-----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, IkBkOq0NqB+SUinU/gtkbqhJ/1nJwkLzBUoRow7B4pyL1c96ykvOYD1wTA0EwCm1 O0vgw5M1Gw0A+Rc/jmJnhw== 0000914317-99-000443.txt : 19990813 0000914317-99-000443.hdr.sgml : 19990813 ACCESSION NUMBER: 0000914317-99-000443 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CCBT BANCORP 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: SEC FILE NUMBER: 333-72565 FILM NUMBER: 99684972 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 10-Q 1 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 June 30, 1999 Commission File No. 000-25381 CCBT BANCORP, INC. (Exact name of Registrant as specified in its charter) Massachusetts 04-3437708 (State of Incorporation) (I.R.S. Employer Identification No.) 307 Main Street, Hyannis, Massachusetts 02601 (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 and (2) : Yes Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. There were 8,917,264 shares of common stock outstanding as of June 30, 1999.
TABLE OF CONTENTS Section Description PART I FINANCIAL INFORMATION Item 1. Financial Statements Page # Consolidated Statements of Financial Condition June 30, 1999 (Unaudited) and December 31, 1998 3 Consolidated Statements of Income (Unaudited) Three and Six Months Ended June 30, 1999 and 1998 4 Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 1999 and 1998 5 Consolidated Statements of Changes in Stockholders' Equity (Unaudited) Six Months Ended June 30, 1999 and 1998 6 Consolidated Statements of Comprehensive Income (Unaudited) Six Months Ended June 30, 1999 and 1998 6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-22 Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 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 23 SIGNATURES 23
PART I FINANCIAL INFORMATION Item 1. Financial Statements
CCBT BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION June 30, December 31, 1999 1998 --------------- --------------- ASSETS (Unaudited) Cash and due from banks .............................. $ 30,622,844 $ 29,383,227 Interest-bearing deposits in banks ................... 656,334 43,888 Securities available for sale, at fair value ......... 531,592,866 496,020,243 Federal Home Loan Bank stock, at cost ................ 22,125,400 22,125,400 Loans Commercial loans ................................ 76,770,522 70,766,629 Construction mortgage loans ..................... 53,106,002 47,939,708 Commercial mortgage loans ....................... 201,921,141 207,860,415 Industrial revenue bonds ........................ 1,278,917 1,344,336 Residential mortgage loans ...................... 263,984,849 254,320,484 Consumer loans .................................. 10,963,718 11,588,705 --------------- --------------- Total loans .................................. 608,025,149 593,820,277 Less: Reserve for loan losses ................ (11,254,731) (11,107,633) --------------- --------------- Net loans .................................... 596,770,418 582,712,644 --------------- --------------- Loans held for sale .................................. 16,198,042 18,140,522 Premises and equipment ............................... 12,471,759 12,847,002 Deferred tax assets ................................. 4,595,972 4,992,690 Accrued interest receivable on securities ............ 4,060,265 4,067,975 Principal and interest receivable on loans ........... 2,988,648 3,596,836 Other assets ......................................... 5,875,645 3,599,734 --------------- --------------- Total assets ................................. $ 1,227,958,193 $ 1,177,530,161 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits ...................................... $ 171,961,270 $ 160,966,042 NOW account deposits ................................. 114,269,263 114,210,098 Money market account deposits ........................ 141,158,156 141,316,906 Other savings deposits ............................... 162,410,608 160,125,653 Certificates of deposit of $100,000 or more .......... 32,980,972 30,299,027 Other time deposits .................................. 117,234,576 120,979,249 --------------- --------------- Total deposits ............................... 740,014,845 727,896,975 --------------- --------------- Borrowings from the Federal Home Loan Bank ........... 370,053,150 343,506,683 Other short-term borrowings .......................... 19,503,339 14,606,322 Current taxes payable ................................ 903,281 255,080 Interest payable on deposits ......................... 993,300 1,060,045 Interest payable on borrowings ....................... 1,519,777 1,437,695 Post retirement benefits payable ..................... 2,228,096 2,016,146 Employee profit sharing retirement and bonuses payable 921,074 1,783,350 Due to brokers securities settlement account ......... 1,663,821 0 Other liabilities .................................... 4,216,952 1,425,465 --------------- --------------- Total liabilities ............................ 1,142,017,635 1,093,987,761 --------------- ---------------
PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued)
CCBT BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION June 30, December 31, 1999 1998 --------------- --------------- (Unaudited) Stockholders' equity Common stock, $2.50 par value, 12,000,000 shares authorized, 9,061,064 shares outstanding ..... 22,652,660 22,652,660 Surplus ......................................... 13,903,294 13,903,294 Undivided profits ............................... 50,939,982 46,704,129 --------------- --------------- 87,495,936 83,260,083 Treasury stock, at cost (143,800 shares) ........ (2,454,913) -- Accumulated other comprehensive income .......... 899,535 282,317 --------------- --------------- Total stockholders' equity ................... 85,940,558 83,542,400 --------------- --------------- Total liabilities and stockholders' equity ... $ 1,227,958,193 $ 1,177,530,161 =============== ===============
See accompanying notes to the unaudited consolidated financial statements. PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued)
CCBT BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME Three Months Ended June 30, Six Months Ended June 30, 1999 1998 1999 1998 ----------- ----------- ----------- ----------- INTEREST AND DIVIDEND INCOME: (Unaudited) (Unaudited) Interest and fees on loans ........................... $11,996,757 $12,424,936 $24,015,873 $24,017,754 Taxable interest income on securities ................ 6,575,495 5,001,267 12,367,808 9,770,203 Tax-exempt interest income on securities ............. 200,124 167,871 364,556 374,551 Dividends on securities .............................. 403,964 300,394 773,364 607,577 ----------- ----------- ----------- ----------- Total interest and dividend income ................ 19,176,340 17,894,468 37,521,601 34,770,085 ----------- ----------- ----------- ----------- INTEREST EXPENSE: Interest on deposits ................................. 4,272,932 4,875,088 8,542,649 10,082,446 Interest on borrowings from the Federal Home Loan Bank 4,909,866 3,270,668 9,744,826 5,993,086 Interest on other short-term borrowings .............. 174,662 151,977 318,067 270,284 ----------- ----------- ----------- ----------- Total interest expense ............................ 9,357,460 8,297,733 18,605,542 16,345,816 ----------- ----------- ----------- ----------- Net interest income .................................. 9,818,880 9,596,735 18,916,059 18,424,269 Provision for loan losses ............................ -- -- -- -- ----------- ----------- ----------- ----------- Net interest income after provision for loan losses .. 9,818,880 9,596,735 18,916,059 18,424,269 ----------- ----------- ----------- ----------- NON-INTEREST INCOME: Trust and Investment fees ............................ 1,584,124 1,376,379 2,909,114 2,559,372 Credit card merchant fees ............................ 923,610 739,458 1,529,858 1,271,184 MoneyCard interchange fees ........................... 171,310 105,870 291,822 189,931 Service charges on deposit accounts .................. 529,907 434,059 976,288 802,618 Return and overdraft charges ......................... 588,591 537,551 1,105,595 990,329 ATM fees ............................................. 152,792 142,713 261,481 246,344 Net gain on sale of loans ............................ 193,637 3,193 294,172 84,156 Net gain on sale of investment securities ............ 4,304 20,481 59,104 146,200 Brokerage fees and commissions ....................... 294,514 370,518 556,744 719,749 Other ................................................ 306,601 269,189 712,411 622,235 ----------- ----------- ----------- ----------- Total non-interest income ............................ 4,749,390 3,999,411 8,696,589 7,632,118 ----------- ----------- ----------- -----------
PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued)
CCBT BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME Three Months Ended June 30, Six Months Ended June 30, 1999 1998 1999 1998 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) NON-INTEREST EXPENSE: Salaries and wages ................................... 3,031,748 2,879,445 6,002,195 5,581,200 Employee benefits .................................... 1,204,463 963,925 2,365,215 2,235,501 Occupancy expense .................................... 568,485 571,985 1,115,257 1,136,167 Equipment rental and expense ......................... 516,692 478,683 988,190 982,242 Credit card processing expense ....................... 978,240 686,680 1,501,869 1,237,928 Advertising and marketing expense .................... 268,036 228,895 424,683 392,643 Printing and supplies ................................ 173,766 236,268 370,197 435,857 Delivery and communication expense ................... 323,601 347,052 637,289 681,003 Service charges correspondent banks .................. 49,536 53,824 111,618 293,866 Directors' fees ...................................... 75,500 76,500 151,000 151,500 Outside services ..................................... 1,204,122 1,092,017 2,264,950 2,339,653 ATM network expense .................................. 126,939 67,453 258,325 174,298 Insurance expense .................................... 62,183 83,882 135,591 179,051 Other ................................................ 432,679 303,759 697,495 710,588 ----------- ----------- ----------- ----------- Total non-interest expense ........................... 9,015,990 8,070,368 17,023,874 16,531,497 ----------- ----------- ----------- ----------- Income before income taxes ........................... 5,552,280 5,525,778 10,588,774 9,524,890 Provision for income taxes ........................... 1,842,679 2,201,580 3,830,314 3,800,923 ----------- ----------- ----------- ----------- Net income ........................................... $ 3,709,602 $ 3,324,198 $ 6,758,460 $ 5,723,967 =========== =========== =========== =========== Average shares outstanding ................................ 8,941,188 9,061,064 8,992,941 9,061,064 Basic earnings per share .................................. $0.41 $0.37 $0.75 $0.63 Diluted earnings per share ................................ $0.41 $0.37 $0.75 $0.63 Cash dividends declared ................................... $0.14 $0.12 $0.28 $0.24
See accompanying notes to the unaudited consolidated financial statements. PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued)
CCBT BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months ended June 30, 1999 1998 ------------- ------------- CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited) Net income ........................................................... $ 6,758,460 $ 5,723,966 Adjustments to reconcile net income to net cash flow provided by operating activities: Provision for loan losses ......................................... 0 0 Depreciation and amortization ..................................... 1,025,535 991,028 Net amortization of securities .................................... 2,252,725 8,787 Amortization of deferred loan fees ................................ 50,690 534,526 Net gain on sale of investment securities ......................... (59,104) (146,200) Deferred (prepaid) income taxes ................................... 762,875 (1,163,456) Net gain on sale of loans ......................................... (294,172) (84,156) Net change in: Loans held for sale ............................................... 1,942,480 (7,618,041) Accrued interest receivable on securities ......................... 615,898 298,251 Accrued expenses and other liabilities ............................ 3,820,319 (794,024) Other, net ........................................................ 5,927,856 4,434,805 ------------- ------------- Net cash provided by operating activities ............................ 22,803,562 2,185,486 ------------- ------------- CASH USED BY INVESTING ACTIVITIES Net increase in loans ............................................. (77,824,051) (123,707,298) Proceeds from sale of loans ....................................... 63,701,791 44,932,500 Dispositions of property from defaulted loans ..................... 115,000 405,000 Purchases of money market funds ................................... (375,271,426) (400,050,000) Sales of money market funds ....................................... 367,552,094 388,050,000 Maturities of securities .......................................... 242,784,124 221,512,493 Purchase of available for sale securities ......................... (313,766,711) (355,006,253) Sales of available for sale securities ............................ 34,137,508 56,524,987 Purchase of premises and equipment ................................ (963,663) (1,181,856) ------------- ------------- Net cash used by investing activities ................................ (59,535,334) (168,520,427) ------------- ------------- CASH PROVIDED BY FINANCING ACTIVITIES Net decrease in deposits .......................................... 12,117,870 11,668,314 Net increase in borrowings from the Federal Home Bank ............. 26,546,467 164,719,104 Net increase in other short-term borrowings ....................... 4,897,017 7,194,686 Purchase of CCBT Bancorp, Inc. common stock in open market ........ (2,454,912) 0 Cash dividends paid on common stock ............................... (2,522,607) (2,174,656) ------------- ------------- Net cash provided by (used in) financing activities .................. 38,583,835 181,407,448 ------------- ------------- Net increase in cash and cash equivalents ........................... 1,852,063 15,072,507 Cash and cash equivalents at beginning of period ..................... 29,427,115 34,087,493 ------------- ------------- Cash and cash equivalents at end of period ........................... $ 31,279,178 $ 49,160,000 ============= ============= Cash equivalents include amounts due from banks and federal funds sold
PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued)
CCBT BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months ended June 30, 1999 1998 ------------- ------------- (Unaudited) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest .......................................................... $ 18,590,203 $ 8,062,064 Income taxes ...................................................... 3,400,000 4,355,000 Non-cash transactions: Additions to property from defaulted loans ........................ $ 115,000 $ 0 Loans to finance OREO property .................................... 100,000 0
See accompanying notes to the unaudited consolidated financial statements . PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued)
CCBT BANCORP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Six Months ended June 30, 1999 1998 ------------ ------------ (Unaudited) COMMON STOCK Balance, beginning of year and June 30 $ 22,652,660 $ 11,326,330 ------------ ------------ SURPLUS Balance, beginning of year and June 30 13,903,294 25,229,624 ------------ ------------ UNDIVIDED PROFITS Balance, beginning of year ............ 46,704,129 38,677,715 Net Income ......................... 6,758,460 5,723,966 Dividends declared ................. (2,522,607) (2,174,656) ------------ ------------ Balance, June 30 ...................... 50,939,982 42,227,025 ------------ ------------ TREASURY STOCK Balance, beginning of year ............ 0 0 Purchase of treasury stock ......... (2,454,913) 0 ------------ ------------ Balance, June 30 ...................... (2,454,913) 0 ------------ ------------ ACCUMULATED OTHER COMPREHENSIVE INCOME Balance, beginning of year ............ 282,317 402,625 Net other comprehensive income ..... 617,218 608,660 ------------ ------------ Balance, June 30 ...................... 899,535 1,011,285 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY ................. $ 85,940,558 $ 79,794,264 ============ ============
See accompanying notes to the unaudited consolidated financial statements. PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued)
CCBT BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the six months ended June 30, 1999 1998 ----------- ----------- (Unaudited) Net income .................................................... $ 6,758,460 $ 5,723,967 ----------- ----------- Holding gains on securities available for sale ........... 1,073,040 1,224,283 Reclassification of gains on securities realized in income (59,104) (230,901) ----------- ----------- Net unrealized gains ..................................... 1,013,936 993,382 Related tax effect ....................................... (396,718) (384,722) ----------- ----------- Net other comprehensive income ................................ 617,218 608,660 ----------- ----------- Comprehensive income .......................................... $ 7,375,678 $ 6,332,627 =========== ===========
See accompanying notes to the unaudited consolidated financial statements. PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued) CCBT BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Six months ended June 30, 1999 and 1998 Note 1. Basis of Presentation General CCBT Bancorp, Inc. ("Bancorp" or "Company") was incorporated under the laws of the Commonwealth of Massachusetts on October 8, 1998 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 (the "Reorganization"). Financial information contained herein for periods and dates prior to February 11, 1999 is that of the Bank. Since the Bank is the only subsidiary of CCBT Bancorp, Inc., financial information contained herein for periods and dates after February 11, 1999 is essentially financial information of the Bank. Certain amounts have been reclassified in the June 30, 1998 financial statements to conform to the 1999 presentation and to reflect the 100% stock dividend paid August 7, 1998. 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. 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 six months ended June 30, 1999 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, 1998. Earnings per share On August 7, 1998, the Company paid a 100% stock dividend to shareholders of record on July 20, 1998. Current and prior period per share data have been restated herein to reflect this dividend. Note 2. Commitments The Company had outstanding commitments to originate new residential and commercial mortgages of $23.9 million at June 30, 1999 and $25.6 million at December 31, 1998 which are not reflected on the consolidated statement of financial condition. Additional unadvanced funds on various loan types at June 30, 1999 are shown in the table at the top of the next page. PART I FINANCIAL INFORMATION Item 1. Financial Statements (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Additional Unadvanced Loan Commitments June 30, December 31, 1999 1998 ------- ------- (in thousands) Commercial loans Dealer floor plan . $ 9,478 $ 7,352 Lines of credit ... 48,667 44,960 Other ............. 1,286 943 Commercial mortgage Construction ...... 7,158 3,084 Other ............. 790 711 Residential mortgage Home equity ....... 28,953 26,321 Consumer lines of credit 1,989 1,858 ------- ------- Total ........ $98,321 $85,229 ======= =======
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 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 Bancorp'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. PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) During the second quarter of 1999, the Company formed a real estate investment trust as a subsidiary of Cape Cod Bank and Trust Company ("Bank") to utilize income tax advantages available under Massachusetts tax law. Under the name of CCBT Preferred Corp., this new corporation purchased 100% of the commercial mortgage loans of the Bank on May 14, 1999, and retained the Bank as servicer of those loans. Cape Cod Bank and Trust Company is a commercial bank with twenty-six banking offices located in Barnstable County, Massachusetts. 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 operation. The Bank's market area is heavily dependent on the tourist and vacation business on Cape Cod. COMPARATIVE ANALYSIS OF SELECTED PERIOD-END ASSETS, LIABILITIES AND CAPITAL The Company had $1.23 billion of consolidated total assets, $740.0 million of deposits and $85.9 million of stockholders' equity at June 30, 1999. Its capital to assets ratio was 7.0%, exceeding all regulatory requirements. As compared to reported balances at December 31, 1998, investment securities, at fair value at June 30, 1999, increased $35.6 million or 7.2%, total loans increased $14.2 million or 2.4%, deposits increased $12.1 million or 1.7% and borrowed funds increased $31.4 million or 8.8%. INVESTMENT SECURITIES The adjusted cost and estimated market values of investment securities which the Company considers to be available for sale at June 30, 1999 and December 31, 1998 were as follows:
June 30, 1999 (in thousands) ----------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value -------- -------- -------- -------- U. S. Government agency CMOs ............... $217,668 $ 2,020 $ 573 $219,115 Other U. S. Government agencies ............ 29,028 18 312 28,734 Other collateralized mortgage obligations .. 78,573 537 86 79,024 State and municipal obligations ............ 29,164 -- -- 29,164 Other debt securities ...................... 175,661 219 324 175,556 -------- -------- -------- -------- Totals ...................... $530,094 $ 2,794 $ 1,295 $531,593 ======== ======== ======== ========
PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
December 31, 1998 (in thousands) ----------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value -------- -------- -------- -------- U. S. Government agency CMOs ............... $266,397 $ 1,506 $ 850 $267,053 Other U. S. Government agencies ............ 18,554 124 235 18,443 Other collateralized mortgage obligations .. 79,107 617 176 79,548 State and municipal obligations ............ 16,416 -- -- 16,416 Other debt securities ...................... 115,060 138 638 114,560 -------- -------- -------- -------- Totals ...................... $495,534 $ 2,385 $ 1,899 $496,020 ======== ======== ======== ========
Investment securities increased $35.6 million to $531.6 million at June 30, 1999, funded by an increase in short term borrowings. High prepayment volume experienced during the latter months of 1998 and into 1999 on mortgage-backed investments reduced CMOs approximately $48 million. All other investment categories increased approximately $84 million, including $61 million of Other debt securities. At June 30,1999, Other debt securities consisted of approximately $96 million floating rate and $72 million short term fixed rate securities, nearly all backed by assets other than residential mortgages, and $8 million of money market investments readily convertible into cash. Sales of securities produced net gains of $4 thousand during the quarter ended June 30, 1999 compared to net gains of $20 thousand during the same period in 1998. Net gains on security sales amounted to $59 thousand and $146 thousand for the six months ended June 30, 1999 and 1998, respectively. LOANS The following is a summary of the Company's outstanding loan balances as of the dates indicated: PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
June 30, December 31, 1999 1998 --------- --------- (in thousands) Mortgage loans on real estate: Residential ......................... $ 242,373 $ 233,533 Commercial .......................... 201,921 207,860 Construction ........................ 53,106 47,940 Equity lines of credit .............. 21,612 20,787 --------- --------- 519,012 510,120 --------- --------- Other loans Commercial .......................... 76,771 70,767 Industrial revenue bonds ............ 1,279 1,344 Consumer and other .................. 10,963 11,589 --------- --------- 89,013 83,700 --------- --------- Total loans .............................. 608,025 593,820 Less: Allowance for loan losses .......... (11,255) (11,108) --------- --------- Loans, net ............................... $ 596,770 $ 582,712 ========= =========
Total loans increased $14.2 million or 2.4% to $608 million at June 30, 1999 as compared to December 31, 1998, led by residential mortgage loans, up $8.8 million or 3.8%. New volume in the residential loan category was strong, with originations of $42.9 million fixed rate and $73.5 million adjustable rate mortgages. During the first half of 1999, the Company sold $48.4 million residential mortgages, producing net gains of $151 thousand. Commercial loans increased $6 million or 8.5% and Construction loans increased $5.2 million or nearly 11%. Non performing assets and loan loss experience: As shown in the table below, non-performing assets were $3.9 million or 0.32% of total assets at June 30, 1999 compared to $7.5 million or 0.63% of total assets at December 31, 1998. All of these amounts represent non accruing loans. 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. The Company holds no property acquired from defaulted loans. PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
June 30, December 31, 1999 1998 ------ ------ (in thousands) Nonaccrual loans ....................................... $3,952 $7,468 Loans past due 90 days or more and still accruing ...... -- -- ------ ------ Total nonperforming assets .................. $3,952 $7,468 ====== ====== Restructured troubled debt performing in accordance with amended terms, not included above ................. $ 633 $ 478 ====== ======
The following is a summary of the activity in the reserve for loan losses for the indicated periods:
Six months ended June 30, June 30, 1999 1998 --------- -------- (in thousands) Balance at the beginning of the period $ 11,108 $ 10,962 Provisions ............................ 0 0 Recoveries ............................ 249 381 --------- -------- 11,357 11,343 Less: Charge-offs ..................... (102) (290) --------- -------- Balance at the end of the period ...... $ 11,255 $ 11,053 ======== ========
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 1.85% of total loans at June 30, 1999 and 1.87% at December 31, 1998. Management considers the reserve to be adequate at June 30, 1999, although there can be no assurance that the reserve is adequate or that additional provisions might be necessary. PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) DEPOSITS The following table is a summary of deposits outstanding as of the dates indicated:
June 30, December 31, 1999 1998 -------- -------- (in thousands) Demand deposits .................................. $171,961 $160,966 NOW accounts ..................................... 114,269 114,210 Other savings deposits ........................... 162,411 160,126 Money market accounts ............................ 141,158 141,317 Certificates of deposit greater than $100,000 .... 32,981 30,299 Other time deposits .............................. 117,235 120,979 -------- -------- Total deposits ................................... $740,015 $727,897 ======== ========
Reflecting the seasonal nature of the Cape Cod economy as discussed in "Liquidity" on page 20 herein, total deposits at June 30, 1999 were $12.1 million or 1.66% higher than total deposits at December 31, 1998. Generally, the Company's strategy is to price deposits that reflect national 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 June 30, 1999, borrowed funds totaled $389.6 million, up $31.4 million or 8.8% compared to borrowed funds at December 31, 1998. This increase has been utilized to support heretofore described loan and investment growth. STOCKHOLDERS' EQUITY The Company's capital to assets ratio was 7.00% at June 30, 1999 compared to 7.09% at December 31, 1998. 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 PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) 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 June 30, 1999:
Minimum June 30, 1999 Regulatory --------------------- Guidelines Company Bank ---------- ------- ---- Tier 1 leverage capital ................. 3.00% 7.31% 6.87% Tier 1 capital to risk-weighted assets .. 4.00% 11.21% 10.52% Total capital to risk-weighted assets ... 8.00% 12.12% 11.75%
During the quarter ended March 31, 1999, the Company's Board of Directors authorized the repurchase of up to 5% of the Company's stock in the open market (the "Program"). Consistent with that authorization, the Company repurchased 143,800 shares (1.6%) between February and June 1999, at an average cost of $17.07 per share. The Company expects to continue these repurchases as acceptable opportunities are presented, and until the Program is complete. The Company's book value at June 30, 1999 was $9.64 per share compared to $9.22 per share at December 31, 1998. PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
CCBT BANCORP, INC. AVERAGE BALANCE SHEETS,INTEREST RATES and SPREAD Three months ended June 30, ------------------------------------------------------------------------------ 1999 1998 -------------------------------------- ---------------------------------- 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 .................... $ 70,425 $ 950 5.40% $ 11,239 $ 169 6.01% U.S. Government CMOs .......................... 137,763 1,763 5.12% 190,340 2,568 5.40% U.S. Government agencies ...................... 29,548 410 5.55% 37,154 549 5.91% Other CMOs .................................... 62,799 807 5.14% 45,435 706 6.22% State & municipal agencies .................... 19,486 207 5.53% 16,165 167 5.37% Other securities ............................. 209,773 3,042 5.80% 80,328 1,313 6.54% ---------- ---------- ---------- ---------- Total securities .......................... 529,794 7,179 5.47% 380,661 5,472 5.80% ---------- ---------- ---------- ---------- Loans Commercial .................................... 78,859 1,762 8.94% 79,424 1,952 9.83% Commercial construction ....................... 14,824 323 8.62% 11,732 282 9.51% Residential construction ...................... 38,172 565 5.93% 31,977 544 6.82% Commercial mortgages .......................... 205,156 4,506 8.69% 209,584 4,933 9.31% Industrial revenue bonds ...................... 1,312 24 10.29% 1,730 35 11.40% Residential mortgages ......................... 269,029 4,565 6.79% 238,672 4,347 7.29% Consumer loans ................................ 10,477 253 9.66% 13,859 332 9.58% Overdrafts .................................... 613 0 0.00% 1,964 0 0.00% ---------- ---------- ---------- ---------- Total Loans ............................... 618,442 11,998 7.73% 588,942 12,425 8.41% ---------- ---------- ---------- ---------- Total interest earning assets .... 1,148,236 19,177 6.69% 969,603 17,897 7.39% ---------- ---------- ---------- Non-earning assets ............................ 59,302 49,289 ---------- ---------- Total assets ............................... $1,207,538 $1,018,892 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY NOW accounts .................................. $ 111,946 $ 229 0.82% $ 104,951 $ 307 1.17% Regular savings .............................. 158,496 1,135 2.87% 158,260 1,296 3.28% Money Market accounts ......................... 142,260 1,087 3.06% 145,306 1,255 3.46% Time certificates of deposit .................. 150,938 1,822 4.84% 149,407 2,017 5.41% ---------- ---------- ---------- ---------- Total interest bearing deposits .......... 563,640 4,273 3.04% 557,924 4,875 3.50% ---------- ---------- ---------- ----------
PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
CCBT BANCORP, INC. AVERAGE BALANCE SHEETS,INTEREST RATES and SPREAD Three months ended June 30, ------------------------------------------------------------------------------ 1999 1998 -------------------------------------- ---------------------------------- Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Paid Balance Expense Rate Paid ------- ------- --------- ------- ------- --------- (Dollar amounts in thousands) Borrowings FHLB .......................................... 368,137 4,910 5.35% 222,492 3,271 5.90% Other short-term borrowings ................... 17,323 175 4.04% 12,507 152 4.87% ---------- ---------- ---------- ---------- Total borrowings ......................... 385,460 5,085 5.29% 234,999 3,423 5.84% ---------- ---------- ---------- ---------- Total interest bearing liabilities 949,100 9,358 3.95% 792,923 8,298 4.20% ---------- ---------- ---------- ---------- Demand deposits .................................. 162,156 141,661 Non-interest bearing liabilities ................. 12,885 6,430 Stockholders' equity ............................. 83,397 77,878 ---------- ---------- Total liabilities and stockholders' equity . $1,207,538 $1,018,892 ========== ========== Net interest income/spread ....................... $ 9,819 2.73% $ 9,599 3.19% ========== ========== Net interest margin (NII/Average Earning Assets) . 3.43% 3.97%
PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
CCBT BANCORP, INC. VOLUME/RATE ANALYSIS Three months ended June 30, 1999 vs June 30, 1998 Changes in income/expense due to -------------------------------- Volume Rate Total ------ ---- ----- EARNING ASSETS Securities Mortgage-backed securities .................... $ 842 $ (61) $ 781 U.S. Government CMOs .......................... (689) (116) (805) U.S. Government agencies ...................... (109) (30) (139) Other CMOs .................................... 246 (145) 101 State & municipal agencies .................... 45 (5) 40 Other securities ............................. 1,991 (262) 1,729 ------- ------- ------- Total securities .......................... 2,326 (619) 1,707 ------- ------- ------- Loans Commercial .................................... (13) (177) (190) Commercial construction ....................... 70 (29) 41 Residential construction ...................... 99 (78) 21 Commercial mortgages .......................... (99) (328) (427) Industrial revenue bonds ...................... (11) 0 (11) Residential mortgages ......................... 533 (315) 218 Consumer loans ................................ (81) 2 (79) Overdrafts .................................... 0 0 0 ------- ------- ------- Total Loans ............................... 498 (925) (427) ------- ------- ------- Total earning assets ............. $ 2,824 $(1,544) $ 1,280 ------- ------- ------- INTEREST BEARING LIABILITIES NOW accounts .................................. $ 17 $ (95) $ (78) Regular savings .............................. 2 (163) (161) Money Market accounts ......................... (25) (143) (168) Time certificates of deposit .................. 20 (215) (195) ------- ------- ------- Total interest bearing deposits .......... 14 (616) (602) ------- ------- -------
PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
CCBT BANCORP, INC. VOLUME/RATE ANALYSIS Three Months ended June 30, 1999 vs June 30, 1998 Changes in income/expense due to -------------------------------- Volume Rate Total ------ ---- ----- Borrowings ....................................... 0 FHLB .......................................... 2,042 (403) 1,639 Other short-term borrowings ................... 54 (31) 23 ------- ------- ------- Total borrowings ......................... 2,096 (434) 1,662 ------- ------- ------- Total interest bearing liabilities $ 2,110 $(1,050) $ 1,060 ------- ------- ------- Net interest income .............................. $ 714 $ (494) $ 220 ======= ======= =======
PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1999 vs. THREE MONTHS ENDED JUNE 30, 1998 Sources of funds As shown in the table on page 13, average interest bearing deposits outstanding increased $5.7 million or 1.0% during the second quarter 1999 versus the second quarter 1998. The cost of those funds declined in the 1999 period, however, as management reduced deposit rates in response to generally declining market rates. On the other hand, average borrowed funds increased substantially in the 1999 period in order to fund increases in both loans and the securities. The rates paid on these borrowed funds were less in the 1999 period when compared to 1998, again reflecting the general decline in market rates. The remaining sources of funds, i.e., non-interest bearing demand deposits, other liabilities and capital, averaged 14.4% higher in the 1999 period under discussion when compared to the 1998 comparable period, including demand deposit growth of $20.5 million or 14.5%. In total, average sources of funds increased nearly $189 million or 18.5% period to period, while the average cost of interest bearing funds declined from 4.20% during the quarter ended June 30, 1998 to 3.95% for the same period in 1999. Uses of funds When compared to the second quarter of 1998, average loans and investments were higher in 1999 by 5.0% and 39.2%, respectively, and on a combined basis, represented 95% of average total assets in each period. Loan growth was spearheaded by residential mortgage and related construction lending, up $36.6 million or 13.5% in a very active local market. Investment growth also focused in real estate backed obligations as well as other asset backed securities. Consistent with market rates generally, and particularly in the investment portfolio where mortgage refinancing reduced earnings on CMOs, the average yield on earning assets declined to 6.69% for the three months ended June 30, 1999 from the 7.39% reported for the comparable period in 1998. Net interest income Net interest income was $9.8 million for the three months ended June 30, 1999 as compared to $9.6 million for the same period in 1998, up 2.3%. The spread and net interest margin ratios were 2.73% and 3.43%, respectively, for the three months ended June 30, 1999 as compared to 3.19% and 3.97%, respectively, for the comparable 1998 period. Consumer attraction to lower residential mortgage rate opportunities lowered yields on the residential mortgage portfolio and the securities portfolio. These, along with intense local competitive pressure for quality commercial loans throughout 1998 and into 1999, are the primary factors contributing to these results. As shown on the Volume/rate analysis on page 14, the company's net interest income improved on volume increases but declined as a result of the narrower spread during the second quarter, 1999 as compared to the same period in 1998. Provision for possible loan losses No provisions were made to the reserve for possible loan losses in the quarters ended June 30, 1999 or 1998. Management believes that, upon continuing review of loan payment and quality statistics, the current reserve continues to be adequate to cover possible losses. PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) Non-interest income Non-interest income totaled $4.75 million for the three months ended June 30, 1999, up $750 thousand or 18.8% compared to the $4.0 million earned during the same period in 1998 due to a general increase in volumes. Higher trust and investment fees, increased deposit activity fees and greater net gains on sales of loans contributed to this increase, along with increased credit card merchant and interchange fees. The latter, which reflect the continuing strength of the tourist season in our marketplace, are partially offset by increased expenses, as discussed below. Non-interest expenses During the second quarter of 1999, non-interest expenses totaled $9.0 million, $945 thousand or 11.7% greater than the expenses of the comparable period last year. Salaries and benefits, the largest combined category of expense, rose $393 thousand or 10.2% to total $4.2 million for the second three months of 1999. Credit card processing expense increased $292 thousand in conjunction with high activity and strong fee income growth, Outside services expense increased $112 thousand, ATM network expense increased $59 thousand and Other expenses increased $129 thousand. These increases were fully anticipated in the normal operations of the Company. Income taxes The combined State and Federal income tax expense of $1.8 million for the quarter ended June 30, 1999 was 16.3% lower than the $2.2 million recorded for the same quarter in 1998, a reflection of the year-to date impact of the newly formed CCBT Preferred Corp, a real estate investment trust subsidiary of Cape Cod Bank and Trust Company. (See "General" on page 8.) The combined effective State and Federal tax expense declined to 33.2% of pretax income in the second quarter of 1999 reflecting the year-to-date impact of the state tax savings brought about by the real estate investment trust. The combined effective tax rate was 40.0% of pretax net income for the 1998 second quarter. Net income Consolidated net income was $3.7 million representing earnings per share of $0.41 for the three months ended June 30, 1999 as compared to $3.3 million or $0.37 per share for the comparable three months ended June 30, 1998. Annualized returns on average assets and average equity were 1.23% and 17.84%, respectively, for the three months ended June 30, 1999 as compared to 1.31% and 17.12%, respectively, for the three months ended June 30, 1998. (The remainder of this page intentionally left blank) PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
CCBT BANCORP, INC. AVERAGE BALANCE SHEETS,INTEREST RATES and SPREAD Six months ended June 30, ------------------------------------------------------------------------------ 1999 1998 -------------------------------------- ------------------------------------- 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 .................... $ 75,486 $ 1,959 5.19% $ 7,865 $ 242 6.15% U.S. Government CMOs .......................... 145,325 3,303 4.55% 170,801 5,013 5.87% U.S. Government agencies ...................... 25,774 696 5.40% 47,514 1,311 5.52% Other CMOs .................................... 64,507 1,657 5.14% 45,473 1,325 5.83% State & municipal agencies .................... 18,320 384 5.45% 17,127 374 5.83% Other securities ............................. 192,402 5,506 5.72% 89,179 2,490 5.57% ---------- ---------- ---------- ---------- Total securities .......................... 521,814 13,505 5.22% 377,959 10,755 5.77% ---------- ---------- ---------- ---------- Loans Commercial .................................... 75,893 3,399 8.96% 77,078 3,799 9.94% Commercial construction ....................... 13,003 571 8.73% 11,964 543 9.14% Residential construction ...................... 37,572 1,104 5.92% 28,242 906 6.47% Commercial mortgages .......................... 205,342 9,102 8.82% 204,157 9,649 9.56% Industrial revenue bonds ...................... 1,345 50 10.60% 1,781 73 11.85% Residential mortgages ......................... 273,174 9,259 6.78% 228,471 8,361 7.32% Consumer loans ................................ 10,680 532 9.98% 14,304 687 9.31% Overdrafts .................................... 602 0 0.00% 1,567 0 0.00% ---------- ---------- ---------- ---------- Total Loans ............................... 617,611 24,017 7.77% 567,564 24,018 8.53% ---------- ---------- ---------- ---------- Total interest earning assets .... 1,139,425 37,522 6.61% 945,523 34,773 7.42% ---------- ---------- Non-earning assets ............................ 52,545 46,309 ---------- ---------- Total assets ............................... $1,191,970 $ 991,832 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY NOW accounts .................................. $ 110,404 $ 450 0.82% $ 103,379 $ 720 1.40% Regular savings .............................. 158,476 2,260 2.87% 158,595 2,698 3.43% Money Market accounts ......................... 140,925 2,145 3.07% 145,832 2,600 3.60% Time certificates of deposit .................. 151,402 3,688 4.91% 150,734 4,065 5.44% ---------- ---------- ---------- ---------- Total interest bearing deposits .......... 561,207 8,543 3.07% 558,540 10,083 3.64% ---------- ---------- ---------- ----------
PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
CCBT BANCORP, INC. AVERAGE BALANCE SHEETS,INTEREST RATES and SPREAD Six months ended June 30, ------------------------------------------------------------------------------ 1999 1998 -------------------------------------- ------------------------------------- Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Paid Balance Expense Rate Paid ---------- ---------- ---- ---------- ---------- ---- (Dollar amounts in thousands) Borrowings FHLB .......................................... 366,875 9,745 5.36% 203,035 5,993 5.95% Other short-term borrowings ................... 16,337 318 3.93% 11,131 270 4.90% ---------- ---------- ---------- ---------- Total borrowings ......................... 383,212 10,063 5.30% 214,166 6,263 5.90% ---------- ---------- ---------- ---------- Total interest bearing liabilities 944,419 18,606 3.97% 772,706 16,346 4.27% ---------- ---------- ---------- ---------- Demand deposits .................................. 154,610 136,726 Non-interest bearing liabilities ................. 9,069 5,313 Stockholders' equity ............................. 83,872 77,087 ---------- ---------- Total liabilities and stockholders' equity . $1,191,970 $ 991,832 ========== ========== Net interest income/spread ....................... $ 18,916 2.64% $ 18,427 3.15% ========== ========== Net interest margin (NII/Average Earning Assets) . 3.30% 3.93%
PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.)
CCBT BANCORP, INC. VOLUME/RATE ANALYSIS Six Months ended June 30, 1999 vs June 30, 1998 Changes in income/expense due to -------------------------------- Volume Rate Total ------- ------- ------- EARNING ASSETS Securities Mortgage-backed securities .................... $ 1,901 $ (184) $ 1,717 U.S. Government CMOs .......................... (658) (1,052) (1,710) U.S. Government agencies ...................... (589) (26) (615) Other CMOs .................................... 518 (186) 332 State & municipal agencies .................... 33 (23) 10 Other securities ............................. 2,890 126 3,016 ------- ------- ------- Total securities .......................... 4,095 (1,345) 2,750 ------- ------- ------- Loans Commercial .................................... (56) (344) (400) Commercial construction ....................... 46 (18) 28 Residential construction ...................... 287 (89) 198 Commercial mortgages .......................... 54 (601) (547) Industrial revenue bonds ...................... (24) 1 (23) Residential mortgages ......................... 1,563 (665) 898 Consumer loans ................................ (173) 18 (155) Overdrafts .................................... 0 0 0 ------- ------- ------- Total Loans ............................... 1,697 (1,698) (1) ------- ------- ------- Total earning assets ............. $ 5,792 $(3,043) $ 2,749 ------- ------- ------- INTEREST BEARING LIABILITIES NOW accounts .................................. $ 39 $ (309) $ (270) Regular savings .............................. (2) (436) (438) Money Market accounts ......................... (81) (374) (455) Time certificates of deposit .................. 17 (394) (377) ------- ------- ------- Total interest bearing deposits .......... (27) (1,513) (1,540) ------- ------- ------- Borrowings FHLB .......................................... 4,595 (843) 3,752 Other short-term borrowings ................... 114 (66) 48 ------- ------- ------- Total borrowings ......................... 4,709 (909) 3,800 ------- ------- ------- Total interest bearing liabilities $ 4,682 $(2,422) $ 2,260 ------- ------- ------- Net interest income .............................. $ 1,110 $ (621) $ 489 ======= ======= =======
PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999 vs SIX MONTHS ENDED JUNE 30, 1998 Sources of funds As shown in the table on the page 17, average interest bearing deposits outstanding increased $2.7 million when comparing the first half of 1999 versus the same period in 1998. The cost of those funds was significantly less in the 1999 period, however, as management reduced deposit rates in response to generally declining market rates. On the other hand, average borrowed funds increased substantially in the 1999 period in order to fund increases in both loans and securities. The rates paid on these borrowed funds were less in the 1999 period when compared to 1998, again reflecting the general decline in market rates. The remaining sources of funds, i.e., non-interest bearing demand deposits, other liabilities and capital, averaged 13.0% higher in the 1999 period under discussion when compared to the 1998 comparable period, including demand deposit growth of $17.9 million or 13.1%. In total, average sources of funds increased $200 million or 20.2% period to period, while the average cost of interest bearing funds declined from 4.27% during the six months ended June 30, 1998 to 3.97% in 1999. Uses of funds Loans and investments were higher in 1999 by 8.8% and 38.1%, respectively, and on a combined basis, approximated 95% of average total assets during each period. Loan growth was spearheaded by residential mortgage and related construction lending, up $54.0 million or 21.0% in very active local market. Investment growth also focused in real estate backed obligations as well as other asset-backed securities. Consistent with market rates generally, and particularly in the investment portfolio where mortgage refinancing reduced earnings on CMOs, the average yield on earning assets declined to 6.61% for the six months ended June 30, 1999 from the 7.42% reported for the comparable period in 1998. Net interest income Net interest income was $18.9 million for the six months ended June 30, 1999 as compared to $18.4 million for the same period in 1998, up 2.65%. The spread and net interest margin ratios were 2.64% and 3.30%, respectively, for the six months ended June 30, 1999 as compared to 3.15% and 3.93%, respectively, for the comparable 1998 period. Consumer attraction to lower residential mortgage rate opportunities lowered yields on the residential mortgage portfolio and the securities portfolio. These, along with intense local competitive pressure for quality commercial loans throughout 1998 and into 1999, are the primary factors contributing to these results. As shown on the Volume/rate analysis on page 18, the company's net interest income improved on volume increases but declined as a result of the narrower spread during the first six months of 1999 as compared to the same period in 1998. PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) Provision for possible loan losses No provisions were made to the reserve for possible loan losses in the six months ended June 30, 1999 or 1998. 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 $8.7 million for the six months ended June 30, 1999, up $1.1 million or 14.0% compared to the $7.6 million earned during the same period in 1998 due to a general increase in volumes. Higher trust and investment fees and increased deposit activity fees contributed to this increase, along with increased credit card merchant and interchange fees. The latter, which reflect a strong start to the tourist season in our marketplace, are partially offset by increased expenses, as discussed below. Non-interest expenses During the first half of 1999, non-interest expenses totaled $17.0 million, $492 thousand or 2.98% greater than the expenses of the comparable period last year. Salaries and benefits, the largest combined category of expense, rose $550 thousand or 7.0% to total $8.4 million for the first six months of 1999. Credit card processing expense increased $264 thousand in conjunction with strong fee income growth while virtually all other expense categories were very near 1998 levels, and in accordance with the Company's expectations. Income taxes The combined State and Federal income tax expense of $3.8 million for the six months ended June 30, 1999 nearly equaled the $3.8 million recorded for the same period in 1998, primarily reflecting the year-to date impact of the newly formed CCBT Preferred Corp, a real estate investment trust subsidiary of the Company's subsidiary bank, Cape Cod Bank and Trust Company. (See "General", page 8.) The combined effective State and Federal tax expense declined to 36.2% of pretax income in the first half of 1999 reflecting the year-to-date impact of the state tax savings brought about by the real estate investment trust. The combined effective tax rate was 39.9% of pretax net income for the first half of 1998. Net income Consolidated net income was $6.8 million representing earnings per share of $0.75 for the six months ended June 30, 1999 as compared to $5.7 million or $0.63 per share for the comparable six months ended June 30, 1998. Annualized returns on average assets and average equity were 1.14% and 16.25%, respectively, for the six months ended June 30, 1999 as compared to 1.16% and 14.97%, respectively, for the six months ended June 30, 1998. PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) LIQUIDITY The Bank normally experiences a wide swing in its liquidity each year due to the seasonal 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 $13.0 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 Bank's Asset/Liability Management Committee ("ALCO"), which is comprised of senior management and several Directors, 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 create problems at the turn of the century because "01/01/00" could be interpreted to mean January 1, 1900 rather than January 1, 2000. If such circumstances are not identified and corrected in advance, they could cause system failure or erroneous calculations of such items as interest income or expense. This could potentially have a significant impact on the Bank's ability to do business. PART I FINANCIAL INFORMATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) 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 $500,000 is expected to be spent in 1999. These costs have been or will be capitalized and depreciated over the useful lives of the items purchased. The Bank relies on outside vendors for much of its critical data processing. These vendors have assured the Bank that they are Year 2000 compliant. The Bank's testing has confirmed this, to the extent that the Bank's testing is complete. As of June 30, 1999, testing is virtually complete on those systems that the Bank considers to be critical or high risk. Final testing is expected to be completed during the summer of 1999. In addition to this testing process, contingency plans are being developed for processing of the Bank's work in the event of failure of any of these systems. The Bank is also dependent on other providers in the conduct of its business, most notably for electrical power and telecommunications. Should these providers experience Year 2000 problems, disruption of service, especially if prolonged, could seriously effect the Bank's ability to conduct business as usual. Certain of the Bank's customers may also be subject to Year 2000 problems which impact their ability to do business. Among other repercussions, this could reduce a customer's ability to make loan payments to the Bank. Year 2000 risk still needs to be evaluated for a number of the Bank's significant customer relationships. 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. 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 Bancorp believe that their responses to the Year 2000 issue are appropriate, neither the Bank nor Bancorp 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, 1998 (the "1998 Annual Report"). For quantitative information about market risk, see Item 7A of Part II of the Company's 1998 Annual Report. There have been no material changes in the quantitative and qualitative disclosures about market risk as of June 30, 1999 from those presented in the Company's 1998 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 The Company's annual meeting of stockholders was held on April 22, 1999 (the "Annual Meeting"). The presence, in person or by proxy, of at least a majority of the total number of issued and outstanding shares of the Company's common stock, $2.50 par value (the"Common Stock"), was necessary to constitute a quorum for the transaction of business at the Annual Meeting. There were 9,061,064 shares of Common Stock issued, outstanding and eligible to vote as of March 8, 1999. A total of 7,409,118.914 shares of Common Stock were present in person or by proxy at the Annual Meeting, constituting a quorum. At the Annual Meeting, the stockholders elected the following two individuals as Directors of the Company to serve until the 2002 annual meeting of stockholders, with the following votes cast: BROKER NON-VOTES NOMINEE FOR WITHHELD AND ABSTENTIONS ------- --- -------- --------------- George D. Denmark 7,316,208.707 92,910.207 0 William C. Snow 7,294,598.205 114,520.709 0 The following additional Directors of the Company continued as Directors after the Annual Meeting: John F. Aylmer, Palmer Davenport, John Otis Drew, and Stephen B. Lawson. ITEM 5. Other information Not applicable PART II OTHER INFORMATION 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 June 30, 1999. EXHIBIT INDEX Exhibit Description 27 Financial data schedule - -------------------------------------------------------------------------------- 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 Bancorp, Inc. ------------------ Date: August 10, 1999 --------------- /s/ Stephen B. Lawson --------------------- Stephen B. Lawson, President and Chief Executive Officer /s/ Noal D. Reid ------------------- Noal D. Reid, Chief Financial Officer and Treasurer EX-27 2
9 6-MOS DEC-31-1999 JUN-30-1999 30,622,844 656,334 0 0 531,592,866 0 0 608,025,149 (11,254,731) 1,227,958,193 740,014,845 270,703,339 12,446,301 118,853,150 0 0 22,652,660 63,287,898 1,227,958,193 11,996,757 7,179,583 0 19,176,340 4,272,932 9,357,460 9,818,880 0 4,304 9,015,990 5,552,280 3,709,602 0 0 3,709,602 0.41 0.41 3.43 3,952,000 0 663,000 4,320,380 11,143,871 25,835 136,695 11,254,731 11,254,731 0 1,581,262
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