- --------------------------------------------------------------------------------
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
September 30, December 31,
1997 1996
--------- ---------
(In Thousands)
(Unaudited)
Assets
Cash and due from banks ............................ $ 7,527 $ 6,942
Federal Home Loan Bank overnight deposits .......... 1,155 1,000
Interest-bearing deposits in other banks ........... 177 277
--------- ---------
Total cash and cash equivalents ................ 8,859 8,219
--------- ---------
Investment securities - fair value
$92,927,000 and $87,633,000 ....................... 92,909 88,065
Loans, net of unearned income ...................... 396,960 394,956
Allowance for loan losses .......................... (7,434) (6,236)
--------- ---------
Loans, net ..................................... 389,526 388,720
--------- ---------
Other real estate owned, net ....................... 7,240 8,910
Land, buildings and equipment, net ................. 12,668 12,575
Accrued interest receivable ........................ 3,125 3,048
Federal Home Loan Bank of Boston stock, at cost .... 2,273 4,422
Deferred income taxes .............................. 2,375 1,450
Other assets ....................................... 1,364 1,933
--------- ---------
$ 520,339 $ 517,342
========= =========
Liabilities and Stockholders' Equity
Deposits ........................................... $ 457,813 $ 442,535
Borrowed funds ..................................... 23,547 40,447
Other liabilities .................................. 4,646 4,512
--------- ---------
Total liabilities ............................... 486,006 487,494
--------- ---------
Commitments and contingencies (note 2)
Stockholders' equity:
Serial preferred stock, $1.00 par value;
5,000,000 shares authorized, none issued
and outstanding
Common stock, $1.00 par value; 20,000,000
shares authorized, 16,651,602 shares
issued and outstanding ........................... 16,652 16,652
Additional paid-in capital ......................... 18,637 18,597
Retained deficit ................................... (956) (5,401)
--------- ---------
Total stockholders' equity ..................... 34,333 29,848
--------- ---------
$ 520,339 $ 517,342
========= =========
See accompanying notes to unaudited consolidated financial statements.
49
- --------------------------------------------------------------------------------
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Income
- --------------------------------------------------------------------------------
Three Months Ended
September 30,
----------------------
1997 1996
--------- ---------
(In Thousands,
Except Per Share Data)
(Unaudited)
Interest and dividend income:
Loans .............................................. $ 8,955 $ 8,829
Mortgage-backed securities ......................... 1,397 1,247
Other debt securities .............................. 50 30
Equity securities .................................. 37 115
Short-term, investments ............................ 35 20
--------- ---------
Total interest and dividend income ............ 10,474 10,241
--------- ---------
Interest expense:
Deposits ........................................... 5,220 5,078
Borrowed funds ..................................... 294 501
--------- ---------
Total interest expense ........................ 5,514 5,579
--------- ---------
Net interest income ................................ 4,960 4,662
Provision for loan losses .......................... 300 300
--------- ---------
Net interest income
after provision for loan losses ............... 4,660 4,362
--------- ---------
Other income:
Net gain on sales of loans ......................... 1 13
Gain on sale of interest-rate exchange agreement ... 172 --
Service charges on deposit accounts ................ 159 150
Miscellaneous income ............................... 118 110
--------- ---------
Total other income ............................ 450 273
--------- ---------
Operating expenses:
Salaries and employee benefits ..................... 1,823 1,731
Occupancy and equipment ............................ 407 401
Data processing .................................... 140 126
Legal and professional fees ........................ 108 202
FDIC insurance assessments ......................... 124 263
Costs associated with problem assets ............... 246 472
Net loss on other real estate owned ................ 206 198
Other general and administrative ................... 625 625
--------- ---------
Total operating expenses ....................... 3,679 4,018
--------- ---------
Income before income taxes ......................... 1,431 617
Income tax provision (benefit) ..................... (318) 10
--------- ---------
Net income ......................................... $ 1,749 $ 607
========= =========
Net income per share ............................... $ 0.10 $ 0.04
========= =========
Weighted average shares outstanding ................ 16,945 16,652
========= =========
See accompanying notes to unaudited consolidated financial statements.
50
- --------------------------------------------------------------------------------
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Income
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
----------------------
1997 1996
--------- ---------
(In Thousands,
Except Per Share Data)
(Unaudited)
Interest and dividend income:
Loans ............................................ $ 26,753 $ 26,596
Mortgage-backed securities ....................... 4,063 3,294
Other debt securities ............................ 215 31
Equity securities ................................ 185 255
Short-term investments ........................... 135 257
--------- ---------
Total interest and dividend income ............ 31,351 30,433
--------- ---------
Interest expense:
Deposits ......................................... 15,353 15,155
Borrowed funds ................................... 1,218 1,528
--------- ---------
Total interest expense ........................ 16,571 16,683
--------- ---------
Net interest income ................................ 14,780 13,750
Provision for loan losses .......................... 900 900
--------- ---------
Net interest income
after provision for loan losses ............. 13,880 12,850
--------- ---------
Other income:
Net gain on sales of loans ....................... 22 25
Gain on sale of interest-rate exchange agreement . 172 --
Service charges on deposit accounts .............. 479 434
Miscellaneous income ............................. 331 288
--------- ---------
Total other income ............................ 1,004 747
--------- ---------
Operating expenses:
Salaries and employee benefits ................... 5,237 5,154
Occupancy and equipment .......................... 1,194 1,151
Data processing .................................. 411 375
Legal and professional fees ...................... 463 577
FDIC insurance assessments ....................... 673 776
Costs associated with problem assets ............. 980 1,486
Net loss on other real estate owned .............. 431 630
Other general and administrative ................. 1,968 1,886
--------- ---------
Total operating expenses ...................... 11,357 12,035
--------- ---------
Income before income taxes ......................... 3,527 1,562
Income tax benefit ................................. (918) (440)
--------- ---------
Net income .................................... $ 4,445 $ 2,002
========= =========
Net income per share ............................... $ 0.26 $ 0.12
========= =========
Weighted average shares outstanding ................ 16,878 16,652
========= =========
See accompanying notes to unaudited consolidated financial statements.
51
- --------------------------------------------------------------------------------
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended
September 30, 1997 and 1996
- --------------------------------------------------------------------------------
Additional
Common Paid-in Retained
Stock Capital Deficit Total
------- ------- ------- -------
(In Thousands)
(unaudited)
Balance at December 31, 1996 .......... $16,652 $18,597 $(5,401) $29,848
Net income ............................ -- -- 4,445 4,445
Issuance of stock options ............. -- 40 -- 40
------- ------- ------- -------
Balance at September 30, 1997 ......... $16,652 $18,637 $ (956) $34,333
======= ======= ======= =======
Balance at December 31, 1995 .......... $16,652 $18,597 $(8,214) $27,035
Net income ............................ -- -- 2,002 2,002
------- ------- ------- -------
Balance at September 30, 1996 ......... $16,652 $18,597 $(6,212) $29,037
======= ======= ======= =======
See accompanying notes to unaudited consolidated financial statements.
52
- --------------------------------------------------------------------------------
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
----------------------
1997 1996
--------- ---------
(In Thousands)
(Unaudited)
Cash flows from operating activities:
Net income ......................................... $ 4,445 $ 2,002
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses ..................... 900 900
Loans originated for sale ..................... (7,947) (5,494)
Principal balance of loans sold ............... 7,947 5,494
Net amortization (accretion) of premiums and
discounts on investment securities ........... 39 (21)
Amortization of net deferred loan fees
and unearned income .......................... (718) (887)
Issuance of stock options ..................... 40
Depreciation and amortization expense ......... 518 460
Net loss on other real estate owned ........... 431 630
Increase in accrued interest receivable ....... (77) (101)
Deferred income tax benefit ................... (925) (450)
Decrease in other assets ...................... 569 314
Increase (decrease) in other liabilities ...... 134 (549)
--------- ---------
Net cash provided by operating activities ... 5,356 2,298
--------- ---------
Cash flows from investing activities:
Proceeds from calls and maturities
of investment securities ......................... 5,000 --
Purchase of investment securities ................. (16,824) (26,641)
Principal payments received on
mortgage-backed securities ....................... 6,941 5,304
Loans purchased ................................... (9,920) --
Net decrease in loans ............................. 5,921 4,114
Proceeds from sales and principal reductions
of other real estate owned ....................... 4,250 4,768
Improvements to other real estate owned ........... -- (42)
Redemption of Federal Home Loan Bank stock ........ 2,149 --
Purchase of equipment ............................. (611) (410)
--------- ---------
Net cash used by investing activities ......... (3,094) (12,907)
========= =========
(Continued)
53
- --------------------------------------------------------------------------------
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Continued)
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
----------------------
1997 1996
--------- ---------
(In Thousands)
(Unaudited)
Cash flows from financing activities:
Net increase in deposits .......................... 15,278 2,626
Net increase in short-term borrowings
with maturities of three months or less .......... 3,100 10,200
Proceeds from issuance of borrowings
with maturities in excess of three months ........ 30,000 --
Repayment of borrowings with maturities
in excess of three months ........................ (50,000) (10,000)
--------- ---------
Net cash provided by (used by) financing
activities .................................. (1,622) 2,826
--------- ---------
Net increase (decrease) in cash and cash
equivalents ...................................... 640 (7,783)
Cash and cash equivalents at
beginning of period .............................. 8,219 12,581
--------- ---------
Cash and cash equivalents at end of period ......... $ 8,859 $ 4,798
========= =========
Supplementary Cash Flow Information:
Interest paid on deposits .......................... $ 15,260 $ 15,152
Interest paid on borrowed funds .................... 1,393 1,577
Property acquired in settlement of loans ........... 3,011 2,484
See accompanying notes to unaudited consolidated financial statements.
54
- --------------------------------------------------------------------------------
SOMERSET SAVINGS BANK AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
September 30, 1997
- --------------------------------------------------------------------------------
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 for the year ended December 31, 1996.
In the opinion of management, the financial statements reflect all
adjustments (consisting solely of 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.
2) Commitments and Contingencies
At September 30, 1997, the Bank had outstanding commitments to originate
loans amounting to approximately $6.8 million, unadvanced funds on
construction loans and lines of credit amounting to approximately $9.6
million and $13.3 million, respectively, and standby letters of credit
amounting to $479,000.
3) Earnings Per Share
Earnings per share is computed using the weighted average number of shares
and common stock equivalents outstanding during each period. Earnings per
share computations include common stock equivalents attributable to
outstanding stock options.
55