results of Operation
Earnings
Net income for the quarter ended September 30, 1998 was $1,529,000, slightly
above the $1,507,000 for the same quarter of 1997. Increases in net interest
income and other income were offset by higher expenses associated with the
conversion to a new in-house computer system, the opening of a new branch office
and the operation of a new auto financing subsidiary. The annualized return on
average assets for the quarter ended September 30, 1998 was 1.21% as compared to
1.42% for the quarter ended September 30, 1997.
Net income for the nine months ended September 30, 1998 was $5,025,000 as
compared to $4,415,000 the same period of 1997, an increase of 13.8.%. Increases
in net interest income, net investment securities gains and other noninterest
income contributed to the higher earnings. The annualized return on average
assets for the nine months ended September 30, 1998 was 1.38% as compared to
1.40% for the nine months ended September 30, 1997. Return on equity increased
to 13.9% as compared to 13.7% for the prior year period.
Net Interest Income
Net interest income increased $225,000 or 5.7% for the third quarter of 1998 as
compared to the same quarter of 1997. Interest income increased $937,000 for the
third quarter of 1998 primarily from an increase in average interest earning
assets of $75,479,000 or 18.3% as compared to the prior year's quarter. The tax
equivalent yield on earning assets decreased to 7.60% for the current quarter as
compared to 8.10% for the same quarter of 1997. Interest expense increased
$712,000 or 17.5%, primarily from a $66,469,000 or 18.8% increase in average
interest bearing liabilities as compared to the prior year's quarter. The
overall cost of interest bearing liabilities declined to 4.53% for the
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<PAGE>
third quarter of 1998 as compared to 4.58% for the same quarter of 1997.
Net interest income increased $807,000 or 6.9% for the nine months ended
September 30, 1998 as compared to the same period of 1998. Interest income
increased $2,464,000 for the nine months ended September 30, 1998 primarily from
an increase in average interest earning assets of $59,110,000 or 14.4% as
compared to the same period of 1998. The tax equivalent yield on earning assets
decreased to 7.71% for the current nine month period as compared to 8.04% for
the same nine month period of 1997. Interest expense increased $1,657,000 or
13.7% primarily from a $50,727,000 or 14.3% increase in average interest bearing
liabilities. The overall cost of interest bearing liabilities decreased slightly
to 4.52% for the first nine months of 1998 as compared from 4.54% for the same
period of 1997.
Provision for Loan Losses
The provision for loan losses decreased to $50,000 for the third 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 $2,104,000 or .78% of
total loans as of September 30, 1998 as compared to $3,685,000 or 1.40% on
September 30, 1997. During the quarter, management performed a detailed analysis
on all nonperforming loans. Based upon that analysis, management returned to
performing status residential real estate mortgages totaling $569,000 that had
previously been reported as nonaccrual loans. Each of the mortgage loans have
become current or less than 60 days past due, have sufficient collateral to
support the remaining principal balance of the loan plus all accrued interest
and have, as of recent history, exhibited a sustained period of repayment
performance.
Net loan charge-offs for the third quarter of 1998 were $1,000 as compared to
net charge-offs of $42,000 for the same quarter of 1997. The allowance for loan
losses as a percentage of nonperforming loans rose to 263.0% as compared to
185.5% on December 31, 1997 due to the large decrease in nonperforming loans
during the quarter. On September 30, 1998, the reserve for loan losses as a
percentage of total loans outstanding was 2.0%, the same percentage as of
December 31, 1997.
For the nine months ended September 30, 1998, the provision for loan losses was
$218,000 as compared to $500,000 for the same period in 1997. Net recoveries for
the first nine months of 1998 totaled $10,000 as compared to net charge-offs of
$122,,000 for the same period of 1997.
Nonperforming assets decreased to $2,637,000 or .5% of total assets as of
September 30, 1998 as compared to $4,039,000 or .91% as of December 31, 1997, a
decrease of 34.7%. (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.)
-13-
<PAGE>
Other Income
Noninterest income was $762,000 for the third quarter of 1998 as compared to
$563,000 for the same quarter of 1997, an increase of 35.3%. Net securities
gains increased $86,000 or 32.0% in the current quarter as compared to the same
quarter of 1997. Due to the decline in the stock market, the Bank had a net
trading account loss of $178,000 during the current quarter as compared to a net
trading gain of $24,000 for the same quarter of 1997. Income from other sources
increased significantly during the quarter. The increase was primarily due to
income from call option premiums of $65,000 received during the current quarter
as compared to a loss of $98,000 for the same quarter of 1997. In addition,
commissions on brokerage services increased $74,000 or 224.2% primarily from
higher sales volume and greater fee retention from a renegotiated contract from
the Bank's third party provider.
Noninterest income for the nine month period ended September 30, 1998 was
$2,734,000 as compared to $1,615,000 for the same period of 1997, an increase of
69.3%. The increase was primarily due to net securities gains for the current
period of $1,166,000 as compared to $604,000 for the same period of 1997.
Service charges on deposit accounts rose $110,000 or 27.9% primarily from an
increase in pricing and trust fees increased $97,000 or 28.3% primarily from a
higher volume of assets under management. The rise in other income during the
current nine month period was primarily due to the receipt of income from option
call premiums which totaled $193,000 as compared to a net loss of $73,000 for
the same nine month period of 1997. In addition, commissions on brokerage
services increased $240,000 or 266.6% primarily from higher sales volume and
greater fee retention from a renegotiated contract from the Bank's third party
provider.
Other Expenses
Noninterest expenses increased by $673,000 or 30.8% for the third quarter of
1998 as compared to the same quarter of 1997. Salaries and employee benefits
increased $405,000 or 33.9% during the current quarter as compared to the same
quarter of last year due to staffing of the new auto financing subsidiary and
new retail branch of the Bank which were nonexistent in 1997, additional
permanent and temporary staffing and overtime related to the conversion to a new
core data processing system 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. Furniture and equipment expenses increased $115,000 or 78.8%
primarily from the higher depreciation charges generated from the new computer
hardware and software costs from the Bank's going in-house for its core data
processing versus a service bureau environment and the complete upgrade of its
local area network. Also, as a result of the computer upgrades, the Bank
scrapped data processing equipment with a remaining book value of $57,000.
Noninterest expenses increased $1,355,000 or 21.6% for the nine months ended
September 30, 1998 as compared to the same period of 1997. Salaries and benefits
increased $812,000 or 23.3% on a year to date basis for 1998 as compared to 1997
primarily from the addition of the Bank's brokerage
-14-
<PAGE>
counselor to the payroll, addition of the staff for the new auto financing
subsidiary and branch facility, data processing conversion costs and an increase
in the Bank's profit sharing contribution. Furniture and equipment expenses
increased due to higher depreciation charges and write-off of data processing
equipment from the Bank's upgrade to a new in-house core processing system.
Outside data processing services increased $ 114,000 or 27.0% due to the
conversion to check image processing and proof of deposit. Advertising expenses
increased $69,000 or 26.6% as compared to the first nine months of the prior
year due to promotion of the Bank's demand deposit image statements and money
fund checking product and new branch facility. The increase in other expenses
for the first nine months of 1998 as compared to 1997 also included higher
consulting fees and printed forms and supplies.
Income Taxes
Estimated income taxes for the third quarter of 1998 were $525,000 as compared
to $696,000 for the same quarter of 1997. The decline was primarily due to the
receipt of a $242,000 income tax settlement from the state of Connecticut for
tax years 1992 through 1994. The decrease was also due to the reduction of
income before taxes to $2,054,000 during the second quarter of 1998 from
$2,203,000 for the same period of 1997. The effective tax rate for the third
quarter of 1998 was 25.6% as compared to 31.6% for the same period of 1997.
Estimated income taxes for the nine months ended September 30, 1998 were
$2,318,000 as compared to $2,075,000 for the same period of 1997. The increase
was primarily due to the generation of income before taxes of $7,343,000 during
the current nine month period as compared to $6,490,000 for the same period of
1997. The effective tax rate for the first nine months of 1998 was 31.6% as
compared to 32.0% for the same period of 1997 and benefited from the receipt of
the above mentioned tax settlement.
Regulatory Changes
On May 19, 1998, the Connecticut Department of Revenue Services enacted
legislation which permits financial services companies, which maintain an office
in Connecticut and a minimum of five employees, the authority to create a
limited passive investment company (PIC) for the purpose of holding for
investment loans secured by real estate free from Connecticut corporation
business tax. The regulation is effective for income tax years beginning January
1, 1999. The Bank is currently examining the new regulation to determine its
financial impact on the Company. The creation of a " PIC" would result in a
decrease in the Bank's deferred Connecticut tax asset as of December 31, 1998
and a corresponding increase to income taxes charged against earnings during the
fourth quarter of 1998. Subsequently, for tax years beginning January 1, 1999,
Connecticut Corporation income taxes would be significantly reduced.
-15-
<PAGE>
Year 2000
Project Plan
Management recognizes the major impact the Year 2000 computer chip problem will
have on all corporations doing business. The following plan has been implemented
to identify critical systems that must be modified to avoid any disruption of
daily business. Several of the phases are ongoing concurrently.
Awareness Phase: Management created a Year 2000 project team to develop an
overall Year 2000 strategy, provide education to employees and to
establish corporate accountability. The awareness phase was completed
February 28, 1998.
Risk Assessment Phase: Beginning in March 1998, an assessment of all hardware,
software, networks and other processing platforms was performed. Year 2000
problems have been identified and mission critical applications
prioritized. In July, 1998, the Company completed the conversion to a new
core processing system utilizing Jack Henry & Associates software and IBM
AS400 hardware, both of which have been certified Year 2000 compliant.
This new data processing solution addresses many of the Bank's mission
critical applications. The risk assessment phase includes the development
of contingency plans for all mission critical applications. Due to the
bankwide effort to convert to the new core processing system, the
development of continency plans has lagged behind the original target
date. Management expects the risk assessment phase to be completed by
December 31, 1998.
Renovation Phase: Management established a December 31, 1998 target date for
replacement or modification of the Bank's mission critical internal
applications to allow for a full year of testing. This phase was
essentially completed ahead of time with the replacement of the core data
processing system.
Validation Phase: This phase provides for the testing of hardware, software,
interfaces and integration with other systems. It also includes testing
and certifying third parties for Year 2000 readiness. The Bank's new core
processing system has been certified Year 2000 compliant by the vendors
they were acquired from. However, the Bank intends to perform its own
independent tests rather than utilize proxy testing results. In addition,
the Bank intends to retain the services of an independent party to review
overall plan effectiveness and the results of testing. Management expects
to complete the validation phase on all critical systems by March 31,
1999.
Implementation Phase: As applications become certified they will be considered
to be "placed into service". Management will assess the impact of any
system failing the certification tests and will implement the contingency
plan developed for that application. The Bank's primary internal
technological systems including core processing system, teller equipment
and local area network have already been "placed in service". Management
expects implementation of all critical systems by June 30, 1999.
-16-
<PAGE>
Costs
In 1997, the Bank completed an extensive analysis of its data processing systems
and decided to bring its core processing system "in-house" rather than continue
the service bureau relationship environment that it had been operating on. The
decision to move to an "in-house" solution was primarily based on the improved
operating effectiveness, enhanced new product development and expanded
management reporting the new system would provide. However, the additional
benefit of the decision was the purchase of a mainframe computer, banking
software and peripheral devices that have already been certified Year 2000
compliant. The cost of the new software and hardware (which includes all new
teller equipment) acquired for the July, 1998 conversion totaled $1,991,000,
which was fully funded by internal resources. The cost has been capitalized and
is being depreciated over the useful lives of the assets, approximately $437,000
per year.
Due to the recent conversion, the Bank does not expect to incur additional
material Year 2000 costs for further equipment replacement. Management expects
to incur Year 2000 readiness costs primarily from labor costs in the testing and
validation of systems and marketing costs to keep customers informed of Year
2000 progress. Management has budgeted $100,000 for these costs.
Risks and Contingencies
Based upon a self-assessment of its current Year 2000 readiness, management
believes that the greatest Year 2000 uncertainties and exposures are not within
its own technological systems but within its third party vendor relationships
and its commercial borrowers.
To date, the Bank has devoted the majority of its efforts to convert to the new
core processing system. When the validation phase of the Year 2000 plan is
completed on March 31, 1999, significant third party vender exposures will have
been identified and contingency plans developed to reduce those exposures.
The Bank has performed mailings to its larger commercial borrowers. These
mailings included Year 2000 thought provoking information and a questionnaire to
be completed by the borrower so that the Bank could analyze individual responses
to critical issues. In addition, the Bank is in the process of randomly
selecting and contacting an appropriate number of borrowers with smaller overall
relationships. This should address a mixture of various sized relationships
within the entire commercial portfolio. Risk data as to what the borrower is
doing to ensure Year 2000 compliance will be collected and will include the
following assessments: technological capabilities, external vendors,
communications equipment, disaster recovery plans and other operating systems.
The Bank is also subject to the safety and soundness standards for Year 2000
readiness established by the Federal Deposit Insurance Corporation and the State
of Connecticut Banking Department and has completed two examinations by these
agencies to date. Management believes it will be able to comply with all
standards set forth by the regulatory agencies.
-17-
<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
September 30, 1998 September 30, 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 $263,905 $5,629 8.53% $261,130 $5,653 8.66% $ 60 ($ 84) ($ 24)
Taxable investment securities (at cost) 213,426 3,483 6.53% 143,462 2,585 7.21% 1,161 (263) 898
Municipal bonds 3,514 62 7.06% 3,305 58 7.02% 4 0 4
Federal funds sold 4,706 63 5.35% 2,303 32 5.56% 32 (1) 31
Other interest-earning assets 3,269 48 5.87% 3,141 46 5.86% 2 0 2
----------------- ----------------- ----------------------
Total interest-earning assets 488,820 9,285 7.60% 413,341 8,374 8.10% 1,259 (348) 911
----------------- ----------------- ----------------------
Noninterest-earning assets:
Cash and due from banks 9,220 5,670
Premises and equipment, net 4,411 2,989
Other assets 7,892 6,271
Less loan loss allowance (5,503) (5,201)
-------- --------
TOTAL ASSETS $504,840 $423,070
======== ========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
NOW and savings deposits $132,281 $ 879 2.66% $116,618 $ 765 2.62% $ 104 $ 10 $ 114
Time deposits 160,911 2,148 5.34% 170,963 2,343 5.48% (135) (60) (195)
FHLB of Boston advances 41,152 560 5.44% 27,367 414 6.05% 191 (45) 146
Federal funds purchased and securities
sold under agreements to repurchase 86,268 1,177 5.46% 39,195 529 5.40% 642 6 648
----------------- ----------------- ----------------------
Total interest-bearing
liabilities 420,612 4,764 4.53% 354,143 4,051 4.58% 802 (89) 713
----------------- ----------------- ----------------------
Noninterest-bearing liabilities:
Demand deposits 32,319 23,663
Other 2,928 1,174
Stockholders' equity 48,981 44,090
-------- --------
TOTAL LIABILITIES AND EQUITY $504,840 $423,070
======== ========
Net interest income before Federal
tax equivalent adjustment 4,521 4,323 $457 ($259) $198
======================
Federal tax equivalent adjustment (324) (351)
-------- --------
Net interest income $4,197 $3,972
======== ========
Net interest spread (tax equivalent basis) 3.07% 3.52%
==== ====
Net interest margin (tax equivalent basis) 3.70% 4.18%
==== ====
</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
18
<PAGE>
Average Balances, Interest, Yields and Rates (Fully Taxable Equivalent Basis)(2)
- --------------------------------------------------------------------------------
The following table presents daily average statements of condition, which
include nonaccrual loans, the components of net interest income and selected
statistical data on a fully taxable equivalent basis.
<TABLE>
<CAPTION>
Nine months ended Nine months ended 1998 Compared to 1997
September 30, 1998 September 30, 1997 Increase (Decrease) Due to
---------------------------- --------------------------- --------------------------
(dollars in thousands) Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Volume Rate Net(1)
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $261,744 $16,857 8.59% $255,421 $16,575 8.65% $ 408 ($126) $ 282
Taxable investment securities 196,631 9,799 6.64% 146,276 7,779 7.09% 2,535 (515) 2,020
Municipal bonds 3,399 180 7.06% 3,268 172 7.02% 7 1 8
Federal funds sold 5,535 224 5.40% 3,125 125 5.33% 98 1 99
Other interest-earning assets 2,940 128 5.80% 3,049 137 5.99% (5) (4) (9)
------------------- ----------------- --------------------------
Total interest-earning assets 470,249 27,188 7.71% 411,139 24,788 8.04% 3,043 (643) 2,400
------------------- ----------------- -------------------------
Noninterest-earning assets:
Cash and due from banks 7,575 5,228
Premises and equipment, net 3,823 3,049
Other assets 7,819 5,989
Less loan loss allowance (5,428) (5,052)
--------- ---------
TOTAL ASSETS $484,038 $420,353
========= =========
LIABILITIES AND EQUITY
Interest-bearing liabilities:
NOW and savings deposits $132,853 $ 2,692 2.70% $114,333 $2,190 2.55% $ 370 132 $ 502
Time deposits 164,155 6,567 5.33% 172,361 7,016 5.43% (330) (119) (449)
FHLB of Boston advances 29,449 1,253 5.67% 25,322 1,136 5.98% 178 (61) 117
Federal funds purchased and securities
sold under agreements to repurchase 78,532 3,214 5.46% 42,246 1,727 5.45% 1,485 2 1,487
------------------- ----------------- -------------------------
Total interest-bearing
liabilities 404,989 13,726 4.52% 354,262 12,069 4.54% 1,703 (46) 1,657
------------------- ----------------- -------------------------
Noninterest-bearing liabilities:
Demand deposits 28,796 21,777
Other 2,023 1,213
Stockholders' equity 48,230 43,101
--------- ---------
TOTAL LIABILITIES AND EQUITY $484,038 $420,353
========= =========
Net interest income before Federal
tax equivalent adjustment $13,462 $12,719 $ 1,340 ($597) $ 743
==========================
Federal tax equivalent adjustment (997) (1,061)
--------- -------
Net interest income $12,465 $11,658
========= =======
Net interest spread (tax equivalent basis) 3.19% 3.50%
==== ====
Net interest margin (tax equivalent basis) 3.82% 4.12%
==== ====
</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
19
<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>
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).
20
<PAGE>
4 Instruments defining the rights of security holders
(Included in Exhibits 3.1 and 3.2).
10.1 Employment Agreement dated as of January 1, 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.
</TABLE>
(b) Reports on Form 8-K.
The Registrant did not file any Report on Form 8-K during the third
quarter of 1998.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
BANCORP CONNECTICUT, INC.
------------------------------------
(Registrant)
Date: November 12, 1998 By: / s / Robert D. Morton
--------------------- --------------------------------
Robert D. Morton
Its President and Chief Executive
Officer (A duly authorized officer)
Date: November 12, 1998 By: / s / Anthony Priore, Jr.
--------------------- --------------------------------
Anthony Priore, Jr.
Its Treasurer and Secretary
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <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
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>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Statements of Condition at September 30, 1998 (unaudited)
and the Consolidated Condensed Statements of Income for the Nine Months Ended
September 30, 1998 (unaudited) and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 8,874
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 382
<INVESTMENTS-HELD-FOR-SALE> 225,926
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 270,621
<ALLOWANCE> (5,534)
<TOTAL-ASSETS> 514,269
<DEPOSITS> 327,042
<SHORT-TERM> 38,654
<LIABILITIES-OTHER> 3,719
<LONG-TERM> 95,710
0
0
<COMMON> 5,636
<OTHER-SE> 43,508
<TOTAL-LIABILITIES-AND-EQUITY> 514,269
<INTEREST-LOAN> 16,857
<INTEREST-INVEST> 8,989
<INTEREST-OTHER> 345
<INTEREST-TOTAL> 26,191
<INTEREST-DEPOSIT> 9,259
<INTEREST-EXPENSE> 13,726
<INTEREST-INCOME-NET> 12,465
<LOAN-LOSSES> 218
<SECURITIES-GAINS> 1,166
<EXPENSE-OTHER> 7,638
<INCOME-PRETAX> 7,343
<INCOME-PRE-EXTRAORDINARY> 7,343
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,025
<EPS-PRIMARY> 0.98
<EPS-DILUTED> 0.90
<YIELD-ACTUAL> 7.43
<LOANS-NON> 2,067
<LOANS-PAST> 37
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,581
<ALLOWANCE-OPEN> 5,306
<CHARGE-OFFS> 85
<RECOVERIES> 95
<ALLOWANCE-CLOSE> 5,534
<ALLOWANCE-DOMESTIC> 3,492
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,042
</TABLE>
