U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON , D.C. 20549
___________________
F O R M 10 - QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the Quarterly Period Ended September 30, 2003
Commission file number 0-49784
SOUTHERN CONNECTICUT BANCORP, INC.
(Name of Small Business Issuer as Specified in Its Charter)
Connecticut 06-1594123
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
215 Church Street
New Haven, Connecticut 06510
(Address of Principal Executive Offices) (Zip Code)
(203) 782-1100
--------------
(Issuer's Telephone Number)
The number of shares of the issuer's Common Stock, par value $.01 per share,
outstanding as of November 10, 2003: 966,667
-------
Transitional Small Business Disclosure Format
Yes No X
--- ---
1
Table of Contents
Part I
Financial Information
Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 2003 (unaudited) and December 31, 2002 3
Consolidated Statements of Operations
for the three and nine months ended September 30, 2003
and 2002 (unaudited) 4
Consolidated Statements of Changes in
Shareholders' Equity for the three and nine months ended
September 30, 2003 and 2002 (unaudited) 5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2003 and 2002 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Item 3. Controls and Procedures 18
Part II
Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 21
Exhibit Index 22
2
PART I
Financial Information
Item 1. Financial Statements
SOUTHERN CONNECTICUT BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2003 (unaudited) and December 31, 2002
2003 2002
---- ----
Assets
Cash and due from banks $ 815,790 $1,245,010
Federal funds sold - 1,144,000
Short-term investments 369,307 662,419
------------------------------------
Cash and cash equivalents 1,185,097 3,051,429
------------------------------------
Available for sale securities 8,746,851 9,501,492
Federal Home Loan Bank Stock 21,500 500
Loans receivable (net of allowance for loan losses of
$353,209 in 2003 and $232,000 in 2002) 35,329,196 19,049,212
Accrued interest receivable 204,105 187,672
Premises and equipment, net 3,501,151 3,052,921
Other assets 696,459 656,889
------------------------------------
Total assets $ 49,684,359 $ 35,500,115
====================================
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest bearing deposits $ 11,914,037 $6,401,759
Interest bearing deposits 27,860,694 18,591,172
------------------------------------
Total deposits 39,774,731 24,992,931
Capital lease obligations 1,191,084 1,191,852
Repurchase agreements 1,158,674 822,259
Accrued expenses and other liabilities 215,923 178,489
Deferred tax liability - 39,905
------------------------------------
Total liabilities 42,340,412 27,225,436
------------------------------------
Commitments and Contingencies - -
Stockholders' Equity
Preferred stock, no par value; 500,000 shares authorized;
none issued
Common stock, par value $.01; 5,000,000, shares authorized;
966,667 shares issued and outstanding 9,667 9,667
Additional paid-in capital 10,705,382 10,705,382
Accumulated deficit (3,126,788) (2,502,915)
Accumulated other comprehensive (loss) income - net unrealized
(loss) gain on available for sale securities (244,314) 62,545
------------------------------------
Total stockholders' equity 7,343,947 8,274,679
------------------------------------
Total liabilities and stockholders' equity $ 49,684,359 $ 35,500,115
====================================
See Notes to Consolidated Financial Statements.
3
SOUTHERN CONNECTICUT BANCORP,INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 2003 and 2002 (unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------- ------------------------------
2003 2002 2003 2002
Interest Income ---- ---- ---- ----
Interest and fees on loans $ 600,932 $ 214,271 $1,548,284 $ 475,836
Interest on securities 66,218 83,759 198,023 176,891
Interest on federal funds sold and
short-term investments 6,935 21,760 29,375 105,185
------------------------------- ------------------------------
Total interest income 674,085 319,790 1,775,682 757,912
------------------------------- ------------------------------
Interest Expense
Interest on deposits 91,468 83,950 276,694 200,589
Interest on capital lease obligations 42,268 32,179 126,350 95,977
Interest on repurchase agreements 1,117 2,463 2,538 2,466
------------------------------- ------------------------------
Total interest expense 134,853 118,592 405,582 299,032
------------------------------- ------------------------------
Net interest income 539,232 201,198 1,370,100 458,880
Provision for Loan Losses 57,100 36,000 143,500 106,000
Net interest income after ------------------------------- ------------------------------
provision for loan losses 482,132 165,198 1,226,600 352,880
------------------------------- ------------------------------
Noninterest Income:
Deposit service charges and fees 34,734 9,420 75,532 26,171
Other noninterest income 13,952 2,210 31,464 3,379
Gains on sales of securities available for sale - - 44,505 -
------------------------------- ------------------------------
Total noninterest income 48,686 11,630 151,501 29,550
------------------------------- ------------------------------
Noninterest Expense
Salaries and benefits 375,123 242,236 1,056,994 626,291
Professional services 62,519 100,255 177,970 266,103
Occupancy and equipment 99,923 41,220 267,962 117,029
Advertising and promotional expense 27,160 20,000 64,660 55,000
Data processing and other outside services 53,617 25,265 140,426 78,210
Postage & communications 18,425 8,852 55,220 22,259
Forms, printing and supplies 13,012 8,792 42,915 26,945
Travel & entertainment 14,502 7,762 39,622 22,362
Other operating expenses 77,762 36,953 156,205 97,491
------------------------------- ------------------------------
Total noninterest expenses 742,043 491,335 2,001,974 1,311,690
------------------------------- ------------------------------
Net loss $ (211,225) $ (314,507) $ (623,873) $ (929,260)
=============================== ==============================
Basic and Diluted Loss per Share $ (0.22) $ (0.33) $ (0.65) $ (0.96)
=============================== ==============================
Dividends per Share $ - $ - $ - $ -
=============================== ==============================
See Notes to Consolidated Financial Statements.
4
SOUTHERN CONNECTICUT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Months and Nine Months Ended September 30, 2003 and 2002 (unaudited)
For the Three Months Ended September 30, 2003 and 2002
Accumulated
Additional Other
Number Common Paid-in Accumulated Comprehensive
of Shares Stock Capital Deficit Income (Loss) Total
----------------------------------------------------------------------------------------
Balance June 30, 2002 966,667 $ 9,667 $ 10,705,382 $ (1,733,655) $ - $ 8,981,394 -
Comprehensive Loss:
Net Loss and total comprehensive loss - - - (314,507) - (314,507)
----------------------------------------------------------------------------------------
Balance September 30, 2002 966,667 $ 9,667 $ 10,705,382 $ (2,048,162) $ - $ 8,666,887
========================================================================================
Balance June 30, 2003 966,667 $ 9,667 $ 10,705,382 $(2,915,563) $ (41,839) $ 7,757,647
Comprehensive Loss:
Net Loss - - - (211,225) - (211,225)
Unrealized holding loss on available
for sale securities - - - - (202,475) (202,475)
---------------
Total comprehensive loss (413,700)
----------------------------------------------------------------------------------------
Balance September 30, 2003 966,667 $ 9,667 $ 10,705,382 $(3,126,788) $ (244,314) $ 7,343,947
========================================================================================
For the Nine Months Ended September 30, 2003 and 2002
Accumulated
Additional Other
Number Common Paid-in Accumulated Comprehensive
of Shares Stock Capital Deficit Income (Loss) Total
----------------------------------------------------------------------------------------
Balance December 31, 2001 966,667 $ 9,667 $ 10,705,382 $ (1,118,902) $ - $ 9,596,147
Net Loss and total comprehensive loss - - - (929,260) (929,260)
----------------------------------------------------------------------------------------
Balance September 30, 2002 966,667 $ 9,667 $ 10,705,382 $ (2,048,162) $ - $ 8,666,887
========================================================================================
Balance December 31, 2002 966,667 $ 9,667 $ 10,705,382 $(2,502,915) $ 62,545 $ 8,274,679
Comprehensive Loss:
Net Loss - - - (623,873) - (623,873)
Unrealized holding loss on available
for sale securities - - - - (306,859) (306,859)
---------------
Total comprehensive loss (930,732)
----------------------------------------------------------------------------------------
Balance September 30, 2003 966,667 $ 9,667 $ 10,705,382 $(3,126,788) $ (244,314) $ 7,343,947
========================================================================================
See Notes to Consolidated Financial Statements.
5
SOUTHERN CONNECTICUT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2003 and 2002 (unaudited) Nine Months Ended
September 30,
-----------------------------------
Cash Flows From Operations 2003 2002
---- ----
Net Loss $ (623,873) $ (929,260)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization and accretion of premiums and discounts on investments, net 22,215 44,551
Gains on sales of available for sale securities (44,405) -
Provision for loan losses 143,500 106,000
Depreciation and amortization 155,309 75,136
Changes in assets and liabilities
Increase (decrease) in deferred loan fees 31,682 (1,494)
Increase in accrued interest receivable (16,433) (85,410)
Increase in other assets (39,570) (57,147)
Increase in accrued expenses and other liabilities 37,434 364,808
-----------------------------------
Net cash used in operating activities (334,141) (482,816)
-----------------------------------
Cash Flows From Investing Activities
Purchases of available for sale securities (10,949,684) (4,785,841)
Proceeds from maturities of available for sale securities 6,185,000 -
Principal repayments on available for sale securities 836,856 -
Proceeds from sales of available for sale securities 4,357,895 -
Purchases of Federal Home Loan Bank Stock (21,000) -
Purchase of life insurance policy - (521,000)
Net increase in loans receivable (16,455,166) (13,515,323)
Purchases of premises and equipment (603,539) (1,064,913)
-----------------------------------
Net cash used in investing activities (16,649,638) (19,887,077)
-----------------------------------
Cash Flows From Financing Activities
Net increase in demand, savings and money market deposits 14,328,987 12,611,111
Net increase in certificates of deposit 452,813 2,595,913
Increase in repurchase agreements 336,415 673,664
Principal payments on capital lease obligations (768) -
-----------------------------------
Net cash provided by financing activities 15,117,447 15,880,688
-----------------------------------
Net decrease in cash and cash equivalents (1,866,332) (4,489,205)
Cash and cash equivalents
Beginning 3,051,429 10,436,331
-----------------------------------
Ending $ 1,185,097 $ 5,947,126
===================================
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 392,724 $ 289,995
===================================
Income taxes $ - $ -
===================================
See Notes to Consolidated Financial Statements.
6
Southern Connecticut Bancorp, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Nature of Operations
Southern Connecticut Bancorp, Inc. ("Bancorp"), a Connecticut
corporation, is a bank holding company incorporated on November 8, 2000 for the
purpose of forming, and becoming the sole shareholder of, The Bank of Southern
Connecticut (the "Bank"). The Bank provides a full range of banking services to
commercial and consumer customers, primarily concentrated in the New Haven
County area of Connecticut, through its main office in New Haven, Connecticut
and branch offices in New Haven (Amity) and Branford, Connecticut.
Note 2. Basis of Financial Statement Presentation
The consolidated balance sheet at December 31, 2002 has been derived
from the audited consolidated financial statements of Bancorp at that date, but
does not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements.
The accompanying consolidated unaudited financial statements as of and
for the three months and nine months ended September 30, 2003 and September 30,
2002 and related notes have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). Accordingly, certain
information and note disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted. The accompanying consolidated
financial statements and notes thereto should be read in conjunction with the
audited financial statements of Bancorp and notes thereto as of December 31,
2002.
The accompanying unaudited consolidated financial information reflects,
in the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the interim periods presented.
The results of operations for the three months and nine months ended September
30, 2003 are not necessarily indicative of the results of operations that may be
expected for all of 2003.
Note 3. Available Borrowings
During the quarter ended March 31, 2003, Bancorp obtained secured and
unsecured lines of credit with other financial institutions with total available
borrowings of $4,400,000. There are no borrowings against these lines as of
September 30, 2003.
Note 4. Commitments and Contingencies
Bancorp entered into an employment agreement (the "President
Agreement") with the new President of the Bank effective in February 2003, and
expiring on December 31, 2004. The President Agreement provides for a base
salary and an annual bonus as determined by the Board of Directors. The
President Agreement also provides for vacation and various insurance benefits
and reimbursement for automobile, travel, entertainment, club dues and
Bank-related education and convention expenses. Also, under the President
Agreement, the Company issued to the President options to purchase 20,000 shares
of the Company's stock under the terms of the Company's 2002 Stock Option Plan.
The Bank is involved in litigation with its former President and Chief
Operating officer Gary D. Mullin for breach of contract in connection with Mr.
Mullin's dismissal for cause. Pursuant to Mr. Mullin's employment agreement with
the Bank, the matter is in arbitration. Mr. Mullin notified the Bank of his
claim in March 2003. The only parties to the dispute are the Bank and Mr.
Mullin. Mr. Mullin is seeking $500,000 for alleged economic loss, plus
attorney's fees. The Bank is seeking attorney's fees. The matter is currently
pending. Bancorp believes that the former president's claims are without merit
and Bancorp intends to defend this case vigorously.
On October 20 ,2003, Bancorp amended its employment agreement with the
Chairman and Chief Executive Officer of Bancorp and the Bank, which began in
2001, to extend the initial five-year term by one year.
7
Note 5. Income (Loss) Per Share
Bancorp is required to present basic income (loss) per share and
diluted income (loss) per share in its statements of operations. Basic per share
amounts are computed by dividing net income (loss) by the weighted average
number of common shares outstanding. Diluted per share amounts assume exercise
of all potential common stock in weighted average shares outstanding, unless the
effect is antidilutive.
For the three month and nine month periods ended September 30, 2003 and
2002, common stock equivalents have been excluded from the computation of the
net loss per share because the inclusion of such equivalents is antidilutive.
Weighted average shares outstanding for the three months and nine months ended
September 30, 2003 and 2002 are presented as follows:
September 30,
---------------------------
2003 2002
---- ----
Three month period ended 966,667 966,667
Nine month period ended 966,667 966,667
Note 6. Other Comprehensive Income
Other comprehensive income, which is comprised solely of the change in
unrealized gains and losses on available for sale securities, is as follows:
Three Months Ended
September 30, 2003
---------------------------------------------
Before-Tax Net-of-Tax
Amount Taxes Amount
---------------------------------------------
Unrealized holding losses arising during the period $ (202,475) $ - ($202,475)
Less: Reclassification adjustment for gains -
recognized in net income - - -
---------------------------------------------
Unrealized holding loss on available for sale
securities, net of taxes $ (202,475) $ - $(202,475)
=============================================
Nine Months Ended
September 30, 2003
---------------------------------------------
Before-Tax Net-of-Tax
Amount Taxes Amount
---------------------------------------------
Unrealized holding losses arising during the period $ (302,259) $ 34,783 $(267,476)
Less: Reclassification adjustment for gains
recognized in net income (44,505) 5,122 (39,383)
---------------------------------------------
Unrealized holding loss on available for sale
securities, net of taxes $ (346,764) $ 39,905 $(306,859)
=============================================
There were no elements of comprehensive income during the three months and nine
months ended September 30, 2002.
8
Note 7. Stock Based Compensation
During the nine months ended September 30, 2003, Bancorp granted
160,841 stock options to employees and directors at exercise prices ranging from
$8.00 to $12.00 per share.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation", encourages all entities to adopt a fair value
based method of accounting for employee stock compensation plans, whereby
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," whereby compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. Stock options issued to
employees and directors under Bancorp's stock option and warrant plans have no
intrinsic value at the grant date, and under Opinion No. 25 no compensation cost
is recognized for them. During 2002, Bancorp adopted SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure, an Amendment of FASB
Statement No. 123." Bancorp has elected to continue with the accounting
methodology in Opinion No. 25 and, as a result, has provided pro forma
disclosures of net loss and earnings per share and other disclosures, as if the
fair value based method of accounting had been applied.
Had compensation cost for issuance of such options and warrants been
recognized based on the fair values of awards on the grant dates, in accordance
with the method described in SFAS No. 123, reported net loss and per share
amounts for the three months and nine months ended September 30, 2003 would have
been increased to the pro forma amounts shown below:
For the three months and nine months ended September 30, 2003
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2003
------------------------- ------------------------
Net loss as reported $ (211,225) $ (623,873)
Deduct: total stock based employee
compensation expense determined under fair value based
method for all awards (72,679) (155,029)
------------------------- ------------------------
Pro forma net loss $ (283,904) $ (778,902)
========================= ========================
Basic dilutd loss per share:
As reported $ (0.22) $ (0.65)
========================= ========================
Pro forma $ (0.29) $ (0.81)
========================= ========================
Note 8. Bank Application and Capital Raising
On June 10, 2003, the board of directors of Bancorp, approved the
establishment of a new commercial bank in New London, Connecticut and plan to
raise between $10 million to $15 million capital by Bancorp.
On July 2, 2003, Bancorp submitted an application to the State of
Connecticut, Department of Banking ("Department"), for the establishment by
Bancorp of a new commercial bank in New London, Connecticut. The application was
subsequently temporarily withdrawn to complete additional information requested
by the Department.
On August 7, 2003, the application, including the completed additional
information, was resubmitted, and on October 2, 2003, the final application,
including additional information, was submitted.
9
Item 2. Management's Discussion and Analysis or Plan of Operation
(a) Plan of Operation
Bancorp, a Connecticut corporation, was incorporated on November 8,
2000 to serve as a bank holding company. Bancorp owns one hundred percent of the
capital stock of The Bank of Southern Connecticut ("Bank"), a state chartered
bank in New Haven, Connecticut, which commenced operations on October 1, 2001
after receiving its Final Certificate of Authority from the Connecticut Banking
Commissioner and its deposit insurance from the Federal Deposit Insurance
Corporation ("FDIC"). Bancorp invested $10,000,000 of the net proceeds of its
July 26, 2001 stock offering to purchase the capital stock of the Bank and an
additional $360,000 to cover the Bank's pre-opening deficit. The $10,000,000 of
initial equity capital for the Bank required under the Bank's Temporary
Certificate of Authority substantially exceeded the statutory minimum equity
capital for a new Connecticut bank of $5,000,000. Bancorp chose a holding
company structure because it provides flexibility that would not otherwise be
available. For example, Bancorp could acquire additional banks, establish de
novo banks and other businesses, including mortgage companies, leasing
companies, insurance agencies and small business investment companies. Bancorp
may in the future decide to engage in additional businesses permitted to bank
holding companies or financial holding companies. Before Bancorp could acquire
interests in other banks, establish de novo banks or expand into other
businesses, it may need to obtain regulatory approvals and might need additional
capital.
Bancorp has leased a free-standing building located at 215 Church
Street, New Haven, Connecticut, located in the central business and financial
district of New Haven. It has assigned this lease to the Bank, and the Bank has
assumed all rights and obligations under this lease. Both Bancorp and the Bank
operate from this facility. On October 7, 2002 the Bank opened a new branch
office in Branford, Connecticut at West Main Street and Summit Place. On August
15, 2002 the Bank also purchased a building at 1475 Whalley Avenue in the
Westville section of New Haven for a branch office site which was opened on
March 24, 2003.
The following table sets forth the location of the Bank's branch
offices and other related information:
Office Location Status
------ -------- -------
Main Office 215 Church Street, New Haven, Connecticut Leased
Branford Office 445 West Main Street, Branford, Connecticut Leased
Amity Office 1475 Whalley Avenue, New Haven, Connecticut Owned
On July 2, 2003, Bancorp submitted an application to the State of
Connecticut, Department of Banking ("Department"), for the establishment by
Bancorp of a new commercial bank in New London, Connecticut. The application was
subsequently temporarily withdrawn to complete additional information requested
by the Department, including a three year balance sheet and income statement
forecast for the proposed new bank.
On August 7, 2003, The application, including the completed additional
information, was resubmitted to the Department, and on October 2, 2003, the
final application, including additional information, was submitted. Bancorp
expects the new bank to be operating by the end on the third quarter of 2004.
Bancorp expects to raise $10 to $15 million in new capital of which $6
million will be used to fund the start up of the new bank.
Management believes that Bancorp's short-term assets have sufficient
liquidity to cover potential fluctuations in deposit accounts and loan demand
and to meet other anticipated operating cash requirements.
10
For a more detailed discussion of Bancorp's liquidity, see Liquidity on
page 17 of this Form 10-QSB. Currently, other than the potential start up of a
new bank in 2004, as previously discussed, there are no plans involving the
significant purchase or sale of property or equipment in the next twelve months.
Outside of staffing the new branches, Bancorp does not anticipate a significant
change in the number of its employees.
The Bank does not expect to compete with large institutions for the
primary banking relationships of large corporations, but it competes for niches
in this business segment and for the consumer business of employees of such
entities. The Bank focuses on small to medium-sized businesses, professionals
and individuals and their employees. This focus includes retail, service,
wholesale distribution, manufacturing and international businesses. The Bank
attracts these customers based on relationships and contacts which the Bank's
directors and management have within and beyond the Bank's primary service area.
Greater New Haven is currently served by approximately 70 offices of
commercial banks, none of which is headquartered in New Haven. In addition, New
Haven Savings Bank, a mutual savings bank, has 17 branches in the New Haven
market. All of these banks are substantially larger than the Bank expects to be
in the near future and are able to offer products and services which may be
impracticable for the Bank to provide at this time.
There are numerous banks and other financial institutions serving the
communities surrounding New Haven which also draw customers from New Haven,
posing significant competition for the Bank to attract deposits and loans. The
Bank also experiences competition from out-of-state financial institutions.
Bancorp will have to obtain customers from the customer base of such existing
banks and financial institutions and from growth in New Haven and the
surrounding area. Many of such banks and financial institutions are well
established and well capitalized, allowing them to provide a greater range of
services (including trust services) than the Bank will be able to offer in the
near future.
Intense market demands, economic pressures and significant legislative
and regulatory actions have eroded banking industry classifications which were
once clearly defined and have increased competition among banks and other
financial institutions. Market dynamics and legislative and regulatory changes
impacting banks and other financial institutions have resulted in a number of
new competitors offering services historically offered only by commercial banks;
non-bank corporations offering services traditionally offered only by banks;
increased customer awareness of product and service differences among
competitors; and increased merger activity.
Additional legislative and regulatory changes may affect the Bank in
the future; however, the nature of such changes and the effect of their
implementation cannot be assessed. New rules and regulations may, among other
things, revise limits on interest rates on various categories of deposits and
may limit or influence interest rates on loans. Monetary and fiscal policies of
the United States government and its instrumentalities, including the Federal
Reserve, significantly influence the growth of loans, investments and deposits.
The present bank regulatory scheme is undergoing significant change both as it
affects the banking industry itself and as it affects competition between banks
and non-bank financial institutions.
The Bank currently offers products and services described as "core"
products and services which are more completely described below. Through
correspondent and other relationships, it is expected that the Bank will be able
to help our customers meet all of their banking needs, including obtaining
services which the Bank may not offer directly.
The Bank is seeking to establish a sound base of core deposits,
including checking accounts, money market accounts, savings accounts, sweep
accounts, NOW accounts and a variety of certificates of deposits and IRA
accounts. To attract deposits, the Bank is employing an aggressive marketing
plan in its service area and features a broad product line and rates and
services competitive with those offered in the New Haven market.
11
The primary sources of deposits have been and are expected to be, residents of,
and businesses and their employees located in, New Haven and the surrounding
communities. The Bank is obtaining these deposits through personal solicitation
by its officers and directors, outside programs and advertisements published and
/ or broadcasted in the local media.
Deposits and the Bank's equity capital are the sources of funds for
lending and investment activities. Repayments on loans, investment income and
proceeds from the sale and maturity of investment securities will also provide
additional funds for these purposes. While scheduled principal repayments on
loans and investment securities are a relatively predictable source of funds,
deposit flows and loan prepayments are greatly influenced by general interest
rates, economic conditions and competition. The Bank expects to manage the
pricing of deposits to maintain a desired deposit balance. The Bank offers
drive-in teller services, wire transfers and safe deposit services.
The Bank's loan strategy is to offer a broad range of loans to
businesses and individuals in its service area, including commercial and
business loans, personal loans, mortgage loans, home equity loans, automobile
loans and education loans. The Bank has received lending approval status from
the Small Business Administration ("SBA") to enable it to make SBA loans to both
the Greater New Haven business community and companies throughout the State of
Connecticut. Our marketing focus on small to medium-size businesses and
professionals may result in an assumption of certain lending risks that are
different from or greater than those which would apply to loans made to larger
companies or consumers. Commercial loans generally entail certain additional
risks because repayment is usually dependent on the success of the enterprise.
The Bank seeks to manage the credit risk inherent in its loan portfolio through
credit controls and loan diversification. Prior to approving a loan the Bank
evaluates: the credit histories of potential borrowers; the value and liquidity
of available collateral; the purpose of the loan; the source and reliability of
funds for repayment and other factors considered relevant in the circumstances.
Loans are made on a variable or fixed rate basis with fixed rate loans
limited to five year terms. All loans are approved by the Bank's management and
the Loan Committee of the Bank's Board of Directors. At the present time, the
Bank is not purchasing participation in loans nor is it syndicating or
securitizing loans. The Bank may consider participation in multi-bank loans for
companies in its service area. Commercial loans and commercial real estate loans
may be written for terms of up to twenty years. Loans to purchase or refinance
commercial real estate are collateralized by the subject real estate. Loans to
local businesses are generally supported by the personal guarantees of the
principal owners and are carefully underwritten to determine appropriate
collateral and covenant requirements.
Other services provided currently or to be provided include, cashier's
checks, money orders, travelers checks, bank by mail, lock box, direct deposit
and U. S. Savings Bonds. The Bank is associated with a shared network of
automated teller machines that its customers are able to use throughout
Connecticut and other regions. The Bank does not currently expect to offer trust
services but may offer trust services through a joint venture with a larger
institution. To offer trust services in the future, the Bank would need the
approval of the Connecticut Banking Commissioner.
Another significant activity for the Bank is maintaining an investment
portfolio. Although granting a variety of loans to generate interest income and
loan fees is an important aspect of the Bank's business plan, the aggregate
amount of loans will be subject to maintaining a satisfactory loan-to-deposit
ratio. The Bank's overall portfolio objective is to maximize the long-term total
rate of return through active management of portfolio holdings taking into
consideration estimated asset/liability and liquidity needs, tax equivalent
yields and maturities. Permissible investments include debt securities such as
U. S. Government securities, government sponsored agency securities, municipal
bonds, domestic certificates of deposit that are insured by the FDIC,
mortgage-backed securities and collateralized mortgage obligations. The Bank
expects that investments in equity securities will be very limited. The Bank's
current investment portfolio is limited to U. S.
12
government obligations which have been classified as available for sale.
Accordingly, the principal risk associated with the Banks current investing
activities is market risk (variations in value resulting from general changes in
interest rates) rather than credit risk.
Overall, the Bank's plan of operation is focused on responsible growth
and pricing of deposits and loans, and investment in high quality U. S.
government securities to achieve a net interest margin sufficient to cover
operating expenses, achieve profitable operations and maintain liquidity.
Currently, the Bank has 22 full-time employees and one part-time
employee. Most routine day-to-day banking transactions are performed at the Bank
by its employees. However, the Bank has entered into a number of arrangements
for banking services such as correspondent banking, data processing and armored
carriers.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations
Summary
Bancorp had a net loss of $211,000 (or a loss per share of $0.22) for
the quarter ended September 30, 2003, compared to a net loss of $315,000 (or a
loss per share of $0.33) for the quarter ended September 30, 2002. On a
year-to-date basis, Bancorp had a net loss of $624,000 (or a loss per share of
$0.65) for the nine months ended September 30, 2003, compared to a net loss of
$929,000 (or a loss per share of $0.96) for the nine months ended September 30,
2002.
Financial Condition
Assets
Since commencing operations on October 1, 2001, Bancorp has reached
total assets of $49.7 million at September 30, 2003, an increase of $14.2
million (40%) from $35.5 million in assets as of December 31, 2002. Earning
assets reached $44.8 million, increasing $14.2 million (47%) during the first
nine months of 2003.
Bancorp has maintained liquidity by maintaining balances in overnight
Federal funds sold and money market mutual funds to provide funding for higher
yielding loans as they are approved and closed. As of September 30, 2003, there
were no Federal funds sold and money market mutual fund balances were $369,000.
In addition, Bancorp has invested $8.7 million in U.S. Government Agency and
mortgage backed securities classified as available for sale with maturities
ranging from 3 years to 15 years.
Investments
Available for sale securities decreased $.8 million from December 31,
2002 to partially fund the increase in loans.
During the three months and the nine months ended September 30, 2003,
unrealized losses on the available for sale securities portfolio totaled
$202,000 and $307,000 respectively. These losses were the result of volatility
in market rates and yield curve changes and impacted the market prices in
government agency bonds and mortgage-backed securities. Management does not
believe these losses are other than temporary, and Bancorp has the ability to
hold these securities to maturity if necessary. As a result, management believes
that these unrealized losses will not have a negative impact on future earnings
and capital.
Loans
The net loan portfolio increased $16.3 million (86%) from $19.0 million
at December 31, 2002 to $35.3 million at September 30, 2003. The increase in
loans is due to expected growth in the early stages of operations, and was
funded primarily by increases in deposits. The loan to deposit ratio as of
September 30, 2003 was 90%. As this ratio has reached its target level, it is
expected that the higher yielding loans versus Federal funds sold, money market
funds and investments will produce an increasingly positive impact on net
interest spread. No significant loan concentrations have developed during this
early stage of building the loan portfolio.
13
Critical Accounting Policy
In the ordinary course of business, Bancorp has made a number of
estimates and assumptions relating to reporting results of operations and
financial condition in preparing its financial statements in conformity with
accounting principals generally accepted in the United States of America. Actual
results could differ significantly from those estimates under different
assumptions and conditions. Bancorp believes the following discussion addresses
Bancorp's only critical accounting policy, which is the policy that is most
important to the portrayal of Bancorp's financial condition and results and
requires management's most difficult, subjective and complex judgments, often as
a result of the need to make estimates about the effect of matters that are
inherently uncertain
Allowance for Loan Losses
The allowance for loan losses, a material estimate susceptible to
significant change in the near-term, is established as losses are estimated to
have occurred through a provision for losses charged against operations, and is
maintained at a level that management considers adequate to absorb losses in the
loan portfolio. Management's judgment in determining the adequacy of the
allowance is inherently subjective and is based on the evaluation of individual
loans, pools of homogeneous loans, the known and inherent risk characteristics
and size of the loan portfolios, the assessment of current economic and real
estate market conditions, estimates of the current value of underlying
collateral, past loan loss experience, review of regulatory authority
examination reports and evaluations of specific loans and other relevant
factors. Loans, including impaired loans, are charged against the allowance for
loan losses when management believes that the uncollectibility of principal is
confirmed. Any subsequent recoveries are credited to the allowance for loan
losses when received. In connection with the determination of the allowance for
loan losses, management obtains appraisals for significant properties, when
considered necessary.
Based on this evaluation, management believes the allowance for loan
losses of $353,000 at September 30, 2003, which represents .99% of gross loans
outstanding, is adequate, under prevailing economic conditions, to absorb losses
on existing loans. At December 31, 2002, the allowance for loan losses was
$232,000 or 1.20% of gross loans outstanding.
Analysis of Allowance for Loan Losses
The following represents the activity in the allowance for loan losses for the
nine months ended September 30:
2003 2002
-------------- ---------------
Balance at beginning of period $232,000 $ 12,000
Charge-offs (22,291) -
Recoveries - -
Provision charged to operations 143,500 106,000
-------------- ---------------
Balance at end of period $353,209 $118,000
============== ===============
Non-Accrual, Past Due and Restructured Loans
The following table presents non-accruing and past due loans:
(Thousands of dollars) September 30,2003 December 31, 2002
--------------------------------------------------------------------------------------------------------
Loss delinquent over 90 days still accruing $ 60,354 $ -
Non-accruing loans - -
------------------------- -----------------------
Total $ 60,354 $ -
========================= =======================
% of Total Loans 0.17% 0.00%
% of Total Assets 0.12% 0.00%
Potential Problem Loans
At September 30, 2003, the Bank had no loans, other than disclosed in
the table above, as to which management has significant doubts as to the ability
of the borrower to comply with the present repayment terms.
14
Deposits
The earning asset growth for the nine months ended September 30, 2003
has been funded primarily by deposit growth within Bancorp's market area.
Deposits reached $39.8 million at September 30, 2003, an increase of $14.8
million (59%) from $25.0 million as of December 31, 2002. The mix of deposits as
of September 30, 2003 and December 31, 2002 appears in the table below. Bancorp
does not have any brokered deposits.
September 30, 2003 December 31, 2002
---------------------------- -----------------------------
Balance Mix Balance Mix
Noninterest bearing deposits: $ 11,914,037 30.0% $6,401,759 25.6%
-------------- ------------ ---------------- ----------
Interest bearing deposits:
Checking 3,237,697 8.1% 2,351,847 9.4%
Money Market 15,412,633 38.7% 8,858,585 35.5%
Savings 2,406,244 6.1% 1,029,433 4.1%
-------------- ------------ ---------------- ----------
Checking, money market & savings 21,056,574 52.9% 12,239,865 49.0%
-------------- ------------ ---------------- ----------
CD'S under $100,000 2,837,162 7.1% 2,610,756 10.4%
CD'S of $100,000 or more 3,966,958 10.0% 3,740,551 15.0%
-----------------------------------------------------------
Time deposits 6,804,120 17.1% 6,351,307 25.4%
-------------- ------------ ---------------- ----------
Interest bearing deposits 27,860,694 70.0% 18,591,172 74.4%
-------------- ------------ ---------------- ----------
Total deposits $ 39,774,731 100.0% $ 24,992,931 100.0%
============== ============ ================ ==========
Other
The $448,000 increase in premises and equipment, net, from December 31,
2002 primarily reflects the building improvements and the purchase of furniture
and equipment for the Amity branch which opened in March 2003.
Repurchase agreements increased $336,000 from December 31, 2002 due to
more activity in these customer accounts.
Results of Operations
De Novo banks in Connecticut have reached profitability on average
within three to four years after commencement of operations. Bancorp anticipates
that the Bank will reach profitability within that time frame.
Net Interest Income
For the quarter ended September 30, 2003, net interest income was
$539,000 versus $201,000 for the same period in 2002, a $338,000 or 168%
increase. This was the result of a $16.4 million increase in average earning
assets, primarily increases in average loans of $18.5 million and average
investments of $600,000 partially offset by a decrease in lower yielding short
term investments of $1.8 million and federal funds sold of $900,000.
The yield on average interest earning assets for the three months ended
September 30, 2003 was 6.26% versus 4.80% for same period in 2002. The cost of
average interest bearing liabilities was 1.74% for the three months ended
September 30, 2003 versus 2.89% for the same period in 2002.
For the nine months ended September 30, 2003, net interest income was
$1.4 million versus $459,000 for the same period in 2002, a $900,000 or 198%
increase. This was the result of a $16.8 million increase in average earning
assets, primarily loans of $19.4 million and investments of $1.6 million,
partially offset by a decrease in lower yielding short term investments of $2.8
million and federal funds sold of $1.4 million.
15
The yield on average interest earning assets for the nine months ended
September 30, 2003 was 6.06% versus 4.54% for same period in 2002. The increase
in the average interest earning asset yield was the result of a $19.4 million
increase in average higher yielding loans coupled with a $2.7 million decrease
in average lower yielding investments over that same period.
The cost of average interest bearing liabilities was 1.94% for the
first nine months of 2003 versus 3.15% for the same period in 2002. The decrease
in the cost of average interest bearing liabilities was the result of a $13.6
million increase in average lower cost funds partially offset by a $1.5 million
increase in average higher cost funds over that same period.
Provision for Loan Losses
The $21,000 increase in the provision for loan losses from $36,000 for
the three months ended September 30, 2002 to $57,000 for the three months ended
September 30, 2003 is due primarily to the increase in the Bank's loan volume.
The $37,000 increase in the provision for loan losses for the nine
months ended September 30, 2003 versus the six months ended June 30, 2002 is
also due primarily to the increase in loan volume.
Noninterest Income
The $37,000 increase in noninterest income for the third quarter of
2003 versus 2002 is primarily the result of fees from increased deposit volume
and activity of $25,000, increased ATM fees of $5,000 and an increase in
insurance referral commissions of $5,000.
The $122,000 increase in noninterest income for the nine months ended
September 30, 2003 versus 2002 is the result of fees from increased deposit
volume and activity of $49,000, increased ATM fees of $16,000, an increase in
insurance referral commissions of $5,000 and a $44,000 gain on the sale of
securities.
Noninterest Expense
Total noninterest expense was $742,000 for the third quarter of 2003
versus $491,000 for the same period in 2002, an increase of $251,000 or 51%. The
increase in expense is due to the growth in the Bancorp's loan and deposit
volume as well as the addition of the Branford office in late 2002 and the Amity
office in March of 2003, requiring additional staffing and other operating
expenses.
Total noninterest expense was $2.0 million for the nine months ended
September 30, 2003 versus $1.3 million for the same period in 2002, an increase
of $700,000 or 53%. The increase in expense is due to the growth in the
Bancorp's loan and deposit volume as well as the addition of the Branford office
in late 2002 and the Amity office in March of 2003, requiring additional
staffing and other operating expenses.
Professional services decreased for the three month and nine month
periods ended September 30, 2003 versus the same periods in 2002 by $38,000 and
$88,000, respectively. The decrease is primarily the result of hiring Michael M.
Ciaburri as President and Chief Operating Officer of the Bank as of February 12,
2003 who had worked up to that point as a consultant to the bank developing new
loan volume.
16
Liquidity
Bancorp's liquidity position as of September 30, 2003 and December 31,
2002 consisted of liquid assets totaling $9.9 million and $12.6 million,
respectively. This represents 20.0% and 35.4% of total assets at September 30,
2003 and December 31, 2002, respectively. The 15.4% decrease is the result of
the funding of the $16.3 million in loan growth from December 31, 2002. The
liquidity ratio is defined as the percentage of liquid assets to total assets.
The following categories of assets as described in the accompanying balance
sheet are considered liquid assets: Cash and due from banks, federal funds sold,
short-term investments, held to maturity securities maturing in one year or less
and securities available for sale. Liquidity is a measure of Bancorp's ability
to generate adequate cash to meet financial obligations. The principal cash
requirements of a financial institution are to cover downward fluctuations in
deposits and increases in its loan portfolio.
As of September 30, 2003, the Bank was required to maintain collateral
held for public deposits at 120% of all public deposits. As of October 1, 2003,
the Bank has been in existence for two years and the requirements for collateral
held for public deposits declined from 120% to 10% of all public deposits.
Capital
The following table illustrates the Bank's regulatory capital ratios
at:
September 30, 2003 December 31, 2002
------------------ -----------------
Leverage Ratio 15.45% 23.76%
Tier 1 Risk - Based Capital Ratio 18.35% 31.52%
Total Risk - Based Capital Ratio 19.21% 32.43%
Capital adequacy is one of the most important factors used to determine
the safety and soundness of individual banks and the banking system. Based on
the above ratios, the Bank is considered to be "well capitalized" under
applicable regulations. To be considered "well capitalized" an institution must
generally have a leverage capital ratio of at least 5%, a Tier 1 risk-based
capital ratio of at least 6% and a total risk-based capital ratio of at least
10%.
Bancorp is also considered to be well capitalized under the regulatory
framework specified by the Federal Reserve Bank. Bancorp's actual and required
ratios are not substantially different from those shown above.
Market Risk
Market risk is defined as the sensitivity of income to fluctuations in
interest rates, foreign exchange rates, equity prices, commodity prices and
other market-driven rates or prices. Based upon on the nature of the Company's
business, market risk is primarily limited to interest rate risk, which is the
impact that changing interest rates have on current and future earnings.
Bancorp's goal is to maximize long-term profitability, while minimizing
its exposure to interest rate fluctuations. The first priority is to structure
and price Bancorp's assets and liabilities to maintain an acceptable interest
rate spread, while reducing the net effect of changes in interest rates. In
order to reach an acceptable interest rate spread, Bancorp must generate loans
and seek acceptable long-term investments to replace the lower yielding balances
in Federal Funds sold and short-term investments. The focus also must be on
maintaining a proper balance between the timing and volume of assets and
liabilities re-pricing within the balance sheet. One method of achieving this
balance is to originate variable loans for the portfolio to offset the
short-term re-pricing of the liabilities. In fact, a number of the interest
bearing deposit products have no contractual maturity. Customers may withdraw
funds from their accounts at any time and deposits balances may therefore run
off unexpectedly due to changing market conditions.
17
The exposure to interest rate risk is monitored by the Asset and
Liability Management Committee ("ALCO") consisting of senior management
personnel and selected members of the Board of Directors. ALCO reviews the
interrelationships within the balance sheet to maximize net interest income
within acceptable levels of risk. ALCO reports to the Board of Directors on a
quarterly basis regarding the status of ALCO activities within the Company.
Impact of Inflation and Changing Prices
Bancorp's financial statements have been prepared in terms of
historical dollars, without considering changes in relative purchasing power of
money over time due to inflation. Unlike most industrial companies, virtually
all of the assets and liabilities of a financial institution are monetary in
nature. As a result, interest rates have a more significant impact on a
financial institution's performance than the effect of general levels of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services. Notwithstanding this
fact, inflation can directly affect the value of loan collateral, in particular,
real estate. Inflation, or disinflation, could significantly affect Bancorp's
earnings in future periods.
"Safe Harbor" Statement Under Private Securities Litigation Reform Act of 1995
Certain statements contained in Bancorp's public reports, including
this report, and in particular in this "Management's Discussion and Analysis or
Plan of Operation", may be forward looking and subject to a variety of risks and
uncertainties. These factors include, but are not limited to, (1) changes in
prevailing interest rates which would affect the interest earned on Bancorp's
interest earning assets and the interest paid on its bearing liabilities, (2)
the timing of re-pricing of Bancorp's interest earning assets and interest
bearing liabilities, (3) the effect of changes in governmental monetary policy,
(4) the effect of changes in regulations applicable to Bancorp and the conduct
of its business, (5) changes in competition among financial service companies,
including possible further encroachment of non-banks on services traditionally
provided by banks and the impact of recently enacted federal legislation, (6)
the ability of competitors which are larger than Bancorp to provide products and
services which it is impracticable for Bancorp to provide, (7) the effect of
Bancorp's opening of branches, (8) the effect of any decision by Bancorp to
engage in any business not historically permitted to it. Other such factors may
be described in Bancorp's filings with the SEC.
Although Bancorp believes that it offers the loan and deposit products
and has the resources needed for success, future revenues and interest spreads
and yields cannot be reliably predicted. These trends may cause Bancorp to
adjust its operations in the future. Because of the foregoing and other factors,
recent trends should not be considered reliable indicators of future financial
results or stock prices.
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
Bancorp's Chairman and Chief Executive Officer, President and Chief
Operating Officer, and Vice President and Controller, and the Bank's President
and Chief Operating Officer and Vice President and Controller, have concluded
that Bancorp's disclosure controls and procedures are effective. This conclusion
is based on the above-referenced officers' evaluation of such controls and
procedures as of the end of the quarter for which this report is filed.
(b) Changes in Internal Controls
There have not been any changes in Bancorp's internal control over
financial reporting that have materially effected or are reasonably likely to
materially effect, the Bank's internal control over financial reporting.
18
PART II
Other Information
Item 1. Legal Proceedings
Bancorp's wholly-owned subsidiary, The Bank of Southern Connecticut
("Bank"), is involved in litigation with its former President and Chief
Operating officer Gary D. Mullin for breach of contract in connection with Mr.
Mullin's dismissal for cause. Pursuant to Mr. Mullin's employment agreement with
the Bank, the matter is in arbitration. Mr. Mullin notified the Bank of his
claim in March 2003. The only parties to the dispute are the Bank and Mr.
Mullin. Mr. Mullin is seeking $500,000 for alleged economic loss, plus
attorney's fees. The Bank is seeking attorney's fees. The matter is currently
pending. Bancorp believes that the former president's claims are without merit
and Bancorp intends to defend this case vigorously.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
No. Description
--- -----------
3(i) Amended and Restated Certificate of Incorporation of the Issuer
(incorporated by reference to Exhibit 3(i) to Issuer's Quarterly Report
on Form 10-QSB dated June 30, 2002)
3(ii) By-Laws of the Issuer (incorporated by reference to Exhibit 3(ii) to
the Issuer's Registration Statement on Form SB-2 (No. 333-59824))
10.1 Lease, dated as of August 17, 2000, between 215 Church Street, LLC and
the Issuer (incorporated by reference to Exhibit 10.1 to the Issuer's
Registration Statement on Form SB-2 (No. 333-59824))
10.2 Letter agreement dated January 3, 2001 amending the Lease between 215
Church Street, LLC and the Issuer (incorporated by reference to Exhibit
10.2 to the Issuer's Registration Statement on Form SB-2 (No.
333-59824))
10.3 First Amendment to Lease dated March 30, 2001 between 215 Church
Street, LLC and the Issuer (incorporated by reference to Exhibit 10.3
to the Issuer's Registration Statement on Form SB-2 (No. 333-59824))
10.4 Second Amendment to Lease dated March 31, 2001 between 215 Church
Street, LLC and the Issuer (incorporated by reference to Exhibit 10.4
to the Issuer's Registration Statement Form SB-2 (No. 333-59824))
10.5 Assignment of Lease dated April 11, 2001 between the Issuer and The
Bank of Southern Connecticut (incorporated by reference to Exhibit 10.5
to the Issuer's Registration Statement on Form SB-2 (No. 333-59824))
19
10.6 Employment Agreement dated as of January 23, 2001, between The Bank of
Southern Connecticut, the Issuer and Joseph V. Ciaburri (incorporated
by reference to Exhibit 10.6 to the Issuer's Registration Statement on
Form SB-2 (No. 333-59824))
10.7 Employment Agreement dated as of March 29, 2001 between The Bank of
Southern Connecticut, and Gary D. Mullin (incorporated by reference to
Exhibit 10.7 to the Issuer's Registration Statement on Form SB-2 (No.
333-59824))
10.8 Issuer's 2001 Stock Option Plan (incorporated by reference to Exhibit
10.8 to the Issuer's Registration Statement on Form SB-2 (No.
333-59824))
10.9 Issuer's 2001 Warrant Plan (incorporated by reference to Exhibit 10.9
to the Issuer's Registration Statement on Form SB-2 (No. 333-59824))
10.10 Sublease dated January 1, 2001 between Michael Ciaburri, d/b/a Ciaburri
Bank Strategies and The Bank of Southern Connecticut (incorporated by
reference to Exhibit 10.10 to the Issuer's Registration Statement on
Form SB-2 (No. 333-59824))
10.11 Sublease dated January 1, 2001 between Laydon and Company, LLC and The
Bank of Southern Connecticut (incorporated by reference to Exhibit
10.11 to the Issuer's Registration Statement on Form SB-2 (No.
333-59824))
10.12 Issuer's 2001 Supplemental Warrant Plan (incorporated by reference to
Exhibit 10.12 to Issuer's Annual Report on Form 10-KSB dated March 29,
2002)
10.13 Issuer's 2002 Stock Option Plan (incorporated by reference to Appendix
B to Issuer's Definitive Proxy Statement dated April 18, 2002).
10.14 Employment Agreement dated as of February 12, 2003, between The Bank of
Southern Connecticut and Michael M. Ciaburri. (incorporated by
reference to Exhibit 10.14 to Issuer's Form 10-QSB dated May 14, 2003).
10.15 Bancorp's Board of Directors approval of the establishment by Bancorp
of a new commercial bank in New London, Connecticut and a capital
raising by Bancorp.
10.16 Amendment to Employment Agreement dated as of October 20, 2003, between
The Bank of Southern Connecticut and Southern Connecticut Bancorp, Inc.
and Joseph V. Ciaburri.
31.1 Section 302 Certification by Chairman and Chief Executive Officer.
31.2 Section 302 Certification by President and Chief Operating Officer.
31.3 Section 302 Certification by Vice President and Controller.
32.1 Section 906 Certification by Chairman and Chief Executive Officer.
32.2 Section 906 Certification by President and Chief Operating Officer.
32.3 Section 906 Certification by Vice President and Controller.
(b) Reports on Form 8-K
-------------------
The issuer filed no reports on Form 8-K during the quarter
ended September 30, 2003.
20
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SOUTHERN CONNECTICUT BANCORP, INC.
By: /S/ Joseph V. Ciaburri
-----------------------------------------
Name: Joseph V. Ciaburri
Title: Chairman & Chief Executive Officer
Date: November 12, 2003
21
Exhibit Index
-------------
10.16 Amendment to Employment Agreement Attached Hereto
31.1 Section 302 Certification by Chairman and Chief Executive Officer. (filed herewith)
31.2 Section 302 Certification by President and Chief Operating Officer. (filed herewith)
31.3 Section 302 Certification by Vice President and Controller. (filed herewith)
32.1 Section 906 Certification by Chairman and Chief Executive Officer. (filed herewith)
32.2 Section 906 Certification by President and Chief Operating Officer. (filed herewith)
32.3 Section 906 Certification by Vice President and Controller. (filed herewith)
22