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American Bank of Connecticut (AMEX: BKC)
Two West Main Street, Waterbury 06723
President and CEO: William E. Solberg
Revenues (Interest Income FYE December 31, 1998): $46,113,000
Net income (FYE December 31, 1998): $10,107,000
Market capitalization: $101.9 million
Employees: 154
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Business New Haven
10/18/1999
By:
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What do Waterbury, Torrington, Middlebury, Seymour, Woodbury, Wolcott, Winsted and Watertown have in common? Yes, they all are near one another, but also they are all are home to operations of American Bank of Connecticut. Along with these locations the bank also has an operations center in Hartford.
American Bank was founded in 1920 as a savings and loan association, but converted to a state savings bank in 1985. Since 1981 it has been a publicly traded company and has traded on the American Stock Exchange since 1987. The bank's primary business is retail banking, residential lending, consumer credit, commercial credit, commercial real estate and lending associated with the U.S. Small Business Administration (SBA).
With assets of $736.7 million and stockholders' equity of $61.6 million as of June 30, the bank is small in comparison to others located in and/or servicing Connecticut. Regardless of size (or perhaps because of it), service ranks high for customer satisfaction. In recognition of this, American Bank embarked on a plan to get the word out on its customer service abilities.
In 1998, to complement its home equity line, the bank introduced a fixed-rate home equity loan. Also, the bank attained SBA certified-lender status, allowing clients three-day turnaround on loan approvals. In addition, the bank also introduced home banking capabilities as well as a 24-hour telephone answer line called AccessLine. It added an Education IRA and Roth IRA to allow customers tax-deferred savings opportunities.
In 1998, the bulk of the bank's growth in assets was fueled by loan growth, with commercial loans growing at 20 percent and mortgage loans at five percent. The bank cites loan originations at a record high for 1998 at $135.8 million.
At December 1998, 94 percent of the bank's $388.4 million loan portfolio comprised real estate loans, with the other six percent in consumer and commercial non-real estate borrowings. The bank allowed for $6.7 million in loan losses, resulting in net loans of $381.6 million at the end of 1998.
Over the same period, deposits grew by more than six percent ($31 million) from the prior year to $490.5 million, with the majority of the growth in the more liquid checking, demand and money-market accounts. Time deposits, although still accounting for more than 45 percent of total deposits, fell by more than six percent ($15 million) to $222 million as a result of depositors wishing to keep assets more liquid. Checking and demand accounts comprised almost 17 percent of total deposits, with savings accounting for the remaining 38 percent.
As of December 31, 1998, the bank held investments in excess of $250 million, with 75 percent ($190 million) in investment securities and 25 percent ($63 million) in mortgage-backed securities. Investments held include those of the U.S. Treasury and other federal agencies, corporate bonds, state and other debt securities, as well as common and preferred stock and Federal Home Loan Bank stock. Contributing to profitability was the bank's return on its investment portfolio. More than 28 percent, or $13.1 million, of the bank's 1998 total interest income derived from interest and/or dividends from investment or mortgage-backed securities. In addition, the bank reported non-interest income of $1.2 million from a net gain on the sale of securities and $2.2 million from stock-option premiums.
For 1998, the bank reported total interest income of $46.1 million, compared to $43.3 million for 1997. Minus the interest expense and provision for loan losses, net interest income was $17.9 million for 1998 compared to $17.3 million for the year before. Net earnings were $10.7 million ($2.24 per diluted share) compared to $7.9 million ($1.69 per diluted share) for 1997.
The bank cites several economic factors that positively affected the results for 1998. The federal funds rate and the 30-year Treasury bond rate both closed lower at the end of 1998. The Connecticut economy showed continuing improvement, with employment, retail sales, building permits all higher and with continued positive movement predicted for 1999. The strong economy and lower interest rates fueled an increase in demand for both housing loans and commercial projects.
In March 1998, American Bank's directors declared a two-for-one stock split paid via stock dividend. Also during the year the regular quarterly dividend was increased by one cent in February and again in August. In November a special dividend was declared of ten cents, bringing total 1998 dividends paid to 88 cents per share. In September of this year, the board increased the dividend to 23 cents from 21 cents per share, the second increase this year.
For the first six months of 1999, net interest income after loan loss provision was reported at $10.1 million, compared to $9.4 million for the comparable 1998 period Net earnings for the period were $5.0 million ($1.05 per diluted share) compared to $4.4 million (92 cents per diluted share) for the comparable 1998 period. The bank cites a strong economy as well as reduced provision for loan losses and increased loan growth, deposits and total assets as responsible for its results.
In other notable events, at the end of 1998 the company's CEO of 26 years, Gene Guilbert, stepped down from that position but continues his service as a director and chairs the board. In January, the bank incorporated a new subsidiary and passive investment company, BKC Passive Investment Corp., which the bank expects to create a tax benefit for the company.
The bank's stock has traded to a 52-week high of 25 1/2 and low of 17 7/8. Currently it is trading near the middle of that range, closing October 1 at 21 3/8. Current analyst response is mixed, with recommendations of average/attractive or hold. Earnings per share are estimated at $2.10 for the 1999 year and $2.30 for the year 2000.
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