-----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, MIp0/h6ePGpN85FIxmhFvotIE1YPM+fhyZinua6juV367tPeDk3yr3ewopeuMFdQ qgyrXziydzPzKwF9cQPW4w== 0001171520-04-000224.txt : 20040624 0001171520-04-000224.hdr.sgml : 20040624 20040624134734 ACCESSION NUMBER: 0001171520-04-000224 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040624 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST IPSWICH BANCORP /MA CENTRAL INDEX KEY: 0000885979 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 223768777 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-47057 FILM NUMBER: 04879126 BUSINESS ADDRESS: STREET 1: 31 MARKET STREET CITY: IPSWICH STATE: MA ZIP: 01938 BUSINESS PHONE: 9783568257 MAIL ADDRESS: STREET 1: 31 MARKET STREET CITY: IPSWICH 10QSB 1 eps1479.txt FIRST IPSWICH BANCORP ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-QSB ----------------- (Mark One) |X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 |_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 333-114018 ----------------- First Ipswich Bancorp (Exact name of small business issuer as specified in its charter) ----------------- Massachusetts 04-2955061 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification Number) 31 Market Street, Ipswich, Massachusetts 01938 (Address of principal executive offices) (978) 356-3700 (Issuer's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) ----------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES |_| NO |X| State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: At May 31, 2004, there were 1,757,630 shares of common stock outstanding, par value $1.00 per share. Transitional Small Business Disclosure Format (Check one): YES |_| NO |X| ================================================================================ FIRST IPSWICH BANCORP AND SUBSIDIARIES FORM 10-QSB Index Page ---- PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balances Sheets as of March 31, 2004 and December 31, 2003 3 Consolidated Statements of Income for the quarter ended March 31, 2004 and 2003 4 Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2004 and 2003 5 Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis 8 Item 3. Controls and Procedures 15 PART II OTHER INFORMATION Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 19 2 PART I--FINANCIAL INFORMATION ITEM 1. Financial Statements FIRST IPSWICH BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (In thousands, except share data)
March 31, December 31, 2004 2003 --------- ------------ ASSETS - ------ Cash and due from banks $ 9,505 $ 9,620 Federal funds sold -- 65 --------- --------- Total cash and cash equivalents 9,505 9,685 --------- --------- Certificate of deposit 2,266 2,253 Securities available for sale, at fair value 105,760 117,046 Securities held to maturity, at amortized cost 37,969 39,217 Federal Home Loan Bank stock, at cost 5,590 5,590 Federal Reserve Bank stock, at cost 489 489 Loans, net of allowance for loan losses of $1,333 and $1,334 159,294 156,504 Banking premises and equipment, net 5,559 5,631 Other assets 3,789 4,304 --------- --------- Total assets $ 330,221 $ 340,719 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Deposits $ 194,542 $ 198,058 Short-term borrowings 62,624 62,254 Long-term borrowings 47,215 54,481 Subordinated debentures 9,000 9,000 Other liabilities 1,142 1,658 --------- --------- Total liabilities 314,523 325,451 --------- --------- Stockholders' equity: Preferred stock, $1.00 par value; 1,000,000 shares authorized, none issued -- -- Common stock, $1.00 par value; 4,000,000 shares authorized, 1,778,120 issued 1,778 1,778 Additional paid-in capital 5,894 5,894 Retained earnings 8,155 7,826 Accumulated other comprehensive loss (18) (119) Treasury stock, at cost - 20,490 shares (111) (111) --------- --------- Total stockholders' equity 15,698 15,268 --------- --------- Total liabilities and stockholders' equity $ 330,221 $ 340,719 ========= =========
See accompanying notes to consolidated financial statements. 3 FIRST IPSWICH BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (In thousands, except per share data)
For the Three Months Ended March 31, 2004 2003 ---- ---- Interest and dividend income: Interest and fees on loans $2,523 $2,382 Interest on debt securities: Taxable 1,296 1,289 Tax-exempt 192 98 Dividends on equity securities 53 93 Other interest 34 1 ------ ------ Total interest and dividend income 4,098 3,863 ------ ------ Interest expense: Interest on deposits 518 665 Interest on borrowed funds 663 609 Interest on subordinated debentures 144 147 ------ ------ Total interest expense 1,325 1,421 ------ ------ Net interest income 2,773 2,442 Provision for loan losses -- -- ------ ------ Net interest income, after provision for loan losses 2,773 2,442 ------ ------ Other income: Gain on sales and calls of securities, net 386 639 Service charges on deposit accounts 286 246 Credit card fees 136 160 Trust fees 91 84 Non-deposit investment fees 93 68 Miscellaneous 21 87 ------ ------ Total other income 1,013 1,284 ------ ------ Operating expenses: Salaries and employee benefits 1,875 1,401 Occupancy and equipment 446 427 Professional fees 287 175 Credit card interchange 94 102 Advertising and marketing 70 92 Data processing 144 124 ATM processing 90 69 Other general and administrative 303 271 ------ ------ Total operating expenses 3,309 2,661 ------ ------ Income before income taxes 477 1,065 Provision for income taxes 124 336 ------ ------ Net income $ 353 $ 729 ====== ====== Weighted average common shares outstanding: Basic 1,758 1,753 ------ ------ Diluted 1,819 1,806 ------ ------ Earnings per share: Basic $ 0.20 $ 0.42 ------ ------ Diluted $ 0.19 $ 0.40 ------ ------
See accompanying notes to consolidated financial statements. 4 FIRST IPSWICH BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (In thousands, except per share data)
Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings Income (Loss) Stock Total ----- ------- -------- ------------- ----- ----- Balance at December 31, 2002 $1,778 $5,881 $5,872 $ 613 $(136) $14,008 ------- Comprehensive income: Net income 729 729 Unrealized loss on securities available for sale, net of reclassification adjustment and tax effect (304) (304) ------- Total comprehensive income 425 ------- Cash dividends declared ($.0125 per share) (22) (22) ------ ------ ------ ----- ----- ------- Balance at March 31, 2003 1,778 5,881 6,579 309 (136) 14,411 ====== ====== ====== ===== ===== ======= Balance at December 31, 2003 1,778 5,894 7,826 (119) (111) 15,268 ------- Comprehensive income: Net income 353 353 Unrealized gain on securities available for sale, net of reclassification adjustment and tax effect 101 101 ------- Total comprehensive income 454 ------- Cash dividends declared ($.0125 per share) (24) (24) ------ ------ ------ ----- ----- ------- Balance at March 31, 2004 $1,778 $5,894 $8,155 $ (18) $(111) $15,698 ====== ====== ====== ===== ===== =======
See accompanying notes to consolidated financial statements. 5 FIRST IPSWICH BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)
For the Three Months Ended March 31, 2004 2003 -------- -------- Cash flows from operating activities: Net income $ 353 $ 729 Adjustments to reconcile net income to net cash provided (used) by operating activities: Gain on sales and calls of securities, net (386) (639) Depreciation and amortization 163 157 Net amortization of securities, including certificate of deposit 364 349 Equity loss in limited partnership -- 13 Derivative fair value adjustment 37 -- Net change in other assets and other liabilities (108) (944) -------- -------- Net cash provided (used) by operating activities 423 (335) -------- -------- Cash flows from investing activities: Activity in available-for-sale securities: Purchases (51,453) (45,922) Sales 49,618 33,605 Maturities, calls and paydowns 13,344 12,424 Activity in held-to-maturity securities: Purchases -- (4,629) Sales 652 -- Maturities, calls and paydowns 553 391 Purchase of Federal Home Loan Bank stock -- (1,228) Purchase of Federal Reserve Bank stock -- (168) Loan originations, net of repayments (2,790) (7,451) Additions to premises and equipment, net (91) (190) -------- -------- Net cash provided (used) by investing activities 9,833 (13,168) -------- -------- Cash flows from financing activities: Net increase in deposits (3,516) (911) Net increase in short-term borrowings 370 3,664 Proceeds from long-term debt -- 6,000 Repayment of long-term debt (7,266) (324) Cash dividends paid (24) (22) -------- -------- Net cash provided (used) by financing activities (10,436) 8,407 -------- -------- Net decrease in cash and cash equivalents (180) (5,096) Cash and cash equivalents at beginning of period 9,685 15,163 -------- -------- Cash and cash equivalents at end of period $ 9,505 $ 10,067 ======== ======== Supplemental disclosures: Interest paid $ 1,330 $ 1,421 Income taxes paid 48 16
See accompanying notes to consolidated financial statements 6 FIRST IPSWICH BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (unaudited) (1) Basis of Presentation and Consolidation The accompanying unaudited consolidated financial statements include the accounts of First Ipswich Bancorp (the "Company"), The First National Bank of Ipswich (the "Bank"), the Company's subsidiaries, and the Bank's subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the instructions for Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted. A summary of significant accounting policies followed by the Company is set forth in the Notes to Consolidated Financial Statements of the Company's Annual Report on Form SB-2 for the year ended December 31, 2003. (2) Earnings per Share Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects additional common shares (common stock equivalents) that would have been outstanding if dilutive potential shares had been issued, as well as any adjustment to income that would result from the assumed issuance. As of March 31, 2004, potential common shares that may be issued by the Company related solely to warrants issued in connection with the Company's subordinated debentures and were determined using the treasury stock method. Assumed conversion of the outstanding warrants would increase the number of shares outstanding, but would not require an adjustment to income as a result of the conversion. For the periods presented, the Company has no potential common shares outstanding that are considered anti-dilutive. (3) Commitments At March 31, 2004, the Company had outstanding commitments to originate loans of $5.6 million. Unused lines of credit and open commitments available to customers at March 31, 2004 amounted to $30.8 million, of which $14.5 million related to construction loans, $7.2 million related to home equity lines of credit, $4.6 million related to credit card loans and $4.5 million in other open commitments. (4) Subsequent Events Subsequent to quarter end, the Company engaged in a public rights offering of its securities. See Part II, Item 2. for further information. On April 2, 2004, the Bank purchased the assets and the liabilities of a branch office of another institution located in Cambridge, Massachusetts. Further, on May 15, 2004, the Bank opened a new branch in Beverly, Massachusetts. 7 ITEM 2. Management's Discussion and Analysis General This quarterly report on Form 10-QSB contains and incorporates by reference "forward-looking statements". Words such as "believes", "expects," "may," "will," "should," "contemplates," or "anticipates" may indicate forward-looking statements. There are a number of important factors that could cause the Company's actual results to differ materially from those contemplated by such forward-looking statements. These important factors include, without limitation, competitive conditions in the Bank's marketplace generally, the Bank's continued ability to originate quality loans, fluctuation in interest rates including fluctuations which may affect the Bank's interest rate spread, real estate conditions in the Bank's lending areas, changes in the securities or financial markets, changes in loan defaults and charge-off rates, general and local economic conditions, the Bank's continued ability to attract and retain deposits, the Company's ability to control costs, new accounting pronouncements, and changing regulatory requirements. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Comparison of Financial Condition at March 31, 2004 versus December 31, 2003 Total assets were $330.2 million at March 31, 2004, a decrease of $10.5 million, or 3.1%, from $340.7 million as of December 31, 2003. Total net loan balances were $159.3 million as of March 31, 2004, an increase of $2.8 million, or 1.8%, from $156.5 million as of December 31, 2003. Loans increased primarily due to an increase in commercial real estate loans to $56.8 million, an increase of $2.8 million, or 5.2%, from $54.0 million as of December 31, 2003. If and where possible, emphasis has been placed on originating commercial hybrid loans that carry shorter initial fixed rate periods and shorter principal amortization periods. Commercial loans increased during the first quarter of 2004 due to a modest improvement in small business lending conditions. Construction loan activity remained active in the first quarter of 2004, due to continued favorable residential construction trends and housing activity, despite competitive lending conditions. Despite a new surge in residential loan refinancing activity associated with a challenging interest rate environment in February and March 2004 with treasury yields approaching the recent lows of June 2003, residential real estate loans of $65.3 million as of March 31, 2004 reflected an increase of $200,000, or .35%, from $65.1 million as of December 31, 2003. New and existing home sales, although moderating, have continued to be favorable in the Bank's primary markets, sparked at least partially by desirable financing alternatives in the marketplace. As a result, the Bank originated $6.3 million in residential and commercial mortgage loans in the first quarter, which substantially offset increased prepayment activity and monthly principal amortization. A recent jump in short and intermediate term market interest rates has generated a customer re-emphasis towards fixed rate loans as opposed to adjustable rate products. Commercial loans were $19.5 million at March 31, 2004, an increase of $.7 million, or 3.7%, from $18.8 million as of December 31, 2003. With geographic expansion and the hiring of new commercial lenders, continued growth in loan balances is anticipated in 2004, though not assured. Total investment securities balances were $152.1 million as of March 31, 2004, a decrease of $12.5 million, or 7.6%, from $164.6 million as of December 31, 2003. Investment securities sales of $50.3 million and calls and principal pay-downs on investment securities of $13.9 million in the first quarter were partially replaced by investment securities purchases of $51.5 million, while the remaining proceeds on investment securities sales and calls were utilized to pay down borrowings and fund net deposit outflows of $3.5 million. Investment securities sold consisted primarily of certain longer-term agency obligations and certain other debt securities, certain preferred term securities that are not eligible to be used as collateral for borrowing purposes, and other longer-term assets. The sale of these securities was completed in order to improve the Bank's interest rate risk profile, given the likelihood of higher interest rates in 2004 with continued signs of an improving economy, as well as to enhance the Bank's liquidity position in preparation for an expected increase in loan funding requirements in the second quarter. Investment purchases consisted primarily of adjustable rate bonds indexed to LIBOR and the Prime Rate 8 that are intended to defensively position the interest rate risk profile of the Bank. Although the short-term yield give-up on these bonds is significant in comparison to fixed rate agency alternatives due to the steepness of the yield curve, these adjustable rate bonds add adjustable rate diversification to the investment portfolio, while also adding assets that possess an interest rate that re-sets periodically and is thus a desirable security to own, from a market valuation and coupon reset perspective, as the Federal Open Market Committee tightening cycle commences. These adjustable rate bonds also complement the composition of actual and expected loan production as a result of the continued consumer preference for fixed rate, as opposed to adjustable rate, loans. Fixed rate loans continue to be attractive by historical yield measures. As a result of management's quarterly review of investment securities for "other-than-temporary" impairment, no such impairment was identified as of March 31, 2004. Total deposit balances were $194.5 million as of March 31, 2004, a decrease of $3.5 million, or 1.8%, from $198.1 million as of December 31, 2003. Total deposit balances decreased primarily due to the strategic pricing of term deposits to discourage the renewal of premium rate funds of approximately $8 million, a significant majority of which exited the bank, that matured in February in anticipation of special deposit promotions in the second quarter to celebrate the grand opening of two new branches. The decrease was partially offset by the raising of $3 million of two year brokered term deposits in March, which are intended to serve as an interest rate risk management tool with the advent of higher market rates. The term of these brokered funds also complement the consumer tendency in the retail branch network to opt for either short-term certificates of deposit or non-maturity money market funds in the first quarter of 2004. In early April 2004, the bank completed the acquisition of a new branch in Cambridge, Massachusetts, which immediately generated approximately $10.5 million of new deposit balances, primarily consisting of savings and checking accounts. Also subsequent to March 31, 2004, the Bank received approximately $31.5 million in nine-month term deposits as a result of a bank-wide promotion, which produced several new customers at each branch and significantly added to our liquidity position to support 2004 growth plans. Total borrowings were $109.8 million as of March 31, 2004, a decrease of $6.9 million, or 5.9%, from $116.7 million as of December 31, 2003. Borrowings were lower than year-end due to the pay-off of a $6 million term borrowing that matured in February. Borrowings were paid down from funds received on the aforementioned sale of certain investment securities. Total stockholder's equity increased from $15.3 million at December 31, 2003 to $15.7 million as of March 31, 2004 due primarily to growth in the bank's retained earnings of $400,000, which represents net income for the quarter ended March 31, 2004. Asset Quality and Allowance for Loan Losses The table below summarizes certain key ratios regarding the quality of the Company's loan portfolio:
March 31, 2004 December 31, 2003 -------------- ----------------- (Dollars in thousands) Non-accrual loans $ -- $ -- Troubled debt restructurings -- -- Loans past due 90 days or more and still accruing 32 19 Non-accrual loans to total loans -- -- Non-performing assets to total assets -- -- Allowance for loan losses as a percentage of total loans 0.83% 0.85%
9 For the three months ended March 31, 2004, the Company recorded no provision for loan losses. The Company recorded charge-offs of $2,000 and recoveries of $1,000 in the quarter. At March 31, 2004 and December 31, 2003, the allowance for loan losses balance was $1.3 million. Management considers the loan loss allowance to be adequate to provide for potential loan losses. While the Bank has continued to enjoy a very low level of loan charge-offs and non-accrual loans, and expects to continue to do so, there can be no assurance that these favorable results will continue in the future. Economic or other external factors, deterioration in credit quality, or appropriate changes in the reserve estimation process as a result of changes in assumptions, as well as other possible factors, may cause the loan loss allowance to be increased through charges to current earnings by increasing the loan loss provision. Comparison of Operating Results for the Quarters Ended March 31, 2004 and 2003 General Operating results are largely determined by the net interest spread on the Company's primary assets (loans and investment securities) and its primary liabilities (consumer deposit balances and Federal Home Loan Bank borrowings). Operating income is also dependent upon revenue from non-interest related sources (such as service charges on deposit accounts), the provision for loan losses, and the growth and variability of operating expenses. Revenue has been produced, and can continue to be produced in certain market conditions, although it cannot be consistently relied upon, from gains on the sale of investment securities. Net income for the quarter-ended March 31, 2004 was $353,000 compared with $729,000 for the quarter-ended March 31, 2003, a decrease of $376,000, or 51.6%. For the quarter-ended March 31, 2004, net interest income increased $331,000, or 13.6%, non-interest income decreased $271,000, or 21.1%, and operating expenses increased $648,000, or 24.4%, as compared to the quarter-ended March 31, 2003. Interest and Dividend Income Total interest and dividend income for the quarter-ended March 31, 2004 was $4.1 million, which was $235,000, or 6.1%, higher than the quarter-ended March 31, 2003. The favorable impact on interest and dividend income of higher average interest-earning assets of $315.4 million for the quarter-ended March 31, 2004, as compared to $286.0 million for the quarter-ended March 31, 2003, was partially offset by the impact of a lower average yield on earning assets of 5.2% for the quarter-ended March 31, 2004 as compared to 5.4% for the quarter-ended March 31, 2003. Average net loans for the quarter-ended March 31, 2004 increased $18.8 million since the first quarter of 2003, or 13.5%, to $157.3 million, while the yield on loans in the first quarter of 2004 was 6.42%, 46 basis points lower than the first quarter of 2003. A lower loan yield was due to lower treasury yields in 2004, which produced lower rates on new loans and loans re-pricing as well as increased residential refinancing activity into lower fixed rates, and competitive conditions. A higher concentration of higher-yielding commercial loan balances and construction loan balances in the first quarter of 2004 as compared to 2003 partially mitigated the impact of lower residential loan yields. Interest Expense Interest expense on deposits for the quarter-ended March 31, 2004 decreased $147,000, or 22.1%, to $518,000 as compared to the quarter-ended March 31, 2003. The decrease in interest expense was due primarily to a lower deposit cost on non-maturity deposits due primarily to the general level of interest rates, a 17.5% increase, or $4.7 million, in lower cost savings balances, a lower rate paid on new versus maturing certificates of deposits, and a 7.2%, or $3.9 million, decrease in higher cost certificates of deposit. 10 Interest expense on borrowed funds for the quarter-ended March 31, 2004 increased $54,000, or 8.9%, to $663,000 as compared to the quarter-ended March 31, 2003. The increase was due primarily to a higher average balance in Federal Home Loan Bank advances in 2004 of $17.5 million, or 20.5%, partially offset by a lower cost of Federal Home Loan Bank advances of 2.36%, 27 basis points, or 10.3% lower than the first quarter of 2003. Higher average balances were partially due to capitalizing on historically low short-term borrowing rates to leverage the balance sheet in order to generate additional net interest income, while maintaining a reasonable interest rate risk profile. Net Interest Income Net interest income for the quarter ended March 31, 2004 increased $331,000, or 13.6%, to $2.8 million as compared to the quarter ended March 31, 2003. The increase in net interest income in the first quarter of 2004 was due primarily to higher average earning assets and a higher net interest margin of 3.52%, or 11 basis points, versus the quarter ended March 31, 2003. Average earning assets increased $29.4 million, or 10.3%, to $315.4 million in the first quarter of 2004 primarily as a result of the increase in average loans. The net interest margin increased primarily as a result of higher average balances in loans, which earned higher yields than investment securities, and a lower cost of funds. The cost of average deposits decreased 40 basis points, or 23.4%, to 1.31% for the quarter ended March 31, 2004. The lower cost of deposits and borrowings was primarily a result of the interest rate environment, particularly the short and intermediate portion of the yield curve, which is typically the primary driver of bank funding costs. To mitigate the impact of lower asset yields, the rates paid on both certificate of deposit accounts and non-maturity deposit accounts were reduced to maintain the net interest margin. Despite this reduction in rates paid, average deposit balances increased for the quarter ended March 31, 2004 as compared to the quarter ended March 31, 2003. With a higher rate of growth in average loans than average deposits for the quarter ended March 31, 2004, low cost short-term Federal Home Loan Bank borrowings were utilized as a funding source to support continued loan growth. Retail deposit marketing efforts primarily focus on generating non-maturity core deposit accounts, particularly in new markets. Despite this fact, the Bank may rely upon higher cost certificates of deposit to support funding needs. As previously noted, the Bank recently raised approximately $31 million of premium rate nine-month certificate of deposit funds in the second quarter of 2004. The objective of raising new funds in new markets, though not assured of being achieved, is to capitalize on significant opportunities to create new and expanded deposit and loan banking relationships. Premium rate short-term funds may, however, produce an immediate reduction in the net interest margin. An increase in market interest rates, with a significant increase in treasury yields in the second quarter having already occurred while the Federal Reserve also appears poised to raise the Federal Funds target, continued competition from several local and national financial institutions, and increased reliance on higher cost funding sources could cause a narrower net interest margin in the future. 11 Average Balances and Yields The following table presents a summary of the Company's interest-earning assets and their average yields, and interest-bearing liabilities and their average costs for the three months ended March 31, 2004 and 2003. The average balances are derived from average daily balances.
Three Months Ended March 31, 2004 2003 Interest Interest Income/ Average Average Rate Income/ Average Average Rate Expense Balance Earned/Paid Expense Balance Earned/Paid ---------------------------------------------------------------------------------- (Dollars in thousands) Assets Interest earning assets: Federal funds sold and certificate of deposit $ 34 $ 2,499 5.44% $ 1 $ 399 1.00% Investment securities: Taxable 1,349 138,646 3.89% 1,382 138,495 3.99% Tax-exempt 192 16,959 4.53% 98 8,591 4.56% Loans, net 2,523 157,311 6.42% 2,382 138,552 6.88% --------------------- ---------------------- Total interest-earning assets 4,098 315,415 5.20% 3,863 286,037 5.40% ------- -------- Noninterest-earning assets 18,935 19,518 ----------- ----------- Total assets 334,350 305,555 =========== =========== Liabilities and Stockholders' Equity: Interest-bearing liabilities: Savings 39 31,228 0.50% 51 26,572 0.77% NOW 13 34,070 0.15% 24 34,382 0.28% MMDA 158 42,652 1.48% 172 40,050 1.72% CD's 308 50,538 2.44% 418 54,453 3.07% --------------------- ---------------------- Total interest-bearing deposits 518 158,488 1.31% 665 155,457 1.71% Other borrowed funds 54 9,723 2.22% 45 8,622 2.09% Federal Home Loan Bank Advances 609 103,169 2.36% 564 85,632 2.63% Subordinated debentures 144 9,000 6.40% 147 9,000 6.53% --------------------- ---------------------- Total interest-bearing liabilities 1,325 280,380 1.89% 1,421 258,711 2.20% ------- -------- Noninterest-bearing deposits 37,659 32,002 Other noninterest-bearing liabilities 679 1,282 ----------- ----------- Total liabilities 318,718 291,995 Total stockholders' equity 15,632 13,560 ----------- ----------- Total liabilities and stockholders' equity $334,350 $305,555 =========== =========== Net interest income $2,773 $2,442 ======== ======== Interest rate spread 3.31% 3.20% ========= ======== Net interest margin 3.52% 3.41% ========= ========
Non-interest Income Total non-interest income decreased $271,000, or 21.1%, to $1,013,000 for the quarter ended March 31, 2004 as compared to the quarter ended March 31, 2003. The decrease in the first quarter of 2004 was primarily due to a decrease in gains on the sale of securities of $253,000, or 39.6%, to $386,000. The existence or level of gains on the sale of securities cannot be assured or predicted as the amounts derived from such activity are a function of many factors, including, but not limited to, the duration, mix, and other attributes of securities owned and the level and slope of the yield curve, product spreads and other market forces that change on a daily basis. Higher securities gains in the first quarter of 2003 were at least partially due to the sale of a more 12 significant quantity of securities with longer maturities, which were acquired as the economy weakened in 1999 and 2000. Service charges on deposit accounts increased $40,000, or 16.3%, to $286,000 for the quarter-ended March 31, 2004 primarily as a result of growth in fee-based deposit balances, which is due at least partially to geographic growth in the retail network. Miscellaneous income decreased $66,000, or 75.8%, to $21,000 for the quarter-ended March 31, 2004 due to a one-time income credit of $63,000 associated with a loan settlement in the first quarter of 2003. Non-interest Expense Total operating expenses increased $648,000, or 24.4%, to $3,309,000 for the quarter ended March 31, 2004. Salaries and employee benefits increased $474,000, or 33.8%, due primarily to an increase in full-time equivalent employees to 118 as of March 31, 2004 from 96 at March 31, 2003 and an executive bonus approved by the Board of Directors in January. An increase in full-time equivalent employees was primarily associated with staffing for new branch locations, hiring lenders in new markets, adding an investment executive to lead the search for the acquisition of an investment company, and growing the staff infrastructure at the main office to support continued growth and expansion. Salaries and employee benefits expense will be impacted in the second quarter of 2004 and thereafter by execution of the SERP agreements. Professional fees increased $112,000, or 64%, to $287,000 for the quarter-ended March 31, 2004 due primarily to an increase in legal expenses associated with several matters related to growth plans and expansion initiatives. Data processing expenses increased $20,000, or 16.1%, to $144,000 for the quarter-ended March 31, 2004 due primarily to investment in new and enhanced technologies to support continued expansion in retail branches, staffing expansion, and growth in customer accounts and activity. The operating efficiency ratio, which represents operating expenses divided by total revenue excluding securities gains, increased to 93.2% for the quarter ended March 31, 2004 versus 84.1% for the quarter ended March 31, 2003. The ratio was higher in the first quarter of 2004 due primarily to a higher rate of growth in operating expenses than revenue. Revenue growth was slowed at least partially by the sale of approximately $51 million of higher yielding investment securities that were either re-invested in defensive shorter duration securities in anticipation of a rising rate environment or used to pay-down borrowings to temporarily increase the company's liquidity ratio until the liquidity benefits of the aforementioned certificate of deposit special in the second quarter of 2004 are realized. Income Taxes The provision for income taxes decreased $212,000, or 63.1%, to $124,000 for the quarter ended March 31, 2004 primarily as a result of lower pre-tax income in the first quarter of 2004 as compared to the first quarter of 2003. The effective tax rate of 26% for the quarter ended March 31, 2004 was lower than the 32% rate for the quarter ended March 31, 2003 due primarily to a higher percentage of pre-tax income in the Bank's subsidiary securities corporations. The effective tax rates were lower than the statutory federal and state tax rates for both periods due to the Company's three securities corporations, which are taxed at a lower state tax rate. Asset/Liability Management A principal operating objective of the Bank is to produce stable earnings by achieving a favorable interest rate spread that can be sustained during fluctuations in prevailing interest rates. Since the Bank's principal interest-earning assets generally have longer terms to maturity than its primary source of funds, i.e., deposit liabilities, increases in general interest rates will generally result in an increase in the Bank's cost of funds before the yield on its asset portfolio adjusts upward. A continual trade-off, which is managed and monitored on an ongoing basis, exists between exposure to interest rate risk and current income. In general, during periods with a normalized yield curve, a wider mismatch between the re-pricing periods of interest rate sensitive assets and liabilities can produce higher current net interest income. The management of interest rate risk considers several factors, including, but not limited to, the nature and extent of actual and anticipated embedded options and other attributes of the balance sheet, the perceived direction of market interest rates, and the risk appetite of management and the Asset/Liability Management Committee ("ALCO"). Members of the ALCO consist of the chief executive officer, the chief financial officer, the senior loan officer, one board member, and others. The Committee discusses the asset/liability mix on the balance sheet and reviews exposures to changes in interest rates. 13 Certain strategies have been implemented in 2004 to reduce the current level of interest rate risk with the prospects for an improving economy and an increase in market interest rates. These strategies currently include, but are not limited to, fixing the cost of certain liability sources, adding interest rate sensitivity to the investment securities portfolio, and shortening the duration of certain newly originated commercial loan products. On an ongoing basis, management analyzes the pros and cons of positioning with a narrower or wider interest rate mismatch and whether an asset sensitive or liability sensitive balance sheet is targeted and to what degree. This analysis considers, but is not limited to, originating adjustable and fixed rate mortgage loans, managing the cost and structure of deposits, analyzing actual and projected asset cash flow, considering the trade-offs of short versus long-term borrowings, and reviewing the pros and cons of certain investment security sectors. Quarterly, ALCO modeling is performed with the assistance of an outside advisor which projects the Bank's financial performance over certain periods under certain interest rate environments. The results of the ALCO process are reported to the Board on at least a quarterly basis. Liquidity and Capital Resources The Bank's primary sources of funds consist of deposits, borrowings, repayment and prepayment of loans, sales of securities, maturities and early calls of securities, and funds provided from operations. While scheduled repayments of loans and maturities of investment securities are predictable sources of funds, deposit flows and the general level of interest rates, economic conditions, and competition largely influences prepayments on loans and investment securities. The Bank primarily uses its liquidity resources to fund existing and future loan commitments, to fund net deposit outflows, to invest in other interest-earning assets, to maintain liquidity, and to pay operating expenses. From time to time, the Bank utilizes advances from the Federal Home Loan Bank of Boston (the "FHLB") primarily in connection with its management of the interest rate sensitivity of its assets and liabilities, as well as to selectively capitalize on leverage opportunities. Total advances outstanding at March 31, 2004 amounted to $100.4 million. The Bank's ability to borrow from the FHLB is dependent upon the amount and type of collateral the Bank has to secure the borrowings. Such collateral consists of, but is not limited to, one-to-four family owner-occupied residential property and federal agency obligations. As of March 31, 2004, the Bank's total borrowing capacity through the FHLB was $132.4 million. The Bank has additional capacity to borrow federal funds from other banks and through such instruments as repurchase agreements utilizing federal agency obligations and mortgage-backed securities as collateral, as well as brokered deposits. A major portion of the Bank's liquidity consists of cash and cash equivalents, short-term investments, U.S. Government and federal agency obligations, mortgage-backed securities, and other debt securities. The level of these assets is dependent upon the Bank's operating, lending, and financing activities during any given period. At March 31, 2004, the Bank had $5.6 million of outstanding commitments to originate loans and $30.8 million of unused lines of credit. The Bank anticipates that it will have sufficient funds available to meet these commitments. Certificates of deposit, which are scheduled to mature in one year or less, totaled $24.2 million at March 31, 2004. Based upon historical experience, management believes that a significant portion of such deposits will remain with the Bank. On a monthly basis, the Company currently generates an average of approximately $8 million in cash flow from the loan and investment securities portfolios. These funds are primarily used to either re-invest in new loans and investment securities or utilized in conjunction with the management of the level of deposit balances or borrowed funds. 14 At March 31, 2004, the Company and the Bank continued to exceed all regulatory capital requirements applicable to them. The table below presents the capital ratios at March 31, 2004, for the Company and the Bank, as well as the minimum regulatory requirements.
Minimum Capital Actual Requirements Amount Ratio Amount Ratio ------------------ ------------------- Bank: Total capital to risk-weighted assets $24,941 13.60% $14,667 8.00% Tier 1 capital to risk-weighted assets 23,608 12.88% 7,333 4.00% Tier 1 capital to average assets 23,608 7.07% 13,361 4.00% Company: Total capital to risk-weighted assets $25,933 14.12% $14,694 8.00% Tier 1 capital to risk-weighted assets 20,800 11.32% 7,347 4.00% Tier 1 capital to average assets 20,800 6.22% 13,374 4.00%
ITEM 3. Controls and Procedures (a) Evaluation of disclosure controls and procedures. As required by Rule 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company's management conducted an evaluation with the participation of the Company's Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the Company's disclosure controls and procedures, as of the end of the last fiscal quarter. In designing and evaluating the Company's disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that they believe the Company's disclosure controls and procedures are reasonably effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's ("SEC") rules and forms. We intend to continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and we may from time to time make changes to the disclosure controls and procedures to enhance their effectiveness and to ensure that our systems evolve with our business. (b) Changes in internal controls over financial reporting. There were no changes in the Company's internal controls over financial reporting identified in connection with the Company's evaluation of its disclosure controls and procedures that occurred during the Company's last fiscal quarter that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting. 15 PART II -- OTHER INFORMATION ITEM 1. Legal Proceedings The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business that, in the aggregate, involved amounts believed by management to be immaterial to the financial condition and operations of the Company. ITEM 2. Changes in Securities Subsequent to quarter end, the Company engaged in a public rights offering of its securities. Pursuant to the offering, the Company registered 300,000 shares of common stock $1.00 par value with the SEC at an offering price of $13.00 per share. The SEC file number assigned to the registration statement is 333-114018. The offering's effective date was May 13, 2004. No underwriters have been involved in the offering. The offering commenced on May 14, 2004. As described in the registration statement, the offering consists of a rights offering to its existing shareholders and a general offering to others, as the Company in its sole discretion may determine. The general offering is to remain open until June 28, 2004 at 5:00 p.m.
Amount Subscribed for Aggregate Offering Price of the Aggregate Price of the as of June 18, Amount Subscribed for as of Amount Registered Offering Amount Registered 2004 June 18, 2004 ----------------- -------------------------- ---- ------------- 300,000 shares $3,900,000 70,772 shares $920,036
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 March 31, 2004. At that meeting, the shareholders approved an increase in the authorized common stock of the Company from 2,000,000 shares to 4,000,000 shares with 1,435,590 shares voting for, no shares voting against, 650 shares abstaining, and no broker non-votes. In addition, the following were elected as directors of the Company:
Shares Voted Shares Voted Broker Director For Against or Withheld Abstentions Non-Votes -------- --- ------------------- ----------- --------- Robert R. Borden, III 1,436,240 None None None Timothy R. Collins 1,436,240 None None None Franz Colloredo-Mansfeld 1,436,240 None None None John T. Coughlin 1,436,240 None None None Stephanie R. Gaskins 1,436,240 None None None Donald P. Gill 1,436,240 None None None Fitz O. Lufkin, Jr. 1,436,240 None None None Peter A. Maistrellis 1,436,240 None None None H.A. Patrican, Jr. 1,436,240 None None None Neil St. John Raymond, Chairman 1,436,240 None None None Neil St. John Raymond, Jr. 1,436,240 None None None William J. Tinti 1,436,240 None None None
The above directors constitute all of the directors of the Company, each of whom stood for election at the annual meeting. 16 Further, at such meeting, the stockholders approved, with 1,435,590 shares voting for, no shares voting against, 690 shares abstaining, and no broker non-votes, the First Ipswich Bancorp 2004 Incentive Stock Option Plan (the "stock option plan") for key employees of the Company and its subsidiaries, providing for options with respect to 200,000 shares of common stock of the Company, subject to adjustments in the event of stock splits, stock dividends or reclassifications, recapitalization or other possible future changes. Under the stock option plan, the board of directors may grant to key employees of the Company whom the board determines to be capable of making substantial contributions to the management and operations of the Company, options to purchase shares of the Company's common stock. The board of directors will administer the stock option plan and will determine which employees shall be granted options, the number of options granted, the times when the options will vest, and the exercise price of the option. The stock option plan shall terminate on February 18, 2014 and no options may be granted thereafter. The board of directors may at any time modify, amend or terminate the stock option plan, except that approval of the holders of at least a majority of stock of the Company is required in certain circumstances such as increasing the amount of shares that may be granted under the plan, increasing the maximum amount of options that may be granted to an individual employee or extending the stock option plan's termination date. As of June 24, 2004, the board of directors has not granted any options. The board of directors currently intends to make future grants of options based on the achievement of financial performance goals established by the board of directors. ITEM 5. Other Information At a meeting of the board of directors on March 17, 2004, the Company adopted the First Ipswich Bancorp 2004 Directors' Plan (the "directors' plan"), providing for the issuance of stock options with respect to 20,000 shares of the common stock of the Company, subject to adjustments in the event of stock splits, stock dividends or reclassification, recapitalization or other possible future changes. The directors' plan terminates in 2014 and no options may be granted thereafter. The board of directors may at any time modify, amend or terminate the directors' plan. As of the date hereof, the board of directors has not granted any options. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 First Ipswich Bancorp 2004 Incentive Stock Option Plan for Key Employees, incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 10.2 First Ipswich Bancorp 2004 Directors' Plan, incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 10.3 Employment Agreement of Donald P. Gill, incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 10.4 Employment Agreement of Neil St. John Raymond, incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 10.5 Change of Control Agreement of Donald P. Gill, incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 17 10.6 Change of Control Agreement of Neil St. John Raymond, incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 10.7 Change in Control Agreement of Michael J. Wolnik, incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 10.8 Change in Control Agreement of John P. DiIorio, Jr., incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 10.9 Executive Supplemental Retirement Agreement of Neil St. John Raymond, incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 10.10 Executive Supplemental Retirement Agreement of Donald P. Gill, incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 19.1 Letter to Shareholders regarding first quarter 2004 financial results with attached March 31, 2004 balance sheet and income statement, incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form SB-2 (File No. 333-114018). 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K None. 18 SIGNATURES In accordance with 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. FIRST IPSWICH BANCORP Date: June 24, 2004 By: /s/ Donald P. Gill ----------------------- Donald P. Gill President and Chief Executive Officer Date: June 24, 2004 By: /s/ Michael J. Wolnik ----------------------- Michael J. Wolnik Senior Vice President, Chief Financial Officer, and Treasurer 19 EX-31.1 2 ex31-1.txt Exhibit 31.1 CERTIFICATIONS I, Donald P. Gill, hereby certify that: (1) I have reviewed this quarterly report on Form 10-QSB of First Ipswich Bancorp; (2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this quarterly report; (4) The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) Disclosed in this quarterly report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and (5) The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons fulfilling the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls over financial reporting. /s/ Donald P. Gill - ----------------------------------------------------- Donald P. Gill Chief Executive Officer June 24, 2004 EX-31.2 3 ex31-2.txt Exhibit 31.2 CERTIFICATIONS I, Michael J. Wolnik, hereby certify that: (1) I have reviewed this quarterly report on Form 10-QSB of First Ipswich Bancorp; (2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this quarterly report; (4) The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) Disclosed in this quarterly report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and (5) The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons fulfilling the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls over financial reporting. /s/ Michael J. Wolnik - ----------------------------------------------------- Michael J. Wolnik Chief Financial Officer June 24, 2004 EX-32.1 4 ex32-1.txt Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of First Ipswich Bancorp (the "Company") on Form 10-QSB for the quarter ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Donald P. Gill, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K ("Item 601(b)(32)") promulgated under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference. /s/ Donald P. Gill - ----------------------------------------------------- Donald P. Gill Chief Executive Officer June 24, 2004 EX-32.2 5 ex32-2.txt Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of First Ipswich Bancorp (the "Company") on Form 10-QSB for the quarter ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael J. Wolnik, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K ("Item 601(b)(32)") promulgated under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference. /s/ Michael J. Wolnik - -------------------------------------------- Michael J. Wolnik Chief Financial Officer June 24, 2004 -----END PRIVACY-ENHANCED MESSAGE-----