-----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, T/GPwEQLtlRoiv3nhE1lFwdAcZM9eHcjZC6wbwkvJjQTNJNwXtV5ATiH8zaTL2+p 7boLbPxnuoqW4psBC4BY6A== /in/edgar/work/0000914317-00-000734/0000914317-00-000734.txt : 20001110 0000914317-00-000734.hdr.sgml : 20001110 ACCESSION NUMBER: 0000914317-00-000734 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CCBT FINANCIAL COMPANIES INC CENTRAL INDEX KEY: 0001074972 STANDARD INDUSTRIAL CLASSIFICATION: [6021 ] IRS NUMBER: 043437708 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-72565 FILM NUMBER: 756557 BUSINESS ADDRESS: STREET 1: 307 MAIN STREET CITY: HYANNIS STATE: MA ZIP: 02601 BUSINESS PHONE: 5087608323 MAIL ADDRESS: STREET 1: 307 MAIN STREET CITY: HYANNIS STATE: MA ZIP: 02601 FORMER COMPANY: FORMER CONFORMED NAME: CCBT BANCORP INC DATE OF NAME CHANGE: 19981209 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended September 30, 2000 Commission File No. 000-25381 CCBT FINANCIAL COMPANIES, INC. (Exact name of Registrant as specified in its charter) Massachusetts 04-3437708 ---------------------- ----------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 495 Station Avenue, South Yarmouth, Massachusetts 02664 ------------------------------------------------- --------- (Address of principal executive office) (Zip Code) (Registrant's telephone #, incl. area code): 508-394-1300 ------------ 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. (1) : Yes [X] No [_] (2) : Yes [X] No [_] Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. There were 8,608,048 shares of common stock outstanding as of September 30, 2000.
TABLE OF CONTENTS Section Description Page # - ------- ----------- ------ PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Financial Condition September 30, 2000 (Unaudited) and December 31, 1999 1 Consolidated Statements of Income (Unaudited) Three and Nine Months Ended September 30, 2000 and 1999 2 Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2000 and 1999 3 Consolidated Statements of Comprehensive Income (Unaudited) Nine Months Ended September 30, 2000 and 1999 4 Consolidated Statements of Changes in Stockholders' Equity (Unaudited) Nine Months Ended September 30, 2000 and 1999 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-21 Item 3. Quantitative and Qualitative Disclosures About Market Risk 21 PART II OTHER INFORMATION Item 1. Legal Proceedings 22 Item 2. Changes in Securities and Use of Proceeds 22 Item 3. Defaults upon Senior Securities 22 Item 4. Submission of Matters to a Vote of Security Holders 22 Item 5. Other Information 22 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 23
PART I FINANCIAL INFORMATION ITEM 1. Financial Statements CCBT FINANCIAL COMPANIES, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, December 31, 2000 1999 ----------------- ---------------- ASSETS (Unaudited) Cash and due from banks $ 42,662,943 $ 43,415,100 Short term interest-bearing deposits 23,262,788 2,207,328 Federal funds sold 20,000,000 -- Securities available for sale, at fair value 392,909,564 463,379,414 Federal Home Loan Bank stock, at cost 22,125,400 22,125,400 Federal Reserve Bank of Boston stock, at cost 1,096,700 1,096,700 Loans, net of reserve for loan losses 785,483,760 663,584,422 Loans held for sale 164,770 200,000 Premises and equipment 16,471,074 12,396,729 Deferred tax assets 5,055,869 4,657,933 Accrued interest receivable on securities 3,170,853 2,850,366 Principal and interest receivable on loans 4,239,281 3,156,914 Intangibles 9,951,259 -- Other assets 8,314,594 12,044,040 --------------- --------------- Total assets $ 1,334,908,855 $ 1,231,114,346 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits $ 983,475,641 $ 766,063,617 Borrowings from the Federal Home Loan Bank 212,535,037 347,962,999 Other short-term borrowings 32,196,967 19,345,885 Current taxes payable 1,072,369 1,721,187 Interest payable on deposits and borrowings 3,299,227 3,061,932 Post retirement benefits payable 2,784,807 2,501,480 Employee profit sharing retirement and bonuses payable 2,105,745 2,396,542 Other liabilities 3,227,794 2,411,093 --------------- --------------- Total liabilities 1,240,697,587 1,145,464,735 --------------- --------------- Minority interest 161,526 -- --------------- --------------- Stockholders' equity Common stock, $2.50 par value Authorized: 12,000,000 shares Issued: 9,061,064 shares in 2000 and 1999 22,652,660 22,652,660 Surplus 13,903,294 13,903,294 Undivided profits 66,866,994 58,181,480 Treasury stock, at cost (453,016 shares) (7,399,628) (7,399,628) Accumulated other comprehensive income (1,973,578) (1,688,195) --------------- --------------- Total stockholders' equity 94,049,742 85,649,611 --------------- --------------- Total liabilities and stockholders' equity $ 1,334,908,855 $ 1,231,114,346 =============== ===============
See accompanying notes to the unaudited consolidated financial statements. 1 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (continued) CCBT FINANCIAL COMPANIES, INC. CONSOLIDATED STATEMENTS OF INCOME
Three Months ended September 30, Nine Months ended September 30, 2000 1999 2000 1999 ------------- -------------- ------------- -------------- (Unaudited) INTEREST INCOME: Interest and fees on loans $ 15,900,554 $ 12,299,918 $ 44,334,344 $ 36,315,791 Interest on short term interest-bearing deposits 356,103 117,989 659,053 553,663 Interest on federal funds sold 29,975 --- 29,975 --- Taxable interest income on securities 7,339,386 6,848,598 21,873,218 18,780,732 Tax-exempt interest income on securities 264,348 219,039 690,810 583,595 Dividends on securities 451,558 309,411 1,298,480 1,082,775 ----------- ----------- ------------ ------------ Total interest income 24,341,924 19,794,955 68,885,880 57,316,556 ----------- ----------- ------------ ------------ INTEREST EXPENSE: Interest on deposits 7,636,029 4,553,343 17,901,379 13,095,992 Interest on borrowings from the Federal Home Loan Bank 3,487,223 4,633,261 14,417,815 14,378,087 Interest on other short-term borrowings 412,674 264,447 1,003,120 582,513 ----------- ----------- ------------ ------------ Total interest expense 11,535,926 9,451,051 33,322,314 28,056,592 ----------- ----------- ------------ ------------ Net interest income 12,805,998 10,343,904 35,563,566 29,259,964 Provision for loan losses --- --- --- --- Net interest income after provision for loan losses 12,805,998 10,343,904 35,563,566 29,259,964 ----------- ----------- ------------ ------------ NON-INTEREST INCOME: Financial advisor fees 1,442,366 1,419,402 4,779,861 4,328,516 Deposit account service charges 495,650 480,074 1,469,236 1,456,362 Branch banking fees 832,337 768,162 2,312,947 2,289,264 Electronic banking fees 429,933 688,674 1,428,785 1,357,869 Loan servicing and other loan fees 39,330 37,178 225,233 84,485 Brokerage fees and commissions 218,575 216,134 752,216 741,243 Net gain on sale of securities 44,931 223,779 73,233 282,883 Net gain on sale of loans 31,144 51,869 58,798 346,046 Insurance commissions 304,722 --- 499,315 --- Other income 150,278 83,829 419,224 267,091 ----------- ----------- ------------ ------------ Total non-interest income 3,989,266 3,969,101 12,018,848 11,153,759 ----------- ----------- ------------ ------------ NON-INTEREST EXPENSE: Salaries 3,799,920 3,194,678 10,486,815 9,223,502 Employee benefits 1,624,850 1,329,083 4,610,371 3,672,350 Building and equipment 1,277,941 1,166,694 3,566,320 3,273,409 Data processing 759,273 759,236 2,201,146 2,250,609 Accounting and legal fees 209,846 219,253 671,530 612,210 Other outside services 509,830 462,851 1,547,574 1,399,334 Amortization of goodwill 395,835 --- 455,609 --- Delivery and communication 386,234 357,711 1,129,960 995,000 Directors' fees 86,250 75,250 262,000 226,250 Marketing and advertising 318,103 179,949 842,407 605,077 Printing and supplies 210,845 190,620 604,052 559,627 Insurance 98,081 70,315 286,324 205,906 Branch conversion expenses 249,808 --- 249,808 --- All other expenses 308,282 275,382 1,273,114 769,692 ----------- ----------- ------------ ------------ Total operating expense 10,235,098 8,281,022 28,187,030 23,792,966 ----------- ----------- ------------ ------------ Minority interest (6,917) --- (17,413) --- ----------- ----------- ------------ ------------ Net income before taxes 6,567,083 6,031,983 19,412,797 16,620,757 Applicable income taxes 2,199,774 2,181,763 6,591,100 6,012,077 ----------- ----------- ------------ ------------ Net income $ 4,367,309 $ 3,850,220 $12,821,697 $10,608,680 =========== =========== ============ ============ Average shares outstanding 8,608,048 8,887,753 8,608,048 8,957,493 Basic earnings per share $0.51 $0.43 $1.49 $1.18 Diluted earnings per share $0.51 $0.43 $1.49 $1.18 Cash dividends declared $0.16 $0.14 $0.48 $0.42
See accompanying notes to the unaudited consolidated financial statements. 2 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (continued) CCBT FINANCIAL COMPANIES, INC CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months ended September 30,
2000 1999 --------------- -------------- CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited) Net income $12,821,697 $10,608,680 Adjustments to reconcile net income to net cash flow provided by operating activities: Provision for loan losses -- -- Depreciation and amortization 1,726,808 1,620,726 Net amortization (accretion) of securities 5,126,638 2,964,928 Amortization of deferred loan fees (97,509) 148,128 Net gain on sale of investment securities (73,233) (282,883) (Prepaid) deferred income taxes (1,046,754) 1,110,485 Net gain on sale of loans (58,798) (346,046) Net change in: Loans held for sale 35,230 3,823,795 Accrued interest receivable (1,402,854) 972,582 Accrued expenses and other liabilities 1,046,526 14,877,862 Other, net (2,986,764) 5,405,143 ------------- ------------ Net cash provided by operating activities 15,090,987 40,903,400 ------------- ------------ CASH USED BY INVESTING ACTIVITIES Net increase in loans (130,355,375) (111,570,024) Proceeds from sale of loans 8,749,600 74,288,570 Dispositions of property from defaulted loans 70,000 115,000 Maturities of securities 546,702,601 382,302,840 Purchases of available for sale securities (783,033,661) (550,411,066) Sales of available for sale securities 297,988,862 60,863,759 Purchases of premises and equipment (5,608,672) (1,396,719) ------------- ------------ Net cash used by investing activities (65,486,645) (145,807,640) ------------- ------------ CASH PROVIDED BY FINANCING ACTIVITIES Net increase in deposits 217,412,024 71,563,513 Net (decrease) increase in borrowings from the Federal Home Loan Bank (135,427,962) 29,953,460 Net increase in other short-term borrowings 12,851,082 14,349,592 Purchases of CCBT Financial Companies, Inc. common stock in open market -- (6,244,288) Cash dividends paid on common stock (4,136,183) (3,771,025) ------------- ------------ Net cash provided by financing activities 90,698,961 105,851,252 ------------- ------------ Net increase in cash and cash equivalents 40,303,303 947,012 Cash and cash equivalents at beginning of period 45,622,428 29,490,715 ------------- ------------ Cash and cash equivalents at end of period $85,925,731 $30,437,727 ============= ============
Note: Cash equivalents include amounts due from banks, short term interest-bearing deposits and federal funds sold.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest $33,085,019 $27,883,338 Income taxes 7,067,843 4,360,000 Non-cash transactions: Additions to property from defaulted loans $ 70,000 $ 1,615,000 Loans to finance OREO property -- 100,000
See accompanying notes to the unaudited consolidated financial statements. 3 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (continued) CCBT FINANCIAL COMPANIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Nine Months ended September 30,
2000 1999 --------------- ------------- (Unaudited) Net income $ 12,821,697 $ 10,608,680 ------------- ------------- Unrealized holding (losses) gains on securities available for sale (356,893) 184,767 Reclassification of gains on securities held in income (73,233) (282,883) ------------- ------------- Net unrealized losses (430,126) (98,116) Related tax effect 144,743 48,103 ------------- ------------- Net other comprehensive loss (285,383) (50,013) ------------- ------------- Comprehensive income $ 12,536,314 $ 10,558,667 ============= =============
See accompanying notes to the unaudited consolidated financial statements. CCBT FINANCIAL COMPANIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Nine Months ended September 30,
2000 1999 --------------- --------------- (Unaudited) COMMON STOCK 6 Balance, beginning of the year $ 22,652,660 $ 22,652,660 --------------- --------------- Balance, September 30 22,652,660 22,652,660 --------------- --------------- SURPLUS Balance, beginning of the year 13,903,294 13,903,294 --------------- --------------- Balance, September 30 13,903,294 13,903,294 --------------- --------------- UNDIVIDED PROFITS Balance, beginning of the year 58,181,480 46,704,129 Net Income 12,821,697 10,608,680 Dividends declared (4,136,183) (3,771,024) --------------- --------------- Balance, September 30 66,866,994 53,541,785 --------------- --------------- TREASURY STOCK Balance, beginning of the year (7,399,628) -- Purchase of Treasury stock -- (6,244,288) --------------- --------------- Balance, September 30 (7,399,628) (6,244,288) --------------- --------------- ACCUMULATED OTHER COMPREHENSIVE INCOME Balance, beginning of the year (1,688,195) 282,317 Net other comprehensive loss (285,383) (50,013) --------------- --------------- Balance, September 30 (1,973,578) 232,304 --------------- --------------- TOTAL STOCKHOLDERS' EQUITY $ 94,049,742 $ 84,085,755 =============== ===============
See accompanying notes to the unaudited consolidated financial statements. 4 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (continued) CCBT FINANCIAL COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Nine months ended September 30, 2000 and 1999 Business CCBT Financial Companies, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Massachusetts on October 8, 1998 under the name of CCBT Bancorp, Inc. (the "Bancorp") at the direction of the Board of Directors and management of Cape Cod Bank and Trust Company (the "Bank") for the purpose of becoming a bank holding company for the Bank. On February 11, 1999, Bancorp became the holding company for the Bank by acquiring 100% of the outstanding shares of the Bank's common stock in a 1:1 exchange for Bancorp common stock. During 1999, the Company's name was changed to CCBT Financial Companies, Inc. The Bank's charter was converted to that of a national bank effective September 1, 1999. Currently, the Company's business activities are conducted primarily through the Bank. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain amounts have been reclassified in the September 30, 1999 financial statements to conform to the 2000 presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the current fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. Minority Interest During the second quarter of 2000, the Bank concluded its purchase of 51% of the firm of Murray & MacDonald Insurance Services, Inc. of Falmouth, Massachusetts. The minority interest amounts shown in the Company's consolidated balance sheet and income statements represent the interest of the minority shareholder in that company. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General This Form 10Q contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's future results could differ materially from those projected in the forward-looking statements as a result, among other factors, of changes in 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 the size and nature of the Company's competition, uncertainties relating to the ability of the Company and its suppliers, vendors and other third parties to resolve Year 2000 issues in a timely manner, and changes in the assumptions used in making such forward-looking statements. The following discussion should be read in conjunction with the accompanying consolidated financial statements and selected consolidated financial data included within this report. Given that the Company's principal 5 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) activity is ownership of the Bank, for ease of reference, the term "Company" in this item generally will refer to the investments and activities of the Company and the Bank except where otherwise noted. In addition to the acquisition of Murray & MacDonald Insurance Services, Inc., the Company also completed its acquisition of two branches of Fleet Bank, in Wareham and Falmouth, Massachusetts during the second quarter of 2000. These branches added approximately $55 million deposits, at a 15.5% premium, to the Bank at June 30, 2000. This premium is being amortized at the rate of $1.2 million per year over a 7 year period. CCBT Financial Companies, Inc. is a bank holding company. Its sole subsidiary, Cape Cod Bank and Trust Company, N. A., is a commercial bank with twenty-eight banking offices and 32 ATMs located in Barnstable and Plymouth Counties in Massachusetts as well as around the clock telephone and computer banking. As such, its principal business activities are the acceptance of deposits from businesses and individuals and the making of loans. The Bank also has a sizable trust department. The Bank's core market is comprised of retail, wholesale and manufacturing businesses; primary households (including a significant retirement population); and a growing number of second home owners. In addition, a substantial non-core vacation population contributes to seasonal deposit growth. (The remainder of this page intentionally left blank) 6 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) CCBT FINANCIAL COMPANIES, INC. NET INTEREST INCOME, NET INTEREST MARGIN Three Months Ended September 30, 2000
2000 1999 -------------------------------------- ------------------------------------- Interest Average Interest Average Average Income/ Yield Average Income/ Yield Balance Expense Rate Paid Balance Expense Rate Paid ----------- ---------- --------- ---------- -------- --------- (Dollar amounts in thousands) ASSETS Securities Mortgage-backed securities $ 24,998 $ 477 7.63% $ 52,191 $ 487 3.73% U.S. Government CMOs 125,509 2,399 7.65% 158,446 2,263 5.71% U.S. Government agencies 26,339 454 6.89% 30,659 470 6.13% Other CMOs 43,330 856 7.90% 74,840 1,067 5.70% State & municipal agencies 19,826 256 5.17% 28,475 226 3.17% Other securities 215,815 4,000 7.41% 211,799 2,982 5.63% Unrealized (losses) gains (3,258) -- 1,071 -- -- -------- ---------- ----------- ----- Total securities 452,559 8,442 7.46% 557,481 7,495 5.38% -------- ---------- ----------- ----- Loans Commercial 72,479 1,796 9.91% 70,906 1,644 9.27% Commercial construction 35,152 842 9.58% 14,331 322 8.99% Residential construction 57,747 943 6.53% 41,901 608 5.80% Commercial mortgages 220,570 5,158 9.35% 203,001 4,492 8.85% Industrial revenue bonds 1,716 34 7.86% 1,248 24 7.69% Residential mortgages 343,793 6,025 7.01% 263,780 4,478 6.79% Home equity 34,269 858 10.02% 21,421 475 8.87% Consumer 8,806 244 11.08% 9,903 257 10.38% Overdrafts 637 -- 730 -- -- ----------- ---------- ----------- -------- Total Loans 775,169 15,900 8.20% 627,221 12,300 7.84% ----------- ---------- ----------- -------- Total earning assets 1,227,728 24,342 7.93% 1,184,702 19,795 6.68% ---------- -------- Non - earning assets 73,143 59,976 ----------- ---------- Total assets $ 1,300,871 $1,244,678 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits NOW accounts $ 133,146 244 0.73% $ 116,193 240 0.83% Regular savings 148,456 1,159 3.12% 169,486 1,228 2.90% Money Market accounts 165,402 1,617 3.91% 149,419 1,169 3.13% Time certificates of deposit 289,722 4,615 6.37% 156,612 1,916 4.89% ----------- ---------- ----------- -------- Total interest bearing deposits 736,726 7,635 4.15% 591,710 4,553 3.08% ----------- ---------- ----------- -------- Borrowings Federal Home Loan Bank 217,149 3,488 6.42% 335,477 4,633 5.52% Other short-term borrowings 29,016 413 5.69% 25,090 265 4.22% ----------- ---------- ----------- -------- Total borrowings 246,165 3,901 6.34% 360,567 4,898 5.43% ----------- ---------- ----------- -------- Total interest bearing liabilities 982,891 11,536 4.69% 952,277 9,451 3.97% ---------- -------- Demand deposits 221,020 193,429 Non-interest bearing liabilities 6,971 11,187 Stockholders' equity 89,989 87,785 ----------- ---------- Total liabilities & equity $ 1,300,871 $1,244,678 =========== ========== Net interest income/ spread $ 12,806 3.24% $ 10,344 2.71% ========= ======== Net interest margin (NII/Avg Earning Assets) 4.15% 3.49%
7 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) CCBT FINANCIAL COMPANIES, INC. VOLUME/RATE ANALYSIS Three months ended September 30, 2000 vs September 30, 1999
Changes in income/expense due to ----------------------------------- Volume Rate Total ----------- -------- -------- (Dollar amounts in thousands) EARNING ASSETS Securities Mortgage-backed securities $ (389) $ 379 $ (10) U.S. Government CMOs (555) 691 136 U.S. Government agencies (71) 55 (16) Other CMOs (540) 329 (211) State & municipal agencies (91) 121 30 Other securities 66 952 1,018 ------- ------- ------- Total securities (1,580) 2,527 947 ------- ------- ------- Loans Commercial 38 114 152 Commercial construction 487 33 520 Residential construction 246 88 334 Commercial mortgages 403 263 666 Industrial revenue bonds 9 1 10 Residential mortgages 1,392 155 1,547 Home equity 306 77 383 Consumer (30) 17 (13) ------- ------- ------- Total Loans 2,851 748 3,599 ------- ------- ------- Total earning assets 1,271 3,275 4,546 ------- ------- ------- INTEREST BEARING LIABILITIES Deposits NOW accounts 33 (29) 4 Regular savings (160) 91 (69) Money Market accounts 142 306 448 Time certificates of deposit 1,890 809 2,699 ------- ------- ------- Total interest bearing deposits 1,905 1,177 3,082 ------- ------- ------- Borrowings Federal Home Loan Bank (1,782) 637 (1,145) Other short-term borrowings 49 99 148 ------- ------- ------- Total borrowings (1,733) 736 (997) ------- ------- ------- Total interest bearing liabilities 172 1,913 2,085 ------- ------- ------- Net changes due to volume/rate $ 1,099 $ 1,362 $ 2,461 ======= ======= =======
8 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS Three Months ended September 30, 2000 vs September 30, 1999 Sources of funds As shown in the table on page 7, average interest bearing deposits increased $145.0 million or 24.5% during the third quarter 2000 versus the third quarter 1999 including acquired deposits of the Bank's new offices in Falmouth and Wareham. With exception to the lower rate on NOW accounts, the cost of those funds rose in the 2000 period as management increased deposit rates in response to generally rising market rates. During the second quarter, the Company introduced a one year certificate of deposit with an aggressive and popular 7.20%APY. Concurrently, average borrowed funds, notably FHLB borrowings, declined in the 2000 period while rates paid on these borrowed funds increased. The remaining sources of funds, i.e., noninterest bearing demand deposits, other liabilities and capital, averaged 8.7% higher, including average demand deposit growth of $27.6 million or 14.3% again, including acquired deposits. In total, average sources of funds increased $56.2 million or 4.5% period to period, while the average cost of interest bearing funds increased from 3.97% during the quarter ended September 30, 1999 to 4.69% for the same period in 2000. Uses of funds When compared to the third quarter of 1999, average earning assets were higher in 2000 by 3.6% with a 23.6% increase in average loans outstanding partially offset by reduced investments. Average earning assets approximated 95% of average total assets in each period. Loan growth was spearheaded by residential mortgage, home equity and related construction lending, up a combined $108.7 million or 33.2% in an active local market. Combined commercial lending activities contributed another $40.4 million or 14.0% growth. Consistent with the general rise in market rates, the average yield on earning assets rose to 7.93% for the three months ended September 30, 2000 from the 6.68% reported for the comparable period in 1999. Net interest income Net interest income was $12.8 million for the three months ended September 30, 2000 as compared to $10.3 million for the same period in 1999, up 23.8%. The spread and net interest margin ratios were 3.24% and 4.15%, respectively, for the quarter just completed, as compared to 2.71% and 3.49%, respectively, for the comparable 1999 period. As shown in the Volume/Rate Analysis table on page 8, the Company's net interest income improved in both volume and rate categories during the third quarter 2000 as compared to the same quarter last year. Provision for loan losses No provisions were made to the reserve for possible loan losses in the quarters ended September 30, 2000 or 1999. Management believes that, upon continuing review of loan payment and quality statistics, the current reserve continues to be adequate to cover possible losses. Non-interest income Non-interest income totaled $3.99 million for the three months ended September 30, 2000, virtually identical to that earned during the same period in 1999. New revenues from insurance activities were offset by reduced electronic banking fees and lower net gains on sales of securities. The former resulted from the sale of the credit card merchant portfolio in late 1999, a portfolio which had historically generated seasonally high income. 9 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Non-interest expenses During the third quarter of 2000, noninterest expenses totaled $10.2 million, $1.9 million or 23.6% greater than the expenses of the comparable period last year. Approximately one half of this increase reflect direct expenses of the newly acquired insurance agency, one time conversion costs relating to the newly acquired branches, and amortization of intangibles arising from both acquisitions. Salaries and benefits, the largest combined category of expense, rose $901 thousand or 19.9% to total $5.0 million for the third quarter of 2000. While salaries and commissions increased 9.3% in 2000 versus 1999, deferred origination costs on residential mortgages declined such that the total increased $401 thousand or nearly 12.8%. Increased benefits expenses include a greater current provision for possible performance-based compensation awards at year end, consistent with increased profitability thus far in 2000. Higher marketing and printing costs reflect the Company's entrance into new markets, i.e., Wareham, Massachusetts and insurance services. All other expense categories are in line with management expectations . Minority interest The third quarter minority interest on the 49% minority holding of Murray & MacDonald Insurance Services, Inc. includes some initial investment in increasing that company's ability to provide additional service to its enlarged customer base. Income taxes Combined State and Federal income tax expense was $2.2 million for the quarter ended September 30, 2000 and $2.2 million was recorded for the same quarter in 1999. The combined effective State and Federal tax rate was 33.5% of pretax income in the third quarter of 2000 and 36.2% of pretax net income for 1999. Net income Consolidated net income of $4.4 million, represented earnings per share of $0.51 for the three months ended September 30, 2000 as compared to $3.9 million or $0.43 per share for the comparable quarter last year. Annualized returns on average assets and average equity were 1.34% and 19.3%, respectively, for the three months ended September 30, 2000 as compared to 1.23% and 17.40%, respectively, for the prior comparable period. (The remainder of this page intentionally left blank) 10 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) CCBT FINANCIAL COMPANIES, INC. NET INTEREST INCOME, NET INTEREST MARGIN Nine Months Ended September 30, 2000
2000 1999 --------------------------------------- -------------------------------------- Interest Average Interest Average Average Income/ Yield Average Income/ Yield Balance Expense Rate Paid Balance Expense Rate Paid -------------- ---------- --------- ----------- --------- -------- (Dollar amounts in thousands) ASSETS Securities Mortgage-backed securities $ 29,119 $ 1,697 7.77% $ 67,636 $ 2,446 4.82% U.S. Government CMOs 135,188 7,395 7.29% 149,747 5,566 4.96% U.S. Government agencies 27,981 1,369 6.63% 27,420 1,166 5.67% Other CMOs 54,345 2,879 7.06% 67,989 2,724 5.34% State & municipal agencies 20,039 691 6.07% 21,742 610 4.86% Other securities 206,047 10,521 6.92% 198,939 8,489 5.69% Unrealized (losses) gains (2,636) -- -- 682 -- -- ---------- ---------- ----------- -------- Total securities 470,083 24,552 7.08% 534,155 21,001 5.24% ---------- ---------- ----------- -------- Loans Commercial 79,584 5,754 9.80% 74,212 5,043 9.06% Commercial construction 28,483 2,005 9.40% 13,451 893 8.85% Residential construction 52,396 2,486 6.23% 39,031 1,712 5.85% Commercial mortgages 216,032 14,823 9.17% 204,553 13,593 8.86% Industrial revenue bonds 1,297 82 11.87% 1,312 74 10.57% Residential mortgages 317,450 16,390 6.88% 256,165 12,851 6.69% Home equity 29,252 2,117 9.67% 21,062 1,361 8.62% Consumer 8,692 677 10.39% 10,418 789 10.10% Overdrafts 469 -- -- 645 -- -- ---------- ---------- ----------- -------- Total Loans 733,655 44,334 8.08% 620,849 36,316 7.80% ---------- ---------- ----------- -------- Total earning assets 1,203,738 68,886 7.71% 1,155,004 57,317 6.62% ---------- -------- Non - earning assets 59,951 54,728 ---------- ----------- Total assets $1,263,689 $ 1,209,732 ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits NOW accounts $ 121,475 680 0.75% $ 112,355 $ 690 0.82% Regular savings 149,684 3,463 3.09% 162,185 3,488 2.87% Money Market accounts 148,750 4,083 3.67% 143,788 3,314 3.07% Time certificates of deposit 220,917 9,675 5.85% 153,158 5,604 4.88% ---------- ---------- ----------- -------- Total interest bearing deposits 640,826 17,901 3.73% 571,486 13,096 3.06% ---------- ---------- ----------- -------- Borrowings Federal Home Loan Bank 315,825 14,418 6.09% 356,294 14,378 5.38% Other short-term borrowings 24,680 1,003 5.43% 19,287 583 4.03% ---------- ---------- ----------- -------- Total borrowings 340,505 15,421 6.05% 375,581 14,961 5.31% ---------- ---------- ----------- -------- Total interest bearing liabilities 981,331 33,322 4.54% 947,067 28,057 3.95% ---------- -------- Demand deposits 186,769 167,692 Non-interest bearing liabilities 7,644 9,783 Stockholders' equity 87,945 85,190 ---------- --------------- Total liabilities & equity $1,263,689 $ 1,209,732 ========== =============== Net interest income/ spread $ 35,564 3.18% $ 29,260 2.67% ======= ======== Net interest margin (NII/Avg Earning Assets) 3.95% 3.38%
11 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) CCBT FINANCIAL COMPANIES, INC. VOLUME/RATE ANALYSIS Nine months ended September 30, 2000 vs September 30, 1999
Changes in income/expense due to ---------------------------------------- Volume Rate Total ----------- ---------- ---------- (Dollar amounts in thousands) EARNING ASSETS Securities Mortgage-backed securities $ (1,821) $ 1,072 $ (749) U.S. Government CMOs (669) 2,498 1,829 U.S. Government agencies 26 177 203 Other CMOs (635) 790 155 State & municipal agencies (70) 151 81 Other securities 336 1,696 2,032 -------- ---------- ---------- Total securities (2,833) 6,384 3,551 -------- ---------- ---------- Loans Commercial 380 331 711 Commercial construction 1,030 82 1,112 Residential construction 606 168 774 Commercial mortgages 777 453 1,230 Industrial revenue bonds (1) 9 8 Residential mortgages 3,122 417 3,539 Home equity 562 194 756 Consumer (133) 21 (112) -------- ---------- ---------- Total Loans 6,343 1,675 8,018 -------- ---------- ---------- Total earning assets 3,510 8,059 11,569 -------- ---------- ---------- INTEREST BEARING LIABILITIES Deposits NOW accounts 54 (64) (10) Regular savings (280) 255 (25) Money Market accounts 126 643 769 Time certificates of deposit 2,729 1,342 4,071 -------- ---------- ---------- Total interest bearing deposits 2,629 2,176 4,805 -------- ---------- ---------- Borrowings Federal Home Loan Bank (1,742) 1,782 40 Other short-term borrowings 191 229 420 -------- ---------- ---------- Total borrowings (1,551) 2,011 460 -------- ---------- ---------- Total interest bearing liabilities 1,078 4,187 5,265 -------- ---------- ---------- Net changes due to volume/rate $ 2,432 $ 3,872 $ 6,304 ======== ========== ==========
12 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS Nine months ended September 30, 2000 vs September 30, 1999 Sources of funds As shown in the table on page 11, average interest bearing deposits outstanding increased $69.3 million when comparing the nine months of 2000 versus the same period in 1999 and include deposits acquired during the second quarter, 2000. With exception to lowered rates on NOW accounts, the cost of those funds was greater in the 2000 period as management raised deposit rates in response to generally rising market rates. Average borrowed funds decreased $35.0 million in the 2000 period. The rates paid on these borrowed funds were higher than in the 1999 period, again reflecting the general rise in market rates. The remaining sources of funds, i.e., noninterest bearing demand deposits, other liabilities and capital, averaged 7.5% higher in the 2000 period, including demand deposit growth of $19.1 million or 11.4%. In total, average sources of funds increased $54.0 million or 4.5% while the average cost of interest bearing funds rose from 3.95% during the nine months ended September 30, 1999 to 4.54% in 2000. Uses of funds Average loans were higher by $112.8 million or 18.2% in 2000 while investments were lower by $64.1 million or 12.0%, and on a combined basis, approximated 95% of average total assets during each period. Loan growth was spearheaded by residential mortgage, home equity and related construction lending, up $82.8 million or 26.2% in an active local market. Accordingly, the investment portfolio declined in size with reductions occurring primarily in mortgage related categories. During the nine months ended September 30, 2000 the average yield on earning assets rose to 7.71% from the 6.62% reported for the comparable period in 1999. Net interest income Net interest income was $35.6 million for the nine months ended September 30, 2000 as compared to $29.3 million for the same period in 1999, up 21.5%. The spread and net interest margin ratios were 3.18% and 3.95%, respectively, for the nine months ended September 30, 2000 as compared to 2.67% and 3.38%, respectively, for the comparable 1999 period. While consumer attraction to lower residential mortgage rate opportunities lowered yields on the residential mortgage portfolio and the securities portfolio in 1999, interest rates have been rising in 2000, thereby having the opposite effect. These factors, along with increased commercial and commercial real estate construction lending, are significant contributors to the increased net interest income. As shown on the Volume/Rate Analysis on page 12, the Company's net interest income improved on both volume and rate increases during the first nine months of 2000 as compared to the same period in 1999. Provision for possible loan losses No provisions were made to the reserve for possible loan losses in the quarters ended September 30, 2000 or 1999. Management believes that, upon continuing review of loan payment and quality statistics, the current reserve continues to be adequate to cover possible losses. Non-interest income Non-interest income totaled $12.0 million for the nine months ended September 30, 2000, up $865 thousand or 7.8% compared to the $11.2 million earned during the same period in 1999. Higher Financial Advisor (trust and investment) fees, loan fees and insurance commissions contributed to this increase, along with increased income from electronic banking. See also comments regarding noninterest income changes during the third quarter 13 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) 2000 within this document entitled "Results of Operations - Three Months ended September 30, 2000 vs Three Months ended September 30, 1999". Non-interest expense During the first nine months of 2000, noninterest expenses totaled $28.2 million, $4.4 million or 18.5% greater than the expenses of the comparable period last year. Salaries and benefits, the largest combined category of expense, rose $2.2 million or 17.1% to total $15.1 million for the first nine months of 2000 while All other expenses increased $539 thousand reflecting one-time write-offs of $303 thousand and an increased commitment to training and education, as reported in the first quarter of 2000. Other expense categories reflect, in part, additional expenses of the insurance services operation, one time conversion expenses of new branches, amortization of intangibles resulting from acquisitions, and general increases in the cost of Bank operations in accordance with expectations. Minority interest The year-to-date minority interest on the 49% minority holding of Murray & MacDonald Insurance Services, Inc. includes some initial investment in increasing that company's ability to provide additional service to its enlarged customer base. Income taxes The combined State and Federal income tax expense was $6.6 million for the nine months ended September 30, 2000, up $579 thousand or 9.6% over the same period last year on higher pretax income. The combined effective State and Federal tax expense equaled 33.9% of pretax income thus far in 2000 as compared to 36.2% in 1999. Net income Consolidated net income was $12.8 million representing earnings per share of $1.49 for the nine months ended September 30, 2000 as compared to $10.6 million or $1.18 per share for the comparable nine months ended September 30, 1999. Annualized returns on average assets and average equity were 1.36% and 19.5%, respectively, for the nine months ended September 30, 2000 as compared to 1.17% and 16.65%, respectively, for the nine months ended September 30, 1999. (The remainder of this page intentionally left blank) 14 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) COMPARATIVE ANALYSIS OF SELECTED PERIOD-END ASSETS, LIABILITIES AND CAPITAL The Company had $1.33 billion of consolidated total assets, $983.4 million of deposits and $94.0 million of stockholders' equity at September 30, 2000. Its capital to assets ratio was 7.05%, exceeding all regulatory requirements. As compared to reported balances at December 31, 1999, Securities available for sale, at fair value, decreased $70.4 million or 15.2%, while portfolio loans, net of reserves, increased $121.9 million or 18.4%. Deposits increased $217.4 million or 28.4% while borrowed funds decreased $122.6 million or 33.4%. Investment Securities The adjusted cost and estimated market values of investment securities available for sale at September 30, 2000 and December 31, 1999 were as follows:
September 30, 2000 ( in thousands) ------------------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value --------------- -------------- --------------- ---------------- U. S. Government agency CMOs $ 138,934 $ 946 $ 4,364 $ 135,516 Other U. S. Government agencies 23,428 3 396 23,035 Other collateralized mortgage obligations 46,134 857 295 46,696 State and municipal obligations 18,336 --- --- 18,336 Other debt securities 169,446 630 749 169,327 ------------ ----------- ----------- ------------- Totals $ 396,278 $ 2,436 $ 5,804 $ 392,910 ============ =========== =========== ============= December 31, 1999 (in thousands) ------------------------------------------------------------------------- Gross Gross Estimated Adjusted Unrealized Unrealized Market Cost Gains Losses Value --------------- -------------- --------------- ---------------- U. S. Government agency CMOs $ 176,935 $ 2,234 $ 4,444 $ 174,725 Other U. S. Government agencies 16,819 3 266 16,556 Other collateralized mortgage obligations 79,425 535 677 79,283 State and municipal obligations 20,596 --- --- 20,596 Other debt securities 172,542 429 752 172,219 ------------ ----------- ----------- ------------- Totals $ 466,317 $ 3,201 $ 6,139 $ 463,379 ============ =========== =========== =============
Investment securities declined $70.5 million to $392.9 million at September 30, 2000, with deference to significant loan growth. Reductions primarily occurred in U.S. Government and other collateralized mortgage obligations. At September 30, 2000, Other debt securities consisted of approximately $137.0 million floating rate and $32.3 million short term fixed rate securities, nearly all backed by assets other than residential mortgages. 15 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Sales of securities produced net gains of $45 thousand during the quarter ended September 30, 2000 compared to net gains of $224 thousand during the same period in 1999. Net gains on security sales amounted to $73 thousand and $283 thousand for the nine months ended September 30, 2000 and 1999, respectively. Loans The following is a summary of the Company's outstanding loan balances as of the dates indicated. September 30, December 31, 2000 1999 ------------ ------------- (in thousands) Mortgage loans on real estate: Residential $ 367,795 $ 290,722 Commercial 222,999 203,987 Construction 91,957 68,809 Equity lines of credit 35,426 23,036 ----------- ------------ 718,177 586,554 ----------- ------------ Other loans Commercial 68,544 77,776 Industrial revenue bonds 1,668 1,137 Consumer 9,068 9,275 ----------- ------------ 79,280 88,188 ----------- ------------ Total loans 797,457 674,742 Less: Allowance for loan losses (11,973) (11,158) ----------- ------------ Loans, net $ 785,484 $ 663,584 =========== ============ Loans held for sale $ 165 $ 200 =========== ============ Portfolio loans increased $122.7 million or 18.2% to $797.5 million at September 30, 2000 as compared to December 31, 1999, led by residential mortgage loans and equity lines of credit which increased a combined $89.5 million or 28.5%. During the period, new residential mortgage volume in the residential loan category included originations of $5.4 million at fixed rates and $60.1 million at adjustable rates. Commercial real estate loans increased $19.0 million or 9.3% while combined residential and commercial real estate construction loans increased $23.1 million or 33.6%. Included in this latter category are a number of new loan participations for the construction of office buildings in the Boston area. Commercial loans decreased $9.2 million or 11.9% as the seasonal upswing in the economy enabled businesses to pay balances down. Non performing assets and loan loss experience: As shown in the next table, non-performing assets were $3.8 million or 0.28% of total assets at September 30, 2000 compared to $3.3 million or 0.27% of total assets at December 31, 1999. Accrual of interest income on loans is discontinued when it is questionable whether the borrower will be able to pay the principal and interest in full and/or when loan payments are 60 days past due, or 90 days past due if the loan is fully secured by real estate or other collateral held by the Bank. 16 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
September 30, December 31, 2000 1999 ------------ ---------------- (in thousands) Nonaccrual loans $ 2,270 $ 1,777 Loans past due 90 days or more and still accruing ---- ---- Property from defaulted loans 1,500 1,500 ---------- --------- Total non-performing assets $ 3,770 $ 3,277 ========== ========= Restructured troubled debt performing in accordance with amended terms, not included above $ 239 $ 626 ========== =========
The following is a summary of the activity in the reserve for loan losses for the indicated periods:
Nine months ended September 30, 2000 1999 ---------------- --------------- (in thousands) Balance at the beginning of the period $ 11,158 $ 11,108 Provisions --- --- Recoveries 966 542 ----------- ----------- 12,124 11,650 Less: Charge-offs (151) (336) ----------- ----------- Balance at the end of the period $ 11,973 $ 11,314 =========== ===========
Management believes that, upon review of loan quality and payment statistics, provisions from current income were unnecessary in the indicated periods, notwithstanding growth in the loan portfolio. The reserve represented 1.50% of total loans at September 30, 2000, 1.65% at December 31, 1999 and 1.80% at September 30, 1999. Management considers the reserve to be adequate at September 30, 2000, although there can be no assurance that the reserve is adequate or that additional provisions might be necessary. The Company had outstanding commitments to originate new residential and commercial mortgages of $33.0 million at September 30, 2000 and $57.0 million at December 31, 1999. Additional unadvanced funds on various loan types at September 30, 2000 are shown in the next table. (The remainder of this page intentionally left blank) 17 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Additional Unadvanced Loan Commitments September 30, December 31, 2000 1999 --------- --------- (in thousands) Commercial loans Dealer floor plan $ 11,999 $ 8,067 Lines of credit 42,320 54,735 Other 4,435 1,781 Commercial mortgages Construction 17,547 20,197 Other 1,043 613 Residential mortgages Home equity 42,457 34,734 Consumer loans Lines of credit 2,812 2,023 --------- --------- Total $ 122,613 $ 122,150 ========= ========= Deposits The following table is a summary of deposits outstanding as of the dates indicated: September 30, December 31, 2000 1999 ------------ ------------- (in thousands) Demand deposits $ 221,639 $ 167,624 NOW accounts 140,730 120,307 Savings deposits 148,194 158,142 Money market accounts 168,314 138,287 Certificates of deposit greater than $100,000 89,270 60,666 Other time deposits 215,329 121,038 ------------ ------------ Total deposits $ 983,476 $ 766,064 ============ ============ Reflecting core deposit growth, the recent acquisition of branches in Wareham and Falmouth, Massachusetts and the seasonal nature of the Cape Cod economy as discussed in "Liquidity" on page 20 herein, total deposits at September 30, 2000 were $217.4 million or 28.4% higher than total deposits at December 31, 1999. Generally, the Company's strategy is to price deposits that reflect national market rates, offering higher alternative rates based on increasing amounts deposited. Between May and September 2000, the Bank initiated a premium offering rate of 7.20%APY for a one-year CD which has proven successful. Also during the second quarter 2000, the Company accepted $25 million brokered deposits, included in Other time deposits in the table above. Interest rates paid are frequently reviewed and are modified to reflect changing conditions. 18 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Borrowed Funds Historically, the Company has selectively engaged in short and long term borrowings from the Federal Home Loan Bank of Boston, and has sold securities under agreements to repurchase, to fund loans and investments. At September 30, 2000, borrowed funds totaled $244.7 million, nearly $122.6 million or 33.4% lower than borrowed funds at December 31, 1999. This decrease responds to the previously described deposit growth during the period. Stockholders' Equity The Company's capital to assets ratio was 7.05% at September 30, 2000 compared to 6.96% December 31,1999. 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 possible 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 of total and Tier 1 capital (as defined) to average assets (as defined). The following schedule displays these capital guidelines and the ratios of the Company and the Bank as of September 30, 2000: Minimum September 30, 2000 Regulatory ------------------ Guidelines Company Bank ----------- --------- ------- Tier 1 leverage capital 3.00% 6.61% 6.46% Tier 1 capital to risk-weighted assets 4.00% 9.66% 9.38% Total capital to risk-weighted assets 8.00% 10.90% 10.63% The Company's book value at September 30, 2000 was $10.93 per share compared to $9.95 per share at December 31, 1999. 19 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) LIQUIDITY The Bank normally experiences a seasonal swing in its liquidity each year due to the nature of the economy in its market area. Liquidity is usually high in late summer and early fall and the annual low point is usually in the early spring. The Bank's investment portfolio is of high quality and is highly marketable although a gain or loss would be realized if the market value of securities sold were not equal to their adjusted book value at date of sale. Alternately, the Bank can borrow funds using investment securities as collateral. The Bank has an available line of credit of $5.0 million from the Federal Home Loan Bank of Boston, has established a line of credit for the purchase of federal funds from a regional bank and may borrow from the Federal Reserve Bank if necessary. ASSET/LIABILITY MANAGEMENT Through the Asset/Liability Management Committee ("ALCO"), a subcommittee of the Board of Directors of the Bank, the Company and the Bank monitor the level and general mix of earning assets and interest bearing liabilities, with particular attention to those assets and liabilities which are rate-sensitive. The primary objective of ALCO is to manage interest rate risk in accordance with policies approved by the Board of Directors regarding acceptable levels of interest rate risk, liquidity and capital. The committee meets monthly and sets the rates paid on deposits, approves loan pricing and reviews investment transactions. Given the substantial liquidity from cash flow and maturities of the Company's investment portfolio, the sizable proportion of rate sensitive loans to total loans, and the large core deposit base, ALCO believes the Company to be moderately asset-sensitive to changes in interest rates. Nevertheless, the Company's strategy has included the funding of certain fixed rate loans with medium term borrowed funds in order to mitigate a margin squeeze should interest rates rise. The Cape Cod market is one in which competing financial institutions frequently offer a wide range of yields for similar deposit products. Within this market, the Company finds it necessary, from time to time, to offer higher rates than it would otherwise justify, thereby increasing pressure on net interest income. In order to offset this pressure somewhat, the Company is strategically focusing on customer relationship profitability. COMPUTER PROCESSING IN THE YEAR 2000 The statements in the following section include "Year 2000 readiness disclosure" within the meaning of the Year 2000 Information and Readiness Act of 1998. Much computer software has been written which allows the year in a date to be recognized and/or stored based on a two-digit number, i.e., "12/31/99", clearly recognizable as meaning December 31, 1999. The same is true of a variety of hardware devices with built-in clock-calendars, such as computers. In some cases, this could have created problems at the turn of the century because "01/01/00" could have been interpreted to mean January 1, 1900 rather than January 1, 2000. If such circumstances had not been identified and corrected in advance, they could have caused system failure or erroneous calculations of such items as interest income or expense. This could potentially have had a significant impact on the Bank's ability to do business. For the Bank's internal computer processing, it was determined to be necessary to replace some of its computers and to acquire more recent versions of certain software. $800,000 was spent for this purpose in 1998 and an additional $540,000 was spent in 1999. These costs have been capitalized and are being depreciated over the useful lives of the items purchased. 20 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The Bank relies on outside vendors for much of its critical data processing. Prior to December 31, 1999, these vendors assured the Bank that they were Year 2000 compliant. The Bank's testing confirmed this on those systems that were considered to be critical or high risk. Contingency plans for processing of daily work in the event of failure of any of these systems were in place on December 31, 1999. As a result of these efforts and assurances, the Company has not experienced computer failures of any kind affecting either internal or subcontracted computer processing as of September 30, 2000. The Bank is also dependent on other providers in the conduct of its business, most notably for electrical power and telecommunications. Had these providers experienced Year 2000 problems, disruption of service, especially if prolonged, could have seriously effected the Bank's ability to conduct business as usual. The Company has not experienced any disruption of services from these providers. Certain of the Bank's customers may also have been subject to Year 2000 problems which may have impacted their ability to do business. Among other repercussions, this could have reduced a customer's ability to make loan payments to the Bank. To the Company's knowledge, no customers have been seriously affected by Year 2000 problems. Other customers may withdraw funds from the Bank in anticipation of possible Year 2000 disruptions. The Bank has traditionally maintained a substantial liquidity position in the normal course of doing business, and expects to continue to maintain a liquid investment portfolio to meet any unusual deposit outflows. Although the Company has not experienced any Year 2000 related problems, some additional dates remain which might disrupt its normal business operations. These are listed below. Until these dates, and others yet unidentified are successfully passed, and until any Year 2000 issues that might arise are corrected, the Company's Year 2000 readiness and contingency plans will remain in effect. October 10 First date to require an eight digit date field Status: open December 31 2000/2001 year end Status: open Please refer to the statement regarding "Forward-Looking Information" at the beginning of Part II, Item 7 of this 10Q entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" with regard to any forward-looking statements in this section. Although management of the Bank and the Company believe that their responses to the Year 2000 issue are appropriate, neither the Bank nor the Company can guarantee their Year 2000 readiness, nor that of material vendors or customers, nor the effectiveness of contingency plans in the event of a failure in any of the Bank's computer systems. 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, 1999 (the "1999 Annual Report"). For quantitative information about market risk, see Item 7A of Part II of the Company's 1999 Annual Report. There have been no material changes in the quantitative and qualitative disclosures about market risk as of September 30, 2000 from those presented in the Company's 1999 Annual Report. 21 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 Not applicable ITEM 5. Other information Not applicable ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Description ------------------- 27 Financial data schedule (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three month period ended September 30, 2000. 22 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. (Registrant) CCBT FINANCIAL COMPANIES, INC. ----------------------------- Date: November 9, 2000 ------------------------------------------------------ /s/ Stephen B. Lawson ----------------------------------------------------------- Stephen B. Lawson, President and Chief Executive Officer /s/ Noal D. Reid ----------------------------------------------------------- Noal D. Reid, Chief Financial Officer and Treasurer The remainder of this page intentionally left blank 23 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 42,662,943 23,262,788 20,000,000 0 392,909,564 0 0 797,456,535 (11,972,775) 1,334,908,855 983,475,641 97,018,639 12,651,468 147,713,365 0 0 22,652,660 71,397,082 1,334,908,855 15,900,554 8,085,267 356,103 24,341,924 7,636,029 11,535,926 12,805,998 0 44,931 10,228,181 6,567,083 6,567,083 0 0 4,367,309 0.51 0.51 4.15 2,270,000 0 239,000 9,373,710 11,158,126 94,265 398,697 11,972,775 11,972,775 0 0
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