FORM 10-Q
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United States Securities and Exchange Commission
Washington, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2000
Commission File Number 001-13405
ALLIANCE BANCORP OF NEW ENGLAND, INC.
Incorporated in the State of Delaware
IRS Employer Identification Number 06-1495617
Address and Telephone:
348 Hartford Turnpike, Vernon, Connecticut 06066, (860) 875-2500
Securities registered pursuant to Section 12(b) of the Act: Common Stock -- $.01
par value, which is registered on the American Stock Exchange.
Alliance Bancorp of New England (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 and (2) has been subject to such filing requirements for the
past 90 days.
As of May 10, 2000, Alliance Bancorp of New England had 2,319,282 shares of
common stock outstanding.
TABLE OF CONTENTS Page
Table Consolidated Selected Financial Data.............................2
Part I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets..................................3
Consolidated Income Statements...............................4
Consolidated Statements of Changes in Shareholders' Equity...5
Consolidated Statements of Cash Flows........................6
Notes to Consolidated Financial Statements...................7
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of Operations............10
Special Note Regarding Forward-Looking Statements...........10
Item 3 Quantitative and Qualitative Disclosures About Market Risk......13
Part II Other Information...............................................14
Table Average Balance Sheet and Interest Rates .......................15
Signatures ............................................................16
1
Alliance Bancorp of New England, Inc.
Consolidated Selected Financial Data (Unaudited)
As of and for the three months ended March 31,
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2000 1999
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For the Quarter (in thousands)
Net interest income $ 2,808 $ 2,386
Provision for loan losses 87 125
Service charges and fees 310 421
Net gain on securities and other assets 104 154
Non-interest expense 2,084 1,878
Income before income taxes 1,051 958
Income tax expense 280 258
Net income $ 771 $ 700
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Per Share
Basic earnings $ .33 $ .31
Diluted earnings .33 .30
Dividends declared .06 .05
Book value 6.77 7.25
Common stock price:
High 9.25 12.38
Low 6.88 9.62
Close 8.38 9.75
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At Quarter End (in millions)
Total assets $ 320.0 $ 281.8
Total loans 198.0 182.4
Other earning assets 101.4 86.0
Deposits 259.6 237.9
Borrowings 43.0 25.6
Shareholders' equity (a) 15.6 16.6
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Operating Ratios (in percent)
Return on average assets 0.98% 1.02%
Return on average equity 20.63 15.80
Equity % total assets (period end) 4.88 5.91
Net interest spread (fully taxable equivalent) 3.56 3.28
Net interest margin (fully taxable equivalent) 3.97 3.77
Dividend payout ratio 17.96 16.40
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(a) Shareholders' equity includes accumulated other comprehensive income (loss),
which consists of unrealized gains (losses) on investment securities, net of
taxes.
2
Alliance Bancorp of New England, Inc.
Consolidated Balance Sheets (Unaudited)
March 31, December 31,
(in thousands except share data) 2000 1999
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Assets
Cash and due from banks $ 8,556 $ 18,584
Short-term investments 23,004 4,028
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Total cash and cash equivalents 31,560 22,612
Securities available for sale (at fair value) 51,147 53,156
Securities held to maturity 27,199 27,857
Residential mortgage loans 55,583 54,197
Commercial mortgage loans 57,810 52,694
Other commercial loans 36,414 34,965
Consumer loans 33,302 33,841
Government guaranteed loans 14,936 15,935
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Total loans 198,045 191,632
Less: Allowance for loan losses (3,250) (3,200)
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Net loans 194,795 188,432
Premises and equipment, net 5,825 5,587
Foreclosed assets, net 132 53
Other assets 9,391 9,240
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Total assets $ 320,049 $ 306,937
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Liabilities and Shareholders' Equity
Demand deposits $ 26,687 $ 25,707
NOW deposits 28,178 26,120
Money market deposits 34,654 35,321
Savings deposits 46,352 44,199
Time deposits 123,740 120,044
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Total deposits 259,611 251,391
Borrowings 43,000 39,575
Other liabilities 1,815 1,624
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Total liabilities 304,426 292,590
Preferred stock, ( $.01 par value; 100,000 shares
authorized, none issued) - -
Common stock, ($.01 par value; authorized 4,000,000
shares; issued 2,509,882 in 2000
and 2,509,882 in 1999; outstanding 2,309,283 in 2000
and 2,309,283 in 1999) 25 25
Additional paid-in capital 11,429 11,429
Retained earnings 12,250 11,618
Accumulated other comprehensive loss, net (4,972) (5,616)
Treasury stock (200,599 shares) (3,109) (3,109)
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Total shareholders' equity 15,623 14,347
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Total liabilities and shareholders' equity $ 320,049 $ 306,937
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See accompanying notes to financial statements
3
Alliance Bancorp of New England, Inc.
Consolidated Income Statements (Unaudited)
Three Months Ended
March 31,
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(in thousands except share data) 2000 1999
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Interest Income
Loans $ 3,928 $ 3,543
Debt securities 1,288 936
Dividends on equity securities 279 290
Other earning assets 197 92
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Total interest and dividend income 5,692 4,861
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Interest Expense
Deposits 2,309 2,176
Borrowings 575 299
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Total interest expense 2,884 2,475
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Net Interest Income 2,808 2,386
Provision For Loan Losses 87 125
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Net interest income after provision for loan losses 2,721 2,261
Non-Interest Income
Service charges and fees 310 421
Net gain on securities 104 104
Net gain on assets - 50
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Total non-interest income 414 575
Non-Interest Expense
Compensation and benefits 1,117 1,014
Occupancy 192 180
Data processing and equipment 281 236
Office and insurance 163 123
Purchased services 163 188
Other 168 137
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Total non-interest expense 2,084 1,878
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Income before income taxes 1,051 958
Income tax expense 280 258
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Net Income $ 771 $ 700
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Per Share Data
Basic earnings per share $ .33 $ .31
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Diluted earnings per share $ .33 $ .30
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Average basic shares outstanding 2,309,283 2,294,084
Average additional dilutive shares 53,662 78,542
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Average diluted shares outstanding 2,362,945 2,372,626
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See accompanying notes to financial statements
4
Alliance Bancorp of New England, Inc.
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
Accumulated
other
Additional comprehensive Total
Three Months ended March 31 Common paid-In Retained income Treasury Shareholders'
(in thousands except share data) stock capital earnings (loss) Stock equity
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1999
Balance, December 31, 1998 $ 25 $ 11,306 $ 9,223 $ 751 $ (3,109) $ 18,196
Comprehensive income
Net income 700 700
Unrealized (loss) on securities,
net of reclassification adjustment (2,157) (2,157)
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Comprehensive income (1,457)
Dividends declared and paid (114) (114)
Issuance of shares pursuant to exercise
of stock options 24 24
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Balance, March 31, 1999 $ 25 $ 11,330 $ 9,809 $ (1,406) $ (3,109) $ 16,649
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2000
Balance, December 31, 1999 $ 25 $ 11,429 $ 11,618 $ (5,616) $ (3,109) $ 14,347
Comprehensive income
Net income 771 771
Unrealized gain on securities,
net of reclassification adjustment 644 644
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Comprehensive income 1,415
Dividends declared and paid (139) (139)
Issuance of shares pursuant to exercise
of stock options - -
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Balance, March 31, 2000 $ 25 $ 11,429 $ 12,250 $ (4,972) $ (3,109) $ 15,623
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Disclosure of reclassification amount
Three months ended March 31 (in thousands) 2000 1999
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Unrealized holding gain (loss) arising during
the period net of income tax expense (benefit)
of $160 and ($1,076), respectively $ 713 $ (2,088)
Less reclassification adjustment for
gains included in net income net of income
tax expense of $35 and $35, respectively (69) (69)
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Net unrealized gains (losses) on securities $ 644 $ (2,157)
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See accompanying notes to financial statements
5
Alliance Bancorp of New England, Inc.
Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31,
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(in thousands) 2000 1999
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Operating Activities:
Net income $ 771 $ 700
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Provision for loan losses 87 125
Depreciation and amortization 167 128
Net investment security gains (104) (104)
Net asset gains - (50)
(Decrease) increase in other liabilities 191 (112)
Decrease in loans held for sale 431 3,782
Increase in other assets (167) (54)
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Net cash provided by operating activities 1,376 4,415
Investing Activities:
Securities available for sale:
Proceeds from amortization and maturities 4,940 1,609
Proceeds from sales of securities 915 2,852
Purchases of securities (3,000) (12,570)
Securities held to maturity:
Proceeds from amortization and maturities 658 2,255
Net increase in loans (6,995) (1,436)
Increase in foreclosed assets, net (79) -
Proceeds from the sale of premises and equipment - 464
Purchases of premises and equipment (373) (219)
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Net cash used in investing activities (3,934) (7,045)
Financing Activities:
Net increase in interest-bearing deposits 7,240 1,784
Net increase (decrease) in demand deposits 980 (3,902)
Net decrease in FHLB advances - (34)
Net increase in other borrowings 3,425 2,000
Stock options exercised - 24
Cash dividends paid (139) (114)
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Net cash provided by (used in) financing activities 11,506 (242)
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Net Change in Cash and Cash Equivalents 8,948 (2,872)
Cash and cash equivalents at beginning of the period 22,612 20,216
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Cash and cash equivalents at end of the period $ 31,560 $ 17,344
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Supplemental Information On Cash Payments
Interest expense $ 2,585 $ 2,450
Income tax expense 300 235
Supplemental Information On Non-cash Transactions
Net loans transferred to foreclosed assets 79 -
See accompanying notes to financial statements
6
Notes to Consolidated Financial Statements (unaudited)
Note 1. Basis of Presentation and Principles of Business and Consolidation
The consolidated financial statements have been prepared and presented in
conformity with generally accepted accounting principles. Unless otherwise
noted, all dollar amounts presented in the financial statements and note tables
are rounded to the nearest thousand dollars, except share data. Certain prior
period amounts have been reclassified to conform with current financial
statement presentation.
Alliance Bancorp of New England, Inc. ("Alliance" or the "Company") uses the
accrual method of accounting for all material items of income and expense. The
Company is required to make certain estimates and assumptions in preparing these
statements. The most significant estimates are those necessary in determining
the allowance for loan losses, the valuation of foreclosed assets, and the
determination of fair values of financial instruments. Factors affecting these
estimates include national economic conditions, the level and trend of interest
rates, local market conditions, and real estate trends and values.
The quarterly 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. Operating results for any interim period are not necessarily
indicative of results for any other interim period or for the entire year.
Management's Discussion and Analysis of Financial Condition and Results of
Operations accompany these financial statements. These consolidated interim
financial statements and notes should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
Alliance is a one bank holding company, chartered in Delaware. Alliance owns
100% of the stock of Tolland Bank (the "Bank"), a Connecticut chartered savings
bank. Alliance also wholly owns Alliance Capital Trust I ("Trust I"), a Delaware
chartered trust which was formed in 1999 and issued $3.5 million in privately
offered trust preferred securities. Proceeds from this issuance were invested in
subordinated notes issued by Alliance, which invested the note proceeds in new
common stock issued by the Bank. Alliance also wholly owns Alliance Capital
Trust II ("Trust II"), a Delaware chartered trust which was formed in the first
quarter of 2000 and issued $3.5 million in privately offered trust preferred
securities. Proceeds from the issuance of Trust II were invested in subordinated
notes issued by Alliance, which invested the note proceeds in a capital
contribution to the Bank.
Tolland Bank provides consumer and commercial banking services from its nine
offices located in and around Tolland County, Connecticut. the Bank's deposits
are insured up to the applicable limits by The Federal Deposit Insurance
Corporation ("FDIC"). Tolland Bank wholly owns Tolland Investment Corporation
("TIC"), a passive investment corporation chartered in Connecticut in 1999 to
own and service real estate secured loans purchased from the Bank. The Bank also
wholly owns a Connecticut chartered corporation name Asset Recovery Systems,
Inc. ("ARS"), which is a foreclosed asset liquidation subsidiary. The
consolidated financial statements include Alliance, Trust I, Trust II, Tolland
Bank, TIC, and ARS. All significant intercompany accounts and transactions have
been eliminated in consolidation.
7
Note 2. Securities
Amortized Unrealized Unrealized Fair
March 31, 2000 (in thousands) Cost Gains Losses Value
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Securities available for sale
U.S. Government and agency $ 5,000 $ 22 $ (311) $ 4,711
U.S. Agency mortgage-backed 2,807 - (62) 2,745
Other debt securities 30,927 170 (2,534) 28,563
Marketable equity 15,557 54 (2,466) 13,145
FHLB stock 1,983 - - 1,983
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Total available for sale $ 56,274 $ 246 $ (5,373) $ 51,147
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Securities held to maturity
U.S. Government and agency $ 1,976 $ 3 $ (9) $ 1,970
U.S. Agency mortgage-backed 6,173 - (80) 6,093
Other debt securities 19,050 180 (693) 18,537
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Total held to maturity $ 27,199 $ 183 $ (782) $ 26,600
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Amortized Unrealized Unrealized Fair
December 31, 1999 (in thousands) Cost Gains Losses Value
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Securities available for sale
U.S. Government and agency $ 6,751 $ - $ (298) $ 6,453
U.S. Agency mortgage-backed 2,936 - (52) 2,884
Other debt securities 30,991 116 (2,831) 28,276
Marketable equity 16,364 87 (2,891) 13,560
Non-marketable equity 1,983 - - 1,983
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Total available for sale $ 59,025 $ 203 $ (6,072) $ 53,156
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Securities held to maturity
U.S. Government and agency $ 1,971 $ - $ (8) $ 1,963
U.S. Agency mortgage-backed 6,752 1 (80) 6,673
Other debt securities 19,134 10 (579) 18,565
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Total held to maturity $ 27,857 $ 11 $ (667) $ 27,201
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Note 3. Nonperforming Loans
March 31, December 31,
(in thousands) 2000 1999
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Total nonaccruing loans $ 1,160 $ 1,218
Accruing loans past due 90 days or more 253 -
Impaired loans:
Impaired loans - valuation allowance required 1,130 852
Impaired loans - no valuation allowance required 328 102
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Total impaired loans $ 1,458 $ 954
Total valuation allowance on impaired loans 276 280
Commitments to lend additional funds for impaired loans - -
8
Note 4. Allowance for Loan Losses
Three Months Ended Year Ended
March 31, December 31,
(in thousands) 2000 1999
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Balance at beginning of year $ 3,200 $ 3,060
Charge-offs (43) (146)
Recoveries 6 49
Provision for loan losses 87 237
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Balance at end of year $ 3,250 $ 3,200
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Note 5. New Accounting Standards
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that companies record all derivatives as either assets or liabilities
on the balance sheet and measure those instruments at fair value. The manner in
which the companies are to record gains and losses resulting from changes in the
values of those derivatives depends on the use of the derivative and whether it
qualifies for hedge accounting. For qualifying hedges, the recognition of
changes in the value of both the hedge and the hedged item are recorded in
earnings in the same period. Changes in the fair value of derivatives that do
not qualify for hedge accounting are included in earnings in the period of the
change. SFAS 133 also allows a one-time reclassification of held to maturity
securities. As amended by SFAS No. 137, this statement is effective for years
beginning after June 15, 2000. The Company does not believe that the adoption of
this statement will have a material impact on its financial position or results
of operations.
9
ITEM 2 MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION &
RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
This report contains certain "forward-looking statements". These forward-looking
statements, which are included in Management's Discussion and Analysis, describe
future plans or strategies and include the Company's expectations of future
financial results. The words "believe," "expect," "anticipate," "estimate,"
"project" and similar expressions identify forward-looking statements. The
Company's ability to predict results or the effect of future plans or strategies
or qualitative or quantitative changes based on market risk exposure is
inherently uncertain. Factors which could affect actual results include but are
not limited to change in general market interest rates, general economic
conditions, legislative/regulatory changes, fluctuations of interest rates,
changes in the quality or composition of the Company's loan and investment
portfolios, deposit flows, competition, demand for financial services in the
Company's markets, and changes in the accounting principles, policies, and
guidelines. These factors should be considered in evaluating the forward-looking
statements, and undue reliance should not be placed on such statements.
SUMMARY
Alliance reported a 10.1% increase in earnings for the first quarter ended March
31, 2000, with net income totaling $771 thousand compared to $700 thousand a
year earlier. First quarter earnings per share increased to $.33 compared to
$.30 last year, on a diluted basis. Alliance also increased the quarterly cash
dividend to seven cents per share, a 16.7% increase over the previous quarterly
dividend of six cents per share.
Excluding purchased government guaranteed loans, the loan portfolio grew at a
16.9% annualized rate in the first quarter, while deposits increased at a 13.1%
annualized rate. Loan growth was primarily in commercial loans which grew at a
significant pace, reflecting the Company's emphasis on the commercial sector.
Tolland Bank is continuing to build its basic business, and is experiencing
steady growth in the new offices opened last year. Tolland Bank was the first
local bank in its market to enroll in the SUM network of over 1400 ATMs, which
provides a surcharge free alternative to larger banks which have introduced ATM
surcharges. During the first quarter, Alliance announced new management
assignments to lead sales and service. Alliance also announced the placement of
a trust preferred security which increased regulatory capital.
First quarter net interest income grew by $422 thousand (17.7%), reflecting the
loan and deposit growth noted above, which also produced an increase in the net
interest margin to 3.97% from 3.77%. Service charge and fee income decreased by
$111 thousand (26.4%) due to unusually high secondary market fees and loan
prepayment fees in 1999. Non-interest expense increased by $206 thousand (11.0%)
due to expansion and new offices.
Total assets were $320.0 million at March 31, 2000, up 4.3% from year-end 1999.
Shareholders' equity totaled $15.6 million, up 8.9% since year-end, including an
increase in accumulated other comprehensive income as a result of changes in the
market value of securities available for sale.
During the most recent quarter, Alliance placed $3.5 million in 10.875%
cumulative trust preferred securities through a wholly owned Delaware
subsidiary, Alliance Capital Trust II. All proceeds qualify as regulatory
capital, and $3.3 million in proceeds were contributed to Tolland Bank as
additional capital surplus. Capital at the holding company and the Bank remained
in excess of all regulatory requirements at March 31, 2000.
RESULTS OF OPERATIONS
Net Interest Income: Net interest income increased by $422 thousand (17.7%) in
the first quarter of 2000, compared to the same period of 1999. This was
primarily due to a 10.3% increase in average earnings asset, together with the
benefit of an increase in the fully taxable equivalent net interest margin to
3.97% from 3.77%.
10
Total earning assets grew by approximately 4.1% during the most recent quarter,
excluding the unusually high level of cash and due from banks at year-end 1999
which was held as part of the Year 2000 contingency plan. Earning assets grew at
a 16.4% annualized rate in the most recent quarter. As noted above, this was
mostly due to the annualized growth rate of loans, primarily reflecting
commercial loan growth. While higher interest rates in the first quarter
contributed to reduced demand for residential mortgages and consumer loans,
Alliance has solicited a mix of variable and fixed rate commercial loans which
reflect the ongoing strong business conditions in the Connecticut markets.
The net interest margin had remained within the range of 3.77% to 3.84% during
the first three months of 1999. The margin grew to an unusually high 4.08% in
the fourth quarter of 1999, and measured 3.97% in the most recent quarter.
Similarly, the net interest spread averaged 3.34% in the first nine months of
1999, and then increased to 3.68% in the fourth quarter of 1999 and 3.56% in the
most recent quarter. These improvements over the last six months primarily
reflect higher loan yields, as a result of increases in the prime interest rate
and due to higher interest rates on fixed rate loans. Additionally, they reflect
the contributions of securities purchases made during the first three quarters
of 1999. They also include the benefit of ongoing growth in demand deposit
accounts, particularly in new offices. Demand deposits averaged $27.9 million
during the most recent quarter, an increase of $3.7 million (13.3%) over the
average of 1999. Alliance has also benefited from growth in other core deposit
accounts over this period, reducing its need to fund growth with relatively more
expensive time deposits in the current rising rate environment. The 4.07% cost
of interest bearing deposits in the most recent quarter was little higher than
the 4.04% average cost in 1999.
Provision for Loan Losses: The provision is made to maintain the allowance for
loan losses at a level deemed adequate by management. The provision was $87
thousand in the most recent quarter, compared to $125 thousand in the same
quarter of 1999. During the most recent quarter, the allowance was increased
from $3.20 million to $3.25 million due primarily to growth in commercial loans.
Please see the later discussion on the Allowance for Loan Losses.
Non-Interest Income: Service charge and fee income decreased by $111 thousand
(26.4%) due to unusually high secondary market fees and loan prepayment fees in
1999. As noted above, lower demand for residential mortgages due to higher rates
also contributed to a decline in secondary market income in the most recent
quarter. Merchant card processing income increased by $45 thousand in 2000 due
to the collection of disputed processing charges. Fee income in the most recent
quarter also included a $35 thousand increase in the cash value of bank owned
life insurance, which was purchased in the fourth quarter of 1999. Securities
gains totaled $104 thousand during the first quarter of both 2000 and 1999. The
gains recorded in 2000 were on one common equity security which had an unusual
price increase which was not viewed as sustainable, and the security was
therefore sold to take advantage of this situation.
Non-Interest Expense and Tax Expense: Non-interest expense increased by $206
thousand (11.0%) due to expansion and new offices. Compensation related expense
grew by $103 thousand (10.2%) in the first quarter and all other expenses
increased by $103 thousand (11.9%). About $65 thousand of the first quarter
increase in other expenses was due to marketing related expenses, with the
balance being related to general growth, higher equipment depreciation, and the
costs of new offices opened around the fourth quarter of 1999. The effective tax
rate was 27% in the first quarter of both 1999 and 2000, reflecting the benefit
of the passive investment subsidiary and the dividends received deduction on
equity securities.
Comprehensive Income: Comprehensive income includes changes (after tax) in the
market valuation of investment securities available for sale. Comprehensive
income was $1.42 million in the most recent quarter, compared to a loss of $1.46
million in the same period of 1999. During the most recent quarter,
comprehensive income included the benefit of improved values of available for
sale securities; in the first quarter of 1999, comprehensive income included the
impact of a decrease in the values of available for sale securities. Please see
the following discussion on investment securities.
11
FINANCIAL CONDITION
Cash and Cash Equivalents: Total cash and equivalents increased by $8.9 million
during the most recent quarter, pending anticipated growth in loans and
investments during the remainder of the year. As previously noted, most short
term liquidity at year-end 1999 was held in cash and due from banks in
accordance with the Company's Year 2000 contingency plan. As of March 31, 2000,
most liquid funds were held in short term investments in accordance with normal
liquidity management.
Investment Securities: Total investment securities decreased by $2.7 million in
the first quarter, primarily due to the maturity of older, lowering yielding
structured U.S. agency securities. Investment purchases have decreased due to a
decision to hold liquid funds in the current rising rate environment, with an
anticipation of higher future potential yields on investment purchases. At March
31, 2000, the total net unrealized loss on available for sale securities (AFS)
was $5.1 million (9.1% of amortized cost), an improvement of $742 thousand since
year-end 1999. About half of this improvement was due to higher equity security
prices, primarily for utility common equity securities. The remainder of the
improvement was in debt securities, including the benefit of a credit upgrade on
one security due to a merger. The yield on AFS securities averaged 8.04% in the
most recent quarter, compared to 7.35% a year earlier.
Total Loans: Total loans increased by $6.4 million (3.3%) during the most recent
quarter, due to growth of $6.6 million in total commercial loans. The yield on
loans increased to 8.14% in the most recent quarter, from 7.81% a year earlier,
due to increases in the prime rate and in other loan rates.
Nonperforming Assets: Nonaccruing loans totaled $1.2 million at March 31, 2000,
unchanged from year-end 1999. Including foreclosed assets of $132 thousand,
total nonperforming assets measured 0.40% of total assets at March 31, 2000,
unchanged from year-end 1999.
Allowance for Loans Losses: The allowance totaled $3.25 million (1.64% of total
loans) at March 31, 2000, compared to 1.67% of total loans at year-end 1999.
During the most recent quarter, gross chargeoffs totaled $43 thousand and gross
recoveries totaled $6 thousand. The allowance measured 280% of total nonaccruing
loans at the most recent quarter-end.
Deposits and Borrowings: Total deposits increased by $8.2 million (3.3%) in the
first quarter of 2000. Most account categories grew, reflecting ongoing
promotions and the contribution of new offices opened in 1999. Borrowings
increased due to the issuance of the $3.5 million capital trust security
previously mentioned. This brings total outstanding capital trust obligations to
$7.0 million.
Interest Rate Sensitivity: The one year interest rate gap increased to $28
million (9% of total earning assets), compared to $18.0 million (6% of earning
assets, adjusted for Year 2000 liquidity) at year-end 1999. Alliance is
attempting to maintain a positive one year gap, utilizing time account growth in
the 1-3 year maturity range to fund variable rate assets, in order to benefit
from improved spreads based on anticipated increases in interest rates.
Liquidity and Cash Flows: The Bank's primary uses of funds during the quarter
were growth in short term investments, and originations of commercial loans. The
primary sources of funds were deposit growth and the issuance of the trust
preferred security. Borrowings, time deposits, and money market accounts are the
primary sources of liquidity for additional balance sheet growth. Short term
investments, securities available for sale, and government guaranteed loan
certificates provide additional sources of liquidity. The Company's primary
source of funds is dividends from the Bank, and its primary use of funds is
dividends to shareholders and to trust preferred security holders.
12
Capital Resources: During the most recent quarter, shareholders' equity
increased by $1.3 million (8.9%) to $15.6 million, reflecting the contribution
of retained earnings and other comprehensive income. Excluding accumulated other
comprehensive income, return on average equity measured 15.03% in the most
recent quarter. Total equity measured 4.9% of assets at March 31, 2000,
increasing from 4.7% at year-end 1999. As of March 31, 2000, both Tolland Bank
and Alliance reported regulatory capital ratios consistent with the "well
capitalized" regulatory classification.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See discussion and analysis of quantitative and qualitative disclosures about
market risk provided in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 filed March 30, 2000. There have been no material
changes in reported market risks faced by the Company since the end of 1999. See
also the discussion of Interest Rate Sensitivity in Item 2 of this Form 10Q.
13
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings
other than ordinary routine litigation incidental to its business.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
Item 5. OTHER INFORMATION
None.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibit index
The exhibits listed below are included in this report or are
incorporated herein by reference to the identified document
previously filed with the Securities and Exchange Commission
as set forth parenthetically.
27 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended March 31, 2000.
The Company did not file any reports on Form 8-K during the
quarter ended March 31, 2000.
14
Average Balance Sheet and Interest Rates - Fully Taxable Equivalent (FTE)
(dollars in thousands) Average Balance Rate (FTE Basis)
- --------------------------------------------- --- -----------------------------------------------
Quarters ended March 31 2000 1999 2000 1999
- --------------------------------------------- --------------- ------------------------- ---------
Loans $ 193,510 $ 182,652 8.14% 7.81%
Securities available for sale 56,901 63,498 8.06 7.35
Securities held to maturity 27,551 14,336 7.87 5.51
Other earning assets 17,996 7,791 4.60 5.23
- --------------------------------------------- --------------- ------------------------- ---------
Total earning assets 295,958 268,277 7.89 7.52
Other assets 20,190 10,076
- --------------------------------------------- --------------- ------------------------- ---------
Total assets $ 316,148 $ 278,353
- --------------------------------------------- --------------- ------------------------- ---------
Interest bearing deposits $ 227,966 $ 213,334 4.07 4.14
Borrowings 39,855 23,610 5.80 5.14
- --------------------------------------------- --------------- ------------------------- ---------
Interest bearing liabilities 267,821 236,944 4.33 4.24
Other liabilities 33,289 23,449
Shareholder's equity 15,038 17,960
- --------------------------------------------- --------------- ------------------------- ---------
Total liabilities and equity $ 316,148 $ 278,353
- --------------------------------------------- --------------- ------------------------- ---------
Net Interest Spread 3.56% 3.28%
Net Interest Margin 3.97% 3.77%
15
Signatures
Pursuant to the requirements to Section 13 or 15(d) 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.
ALLIANCE BANCORP OF NEW ENGLAND, INC.
Date: May 11, 2000 /s/ Joseph H. Rossi
-------------------
Joseph H. Rossi
President/CEO
Date: May 11, 2000 /s/ David H. Gonci
------------------
David H. Gonci
Senior Vice President/CFO
16