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EXHIBIT 99.2
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Balance Sheets
MARCH 31, DECEMBER 31,
1998 1997
-------------- ------------
(Unaudited)
(In Thousands)
ASSETS
Cash, due from banks........................................................... $ 8,240 $ 7,731
Federal Home Loan Bank overnight deposits...................................... 7,490 2,805
Interest-bearing deposits in other banks....................................... 177 177
---------- ----------
Total cash and cash equivalents..................................... 15,907 10,713
---------- ----------
Investment securities-fair value $82,705,000 and $89,410,000................... 82,150 89,143
Loans, net of unearned income.................................................. 416,322 419,845
Allowance for loan losses...................................................... (7,895) (7,668)
---------- ----------
Loans, net.......................................................... 408,427 412,177
---------- ----------
Other real estate owned, net................................................... 4,402 5,711
Land, buildings and equipment, net............................................. 12,372 12,538
Accrued interest receivable ................................................... 2,921 2,994
Federal Home Loan Bank of Boston stock, at cost................................ 2,513 2,273
Deferred income taxes.......................................................... 2,700 2,700
Other assets................................................................... 1,628 1,423
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$ 533,020 $ 539,672
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Deposits....................................................................... $ 452,477 $ 455,886
Borrowed funds................................................................. 38,447 43,376
Other liabilities.............................................................. 3,446 4,533
---------- ----------
Total liabilities................................................... 494,370 503,795
---------- ----------
Commitments and contingencies (Note 2)
Stockholders' equity:
Serial preferred stock $1 par value; 5,000,000 shares authorized, none
issued and outstanding.....................................................
Common stock, $1.00 par value; 20,000,000 shares authorized, 16,726,856
and 16,659,356 shares issued and outstanding............................... 16,727 16,659
Additional paid-in capital..................................................... 18,692 18,652
Retained earnings.............................................................. 3,231 566
---------- ----------
Total stockholders' equity.......................................... 38,650 35,877
---------- ----------
$ 533,020 $ 539,672
========== ==========
See accompanying notes to unaudited consolidated financial statements.
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SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Income
THREE MONTHS ENDED MARCH 31,
1998 1997
---- ----
(In Thousands, Except Per Share
Data)
(Unaudited)
Interest and dividend income:
Loans...................................................... $ 9,945 $ 8,843
Mortgage-backed securities................................. 1,370 1,333
Other debt securities...................................... 25 84
Equity securities.......................................... 37 68
Short-term investments..................................... 55 56
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Total interest and dividend income........... 11,432 10,384
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Interest expense:
Deposits................................................... 5,057 4,993
Borrowed funds............................................. 600 583
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Total interest expense....................... 5,657 5,576
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Net interest income.......................................... 5,775 4,808
Provision for loan losses.................................... 300
------- ------
Net interest income after provision for loan losses........ 5,775 4,508
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Other income:
Net gain on sales of loans................................. 9 6
Gain on sale of interest rate exchange agreement........... 158
Service charges on deposit accounts........................ 143 154
Miscellaneous income....................................... 88 122
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Total other income......................................... 398 282
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Operating expenses:
Salary and employee benefits............................... 1,827 1,710
Occupancy and equipment.................................... 404 390
Data processing............................................ 152 137
Legal and professional fees................................ 110 191
FDIC insurance assessments................................. 48 273
Costs associated with problem assets....................... 309 390
Net loss on other real estate owned........................ 34 63
Other general and administrative........................... 605 648
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Total operating expenses..................... 3,489 3,802
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Income before income taxes................................... 2,684 988
Income taxes................................................. 19
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Net income.................................. $ 2,665 $ 988
======== ========
Weighted average shares outstanding.......................... 16,665 16,652
======== ========
Weighted average shares outstanding outstanding-assuming
dilution..................................................... 16,964 16,832
======== ========
Basic earnings per share..................................... $ 0.16 $ 0.06
======== ========
Diluted earnings per share................................... $ 0.16 $ 0.06
======== ========
See accompanying notes to unaudited consolidated financial statements.
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SOMERSET SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED
MARCH 31, 1998 AND 1997
ACCUMULATED
ADDITIONAL RETAINED OTHER
COMPREHENSIVE COMMON PAID-IN EARNINGS COMPREHENSIVE
INCOME STOCK CAPITAL (DEFICIT) INCOME TOTAL
------------- -------- ---------- --------- ------------- --------
(IN THOUSANDS, UNAUDITED)
Balance at December 31, 1997..... $ 16,659 $ 18,652 $ 566 $ 35,877
Comprehensive income:
Net income..................... $ 2,665 2,665 2,665
========
Compensation recognized on stock
option grants 15 15
Exercise of stock options 68 25 93
-------- -------- -------- --------
Balance March 31, 1998........... $ 16,727 $ 18,692 $ 3,231 $ - $ 38,650
======== ======== ======== =========== ========
Balance December 31, 1996........ $ 16,652 $ 18,597 $ (5,401) $ 29,848
Comprehensive income:
Net income..................... $ 988 988 988
======== -------- --------
Balance March 31, 1997........... $ 16,652 $ 18,597 $ (4,413) $ - $ 30,836
======== ======== ======== =========== ========
The accompanying notes are an integral part of these consolidated financial statements.
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SOMERSET SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
1998 1997
---- ----
(IN THOUSANDS,
UNAUDITED)
Cash flows from operating activities:
Net income.............................................................................. $ 2,665 $ 988
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses.............................................................. 300
Loans originated for sale.............................................................. (5,334) (1,483)
Principal balance of loans sold........................................................ 5,334 1,483
Net amortization of premiums and discounts on investment securities.................... 17 7
Amortization of net deferred loan fees and unearned income............................. (744) (215)
Compensation recognized on stock option grants......................................... 15
Depreciation and amortization expense.................................................. 180 168
Net loss on other real estate owned.................................................... 34 63
(Increase) decrease in accrued interest receivable...................................... 73 (116)
(Increase) decrease in other assets..................................................... (205) 337
Decrease in other liabilities.......................................................... (1,087) (363)
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Net cash provided by operating activities....................................... 948 1,169
Cash flows from investing activities:
Proceeds from calls and maturities of investment securities.............................. 2,000 3,000
Purchase of investment securities........................................................ (3,951)
Principal payments received on mortgage-backed securities................................ 4,976 1,918
Purchase of Federal Home Loan Bank stock................................................. (240)
Redemption of Federal Home Loan Bank stock.............................................. 2,149
Loans purchased.......................................................................... (5,738)
Net (increase) decrease in loans......................................................... 9,630 (447)
Proceeds from sales and principal reductions of other real estate owned.................. 1,892 998
Improvements to other real estate owned.................................................. (15)
Purchase of equipment.................................................................... (14) (340)
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Net cash provided by investing activities....................................... 12,491 3,327
Cash flows from financing activities:
Net increase (decrease) in deposits..................................................... (3,409) 4,183
Net decrease in borrowings with maturities of less than three months.................... (5,929)
Proceeds from issuance of borrowings with maturities in excess of three months.......... 26,000
Repayment of borrowings with maturities in excess of three months....................... (25,000)
Exercise of stock options............................................................... 93
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Net cash provided by (used by) financing activities............................. (8,245) 4,183
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Net increase in cash and cash equivalents................................................ 5,194 8,679
Cash and cash equivalents at beginning of period........................................ 10,713 8,219
------- --------
Cash and cash equivalents at end of period.............................................. $ 15,907 $ 16,898
======== ========
Supplementary Cash Flow Information:
Interest paid on deposits............................................................. $ 5,025 $ 4,945
======== ========
Interest paid on borrowed funds....................................................... $ 669 $ 582
======== ========
Property acquired in settlement of loans.............................................. $ 602 $ 1,035
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
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SOMERSET SAVINGS BANK AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1: BASIS OF PRESENTATION AND CONSOLIDATION
The consolidated interim financial statements of Somerset Savings Bank
and subsidiaries presented herein should be read in conjunction with
the consolidated financial statements of Somerset Savings Bank in the
annual report on Form 10-K for the year ended December 31, 1997.
In the opinion of management, the financial statements reflect all
adjustments (consisting solely normal recurring accruals) necessary for
a fair presentation of such information. Interim results are not
necessarily indicative of results to be expected for the entire year.
NOTE 2: COMMITMENTS AND CONTINGENCIES
At March 31, 1998, the Bank had outstanding commitments to originate
loans amounting to approximately $13.7 million, unadvanced funds on
construction loans and lines of credit amounting to approximately $9.4
million and $17.0 million, respectively, and standby letters of credit
amounting to $364,000.
NOTE 3: COMPREHENSIVE INCOME
In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997.
Accounting principles generally require that recognized revenue,
expenses, gains and losses be included in net income. Certain FASB
statements, however, require entities to report specific changes in
assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, as a separate component of the equity
section of the balance sheet. Such items, along with net income, are
components of comprehensive income. SFAS No. 130 requires that all
items of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
Additionally, SFAS No. 130 requires that the accumulated balance of
other comprehensive income be displayed separately from retained
earnings and additional paid-in capital in the equity section of the
balance sheet. The Bank adopted these disclosure requirements in the
first quarter of 1998 and has presented comparative disclosure for the
quarter ended March 31, 1997. The Bank had no other components of
comprehensive income other than net income.
NOTE 4: SEGMENTS AND RELATED INFORMATION
In June 1997, FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual and interim financial statements. It also
establishes standards for related disclosures about products and
services, geographic areas and major customers. Generally, financial
information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to
allocate resources to segments. The Statement also requires descriptive
information about the way that the operating segments were determined,
the products and services provided by the operating segments,
differences
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between the measurements used in reporting segment information and
those used by the enterprise in its general purpose financial
statements, and changes in the measurement of segment amounts from
period to period. The Bank has determined that its business is
comprised of a single segment and that SFAS No. 131, therefore, has no
impact on the consolidated financial statements.
NOTE 5: EARNINGS PER SHARE
In February 1997, FASB issued SFAS No. 128, "Earnings Per Share," which
requires that earnings per share be calculated on a basic and a
dilutive basis. Basic earnings per share represents income available to
common stock divided by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflects
additional common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to
income that would result from the assumed conversion. Potential common
shares that may be issued by the Bank relate solely to outstanding
stock options and are determined using the treasury stock method. The
assumed conversion of outstanding dilutive stock options would increase
shares outstanding but would not require an adjustment to income as a
result of the conversion. SFAS No. 128 is effective for interim and
annual periods ending after December 15, 1997, and requires the
restatement of all prior-period earnings per share data presented.