Exhibit 13.1
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
FORM F-2
ANNUAL REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
FDIC CERTIFICATE No. 19702-5
THE GLASTONBURY BANK & TRUST COMPANY
Incorporated in the State of Connecticut
I.R.S. Employer Identification No. 06-0363160
2461 MAIN STREET
GLASTONBURY, CONNECTICUT 06033
Telephone No. (860) 633-4695
Securities Registered Under Section 12(b) of the Act:
None
Securities Registered Under Section 12 (g) of the Act:
Common Stock
(par value $2.50 per share)
1,829,920 Shares Outstanding (as of December 31, 1996)
Name of Exchange on which class is registered:
Nasdaq SmallCap Market
Indicate by check mark whether the Bank (1) has filed all reports required to be
filed by section 13 of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Bank was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES X NO
-------- --------
Aggregate Market Value of the Voting Stock as of March 3, 1997
$31,108,640
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants definitive Proxy Statement dated April 1, 1997 are
incorporated by reference into Part I (item 4) and Part III (items 9 and 10).
The 1996 Annual Report to Shareholders is incorporated by reference into Part II
(item 5,6,7,and 8) and Part IV (item 11).
Portions of the Bank's Registration Statement on Form F-1 dated April 29, 1992
are incorporated by reference into Part IV (item 11).
1
PART I
------
ITEM 1
------
BUSINESS
--------
(a) The Glastonbury Bank and Trust Company (the "Bank") was organized as a
Connecticut state-chartered commercial bank with full trust powers on
September 19, 1919. Its primary regulators are the commissioner of Banking
of the State of Connecticut and the Federal Deposit Insurance Corporation
(the "FDIC").
The Bank owns an insurance agency subsidiary, GBT Insurance Group, Inc.
(formerly The Glastonbury Company), which was organized on January 1, 1924,
pursuant to Connecticut law.
The Bank has a single class of equity securities; Common Stock, par value
$2.50 per share. There are 2,000,000 shares of Common Stock authorized by
the Bank. As of December 31, 1996, there were 1,829,920 shares of common
stock issued and outstanding, and the Bank had 567 holders of record of its
Common Stock.
(b) (1) The Bank and its subsidiary provide comprehensive deposit, loan,
investment, and insurance products and services to small and medium-
sized businesses, professionals and individuals in its primary and
secondary markets. Additionally, the Bank provides trusts services
through an affiliation with the trust division of Peoples Savings
Bank of New Britain. In 1995, the Bank agreed to sell its remaining
trust relationships to Peoples Savings Bank of New Britain
(Connecticut) and to receive compensation for referring future trust
business. The Bank will continue to maintain its trust powers under
this agreement.
The deposits of the Bank are insured by the FDIC to the maximum
extent allowed by law.
The Bank conducts business from nine branches including its Main
Office located at 2461 Main Street, Glastonbury, Connecticut, and
eight other branch facilities in the towns of Colchester (1), East
Hartford (1), Glastonbury (2), Portland (1), Rocky Hill (1), South
Glastonbury (1) and Wethersfield (1).
The Bank has defined its secondary market area to include the
following towns in Connecticut: Columbia, Cromwell, East Haddam, East
Hampton, Hebron, Lebanon, Manchester, Marlborough, Middletown,
Newington and Salem.
Individuals and businesses in the Bank's primary and secondary
markets are served by many aggressive financial institutions
(commercial banks, savings banks, savings and loan associations,
credit unions and investment and insurance firms). Many residents
work in the Greater Hartford, Greater Middletown or New
London/Norwich areas and have access to an even broader base of
banking services. There are over 15 financial institutions serving
the primary marketplace serviced by the Bank. The dominant banking
competitors in our market include: Fleet Bank, Bank of Boston,
Mechanics Savings Bank, First Federal Savings, Savings Bank of
Manchester, American Savings Bank, and Webster Bank.
The consolidation trend continued in the Bank's market area in 1996.
Following the merger of Fleet Bank of Connecticut (a subsidiary of
the Fleet Financial
2
Group, Providence, RI) and Shawmut Bank NA of Connecticut (a
subsidiary of Shawmut Corp., Boston, MA), Webster Bank (a subsidiary
of Webster Financial Corporation, Waterbury, CT) acquired Derby
Savings of Ansonia, CT, and First Union of Charlotte, NC acquired
Center Bank Waterbury, CT. In 1995, Webster Bank purchased the
Hartford area branches of Shawmut Bank, including one branch in
Glastonbury. There was one Derby Savings branch located in
Glastonbury that was merged into the one Webster branch. Webster's
entry into the Bank's market area is not expected to negatively
impact the Bank's market share. At June 30, 1996, the Bank had over a
20% deposit market share in Glastonbury.
In May 1996, the FDIC terminated the Bank's Cease and Desist Order
(the "Order"), which had been in effect since September 1993. The
termination of the Order, among other things, lowered noninterest
expenses, particularly FDIC insurance premiums, and allowed the Bank
to devote greater resources to redesigning products and enhancing
customer service.
(2) No material portion of the Bank's deposits were obtained from a
single person. The Bank and its Board of Directors are aware of a
concentration of loans (direct and indirect) as defined by FDIC
concentration guidelines. Please see Notes to Consolidated Financial
Statements, Note 4 "Loans" for a discussion regarding the issue of
concentration as it relates to loans. The Bank anticipates no losses
from such concentrations.
(3) The Bank conducts substantially the same business operations and
services as any independent commercial bank with full trust powers.
Through its nine branches and ATM (Automated Teller Machine) system,
the Bank offers the following products and services:
Consumer services: Checking accounts, savings accounts,
certificates of deposit, individual retirement accounts,
automobile loans, home equity loans, mortgage loans, student
loans, other personal loans, INVEST investment (brokerage)
services, trust services, money orders, travelers checks, welfare
check cashing services, safety deposit boxes, funds transfer
services, ATM services, point-of-sale ATM card services, notary
services, direct deposit, telephone transfer services, fax
services, electronic tax return filing, ACH origination services,
account reconciliation services and education seminars.
Commercial services: In addition to the above list, other
commercial services include: treasury tax and loan services, cash
management programs, commercial mortgages, SBA loans, equipment
loans, other business loans, SEP-IRAs plan services, night
depository services, ACH origination services, account
reconciliation services, checking account programs that meet the
criteria of IOLTA/IORETA (attorneys' client trust funds)
requirements, and merchant processing services.
GBT Insurance Group, Inc., the Bank's insurance agency subsidiary,
offers consumers and businesses a broad selection of property and
casualty insurance and is licensed to sell most other lines of
insurance such as life, disability and health insurance. In the first
quarter of 1997, the agency entered into a management agreement with
the Louis Levine Agency of Waterford, Connecticut.
3
Under the terms of the agreement, the Levine Agency will manage the
property and casualty operation of GBT Insurance Group, including
providing state-of-the-art automation, appointment of insurance
carriers, and personnel management. GBT Insurance Group expects to
offer life and health products by mid-1997 under a similar management
alliance.
To enhance the Bank's residential lending products and service, the
Bank, in November 1996, entered into an agreement with the Mortgage
Service Center of New England ("MSCNE"), a division of Chittenden
Corporation of Burlington, Vermont. MSCNE will originate, process,
and service residential 1-4 family mortgage loans on behalf of the
Bank, including FHA, VA, CHFA loans as well as other loan programs to
meet the credit needs of consumers in the Bank's market area. This
alliance with MSCNE has enabled the Bank to offer a complete array of
residential mortgage products, without the cost of developing a full-
scale residential mortgage operation.
(4) The Bank holds no patents, franchises, concessions, or licenses
(other than those required by regulatory authorities) which are
material to the business of the bank and its subsidiary.
(5) (i) The Bank conducts research activities related to customer
product needs and identification of potential markets for the
Bank's products. The cost of such research is considered to be
necessary and customary given the size of the Bank and its
market area. These costs were not considered to be material.
(ii) The Bank's introduction of new products or business lines
during the past two fiscal years has not required a material
investment of total assets of the Bank. The level of investment
in new products (or the redesign of existing products) and the
introduction of new business lines is considered to be
appropriate for the ongoing development of the Bank.
(iii) No employees are engaged in full-time market research or
development activities.
(6) There were no material effects on the Bank, either monetary or
otherwise, due to compliance with Federal, State or Local provisions
which have been enacted or adopted to regulate the discharge of
material into the environment.
(7) The Bank and its subsidiaries employed 132 persons (110 full-time and
22 part-time) or 123 full time equivalents as of December 31, 1996.
The Bank does not anticipate a material change in the number of
employees in the next year; only steady growth in the ordinary course
of business.
(8) No material portion of the Bank's business is subject to seasonal
fluctuations. There are no other material areas peculiar to the
Bank's business or the business of its subsidiary.
4
ITEM 2
------
PROPERTIES
----------
The following table summarizes the Bank's locations as of December 31, 1996.
Leased/ Leased
Location - Town Address Owned Expiration
- ----------------------- ------- ----------
Glastonbury - (2461 Main Street) Owned
East Hartford - (29 Main Street) Leased 2000
Colchester - (64 Norwich Avenue) Owned
Portland - (255 Main Street) Leased 1999
Rocky Hill - (38 Town Line Road) Leased 1997
Glastonbury - (730 Hebron Avenue) Leased 2003
Glastonbury - (Welles Street) Leased 2006
South Glastonbury - (901 Main Street) Leased 1999
Wethersfield - (171 Silas Deane Highway) Leased 1998
Additional information related to lease terms and rental expense appear in the
Notes to Consolidated Financial statements Note 9, "Lease Commitments," on page
28 of the 1996 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 3
------
LEGAL PROCEEDINGS
-----------------
Due to the nature of its business, the Bank may be subject to legal actions
which arise out of the normal course of its business. Based on information
presently available and advice received from legal counsel representing the Bank
in connection with such claims and lawsuits, it was the opinion of management
that the disposition or ultimate determination of such claims and lawsuits will
not have a material adverse effect on the consolidated financial position of the
Bank. Management's opinion extends to a lawsuit brought against the Bank and
seven directors on or about November 1, 1995 by a former director of the Bank,
Henry J. Stone, Jr., and contemporaneously, by Mr. Stone's wife, Merriam March.
Both suits allege misconduct by the directors in connection with a proposed
acquisition offer received by the Bank in 1994.
Mr. Stone's suit sought damages directly from the Bank and the directors to be
paid to Mr. Stone. Mr. Stone also sought to be returned to the Bank's Board of
Directors despite his resignation in May of 1995. The damages portion of the
suit was dismissed by the Connecticut Superior Court, and Mr. Stone has not
taken an appeal from that dismissal. His action to be returned to the Board
remains, and the Bank intends to continue to vigorously oppose Mr. Stone.
5
Among other things, the Bank's Board is elected annually, and Mr. Stone was
neither nominated as a director nor did he seek election at the shareholders
meeting in 1996, a year after his resignation and the shareholders meeting at
which he should have been seated on the Board.
Ms. March's suit does not seek damages from the Bank and the directors to be
paid to Ms. March herself. Rather, it is a "derivative suit" in which she, as a
shareholder, has sued the directors of the Bank on behalf of the Bank for
damages they have allegedly caused to the Bank. Because the suit is
"derivative", any monetary judgment obtained by Ms. March would be paid by the
directors to the Bank. Thus, although the Bank considers her suit without
merit, the Bank would nonetheless be benefitted in the event Ms. March's suit
were to succeed.
The derivative action by Ms. March seeks approximately $11.7 million in money
damages from the directors. However, the Bank's Certificate of Incorporation,
which tracks the language of Connecticut banking law, limits the personal
liability of directors to the Bank and its shareholders to an amount equal to
one year of the director's compensation. This limitation is inoperative only
when the director (1) has committed a knowing and culpable violation of the law,
(2) has obtained improper personal economic gain, (3) has shown a lack of good
faith and a conscious disregard of duty with an unjustifiable risk to the bank,
(4) has sustained an unexcused pattern of inattention amounting to an abdication
of duty, or (5) has violated state banking law. Therefore, unless one of the
exceptions above applies, the Bank's recovery from the directors will be limited
to one year of each director's compensation. Although Ms. March has alleged
that some of the exceptions apply here, the Bank believes that they do not and
the directors are defending themselves accordingly.
Under Connecticut law, the Bank is required in some cases, and is permitted in
others, to "indemnify", or reimburse, its directors from damages and costs
incurred by them in connection with litigation brought against them in their
official capacities at the Bank. If the director is wholly successful in the
suit, the Bank must indemnify him. If the director conducted himself in good
faith, and he or she reasonably believed his or her conduct to have been in the
best interests of the Bank, then the Bank may indemnify the directors. If the
Bank does not choose to indemnify a director, he or she can apply to the court
for an order of indemnification. These rules apply whether the suit is finally
adjudicated or settled earlier. In addition, the Bank may advance expenses of a
director involved in Bank litigation upon certain conditions. In the Stone and
March cases, a special committee of non-defendant directors of the Bank has
determined that the directors are likely to be entitled to indemnification and
that circumstances are appropriate to advance their expenses.
In summary, the Stone lawsuit has been dismissed in its entirety except for the
count which requests that Mr. Stone be re-seated on the Bank's Board of
Directors. No monetary relief is sought in connection with that claim. In the
March suit, any damages that the court may order the defendant directors to pay
(the Bank believes this to be unlikely and, in any event, limited to one year's
compensation from each director) would be paid to the Bank. At that point, the
Bank would determine whether or not it can or may reimburse the defendant
directors, essentially returning to them, in whole or in part, the damages paid
to the Bank. The Bank's principal monetary exposure, therefore, is from the
attorney's fees that it and its directors have incurred and will continue to
incur until the suits are resolved. Although some of that exposure may be
recoverable through insurance coverage, thus far the relevant insurers have
claimed that these suits are excluded from their coverage. Through December
1996, the Bank had accrued for all expenses incurred for attorneys' fees and
related costs in connection with the suit, including the advancing of such fees
for the defendant directors.
As of December 1996, preliminary motions have been completed and the parties are
engaging
6
in mutual discovery efforts. The timing for trial is unpredictable due to court
scheduling uncertainties, but the Bank currently expects that a trial will
commence earlier than late 1998. The amount of additional legal fees to be
incurred by the Bank will depend upon the scope of the plaintiff's discovery
efforts, whether the suits actually go to trial, and other variables.
ITEM 4
------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
-----------------------------------------------
AND MANAGEMENT
--------------
The information required by this item appears in the Bank's Proxy Statement
dated April 1, 1997 on pages 2-3 under the captions "Principal Holders" and
"Election of Directors" which is incorporated herein by reference.
PART II
-------
ITEM 5
------
MARKET FOR THE BANK'S COMMON STOCK AND
--------------------------------------
RELATED SECURITY HOLDER MATTERS
-------------------------------
(a) At the present time, McConnell, Budd & Downes; Tucker, Anthony, Inc; and
Ryan Beck & Co. are market makers for the Bank's Common Stock. On July 18,
1996, the Bank's common stock began trading on the Nasdaq SmallCap Market under
the symbol "GLBT." Previously, the Bank's stock was traded on the OTC bulletin
board and in the "pink sheets" as indicated by the asterisk ("*"). The
following are quoted bid prices for the Bank's stock as reported by Nasdaq where
applicable and by Ryan, Beck & Co. where applicable, as of the dates indicated:
Bid
-----
Date Low High
-------- ----- ------
3/31/95 * 7.70 7.75
6/30/95 * 7.25 7.625
9/30/95 * 7.25 10.50
12/31/95 * 7.50 9.875
3/31/96 * 8.50 9.25
6/30/96 * 9.125 10.25
9/30/96 10.00 10.875
12/31/96 10.125 13.25
(b) As of March 15, 1997, the Bank had 558 shareholders of its common stock.
This does not reflect the number of persons or entities who hold their stock in
nominee or "street" name.
(c) The Bank declared a $0.07 cash dividend per common share in the second,
third, and fourth quarters of 1996 and declared a "special" cash dividend of
$0.07 per common share payable on December 15, 1996. No dividends were declared
or paid in 1995.
As a state capital stock bank subject to Connecticut banking law, the Bank may
not declare a cash dividend on its common stock in an amount in excess of its
net profits (as defined by state
7
statute) for the year in which the dividend is declared plus its retained net
profits from the prior two years. The Bank may not declare or pay a cash
dividend or repurchase any of its outstanding shares if the effect thereof would
reduce its capital below the capital required by federal and state regulations.
8
ITEM 6
GLASTONBURY BANK & TRUST
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
Interest income................................. $ 17,461 $ 16,518 $ 15,453 $ 16,136 $ 17,580
Interest expense................................ 7,742 6,892 5,937 6,392 7,488
-------- -------- -------- -------- --------
Net interest income............................. 9,719 9,626 9,516 9,744 10,092
Provision (benefit) for loan losses............. 675 (213) 1,789 3,847 3,587
-------- -------- -------- -------- --------
Net interest income after provision
(benefit) for loan losses..................... 9,044 9,839 7,727 5,897 6,505
Other operating income.......................... 3,197 3,135 4,043 4,045 3,670
Other operating expense......................... 10,473 10,197 11,225 12,606 10,898
(Recovery) loss on National Premium CD Program.. -- (410) 1,370 -- --
Loss on bulk sale of loans...................... -- 2,045 -- -- --
-------- -------- -------- -------- --------
Income (loss) before income taxes and
accounting change............................. 1,768 1,142 (825) (2,664) (723)
Income tax (benefit) provision.................. (757) (500) 35 65 76
-------- -------- -------- -------- --------
Income (loss) before accounting change.......... 2,525 1,642 (860) (2,729) (799)
Cumulative effect of change in accounting for
income taxes.................................. -- -- -- 52 --
-------- -------- -------- -------- --------
Net income (loss)............................... $ 2,525 $ 1,642 $ (860) $ (2,677) $ (799)
======== ======== ======== ======== ========
Per share data:
Earnings (loss) before accounting change...... $ 1.38 $ 1.22 $ (0.67) $ (2.12) $ (0.62)
Cumulative effect of accounting change........ -- -- -- 0.04 --
-------- -------- -------- -------- --------
Earnings (loss) per share....................... $ 1.38 $ 1.22 $ (0.67) $ (2.08) $ (0.62)
======== ======== ======== ======== ========
Dividends....................................... $ 0.28 $ 0.00 $ 0.00 $ 0.05 $ 0.20
Book value per share (as of period end)......... 9.22 8.18 6.23 8.57 10.70
Balance sheet data as of period end:
Loans (net of unearned income)................ $148,733 $141,965 $130,790 $147,736 $164,742
Other earning assets.......................... 80,521 70,773 68,654 58,400 44,391
Total assets.................................. 248,598 229,774 218,292 228,981 238,499
Interest-bearing deposits..................... 172,606 157,487 159,460 168,695 185,568
FHLB borrowing................................ 21,000 23,000 13,000 14,000 5,000
Stockholders' equity.......................... 16,869 14,974 8,040 11,054 13,796
9
ITEM 7
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATION
------------------------
The response to this item is included on pages 3-14 under the caption
"Management's Discussion and Analysis and Results of Operations" contained in
the Bank's 1996 Annual Report which is incorporated herein by reference.
In addition, the Supplemental Statistical Information similar to SEC Guide 3
required by 12 C.F.R. Section 335.312, Item 7, Instruction 7, is included on the
following pages.
10
Average Balance Sheets, Net Interest Income and Interest Rates
====================================================================================================================================
The table presents the Bank's daily average balance sheets
and the components: net interest income, net interest spread
net interest margin and interest rate for the year ended
December 31, 1996. Daily average loans outstanding
include nonaccruing loans.
1996 1995 1994
Interest Interest Interest
Income/ Income/ Income/
Average Expense Yield/ Average Expense Yield/ Average Expense Yield/
Balance (000's Rate Balance (000's Rate Balance (000's Rate
omitted) omitted) omitted)
---------------------------- -------------------------- --------------------------
ASSETS
Interest bearing balances due from
depository institutions $3,795 $210 5.53% $590 $11 1.86% $ - $ -
Federal funds sold 1,658 92 5.55% 774 58 7.49% 3,178 119 3.74%
Securities:
Taxable 67,223 4,257 6.33% 66,139 4,164 6.30% 62,739 3,627 5.78%
Tax-Exempt 349 18 5.16% 198 15 7.58% 200 19 9.50%
------------------- ------------------- -------------------
Total 67,572 4,275 6.33% 66,337 4,179 6.30% 62,939 3,646 5.79%
------------------- ------------------- -------------------
Loans (net of unearned income) 145,068 12,884 8.88% 135,361 12,270 9.06% 136,821 11,688 8.54%
Total interest-earning assets 218,093 17,461 8.01% 203,062 16,518 8.13% 202,938 15,453 7.61%
------------------- ------------------- -------------------
Cash and non-interest bearing balances
due from depository institutions 7,816 7,729 8,963
Loan loss reserve (3,275) (4,628) (4,578)
Premises and fixed assets - net 7,552 7,933 8,386
Other real estate owned 321 1,018 3,132
Accrued interest receivable 1,361 1,384 1,535
Other assets 2,313 1,976 2,360
--------- --------- ---------
Total $234,181 $218,474 $222,736
========= ========= =========
11
1996 1995 1994
Interest Interest Interest
Income/ Income/ Income/
Average Expense Yield/ Average Expense Yield/ Average Expense Yield/
Balance (000's Rate Balance (000's Rate Balance (000's Rate
omitted) omitted) omitted)
---------------------------- -------------------------- --------------------------
LIABILITIES
Interest-bearing deposits:
Savings, NOW, and money
market accounts $79,301 $1,797 2.27% $84,211 $1,903 2.26% $96,703 $2,126 2.20%
Time deposits 83,830 4,638 5.53% 73,691 3,997 5.42% 69,407 3,069 4.42%
------------------- ------------------- -------------------
Total interest-bearing deposits 163,131 6,435 3.94% 157,902 5,900 3.74% 166,110 5,195 3.13%
Other borrowings:
Federal Home Loan Bank borrowings 23,356 1,306 5.59% 17,262 899 5.21% 15,167 742 4.89%
-------------------
Securities sold under agreements
to repurchase 25 1 4.00% 1,512 93 6.15%
------------------- -------------------
Total interest-bearing deposits
and other borrowings 186,512 7,742 4.15% 176,676 6,892 3.90% 181,277 5,937 3.28%
------------------- ------------------- -------------------
Demand and noninterest
bearing accounts 30,705 29,877 29,388
Dividends payable 33 - -
Accrued expenses and other liabilities 1,436 1,682 1,391
--------- --------- ---------
Total deposits, other borrowings
and other liabilities 218,686 208,235 212,056
--------- --------- ---------
Stockholders' equity:
Common stock 4,575 3,380 3,225
Capital surplus 6,609 4,677 4,498
Retained earnings 4,799 3,501 3,585
Net unrealized holding loss on
securities available for sale (488) (1,319) (628)
--------- --------- ---------
Total stockholders' equity 15,495 10,239 10,680
--------- --------- ---------
Total $234,181 $218,474 $222,736
=================== =================== ===================
Net interest income $9,719 $9,626 $9,516
======== ======== ========
Net interest spread 1 3.86% 4.23% 4.33%
======= ======= =======
Net interest margin 2 4.46% 4.74% 4.69%
======= ======= =======
<FN>
1. Net interest spread equals the yield on Total
interest earning assets minus the rate on Total
interest bearing deposits and other borrowings.
2. Net interest margin equals Interest income on
Total interest earning assets minus Interest
expense on Total interest bearing deposits
and other borrowings divided by Total interest
earning assets.
</FN>
12
Rate\Volume Analysis
====================================================================================================================================
The following table reflects the changes for the year ended December 31, 1996
in net interest income arising from changes in interest rates and from
asset and liability volume, including mix. The change in interest attributable
to both rate and volume has been allocated to the changes in the rate and the
volume on a pro-rated basis.
1996
Increase/ Change Due to:
Decrease Rate Volume
(000's omitted)
--------------------------------------------------------
Interest income change:
Interest-bearing deposits $199 $53 $146
Federal funds sold 34 (18) 52
Securities:
Taxable 93 24 69
Tax-Exempt 3 (6) 9
--------------------------------------------------------
Total 96 18 78
Loans (net of unearned income) 614 (252) 866
--------------------------------------------------------
Total interest income change $943 ($199) $1,142
========================================================
Interest expense change:
Interest-bearing deposits:
Savings, NOW, and money market accounts ($106) $5 ($111)
Time deposits 641 81 560
--------------------------------------------------------
Total interest-bearing deposits 535 86 449
Other borrowings:
Federal Home Loan Bank borrowings 407 70 337
Securities sold under agreements to repurchase (92) (24) (68)
--------------------------------------------------------
Total other borrowings 315 46 269
Total interest expense change 850 132 718
--------------------------------------------------------
Net interest income change $93 ($331) $424
========================================================
13
Rate\Volume Analysis
================================================================================
The following table reflects the changes for the year ended December 31, 1995
in net interest income arising from changes in interest rates and from
asset and liability volume, including mix. The change in interest attributable
to both rate and volume has been allocated to the changes in the rate and the
volume on a pro-rated basis.
1995
Increase/ Change Due to:
Decrease Rate Volume
(000's omitted)
----------------------------------------------------------
Interest income change:
Interest-bearing deposits $11 $ - $11
Federal funds sold (61) 68 (129)
Securities:
Taxable 537 334 203
Tax-Exempt (4) (4) -
----------------------------------------------------------
Total 533 330 203
Loans (net of unearned income) 582 708 (126)
----------------------------------------------------------
Total interest income change $1,065 $1,106 ($41)
==========================================================
Interest expense change:
Interest-bearing deposits:
Savings, NOW, and money market accounts ($223) $58 ($281)
Time deposits 928 729 199
----------------------------------------------------------
Total interest-bearing deposits 705 787 (82)
Other borrowings:
Federal Home Loan Bank borrowings 157 50 107
Securities sold under agreements to repurchase 93 - 93
----------------------------------------------------------
250 50 200
Total interest expense change 955 837 118
----------------------------------------------------------
Net interest income change $110 $269 ($159)
==========================================================
14
Securities Portfolio
====================================================================================================================================
The following table summarizes the carrying amounts of the Bank's securities held to maturity and securities
available for sale at December 31, 1996, 1995, and 1994 (in thousands). No investment securities of a single
issuer other than in U.S. Government and its agencies and FHLB stock exceeded 10% of stockholders' equity in
the years 1996, 1995 and 1994.
1996 1995 1994
--------------------------------------------------------
Securities held to maturity (at amortized cost):
- ----------------------------------------------------
US Treasury securities $ - $ - $999
US Government agencies 7,932 5,434 8,235
US Government mortgage-backed 15,077 17,954 26,646
Collateralized mortgage obligations 5,063 5,160 7,789
State and Municipal bonds 185 440 450
Other bonds 215 281 333
--------------------------------------------------------
Total securities held to maturity $28,472 $29,269 $44,452
========================================================
Securities available for sale (at fair value):
- ----------------------------------------------------
US Treasury securities $ - $3,513 $2,939
US Government agencies 1,517 4,314 3,034
US Government mortgage-backed 15,379 16,895 9,548
Collateralized mortgage obligations 14,212 9,057 5,812
State and Municipal bonds 857 - -
Money market mutual funds 106 - -
--------------------------------------------------------
Total securities available for sale $32,071 $33,779 $21,333
========================================================
FHLB Stock $2,220 $2,023 $1,544
========================================================
Trading Securities $458 $ - $ -
========================================================
15
Securities Portfolio
====================================================================================================================================
The following table presents the contractual maturities of securities at December 31, 1996, and the weighted average yields of such
securities. The weighted average yields were calculated based on the cost and effective yields to maturity of each security.
Securities available for sale are presented seperately. Yields are calculated on a tax equivalent basis.
Book Value (in thousands)
--------------------------------------------------------------------------------------------
Less After one After five
than through through After No
one year five years ten years ten years Maturity
--------------------------------------------------------------------------------------------
Securities held to maturity:
- ----------------------------------------
US Government agencies $ - $2,000 $5,932 $ - $ -
US Government mortgage-backed - 6,719 643 7,716
Collateralized mortgage obligations - - 949 4,113
State and Municipal bonds - - - 185 -
Other bonds - 70 145 - -
FHLB stock 2,220
--------------------------------------------------------------------------------------------
Total/Average weighted yields $ - 0.00% $8,789 5.95% $7,669 7.09% $12,014 7.10% $2,220 6.40%
============================================================================================
Securities available for sale:
- ----------------------------------------
US Government agencies $ - $513 $1,005 $ -
US Government mortgage-backed 20 1,872 2,633 10,852
Collateralized mortgage obligations - - 5,840 8,373
State and Municipal bonds - - - 857
Total securities available for sale
--------------------------------------------------------------------------------------------
(excluding money market mutual funds) $20 9.50% $2,385 6.73% $9,478 6.61% $20,082 6.59%
============================================================================================
16
Loan Portfolio
====================================================================================================================================
Loans at December 31, 1996-1992 were as follows (in thousands):
1996 1995 1994 1993 1992
-----------------------------------------------------------------------------------------
Commercial, financial and agricultural $23,897 $23,541 $23,924 $31,792 $39,792
Real estate-construction 1,717 1,773 2,093 2,754 3,621
Real estate-mortgage 118,707 112,313 101,934 110,132 116,073
Installment and other loans to individuals 4,788 4,634 3,167 3,644 5,973
-----------------------------------------------------------------------------------------
Gross loans 149,109 142,261 131,118 148,322 165,459
-----------------------------------------------------------------------------------------
Less:
Unearned income (376) (296) (328) (586) (717)
Loan loss reserve (3,352) (3,029) (4,517) (4,742) (4,601)
-----------------------------------------------------------------------------------------
Loans-net $145,381 $138,936 $126,273 $142,994 $160,141
=========================================================================================
17
Loan Maturity and Interest Rate Sensitivity
============================================================================================================
Commercial, financial and agricultural loans and real estate construction loans at December 31, 1996
are summarized in the following table by maturity distribution and interest rate sensitivity based upon
contractual terms (in thousands). Requests for renewals or extensions are reviewed on an individual basis
and granted if deemed appropriate. Such extensions, however, do not materially alter the anticipated
maturity schedule as reported.
One year After one After
or less Thru five five years
--------------------------------------------------------
Commercial, financial and agricultural: $5,360 $9,007 $9,530
Real estate-construction: 1,717 - -
--------------------------------------------------------
$7,077 $9,007 $9,530
========================================================
Fixed or Floating or
Predetermined Adjustable
Rate Rate
------------------------------------
Commercial, financial and agricultural:
Due after one year $5,249 $13,288
====================================
18
Nonaccrual, Past Due and Restructured Loans
====================================================================================================================================
The Bank's nonperforming loans at December 31, 1996-1992 are presented below (in thousands). Had nonaccrual and restructured loans
been current in accordance with their original terms, gross interest income on these loans for 1996 would have increased by
$150,443. The amount of interest income recognized on restructured loans was $77,172 for the year ended December 31, 1996. There are
no commitments to extend additional funds to borrowers who currently have loans on nonaccrual status, 90 days past due and still
accruing, or that are troubled debt restructurings.
The following table shows the composition of nonaccrual, past due and restructured loans at December 31, 1996-1992:
1996 1995 1994 1993 1992
----------------------------------------------------------------
Loans accounted for on a nonaccrual basis $1,464 $733 $3,943 $5,484 $2,975
Loans past due 90 days and still accruing - - - 57 376
----------------------------------------------------------------
Total nonaccrual and past due loans $1,464 $733 $3,943 $5,541 $3,351
================================================================
Troubled debt restructurings (exclusive of $619,000, $303,000,
$1,547,000, $1,938,000 and $1,032,000 of nonaccrual loans
included above for the years ended December 31, 1996, 1995,
1994, 1993, and 1992, respectively.) $694 $685 $332 $2,400 $2,836
================================================================
19
Summary of Loan Loss Experience
====================================================================================================================================
The following table summarizes the activity in the allowance for loan losses on loans for the years ended December 31, 1996-1992 (in
thousands.) The allowance is maintained at a level consistent with identified loss potential and the perceived risk in the
portfolio. Please see Notes 1 and 4 to the 1996 Annual Report to Shareholders incorporated herein by reference for a discussion
regarding the determination of the allowance for loan losses. It is not considered meaningful or practicable to allocate the
allowance for loan losses according to industry, type of loan or geographic area.
1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------
Loans charged off:
Commercial, financial and agricultural $24 $1,114 $1,408 $2,517 $1,343
Real estate-construction - - - - -
Real estate-mortgage 451 481 918 1,253 414
Installment and other loans to individuals 29 17 81 111 198
--------------------------------------------------------------------------------------
504 1,612 2,407 3,881 1,955
--------------------------------------------------------------------------------------
Recoveries on loans charged off:
Commercial, financial and agricultural 128 190 216 101 114
Real estate-construction - - - - -
Real estate-mortgage 7 138 118 2 -
Installment and other loans to individuals 17 9 59 72 54
--------------------------------------------------------------------------------------
152 337 393 175 168
--------------------------------------------------------------------------------------
Net loans charged off 352 1,275 2,014 3,706 1,787
(Benefit) Provision charged to income 675 (213) 1,789 3,847 3,587
Balance at beginning of year 3,029 4,517 4,742 4,601 2,801
--------------------------------------------------------------------------------------
Balance at end of year $3,352 $3,029 $4,517 $4,742 $4,601
======================================================================================
Ratio of net charge-offs during the year to
average loans outstanding during the year 0.24% 0.94% 1.47% 2.30% 1.06%
======================================================================================
20
Deposits
====================================================================================================================================
The following table summarizes average daily deposits and average rates of the Bank for the years ended December 31, 1996, 1995 and
1994 (in thousands.)
1996 1995 1994
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
--------------------------------------------------------------------------------------
Demand:
Noninterest bearing $30,705 $29,877 $29,388
============== ============ ===========
Interest-bearing $21,682 1.61% $21,069 1.69% $22,952 1.78%
Interest-bearing deposits:
Savings and money market accounts 57,619 2.51% 63,142 2.45% 73,751 2.34%
Time deposits 83,830 5.53% 73,691 5.42% 69,407 4.42%
-------------- ------------ -----------
Total interest-bearing deposits $163,131 3.94% $157,902 3.74% $166,110 3.13%
======================================================================================
21
Certificates of Deposit
================================================================================
Time certificates of deposit in amounts of $100,000 or more at December 31, 1996
(in thousands) are scheduled to mature as follows:
Three months or less $3,787
Over three through twelve months 3,773
Over one year through five years 2,962
Over five years 214
-----------------
Total $10,736
=================
22
Return on Equity and Assets
====================================================================================================================================
The table below presents selected ratios of the Bank for 1996, 1995, and 1994.
1996 1995 1994
--------------------------------------------------------
Return on Average Total Assets 1.08% 0.75% -0.39%
Return on Average Stockholders' Equity 16.29% 16.04% -8.05%
Dividend Payout Ratio 20.29% 0.00% 0.00%
Average Stockholders' Equity to Average Total Assets Ratio 6.62% 4.68% 4.79%
23
ITEM 8
------
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The information required by this item is contained in the Bank's 1996 Annual
Report on pages 15-37 under the captions "Consolidated Balance Sheets, December
31, 1996 and 1995", "Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994", "Consolidated Statements of Changes in
Stockholders' Equity for the Years Ended December 31, 1996, 1995 and 1994",
"Consolidated Statements of Cash Flows for the Years Ended December 31, 1996,
1995 and 1994", "Notes to Consolidated Financial Statements", and the
"Independent Auditors' Report" from Shatswell, MacLeod & Company, P.C., the
Bank's independent auditors, all of which are incorporated herein by reference.
PART III
--------
ITEM 9
------
DIRECTORS AND PRINCIPAL OFFICERS OF THE BANK
--------------------------------------------
(a) The information required by this sub-item is found in the Bank's Proxy
Statement dated April 1, 1997 on pages 2-3 under the caption "Election of
Directors" which is incorporated herein by reference.
(b) The principal officers of the Bank are:
(1) J. Gilbert Soucie, (age 59), serves as President, Chief Executive Officer
and is a Director. Mr. Soucie joined the Bank in April 1994. Prior to
joining Glastonbury Bank & Trust, Mr. Soucie was a Senior Vice
President/Senior Loan Officer with Mechanics Savings Bank of Hartford,
Connecticut.
(2) Charles Balocca, (age 51) serves as Senior Vice President and Senior
Credit Officer. Mr. Balocca joined the Bank in October, 1994. Prior to
joining Glastonbury Bank & Trust, Mr. Balocca was Senior Commercial Lending
Officer with Great Country Bank of Ansonia, Connecticut.
(3) Wayne F. Patenaude, CFA (age 36) serves as Senior Vice President,
Treasurer and Chief Financial Officer. Mr. Patenaude joined the Bank in May,
1991 and has served in these capacities since April of 1993 and previously
served as Vice President and Manager of Financial Services. Mr. Patenaude is
a Chartered Financial Analyst.
(4) David B. Rowley, (age 49) serves as Senior Vice President of
Administration. Mr. Rowley joined the Bank in December 1995 as Vice President
and Credit Policy Officer. Prior to joining Glastonbury Bank & Trust, Mr.
Rowley was Vice President and Senior Loan Workout Officer with Fleet Bank,
N.A.
(c) The Bank employs no persons, such as special consultants, who are not
Principal Officers but who make significant contributions to the business of the
Bank.
(d) None of the Directors or Principal officers have any family
relationships to the other, nor is any Director or Principal Officer a Director
of any other corporation registered under Section 12 of the Securities Exchange
Act of 1934, as amended. There are no material legal proceedings to be reported.
ITEM 10
-------
MANAGEMENT COMPENSATION AND TRANSACTIONS
----------------------------------------
The information required by this item may be found in the Bank's Proxy Statement
dated April 1, 1997 on pages 4-6 under the captions "Summary Officer
Compensation", "Retirement Plan", "401(k) Plan", "Deferred Compensation
Plans/Change of Control Agreements", and "Transactions with and Indebtedness
24
of Management and Others", which are incorporated herein by reference.
PART IV
-------
ITEM 11
-------
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM F-3
----------------------------------------------------------------
(a) Financial Statements
(1) The following financial statements are contained on pages 15-37 in the
Bank's 1996 Annual Report and are incorporated herein as Exhibit 3:
1. Consolidated Balance Sheets as of December 31, 1996 and 1995.
2. Consolidated Statements of Operations and Cash Flows for the years
ended December 31, 1996, 1995, and 1994.
3. Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994.
4. Notes to Consolidated Financial Statements.
5. Independent Auditors' Report.
(2) The following Independent Auditors' Report and the supporting financial
schedules appear in Exhibit I.
1. Schedule II: Loans to Officers, Directors, Principal Security
Holders, and any Associates of Foregoing Persons.
2. Schedule IV: Bank Premises and Equipment.
3. Schedule V: Investments in, Income From Dividends, and Equity in
Earnings or Losses of Subsidiaries and Associated companies.
4. Independent Auditors' Report.
(2a) The following Schedules are incorporated herein by reference to the
Bank's 1996 Annual Report:
I. Schedule I: Securities
The information for this Schedule appears in the Notes to the
Consolidated Financial Statements, Note I under "Securities" and Note 3
"Securities".
2. Schedule III: Loans and Lease Financing Receivables. The information
for this Schedule appears in the Notes to the Consolidated Financial
Statements', Note 1 under "Loans and Allowance for Loan Losses," and Note
4 "Loans".
3. Schedule VI: Allowance for Possible Loan Losses. The information for
this schedule
25
appears in the Notes to the Consolidated Financial Statements, Note 1
under "Loans and Allowance for Loan Losses" and under Note 4 "Loans".
(b) The Bank did not file a Form F-3 in the last quarter of 1996.
(c) Exhibits:
(1) Financial Schedules appear as Exhibit 1.
(2) Articles of Incorporation and Bylaws: The Certificate of Authority,
Certificate of Organization, Bylaws and Approval of the Commissioner
appear as Exhibit 2.
(3) The Bank's 1996 Annual Report appears as Exhibit 3.
(4) Instruments defining the rights of security holders, including
indentures: A specimen stock certificate was previously filed as Exhibit
2 to Form F-1 dated April 29, 1992, and is hereby incorporated by
reference.
(5) Material Contracts:
(i) (A-C), (ii) The Bank was not engaged in any contracts considered
by management to be material as defined in this section, either
related to personnel, fixed property, or otherwise.
(6) Statement Re Computation of per share earnings (loss): A statement
concerning the computation of per share loss is found in the Notes to
Consolidated Financial Statements on page 22 under the caption "Earnings
(Loss) per share."
(7) Statements Re Computation of ratios: Not applicable.
(8) Letter Re Change in Accounting Principles: Not applicable.
(9) Previously Unfilled Documents: Not applicable.
(10) The following are subsidiaries of the Bank: The subsidiaries of the
Bank are attached hereto as Exhibit 4.
26
Pursuant to the requirements of section 13 of the Securities Exchange Act of
1934, the Bank has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
/s/ J. Gilbert Soucie
- -------------------------------
J. Gilbert Soucie, President and Chief Executive Officer
Dated: March 27, 1997
-----------------
/s/ Wayne F. Patenaude
- --------------------------
Wayne F. Patenaude, Senior Vice President & Treasurer
Dated: March 27, 1997
-----------------
Pursuant to the requirements of section 13 of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signatures Date Title
/s/ Alden A. Ives March 27, 1997 Chairman,
- ------------------------- -------------- Director
Alden A. Ives
/s/ J. Gilbert Soucie March 27, 1997 President, Chief
- ------------------------- -------------- Executive Officer, Director
J. Gilbert Soucie
/s/ Loren J. Andreo March 27, 1997 Director
- ------------------------- --------------
Loren J. Andreo
/s/ Ronald E. Bourbeau March 27, 1997 Director
- ------------------------- --------------
Ronald E. Bourbeau
/s/ Camille S. Bushnell March 27, 1997 Director
- ------------------------- --------------
Camille S. Bushnell
/s/ John J. Carson March 27, 1997 Director
- ------------------------- --------------
John J. Carson
/s/ Harvey A. Katz March 27, 1997 Director
- ------------------------- --------------
Harvey A. Katz
Director
- ------------------------- --------------
Grace C. Nome
/s/ Mark A. Sheptoff March 27, 1997 Director
- ------------------------- --------------
Mark A. Sheptoff
/s/ James Uccello March 27, 1997 Director
- ------------------------- --------------
James Uccello
27
EXHIBIT 4
PARENTS AND SUBSIDIARIES
The Glastonbury Bank & Trust Company
(Parent)
GBT Insurance Group, Inc.
(100% owned)
GBT Insurance Group, Inc. is an insurance agency subsidiary organized under
Connecticut law and is consolidated for financial reporting purposes.
28