-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RzqzrMxPNxY1uiiqU5pTDZDQOQtvyU7/5IH2wU/jf5qJnJWRJT8AhAHA7Zy/dGgr Kk2OW2Ly6JK4Tj2t4zeK/w== 0001005477-01-501988.txt : 20020410 0001005477-01-501988.hdr.sgml : 20020410 ACCESSION NUMBER: 0001005477-01-501988 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDFORD BANCORP INC CENTRAL INDEX KEY: 0001049895 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 043384928 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23435 FILM NUMBER: 1789668 BUSINESS ADDRESS: STREET 1: 29 HIGH ST CITY: MEDFORD STATE: MA ZIP: 02155 BUSINESS PHONE: 6173957700 MAIL ADDRESS: STREET 1: 29 HIGH ST CITY: MEDFORD STATE: MA ZIP: 02155 10-Q 1 d01-35158.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to Commission File Number 0-23435 Medford Bancorp, Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-3384928 - ------------- ---------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 29 High Street Medford, Massachusetts 02155 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (781) 395-7700 ------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| The number of shares outstanding of Medford Bancorp, Inc.'s common stock, $0.50 par value per share, as of September 30, 2001 was 7,797,476. TABLE OF CONTENTS PART I FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS PAGE Consolidated Balance Sheets 1 Consolidated Statements of Income 2-5 Consolidated Statements of Changes in Stockholders' Equity 6 Consolidated Statements of Cash Flows 7-8 Notes to Consolidated Financial Statements 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10-26 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 26 PART II OTHER INFORMATION ITEM 1 - Legal Proceedings 26 ITEM 2 - Changes in Securities and Use of Proceeds 26 ITEM 3 - Defaults Upon Senior Securities 26 ITEM 4 - Submission of Matters to a Vote of Security Holders 26 ITEM 5 - Other Information 26 ITEM 6 - Exhibits and Reports on Form 8-K 26 SIGNATURES 27 PART I FINANCIAL INFORMATION ITEM 1 Financial Statements MEDFORD BANCORP, INC. CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2001 2000 ------------- ------------ (In thousands) ASSETS Cash and due from banks $ 17,989 $ 16,905 Interest-bearing deposits 64,960 5,353 ----------- ----------- Cash and cash equivalents 82,949 22,258 ----------- ----------- Securities available for sale, at fair value 541,102 528,690 Securities held to maturity , at amortized cost 58,853 42,854 Federal Home Loan Bank stock, at cost 11,920 11,420 Loans 683,658 675,697 Less allowance for loan losses (7,033) (6,950) ----------- ----------- Loans, net 676,625 668,747 ----------- ----------- Banking premises and equipment, net 11,481 10,884 Accrued interest receivable 10,092 10,211 Goodwill and deposit-based intangibles 1,792 2,588 Other assets 6,631 12,038 ----------- ----------- Total assets $ 1,401,445 $ 1,309,690 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits $ 1,073,148 $ 975,857 Short-term borrowings 18,012 20,443 Long-term debt 191,325 203,400 Accrued taxes and expenses 2,494 2,278 Other liabilities 2,521 2,747 ----------- ----------- Total liabilities 1,287,500 1,204,725 ----------- ----------- Stockholders' equity: Serial preferred stock, $.50 par value, 5,000,000 shares authorized; none issued -- -- Common stock, 15,000,000 shares authorized; $.50 par value, 9,122,596 shares issued 4,561 4,561 Additional paid-in capital 21,929 22,705 Retained earnings 102,050 94,697 Accumulated other comprehensive income 8,954 424 Treasury stock, at cost (1,325,120 and 980,048 shares, respectively) (23,549) (17,422) ----------- ----------- Total stockholders' equity 113,945 104,965 ----------- ----------- Total liabilities and stockholders' equity $ 1,401,445 $ 1,309,690 =========== ===========
See accompanying notes to consolidated financial statements. 1 MEDFORD BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30, ------------------------ 2001 2000 ---------- ---------- (Dollars in thousands, except per share data) Interest and dividend income: Interest and fees on loans $ 12,463 $ 12,695 Interest on debt securities 9,199 8,862 Dividends on equity securities 211 258 Interest on short-term investments 394 79 ---------- ---------- Total interest and dividend income 22,267 21,894 ---------- ---------- Interest expense: Interest on deposits 9,707 9,474 Interest on short-term borrowings 190 462 Interest on long-term debt 2,979 2,948 ---------- ---------- Total interest expense 12,876 12,884 ---------- ---------- Net interest income 9,391 9,010 Provision for loan losses 100 -- ---------- ---------- Net interest income, after provision for loan losses 9,291 9,010 ---------- ---------- Other income: Customer service fees 577 507 Gain (loss) on sales of securities, net 1,626 (90) Miscellaneous 199 224 ---------- ---------- Total other income 2,402 641 ---------- ---------- Operating expenses: Salaries and employee benefits 3,088 2,785 Occupancy and equipment 738 636 Data processing 455 392 Professional fees 107 111 Amortization of intangibles 264 272 Advertising and marketing 155 203 Other general and administrative 651 598 ---------- ---------- Total operating expenses 5,458 4,997 ---------- ---------- Income before income taxes 6,235 4,654 Provision for income taxes 2,254 1,638 ---------- ---------- Net income $ 3,981 $ 3,016 ========== ==========
(continued) 2 MEDFORD BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Continued)
Three Months Ended September 30, ---------------------------- 2001 2000 ----------- ----------- (Dollars in thousands, except per share data) Earnings per share: Basic $ 0.51 $ 0.37 Diluted $ 0.50 $ 0.36 Cash dividends declared per share $ 0.13 $ 0.12 Weighted averages shares outstanding: Basic 7,802,556 8,048,154 Diluted 8,024,090 8,315,642
See accompanying notes to consolidated financial statements. 3 MEDFORD BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Continued)
Nine Months Ended September 30, -------------------------- 2001 2000 ----------- ----------- (Dollars in thousands, except per share data) Interest and dividend income: Interest and fees on loans $ 37,806 $ 37,049 Interest on debt securities 27,709 25,613 Dividends on equity securities 636 658 Interest on short-term investments 835 269 ----------- ----------- Total interest and dividend income 66,986 63,589 ----------- ----------- Interest expense: Interest on deposits 28,949 26,782 Interest on short-term borrowings 829 1,844 Interest on long-term debt 9,377 7,891 ----------- ----------- Total interest expense 39,155 36,517 ----------- ----------- Net interest income 27,831 27,072 Provision for loan losses 100 75 ----------- ----------- Net interest income, after provision for loan losses 27,731 26,997 ----------- ----------- Other income: Customer service fees 1,686 1,464 Gain (loss) on sales of securities, net 1,997 (164) Pension plan curtailment gain -- 1,195 Miscellaneous 773 777 ----------- ----------- Total other income 4,456 3,272 ----------- ----------- Operating expenses: Salaries and employee benefits 8,953 8,298 Occupancy and equipment 2,195 1,936 Data processing 1,325 1,139 Professional fees 335 331 Amortization of intangibles 796 822 Advertising and marketing 460 521 Other general and administrative 1,909 1,808 ----------- ----------- Total operating expenses 15,973 14,855 ----------- ----------- Income before income taxes 16,214 15,414 Provision for income taxes 5,821 5,561 ----------- ----------- Net income $ 10,393 $ 9,853 =========== ===========
(continued) 4 MEDFORD BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Concluded)
Nine Months Ended September 30, ------------------------ 2001 2000 ---------- ---------- (Dollars in thousands, except per share data) Earnings per share: Basic $ 1.33 $ 1.21 Diluted $ 1.29 $ 1.17 Cash dividends declared per share $ 0.39 $ 0.36 Weighted averages shares outstanding: Basic 7,833,146 8,144,345 Diluted 8,036,792 8,427,433
See accompanying notes to consolidated financial statements. 5 MEDFORD BANCORP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Nine Months Ended September 30, 2001 and 2000
Common Stock Additional ------------------- Paid-In Retained Shares Dollars Capital Earnings --------- ------- ---------- -------- (In thousands) Balance at December 31, 2000 9,122,596 $ 4,561 $ 22,705 $ 94,697 Comprehensive income: Net income -- -- -- 10,393 Change in net unrealized gain (loss) on securities available for sale, net of reclassification adjustment and tax effects -- -- -- -- Total comprehensive income Cash dividends declared ($.39 per share) -- -- -- (3,040) Repurchase of treasury stock -- -- -- -- Issuance of common stock under stock option plan -- -- (776) -- --------- ------- ---------- -------- Balance at September 30, 2001 9,122,596 $ 4,561 $ 21,929 $102,050 ========= ======= ========== ======== Balance at December 31, 1999 9,122,596 $ 4,561 $ 24,839 $ 85,153 Comprehensive income: Net income -- -- -- 9,853 Change in net unrealized gain (loss) on securities available for sale, net of reclassification adjustment and tax effects -- -- -- -- Total comprehensive income Cash dividends declared ($.36 per share) -- -- -- (2,922) Repurchase of treasury stock -- -- -- -- Issuance of common stock under stock option plan -- -- (1,344) -- --------- ------- --------- -------- Balance at September 30, 2000 9,122,596 $ 4,561 $ 23,495 $ 92,084 ========= ======= ========= ========
Accumulated Treasury Stock Other --------------------- Comprehensive Shares Dollars Income (Loss) Total ---------- ------- -------------- --------- (In thousands) Balance at December 31, 2000 (980,048) $(17,422) $ 424 $ 104,965 --------- Comprehensive income: Net income -- -- -- 10,393 Change in net unrealized gain (loss) on securities available for sale, net of reclassification adjustment and tax effects -- -- 8,530 8,530 --------- Total comprehensive income 18,923 --------- Cash dividends declared ($.39 per share) -- -- -- (3,040) Repurchase of treasury stock (418,048) (7,420) -- (7,420) Issuance of common stock under stock option plan 72,976 1,293 -- 517 ---------- -------- -------------- --------- Balance at September 30, 2001 (1,325,120) $(23,549) $ 8,954 $ 113,945 ========== ========= ============== ========= Balance at December 31, 1999 (739,344) $(14,278) $ (9,405) $ 90,870 --------- Comprehensive income: Net income -- -- -- 9,853 Change in net unrealized gain (loss) on securities available for sale, net of reclassification adjustment and tax effects -- -- 4,015 4,015 --------- Total comprehensive income 13,868 --------- Cash dividends declared ($.36 per share) -- -- -- (2,922) Repurchase of treasury stock (423,100) (6,428) -- (6,428) Issuance of common stock under stock option plan 106,616 1,937 -- 593 ---------- -------- -------------- --------- Balance at September 30, 2000 (1,055,828) $(18,769) $ (5,390) $ 95,981 ========== ======== ============== =========
See accompanying notes to consolidated financial statements. 6 MEDFORD BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, ----------------------- 2001 2000 --------- -------- (In thousands) Cash flows from operating activities: Net income $ 10,393 $ 9,853 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 100 75 Depreciation and amortization, net 1,578 1,813 (Gain) loss on sales of securities, net (1,997) 164 Increase (decrease) in accrued interest receivable and other assets 233 (1,985) Decrease (increase) in accrued taxes and expenses and other liabilities 275 (921) --------- --------- Net cash provided by operating activities 10,582 8,999 --------- --------- Cash flows from investing activities: Activity in securities available for sale: Maturities 52,023 59,974 Sales 101,865 15,849 Purchases (186,723) (102,846) Principal amortization of mortgage-backed securities 36,114 22,639 Activity in securities held to maturity: Maturities -- 4,997 Purchases (27,535) (35,522) Principal amortization of mortgage-backed securities 11,140 646 Loans originated and purchased, net of amortization and payoffs (7,784) (42,412) Additions to banking premises and equipment, net (1,544) (287) --------- --------- Net cash used in investing activities (22,444) (76,962) --------- ---------
(continued) 7 MEDFORD BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded) Nine Months Ended September 30, --------------------- 2001 2000 -------- -------- (In thousands) Cash flows from financing activities: Net increase in deposits 97,291 51,946 Decrease in borrowings with maturities of three months or less (2,431) (37,233) Repayment of long-term debt (12,075) 63,464 Issuance of common stock 517 298 Payments to acquire treasury stock (7,420) (6,428) Cash dividends paid (3,329) (3,466) -------- -------- Net cash provided by financing activities 72,553 68,581 -------- -------- Net change in cash and cash equivalents 60,691 618 Cash and cash equivalents at beginning of period 22,258 20,910 -------- -------- Cash and cash equivalents at end of period $ 82,949 $ 21,528 ======== ======== See accompanying notes to consolidated financial statements. 8 MEDFORD BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 Note 1. Basis of Presentation The consolidated interim financial statements of Medford Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Medford Savings Bank (the "Bank") presented herein are intended to be read in conjunction with the consolidated financial statements presented in the Company's annual report for the year ended December 31, 2000. The consolidated financial information for the three and nine months ended September 30, 2001 is unaudited. In the opinion of management, however, the consolidated financial information reflects all adjustments (consisting solely of normal recurring accruals) necessary for a fair presentation in accordance with accounting principles generally accepted in the United States of America. Interim results are not necessarily indicative of results to be expected for the entire year. Note 2. Commitments At September 30, 2001, the Company had outstanding commitments to originate new residential and commercial real estate mortgage loans totaling approximately $34.0 million, which are not reflected on the consolidated balance sheet. Unadvanced funds on equity lines were $24.6 million, unadvanced construction loan funds were $11.5 million, and unadvanced funds on commercial lines of credit were $10.7 million at September 30, 2001. Note 3. Earnings per Share Basic earnings per share represents income available to common stockholders 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 Company relate solely to outstanding stock options, and are determined using the treasury stock method. The assumed conversion of outstanding dilutive stock options would increase the shares outstanding but would not require an adjustment to income as a result of the conversion. 9 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operation GENERAL The discussions set forth below and elsewhere herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. The Company may make written or oral forward-looking statements in other documents we file with the SEC, in our annual reports to stockholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "will," "should," and other expressions which predict or indicate future events or trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Some of the factors that might cause these differences include the following: changes in general, national or regional economic conditions; changes in loan default and charge-off rates; reductions in deposit levels necessitating increased borrowing to fund loans and investments; changes in interest rates; changes in laws and regulations; changes in size and nature of the Company's competition; and changes in the assumptions used in making such forward-looking statements. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences, including, among others, the factors listed under "Risk Factors and Factors Affecting Forward Looking Statements," as found in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. Readers should carefully review the factors described under "Risk Factors and Factors Affecting Forward Looking Statements" and should not place undue reliance on our forward-looking statements. These forward-looking statements were based on information, plans and estimates at the date of this report, and we do not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. Consolidated net income was $3,981,000, or basic earnings per share of $0.51 ($0.50 diluted basis), for the three months ended September 30, 2001, compared to $3,016,000, or basic earnings per share of $0.37 ($0.36 diluted basis), for the comparable prior year period. Net interest income was $9,391,000 for the quarter ended September 30, 2001, up $381,000 or 4.2% from the comparable 2000 period, and represented a net interest margin of 2.87%, which compared to 2.93% for the comparable 2000 period. Net gain on sale of assets was $1.6 million for the 2001 third quarter compared to a $90,000 loss for the same quarter in 2000. Total operating expenses were $5,458,000 for the quarter ended September 30, 2001, up $461,000 or 9.2% from $4,997,000 during the comparable period in 2000. There was a provision for loan losses of $100,000 recorded for the three-month periods ended September 30, 2001 and zero for the same period in 2000. For the third quarter of 2001, the annualized return on assets was 1.15% and the annualized return on equity was 14.61%, compared to 0.94% and 13.04%, respectively, for the comparable period in 2000. 10 Consolidated net income was $10,393,000, or basic earnings per share of $1.33 ($1.29 diluted basis), for the nine months ended September 30, 2001, compared to $9,853,000, or basic earnings per share of $1.21 ($1.17 diluted basis), for the comparable prior year period. Basic and diluted earnings per share have increased 9.9% and 10.3%, respectively, while consolidated net income increased $540,000 or 5.5% for the nine months comparative period. Net interest income was $27,831,000 for the nine months ended September 30, 2001, up $759,000 or 2.8% from the comparable 2000 period, and represented a net interest margin of 2.87% compared to 2.96% for the nine months ended September 30, 2000. The net gain on sales of assets totaled $1,997,000 for the first nine months of 2001 compared to a net loss of $164,000 for the same nine-month period in 2000. During the nine months ended September 30, 2000, there was a $1.2 million pre-tax curtailment gain from the termination of the Company's defined benefit pension plan recorded as miscellaneous other income. Total operating expenses were $15,973,000 for the nine months ended September 30, 2001, up $1,118,000 or 7.5% from $14,855,000 during the comparable period in 2000. There was a $100,000 provision for loan losses recorded for the nine months ended September 30, 2001 compared to $75,000 for the same prior year period. For the first nine months of 2001, the annualized return on assets was 1.04% and the annualized return on equity was 13.20%, compared to 1.05% and 14.75%, respectively, for the comparable period in 2000. Total non-performing assets were $1,908,000 or 0.14% of total assets at September 30, 2001, compared to $1,047,000 or 0.08%, respectively, at December 31, 2000. The allowance for loan losses at September 30, 2001 was $7,033,000, representing 1.03% of total loans. At December 31, 2000, the allowance for loan losses was $6,950,000, representing 1.03% of total loans. The Company had no foreclosed real estate at September 30, 2001 or December 31, 2000. The Company had total assets of $1.40 billion and capital of $113.9 million at September 30, 2001, representing a capital to assets ratio of 8.13%, exceeding all regulatory requirements. When compared to December 31, 2000, securities increased $28.9 million or 5.0% to $611.9 million, total gross loans increased $8.0 million or 1.18% to $683.7 million, deposits increased $97.3 million or 10.0% to $1.07 billion, and borrowings decreased $14.5 million or 6.48% to $209.3 million. A more detailed discussion and analysis of the Company's financial condition and results of operations follows. 11 SECURITIES The amortized cost and fair value of securities, excluding restricted equity securities, at September 30, 2001 and December 31, 2000 with gross unrealized gains and losses, follows:
Gross Gross Amortized Unrealized Unrealized Fair September 30, 2001 Cost Gains Losses Value - ------------------------------------------------ --------- ---------- ---------- --------- (In thousands) Debt securities: Corporate bonds $ 250,018 $ 8,882 $ -- $ 258,900 Federal agency obligations 38,505 504 -- 39,009 Mortgage-backed 237,227 5,147 -- 242,374 --------- -------- -------- --------- Total debt securities 525,750 14,533 -- 540,283 Marketable equity securities 873 75 (129) 819 --------- -------- -------- --------- Total securities available for sale $ 526,623 $ 14,608 $ (129) $ 541,102 ========= ======== ======== ========= Debt securities: Federal agency obligations $ 4,865 $ 366 $ -- $ 5,231 Mortgage-backed 53,988 1,651 (7) 55,632 --------- -------- -------- --------- Total securities held to maturity $ 58,853 $ 2,017 $ (7) $ 60,863 ========= ======== ======== =========
Gross Gross Amortized Unrealized Unrealized Fair December 31, 2000 Cost Gains Losses Value - ------------------------------------------------ --------- ---------- ---------- --------- (In thousands) Debt securities: Corporate bonds $ 310,165 $ 2,628 $ (478) $ 312,315 Federal agency obligations 3,000 -- (3) 2,997 Mortgage-backed 212,589 668 (1,850) 211,407 --------- -------- -------- --------- Total debt securities 525,754 3,296 (2,331) 526,719 Marketable equity securities 2,285 81 (395) 1,971 --------- -------- -------- --------- Total securities available for sale $ 528,039 $ 3,377 $ (2,726) $ 528,690 ========= ======== ======== ========= Debt securities: Federal agency obligations $ 4,809 $ 210 $ -- $ 5,019 Mortgage-backed 38,045 871 -- 38,916 --------- -------- -------- --------- Total securities held to maturity $ 42,854 $ 1,081 $ -- $ 43,935 ========= ======== ======== =========
12 The amortized cost and fair value of debt securities by contractual maturity at September 30, 2001 are as follows:
Available for Sale Held to Maturity ------------------------ ---------------------- Amortized Fair Amortized Fair Cost Value Cost Value ---------- ---------- --------- --------- (In thousands) Within 1 year $ 72,743 $ 73,840 $ -- $ -- After 1 year through 5 years 202,280 210,377 4,865 5,231 After 5 year through 10 years 13,500 13,692 -- -- ---------- ---------- --------- --------- 288,523 297,909 4,865 5,231 Mortgage-backed securities 237,227 242,374 53,988 55,632 ---------- ---------- --------- --------- $ 525,750 $ 540,283 $ 58,853 $ 60,863 ========== ========== ========= =========
Securities increased $28.9 million from $583.0 million at December 31, 2000 to $611.9 million at September 30, 2001. At September 30, 2001, the securities portfolio classified as "available for sale" reflected a $14.5 million appreciation in market value as a result of the ongoing changes in market interest rates as compared to $965,000 at December 31, 2000. In accordance with the Company's asset-liability strategies, purchases of mortgage-backed securities are primarily in fifteen year mortgages with weighted-average lives of six years and other securities are generally short-term with maturities of five years or less. Sales of debt securities produced gains of $1,620,000 during the 2001 third quarter and gains of $1,931,000 for the nine months ended September 30, 2001 compared to losses of $90,000 for the three months and $154,000 for the nine months ended September 30, 2000. Sales of equities produced gains of $6,000 for the three months and $66,000 during the nine months ended September 30, 2001 compared to losses of $10,000 for the nine months ended September 30, 2000. There were no sales of equities recorded for the quarterly period ended September 30, 2000. 13 LOANS A summary of the Company's outstanding loan balances as of the dates indicated follows: September 30, December 31, 2001 2000 --------- ----------- (In thousands) Mortgage loans on real estate: Residential 1 - 4 family $ 493,557 $ 487,964 Commercial 127,297 124,201 Construction 18,072 19,913 Second mortgages 488 699 Equity lines of credit 23,806 21,609 --------- --------- 663,220 654,386 Other loans: Commercial 16,441 17,219 Personal 2,739 2,925 --------- --------- 19,180 20,144 --------- --------- Net deferred loan origination costs 1,258 1,167 --------- --------- Total loans 683,658 675,697 Less allowance for loan losses (7,033) (6,950) --------- --------- Loans, net $ 676,625 $ 668,747 ========= ========= Total gross loans outstanding at September 30, 2001 increased $8.0 million to $683.7 million when compared to the December 31, 2000 level. Net residential mortgage activity during the first nine months of 2001 caused an increase in residential 1-4 family real estate mortgage loans of $5.6 million. Construction real estate declined $1.8 million while commercial real estate increased $3.1 million from December 31, 2000 levels. NON-PERFORMING ASSETS Total non-performing assets were $1.9 million and $1.0 million at September 30, 2001 and December 31, 2000, respectively. There were no foreclosed assets at September 30, 2001 or December 31, 2000. As a percentage of total assets, non-performing assets equaled 0.14% and 0.08% at September 30, 2001 and December 31, 2000, respectively. Fluctuations in total non-performing assets occur from quarter to quarter but remain at historically low levels. It is the Company's general policy to place loans on a non-accrual status when such loans become 90 days contractually delinquent or when the collectibility of principal or interest payments becomes doubtful. When a loan is placed on non-accrual status, its interest income accrual ceases and all income previously accrued but unpaid is reversed. In accordance with SFAS No. 114, a loan is considered impaired when, based on current information and events, it is probable that the borrower will be unable to meet principal or interest payments as agreed in the original loan contract. The principal balance of impaired loans at September 30, 2001 was $1.9 million all of which were included in the $1.9 million non-performing assets referenced in the preceding paragraph. 14 ALLOWANCE FOR LOAN LOSSES A summary of the activity in the allowance for loan losses follows: Nine Months Ended September 30, ------------------- 2001 2000 ------- ------- (In thousands) Balance at beginning of period $ 6,950 $ 6,779 Provision for loan losses 100 75 Recoveries 57 46 Loans charged-off (74) (58) ------- ------- Balance at end of period $ 7,033 $ 6,842 ======= ======= The allowance for loan losses is established through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the collectibility of the loan balance is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectibility of the loans in light of historical experience, known inherent risks in the nature and volume of the loan portfolio, levels of non-performing loans, adverse situations that may affect the borrowers' ability to repay, trends in delinquencies and charge-offs, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision, as more information becomes available. Ultimate losses may vary from current estimates and future additions to the allowance may be necessary. The allowance consists of specific, general and unallocated loss components. Specific allocations include the results of measuring impaired loans under SFAS No. 114. General Risk allocations are determined by formula whereby the loan portfolio is stratified by loan type and by risk rating category. Loss factors are then applied to each category based on various considerations including historical loss experience, delinquency trends, current economic conditions, industry standards and regulatory guidelines. Any remaining unallocated portion is reviewed for adequacy in relation to the overall loan portfolio and in recognition of estimates inherent in the calculation methodology. The allowance for loan losses of $7.0 million at September 30, 2001 represented a reserve coverage of 1.03% of total loans. At December 31, 2000, the allowance for loan losses was $7.0 million, representing 1.03% of total loans. 15 DEPOSITS A summary of deposit balances, by type, is as follows: September 30, December 31, 2001 2000 ----------- ---------- (In thousands) Demand $ 73,415 $ 63,122 NOW 61,875 65,106 Savings and money market accounts 493,159 388,655 Term certificates 444,699 458,974 ----------- ---------- Total deposits $ 1,073,148 $ 975,857 =========== ========== Total deposits increased $97.3 million from December 31, 2000 to $1.07 billion at September 30, 2001. Demand deposits increased $10.3 million from year-end levels. During the first nine months of 2001, savings and money market accounts increased $104.5 million as retail depositors sought alternative banking relationships in a consolidating market and a safe harbor from the equity markets, and municipalities shifted from certificates of deposits to money market accounts for increased liquidity. The shift in municipal deposits contributed to the $14.3 million decrease in term certificates from $459.0 million at December 31, 2000 to $444.7 million at September 30, 2001. BORROWED FUNDS At September 30, 2001, the Company's long-term borrowings decreased by $12.1 million to $191.3 million from $203.4 million at December 31, 2000. Short-term borrowings decreased by $2.4 million to $18.0 million from $20.4 million at year-end. At September 30, 2001, borrowed funds totaled $209.3 million, decreasing $14.5 million from the $223.8 million reported at December 31, 2000 as the Company experienced strong deposit growth. 16 STOCKHOLDERS' EQUITY The Company's capital to assets ratio was 8.13% and 8.01% at September 30, 2001 and December 31, 2000, respectively. The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and/or the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Holding companies, such as the Company, are not subject to prompt corrective action provisions. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined) to average assets (as defined). Management believes as of September 30, 2001 that the Company and the Bank met all capital adequacy requirements to continue to be categorized as well capitalized. The Company's book value at September 30, 2001 was $14.61 per share, compared with $12.89 per share at December 31, 2000. 17 RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 2001 VS QUARTER ENDED SEPTEMBER 30, 2000 NET INTEREST INCOME Interest and dividend income from loans and investments increased $373,000 or 1.7% to $22.3 million for the 2001 third quarter when compared to the same quarter in 2000. For the 2001 third quarter, average earning assets totaled $1.327 billion, an increase of $82.7 million or 6.6% over the comparable average for 2000, with $65.0 million of that increase attributed to short and long-term securities and $17.7 million attributed to loans. The annualized yields on earning assets were 6.71% and 7.03% for the third quarters in 2001 and 2000, respectively. The yield on investment securities was 6.27% for the third quarter 2001 as compared 6.33% for the third quarter 2000. Short and long-term investments contributed $605,000 of additional interest and dividend income when comparing the third quarter of 2001 to the third quarter of 2000, primarily as a result of higher average balances. The increase in the average balance on loans and a decrease in the yield, from 7.65% to 7.31%, caused interest income on loans to decrease $232,000 from its 2000 third quarter level. Total interest expense for the three months ended September 30, 2001 was $12.9 million, reflecting an decrease of $8,000 or .06% over the same period in 2000. At September 30, 2001, average interest-bearing liabilities were $1.19 billion, an increase of $70.7 million or 6.3% over the comparable prior year period. This period-to-period increase can be attributed to average deposit growth of $81.6 million and average borrowed funds declining $10.9 million. Overall, interest expense on deposits increased $233,000 to $9.7 million as a result of the increase in average deposits offset by a decline in rates paid from 4.17% to 3.92% for the quarters ended September 30, 2001 and 2000, respectively. Interest expense on borrowed funds decreased $241,000 as the average balances and the rates paid on borrowed funds decreased 15 basis points to 5.97% in the third quarter of 2001 compared to the third quarter in 2000. The overall cost of interest bearing liabilities decreased to 4.28% from 4.56% when comparing the two quarters. Net interest income increased 4.2% or $381,000 to $9.4 million when comparing the third quarter in 2001 to the same quarter in 2000 even as the weighted average rate spread decreased by 4 basis points to 2.43% while the net interest margin decreased 6 basis points to 2.87%. The increase in net interest income is primarily due to increased levels of earning assets while the basis point declines in spread and margin reflect the changing mix of earning assets and interest bearing liabilities. The yield on earning assets decreased 32 basis points to 6.71% in the third quarter 2001 as compared to the same quarter in 2000, while the cost of interest-bearing liabilities decreased by 28 basis points to 4.28%. This resulted in an interest rate spread and a net interest margin of 2.43% and 2.87%, respectively, for the three months ended September 30, 2001. 18 MEDFORD BANCORP, INC. INTEREST RATE SPREAD Three Months Ended September 30, ------------------ 2001 2000 ---- ---- Weighted average yield earned on: Short-term investments 3.39% 6.27% Securities 6.27 6.33 Loans 7.31 7.65 ---- ---- All earning assets 6.71 7.03 ---- ---- Weighted average rate paid on: Deposits 3.92 4.17 Borrowed funds 5.97 6.12 ---- ---- All interest-bearing liabilities 4.28 4.56 ---- ---- Weighted average rate spread 2.43% 2.47% ==== ==== Net interest margin 2.87% 2.93% ==== ==== 19 PROVISION FOR LOAN LOSSES The provision for loan losses represents a charge against current earnings and an addition to the allowance for loan losses. The provision is determined by management on the basis of many factors, including the quality of specific loans, risk characteristics of the loan portfolio generally, the level of non performing loans, current economic conditions, trends in delinquency and charge-offs, and value of the underlying collateral. Management considers the allowance for loan losses to be adequate at September 30, 2001, although there can be no assurance that the allowance is adequate or that additional provisions to the allowance for loan losses will not be necessary. The Company recorded a provision for loan losses of $100,000 and none for the third quarter of 2001 and 2000, respectively. The Company recorded net loan charge-offs of $15,000 for the three months ended September 30, 2001 compared to net loan recoveries of $26,000 for the same period in 2000. OTHER INCOME Other income, including customer service fees and gains and losses on sales of assets, equaled $2,402,000 for the third quarter of 2001 as compared to $641,000 in the third quarter of 2000, representing a increase of $1,761,000. When comparing the third quarter of 2001 with the third quarter of 2000, the increase in securities gains and customer service fees of $1,716,000 and $70,000, respectively, principally account for the increase in other income. See related discussions under "Securities" included in "Management's Discussion and Analysis" in Item 2 of Part 1 of this report. OPERATING EXPENSES Operating expenses increased $461,000 or 9.2% to $5,458,000 for the three months ended September 30, 2001 when compared to the same period in 2000. Salaries and employee benefits increased $303,000, when comparing the third quarter of 2001 to the third quarter of 2000. Occupancy and equipment and data processing expenses increased $102,000 and $63,000, respectively, when compared to the third quarter of 2000 as a result of additional operating expenses associated with the opening of branches in Somerville and Arlington Center and a remote ATM also in Somerville. The Company's annualized expense ratio, which is the ratio of non-interest expense to average assets, was 1.58% and 1.56% for the three months ended September 30, 2000 and 2001, respectively. PROVISION FOR INCOME TAXES The Company's effective tax rate for three months ended September 30, 2001 was 36.2% as compared to 35.2% for the period ended September 30, 2000. 20 NINE MONTHS ENDED SEPTEMBER 30, 2001 VS NINE MONTHS ENDED SEPTEMBER 30, 2000 NET INTEREST INCOME Interest and dividend income from loans and investments increased $3.4 million or 5.3% to $67.0 million for the first nine months of 2001 when compared to 2000. During the first nine months of 2001, average earning assets totaled $1.3 billion, an increase of $72.7 million or 5.9% over the comparable average for 2000, with $49.1 million of that increase attributed to short and long-term securities and $23.6 million attributed to loans. The annualized yields on earning assets were 6.89% and 6.93% for the nine months ended September 30, 2001 and 2000, respectively. The yield on securities was 6.37% for the first nine months of 2001, an increase of 18 basis points from 6.19% for the same period in 2000. Short and long-term investments contributed $2,640,000 of additional interest and dividend income when comparing the first nine months of 2001 to the first nine months of 2000, primarily as a result of higher average balances and yield. The increase in the average balance of loans and decline in yield from 7.58% to 7.46% caused interest income on loans to increase only $757,000 from its 2000 nine month level. Total interest expense for the nine months ended September 30, 2001 was $39.2 million, reflecting an increase of $2.6 million or 7.2% over the same period in 2000. At September 30, 2001, average interest-bearing liabilities were $1.165 billion, an increase of $61.7 million or 5.6% over the comparable prior year period. This period-to-period increase can be attributed to average deposit growth of $58.0 million and average borrowed funds increasing $3.7 million. Overall, interest expense on deposits increased $2.2 million to $28.9 million due to increases in both average deposits and rates paid. Interest expense on borrowed funds increased $471,000 as the average balances increased and the rates paid on borrowed funds increased 18 basis points to 6.11% in the first nine months of 2001 compared to the first nine months of 2000. The overall cost of interest bearing liabilities increased to 4.48% from 4.40% when comparing the two periods. Net interest income increased 2.8% or $759,000 to $27.7 million when comparing the nine months in 2001 to the same period in 2000 even as the weighted average rate spread decreased by 12 basis points to 2.41% while net interest margin decreased 9 basis points to 2.87%. The increase in net interest income is primarily due to increased levels of earning assets while the basis point declines in spread and margin reflect the changing mix of earning assets and interest bearing liabilities. The yield on earning assets decreased 4 basis points to 6.89% in the first nine months of 2001 as compared to the first nine months of 2000, while the cost of interest bearing liabilities increased by 8 basis points to 4.48%. This resulted in an interest rate spread and a net interest margin of 2.41% and 2.87%, respectively, for the nine months ended September 30, 2001. 21 MEDFORD BANCORP, INC. INTEREST RATE SPREAD Nine Months Ended September 30, ----------------- 2001 2000 ----- ----- Weighted average yield earned on: Short-term investments 4.00% 5.95% Securities 6.37 6.19 Loans 7.46 7.58 ---- ---- All earning assets 6.89 6.93 ---- ---- Weighted average rate paid on: Deposits 4.10 4.03 Borrowed funds 6.11 5.93 ---- ---- All interest-bearing liabilities 4.48 4.40 ---- ---- Weighted average rate spread 2.41% 2.53% ==== ==== Net interest margin 2.87% 2.96% ==== ==== 22 PROVISION FOR LOAN LOSSES The provision for loan losses represents a charge against current earnings and an addition to the allowance for loan losses. The provision is determined by management on the basis of many factors, including the quality of specific loans, risk characteristics of the loan portfolio generally, the level of non performing loans, current economic conditions, trends in delinquency and charge-offs, and value of the underlying collateral. Management considers the allowance for loan losses to be adequate at September 30, 2001, although there can be no assurance that the allowance is adequate or that additional provisions to the allowance for loan losses will not be necessary. The Company recorded a $100,000 provision for loan losses for the first nine months of 2001 as compared to $75,000 for the same period in 2000. The Company recorded net loan charge-offs of $17,000 for the first nine months of 2001 compared to net charge-offs of $12,000 for the nine months ended September 30, 2000. OTHER INCOME Other income, including customer service fees and gains and losses on sales of assets equaled $4.5 million in the first nine months of 2001 as compared to $3.3 million in the first nine months of 2000, representing an increase of $1.2 million or 36.2%. When comparing the first nine months of 2001 and 2000, this increase is primarily due to an increase in securities gains and losses of $2,161,000 partially offset by a decrease in income due to the pre-tax gain of $1.2 million from the Company's defined benefit pension plan recorded in the first quarter of 2000. See related discussions under "Securities" included in "Management's Discussion and Analysis" in Item 2 of Part 1 of this report. OPERATING EXPENSES Operating expenses increased $1,118,000 or 7.5% to $15,973,000 for the nine months ended September 30, 2001 when compared to the same period in 2000. Salaries and employee benefits increased $655,000, when comparing the first nine months of 2001 to the first nine months of 2000. Occupancy and equipment and data processing expenses increased $259,000 and $186,000, respectively, when compared to the first half of 2000 as a result of additional operating expenses associated with the opening of branches in Somerville and Arlington Center and a remote ATM in Somerville. The Company's annualized expense ratio, which is the ratio of non-interest expense to average assets, was 1.59% for the nine months ended September 30, 2001, as compared to 1.58% for the prior year comparable period. PROVISION FOR INCOME TAXES The Company's effective tax rate for the nine months ended September 30, 2001 was 35.9% as compared to 36.1% for the nine months ended September 30, 2000. 23 LIQUIDITY AND CAPITAL RESOURCES The Company's principal sources of funds are customer deposits, amortization and payoff of existing loan principal and sales or maturities of various securities. The Company is a voluntary member of the Federal Home Loan Bank of Boston ("FHLBB"), and as such may take advantage of the FHLBB's borrowing programs to enhance liquidity and leverage its favorable capital position. The Company also may draw on lines of credit at the FHLBB and a large commercial bank, and it may pledge U.S. Government securities to borrow from certain investment firms and the Mutual Savings Central Fund of Massachusetts. These various sources of liquidity are used to fund withdrawals, new loans, and investments. Management seeks to promote deposit growth while controlling the Company's cost of funds. Sales oriented programs to attract new depositors and the cross-selling of various products to its existing customer base are currently in place. Management reviews, on an ongoing basis, possible new products, with particular attention to products and services that will assist retention of the Company's base of lower-costing deposits. Maturities and sales of securities provide significant liquidity to the Company. The Company's policy of purchasing shorter-term debt securities reduces market risk in the bond portfolio while providing significant cash flow. For the nine months ended September 30, 2001, cash flow from maturities and sales of securities was $153.9 million compared to $55.3 million for the nine months ended September 30, 2000. Principal payments received on mortgage-backed securities during the nine months ended September 30, 2001 and 2000 totaled $47.3 million and $14.2 million, respectively. During periods of high interest rates, maturities in the bond portfolio could provide significant liquidity at a lower cost than borrowings. Amortization and payoffs of the loan portfolio also contribute significant liquidity to the Company. Traditionally, the amortization and payoffs have been reinvested into loans. When payoff rates exceed origination rates, excess liquidity from loan payoffs is shifted into the investment portfolio. The Company also uses borrowed funds as a source of liquidity. These borrowings generally contribute toward funding over-all loan growth as well as purchases of mortgage-backed securities. At September 30, 2001, the Company's outstanding borrowings from the FHLBB were $206.3 million and $223.4 million at December 31, 2000. The Company also utilizes repurchase agreements as a source of funding when management deems market conditions to be conducive to such activities. Commitments to originate residential and commercial real estate mortgage loans at September 30, 2001, excluding unadvanced construction funds of $11.5 million, were $34.0 million. Management believes that adequate liquidity is available to fund loan commitments utilizing deposits, loan amortization, maturities of securities, or borrowings. Purchases of securities during the nine months ended September 30, 2001 totaled $214.3 million, consisting of debt instruments generally maturing in less than five years. This compares with purchases of $96.1 million for the nine months ended September 30, 2000. Residential and commercial real estate mortgage loan originations for the nine months ended September 30, 2001 totaled $ 105.2 million, compared with $ 113.9 million for the nine months ended September 30, 2000. The Company's capital position (total stockholders' equity) was $113.9 million or 8.13% of total assets at September 30, 2001 compared with $105.0 million or 8.01% of total assets at December 31, 2000. During the nine months ended September 30, 2001, the Company purchased 418,048 shares of its common stock in accordance with previously announced stock purchase programs. The Company's capital position exceeds all regulatory requirements. 24 ASSET-LIABILITY MANAGEMENT Through the Company's Asset-Liability Management Committee ("ALCO"), which is comprised of certain senior and middle management personnel, the Company monitors the level and general mix of interest rate-sensitive assets and liabilities. The primary objective of the Company's ALCO program is to manage the assets and liabilities of the Company to provide for optimum profitability and capital at prudent levels of liquidity and interest rate, credit, and market risk. It is ALCO's general policy to closely match the maturity or rate sensitivity of its assets and liabilities. In accordance with this policy, certain strategies have been implemented to improve the match between interest rate sensitive assets and liabilities. These strategies include, but are not limited to: daily monitoring of the Company's changing cash requirements, with particular concentration on investment in short term securities; originating adjustable and fixed rate mortgage loans for the Company's own portfolio; managing the cost and structure of deposits; and generally using matched borrowings to fund specific purchases of loan packages and large loan originations. Occasionally, management may choose to deviate from specific matching of maturities of assets and liabilities, if an attractive opportunity to enhance yields becomes available. The Company actively manages its liability portfolio in order to effectively plan and manage growth and maturities of deposits. Management recognizes the need for strict attention to all deposits. Accordingly, plans for growth of all deposit types are reviewed regularly. Programs are in place which are designed to build multiple relationships with customers and to enhance the Company's ability to retain deposits at controlled rates of interest, and management has adopted a policy of reviewing interest rates on an ongoing basis on all deposit accounts in order to control deposit growth and interest costs. In addition to attracting deposits, the Company has selectively borrowed funds using advances from the FHLBB and, upon occasion, reverse repurchase agreements. These funds have generally been used to fund loans typically having a matched repricing date as well as purchases of mortgage-backed securities. IMPACT OF INFLATION The consolidated financial statements and related consolidated financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and results of operations in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary effect of inflation on the operations of the Company is reflected in increased operating costs. Unlike most industrial companies, virtually all assets of a financial institution are monetary in nature. As a result, interest rates have a more significant effect 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. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. These Statements change the accounting for business combinations and goodwill and intangible assets. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method is prohibited. SFAS No. 142, which is effective January 1, 2002, changes the accounting for goodwill from an amortization method to an impairment-only approach. In addition, this Statement requires that acquired intangible assets, as defined, be amortized over their useful lives. Management is currently evaluating the impact of adopting this Statement on consolidated financial statements. 25 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk For a discussion of the Company's management of market risk exposure, see "Asset-Liability Management" in Item 2 of Part I of this report and Item 7A of Part II of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the "2000 Annual Report"). For quantitative information about market risk, see Item 7A of Part II of the Company's 2000 Annual Report. There have been no material changes in the quantitative and qualitative disclosures about market risk as of September 30, 2001 from those presented in the Company's 2000 Annual Report. PART II - OTHER INFORMATION ITEM 1 - Legal Proceedings There are no material legal proceedings to which the Company is a party or to which any of its property is subject, although the Company is a party to ordinary routine litigation incidental to its business. 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 ITEM 5 - Other Information None. ITEM 6 - Exhibits and Reports on Form 8-K (a) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three-month period ended September 30, 2001. 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEDFORD BANCORP, INC. Date: November 14, 2001 /s/ Arthur H. Meehan -------------------------------------------------------------- Arthur H. Meehan Chairman, President and Chief Executive Officer Date: November 14, 2001 /s/ Phillip W. Wong --------------------------------------------------------------- Phillip W. Wong Executive Vice President, Treasurer and Chief Financial Officer 27 -----END PRIVACY-ENHANCED MESSAGE-----