SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
_____ Exchange Act of 1934
For the quarter ended March 31, 1995
___________________
or
Transition report persuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the transition period from ____________ to ____________
Commission File Number 0 - 16123
______________
Bethel Bancorp
______________________________________________________________________________ _
(Exact name of registrant as specified in its charter)
Maine 01 - 0425066
________________________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
489 Congress Street, Portland, Maine 04101
________________________________________ ____________________________________
(Address of principal executive offices) (Zip Code)
(207) 772 - 8587
______________________________________________________________________________ _
Registrant's telephone number, including area code
Not Applicable
______________________________________________________________________________ _
Former name, former address and former fiscal year,if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Not Applicable
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares outstanding as of April 30, 1995: 547,502 of common stock, $1.00 par
value per share.
BETHEL BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, June 30,
1995 1994
_______________ _______________
Assets
Cash and due from banks $ 3,304,031 $ 2,480,913
Interest bearing deposits in other banks 5,061,143 8,855,592
Trading account securities at market 52,851 173,071
Available for sale securities 2,116,204 2,060,222
Held to maturity securities (market value
$18,644,750 at 3/31/95 and $7,358,599 at
6/30/94) 18,932,804 8,020,108
Federal Home Loan Bank stock 2,550,000 2,345,000
Loans held for sale 215,454 521,458
Loans 167,055,893 158,819,218
Less deferred loan origination fees 323,189 358,439
Less allowance for loan losses 2,530,000 2,463,000
_______________ _______________
Net loans 164,202,704 155,997,779
Bank premises and equipment, net 3,945,071 3,044,791
Real estate held for investment 490,837 650,191
Other real estate owned 1,441,082 1,993,984
Goodwill (net of accumulated amortization of
$558,172 at 3/31/95 and $396,048 at 6/30/94) 2,939,800 1,452,260
Other assets 3,439,729 3,005,119
_______________ _______________
Total Assets 208,691,710 190,600,488
=============== ===============
Liabilities and Shareholders' Equity
Liabilities
Deposits $ 149,468,192 $ 124,306,354
Repurchase Agreements 2,425,603 --
Advances from Federal Home Loan Bank 36,200,000 45,900,000
Notes payable 2,137,695 2,520,206
Other Liabilities 1,714,907 2,117,565
_______________ _______________
Total Liabilities 191,946,397 174,844,125
Shareholders' Equity
Preferred stock, Series A, 45,454 shares
issued and outstanding 999,988 999,988
Preferred stock, Series B, 71,428 shares
issued and outstanding 999,992 999,992
Common stock, par value $ 1, issued and
outstanding, 547,400 shares at 3/31/95
and 547,400 at 6/30/94 547,400 547,400
Additional paid in capital 4,640,968 4,640,968
Retained earnings 9,990,561 9,006,038
_______________ _______________
17,178,909 16,194,386
Net unrealized loss on available for
sale securities (433,596) (438,023)
_______________ _______________
Total Shareholders' Equity 16,745,313 15,756,363
_______________ _______________
Total Liabilities and Shareholders' Equity $ 208,691,710 $ 190,600,488
=============== ===============
BETHEL BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
Three Months Ended
March 31,
1995 1994
_______________ _______________
Interest and Dividend Income
Interest on fed funds & interest
bearing deposits $ 93,657 $ 52,873
Interest on loans & loans held for sale 3,811,479 3,336,750
Interest on investment securities &
available for sale securities 393,563 126,793
Dividend on Federal Home Loan Bank Stock 45,271 43,232
_______________ _______________
Total Interest Income 4,343,970 3,559,648
Interest Expense
Deposits 1,410,184 1,053,807
Repurchase agreements 25,721 --
Other borrowings 628,565 491,091
_______________ _______________
Total Interest Expense 2,064,470 1,544,898
_______________ _______________
Net Interest Income 2,279,500 2,014,750
Provision for loan losses 145,776 186,908
_______________ _______________
Net Interest Income after Provision
for Loan Losses 2,133,724 1,827,842
Other Income
Service charges 248,119 214,184
Available for sale securities gains (losses) (1,848) 43,121
Gain (Loss) on trading account 151,910 94,795
Other 145,717 282,060
_______________ _______________
Total Other Income 543,898 634,160
Other Expenses
Salaries and employee benefits 1,003,890 942,283
Net occupancy expense 149,483 113,670
Equipment expense 190,717 144,651
Goodwill amortization 72,294 31,951
Other 614,482 646,331
_______________ _______________
Total Other Expenses 2,030,866 1,878,886
_______________ _______________
Income Before Income Taxes 646,756 583,116
Income tax expense 238,683 230,975
_______________ _______________
Net Income $ 408,073 $ 352,141
=============== ===============
Earnings Per Share
Primary $ 0.61 $ 0.56
Fully Diluted $ 0.56 $ 0.56
BETHEL BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
Nine Months Ended
March 31,
1995 1994
_______________ _______________
Interest and Dividend Income
Interest on fed funds & interest
bearing deposits $ 313,428 $ 171,504
Interest on loans & loans held for sale 11,084,775 9,889,507
Interest on investment securities &
available for sale securities 859,340 303,781
Dividend on Federal Home Loan Bank Stock 148,188 113,346
_______________ _______________
Total Interest Income 12,405,731 10,478,138
Interest Expense
Deposits 3,864,227 3,379,508
Repurchase agreements 47,163 --
Other borrowings 1,861,647 1,399,683
_______________ _______________
Total Interest Expense 5,773,037 4,779,191
_______________ _______________
Net Interest Income 6,632,694 5,698,947
Provision for loan losses 494,590 724,337
_______________ _______________
Net Interest Income after Provision
for Loan Losses 6,138,104 4,974,610
Other Income
Service charges 698,405 642,236
Available for sale securities gains (losses) 6,280 268,920
Gain (Loss) on trading account 375,732 82,472
Other 531,412 1,058,879
_______________ _______________
Total Other Income 1,611,829 2,052,507
Other Expenses
Salaries and employee benefits 2,873,541 2,636,117
Net occupancy expense 382,659 297,539
Equipment expense 508,121 393,591
Goodwill amortization 162,124 88,480
Other 1,896,899 2,014,978
_______________ _______________
Total Other Expenses 5,823,344 5,430,705
_______________ _______________
Income Before Income Taxes and Cumulative
Effect of Change in Accounting Principle 1,926,589 1,596,412
Income tax expense 705,691 589,003
_______________ _______________
Income After Taxes and Before the Cumulative
Effect of Change in Accounting Principle 1,220,898 1,007,409
Cumulative effect at July 1, 1993 of change
in accounting for income taxes -- 260,000
_______________ _______________
Net Income $ 1,220,898 $ 1,267,409
=============== ===============
Earnings Per Share After Accounting Change
Primary $ 1.82 $ 2.12
Fully Diluted $ 1.67 $ 2.06
Earnings Per Share Before Accounting Change
Primary $ 1.82 $ 1.66
Fully Diluted $ 1.67 $ 1.64
BETHEL BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
Nine Months Ended March 31, 1995 and 1994
Net
Unrealized
Gains(Losses)
Additional on Available
Common Preferred Paid - In Retained for Sale
Stock Stock Capital Earnings Securities Total
______________ ______________ ______________ ______________ ______________ ______________
Balance at June 30, 1993 $ 542,400 $ 999,988 $ 4,589,068 $ 7,824,465 $ 111,421 $ 14,067,342
Net Income for Nine Months
Ended March 31,1994 -- -- -- 1,267,409 -- 1,267,409
Dividends Paid on Common
Stock -- -- -- (130,197) -- (130,197)
Dividends Paid on Preferred
Stock -- -- -- (69,998) -- (69,998)
Stock Options Exercised 5,000 -- 51,900 -- -- 56,900
Preferred Stock, Series B,
71,428 Shares Issued
and Outstanding -- 999,992 -- -- -- 999,992
Net Change in Unrealized
Loss on Securities
Available for Sale -- -- -- -- (497,288) (497,288)
______________ ______________ ______________ ______________ ______________ ______________
Balance March 31, 1994 $ 547,400 $ 1,999,980 $ 4,640,968 $ 8,891,679 $ (385,867) $ 15,694,160
============== ============== ============== ============== ============== ==============
Balance at June 30, 1994 $ 547,400 $ 1,999,980 $ 4,640,968 $ 9,006,038 $ (438,023) $ 15,756,363
Net Income for Nine Months
Ended March 31, 1995 -- -- -- 1,220,898 -- 1,220,898
Dividends Paid on Common
Stock -- -- -- (131,376) -- (131,376)
Dividends Paid on Preferred
Stock -- -- -- (104,999) -- (104,999)
Net Change in Unrealized
Loss on Securities
Available for Sale -- -- -- -- 4,427 4,427
______________ ______________ ______________ ______________ ______________ ______________
Balance March 31, 1995 $ 547,400 $ 1,999,980 $ 4,640,968 $ 9,990,561 $ (433,596) $ 16,745,313
============== ============== ============== ============== ============== ===============
BETHEL BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flow
Nine Months Ended
March 31,
1995 1994
_______________ _______________
Cash provided by operating activities $ 2,205,597 $ 4,335,841
Cash flows from investing activities:
FHLB stock purchased (205,000) --
Held to maturity securities purchased (12,421,919) (4,359,329)
Held to maturity securities matured 1,481,795 189,352
Available for sale securities purchased (265,841) (8,325,714)
Available for sale securities matured 66,882 3,869,109
Available for sale securities sold 149,417 2,747,273
New loans, net of repayments & charge offs (9,146,040) (6,091,085)
Net capital expenditures (1,325,865) (293,746)
Real estate owned sold 664,621 471,389
Real estate held for investment purchased (21,905) (59,003)
Real estate held for investment sold 168,600 70,292
Premium paid for Key Bank acquisition (1,590,228) --
_______________ _______________
Net cash (used in) investing activities (22,445,483) (11,781,462)
Cash flows from financing activities:
Net change in deposits 25,161,838 451,514
Net change in repurchase agreements 2,425,603 --
Dividends paid (236,375) (200,494)
Proceeds from stock options exercised -- 56,900
Proceeds from preferred stock issurance -- 999,992
Net (decrease) increase in advances from
Federal Home Loan Bank of Boston (9,700,000) 6,719,000
Net change in notes payable (382,511) 22,648
_______________ _______________
Net cash provided by financing activities 17,268,555 8,049,560
_______________ _______________
Net (decrease) increase in cash and cash
equivalents (2,971,331) 603,939
Cash and cash equivalents, beginning of period 11,336,505 10,447,779
_______________ _______________
Cash and cash equivalents, end of period $ 8,365,174 $ 11,051,718
=============== ===============
Cash and cash equivalents include cash on
hand, amounts due from banks, interest
bearing deposits and federal funds sold
Supplemental schedule of noncash investing
activities:
Nine Months Ended
March 31,
1995 1994
_______________ _______________
Transfer of invetments available for sale
to investments held to maturity -- 4,082,439
Net increase (decrease) in valuation for
unrealized market value adjustments on
available for sale securities 4,427 (497,288)
Net transfer (to) from Loans to Other Real
Estate Owned 481,775 (279,810)
BETHEL BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
1. Basis of Presentation
_____________________
The accompanying unaudited condensed and consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the nine month
period ended March 31, 1995 are not necessarily indicative of the results that
may be expected for the year ending June 30, 1995. For further information,
refer to the audited consolidated financial statements and footnotes thereto
for the fiscal year ended June 30, 1994 included in the Company's annual
report on Form 10-K.
2. Securities
__________
Securities held to maturity at their carrying and approximate market values are
summarized below.
March 31, 1995 June 30, 1994
________________________________ ________________________________
Market Market
Cost Value Cost Value
_______________ _______________ _______________ _______________
Debt securities issued by the U.S. Treasury
and other U.S. Government corporations
and agencies $ 1,385,624 $ 1,264,735 $ 1,382,544 $ 1,239,725
Mortgage-backed securities 16,698,546 16,552,933 5,669,215 5,242,518
FNMA Guaranteed REMIC 848,634 827,082 968,349 876,356
_______________ _______________ _______________ _______________
$ 18,932,804 $ 18,644,750 $ 8,020,108 $ 7,358,599
=============== =============== =============== ===============
March 31, 1995 June 30, 1994
________________________________ ________________________________
Market Market
Cost Value Cost Value
_______________ _______________ _______________ _______________
Due in one year or less -- -- -- --
Due after one year through five years -- -- -- --
Due after five years through ten years -- -- -- --
Due after ten years 1,385,624 1,264,735 1,382,544 1,239,725
Mortgage-backed securities (including
securities with interest rates ranging from
6.0% to 8.5% maturing June 2004 to
November 2024) 16,698,546 16,552,933 5,669,215 5,242,518
FNMA Guaranteed REMIC (6.725%
maturing March 2023) 848,634 827,082 968,349 876,356
_______________ _______________ _______________ _______________
$ 18,932,804 $ 18,644,750 $ 8,020,108 $ 7,358,599
=============== =============== =============== ===============
Securities available for sale at the carrying and approximate market values are
summarized below.
March 31, 1995 June 30, 1994
________________________________ ________________________________
Market Market
Cost Value Cost Value
_______________ _______________ _______________ _______________
Debt securities issued by the U.S. Treasury
and other U.S. Government corporations
and agencies $ 250,000 $ 226,875 $ 250,000 $ 226,407
Corporate bonds 149,587 131,710 149,551 129,094
Mortgage-backed securities 1,324,895 1,226,114 1,391,708 1,265,380
Equity securities 645,589 531,505 524,433 439,341
_______________ _______________ _______________ _______________
$ 2,370,071 $ 2,116,204 $ 2,315,692 $ 2,060,222
=============== =============== =============== ===============
March 31, 1995 June 30, 1994
________________________________ ________________________________
Market Market
Cost Value Cost Value
_______________ _______________ _______________ _______________
Due in one year or less -- -- -- --
Due after one year through five years -- -- -- --
Due after five years through ten years 399,587 358,585 399,551 355,501
Due after ten years -- -- -- --
Mortgage-backed securities (including
securities with interest rates ranging from
5.15% to 6.5% maturing September 2023 to
February 2024) 1,324,895 1,226,114 1,391,708 1,265,380
Equity securities 645,589 531,505 524,433 439,341
_______________ _______________ _______________ _______________
$ 2,370,071 $ 2,116,204 $ 2,315,692 $ 2,060,222
=============== =============== =============== ===============
3. Allowance for Loan Losses
_________________________
The following is an analysis of transactions in the allowance for loan losses:
Nine Months Ended
March 31,
1995 1994
_______________ _______________
Balance at beginning of year $ 2,463,000 $ 2,123,000
Add provision charged to operations 494,590 724,337
Recoveries on loans previously charged off 36,387 41,266
_______________ _______________
2,993,977 2,888,603
Less loans charged off 463,977 554,603
_______________ _______________
Balance at end of period $ 2,530,000 $ 2,334,000
=============== ===============
4. Advances from Federal Home Loan Bank
____________________________________
A summary of borrowings from the Federal Home Loan Bank is as follows:
March 31, 1995
_____________________________________________________
Principal Interest Maturity
Amounts Rates Dates
_______________ _______________ _______________
$ 28,400,000 3.98% - 7.65% 1996
4,800,000 5.17% - 8.30% 1997
2,000,000 4.97% - 5.08% 1998
1,000,000 5.75% 1999
_______________
$ 36,200,000
===============
June 30, 1994
_____________________________________________________
Principal Interest Maturity
Amounts Rates Dates
_______________ _______________ _______________
$ 25,200,000 3.93% - 8.81% 1995
7,300,000 4.41% - 5.84% 1996
6,900,000 3.61% - 8.30% 1997
3,500,000 3.86% - 5.08% 1998
3,000,000 3.90% - 5.75% 1999
_______________
$ 45,900,000
===============
5. Acquisition
___________
The subsidiaries of Bethel Bancorp, Bethel Savings Bank, F.S.B. and Brunswick
Federal Savings, F.A., acquired four branches from Key Bank of Maine on October
28, 1994. Bethel Savings Bank, F.S.B. acquired the Buckfield and Mechanic
Falls branches from Key Bank. Brunswick Federal Savings, F.A. acquired the
Lisbon Falls and Richmond branches from Key Bank. The total deposits and
repurchase agreements acquired from the four branches were $27,744,418. The
premium paid to Key Bank for these deposits was $1,590,228. The cost of the
real estate, buildings, and equipment purchased from Key Bank was $498,500.
BETHEL BANCORP AND SUBSIDIARIES
Part I.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Financial Condition
___________________
Total consolidated assets were $208,691,710, which was an increase of
$18,091,222 for the nine months ended March 31, 1995. Total loans increased
by 7,898,921 and cash equivalents and investments increased by 7,877,127.
Total deposits increased $25,161,838 and total borrowings from the Federal Home
Loan Bank decreased by $9,700,000 since June 30, 1994. The Company has also
obtained $2,425,603 of repurchase agreement deposits from local municipalities
as of March 31, 1995. The growth in total assets and the deposit accounts was
primarily attributed to the acquisition of four Key Bank branches.
The subsidiaries of Bethel Bancorp, Bethel Savings, F.S.B. and Brunswick
Federal Savings, F.A., acquired four branches from Key Bank of Maine on October
28, 1994. Bethel Savings, F.S.B. acquired the Buckfield and Mechanic Falls
branches from Key Bank. Brunswick Federal Savings, F.A. acquired the Lisbon
Falls and Richmond branches from Key Bank. The total deposits and repurchase
agreements acquired from the four branches were $27,744,418. The premium paid
to Key Bank for these deposits was $1,590,228. The cost of the real estate,
buildings, and equipment purchased from Key Bank was $498,500.
Cash and due from banks has increased by $823,118 due to the additional cash
needs at the new branches and the liquidity requirements for the increased
deposit base. Interest bearing deposits in other banks have decreased by
$3,794,449 primarily to fund the growth in securities and loans. Gross
portfolio loans increased $8,236,675 and total securities held to maturity
increased by $10,912,696 for the nine months ended March 31, 1995. The total
loan increase was primarily due to the increased demand for 1-4 family
residential and real estate commercial loans. The increase in securities was
attributed to the subsidiary banks investing the cash from deposits acquired
from the Key Bank branches. The cash from the acquired deposits of Key Bank
was also utilized to reduce Federal Home Loan Bank advances. Loans held for
sale decreased due to the Company's sale of mortgage loans to Freddie Mac and
the sale of SBA guaranteed commercial loans to the secondary market. The
Company's additional borrowing capacity at the Federal Home Loan Bank on March
31, 1995 was $61,400,000. With the borrowing capacity at the Federal Home Loan
Bank and the continued growth in bank deposits, management believes that the
Company's available liquidity resources are sufficient to support future loan
growth.
Fixed Assets increased by $900,280 for the nine months ended March 31, 1995.
This increase was primarily due to the acquisition of the Key Bank branches,
explained above, as well as the capitalized costs associated with the
relocation of the Mechanic Falls branch to a new facility. Other real estate
owned has decreased by $552,902 due to real estate sales and reducing property
values to current appraisals. Goodwill has increased by $1,487,540 due to the
premium paid to Key Bank for the branch acquisition, explained above. The
premium paid for the Key Bank branch acquisition is being amortized over a ten
year period. The increase in other assets of $434,610 was due to accrued
interest receivables, deferred taxes, and suspense accounts.
Notes payable has decreased by $382,511 due to principal payments. The decrease
in other liabilities of $402,658 was due to larger balances at June 30, 1994
in loan escrows, deferred gains on sale of the guaranteed portion of SBA loans,
and ASI Data Service's accounts payable.
Cash provided by operating activities, as stated in the consolidated statements
of cash flow, was $2,205,597 as of March 31, 1995 versus $4,335,841 as of March
31, 1994. The difference between the periods of $2,130,244 was due to the
change in the balances in Loans Held for Sale and the decrease in other
liabilities due to larger balances in loan escrows and deferred gains on sale
of the guaranteed portion of SBA loans.
Total equity of the Company was at $16,745,313 as of March 31, 1995 versus
$15,756,363 at June 30, 1994. Book value per common share was $26.94 as of
March 31, 1995 versus $25.13 at June 30, 1994. Total equity to total assets of
the Company as of March 31, 1995 was 8.02%.
At March 31, 1995, the Banks' regulatory capital was in compliance with
regulatory capital requirements as follows:
Brunswick
Bethel Savings Federal Savings,
Bank, F.S.B. F.A.
__________________ __________________
Capital Requirements:
Tangible capital $ 1,556,000 $ 1,520,000
Percent of tangible assets 1.50% 1.50%
Core capital $ 3,112,000 $ 3,040,000
Percent of adjusted tangible assets 3.00% 3.00%
Leverage capital $ 4,149,000 $ 4,053,000
Percent of adjusted leverage assets 4.00% 4.00%
Risk-based capital $ 5,430,000 $ 4,508,000
Percent of risk-weighted assets 8.00% 8.00%
Actual:
Tangible capital $ 7,798,000 $ 7,101,000
Percent of adjusted total assets 7.52% 7.01%
Excess of requirement $ 6,242,000 $ 5,581,000
Core capital $ 7,798,000 $ 7,101,000
Percent of adjusted tangible assets 7.52% 7.01%
Excess of requirement $ 4,686,000 $ 4,061,000
Leverage capital $ 7,798,000 $ 7,101,000
Percent of adjusted leverage assets 7.52% 7.01%
Excess of requirement $ 3,649,000 $ 3,048,000
Risk-based capital $ 8,062,000 $ 7,807,000
Percent of risk-weighted assets 11.88% 13.85%
Excess of requirement $ 2,632,000 $ 3,299,000
The carrying value of securities available for sale of the Company was
$2,116,204, which is $253,867 less than the cost of the underlying securities,
at March 31, 1995. The difference from the cost and the carrying value of the
securities was primarily due to the change in current market rates from the
rates at the time of purchase. Management believes that it is obtaining a
reasonable rate of return on these investments, all of which are of high
quality. Based on the Company's available sources of liquidity, management has
the ability and the intent to hold these securities until the market values
have recovered to approximate cost. It is advantageous to hold these
securities until the market values recover and earn approximately 1% below
current market rates than it is to sell the securities at a loss and reinvest
the proceeds in securities bearing current interest rates.
The loan loss allowance of the Company was $2,530,000 as of March 31, 1995
versus $2,463,000 as of June 30, 1994. The Company had non- performing loans
totaling $2,518,123 at March 31, 1995 as compared to $2,723,000 at June 30,
1994. Management realizes during the past nine months non-performing loans
have decreased in 1-4 family mortgages and increased slightly in commercial
mortgages. At March 31, 1995, the Company had approximately $4,461,000 of
loans classified substandard, exclusive of the non-performing loans stated
above, that could potentially become non-performing due to delinquencies or
marginal cash flows. Non-performing loans represented 1.21% of total assets
at March 31, 1995. The following table represents the Company's current
non-performing loans:
Description Total
_________________________ _______________
1-4 Family Mortgages $ 816,972
Commercial Mortgages 1,333,559
Commercial Installment 336,002
Consumer Installment 31,590
_______________
Total non-performing $ 2,518,123
===============
The majority of the non-performing loans are seasoned loans located in the
Oxford county area. Management believes that the increase is due to the
depressed economy in this geographic area which has resulted in high
unemployment and a soft real estate market. Management has allocated
substantial resources to this area in an effort to control the growth in
non-performing loans.
The following table reflects the quarterly trend of total delinquencies 30 days
or more past due, including non-performing loans, for the Company as a
percentage of total loans:
6-30-94 9-30-94 12-31-94 3-31-95
2.64% 2.14% 1.96% 2.27%
The Company has decreased its delinquent accounts at March 31, 1995 when
compared to June 30, 1994. This reduction was largely due to the decrease of
the non-performing loans by $205,000 and the collection efforts of the 30 and
60 day delinquent accounts. The majority of the Company's delinquencies are in
real estate mortgage loans. The Company maintains a well collateralized
position in real estate mortgage loans. This factor of collateral is utilized
by management in the computation of an adequate loan loss allowance balance.
For the reasons given above and management's evaluation of the risk of loss in
the loan portfolio, management believes the balance of the loan loss allowance,
currently and when compared to the prior year, is adequate.
The Company's loan loss allowance was equal to 100% of the total non-performing
loans at March 31, 1995. The Company currently budgets $48,000 per month to
the provision for loan losses and additional provisions are made when deemed
necessary. The Company continues to monitor its reserve for adequacy and
currently believes it is sufficient based on the level of risk in the loan
portfolio.
Continued weakness in the New England economy, which has previously resulted in
high unemployment and a soft real estate market in the region, creates a risk
to the overall credit quality of the portfolio of each subsidiary bank. The
Company intends to continue monitoring its loan portfolio and to add
additional reserves if and when it becomes necessary to do so.
Results of Operations
_____________________
Net income for the quarter ended March 31, 1995 was $408,073. The primary
earnings per share was $.61 and the fully diluted earnings per share was $.56
for the quarter ended March 31, 1995. This compares to earnings of $352,141, or
a primary earnings per share of $.56 per share and a fully diluted earnings per
share of $.56, for the quarter ended March 31, 1994. Net income for the nine
months ended March 31, 1995 was $1,220,898 versus $1,267,409 for the period
ended March 31, 1994. Primary earnings per share was $1.82 and fully diluted
earnings per share was $1.67 for the nine month period ended March 31, 1995
versus primary earnings per share of $2.12 and fully diluted earnings per share
of $2.06, for the nine month period ended March 31, 1994. The Company's
earnings from operations for the nine months ended March 31, 1994 was
$1,007,409, which represented primary earnings per share of $1.66 and fully
diluted earnings per share of $1.64. Included in the Company's income for the
nine months ended March 31, 1994 was $260,000 for the cumulative effect of a
change in the method of accounting for income taxes, Statement of Financial
Accounting Standard 109. This one time adjustment increased the Company's 1994
nine month primary earnings per share by $.46 and the fully diluted earnings
per share by $.42.
The Company's net interest income was $2,279,500 for the quarter ended March
31, 1995, versus $2,014,750 for the quarter ended March 31, 1994, for an
increase of $264,750. This increase was due to an increase of $784,322 in
interest income which was offset by an increase in total interest expense of
$519,572.
The Company's net interest income for the nine months ended March 31, 1995 was
$6,632,694 versus $5,698,947, for an increase of $933,747, when compared to the
nine months ended March 31, 1994. This increase was due to an increase of
$1,927,593 in interest income which was offset by an increase in interest
expense of $993,846. Total interest income increased $1,927,593 during the
nine months ended March 31, 1995 when compared to the nine months ended March
31, 1994, resulting from the following items. Interest income on loans and
loans held for sale increased by $1,195,268 for the nine months ended March 31,
1995 resulting from a $486,569 increase due to an increase in the volume of
loans as well as an increase of $708,699 due to increased rates on loans.
Interest income on investment securities increased by $590,401 resulting from
a $537,078 increase due to an increase in volume as well as an increase of
$53,323 due to increased rates on investments. Interest income on short term
liquid funds increased by $141,924 resulting from a $26,216 increase due to an
increase in volume as well as an increase of $115,708 due to increased rates on
fed funds and deposits. The increase in total interest expense of $993,846 for
the nine months ended March 31, 1995 resulted from the following items.
Interest expense on deposits increased by $484,719 for the nine months ended
March 31, 1995 resulting from a $314,813 increase due to an increase in the
volume of deposits as well as an increase of $169,906 due to increasing deposit
rates. Interest expense on repurchase agreements increased by $47,163 due to
the new volume acquired from Key Bank in the current year. Interest expense on
borrowings increased $461,964 for the nine months ended March 31, 1995
resulting from an increase of $244,770 due to an increase in the volume of
borrowings as well as an increase of $217,194 due to a change in the mix of
interest rates on borrowings. The changes in net interest income, as explained
above, are also presented in the schedule below.
Bethel Bancorp
Rate/Volume Analysis for the nine months ended
March 31, 1995 versus March 31, 1994
Difference Due to
Volume Rate Total
______________ ______________ ______________
Fed Funds & Deposits $ 26,216 $ 115,708 $ 141,924
Investments 537,078 53,323 590,401
Loans & Loans Held for Sale 486,569 708,699 1,195,268
______________ ______________ ______________
Total 1,049,863 877,730 1,927,593
Deposits 314,813 169,906 484,719
Repurchase Agreements 47,163 0 47,163
Borrowings 244,770 217,194 461,964
______________ ______________ ______________
Total 606,746 387,100 993,846
______________ ______________ ______________
Net Interest Income $ 443,117 $ 490,630 $ 933,747
============== ============== ==============
Rate/Volume amounts spread proportionately between volume and rate.
Since October 1993, actions by the Federal Reserve Board have resulted in
increases in prime lending rates. Approximately 20% of the Company's loan
portfolio is comprised of floating rate loans based on a prime rate index.
Interest income on these existing loans will increase as the prime rate
increases, as well as on approximately 21% of other loans in the Company's
portfolio that are based on short-term rate indices such as the one-year
treasury bill. An increase in short-term interest rates will also increase
deposit and Federal Home Loan Bank advance rates, increasing the Company's
interest expense. Although the Company anticipates some net interest margin
compression due to rising rates, the impact on net interest income will depend
on, among other things, actual rates charged on the Company's loan portfolio,
deposit and advance rates paid by the Company and loan volume.
Total non-interest income was $543,898 and $1,611,829 for the three and nine
months ended March 31, 1995 versus $634,160 and $2,052,507 for the three and
nine months ended March 31, 1994. Income from available for sale securities
gains (losses) was $(1,848) and $6,280 for the three and nine months ended
March 31, 1995 versus $43,121 and $286,920 for the three and nine months ended
March 31, 1994. Gains from the sale of securities have decreased due to the
Company holding the majority of its current securities to maturity. Income
from trading account securities was $151,910 and $375,732 versus $94,795 and
$82,472 for the three and nine months ended March 31, 1995 and 1994,
respectively. The increase in gain (loss) on trading account was due to the
sale and appreciation in the market values of the securities classified as
trading.
Gains on the sale of loans held for sale amounted to $24,639 and $141,399 for
the three and nine months ended March 31, 1995 versus $87,772 and $392,037 for
the three and nine months ended March 31, 1994. Gains from the sale of loans
have decreased as a result of decreased originations due to money center banks
becoming highly competitive in originating residential loans for sale to the
secondary market, as well as underwriting and selling SBA guaranteed commercial
loans. Gross income for ASI Data Services amounted to $6,234 and $16,718 versus
$34,293 and $334,709 for the three and nine months ended March 31, 1995 and
1994, respectively. ASI Data Services decreased income was due to decreased
sales activity based on the Company's need. Gross income for First New England
Benefits was $85,659 and $255,349 for the three and nine months ended March 31,
1995 versus $134,463 and $184,069 for the three and nine months ended March 31,
1994. The amounts discussed in this paragraph are reflected in other income.
Total operating expense, or non-interest expense, for the Company was
$2,030,866 and $5,823,344 for the three and nine months ended March 31, 1995
versus $1,878,886 and $5,430,705 for the three and nine months ended March 31,
1994.
Compensation expense increased by $61,607 and $237,424 for the three and nine
months ended March 31, 1995 as a result of the addition of officers and
administrative employees at Bethel Bancorp and its subsidiaries, the addition
of First New England Benefits and the four new branches, as well as annual
salary increases. Net occupancy expenses increased by $35,813 and $85,120 for
the three and nine months ended March 31, 1995 primarily due to the additional
space expense associated with the Portland office, First New England Benefits,
and the four new branches acquired from Key Bank. Equipment expense increased
by $46,066 and $114,530 for the three and nine months ended March 31, 1995 due
to the expenses associated with the new acquisitions as well as the general
needs at the subsidiaries. Goodwill expense increased by $40,343 and $73,644
for the three and nine months ended March 31, 1995 due to the premium paid for
the four Key Bank branches and First New England Benefits. Other expenses have
decreased by $31,849 and decreased by $118,079 for the three and nine months
ended March 31, 1995. Other expenses decreased during the three and nine months
ended March 31, 1995 primarily due to the decrease in ASI Data Services' costs
of goods sold, in association with the reduction of its gross income, which was
offset in part primarily due to the increased expenses from First New England
Benefits and the four new branches.
The provision for loan loss was $145,776 and $494,590 for the three and nine
months ended March 31, 1995 versus $186,908 and $724,337 for the three and nine
months ended March 31, 1994. The large variance between periods was due to
higher levels of non-performing loans and loans charged off at March 31, 1994.
Impact of Inflation
___________________
The consolidated financial statements and related notes herein have been
presented in terms of historic dollars without considering changes in the
relative purchasing power of money over time due to inflation.
Unlike many industrial companies, substantially all of the assets and virtually
all of the liabilities of the Company are monetary in nature. As a result,
interest rates have a more significant impact on the Company's performance than
the general level of inflation. Over short periods of time, interest rates may
not necessarily move in the same direction or in the same magnitude as
inflation.
BETHEL BANCORP AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
_________________
Not Applicable.
Item 2. Changes in Securities
_____________________
Not Applicable.
Item 3.Defaults Upon Senior Securities
_______________________________
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
Not Applicable.
Item 5. Other Information
_________________
Not Applicable.
Item 6. Exhibits and Reports on Form 8 - K
__________________________________
(a) Exhibits
________
2.1 Agreement for the Purchase and Sale of Assets and Assumption of Liabilities
dated as of May 4, 1994 between Bethel Savings Bank and Key Bank of Maine,
incorporated by reference to Exhibit 2.1 to Bethel Bancorp's Current Report
on Form 8 - K dated May 4, 1994.
2.2 Agreement for the Purchase and Sale of Assets and Assumption of Liabilities
dated as of May 4, 1994 between Brunswick Federal Savings and Key Bank of
Maine, incorporated by reference to Exhibit 2.2 to Bethel Bancorp's Current
Report on Form 8 - K dated May 4, 1994.
11 Statement regarding computation of per share amounts
27 Financial Data Schedule
(b) Reports on Form 8 - K
_____________________
On February 6, 1995, the Company filed a report on Form 8-K announcing that it
had dismissed KPMG Peat Marwick LLP (KPMG) as its independent accountants and
retained Baker Newman & Noyes, Limited Liability Company (BNN) in this regard.
These actions were taken following the closure of KPMG's Portland, Maine,
office and the formation of BNN by former KPMG representatives and another
accounting firm.
BETHEL BANCORP AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
BETHEL BANCORP
____________________________
(Registrant)
/s/ James D. Delamater
____________________________
James D. Delamater
President and CEO
/s/ Richard Wyman
____________________________
Richard Wyman
Chief Financial Officer
Date: May 10, 1995
BETHEL BANCORP AND SUBSIDIARIES
Index to Exhibits
EXHIBIT NUMBER DESCRIPTION
2.1 Agreement for the Purchase and Sale of Assets and Assumption
of Liaibilities dated as of May 4, 1994 between Bethel Savings
and Key Bank of Maine, Incorporated by reference to Exhibit
2.1 to Bethel Bancorp's Current Report on Form 8 - K dated
May 4, 1994
2.2 Agreement for the Purchase and Sale of Assets and Assumption
of Liabilites dated as of May 4, 1994 between Brunswick
Federal Savings Bank and Key Bank of Maine, incorporated by
reference to Exhibit 2.2 to Bethel Bancorp's Current Report on
Form 8 - K dated May 4, 1994
11 Statement regarding computation of per share earnings
27 Financial Data Schedule