SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
ALLIANCE BANCORP OF NEW ENGLAND, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1495617
(State of Incorporation of Organization) (I.R.S. Employer
Identification No.)
348 Hartford Turnpike, Vernon, CT 06066
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (860) 875-2500
N/A
(Former name or former address, if changed since last report.)
Item 5. Other Events.
Quarterly Report on F.D.I.C. Form F-4 of Tolland Bank for the
fiscal quarter ended September 30, 1997.
The following exhibit is filed as a part of this Registration
Statement:
Exhibit Number Description
99.1 Quarterly Report on F.D.I.C. Form F-4 of
Tolland Bank for the fiscal quarter ended
September 30, 1997.
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 hereunto duly authorized.
ALLIANCE BANCORP OF NEW ENGLAND, INC.
By: /s/David H. Gonci
Vice President, Chief Financial
Officer & Treasurer
Dated December 5, 1997
Exhibit 99.1
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997 FDIC Certificate No.
18205-2
TOLLAND BANK
(Exact name of Registrant as specified in its charter)
Connecticut 06-0523950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Olde Tolland Common, P.O. Box 156, Tolland, Connecticut 06084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860)875-2500
Former name, former address and former fiscal year, if changed
since last report. Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for 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 the issuer's classof
common stock, as of the latest practicable date.
Class Outstanding at November 11, 1997
Common Stock (par value $1.00) 1,626,960 shares
TOLLAND BANK
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
Consolidated Statements of Financial Condition as of
September 30, 1997, December 31, 1996, and September
30, 1996.
Consolidated Statements of Income for the Three Months
and Nine Months Ended September 30, 1997 and 1996.
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996.
Consolidated Statements of Changes in Equity Capital
for the Nine Months Ended September 30, 1997 and 1996.
Notes to the Consolidated Financial Statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
ALLIANCE BANCORP OF NEW ENGLAND, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
[CAPTION]
September December September
Assets 30, 31, 30,
1997 1996 1996
Cash and due from banks $ 6,584 $ 7,463 $ 5,823
Short-term investments 11,651 5,100 6,615
Total cash and cash
equivalents 18,235 12,563 12,438
Securities available for sale 47,542 45,386 37,341
Securities held to maturity 20,149 20,690 20,921
Residential mortgage loans 40,329 41,669 41,549
Commercial mortgage loans 42,687 40,494 41,028
Consumer loans 27,221 26,118 24,607
Other commercial loans 15,654 15,287 15,421
Government guaranteed loans 25,181 24,263 24,779
Total loans 151,072 147,831 147,384
Less: Allowance for loan losses (3,020) (2,850) (2,750)
Net loans 148,052 144,981 144,634
Premises and equipment, net 4,161 4,416 4,473
Foreclosed assets, net 545 980 1,399
Other assets 3,234 3,266 6,849
Total assets $ 241,918 $ 232,282 $ 228,055
Liabilities and Equity
Demand deposits $ 19,766 $ 19,673 $ 17,991
NOW deposits 20,760 20,522 19,070
Money market deposits 11,933 6,469 5,369
Savings deposits 35,126 38,102 37,501
Time deposits 130,676 120,842 127,829
Total deposits 218,261 205,608 207,760
Borrowings 4,795 10,406 5,286
Other liabilities 1,054 679 627
Total liabilities 224,110 216,693 213,673
Common stock (Par value $.01) 16 12 12
Additional paid-in capital 11,018 10,079 9,941
Net unrealized gain (loss) on
securities 179 (233) (917)
Retained earnings 6,595 5,731 5,346
Total shareholders' equity 17,808 15,589 14,382
Total liabilities and
shareholders' equity $ 241,918 $ 232,282 $ 228,055
Note: Alliance Bancorp of New England, Inc. is the holding
company for Tolland Bank. Common stock par value has been
restated for all periods from $1.00 per share to $.01 per share.
ALLIANCE BANCORP OF NEW ENGLAND, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands except share data)
[CAPTION]
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Interest on loans $ 3,065 $ 3,088 $ 9,004 $ 9,283
Interest on other
earning assets 1,139 983 3,411 2,583
Total interest
income 4,204 4,071 12,415 11,866
Interest on deposits 2,163 2,022 6,262 5,843
Interest on
borrowings 61 106 205 342
Total interest
expense 2,224 2,128 6,467 6,185
Net interest income 1,980 1,943 5,948 5,681
Provision for loan
losses 379 493 516 813
Net interest income 1,601 1,450 5,432 4,868
after provision
Service charges and
fees 289 269 834 838
Gain (loss) on
securities 430 0 436 (41)
Gain (loss) on
assets (26) 334 (66) 338
Total non-interest
income 693 603 1,204 1,135
Compensation and
benefits 767 781 2,442 2,409
Occupancy 138 136 435 453
Equipment & data
processing 233 186 706 583
Other expense 446 467 1,166 1,207
Total non-interest
expense 1,584 1,570 4,749 4,652
Income before income
taxes 710 483 1,887 1,351
Income tax expense 187 109 434 333
Net income $ 523 $ 374 $ 1,453 $ 1,018
Net income per
share $ 0.31 $ 0.23 $ 0.89 $ 0.62
Note: Alliance Bancorp of New England, Inc. is the holding
company for Tolland Bank. Per share values have been restated
for all periods due to a four-for-three common stock split
effected as a 33.33% stock dividend declared on June 17, 1997.
ALLIANCE BANCORP OF NEW ENGLAND, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
[CAPTION]
Nine Months Ended
September 30,
1997 1996
Operating activities:
Net income $1,453 $1,018
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 516 813
Provision for depreciation
and amortization 412 390
Net investment security (gains) losses 26 41
Net asset (gains) losses (430) (338)
Increase (decrease) in other
liabilities 375 155
(Increase) decrease in other assets (26) (2,485)
Net cash provided by operating
activities 2,326 (406)
Investing activities:
Proceeds from sales and maturities
of investment securities 13,263 6,584
Purchases of investment securities (14,466) (18,864)
Net (increase) decrease in loans and
foreclosed assets (2,806) 6,091
Purchases of property and equipment (41) (133)
Net cash used by investing activities (4,050) (6,322)
Financing activities:
Net increase (decrease) in
interest bearing deposits 12,560 14,011
Net increase (decrease) in
demand deposits 93 311
Net increase (decrease) in
borrowings (5,611) (1,599)
Proceeds from issuance of
common stock 559 --
Cash dividends paid (205) --
Net cash provided by financing
activities 7,396 12,723
Increase (decrease) in cash and
cash equivalents 5,672 5,995
Cash and cash equivalents at
beginning of the period 12,563 6,443
Cash and cash equivalents at
end of the period $18,235 $12,438
Note: Alliance Bancorp of New England, Inc. is the successor
holding company for Tolland Bank as a result of a reorganization
discussed more fully in the Notes to Financial Statements underthe heading
"Holding Company Formation."
ALLIANCE BANCORP OF NEW ENGLAND, INC.
Consolidated Statements of Changes in Equity Capital (Unaudited)
(in thousands)
[CAPTION]
Nine Months Ended
September 30,
1997 1996
Shareholders' Equity at Beginning of Period $15,589 $ 13,281
Net Income 1,453 1,018
Cash Dividend Declared (205) --
Proceeds from Exercise of Options 559 --
(Increase)/Decrease in Unrealized Loss
on Investment Securities 412 83
Shareholders' Equity at End of Period $17,808 $ 14,382
Note: Alliance Bancorp of New England, Inc. is the successor
holding company for Tolland Bank as a result of a reorganization
discussed more fully in the Notes to Financial Statements under
the heading "Holding Company Formation."
TOLLAND BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Holding Company Formation
On October 3, 1997, shareholders of Tolland Bank became
shareholders of Alliance Bancorp of New England, Inc. on a share-
for-share basis due to the culmination of a reorganization plan
approved at the 1997 annual meeting. All existing Tolland Bank
shares are treated the same as Alliance shares, with no need for
shareholders to exchange certificates. The consolidated
financial statements of Tolland Bank as of September 30, 1997
have been restated as the consolidated financial statements of
Alliance Bancorp of New England, Inc. The only financial
statement accounts affected by the restatement were Common Stock
and Additional Paid-in-Capital. Common stock par value has
been restated for all periods from $1.00 per share to $.01 per
share. A reconciliation of these accounts is as follows:
[CAPTION]
(in $000) September December September
30, 31, 30,
1997 1996 1996
Common Stock
Tolland Bank (Par value $1.00) $ 1,627 $ 1,173 $ 1,158
Adjusting Entry (1,611) (1,161) (1,146)
Alliance Bancorp (Par value
$0.01) $ 16 $ 12 $ 12
Additional Paid-In Capital
Tolland Bank $ 9,407 $ 8,918 $ 8,795
Adjusting Entry 1,611 1,161 1,146
Alliance Bancorp $11,018 $10,079 $ 9,941
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities
In June, 1996, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards, Accounting
for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (SFAS 125). SFAS 125 is effective
for servicing of financial assets and extinguishments of
liabilities beginning January 1, 1997. The transfer and
collateral provisions of SFAS 125 are effective for transfers
occuring after December 31, 1997. The provisions of the
statement are to be applied prospectively. This Statement
provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial-components approach
that focus on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings.
The adoption of SFAS 125 did not have a material impact on the
Company's financial position, results of operations, or liquidity,
and no material impact is expected for those provisions effective
for transfers occuring after December 31, 1997.
Stock Split
In June, 1997, the Company declared a four-for-three common
stock split, which was effected as a stock dividend paid on July
17, 1997. The financial statements as of June 30, 1997 include
the effects of this split, and all items related to outstanding
shares, share prices, and amounts per share have been restated
for the effect of this split for all periods in the statements.
The stock dividend was recorded based on the $1 par value of the
common stock. After the stock split, common stock par value
totaled $1.560 million, an increase of $387 thousand from
year-end 1996.
Earnings Per Share
In February, 1997, the Financial Accounting Standards board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share." This statement provides
new accounting and reporting standards for earnings per share.
It will replace the currently used primary and fully diluted
earnings per share with basic and diluted earnings per share.
Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period.
Diluted earnings per share represents the potential dilution
that could occur if all stock options and other stock-based
awards were exercised and converted into common stock if their
effect is dilutive. A reconciliation of the numerator and
denominator used in the basic earnings per share computation to
the diluted earnings per share computation's numerator and
denominator is also required. This statement is effective for
the Company's December 31, 1997 financial statements (earlier
implementation is not permitted) and requires that prior period
earnings per share be restated. The adoption of SFAS No. 128
will not materially impact the Company's earnings per share
calculation.
Other Matters
The foregoing financial statements are unaudited. However, in
the opinion of Management, all material adjustments, consisting
primarily of normal recurring accruals, necessary for a fair
presentation of the financial statements have been included.
The Company is required to make certain estimates and assumptions
in preparing these statements. The most material estimates are
those necessary in determining the allowance for loan losses,
the valuation of foreclosed assets, the valuation of investment
securities available for sale, and the valuation allowance
associated with the net deferred tax asset. Operating results
for any interim period are not necessarily indicative of results
for any other interim period or for the entire year. Unless
otherwise noted, all dollar amounts presented in the financial
statements are rounded to the nearest thousand dollars, except
per share data. Certain prior period amounts have been
reclassified to conform with current financial statement
presentation. Management's Discussion and Analysis of Financial
Condition and Results of Operations accompany these financial
statements. Additional information and financial disclosures are
contained in the Company's 1996 Annual Report. During the
second quarter of 1997, the Company reclassified residential
mortgages held for sale from total other assets and they are now
included with total residential mortgage loans.
TOLLAND BANK - ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Management's Discussion and Analysis of Results of Operations
and Financial Condition is based on the Company's financial
statements in Item 1. These statements should be read along with
Management's Discussion. Tolland Bank is a Connecticut chartered
savings bank serving Tolland County and the surrounding
communities. Tolland Bank is the subsidiary of Alliance Bancorp
of New England, Inc. (AMEX: ANE).
[CAPTION]
SELECTED FINANCIAL DATA As of and for As of and for
the Three Months the Nine Months
Ended September Ended September
30, 30,
OPERATING DATA (in thousands): 1997 1996 1997 1996
Net interest income $1,980 $1,943 $5,948 $5,681
Provision for loan losses 379 493 516 813
Service charge and fee income 289 269 834 838
Net gain(loss) on securities 430 0 436 (41)
Net gain(loss) on assets (26) 334 (66) 338
Non-interest expense 1,584 1,570 4,749 4,652
Income before income taxes 710 483 1,887 1,351
Income tax expense 187 109 434 333
Net income $523 $374 $1,453 $1,018
BALANCE SHEET DATA (in millions):
Total assets $241.9 $228.1 $241.9 $228.1
Total loans 151.1 147.1 151.1 147.1
Other earning assets 79.3 69.5 79.3 69.5
Deposits 218.3 207.8 218.3 207.8
Borrowings 4.8 5.3 4.8 5.3
Shareholders' equity 17.8 14.4 17.8 14.4
Net interest spread (fully 3.23% 3.39% 3.35% 3.30%
taxable equivalent).
Net interest margin (fully 3.74% 3.82% 3.84% 3.73%
taxable equivalent)
Return on average assets 0.88% 0.66% 0.84% 0.62%
Return on average equity 12.18% 10.71% 11.79% 9.65%
Equity % total assets (period 7.36% 6.31% 7.36% 6.31%
end)
PER SHARE DATA (in dollars):
Net income (fully diluted) $0.31 $0.23 $0.89 $0.62
Cash dividends declared 0.05 -- 0.15 --
Book Value (period-end) 10.95 9.32 10.95 9.32
Common stock price:
High 18.25 9.29 18.25 9.29
Low 13.03 7.22 8.63 6.94
Close 16.75 8.81 16.75 8.81
COMMON SHARES OUTSTANDING
(in thousands):
Period-end 1,627 1,158 1,627 1,158
Average fully diluted 1,697 1,640 1,640 1,632
SUMMARY
On October 3, 1997, shareholders of Tolland Bank became
shareholders of Alliance Bancorp of New England, Inc. on a share-
for-share basis due to the culmination of a reorganization plan
approved at the 1997 annual meeting. All existing Tolland Bank
shares are treated the same as Alliance shares, with no need for
shareholders to exchange certificates. The consolidated financial statements
of Tolland Bank as of September 30, 1997 have been restated as the
consolidated financial statements of Alliance Bancorp of New England, Inc.
This is described in more detail in the Notes to Consolidated Financial
Statements.
Alliance Bancorp of New England, Inc., the holding Company for
Tolland Bank, reported a 40% increase in earnings for the third
quarter ended September 30, 1997 to $523 thousand compared to
$374 thousand a year earlier ($.31 vs. $.23 on a per share
basis). Nine month earnings increased by 43% to $1.453 million
in 1997 from $1.018 million in 1996 ($.89 vs. $.62 on a per
share basis). Alliance Directors also declared a regular
quarterly cash dividend of five cents per share payable on
November 25, 1997 to shareholders of record at the close of
business on November 11, 1997.
President Joseph H. Rossi stated, "We have enjoyed strong loan
and deposit growth in this past quarter, and market response has
been good to new home equity loan and money market account offerings. We
have also introduced new electronic business banking services
which are keeping us at the leading edge of
technological enhancements. With the completion of our holding
company formation, we are positioned to take advantage of further
growth opportunities to maintain our forward momentum."
Improved earnings are primarily attributable to higher interest
income due to growth in earning assets and an improvement in the
net interest margin for the year-to-date. Earnings also
benefited from a reduction in the loan loss provision and from an
increase in non-interest income. The decrease in the loan loss
provision is due to the Company's progress in reducing problem
assets in the last several quarters. The increase in
non-interest income is due to gains on the sale of investment
securities. Strict containment of operating costs has held total
nine month non-interest expense growth to 2% over 1996.
Since a year ago, the allowance for loan losses has been
increased by 10% to $3.02 million or 2.0% of total loans at
September 30, 1997. The reserve now represents approximately
102% of non-accruing loans. The effect of this increase on the
loan loss provision was offset by the securities gains noted
above.
At September 30, Alliance had total assets of $242 million, 6%
higher than a year earlier. Total deposits were $218 million, a
5% increase over the same period.
Shareholders' equity increased 24% from a year earlier to $17.8
million, representing a book value per share of $10.95. At
period-end, the equity to asset ratio stood at 7.36%, up from
6.31% a year earlier. The Company's capital remains in excess of
all regulatory requirements. On July 17, a 33.33% stock dividend
was paid to shareholders, providing one additional share for each
three shares held, as a result of a four-for-three stock split.
Prior period earnings and book value per share have been restated
for this change.
RESULTS OF OPERATIONS
Net Interest Income: Net interest income increased by $37
thousand (1.9%) for the third quarter and by $267 thousand (4.7%)
for the first nine months of 1997 compared to the comparable
periods of 1996. This growth is primarily due to growth in
average year-to-date earning assets, which increased by 6.1% in
1997 compared to 1996, and an improvement in the net interest
margin (fully taxable equivalent) to 3.84% for the year-to-date
in 1997 vs. 3.73% in 1996. The net interest margin declined to
3.74% in the third quarter of 1997 from 3.90% for the first six
months of the year. This was primarily due to a reduction in
interest and dividend income related to securities sales during
the quarter.
The fully taxable equivalent yield on earning assets decreased to 7.66%
in the third quarter of 1996 due to the above-mentioned securities sales.
The cost of interest bearing liabilities increased to 4.43% in the
third quarter of 1997 from 4.39% in the same quarter of the prior
year. This is primarily due to growth in time deposits and money
market deposits, which pay a higher rate of interest.
The Company has maintained an asset-sensitive one year interest
rate profile for the past two years to minimize the risk to
earnings of an increase in interest rates from the comparatively
low levels of the past few years. The positive one year gap
position benefited the Company in 1997 due to the .25% increase
in the prime rate in the first quarter. The one year interest
rate gap increased to $34 million at September 30, 1997 (15% of
total earning assets), compared to $16 million at year-end 1996
and to $7 million at September 30, 1996. The one year gap at the
most recent quarter-end was higher than the Company customarily
targets. In part, this is due to a time deposit promotion in
1997 which emphasized deposit maturities of 24 months and higher.
Additionally, the Company reports its callable agency security
maturities based on market estimates of remaining lives, and
most of these securities changed to under one year due to a
decrease in rates during 1997. The Company's cumulative two year
gap position at the most recent quarter-end was ($18 million),
which is a liability sensitive position measuring 8% of total
earning assets.
Provision for Loan Losses: The provision is made to maintain the
allowance for loan losses at a level deemed adequate by
management. The allowance is discussed in Management's
Discussion of Financial Condition. The provision for loan losses
declined by $114 thousand (23.1%) for the third quarter and by
$297 thousand (36.5%) for the first nine months of 1997 compared
to the same periods of 1996.
Non-Interest Income: Total non-interest income increased by $90
thousand (14.9%) in the third quarter and by $69 thousand (6.1%)
in the first nine months of 1997 compared to the same periods of
1996. In both years, the Company had significant gains related
to asset dispositions during the third quarter. In the third
quarter of 1997, the Company recorded $430 thousand in net gains
on securities due to gains on the sale of investment securities.
In the third quarter of 1996, the Company recorded a $334
thousand gain on the sale of assets, primarily due to gains on
the sale of foreclosed assets. Total service charges and fees
increased by $20 thousand (7.4%) in the third quarter of 1997
compared to the same quarter of 1996. For the first nine months,
total service charges and fees decreased by $4 thousand (0.5%) in
1997 compared to the same period in 1996.
Non-Interest Expense: Non-interest expense increased by $14
thousand (0.9%) in the third quarter and by $97 thousand (2.1%)
in the first nine months of 1997 compared to the same periods in
1996. Due to strict containment of expenses, year-to-date salary
expense growth was limited to $33 thousand (1.4%). Salary expense
has also benefited from a $141 thousand increase in
deferred salaries related to loan originations activities. Also,
occupancy expense and all other expenses have decreased in 1997
compared to 1996. This has included a $231 thousand reduction
in problem asset related expenses primarily due to lower problem
asset levels and to recoveries of previous collections charges.
Equipment and data processing expense has increased due to a $114
thousand increase in data processing expense related primarily to
the utilization of certain credits in 1996.
Income Tax Expense: The ratio of the Company's income tax expense
to income before income taxes was approximately 26% in the third
quarter of 1997 and 23% for the third quarter of 1996. For the
first nine months, this ratio was approximately 23% and 25% in
1997 and 1996, respectively. The effective tax rate is lower
than the combined federal and state statutory rate of
approximately 41% primarily due to growth in investments with
income subject to a lower net tax rate. Additionally, net income
tax expense in both years benefited from a reduction in the
valuation allowance for the deferred tax asset which totaled $130
thousand and $120 thousand in the first nine months of 1997 and
1996, respectively.
FINANCIAL CONDITION
Cash and Cash Equivalents: Short term investments increased at
September 30, 1997 as funds supplied from deposit growth were
being held in anticipation of further loan growth. Short term
investments normally include bank qualifying money market funds
and federal funds sold to the Federal Home Loan Bank of Boston.
Investment Securities: Total securities available for sale
increased by $2.2 million (4.8%) for the first nine months of
1997 and by $10.2 million (27.3%) for the twelve months ended
September 30, 1997. Growth in 1997 was recorded primarily in
the first quarter and consisted primarily of purchases of
callable U.S. Agency and mortgage backed debt securities rated A
or better. The net unrealized gain on investment securities
reported as a component of shareholders' equity measured $179
thousand as of September 30, 1997 due to improved capital market
prices in the third quarter; this included a $251 thousand net
unamortized transfer loss on securities held to maturity and a
$430 thousand net unrealized gain on securities available for
sale. During the third quarter of 1997, the Company restructured
a segment of the securities available for sale portfolio in
order to lengthen maturities and to realize gains on securities
expected to be called in the future. The resulting $430 thousand
total of net gains on securities provided an offset to the
increase in the provision for loan losses.
Total Loans: Total loans increased by $3.2 million (2.2%) for
the first nine months of 1997 and by $3.7 million (2.5%) for the
twelve months ended September 30, 1997. All categories of loans
except residential mortgages increased during 1997 as a result of
growth in loan originations activities. The Company's
residential mortgage loan originations consist primarily of fixed
rate mortgages which are sold to secondary market investors at
the time of loan origination.
Allowance for Loan Losses: The allowance for loan losses totaled
$3.020 million (2.00% of total loans) at September 30, 1997,
compared to $2.850 million (1.93% of total loans) at year-end
1996 and to $2.75 million (1.86% of total loans) twelve months
ago. Excluding loans and loan certificates 100% guaranteed by
U.S. Government agencies, the allowance measured 2.40% of total
regular loans at September 30, 1997. Net charge-offs against the
allowance were $346 thousand for the first nine months of 1997
(.31% of total average loans on an annualized basis), compared to
$403 thousand (.43% of total average loans on an annualized
basis) for the same period of 1996. Impaired loans totaled $3.2
million at September 30, 1997, compared to $4.7 million at
year-end 1996 and to $7.7 million a year ago. However, the
valuation allowance on impaired loans increased to $534 thousand
at the most recent quarter-end, compared to $186 thousand at
year-end 1996; there was no valuation allowance required at
September 30, 1996. The increase in the valuation allowance in
1997 is primarily due to one commercial loan relationship
totaling $1.0 million which is collateralized, but the Company's
collateral position is being challenged in a bankruptcy
proceeding. The Company has recorded $200 thousand in
write-downs on this relationship in the first nine months of
1997. Also, management made a determination to increase the
total amount of the allowance by $270 thousand during the most
recent quarter in order to improve the coverage of nonperforming
loans to 102% and in anticipation of an increase in the portion
of the allowance related to seasoned mobile home loans, which
continue to be the primary continuing source of net chargeoffs
related to consumer and residential mortgage loans.
Problem Assets: Problem assets totaled $4.6 million at September
30, 1997, a decrease of $1.0 million (17.9%) from year-end 1996
and a decrease of $1.7 million (26.7%) from a year ago. The
components of problem assets at September 30, 1997 included $2.9
million of non-accruing loans, $1.2 million of restructured
loans, and $0.5 million of foreclosed assets.
Deposits and Borrowings: Total deposits increased by $12.6
million (6.2%) since year-end 1996 and by $10.5 million (5.1%)
over the past twelve months. This growth was primarily in time
deposits, resulting from ongoing promotions. Additionally, the
Company introduced a new money market deposit account in the
most recent quarter, adding $6.6 million in new balances since
June 30, 1997. Deposit growth has also resulted from growth in
transactions account balances (demand deposits and NOW accounts)
due to growth in total customer relationships. Borrowings have
been reduced during the last twelve months, as deposit growth has
provided a more attractive source of additional funds.
Cash Flow and Liquidity: For the year-to-date, the primary source of
funds has been deposit growth and the primary use of
funds has been the increase in total loans and in short-term
investments in anticipation of future loan bookings. Borrowings,
time deposits and money market accounts are the primary sources
of liquidity for additional balance sheet growth, and securities
available for sale and government guaranteed loan certificates
provide additional sources of potential liquidity.
Capital Resources: At the most recent quarter-end, Tier 1
Capital totaled $17.2 million and the Tier 1 Leverage Capital
Ratio measured 7.2%. The Risk Based Capital Ratio measured
13.3%. The Company's capital remains in excess of all regulatory
requirements. During 1997, the Company has declared and paid a
five cent cash dividend to common shareholders in each quarter.
Additionally, on June 17, 1997, the Company declared a
four-for-three common stock split effected as a 33.33% stock
dividend. Also, in the first nine months of 1997, the Company
received $559 thousand in proceeds from the issuance of stock
pursuant to the exercise of options previously issued under stock
option plans.
TOLLAND BANK
SIGNATURE
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.
TOLLAND BANK
(Registrant)
Date: November 14, 1997 /s/Joseph H. Rossi
President/CEO
/s/David H. Gonci
Vice President/CFO