United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended September 30, 1994
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 1-8408
THE ADVEST GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0950444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Commercial Plaza - 280 Trumbull Street Hartford, Connecticut 06103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 525-1421
Securities registered pursuant to Section 12(b) of the Act: Yes
Name of each exchange on
Title of each class which registered
Common Stock, $.01 Par Value New York Stock Exchange, Inc.
9% Convertible Subordinated Debentures New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by an (X) 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 by an (X) if disclosure of delinquent filers pursuant to item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $41,998,724 as of December 1, 1994.
On December 1, 1994, the Registrant has outstanding 8,511,115 shares of common
stock of $.01 par value, which is the Registrant's only class of common stock.
Parts I, II and IV incorporate information by reference from the Registrant's
1994 Annual Report to Shareholders. Part III incorporates information by
reference from the Registrant's definitive proxy statement for the annual
meeting to be held on January 26, 1995.
Total of sequentially numbered pages 91.
Exhibit index sequential page number page 29.
PART I
Item 1. Business
General Development of Business
(1) The Advest Group, Inc. ("AGI"), a Delaware corporation, is a financial
services holding company engaged, with its operating subsidiaries (collectively
the "Company"), in securities brokerage, trading, investment banking,
commercial and consumer lending and leasing, asset management and related
financial services. It is organized under the laws of Delaware and commenced
operations on January 1, 1977. AGI is successor to a partnership which
resulted from mergers of five New York Stock Exchange, Inc. ("NYSE") member
firms organized between 1898 and 1919. The Company's broker-dealer subsidiary,
Advest, Inc. ("Advest"), was organized to succeed the business of the
partnership, effective January 1, 1977. Since that date, a number of other
operating subsidiaries in the brokerage and financial services industries have
been established or acquired.
In addition to Advest, operating subsidiaries include Advest Bank (the
"Bank"), a Connecticut-chartered capital stock savings bank; Boston Security
Counsellors, Inc. ("BSC"), an investment management company; and Billings &
Company, Inc. ("Billings"), a real estate services company. Material
acquisitions and dispositions of the Company during the past five years follow.
In April 1990, Advest acquired Ulin, Mortin, Bradley & Welling,
Incorporated ("UMBW"), a Boston-based firm specializing in mergers and
acquisitions, financings and valuations. The purchase price approximated the
net book value of furniture, fixtures and leaseholds acquired. UMBW operated
as a division of Advest through fiscal 1992 when it was merged with Advest's
corporate finance department.
In November 1992, the Company sold substantially all the assets, the
business and name of Shore & Reich, Ltd. ("S&R"), its subsidiary specializing
in pension plan administration, to an unrelated third party. Consideration
included an initial cash payment of $600,000 and future payments over a five
year period based on revenues of the business sold. The Company realized a
pre-tax loss of $170,000 related to the disposition in its 1993 fiscal year.
In January 1994, Lyons, Zomback & Ostrowski, Inc., a financial consulting
company specializing in the banking industry and a subsidiary of AGI, was
merged into the corporate finance division of Advest as the Financial
Institutions Group (the "FIG"). The FIG unit will focus its efforts on serving
as an advisor to small and medium-sized community banks.
(2) Advest is engaged in a broad range of activities in the securities
brokerage and investment banking business, including retail brokerage
transactions, institutional sales, origination of and participation in
underwritings and distribution of corporate and municipal securities issues,
market making and trading activities in corporate securities and municipal
bonds, mutual fund distribution, custodial and money management, option
transactions and research services.
Advest has been classified by the Securities and Exchange Commission
("SEC") and the Securities Industry Association as a "large regional" brokerage
firm. "Regional" is a term commonly used in the securities industry to
indicate that a firm's headquarters are located outside New York City. Advest
has retail clients in all fifty states with the largest concentration in the
Northeast and Midwest regions and also services institutional accounts
2
throughout the country. During fiscal 1994 Advest opened 3 new sales offices
and closed 1. At September 30, 1994, Advest had sales offices and account
executives in 17 states and the District of Columbia as follows:
Number of
Number of Account
State Offices Executives
Connecticut 7 65
District of Columbia 1 11
Florida 6 50
Illinois 2 9
Kentucky 3 13
Maine 3 23
Maryland 1 4
Massachusetts 5 49
Missouri 3 22
New Hampshire 2 7
New Jersey 3 17
New York 16 125
Ohio 11 52
Pennsylvania 11 69
Rhode Island 1 8
Vermont 1 3
Virginia 3 13
West Virginia 1 1
80 541
Advest is a member of all major securities exchanges in the United States,
the National Association of Securities Dealers ("NASD") and the Securities
Investor Protection Corporation ("SIPC"). In addition, Advest is registered
with the Commodity Futures Trading Commission as a commodity trading advisor
and a futures commission merchant.
The Bank is a Connecticut-chartered capital stock savings bank which opened
for business in 1984. The Bank's offices and single retail branch are located
at 280 Trumbull Street, Hartford, Connecticut 06103. The Bank's principal
business has consisted of attracting deposits and investing such deposits,
together with funds from capital and other borrowings, in various types of
loans, primarily residential, and investments. The Bank's loan portfolio
includes single and multi-family residential mortgages, consumer, commercial
mortgages and commercial and construction loans. Investments include
government and agency obligations, mortgage-backed securities and money market
instruments. In addition to providing deposit, lending and trust services
within the Bank's primary market area, a significant portion of the Bank's
activities have been directed toward providing such products and services to
clients of AGI's brokerage and other subsidiaries. The Bank does not
currently have a material source of deposits other than those obtained through
Advest. Deposits in the Bank are insured by the Bank Insurance Fund of the
FDIC, subject to applicable limits.
In fiscal 1991, the Office of Thrift Supervision ("OTS") approved requests
by AGI and the Bank for the Bank to be deemed a "savings association" by virtue
of its meeting the test for a qualified thrift lender and for AGI, as the sole
shareholder of a "savings association", to be treated as a unitary thrift
holding company. In order to retain its status as a "savings association" the
3
Bank must continue to satisfy the "qualified thrift lender" test. This test
generally requires that an institution maintain a minimum of 65% of its assets
in residential real estate and related investments. At September 30, 1994,
76.0% of the Bank's assets consisted of such assets.
(3) The Company's principal executive offices are located at One Commercial
Plaza, 280 Trumbull Street, Hartford, Connecticut, 06103 (telephone number
(203) 525-1421). At September 30, 1994, the Company employed 1,525 persons.
Financial Information about Industry Segments
The information required by this item is disclosed in Exhibit 13 on pages 86
and 87 of this filing under the caption "Note 18 Segment Reporting".
Narrative Description of Business
(1) Revenues
The principal sources of revenue for the last five years are disclosed in
Exhibit 13 on page 54 of this filing under the caption "Five Year Financial
Summary". A discussion of the components of services provided and related
compensation follows.
Commissions:
Listed Advest acts as an agent for its customers in the purchase and sale
of securities on the major securities exchanges. Commissions generated by
these customers represent a large portion of the Company's revenue.
Mutual funds Advest executes purchases and redemptions of shares for its
clients in many diverse mutual funds. Income from proprietary mutual funds is
derived from 12(b)1 distribution fees, contingent deferred sales load and
advisory fees (see also Asset Management and Administration Revenues). Under
distribution agreements, Advest serves as sole distributor for The Advantage
Family of Mutual Funds, unincorporated Massachusetts business trusts. In July
1994, the Advantage Strategic Income Fund was introduced. The fund invests in
the fixed income sectors: U.S. Government, high yield and international and is
part of the Advantage Family of Funds. In July 1993, Advest launched the
Advantage Municipal Bond Fund, a series fund consisting of three portfolios:
National, New York and Pennsylvania. In addition, Advest acts as distributor
of the Scottish Widows International Fund, which is also sold through
distribution agreements with other brokers.
Over-the-counter In executing customers' orders in the over-the-counter
market, Advest generally acts as agent with another firm which is a market
maker in the securities being purchased or sold. The market price executed
represents the best inter-dealer market price available.
Insurance Advest acts as agent for several life insurance companies and
sells life insurance and tax-advantaged annuities to its brokerage clients. A
principal objective of Advest's insurance department is to assist account
executives in protecting the assets of high net worth individuals and
businesses. The department provides customized advice and recommends
appropriate products to meet unique individual, professional or business needs.
4
Options Advest also effects for its customers the purchase and sale of
put and call options traded on the Chicago Board of Option Exchange, American
Stock Exchange and Philadelphia Stock Exchange. Advest offers a fully
discretionary options management program for suitable accounts.
Other Other commissions include commissions from commodity trading,
international stocks and bonds, certificates of deposit and income from
correspondent brokers. In addition, Advest markets private placement and
registered offerings of limited partnerships investing in various ventures,
primarily real estate. Certain of these limited partnerships are originated by
Advest or Billings who, consequently, receive management and other fees.
Principal transactions
Revenue from principal transactions includes realized and unrealized gains
and losses on securities held for resale by Advest and the Bank and related
brokerage commissions of Advest. The Company does not actively participate in
the high yield securities market.
Advest actively engages in trading as principal in various phases of the
over-the-counter securities business and acts as principal to facilitate the
execution of customers' orders. Advest buys, sells and maintains an inventory
of a security in order to "make a market" in that security. As of September
30, 1994, Advest made dealer markets in the common stock or other equity
securities of approximately 188 corporations. Advest also actively engages in
trading municipal bonds and unit trust instruments.
Investment banking
Advest manages and participates as an underwriter of corporate and
government securities, mutual funds and private placement offerings. The
Syndicate Department is responsible for Advest's participation in underwritings
managed by Advest and other firms. The Corporate Finance and Public Finance
Departments are responsible for offerings managed or co-managed by Advest. The
Syndicate Department participated in 365 underwritings (allocations of $477
million) in 1994 and 464 underwritings (allocations of $487 million) in 1993, a
record year. It also co-managed 9 closed-end mutual fund offerings which
raised $2.1 billion in 1994 (26 offerings raised $5.6 billion in 1993).
Corporate Finance managed 12 and 11 offerings in 1994 and 1993, respectively,
raising $330 million and $268 million, respectively. In 1994 and 1993, Public
Finance managed or co-managed 49 and 56 offerings, respectively, aggregating
$2.4 billion and $4.4 billion, respectively.
Underwriting involves both economic and regulatory risks. An underwriter
may incur losses if it is unable to resell the securities it is committed to
purchase or if it is forced to liquidate its commitments at less than the
agreed purchase price. In addition, under the Securities Act of 1933, other
laws and court decisions with respect to underwriters' liability and limitation
on indemnification of underwriters by issuers, an underwriter is subject to
substantial potential liability for material misstatements or omissions in
prospectuses and other communications with respect to underwritten offerings.
Further, underwriting commitments constitute a charge against net capital and
Advest's underwriting commitments may be limited by the requirement that it
must at all times be in compliance with the net capital Rule 15c3-1 of the SEC.
Advest also provides merger and acquisition advisory services, appraisals
and related services. Billings develops private placement offerings of limited
5
partnerships in real estate and other industries. The Company does not engage
in bridge financing activities.
Asset management and administration
BSC provides advisory services to a diverse clientele and is the investment
advisor to The Advantage Family of Mutual Funds, the Advantage Municipal Bond
Fund and the Scottish Widows International Fund. BSC has entered into an
arrangement with a third-party to act as subadvisor for the Scottish Widows
Fund. As of September 30, 1994, BSC had approximately $731 million of assets
under management, including $620 million in the Advest-sponsored proprietary
mutual funds for which BSC acts as advisor.
Advest provides money management services to its brokerage customers
through its Investment Management Group ("IM"). IM provides various services
to brokerage clients including client profiling, asset allocation, manager
selection, due diligence and performance measurement. Recommended portfolio
managers include managers in the proprietary Advest Managed Portfolio Services
as well as managers not affiliated with the Company. Revenue is generated from
fees and/or commissions.
Advest Transfer Services, Inc., a subsidiary of AGI, acts as transfer agent
and provides dividend disbursing and reinvestment services for the Company's 10
proprietary mutual funds. Advest provides dividend reinvestment for more than
550 equities and closed-end funds as well as 19 families of mutual funds
representing over 540 individual funds.
The Advest Reserve Cash Account "ARCA" enables brokerage clients to
participate in an integrated financial services program. ARCA clients have
access to their assets through unlimited checkwriting and a VISA debit card
issued by a major third party bank as well as on-request loan against margined
securities. Direct deposit is available to ARCA accounts who can select among
several automatic investment options for idle cash balances, including an FDIC-
insured money market account with the Bank and 5 money market mutual funds.
Other services offered to all brokerage clients include retirement plan
servicing, securities custody and safekeeping.
Advest Bank net interest income
Net interest income is the excess of the interest income and loan fee
income over interest expense. The Bank derives interest income from loans
extended for the purposes of residential, commercial and consumer credit.
Funds not used in lending are invested primarily in money market instruments
and short and intermediate-term mortgage-backed securities. The Bank's loans
and investments are funded by interest bearing deposits, by debt (primarily
advances from the Federal Home Loan Bank of Boston), and by the Bank's equity
capital. The Bank's interest and loan fee income has historically exceeded the
interest expense of funding and has produced positive net interest income.
The Bank is subject to interest rate risk to the degree that the Bank's
interest-bearing liabilities reprice or mature more rapidly, and in greater
volume, as is the case currently, than its interest-earning assets (see
Distribution of assets, liabilities and shareholder's equity; interest rates
and interest differentials as disclosed in Item 1(c) 4 of this filing and in
Exhibit 13 filed herewith on pages 85 and 86 under the caption "Note 17
Financial Instruments with Off-Balance Sheet Concentrations of Credit Risk".
6
Interest income and customer financing
Customers' transactions in securities are effected on either a cash or
margin basis. In a margin account, the customer pays less than the full cost
of a security purchased and the broker-dealer makes a loan for the balance of
the purchase price which is secured by the securities purchased, or other
securities owned by the investor. The amount of the loan is subject to the
margin regulations (Regulation T) of the Board of Governors of the Federal
Reserve System, NYSE margin requirements, and the firm's internal policies
which in some instances are more stringent than Regulation T or NYSE
requirements. Currently, in most transactions, Regulation T requires that the
amount loaned to a customer for a particular purchase not exceed 50% of the
purchase price of a security, so that initially the customer's equity in the
purchase exceeds the NYSE's rules. A member firm is required to have the
customer deposit cash or additional securities so that the loan to the customer
for which marginable equity securities are pledged as collateral is no greater
than 75% of the value of the securities in the account.
Interest is charged on the amount borrowed to finance customers' margin
transactions. The rate of interest charged customers is based primarily on the
brokers' call rate (the charge on bank loans to brokers secured by firm and
customers' securities), to which an additional amount is added up to 2.75%.
The amount of this interest surcharge is dependent on the average net margin
account balance and the dollar amount of commissions charged on account
transactions during the month.
Customer credit balances, retained earnings and, to a lesser extent,
short-term borrowings and cash received from stock loan activities, are the
primary source for financing customer margin accounts.
Other income
Other income includes execution fees, exchange and other marketing credits,
transfer and service fees as well as investment gains and losses.
Research
Through the combined resources of its in-house research staff and
correspondent research provided by three leading outside research firms, Advest
provides its brokerage clients with a full range of research services. These
include corporate data, financial analysis, identification of emerging trends
and objective recommendations. In-house analysts specialize in health care,
financial services, and consumer and business products and services.
Correspondent research provides information and recommendations on
approximately 3,000 domestic and international equities in over 60 industries
in 30 countries.
(2) Competition
All aspects of the business of the Company are highly competitive. Advest
competes with numerous regional and national broker-dealers and other entities,
many of which have greater financial resources than the Company. Because of
the variety of financial services offered by the Company and the various types
of entities that provide such services (including other brokers, banks,
insurance companies and retail merchandise outlets), it is not possible to
estimate the number of companies that compete with the Company for investor
assets. Advest competes with other firms on the basis of transaction prices,
7
quality of service, product availability and locations. With respect to price,
service and product, the Company believes it is competitively well-positioned;
it is impossible to predict, however, the effect of the broader distribution
locales offered by competing entities or the lower costs which may be offered
by certain discount brokers. In addition, there is competition for investment
professionals among the large number of companies now in the financial services
field.
In attracting deposits, the Bank faces strong competition from numerous
savings banks, savings and loan associations, commercial banks, broker-dealers,
credit unions, insurance companies, investment firms and mutual funds with
offices located both within and without its primary market area. The Bank also
faces significant competition for investors' funds from short-term money market
funds and other corporate and government securities.
The Bank's deposit base is substantially derived from Advest's brokerage
clients. A portion of these deposits, primarily certificates of deposits, are
acquired on a fee basis and are considered "brokered" under FDIC rules. The
Bank does not possess branch operations with which it may attract significant
additional retail deposits other than those obtained through Advest. Pursuant
to the terms of federal banking regulations, concerning brokered deposits, the
Bank is deemed to be an "adequately capitalized bank", and as such is
limited in the maximum interest rates it may offer on its brokered deposit
products to rates which do not exceed (1) the rate paid on deposits of similar
maturity in the Bank's normal market area for deposits accepted or (2) the
"national rate" paid on deposits of comparable maturity for deposits accepted
outside the Bank's normal market area. The Bank, as of September 30, 1994, had
$64.5 million of brokered deposits and $224.2 million of special money market
accounts. Prior to January 1, 1993, these money market accounts were also
classified as brokered. The Bank notified the FDIC of this change in
classification in January 1993. To date, the FDIC has neither affirmed or
disaffirmed this treatment but has approved a brokered deposit waiver which
excluded money market and certain other accounts from the category of brokered
deposits.
The Bank also competes with other financial institutions for retail loans
such as residential mortgages. These other competitors include banks, savings
and loans, insurance companies, credit unions and mortgage banking companies.
This market is also highly sensitive to the level and volatility of interest
rates, which affects the volume of business being conducted.
(3) Regulation
The securities industry in the United States is subject to extensive
regulation under both Federal and state laws. The SEC is the Federal agency
charged with administration of the Federal securities laws. Much of the
regulation of broker-dealers has been delegated to self-regulatory authorities,
principally the NASD and the securities exchanges. These self-regulatory
organizations conduct periodic examinations of member broker-dealers in
accordance with the rules they have adopted and amended from time to time,
subject to approval by the SEC. Securities firms are also subject to
regulation by state securities commissions in those states in which they do
business.
Broker-dealers are subject to regulations which cover all aspects of the
securities business, including sales methods, trading practices among broker-
dealers, uses and safekeeping of customers' funds and securities, capital
8
structure of securities firms, recordkeeping and the conduct of directors,
officers and employees. Additional legislation, changes in rules promulgated
by the SEC and self-regulatory authorities, or changes in the interpretation or
enforcement of existing laws and rules, may directly affect the mode of
operation and profitability of broker-dealers. The SEC, self-regulatory
authorities and state securities commissions may conduct administrative
proceedings which can result in censure, fine, suspension or expulsion of a
broker-dealer, its officers or employees. Such administrative proceedings,
whether or not resulting in adverse findings, can require substantial
expenditures. The principal purpose of regulation and discipline of broker-
dealers is the protection of customers and the securities markets, rather than
protection of creditors and stockholders of broker-dealers.
The Company's investment advisory subsidiaries and its proprietary mutual
funds are also subject to extensive Federal and state regulations by the SEC
and state securities commissions.
Advest is required by Federal law to belong to the Securities Investor
Protection Corporation ("SIPC"). The SIPC fund provides protection for
securities held in customer accounts up to $500,000 per customer, with a
limitation of $100,000 on claims for cash balances. The Company purchases
coverage which provides an additional $24.5 million of coverage per customer
for securities held in customers' accounts.
As a Connecticut-chartered capital stock savings bank whose deposits are
insured by the FDIC, subject to applicable limits, the Bank is subject to
extensive regulation and supervision by both the Commissioner of the Department
of Banking of the State of Connecticut and the Regional Director of the FDIC.
The Bank is also subject to various regulatory requirements of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board")
applicable to FDIC insured financial institutions. This governmental
regulation is primarily intended to protect depositors, rather than
shareholders, and concerns, among other matters, capital requirements, safety
and soundness, permissible investments, community reinvestment and credit
discrimination. AGI, for the purpose of ownership of the Bank, is a Unitary
Savings and Loan holding company, and is subject to limited regulation of and
certain reporting requirements to the Office of Thrift Supervision.
The Bank has posted losses in each of the last five fiscal years, resulting
primarily from the significant deterioration in the Bank's loan portfolio. In
July 1991, the Bank entered into a Memorandum of Understanding ("MOU") with its
regulators to address certain concerns arising out of an examination of the
Bank. In February 1993, the Bank entered into a new MOU with its regulators
with terms similar to the original MOU. The Bank has also requested and
received a waiver from the FDIC permitting it to continue to accept brokered
deposits through September 30, 1995. If the Bank's condition were to
deteriorate significantly, the Bank could be subject to regulatory sanctions,
which potentially could include additional restrictions on the Bank's
operations (including its ability to accept brokered deposits), revocation of
the Bank's deposit insurance and the appointment of a conservator or receiver
or the closing of the Bank.
Refer to Exhibit 13 on pages 45 through 53 of this filing under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and on pages 72 through 73 under the caption "Note 7 Deposits" and
on pages 79 through 80 under the caption "Note 14 Capital and Regulatory
Requirements" for a further description of capital and regulatory
considerations concerning the Bank.
9
Certain legislative and regulatory proposals that could affect the Bank and
the banking business in general are pending, or may be introduced, before the
United States Congress, the Connecticut General Assembly and various
governmental agencies. These proposals include measures that may further alter
the structure, regulation and competitive relationship of financial
institutions and that may subject financial institutions to increased
regulation, disclosure and reporting requirements. The Bank in its present
status is restricted by state bank regulations from the declaration of
dividends. (For further discussion concerning the dividend restriction
applicable to the Bank refer to pages 79 through 80 of Exhibit 13 of this
filing under the caption "Note 14 Capital and Regulatory Requirements"). It
cannot be predicted whether or in what form any future legislation or
regulations will be enacted or to what extent the business of the Bank may be
affected.
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") was enacted. FDICIA substantially revises the bank
regulatory and funding provisions of the Federal Deposit Insurance Act and
makes revisions to several other federal banking statutes. The FDIC has
adopted final rules and regulations relating to FDICIA, including new
regulations regarding the "prompt corrective action" powers of the FDIC
regarding undercapitalized banking institutions. FDICIA defines five
categories of capital adequacy for all insured depository institutions,
including categories that would prompt supervisory actions. These categories
include "Well Capitalized" (with total risk based capital of greater than 10%
of risk adjusted assets, Tier One Risk Based Capital of greater than 6% of risk
adjusted assets and Leverage Capital of greater than 5% of assets), "Adequately
Capitalized" (greater than 8%, 5% and 4% respectively), "Undercapitalized"
(less than 8%, less than 4% and less than 4%, respectively), "Significantly
Undercapitalized" (less than 6%, 3% and 3%, respectively) and "Critically
Undercapitalized" (Tangible Capital of less than 2% of total assets.) In
addition, an institution may not be categorized as "Well Capitalized" if it is
subject to a regulatory order. Financial institutions classified as one of the
three undercapitalized categories are subject to progressively more restrictive
limitations on activities and may be subject to orders to increase capital and
to cease certain activities and practices. A "Critically Undercapitalized"
institution, among other additional restrictions, may, under certain
conditions, be placed in a receivership or a conservatorship. Holding Company
guarantees apply if an insured institution is classified "Undercapitalized".
Such holding company guarantees include guarantee of compliance with banking
rules, regulations and laws and the improvement of the Bank, including limited
capital support. As previously disclosed, Advest Bank, which is classified as
an "Adequately Capitalized" bank, has been subject to successive Memoranda of
Understanding since July 1991.
(4) Disclosure requirements for nonbank holding companies
Article 9 of Regulation S-X and Industry Guide 3 specify financial
statement and certain disclosure requirements for bank holding companies. SEC
Staff Accounting Bulletin #69 ("SAB 69") details the view of the SEC staff
concerning the applicability of Article 9 and Industry Guide 3 to registrants
which are not bank holding companies. The bulletin concludes that a nonbank
holding company registrant engaged in similar lending and deposit activities
should provide certain disclosures relevant to an understanding of the
Registrant's operations. In accordance with SAB 69, the Company, a nonbank
holding company, makes the following disclosures regarding the Bank.
10
Distribution of assets, liabilities and shareholder's equity; interest rates
and interest differentials
The following table presents for the periods indicated (I) average assets,
liabilities and shareholder's equity, (II) interest income and expense, (III)
average yields on interest-earning assets and average rates incurred on
interest-bearing liabilities, (IV) the net interest spread and (V) net interest
margin on interest- earning assets. Yields and rates are computed on a tax
equivalent basis at tax rates of 34% for each of the three years ended
September 30, 1994.
1994 1993 1992
---------------------------- ---------------------------- ----------------------------
Interest Average Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
(Dollars in thousands) Balance Expense Rates Balance Expense Rates Balance Expense Rates
----------------------------------------------------------------------------------------------------------------------------------
Assets
Interest-earning assets
CD's, time deposits, federal funds
and other short-term investments $23,861 $785 3.29% $57,206 $1,807 3.16% $65,090 $2,916 4.48%
Investment securities: (1) <F1>
U.S. government and agency obligations 2,163 160 7.40% 513 21 4.09% 547 34 6.22%
Other 827 41 4.96% 823 47 5.71% 1,090 53 4.88%
Mortgage backed securities 66,312 2,574 3.88% 66,635 2,118 3.18% 95,552 4,744 4.96%
Federal Home Loan Bank stock 2,127 162 7.62% 2,590 197 7.61% 2,590 201 7.76%
Loans (net of unearned income) (2)<F2> 247,075 18,987 7.68% 233,708 19,594 8.38% 257,136 23,178 9.01%
---------------------------- ---------------------------- ----------------------------
Total interest-earning assets 342,365 22,709 6.63% 361,475 23,784 6.58% 422,005 31,126 7.38%
---------------------------- ---------------------------- ----------------------------
Non-interest earning assets
Cash and equivalents 1,472 1,361 1,440
Property and equipment 663 695 901
Interest receivable 1,818 1,930 2,993
OREO and other assets 26,209 32,980 35,820
Due from affiliates 115 11 17
Prepaid commissions 178 253 446
---------- ---------- ----------
Total non-interest earning assets 30,455 37,230 41,617
---------- ---------- ----------
$372,820 $398,705 $463,622
---------- ---------- ----------
Liabilities and shareholder's equity
Interest-bearing liabilities
Total deposits (3)<F3> $325,993 $11,045 3.39% $355,442 $12,981 3.65% $410,873 $19,401 4.72%
FHLB advances (4)<F4> 15,991 1,033 6.46% 12,896 978 7.58% 16,957 1,387 8.18%
---------------------------- ---------------------------- ----------------------------
Total interest-bearing liabilities 341,984 12,078 3.53% 368,338 13,959 3.79% 427,830 20,788 4.86%
---------------------------- ---------------------------- ----------------------------
Non-interest bearing liabilities
Accrued interest payable 1,201 1,305 1,890
Other liabilities 5,506 4,029 7,108
Accrued expenses 969 849 2,594
Due to affiliates 58 32 58
---------- ---------- ----------
Total non-interest-bearing liabilities 7,734 6,215 11,650
---------- ---------- ----------
Shareholder's equity 23,102 24,152 24,142
---------- ---------- ----------
$372,820 $398,705 $463,622
---------- ---------- ----------
Net interest income (tax equivalent basis) $10,631 $9,825 $10,338
--------- --------- ---------
Net interest spread(tax equivalent bases) 3.10% 2.79% 2.52%
--------- --------- ---------
Net interest income as a percentage of
interest-earning assets (tax equivalent basis) 3.11% 2.72% 2.45%
--------- --------- ---------
11
Analysis of changes in interest income and interest expense
The following table presents an analysis of increases and decreases in interest
income and expense in terms of changes in volume and interest rates for the
periods indicated. Changes not due solely to either a change in volume or a
change in rate have been allocated based on the respective percentage changes
in average balances and average rates. The table is presented on a tax
equivalent basis at tax rates of 34% for fiscal years 1994 and 1993.
1994 vs. 1993 1993 vs. 1992
Increase (decrease) due to change in Increase (decrease) due to change i
(In thousands) Volume Rate Total Volume Rate Total
-------------------------------------------------------------------------------------------------------------------------------
Interest income
CD's, time deposits, federal funds
and other short-term investments ($1,247) $225 ($1,022) ($249) ($860) ($1,109)
Investment securities: (1)<F1>
U.S. government and agency obligations 17 122 139 (1) (12) (13)
Other - (6) (6) (15) 9 (6)
Mortgage backed securities (23) 479 456 (919) (1,707) (2,626)
Federal Home Loan Bank stock (35) - (35) - (4) (4)
Loans (net of unearned income) (2)<F2> 28 (635) (607) (1,964) (1,620) (3,584)
----------------------------------------------------------------------
Total interest income (1,260) 185 (1,075) (3,148) (4,194) (7,342)
----------------------------------------------------------------------
Interest expense
Total deposits (3)<F3> (1,131) (805) (1,936) (2,024) (4,396) (6,420)
FHLB advances (4)<F4> 200 (145) 55 (308) (101) (409)
----------------------------------------------------------------------
Total interest expense (931) (950) (1,881) (2,332) (4,497) (6,829)
----------------------------------------------------------------------
Change in net interest income ($329) $1,135 $806 ($816) $303 ($513)
----------------------------------------------------------------------
<FN>
<F1> (1) Securities available for sale and trading securities are included in
investment securities.
<F2> (2) Non accrual loans at year end are included in the total loan
portfolio.
<F3> (3) Includes net cost of interest rate swaps and caps.
<F4> (4) FHLB advances (short term) are disclosed in Schedule IX - Short Term
Borrowings.
Investment activities
The following table summarizes the composition of the securities portfolio
(book values) for the three years ended September 30, 1994:
1994 1993 1992
------------------ ------------------ -------------------
(Dollars in thousands) Amount % Amount % Amount %
----------------------------------------------------------------------------------------------------------------------
U.S. government and agency obligations $493 1% $494 1% $499 1%
Mortgage backed securities 48,003 79% 39,374 48% 37,582 38%
Other 818 1% 817 1% 816 1%
Federal Home Loan Bank stock 2,045 3% 2,590 3% 2,590 3%
Securities available for sale (5)<F5> 4,902 8% 38,662 47% 57,129 58%
Trading securities (6)<F6> 4,395 7% - - - -
-----------------------------------------------------------
Total $60,656 100% $81,937 100% $98,616 100%
-------------------------------------------------------------
The following table sets forth the maturities of investment securities at
September 30, 1994 and the weighted average (tax equivalent) yields on such
securities.
Within After one but Five to ten After ten
one year within five year years years To
------------------ ------------------ ------------------ ------------------- ------------
(Dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount
----------------------------------------------------------------------------------------------------------------------------------
U.S. government and agency obligation $493 5.01% - - - - - - $493
Mortgage backed securities - - - - - - $48,003 4.92% 48,003
Other 568 5.27% - - $250 6.75% - - 818
Federal Home Loan Bank stock 2,045 8.11% - - - - - - 2,045
Securities available for sale (5)<F5> 4,902 4.81% - - - - - - 4,902
Trading securities (6)<F6> 4,395 6.94% - - - - - - 4,395
---------------------------------------------------------------------------------------------
$12,403 6.14% - - $250 6.75% $48,003 4.92% $60,656
---------------------------------------------------------------------------------------------
Total
<FN>
<F5>(5) Securities available for sale are detailed in Note 5 of Notes to
Consolidated Financial Statements in the 1994 Annual Report.
<F6>(6) Trading securities are detailed in Note 4 of Notes to Consolidated
Financial Statements of the 1994 Annual Report.
As of September 30, 1994, the Bank held an investment in the following floating
rate collateralized mortgage obligation (CMO) securities, each of which
exceeded 10% of shareholder's equity.
Maturity
Issuer Name Book value Market value Coupon date
-------------------------------------------------------------------------------------------------------------------------------
FNMA SERIES 1992 151 CLASS F 2,990,362 2,998,125 1 Month LIBOR + 35bp 08/25/2007
FNMA SERIES 1993-59 CLASS F 4,107,826 4,102,985 1 Month LIBOR + 50bp 05/25/2008
FNMA SERIES 1486 CLASS FB 3,387,595 3,370,717 1 Month LIBOR + 50bp 04/15/2023
12
Lending activities
The following table summarizes the composition of loan portfolio for the three
years ended September 30, 1994:
1994 1993 1992
-------------------- ---------------------------- -------------------
(Dollars in thousands) Amount % Amount % Amount %
-----------------------------------------------------------------------------------------------------------------------
Commercial and financial $7,021 3% $6,483 3% $15,035 6%
Real estate construction 2,819 1% 9,783 4% 10,467 4%
Real estate mortgage 262,797 95% 222,450 92% 212,673 89%
Installment 913 - 375 - 445 -
Lease financing 2,199 1% 2,835 1% 2,900 1%
-------------------- ------------------- --------------------
Gross total loans $275,749 100% $241,926 100% $241,520 100%
---------- --------- ----------
Less: Allowance for loan loss 4,645 5,433 5,925
---------- ---------- ----------
Net total loans $271,104 $236,493 $235,595
---------- ---------- ----------
Commercial loans, primarily to individuals and small to medium sized firms,
were made at a variety of repayment terms and are primarily collateralized by
equipment, marketable securities or inventory primarly located in
Connectitcut. Real estate mortgage and construction balances as of September
30, 1994 are comprised of residential, commercial and multifamily mortgages of
approximately $158.8 million, $75.3 million and $31.5 million, respectively.
Commercial real estate loans are primarily located in the Northeast and include
as collateral multifamily, health care, office and industrial property. The
Bank is no longer an active loan originator in the commercial real estate
market. The Bank's residential loan portfolio is primarily collateralized by
mortgages on 1-4 family residential properties located throughout the Eastern
United States with concentrations in CT, MA, NY and PA. Installment loans are
made to individuals. The Bank also occasionally purchases residential mortgage
loans for its portfolio from other financial institutions and mortgage bankers
for its portfolio. Such purchases are primarily loans collateralized by
property located in Connecticut. There were no such purchases during fiscal
1994.
The following tables show the interest rate sensitivities of loans outstanding
as of September 30, 1994 which are due in the periods indicated. Loans due
within one year include demand loans.
After one
Within but within After five
(In thousands) one year five years years Total
-----------------------------------------------------------------------------------------------------------------------
Commercial and financial $6,751 $270 $ - $7,021
Real estate construction 1,456 1,363 - 2,819
Real estate mortgage 110,665 69,992 82,140 262,797
Installment 302 254 357 913
Lease financing 160 189 1,850 2,199
-------------------------------------------------------------------
Total $119,334 $72,068 $84,347 $275,749
-------------------------------------------------------------------
Fixed interest rate $6,665 $76,705
Variable interest rate 65,403 7,642
----------------------------
Total $72,068 $84,347
----------------------------
Nonperforming assets
A summary of nonperforming assets by type follows for the three years ended
September 30, 1994:
(Dollars in thousands) 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------
Nonaccrual loans $6,730 $4,474 $4,977
Accruing loans contractually past due 90 days or more 960 19 388
Restructured loans 638 665 381
Other real estate owned, net 13,414 22,683 34,151
------------------------------------------------
Total nonperforming assets $21,742 $27,841 $39,897
------------------------------------------------
Nonperforming assets as a percentage of loans
and other real estate owned 7.5% 10.4% 14.3%
------------------------------------------------
OREO is shown net of the reserve for OREO losses. The 1994 activity in the
reserve account reflects a beginning balance of $2,201,000, provisions for
possible OREO losses of $772,000, total OREO reserve chargeoffs of $1,922,000,
total recoveries of $150,000; and an ending balance in the reserve for OREO
losses of $1,201,000.
13
Generally loans are placed in nonaccrual status when interest or principal is
past due for ninety days or earlier if circumstances indicate collection is
doubtful. The Bank resumes the accrual of interest on such loans if, in the
opinion of management, the borrower has demonstrated adequate financial
resources and intent to meet the terms and conditions of the loan, and all
payments are again current. Interest income forgone on nonperforming loans in
fiscal years 1994, 1993, and 1992 amounted to $754,000, $700,000 and
$1,036,000, respectively.
Summary of loan loss experience
The following table summarizes the Bank's loan loss experience for each of the
three years ended September 30, 1994:
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------------------------------------------------
Balance at beginning of period $5,433 $5,925 $4,553
Acquired portfolio of ACC lease financings - - 464
---------------------------------------------
5,433 5,925 5,017
---------------------------------------------
Chargeoffs:
Real estate mortgage 2,640 1,051 3,111
Installment 27 - 9
Commercial 52 70 735
Lease financing 97 - 285
---------------------------------------------
2,816 1,121 4,140
---------------------------------------------
Recoveries:
Real estate mortgage 136 50 2
Commercial 16 19 161
Lease financing 22 - -
---------------------------------------------
174 69 163
---------------------------------------------
Net charge-offs 2,642 1,052 3,977
Additions charged to operations 1,854 560 4,885
---------------------------------------------
Balance at end of period $4,645 $5,433 $5,925
---------------------------------------------
Ratio of net charge-offs to average loans
outstanding during the period 1.07% 0.45% 1.55%
---------------------------------------------
The Bank maintains general reserves for potential losses from its loan
portfolio in an Allowance for Losses from Loans and Leases (the "ALLL"). The
ALLL is maintained at a level considered by management to be adequate. The
adequacy of the ALLL is reveiwed quarterly by the Bank's management and its
Board of Directors, and is determined primarily by management's informed
judgement concerning the amount of risk inherent in the portfolio at a point in
time. Management's judgement is based on a number of factors including: 1) a
detailed risk rating system for commercial loans in which loans are
individually reviewed with respect to such criteria as the estimated value of
underlying loan collateral and the financial condition of borrowers, 2) recent
historical loan loss experience, 3) industry and geographic concentrations, 4)
the results of the most recent regulatory examination available, 5) current
national and local economic conditions, and 6) other relevant information as
may be available. The balance of each risk rating category has a reserve
percentage applied for the purpose of estimating each component of the ALLL.
A substantial portion of outstanding commerical loan portfolio balances on an
annualized basis are reviewed periodically by a third party that is independent
from the Bank and the results of such review are factored into the risk rating
system.
Management also reviews monthly, certain monitored performing and all
non-performing loans individually and makes further reserve allocation
adjustments. The Bank's one to four family residential mortgage portfolio
reserves are evaluated primarily upon the basis of portfolio historical
performance. The Bank also maintains an unallocated and supplemental reserve
that reflects management's assessment of local and national economic, business
and real estate market trends, and the Bank's procedures, controls and
personnel.
Loans are charged off against the ALLL when management believes that collection
is unlikely. Loan charge-offs are identified during the loan review process.
The charge-offs recorded during 1994 were primarily associated with the real
estate mortgage portfolio and resulted from the decline in the value of the
properties serving as collateral for the loans.
14
The following table presents the allocation of the reserve for loan and lease
losses by loan categories for the three years ended September 30, 1994:
1994 1993 1992
------------------- ------------------- -------------------
Loans in Loans in Loans in
Amount category Amount category Amount category
of as a % of of as a % of of as a % of
(Dollars in thousands) reserve total loans reserve total loans reserve total loans
--------------------------------------------------------------------------------------------------------------------
Commercial and financial $86 3% $1,033 3% $951 6%
Real estate construction 37 1% 291 4% 305 4%
Real estate mortgage 4,198 95% 3,144 92% 3,483 89%
Installment 18 - 17 - 9 -
Lease financing 105 1% 381 1% 370 1%
Unallocated 201 - 567 - 807 -
---------------------------------------------------------------------------
Total $4,645 100% $5,433 100% $5,925 100%
---------------------------------------------------------------------------
Deposits
The Bank offers a variety of deposit accounts designed to attract both short
and long term funds. The Bank provides a money market deposit account to
Advest's customers as a component of various cash management products available
to those customers. The Bank primarily markets brokered Certificates of
Deposit (CD's) through Advest. The Bank also markets retail deposit accounts,
such as money market accounts, primarily through Advest. At September 30,
1994, deposits obtained through Advest constituted 90% of all deposits at the
Bank. Additional deposit information is disclosed in Note 7 of Notes to
Consolidated Financial Statements in the 1994 Annual Report.
The following table presents the average balances of and average rates paid on
deposits for the three years ended September 30, 1994:
1994 1993 1992
------------------- ------------------- -------------------
Average Average Average Average Average Average
(Dollars in thousands) balance rate balance rate balance rate
--------------------------------------------------------------------------------------------------------------------
Savings-non interest bearing $58 $63 $43
Savings 243 2.00% 354 2.51% 165 3.93%
Money market 274,715 2.76% 306,722 2.96% 339,346 3.57%
Time certificates 50,977 6.17% 48,303 8.00% 71,319 8.07%
---------------------------------------------------------------------------
Total deposits $325,993 3.39% $355,442 3.65% $410,873 4.72%
---------------------------------------------------------------------------
The following table sets forth the maturity distribution of time deposits in
excess of $100,000 as of September 30, 1994:
(In thousands) Amount
-------------------------------------------------------------------------------
Three months or less $985
Over three months to six months 5,146
Over six months to twelve months 11,756
Over twelve months 5,638
---------
$23,525
---------
Years ended September 30,
-----------------------------------------------
Return on equity and assets 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
Return on assets (net income/average total assets) * * *
Return on equity (net income/average equity) * * *
Net interest margin 2.85% 2.46% 2.21%
Equity to assets (average equity/average assets) 6.20% 6.06% 5.21%
<FN>
* As a result of net losses in 1994, 1993, and 1992, this information is not
meaningful.
15
Item 2. Properties
The Company conducts all of its operations from leased premises,
generally under non-cancelable leases with terms up to 15 years.
Item 3. Legal Proceedings
The Company has been named as defendant in various legal actions some of
which claim substantial damages. The actions have arisen principally from the
securities and investment banking business. In the opinion of management,
based on discussions with counsel, the outcome of these matters will not result
in a material adverse effect on the results of operations and financial
condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information required by this item is disclosed in Exhibit 13 on
pages 74 through 75 of this filing under the caption "Note 11 Common Stock" and
on page 88 under the captions "Quarterly Financial Information" and
"Shareholder Information".
Item 6. Selected Financial Data
The information required by this item is disclosed in Exhibit 13 on page
54 of this filing under the caption "Five Year Financial Summary".
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this item is disclosed in Exhibit 13 of this
filing on pages 45 through 53 under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
Item 8. Financial Statements and Supplementary Data
The information required by this item is disclosed in the Consolidated
Financial Statements and Notes thereto of the 1994 Annual Report to
Shareholders excerpted in Exhibit 13 of this filing on pages 60 though 87 and
under the caption "Quarterly Financial Information" on page 88 of Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements with the Company's independent accountants on
any accounting or financial disclosure matters.
16
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required for "Directors" by this item is included under
the caption "Election of Directors" of the Company's Proxy Statement to be
filed with the Securities and Exchange Commission in connection with the
Company's annual meeting to be held January 26, 1995. Such information is
hereby incorporated by reference.
The following table sets forth the executive officers of the Company at
December 1, 1994. Executive officers of the Company are appointed annually by
the Board of Directors to hold office until their successors are appointed and
qualify.
Officer
Name Age Office Since
Allen Weintraub 59 President, Chief Executive
Officer and Chairman of the Board 1977
Charles Bassos 52 President and Chief Executive
Officer of Advest Bank 1991
Allen G. Botwinick 51 Group Vice President, Operations 1980
George A. Boujoukos 60 Executive Vice President - Capital
Markets of Advest, Inc. 1977
Lee G. Kuckro 53 Senior Vice President and Secretary 1978
Grant Kurtz 52 Senior Executive Vice President
and President of Advest, Inc. 1985
Martin M. Lilienthal 52 Senior Vice President, Treasurer and
Chief Financial Officer 1977
Robert L. Thomas 57 President of Boston Security
Counsellors, Inc. and Executive
Vice President - Director of
Investment Policy of Advest, Inc. 1977
Harry H. Branning 43 Executive Vice President
of Advest, Inc. 1994
Item 11. Executive Compensation
The information required by this item is included under the caption
"Remuneration of Directors and Officers" and "Certain Transactions" of the
Company's Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Company's annual meeting to be held January
26, 1995. Such information is hereby incorporated by reference.
Item 12. Security Ownership Of Certain Beneficial Owners And Management
The information required by this item is contained under the caption
"Election of Directors" in the Company's Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Company's annual
meeting to be held January 26, 1995. Such information is hereby incorporated
by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this item is included under the caption
"Certain Transactions" of the Company's Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Company's annual
meeting to be held January 26, 1995. Such information is hereby incorporated
by reference.
17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page Reference
(a) 1. Financial Statements Exhibit 13 10-K
The Consolidated Financial Statements and the
Report of Independent Accountants contained
in the 1994 Annual Report to Shareholders
are incorporated herein by reference:
Report of Independent Accountants 55
Consolidated Balance Sheets 57
Consolidated Statements of Operations 56
Consolidated Statements of Cash Flows 58
Consolidated Statements of Changes in
Shareholders' Equity 59
Notes to Consolidated Financial Statements 60-87
2. Financial Statements Schedules
Report of Independent Accountants 23
Schedule III - Condensed Financial Information of
Registrant 24-26
Schedule VIII - Valuation and Qualifying Accounts 27
Schedule IX - Short-Term Borrowings 28
3. Exhibits
The following is a list of exhibits to this report on Form 10-K
filed herewith or incorporated by reference herein.
Prior Filing(s) to which
Exhibit Description reference is made, if applicable
3(a) Restated Certificate of Exhibit 3(a) of Registrant's
Incorporation of Report on Form 10-Q for the
Registration quarter ended March 31, 1989
3(b) By-laws of Registrant, as Exhibit 3(b) of Registrant's Report
restated on Form 10-Q for the quarter ended
March 31, 1989 and Exhibit 3(a) to
to Registrant's Report on Form 10-Q
for the quarter ended June 30, 1990
18
Prior Filing(s) to which
Exhibit Description reference is made, if applicable
4(a) Shareholder Rights Agreement Exhibit to Registrant's
dated as of October 31, 1988 Report on Form 8-K dated
between Registrant and The November 1, 1988
Connecticut Bank and Trust
Company, N.A., as Rights Agent
4(b) Indenture pertaining to Exhibit 4(e) to Registrant's
Registrant's 9% Convertible Registration Statement on
Subordinated Debentures Form S-1, File No. 2-81977
10(a) Registrant's Employees' Exhibit 10(a) to Registrant's
Retirement Plan, Amended and Report on Form 10-K for the fiscal
Restated as of October 1, 1989 year ended September 20, 1989
10(b) Registrant's 1986 Stock Exhibit 10 to Registrant's Report
Option Plan, as amended on Form 10-Q for the quarter ended
March 31, 1987; Exhibit 10(a) to
Registrant's Report on Form 10-Q
for the quarter ended March 31, 1988
10(c) Registrant's Incentive Exhibit 10(c) to Registrant's
Savings Plan Under IRC Report on Form 10-K for the fiscal
Section 401-K, Amended and year ended September 30, 1989 and
restated as of January 1, Exhibit 10(a) to Registrant's Report
1989 on Form 10-Q for the quarter ended
June 30, 1990
10(d) Registrant's 1981 and 1983 Exhibit A to Registrant's Proxy
Incentive Stock Option Statements dated December 15, 1981
Plans, as amended and December 21, 1983; Exhibit 10(a)
to Registrant's Report on Form 10-Q
for the quarter ended March 31, 1988
10(e) Registrant's Deferred Exhibit 10(f) to Registrant's
Compensation Savings and Report on Form 10-K for the fiscal
Investment Plan, Amended and year ended September 30, 1989
Restated as of November 17, 1989
10(f) First Amendment to Registrant's Exhibit 10(j) to Registrant's
Deferred Compensation Savings Report on Form 10-K for its fiscal
and Investment Plan year ended September 30, 1990
10(g) Amendments Nos. 2 and 3 to Exhibit 10(b) of Registrant's
Registrant's Deferred Report on Form 10-Q for the
Compensation Savings and quarter ended December 31, 1992
Investment Plan
10(h) Registrant's Employee Stock Exhibit 10(h) to Registrant's
Ownership Plan effective Report on Form 10-K for its fiscal
as of October 1, 1988 year ended September 30, 1988
19
Prior Filing(s) to which
Exhibit Description reference is made, if applicable
10(i) The Advest Thrift Plan of Exhibit 10(a) of Registrant's
Registrant, effective as of Report on Form 10-Q for the
December 31, 1992 quarter ended December 31, 1992
10(j) Registrant's 1990 Top AE Exhibit 10(i) to Registrant's
Stock Option Plan, effective Report on Form 10-K for its fiscal
as of October 26, 1990 year ended September 30, 1990
10(k) Registrant's 1991 Top AE Exhibit 10(k) to Registrant's
Stock Option Plan, effective Report on Form 10-K for its fiscal
as of November 22, 1991. year ended September 30, 1991
10(l) Registrant's 1992 Top AE Exhibit 10(c) of Registrant's
Stock Option Plan Report on Form 10-Q for the
quarter ended December 31, 1992
10(m) Registrant's Account Exhibit 10(m) of Registrant's
Executive Nonqualified Report on Form 10-K for its fiscal
Defined Benefit Plan year ended September 30, 1993
10(n) Registrant's Nonqualified Filed herewith
Executive Post-employment
Income Plan
10(o) Registrant's 1995 Equity Exhibit 4.1 to Registrant's
Plan, effective as of Regulation Statement on
December 1, 1994 Form S-8, File No. 33-56275
11 Statement Regarding Filed herewith
Computation of Net Earnings
per Common Share
13 Selected Excerpts from the Filed herewith
Annual Report to Shareholders
for fiscal year ended September
30, 1994
21 Subsidiaries Filed herewith
23 Consent of Independent Filed herewith
Accountants
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
year ended September 30, 1994.
20
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
THE ADVEST GROUP, INC.
By Martin M. Lilienthal November 18, 1994
(Martin M. Lilienthal)
Senior Vice President and Treasurer
(Chief Financial and Principal Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
President, Chief Executive
Officer, Chairman of the
Board and Director
(Principal Executive
Allen Weintraub Officer) November 18, 1994
(Allen Weintraub)
Senior Vice President and
Treasurer (Chief Financial
and Principal Accounting
Martin M. Lilienthal Officer) November 18, 1994
(Martin M. Lilienthal)
George A. Boujoukos Director November 18, 1994
(George A. Boujoukos)
Anthony E. Cascino Director November 18, 1994
(Anthony E. Cascino)
Richard G. Dooley Director November 18, 1994
(Richard G. Dooley)
Grant Kurtz Director November 18, 1994
(Grant Kurtz)
Vice Chairman of the
Anthony A. LaCroix Board and Director November 18, 1994
(Anthony A. LaCroix)
21
Signatures
Charles T. Larus Director November 18, 1994
(Charles T. Larus)
Corine T. Norgaard Director November 18, 1994
(Corine T. Norgaard)
John A. Powers Director November 18, 1994
(John A. Powers)
Robert L. Thomas Director November 18, 1994
(Robert L. Thomas)
22
Report of Independent Accountants
The Board of Directors and Shareholders
of The Advest Group, Inc.
Our report on the consolidated financial statements of The Advest Group, Inc.
and Subsidiaries has been incorporated by reference in this Form 10-K from
page 14 of the 1994 Annual Report to Shareholders of The Advest Group, Inc.
In connection with our audits of such financial statements, we have also
audited the related financial statement schedules listed in the index on page
18 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
October 27, 1994
23
Schedule III
Condensed Financial Information of Registrant
The Advest Group, Inc.
(Parent Company)
Condensed Balance Sheets
September 30,
(In thousands) 1994 1993
Assets
Cash $ 352 $ 1,939
Short-term investment 3,000 5,000
Investment in subsidiaries, equity
method(a) 92,955 86,683
Receivables from subsidiaries(a) 2,788 2,617
Loans 8,371 8,325
Investment securities 2,344 4,665
Other assets 8,609 10,404
Total assets $118,419 $119,633
Liabilities
Accounts payable and accrued expenses $ 11,708 $ 12,104
Payable to subsidiaries(a) 6,696 6,477
Borrowings 5,038 5,688
Subordinated liabilities 20,997 21,375
Total liabilities 44,439 45,644
Shareholders' Equity(b) 73,980 73,989
Total liabilities and shareholders' equity $118,419 $119,633
(a) Eliminated in consolidation.
(b) For an analysis of Shareholders' Equity and its components, see
Consolidated Balance Sheets and Statements of Changes in Shareholders'
Equity on pages 57 and 59 in Exhibit 13 of this filing.
24
Schedule III
(Continued)
The Advest Group, Inc.
(Parent Company)
Condensed Statements of Operations
For the years ended September 30,
(In thousands) 1994 1993 1992
Interest and other income $ 284 $ 293 $ (113)
Interest and other expenses 5,149 3,586 11,330
Loss before income tax benefit,
extraordinary credit and
equity in earnings of
subsidiaries (4,865) (3,293) (11,443)
Income tax benefit 2,787 2,711 6,172
Loss before extraordinary credit
and equity in earnings of
subsidiaries (2,078) (582) (5,271)
Extraordinary credit -- 2,103 --
Income (loss) before equity in
income of subsidiaries (2,078) 1,521 (5,271)
Equity in income of subsidiaries 5,131 5,750 674
Net income (loss) $ 3,053 $ 7,271 $(4,597)
25
The Advest Group, Inc. Schedule III
(Parent Company) (Continued)
Condensed Statements of Cash Flows
For the years ended September 30,
(In thousands) 1994 1993 1992
Operating Activities
Net income (loss) $ 3,053 $ 7,271 $(4,597)
Equity in loss of subsidiaries (5,131) (5,750) (674)
Adjustments to reconcile net loss to net
cash from operating activities 3,391 189 6,832
Deferred ESOP contribution -- 1,000 1,000
Net decrease (increase)in operating assets 24 (111) 512
Net decrease in operating liabilities (1,365) (450) (5,695)
Net cash (used for) provided by operating
activities (28) 2,149 (2,622)
Financing Activities
Proceeds from long term borrowing -- -- 6,500
Repayment of long term borrowings -- (67) (1,000)
Repayment of short term borrowings (650) (1,050) (396)
Employee stock transaction 27 84 15
Repurchase of sub. debentures (366) (281) (114)
Net (decrease) increase in payables to
subsidiaries (747) 6,358 5,787
Purchase of treasury stock (3,090) (2,022) (2,095)
Net cash (used for) provided by financing
activities (4,826) 3,022 8,697
Investing Activities
(Increase) decrease in investments in
subsidiaries (548) (1,050) 2,131
Proceeds from sales of investment securities 8,975 -- --
Proceeds from maturities of investment
securities 39,000 30,000 24,000
Purchases of investment securities (44,114) (37,108) (24,001)
Loans originated (56) -- (8,344)
Principal collections on loans 10 19 284
Recovery on write-offs -- 291 392
Net cash provided by (used for) investing
activities 3,267 (7,848) (5,538)
(Decrease) increase in cash (1,587) (2,677) 537
Cash at beginning of period 1,939 4,616 4,079
Cash at period end $ 352 $ 1,939 $ 4,616
Supplemental Information
Interest paid $ 2,426 $ 2,792 $ 3,918
Income taxes paid $ 1,058 $ 2,406 $ 4,188
Non-cash transfers (reduction of payable
to subsidiaries effected in the form of
dividends $ -- $ 7,000 $35,500
26
Schedule VIII
The Advest Group, Inc. and Subsidiaries
Valuation and Qualifying Accounts
Additions
Balance at charged to Chargeoffs Balance at
beginning cost and and end
(In thousands) of period expenses recoveries of period
For the years ended
September 30,
1994
Credit Losses
Brokerage customers $ 1,305 $ 265 $ (701) $ 869
Loans 5,782 2,499 (3,501) 4,780
Other -- 6 (6) --
Asset Devaluation
Other real estate owned 2,201 772 (1,772) 1,201
Other investments/assets 1,383 1,869 (914) 2,338
$10,671 $ 5,411 $ (6,894) $ 9,188
1993
Credit Losses
Brokerage customers $ 1,674 $ 364 $ (733) $ 1,305
Loans 5,986 1,690 (1,894) 5,782
Other -- 5 (5) --
Asset Devaluation
Other real estate owned 2,830 2,190 (2,819) 2,201
Other investments/assets 1,626 43 (286) 1,383
$12,116 $ 4,292 $ (5,737) $10,671
1992
Credit Losses
Brokerage customers $ 1,455 $ 1,049 $ (830) $ 1,674
Loans 6,004 11,134 (11,152) 5,986
Asset Devaluation
Other real estate owned 2,200 5,762 (5,132) 2,830
Other investments/assets -- 8,499 (6,873) 1,626
$ 9,659 $26,444 $(23,987) $12,116
27
Schedule IX
The Advest Group, Inc. and Subsidiaries
Short-term Borrowings
(Dollars in thousands)
Weighted Maximum amount Average amount Weighted
Category of Balance average outstanding outstanding average interest
aggregate short at end interest rate during the during the rate during
term borrowings of period end of period period (a) period (b) the period
For the years ended
September 30,
1994
Bank loans payable $22,502 5.27% $42,422 $5,347 4.29%
Federal Home Loan
Bank advances 9,500 5.58 17,300 6,154 5.45
Other 650 9.00 650 650 7.83
1993
Bank loans payable $ 2 3.72% $14,202 $1,399 3.64%
Federal Home Loan
Bank advances 1,000 8.03 7,000 4,553 7.09
Other 650 7.25 650 650 7.25
1992
Bank loans payable $ 1,502 4.42% $11,502 $ 885 4.76%
Federal Home Loan
Bank advances 6,000 6.67 7,500 4,789 7.50
Other 650 7.25 650 26 7.25
<FN>
(a) Highest month end balance during period.
(b) Average daily balance during period.
28
Form 10-K
Exhibit Index
Exhibit Description Page
10(n) Registrant's Nonqualified Executive
Post-employment Income Plan 30
11 Statement Regarding Computation
of Net Earnings per Common Share 44
13 Selected Excerpts from the
Annual Report to Shareholders
for fiscal year ended September
30, 1994 45
21 Subsidiaries 89
23 Consent of Independent Accountants 90
29