-----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, D7qUHqYLTOcloITb8LEXCU/WMbwUa9jKvSmfntdqBB4lAcgxalh30bmc5tw/8okX 5TbBUagtzlfxjDj2aqXFAg== 0000914317-02-000589.txt : 20020515 0000914317-02-000589.hdr.sgml : 20020515 20020515155258 ACCESSION NUMBER: 0000914317-02-000589 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CCBT FINANCIAL COMPANIES INC CENTRAL INDEX KEY: 0001074972 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 043437708 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-72565 FILM NUMBER: 02652086 BUSINESS ADDRESS: STREET 1: 495 STATION AVENUE CITY: SOUTH YARMOUTH STATE: MA ZIP: 02601 BUSINESS PHONE: 5087608323 MAIL ADDRESS: STREET 1: 495 STATION AVENUE CITY: SOUTH YARMOUTH STATE: MA ZIP: 02601 FORMER COMPANY: FORMER CONFORMED NAME: CCBT BANCORP INC DATE OF NAME CHANGE: 19981209 10-Q 1 form10q-45221.txt 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 March 31, 2002 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) : [X] Yes [ ] 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 8,630,173 shares of common stock outstanding as of May 13, 2002. 1
TABLE OF CONTENTS - ----------------- Section Description Page No. - ------- ----------- -------- PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Statements of Financial Condition 3 March 31, 2002 and December 31, 2001 Consolidated Statements of Income 4 Three Months Ended March 31, 2002 and 2001 Consolidated Statements of Cash Flows 5 Three Months Ended March 31, 2002 and 2001 Consolidated Statements of Comprehensive Income 6 Three Months Ended March 31, 2002 and 2001 Consolidated Statements of Changes in Stockholders' Equity 6 Three Months Ended March 31, 2002 and 2001 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition 7-15 and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 PART II OTHER INFORMATION Item 1. Legal Proceedings 16 Item 2. Changes in Securities and Use of Proceeds 16 Item 3. Defaults upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17
2 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION March 31, December 31, 2002 2001 ---- ---- (Unaudited) ASSETS Cash and due from banks $ 68,490,925 $ 51,204,747 Short term interest-bearing deposits 14,526,891 10,857,540 Securities available for sale at fair value 385,751,120 438,349,833 Federal Home Loan Bank stock, at cost 23,502,600 23,502,600 Federal Reserve Bank stock, at cost 1,235,050 1,235,050 Total loans 882,131,830 884,291,338 Less: Allowance for loan losses (12,336,034) (12,251,907) --------------- --------------- Net loans 869,795,796 872,039,431 --------------- --------------- Loans held for sale 5,058,188 8,349,342 Premises and equipment 18,794,166 18,496,280 Deferred tax assets 3,781,457 2,619,189 Accrued interest receivable on securities 2,107,237 2,632,117 Interest receivable on loans 3,789,879 3,736,071 Intangibles 7,647,837 7,972,088 Other assets 12,155,882 13,672,642 --------------- --------------- Total assets $ 1,416,637,028 $ 1,454,666,930 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits $ 908,082,290 $ 903,390,528 Borrowings from the Federal Home Loan Bank 327,244,404 384,314,318 Other short-term borrowings 18,096,082 30,735,238 Subordinated debt 5,000,000 5,000,000 Current taxes payable 3,793,218 2,064,060 Interest payable on deposits and borrowings 1,861,245 2,410,159 Post retirement benefits payable 3,387,865 3,293,458 Employee profit sharing retirement and bonuses payable 842,053 4,214,186 Due to broker securities settlement account 27,458,338 -- Other liabilities 3,532,771 3,925,378 --------------- --------------- Total liabilities 1,299,298,266 1,339,347,325 --------------- --------------- Minority interest (4) 3,602 --------------- --------------- Commitments and contingencies Stockholders' equity Common stock, $1.00 par value: Authorized: 12,000,000 shares Issued: 9,061,064 9,061,064 9,061,064 Surplus 27,473,713 27,473,395 Undivided profits 86,566,152 83,156,834 Treasury stock, at cost (433,266 shares) in 2002 440,641 shares) in 2001 (7,077,029) (7,197,493) Accumulated other comprehensive income 1,314,866 2,822,203 --------------- --------------- Total stockholders' equity 117,338,766 115,316,003 --------------- --------------- Total liabilities and stockholders' equity $ 1,416,637,028 $ 1,454,666,930 =============== ===============
The accompanying notes are an integral part of these unaudited, consolidated financial statements. 3 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (continued)
CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended March 31, 2002 2001 ---- ---- (Unaudited) INTEREST & DIVIDEND INCOME Interest and fees on loans $14,154,462 $17,134,782 Interest on short term interest-bearing deposits 78,029 188,534 Interest on federal funds sold 948 827 Taxable interest income on securities 4,539,605 8,089,562 Tax-exempt interest income on securities 184,750 236,997 Dividends on securities 238,813 417,942 ----------- ----------- Total interest & dividend income 19,196,607 26,068,644 ----------- ----------- INTEREST EXPENSE Interest on deposits 3,337,490 7,773,716 Interest on borrowings from the Federal Home Loan Bank 3,717,226 4,966,384 Interest on other short-term borrowings 58,899 277,084 Interest on subordinated debt 71,955 -- ----------- ----------- Total interest expense 7,185,570 13,017,184 ----------- ----------- Net interest income 12,011,037 13,051,460 Provision for loan losses -- -- ----------- ----------- Net interest income after provision for loan losses 12,011,037 13,051,460 ----------- ----------- NON-INTEREST INCOME Financial advisor fees 1,720,190 1,760,363 Deposit account service charges 558,556 501,746 Branch banking fees 746,860 717,396 Electronic banking fees 520,409 408,259 Loan servicing and other loan fees (costs) (53,563) 59,672 Brokerage fees and commissions 362,338 272,530 Net gain on sales of securities 1,678,815 460,494 Net gain on sales of loans 576,060 141,631 Insurance commissions 426,128 397,693 Gain on sale of credit card merchant portfolio 52,935 74,089 Other income 119,859 122,036 ----------- ----------- Total non-interest income 6,708,587 4,915,909 ----------- ----------- NON-INTEREST EXPENSE Salaries 4,082,985 3,944,538 Employee benefits 2,055,256 1,861,198 Buildings and equipment 1,464,079 1,329,847 Data processing 655,350 777,720 Accounting and legal fees 224,831 214,678 Other outside services 552,781 509,188 Amortization of intangibles 324,251 395,833 Delivery and communications 576,968 524,491 Directors' fees 85,800 85,800 Marketing and advertising 310,141 348,252 Printing and supplies 172,084 137,375 Insurance 143,424 137,470 All other expenses 525,859 375,284 ----------- ----------- Total non-interest expense 11,173,809 10,641,674 ----------- ----------- Minority Interest (3,606) 12,169 ----------- ----------- Net income before taxes 7,549,421 7,313,526 Applicable income taxes 2,502,223 2,483,542 ----------- ----------- Net income $ 5,047,198 $ 4,829,984 ----------- ----------- Average shares outstanding - basic 8,622,102 8,608,048 Average shares outstanding - diluted 8,657,417 8,639,583 Basic earnings per share $0.59 $0.56 Diluted earnings per share $0.58 $0.56 Cash dividends declared $0.19 $0.18
The accompanying notes are an integral part of these unaudited, consolidated financial statements. 4 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 2001 ---- ---- (Unaudited) ----------- CASH PROVIDED BY OPERATING ACTIVITIES Net income $ 5,047,198 $ 4,829,984 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,047,334 1,069,120 Net amortization (accretion) of securities 4,272,932 (2,569,861) Amortization of net deferred loan costs 340,542 263,910 Net gain on sales of securities (1,678,815) (460,494) Net gain on sale of loans (576,060) (141,631) Net change in: Proceeds from sales (originations) of loans held for sale, net 3,867,214 (255,073) Accrued interest receivable (471,072) (176,652) Accrued expenses and other liabilities (4,212,717) (1,972,311) Other, net 5,122,621 2,536,819 ------------ ------------ Net cash provided by operating activities 12,759,177 3,123,811 ------------ ------------ CASH PROVIDED (USED) BY INVESTING ACTIVITIES Net decrease (increase) in loans 2,584,177 (30,615,864) Maturities of available-for-sale securities 182,254,774 81,579,045 Purchase of available-for-sale securities (134,148,893) (160,730,569) Sales of available-for-sale securities 25,061,669 19,399,620 Purchases of premises and equipment (1,020,968) (1,478,813) ------------ ------------ Net cash provided (used) by investing activities 74,730,759 (91,846,581) ------------ ------------ CASH PROVIDED (USED) BY FINANCING ACTIVITIES Net increase (decrease) in deposits 4,691,762 (18,370,045) Advances of borrowings from the Federal Home Loan Bank 367,393,508 472,121,000 Repayments of borrowings from the Federal Home Loan Bank (424,463,423) (369,936,411) Net decrease in other short-term borrowings (12,639,156) (249,718) Purchase of treasury stock -- -- Issuance of common stock under stock option plan 120,782 -- Cash dividends paid on common stock (1,637,880) (1,549,449) ------------ ------------ Net cash provided (used) by financing activities (66,534,407) 82,015,377 ------------ ------------ Net increase (decrease) in cash and cash equivalents 20,955,529 (6,707,393) Cash and cash equivalents at beginning of year 62,062,287 66,215,030 ------------ ------------ Cash and cash equivalents at end of period $ 83,017,816 $ 59,507,637 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest $ 7,729,372 $ 12,375,792 Income taxes 766,630 1,429,819 Non-cash transactions: Unsettled trades $ 27,451,808 $ 513,645 Additions to property from defaulted loans -- -- Loans to finance OREO property -- --
The accompanying notes are an integral part of these unaudited, consolidated financial statements. 5 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (continued)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Three Months Ended March 31, 2002 2001 ---- ---- (Unaudited) Net income $5,047,198 $4,829,984 ---------- ---------- Unrealized holding (losses) gains on securities available for (941,224) 3,691,604 sale Reclassification of gains on securities realized in income (1,678,815) (460,494) ---------- ---------- Net unrealized (losses) gains (2,620,039) 3,231,110 Related tax effect 1,112,702 (1,337,305) ---------- ---------- Net other comprehensive (loss) income (1,507,337) 1,893,805 ---------- --------- Comprehensive income $3,539,861 $6,723,789 ========== ==========
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Three Months Ended March 31, 2002 2001 ---- ---- (Unaudited) COMMON STOCK Balance, beginning of quarter $ 9,061,064 $ 9,061,064 ------------- ------------- Balance, March 31 9,061,064 9,061,064 ------------- ------------- SURPLUS Balance, beginning of quarter 27,473,395 27,494,890 Issuance of common stock under stock option plan 318 -- ------------- ------------- Balance, March 31 27,473,713 27,494,890 ------------- ------------- UNDIVIDED PROFITS Balance, beginning of quarter 83,156,834 69,896,759 Net income 5,047,198 4,829,984 Cash dividends declared (1,637,880) (1,549,449) ------------- ------------- Balance, March 31 86,566,152 73,177,294 ------------- ------------- TREASURY STOCK Balance, beginning of quarter (7,197,493) (7,399,628) Issuance of common stock under stock option plan 120,464 -- ------------- ------------- Balance, March 31 (7,077,029) (7,399,628) ------------- ------------- ACCUMULATED OTHER COMPREHENSIVE INCOME Balance, beginning of quarter 2,822,203 (324,307) Net other comprehensive (loss) income (1,507,337) 1,893,805 ------------- ------------- Balance, March 31 1,314,866 1,569,498 ------------- ------------- TOTAL STOCKHOLDERS' EQUITY, END OF QUARTER $ 117,338,766 $ 103,903,118 ============= =============
The accompanying notes are an integral part of these unaudited, consolidated financial statements. 6 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (continued) CCBT FINANCIAL COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three months ended March 31, 2002 and 2001 (Unaudited) Business CCBT Financial Companies, Inc. ("Company") was incorporated under the laws of the Commonwealth of Massachusetts on October 8, 1998 under the name of CCBT Bancorp, Inc. at the direction of the Board of Directors and management of Cape Cod Bank and Trust Company ("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. During the second quarter of 2000, the Company, through its wholly-owned subsidiary, Cape Cod Bank and Trust Company N.A., acquired 51% of the stock of Murray & MacDonald Insurance Services, Inc. of Falmouth, Massachusetts, a full service insurance Agency offering property, casualty, life, accident and health products to clients on Cape Cod. The Agency has been in business since 1972 and has license agreements with more than thirty insurance firms. As part of the transaction, Murray & MacDonald President Douglas D. MacDonald will continue as President of the Agency, and will direct all insurance activities for the Bank. In addition to the acquisition of Murray & MacDonald Insurance Services, Inc., the Company also completed its acquisition of two branch banking offices, in Falmouth and Wareham, Massachusetts, from Fleet Bank during the second quarter of 2000. These branches added approximately $55 million in deposits at a 15.5% premium, at June 30, 2000. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principals 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 principals for complete financial statements. Certain amounts have been reclassified in the March 31, 2001 financial statements to conform to the 2002 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 ended March 31, 2002 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 31,2001. On June 30, 2001, the FASB issued SFAS No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. With the adoption of SFAS No. 142, effective January 1, 2002, goodwill is no longer subject to amortization over its estimated useful life, but will be subject to at least an annual assessment for impairment by applying a fair value based test. The first impairment evaluation must be completed by June 30, 2002. Additionally, under SFAS No. 142, acquired intangible assets (such as core deposit intangibles) should be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of intent to do so. Unidentified intangible assets pertaining to branch acquisitions will continue to be amortized as such transactions are outside the scope of SFAS No. 142. As a result, effective January 1, 2002, the Company's goodwill will no longer be amortized but will be evaluated for impairment and the Company's core deposit intangibles will continue to be amortized over their estimated useful lives. 7 PART I FINANCIAL INFORMATION 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 actual results could differ materially from those projected in the forward-looking statements as a result, among other factors, of 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 the size and nature of the Company's competition, 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 activity currently 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. CCBT Financial Companies, Inc. is a bank holding company. Its main operating subsidiary, Cape Cod Bank and Trust Company, N.A. is the largest commercial bank headquartered in Barnstable County. It offers a wide range of commercial banking services for individuals, businesses, non-profit organizations, governmental units and fiduciaries. The Bank receives substantially all of its deposits from and makes substantially all of its loans to individuals and businesses on Cape Cod, although the Bank has some loans on properties outside its market area, including some sizable participations in commercial mortgages. 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 homeowners. In addition, a substantial non-core vacation population contributes to seasonal deposit growth. (The remainder of this page intentionally left blank.) 8 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont.)
Net Interest Income, Net Interest Margin Quarters Ended March 31, --------------------------------------------------------------------------- 2002 2001 ------------------------------------- ---------------------------------- Average Average Average Average Balance Interest Yield Balance Interest Yield ------------------------------------- ---------------------------------- (Dollar amounts in thousands) ASSETS Securities: Mortgage-backed securities $ 17,672 $ 234 5.30% $ 37,450 $ 700 7.48% CMOs 158,828 2,007 5.06% 177,802 3,432 7.72% U.S. Government agencies 17,607 200 4.53% 22,291 358 6.51% State and municipal obligations 23,499 185 4.09% 22,118 251 5.98% Other securities 247,217 2,416 3.96% 246,053 4,193 6.91% --------- ------ --------- ------ Total securities 464,823 5,042 4.42% 505,714 8,934 7.18% --------- ------ --------- ------ Loans: Commercial 85,779 1,233 5.75% 80,275 1,821 9.20% Commercial construction 53,122 693 5.22% 42,139 925 8.90% Residential construction 43,986 599 5.44% 49,522 772 6.24% Commercial mortgages 264,530 5,055 7.64% 236,536 5,409 9.27% Industrial revenue bonds 1,135 16 7.90% 1,565 32 11.68% Residential mortgages 371,009 5,693 6.14% 400,472 7,095 7.09% Home equity 54,880 683 5.04% 37,971 863 9.22% Consumer 7,016 183 11.42% 8,522 218 10.23% --------- ------ --------- ------ Total loans 881,457 14,155 6.43% 857,002 17,135 8.06% --------- ------ --------- ------ Total earning assets 1,346,280 19,197 5.74% 1,362,716 26,069 7.74% --------- ------ --------- ------ Cash and due from banks 38,726 36,813 Non-earning assets 31,131 30,964 ---------- ---------- Total assets $1,416,137 $1,430,493 ========== ========== LIABILITIES & STOCKHOLDERS' EQUITY Interest bearing deposits: NOW accounts $ 146,518 168 0.47% $ 132,395 226 0.69% Regular savings 75,736 213 1.14% 64,924 286 1.79% Money Market accounts 271,633 1,215 1.81% 240,044 2,198 3.71% Certificates of Deposit of 48,335 $100,000 or more 390 3.28% 122,486 1,904 6.30% Other time deposits 146,247 1,351 3.75% 203,340 3,160 6.30% --------- ------ --------- ------ Total interest bearing deposits 688,469 3,337 1.97% 763,189 7,774 4.13% --------- ------ --------- ------ Borrowings: Federal Home Loan Bank 370,915 3,718 4.07% 344,518 4,966 5.85% Other short-term borrowings 26,781 59 0.89% 25,930 277 4.33% Subordinated debt 5,000 72 5.84% -- -- --------- ------ --------- ------ Total borrowings 402,696 3,849 3.88% 370,448 5,243 5.74% --------- ------ --------- ------ Total interest-bearing 1,091,165 7,186 2.67% 1,133,637 13,017 4.66% liabilities ------ ------ Demand deposits 199,400 188,873 Non-interest bearing liabilities 10,471 10,267 Stockholders' equity 115,101 97,716 ---------- ---------- Total liabilities & equity $1,416,137 $1,430,493 ========== ========== Net interest income/spread $12,011 3.07% $13,052 3.08% ======= ======= Net interest margin (NII/Avg. Earning Assets) 3.62% 3.88%
9 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont.) Source and Use of Funds On average, borrowings from the Federal Home Loan Bank during the first quarter of 2002 were higher by $26,397,000 or 7.7% than in the first quarter of 2001. Additional funds were raised by the issuance of $5 million of Trust Preferred Securities during the third quarter of 2001 by CCBT Statutory Trust I, a subsidiary of the Company. In contrast, average interest bearing deposits declined by $74,720,000 or 9.8% during the first quarter of 2002 when compared to the same period in the prior year. This decline can be attributed to time Certficates of Deposit which decreased by $131,243,000 or 40.3% as a result of the maturity of a significant amount of one year Certificates of Deposit during the third quarter of 2001 and the reduction of interest rates being offered on these products. Partially offsetting the decrease in time deposits were increases in Money Market accounts of $31,589,000 or 13.2%, NOW accounts up $14,123,000 or 10.7%, and Regular Savings up $10,812,000 or 16.7%. Average non-interest bearing demand deposits also increased 5.6% or $10,527,000 for the first quarter of 2002 as compared to 2001. When compared to the first three months of 2001, average loans were higher in 2002 by 2.9% or $24,455,000. On average, Commercial Construction and mortgage loans grew by 14.0% or $38,977,000 while Residential Construction and mortgage loans declined by $34,999,000 or 7.8% as a result of sales of Residential Mortgages. During the first quarter of 2002 as compared to 2001, Commercial Loans increased $5,504,000 or 6.9% on average and Home Equity loans, on average, increased $16,909,000 or 44.5% as a result of lower rates on this prime-based product. When compared to the first quarter of 2001, average securities were lower in the first quarter of 2002 by $40,891,000 or 8.1% with significant declines occurring in Mortgage-backed Securities, down $19,778,000 or 52.8%, and CMOs, down $18,974,000 or 10.7% due to prepayments on these securities as a result of the impact of declining interest rates. Net interest income Net interest income was $12.0 million for the three months ended March 31, 2002 as compared to $13.1 million for the same period in 2001, a decline of 8.4%. The spread and net interest margin ratios were 3.07% and 3.62%, respectively, for the three months ended March 31, 2002 as compared to 3.08% and 3.88%, respectively, for the comparable 2001 period. These results reflect the significant decline in interest rates over the last year. The Company is negatively impacted by the current low interest rate environment since a high percentage of the Company's deposits are not subject to repricing. Provision for loan losses Recoveries on loans previously charged off exceeded charge-offs during the three months ended March 31, 2002 by $84,000. Management's assessment of the risks in the loan portfolio at March 31, 2002 as well as the Company's recent loss experiene, whereby recoveries have actually exceeded charge-offs since 1997, resulted in no provision for loan losses during the first quarter of 2002. The allowance for loan losses was 1.40% and 1.38% of total loans at March 31, 2002 and 2001, respectively. Non-interest Income and Expense Non-interest income totaled $6,709,000 for the three months ended March 31, 2002, an increase of 36.5% compared to the 4,916,000 earned during the same period in 2001. Net gain on sales of securities contributed $1,219,000 to this increase while net gains on sales of loans increased $434,000. During the first quarter of 2002, non-interest expenses totaled $11,174,000, an increase of 5.0% or $532,000 over the $10,642,000 expended during the comparable period in 2001. Salaries increased by $138,000 or 3.5% while employee benefits increased by $194,000 or 10.4%. Increases in building and equipment expense of $134,000 or 10.1% can be attributed to costs associated with the opening of two new financial service offices in March 2002 as well as amortizaton expense of computer software. 10 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont.) Income taxes Applicable State and Federal income tax expense was $2,502,000 for the quarter ended March 31, 2002 and $2,484,000 for the same quarter in 2001. The combined effective State and Federal tax rate was 33% and 34% of pretax net income for the first quarter of 2002 and 2001, respectively. Net income Consolidated net income was $5,047,198 representing earnings per basic share of $0.59 for the three months ended March 31, 2002 as compared to $4,829,984 or $0.56 per share for the comparable three months ended March 31, 2001. Annualized returns on average assets and average equity were 1.43% and 17.54%, respectively, for the three months ended March 31, 2002 as compared to 1.35% and 19.77%, respectively, for the three months ended March 31, 2001. COMPARATIVE ANALYSIS OF SELECTED PERIOD-END ASSETS, LIABILITIES AND CAPITAL The Company had $1.42 billion consolidated total assets, $908.1 million deposits and $117.3 million stockholders' equity at March 31, 2002. Its capital to assets ratio was 8.28%, exceeding all regulatory requirements. As compared to reported balances at December 31, 2001, gross loans decreased $2.2 million or ...24%, deposits increased $4.7 million or .52% and borrowed funds decreased $69.7 million or 16.8%. Securities The adjusted cost and estimated market values of securities which the Company classified as available for sale at March 31, 2002 and December 31, 2001 were as follows:
March 31, 2002 ------------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- (Dollar amounts in thousands) U.S. Government agency CMOs $60,123 $1,049 $568 $ 60,604 Other U.S. Government agency obligations 21,732 47 214 21,565 Other collateralized mortgage obligations 49,561 1,092 366 50,287 State and municipal obligations 14,144 -- -- 14,144 Other debt securities 237,964 2,166 979 239,151 -------- ----- ------ -------- Totals $383,524 $4,354 $2,127 $385,751 ======== ====== ====== ========
December 31, 2001 ------------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- (Dollar amounts in thousands) U.S. Government agency CMOs $116,949 $2,362 $921 $118,390 Other U.S. Government agency obligations 14,254 158 48 14,364 Other collateralized mortgage obligations 66,356 1,720 289 67,787 State and municipal obligations 24,114 -- -- 24,114 Other debt securities 211,831 2,672 808 213,695 -------- ----- ------ -------- Totals $433,504 $6,912 $2,066 $438,350 ======== ====== ====== ========
11 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont.) Securities available for sale decreased $52.6 million, from $438.3 million at December 31, 2001 to $385.8 million at March 31, 2002. Net gains from security sales were $1.7 million during the quarter ended March 31, 2002 compared to $460 thousand during the same period in 2001. Loans The following is a summary of the Company's outstanding loan balances as of the dates indicated: March 31, 2002 December 31, 2001 -------------- ----------------- Mortgage loans on real estate Residential $ 362,391 $ 376,504 Commercial 265,467 264,934 Construction 100,742 95,186 Equity lines of credit 56,585 53,336 Other loans Commercial 89,154 84,947 Industrial revenue bonds 1,111 1,163 Consumer 6,682 8,221 --------- --------- Total loans 882,132 884,291 Less: Allowance for loan losses (12,336) (12,252) --------- --------- Total portfolio loans, net $ 869,796 $ 872,039 ========= ========= Loans held for sale $ 5,058 $ 8,349 ========= ========= As shown in the table above, total loans decreased $2.2 million or .24% to $882.1 million at March 31, 2002 as compared to December 31, 2001, with balanced growth between commercial and commercial construction mortgage loans, up $4.2 and $5.6 million, respectively. New residential mortgage originations of $36.3 million fixed rate and $37.8 million adjustable rate were achieved in the first quarter 2002. During the same period, the Company sold $53.4 million residential mortgages, producing net gains of $653 thousand. Allowance for Loan Losses The allowance for loan losses is an estimate of the amount necessary to absorb probable losses in the loan portfolio. The allowance consists of specific, general and unallocated components. Commercial real estate and commercial business loans are evaluated individually for allowance purposes. Other categories of loans are generally evaluated as a group. The specific component relates to loans that are classified as doubtful, substandard or special mention. Loans classified as doubtful are considered impaired in accordance with SFAS No. 114, and an allowance is determined using a discounted cash flow calculation. Loss factors for substandard loans are based on a loss migration database, while loss factors for all other categories of loans are based on the Company's historical loss experience with similar loans of similar quality as determined by the Company's internal rating system. Loss factors are then adjusted for additional points that consider qualitative factors such as current economic trends (both local and national), concentrations, growth and performance trends, and the results of risk management assessments. Accordingly, increases or decreases in the amount of each loan category as well as the ratings of the loans within each category are considered in calculating the overall allowance. The allowance is an estimate, and ultimate losses may vary from current estimates. As adjustments become necessary, they are reported in earnings of the periods in which they become known. In addition, the Company's allowance for loan losses is periodically reviewed by the OCC as part of their examination process. The OCC may require the Company to make additions to the allowance based upon judgments different from those of management. 12 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont.) Non performing assets and loan loss experience As shown in the following table non-performing assets were $3.3 million or .23% of total assets at March 31, 2002 compared to $3.3 million or .23% of total assets at December 31, 2001. 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.
March 31, December 31, 2002 2001 ---- ---- (Dollar amounts in thousands) Nonaccrual loans $1,815 $1,802 Loans past due 90 days or more and still accruing -- -- Property from defaulted loans 1,500 1,500 ------ ------ Total non-performing assets $3,315 $3,302 ====== ====== Restructured troubled debt performing in accordance With amended terms, not included above $ 223 $ 224 ====== ======
The following is a summary of the activity in the allowance for loan losses for the indicated periods:
Three Months Ended March 31, 2002 2001 ---- ---- (Dollar amounts in thousands) Balance, beginning of period $12,252 $12,154 Provision for loan losses -- -- Charge-offs (27) (98) Recoveries on loans previously charged off 111 85 ------- ------- Balance, end of period $12,336 $12,141 ======= =======
Recoveries on loans previously charged off exceeded charge-offs therefore management determined that additions to the reserve for loan losses were unnecessary in 2002, notwithstanding the growth in the loan portfolio. The reserve represented 1.40% of total loans at March 31, 2002, 1.39% at December 31, 2001, and 1.38% at March 31, 2001. Although management believes that upon review of loan quality and payment statistics, the reserve is adequate to cover losses likely to result from loans in the current portfolio at March 31, 2002, there can be no assurance that the reserve is adequate or that additional provisions might not become necessary. The Company had outstanding commitments to originate new residential and commercial mortgages of $15.2 million at March 31, 2002 and $40.3 million at December 31, 2001 which are not reflected on the consolidated statement of financial condition. Additional unadvanced loan funds are summarized as follows for the indicated periods: 13 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont.) March 31, 2002 December 31, 2001 -------------- ------------------ (Dollar amounts in thousands) Commercial loans Dealer floor plan $ 6,693 $ 9,997 Lines of credit 48,904 45,469 Other 3,450 4,845 Commercial mortgages Construction 38,800 25,685 Other 17,387 10,346 Residential mortgages Home equity 65,449 61,891 Consumer loans Lines of credit 3,071 2,969 -------- -------- Total $183,754 $161,202 ======== ======== Deposits The following table is a summary of deposits outstanding as of the dates indicated:
March 31, 2002 December 31, 2001 -------------- ----------------- Deposits Demand $204,748 $209,551 NOW 156,503 149,109 Money market 195,449 185,156 Other savings 161,963 155,255 Certificates of deposit greater than $100,000 46,206 53,123 Other time 143,213 151,197 -------- -------- Total deposits $908,082 $903,391 ======== ========
Reflecting somewhat the seasonal nature of Cape Cod economy as discussed in "Liquidity" on page 15 herein, total deposits at March 31, 2002 are $4.7 million or .52% higher than total deposits at December 31, 2001. Generally, the Company's strategy is to price deposits according to local market rates, offering higher alternative rates based on increasing amounts deposited. Interest rates paid are frequently reviewed and are modified to reflect changing conditions. 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 March 31, 2002, borrowed funds totaled $350.3 million, down 16.6% or $69.7 million compared to borrowed funds at December 31, 2001. This decrease offsets the seasonal deposit decline described under the section entitled "Deposits" above and contributes to the support of heretofore described loan growth. During the third quarter of 2001, CCBT Statutory Trust I was formed for the purpose of issuing trust preferred securities and investing the proceeds of the sale of these securities in subordinated debentures issued by the Company. A total of $5 million of floating rate Trust Preferred Securities were issued and are scheduled to mature in 2031, callable at the option of the Company after 7/31/06. Distributions on these securities are payable quarterly in arrears on the last day of April, July, October and January. The Trust Preferred Securities are presented in the consolidated statements of financial condition of the Company as Subordinated Debt. The Company records distributions payable on the Trust Preferred Securities as Interest on subordinated debt in its consolidated statements of income. Stockholders' Equity The Company's capital to assets ratio was 8.28% at March 31, 2002 compared to 7.93% at December 31, 2001. 14 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont.) 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 March 31, 2002.
Minimum March 31, 2002 Regulatory -------------------------- Guidelines Company Bank ----------------------------------------- Tier 1 leverage capital 4.00% 8.01% 7.98% Tier 1 capital to risk-weighted assets 4.00% 12.27% 12.22% Total capital to risk-weighted assets 8.00% 13.52% 13.47%
The Company's book value at March 31, 2002 was $13.60 per share compared to $13.38 per share at December 31, 2001. LIQUIDITY The Company normally experiences a wide swing in its liquidity each year as a result of the seasonal nature of the economy in its market area. Liquidity is usually at its high in late summer and early fall and the annual low point is usually in the spring. The Bank's investment securities could be sold if necessary to meet liquidity needs. In that event, a gain or loss would be realized if the market value of the securities sold was not equal to their cost, adjusted for the amortization of premium or accretion of discount. The Bank can also borrow funds using investment securities as collateral, and it has a line of credit of $5,000,000 from the Federal Home Loan Bank of Boston. The Bank has also established a line of credit of $7,000,000 for the purchase of federal funds from SunTrust Bank and may also borrow from the Federal Reserve if necessary. ASSET/LIABILITY MANAGEMENT The Company's Asset/Liability Management Committee ("ALCO"), which is comprised of several Directors with senior management, is responsible for managing 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 15 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont.) 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. 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, 2001 (the "2001 Annual Report"). For quantitative information about market risk, see Item 7A of Part II of the Company's 2001 Annual Report. There have been no material changes in the quantitative and qualitative disclosures about market risk as of March 31, 2002 from those presented in the Company's 2001 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 Not applicable ITEM 5. Other information Not applicable ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three month period ended March 31, 2002 16 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: May 15, 2002 ----------------------------------------------------- /s/ STEPHEN B. LAWSON ----------------------------------------------------------- Stephen B. Lawson, President and Chief Executive Officer /s/ NOAL D. REID ----------------------------------------------------------- Noal D. Reid, Chief Financial Officer and Treasurer 17 -----END PRIVACY-ENHANCED MESSAGE-----