SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended JUNE 30, 1997
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from__________to_____________
Commission File Number 0-14018
BNH BANCSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
CONNECTICUT 06-1126899
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
209 CHURCH STREET, NEW HAVEN, CONNECTICUT 06510
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code (203) 498-3500
Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report: NONE
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 period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS August 12, 1997
Common Stock (no par value) 3,691,081
BNH BANCSHARES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Page
Consolidated Statement of Financial Position as of June 30, 1997
and December 31, 1996 3
Consolidated Statement of Operations for the three and six
months ended June 30, 1997 and June 30, 1996 4
Consolidated Statement of Changes in Shareholders' Equity for the
six months ended June 30, 1997 and June 30, 1996 5
Consolidated Statement of Cash Flows for the six months ended
June 30, 1997 and June 30 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Items 1-3 Not Applicable 26
Item 4 Submission of Matters to a Vote of Security Holders 26
Item 5 Not Applicable 27
Item 6 Exhibits and Reports on Form 8-K 27
SIGNATURES 28
2
BNH BANCSHARES, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS June 30, 1997 Dec. 31, 1996
- ----------------------------------------------------------------------------
(unaudited)
Cash and due from banks $ 20,600,325 $ 21,043,918
Federal funds sold 7,900,000 10,700,000
Investment securities:
Held to Maturity, at amortized cost 20,570,483 21,546,034
Available for Sale, at market value 43,910,947 42,439,947
Loans net of unearned discount 246,672,076 234,679,749
Less allowance for loan losses (4,693,414) (4,695,681)
--------------------------------------
Loans - net 241,978,662 229,984,068
Property and equipment-net 4,884,058 4,335,019
Accrued interest receivable 2,324,583 2,159,525
Other real estate owned 513,396 558,706
Other assets 9,612,449 9,462,190
======================================
TOTAL $352,294,903 $342,229,407
======================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
- --------------------------------
Deposits:
Demand deposits $ 59,987,572 $ 58,108,856
NOW accounts 47,381,668 43,948,468
Money market accounts 34,722,189 30,709,756
Savings deposits 34,224,946 32,344,788
Time deposits under $100,000 117,156,276 117,008,717
Time deposits $100,000 or more 17,648,314 16,803,504
--------------------------------------
Total deposits 311,120,965 298,924,089
Federal Funds purchased and
securities sold under
repurchase agreement 560,919 4,740,797
FHLB Advances 12,488,976 11,922,273
Accrued interest payable 433,272 434,339
Other liabilities 1,153,742 596,624
--------------------------------------
Total liabilities 325,757,874 316,618,122
--------------------------------------
Shareholders' equity:
Common stock, $.01 stated
value, authorized
30,000,000 issued 3,695,352 shares 36,953 36,953
Capital surplus 47,718,180 47,717,466
Undivided profit/(loss) (20,636,260) (21,597,946)
Net unrealized losses on
securities (334,673) (298,017)
Treasury stock (4,776 shares) (247,171) (247,171)
----------------------------------------
Total shareholders' equity 26,537,029 25,611,285
========================================
TOTAL $352,294,903 $342,229,407
========================================
See accompanying Notes to Consolidated Financial Statements.
3
BNH BANCSHARES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
----------------------------------------------------
INTEREST INCOME:
Loans $5,288,719 $4,483,177 $10,317,766 $8,910,408
Investment securities:
Held to maturity 282,081 323,555 563,860 652,908
Available for sale 680,784 617,587 1,363,567 1,199,710
Federal funds sold 37,715 38,853 103,018 88,587
----------------------------------------------------
Total interest income 6,289,299 5,463,171 12,348,211 10,851,613
INTEREST EXPENSE:
Time deposits $100,000 or more 234,352 197,734 460,630 396,191
Time deposits under $100,000 1,566,062 1,494,126 3,148,185 2,968,131
Other deposits 692,417 588,905 1,329,125 1,172,376
Other borrowings 203,029 107,978 443,619 213,929
----------------------------------------------------
Total interest expense 2,695,860 2,388,745 5,381,560 4,750,627
----------------------------------------------------
NET INTEREST INCOME 3,593,439 3,074,425 6,966,651 6,100,986
PROVISION FOR LOAN LOSSES (325,000) (526,000) (651,000) (1,102,000)
----------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,268,439 2,548,425 6,315,651 4,998,986
OTHER INCOME:
Service charges 568,582 549,556 1,124,454 1,058,369
Other income 277,381 303,961 520,104 575,682
Net gain on investment
securities 0 0 0 7,242
----------------------------------------------------
Total other income 845,963 853,517 1,644,558 1,641,293
----------------------------------------------------
OPERATING EXPENSES:
Salaries and employee
benefits 1,675,635 1,440,006 3,280,048 2,811,346
Occupancy 398,878 318,218 788,752 672,646
Advertising and promotion 151,907 140,808 307,331 226,432
Office stationery and
supplies 104,726 83,633 196,879 159,291
Examination and
professional fees 177,079 182,046 382,153 383,467
Insurance 64,172 108,303 120,032 215,276
Other real estate owned 16,891 20,182 54,340 66,426
Other 729,819 572,626 1,227,965 1,060,965
----------------------------------------------------
Total operating expenses 3,319,107 2,865,822 6,357,499 5,595,849
----------------------------------------------------
NET INCOME BEFORE INCOME
TAXES $795,295 $536,120 $1,602,709 $1,044,430
----------------------------------------------------
PROVISION(BENEFIT) FOR
INCOME TAXES 318,058 (235,000) 641,024 (460,500)
----------------------------------------------------
NET INCOME $477,238 $771,120 $961,686 $1,504,930
====================================================
NET INCOME PER COMMON $0.13 $0.21 $0.26 $0.41
SHARE
Weighted average number
of common shares outstanding
during the period 3,690,576 3,688,307 3,690,576 3,687,378
See accompanying Notes to Consolidated Financial Statements.
4
BNH BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
June 30, 1997 June 30, 1996
------------------------------
SHAREHOLDERS' EQUITY at beginning of period $25,611,285 $15,592,723
COMMON STOCK
Net proceeds of stock options exercised 1 20
CAPITAL SURPLUS
Net proceeds of stock options exercised 713 11,100
UNDIVIDED LOSSES
Net Income 961,686 1,504,930
Unrealized depreciation on investment
securities available for sale (36,656) (567,326)
------------------------------
SHAREHOLDERS' EQUITY at end of period $26,537,029 $16,541,447
==============================
See accompanying Notes to Consolidated Financial Statements.
5
BNH BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Six months ended June 30,
1997 1996
-------------------------------------
OPERATING ACTIVITIES
Net profit $ 961,686 $1,504,930
Adjustments for items not affecting
cash:
Provision for loan losses 651,000 1,102,000
Depreciation and amortization of
property and equipment 306,613 226,286
Net accretion of bond premiums and
discounts (35,350) (132,552)
(Gain)loss from the sale of available
for sale securities 0 (7,242)
Loss/writedown on other real estate owned 3,982 22,077
Decrease in interest receivable (165,058) (27,399)
Increase(decrease) in interest payable (1,067) 15,613
Other,net 407,574 (579,754)
-------------------------------------
Net cash provided by operating
activities 2,129,380 2,123,959
-------------------------------------
FINANCING ACTIVITIES
Net increase in demand, NOW, money
market and savings accounts 11,204,506 3,914,002
Net increase in time deposits 992,369 4,919,321
Net decrease in federal funds
purchased and securities sold
under repurchase agreements (4,179,878) 0
Proceeds from FHLB advances 566,703 2,295,952
---------------------------------
Net cash provided by financing
activities 8,583,700 11,129,275
---------------------------------
INVESTING ACTIVITIES
Net decrease in federal funds sold 2,800,000 550,000
Maturities of securities held to
maturity 1,010,000 0
Maturities of securities available for
sale 2,500,000 17,049,185
Purchase of securities available for
sale (4,006,754) (16,351,781)
Proceeds from the sale of available
for sale securities 0 10,392
Net loans originated and matured (12,645,594) (10,847,063)
Proceeds from sale of other real
estate owned 86,448 609,981
Purchase/capitalization of OREO
property (45,121) (1,690,352)
Purchase of property and equipment (855,652) (209,088)
-------------------------------------
Net cash used by investing activities (11,156,673) (10,878,726)
-------------------------------------
(Decrease)increase in cash (443,593) 2,374,508
Cash and due from banks at beginning
of year 21,043,918 19,818,406
=====================================
Cash and due from banks at end of
period $20,600,325 $22,192,914
=====================================
Cash paid for:
Interest expense $ 5,382,626 $ 4,735,012
Income taxes $ 80,000 $ 15,500
- -----------------------------------------------------------------------------
Non-cash transfers from loans receivable to other real estate owned were $42,000
and $575,126, for the six months ending June 30, 1997 and 1996, respectively.
There were no cash transfers from other real estate owned to loans receivable
for the six months ended June 30, 1997 and 1996.
See accompanying Notes to Consolidated Financial Statements.
6
BNH BANCSHARES, INC.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements are unaudited and
include the accounts of BNH Bancshares, Inc. (the "Company") and its
subsidiaries, The Bank of New Haven (the "Bank") and Northeastern Capital
Corporation. The financial statements reflect, in management's opinion,
all appropriate adjustments consisting of normal recurring adjustments
necessary for a fair presentation of the Company's financial position, the
results of its operations and the change in its cash flows for the periods
presented. These financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's 1996
Annual Report to Shareholders.
Net income per common share is computed based on the weighted average
number of common shares outstanding during each year. Per share earnings
and weighted average shares of common stock for all periods presented
reflect all stock dividends and splits. The exercise of stock options
would not result in material dilution of earnings per share.
2. Loan Portfolio
June 30, Dec. 31,
1997 1996
(dollars in thousands)
Commercial $ 52,869 $ 54,240
Real estate:
Construction 1,180 820
Commercial mortgage 59,749 59,283
Residential mortgage 55,844 54,651
Consumer 77,030 65,686
--------- --------
Total loans 246,672 234,680
Allowance for loan losses (4,693) ( 4,696)
-------- ---------
Loans - net $241,979 $229,984
========= ========
7
3. Pending Merger
On April 8, 1997, the Company announced that it is a party to a definitive
merger agreement (the "Agreement") pursuant to which Citizens Bank of
Connecticut, a subsidiary of Citizens Financial Group, Inc., will acquire
all of the outstanding shares of stock of the Company (other than certain
shares to be canceled pursuant to the Agreement and any objecting shares)
for $57.2 million, or $15.50 per share.
The acquisition, which is subject to shareholder and regulatory approval,
will be the fourth Connecticut acquisition by Citizens since 1993 and the
11th overall in Citizens' four-state franchise. When completed, the
acquisition will make Citizens Bank of Connecticut a $1.75 billion bank
with 42 branch offices. The Company's shareholders will vote on the merger
at a special meeting of shareholders to be held August 14, 1997. Assuming
the required approvals are obtained, the transaction is expected to be
completed during the last week of August, 1997.
Citizens Financial Group, Inc. is a $16 billion financial services company
headquartered in Providence, Rhode Island, with 250 offices operating as
Citizens Bank in Connecticut, Massachusetts, New Hampshire and Rhode
Island. Citizens is 76.5 percent owned by The Royal Bank of Scotland plc,
with the remaining interest held by The Governor and Company of the Bank
of Ireland.
4. New Accounting Pronouncements
In February, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128 provides
accounting and reporting standards for the calculation of earnings per
share intended to simplify the computation by replacing the presentation
of primary earnings per share with the presentation of basic earnings per
share. The Company will be required to adopt SFAS 128 in the fourth
quarter of 1997. Had earnings per share for the quarter ended June 30,
1997 been computed in accordance with SFAS 128, basic and diluted earnings
per share would have both been $.13, and basic and diluted earnings per
share would have both been $.21 for the quarter ended June 30, 1996.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company earned income before tax for the six months ending June 30,
1997 of $1,603,000 compared with $1,044,000 for the same period last year.
Net income for the six months ending June 30, 1997 was $962,000, or $.26
per share, compared with $1,505,000, or $.41 per share, for the same
period last year. The Company earned income before tax for the three
months ending June 30, 1997 of $795,000, or $.22 per share, compared with
$536,000, or $.15 per share, for the same period last year. Net income for
the three months ending June 30, 1997 was $477,000, or $.13 per share,
compared with $771,000, $.21 per share, for the same period last year.
During the first six months of 1997, the Company, as a result of returning
to a fully taxable reporting basis due to improved operating performance,
recorded a provision for income taxes of $641,000 compared to a benefit
recorded during the same 1996 period of $461,000. The income tax provision
was $318,000 for the three month period ending June 30, 1997 as compared
to a recorded benefit of $235,000 for the same period in 1996.
The primary reason for the improvement in both quarterly and year to date
pretax earnings when comparing the periods ending June 30, 1997 with the
same periods last year was an increase in net interest income and lower
loan loss provisions partially offset by increased operating expenses. The
Company's net interest income increased $866,000, or 14%, from $6,101,000
for the six months ending June 30, 1996 to $6,967,000 for the same period
in 1997. The Company's net interest income also increased $519,000, or
17%, from $3,074,000 for the three months ending June 30, 1996 to
$3,593,000 for the same period in 1997. The increase in net interest
income can primarily be attributed to an overall increase in loan volume.
Total loans were $213,071,000 as of June 30, 1996, $234,680,000 as of
December 31, 1996 and $246,672,000 as of June 30, 1997. As a result of an
improvement in asset quality, the Company's quarterly provisions for loan
losses have been lower in 1997 as compared with the prior year. The loan
loss provision for the six months ending June 30, 1997 was $651,000
compared with $1,102,000 for the same 1996 period. The loan loss provision
for the three months ending June 30, 1997 was $325,000 compared with
$526,000 for the same 1996 period. The Company's operating expenses
increased $761,000, or 14%, from $5,596,000 for the six months ending June
30, 1996 compared with $6,357,000 for the same period in 1997. The
Company's operating expenses increased $453,000, or 16%, from $2,866,000
for the three months ending June 30, 1996 compared with $3,319,000 for the
same period in 1997. This was primarily due to increased staffing,
occupancy and other expenses related to operating three additional
branches as well as costs associated with an increased level of loan
production.
The return on average assets was .50% for the six months ending June 30,
1997 compared to 1.00% for the same 1996 period. Net income was
9
$0.13 for the three months ended June 30, 1997 compared with $0.21 per
share for the three months ended June 30, 1996. Net income was $0.26 per
share for the six months ended June 30, 1997 compared with $0.41 per share
for the same 1996 period. All per share data has been adjusted for a
reverse stock split which occurred during the second quarter of 1996.
NET INTEREST INCOME
Net interest income is the difference between the interest earned on loans
and investments and the interest paid on deposits and other borrowings.
Net interest income was $6,967,000 for the six month period ended June 30,
1997 compared to $6,101,000 for the same 1996 period, representing an
increase of $866,000, or 14%. Net interest income was $3,593,000 for the
three month period ended June 30, 1997 compared to $3,074,000 for the same
1996 period, representing an increase of $519,000, or 17%. The increase in
net interest income for both the three and six month comparative periods
is primarily attributed to higher levels of average loans partially offset
by a proportionately smaller increase in the levels of average paying
liabilities. Yields on average paying assets increased 20 basis points
when comparing the three month periods ended June 30, 1997 and June 30,
1996, and increased by 12 basis points when comparing the respective six
month periods.
Interest income increased to $12,348,000 for the six months ended June 30,
1997 from $10,852,000 for the same 1996 period, an increase of $1,496,000,
or 14%. Interest income increased to $6,289,000 for the three months ended
June 30, 1997 from $5,463,000 for the same 1996 period, an increase of
$826,000, or 15%. The Company's average earning assets increased to
$308,019,000 for the six months ended June 30, 1997 from $274,257,000 for
the same 1996 period, or 12%. The increase in interest income can be
primarily attributed to an increase in both the average loan and
investment portfolios.
Interest expense increased to $5,382,000 for the six months ended June 30,
1997 from $4,751,000 for the same 1996 period, an increase of $631,000, or
13%. Interest expense increased to $2,696,000 for the three months ended
June 30, 1997 from $2,389,000 for the same 1996 period, an increase of
$307,000, or 13%. This increase reflects the growth in average paying
liabilities and their associated interest rates from June 30, 1996 to June
30, 1997. Average paying liabilities increased to $255,000,000 for the six
months ended June 30, 1997 from $228,000,000 for the same period in 1996,
an increase of $27,000,000, or 12%. The Company's average interest rate on
paying liabilities increased 7 basis points from 4.18% for the six months
ended June 30, 1996 to 4.25% for the six months ended June 30, 1997.
10
Three Months Ended June 30,
(dollars in thousands)
(unaudited)
1997 | 1996
ASSETS Average Average | Average Average
Balance Interest Yield Balance Interest Yield
Investments:
Held to Maturity, at
amortized cost $ 20,566 $ 282 5.50% | $ 23,834 $ 323 5.46%
Available
for Sale(2) 44,242 680 6.16% | 42,055 618 5.91%
Federal funds sold 2,884 38 5.35% | 2,920 39 5.35%
Loans - net(1) 242,904 5,289 8.73% | 208,789 4,483 8.64%
-------- ------ ----- -------- -------- -----
Total average |
earning assets
(1) $310,597 $6,289 8.12% | $277,598 $ 5,463 7.92%
======== ====== ===== ======== ======== =====
INTEREST
BEARING
LIABILITIES
Deposits:
NOW accounts $ 42,694 $ 160 1.50% | $40,590 $ 151 1.50%
Money markets 34,243 310 3.63% | 29,039 244 3.37%
Savings 33,783 223 2.65% | 30,384 194 2.57%
deposits
Time deposits
under $100,000 113,659 1,566 5.53% | 109,225 1,494 5.50%
Time deposits
of $100,000
or more 17,171 234 5.47% | 14,629 198 5.44%
-------- --- ----- -------- -------- -----
Total interest
bearing deposits $241,550 $2,493 4.14% | $223,867 $ 2,281 4.10%
Other borrowings 14,086 203 5.78% | 7,705 108 5.64%
-------- ------ ----- -------- -------- -----
Total interest
bearing deposits
& other
borrowings $255,636 $2,696 4.23% | $231,572 $ 2,389 4.15%
======== ======= ===== ======== ======== =====
Net interest
income $3,593 | $3,074
------ ------
Interest rate
spread (1) 3.89% | 3.77%
----- -----
Net interest
margin (1) 4.64% | 4.45%
----- -----
==============================================================================
(1) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing demand
accounts), and net interest margin represents net interest income as a
percentage of average interest-earning assets, including the average daily
amount of nonperforming loans.
(2) The average balance and related weighted average yield calculations are
based on average historical amortized cost for period presented.
==============================================================================
11
Six Months Ended June 30,
(dollars in thousands)
(unaudited)
1997 | 1996
Average Average | Average Average
ASSETS Balance Interest Yield | Balance Interest Yield
Investments:
Held to
Maturity,
at amortized
cost $ 20,720 $ 564 5.49% | $ 23,833 $ 653 5.51%
Available
for Sale(2) 44,310 1,363 6.21% | 41,048 1,200 5.88%
Federal funds
sold 3,968 103 5.24% | 3,377 89 5.28%
Loans - net(1) 239,021 10,318 8.70% | 206,000 8,910 8.70%
-------- ------ ----- -------- -------- -----
Total average |
earning assets
(1) $308,019 $12,348 8.08% | $274,258 $ 10,852 7.96%
======== ======= ===== ======== ======== =====
INTEREST BEARING
LIABILITIES
Deposits:
NOW accounts $ 41,465 $ 307 1.49% | $ 40,021 $ 299 1.50%
Money markets 32,831 589 3.62% | 29,004 483 3.35%
Savings
deposits 32,975 432 2.64% | 30,840 391 2.55%
Time deposits |
under $100,000 114,663 3,148 5.54% 106,703 2,968 5.59%
Time deposits |
of $100,000
or more 16,928 461 5.49% | 14,628 396 5.45%
-------- ------ ----- -------- -------- -----
Total interest
bearing deposits $238,862 $ 4,937 4.17% | $221,196 $ 4,537 4.12%
Other borrowings 16,194 444 5.52% | 7,460 214 5.77%
-------- ------ ----- -------- -------- -----
Total interest
bearing deposits
& other
borrowings $255,056 $ 5,381 4.25% | $228,656 $ 4,751 4.18%
======== ======== ===== ======== ======== =====
Net interest
income $ 6,967 | $ 6,101
------- --------
Interest rate
spread (1) 3.83% | 3.78%
----- -----
Net interest
margin (1) 4.56% | 4.47%
----- -----
==============================================================================
(1) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing demand
accounts), and net interest margin represents net interest income as a
percentage of average interest-earning assets, including the average daily
amount of nonperforming loans.
(2) The average balance and related weighted average yield calculations are
based on average historical amortized cost for period presented.
==============================================================================
12
OTHER INCOME
Other income increased marginally to $1,644,000 for the first six months
of 1997 as compared to $1,641,000 for the same period in 1996. Service
charges assessed against customer accounts, a major component of other
income, increased $66,000 to $1,124,000 for the first six months of 1997
as compared to $1,058,000 for the same 1996 period. Mortgage placement
fees, which are fees the company earns for originating residential first
mortgage loans, increased $14,000 to $159,000 for the first six months of
1997 as compared to $145,000 for the same period in 1996. ATM fees, which
are fees assessed by the Company to process automated teller machine
transactions, increased $20,000 to $74,000 for the period ended June 30,
1997 as compared to $54,000 for the period ended June 30, 1996. Increases
in service charges, mortgage placement and ATM fees were partially offset
by decreases in fees earned on installment loan placements and
miscellaneous loan fees. Installment loan placement fees, which are fees
the Company earns for originating installment loans, decreased $14,000 to
$89,000 for the first six months of 1997 as compared to $103,000 for the
same 1996 period. Miscellaneous loan fees, various charges assessed to
approve, process and service loan products, decreased $83,000 to $23,000
for the first six months of 1997 as compared to $106,000 for the same 1996
period.
PROVISION FOR LOAN LOSSES
The provision for loan losses charged to operations reflects management's
analysis of the loan portfolio and determination of an adequate allowance
for loan losses to provide for probable losses in the loan portfolio. The
potential for loss in the portfolio reflects the risks and uncertainties
inherent in the extension of credit.
The determination of the adequacy of the allowance for loan losses is
based upon management's assessment of risk elements in the portfolio,
factors affecting loan quality and assumptions about the economic
environment in which the Company operates. The Company utilizes a loan
grading system, based upon FDIC parameters, and utilizes that assessment
of the overall quality of the loan portfolio in the process of determining
an adequate allowance for loan loss level. This system involves an ongoing
review of the commercial and real estate loan portfolios, with added
emphasis on the Company's larger commercial credits and nonperforming
loans. Various factors are involved in determining the loan grade,
including the cash flow and financial status of the borrower, the
existence and nature of collateral, and general economic conditions and
their impact on the borrower's industry. These reviews are dependent upon
estimates, appraisals and judgments, which can change quickly due to
economic conditions
13
and the Company's perceptions as to how these conditions affect the
collateral securing its current and past due loans as well as the
borrower's economic prospects. In each reporting period, the allowance for
loan losses is reviewed based on the most recent loan grading data and is
adjusted to the amount deemed necessary, in the Company's judgment, to
maintain adequate allowance for loan loss levels.
The provision for loan losses charged against earnings in the first six
months of 1997 was $651,000 compared with $1,102,000 in the same 1996
period. Net loan charge-offs for the six months ended June 30, 1997 and
1996 were $653,000 and $2,272,000, respectively. The provision for loan
losses charged against earnings in the second quarter of 1997 was $325,000
compared with $526,000 in the same 1996 period. Net loan charge-offs for
the three months ended June 30, 1997 and June 30, 1996 were $330,000 and
$967,000, respectively.
In establishing the allowance for loan losses, management has considered
the possible deterioration of the collateral securing its past due loans.
As of June 30, 1997, the Company's allowance for loan losses was
$4,693,000, or 1.97% of total loans, as compared to $4,723,000, or 2.2% of
total loans, as of June 30, 1996. The allowance for loan losses was
$4,696,000, or 2.0% of total loans, as of December 31, 1996. The ratio of
the allowance for loan losses to nonaccrual and restructured loans and
accruing loans past due 90 days or more was 70.8% as of June 30, 1997 as
compared to 79.9% and 75.8% as of December 31, 1996 and June 30, 1996,
respectively.
As of June 30, 1997, nonaccrual loans were $3,649,000 as compared with
$5,761,000 as of December 31, 1996, and $4,452,000 as of June 30, 1996. As
of June 30, 1997, approximately $3,206,000 of the loans in the nonaccrual
portfolio were collateralized partially by commercial or residential real
estate or business assets and approximately $443,000 of nonaccrual loans
were unsecured. The Company believes that its allowance for loan losses is
adequate to absorb any potential reduction of the net carrying value in
the nonaccrual portfolio. The ratio of nonaccrual loans to total loans
declined from 2.1% at June 30, 1996 to 1.5% at June 30, 1997.
Management, after careful consideration of the above factors, is of the
opinion that the allowance for loan losses as of June 30, 1997 is
adequate. Although the economy in Connecticut has improved, it is
difficult to predict how the future economy may impact the Company's loan
customers. If economic conditions continue to improve during 1997,
management believes that the level of its nonaccrual loans will continue
to decline during the next several quarterly periods. However, the level
of the
14
Company's nonperforming assets will continue to negatively impact the
Company's profitability in future quarterly periods. The nature of the
Connecticut economy will continue to influence the levels of loan
charge-offs, nonaccrual loans and the allowance for loan losses, and
management will appropriately adjust the allowance as considered necessary
to reflect future changes in risk.
The following tables set forth quarterly information on nonperforming
assets, restructured loans, accruing loans past due 90 days or more and
loans charged-off for the quarterly periods from June 30, 1996 to June 30,
1997.
15
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(dollars in thousands)
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
QUARTER ENDED 1997 1997 1996 1996 1996
Balance beginning
of period $ 4,698 $ 4,696 $ 4,696 $ 4,723 $ 5,164
Provision charged to
income 325 326 362 500 526
Loans charged off:
Commercial 94 196 276 413 696
Real Estate:
Commercial Mtg. 125 70 0 33 182
Residential Mtg. 36 2 13 48 108
Consumer 181 103 128 108 109
------- ------- ------- ------- -------
Total Loans
Charged-off 436 371 417 602 1,095
Recoveries 106 47 55 75 128
------- ------- ------- ------- -------
Net loans
charged-off 330 324 362 527 967
------- ------- ------- ------- -------
Balance, end of
period $ 4,693 $ 4,698 $ 4,696 $ 4,696 $ 4,723
======= ======= ======= ======= =======
Ratios:
Net loans
charged-off to avg.
loans 0.14% 0.14% 0.16% 0.24% 0.46%
Allowance for loan
losses to total
loans 1.90% 1.96% 2.00% 2.07% 2.22%
16
NONACCRUAL LOANS, RESTRUCTURED LOANS
AND OTHER REAL ESTATE OWNED
(dollars in thousands)
QUARTER ENDED June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
1997 1997 1996 1996 1996
Nonaccrual loans:
Commercial $ 1,064 $ 924 $ 1,005 $ 1,213 $ 1,665
Real Estate:
Commercial 1,757 1,769 2,255 2,316 2,336
Residential 538 110 99 99 185
Consumer 290 259 263 266 266
--------- -------- -------- -------- --------
Total nonaccrual
loans 3,649 3,062 3,622 3,894 4,452
Other Real Estate
Owned-net 513 588 559 956 1,673
--------- -------- -------- -------- --------
Total nonperforming
assets 4,163 3,650 4,181 4,850 6,124
Restructured loans 2,666 2,937 1,580 1,592 1,622
--------- -------- -------- -------- --------
Total nonperforming
assets &
restructured loand $ 6,828 $ 6,587 $ 5,761 $ 6,442 $ 7,746
========= ======== ======== ======== ========
Accruing loans past
due 90 days or more:
Commercial 0 142 97 514 5
Real Estate:
Construction 0 0 0 0 0
Commercial 0 260 103 0 0
Residential 112 473 346 0 0
Consumer 199 318 125 142 151
--------- -------- -------- -------- --------
Total accruing loans
past due 90 days or
more $ 311 $ 1,193 $ 671 $ 656 $ 156
========= ======== ======== ======== ========
Allowance for loan
losses $ 4,693 $ 4,698 $ 4,696 $ 4,696 $ 4,723
SFAS 114 impaired
loans $ 3,975 $ 3,901 $ 2,507 $ 2,723 $ 2,997
Ratio of
nonperforming assets
to total assets 1.2% 1.1% 1.2% 1.5% 2.0%
Ratio of
nonperforming
assets, restructured
loans & accruing
loans past due 90
days or more to
total assets 2.0% 2.3% 1.9% 2.2% 2.5%
Ratio of
nonperforming assets
to total loans and
OREO 1.7% 1.5% 1.8% 2.1% 2.9%
Ratio of
nonperforming
assets, restructured
loans, and accruing
loans past due 90
days or more to
total loans and OREO 2.9% 3.3% 2.7% 3.1% 3.7%
Ratio of allowance
for loan losses to
nonaccrual loans,
restructured loans
and accruing loans
past due 90 days or
more 70.8% 65.3% 79.9% 76.5% 75.8%
Ratio of nonaccrual
loans, restructured
loans and accruing
loans past due 90
days or more to
shareholders' equity
and allowance for
loan losses 21.2% 23.6% 19.4% 20.8% 29.3%
17
OTHER REAL ESTATE OWNED
Other Real Estate Owned (OREO) expense was $54,000 for the six month period
ended June 30, 1997 as compared to $66,000 for the six months ended June 30,
1996. OREO expense was $17,000 for the three month period ended June 30, 1997 as
compared to $20,000 for the three months ended June 30, 1996. These expenses
reflect losses on sales and writedowns on OREO properties and associated direct
holding costs, such as property taxes, insurance and utilities. OREO holding
costs were $50,000 and $44,000 for the six month periods ended June 30, 1997 and
1996, respectively. For the three month period ended June 30, 1997, holding
costs were $25,000 as compared to $19,000 for the same 1996 period.
The OREO balance as of June 30, 1997 was $513,000 and was comprised of 9
properties. The OREO portfolio consists of 2 commercial properties which
constitute 15% of the total OREO portfolio, 5 residential properties, including
multifamily homes, representing 80% of the total OREO portfolio, and 2 parcels
of land comprising the remaining 5% of the portfolio.
The following table reflects OREO activity for the last five quarterly periods.
OTHER REAL ESTATE OWNED
QUARTERLY ANALYSIS
(dollars in thousands)
QUARTER ENDED
DESCRIPTION 06/30/97 03/31/97 12/31/96 09/30/96 06/30/96
- --------------------------------------------------------------------
Beginning book $ 588 $ 558 $ 956 $1,673 $1,617
value
Properties added 0 42 104 1 620
Proceeds from
OREO sold (85) 0 (480) (722) (563)
Gains(losses) on
properties sold 8 0 (22) 4 84
Other activity 2
Property
writedowns 0 (12) 0 0 (85)
=================================================
Ending book value $ 513 $ 588 $ 558 $ 956 $1,673
=================================================
18
OPERATING EXPENSES
Operating expenses increased $761,000, or 14%, from $5,596,000 for the six
months ending June 30, 1996 to $6,357,000 for the same 1997 period. Salary and
employee benefits, occupancy, advertising and promotion and office stationery
and supplies were primarily responsible for this increase in operating expenses.
Salary and employee benefits increased $469,000, or 17%, from $2,811,000 for the
first six months of 1996 to $3,280,000 for the same 1997 period. This increase
can be primarily attributed to additional staffing requirements to maintain
three new branch locations which were opened during 1996 and early 1997, one
each in Milford, Branford, and Guilford. The Company's full time equivalent
positions as of June 30, 1996 were 143 as compared to 149 as of June 30, 1997.
Occupancy expense also increased, from $673,000 for the first six months of 1996
to $789,000 for the same 1997 period. Advertising expense and office stationery
supplies expense increased $120,000 from $385,000 for the first six months of
1996 to $505,000 for the first six months of 1997. As with salary and employee
benefits, these increases can be attributed to the new branch locations.
As a result of lower FDIC deposit insurance premiums, insurance expense
decreased $95,000 from $215,000 for the first six months of 1996 to $120,000 for
the same 1997 period.
Operating expenses increased $453,000, or 16%, from $2,866,000 for the three
month period ending June 30, 1996 to $3,319,000 for the same 1997 period. The
reasons for this increase are substantially similar to those outlined in the
comparison of the first six month periods of 1996 and 1997.
PROVISION(BENEFIT) FOR INCOME TAXES
During the first six months of 1997, the Company recognized an income tax
expense of $641,000 as compared with the recognition of an income tax benefit of
$461,000 for the same period in 1996. Because of improved operating performance
and anticipation of continued future profitability, the Company had recorded
income tax benefits during 1996 to reduce its valuation allowance on deferred
tax assets. The Company has since returned to a fully taxable reporting basis.
19
Gross deferred tax assets were approximately $11.2 million as of June 30, 1997.
A valuation allowance of $2.2 million was established for a portion of the
deferred tax assets, principally state net operating loss carryforwards which
may expire before utilization. The net deferred tax assets, after valuation
allowance, were $9 million as of June 30, 1997 and are included in other assets
in the financial statements. The level of the valuation allowance is
management's best judgment regarding the amount and timing of future taxable
income and established reversal patterns of temporary differences.
As a result of the Company's net operating losses in prior years, it has Federal
net operating loss carryforwards of approximately $20 million (expiring 2010),
and State net operating loss carryforwarsds of $21 million (expiring 2000), as
of December 31, 1996. Such net operating loss carryforwards, except for a
portion of the State net operating loss carryforwards which may expire before
utilization, can be used to offset future taxable income based on management's
estimate of the amount of taxable income to be generated in future periods.
CAPITAL ADEQUACY
The Company and the Bank are subject to the capital adequacy rules of several
regulators. Effective December 19, 1992, each federal banking agency issued
final rules to carry out the "prompt corrective action" provisions of the
Federal Deposit Insurance Corporation Improvement Act of 1991 (the "Improvement
Act"). The regulations adopted, among other things, defined capital measures and
capital thresholds for each of the five capital categories established in the
Improvement Act and established a uniform schedule for the filing of capital
restoration plans by undercapitalized institutions. The following table
identifies generally the capital measures and thresholds defined under the FDIC
and Federal Reserve Board rules.
Total Tier 1 Tier 1
Risk-Based Risk-Based Leverage
Ratio Ratio Ratio
Well Capitalized 10% or 6% or 5% or above
above & above &
Adequately Capitalized 8% or 4% or 4% or above
above & above &
Undercapitalized Under 8% Under 4% Under 4%
Significantly
Undercapitalized Under 6% or Under 3% or Under 3%
Critically Undercapitalized A ratio of tangible
equity to total assets
equal to or under 2%
20
To fall within the well capitalized or adequately capitalized category, the
financial institution must meet the requirements of all three capital
measurements. Undercapitalized and significantly undercapitalized institutions
will be categorized as such if the institution falls within any of those three
capital measurements. The risk-based capital guidelines establish a measurement
of capital adequacy by relating a banking organization's capital to its
financial risks, both on- and off-balance sheet. As of June 30, 1997, December
31, 1996 and June 30, 1996, the Company's total risk-based capital ratio was
9.80%, 9.56% and 9.72%, respectively. The second capital measure is the Tier 1
risk-based ratio, which includes only core capital as it measures the
relationship to risk-weighted assets. As of June 30, 1997, December 31, 1996 and
June 30, 1996, the Company's Tier 1 risk-based ratio was 8.54%, 8.3%, and 8.46%,
respectively. The third capital adequacy measure is the Tier 1 (or core)
leverage capital (using the same definition of capital as used in the risk-based
guidelines) to average total assets. The Company's Tier 1 leverage ratio was
6.07%, 5.75%, and 5.76% as of June 30, 1997, December 31, 1996 and June 30,
1996, respectively. As of June 30, 1997, based on the above criteria, the
Company falls within the adequately capitalized category. The Bank also falls
within the adequately capitalized category.
At the conclusion of its regulatory examination, the FDIC, based on the Bank's
improved overall financial condition, has removed the Memorandum of
Understanding. See "Regulatory Matters" for further discussion.
The Improvement Act also requires each federal banking agency to revise its
risk-based capital standards for insured institutions to ensure that those
standards take adequate account of interest rate risk, concentration of credit
risk, and risks of nontraditional activities and reflect the actual performance
and expected risk of loss on multi-family residential loans. While the FDIC has
published proposed regulations for the purpose of amending its risk-based
capital standards, the Company cannot predict what may be required under any
final regulations that may be adopted. Such regulations could, however, further
increase the regulatory capital requirements which are applicable to the Company
and the Bank.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The liquidity process is monitored by the Company's Asset Liability Committee
("ALCO"), which meets regularly to implement its asset/liability and funds
management policy. ALCO's role is to evaluate liquidity and interest rate risk
and their impact on earnings. The Committee developed a reporting system that
integrates the current interest rate environment of the national
21
and local economy with the maturities and the repricing schedules of both
the assets and liabilities of the Company. The objective of ALCO is to manage
the Company's assets and liabilities to provide an optimum and stable net
interest margin and to facilitate a constant level of net interest income.
The primary focus of the Company's liquidity management is to match cash inflows
and outflows with funds provided by the Company's market for deposits and loans.
The Company's objective is to maintain adequate cash which is invested in
federal funds. During the first six months of 1997, the average balance of
federal funds sold was $2,093,000. In the event the Company needs to borrow cash
to manage its overnight position or short-term position, the Company can borrow
approximately $10 million, as of June 30, 1997, on an overnight basis from the
Federal Home Loan Bank of Boston ("FHLBB") and has access to a $1,000,000
federal funds line of credit with a commercial correspondent bank. As of June
30, 1997, the Company had no outstanding overnight borrowings at the FHLBB. In
addition, the Company has access to $30,000,000 in short-term funds via reverse
repurchase agreements with a brokerage firm. The Company also has the ability to
borrow term advances (from one week to twenty years) from the FHLBB. Its total
advance line, including overnight borrowings from the FHLBB, is approximately
$22,300,000, of which $12,489,000 was outstanding as of June 30, 1997. In order
to utilize additional borrowing capacity from the FHLBB, additional shares of
FHLBB capital stock would need to be purchased. The Company's investment
portfolio also provides a secondary source of liquidity.
At June 30, 1997, the Company's liquidity ratio, as defined by FDIC criteria,
was 25.4% compared to 27.0% and 29.1% as of December 31, 1996 and June 30, 1996,
respectively. The liquidity ratio is defined as the total of net cash,
short-term investments and other marketable assets, divided by total net
deposits and short-term liabilities. Management believes that its liquidity
position is adequate as of June 30, 1997.
The Company generated a negative aggregate cash flow of $444,000 for the six
months ended June 30, 1997, as compared to a positive aggregate cash flow of
$2,375,000 for the same 1996 period. The aggregate cash flows provided by
operating activities were relatively unchanged and were $2,129,000 and
$2,124,000 for the six months ending June 30, 1997 and June 30, 1996,
respectively.
During the first six months of 1997, net cash of $8,584,000 was provided by
financing activities as compared to $11,129,000 for the same 1996 period. The
decrease in cash used by financing activities in 1997 is primarily due to a net
increase in demand, NOW, money market and savings accounts offset by a decrease
in federal funds purchased and securities sold under repurchase agreements.
22
Net cash provided by investing activities was $11,157,000 for the first six
months of 1997 compared to $10,879,000 for the same 1996 period. This slight
increase in cash as a result of investing activities was due primarily to an
overall reduction in both maturities and purchases of available for sale
securities.
The table below compares rate sensitive assets and rate sensitive liabilities
according to when they will mature and/or reprice after June 30, 1997. The
comparison is expressed as a rate sensitivity gap (i.e., interest rate sensitive
assets less interest rate sensitive liabilities) and an interest rate
sensitivity gap ratio (i.e., the rate sensitivity gap as a percentage of rate
sensitive assets). These measures are shown both for individual periods and
cumulatively. In an increasing rate environment, asset sensitivity (i.e., a
positive gap) enhances earnings potential, whereas liability sensitivity (i.e.,
a negative gap) negatively impacts earnings. The opposite results occur in a
declining rate environment. It should be noted that the table does not
necessarily indicate the impact of general interest rate movements on net
interest margin since the Company's repricing of different assets and
liabilities is also influenced by competitive pressures and the needs of the
Company's customers.
As of June 30, 1997 the Company has a positive cumulative gap through the one
year horizon. This results from approximately 44% of the Company's loan
portfolio maturing or repricing within one year. However, the Company becomes
liability sensitive beyond one year, primarily due to its demand and savings
accounts, which are considered relatively stable and not easily influenced by
changes in interest rates. Cumulatively through one year, the Company has a
positive gap position of $13,911,000, representing a positive 5% cumulative gap
ratio.
ALCO manages the gap position on an ongoing basis according to its assessment of
the interest rate outlook and other factors in order to assure that interest
rate risk does not exceed a 10% change in net interest income for a one year
period. As the Company increases its total assets, the overall business plan
provides for matching assets and liabilities to minimize interest rate and
liquidity risk. If interest rates were to increase immediately by 200 basis
points, the negative impact on the Company would be within ALCO's tolerance
level.
23
Interest Rate Sensitivity Table
(dollars in thousands)
Months Months Over
June 30, 1997 Month 1 Month 2 Month 3 4-6 7-12 1 Year Total
- ----------------------------------------------------------------------------
Rate
Sensitive
Assets:
Loans (1) $69,163 $6,909 $3,425 $9,421 $16,123 $137,982 $243,023
Investments 13,762 2,073 4,425 6,436 13,309 32,907 72,912
-------------------------------------------------------------
Total Rate
Sensitive
Assets 82,925 8,982 7,850 15,857 29,432 170,889 315,935
Rate Sensitive
Liabilities:
Time deposits 10,100 6,951 6,848 26,835 39,595 44,475 134,804
Other
deposits (2) 12,681 12 2,852 1,928 23,333 148,560 189,366
-------------------------------------------------------------
Total Rate
Sensitive
Liabilities 22,781 6,963 9,700 28,763 62,928 193,035 324,170
Net Gap 60,144 2,019 (1,850)(12,906) (33,496) (22,146) (8,235)
-------------------------------------------------------------
Cumulative Gap 60,144 62,163 60,313 47,407 13,911 (8,235) (8,235)
-------------------------------------------------------------
Net Gap as %
of total rate
sensitive assets 19% 1% -1% -4% -11% -7% -3%
Cumulative
Gap as % of
total rate
sensitive
assets 19% 20% 19% 15% 4% -3% -3%
(1) Excludes nonaccrual loans
(2) Includes borrowings
REGULATORY MATTERS
The Federal Deposit Insurance Corporation ("FDIC"), after completion of a joint
examination of the Bank with the Connecticut Banking Department as of December
31, 1995, has removed its Memorandum of Understanding (the "Memorandum"), issued
on May 16, 1995. The Memorandum required, among other things, that the Bank
achieve certain Tier 1 leverage and total risk-based capital levels. The Bank
was required to have a Tier 1 leverage capital ratio of at least 5% by June 30,
1996 and 6% by June 30, 1997. Also, the Bank was required to maintain a total
risk-based capital ratio of at least 8% throughout the existence of the
Memorandum. As of September 30, 1995, the Bank met the first capital target
identified in the Memorandum, as its Tier 1 leverage capital and total
risk-based capital ratios were 5.0% and 8.8%, respectively. The Company has
achieved the second Tier 1 leverage capital ratio requirement and as of June 30,
1997, the Bank's Tier 1 leverage capital and total risk-based capital ratios are
6.1% and 9.8%, respectively. In
24
removing the Memorandum, the FDIC and the Company have agreed that the Company
will continue efforts toward meeting the capital goals outlined in the
Memorandum, notify the State regulators prior to paying dividends, and establish
a goal for the end of 1996 that classified assets will be equal to 40% of total
capital and eligible reserves; and, at the end of 1997, that this ratio will be
30%.
25
PART II - OTHER INFORMATION
ITEMS 1-3 Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 29, 1997, BNH Bancshares, Inc. held its
Annual Meeting of Shareholders. At the meeting, the
Company's shareholders were asked to vote upon the
following proposals:
Proposal 1 the election of directors;
Proposal 2 to approve an amendment increasing the aggregate
number of shares of the common stock authorized for
issuance under the BNH Bancshares, Inc. 1992 Stock
Incentive Plan;
Proposal 3 to ratify the appointment of Coopers & Lybrand
L.L.P. as the independent accountants to audit the
consolidated financial statements of the Company for
the calendar year 1997.
The following is the name of each director elected at the meeting,
which includes all directors whose term as director will continue
after such Annual Meeting, and a description of the number of votes
cast for, against or withheld, abstentions and broker non-votes as
to the election of each nominee for director:
Proposal 1 Votes Broker
Election of Votes For Against Abstentions Non-Votes
Directors or
Withheld
Stephen P. Ahern 3,015,533 31,886 0 0
Martin R. Anastasio 3,024,668 22,731 0 0
Edward M. Crowley 2,984,849 62,550 0 0
James J. Cullen 3,016,182 31,217 0 0
George M. Dermer 3,014,664 32,735 0 0
Thomas M. Donegan 3,019,308 28,091 0 0
Theodore F. Hogan, Jr. 3,034,558 12,841 0 0
Jean G. Lamont 3,014,908 32,491 0 0
Lawrence M. Liebman 2,913,610 133,789 0 0
F. Patrick McFadden, Jr. 3,016,783 30,616 0 0
Carl M. Porto 3,016,808 30,591 0 0
Vincent A. Romei 3,016,171 31,228 0 0
Stanley Scholsohn 3,034,471 12,928 0 0
Cheever Tyler 3,018,088 29,311 0 0
Proposal 2 2,603,047 183,966 29,044 231,342
Proposal 3 3,009,818 30,079 7,502 0
26
ITEM 5 OTHER INFORMATION - None.
ITEM 6 Exhibits and Reports on Form 8-K:
(a) Exhibits - Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - A Current Report on Form 8-K, dated April 8,
1997, was filed on April 21, 1997. The filing reported on Item 5,
"Other Events."
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 12, 1997 /s/ F. Patrick McFadden, Jr.
---------------------------------
F. Patrick McFadden, Jr.
President/Chief Executive Officer
Date: August 12, 1997 /s/ John F. Trentacosta
---------------------------------
John F. Trentacosta
Executive Vice President/Chief
Financial Officer