<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
COMMISSION FILE NUMBER: 000-25077
SEACOAST FINANCIAL SERVICES CORPORATION
---------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Massachusetts 04-1659040
------------------------ ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
One Compass Place, New Bedford, Massachusetts 02740
--------------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
(508) 984-6000
-------------------------------
(Registrant's Telephone Number)
N/A
-------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year if Changed Since Last Report
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
At November 10, 2000, the Company had 25,155,361 shares of common stock
outstanding.
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION
INDEX
PART 1 - FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30, 2000
and December 31, 1999 1
Consolidated Statements of Income for the three
months and nine months ended September 30, 2000 and 1999 2
Consolidated Statements of Changes in Stockholders'
Equity for the nine months ended September 30, 2000 and 1999 3
Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999 4
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Liquidity and Capital Resources 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 18
EXHIBIT 27 - Financial Data Schedule
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS:
Cash and due from banks ........................................................ $ 78,489 $ 60,245
Federal funds sold ............................................................. 2,638 106
----------- -----------
Total cash and cash equivalents .............................................. 81,127 60,351
Other short-term investments ................................................... 3 231
Investment securities--
Available-for-sale, at fair value ............................................ 232,999 245,583
Held-to-maturity, at amortized cost .......................................... 12,398 12,408
Restricted equity securities ................................................. 18,795 14,936
Loans held-for-sale ............................................................ -- 756
Loans, net (Note 2) ............................................................ 2,009,249 1,730,378
Accrued interest receivable .................................................... 11,721 9,426
Banking premises and equipment, net ............................................ 42,263 26,585
Other real estate owned, net ................................................... 547 552
Net deferred tax asset ......................................................... 12,686 12,527
Other assets ................................................................... 8,736 9,052
----------- -----------
Total assets ................................................................ $ 2,430,524 $ 2,122,785
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits (Note 3) .............................................................. $ 1,746,962 $ 1,515,622
Short-term borrowings .......................................................... 33,781 40,787
Federal Home Loan Bank advances ................................................ 344,983 271,900
Other borrowings ............................................................... 1,895 1,935
Mortgagors' escrow payments .................................................... 4,358 3,829
Accrued expenses and other liabilities ......................................... 15,193 14,691
----------- -----------
Total liabilities ........................................................... 2,147,172 1,848,764
----------- -----------
COMMITMENTS AND CONTINGENCIES
Stockholders' equity (Notes 6 and 7):
Preferred stock, par value $.01 per share; authorized
10,000,000 shares; none issued ............................................ -- --
Common stock, par value $.01 per share; authorized
100,000,000 shares; 26,758,136 shares issued .............................. 268 268
Additional paid-in capital ................................................... 152,789 152,702
Treasury stock, at cost, 1,602,775 shares in 2000 and
898,500 shares in 1999 .................................................... (15,951) (9,310)
Retained earnings ............................................................ 162,145 149,256
Accumulated other comprehensive income (loss) ................................ (909) (2,430)
Unearned compensation - ESOP and restricted stock ............................ (14,836) (16,326)
Shares held in employee trust ................................................ (154) (139)
----------- -----------
Total stockholders' equity ................................................ 283,352 274,021
----------- -----------
Total liabilities and stockholders' equity ................................ $ 2,430,524 $ 2,122,785
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
1
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest on loans ................................................ $ 38,803 $ 30,913 $107,893 $ 88,038
Interest and dividends on investment securities .................. 4,235 4,219 12,704 13,041
Interest on federal funds sold and short-term investments ........ 266 10 300 369
-------- -------- -------- --------
Total interest and dividend income ............................. 43,304 35,142 120,897 101,448
-------- -------- -------- --------
INTEREST EXPENSE:
Interest on deposits ............................................. 16,965 13,277 45,667 39,935
Interest on borrowed funds ....................................... 5,979 2,815 16,082 6,491
-------- -------- -------- --------
Total interest expense ......................................... 22,944 16,092 61,749 46,426
-------- -------- -------- --------
Net interest income ............................................ 20,360 19,050 59,148 55,022
PROVISION FOR LOAN LOSSES .............................................. 1,250 650 3,500 1,225
-------- -------- -------- --------
Net interest income after provision for loan losses ............ 19,110 18,400 55,648 53,797
-------- -------- -------- --------
NONINTEREST INCOME:
Deposit and other banking fees ................................... 1,631 1,427 4,252 3,877
Loan servicing fees, net ......................................... 158 117 502 441
Card fee income, net ............................................. 393 264 873 552
Other loan fees .................................................. 179 143 602 376
Gain on sales of investment securities, net ...................... -- 7 4 165
Gain on sales of loans, net ...................................... 27 12 28 90
Gain on pension plan termination ................................. -- 1,472 -- 1,472
Other income ..................................................... 540 278 1,147 736
-------- -------- -------- --------
Total noninterest income ...................................... 2,928 3,720 7,408 7,709
-------- -------- -------- --------
NONINTEREST EXPENSE:
Salaries and employee benefits ................................... 6,549 5,790 19,705 16,610
Occupancy and equipment expenses ................................. 1,867 1,428 4,714 4,363
Data processing expenses ......................................... 1,309 1,094 3,631 3,339
Marketing expenses ............................................... 892 656 2,131 1,773
Professional services expenses ................................... 491 558 1,407 1,260
Other operating expenses ......................................... 1,652 1,769 4,460 5,606
-------- -------- -------- --------
Total noninterest expense ...................................... 12,760 11,295 36,048 32,951
-------- -------- -------- --------
Income before provision for income taxes ....................... 9,278 10,825 27,008 28,555
PROVISION FOR INCOME TAXES ............................................. 3,183 3,880 9,486 10,188
-------- -------- -------- --------
Net income ..................................................... $ 6,095 $ 6,945 $ 17,522 $ 18,367
======== ======== ======== ========
Net income per share-diluted (Note 4) .......................... $ 0.26 $ 0.27 $ 0.74 $ 0.72
======== ======== ======== ========
Weighted average number of outstanding shares (diluted) ........ 23,691 25,356 23,839 25,552
======== ======== ======== ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
2
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-In Treasury Retained Comprehensive
Stock Capital Stock Earnings Income (Loss)
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 .......................... $ 268 $ 152,936 $ -- $ 127,263 $ 2,337
Grant of restricted stock awards .................... -- 6,370 -- -- --
Repurchase of common stock (Note 6) ................. -- -- (7,369) -- --
Issuance of restricted stock awards ................. -- (6,629) 6,629 -- --
Net income .......................................... -- -- -- 18,367 --
Other comprehensive income--change in unrealized
gain on securities available for sale, net of taxes -- -- -- -- (3,537)
Comprehensive income .............................
Cash dividends-- $.05 per share ..................... -- -- -- (1,262) --
Amortization of unearned compensation ............... -- 22 -- -- --
--------- --------- --------- --------- ---------
Balance, September 30, 1999 ......................... $ 268 $ 152,699 $ (740) $ 144,368 $ (1,200)
========= ========= ========= ========= =========
Balance, December 31, 1999 .......................... $ 268 $ 152,702 $ (9,310) $ 149,256 $ (2,430)
Repurchase of common stock (Note 6) ................. -- -- (6,641) -- --
Net income .......................................... -- -- -- 17,522 --
Other comprehensive income-- change in unrealized
loss on securities available for sale, net of taxes -- -- -- -- 1,521
Comprehensive income ............................
Cash dividends-- $.19 per share ..................... -- -- -- (4,633) --
Amortization of unearned compensation ............... -- (15) -- -- --
Other ............................................... -- 102 -- -- --
--------- --------- --------- --------- ---------
Balance, September 30, 2000 ......................... $ 268 $ 152,789 $ (15,951) $ 162,145 $ (909)
========= ========= ========= ========= =========
<CAPTION>
Shares
Held In
Unearned Employee
Compensation Trust Total
----------- --------- ---------
<S> <C> <C> <C>
Balance, December 31, 1998 .......................... $ (11,153) $ (139) $ 271,512
Grant of restricted stock awards .................... (6,370) -- --
Repurchase of common stock (Note 6) ................. -- -- (7,369)
Issuance of restricted stock awards ................. -- -- --
Net income .......................................... -- -- 18,367
Other comprehensive income-- change in unrealized
gain on securities available for sale, net of taxes -- -- (3,537)
---------
Comprehensive income ............................. 14,830
Cash dividends-- $.05 per share ..................... -- -- (1,262)
Amortization of unearned compensation ............... 738 -- 760
--------- --------- ---------
Balance, September 30, 1999 ......................... $ (16,785) $ (139) $ 278,471
========= ========= =========
Balance, December 31, 1999 .......................... $ (16,326) $ (139) $ 274,021
Repurchase of common stock (Note 6) ................. -- -- (6,641)
Net income .......................................... -- -- 17,522
Other comprehensive income-- change in unrealized
loss on securities available for sale, net of taxes -- -- 1,521
---------
Comprehensive income ............................ 19,043
Cash dividends-- $.19 per share ..................... -- -- (4,633)
Amortization of unearned compensation ............... 1,490 -- 1,475
Other ............................................... -- (15) 87
--------- --------- ---------
Balance, September 30, 2000 ......................... $ (14,836) $ (154) $ 283,352
========= ========= =========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................................... $ 17,522 $ 18,367
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation ....................................................................... 1,956 1,840
Amortization and accretion, net .................................................... 1,968 1,644
Provision for loan losses .......................................................... 3,500 1,225
Gain on pension plan termination ................................................... -- (1,472)
Gain on sale of investment securities, net ......................................... (4) (165)
(Gain)loss on disposal of banking premises and equipment, net of
impairment reserve ............................................................... (252) 195
Other real estate owned income ..................................................... -- (63)
Provision (benefit) for deferred taxes ............................................. (776) 483
Origination of loans held-for-sale ................................................. (366) (5,543)
Proceeds from sales of loans originated for resale ................................. 1,150 5,633
Gain on sales of loans, net ........................................................ (28) (90)
Net increase in accrued interest receivable ........................................ (2,295) (838)
Net (increase) decrease in other assets ............................................ (47) 354
Net increase in accrued expenses and other liabilities ............................. 206 459
--------- ---------
Net cash provided by operating activities ................................. 22,534 22,029
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in short-term investments, net .............................................. 228 30,942
Purchase of securities classified as available-for-sale ............................ (41,547) (47,922)
Purchase of securities classified as held-to-maturity .............................. (1,000) (75)
Purchase of restricted equity securities ........................................... (3,859) (1,663)
Proceeds from sales, calls, paydowns and maturities of
securities classified as available-for-sale ...................................... 56,536 98,701
Proceeds from paydowns, maturities and calls of securities
classified as held-to-maturity ................................................... 1,000 1,360
Purchases of loans ................................................................. (14,106) (12,589)
Net increase in loans .............................................................. (269,024) (271,542)
Recoveries of loans previously charged off ......................................... 297 433
Proceeds from sales of other real estate owned ..................................... 467 225
Purchase of premises and equipment ................................................. (17,590) (6,525)
Proceeds from sale of banking premises and equipment ............................... 208 --
--------- ---------
Net cash used in investing activities ..................................... (288,390) (208,655)
--------- ---------
</TABLE>
4
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in NOW, money market deposit and demand
deposit accounts ............................................................ $ 52,053 $ 27,823
Increase in passbook and other savings accounts ................................ 5,374 18,670
Increase (decrease) in term certificates ....................................... 173,913 (13,160)
Advances from Federal Home Loan Bank ........................................... 325,000 117,000
Repayments of Federal Home Loan Bank advances .................................. (251,917) (14,468)
Increase (decrease) in short-term and other borrowings ......................... (7,046) 17,402
Increase in mortgagors' escrow payments ........................................ 529 893
Repurchase of common stock ..................................................... (6,641) (7,369)
Cash dividends ................................................................. (4,633) (1,262)
--------- ---------
Net cash provided by financing activities ............................. 286,632 145,529
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .................................................................... 20,776 (41,097)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE YEAR .......................................................... 60,351 101,419
--------- ---------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD .............................................................. $ 81,127 $ 60,322
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid on deposits and borrowed funds ................................... $ 61,566 $ 46,004
Income taxes paid .............................................................. 10,480 9,470
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
Transfer from loans to other real estate owned ................................. 684 514
Financed sales of other real estate owned ...................................... 222 1,081
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited consolidated financial statements of Seacoast Financial
Services Corporation ("the Company") and its wholly-owned subsidiaries, Compass
Bank for Savings ("Compass" or "the Bank") and Lighthouse Securities
Corporation, presented herein should be read in conjunction with the
consolidated financial statements of the Company as of and for the year ended
December 31, 1999 included as part of its Form 10-K.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation. Management is required to make estimates and
assumptions that affect amounts reported in the financial statements. Actual
results could differ significantly from those estimates.
Summary of Significant Accounting Policies
The Company's significant accounting policies are described in Note 1 of
the Notes to Consolidated Financial Statements included in its Form 10-K for the
year ended December 31, 1999 filed with the Securities and Exchange Commission.
For interim reporting purposes, the Company follows the same significant
accounting policies.
(2) LOANS
The Bank's loan portfolio consisted of the following:
September 30, December 31,
2000 1999
---------- ----------
(In thousands)
Real estate loans:
Residential (one-to-four family) ......... $1,017,268 $ 896,479
Commercial ............................... 248,113 223,500
Home equity lines of credit .............. 31,087 26,076
Construction ............................. 87,405 71,735
---------- ----------
Total real estate loans ............. 1,383,873 1,217,790
---------- ----------
Commercial loans ............................... 81,890 66,360
---------- ----------
Consumer loans:
Indirect auto loans ...................... 519,813 439,753
Less-unearned discount ................... 8,861 17,370
---------- ----------
Indirect auto loans, net ............ 510,952 422,383
Other .................................... 51,900 40,673
---------- ----------
Total consumer loans, net ........... 562,852 463,056
---------- ----------
Total loans ......................... 2,028,615 1,747,206
Less-Allowance for loan losses ................. 19,366 16,828
---------- ----------
Total loans, net .................... $2,009,249 $1,730,378
========== ==========
Non-accrual loans amounted to $5,712,000 and $5,734,000 at September 30,
2000 and December 31, 1999, respectively.
6
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(3) DEPOSITS
A summary of deposit balances is as follows:
September 30, December 31,
2000 1999
---------- ----------
(In thousands)
Demand deposit accounts .......................... $ 142,813 $ 101,218
NOW and money market deposit accounts ............ 473,610 463,152
Passbook and other savings accounts .............. 219,691 214,317
---------- ----------
Total non-certificate accounts ............ 836,114 778,687
---------- ----------
Term certificates-
Term certificates of $100,000 and over ......... 207,465 157,113
Term certificates less than $100,000 ........... 703,383 579,822
---------- ----------
Total term certificate accounts ........... 910,848 736,935
---------- ----------
Total deposits ............................ $1,746,962 $1,515,622
========== ==========
(4) EARNINGS PER SHARE
Diluted earnings per share for the three months and nine months ended
September 30, 1999 and 2000 were computed based on the adjusted weighted average
number of shares outstanding during the periods. Unallocated ESOP shares and
unvested restricted stock awards are not considered outstanding for purposes of
the computation of basic earnings per share. There is only an insignificant
difference in the number of shares used in computing basic and diluted earnings
per share and, accordingly, such per share amounts do not differ.
(5) BUSINESS SEGMENT INFORMATION
The community banking business segment consists of commercial and retail
banking. This segment is managed as a single strategic unit which derives its
revenues from a wide range of banking services, including investing and lending
activities and acceptance of demand, savings and time deposits, merchant credit
card services as well as servicing loans for investors. There is no major
customer, as defined, and the Bank operates within a single geographic area
(Southeastern Massachusetts).
Non-reportable operating segments of the Company's operations which do not
have similar characteristics to the community banking operations and do not meet
the quantitative thresholds requiring disclosure, are included in the Other
category in the following disclosure of business segments. These non-reportable
segments include the Parent Company.
7
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(5) BUSINESS SEGMENT INFORMATION (Continued)
Reportable segment specific information and reconciliation to consolidated
financial information as of September 30, 2000 and 1999 and for the nine month
periods then ended are as follows (in thousands):
<TABLE>
<CAPTION>
Other
Adjustments
Community and
Banking Other Eliminations Consolidated
----------- --------- ------------ ------------
<S> <C> <C> <C> <C>
September 30, 2000
Investment securities...................... $ 260,853 $ 3,339 $ -- $ 264,192
Net loans.................................. 2,009,249 10,646 (10,646) 2,009,249
Total assets............................... 2,426,830 283,673 (279,979) 2,430,524
Total deposits............................. 1,746,962 -- -- 1,746,962
Total borrowings........................... 380,659 -- -- 380,659
Total liabilities.......................... 2,146,850 322 -- 2,147,172
Net interest income........................ 59,049 724 (625) 59,148
Provision for loan losses.................. 3,500 -- -- 3,500
Total noninterest income................... 7,408 -- -- 7,408
Total noninterest expense.................. 35,233 815 -- 36,048
Net income................................. 17,568 17,522 (17,568) 17,522
September 30, 1999
Investment securities...................... $ 257,618 $ 2,300 $ -- $ 259,918
Net loans.................................. 1,671,180 10,961 (10,961) 1,671,180
Total assets............................... 2,045,784 278,980 (276,637) 2,048,127
Total deposits............................. 1,530,548 -- -- 1,530,548
Total borrowings........................... 218,707 -- -- 218,707
Total liabilities.......................... 1,769,147 509 -- 1,769,656
Net interest income........................ 54,958 709 (645) 55,022
Provision for loan losses.................. 1,225 -- -- 1,225
Total noninterest income................... 7,709 -- -- 7,709
Total noninterest expense.................. 32,276 675 -- 32,951
Net income................................. 18,334 18,367 (18,334) 18,367
</TABLE>
(6) STOCK REPURCHASE PROGRAMS
In July 1999, the Board of Directors authorized the Company to repurchase
up to 1,000,000 shares in the open market to meet the anticipated needs of stock
awards and stock options issued in connection with the 1999 Stock Incentive
Plan. In October 1999 and July 2000, the Board of Directors, with the approval
of the Commissioner of Banks, authorized the Company to repurchase in the open
market up to an additional 1,231,900 and 1,254,312 shares, respectively. The
Board of Directors delegated to the discretion of senior management the
authority to determine the timing of the repurchase programs' commencement, the
timing of the subsequent repurchases and the prices at which repurchases will be
made.
As of November 10, 2000, the Company had repurchased 2,162,775 shares of
its common stock under these programs at a total cost of $22,580,228, all of
which shares had been repurchased as of September 30, 2000.
8
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(7) QUARTERLY CASH DIVIDEND
On October 23, 2000, the Company announced a quarterly cash dividend of
$.07 per share payable on November 17, 2000 to stockholders of record on
November 3, 2000.
(8) PENDING ACQUISITION
On July 20, 2000, the Company entered into a definitive agreement with
Home Port Bancorp, Inc. (Home Port) under which the Company would acquire all of
the outstanding stock of Home Port for cash of $37 per share resulting in a
transaction value of approximately $68.5 million, exclusive of one-time
transaction costs. Home Port has agreed to omit the payment of dividends to
shareholders for the remainder of 2000.
Home Port is the holding company for Nantucket Bank, a three branch
savings bank with total assets of approximately $340 million, located on
Nantucket Island, Massachusetts. The Company intends to keep Nantucket Bank as a
separate operating subsidiary retaining its name and charter. Accordingly, the
only cost savings initially expected from the transaction are from the
elimination of Home Port as the holding company for Nantucket Bank.
In connection with the execution of the definitive agreement, a reciprocal
break-up fee of $3.5 million was negotiated. In addition, the Company was
granted an option to purchase up to 19.9% of Home Port's outstanding common
stock under certain circumstances.
The transaction, which will be accounted for under the purchase method
of accounting, was approved by Home Port's shareholders on October 20,
2000 and is awaiting regulatory approval. The Company recently learned that
it might not be possible to receive final regulatory approval by the end of
December, as initially projected, and that such approval might be expected,
instead, early in the first quarter of 2001.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual events could differ materially from
those anticipated in the forward-looking statements. Important factors that
might cause such a difference include, among other things, general economic
conditions, particularly the real estate market, in the Company's primary market
area, potential increases in the Company's non-performing assets (as well as
increases in the allowance for loan losses that might be necessary),
concentrations of loans in a particular geographic area or with certain large
borrowers, changes in government regulation and supervision, including increased
deposit insurance premiums or capital or reserve requirements, changes in
interest rates, and increased competition and bank consolidations in the
Company's market area.
Comparison of Financial Condition at September 30, 2000 and December 31, 1999
Total assets increased by $307.7 million from $2,122.8 million at December
31, 1999 to $2,430.5 million at September 30, 2000. During the nine months ended
September 30, 2000, Compass increased its loan portfolio by $281.4 million, or
16.1%, which was funded principally by deposit growth (primarily certificates of
deposit) of $231.4 million and, to a lesser extent, additional Federal Home Loan
Bank borrowings of $55.4 million.
The increase in loans occurred primarily in the residential mortgage,
indirect auto and commercial loan portfolios. From December 31, 1999 to
September 30, 2000, residential mortgage loans increased by $120.8 million, or
13.5%, indirect auto loans (net of unearned discounts) increased by $88.6
million, or 21.0% and commercial loans (including commercial real estate loans)
increased by $40.1 million, or 13.8%. The growth during the nine months ended
September 30, 2000 is generally attributable to the favorable economic
conditions which prevailed during this period. The Bank has continued to retain
all residential mortgage loan originations in its portfolio and has continued to
emphasize the origination of indirect auto loans through its network of
automobile dealers which has been expanded to include dealers in communities
contiguous to the metropolitan Boston area. The increase in commercial loans
reflects the Bank's strategy to expand this portion of its loan portfolio.
Towards that end, the Bank has added four commercial lenders since November
1999.
Total deposits at September 30, 2000 were $1,747.0 million, an increase of
$231.4 million, or 15.3%, compared to $1,515.6 million at December 31, 1999 due
largely to an increase in certificates of deposit of $173.9 million during the
period. This increase was fueled by the introduction and promotion, in February
2000, of a 7-month certificate at 6.30% and, to a lesser extent, the promotion
of 9-month and 18-month certificates of deposit during the second quarter. Core
deposit account balances increased by $57.4 million, or 7.4% during the nine
months ended September 30, 2000. The growth in core deposits during the period
was generally attributable to normal seasonal fluctuations and the promotion of
a free checking account product partially offset by the shift in funds to higher
yielding certificates of deposit. Management believes that the bank
consolidation and divestitures currently underway in the Bank's market area as a
result of the Fleet/BankBoston merger have contributed to the growth in deposits
in 2000 and continue to offer Compass an opportunity to increase its deposits.
Total borrowed funds were $380.7 million at September 30, 2000 compared to
$314.6 million at December 31, 1999, an increase of $66.1 million, or 21.0%.
During the nine months ended September 30, 2000, Compass increased its net
borrowings from the Federal Home Loan Bank by $55.4 million in order to
partially fund loan growth. Management believes that it will continue to rely on
Federal Home Loan Bank borrowings during the remainder of 2000 to partially fund
anticipated loan growth and to finance its pending acquisition of Home Port
Bancorp, Inc. (Home Port).
The increase in stockholders' equity of $9.3 million to $283.4 million at
September 30, 2000 resulted from net income of $17.5 million for the nine months
ended September 30, 2000 which was partially offset by cash dividends and stock
repurchases. During 1999 and 2000, the Company announced three stock repurchase
programs, the most recent of which was approved in July 2000, aggregating
3,486,212 shares. As of November 10, 2000, 2,162,775 shares had been repurchased
leaving up to 1,323,437 shares for repurchase. The Company has not repurchased
any of its stock since June 2000 but expects to recommence purchases of its
stock in the near future.
10
<PAGE>
Comparison of Operating Results for the Quarters Ended September 30, 2000 and
1999
Net income was $6.1 million, or $.26 per diluted share, for the quarter
ended September 30, 2000 compared to net income of $6.9 million, or $.27 per
diluted share, for the comparable period in 1999. The 1999 results include a
curtailment gain on the pending termination of the Bank's pension plan which,
after taxes, amounted to $856,000, or $.03 per share. Exclusive of this
non-recurring item, net income for the quarter ended September 30, 2000 was
unchanged while earnings per diluted share increased $.02 or 8.3%. The increase
in earnings per share despite an unchanged level of net income in 2000 reflects
the impact of the Company's stock repurchase program. The 2000 results, as
compared to 1999, include an increase of $1.3 million, or 6.9%, in net interest
income, an increase of $600,000 in the provision for loan losses, an increase of
$680,000, or 30.2%, in non-interest income (exclusive of the non-recurring gain
of $1.5 million on termination of the pension plan) and an increase of $1.5
million, or 13.0%, in non-interest expense. The Company's effective tax rate
decreased to 34.3% in 2000 from 35.8% in the comparable 1999 period.
Interest Income. Interest income for the quarter ended September 30, 2000
was $43.3 million compared to $35.1 million for the quarter ended September 30,
1999, an increase of $8.2 million, or 23.2%. The increase in interest income
resulted from growth in average interest-earning assets of $331.2 million, or
17.1%, and an increase in the yield on interest-earning assets of 37 basis
points in the 2000 period. The increase in the yield on interest-earning assets,
as compared to the same period in the prior year, reflects the series of rate
increases initiated by the Federal Reserve Board beginning in June 1999. The
principal areas of growth in average balances were related to real estate loans
(up $206.9 million, or 17.9%) and indirect auto loans (up $107.2 million, or
27.6%). Most of the real estate loan growth resulted from origination and
retention in portfolio of one-to-four family residential real estate loans. The
increase in indirect auto loans resulted from the positive economic environment
within Compass's local markets and the continued emphasis of this area of
lending as previously noted.
Interest Expense. Interest expense for the quarter ended September 30,
2000 was $22.9 million compared to $16.1 million for the quarter ended September
30, 1999, an increase of $6.8 million or 42.6%. This increase resulted from a 72
basis point increase in the cost of all funds from 4.00% in 1999 to 4.72% in
2000, and a higher average balance of interest-bearing liabilities (up $332.8
million, or 20.6%). Average interest-bearing deposit balances increased $153.6
million, or 10.9%, during the quarter ended September 30, 2000 compared to the
same period in 1999.
Interest expense on borrowed funds increased $3.2 million in the quarter
ended September 30, 2000 to $6.0 million due to a $179.2 million increase in the
average balance of such funds and a 66 basis point increase in the average rate
paid on borrowed funds to 6.33% in the 2000 period.
The increase in the cost of funds on interest-bearing liabilities, as
compared to the same period in the prior year, reflects the series of rate
increases initiated by the Federal Reserve Board beginning in June 1999.
Provision for Loan Losses. Compass provides for loan losses in order to
maintain the allowance for loan losses at a level that management estimates is
appropriate to absorb future chargeoffs of loans deemed uncollectible. In
determining the appropriate level of the allowance for loan losses, management
considers past and anticipated loss experience, evaluations of real estate
collateral, current and anticipated economic conditions, volume and type of
lending and the levels of nonperforming and other classified loans. The amount
of the allowance is based on estimates and ultimate losses may vary from such
estimates. Management assesses the allowance for loan losses on a quarterly
basis and provides for loan losses monthly in order to maintain the adequacy of
the allowance.
Compass provided $1.25 million for loan losses in the quarter ended
September 30, 2000 compared to $650,000 in the quarter ended September 30, 1999.
The increase of $600,000 in 2000 was primarily attributable to the growth in the
loan portfolio as all indicators of credit quality generally continue to be
positive. The allowance for loan losses was $19.4 million, or .96% of loans at
September 30, 2000 compared with $16.8 million, or .96% of loans, at December
31, 1999.
Non-Interest Income. Total non-interest income was $2.9 million for the
quarter ended September 30, 2000 compared to $2.2 million (exclusive of the
non-recurring gain of $1.5 million on termination of the pension plan) in the
same period of 1999, an increase of $680,000 or 30.2%. This growth was
principally caused by increases in ATM/Debit card usage, checking account
related fees and a non-recurring gain on the disposition of banking premises and
equipment of $250,000.
11
<PAGE>
Non-Interest Expense. Non-interest expense increased by $1.5 million, or
13.0%, from $11.3 million for the quarter ended September 30, 1999 to $12.8
million for the quarter ended September 30, 2000. Of this increase, $759,000
related to salaries and employee benefits, $439,000 related to occupancy and
equipment expenses, $215,000 related to data processing expenses and $236,000
related to marketing expenses. Such increases were partially offset by an
aggregate decrease of $184,000 in other categories of non-interest expense. Such
decrease was primarily attributable to certain non-recurring items associated
with the merger with Sandwich Bank.
Of the increase of $759,000 in salaries and employee benefits for the
quarter ended September 30, 2000, approximately $400,000 related to increases in
the number of employees and annual wage adjustments. In addition,
employee-related insurance costs increased $125,000, management incentive plan
expense increased $150,000, restricted stock plan expense increased $94,000 and
the cost of a new sales incentive program for branch personnel amounted to
$50,000. These increases were partially offset by a net savings of $56,000 due
to changes made in September 1999 to the Bank's employee retirement plans.
Occupancy and equipment expenses increased $439,000, or 30.7% to $1.9
million for the quarter ended September 30, 2000. This increase was primarily
due to an increase in depreciation and utility costs of $250,000 attributable to
the opening of the new main banking office and corporate offices in July 2000 as
well as non-recurring moving costs of $125,000 associated with this relocation.
The opening of new branches in Seekonk and Mattapoisett during the third quarter
also contributed to this increase.
Data processing expenses increased $215,000, or 19.7%, to $1.3 million for
the quarter ended September 30, 2000. This increase was substantially driven by
volume-related factors such as the number of new loan and deposit accounts and
ATM usage.
Marketing expenses increased $236,000, or 36.0%, to $892,000 for the
quarter ended September 30, 2000. Such increase was attributable to various
initiatives promoting the grand opening of the Bank's new main banking office
and corporate offices as well as customer acquisition programs targeted at
individuals and businesses affected by the branch divestitures required by the
Fleet/Bank Boston merger.
Income Taxes. The effective tax rate for the quarter ended September 30,
2000 was 34.3% compared to 35.8% in the same period in 1999. This decrease in
overall tax rate is primarily due to the greater utilization of non-bank
subsidiaries that are taxed at lower rates for state tax purposes and an
increase in tax-favored investment income in 2000.
Comparison of Operating Results for the Nine Months Ended September 30, 2000 and
1999
Net income was $17.5 million, or $.74 per diluted share, for the nine
months ended September 30, 2000 compared to net income of $18.4 million, or $.72
per diluted share, for the comparable period in 1999. The 1999 results include a
curtailment gain on the pending termination of the Bank's pension plan which,
after taxes, amounted to $856,000, or $.03 per share. Exclusive of this
non-recurring item, net income for the nine months ended September 30, 2000 was
unchanged, while earnings per diluted share increased by $.05, or 7.2%. The
increase in earnings per share despite an unchanged level of net income in 2000
reflects the impact of the Company's stock repurchase program. The 2000 results,
as compared to 1999, include an increase of $4.1 million, or 7.4%, in net
interest income, an increase of $2.3 million in the provision for loan losses,
an increase of $1.2 million, or 18.8%, in non-interest income (exclusive of the
non-recurring gain of $1.5 million on termination of the pension plan) and an
increase of $3.1 million, or 9.4%, in non-interest expense. The Company's
effective tax rate decreased to 35.1% in 2000 from 35.7% in 1999.
Interest Income. Interest income for the nine months ended September 30,
2000 was $120.9 million compared to $101.4 million for the nine months ended
September 30, 1999, an increase of $19.5 million, or 19.2%. The increase in
interest income resulted from growth in average interest-earning assets of
$296.6 million, or 15.9%, and an increase in the overall yield on
interest-earning assets of 21 basis points in the 2000 period. The increase in
the yield on interest-earning assets, as compared to the same period in the
prior year, reflects the series of rate increases initiated by the Federal
Reserve Board beginning in June 1999. The principal areas of growth in average
balances were related to real estate loans (up $205.4 million, or 18.7%) and
indirect auto loans (up $105.9 million, or 29.5%). Most of the real estate loan
growth resulted from origination and retention in the portfolio of one-to-four
family
12
<PAGE>
residential real estate loans. The increase in indirect auto loans resulted from
the positive economic environment within Compass's local markets and the
continued emphasis of this area of lending.
Interest Expense. Interest expense for the nine months ended September 30,
2000 was $61.7 million compared to $46.4 million for the nine months ended
September 30, 1999, an increase of $15.3 million or 33.0%. This increase
resulted from a 44 basis point increase in the cost of all funds from 4.02% in
1999 to 4.46% in 2000, and a higher average balance of interest-bearing
liabilities (up $304.5 million, or 19.7%). Average interest-bearing deposit
balances increased $102.4 million, or 7.4%, during the nine months ended
September 30, 2000 compared to the same period in 1999.
Interest expense on borrowed funds increased $9.6 million in the nine
months ended September 30, 2000 to $16.1 million due to a $202.1 million
increase in the average balance of such funds, and a 36 basis point increase in
the average rate paid on borrowed funds to 6.06% in the 2000 period.
The increase in the cost of funds on interest-bearing liabilities, as
compared to the same period in the prior year, reflects the series of rate
increases initiated by the Federal Reserve Board beginning in June 1999.
Provision for Loan Losses. Compass provided $3.5 million for loan losses
in the nine months ended September 30, 2000 compared to $1.2 million in the
comparable prior year period. The increase of $2.3 million in 2000 was primarily
attributable to the growth in the loan portfolio as all indicators of credit
quality generally continue to be positive.
Non-Interest Income. Total non-interest income was $7.4 million for the
nine months ended September 30, 2000 compared to $6.2 million (exclusive of the
non-recurring gain of $1.5 million on termination of the pension plan) in the
same period of 1999, an increase of $1.2 million, or 18.8%. This increase was
principally caused by increases in loan fees, ATM/Debit card usage, checking
account related fees as well as non-recurring income ($320,000) attributable to
both the sale of banking premises and equipment and an insurance settlement.
Such increases more than offset a decrease of $223,000 in gains on sales of
investment securities and loans.
Non-Interest Expense. Non-interest expense increased by $3.1 million, or
9.4%, from $33.0 million for the nine months ended September 30, 1999 to $36.1
million for the nine months ended September 30, 2000. This increase was entirely
attributable to a $3.1 million increase to salaries and employee benefits, which
totaled $19.7 million for the nine months ended September 30, 2000. All other
categories of non-interest expense were unchanged in the aggregate.
Of the increase of $3.1 million in salaries and employee benefits for the
nine months ended September 30, 2000, approximately $1.5 million was due to
increases in the number of employees and annual wage adjustments while $731,000
was attributable to the restricted stock awarded in July 1999. Also, employment
taxes increased $221,000, employee-related insurance costs increased $248,000
and the cost of a new sales incentive program for branch personnel amounted to
$164,000. In addition, the amount accrued in connection with Compass's
management incentive plan increased $500,000 in 2000 principally due to reduced
expense in the first quarter of 1999 resulting from the utilization of amounts
accrued but not paid during the two month transition period ended December 31,
1998. These increases were partially offset by a net savings of $235,000 due to
changes made in September 1999 to the Bank's employee retirement plans.
Occupancy and equipment expense increased $351,000, or 8.0%, to $4.7
million for the nine months ended September 30, 2000. This increase was
primarily due to an increase in depreciation and utility costs of $200,000
attributable to the opening of the new main banking office and corporate offices
as well as non-recurring moving and storage costs of $170,000 associated with
this relocation.
Data processing expenses increased $292,000, or 8.7%, to $3.6 million for
the nine months ended September 30, 2000. This increase was caused by
volume-related factors such as the number of new loan and deposit accounts and
ATM usage.
13
<PAGE>
Marketing expenses increased $358,000, or 20.2%, to $2.1 million for
the nine months ended September 30, 2000. Such increase was attributable to
various initiatives promoting the grand opening of the Bank's new main
banking office and corporate offices during the third quarter as well as
customer acquisition programs utilized throughout the year targeted at
individuals and businesses affected by the branch divestitures required by
the Fleet/Bank Boston merger.
Other categories of non-interest expense decreased by $1.0 million in the
nine months ended September 30, 2000. This decrease is primarily attributable to
certain non-recurring items associated with the merger with Sandwich Bank.
Income Taxes. The effective tax rate for the nine months ended September
30, 2000 decreased to 35.1% in 2000 from 35.7% in 1999. The overall tax rate was
favorably affected by the greater utilization of non-bank subsidiaries that are
taxed at lower rates for state tax purposes and an increase in tax-favored
investment income which were partially offset by the non-deductible portion of
expense associated with the vesting of restricted stock awards in 2000.
Liquidity and Capital Resources
Compass's liquidity, represented by cash and cash equivalents and debt
securities is a product of its operating, investing and financing activities.
The Bank's primary sources of funds are deposits, borrowings, principal and
interest payments on outstanding loans and mortgage-backed securities,
maturities of investment securities and funds provided from operations. While
scheduled payments from the amortization of loans and mortgage related
securities and maturing investment securities are relatively predictable sources
of funds, deposit flows and loan prepayments are greatly influenced by general
interest rates and, in the case of deposits, other financial instruments
available to the public such as mutual funds and annuities.
As a voluntary member of the Federal Home Loan Bank of Boston (FHLB),
Compass is entitled to borrow an amount up to the value of its qualified
collateral that has not been pledged to others. Qualified collateral
generally consists of residential first mortgage loans, U.S. Government and
Agency securities and funds on deposit at the FHLB. At September 30, 2000,
Compass had approximately $436 million in unused borrowing capacity that is
contingent upon the purchase of additional FHLB stock. Use of this borrowing
capacity may also be impacted by regulatory capital requirements.
Liquidity management is both a daily and long-term function of business
management. The measure of a bank's liquidity is its ability to meet its cash
commitments at all times with available funds, by the conversion of other assets
to cash at a reasonable price and by its ability to borrow under existing
arrangements. At September 30, 2000, the Company maintained cash and due from
banks, short-term investments and debt securities maturing within one year of
$101.6 million, or 4.18% of total assets.
At September 30, 2000, Compass had commitments to originate loans, unused
outstanding lines of credit, standby letters of credit and undisbursed proceeds
of loans totaling $203.0 million. Management believes that it will have
sufficient funds available to meet its current loan commitments. Certificates of
deposit maturing within one year from September 30, 2000 amounted to $715.3
million. Management expects that a significant portion of maturing certificate
accounts will be retained at maturity, although the percentage retained may be
below historical levels due to increased price competition for these deposits.
Compass's Tier 1 capital measured 13.99% of risk-weighted assets at
September 30, 2000. Total capital, including the Tier 2 allowance for loan
losses, was 15.17% of risk-weighted assets. The leverage ratio was 9.92%. These
ratios placed Compass in the "well capitalized" category according to regulatory
standards.
The Company's Tier 1 capital measured 16.69% of risk-weighted assets at
September 30, 2000. Total capital, including the Tier 2 allowance for loan
losses, was 17.89% of risk-weighted assets. The leverage ratio was 11.81%. These
ratios placed the Company in excess of regulatory standards set forth by the
Federal Reserve Board.
14
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
The chief market risk factor affecting the financial condition and
operating results of Compass is interest rate risk. This risk is managed by
periodic evaluation of the interest rate risk inherent in certain balance sheet
accounts, determination of the level of risk considered appropriate given
Compass's capital and liquidity requirements, business strategy, performance
objectives and operating environment and maintenance of such risks within
guidelines approved by the Board of Directors. Through such management, Compass
seeks to reduce the vulnerability of its net earnings to changes in interest
rates. Compass's Asset/Liability Committee, comprised of senior management, is
responsible for managing interest rate risk and reviewing with the Board of
Directors on a quarterly basis its activities and strategies, the effect of
those strategies on Compass's and the Company's operating results, Compass's
interest rate risk position and the effect changes in interest rates would have
on Compass's net interest income. The extent of movement of interest rates is an
uncertainty that could have a negative impact on the earnings of the Company.
The principal strategies Compass generally uses to manage interest rate
risk include (i) emphasizing the origination and retention of adjustable-rate
loans, origination of indirect auto loans which have relatively short maturities
and origination of loans with maturities at least partly matched with those of
the deposits and borrowings funding the loans, (ii) investing in debt securities
with relatively short maturities and (iii) classifying a significant portion of
its investment portfolio as available for sale so as to provide sufficient
flexibility in liquidity management.
The Company quantifies its interest rate risk exposure using a
sophisticated simulation model. Simulation analysis is used to measure the
exposure of net interest income and net income to changes in interest rates over
a specified time horizon. Simulation analysis involves projecting future income
and expense under various rate scenarios. Compass's internal guidelines on
interest rate risk specify that for every 100 basis points immediate shift in
interest rates, its estimated net interest income over the next 12 months should
decline by less than 5%.
In utilizing a 300 basis point increase in rates in its simulation model,
the full impact of annual rate caps of 200 basis points common to most
adjustable rate mortgage loan products is considered. The rate shocks used
assume an instantaneous and parallel change in interest rates. Prepayment speeds
for loans are based on published median dealer forecasts for each interest rate
scenario.
As of September 30, 2000, the Company's estimated exposure as a percentage
of estimated net interest income for the next twelve and twenty-four month
periods is as follows:
Percentage Change in Estimated
Net Interest Income Over:
12 months 24 months
--------- ---------
300 basis point increase in rates ............... (15.15%) (15.83%)
200 basis point decrease in rates ............... (0.21%) (4.79%)
At September 30, 2000, the Company exceeded its internal guidelines for
interest rate, risk as set forth above, by an insignificant amount. This
represents an improvement from the forecast at June 30, 2000 for the scenarios
based on an increase in rates. This improvement occurred as a result of a recent
decline in short-term rates. Management believes that it is advantageous to
continue to utilize shorter term funding sources in the current rate environment
and, along with its professional advisors, will continue to monitor the trend in
short-term and long-term interest rates and the related impact which changes in
rates may have on net interest income.
Based on the scenario above, net income would be adversely affected in
both the twelve and twenty-four month periods. For each one percentage point
change in net interest income, the effect on net income would be $541,000,
assuming a 36% effective tax rate.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and Compass are not involved in any pending legal proceedings
other than matters arising in the ordinary course of business. Management
believes that the resolution of these matters will not materially affect their
business or the consolidated financial condition, results of operations and
liquidity of the Company and Compass.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to A Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
3.1 Articles of Organization of Seacoast Financial Services Corporation+++
3.2 By-Laws of Seacoast Financial Services Corporation+++
4 Specimen certificate for the common stock of Seacoast Financial Services
Corporation++
10.1* Form of Employment Agreement by and among Seacoast Financial Services
Corporation, Compass Bank for Savings and Kevin G. Champagne+
10.2* Form of Employment Agreement by and among Compass Bank for Savings,
Seacoast Financial Services Corporation and certain Officers of Compass
Bank for Savings+
10.3* Form of Change in Control Agreements by and among Seacoast Financial
Services Corporation, Compass Bank for Savings, Kevin G. Champagne and
certain other Officers of Compass Bank for Savings+
10.4* Form of Change in Control Agreement by and among Seacoast Financial
Services Corporation, Compass Bank for Savings and certain Officers of
Compass Bank for Savings+
10.5* Form of Executive Salary Continuation Agreements made and entered into
by and between Compass Bank for Savings and Kevin G. Champagne, Arthur
W. Short, John D. Kelleher and Francis S. Mascianica and forms of
amendments thereto+
10.6* Trust Agreement, made as of December 18, 1992, by and between Compass
Bank for Savings and Shawmut Bank, N.A.+
10.7* Compass Bank for Savings January 2000 Incentive Compensation Plan +++++
10.12* Compass Bank for Savings Executive Deferred Compensation Plan+
16
<PAGE>
10.13* Rabbi Trust for Compass Bank for Savings Executive Deferred Compensation
Plan+
10.16* Sandwich Co-operative Bank 1983 Directors Deferred Income Agreement ++
10.17* Sandwich Co-operative Bank 1992 Directors Deferred Compensation Plan++
10.20* Seacoast Financial Services Corporation 1999 Stock Incentive Plan++++
10.21 Agreement and Plan of Merger by and between Seacoast Financial Services
Corporation and Home Port Bancorp, Inc. dated as of July 20, 2000++++++
10.22 Stock Option Agreement between Home Port Bancorp, Inc. and Seacoast
Financial Services Corporation dated as of July 20, 2000++++++
11 A statement regarding earnings per share is included in Item 1, Note 4,
of this report.
27 EDGAR Financial Data Schedule
b. Reports on Form 8-K: The Company filed a Current Report on Form 8-K with
the SEC on August 3, 2000 in connection with the signing of a definitive
agreement to acquire Home Port Bancorp, Inc.
--------------------------------------------
* Management compensatory plan or arrangement.
+ Incorporated by reference to the Company's Registration Statement on
Form S-1 (333-52889), filed with the Securities and Exchange Commission
under the Company's prior name, "The 1855 Bancorp", on May 15, 1998.
++ Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement on Form S-1 (333-52889), filed with the
Securities and Exchange Commission under the Company's prior name, "The
1855 Bancorp", on August 14, 1998.
+++ Incorporated by reference to the Company's Registration Statement on
Form 8-A filed with the Securities and Exchange Commission on November
18, 1998.
++++ Incorporated by reference to the Company's Proxy Statement on Schedule
14A filed with the Securities and Exchange Commission on April 16, 1999.
+++++ Incorporated by reference to the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 28, 2000.
++++++ Incorporated by reference to the Company's Current Report on Form 8-K
filed with the Securites and Exchange Commisssion on August 3, 2000.
17
<PAGE>
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.
Seacoast Financial Services Corporation
---------------------------------------
(Registrant)
Date: November 10, 2000 By: /s/ Kevin G. Champagne
---------------------------------------
Kevin G. Champagne
President and Chief Executive Officer
Date: November 10, 2000 By: /s/ Francis S. Mascianica, Jr.
---------------------------------------
Francis S. Mascianica, Jr.
Treasurer, as Principal
Financial and Accounting Officer
18
