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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, 1995
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)
90 State House Square, - Hartford, Connecticut 06103
(Address of principal executive offices) (Zip
Code)
Registrant's telephone number, including area code: (860) 509-1000
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 $72,899,351 as of December 1, 1995.
On December 1, 1995 the Registrant has outstanding 8,391,371 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 1995 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 25, 1996.
Total of sequentially numbered pages 64 .
exhibit index equential page number page 27 .
>
Part I
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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, consumer lending, asset
management, trust 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 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.
During 1995, the Company sold the investment advisory
business related to its proprietary mutual funds in three separate
transactions. In the first quarter, a pre-tax gain of $.8 million
was realized from the sale of the business related to the Scottish
Widows International Fund to an unrelated third party. During the
third quarter, the businesses related to the six taxable and three
non-taxable funds, respectively, in the Advantage Family of Funds
("Funds") were sold to two other unrelated third parties for total
consideration of $11.2 million. Net of expenses, the Company
realized a pre-tax gain of $9.3 million from the two transactions.
The total gain from all sales was $10.1 million and is reported
separately on the 1995 Consolidated Statement of Earnings.
(2) Advest is engaged in a broad range of activities in the
securities brokerage, investment banking and asset management
businesses. Specific services include retail brokerage,
institutional sales, origination of and participation in
underwritings and distribution of corporate and municipal
securities', market making and trading activities in corporate
securities and municipal bonds, research, custody and money
management.
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 throughout the country. During fiscal 1995, Advest
opened 1 new sales office and closed 2. At September 30, 1995,
Advest had sales offices and account executives in 16 states and
the District of Columbia as
2
follows:
Number of
Number of Account
State Offices Executives
----- ------- ---------
Connecticut 7 70
District of Columbia 1 11
Florida 6 48
Illinois 2 9
Kentucky 3 15
Maine 3 23
Maryland 1 4
Massachusetts 5 52
Missouri 2 15
New Hampshire 2 7
New Jersey 4 25
New York 16 127
Ohio 12 53
Pennsylvania 10 59
Rhode Island 1 8
Vermont 1 3
Virginia 3 12
--- ---
79 541
== ===
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. (In December 1995, the Bank has relocated its
corporate office and branch office to 90 State House Square,
Hartford, CT 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 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, 1995, 97.0% of the Bank's
portfolio consisted of such assets.
3
(3) The Company's principal executive offices are located at One
Commercial Plaza, 280 Trumbull Street, Hartford, Connecticut,
06103 (telephone number (203) 525-1421). As of January 1996, the
Company will relocate its executive offices to 90 State House
Square, Hartford, CT 06103, telephone number (860) 509-1000.) At
September 30, 1995, the Company employed 1,539 persons.
Financial Information about Industry Segments
The information required by this item is disclosed on page 37 of
the 1995 Annual Report to Shareholders in Note 18 of Notes to
Consolidated Financial Statements. Such information is hereby
incorporated by reference.
Narrative Description of Business
(1) Revenues
The principal sources of revenue for the last five years are
disclosed on page 9 of the 1995 Annual Report to Shareholders
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. Prior to the
sale of the investment advisory business related to its
proprietary mutual funds Advest served as sole distributor for The
Advantage Family of Mutual Funds and the Advantage Municipal Bond
Fund and acted as a distributor of the Scottish Widows
International Fund.
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.
Options Advest also effects for its customers the purchase
and sale of put and call options traded on all major stock
exchanges.
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 sales credits of Advest. The
Company does not actively participate in the high yield securities
market. Advest also hedges its municipal bond inventory by
entering into derivative transactions, primarily futures when
certain inventory levels
4
are reached. Derivative positions are not material and are marked-
to-market daily.
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,
1995, Advest made dealer markets in the common stock or other
equity securities of approximately 184 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.
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 partnerships in real estate
and other industries. As a general rule, the Company does not
engage in bridge financing activities.
Asset Management and Administration
BSC provides advisory services to a diverse clientele and, until
the sale of the investment advisory business related to the
Advantage Family of Mutual Funds and the Scottish Widows
International Fund in fiscal 1995, acted as their investment
advisor. As of September 30, 1995, BSC had approximately $358
million of private account assets under management.
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. At September 30, 1995, IM
had approximately $1.6 billion of assets under management.
Advest Transfer Services, Inc., a subsidiary of AGI, provides
transfer agency services to the formerly proprietary mutual funds
of the Company. Advest provides dividend reinvestment for more
than 1,200 equities and closed-end funds as well as 31 families of
mutual funds representing over 1,100 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 loans collateralized by
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 five money market mutual funds. Other services
5
offered to all clients include retirement plan servicing,
securities custody and asset 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 adjustable
rate 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
Note 17 of Notes to Consolidated Financial Statements on pages 35
through 37 in the 1995 Annual Report to Shareholders. Such
information is hereby incorporated by reference).
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 balance and the dollar amount of commissions charged on
account transactions during the month.
Customer credit balances, retained earnings, cash received
from stock loan activities, and as needed short-term borrowings,
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,
6
regional banking, insurance and technology. 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, 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
primarily in 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, 1995, had $69.6
million of brokered deposits.
The Bank also competes with other financial institutions for
retail loans such as one to four family 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
7
customers' funds and securities, capital 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 subsidiary is 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 six 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, 1996.
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), or under
extreme conditions, revocation of the Bank's deposit insurance and
the appointment of a conservator or receiver or the closing of the
Bank.
The Bank recorded a significant loss in fiscal 1995 due to
its implementation of the accelerated asset disposition plan for
NPAs (Refer to Note 2 of Notes to Consolidated Financial
Statements on page 27 of the 1995 Annual Report to Shareholders).
Consequently, the Bank's leverage capital ratio as of September
30, 1995 was below that required under the terms of the MOU. The
1995 operating loss was anticipated and the accelerated asset
disposition plan was discussed with the Bank's state and federal
banking regulators prior to implementation. The regulators have
required that the Bank submit a capital plan detailing the Bank's
estimate of when it will comply with the leverage capital ratio
requirement, its risk management program, and contingency plans.
Bank management expects to submit its plans to the regulators by
the end of
8
the first quarter of fiscal 1996. Management believes that the
Bank's non-compliance with the required leverage capital ratio
requirement is unlikely to result in adverse action by its
regulators.
Refer to pages 10 through 18 of the 1995 Annual Report to
Shareholders under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and on
page 30 in Note 7 and on pages 33 and 34 in Note 14 of the Notes
to Consolidated Financial Statements for a further description of
capital and regulatory considerations concerning the Bank. Such
information is hereby incorporated by reference.
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 dividend restriction applicable to the Bank refer to
pages 33 and 34 of the 1995 Annual Report to Shareholders in Note
14 of Notes to Consolidated Financial Statements. Such
information is hereby incorporated by reference.) 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.
Federal banking regulations define 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.
9
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, 1995.
1995 1994 1993
----------------------------- -------------------------- --------------------------
Interest Average Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
(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 $ 6,294 $ 366 5.82% $ 23,861 $ 785 3.29% $ 57,206 $ 1,807 3.16%
Investment securities: <F1>
U.S. government and agency obligations 2,107 151 7.17% 2,163 160 7.40% 513 21 4.09%
Other 703 47 6.69% 827 41 4.96% 823 47 5.71%
Mortgage-backed securities 35,321 2,044 5.79% 66,312 2,574 3.88% 66,635 2,118 3.18%
FHLB stock 2,129 157 7.37% 2,127 162 7.62% 2,590 197 7.61%
Loans (net of unearned income)<F2> 258,011 19,975 7.74% 247,075 18,987 7.68% 233,708 19,594 8.38%
----------------------------- -------------------------- ----------
Total interest-earning assets 304,565 22,740 7.47% 342,365 22,709 6.63% 361,475 23,784 6.58%
----------------------------- -------------------------- ----------
Non-interest earning assets
Cash and equivalents 960 1,472 1,361
Property and equipment 692 663 695
Interest receivable 2,339 1,818 1,930
OREO and other assets 16,421 26,209 32,980
Due from affiliates 255 115 11
Prepaid commissions 163 178 253
----------- ---------- ----------
Total non-interest earning assets 20,830 30,455 37,230
----------- ---------- ----------
$325,395 $372,820 $398,705
=========== ========== ==========
Liabilities and shareholder's equity
Interest-bearing liabilities
Total deposits <F3> $275,962 $11,370 4.12% $325,993 $11,045 3.39% $355,442 $12,981 3.65%
FHLB advances 23,965 1,605 6.70% 15,991 1,033 6.46% 12,896 978 7.58%
----------- ---------- ----------
Total interest-bearing liabilities 299,927 12,975 4.33% 341,984 12,078 3.53% 368,338 13,959 3.79%
----------- ---------- ----------
Non-interest bearing liabilities
Accrued interest payable 1,251 1,201 1,305
Other liabilities 5,067 5,506 4,029
Accrued expenses 232 969 849
Due to affiliates 71 58 32
----------- ---------- ----------
Total non-interest-bearing liabilities 6,621 7,734 6,215
----------- ---------- ----------
Shareholder's equity 18,847 23,102 24,152
----------- ---------- ----------
$325,395 $372,820 $398,705
=========== ========== ==========
Net interest income (tax equivalent basis) $ 9,765 $10,631 $ 9,825
=========== ========= =========
Net interest spread (tax equivalent basis) 3.14% 3.10% 2.79%
======= ======= =======
Net interest income as a percentage of
interest-earning assets (tax equivalent basis) 3.21% 3.11% 2.72%
======= ======= =======
<FN>
<F1>(1) Securities available for sale and trading
securities are included in investment securities.
<F2>(2) Nonaccrual loans at year end are included in the total
loan portfolio.
<F3>(3) Includes net cost of interest rate swaps and caps.
10
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
1995 and 1994.
1995 vs. 1994 1994 vs. 1993
-------------- --------------
Increase (decrease) due to cIncrease (decrease) due to change in
(In thousands) Volume Rate Total Volume Rate Total
- ---------------------------------------------------------------------------------
Interest income
CD's, time deposits, federal funds
and other short-term investments $ (918$ 499 $(419) $(1,247$ 225 $(1,022)
Investment securities: <F1>
US government and agency obligation (4) (5) (9) 17 122 139
Other (19) 25 6 - (6) (6)
Mortgage-backed securities (2,270)1,740 (530) (23) 479 456
FHLB stock 0 (5) (5) (35) - (35)
Loans (net of unearned income) <F2> 695 293 988 28 (635) (607)
-------------- --------------
Total interest income (2,516)2,547 31 (1,260) 185 (1,075)
-------------- --------------
Interest expense
Total deposits <F3> (2,004)2,329 325 (1,131) (805) (1,936)
FHLB advances 519 53 572 200 (145) 55
-------------- --------------
Total interest expense (1,485)2,382 897 (931) (950) (1,881)
-------------- --------------
Change in net interest income $(1,031$ 165 $(866) $ (329$1,135 $ 806
============== ==============
<FN>
<F1> (1) Securities available for sale and trading securities are included in investment securities.
<F2> (2) Nonaccrual loans at year end are included in the total loan portfolio.
<F3> (3) Includes net cost of interest rate swaps and caps.
Investment activities
The following table summarizes the composition of the securities portfolio
(book values) for the three years ended September 30, 1995:
1995 1994 1993
------------- ------------- -------------
(In thousands) Amount % Amount % Amount %
- --------------------------------------------------------------------------------
US government and agency obligations $ 49 2% $ 4,888 9% $ 49 1%
Mortgage-backed securities 21,965 83% 48,003 79% 39,374 48%
Other 596 2% 818 1% 817 1%
FHLB stock 2,233 9% 2,045 3% 2,590 3%
Securities available for sale <F4> 1,127 4% 4,902 8% 38,662 47%
-----------------------------------------
Total $26,411 100% $60,656 100% $81,937 100%
=========================================
The following table sets forth the maturities of investment securities at
September 30, 1995 and the weighted average (tax equivalent) yields on such
securities.
Within After one Five After ten
one year within fiv y Total
------------ ------------- ------------- ------------- -------
(In thousands) AmountYield Amount Yield Amount Yield Amount Yield Amount Yield
- --------------------------------------------------------------------------------
US government and agency o$ 490 6.45% - - - - - - $ 49 6.45%
Mortgage-backed securities - - - - - - $21,965 6.25% 21,965 6.25%
Other 96 0.00% - - $500 8.50% - - 596 7.13%
FHLB stock 2,233 6.80% - - - - - - 2,233 6.80%
Securities available for s - - - - - - 1,127 5.71% 1,127 5.71%
------------------------------------------------------
Total $2,819 6.51% - - $500 8.50% $23,092 6.22% $26,411 6.30%
======================================================
<FN>
<F4>(4) Securities available for sale are detailed in Note 6 of Notes to
Consolidated Financial Statements in the 1995 Annual Report to Shareholders.
As of September 30, 1995, the Bank held no investments in floating rate
collateralized mortgage obligation (CMO) securities, which exceeded 10% of
shareholder's equity.
11
Lending activities
The following table summarizes the composition of loan
portfolio for the three years ended September 30, 1995:
1995 1994 1993
---------------- ---------------- ----------------
(In thousands) Amount % Amount % Amount %
- --------------------------------------------------------------------------------------
Commercial and financi$ 3,85 2% $ 7,02 3% $ 6,48 3%
Real estate constructi 5,597 2% 2,819 1% 9,783 4%
Real estate mortgage 220,613 95% 262,797 95% 222,450 92%
Installment 922 - 913 - 375 -
Lease financing 1,811 1% 2,199 1% 2,835 1%
---------------- ---------------- ----------------
Gross total loans $232,799 100% $275,749 100% $241,926 100%
======== ======== ========
Less: Allowance for l 2,213 4,645 5,433
-------- -------- --------
Net total loans $230,586 $271,104 $236,493
======== ======== ========
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, 1995 are
comprised of residential, commercial and multifamily mortgages
of approximately $170.0 million, $43.9 million and $12.3
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 1995.
The following tables show the interest rate sensitivities of
loans outstanding as of September 30, 1995 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 $ 3,556 $ 300 $ - $ 3,85
Real estate construction 3,566 1,443 588 5,597
Real estate mortgage 114,654 41,318 64,641 220,613
Installment 317 267 338 922
Lease financing - 79 1,732 1,811
--------------------------------------------------------
Total $122,093 $43,407 $67,299 $232,799
--------------------------------------------------------
Fixed interest rate $ 7,368 $66,987
Variable interest rate 36,039 312
------------------------
Total $43,407 $67,299
========================
Nonperforming assets
A summary of nonperforming assets by type follows for the three
years ended September 30, 1995:
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------
Nonaccrual loans $ 290 $ 6,730 $ 4,474
Accruing loans contractually past due 90 days - 960 19
Restructured loans - 638 665
Other real estate owned, net 2,849 13,414 22,683
----------------------------------------
Total nonperforming assets $3,139 $21,742 $27,841
========================================
Nonperforming assets as a percentage of loans
and other real estate owned 1.3% 7.5% 10.4%
========================================
OREO is shown net of the reserve for OREO losses. The 1995
activity in the reserve account reflects a beginning balance of
$1,201,000, provisions for possible OREO losses of $4,491,000,
total OREO reserve chargeoffs of $5,186,000, total recoveries
of $212,000 and an ending balance in the reserve for OREO
losses of $718,000.
12
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 1995, 1994, and 1993 amounted to $508,000, $754,000
and $700,000, 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, 1995:
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------
Balance at beginning of period $4,645 $5,433 $5,925
----------------------------
Chargeoffs:
Real estate mortgage 7,831 2,640 1,051
Installment - 27 -
Commercial 483 52 70
Lease financing 14 97 -
----------------------------
8,328 2,816 1,121
----------------------------
Recoveries:
Real estate mortgage 239 136 50
Commercial 1 16 19
Lease financing 19 22 -
----------------------------
259 174 69
----------------------------
Net charge-offs 8,069 2,642 1,052
Additions charged to operations 5,637 1,854 560
----------------------------
Balance at end of period $2,213 $4,645 $5,433
============================
Ratio of net charge-offs to average loans
outstanding during the period 3.13% 1.07% 0.45%
============================
The Bank maintains general reserves for potential losses from its
loan portfolio in an Allowance for Losses from Loans (the "ALL").
The ALL is maintained at a level considered by management to be
adequate. The adequacy of the ALL is reviewed quarterly by the
Bank's management and its Board of Directors, and is determined
primarily by management's informed judgment concerning the amount
of risk inherent in the portfolio at a point in time. Management's
judgment 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 ALL. A substantial portion of outstanding
commercial 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 nonperforming 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 ALL when management believes that
collection is unlikely. Loan charge-offs are identified during the
loan review process. The charge-offs recorded prior to 1995 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. The charge-offs recorded during 1995
were primarily associated with the discounts neccessary to attract
buyers of those distressed commercial OREO assets included in the
Bank's accelerated asset disposition plan and other bulk sales.
(See Note 2 of Notes to Consolidated Financial Statements in the
1995 Annual Report to Shareholders. )
13
The following table presents the allocation of the reserve for loan
and lease losses by loan categories for the three years ended
September 30, 1995:
1995 1994 1993
---------------- ------------------ ----------------
Loans in Loans in Loans in
Amount category Amount category Amount category
of as a % of of as a % of of as a % of
(In thousands) reserve total loanreserve total loans reserve total loans
- ------------------------------------------------------------------------------
Commercial and financ$ 29 2% $ 86 3% $1,033 3%
Real estate construct 38 2% 37 1% 291 4%
Real estate mortgage 1,752 95% 4,198 95% 3,144 92%
Installment 18 - 18 - 17 -
Lease financing 66 1% 105 1% 381 1%
Unallocated 310 - 201 - 567 -
---------------- ------------------ ----------------
Total $2,213 100% $4,645 100% $5,433 99%
================ ================== ================
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,
1995, deposits obtained through Advest constituted 89% of all
deposits at the Bank. Additional deposit information is disclosed
in Note 9 of Notes to Consolidated Financial Statements in the 1995
Annual Report to Shareholders.
The following table presents the average balances of and average
rates paid on deposits for the three years ended September 30,
1995:
1995 1994 1993
---------------- ------------------ ----------------
Average Average Average Average Average Average
(Dollars in thousandsbalance rate balance rate balance rate
- ------------------------------------------------------------------------------
Savings-non interest $ 66 $ 58 $ 63
Savings 33 1.99% 243 2.00% 354 2.51%
Money market 209,407 3.22% 274,715 2.76% 306,722 2.96%
Time certificates 66,456 6.41% 50,977 6.17% 48,303 8.00%
---------------------------------------------------------
Total deposits $275,962 4.12% $325,993 3.39% $355,442 3.65%
=========================================================
The following table sets forth the maturity distribution of time
deposits of $100,000 or more as of September 30, 1995:
(Dollars in thousands) Amount
-----------------------------------------
Three months or less $ 4,150
Over three months to six months 7,108
Over six months to twelve month 6,441
Over twelve months 9,056
----------
$26,755
==========
Return on equity and assets
Years ended September 30,
---------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
Return on assets (net income/average to * * *
Return on equity (net income/average eq * * *
Net interest margin 3.00% 2.85% 2.46%
Equity to assets (average equity/averag 5.79% 6.20% 6.06%
<FN>
* As a result of net losses in 1995, 1994, and 1993, this
information is not meaningful.
14
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 on pages 31 and 32
of the 1995 Annual Report to Shareholders in Note 11 of the Notes to
Consolidated Financial Statements and on page 39 under the captions
"Quarterly Financial Information" and "Shareholder Information". Such
information is hereby incorporated by reference.
Item 6. Selected Financial Data
The information required by this item is disclosed on page 9 of the
1995 Annual Report to Shareholders under the caption "Five Year
Financial Summary". Such information is hereby incorporated by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The information required by this item is disclosed on pages 10 through
18 of the 1995 Annual Report to Shareholders under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations". Such information is hereby incorporated by
reference.
Item 8. Financial Statements and Supplementary Data
The information required by this item is disclosed in the Consolidated
Financial Statements and Notes on pages 20 through 38 and under the
caption "Quarterly Financial Information" on page 39 of the 1995
Annual Report to Shareholders. Such information is hereby incorporated
by reference.
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.
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" 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 25,
1996. Such information is hereby incorporated by reference.
15
The following table sets forth the executive officers of the
Company at December 1, 1995. 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 60 Chief Executive Officer and
Chairman of the Board 1977
Grant W. Kurtz 53 President of the Company and Advest, Inc. 1985
Allen G. Botwinick 52 Executive Vice President - Administration
and Operations 1980
George A. Boujoukos 61 Executive Vice President - Capital
Markets of Advest, Inc. 1977
Lee G. Kuckro 54 Senior Vice President, Secretary
and General Counsel 1978
Martin M.
Lilienthal 53 Senior Vice President, Treasurer and
Chief Financial Officer 1977
Harry H. Branning 44 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 25, 1996. 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 25, 1996. 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 25, 1996. Such
information is hereby incorporated by reference.
16
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
Page Reference
-----------------------
Annual Report 10-K
----------------------
(a) 1. Financial Statements
--------------------
The Consolidated Financial Statements and The Report of
Independent Accountants contained in the 1995 Annual
Report to Shareholders are incorporated herein by reference:
Report of Independent Accountants 19
Consolidated Balance Sheets 21
Consolidated Statements of Earnings 20
Consolidated Statements of Cash Flows 22
Consolidated Statement of Changes
in Shareholders' Equity 23
Notes to Consolidated Financial Statements 24-38
2. Financial Statement Schedules
-----------------------------
Report of Independent Accountants on all schedules 22
Schedule I - Condensed Financial Information
of Registrant 23-25
Schedule II - Valuation and Qualifying Accounts 26
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 Reference
---------------------------------
Exhibit Description is made, if applicable
- -------- ----------- --------------------
3(a) Restated Certificate of Exhibit 3(a) of Incorporation
Incorporation of Registration Registrant's Report on Form 10-q
for the quarter ended March 31, 1989
3(b) By-laws of Registrant, as restated Exhibit 3(b) of Registrant's
Report on Form 10-Qfor the
quarter ended March 31, 1989
and Exhibit 3(a) to Registrant's
Report on Form 10-Q for the
quarter ended June 30, 1990
3(c) First Amendment to By-laws Filed Herewith
of Registrant
4(a) Shareholder Rights Agreement Exhibit to Registrant's Report on
dated as of October 31, 1988 Form 8-k datedNovember 1, 1988
between Registrant and The
Connecticut Bank and Trust
Company, N.A., as Rights Agent
4(b) Indenture pertaining to Registrants Exhibit 4(e) to Registrant's
9% Convertible Subordinated Registration Statement on Form
Debentures S-1, File NO. 2-81977
17
Prior Filing(s) to which Reference
---------------------------------
Exhibit Description is made, if applicable
- -------- ----------- --------------------
10(a) Registrant's 1994 Non-Employee Exhibit A to Registrant's Proxy
Director Stock Option Plan Statement dated December 20, 1994
10(b) Registrant's 1986 Stock Exhibit 10 to Registrant's Report
Option Plan, as amended on Form 10-q 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 1993 Stock Option Exhibit A to Registrant's Proxy
Plan Statement dated December 21, 1993
10(d) Registrant's 1981 and 1983 Exhibit A to Registrant's Proxy
Incentive Stock Option Plans, Statements dated December 15,
as amended 1981 and December 21, 1983;
Exhibit 10(a) to Registrant's
Report on Form 10-Qfor 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
Investment Plan, Amended and fiscal year ended September
Restated as of November 17, 1989 30, 1989
10(f) First Amendment to Registrant's Exhibit 10(j) to Registrant's
Deferred Compensation Savings Report on Form 10-k for its
and Investment Plan fiscal year ended September
30, 19900
10(g) Amendments Nos. 2 and 3 to Exhibit 10(b) of Registrant's
Registrant's Deferred for the quarter ended December
Compensation Savings and 30, 1992
Investment Plan
10(h) Form of Executive Officer Exhibit 10 to Registrant's Report
Restricted Stock and Stock on Form 10-Q for the quarter
Option Agreement ended December 31, 1994
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 Stock Exhibit 10(i) to Registrant's
Option Plan, effective as of Report on Form 10-k for its
October 26, 1990 fiscal year ended September
30, 1990
10(k) Registrant's 1991 Top AE Exhibit 10(k) to Registrant's
Stock Option Plan, effective Report Form 10-k for its fiscal
as of November 22, 1991. year ended September 30, 1991
18
Prior Filing(s) to which Reference
---------------------------------
Exhibit Description is made, if applicable
- -------- ----------- --------------------
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 Executive Exhibit 10(m) of Registrant's
Nonqualified Define Benefit Plan Report on Form 10-k for its
fiscal year ended September 30,
1993
10(n) Registrant's Nonqualified Exhibit 10(n) of Registrant's
Executive Post-employment Report on Form 10-k for its
Income Plan fiscal year ended September
30, 1994
10(o) Registrant's 1995 Equity Plan, Exhibit 4.1 to Registrant's
effective as of December 1, 1994 Regulation Statement on Form
S-8, File NO. 33-56275
10(p) First Amendment to Registrant's Filed Herewith
Nonqualified Executive Post-
employment Income Plan
11 Statement Regarding Computation Filed Herewith
of Net Earnings per Common Share
13 Annual Report to Shareholders Filed Herewith *
for fiscal year ended
September 30, 1995
21 Subsidiaries Filed Herewith
23 Consent of Independent Filed Herewith
Accountants
* Pursuant to Item 601(b) (13) of Regulation S-K, except for those portions
of the Annual Report expressly incorporated by reference and included in
Exhibit 13, the Annual Report is not to be deemed filed as part of this filing
on Form 10-K.
- -------------------
(b) Reports on Form 8-K
--------------------
No reports on Form 8-K were filed during the fourth quarter of the year
ended September 30, 1995.
19
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 /s/Martin M. Lilienthal November 30, 1995
--------------------------
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.
Chief Executive Officer,
Chairman of the Board
and Director (Principal
/s/Allen Weintraub Executive Officer) November 30, 1995
- --------------------------
Allen Weintraub
Senior Vice President and
Treasurer (Chief Financial
and Principal Accounting
/s/Martin M. Lilienthal Officer) November 30, 1995
- ----------------------------
Martin M. Lilienthal
/s/George A. Boujoukos Director November 30, 1995
- ----------------------------
George A. Boujoukos
/s/Sanford Cloud, Jr. Director November 30, 1995
- ----------------------------
Sanford Cloud, Jr.
/s/Richard G. Dooley Director November 30, 1995
- ----------------------------
Richard G. Dooley
/s/Robert W. Fiondella Director November 30, 1995
- ----------------------------
Robert W. Fiondella
20
SIGNATURES
/s/Grant W. Kurtz President and Director November 30, 1995
- ----------------------------
Grant W. Kurtz
Vice Chairman of the
/s/Anthony A. LaCroix Board and Director November 30, 1995
- ----------------------------
Anthony A. LaCroix
/s/Corine T. Norgaard Director November 30, 1995
- -----------------------------
Corine T. Norgaard
/s/John A. Powers Director November 30, 1995
- -----------------------------
John A. Powers
21
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 19 of the 1995 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 17 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 26, 1995
22
Schedule I
Condensed Financial Information of Registrant
The Advest Group, Inc.
---------------------
(Parent Company)
Condensed Balance Sheets
September 30,
---------------
- ------------------------------------------------------------------
(In thousands) 1995 1994
- ------------------------------------------------------------------
Assets
Cash $ 670 $ 352
Short-term investment - 3,000
Investment in subsidiaries, equity
method(a) 88,766 92,955
Receivables from subsidiaries(a) 3,038 2,788
Loans 10,922 8,371
Investment securities 8,313 2,344
Other assets 9,047 8,609
----------------------
Total assets $120,756 $118,419
=======================
Liabilities
Accounts payable and accrued expenses$ 9,657 $ 11,708
Payable to subsidiaries(a) 6,375 6,696
Borrowings 5,240 5,038
Subordinated liabilities 20,552 20,997
----------------------
Total liabilities 41,824 44,439
Shareholders' Equity(b) 78,932 73,980
----------------------
Total liabilities and shareholders'
equity $120,756 $118,419
===================
(a) Eliminated in consolidation.
(b) For an analysis of Shareholders' Equity and its components, see
Registrant's Consolidated Balance Sheets and Statements of Changes in
Shareholders' Equity on pages 21and 23 of the 1995 Annual Report to
Shareholders.
23
Schedule I
(Continued)
The Advest Group, Inc.
----------------------
(Parent Company)
Condensed Statements of Earnings
For the years ended September 30,
------------------------
(In thousands) 1995 1994 1993
- ----------------------------------------------------------------
Gain on sale of investment
advisory business, net $10,092 $ -- $ --
Interest and other income 428 284 293
--------------------------------
Total revenues $10,520 $ 284 $ 293
Interest and other expenses 3,259 5,149 3,586
-------------------------------
Income (loss) before income tax benefit,
extraordinary credit and
equity in earnings of
subsidiaries 7,261 (4,865) (3,293)
Income tax benefit 542 2,787 2,711
-------------------------------
Income (loss) before extraordinary credit
and equity in earnings of
subsidiaries 7,803 (2,078) (582)
Extraordinary credit -- -- 2,103
----------------------------------
Income (loss) before equity in
income of subsidiaries 7,803 (2,078) 1,521
Equity in (loss) income of
subsidiaries (1,452) 5,131 5,750
-----------------------------
Net income $ 6,351 $3,053 $7,271
=============================
24
Schedule I
(Continued)
The Advest Group, Inc.
----------------------
(Parent Company)
Condensed Statements of Cash Flows
For the years ended September 30,
- --------------------------------------------------------------------
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------
Operating Activities:
Net income $ 6,351 $ 3,053 $ 7,271
Equity in income (loss) of
subsidiaries 1,452 (5,131) (5,750)
Adjustments to reconcile net income to net cash
provide by (used for) operating
activities 1,580 3,391 189
Gain on sale of investment
advisory business, net (10,092) -- --
Deferred ESOP contribution -- -- 1,000
Net decrease (increase)in
operating assets (20) 24 (111)
Net decrease in operating liabilities (2,103) (1,365) (450)
----------------------------
Net cash (used for) provided by
operating activities (2,832) (28) 2,149
----------------------------
Financing Activities:
Proceeds from long term borrowing 1,000 -- --
Repayment of long term borrowings -- -- (67)
Repayment of short term borrowings (798) (650) (1,050)
Employee stock transaction 62 27 84
Repurchase of subordinated debentures (410) (365) (281)
Net (decrease) increase in payables
to subsidiaries 3,018 (748) 6,358
Repurchase of common stock (2,309) (3,090) (2,022)
Proceeds from sale of treasury stock 846 -- --
------------------------------
Net cash provied by (used for)
financing activities 1,409 (4,826) 3,022
-----------------------------
Investing Activities:
Acquisition of subsidiaries assets (4,585) -- --
Increase in investments in
subsidiaries (152) (548) (1,050)
Proceeds from sales of investment
securities -- 8,975 --
Proceeds from maturities of held
to maturity securities 12,500 39,000 30,000
Proceeds from investment
advisory business, net 10,141 -- --
Purchases of investment securities (15,309) (44,114) (37,108)
Loans originated (1,761) (56) --
Principal collections on loans 746 10 19
Recovery on write-offs 161 -- 291
------------------------------
Net cash provided by (used for)
investing activities 1,741 3,267 7,848)
-----------------------------
Increase (decrease) in cash 318 (1,587) (2,677)
Cash at beginning of period 352 1,939 4,616
------------------------------
Cash at period end $ 670 $ 352 $ 1,939
=============================
Supplemental Information:
Interest paid $ 2,452 $ 2,426 $ 2,792
Income taxes paid $ 2,273 $ 1,058 $ 2,406
Non-cash transfers (reduction of payable to
subsidiaries effected in the form
of dividends) $ 3,007 $ -- $ 7,000
25
Schedule II
The Advest Group, Inc. and Subsidiaries
---------------------------------------
Valuation and Qualifying Accounts
Additions
Balance charged Charge Balance
at to -offs at
beginning cost and and end
(In thousands) of period expenses recoveries of period
- -------------------------------------------------------------------
For the years ended
September 30,
- ------------------
1995
Credit losses:
Brokerage customers $ 869 $ 473$ (599) $ 743
Loans 4,900 5,637 (8,203) 2,334
Asset devaluation:
Other real estate owned 1,201 4,491 (4,974) 718
Other investments/assets 2,218 (263) (705) 1,250
---------------------------------------
$ 9,188 $10,338 $(14,481) $ 5,045
======================================
1994
Credit losses:
Brokerage customers $ 1,305 $ 265$ (701) $ 869
Loans 5,782 2,499 (3,381) 4,900
Other -- 6 (6) --
Asset devaluation:
Other real estate owned 2,201 772 (1,772) 1,201
Other investments/assets 1,383 1,869 (1,034) 2,218
---------------------------------------
$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
======================================
26
Form 10-K
Exhibit Index
Exhibit Description
- -------------------
3(c) First Amendment to By-laws of Registrant
10(p) First amendment to registran's Nonqualified Executive
Postemployment Income Plan
10(n) Registrant's Nonqualified Executive Post-employment Income
Plan
11 Statement Regarding Computation of Net Earnings per Common
Share
13 Selected Excerpts from the Annual Report to Shareholders for
fiscal year ended September 30, 1995
21 Subsidiaries
23 Consent of Coopers & Lybrand L.L.P.
27