SECURITIES AND 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 MARCH 31, 1999
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
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 06-1394443
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
121 MAIN STREET, SOUTHINGTON, CONNECTICUT 06074
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (860) 628-0351
Indicate by check mark 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 for 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.
COMMON STOCK, $1.00 PAR VALUE - 5,214,572 SHARES AS OF MAY 7, 1999
1
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BANCORP CONNECTICUT, INC.
FORM 10-Q
INDEX
PART I.
Page
Item 1. Financial Statements
Consolidated Condensed Statements of Condition as of
March 31, 1999 (unaudited) and
December 31, 1998.................................................3
Consolidated Condensed Statements of Income for the
Three Months Ended
March 31, 1999 and 1998 (unaudited)...............................4
Consolidated Condensed Statements of Changes in Shareholders'
Equity for the Three Months Ended
March 31, 1999 and 1998 (unaudited)...............................5
Consolidated Condensed Statements of Cash Flows for the
Three Months Ended
March 31, 1999 and 1998 (unaudited)...............................6
Notes to Consolidated Condensed Financial Statements (unaudited).....7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................12
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........20
PART II.
Item 1. Legal Proceedings...................................................21
Item 2. Changes in Securities and Use of Proceeds...........................21
Item 3. Defaults Upon Senior Securities.....................................21
Item 4. Submission of Matters to a Vote of Security Holders.................21
Item 5. Other Information...................................................21
Item 6. Exhibits and Reports on Form 8-K....................................21
Signatures....................................................................23
2
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CONSOLIDATED CONDENSED STATEMENTS OF CONDITION
BANCORP CONNECTICUT, INC.
March 31, December 31,
(dollars in thousands, except per share data) 1999 1998
- --------------------------------------------------------------------------------
(unaudited) (Note 1)
Assets
Cash and due from banks $ 9,472 $ 11,178
Federal funds sold 5,175 -
------------ -----------
Cash and cash equivalents 14,647 11,178
------------ -----------
Securities available for sale (at market value) 218,077 217,333
Trading account securities 437 172
Federal Home Loan Bank stock 2,832 2,832
Loans 295,084 284,839
Less:
Deferred loan fees (795) (850)
Allowance for loan losses (5,580) (5,549)
------------ -----------
Net loans 288,709 278,440
------------ -----------
Premises and equipment 4,368 4,524
Accrued income receivable 3,298 3,077
Foreclosed real estate, net 321 334
Deferred taxes 2,258 1,901
Other assets 1,865 1,585
------------ -----------
Total assets $ 536,812 $ 521,376
------------ -----------
Commitments and Contingencies - -
Liabilities and Shareholders' Equity
Liabilities
Deposits $ 341,861 $ 345,563
Advances from Federal Home Loan Bank of Boston 41,630 40,630
Federal funds purchased and securities sold under
agreements to repurchase 96,219 80,516
Accrued taxes, expenses and other liabilities 6,745 4,751
------------ -----------
Total liabilities 486,455 471,460
------------ -----------
Shareholders' Equity
Preferred stock, no par value: authorized
1,000,000 shares; none issued and
outstanding - -
Common stock, $1.00 par value: authorized
7,000,000 shares; issued and outstanding
5,713,446 shares at March 31, 1999 and
5,653,406 shares at December 31, 1998 5,713 5,653
Additional paid-in capital 17,842 17,421
Retained earnings 32,877 31,761
Accumulated other comprehensive (loss) income (331) 825
Treasury stock at cost: 519,498 shares at
December 31, 1998 and 1997 (5,744) (5,744)
------------ -----------
Total shareholders' equity 50,357 49,916
------------ -----------
Total liabilities and shareholders' equity $ 536,812 $ 521,376
------------ -----------
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
BANCORP CONNECTICUT, INC.
Three Months Ended
March 31,
---------------------------
(dollars in thousands, except per share data) 1999 1998
- --------------------------------------------------------------------------------
(unaudited)
Interest income
Interest on loans, including fees $ 5,788 $ 5,614
---------- ----------
Interest and dividends on
investment securities
Interest income 2,646 1,976
Dividend income 582 838
Interest on trading account 2 -
---------- ----------
3,230 2,814
---------- ----------
Interest on federal funds sold 10 121
Other interest and dividends 45 34
---------- ----------
Total interest income 9,073 8,583
---------- ----------
Interest expense
Savings deposits 630 729
Time deposits 1,979 2,238
NOW accounts 289 212
---------- ----------
2,898 3,179
Interest on borrowed money 1,688 1,308
---------- ----------
Total interest expense 4,586 4,487
---------- ----------
Net interest income 4,487 4,096
Provision for loan losses 30 100
---------- ----------
Net interest income after provision
for loan losses 4,457 3,996
---------- ----------
Noninterest income
Net securities gains 402 474
Net trading account (losses) gains (27) 26
Trust fees 153 141
Service charges on deposit accounts 182 160
Brokerage servicing fees 55 81
Other 212 118
---------- ----------
Total noninterest income 977 1,000
---------- ----------
Noninterest expense
Salaries and employee benefits 1,599 1,254
Furniture and equipment expense 240 123
Occupancy expense, net 156 126
Professional services 180 135
Data processing expense 123 190
Advertising expense 72 103
Foreclosed real estate provision (recoveries) and
expense, net 22 (10)
FDIC assessments 10 10
Other 461 379
---------- ----------
Total noninterest expense 2,863 2,310
---------- ----------
Income before income taxes 2,571 2,686
Provision for income taxes 736 941
---------- ----------
Net income $ 1,835 $ 1,745
---------- ----------
Average common shares outstanding:
Basic 5,156,638 5,095,589
Diluted 5,524,443 5,557,818
Net income per common share:
Basic $ 0.36 $ 0.34
Diluted $ 0.33 $ 0.31
Dividends declared $ 0.14 $ 0.13
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
BANCORP CONNECTICUT, INC.
Accumulated
Other
Comprehensive
Additional Income Total
Common Paid-In Retained Unrealized Treasury Shareholders'
(dollars in thousands, except per share amounts) Stock Capital Earnings Gains(Losses) Stock Equity
- ---------------------------------------------------- ------------- ------------- ------------ -------------- -------- -----------
(unaudited)
Balance as of December 31, 1997 $ 5,612 $ 17,051 $ 28,149 $ 1,879 $ (5,744) $ 46,947
-----------
Net income - - 1,745 - - 1,745
Increase in net unrealized gain on securities
available-for-sale - - - 37 - 37
-----------
Total comprehensive income 1,782
-----------
Stock options exercised 7 58 - - - 65
Cash dividends declared - $0.13 per share - - (662) - - (662)
Tax benefits related to common stock options
exercised - 28 - - - 28
------------- ------------- ----------- ----------- ------------ -----------
Balance as of March 31, 1998 $ 5,619 $ 17,137 $ 29,232 $ 1,916 $ (5,744) $ 48,160
------------- ------------- ----------- ----------- ------------ -----------
Balance as of December 31, 1998 $ 5,653 $ 17,421 $ 31,761 $ 825 $ (5,744) $ 49,916
-----------
Net income - - 1,835 - - 1,835
Decrease in unrealized gain on securities
available-for-sale - - - (1,156) - (1,156)
-----------
Total comprehensive income 679
-----------
Stock options exercised 60 346 - - - 406
Cash dividends declared - $0.14 per share - - (719) - - (719)
Tax benefits related to common stock options
exercised - 75 - - - 75
------------- ------------- ----------- ----------- ------------ -----------
Balance as of March 31, 1999 $ 5,713 $ 17,842 $ 32,877 $ (331) $ (5,744) $ 50,357
------------- ------------- ----------- ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
BANCORP CONNECTICUT, INC.
Three Months Ended
March 31,
----------------------------------
(dollars in thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------------
(unaudited)
Cash flows from operating activities
Net income $ 1,835 $ 1,745
-------------- ---------------
Adjustments to reconcile net income to net cash provided
by operating activities
Deferred income tax provision 239 28
Net accretion and amortization of bond premiums
and discounts (301) (71)
Provision for loan losses 30 100
Provision for foreclosed real estate losses 13 25
Gain on sale of foreclosed real estate - (62)
Amortization of deferred loan points (59) (63)
Realized investment security gains (402) (474)
Depreciation expense 195 102
(Increase) decrease in trading account (238) 254
Increase in accrued income receivable (221) (222)
Increase in other assets (292) (14)
Increase in accrued expenses payable and other liabilities 2,059 532
-------------- ---------------
Total adjustments 1,023 135
-------------- ---------------
Net cash provided by operating activities 2,858 1,880
-------------- ---------------
Cash flows from investing activities
Purchases of securities available-for-sale (49,168) (58,323)
Proceeds from sales of securities available-for-sale 30,216 9,247
Proceeds from maturities of securities 10,574 8,049
Paydowns on mortgage-backed securities 6,583 4,063
Purchases of Federal Home Loan Bank stock - (271)
Net increase in loans (10,244) (870)
Purchases of premises and equipment, net (38) (396)
Proceeds from sales of foreclosed real estate, net - 449
-------------- ---------------
Net cash used in investing activities (12,077) (38,052)
-------------- ---------------
Cash flows from financing activities
Net decrease in time deposits (17) (3,889)
Net (decrease) increase in other deposits (3,685) 23,869
Proceeds from borrowings 3,000 5,000
Repayment of borrowings (2,000) (10,000)
Net increase in Federal funds purchased and
repurchase agreements 15,703 19,959
Proceeds from exercise of stock options 406 65
Cash dividends paid (719) (662)
-------------- ---------------
Net cash provided by financing activities 12,688 34,342
-------------- ---------------
Net increase (decrease) in cash and cash equivalents 3,469 (1,830)
Cash and cash equivalents at beginning of year 11,178 10,717
-------------- ---------------
Cash and cash equivalents at end of year $ 14,647 $ 8,887
-------------- ---------------
Noncash Investing and Financing Activities
Change in net unrealized gain on securities available-for-sale $ (1,156) $ 37
Transfer of loans to foreclosed real estate - 108
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
6
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
BANCORP CONNECTICUT, INC.
NOTE 1 - BASIS OF PRESENTATION
The consolidated condensed financial statements of Bancorp Connecticut, Inc.
(the "Corporation") include the accounts of its wholly owned subsidiary,
Southington Savings Bank (the "Bank"). The Bank operates four branches and a
mortgage lending center in Southington, Connecticut, one branch in Wallingford,
Connecticut and BCI Financial Corporation, an indirect auto finance subsidiary
located in Southington, Connecticut. During the fourth quarter of 1998, the Bank
formed a passive investment company, SSB Mortgage Corporation, to take advantage
of changes in Connecticut state tax statutes. SSB Mortgage Corporation commenced
operations during the first quarter of 1999. The Bank's primary source of
revenue is providing loans to customers who are either small and middle market
businesses or individuals. All significant intercompany balances and
transactions have been eliminated in consolidation.
The consolidated condensed statement of condition as of March 31, 1999 and the
consolidated condensed statements of income, consolidated condensed statements
of changes in shareholders' equity and consolidated condensed statements of cash
flows for the three month periods ended March 31, 1999 and 1998 have been
prepared by the Corporation without audit. Certain amounts for prior periods
have been reclassified to conform to the current period presentation.
In the opinion of management, the financial statements have been prepared in
conformity with generally accepted accounting principles for interim financial
statements and include all adjustments necessary to present fairly the financial
position of the Corporation as of March 31, 1999 and the results of operations,
the changes in shareholders' equity and results of cash flows for the three
month periods ended March 31, 1999 and 1998. Results of operations for the three
month period ended March 31, 1999 is not necessarily indicative of results for
any other period.
The statement of condition as of December 31, 1998, which has been included for
comparative purposes, has been condensed from the audited statements for the
year then ended. Certain information and footnote disclosures normally included
in financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. These consolidated
condensed financial statements should be read in conjunction with the financial
statements and notes thereto included in the Corporation's annual report on Form
10-K for the year ended December 31, 1998.
7
<PAGE>
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated market
values of securities available for sale as of March 31, 1999 and December 31,
1998 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
March 31, 1999
-----------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------------- -------------- ------------- ---------------
(in thousands)
United States Government and agency obligations $ 75,133 $ 129 $ (423) $ 74,839
Municipal bonds 3,531 79 (4) 3,606
Mortgage-backed securities 74,593 82 (194) 74,481
Capital trust preferreds 17,122 137 (479) 16,780
Marketable equity securities 47,597 1,426 (1,275) 47,748
Mutual funds 603 20 - 623
---------------- -------------- ------------- ---------------
$ 218,579 $ 1,873 $ (2,375) $ 218,077
---------------- -------------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
December 31, 1998
-----------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------------- ------------- ------------- ---------------
(in thousands)
United States Government and agency obligations $ 47,547 $ 277 $ (69) $ 47,755
Municipal bonds 3,584 101 (2) 3,683
Mortgage-backed securities 93,034 168 (70) 93,132
Capital trust preferreds 13,174 130 (338) 12,966
Marketable equity securities 58,141 1,925 (863) 59,203
Mutual funds 602 15 (23) 594
---------------- ------------- ------------- ---------------
$ 216,082 $ 2,616 $ (1,365) $ 217,333
---------------- ------------- ------------- ---------------
</TABLE>
8
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NOTE 3 - LOANS
The composition of the loan portfolio was:
March 31, December 31,
1999 1998
----------- ----------------
(in thousands)
Residential real estate $ 136,144 $ 137,326
Commercial real estate 43,546 42,408
Real estate construction 4,911 3,688
Commercial 46,354 42,857
Consumer 64,129 58,560
----------- ----------------
295,084 284,839
Less: Deferred loan fees (795) (850)
Allowance for loan losses (5,580) (5,549)
----------- ----------------
Total loans $ 288,709 $ 278,440
----------- ----------------
NOTE 4 - ALLOWANCE FOR LOAN AND OTHER REAL ESTATE OWNED LOSSES
Changes in the allowances were:
Three Months Ended
March 31,
-------------- ----------------
1999 1998
-------------- ----------------
(in thousands)
Allowance for loan losses:
Balance at beginning of year $ 5,549 $ 5,306
Provision charged to expense 30 100
Loan charge-offs (25) (62)
Recoveries 26 41
-------------- ----------------
Balance, end of period $ 5,580 $ 5,385
-------------- ----------------
Allowance for foreclosed real
estate losses:
Balance at beginning of year $ 50 $ 25
Provision charged to expense 13 25
Foreclosed real estate write-downs, net (13) (15)
-------------- ----------------
Balance, end of period $ 50 $ 35
-------------- ----------------
9
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NOTE 5 - NONPERFORMING ASSETS
March 31, December 31,
1999 1998
-------------- --------------
(dollars in thousands)
Nonaccrual loans
Residential real estate $ 693 $ 705
Commercial real estate 120 402
Commercial 189 60
Consumer 113 98
-------------- ----------
Total nonaccrual loans 1,115 1,265
Accruing loans past due 90 days or more - -
-------------- ----------
Total nonperforming loans 1,115 1,265
Other real estate owned 321 334
-------------- ----------
Total nonperforming assets $ 1,436 $ 1,599
-------------- ----------
Nonperforming loans as a percentage of
total loans 0.38% 0.44%
-------------- ----------
Nonperforming assets as a percentage of
total assets 0.27% 0.31%
-------------- ----------
NOTE 6 - PER COMMON SHARE DATA
Basic earnings per share is computed using the weighted average common shares
outstanding during the periods 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 three months ended March 31, 1999
and 1998 were as follows:
1999 1998
--------------- ---------------
(in thousands)
Basic 5,157 5,096
Effect of dilutive stock options 367 462
--------------- ---------------
Diluted 5,524 5,558
--------------- ---------------
10
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NOTE 7 - SHAREHOLDERS' EQUITY
The following table presents the components and related tax effects allocated to
other comprehensive income for the three month period ended March 31, 1999.
Before Tax Net
Tax (Benefit) of Tax
Amount Expense Amount
-----------------------------
(in thousands)
Net unrealized gains (losses) on
securities arising during the period $ (1,351) $ 460 $ (891)
Less: reclassification adjustment for
gains realized in net income 402 (137) 265
---------- -------- ---------
Net unrealized gains (losses) on securities $ (1,753) $ 597 $ (1,156)
---------- -------- ---------
The following table presents the components and related tax effects allocated to
other comprehensive income for the three month period ended March 31, 1998.
Before Tax Net
Tax (Benefit) of Tax
Amount Expense Amount
--------- ------------- -------
(in thousands)
Net unrealized gains (losses
on securities arising during the period $535 (215) $ 320
Less: reclassification adjustment
for gains realized in net income 474 (191) 283
-------- ------------- -------
Net unrealized gains (losses) on securities $ 61 $ (24) $ 37
-------- ------------- -------
On April 21, 1999, the Corporation announced that it planned to repurchase up to
5% of the Corporation's currently outstanding shares of common stock. Purchases
will be made from time to time in the open market and through private
transactions over the next year. The timing and amount of these transactions, to
be funded through available corporate funds, will depend upon market conditions
and corporate requirements. Shares repurchased will be held in treasury for
general corporate purposes including reissue to satisfy the exercise of
outstanding stock options. As of March 31, 1999, the Corporation had 5,193,948
shares outstanding.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTH PERIODS
ENDED MARCH 31, 1999 AND 1998
The following discussion and analysis presents a review of the financial
condition and results of Bancorp Connecticut, Inc. (the "Corporation"). Since
Southington Savings Bank (the "Bank") is the sole subsidiary of the Corporation,
the Corporation's earnings and financial condition are predicated almost
entirely on the performance of the Bank. This review should be read in
conjunction with the consolidated condensed financial statements and other
financial data presented elsewhere herein
CHANGES IN FINANCIAL CONDITION
LOANS - Loans increased $10,245,000 or 3.60% to $295,084,000 at March 31, 1999
from $284,839,000 at December 31, 1998 primarily due to a higher volume of
commercial loan originations and loans closed by BCI Financial Corporation
("BCIF"), the Bank's auto loan financing subsidiary. Commercial loans increased
$3,497,000 or 8.16% and represented 15.71% of the loan portfolio at March 31,
1999. Consumer loans increased $5,569,000 or 9.51% primarily due to loans closed
by BCIF. At March 31, 1999, the consumer portfolio of $64,129,000 consisted of
52.53% home equity loans and lines of credit, 39.05% automobile loans and 8.42%
other consumer loans.
At March 31, 1999, loans collateralized by residential real estate, including
home equity loans and lines of credit, represented 58.65% of the total loan
portfolio.
DEPOSITS - Total deposits decreased $3,702,000 or 1.07% during the first quarter
of 1999 from $345,563,000 at December 31, 1998 primarily due to a net outflow of
$2,632,000 from commercial and municipal demand deposit accounts.
BORROWINGS - Advances from the Federal Home Loan Bank of Boston (the "FHLB")
increased by $1,000,000 or 2.46% during the first quarter of 1999 as compared to
December 31, 1998. Federal funds purchased and securities sold under agreements
to repurchase increased $15,703,000 or 19.50% to $96,219,000 at March 31, 1999
as compared to December 31, 1998. As of March 31, 1999, broker/dealer repurchase
agreements and retail repurchase agreements totaled $80,617,000 and $13,477,000,
respectively.
CHANGES IN RESULTS OF OPERATIONS
EARNINGS - Net income for the quarter ended March 31, 1999 was $1,835,000 as
compared to $1,745,000 for the first quarter of 1998, an increase of 5.16%.
Increases in net interest income and lower provisions for loan losses and income
taxes offset by increased noninterest expenses were the primary reasons for the
higher earnings. The annualized return on average assets for the quarter ended
March 31, 1999 was 1.40% as compared to 1.49% for the quarter ended March 31,
1998.
NET INTEREST INCOME - Net interest income, the difference between interest
earned on interest earning assets and interest expense incurred on interest
bearing liabilities, is a significant component of the Corporation's
consolidated condensed statements of income. Net interest income is affected by
changes in the volumes of and rates on interest earning assets and interest
bearing liabilities, the volume of interest earning assets funded with low cost
deposits, noninterest bearing deposits and shareholders' equity, and the level
of nonperforming assets. Average interest earning assets increased by
$53,675,000 or 11.78% to $509,144,000 for the three months ended March 31, 1999
from $455,469,000 from the same period in 1998.
12
<PAGE>
The interest rate spread was 3.12% for the three months ended March 31, 1999
compared to 3.27% for the same period in 1998. The ratio of net interest income
to average interest earning assets on a fully tax equivalent basis was 3.70% for
the three months ended March 31, 1999 compared to 3.90% for the same period in
1998. The decrease in the interest rate spread in 1999 compared to 1998 is
primarily attributable to a proportionately greater decrease in the average
yield on earning assets compared with the average interest rate of funds. The
decrease in the average yield on earning assets, in turn, is attributable in
part to the Bank's increased investment in its securities portfolio at generally
lower yields than the then average yield on the existing investment and loan
portfolios.
For the three months ended March 31, 1999 the increase in net interest income of
$391,000 or 9.55% from 1998 reflected increases in the average volume of the
invested funds and loan portfolios of $25,988,000 and $27,687,000, respectively.
In addition, average noninterest bearing demand deposits increased by $5,225,000
or 19.80% during 1999 compared to 1998 which helped reduce the cost of funds and
thus had a positive effect on net interest income.
PROVISION FOR LOAN LOSSES - For the three months ended March 31, 1999 and 1998,
the provisions for loan losses were $30,000 and $100,000, respectively. Net loan
recoveries totaled $1,000 for the first three months of 1999 compared to net
charge-offs of $21,000 for the same period in 1998. The allowance for loan
losses was $5,580,000 or 1.89% of outstanding loans as of March 31, 1999
compared to $5,385,000 or 2.05% of outstanding loans as of March 31, 1998.
Nonperforming loans were $1,115,000 as of March 31, 1999 and $2,687,000 as of
March 31, 1998, representing .38% and 1.02%, respectively, of outstanding loans.
The allowance for loan losses is established by management. Its adequacy is
monitored based on internal credit review and analysis of the loan portfolio,
which considers current economic conditions and their probable effect on
borrowers, the amount of nonperforming loans and related collateral, the amount
of charge-offs during the period and other relevant factors. This evaluation is
inherently subjective as it requires material estimates including the amounts
and timing of future cash flows expected to be received on impaired loans that
may be susceptible to significant change.
NONINTEREST INCOME - Total noninterest income decreased by $23,000 or 2.30% to
$977,000 in the first three months of 1999 from $1,000,000 for the same period
in 1998. During the first three months of 1999, the Corporation recognized total
net securities gains of $402,000 on the sale of securities available for sale
compared to $474,000 in 1998. Net trading account losses totaled $27,000 for the
first three months compared to net trading gains of $26,000 for the same period
in 1998, a decrease of $53,000 or 203.85%. Other income totaled $212,000 in 1999
compared to $118,000 in 1998, representing an increase of $94,000 or 79.66%.
This increase reflected increased fee income generated by BCIF as well as
increased options call premiums recorded by the Bank.
NONINTEREST EXPENSE - Operating expenses increased $553,000 or 23.94% to
$2,863,000 in the first three months of 1999 from $2,310,000 in 1998.
Salaries and employee benefits were $345,000 or 27.51% higher in 1999 compared
to 1998 reflecting scheduled employee annual salary increases and increased
staffing levels due to the start-up of BCIF and the new Wallingford branch
facility in the second and third quarter of 1998, respectively. Increased group
medical and payroll tax expenses as well as an increase in the utilization of
temporary employees during 1999 contributed to the higher level of employee
expense.
13
<PAGE>
The expenses related to furniture and equipment were $240,000 for the first
three months of 1999 compared to $123,000 for the same period in 1998, an
increase of $117,000 or 95.12%. Higher depreciation and maintenance charges
related to the Bank's installation of the new in-house core processing system
during the second quarter of 1998 were primarily responsible for the increase.
The increase in other noninterest expenses of $82,000 or 21.64% reflected a net
increase in a number of miscellaneous expense categories. The most significant
increases in these categories were expenses incurred in 1999 for Year 2000
testing, increased expenditures for telephone service and computer supplies
related to the new in-house core processing system and expenses incurred by BCIF
and the new Wallingford branch facility.
PROVISION FOR INCOME TAXES - The provision for income taxes for the three months
ended March 31, 1999 and 1998 was $736,000 and $941,000, respectively,
representing effective tax rates of 28.63% and 35.03%, respectively.
On May 19, 1998, the Connecticut state legislature enacted legislation which
permits financial services companies which maintain an office in Connecticut,
and have a minimum of five employees (among other provisions), the authority to
create a limited passive investment company ("PIC") for the purpose of holding
for investment loans collateralized by real estate free from Connecticut
corporation business tax. The regulation is effective for income tax years
beginning January 1, 1999. During the fourth quarter of 1998, the Bank formed a
passive investment company, SSB Mortgage Corporation. Subsequently, for tax
years beginning January 1, 1999, the Corporation's state tax expense has been
eliminated.
LIQUIDITY - The liquidity of a banking institution reflects its ability to
provide funds to meet loan requests, to accommodate possible outflows in
deposits and to take advantage of interest rate market opportunities. Funding of
loan requests, providing for liability outflows and management of interest rate
fluctuations require continuous analysis in order to match the maturities of
specific categories of short-term loans and investments with specific types of
deposits and borrowings. Bank liquidity is thus normally considered in terms of
the nature and mix of a banking institution's sources and uses of funds. The
Bank's Asset Liability Committee is responsible for implementing the Board of
Directors' policies and guidelines for the maintenance of prudent levels of
liquidity.
The Bank's principal sources of funds for operations are cash flows generated
from earnings, deposits, loan repayments, borrowings from correspondent banks
and securities sold under repurchase agreements. Such sources are supplemented
by interest bearing deposits with banks, Federal funds sold and unencumbered
securities available for sale. Brokered deposits were not utilized as a source
of funds during 1999 or 1998, and none were outstanding as of March 31, 1999.
The Bank is a member of the Federal Home Loan Bank of Boston (the "FHLB"), which
makes substantial borrowings available to its members. The Bank is eligible to
borrow against its assets in an amount not to exceed collateral as defined by
the FHLB. As of March 31, 1999, qualified collateral totaled $122,652,331. The
Bank's actual borrowings on that date were $41,630,000.
The inflow and outflow of funds is detailed in the consolidated condensed
statements of cash flows for the three months ended March 31, 1999 and 1998 and
is summarized below.
During the current period, cash and cash equivalents increased by $3,469,000, as
net cash provided by operating activities and financing activities exceeded the
$12,077,000 of net cash used for investing activities.
Net cash used for investing activities, which primarily reflects the
redeployment of funds into the securities and loan portfolios, was $12,077,000
for the three months ended March 31, 1999. During the first three months of
1999, the Corporation increased its investment in securities by $1,795,000 and
experienced net originations of loans totaling $10,244,000.
The net cash provided by financing activities of $12,689,000 for the first three
months of 1999 primarily reflected net decreases in deposits of $3,702,000
partially offset by a net increase in funds borrowed from the FHLB of
$1,000,000. The net increase in Federal funds purchased and repurchase
agreements of $15,703,000 consisted primarily of broker/dealer repurchase
agreements which increased $18,057,000 and have been primarily utilized to fund
the Bank's loan growth.
14
<PAGE>
Closely related to the concept of liquidity is the management of interest
earning assets and interest bearing liabilities, which focuses on maintaining
stability in the interest rate spread, an important factor in earnings growth
and stability. Emphasis is placed on maintaining a controlled rate sensitivity
position to avoid wide swings in interest rate spreads and to minimize risk due
to changes in interest rates. An asset or liability is considered rate sensitive
within a specified period when it matures or could be repriced within such
period in accordance with its contractual terms. Management establishes overall
policy and interest rate risk tolerance levels which are administered by the
Bank's Asset Liability Committee on a monthly basis.
CAPITAL RESOURCES - The Bank is subject to various regulatory capital
requirements administered by the Federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
and classifications are also subject to quantitative judgements by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of March 31,
1999, that the Bank meets all capital adequacy requirements to which it is
subject.
To be categorized as well capitalized, the Bank must maintain the ratios set
forth in the table below. Management believes that there are no events or
conditions that have occurred that would change its category.
The Bank's actual capital amounts and ratios were (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
To Be Well Capitalized
Under Prompt Corrective
Actual Action Provisions
------------------------ --------------------------
Amount Ratio Amount Ratio
----------- ---------- ---------- ---------
As of March 31, 1999:
Total Capital (to Risk Weighted Assets) $ 50,981 16.06 % >/= $31,748 >/= 10.0 %
Tier I Capital (to Risk Weighted Assets) 46,993 14.80 >/= 19,049 >/= 6.0
Tier I Capital (to Average Assets) 46,993 8.98 >/= 26,175 >/= 5.0
</TABLE>
On January 20, 1999, the Board of Directors of the Corporation declared a cash
dividend of $.14 per common share payable on February 16, 1999 to shareholders
of record on February 2, 1999. Subsequent to March 31, 1999, the Board of
Directors of the Corporation declared a cash dividend of $.15 per common share
payable on May 17, 1999 to shareholders of record on May 3, 1999.
On April 21, 1999, the Corporation announced that it planned to repurchase up to
5% of the Corporation's currently outstanding shares of common stock. Purchases
will be made from time to time in the open market and through private
transactions over the next year. The timing and amount of these transactions, to
be funded through available corporate funds, will depend upon market conditions
and corporate requirements. Shares repurchased will be held in treasury for
general corporate purposes including reissue to satisfy the exercise of
outstanding stock options. As of March 31, 1999, the Corporation had 5,193,948
shares outstanding.
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 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 Bank 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. The development of contingency plans lagged behind the original
target date because of the need to reevaluate the risk assessments as a result
of the bankwide effort to convert to the new processing system. The risk
assessment phase was completed on December 31, 1998 and the contingency plan
will be completed by June 30, 1999.
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 its manufacturer. However, the
Bank intends to perform its own independent tests rather than utilize proxy
testing results from the vendor. In addition, the Bank retained 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 June 30, 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 include core processing system, teller equipment and local area network
have already been placed into service. Management expects implementation of all
critical systems by June 30, 1999.
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 in
a service bureau relationship environment. 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 could
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. The cost has been capitalized and is being depreciated over
the useful lives of the assets, approximately $437,000 per year.
The Corporation does not separately track the internal costs associated with its
Year 2000 readiness project, and such costs are primarily the portion of an
employee's time spent on Year 2000 related issues.
16
<PAGE>
Due to the recent conversion, the Bank does not expect to incur any additional
significant 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, professional consulting costs and marketing
costs to keep customers informed of Year 2000 progress. Management has budgeted
$100,000 for those costs.
RISKS AND CONTINGENCIES
Based upon a self-assessment of its current Year 2000 readiness, management
believes 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.
As of year-end 1998, the Bank has devoted the majority of its efforts to convert
to the new core processing system. By June 30, 1999, when the validation phase
of the Year 2000 will be completed, significant third-party vendor exposures
will be identified and contingency plans developed to reduce those exposures.
The Bank has completed 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 has completed the process of randomly
selecting and contacting an appropriate number of borrowers with smaller overall
relationships. This has addressed 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 has been collected and includes 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 the Phase 2 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>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST RATES (a)
Three Months Ended March 31,
-----------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/
(dollars in thousands) Balance Interest Rate(c) Balance Interest Rate(c)
- -------------------------------------------------------------------------------------------------------------------------
Assets
Interest-earning assets:
Loans(b) $288,409 $ 5,788 8.03% $260,722 $ 5,614 8.61%
Taxable investment securities
(at cost)(c) 213,080 3,385 6.35% 179,839 3,096 6.89%
Municipal Bonds(c) 3,543 61 6.89% 3,341 59 7.06%
Federal funds sold 837 10 4.78% 9,076 121 5.33%
Other interest-earning assets 3,275 47 5.74% 2,491 34 5.46%
--------- -------- --------- --------
Total interest-earning assets 509,144 9,291 7.30% 455,469 8,924 7.84%
--------- -------- --------- --------
Noninterest-earning assets 16,212 14,487
========= ========
Total Assets $525,356 $469,956
========= ========
Liabilities and Equity
Interst-bearing liabilities:
NOW and savings deposits $147,835 $ 919 2.49% $131,926 $ 940 2.85%
Time deposits 159,577 1,979 4.96% 168,122 2,239 5.33%
FHLB of Boston advances 42,599 540 5.07% 23,066 356 6.17%
Federal funds purchased and securities
sold under agreements to repurchase 88,510 1,148 5.19% 69,880 952 5.45%
--------- -------- --------- --------
Total interest-bearing liabilities 438,521 4,586 4.18% 392,994 4,487 4.57%
--------- -------- --------- --------
Noninterest-bearing liabilities:
Demand deposits 31,620 26,395
Other 5,245 3,219
Shareholders' equity 49,970 47,348
--------- ---------
Total Liabilities and
Shareholders' Equity $525,356 $469,956
========= =========
Net interest income before Federal tax
equivalent adjustment 4,705 4,437
Federal tax equivalent adjustment (218) (341)
-------- --------
Net interest income $ 4,487 $4,096
-------- --------
Net interest spread (tax equivalent basis) 3.12% 3.27%
------ ------
Net interest margin (tax equivalent basis) 3.70% 3.90%
------ ------
(a) Computed on an annualized basis.
(b) Average balances for loans include nonaccrual and renegotiated balances.
(c) Yields/Rates are computed on a tax equivalent basis using a Federal income
tax rate of 34% for 1999 and 1998 and a state income tax rate of 9.5% in
1998.
</TABLE>
18
<PAGE>
RATE/VOLUME ANALYSIS
1999 Compared to 1998
-------------------------------
Increase (Decrease)
Due to
---------------------
(in thousands) Volume Rate Net(1)
- ------------------------------------------------------------------------------
Interest earned on:
Loans $ 571 $ (397) $ 174
Taxable investment securities 541 (252) 289
Municipal bonds 4 (2) 2
Federal funds sold (100) (11) (111)
Other interest-earning assets 11 2 13
-------- -------- --------
1,027 (660) 367
-------- -------- --------
Interest paid on:
NOW and savings deposits 106 (127) (21)
Time deposits (110) (150) (260)
FHLB of Boston advances 257 (73) 184
Federal funds purchased and securities
sold under agreements to repurchase 243 (47) 196
-------- -------- --------
496 (397) 99
-------- -------- --------
Change in net interest income $ 531 $ (263) $ 268
-------- -------- --------
(1) The change in interest income due to both tax equivalent rate and volume has
been allocated to volume and tax equivalent rate changes in proportion to the
relationship of the absolute dollar amounts of the change in each.
19
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Bank manages interest rate risk through an Asset Liability Committee
comprised of senior management. The committee monitors exposure to interest rate
risk on a quarterly basis using both a traditional gap analysis and similutation
analysis. Traditional gap analysis identifies short and long-term interest rate
positions or exposure. Simulation analysis measures the amount of short-term
earnings at risk under both rising and falling rate scenarios. the Bank's
interest rate risk has not significantly changed from the prior year.
20
<PAGE>
PART II.
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
EXHIBIT NO. DESCRIPTION
3.1 Certificate of Incorporation of Registrant
(Incorporated by reference to Exhibit 3.1
to the Registrants 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 for the fiscal year ended December
31, 1996)
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)
21
<PAGE>
10.7 Southington Savings Bank Supplemental
Executive Retirement Plan (effective December
21, 1998) (Incorporated by reference to
Exhibit 10.7 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1998)
27 Financial Data Schedule
(b) Reports on Form 8-K
The registrant did not file any Report on Form 8-K during the first quarter of
1999.
22
<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: MAY 14,1999 /s/Robert D. Morton
Robert D. Morton
President and Chief
Executive Officer
(Principal Executive Officer)
Date: MAY 14, 1999 /s/ Wayne F. Patenaude
Wayne F. Patenaude
Treasurer and Secretary
(Principal Accounting Officer)
23
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Certificate of Incorporation of Registrant
(Incorporated by reference to Exhibit 3.1
to the Registrants 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 for the fiscal year ended December
31, 1996)
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)
24
<PAGE>
10.7 Southington Savings Bank Supplemental
Executive Retirement Plan (effective December
21, 1998) (Incorporated by reference to
Exhibit 10.7 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1998)
27 Financial Data Schedule
25
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Statements of Condition at March 31, 1999 (unaudited) and
the Consolidated Condensed Statements of Income for the three months ended March
31, 1999 (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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,472
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,175
<TRADING-ASSETS> 437
<INVESTMENTS-HELD-FOR-SALE> 218,077
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 295,084
<ALLOWANCE> (5,580)
<TOTAL-ASSETS> 536,812
<DEPOSITS> 341,861
<SHORT-TERM> 96,219
<LIABILITIES-OTHER> 6,745
<LONG-TERM> 41,630
0
0
<COMMON> 5,713
<OTHER-SE> 44,644
<TOTAL-LIABILITIES-AND-EQUITY> 536,812
<INTEREST-LOAN> 5,788
<INTEREST-INVEST> 3,230
<INTEREST-OTHER> 55
<INTEREST-TOTAL> 9,073
<INTEREST-DEPOSIT> 2,898
<INTEREST-EXPENSE> 4,586
<INTEREST-INCOME-NET> 4,487
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 402
<EXPENSE-OTHER> 2,863
<INCOME-PRETAX> 2,571
<INCOME-PRE-EXTRAORDINARY> 2,571
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,835
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 7.12
<LOANS-NON> 1,115
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,668
<ALLOWANCE-OPEN> 5,549
<CHARGE-OFFS> 25
<RECOVERIES> 26
<ALLOWANCE-CLOSE> 5,580
<ALLOWANCE-DOMESTIC> 3,891
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,689
</TABLE>
