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, 2000
Commission File No. 000-25381
CCBT FINANCIAL COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3437708
(State of Incorporation) (I.R.S. Employer Identification No.)
307 Main Street, Hyannis, Massachusetts 02601
(Address of principal executive office) (Zip Code)
(Registrant's telephone #, incl. area code): 508-394-1300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (1) [X] Yes No and (2) [X] Yes : No
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. There were 8,608,048
shares of common stock outstanding as of March 31, 2000.
<PAGE>
TABLE OF CONTENTS
Section Description Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
March 31, 2000 (Unaudited) and December 31, 1999
Consolidated Statements of Income (Unaudited) 4
Three Months Ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows (Unaudited) 5
Three Months Ended March 31, 2000 and 1999
Consolidated Statements of Changes in Stockholders' Equity 6
(Unaudited) Three Months Ended March 31, 2000 and 1999
Consolidated Statements of Comprehensive Income (Unaudited) 6
Three Months Ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 8-16
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
Exhibit Index 18
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE>
<CAPTION>
CCBT FINANCIAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CONDITION
March 31, December 31,
2000 1999
-------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks $ 36,771,235 $ 43,415,100
Short term interest-bearing deposits 22,702,464 2,207,328
Securities available for sale, at fair value 441,805,200 463,379,414
Federal Home Loan Bank stock, at cost 22,125,400 22,125,400
Federal Reserve Bank of Boston stock, at cost 1,096,700 1,096,700
Loans, net of reserve for loan losses 704,233,526 663,584,422
Loans held for sale 195,300 200,000
Premises and equipment 12,162,266 12,396,729
Deferred tax assets 4,255,464 4,657,933
Accrued interest receivable on securities 3,413,335 2,850,366
Principal and interest receivable on loans 3,547,326 3,156,914
Other assets 9,076,392 12,044,040
-------------- --------------
Total assets $1,261,384,608 $1,231,114,346
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 757,122,073 $ 766,063,617
Borrowings from the Federal Home Loan Bank 381,864,413 347,962,999
Other short-term borrowings 20,477,601 19,345,885
Current taxes payable 3,098,969 1,721,187
Interest payable on deposits and borrowings 2,877,336 3,061,932
Post retirement benefits payable 2,585,849 2,501,480
Employee profit sharing retirement and bonuses payable 669,788 2,396,542
Other liabilities 3,803,421 2,411,093
-------------- --------------
Total liabilities 1,172,499,450 1,145,464,735
-------------- --------------
Stockholders' equity
Common stock, $2.50 par value
Authorized: 12,000,000 shares
Issued: 9,061,064 shares in 2000 and 1999 22,652,660 22,652,660
Surplus 13,903,294 13,903,294
Undivided profits 60,905,242 58,181,480
Treasury stock, at cost (453,016 shares) -7,399,628 -7,399,628
Accumulated other comprehensive income -1,176,410 -1,688,195
-------------- --------------
Total stockholders' equity 88,885,158 85,649,611
-------------- --------------
Total liabilities and stockholders' equity $1,261,384,608 $1,231,114,346
============== ==============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
<TABLE>
<CAPTION>
CCBT FINANCIAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months ended March 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $13,715,616 $12,019,115
Interest on short term interest-bearing deposits 73,816 175,286
Taxable interest income on securities 7,664,395 5,617,027
Tax-exempt interest income on securities 207,958 164,432
Dividends on securities 362,838 369,400
----------- -----------
Total interest income 22,024,623 18,345,260
----------- -----------
INTEREST EXPENSE:
Interest on deposits 4,863,923 4,269,717
Interest on borrowings from the Federal Home Loan Bank 5,586,152 4,834,960
Interest on other short-term borrowings 259,125 143,404
----------- -----------
Total interest expense 10,709,200 9,248,081
----------- -----------
Net interest income 11,315,423 9,097,179
Provision for loan losses -- --
----------- -----------
Net interest income after provision for loan losses 11,315,423 9,097,179
----------- -----------
NON-INTEREST INCOME:
Financial Advisor Fees 1,507,595 1,324,990
Deposit account service charges 488,179 446,381
Branch banking fees 714,072 712,417
Electronic banking fees 388,502 363,417
Brokerage fees and commissions 283,545 240,650
Net gain (loss) on sale of securities -21,092 54,855
Net gain on sale of loans 23,057 173,439
Other income 196,491 100,791
----------- -----------
Total non-interest income 3,580,349 3,416,940
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
NON-INTEREST EXPENSE:
Salaries 3,157,318 2,978,504
Employee benefits 1,549,054 1,149,541
Building and equipment 1,117,970 1,019,929
Data processing 689,621 743,386
Accounting and legal fees 203,230 142,924
Other outside services 472,598 429,011
Delivery and communication 328,675 313,688
Directors' fees 87,500 75,500
Marketing and advertising 203,863 156,647
Printing and supplies 166,171 196,791
Insurance 95,820 73,419
Expenses from defaulted loans 13,246 18,679
All other expenses 597,568 179,607
----------- -----------
Total operating expense 8,682,634 7,477,626
----------- -----------
Net income before taxes 6,213,138 5,036,493
Applicable income taxes 2,112,089 1,987,635
----------- -----------
Net income $ 4,101,049 $ 3,048,858
=========== ===========
Average shares outstanding 8,608,048 9,045,270
Basic earnings per share $ 0.48 $ 0.34
Diluted earnings per share $ 0.48 $ 0.34
Cash dividends declared $ 0.16 $ 0.14
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
<TABLE>
<CAPTION>
CCBT FINANCIAL COMPANIES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended March 31,
2000 1999
------------- -------------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited)
Net income $ 4,101,049 $ 3,048,858
Adjustments to reconcile net income to net cash flow provided by
operating activities:
Provision for loan losses -- --
Depreciation and amortization 539,695 500,600
Net accretion of securities (4,632,731) (1,626,757)
Amortization of deferred loan fees (102,184) (45,828)
Net (gain) loss on sale of investment securities 21,092 (54,855)
Deferred income taxes 975,313 1,168,397
Net gain on sale of loans (23,057) (173,439)
Net change in:
Loans held for sale 4,700 3,384,000
Accrued interest receivable (953,381) 401,031
Accrued expenses and other liabilities (434,653) 5,581,005
Other, net 4,641,429 (2,777,201)
------------- -------------
Net cash provided by operating activities 4,137,272 9,405,811
------------- -------------
CASH PROVIDED (USED) BY INVESTING ACTIVITIES
Net increase in loans (33,058,138) (43,868,432)
Proceeds from sale of loans 3,648,217 42,322,382
Dispositions of property from defaulted loans -- 115,000
Maturities of securities 48,937,255 131,806,462
Purchase of available for sale securities (62,860,730) (136,824,964)
Sales of available for sale securities 28,637,749 33,516,265
Purchase of premises and equipment (304,653) (387,676)
------------- -------------
Net cash provided (used) investing activities (15,000,300) 26,679,037
------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES
Net decrease in deposits (8,941,544) (24,272,914)
Net increase in borrowings from the Federal Home Loan Bank 31,901,414 26,640,882
Net increase in other short-term borrowings 3,131,716 1,236,800
Purchase of CCBT Financial Companies, Inc. common stock in open market -- (1,583,750)
Cash dividends paid on common stock (1,377,287) (1,268,549)
------------- -------------
Net cash provided by financing activities 24,714,299 752,469
------------- -------------
Net increase in cash and cash equivalents 13,851,271 36,837,317
Cash and cash equivalents at beginning of period 45,622,428 29,490,715
------------- -------------
Cash and cash equivalents at end of period $ 59,473,699 $ 66,328,032
============= =============
Cash equivalents include amounts due from banks, short term
interest-bearing deposits and federal funds sold
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 10,893,796 $ 9,047,813
Income taxes 583,348 1,000,000
Non-cash transactions:
Additions to property from defaulted loans $ 70,000 $ 115,000
Loans to finance OREO property -- 100,000
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
<TABLE>
<CAPTION>
CCBT FINANCIAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months ended March 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
COMMON STOCK
Balance, beginning of the year $ 22,652,660 $ 22,652,660
------------ ------------
Balance, March 31 22,652,660 22,652,660
------------ ------------
SURPLUS
Balance, beginning of the year 13,903,294 13,903,294
------------ ------------
Balance, March 31 13,903,294 13,903,294
------------ ------------
UNDIVIDED PROFITS
Balance, beginning of the year 58,181,480 46,704,129
Net Income 4,101,049 3,048,858
Dividends declared (1,377,287) (1,268,549)
------------ ------------
Balance, March 31 60,905,242 48,484,438
------------ ------------
TREASURY STOCK
Balance, beginning of the year (7,399,628) --
Purchase of Treasury stock -- (1,583,750)
------------ ------------
Balance, March 31 (7,399,628) (1,583,750)
------------ ------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of the year (1,688,195) 282,317
Net other comprehensive income 511,785 253,977
------------ ------------
Balance, March 31 (1,176,410) 536,294
------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 88,885,158 $ 83,992,936
============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CCBT FINANCIAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months ended March 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Net income $ 4,101,049 $ 3,048,858
----------- -----------
Holding gains on securities available for sale 893,162 491,292
Reclassification of gains(losses) on securities held in income 21,092 (54,855)
----------- -----------
Net unrealized gains 914,254 436,437
Related tax effect (402,469) (182,460)
----------- -----------
Net other comprehensive income 511,785 253,977
----------- -----------
Comprehensive income $ 4,612,834 $ 3,302,835
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
6
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT Financial Companies, Inc.
Notes to Consolidated Financial Statements
Three months ended March 31, 2000 and 1999
Business
CCBT Financial Companies, Inc. ("Company") was incorporated under the laws of
the Commonwealth of Massachusetts on October 8, 1998 under the name of CCBT
Bancorp, Inc. at the direction of the Board of Directors and management of Cape
Cod Bank and Trust Company ("Bank") for the purpose of becoming a bank holding
company for the Bank. On February 11, 1999, Bancorp became the holding company
for the Bank by acquiring 100% of the outstanding shares of the Bank's common
stock in a 1:1 exchange for Bancorp common stock. During 1999, the Company's
name was changed to CCBT Financial Companies, Inc. The Bank's charter was
converted to that of a national bank effective September 1, 1999. Currently, the
Company's business activities are conducted primarily through the Bank.
During 1999, the Company announced that it had entered into a purchase agreement
with Fleet Bank to acquire two of Fleet's banking offices, in Falmouth and
Wareham, Massachusetts. The Company also announced an agreement to acquire 51%
of the stock of Murray & MacDonald Insurance Services, Inc. of Falmouth,
Massachusetts. Both acquisitions have received regulatory approval and are
expected to be concluded by early summer.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles 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 principles for complete
financial statements. Certain amounts have been reclassified in the March 31,
1999 financial statements to conform to the 2000 presentation . In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2000 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, 1999.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- --------------
General
This Form 10Q contains certain statements that may be considered forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company's actual results could differ materially from those projected in the
forward-looking statements as a result, among other factors, of changes in
general national or regional economic conditions, changes in loan default and
charge-off rates, reductions in deposit levels necessitating increased borrowing
<PAGE>
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
remaining 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 the Company's principal activity
currently is ownership of the Bank, for ease of reference, the term "Company" in
this item generally will refer to the investments and activities of the Company
and the Bank except where otherwise noted.
CCBT Financial Companies, Inc. is a bank holding company. Its sole subsidiary,
Cape Cod Bank and Trust Company N. A. , is a commercial bank with twenty-seven
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 core market is comprised of retail, wholesale and
manufacturing businesses; primary households (including a significant retirement
population); and a growing number of second home owners. In addition, a
substantial non-core vacation population contributes to seasonal deposit growth.
7
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ---------------------
<TABLE>
<CAPTION>
CCBT FINANCIAL COMPANIES, INC.
NET INTEREST INCOME, NET INTEREST MARGIN
Quarters ended March 31,
2000 1999
--------------------------------- -------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Paid Balance Expense Rate Paid
------- ------- --------- ------- ------- ---------
Assets (Dollar amounts in Thousands)
- ------
<S> <C> <C> <C> <C> <C> <C>
Securities
Mortgage-backed securities $ 32,013 $ 650 8.12% $ 80,233 $ 1,009 5.02%
U.S. Government CMO's 145,796 2,519 6.91% 152,736 1,540 4.03%
U.S. Government agencies 29,790 463 6.32% 22,066 286 5.18%
Other CMO's 69,665 1,255 7.21% 66,058 850 5.14%
State & municipal agencies 19,700 208 5.58% 17,141 177 5.36%
Other securities 203,225 3,213 6.43% 175,330 2,464 5.62%
Unrealized gains (losses) (2,924) 0 181 0
---------- --------- ---------- -----------
Total securities 497,265 8,308 6.79% 513,745 6,326 4.98%
---------- --------- ---------- -----------
Loans
Commercial 81,194 1,900 9.51% 72,894 1,637 8.98%
Commercial construction 22,954 511 8.96% 11,162 248 8.89%
Residential construction 46,305 711 6.07% 36,965 539 5.83%
Commercial mortgages 210,930 4,735 9.03% 205,530 4,596 8.95%
Industrial revenue bonds 1,125 24 11.93% 1,378 26 10.62%
Residential mortgages 298,302 5,046 6.77% 256,882 4,260 6.63%
Home equity loans 24,878 570 9.21% 20,483 434 8.59%
Consumer loans 8,596 219 10.22% 10,885 279 10.25%
Overdrafts 450 0 592 0
---------- --------- ---------- -----------
Total Loans 694,734 13,716 7.93% 616,771 12,019 7.80%
---------- --------- ---------- -----------
Total earning assets 1,191,999 22,024 7.46% 1,130,516 18,345 6.53%
--------- -----------
Non - earning assets 49,837 45,713
---------- ----------
Total assets $1,241,836 $1,176,229
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Liabilities & stockholders' equity
- ----------------------------------
Deposits
NOW accounts $ 111,151 219 0.79% $ 108,845 221 0.82%
Regular savings 153,622 1,169 3.06% 158,456 1,125 2.88%
Money Market accounts 137,690 1,151 3.36% 139,575 1,058 3.07%
Time certificates of deposit 178,504 2,325 5.24% 151,871 1,866 4.98%
---------- --------- ---------- -----------
Total interest bearing deposits 580,967 4,864 3.37% 558,747 4,270 3.10%
---------- --------- ---------- -----------
Borrowings
Borrowings from the FHLB 384,353 5,586 5.89% 365,599 4,835 5.36%
Other short-term borrowings 20,660 259 5.04% 15,340 143 3.79%
---------- --------- ---------- -----------
Total borrowings 405,013 5,845 5.80% 380,939 4,978 5.30%
---------- --------- ---------- -----------
Total interest bearing liabilities 985,980 10,709 4.37% 939,686 9,248 3.99%
--------- ----------
Demand deposits 161,576 146,980
Non-interest bearing liabilities 8,175 5,211
Stockholders' equity 86,105 84,352
---------- ----------
Total liabilities & equity $1,241,836 $1,176,229
========== ==========
Net interest income/ spread $ 11,315 3.09% $ 9,097 2.53%
========= ===========
Net interest margin (NII/Avg Earning Assets) 3.82% 3.22%
</TABLE>
8
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ----------------------
<TABLE>
<CAPTION>
CCBT FINANCIAL COMPANIES, INC.
VOLUME/ RATE ANALYSIS
Three Months ended March 31, 2000 vs March 31, 1999
Changes in income/expense due to
Volume Rate Total
------- ------- -------
EARNING ASSETS
<S> <C> <C> <C>
Securities
Mortgage-backed securities $ (269) $ (90) $ (359)
U.S. Government CMOs (32) 1,011 979
U.S. Government agencies 38 139 177
Other CMOs 19 386 405
State & municipal agencies 12 19 31
Other securities 143 606 749
Unrealized gains (losses) -- -- --
------- ------- -------
Total securities (89) 2,071 1,982
------- ------- -------
Loans
Commercial 65 197 262
Commercial construction 89 174 263
Residential construction 47 125 172
Commercial mortgages 41 97 138
Industrial revenue bonds (2) 0 (2)
Residential mortgages 236 550 786
Home equity loans 33 103 136
Consumer loans (20) (40) (60)
Overdrafts -- -- --
------- ------- -------
Total loans 489 1,206 1,695
------- ------- -------
Total earning assets $ 400 $ 3,277 $ 3,677
------- ------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INTEREST BEARING LIABILITIES
Deposits
NOW accounts $ 2 $ (4) $ (2)
Regular savings (12) 57 45
Money Market accounts (5) 98 93
Time certificates of deposit 115 344 459
------- ------- -------
Total interest bearing deposits 100 495 595
------- ------- -------
Borrowings
FHLB 90 661 751
Other short-term borrowings 20 96 116
------- ------- -------
Total borrowings 110 757 867
------- ------- -------
Total interest bearing liabilities $ 210 $ 1,252 $ 1,462
------- ------- -------
Net changes due to volume/rate $ 190 $ 2,025 $ 2,215
======= ======= =======
</TABLE>
9
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ----------------------
Sources of funds
As shown in the table on the previous page, average interest bearing deposits
outstanding increased 4.0% when comparing the first quarter 2000 with the first
quarter 1999. The cost of those funds was somewhat greater in the 2000 period as
management increased deposit rates in conjunction with recent increases in
market rates. Average borrowed funds increased 6.3% in the 2000 period in order
to fund increased loan outstandings. Rates on these borrowed funds were also
somewhat higher in the 2000 period when compared to 1999, again reflecting the
recent general rise in market rates. The remaining sources of funds, i.e.,
non-interest bearing demand deposits, other liabilities and capital, averaged
8.2% higher in the 2000 period under discussion when compared to 1999, led by
demand deposit growth of $14.6 million, nearly 10%. In total, average total
funds sources increased $65.6 million or 5.6%, while the average cost of
interest bearing funds increased from 3.99% to 4.37%.
Uses of funds
When compared to the first three months of 1999, average earning assets were
higher in 2000 by 5.4% and represented 96% of average total assets in each
period. Loan growth of nearly $78 million or 12.6% was spearheaded by
residential construction and mortgage lending, up nearly $51 million or 17.3% in
a very active local market during 1999, along with increased commercial lending,
up $25 million or 8.8%. The $16 million investment portfolio reduction partially
offsets this loan growth . Consistent with higher market rates generally, and
particularly in the investment portfolio where significant reductions of
mortgage refinancings increased earnings on all mortgage related securities ,
the average yield on earning assets rose to 7.46% for the three months ended
March 31, 2000 from the 6.53% reported for the comparable period in 1999.
Net interest income
Net interest income was $11.3 million for the three months ended March 31, 2000
as compared to $9.1 million for the same period in 1999, up 24.4%. The spread
and net interest margin ratios were 3.09% and 3.82%, respectively, for the three
months ended March 31, 2000 as compared to 2.53% and 3.22%, respectively, for
the comparable 1999 period. Generally higher rates and reduced mortgage
repayment speeds improved asset yields while deposit rates have not risen as
quickly.
Provision for possible loan losses
No provisions were made to the reserve for possible loan losses in the quarters
ended March 31, 2000 or 1999. 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 $3.6 million for the three months ended March 31,
2000, up 4.8% compared to the $3.4 million earned during the same period in
1999. Financial advisor fees and deposit activity fees were the primary
contributors to this increase. While higher market rates reduced opportunities
for gains on sales of mortgage loans, slower housing turnover reduced the
amortization of servicing rights acquired in conjunction with prior sales.
<PAGE>
Non-interest expenses
During the first quarter of 2000, non-interest expenses totaled $8.7 million,
greater than the $7.5 million expended during the comparable period last year by
$1.2 million or 16.1%. Salaries expense rose $179 thousand or 6.0%. Lower
numbers and dollar levels of residential mortgage originations thus far in 2000
have combined to account for nearly two-thirds of this increase. Benefits
expenses rose significantly as well in the first quarter of 2000, in part
because increased profitability warranted a greater current provision for
possible performance-based compensation awards at year end. The $418 thousand
variance in "All other expenses" includes a one-time writeoff of $183 thousand
remaining organization expenses of the Company, a one-time $120 thousand charge
off related to the merchant credit card portfolio and an increased commitment to
staff training and education. Other categories of non-interest expense were
generally in line with management expectations.
10
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ----------------------
Income taxes
Applicable State and Federal income tax expense of $2.1 million for the quarter
ended March 31, 2000 was 6.3% greater than the $2.0 million recorded for the
same quarter in 1999, a reflection of higher pretax net income mitigated by tax
advantages derived from the Bank's real estate investment trust subsidiary. The
combined effective State and Federal tax rate was 34.0% of pretax net income for
the quarter just completed, and was 39.5% of pretax net income for the 1999
first quarter.
Net income
Consolidated net income was $4,101,049 representing earnings per share of $0.48
for the three months ended March 31, 2000 as compared to $3,048,858 or $0.34 per
share for the comparable three months ended March 31, 1999. Annualized returns
on average assets and average equity were 1.32% and 19.31%, respectively, for
the three months ended March 31, 2000 as compared to 1.04% and 14.46%,
respectively, for the three months ended March 31, 1999.
COMPARATIVE ANALYSIS OF SELECTED PERIOD-END ASSETS, LIABILITIES AND CAPITAL
The Company had $1.26 billion consolidated total assets, $757.1 million deposits
and $88.9 million stockholders' equity at March 31, 2000. Its capital to assets
ratio was 7.05%, exceeding all regulatory requirements. As compared to reported
balances at December 31, 1999, gross loans increased $40.8 million or 6.0%,
deposits decreased $8.9 million or 1.2% and borrowed funds increased $35.0
million or 9.5%.
INVESTMENT SECURITIES The adjusted cost and estimated market values of
investment securities which the Company considers to be available for sale at
March 31, 2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
March 31, 2000
(in thousands)
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
U. S. Government agency CMOs $169,964 $ 2,169 $ 3,551 $168,582
Other U. S. Government agencies 27,896 200 371 27,725
Other collateralized mortgage obligations 64,212 349 504 64,057
State and municipal obligations 20,556 -- -- 20,556
Other debt securities 160,905 506 526 160,885
-------- -------- -------- --------
Totals $443,533 $ 3,224 $ 4,952 $441,805
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 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 $176,935 $ 2,234 $ 4,444 $174,725
Other U. S. Government agencies 16,819 3 266 16,556
Other collateralized mortgage obligations 79,425 535 677 79,283
State and municipal obligations 20,596 -- -- 20,596
Other debt securities 172,542 429 752 172,219
-------- -------- -------- --------
Totals $466,317 $ 3,201 $ 6,139 $463,379
======== ======== ======== ========
</TABLE>
11
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ----------------------
Investment securities available for sale decreased $21.6 million, from $463.4
million at December 31, 1999 to $441.8 million at March 31, 2000 to provide
funding of first quarter loan growth as shown in the table below.
Net losses from security sales were $21 thousand during the quarter ended March
31, 2000 compared to net gains of $55 thousand during the same period in 1999.
LOANS
The following is a summary of the Company's outstanding loan balances as of the
dates indicated:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
(in thousands)
<S> <C> <C>
Mortgage loans on real estate:
Residential $ 305,072 $ 290,722
Commercial 216,128 203,987
Construction 72,226 68,809
Equity lines of credit 26,630 23,036
--------- ---------
620,056 586,554
--------- ---------
Other loans
Commercial 85,104 77,776
Industrial revenue bonds 1,146 1,137
Consumer 9,214 9,275
--------- ---------
95,464 88,188
--------- ---------
Total loans 715,520 674,742
Less: Allowance for loan losses (11,286) (11,158)
--------- ---------
Loans, net $ 704,234 $ 663,584
========= =========
Loans held for sale $ 195 $ 200
========= =========
</TABLE>
As shown in the table above, total loans increased $40.8 million or 6.0% to
$715.5 million at March 31, 2000 as compared to December 31, 1999, with balanced
growth between commercial/commercial real estate and residential mortgage loans,
up $19.5 and $17.9 million, respectively. New residential mortgage originations
of $3.6 million fixed rate and $51.0 million adjustable rate were achieved in
the first quarter 2000. During the same period, the Company sold $3.6 million
residential mortgages, producing net gains of $23 thousand.
<PAGE>
Non performing assets and loan loss experience
As shown in the table on the next page, non-performing assets were $2.6 million
or .20% of total assets at March 31, 2000 compared to $3.3 million or .27% of
total assets at December 31, 1999. 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.
12
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ----------------------
<TABLE>
<CAPTION>
March 31, December 31
2000 1999
------ ------
(in thousands)
<S> <C> <C>
Nonaccrual loans $1,013 $1,777
Loans past due 90 days or more and still accruing -- --
Property from defaulted loans 1,570 1,500
------ ------
Total non-performing assets $2,583 $3,277
====== ======
Restructured troubled debt performing in accordance
with amended terms, not included above $ 620 $ 626
====== ======
</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,
2000 1999
--------- --------
(in thousands)
<S> <C> <C>
Balance at the beginning of the period $ 11,158 $ 11,108
Provisions -- --
Recoveries 155 112
-------- --------
11,313 11,220
Less: Charge-offs (27) (76)
-------- --------
Balance at the end of the period $ 11,286 $ 11,144
======== ========
</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 1.58% of
total loans at March 31, 2000, 1.65% at December 31, 1999, and 1.86% at March
31, 1999. Management considers the reserve to be adequate at March 31, 2000,
although there can be no assurance that the reserve is adequate or that
additional provisions might be necessary.
The Company had outstanding commitments to originate new residential and
commercial mortgages of $45.4 million at March 31, 2000 and $57.0 million at
December 31, 1999 which are not reflected on the consolidated statement of
financial condition. Additional unadvanced loan funds at March 31, 2000 are
shown below.
<PAGE>
<TABLE>
<CAPTION>
Additional Unadvanced Loan Commitments
March 31, December 31,
2000 1999
-------- --------
(in thousands)
<S> <C> <C>
Commercial loans
Dealer floor plan $ 7,299 $ 8,067
Lines of credit 52,429 54,735
Other 1,606 1,781
Commercial mortgages
Construction 17,034 20,197
Other 1,539 613
Residential mortgages
Home equity 36,436 34,734
Consumer loans
Lines of credit 2,089 2,023
-------- --------
Total $118,432 $122,150
======== ========
</TABLE>
13
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ----------------------
DEPOSITS
The following table is a summary of deposits outstanding as of the dates
indicated:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------- --------
(in thousands)
<S> <C> <C>
Demand deposits $168,423 $167,624
NOW accounts 115,319 120,307
Other savings deposits 150,589 158,142
Money market accounts 143,373 138,287
Certificates of deposit > $100,000 59,276 60,666
Other time deposits 120,142 121,038
-------- --------
Total deposits $757,122 $766,064
======== ========
</TABLE>
Reflecting somewhat the seasonal nature of the Cape Cod economy as discussed in
"Liquidity" on page 15 herein, total deposits at March 31, 2000 are $8.9 million
or 1.2% lower than total deposits at December 31, 1999. Generally, the Company's
strategy is to price deposits according to local market rates, offering higher
alternative rates based on increasing amounts deposited. Interest rates paid are
frequently reviewed and are modified to reflect changing conditions.
BORROWED FUNDS
Historically, the Company has selectively engaged in short and long term
borrowings from the Federal Home Loan Bank of Boston, and has sold securities
under agreements to repurchase, to fund loans and investments. At March 31,
2000, borrowed funds totaled $402.3 million, up 9.5% or $35.0 million compared
to borrowed funds at December 31, 1999. This increase offsets the seasonal
deposit decline described under the section entitled "Deposits" above and
contributes to the support of heretofore described loan growth.
STOCKHOLDERS' EQUITY
The Company's capital to assets ratio was 7.05% at March 31, 2000 compared to
6.96% at December 31, 1999.
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
<PAGE>
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, 2000.
14
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ----------------------
<TABLE>
<CAPTION>
Minimum March 31, 2000
Regulatory --------------------------
Guidelines Company Bank
---------- ------- ----
<S> <C> <C> <C>
Tier 1 leverage capital 3.00% 7.24% 6.72%
Tier 1 capital to risk-weighted assets 4.00% 10.14% 9.44%
Total capital to risk-weighted assets 8.00% 11.38% 10.69%
</TABLE>
The Company's book value at March 31, 2000 was $10.33 per share compared to
$9.95 per share at December 31, 1999.
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 $5.0 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.
<PAGE>
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.
15
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (cont.)
- ---------------------
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 or allowed 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 have created problems at the turn of the
century because "01/01/00" could have been interpreted to mean January 1, 1900
rather than January 1, 2000. If such circumstances are not identified and
corrected in advance, they could have caused system failure or erroneous
calculations of such items as interest income or expense. This could potentially
have had 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 $540,000
was spent in 1999. These costs have been capitalized and are being depreciated
over the useful lives of the items purchased.
The Bank relies on outside vendors for much of its critical data processing.
Prior to December 31, 1999, these vendors assured the Bank that they were Year
2000 compliant. The Bank's testing confirmed this on those systems that were
considered to be critical or of high risk. Contingency plans for processing of
daily work in the event of failure of any of these systems were in place on
December 31, 1999.
As a result of these efforts and assurances, the Company has not experienced
computer failures of any kind affecting either internal or subcontracted
computer processing as of March 31, 2000.
The Bank is also dependent on other providers in the conduct of its business,
most notably for electrical power and telecommunications. If these providers
experience Year 2000 problems, disruption of service, especially if prolonged,
could seriously affect the Bank's ability to conduct business as usual. The
Company has not experienced any disruption of service from these providers.
Certain of the Bank's customers may also have been subject to Year 2000 problems
which may have impacted their ability to do business. Among other repercussions,
this could have reduced their ability to make loan payments to the Bank. To the
Company's knowledge, no customers have been seriously affected by Year 2000
problems.
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.
<PAGE>
Although the Company has not experienced any Year 2000 related problems, some
additional dates remain which might disrupt its normal business operations.
These are listed below. Until these dates, and others yet unidentified are
successfully passed, and until any Year 2000 issues that might arise are
corrected, the Company's Year 2000 readiness and contingency plans will remain
in effect.
October 10 First date to require an eight digit date field Status: open
December 31 2000/2001 year end Status: open
Please refer to the statement regarding "Forward-Looking Information" at the
beginning of Part II, Item 7 of this 10Q entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" with regard to any
forward-looking statements in this section. Although management of the Bank and
the Company believe that their responses to the Year 2000 issue are appropriate,
neither the Bank nor the Company 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.
16
<PAGE>
PART I FINANCIAL INFORMATION
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, 1999 (the "1999 Annual Report").
For quantitative information about market risk, see Item 7A of Part II of the
Company's 1999 Annual Report.
There have been no material changes in the quantitative and qualitative
disclosures about market risk as of March 31, 2000 from those presented in the
Company's 1999 Annual Report.
PART II OTHER INFORMATION
ITEM 1. Legal proceedings
- --------------------------
There are no material legal proceedings to which the Company is a
party or to which any of its property is subject, although the
Company is a party to ordinary routine litigation incidental to
its business.
ITEM 2. Changes in securities and use of proceeds
- --------------------------------------------------
Not applicable
ITEM 3. Defaults upon senior securities
- ----------------------------------------
Not applicable
ITEM 4. Submission of matters to a vote of security holders
- ------------------------------------------------------------
Not applicable
ITEM 5. Other information
- --------------------------
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
Exhibit Description
27 Financial data schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the three month period ended March 31, 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.
(Registrant): CCBT Financial Companies, Inc.
Date: May 8, 2000
/s/STEPHEN B. LAWSON
--------------------
STEPHEN B. LAWSON,
President and Chief Executive Officer
/s/NOAL D. REID
---------------
NOAL D. REID,
Chief Financial Officer and Treasurer
EXHIBIT INDEX
Exhibit Description
27 Financial data schedule
18
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 36,771,235
<INT-BEARING-DEPOSITS> 22,702,464
<FED-FUNDS-SOLD> 441,805,200
<TRADING-ASSETS> 22,125,400
<INVESTMENTS-HELD-FOR-SALE> 715,519,242
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 715,519,242
<ALLOWANCE> 1,261,384,608
<TOTAL-ASSETS> (11,285,716)
<DEPOSITS> 757,122,073
<SHORT-TERM> 1,172,499,450
<LIABILITIES-OTHER> 270,012,468
<LONG-TERM> 13,035,363
132,329,546
0
<COMMON> 22,652,660
<OTHER-SE> 66,232,498
<TOTAL-LIABILITIES-AND-EQUITY> 1,261,384,608
<INTEREST-LOAN> 8,232,191
<INTEREST-INVEST> 7,872,353
<INTEREST-OTHER> 362,838
<INTEREST-TOTAL> 73,616
<INTEREST-DEPOSIT> 22,024,523
<INTEREST-EXPENSE> 4,863,923
<INTEREST-INCOME-NET> 5,845,277
<LOAN-LOSSES> 11,315,423
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> (21,092)
<INCOME-PRETAX> 8,682,634
<INCOME-PRE-EXTRAORDINARY> 6,213,138
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,101,049
<EPS-BASIC> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 3.82
<LOANS-NON> 1,224,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 620,000
<LOANS-PROBLEM> 10,626,621
<ALLOWANCE-OPEN> 11,158,126
<CHARGE-OFFS> 27,484
<RECOVERIES> 155,270
<ALLOWANCE-CLOSE> 11,285,716
<ALLOWANCE-DOMESTIC> 11,285,716
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
