EXHIBIT 99.6
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-4
QUARTERLY REPORT under Section 13 of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1996
23297
(FDIC Certificate Number)
--------------
SPRINGFIELD INSTITUTION FOR SAVINGS
(exact name of bank as specified in charter)
COMMONWEALTH OF MASSACHUSETTS
(State or other jurisdiction of incorporation or organization)
1441 Main Street
Springfield, Massachusetts 01102
(address of principal office)
04-1859200
(I.R.S. Employer Identification No.)
Telephone: (413) 748-8000
(Bank's telephone number, including area code)
Indicate by check mark whether the bank (1) has filed all reports to be filed by
Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the bank was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
The Bank has 5,718,200 shares of common stock, par value $1.00 per share,
outstanding as of March 31, 1996.
---------------
CAUTIONARY STATEMENT FOR PURPOSES OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Bank desires to take advantage of the new "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. This Report contains certain
"forward-looking statements" including statements concerning plans, objectives,
future events or performance and assumptions and other statements which are
other than statements of historical fact. The Bank wishes to caution readers
that the following important factors, among others, may have affected and could
in the future affect the Bank's actual results and could cause the Bank's actual
results for subsequent periods to differ materially from those expressed in any
forward-looking statement made by or on behalf on the Bank herein: (i) the
effect of changes in laws and regulations, including federal and state banking
laws and regulations, with which the Bank must comply, and the associated costs
of compliance with such laws and regulations either currently or in the future
as applicable; (ii) the effect of changes in accounting policies and practices,
as may be adopted by the regulatory agencies as well as by the Financial
Accounting Standards Board, or of changes in the Bank's organization,
compensation and benefit plans; (iii) the effect on the Bank's competitive
position within its market area of the increasing consolidation within the
banking and financial services industries, including the increased competition
from larger regional and out-of-state banking organizations as well as nonbank
providers of various financial services; (iv) the effect of unforeseen changes
in interest rates; and (v) the effect of changes in the business cycle and
downturns in the local, regional or national economies.
SPRINGFIELD INSTITUTION FOR SAVINGS
FORM F-4
INDEX
PAGE NO.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1996 and 1995........ 1
Condensed Consolidated Statements of Financial Condition
at March 31, 1996 and December 31, 1995................... 2
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1996 and 1995........ 3
Condensed Consolidated Statements of Changes in
Stockholders' Equity for the three months ended
March 31, 1996 and 1995................................... 5
Notes to the Unaudited Financial Statements................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 7
Exhibits
A. Computation of Pro Forma Earnings per Share................... 24
SPRINGFIELD INSTITUTION FOR SAVINGS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
(Unaudited)
Three Months Ended
March March
----------------------------
1996 1995
---- ----
Interest and dividend income
Loans $ 11,552 $ 10,618
Investment securities available for sale 4,126 2,656
Investment securities held to maturity 2,946 2,284
Federal funds sold and interest bearing deposits 214 464
--------- ---------
Total interest and dividend income 18,838 16,022
--------- ---------
Interest expense
Deposits 8,077 6,716
Borrowings 1,190 46
--------- ---------
Total interest expense 9,267 6,762
--------- ---------
Net interest and dividend income 9,571 9,260
Less: Provision for possible loan losses 700 1,153
--------- ---------
Net interest and dividend income after provision
for possible loan losses 8,871 8,107
Noninterest income:
Net gain (loss) on sale of loans 270 (6)
Net gain (loss) on sale of securities 2 4
Fees and other income 2,309 2,048
--------- ---------
Total noninterest income 2,581 2,046
--------- ---------
Noninterest expense:
Operating expenses:
Salaries and employee benefits 4,250 4,036
Occupancy expense of bank premises, net 782 900
Furniture and equipment expense 542 459
Other operating expenses 3,116 3,535
--------- ---------
Total operating expenses 8,690 8,930
--------- ---------
Foreclosed real estate expense 160 330
Net expense of real estate operations (14) 65
--------- ---------
Total noninterest expense 8,836 9,325
Income before income tax expense 2,616 828
Income tax expense 212 39
--------- ---------
Net income $ 2,404 $ 789
========= =========
Earnings per share and pro forma earnings per share:
Primary $ 0.45 $ 0.15
Fully diluted $ 0.45 $ 0.15
Weighted average and pro forma weighted average shares outstanding:
Primary 5,336,487 5,117,500
Fully diluted 5,336,487 5,117,500
See accompanying Notes to the Unaudited Financial Statements
1
SPRINGFIELD INSTITUTION FOR SAVINGS
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands Except Share Amounts)
(Unaudited)
March 31, December 31,
------------- --------------
1996 1995
---- ----
ASSETS
Cash and due from banks $ 28,646 $ 30,377
Federal funds sold and interest bearing deposits 6,045 8,045
Investment securities available for sale 300,265 246,984
Investment securities held to maturity (fair value: $184,191 at March 31, 1996
and $172,930 at December 31, 1995) 184,349 172,793
Loans receivable, net of allowance for possible loan losses
( $14,619 at March 31, 1996 and $ 14,986 at December 31, 1995) 561,157 558,663
Accrued interest and dividends receivable 7,393 7,109
Investments in real estate and real estate partnerships 6,101 6,092
Foreclosed real estate, net 502 1,529
Bank premises, furniture and fixtures, net 25,590 25,706
Other assets 15,122 13,680
----------- -----------
Total assets $ 1,135,170 $ 1,070,978
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 911,124 $ 885,386
Federal Home Loan Bank advances 48,497 41,500
Securities sold under agreements to repurchase 61,215 31,101
Loans payable 3,204 5,470
Mortgage escrow 6,168 4,193
Accrued expenses and other liabilities 20,725 21,859
----------- -----------
Total liabilities 1,050,933 989,509
----------- -----------
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock ($1 par value; 5,000,000 shares
authorized: no shares issued and outstanding) -- --
Common stock ($1 par value; 25,000,000 shares authorized; shares issued and
outstanding: 5,718,200 at March 31, 1996 and 5,710,700 at December 31, 1995) 5,718 5,710
Unearned compensation (4,649) (4,937)
Additional paid-in capital 36,197 35,887
Retained earnings 45,486 43,083
Net unrealized gains (losses) on investment securities available for sale 1,485 1,726
----------- -----------
Total stockholders' equity 84,237 81,469
----------- -----------
Total liabilities and stockholders' equity $ 1,135,170 $ 1,070,978
----------- -----------
See accompanying Notes to the Unaudited Financial Statements
2
SPRINGFIELD INSTITUTION FOR SAVINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Three Months Ended
March 31,
1996 1995
--------- ----------
Cash Flows From Operating Activities
Net income (loss) $ 2,404 $ 789
Adjustments to reconcile net income (loss) to net cash (used for)/
provided by operating activities
Provision for possible loan losses 700 1,153
Provision for foreclosed real estate - 311
Depreciation 747 787
Amortization of premium on investment securities, net 588 25
Investment security (gains) (2) (4)
Loss (income) from equity investment in partnerships (87) (3)
(Gain) loss on sale of loans (270) 6
Disbursements for mortgage loans held for sale (33,322) (5,757)
Receipts from mortgage loans held for sale 33,592 5,752
Loss on sale of fixed assets and real estate - 1
Changes in assets and liabilities:
(Increase) decrease in other assets, net (1,549) 665
Decrease in accrued expenses and other liabilities (904) (13,297)
------- -------
Net cash (used for)/provided by operating activities 1,897 (9,572)
------- -------
Cash Flows From Investing Activities
Proceeds from sales of investment securities - available for sale 6,600 -
Proceeds from maturities and principal payments received
on investment securities - available for sale 46,750 33,905
Purchase of investment securities - available for sale (107,484) (36,973)
Proceeds from maturities and principal payments received
on investment securities - held to maturity 11,728 2,890
Purchase of investment securities -held to maturity (23,436) (23,286)
Net decrease in investment in real estate - (2)
Net change in loans receivable (3,819) (19,759)
Net change in foreclosed real estate 1,368 78
Proceeds from sale of loans 284 161
Proceeds from sale of fixed assets and leases - 1
Purchase of fixed assets (553) (1,122)
------- -------
Net cash (used for)/provided by investing activities (68,562) (44,107)
------- -------
See accompanying Notes to the Unaudited Financial Statements
3
SPRINGFIELD INSTITUTION FOR SAVINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Three Months Ended
March 31,
1996 1995
--------- ----------
Cash flows from financing activities
Net proceeds from stock conversion - 35,946
Net increase (decrease) in deposits 25,738 (6,283)
Net increase in borrowings 34,845 3,470
Net increase in mortgagors' escrow deposits 1,975 2,540
Net decrease in unearned compensation 376 -
--------- --------
Net cash provided by/(used for) financing activities 62,934 35,673
--------- --------
(Decrease) in cash and cash equivalents (3,731) (18,006)
Cash and cash equivalents, beginning of year 38,422 55,720
--------- --------
Cash and cash equivalents, at quarter end $ 34,691 $ 37,714
========= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest to depositors
and interest on debt $ 9,220 $ 6,647
Non-cash investing activities:
Transfers to foreclosed real estate, net $ 341 $ 8
See accompanying Notes to the Unaudited Financial Statements
4
SPRINGFIELD INSTITUTION FOR SAVINGS
CONDENSED CONSOLIDATED CHANGES IN STOCKHOLDERS' EQUITY
For The Three Months Ended March 31, 1996 and 1995
(Dollars In Thousands)
Net unrealized
gain (loss)
on investment
Additional securities
Common Unearned Paid-In Retained available
Stock Compensation Capital Earnings for sale Total
--------- ------------ ----------- -------- ------------- -----
Balance at December 31, 1995 $ 5,710 ($ 4,937) $ 35,887 $ 43,083 $ 1,726 $ 81,469
Net income - - - 2,404 - 2,404
Issuance of common stock -
Unearned compensation 8 (241) 309 - - 76
Decrease in unearned compensation - 529 - - - 529
Change in unrealized gain (loss) on investment
securities available for sale - - - - (241) (241)
-------- -------- -------- -------- -------- --------
Balance at March 31, 1996 $ 5,718 ($ 4,649) $ 36,196 $ 45,487 $ 1,485 $ 84,237
======== ======== ======== ======== ======== ========
Balance at December 31, 1994 $ - $ - $ - $ 31,624 ($ 3,121) $ 28,503
Net income - - - 789 - 789
Issuance of common stock 5,562 - 33,944 - - 39,506
Unearned compensation - (3,560) - - - (3,560)
Decrease in unearned compensation - - - - - -
Change in unrealized gain (loss) on investment
securities available for sale - - - - 2,761 2,761
-------- -------- -------- -------- -------- --------
Balance at March 31, 1995 $ 5,562 ($ 3,560) $ 33,944 $ 32,413 ($ 360) $ 67,999
======== ======== ======== ======== ======== ========
See accompanying Notes to the Unaudited Consolidated Financial Statements
5
SPRINGFIELD INSTITUTION FOR SAVINGS
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. Condensed Consolidated Financial Statements
The Condensed Consolidated Financial Statements of Springfield Institution for
Savings (the "Bank") included herein are unaudited, and in the opinion of
Management all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the financial condition, results of
operations and cash flows, as of and for the periods covered herein, have been
made. Certain information and note disclosures normally included in Condensed
Consolidated Financial Statements prepared in accordance with generally accepted
accounting principles have been omitted as they are included in the most recent
Federal Deposit Insurance Corporation ("FDIC") Form F-2 Annual Report and
accompanying Notes to the Financial Statements for the year ended December 31,
1995. Management believes that the disclosures contained herein are adequate to
make a fair presentation.
It is suggested that these unaudited condensed consolidated financial statements
be read in conjunction with the Bank's Consolidated Financial Statements and the
Notes thereto included in the Bank's 1995 FDIC Form F-2 Annual Report.
The results for the three month interim periods covered hereby are not
necessarily indicative of the operating results for a full year.
2. New Accounting Pronouncements
Effective January 1, 1996, the Bank adopted Statement of Financial Accounting
Standards ("SFAS") No. 122, "Accounting for Mortgage Service Rights". SFAS 122
amends certain provisions of SFAS 65, "Accounting for Certain Mortgage Banking
Activities", to eliminate the accounting distinction between rights to service
mortgage loans for others that are acquired through loan origination activities
and those acquired through purchase transactions. During the quarter ended March
31, 1996 the Bank recognized $0.1 million of income as a result of this new
standard.
3. Dividend Policy
While it is not anticipated that the Bank will be paying any cash dividends on
its common stock in the near future, the Board of Directors of the Bank will be
periodically reviewing whether any cash dividend should be paid.
4. Earnings Per Share and Pro Forma Earnings Per Share
Net income per share for the three months ended March 31, 1996 is computed on
weighted shares outstanding for the period. Net income per share for the three
months ended March 31, 1995 is computed on a pro forma basis as if the stock
issued in the conversion had been issued as of the beginning of the period.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Overview
Springfield Institution for Savings is a state chartered, stock form savings
bank headquartered in Springfield, MA. The Bank provides a wide variety of
financial services which include retail and commercial banking, residential
mortgage origination and servicing, commercial real estate lending and consumer
lending. The Bank serves its primary market of Hampden and Hampshire Counties
through a network of 21 retail branches. The Bank completed a successful
conversion from mutual to stock form (the "Conversion") on February 7, 1995.
Through the issuance of 5,562,500 shares of common stock, the Bank received
proceeds of $35.9 million, net of Conversion related costs and the Bank's
Employee Stock Ownership Plan (the "ESOP").
The Bank's revenues are derived principally from interest payments on its loan
portfolios and mortgage-backed and other investment securities. The Bank's
primary sources of funds are deposits, borrowings and principal and interest
payments on loans and mortgage-backed securities.
Results of Operations for the Three Months Ended March 31, 1996 and March 31,
1995
The Bank reported net income of $2.4 million, or $0.45 per share, for the first
quarter of 1996 as compared to net income of $0.8 million, or $.15 per share, on
a pro forma basis, for the same period last year. The improved results are
attributable to increased net interest margin and noninterest income, and lower
provisions for possible loans losses and noninterest expenses.
Net Interest Income
Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing liabilities. Net interest income is
affected by the mix and volume of assets and liabilities, and the movement and
level of interest rates.
The following table sets forth, for the period indicated, average balances,
interest income and expense, and yields earned or rates paid on the major
categories of assets and liabilities. Non-accrual loans have been included in
the appropriate average balance loan category, but unpaid interest on
non-accrual loans has not been included for purposes of determining interest
income. In addition, investment securities available for sale are reflected at
amortized cost.
7
Three Months Ended March 31,
-------------------------------------------------------------------------
1996 1995
--------------------------------------- --------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- --------- ---------- ------- -------- ----------
(Dollars in Thousands)
Interest-earning assets:
Fed funds sold and interest-bearing deposits $ 15,792 $ 214 5.36% $ 31,988 $ 464 5.80%
Investment securities held to maturity 174,574 2,946 6.75% 161,866 2,284 5.64%
Investment securities available for sale 260,110 4,126 6.35% 167,804 2,656 6.33%
Residential real estate loans 255,386 5,033 7.88% 259,688 5,019 7.73%
Commercial real estate loans 118,681 2,444 8.24% 120,048 2,440 8.13%
Commercial loans 111,522 2,492 8.84% 81,944 1,858 9.07%
Home equity loans 69,350 1,486 8.62% 50,815 1,159 9.12%
Consumer loans 6,858 97 5.66% 6,754 142 8.41%
---------- ------- ----- -------- ------- -----
Total interest-earning assets 1,012,273 18,838 7.44% 880,907 16,022 7.28%
Allowance for loan losses (15,422) (16,145)
Non-interest-earning assets 80,504 69,878
---------- --------
Total assets $1,077,355 $18,838 $934,640 $16,022
========== ======= ======== =======
Interest-bearing liabilities
Deposits
Savings accounts $188,855 $1,177 2.51% $183,687 $1,124 2.48%
NOW accounts 54,246 168 1.25% 53,305 187 1.42%
Money market accounts 203,808 1,696 3.35% 225,691 1,720 3.09%
Time deposit accounts 370,581 5,036 5.47% 329,531 3,685 4.54%
---------- ------- ----- -------- ------- -----
Total Interest-bearing Deposits 817,490 8,077 3.97% 792,214 6,716 3.44%
Borrowed funds 83,721 1,190 5.62% 2,097 46 8.90%
---------- ------- ----- -------- ------- -----
Total interest-bearing liabilities 901,211 9,267 4.14% 794,311 6,762 3.45%
Non-interest-bearing liabilities 96,523 87,124
Stockholders' equity 79,621 53,205
---------- --------
Total liabilities and stockholders' equity $1,077,355 $9,267 $934,640 $6,762
========== ======= ======== =======
Net interest income/spread $9,571 3.30% $9,260 3.83%
======= ===== ======= =====
Net interest margin as a % of interest-
earning assets 3.78% 4.20%
===== =====
Net interest income for the three months ended March 31, 1996 was $9.6 million
compared to $9.3 million for the three months ended March 31, 1995, an increase
of $0.3 million or 3.2%. This increase is primarily due to a $131.4 million
increase in average earning assets partially offset by a 42 basis point decrease
in net interest margin.
Total interest income was $18.8 million for the three months ended March 31,
1996, an increase of $2.8 million or 17.5% from the same period last year. This
increase is attributable to higher levels of interest-earning assets and
weighted average yields. Interest-earning assets totaled $1.01 billion in the
first quarter of 1996 compared to $880.9 million for the first quarter of 1995,
an increase of $131.4 million or 14.9%. Average investments increased $105.0
million reflecting the reinvestment of proceeds from the Conversion and
leveraging a portion of the Bank's capital position. Average loans increased
$42.6 million as the Bank continued to focus on the commercial (small business)
and home equity market segments, which grew by $29.6 million or 36.1% and $18.5
million or 36.4%, respectively. The average yield on interest-earning assets was
7.44% for the first quarter of 1996 compared to 7.28% for the first quarter of
1995, an increase of 16 basis points or 2.2% reflecting the repricing of
adjustable rate loans and investment securities to market rates and lower levels
of non-accruing loans.
8
Total interest expense was $9.3 million for the three months ended March 31,
1996 compared to $6.8 million during the same period in 1995, an increase of
$2.5 million or 36.8%. This increase is attributable to increases in
interest-bearing deposits, higher deposit rates and the use of borrowings as a
source of funds. Interest-bearing deposits totaled $817.5 million for the
quarter ended March 31, 1996 compared to $792.2 million for the same period in
1995, an increase of $25.3 million or 3.2%. This growth occurred primarily in
Time deposits, which increased $41.1 million principally as a result of the new
"Can't Lose CD" product (which pays a rate equal to the prime rate less 350
basis points), partially offset by a $21.9 million reduction in Money Market
balances, reflecting a shift to higher yielding Time deposits as well as outflow
to other investment vehicles such as annuities and mutual funds. The average
rate paid on deposits was 3.97% in the first quarter of 1996 compared to 3.44%
in the first quarter of 1995, an increase of 53 basis points or 15.4% reflecting
continued competitive pricing pressures on consumer deposits as well as the
introduction of the Can't Lose CD, partially offset by a lower interest rate
environment. Borrowings averaged $83.7 million for the three months ended March
31, 1996 reflecting the Bank's leveraged ESOP as well as the use of Federal Home
Loan Bank ("FHLB") advances and repurchase agreements to leverage a portion of
the Bank's capital.
The following table presents the changes in net interest income resulting from
changes in interest rates or changes in the volume of interest-earning assets
and interest-bearing liabilities during the periods indicated. Changes which are
attributable to both rate and volume have been allocated evenly between the
change in rate and volume components.
Three months ended March 31,
1996 versus 1995
-------------------------------
Increase (Decrease) Due to
-------------------------------
Volume Rate Net
--------- -------- --------
(In Thousands)
Interest earning assets:
Federal funds sold and
interest bearing deposits ($ 227) ($ 23) ($ 250)
Investment securities held to maturity 197 465 662
Investment securities available for sale 1,463 7 1,470
Residential real estate loans (84) 98 14
Commercial real estate loans (28) 32 4
Commercial loans 666 (32) 634
Home equity loans 410 (83) 327
Consumer loans 2 (47) (45)
------ ------ ------
Total interest-earning assets 2,399 417 2,816
------ ------ ------
Interest bearing liabilities:
Deposits:
Savings accounts 32 21 53
NOW accounts 3 (22) (19)
Money market accounts (174) 150 (24)
Time deposit accounts 508 843 1,351
------ ------ ------
Total interest-bearing deposits 369 992 1,361
Borrowed funds 1,475 (331) 1,144
------ ------ ------
Total interest-bearing liabilities 1,844 661 2,505
------ ------ ------
Change in net interest income $ 555 ($ 244) $ 311
====== ====== ======
9
Provision for Possible Loan Losses
The Bank provided $0.7 million for its provision for possible loan losses in the
first quarter of 1996 compared to $1.2 million in the first quarter of 1995.
This decrease of $0.5 million reflects a reduction in nonperforming assets. The
provision for possible loan losses is based upon Management's judgment of the
amount necessary to maintain the allowance for possible loan losses at a level
which is considered adequate. For further discussion of this topic please refer
to the section titled "Allowance for Possible Loan Losses" in the Balance Sheet
Analysis section of this document.
Non-interest Income
Non-interest income is composed of fee income for bank services and gains or
losses from the sale of assets. The components of non-interest income for the
periods presented are as follows:
Three months ended
March 31,
--------------------
1996 1995
------- --------
Net gain (loss) on sale of loans $ 270 ($ 6)
Net gain (loss) on sale of securities 2 4
Loan charges and fees 723 807
Deposit related fees 1,403 1,088
Other charges and fees 183 153
------- -------
$ 2,581 $ 2,046
======= =======
Net gain (loss) on sale of loans increased $0.3 million as a result of the
growth in residential mortgage refinancing activities due to a more favorable
interest rate environment. The Bank originates fixed rate mortgages for sale in
the secondary market and generally holds adjustable rate mortgages in the Bank's
loan portfolio.
Deposit service charges and fees increased $0.4 million due primarily to
increased service charges on noninterest bearing accounts.
Salaries and Benefits Expense
Salaries and benefits expense totaled $4.3 million for the first quarter of 1996
compared to $4.0 million for the same period in 1995, an increase of $0.3
million reflecting standard wage increases as well as the introduction of new
benefit programs to include the ESOP and a 401(k) plan.
Occupancy Expense
Total occupancy expense was $0.8 million for the three months ended March 31,
1996, a decrease of $0.1 million from the same period in 1995 as a result of the
improved operating results of SIS Center, the Bank's corporate headquarters.
10
Other Operating Expense
The components of other operating expense for the periods presented are as
follows:
Three months ended
March 31,
--------------------------
1996 1995
---- ----
Marketing and public relations $ 383 $ 308
Insurance 101 801
Professional services 640 647
Outside processing 957 895
Other 1,035 884
------ ------
$3,116 $3,535
====== ======
Marketing and public relations expense increased $0.1 million reflecting a
higher level of advertising expenses directed towards the consumer strategy for
obtaining consumer deposit accounts in connection with its increased emphasis on
community banking activities.
Insurance expense includes FDIC deposit insurance expense, which totaled $1
thousand in the first quarter of 1996 compared to $0.7 million in the same
period in 1995. This decrease is attributable to a significant reduction in FDIC
premiums.
Other operating expenses increased $0.2 million primarily due to costs
associated with growth in consumer deposit accounts as a result of the consumer
strategy.
Foreclosed Real Estate Expense
Foreclosed real estate expense reflects losses on sales, writedowns and net
operating results of foreclosed properties. These expenses were $0.2 million for
the first quarter of 1996 compared to $0.3 million for the same period in 1995.
This $0.1 million decrease reflects lower levels of foreclosed properties.
Net Expense of Real Estate Operations
The Bank has certain subsidiaries that are engaged in various real estate
investments directly or in joint ventures with unaffiliated partners. The Bank
has terminated its real estate development activities and is in the process of
selling its remaining real estate investments. Net expense of real estate
operations reflects the net operating results of these activities, writedowns on
real estate properties and gains/losses on sales of these properties. Net
expense of real estate operations of zero and $0.1 million for the three months
ended March 31, 1996 and March 31, 1995, respectively, reflects normal operating
results.
Income Taxes
The Bank recorded $0.2 million of state and federal alternative minimum tax
provision in the first quarter of 1996 compared to $39 thousand in the first
quarter of 1995. This increase in taxes resulted from the increase in pretax
earnings between the periods ended March 31, 1995 and 1996.
11
BALANCE SHEET ANALYSIS - COMPARISON AT MARCH 31, 1996 TO DECEMBER 31, 1995
Total assets increased from $1.07 billion at December 31, 1995 to $1.14 billion
at March 31, 1996. This increase reflects growth in the investment portfolio
achieved through an increase in deposits and wholesale borrowings.
Investments
The Bank's investment portfolio increased $64.8 million from $419.8 million at
December 31, 1995 to $484.6 million at March 31, 1996.
The Bank engages in investment activities for both investment and liquidity
purposes. The Bank maintains an investment securities portfolio which consists
primarily of U.S. Government and Agency securities, corporate obligations,
Federal Home Loan Bank stock, and marketable equity securities. Other short-term
investments held by the Bank periodically include interest-bearing deposits and
federal funds sold. The Bank also maintains a mortgage-backed securities
portfolio consisting of securities issued and guaranteed by the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC") in addition to publicly traded mortgage-backed securities issued by
private financial intermediaries which are rated "AA" or higher by rating
agencies of national prominence.
Effective January 1, 1994, the Bank adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities", and now holds both "available for
sale" and "held to maturity" portfolios. Securities which the Bank has the
intent and ability to hold until maturity are classified as held-to-maturity and
are carried at amortized cost, while those securities which have been identified
as assets that may be sold prior to maturity or assets for which there is not a
positive intent to hold to maturity are classified as available-for-sale and are
carried at fair value, with unrealized gains and losses excluded from earnings
and reported as a separate component of stockholders' equity. At March 31, 1996,
the net unrealized gain on the available for sale portfolio that was included as
a separate component of stockholders' equity was $1.5 million.
In 1995, the Financial Accounting Standards Board ("FASB") issued a special
report, "A Guide to Implementation of Statement 115," that provided additional
guidance related to the application of SFAS 115. In connection with the issuance
of this special report, the FASB allowed all organizations to review their
portfolio classifications and make a one-time reclassification of securities
between categories during the period from November 15, 1995 to December 31,
1995. On December 15, 1995, the Bank transferred securities with an amortized
cost of $84.3 million and an unrealized loss of $1.2 million from the held to
maturity portfolio to the available for sale portfolio. In addition, the Bank
also transferred securities with an estimated fair value of $47.3 million and an
unrealized gain of $0.3 million from the available for sale portfolio to the
held to maturity portfolio. The unrealized gain of $0.3 million remains as a
separate component of stockholders' equity. Subsequent to the transfer of these
securities, the Bank sold $82.9 million of available for sale securities at a
net loss of $0.9 million.
The table below sets forth certain information regarding the amortized cost and
fair value of the Bank's investment portfolio at the dates indicated.
12
March 31, 1996
--------------------------------------------------------------
Available for Sale Held to Maturity
---------------------------- ---------------------------
(Dollars in Thousands)
Amortized Amortized
Cost Fair Value Cost Fair Value
----------- ------------ ---------- ------------
U.S. government and agency obligations $ 8,858 $ 8,837 $ - $ -
Mortgage-backed securities 279,885 280,940 173,276 173,096
Other bonds and short term obligations 2,675 2,675 11,073 11,095
Other securities 7,819 7,813 - -
-------- -------- -------- --------
Total $299,237 $300,265 $184,349 $184,191
======== ======== ======== ========
December 31, 1995
--------------------------------------------------------------
Available for Sale Held to Maturity
---------------------------- ---------------------------
(Dollars in Thousands)
Amortized Amortized
Cost Fair Value Cost Fair Value
----------- ------------ ---------- ------------
U.S. government and agency obligations $ 7,700 $ 7,699 $ - $ -
Mortgage-backed securities 222,673 224,101 161,168 161,481
Other bonds and short term obligations 9,300 9,300 11,625 11,449
Other securities 5,884 5,884 - -
-------- -------- -------- --------
Total $245,557 $246,984 $172,793 $172,930
======== ======== ======== ========
13
Loan Portfolio Composition
Gross loans comprised $575.1 million or 50.7% of total assets as of March 31,
1996. The following table sets forth information concerning the Bank's loan
portfolio in dollar amounts and percentages, by type of loan at March 31, 1996
and at December 31, 1995.
March 31, 1996 December 31, 1995
------------------------------- -------------------------------
Percent of Percent of
Amount Total Amount Total
---------- ------------ -------- ------------
(Dollars in Thousands)
Residential real estate loans $254,269 44.21% $263,551 45.99%
Commercial real estate loans 120,442 20.94% 118,005 20.59%
Commercial loans 123,181 21.42% 117,674 20.53%
Home equity loans 70,541 12.27% 67,657 11.81%
Consumer loans 6,698 1.16% 6,196 1.08%
-------- ------- --------- -------
Total loans receivable, gross 575,131 100.00% 573,083 100.00%
Less:
Unearned income and fees (645) (566)
Allowance for possible loan losses 14,619 14,986
-------- --------
Total loans receivable, net $561,157 $558,663
======== ========
The Bank continues to emphasize the origination of loans secured by first
mortgages on one to four family residences, and offers a variety of fixed and
adjustable rate mortgage loan products. The Bank originates fixed rate mortgages
for sale in the secondary market and generally holds adjustable rate mortgages
in the Bank's loan portfolio. During the first quarter of 1996, many borrowers
refinanced adjustable rate mortgages to take advantage of lower fixed rates.
These fixed rate loans were subsequently sold, offsetting new originations
during the quarter and resulting in a $9.2 million decrease in residential real
estate loans between December 31, 1995 and March 31, 1996.
During the three months ended March 31, 1996 commercial loan balances increased
$5.5 million, reflecting the Bank's continued focus on lending activities in the
small business market.
Home equity loans outstanding have increased $2.9 million since December 31,
1995 resulting from the Bank's pricing approach, the waiver of closing costs and
the active promotion of these products.
The Bank has discontinued offering most types of personal installment loans.
This decision was made based on the low volumes achieved by the Bank and the
highly competitive nature of consumer products offered by bank and non-bank
competitors. The Bank continues to offer student loans and overdraft protection
lines associated with the transaction accounts of its consumer customers.
Student loans are subsidized by the government and held by the Bank while the
student is in school. These loans are sold to the Student Loan Marketing
Association when the student graduates and repayment begins.
14
Non-performing Assets
Non-performing assets totaled $12.6 million as of March 31, 1996 compared to
$13.9 million as of December 31, 1995, a decrease of $1.3 million or 9.4%.
The following table sets forth information regarding the components of
non-performing assets for the periods presented:
March 31, 1996 December 31, 1995
---------------- -------------------
(Dollars in Thousands)
Non-accrual loans (1):
Residential real estate loans $ 2,774 $ 2,553
Commercial real estate loans 6,938 5,745
Commercial loans 874 638
Home equity loans 175 90
Consumer loans 17 11
------- -------
Total non-accrual loans 10,778 9,037
------- -------
Loans past due 90 days still accruing (2) 154 587
------- -------
Total non-performing loans 10,932 9,624
Foreclosed real estate (3) 502 1,529
Restructured loans on accrual status (4) 1,167 2,732
------- -------
Total non-performing assets $12,601 $13,885
======= =======
Total non-performing loans to total
gross loans 1.90% 1.68%
Total non-performing assets to total
assets 1.11% 1.30%
Allowance for possible losses to
non-performing loans 133.73% 155.71%
<FN>
(1) Non-accrual loans are loans that are contractually past due in excess of 90
days, for which the Bank has stopped the accrual of interest, or loans which are
not past due but on which the Bank has stopped the accrual of interest based on
Management's assessment of the circumstances surrounding these loans.
(2) Accruing loans past due 90 days or more are loans which have not been placed
on non-accrual status as, in management's opinion, the collection of the loan,
in full, is not in doubt.
(3) Foreclosed real estate includes OREO, defined as real estate acquired
through foreclosure or acceptance of a deed in lieu of foreclosure. The Bank
carries foreclosed real estate at net realizable value, which approximates fair
value less estimated selling costs.
(4) Restructured loans are loans for which concessions, including reduction of
interest rates or deferral of interest or principal payments have been granted
due to the borrower's financial condition. Restructured loans on non-accrual
status are reported in the non-accrual loan category. Restructured loans on
accrual status are those loans that have complied with terms of a restructuring
agreement for a satisfactory period (generally six months).
</FN>
15
Allowance for Possible Loan Losses
The allowance for possible loan losses reflects an amount that in Management's
judgment is adequate to provide for potential losses in the loan portfolio. In
addition, examinations of the adequacy of the loan loss reserve are conducted
periodically by various regulatory agencies.
The Bank's loan loss reserve methodology emphasizes an evaluation of
non-performing loans and those loans that have been identified as having a
higher risk of becoming non-performing loans. The overall analysis is a
continuing process that gives consideration to such factors as size and risk
characteristics of the loan portfolio, the risk rating of individual credits,
general economic conditions, historic delinquency and charge-off experience and
the borrowers' financial capabilities and the underlying collateral, including,
when appropriate, independent appraisals of real estate properties. In addition,
Management periodically reviews the methodology of allocating reserves to the
various loan categories based on similar factors.
The Bank's allowance for possible loan losses is decreased by loan charge-offs
and increased by provisions for possible loan losses and recoveries on loans
previously charged-off. When commercial and residential real estate loans are
foreclosed, the loan balance is compared with the fair value of the property. If
the net carrying value of the loan at the time of foreclosure exceeds the fair
value of the property less estimated selling costs, the difference is charged to
the allowance for possible loan losses and the fair value of the property
becomes the new cost basis of the real estate owned. The Bank has or obtains
current appraisals on real estate owned at the time it obtains possession of the
property. Real estate owned is subsequently carried at the lower of cost or fair
value less estimated selling costs with any further adjustments reflected as a
charge against operations. The Bank assesses the value of real estate owned on a
periodic basis. The Bank maintains an allowance for estimated losses, which at
March 31, 1996 amounted to zero, to account for declines in the carrying value
of foreclosed real estate.
The allowance for possible loan losses at March 31, 1996 was $14.6 million,
compared to $17.0 million at March 31, 1995. The activity in the allowance for
possible loan losses for the three months ended March 31, 1996 and 1995 was as
follows:
16
Three months ended
March 31,
------------------------
1996 1995
--------- ---------
(Dollars In Thousands)
Balance at beginning of period $ 14,986 $ 15,844
Provision for loan losses 700 1,153
Charge-offs:
Residential real estate loans - (122)
Commercial real estate loans (1,866) -
Commercial loans - (36)
Home equity loans (63) (25)
Consumer loans (18) (32)
-------- -------
Total charge-offs (1,947) (215)
-------- -------
Recoveries:
Residential real estate loans 408 -
Commercial real estate loans 407 81
Commercial loans 45 69
Home equity loans 11 19
Consumer loans 9 32
-------- -------
Total recoveries 880 201
-------- -------
Net charge-offs (1,067) (14)
-------- -------
Balance at end of period $ 14,619 $ 16,983
======== ========
Ratio of allowance for loan losses to total
loans at the end of the period 2.54% 3.19%
Ratio of allowance for loan losses to non-
performing loans at the end of the period 133.73% 101.67%
17
At March 31, 1996, the recorded investment in loans that are considered impaired
under SFAS 114 was $8.2 million. Included in this amount is $0.9 million of
impaired loans for which the related SFAS 114 allowance is $0.2 million and $7.3
million of impaired loans for which the SFAS 114 allowance is zero. The average
recorded investment in impaired loans during the three months ended March 31,
1996 was approximately $9.7 million. For the three month period ended March 31,
1996, the Bank recognized interest income on these impaired loans of $0.2
million.
The following table shows the allocation of the allowance for possible loan
losses to the various types of loans as well as the percentage of loans in each
category to total loans.
March 31, 1996 December 31, 1995
----------------------------- -----------------------------
% of % of
Loans in Loans in
Category Category
to Total to Total
Amount Loans Amount Loans
------- ---------- -------- ----------
Residential real estate loans . . . . . . . . . . . . . $1,581 44.21% $1,881 45.99%
Commercial real estate loans . . . . . . . . . . . . . 7,891 20.94% 6,784 20.59%
Commercial loans . . . . . . . . . . . . . . . . . . . . 4,387 21.42% 5,480 20.53%
Home equity loans . . . . . . . . . . . . . . . . . . . 545 12.27% 672 11.81%
Consumer loans . . . . . . . . . . . . . . . . . . . . . 215 1.16% 169 1.08%
------- ------- ------- -------
Total allowance for
possible loan losses . . . . . . . . . . . . . . . $14,619 100.00% $14,986 100.00%
======= ======= ======= =======
18
Deposit Distribution
The principal source of funds for the Bank are deposits from local consumers and
businesses. There were no brokered deposits at March 31, 1996. The Bank's
deposits consist of demand and NOW accounts, passbook and statement savings
accounts, Money Market accounts and Time deposit accounts.
Total deposits were $911.1 million at March 31, 1996 compared to $885.4 million
at December 31, 1995, an increase of $25.7 million. This growth occurred
primarily in Savings accounts and Demand deposits, which increased $8.9 million
and $10.2 million, respectively. These balances continue to grow as customers
take advantage of free savings and checking accounts offered as a result of the
Bank's consumer deposit strategy to attract and retain core deposits which
provides the Bank with a lower cost source of funds.
The following table presents the composition of deposits for the periods
indicated:
March 31, 1996 December 31, 1995
-------------------- ----------------------
(Dollars in Thousands)
Percent Percent
of of
Amount Total Amount Total
--------- --------- --------- --------
Demand deposits $ 81,736 8.97% $ 71,539 8.08%
NOW accounts 56,303 6.18% 57,271 6.47%
Savings accounts 194,523 21.35% 185,555 20.96%
Money market accounts 206,433 22.66% 203,313 22.96%
Time deposits 372,129 40.84% 367,708 41.53%
-------- ------- -------- -------
Total deposits $911,124 100.00% $885,386 100.00%
======== ======= ======== =======
19
Regulatory Capital
Under current FDIC capital regulations, state-chartered, non-member banks (i.e.,
banks that are not members of the Federal Reserve System), such as the Bank, are
required to comply with three separate minimum capital requirements: a "Tier 1
leverage capital ratio" and two "risk-based" capital requirements: "Tier 1
risk-based capital ratio" and "Total risk-based capital ratio".
The Tier 1 leverage capital ratio is expressed as a percentage of Tier 1 capital
to total quarterly average assets. Tier 1 capital generally includes common
stockholders' equity (including retained earnings), qualifying noncumulative
perpetual preferred stock and any related surplus and minority interests in the
equity accounts of fully consolidated subsidiaries. In addition, deferred tax
assets are allowable up to a certain limit. Intangible assets, other than
properly valued purchased mortgage servicing rights up to certain specified
limits, must be deducted from Tier 1 capital. The unrealized gain or loss on
securities available for sale is not included as a component of Tier 1 capital
under the current guidelines.
The Tier 1 risk-based capital ratio is expressed as a percentage of Tier 1
capital to total risk-weighted assets. Risk- weighted assets are calculated by
assigning assets to one of several broad categories (0%, 20%, 50%, or 100%)
based primarily on credit risk. The aggregate dollar value of the amount in each
category is then multiplied by the risk-weight associated with the category.
Risk weights for all off-balance sheet items are determined by a two-step
process. First, the "credit equivalent amount" of off-balance sheet items is
determined in most cases by multiplying the off-balance sheet item by a credit
conversion factor. Second, the credit equivalent amount is treated like any
balance sheet asset and generally is assigned to the appropriate risk category.
The resulting weighted values from each of the risk categories are added
together, and this sum is the Bank's total risk-weighted assets that comprise
the denominator of the risk-based capital ratios.
The Total risk-based capital ratio is expressed as a percentage of "Qualifying
total capital" to total risk-weighted assets. Qualifying total capital consists
of the sum of Tier 1 capital plus Tier 2 capital, which consists of cumulative
perpetual preferred stock, mandatory convertible debt, term subordinated debt,
and a certain portion of the allowance for loan losses up to a maximum of 1.25%
of risk-weighted assets.
The following table reflects the regulatory capital position of the Bank as of
March 31, 1996 and December 31, 1995 as well as the March 31, 1996 minimum
regulatory capital requirements for well-capitalized institutions.
March 31, December 31, FDIC
1996 1995 Requirement
-------- ------------ -----------
Tier 1 leverage captial ratio 7.68% 7.57% 5.00%
Tier 1 risk-based capital ratio 12.92% 12.52% 6.00%
Total risk-based capital ratio 14.18% 13.77% 10.00%
20
Interest Rate Risk Management
The operations of the Bank are subject to the risk of interest rate fluctuations
to the extent that there is a substantial difference in the amount of the Bank's
assets and liabilities repricing or maturing within specific time periods. An
asset-sensitive position indicates that there are more rate-sensitive assets
than rate-sensitive liabilities repricing or maturing within specific time
horizons, which would generally imply a favorable impact on net interest income
in periods of rising interest rates and a negative impact in periods of falling
interest rates. A liability-sensitive position would generally imply a negative
impact on net interest income in periods of rising interest rates and a positive
impact in periods of falling interest rates.
The objective of the Bank's interest rate risk management process is to
identify, manage and control its interest rate risk within established limits in
order to produce consistent earnings that are not contingent upon favorable
trends in interest rates. This is attained by monitoring the levels of interest
rates, the relationships between the rates paid on assets and the rates paid on
liabilities, the absolute amount of assets and liabilities which reprice or
mature over similar periods, and the effect of all of these factors on the
estimated level of net interest income.
There are a number of industry standards used to measure a financial
institution's interest rate risk position. Most common among these is the
one-year gap which is the difference between assets, liabilities, and
off-balance sheet instruments that will mature or reprice within one year
expressed as a percentage of total assets. Using Management's estimates of asset
prepayments and core deposit decay in its computation, the Bank estimates that
its cumulative one-year gap position was a positive $98.4 million or 8.67% of
total assets at March 31, 1996. The Bank also utilizes income simulation
modeling in measuring its interest rate risk and managing its interest rate
sensitivity. Income simulation not only considers the impact of changing market
interest rates on forecasted net interest income, but also takes into
consideration other factors such as yield curve relationships, the volume and
mix of assets and liabilities, customer preferences and general market
conditions.
The following table sets forth the amounts of assets and liabilities outstanding
at March 31, 1996, which are anticipated by the Bank to mature or reprice in
each of the future time periods shown using certain assumptions based on its
historical experience, the current interest rate environment, and other data
available to management. Management believes that these assumptions approximate
actual experience and considers such assumptions reasonable, however, the
interest rate sensitivity of the Bank's assets and liabilities could vary
substantially if different assumptions were used or actual experience differs
from the assumptions used. Management periodically reviews and, when
appropriate, changes assumptions used in creating this table.
21
GAP Position
at March 31, 1996
--------------------------------------------------------------------------------------
(Dollars in Thousands)
More than six
Less than months less
six months than one year 1 - 5 Years Over 5 Yrs TOTAL
------------- --------------- ------------- ----------- ---------
Assets:
Federal funds sold and
interest bearing deposits $ 6,045 $ - $ - $ - $ 6,045
Investment securities 260,086 147,596 50,578 26,354 484,614
Residential real estate 91,282 56,608 89,240 14,657 251,787
Commercial real estate 30,855 23,090 59,554 - 113,499
Commercial loans 61,046 7,471 52,799 1,174 122,490
Home equity 61,920 399 6,162 2,157 70,638
Consumer loans 5,309 227 828 221 6,585
Other Assets - - - 79,512 79,512
-------- -------- -------- -------- ----------
Total assets $516,543 $235,391 $259,161 $124,075 $1,135,170
======== ======== ======== ======== ==========
Liabilities & stockholders' equity:
Savings accounts $ 29,178 $ 29,178 $136,167 $ - $ 194,523
NOW accounts 8,446 8,446 39,411 - 56,303
Money market accounts 61,930 61,930 82,573 - 206,433
Time deposits 197,026 113,304 61,799 - 372,129
Borrowed funds 96,443 15,022 206 1,245 112,916
Other liabilities & stockholders' equity 16,292 16,292 48,877 111,405 192,866
-------- -------- -------- -------- ----------
Total liabilities & stockholders' equity $409,315 $244,172 $369,033 $112,650 $1,135,170
======== ======== ======== ======== ==========
Period GAP position $107,228 ($8,781) ($109,872) $11,425
Net period GAP as a percentage of total 9.45% -0.77% -9.68%
assets 1.01%
Cumulative GAP $107,228 $98,447 ($11,425) -
Cumulative GAP as a percentage of total
assets 9.45% 8.67% -1.01% -
<FN>
For purposes of the above interest
sensitivity analysis:
Residential loans held for sale at March 31, 1996 totaling $4.4 million are in
the less than six month interest sensitivity period.
Fixed rate assets are schedule by contractual maturity and adjustable rate
assets are schedule by their next repricing date. In both cases, assets that
have prepayment optionality are adjusted for the Bank's estimate of prepayments.
Loans do not include non accrual loans of $10.8 million.
Loans do not include the allowance for loan loss of $14.6 million.
In certain deposit categories where there is no contractual maturity, Management
assumed the sensitivity characteristics listed below based on the current
interest rate environment and the Bank's historical experience. Management
reviews these assumptions on a quarterly basis and may modify them as
circumstances dictate.
- Savings accounts are assumed to decay at an annual rate of 30%
- NOW accounts assumed to decay at an annual rate of 30%
- Money market accounts are assumed to decay at an annual rate of 60%
- Non-interest bearing accounts of $81.7 million are included in other
liabilities and are assumed to decay at an annual rate of 40%.
</FN>
22
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, while certain assets and liabilities may have
similar contractual maturities or periods to repricing, they may react in
different ways to changes in market interest rates. Further, in the event of a
change in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in calculating the table. Additionally,
certain assets, such as adjustable rate mortgages, have features which restrict
changes in interest rates on a short-term basis and over the life of the asset.
Finally, the ability of borrowers to service their adjustable rate mortgages may
decrease in the event of an interest rate increase.
Liquidity
Liquidity measures the ability of the Bank to meet its maturing obligations and
existing commitments, to withstand fluctuations in deposit levels, to fund its
operations and to provide for customer credit needs.
The Bank's principal sources of funds are deposits, advances from the FHLB of
Boston, repurchase agreements, repayments and maturities on loans and
securities, proceeds from the sale of securities in the available-for-sale
portfolio, and funds provided by operations. While scheduled loan and security
amortization and maturities are relatively predictable sources of funds, deposit
flows and loan and security prepayments are greatly influenced by economic
conditions, the general level of interest rates and competition. The Bank
utilizes particular sources of funds based on comparative costs and
availability. The Bank generally manages the pricing of its deposits to maintain
a steady deposit balance, but has from time to time decided not to pay rates on
deposits as high as its competition, and when necessary, will supplement
deposits with longer term and/or less expensive alternative sources of funds
such as advances from the FHLB and repurchase agreements.
Liquidity management is both a daily and long-term responsibility of Management.
The Bank adjusts its investments in cash and cash equivalents based upon
Management's assessment of expected loan demand, projected security maturities,
expected deposit flows, yields available on interest-bearing deposits, and the
objectives of its asset/liability management program. If the Bank requires funds
beyond its ability to generate them internally, it has additional borrowing
capacity with the FHLB and collateral eligible for repurchase agreements.
Because the Bank has a stable retail deposit base, Management believes that
significant borrowings will not be necessary to maintain its current liquidity
position.
The Bank's ongoing principal use of capital resources remains the origination of
single-family residential mortgage loans, commercial real estate loans,
commercial loans, and consumer loans secured by residential real estate.
23
Form F-4
Exhibit A
SPRINGFIELD INSTITUTION FOR SAVINGS
COMPUTATION OF PRO FORMA PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(In Thousands Except Per Share Amounts)
Three Months Ended
March 31,
-------------------------------
Primary: 1996 1995
--------- --------
Net income $2,404 $789
Weighted average and pro forma weighted
average shares outstanding during the period 5,562 5,562
Unearned ESOP shares (391) (445)
Stock options considered outstanding during the period 105 -
Restricted stock shares considered outstanding during the period 60 -
------ ------
Total shares 5,336 5,117
====== ======
Net income per share $0.45 $0.15
====== ======
Three Months Ended
March 31,
-------------------------------
Fully Diluted: 1996 1995
--------- --------
Net income $2,404 $789
Weighted average and pro forma weighted
average shares outstanding during the period 5,562 5,562
Unearned ESOP shares (391) (445)
Stock options considered outstanding during the period 105 -
Restricted stock shares considered outstanding during the period 60 -
------ ------
Total shares 5,336 5,117
====== ======
Net income per share $0.45 $0.15
====== ======
Net income per share for the three months ended March 31, 1996 is computed on
weighted shares outstanding for the period. Net income per share for the three
months ended March 31, 1995 is computed on a pro forma basis as if the stock
issued in the conversion had been issued as of the beginning of the period
presented.
This computation includes the impact of the Restricted Stock Plan ("RSP") and
the Stock Option Plan which were approved by stockholders at the Annual Meeting
of the Stockholders held on May 31, 1995.
24
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, as amended, the
Bank has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SPRINGFIELD INSTITUTION FOR SAVINGS
May 13, 1996 /s/ F. William Marshall, Jr.
Date F. William Marshall, Jr.
President & Chief Executive Officer
May 13, 1996 /s/ John F. Treanor
Date John F. Treanor
Executive Vice President
and Chief Financial Officer
25