<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 1999
Commission File No. 000-25381
CCBT BANCORP, INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3437708
(State of Incorporation) (I.R.S. Employer Identification No.)
307 Main Street, Hyannis, 02601
Massachusetts (Zip Code)
(Address of principal executive
office)
(Registrant's telephone #, incl. area code): 508-394-1300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. (1) [X] Yes [_] No and
(2) [_] Yes [X] No
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. There were
8,970,564 shares of common stock outstanding as of March 31, 1999.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Description Page No.
------- ----------- --------
<C> <S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition March 31,
1999 (Unaudited) and December 31, 1998.................. 3
Consolidated Statements of Income (Unaudited) Three
Months Ended March 31, 1999 and 1998.................... 4
Consolidated Statements of Cash Flows (Unaudited) Three
Months Ended March 31, 1999 and 1998.................... 5
Consolidated Statements of Changes in Stockholders'
Equity (Unaudited) Three Months Ended March 31, 1999 and
1998.................................................... 6
Consolidated Statements of Comprehensive Income
(Unaudited) Three Months Ended March 31, 1999 and 1998.. 7
Notes to Consolidated Financial Statements............... 8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9-17
Quantitative and Qualitative Disclosures About Market
Item 3. Risk.................................................... 17
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................ 18
Item 2. Changes in Securities and Use of Proceeds................ 18
Item 3. Defaults upon Senior Securities.......................... 18
Item 4. Submission of Matters to a Vote of Security Holders...... 18
Item 5. Other Information........................................ 18
Item 6. Exhibits and Reports on Form 8-K......................... 18
SIGNATURES............................................... 19
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CCBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks........................ $ 32,519,312 $ 29,383,227
Interest-bearing deposits in banks............. 45,953 43,888
Securities available for sale, at fair value... 502,557,097 496,020,243
Federal Home Loan Bank stock, at cost.......... 22,125,400 22,125,400
Loans
Commercial loans.............................. 78,496,398 70,766,629
Construction mortgage loans................... 47,291,183 47,939,708
Commercial mortgage loans..................... 207,595,050 207,860,415
Industrial revenue bonds...................... 1,358,126 1,344,336
Residential mortgage loans.................... 252,315,644 254,320,484
Consumer loans................................ 11,788,365 11,588,705
-------------- --------------
Total loans................................... 598,844,766 593,820,277
Less: Reserve for loan losses................. (11,143,871) (11,107,633)
-------------- --------------
Net loans..................................... 587,700,895 582,712,644
-------------- --------------
Loans held for sale............................ 14,756,522 18,140,522
Premises and equipment......................... 12,681,136 12,847,002
Deferred tax assets............................ 4,810,231 4,992,690
Current tax assets............................. 335,590 177,720
Accrued interest receivable on securities...... 3,666,944 4,067,975
Principal and interest receivable on loans..... 3,302,605 3,596,836
Other assets................................... 3,808,593 3,422,014
-------------- --------------
Total assets.................................. $1,188,310,278 $1,177,530,161
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................ $ 146,171,547 $ 160,966,042
NOW account deposits........................... 109,877,061 114,210,098
Money market account deposits.................. 139,141,593 141,316,906
Other savings deposits......................... 156,589,995 160,125,653
Certificates of deposit of $100,000 or more.... 30,999,826 30,299,027
Other time deposits............................ 120,844,038 120,979,249
-------------- --------------
Total deposits................................ 703,624,060 727,896,975
-------------- --------------
Borrowings from the Federal Home Loan Bank..... 370,147,565 343,506,683
Other short-term borrowings.................... 15,843,122 14,606,322
Current taxes payable.......................... 1,398,888 255,080
Interest payable on deposits................... 1,011,976 1,060,045
Interest payable on borrowings................. 1,686,032 1,437,695
Post retirement benefits payable............... 2,122,903 2,016,146
Employee profit sharing retirement and bonuses
payable....................................... 450,357 1,783,350
Due to brokers securities settlement account... 6,578,212 0
Other liabilities.............................. 1,454,227 1,425,465
-------------- --------------
Total liabilities............................. 1,104,317,342 1,093,987,761
-------------- --------------
Stockholders' equity
Common stock, $2.50 par value, 12,000,000
shares authorized, 9,061,064 shares
outstanding.................................. 22,652,660 22,652,660
Surplus....................................... 13,903,294 13,903,294
Undivided profits............................. 48,484,438 46,704,129
-------------- --------------
85,040,392 83,260,083
Treasury stock, at cost (90,500 shares)....... (1,583,750) --
Accumulated other comprehensive income........ 536,294 282,317
-------------- --------------
Total stockholders' equity.................... 83,992,936 83,542,400
-------------- --------------
Total liabilities and stockholders' equity... $1,188,310,278 $1,177,530,161
============== ==============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans............................ $12,019,115 $11,592,818
Taxable interest income on securities................. 5,792,313 4,768,936
Tax-exempt interest income on securities.............. 164,432 206,680
Dividends on securities............................... 369,400 307,183
----------- -----------
Total interest and dividend income.................... 18,345,260 16,875,617
----------- -----------
INTEREST EXPENSE:
Interest on deposits.................................. 4,269,717 5,207,358
Interest on borrowings from the Federal Home Loan
Bank................................................. 4,834,960 2,722,418
Interest on other short-term borrowings............... 143,404 118,308
----------- -----------
Total interest expense................................ 9,248,081 8,048,084
----------- -----------
Net interest income................................... 9,097,179 8,827,533
Provision for loan losses............................. -- --
----------- -----------
Net interest income after provision for loan losses.... 9,097,179 8,827,533
----------- -----------
NON-INTEREST INCOME:
Trust and Investment division fees.................... 1,324,990 1,182,993
Credit card merchant fees............................. 606,248 531,726
MoneyCard interchange fees............................ 120,512 84,061
Service charges on deposit accounts................... 446,381 368,559
Return and overdraft charges.......................... 517,004 452,778
ATM fees.............................................. 108,689 103,631
Net gain on sale of loans............................. 100,540 80,963
Net gain on sale of investment securities............. 54,800 125,719
Brokerage fees and commissions........................ 262,230 349,231
Other................................................. 476,236 353,046
----------- -----------
Total non-interest income............................. 4,017,630 3,632,707
----------- -----------
NON-INTEREST EXPENSE:
Salaries and wages.................................... 2,970,447 2,701,755
Employee benefits..................................... 1,160,752 1,271,576
Occupancy expense..................................... 546,772 564,182
Equipment rental and expense.......................... 471,498 503,559
Credit card processing expense........................ 523,629 551,248
Advertising and marketing expense..................... 156,647 163,748
Printing and supplies................................. 196,431 199,589
Delivery and communication expense.................... 313,688 333,951
Service charges correspondent banks................... 62,082 240,042
Directors' fees....................................... 75,500 75,000
Outside services...................................... 1,131,259 1,247,636
ATM network expense................................... 131,386 106,845
Insurance expense..................................... 73,408 95,169
Other................................................. 264,817 406,829
----------- -----------
Total non-interest expense............................ 8,078,316 8,461,129
----------- -----------
Income before income taxes............................. 5,036,493 3,999,111
Provision for income taxes............................. 1,987,635 1,599,343
----------- -----------
Net income............................................. $ 3,048,858 $ 2,399,768
=========== ===========
Average shares outstanding............................. 9,045,270 9,061,064
Basic earnings per share............................... $ 0.34 $ 0.26
Diluted earnings per share............................. $ 0.34 $ 0.26
Cash dividends declared................................ $ 0.14 $ 0.12
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31,
<TABLE>
<CAPTION>
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES
Net income..................................... $ 3,048,858 $ 2,399,768
Adjustments to reconcile net income to net cash
flow provided by operating activities:
Provision for loan losses.................... 0 0
Depreciation and amortization................ 500,600 508,526
Net accretion of securities.................. (1,626,757) (99,564)
Amortization (accretion) of deferred loan
(costs) fees................................ (45,828) 274,121
Net gain on sale of investment securities.... (54,800) (125,718)
Deferred (prepaid) income taxes.............. 1,168,397 (219,204)
Net gain on sale of loans.................... (100,540) (80,963)
Net change in:
Loans held for sale.......................... 3,384,000 (3,580,971)
Accrued interest receivable on securities.... 401,031 (962,994)
Accrued expenses and other liabilities....... 5,581,005 1,840,892
Other, net................................... (2,065,465) 2,716,734
------------- -------------
Net cash provided by operating activities...... 10,190,501 2,670,627
------------- -------------
CASH USED BY INVESTING ACTIVITIES
Net increase in loans........................ (43,941,331) (42,101,994)
Proceeds from sale of loans.................. 42,322,382 11,762,275
Dispositions of property from defaulted
loans....................................... 115,000 59,000
Purchase of money market mutual funds........ (174,304,758) (120,650,000)
Sales of money market mutual funds........... 139,893,800 120,650,000
Maturities of securities..................... 131,806,462 117,122,664
Purchase of available for sale securities.... (136,824,964) (112,875,323)
Sales of available for sale securities....... 33,516,265 40,951,564
Purchase of premises and equipment........... (387,676) (583,522)
------------- -------------
Net cash used by investing activities.......... (7,804,820) 14,334,664
------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES
Net decrease in deposits..................... (24,272,914) (12,292,503)
Net increase in borrowings from the Federal
Home Bank................................... 26,640,882 60,082
Net increase (decrease) in other short-term
borrowings.................................. 1,236,800 (587,528)
Purchase of CCBT Bancorp, Inc. common stock
in open market.............................. (1,583,750) 0
Cash dividends paid on common stock.......... (1,268,549) (1,087,328)
------------- -------------
Net cash provided by (used in) financing
activities.................................... 752,469 (13,907,277)
------------- -------------
Net increase in cash and cash equivalents...... 3,138,150 3,098,014
Cash and cash equivalents at beginning of
period........................................ 29,427,115 34,087,493
------------- -------------
Cash and cash equivalents at end of period..... $ 32,565,265 $ 37,185,507
============= =============
Cash equivalents include amounts due from banks
and federal funds sold.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest..................................... $ 9,047,813 $ 8,096,114
Income taxes................................. 1,000,000 1,560,000
Non-cash transactions:
Additions to property from defaulted loans... $ 115,000 $ 0
Loans to finance OREO property............... 100,000 0
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the three months ended March 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(Unaudited)
------------------------
<S> <C> <C>
COMMON STOCK
Balance, beginning of year and March 31............. $22,652,660 $11,326,330
----------- -----------
SURPLUS
Balance, beginning of year and March 31............. 13,903,294 25,229,624
----------- -----------
UNDIVIDED PROFITS
Balance, beginning of year.......................... 46,704,129 38,677,715
Net Income........................................ 3,048,858 2,399,768
Dividends declared................................ (1,268,549) (1,087,327)
----------- -----------
Balance, March 31................................... 48,484,438 39,990,156
----------- -----------
TREASURY STOCK
Balance, beginning of year.......................... 0 0
Purchase of treasury stock........................ (1,583,750) 0
----------- -----------
Balance, March 31................................... (1,583,750) 0
----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year.......................... 282,317 402,625
Net other comprehensive income.................... 253,977 58,248
----------- -----------
Balance, March 31................................... 536,294 460,873
----------- -----------
TOTAL STOCKHOLDERS' EQUITY............................ $83,992,936 $77,006,983
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
6
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended March 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(Unaudited)
----------------------
<S> <C> <C>
Net income............................................. $3,048,858 $2,399,768
---------- ----------
Holding gains on securities available for sale....... 491,237 225,845
Reclassification of gains on securities realized in
income.............................................. (54,800) (125,719)
---------- ----------
Net unrealized gains................................. 436,437 100,126
Related tax effect................................... (182,460) (41,878)
---------- ----------
Net other comprehensive income......................... 253,977 58,248
---------- ----------
Comprehensive income................................... $3,302,835 $2,458,016
========== ==========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
7
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 1999 and 1998
Note 1. Basis of Presentation
General
CCBT Bancorp, Inc. ("Bancorp" or "Company") was incorporated under the laws
of the Commonwealth of Massachusetts on October 8, 1998 at the direction of
the Board of Directors and management of Cape Cod Bank and Trust Company (the
"Bank") for the purpose of becoming a bank holding company for the Bank. On
February 11, 1999, Bancorp became the holding company for the Bank by
acquiring 100% of the outstanding shares of the Bank's common stock in a 1:1
exchange for Bancorp common stock (the "Reorganization"). Financial
information contained herein for periods and dates prior to February 11, 1999
is that of the Bank. Since the Bank is the only subsidiary of CCBT Bancorp,
Inc., financial information contained herein for periods and dates after
February 11, 1999 is essentially financial information of the Bank.
Certain amounts have been reclassified in the March 31, 1998 financial
statements to conform to the 1999 presentation and to reflect the 100% stock
dividend paid August 7, 1998.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principals
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three months
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for the current fiscal year. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1998 (the
"1998 Annual Report").
Earnings per share
On August 7, 1998, the Company paid a 100% stock dividend to shareholders of
record on July 20, 1998. Current and prior period per share data have been
restated herein to reflect this dividend.
Note 2. Commitments
The Company had outstanding commitments to originate new residential and
commercial mortgages of $28.0 million at March 31, 1999 and $25.6 million at
December 31, 1998 which are not reflected on the consolidated statement of
financial condition. Additional unadvanced funds on various loan types at
March 31, 1999 are shown in the table at the top of the next page.
8
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Additional Unadvanced Loan Commitments
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(in thousands)
<S> <C> <C>
Commercial loans
Dealer floor plan................................... $ 6,659 $ 7,352
Lines of credit..................................... 49,066 44,960
Other............................................... 1,071 943
Commercial mortgage
Construction........................................ 7,768 3,084
Other............................................... 945 711
Residential mortgage
Home equity......................................... 27,719 26,321
Consumer lines of credit.............................. 1,937 1,858
------- -------
Total............................................. $95,165 $85,229
======= =======
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
This Form 10-Q contains certain statements that may be considered forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The Company's actual results could differ materially from those
projected in the forward-looking statements as a result, among other factors,
of changes in general national or regional economic conditions, changes in
loan default and charge-off rates, reductions in deposit levels necessitating
increased borrowing to fund loans and investments, changes in interest rates,
changes in the size and nature of the Company's competition, uncertainties
relating to the ability of the Company and its suppliers, vendors and other
third parties to resolve Year 2000 issues in a timely manner, and changes in
the assumptions used in making such forward-looking statements.
The following discussion should be read in conjunction with the accompanying
consolidated financial statements and selected consolidated financial data
included within this report. Given that Bancorp's principal activity currently
is ownership of the Bank, for ease of reference, the term "Company" in this
item generally will refer to the investments and activities of the Company and
the Bank except where otherwise noted.
Cape Cod Bank and Trust Company is a commercial bank with twenty-six banking
offices located in Barnstable County, Massachusetts. As such, its principal
business activities are the acceptance of deposits from businesses and
individuals and the making of loans. The Bank also has a sizable Trust
Department. The Bank's market area is heavily dependent on the tourist and
vacation business on Cape Cod.
9
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont'd)
<TABLE>
<CAPTION>
CCBT Bancorp, Inc.
Average Balance Sheets, Interest Rates and Spread
Quarter ended March 31,
---------------------------------------------------------
1999 1998
----------------------------- ---------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Paid Balance Expense Rate Paid
---------- -------- --------- -------- -------- ---------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Securities
Mortgage-backed
securities............ $ 80,603 $ 1,009 5.00% $ 4,454 $ 73 6.60%
U.S. Government CMOs... 152,971 1,540 4.02% 151,045 2,445 6.47%
U.S. Government
agencies.............. 21,958 286 5.21% 57,989 762 5.25%
Other CMOs............. 66,234 850 5.13% 45,511 619 5.45%
State & municipal
agencies.............. 17,141 177 5.36% 18,100 207 6.13%
Other securities ...... 174,838 2,464 5.64% 98,128 1,177 4.80%
---------- ------- -------- -------
Total securities....... 513,745 6,326 4.98% 375,227 5,283 5.72%
---------- ------- -------- -------
Loans
Commercial............. 72,894 1,637 8.98% 74,706 1,847 10.01%
Commercial
construction.......... 11,162 248 8.89% 12,199 261 8.66%
Residential
construction.......... 36,965 539 5.83% 24,465 362 6.01%
Commercial mortgages... 205,530 4,596 8.95% 198,670 4,716 9.63%
Industrial revenue
bonds................. 1,378 26 10.62% 1,833 38 11.85%
Residential mortgages.. 277,365 4,694 6.77% 218,157 4,014 7.36%
Consumer loans......... 10,885 279 10.25% 14,754 355 9.48%
Overdrafts............. 592 0 0.00% 1,164 0 0.00%
---------- ------- -------- -------
Total Loans............ 616,771 12,019 7.80% 545,948 11,593 8.57%
---------- ------- -------- -------
Total interest earning
assets............... 1,130,516 18,345 6.53% 921,175 16,876 7.41%
------- -------
Non-earning assets..... 45,713 43,296
---------- --------
Total assets........... $1,176,229 $964,471
========== ========
LIABILITIES AND STOCK-
HOLDERS' EQUITY
NOW accounts............ $ 108,845 $ 221 0.82% $101,790 $ 413 1.65%
Regular savings ........ 158,456 1,125 2.88% 158,934 1,402 3.58%
Money Market accounts... 139,575 1,058 3.07% 146,364 1,345 3.73%
Time certificates of
deposit................ 151,871 1,866 4.98% 152,074 2,048 5.46%
---------- ------- -------- -------
Total interest bearing
deposits.............. 558,747 4,270 3.10% 559,162 5,208 3.78%
---------- ------- -------- -------
Borrowings
FHLB................... 365,599 4,835 5.36% 183,362 2,722 6.02%
Other short-term
borrowings............ 15,340 143 3.79% 9,740 118 4.93%
---------- ------- -------- -------
Total borrowings....... 380,939 4,978 5.30% 193,102 2,840 5.97%
---------- ------- -------- -------
Total interest bearing
liabilities.......... 939,686 9,248 3.99% 752,264 8,048 4.34%
Demand deposits......... 146,980 131,736
Non-interest bearing
liabilities............ 5,211 4,184
Stockholders' equity.... 84,352 76,287
---------- --------
Total liabilities and
stockholders' equity.. $1,176,229 $964,471
========== ========
Net interest
income/spread.......... $ 9,097 2.53% $ 8,828 3.07%
Net interest margin
(NII/Average Earning
Assets)................ 3.22% 3.87%
</TABLE>
10
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (cont'd)
Sources of funds
As shown in the table on the previous page, average interest bearing
deposits outstanding were virtually unchanged when comparing the first quarter
1999 with the first quarter 1998. The cost of those funds was significantly
less in the 1999 period, however, as management reduced deposit rates in
response to generally declining market rates. On the other hand, average
borrowed funds nearly doubled in the 1999 period in order to fund increases in
both loans and securities. The rates paid on these borrowed funds were less in
the 1999 period when compared to 1998, again reflecting the general decline in
market rates. The remaining sources of funds, i.e., non-interest bearing
demand deposits, other liabilities and capital, averaged 11.5% higher in the
1999 period under discussion when compared to the 1998 comparable period, led
by demand deposit growth of $15.2 million or 11.6%. In total, average sources
of funds increased nearly $212 million or 22.0% period to period, while the
average cost of interest bearing funds declined from 4.34% during the three
months ended March 31, 1998 to 3.99% for the same three months in 1999.
Uses of funds
When compared to the first three months of 1998, average loans and
investments were higher in 1999 by 13.0% and 36.9%, respectively, and on a
combined basis, represented 96% of average total assets in each period. Loan
growth was spearheaded by residential mortgage and related construction
lending, up nearly $72 million or 29.6% in a very active local market.
Investment growth also focused in real estate backed obligations as well as
other asset backed securities. Consistent with market rates generally, and
particularly in the investment portfolio where mortgage refinancing reduced
earnings on CMOs, the average yield on earning assets declined to 6.53% for
the three months ended March 31, 1999 from the 7.41% reported for the
comparable period in 1998.
Net interest income
Net interest income was $9.1 million for the three months ended March 31,
1999 as compared to $8.8 million for the same period in 1998, up 3.0%. The
spread and net interest margin ratios were 2.53% and 3.22%, respectively, for
the three months ended March 31, 1999 as compared to 3.07% and 3.87%,
respectively, for the comparable 1998 period. Consumer attraction to lower
residential mortgage rate opportunities lowered yields on the residential
mortgage portfolio and the securities portfolio. These, along with intense
local competitive pressure for quality commercial loans throughout 1998 and
into 1999, are the primary factors contributing to these results.
Provision for possible loan losses
No provisions were made to the reserve for possible loan losses in the
quarters ended March 31, 1999 or 1998. Management believes that, upon
continuing review of loan payment and quality statistics, the current reserve
continues to be adequate to cover possible losses.
Non-interest income
Non-interest income totaled $4.0 million for the three months ended March
31, 1999, up 10.6% compared to the $3.6 million earned during the same period
in 1998 due to a general increase in volumes. Trust and investment fees,
credit card merchant and interchange fees, and deposit activity fees were the
collective contributors to this increase.
Non-interest expenses
During the first quarter of 1999, non-interest expenses totaled $8.1
million, lower than expenses of the comparable period last year by $383
thousand or 4.5%. Salaries and benefits, the largest combined category of
11
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (cont'd)
expense, rose 4.0% to total $4.1 million for the first three months of 1999.
Service charges correspondent banks expense incurred a one-time special charge
of $195 thousand in 1998 while the 1999 expense level is as expected. Other
categories of non-interest expense were slightly lower than those reported in
1998. Management believes that these modest favorable expense variances are
not necessarily indicative of a trend, as the seasonal nature of the Bank's
marketplace will impact the level of expenses necessary to handle increased
volumes.
Income taxes
The combined State and Federal income tax expense of $2.0 million for the
quarter ended March 31, 1999 was 24.3% greater than the $1.5 million recorded
for the same quarter in 1998, a reflection of higher pretax net income in
1999. The combined effective State and Federal tax expense remained relatively
consistent at 39.5% and 40.0% of pretax net income for the 1999 and 1998 first
quarters, respectively.
Net income
Consolidated net income was $3,048,858 representing earnings per share of
$0.34 for the three months ended March 31, 1999 as compared to $2,399,768 or
$0.26 per share for the comparable three months ended March 31, 1998.
Annualized returns on average assets and average equity were 1.04% and 14.46%,
respectively, for the three months ended March 31, 1999 as compared to 1.00%
and 12.58%, respectively, for the three months ended March 31, 1998.
COMPARATIVE ANALYSIS OF SELECTED PERIOD-END ASSETS, LIABILITIES AND CAPITAL
The Company had $1.19 billion of consolidated total assets, $703.6 million
of deposits and $84.0 million of stockholders' equity at March 31, 1999. Its
capital to assets ratio was 7.07%, exceeding all regulatory requirements. As
compared to reported balances at December 31, 1998, investment securities, at
fair value at March 31, 1999, increased $6.5 million or 1.3%, total loans
increased $5.0 million or 0.85%, deposits decreased $24.3 million or 3.3% and
borrowed funds increased $27.9 million or 7.8%.
INVESTMENT SECURITIES
The adjusted cost and estimated market values of investment securities which
the Company considers to be available for sale at March 31, 1999 and December
31, 1998 were as follows:
<TABLE>
<CAPTION>
March 31, 1999
(in thousands)
-----------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U. S. Government agency CMOs..... $211,611 $1,571 $ 682 $212,500
Other U. S. Government agencies.. 24,396 38 67 24,368
Other collateralized mortgage ob-
ligations....................... 55,146 239 181 55,204
State and municipal obligations.. 18,414 -- -- 18,414
Other debt securities............ 192,067 335 331 192,071
-------- ------ ------ --------
Totals......................... $501,635 $2,183 $1,261 $502,557
======== ====== ====== ========
</TABLE>
12
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (cont'd)
<TABLE>
<CAPTION>
December 31, 1998
(in thousands)
-----------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U. S. Government agency CMOs..... $266,397 $1,506 $ 850 $267,053
Other U. S. Government agencies.. 18,554 124 235 18,443
Other collateralized mortgage ob-
ligations....................... 79,107 617 176 79,548
State and municipal obligations.. 16,416 -- -- 16,416
Other debt securities............ 115,060 138 638 114,560
-------- ------ ------ --------
Totals....................... $495,534 $2,385 $1,899 $496,020
======== ====== ====== ========
</TABLE>
Investment securities increased $6.6 million, from $496.0 million at
December 31, 1998 to $502.6 million at March 31, 1999. In response to the high
prepayment volume experienced during the latter months of 1998 and into 1999,
which lowered the yield on mortgage-backed investments, management modified
the portfolio mix by reducing CMOs approximately $79 million and increasing
Other debt securities by the same approximate amount. At March 31, 1999, Other
debt securities consisted of approximately $103 million floating rate and $56
million short term fixed rate securities, nearly all backed by assets other
than residential mortgages, and $33 million of money market mutual fund
investments readily convertible into cash.
Sales of securities produced net gains of $55 thousand during the quarter
ended March 31, 1999 compared to net gains of $126 thousand during the same
period in 1998.
LOANS
The following is a summary of the Company's outstanding loan balances as of
the dates indicated:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(in thousands)
<S> <C> <C>
Mortgage loans on real estate:
Residential........................................ $231,780 $233,533
Commercial......................................... 207,595 207,860
Construction....................................... 47,291 47,940
Equity lines of credit............................. 20,536 20,787
-------- --------
507,202 510,120
-------- --------
Other loans
Commercial......................................... 78,496 70,767
Industrial revenue bonds........................... 1,358 1,344
Consumer and other................................. 11,788 11,589
-------- --------
91,642 83,700
-------- --------
Total loans.......................................... 598,844 593,820
Less: Allowance for loan losses...................... (11,144) (11,108)
-------- --------
Loans, net........................................... $587,700 $582,712
======== ========
</TABLE>
As shown in the table above, total loans increased $5.0 million or 0.85% to
$598.8 million at March 31, 1999 as compared to December 31, 1998, led by
commercial loans, up $7.7 million or 10.92%. New volume in the residential
loan category was also strong, with originations of $22.0 million fixed rate
and
13
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (cont'd)
$29.6 million adjustable rate mortgages. During the first quarter of 1999, the
Company sold $27.0 million residential mortgages, producing net gains of $101
thousand. The other loan categories remained essentially stable throughout the
quarter as new loan originations replaced amortization and payoffs, and as the
Company continued to experience intense competition for quality loans in the
Cape Cod region.
Non performing assets and loan loss experience:
As shown in the table below, non-performing assets were $4.7 million or
0.39% of total assets at March 31, 1999 compared to $7.5 million or 0.63% of
total assets at December 31, 1998. All of these amounts represent non accruing
loans. Accrual of interest income on loans is discontinued when it is
questionable whether the borrower will be able to pay the principal and
interest in full and/or when loan payments are 60 days past due, or 90 days
past due if the loan is fully secured by real estate or other collateral held
by the Bank. The Company holds no property acquired from defaulted loans.
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(in thousands)
<S> <C> <C>
Nonaccrual loans.................................... $4,737 $7,468
Loans past due 90 days or more and still accruing... -- --
------ ------
Total nonperforming assets........................ $4,737 $7,468
====== ======
Restructured troubled debt performing in accordance
with amended terms, not included above............. $ 913 $ 478
====== ======
</TABLE>
The following is a summary of the activity in the reserve for loan losses
for the indicated periods:
<TABLE>
<CAPTION>
Three months ended
-------------------
March 31, March 31,
1999 1998
--------- ---------
(in thousands)
<S> <C> <C>
Balance at the beginning of the period................... $11,108 $10,962
Provisions............................................... 0 0
Recoveries............................................... 112 227
------- -------
11,220 11,189
Less: Charge-offs........................................ (76) (176)
------- -------
Balance at the end of the period......................... $11,144 $11,013
======= =======
</TABLE>
Management believes that, upon review of loan quality and payment
statistics, provisions from current income were unnecessary in the indicated
periods, notwithstanding growth in the loan portfolio. The reserve represented
1.86% of total loans at March 31, 1999, 1.87% at December 31, 1998, and 1.99%
at March 31, 1998. Management considers the reserve to be adequate at March
31, 1999, although there can be no assurance that the reserve is adequate or
that additional provisions might be necessary.
14
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (cont'd)
DEPOSITS
The following table is a summary of deposits outstanding as of the dates
indicated:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(in thousands)
<S> <C> <C>
Demand deposits....................................... $146,172 $160,966
NOW accounts.......................................... 109,877 114,210
Other savings deposits................................ 156,590 160,126
Money market accounts................................. 139,142 141,317
Certificates of deposit > $100,000.................... 31,000 30,299
Other time deposits................................... 120,844 120,979
-------- --------
Total deposits...................................... $703,625 $727,897
======== ========
</TABLE>
Reflecting the seasonal nature of the Cape Cod economy as discussed in
"Liquidity" on page 15 herein, total deposits at March 31, 1999 were $24.3
million or 3.3% lower than total deposits at December 31, 1998. Generally, the
Company's strategy is to price deposits that reflect national market rates,
offering higher alternative rates based on increasing amounts deposited.
Interest rates paid are frequently reviewed and are modified to reflect
changing conditions.
BORROWED FUNDS
Historically, the Company has selectively engaged in short and long term
borrowings from the Federal Home Loan Bank of Boston, and has sold securities
under agreements to repurchase, to fund loans and investments. At March 31,
1999, borrowed funds totaled $386.0 million, up 7.8% or nearly $27.9 million
compared to borrowed funds at December 31, 1998. This increase offsets the
seasonal deposit decline described under the section entitled "Deposits" above
and is utilized to support heretofore described loan and investment growth.
STOCKHOLDERS' EQUITY
The Company's capital to assets ratio was 7.07% at March 31, 1999 compared
to 7.09% at December 31, 1998.
The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory
and possible additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's and the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and/or the Bank
must meet specific capital guidelines that involve quantitative measures of
their assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. Holding companies, such as the Company,
are not subject to prompt corrective action provisions. The capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors. Quantitative measures
established by regulation to ensure capital adequacy require the Company and
the Bank to maintain minimum amounts of total and Tier 1 capital (as defined)
to average assets (as defined). The following schedule displays these capital
guidelines and the ratios of the Company and the Bank as of March 31, 1999:
<TABLE>
<CAPTION>
Minimum March 31, 1999
Regulatory --------------
Guidelines Company Bank
---------- ------- ------
<S> <C> <C> <C>
Tier 1 leverage capital............................ 3.00% 6.79% 6.75%
Tier 1 capital to risk-weighted assets............. 4.00% 10.91% 10.47%
Total capital to risk-weighted assets.............. 8.00% 12.09% 11.65%
</TABLE>
15
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (cont'd)
During the quarter ended March 31, 1999, the Company's Board of Directors
authorized the repurchase of up to 5% of the Company's stock in the open
market (the "Program"). Consistent with that authorization, the Company
repurchased 90,500 shares (1.0%) during February and March 1999, at an average
cost of $17.50 per share. The Company expects to continue these repurchases as
acceptable opportunities are presented, and until the Program is complete.
The Company's book value at March 31, 1999 was $9.36 per share compared to
$9.22 per share at December 31, 1998.
LIQUIDITY
The Bank normally experiences a wide swing in its liquidity each year as a
result of the seasonal nature of the economy in its market area. Liquidity is
usually high in late summer and early fall and the annual low point is usually
in the early spring. The Bank's investment portfolio is of high quality and is
highly marketable although a gain or loss would be realized if the market
value of securities sold were not equal to their adjusted book value at date
of sale. Alternately, the Bank can borrow funds using investment securities as
collateral. The Bank has an available line of credit of $13.0 million from the
Federal Home Loan Bank of Boston, has established a line of credit for the
purchase of federal funds from a regional bank and may borrow from the Federal
Reserve Bank if necessary.
ASSET/LIABILITY MANAGEMENT
Through the Company's Asset/Liability Management Committee ("ALCO"), which
is comprised of senior management and several Directors, the Company monitors
the level and general mix of earning assets and interest bearing liabilities,
with particular attention to those assets and liabilities which are rate-
sensitive. The primary objective of ALCO is to manage interest rate risk in
accordance with policies approved by the Board of Directors regarding
acceptable levels of interest rate risk, liquidity and capital. The committee
meets monthly and sets the rates paid on deposits, approves loan pricing and
reviews investment transactions.
Given the substantial liquidity from cash flow and maturities of the
Company's investment portfolio, the sizable proportion of rate sensitive loans
to total loans, and the large core deposit base, ALCO believes the Company to
be moderately asset-sensitive to changes in interest rates. Nevertheless, the
Company's strategy has included the funding of certain fixed rate loans with
medium term borrowed funds in order to mitigate a margin squeeze should
interest rates rise.
The Cape Cod market is one in which competing financial institutions
frequently offer a wide range of yields for similar deposit products. Within
this market, the Company finds it necessary, from time to time, to offer
higher rates than it would otherwise justify, thereby increasing pressure on
net interest income. In order to offset this pressure somewhat, the Company is
strategically focusing on customer relationship profitability.
COMPUTER PROCESSING IN THE YEAR 2000
The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness Act
of 1998.
Much computer software has been written which allows the year in a date to
be recognized and/or stored based on a two-digit number, i.e., "12/31/99",
clearly recognizable as meaning December 31, 1999. The same is true of a
variety of hardware devices with built-in clock-calendars, such as computers.
In some cases, this could create problems at the turn of the century because
"01/01/00" could be interpreted to mean January 1,
16
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (cont'd)
1900 rather than January 1, 2000. If such circumstances are not identified and
corrected in advance, they could cause system failure or erroneous
calculations of such items as interest income or expense. This could
potentially have a significant impact on the Bank's ability to do business.
For the Bank's internal computer processing, it was determined to be
necessary to replace some of its computers and to acquire more recent versions
of certain software. $800,000 was spent for this purpose in 1998 and an
additional $500,000 is expected to be spent in 1999. These costs have been or
will be capitalized and depreciated over the useful lives of the items
purchased.
The Bank relies on outside vendors for much of its critical data processing.
These vendors have assured the Bank that they are Year 2000 compliant. The
Bank's testing has confirmed this, to the extent that the Bank's testing is
complete. Approximately 25% of those systems that the Bank considers to be
critical or high risk have not yet been tested at March 31, 1999. The
remaining testing is expected to be completed by the summer of 1999. In
addition to this testing process, contingency plans are being developed for
processing of the Bank's work in the event of failure of any of these systems.
The Bank is also dependent on other providers in the conduct of its
business, most notably for electrical power and telecommunications. Should
these providers experience Year 2000 problems, disruption of service,
especially if prolonged, could seriously effect the Bank's ability to conduct
business as usual.
Certain of the Bank's customers may also be subject to Year 2000 problems
which impact their ability to do business. Among other repercussions, this
could reduce a customer's ability to make loan payments to the Bank. Year 2000
risk still needs to be evaluated for a number of the Bank's significant
customer relationships.
Other customers may withdraw funds from the Bank in anticipation of possible
Year 2000 disruptions. The Bank has traditionally maintained a substantial
liquidity position in the normal course of doing business, and expects to
continue to maintain a liquid investment portfolio to meet any unusual deposit
outflows.
Please refer to the statement regarding "Forward-Looking Information" at the
beginning of Part II, Item 7 of this 10-Q entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" with regard to
any forward-looking statements in this section. Although management of the
Bank and Bancorp believe that their responses to the Year 2000 issue are
appropriate, neither the Bank nor Bancorp can guarantee their Year 2000
readiness, nor that of material vendors or customers, nor the effectiveness of
contingency plans in the event of a failure in any of the Bank's computer
systems.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
For a discussion of the Company's management of market risk exposure, see
"Asset/Liability Management" in Item 2 of Part I of this report and Item 7A of
Part II of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
17
<PAGE>
PART I FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk (continued)
For quantitative information about market risk, see Item 7A of Part II of
the Company's 1998 Annual Report.
There have been no material changes in the quantitative and qualitative
disclosures about market risk as of March 31, 1999 from those presented in the
Company's 1998 Annual Report.
PART II OTHER INFORMATION
ITEM 1. Legal proceedings
There are no material legal proceedings to which the Company is a party or
to which any of its property is subject, although the Company is a party to
ordinary routine litigation incidental to its business.
ITEM 2. Changes in securities and use of proceeds
Not applicable
ITEM 3. Defaults upon senior securities
Not applicable
ITEM 4. Submission of matters to a vote of security holders
Not applicable
ITEM 5. Other information
On January 14, 1999, the Board of Directors of the Company approved the
repurchase, from time to time, of up to 5% of the Company's currently
outstanding Common Stock at prevailing market prices. The Board has authorized
certain officers of the Company to determine when and if such repurchase or
repurchases will occur, the number of shares of Common Stock to be acquired
through any such repurchase, and the exact price for the shares of Common
Stock to be acquired.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
27 Financial data schedule
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three month
period ended March 31, 1999.
18
<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.
(Registrant): CCBT Bancorp, Inc.
------------------------
Date: May 7, 1999
-------------------------------
/s/ Stephen B. Lawson
-------------------------------------
Stephen B. Lawson, President and
Chief Executive Officer
/s/ Noal D. Reid
----------------------------------
Noal D. Reid, Chief Financial
Officer and Treasurer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 32,519,312
<INT-BEARING-DEPOSITS> 45,953
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 502,557,097
<INVESTMENTS-CARRYING> 22,125,400
<INVESTMENTS-MARKET> 0
<LOANS> 598,844,766
<ALLOWANCE> (11,143,871)
<TOTAL-ASSETS> 1,188,310,278
<DEPOSITS> 703,624,060
<SHORT-TERM> 15,843,122
<LIABILITIES-OTHER> 14,702,595
<LONG-TERM> 370,147,565
0
0
<COMMON> 22,652,660
<OTHER-SE> 61,340,276
<TOTAL-LIABILITIES-AND-EQUITY> 1,188,310,278
<INTEREST-LOAN> 12,019,115
<INTEREST-INVEST> 6,326,145
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 18,345,260
<INTEREST-DEPOSIT> 4,269,717
<INTEREST-EXPENSE> 9,248,081
<INTEREST-INCOME-NET> 9,097,179
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 54,800
<EXPENSE-OTHER> 8,078,316
<INCOME-PRETAX> 5,036,493
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,048,858
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 3.22
<LOANS-NON> 4,737,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 913,000
<LOANS-PROBLEM> 7,901,340
<ALLOWANCE-OPEN> 11,107,633
<CHARGE-OFFS> 76,096
<RECOVERIES> 112,334
<ALLOWANCE-CLOSE> 11,143,871
<ALLOWANCE-DOMESTIC> 11,143,871
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
