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EXHIBIT 99.1
FIRST VALLEY BANCORP, INC. AND SUBSIDIARY
JUNE 30, 2007
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS EXCEPT SHARE DATA)
June 30, December 31,
2007 2006
------------------------------------------
(Unaudited)
ASSETS
------
Cash and due from depository institutions $ 4,987 $ 12,319
Federal funds sold and money market accounts 12,694 13,841
Investment securities 24,014 26,672
Loans receivable, net 140,792 133,709
Loans held for sale 222 1,080
Premises and equipment, net 2,867 2,321
Federal Home Loan Bank of Boston Stock 602 719
Accrued income receivable 863 865
Deferred income taxes 1,048 1,052
Other assets 538 569
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TOTAL ASSETS $ 188,627 $ 193,147
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Non-interest bearing $ 21,049 $ 18,225
Interest bearing 145,870 146,533
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Total deposits 166,919 164,758
Borrowed funds 8,800 14,952
Mortgagors' escrow accounts 170 169
Other liabilities 2,299 2,737
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Total Liabilities 178,188 182,616
Commitments and contingencies
Stockholders' Equity:
Common stock, no par value; authorized 3,000,000 shares; issued and
outstanding 1,194,550 at June 30, 2007
and December 31, 2006 899 899
Additional paid-in capital 8,273 8,273
Retained earnings 1,529 1,627
Accumulated other comprehensive loss (262) (268)
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Total Stockholders' Equity 10,439 10,531
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 188,627 $ 193,147
==========================================
See notes to consolidated financial statements
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FIRST VALLEY BANCORP, INC. AND SUBSIDIARY
JUNE 30, 2007
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
Interest income: 2007 2006 2007 2006
---- ---- ---- ----
Interest on loans $ 2,600 $ 2,166 $ 5,128 $ 4,162
Interest and dividends on investments and deposits 432 344 888 727
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Total interest income 3,032 2,510 6,016 4,889
Interest expense:
Deposits and escrow 1,448 868 2,870 1,620
Borrowed funds 119 205 241 444
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Total interest expense 1,567 1,073 3,111 2,064
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Net interest income 1,465 1,437 2,905 2,825
Provision for loan losses 110 75 209 150
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Net interest income after provision for loan losses 1,355 1,362 2,696 2,675
Noninterest income:
Service charges and other fees 185 106 341 192
Realized losses on investments - - - (86)
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Total noninterest income 185 106 341 106
Noninterest expenses:
Salaries 704 497 1,395 950
Employee benefits and taxes 130 102 266 193
Occupancy and equipment 369 183 747 365
Professional fees 81 52 163 101
Marketing 51 34 91 59
Office supplies 29 20 58 35
Outside service fees 72 56 137 103
Merger related expenses 42 - 77 -
Other 134 113 257 190
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Total noninterest expenses 1,612 1,057 3,191 1,996
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Income (loss) before income tax expense (benefit) (72) 411 (154) 785
Income tax expense (benefit) (39) 170 (55) 322
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NET INCOME (LOSS) $ (33) $ 241 $ (99) $ 463
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Basic income (loss) per share $ (0.03) $ 0.20 $ (0.08) $ 0.39
Diluted income (loss) per share $ (0.03) $ 0.19 $ (0.08) $ 0.37
Weighted-average shares outstanding - basic 1,194,550 1,187,719 1,194,550 1,187,646
Weighted-average shares outstanding - diluted 1,265,275 1,243,888 1,265,275 1,243,815
See notes to consolidated financial statements
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FIRST VALLEY BANCORP, INC. AND SUBSIDIARY
JUNE 30, 2007
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
Six Months Ended June 30,
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES 2007 2006
---- ----
Net income (loss) $ (99) $ 463
Adjustments to reconcile net income to net
cash provided by operating activities:
Realized losses on investments - 86
Depreciation 184 112
Provision for loan losses 209 150
Amortization of debt issuance costs 3 3
Amortization (accretion) of premiums (discounts), net 37 56
Common stock issued as compensation - 27
Net Change in: -
Accrued income receivable 2 (75)
Deferred loan fees (10) 84
Other assets 32 (196)
Other liabilities (438) (785)
--------------------------------
Net cash provided (used) by operating activities (80) (75)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities, calls and paydowns
of available-for-sale securities 7,131 3,214
Proceeds from sales of available-for-sale securities - 3,122
Purchase of available-for-sale securities (4,500) (500)
Loan originations net of principal payments (6,424) (15,359)
Redemption (purchase) of Federal Home Loan Bank
of Boston Stock 117 -
Purchase of premises and equipment (730) (156)
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Net cash used by investing activities (4,406) (9,679)
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CASH FLOWS FROM FINANCING ACTIVITIES
Change in DDA, NOW, money market and
savings accounts 10,437 2,183
Change in time deposit accounts (8,276) 8,601
Proceeds from borrowed funds - 17,000
Repayments of borrowed funds (6,155) (19,893)
Change in mortgagors' escrow accounts 1 (4)
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Net cash provided by financing activities (3,993) 7,887
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Net change in cash and cash equivalents (8,479) (1,867)
Cash and cash equivalents at beginning of period 26,160 12,667
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,681 $ 10,800
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SUPPLEMENTAL DISCLOSURES Cash paid during the period for:
Interest $ 3,175 $ 2,108
Income taxes $ 245 $ 495
See notes to consolidated financial statements
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FIRST VALLEY BANCORP, INC.
JUNE 30, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BUSINESS
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First Valley Bancorp, Inc. (the "Company"), a Connecticut corporation, was
formed in 2005 for the purpose of becoming the one-bank holding company of
Valley Bank (the "Bank"), a wholly-owned subsidiary. The Company's activity is
currently limited to the holding of the Bank's outstanding common stock and the
Bank is the Company's primary investment. The Company's net income is largely
derived from the business of the Bank.
The Bank commenced operations as a Connecticut state-chartered commercial bank
on November 15, 1999. The Bank is an insured bank under the Federal Deposit
Insurance Act up to its applicable limits. Like most state-chartered commercial
banks in Connecticut, it is not a member of the Federal Reserve System.
On July 12, 2007, the Company merged with and into New England Bancshares
Acquisition, Inc. in exchange for cash and common stock of New England
Bancshares, Inc. ("NEBS"). See Note 9 Merger for additional details.
The Bank conducts its business from four locations serving the greater Bristol
community, its main office at Four Riverside Avenue, Bristol, Connecticut,
06010, and three additional full-service offices at 8 South Main Street in the
Terryville section of Plymouth, Connecticut, 06786, at 98 Main Street in
Southington, Connecticut, 06489, and at 888 Farmington Avenue, Bristol,
Connecticut 06010.
The Bank is engaged principally in the business of attracting deposits from the
general public and investing those deposits in small business, commercial real
estate, residential real estate and consumer loans. In connection with both
loans and deposits, the Bank does a substantial amount of business with
individuals as well as customers in commercial and professional businesses. The
Bank offers safe deposit boxes at all full-service locations, and other
customary bank services to its customers. The Bank has drive-up facilities and
automated teller machines which are connected to the NYCE, SUM and PLUS
networks.
NOTE 2. BASIS OF PRESENTATION
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The interim consolidated financial statements of the Company include those of
the Company and its wholly owned subsidiary, Valley Bank. Inter-company
transactions have been eliminated. The Company does not consolidate its
subsidiary, FVB Capital Trust I, as described in Note 8. The accounting and
reporting policies of the Company conform to generally accepted accounting
principles in the United States of America and to general practices within the
banking industry. Such policies have been followed on a consistent basis.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet, and income and expenses for the period. Actual
results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for losses on loans.
While management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in credit quality
and economic conditions, particularly in Connecticut.
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FIRST VALLEY BANCORP, INC.
JUNE 30, 2007
The data presented for the three and six months ended June 30, 2007 and 2006
reflect, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) which are necessary to present fairly the results
for such interim periods.
Interim results at and for the three and six months ended June 30, 2007 are not
necessarily indicative of the results that may be expected for the fiscal year
ended December 31, 2007.
NOTE 3. COMPREHENSIVE INCOME
--------------------
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" establishes standards for disclosure of comprehensive income, which
includes net income and any changes in equity from non-owner sources that are
not recorded in the income statement (such as changes in the net unrealized
gains (losses) on securities).
The Company's one source of other comprehensive income is the net unrealized
gain (loss) on securities.
Six Months Ended
(in thousands) June 30,
-----------------------
2007 2006
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Net Income (loss) $ (99) $ 463
Other comprehensive income (loss):
- ---------------------------------
Net unrealized holding gains (losses) on securities available for sale 10 (246)
Reclassification adjustment for loss recognized in net income - 86
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Other comprehensive income (loss) before tax expense 10 (160)
Income tax expense (benefit) related to items of other comprehensive
income (loss) 4 (62)
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Other comprehensive income (loss) net of tax 6 (98)
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TOTAL COMPREHENSIVE INCOME (LOSS) $ (93) $ 365
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NOTE 4. INCOME PER SHARE
----------------
The Company has computed and presented income per share in accordance with
Statement of Financial Accounting Standards No. 128.
NOTE 5. COMMITMENT TO EXTEND CREDIT
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The Company is party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit. These commitments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the statement of financial condition.
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FIRST VALLEY BANCORP, INC.
JUNE 30, 2007
The contractual amounts of outstanding commitments June 30, 2007 and
December 31, 2006 were as follows:
(in thousands) June 30, December 31,
2007 2006
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Commitments to extend credit:
Loan commitments $ 4,370 $ 8,759
Unadvanced lines of credit 26,465 21,992
Unused overdraft privilege 2,386 -
Standby letters of credit 1,540 2,139
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Outstanding commitments $ 34,761 $ 32,890
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NOTE 6. STOCK BASED COMPENSATION
------------------------
The Company has a long-term incentive plan authorizing various types of market
and performance based incentive awards that may be granted to directors,
officers and employees. Information regarding stock options as of June 30, 2007
is summarized below:
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Weighted
Average
Number of Exercise
shares Price
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Outstanding at December 31, 2006 118,242 $ 8.22
Granted - -
Exercised - -
Forfeited - -
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Outstanding at June 30, 2007 118,242 $ 8.22
- -----------------------------------------------------------------------
Options exercisable at June 30, 2007 118,242 $ 8.22
On January 1, 2006, the Company adopted the provision of SFAS 123R using the
modified prospective transition method. Under this transition method,
compensation expense is recognized currently for all outstanding options not yet
vested. All of the Company's outstanding options were fully vested as of the
effective date and therefore no compensation expense was recognized. Previously,
the Company applied APB Opinion 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for its long-term incentive plan.
NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," to
define fair value, establish a framework for measuring fair value and expand
disclosures about fair values. The Statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. The Company does not expect SFAS No.
157 to have a material impact on the Company's financial position or results of
operation.
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FIRST VALLEY BANCORP, INC.
JUNE 30, 2007
In February 2007, FASB issued SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial Liabilities" ("SFAS 159"), which permits entities to choose
and measure many financial instruments and certain other items at fair value.
The Company will be required to adopt SFAS No. 159 in the first quarter of 2008
with earlier adoption permitted, and is currently evaluating the impact of the
adoption of SFAS No. 159 on its financial position and results of operations.
NOTE 8. LONG TERM DEBT
--------------
In July 2005, the Company formed FVB Capital Trust I (the "Trust"). The Trust
has no independent assets or operations and was created for the sole purpose of
issuing trust preferred securities and investing the proceeds thereof in an
equivalent amount of junior subordinated debentures issued by the Company.
Trust preferred securities issued by the statutory trust are considered
regulatory capital for purposes of determining the Company's Tier I capital
ratio and the Bank's Tier I capital ratio to the extent that the trust preferred
proceeds have been invested in the Bank's capital.
The subordinated debentures, which bear an interest rate fixed at 6.42% for the
first five years and a floating interest rate set at three-month LIBOR plus 190
basis points thereafter, mature on August 23, 2035 and can be redeemed at the
Company's option in an amount equal to 100% of the principal amount of the debt
securities beginning in 2010 and thereafter. The trust securities have identical
terms except the duration of the trust is 35 years.
NOTE 9. MERGER
------
On November 21, 2006, the Company entered into a definitive agreement in which
the Company would merge with and into New England Bancshares Acquisition, Inc.
in exchange for cash and common stock of New England Bancshares, Inc. ("NEBS").
NEBS is a Maryland corporation based in Enfield, Connecticut and is the holding
company for Enfield Federal Savings and Loan Association in Enfield,
Connecticut. On July 12, 2007 the merger was completed and the separate
corporate existence of the Company ceased. Valley Bank, the Company's
subsidiary, became a subsidiary of NEBS. Per the definitive agreement, Valley
Bank will continue as a separate subsidiary for a minimum of five years after
the effective date, absent the occurrence of certain unexpected events.
The transaction is valued at approximately $25.6 million. Per the terms of the
definitive agreement, each outstanding share of the Company to be converted into
the right to receive 0.8907 shares of NEBS common stock and $9.00 in cash.
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