SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 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.)
495 Station Avenue, South Yarmouth, Massachusetts 02664
------------------------------------------------- ---------
(Address of principal executive office) (Zip Code)
(Registrant's telephone #, incl. area code): 508-394-1300
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (1) : Yes [X] 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 8,608,048
shares of common stock outstanding as of June 30, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Description Page No.
------- ----------- --------
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition 1
June 30, 2000 (Unaudited) and December 31, 1999
Consolidated Statements of Income (Unaudited) 2
Three and Six Months Ended June 30, 2000 and 1999
Consolidated Statements of Cash Flows (Unaudited) 3
Six Months Ended June 30, 2000 and 1999
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) 4
Six Months Ended June 30, 2000 and 1999
Consolidated Statements of Comprehensive Income (Unaudited) 4
Six Months Ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 5-21
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
PART II OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CCBT FINANCIAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------- -------------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks $ 42,330,849 $ 43,415,100
Short term interest-bearing deposits 551,715 2,207,328
Securities available for sale, at fair value 422,478,428 463,379,414
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 744,763,873 663,584,422
Loans held for sale --- 200,000
Premises and equipment 16,508,094 12,396,729
Deferred tax assets 4,892,278 4,657,933
Accrued interest receivable on securities 2,964,302 2,850,366
Principal and interest receivable on loans 3,848,913 3,156,914
Intangibles 10,807,261 ---
Other assets 12,105,264 12,044,040
------------------- -------------------
Total assets $ 1,284,473,077 $ 1,231,114,346
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 902,723,037 $ 766,063,617
Borrowings from the Federal Home Loan Bank 254,315,005 347,962,999
Other short-term borrowings 25,031,105 19,345,885
Current taxes payable 1,476,211 1,721,187
Interest payable on deposits and borrowings 2,372,546 3,061,932
Post retirement benefits payable 2,685,036 2,501,480
Employee profit sharing retirement and bonuses payable 1,338,152 2,396,542
Other liabilities 3,075,732 2,411,093
------------------- -------------------
Total liabilities 1,193,016,824 1,145,464,735
------------------- -------------------
Minority interest 168,442 ---
------------------- -------------------
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 63,876,972 58,181,480
Treasury stock, at cost (453,016 shares) (7,399,628) (7,399,628)
Accumulated other comprehensive income (1,745,487) (1,688,195)
------------------- -------------------
Total stockholders' equity 91,287,811 85,649,611
------------------- -------------------
Total liabilities and stockholders' equity $ 1,284,473,077 $ 1,231,114,346
=================== ===================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT FINANCIAL COMPANIES, INC
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months ended June 30,
2000 1999
---------------- ----------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 14,718,174 $ 11,996,758
Interest on short term interest-bearing deposits 229,134 260,388
Taxable interest income on securities 6,869,437 6,315,107
Tax-exempt interest income on securities 218,504 200,124
Dividends on securities 484,084 403,964
---------------- ----------------
Total interest income 22,519,333 19,176,341
---------------- ----------------
INTEREST EXPENSE:
Interest on deposits 5,401,427 4,272,932
Interest on borrowings from the Federal Home Loan Bank 5,344,440 4,909,866
Interest on other short-term borrowings 331,321 174,662
---------------- ----------------
Total interest expense 11,077,188 9,357,460
---------------- ----------------
Net interest income 11,442,145 9,818,881
Provision for loan losses --- ---
---------------- ----------------
Net interest income after provision for loan losses 11,442,145 9,818,881
---------------- ----------------
NON-INTEREST INCOME:
Financial advisor fees 1,829,900 1,584,124
Deposit account service charges 485,407 529,907
Branch banking fees 766,538 808,685
Electronic banking fees 610,350 305,778
Loan servicing and other loan fees 130,318 43,232
Brokerage fees and commissions 250,096 284,459
Net gain on sale of securities 49,394 4,249
Net gain on sale of loans 4,597 120,738
Insurance commissions 194,592 ---
Other income 128,040 86,546
---------------- ----------------
Total non-interest income 4,449,232 3,767,718
---------------- ----------------
NON-INTEREST EXPENSE:
Salaries 3,529,577 3,050,320
Employee benefits 1,436,467 1,193,726
Building and equipment 1,170,409 1,086,786
Data processing 752,252 747,987
Accounting and legal fees 258,454 250,033
Other outside services 565,146 507,472
Delivery and communication 415,051 323,601
Directors' fees 88,250 75,500
Marketing and advertising 320,441 268,481
Printing and supplies 227,036 172,216
Insurance 92,423 62,172
Expenses from defaulted loans 958 13,908
All other expenses 412,833 282,116
---------------- ----------------
Total operating expense 9,269,297 8,034,318
---------------- ----------------
Minority interest (10,496) ---
---------------- ----------------
Net income before taxes 6,632,576 5,552,281
Applicable income taxes 2,279,237 1,842,679
---------------- ----------------
Net income $ 4,353,339 $ 3,709,602
================ ================
Average shares outstanding 8,608,048 8,941,188
Basic earnings per share $0.50 $0.41
Diluted earnings per share $0.50 $0.41
Cash dividends declared $0.16 $0.14
<CAPTION>
Six Months ended June 30,
2000 1999
--------------- ----------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 28,433,790 $ 24,015,873
Interest on short term interest-bearing deposits 302,950 435,674
Taxable interest income on securities 14,533,832 11,932,134
Tax-exempt interest income on securities 426,462 364,556
Dividends on securities 846,922 773,364
--------------- ----------------
Total interest income 44,543,956 37,521,601
--------------- ----------------
INTEREST EXPENSE:
Interest on deposits 10,265,350 8,542,649
Interest on borrowings from the Federal Home Loan Bank 10,930,592 9,744,826
Interest on other short-term borrowings 590,446 318,066
--------------- ----------------
Total interest expense 21,786,388 18,605,541
--------------- ----------------
Net interest income 22,757,568 18,916,060
Provision for loan losses --- ---
--------------- ----------------
Net interest income after provision for loan losses 22,757,568 18,916,060
--------------- ----------------
NON-INTEREST INCOME:
Financial advisor fees 3,337,495 2,909,114
Deposit account service charges 973,586 976,288
Branch banking fees 1,480,610 1,521,102
Electronic banking fees 998,852 669,195
Loan servicing and other loan fees 185,903 47,307
Brokerage fees and commissions 533,641 525,109
Net gain on sale of securities 28,302 59,104
Net gain on sale of loans 27,654 294,177
Insurance commissions 194,592 ---
Other income 268,946 183,262
--------------- ----------------
Total non-interest income 8,029,581 7,184,658
--------------- ----------------
NON-INTEREST EXPENSE:
Salaries 6,686,895 6,028,824
Employee benefits 2,985,521 2,343,267
Building and equipment 2,288,379 2,106,715
Data processing 1,441,873 1,491,373
Accounting and legal fees 461,684 392,957
Other outside services 1,037,744 936,483
Delivery and communication 743,726 637,289
Directors' fees 175,750 151,000
Marketing and advertising 524,304 425,128
Printing and supplies 393,207 369,007
Insurance 188,243 135,591
Expenses from defaulted loans 14,204 32,587
All other expenses 1,010,401 461,723
--------------- ----------------
Total operating expense 17,951,931 15,511,944
--------------- ----------------
Minority interest (10,496) ---
--------------- ----------------
Net income before taxes 12,845,714 10,588,774
Applicable income taxes 4,391,326 3,830,314
--------------- ----------------
Net income $ 8,454,388 $ 6,758,460
=============== ================
Average shares outstanding 8,608,048 8,992,941
Basic earnings per share $0.98 $0.75
Diluted earnings per share $0.98 $0.75
Cash dividends declared $0.32 $0.28
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT FINANCIAL COMPANIES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months ended June 30,
<TABLE>
<CAPTION>
2000 1999
------------------ -----------------
CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited)
<S> <C> <C>
Net income $ 8,454,388 $ 6,758,460
Adjustments to reconcile net income to net cash flow
provided by operating activities:
Provision for loan losses --- ---
Depreciation and amortization 1,099,517 1,025,535
Net amortization of securities 13,645,606 2,252,725
Amortization of deferred loan fees (235,135) 50,690
Net gain on sale of investment securities (28,302) (59,104)
(Prepaid) deferred income taxes (479,321) 762,875
Net gain on sale of loans (27,654) (294,172)
Net change in:
Loans held for sale 200,000 1,942,480
Accrued interest receivable (805,935) 615,898
Accrued expenses and other liabilities (899,581) 3,820,319
Other, net (7,118,894) 6,425,045
------------------ -----------------
Net cash provided by operating activities 13,804,689 23,300,751
------------------ -----------------
CASH USED BY INVESTING ACTIVITIES
Net increase in loans (87,675,346) (77,824,051)
Proceeds from sale of loans 6,453,313 63,701,791
Sales of property from defaulted loans 70,000 115,000
Maturities of securities 114,130,910 242,784,124
Purchase of available for sale securities (147,307,413) (313,766,711)
Sales of available for sale securities 57,060,977 34,137,508
Purchase of premises and equipment (5,214,744) (963,663)
------------------ -----------------
Net cash used by investing activities (62,482,303) (51,816,002)
------------------ -----------------
CASH PROVIDED BY FINANCING ACTIVITIES
Net increase in deposits 136,659,420 12,117,870
Net (decrease) increase in borrowings from the Federal
Home Loan Bank (93,647,994) 26,546,467
Net increase in other short-term borrowings 5,685,220 4,897,017
Purchase of CCBT Financial Companies, Inc.
common stock in open market --- (2,454,912)
Cash dividends paid on common stock (2,758,896) (2,522,607)
------------------ -----------------
Net cash provided by financing activities 45,937,750 38,583,835
------------------ -----------------
Net (decrease) increase in cash and cash equivalents (2,739,864) 10,068,584
Cash and cash equivalents at beginning of period 45,622,428 29,490,715
------------------ -----------------
Cash and cash equivalents at end of period $ 42,882,564 $ 39,559,299
================== =================
Cash equivalents include amounts due from banks, short term
interest-bearing deposits and federal funds sold.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 22,475,774 $ 18,590,203
Income taxes 4,467,843 3,400,000
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.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT FINANCIAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Six Months ended June 30,
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
(Unaudited)
<S> <C> <C>
Net income $ 8,454,388 $ 6,758,460
------------ ------------
Unrealized holding (losses) gains on securities available for sale (31,096) 1,073,040
Reclassification of (gains) on securities held in income (28,302) (59,104)
------------ ------------
Net unrealized (losses) gains (59,398) 1,013,936
Related tax effect 2,106 (396,718)
------------ ------------
Net other comprehensive (loss) income (57,292) 617,218
------------ ------------
Comprehensive income $ 8,397,096 $ 7,375,678
============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
CCBT FINANCIAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months ended June 30,
<TABLE>
<CAPTION>
2000 1999
------------------ -----------------
(Unaudited)
<S> <C> <C>
COMMON STOCK
Balance, beginning of the year $ 22,652,660 $ 22,652,660
------------------ -----------------
Balance, June 30 22,652,660 22,652,660
------------------ -----------------
SURPLUS
Balance, beginning of the year 13,903,294 13,903,294
------------------ -----------------
Balance, June 30 13,903,294 13,903,294
------------------ -----------------
UNDIVIDED PROFITS
Balance, beginning of the year 58,181,480 46,704,129
Net Income 8,454,388 6,758,460
Dividends declared (2,758,896) (2,522,607)
------------------ -----------------
Balance, June 30 63,876,972 50,939,982
------------------ -----------------
TREASURY STOCK
Balance, beginning of the year (7,399,628) ---
Purchase of Treasury stock --- (2,454,913)
------------------ -----------------
Balance, June 30 (7,399,628) (2,454,913)
------------------ -----------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of the year (1,688,195) 282,317
Net other comprehensive (loss) income (57,292) 617,218
------------------ -----------------
Balance, June 30 (1,745,487) 899,535
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY $ 91,287,811 $ 85,940,558
================== =================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
CCBT FINANCIAL COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended June 30, 2000 and 1999
Note 1. Basis of Presentation
Business
CCBT Financial Companies, Inc. (the "Company") was incorporated under the laws
of the Commonwealth of Massachusetts on October 8, 1998 under the name of CCBT
Bancorp, Inc. (the "Bancorp") 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.
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.
Basis of Presentation
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. Certain amounts have been reclassified in the June 30,
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 and six months ended June 30, 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.
Minority Interest
During the second quarter of 2000, the Bank concluded its purchase of 51% of the
firm of Murray & MacDonald Insurance Services, Inc. of Falmouth, Massachusetts.
The minority interest amounts shown in the Company's consolidated balance sheet
and income statements represent the interest of the minority shareholder in that
company.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
This Form 10Q contains certain statements that may be considered forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company's actual results could differ materially from those projected in the
forward-looking statements as a result, among other factors, of changes in
national or regional economic conditions, changes in loan default and charge-off
rates, reductions in deposit levels necessitating increased borrowing to fund
loans and investments, changes in interest rates, changes in the size and nature
of the Company's competition, uncertainties relating to the ability of the
Company and its suppliers, vendors and other third parties to resolve Year 2000
issues in a timely manner, and changes in the assumptions used in making such
forward-looking statements.
The following discussion should be read in conjunction with the accompanying
consolidated financial statements and selected consolidated financial data
included within this report. Given that the Company's principal activity is
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
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.
In addition to the acquisition of 51% of the Murray & MacDonald Insurance
Services, Inc. Insurance agency, the Company also completed its acquisition of
branches of Fleet Bank, in Wareham and Falmouth, Massachusetts during the second
quarter of 2000. These branches have added approximately $55 million deposits,
at a 15.5% premium, to the Bank at June 30, 2000. This premium will be amortized
based upon the Company's evaluation of the estimated lives of the core deposits
acquired.
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-eight
banking offices and 32 ATMs located in Barnstable and Plymouth Counties in
Massachusetts as well as around the clock telephone and computer banking. 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.
(The remainder of this page intentionally left blank)
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
CCBT FINANCIAL COMPANIES, INC.
AVERAGE BALANCE SHEET, INTEREST RATES and SPREAD
Three months ended June 30,
<TABLE>
<CAPTION>
2000
---------------------------------------------------
Ave. Ave.
Y-T-D Y-T-D Y-T-D
Balance Interest Yield
--------------- ------------- --------------
(Dollar amounts in thousands)
Assets
<S> <C> <C> <C>
Securities
Mortgage-backed securities $ 30,391 $ 570 7.51%
U.S. Government CMOs 134,366 2,477 7.37%
U.S. Government agencies 27,831 453 6.61%
Other CMOs 50,161 768 6.13%
State & municipal agencies 20,594 226 5.81%
Other securities 198,993 3,308 6.76%
Unrealized (losses) gains (1,720) ---
--------------- -------------
Total securities 460,616 7,802 6.90%
--------------- -------------
Loans
Commercial 85,155 2,058 9.56%
Commercial construction 27,271 652 9.56%
Residential construction 53,077 832 6.27%
Commercial mortgages 216,547 4,930 9.11%
Industrial revenue bonds 1,046 24 13.26%
Residential mortgages 309,963 5,319 6.86%
Home equity 28,555 689 9.64%
Consumer loans 8,675 214 9.86%
Overdrafts 318 ---
--------------- -------------
Total Loans 730,607 14,718 8.05%
--------------- -------------
Total earning assets 1,191,223 22,520 7.61%
-------------
Non - earning assets 56,729
---------------
Total assets $ 1,247,952
===============
Liabilities & stockholders' equity
Deposits
NOW accounts $ 119,999 217 0.72%
Regular savings 146,989 1,135 3.10%
Money Market accounts 142,975 1,315 3.69%
Time certificates of deposit 193,771 2,735 5.66%
--------------- -------------
Total interest bearing deposits 603,734 5,402 3.59%
--------------- -------------
Borrowings
FHLB 347,059 5,344 6.19%
Other short-term borrowings 24,315 331 5.48%
--------------- -------------
Total borrowings 371,374 5,675 6.14%
--------------- -------------
Total interest bearing liabilities 975,108 11,077 4.56%
-------------
Demand deposits 177,335
Non-interest bearing liabilities 7,792
Stockholders' equity 87,717
---------------
Total liabilities & equity $ 1,247,952
===============
Net interest income/spread $ 11,443 3.05%
=============
Net interest margin (NII/Avg Earning Assets) 3.86%
<CAPTION>
1999
-----------------------------------------------------
Ave. Ave.
Y-T-D Y-T-D Y-T-D
Balance Interest Yield
---------------- ------------ --------------
(Dollar amounts in thousands)
Assets
<S> <C> <C> <C>
Securities
Mortgage-backed securities $ 70,425 $ 950 5.40%
U.S. Government CMOs 137,763 1,763 5.12%
U.S. Government agencies 29,548 410 5.55%
Other CMOs 62,799 807 5.14%
State & municipal agencies 19,486 207 5.53%
Other securities 209,773 3,042 5.80%
Unrealized (losses) gains 1,476 ---
---------------- ------------
Total securities 531,270 7,179 5.47%
---------------- ------------
Loans
Commercial 78,859 1,762 8.94%
Commercial construction 14,824 323 8.62%
Residential construction 38,172 565 5.93%
Commercial mortgages 205,156 4,506 8.69%
Industrial revenue bonds 1,312 24 10.29%
Residential mortgages 247,178 4,113 6.79%
Home equity 21,851 452 8.26%
Consumer loans 10,477 253 9.66%
Overdrafts 613 ---
---------------- ------------
Total Loans 618,442 11,998 7.73%
---------------- ------------
Total earning assets 1,149,712 19,177 6.68%
------------
Non - earning assets 57,826
----------------
Total assets $ 1,207,538
================
Liabilities & stockholders' equity
Deposits
NOW accounts $ 111,946 229 0.82%
Regular savings 158,496 1,135 2.87%
Money Market accounts 142,260 1,087 3.06%
Time certificates of deposit 150,938 1,822 4.84%
---------------- ------------
Total interest bearing deposits 563,640 4,273 3.04%
---------------- ------------
Borrowings
FHLB 368,137 4,910 5.35%
Other short-term borrowings 17,323 175 4.04%
---------------- ------------
Total borrowings 385,460 5,085 5.29%
---------------- ------------
Total interest bearing liabilities 949,100 9,358 3.95%
------------
Demand deposits 162,156
Non-interest bearing liabilities 12,885
Stockholders' equity 83,397
----------------
Total liabilities & equity $ 1,207,538
================
Net interest income/ spread $ 9,819 2.73%
============
Net interest margin (NII/Avg Earning Assets) 3.43%
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
CCBT FINANCIAL COMPANIES, INC.
VOLUME/RATE ANALYSIS
Three months ended June 30, 2000 vs June 30, 1999
<TABLE>
<CAPTION>
Changes in income/expense due to
---------------------------------------------------
Volume Rate Total
--------------- ------------- --------------
<S> <C> <C> <C>
EARNING ASSETS
Securities
Mortgage-backed securities $ (643) $ 263 $ (380)
U.S. Government CMOs (46) 760 714
U.S. Government agencies (26) 69 43
Other CMOs (177) 138 (39)
State & municipal agencies 16 3 19
Other securities (183) 449 266
--------------- ------------- --------------
Total securities (1,059) 1,682 623
--------------- ------------- --------------
Loans
Commercial 145 151 296
Commercial construction 281 48 329
Residential construction 226 41 267
Commercial mortgages 252 172 424
Industrial revenue bonds (8) 8 0
Residential mortgages 1,066 140 1,206
Home equity 149 88 237
Consumer loans (44) 5 (39)
--------------- ------------- --------------
Total Loans 2,067 653 2,720
--------------- ------------- --------------
Total earning assets $ 1,008 $ 2,335 $ 3,343
--------------- ------------- --------------
INTEREST BEARING LIABILITIES
Deposits
NOW accounts $ 15 $ (27) $ (12)
Regular savings (85) 85 0
Money Market accounts 6 222 228
Time certificates of deposit 559 354 913
--------------- ------------- --------------
Total interest bearing deposits 495 634 1,129
--------------- ------------- --------------
Borrowings
FHLB (302) 736 434
Other short-term borrowings 83 73 156
--------------- ------------- --------------
Total borrowings (219) 809 590
--------------- ------------- --------------
Total interest bearing liabilities $ 276 $ 1,443 $ 1,719
--------------- ------------- --------------
Net interest income $ 732 $ 892 $ 1,624
=============== ============= ==============
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 vs. THREE MONTHS ENDED JUNE 30, 1999
Sources of funds
As shown in the table on page 7, average interest bearing deposits outstanding
increased $40.1 million or 7.1% during the second quarter 2000 versus the second
quarter 1999. With exception to the lower rate on NOW accounts, the cost of
those funds rose in the 2000 period as management increased deposit rates in
response to generally rising market rates. During the quarter, the Company
introduced a one year certificate of deposit with an aggressive and popular
7.20%APY. Concurrently, average borrowed funds, notably FHLB borrowings,
declined in the 2000 period while rates paid on these borrowed funds also
increased. The remaining sources of funds, i.e., non-interest bearing demand
deposits, other liabilities and capital, averaged 5.6% higher, including average
demand deposit growth of $15.2 million or 9.4%. In total, average sources of
funds increased $40.4 million or 3.3% period to period, while the average cost
of interest bearing funds increased from 3.95% during the quarter ended June 30,
1999 to 4.56% for the same period in 2000.
Uses of funds
When compared to the second three months of 1999, average earning assets were
higher in 2000 by 3.6% with an 18.1% increase in average loan outstandings
partially offset by reduced investments. Average earning assets represented 95%
of average total assets in each period. Loan growth was spearheaded by
residential mortgage, home equity and related construction lending, up a
combined $84.4 million or 27.5% in a very active local market. Combined
commercial lending activities contributed another $29.9 million or 10.0% growth.
Consistent with the general rise in market rates, the average yield on earning
assets rose to 7.61% for the three months ended June 30, 2000 from the 6.68%
reported for the comparable period in 1999.
Net interest income
Net interest income was $11.4 million for the three months ended June 30, 2000
as compared to $9.8 million for the same period in 1999, up 16.5%. The spread
and net interest margin ratios were 3.05% and 3.86%, respectively, for the three
months ended June 30, 2000 as compared to 2.73% and 3.43%, respectively, for the
comparable 1999 period. As shown in the Volume/Rate Analysis table on page 8,
the Company's net interest income improved in both volume and rate categories
during the second quarter 2000 as compared to the same quarter last year.
Provision for loan losses
No provisions were made to the reserve for loan losses in the quarters ended
June 30, 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 $4.4 million for the three months ended June 30,
2000, up $682 thousand or 18.1% compared to the $3.8 million earned during the
same period in 1999, reflecting new Financial advisor product fees from the
Trust department, new revenues from insurance activities, and other volume
changes. Deposit and branch related fees are lower in 2000 due to higher account
balances and fewer overdrafts, while the lower gain on sale of loans results
from lower originations and sales of fixed rate residential mortgages.
Offsetting these lower gains is an increase in residential mortgage servicing
fees as well as a reduced rate of amortization of servicing rights consistent
with reduced early payoffs as compared to last year.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Non-interest expenses
During the second quarter of 2000, non-interest expenses totaled $9.3 million,
$1.2 million or 15.4% greater than the expenses of the comparable period last
year. Approximately 20% of this increase are direct expenses of the newly
acquired insurance agency. Salaries and benefits, the largest combined category
of expense, rose $722 thousand or 17.0% to total $5.0 million for the second
three months of 2000. While salaries and commissions increased 5.0% in 2000
versus 1999, deferred originations on residential mortgages declined such that
total salaries increased $330 thousand or nearly 11%. Increased benefits
expenses include a greater current provision for possible performance-based
compensation awards at year end, consistent with increased profitability thus
far in 2000. Higher marketing and printing costs reflect the Company's entrance
into new markets, i.e., Wareham, Massachusetts and insurance services. All other
expense categories are in line with management expectations.
Minority interest
The second quarter minority interest on the 49% minority holding of Murray &
MacDonald Insurance Services, Inc. includes some initial investment in
increasing that company's ability to provide additional service to its enlarged
customer base.
Income taxes
Consistent with higher pretax net income, the combined State and Federal income
tax expense of $2.3 million for the quarter ended June 30, 2000 was 23.7%
greater than the $1.8 million recorded for the same quarter in 1999. The
combined effective State and Federal tax rate was 34.4% of pretax income in the
second quarter of 2000 and 33.2% of pretax net income for 1999.
Net income
Consolidated net income was $4.4 million, representing earnings per share of
$0.50 for the three months ended June 30, 2000 as compared to $3.7 million or
$0.41 per share for the comparable three months ended June 30, 1999. Annualized
returns on average assets and average equity were 1.40% and 19.96%,
respectively, for the three months ended June 30, 2000 as compared to 1.23% and
17.84%, respectively, for the prior comparable period.
(The remainder of this page intentionally left blank)
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
CCBT FINANCIAL COMPANIES, INC.
AVERAGE BALANCE SHEET, INTEREST RATES and SPREAD
Six months ended June 30,
<TABLE>
<CAPTION>
2000
---------------------------------------------------
Ave. Ave.
Y-T-D Y-T-D Y-T-D
Balance Interest Yield
--------------- ------------ --------------
(Dollar amounts in thousands)
Assets
<S> <C> <C> <C>
Securities
Mortgage-backed securities $ 31,202 $ 1,220 7.82%
U.S. Government CMOs 140,081 4,996 7.13%
U.S. Government agencies 28,811 916 6.46%
Other CMOs 59,913 2,023 6.75%
State & municipal agencies 20,147 434 5.70%
Other securities 201,108 6,521 6.59%
Unrealized (losses) gains (2,322) ---
--------------- ------------
Total securities 478,940 16,110 6.84%
--------------- ------------
Loans
Commercial 83,175 3,958 9.67%
Commercial construction 25,112 1,163 9.31%
Residential construction 49,691 1,543 6.14%
Commercial mortgages 213,739 9,665 9.09%
Industrial revenue bonds 1,085 48 12.57%
Residential mortgages 304,133 10,365 6.82%
Home equity 26,716 1,259 9.47%
Consumer loans 8,635 433 10.04%
Overdrafts 384 ---
--------------- ------------
Total Loans 712,670 28,434 8.02%
--------------- ------------
Total earning assets 1,191,610 44,544 7.56%
------------
Non - earning assets 53,283
---------------
Total assets $ 1,244,893
===============
Liabilities & stockholders' equity
Deposits
NOW accounts $ 115,575 436 0.76%
Regular savings 150,305 2,304 3.08%
Money Market accounts 140,333 2,466 3.53%
Time certificates of deposit 186,137 5,060 5.47%
--------------- ------------
Total interest bearing deposits 592,350 10,266 3.49%
--------------- ------------
Borrowings
FHLB 365,706 10,930 6.01%
Other short-term borrowings 22,487 590 5.28%
--------------- ------------
Total borrowings 388,193 11,520 5.97%
--------------- ------------
Total interest bearing liabilities 980,543 21,786 4.47%
------------
Demand deposits 169,455
Other liabilities 7,984
Stockholders' equity 86,911
---------------
Total liabilities & equity $ 1,244,893
===============
Net interest income/spread $ 22,758 3.09%
============
Net interest margin (NII/Avg Earning Assets) 3.84%
<CAPTION>
1999
--------------------------------------------------
Ave. Ave.
Y-T-D Y-T-D Y-T-D
Balance Interest Yield
---------------- ------------ --------------
(Dollar amounts in thousands)
ASSETS
<S> <C> <C> <C>
Securities
Mortgage-backed securities $ 75,486 $ 1,959 5.19%
U.S. Government CMOs 145,325 3,303 4.55%
U.S. Government agencies 25,774 696 5.40%
Other CMOs 64,507 1,657 5.14%
State & municipal agencies 18,320 384 5.45%
Other securities 192,402 5,506 5.72%
Unrealized (losses) gains 832 ---
---------------- ------------
Total securities 522,646 13,505 5.21%
---------------- ------------
Loans
Commercial 75,893 3,399 8.96%
Commercial construction 13,003 571 8.73%
Residential construction 37,572 1,104 5.92%
Commercial mortgages 205,342 9,102 8.82%
Industrial revenue bonds 1,345 50 10.60%
Residential mortgages 252,003 8,373 6.65%
Home equity 21,171 886 8.44%
Consumer loans 10,680 532 9.98%
Overdrafts 602 ---
---------------- ------------
Total Loans 617,611 24,017 7.77%
---------------- ------------
Total earning assets 1,140,257 37,522 6.61%
------------
Non - earning assets 51,713
----------------
Total assets $ 1,191,970
================
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits
NOW accounts $ 110,404 450 0.82%
Regular savings 158,476 2,260 2.87%
Money Market accounts 140,925 2,145 3.07%
Time certificates of deposit 151,402 3,688 4.91%
---------------- ------------
Total interest bearing deposits 561,207 8,543 3.07%
---------------- ------------
Borrowings
FHLB 366,875 9,745 5.36%
Other short-term borrowings 16,337 318 3.93%
---------------- ------------
Total borrowings 383,212 10,063 5.30%
---------------- ------------
Total interest bearing liabilities 944,419 18,606 3.97%
------------
Demand deposits 154,610
Other liabilities 9,069
Stockholders' equity 83,872
----------------
Total liabilities & equity $ 1,191,970
================
Net interest income/spread $ 18,916 2.64%
============
Net interest margin (NII/Avg Earning Assets) 3.30%
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
CCBT FINANCIAL COMPANIES, INC.
VOLUME/RATE ANALYSIS
Six months ended June 30, 2000 vs June 30, 1999
<TABLE>
<CAPTION>
Changes in income/expense due to
----------------------------------------------------
Volume Rate Total
---------------- ------------- --------------
<S> <C> <C> <C>
EARNING ASSETS
Securities
Mortgage-backed securities $ (1,433) $ 694 $ (739)
U.S. Government CMOs (142) 1,835 1,693
U.S. Government agencies 90 130 220
Other CMOs (136) 502 366
State & municipal agencies 39 11 50
Other securities 278 737 1,015
------------ ------------ -------------
Total securities (1,304) 3,909 2,605
------------ ------------ -------------
Loans
Commercial 337 222 559
Commercial construction 543 49 592
Residential construction 363 76 439
Commercial mortgages 374 189 563
Industrial revenue bonds (15) 13 (2)
Residential mortgages 1,745 247 1,992
Home equity 247 126 373
Consumer loans (102) 3 (99)
------------ ------------ -------------
Total Loans 3,492 925 4,417
------------ ------------ -------------
Total earning assets $ 2,188 $ 4,834 $ 7,022
------------ ------------ -------------
INTEREST BEARING LIABILITIES
Deposits
NOW accounts $ 20 $ (34) $ (14)
Regular savings (121) 165 44
Money Market accounts (10) 331 321
Time certificates of deposit 896 476 1,372
------------ ------------ -------------
Total interest bearing deposits 785 938 1,723
------------ ------------ -------------
Borrowings
FHLB (33) 1,218 1,185
Other short-term borrowings 141 131 272
------------ ------------ -------------
Total borrowings 108 1,349 1,457
------------ ------------ -------------
Total interest bearing liabilities $ 893 $ 2,287 $ 3,180
------------ ------------ -------------
Net interest income $ 1,295 $ 2,547 $ 3,842
============ ============ =============
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 vs SIX MONTHS ENDED JUNE 30, 1999
Sources of funds
As shown in the table on page 11, average interest bearing deposits outstanding
increased $31.1 million when comparing the first half of 2000 versus the same
period in 1999. With exception to lowered rates on NOW accounts, the cost of
those funds was greater in the 2000 period as management raised deposit rates in
response to generally rising market rates. Average borrowed funds increased $5.0
million in the 2000 period. The rates paid on these borrowed funds were also
higher than in the 1999 period, again reflecting the general rise in market
rates. The remaining sources of funds, i.e., non-interest bearing demand
deposits, other liabilities and capital, averaged 6.8% higher in the 2000
period, including demand deposit growth of $14.8 million or 9.6%. In total,
average sources of funds increased $52.9 million or 4.4% while the average cost
of interest bearing funds rose from 3.97% during the six months ended June 30,
1999 to 4.47% in 2000.
Uses of funds
Average loans were higher by $95.1 million or 15.4% in 2000 while investments
were lower by $43.7 million or 8.4%, and on a combined basis, approximated 96%
of average total assets during each period. Loan growth was spearheaded by
residential mortgage and related construction lending, up $69.8 million or 22.5%
in very active local market. Accordingly, the investment portfolio declined in
size with reductions occurring primarily in mortgage related categories. During
the six months ended June 30, 2000 the average yield on earning assets rose to
7.56% from the 6.61% reported for the comparable period in 1999.
Net interest income
Net interest income was $22.8 million for the six months ended June 30, 2000 as
compared to $18.9 million for the same period in 1999, up 20.3%. The spread and
net interest margin ratios were 3.09% and 3.84%, respectively, for the six
months ended June 30, 2000 as compared to 2.64% and 3.30%, respectively, for the
comparable 1999 period. While consumer attraction to lower residential mortgage
rate opportunities lowered yields on the residential mortgage portfolio and the
securities portfolio in 1999, interest rates have been rising in 2000, thereby
having the opposite effect. These factors, along with increased commercial and
commercial real estate construction lending, are significant contributors to the
increased net interest income. As shown on the Volume/Rate Analysis on page 12,
the Company's net interest income improved on both volume and rate increases
during the first six months of 2000 as compared to the same period in 1999.
Provision for loan losses
No provisions were made to the reserve for loan losses in the quarters ended
June 30, 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 $8.0 million for the six months ended June 30, 2000,
up $845 thousand or 11.8% compared to the $7.2 million earned during the same
period in 1999. Higher Financial advisor (trust and investment) fees, loan fees
and insurance commissions contributed to this increase, along with increased
income from electronic banking. The latter includes pre-conversion net credit
card merchant fee income of $218 thousand, which amount, net of applicable
expenses, has been forwarded to the purchaser of the Merchant credit card
portfolio. See also comments regarding non-interest income improvements during
the second quarter 2000 within this document entitled "Results of Operations -
Three Months ended June 30, 2000 vs Three Months ended June 30, 1999".
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Non-interest expenses
During the first half of 2000, non-interest expenses totaled $18.0 million, $2.4
million or 15.7% greater than the expenses of the comparable period last year.
Salaries and benefits, the largest combined category of expense, rose $1.3
million or 15.5% to total $9.7 million for the first six months of 2000 while
All other expenses increased $549 thousand reflecting one-time writeoffs of $303
thousand and an increased committment to training and education, as reported in
the first quarter of 2000. Other expense categories reflect, in part, additional
expenses of the insurance services operation and general increases in the cost
of Bank operations in accordance with expectations.
Minority interest
The year-to-date minority interest on the 49% minority holding of Murray &
MacDonald Insurance Services, Inc. includes some initial investment in
increasing that company's ability to provide additional service to its enlarged
customer base.
Income taxes
The combined State and Federal income tax expense was $4.4 million for the six
months ended June 30, 2000 , up $561 thousand or 14.6% over the same period last
year on higher pretax income. The combined effective State and Federal tax
expense equalled 34.2% of pretax income thus far in 2000 as compared to 36.2% in
1999.
Net income
Consolidated net income was $8.5 million representing earnings per share of
$0.98 for the six months ended June 30, 2000 as compared to $6.8 million or
$0.75 per share for the comparable six months ended June 30, 1999. Annualized
returns on average assets and average equity were 1.37% and 19.56%,
respectively, for the six months ended June 30, 2000 as compared to 1.14% and
16.25%, respectively, for the six months ended June 30, 1999.
(The remainder of this page intentionally left blank)
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
COMPARATIVE ANALYSIS OF SELECTED PERIOD-END ASSETS, LIABILITIES AND CAPITAL
The Company had $1.28 billion of consolidated total assets, $902.7 million of
deposits and $91.3 million of stockholders' equity at June 30, 2000. Its capital
to assets ratio was 7.11%, exceeding all regulatory requirements. As compared to
reported balances at December 31, 1999, Securities available for sale, at fair
value, decreased $40.9 million or 8.8%, portfolio loans, net of reserves,
increased $81.1 million or 12.2%, deposits increased $136.7 million or 17.8% and
borrowed funds decreased $88.0 million or 23.9%.
INVESTMENT SECURITIES
The adjusted cost and estimated market values of investment securities which the
Company considers to be available for sale at June 30, 2000 and December 31,
1999 were as follows:
<TABLE>
<CAPTION>
June 30, 2000
(in thousands)
-------------------------------------------------------------------------
Gross Gross Estimated
Adjusted Unrealized Unrealized Market
Cost Gains Losses Value
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U. S. Government agency CMOs $ 154,336 $ 1,868 $ 4,243 $ 151,961
Other U. S. Government agencies 27,146 4 512 26,638
Other collateralized mortgage obligations 48,031 661 820 47,872
State and municipal obligations 18,965 --- --- 18,965
Other debt securities 176,998 640 596 177,042
---------------- -------------- -------------- --------------
Totals $ 425,476 $ 3,173 $ 6,171 $ 422,478
================ ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
(in thousands)
-------------------------------------------------------------------------
Gross Gross Estimated
Adjusted 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>
Investment securities declined $40.9 million to $422.5 million at June 30, 2000,
with deference to the significant loan growth. Reductions occurred in CMOs and
other U.S. Government agencies while State and municipal obligations and Other
debt securities increased modestly. At June 30, 2000, Other debt securities
consisted of approximately $80 million floating rate and $97 million short term
fixed rate securities, nearly all backed by assets other than residential
mortgages.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Sales of securities produced net gains of $49 thousand during the quarter ended
June 30, 2000 compared to net gains of $4 thousand during the same period in
1999. Net gains on security sales amounted to $28 thousand and $59 thousand for
the six months ended June 30, 2000 and 1999, respectively.
LOANS
The following is a summary of the Company's outstanding loan balances as of the
dates indicated:
June 30, December 31,
2000 1999
-------------- ---------------
(in thousands)
Mortgage loans on real estate:
Residential $ 319,108 $ 290,722
Commercial 219,643 203,987
Construction 88,871 68,809
Equity lines of credit 33,365 23,036
-------------- ---------------
660,987 586,554
-------------- ---------------
Other loans
Commercial 82,468 77,776
Industrial revenue bonds 2,077 1,137
Consumer 10,900 9,275
-------------- ---------------
95,445 88,188
-------------- ---------------
Total loans 756,432 674,742
Less: Allowance for loan losses (11,668) (11,158)
-------------- ---------------
Loans, net $ 744,764 $ 663,584
============== ===============
Loans held for sale $ --- $ 200,000
============== ===============
Portfolio loans increased $81.7 million or 12.1% to $756 million at June 30,
2000 as compared to December 31, 1999, led by residential mortgage loans, up
$28.4 million or 9.8%. During the period, new residential mortgage volume in the
residential loan category included originations of $4.5 million at fixed rates
and $60.5 million at adjustable rates. Commercial and commercial real estate
loans increased a combined $20.4 million or 7.3% while combined residential and
commercial real estate construction loans increased $20.1 million or 29.2%.
Included in this latter category are a number of new loan participations for the
construction of office buildings in nearby Boston.
Non performing assets and loan loss experience:
As shown in the next table, non-performing assets were $3.4 million or 0.26% of
total assets at June 30, 2000 compared to $3.3 million or 0.27% of total assets
at December 31, 1999. 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.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------- ---------------
(in thousands)
<S> <C> <C>
Nonaccrual loans $ 1,879 $ 1,777
Loans past due 90 days or more and still accruing --- ---
Property from defaulted loans 1,500 1,500
--------------- -------------
Total non-performing assets $ 3,379 $ 3,277
=============== =============
Restructured troubled debt performing in accordance
with amended terms, not included above $ 243 $ 626
=============== =============
</TABLE>
The following is a summary of the activity in the reserve for loan losses for
the indicated periods:
<TABLE>
<CAPTION>
Six months ended June 30,
2000 1999
----------------- -----------------
(in thousands)
<S> <C> <C>
Balance at the beginning of the period $ 11,158 $ 11,108
Provisions --- ---
Recoveries 567 249
----------------- ---------------
11,725 11,357
Less: Charge-offs (57) (102)
----------------- ---------------
Balance at the end of the period $ 11,668 $ 11,255
================= ===============
</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 1.54% of
total loans at June 30, 2000, 1.65% at December 31, 1999 and 1.85% at June 30,
1999. Management considers the reserve to be adequate at June 30, 2000, although
there can be no assurance that the reserve is adequate or that additional
provisions might be necessary.
The Company had outstanding committments to originate new residential and
commercial mortgages of $36.7 million at June 30, 2000 and $57.0 million at
December 31, 1999. Additional unadvanced funds on various loan types at June 30,
2000 are shown in the next table.
(The remainder of this page intentionally left blank)
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
<TABLE>
<CAPTION>
Additional Unadvanced Loan Commitments
June 30, December 31,
2000 1999
--------------- --------------
(in thousands)
<S> <C> <C>
Commercial loans
Dealer floor plan $ 11,373 $ 8,067
Lines of credit 47,122 54,735
Other 4,523 1,781
Commercial mortgage
Construction 19,768 20,197
Other 1,293 613
Residential mortgage
Home equity 38,879 34,734
Consumer loans
Lines of credit 2,736 2,023
--------------- -------------
Total $ 125,694 $ 122,150
=============== =============
</TABLE>
DEPOSITS
The following table is a summary of deposits outstanding as of the dates
indicated:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------- ---------------
(in thousands)
<S> <C> <C>
Demand deposits $ 205,623 $ 167,624
NOW accounts 135,793 120,307
Other savings deposits 146,118 158,142
Money market accounts 152,374 138,287
Certificates of deposit greater
than $100,000 78,969 60,666
Other time deposits 183,846 121,038
-------------- -------------
Total deposits $ 902,723 $ 766,064
============== =============
</TABLE>
Reflecting core deposit growth, the recent acquisition of branches in Wareham
and Falmouth, Massachusetts and, to a lesser degree, the seasonal nature of the
Cape Cod economy as discussed in "Liquidity" on page 20 herein, total deposits
at June 30, 2000 were $136.7 million or 17.8% higher than total deposits at
December 31, 1999. The two branch acquisitions represented approximately $58
million at June 30, 2000. Generally, the Company's strategy is to price deposits
that reflect national market rates, offering higher alternative rates based on
increasing amounts deposited. During the second quarter of 2000, the Bank
initiated a premium offering rate of 7.20% APY for a one-year CD which has
proven successful. Also during the second quarter 2000, the Company accepted $25
million brokered deposits, included in Other time deposits in the table above.
Interest rates paid are frequently reviewed and are modified to reflect changing
conditions.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
BORROWED FUNDS
Historically, the Company has selectively engaged in short and long term
borrowings from the Federal Home Loan Bank of Boston, and has sold securities
under agreements to repurchase, to fund loans and investments. At June 30, 2000,
borrowed funds totaled $279.3 million, nearly $88 million or 23.9% lower than
borrowed funds at December 31, 1999. This decrease responds to the unusually
high deposit growth during the period.
STOCKHOLDERS' EQUITY
The Company's capital to assets ratio was 7.11% at June 30, 2000 compared to
6.96% 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
certain off-balance-sheet items as calculated under regulatory accounting
practices. Holding companies, such as the Company, are not subject to prompt
corrective action provisions. The capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. Quantitative measures established by regulation
to ensure capital adequacy require the Company and the Bank to maintain minimum
amounts of total and Tier 1 capital (as defined) to average assets (as defined).
The following schedule displays these capital guidelines and the ratios of the
Company and the Bank as of June 30, 2000:
<TABLE>
<CAPTION>
Minimum June 30, 2000
Regulatory ------------------------------------
Guidelines Company Bank
---------------- --------------- ---------------
<S> <C> <C> <C>
Tier 1 leverage capital 3.00% 7.46% 6.46%
Tier 1 capital to risk-weighted assets 4.00% 10.26% 8.78%
Total capital to risk-weighted assets 8.00% 11.50% 10.03%
</TABLE>
The Company's book value at June 30, 2000 was $10.60 per share compared to $9.95
per share at December 31, 1999.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
LIQUIDITY
The Bank normally experiences a seasonal swing in its liquidity each year due to
the 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 Asset/Liability Management Committee ("ALCO"), a subcommittee of the
Board of Directors of the Bank, the Company and the Bank monitor the level and
general mix of earning assets and interest bearing liabilities, with particular
attention to those assets and liabilities which are rate-sensitive. The primary
objective of ALCO is to manage interest rate risk in accordance with policies
approved by the Board of Directors regarding acceptable levels of interest rate
risk, liquidity and capital. The committee meets monthly and sets the rates paid
on deposits, approves loan pricing and reviews investment transactions.
Given the substantial liquidity from cash flow and maturities of the Company's
investment portfolio, the sizable proportion of rate sensitive loans to total
loans, and the large core deposit base, ALCO believes the Company to be
moderately asset-sensitive to changes in interest rates. Nevertheless, the
Company's strategy has included the funding of certain fixed rate loans with
medium term borrowed funds in order to mitigate a margin squeeze should interest
rates rise.
The Cape Cod market is one in which competing financial institutions frequently
offer a wide range of yields for similar deposit products. Within this market,
the Company finds it necessary, from time to time, to offer higher rates than it
would otherwise justify, thereby increasing pressure on net interest income. In
order to offset this pressure somewhat, the Company is strategically focusing on
customer relationship profitability.
COMPUTER PROCESSING IN THE YEAR 2000
The statements in the following section include "Year 2000 readiness disclosure"
within the meaning of the Year 2000 Information and Readiness Act of 1998.
Much computer software has been written which allows the year in a date to be
recognized and/or stored based on a two-digit number, i.e., "12/31/99", clearly
recognizable as meaning December 31, 1999. The same is true of a variety of
hardware devices with built-in clock-calendars, such as computers. In some
cases, this could 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 had not been 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
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
that were considered to be critical or 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 June 30, 2000.
The Bank is also dependent on other providers in the conduct of its business,
most notably for electrical power and telecommunications. Had these providers
experienced Year 2000 problems, disruption of service, especially if prolonged,
could have seriously effected the Bank's ability to conduct business as usual.
The Company has not experienced any disruption of services 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 a customer's 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.
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.
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 June 30, 2000 from those presented in the
Company's 1999 Annual Report.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. Legal proceedings
There are no material legal proceedings to which the Company is a party or to
which any of its property is subject, although the Company is a party to
ordinary routine litigation incidental to its business.
ITEM 2. Changes in securities and use of proceeds
Not applicable
ITEM 3. Defaults upon senior securities
Not applicable
ITEM 4. Submission of matters to a vote of security holders
The Company's annual meeting of stockholders was held on April 27, 2000 (the
"Annual Meeting"). The presence, in person or by proxy, of at least a majority
of the total number of issued and outstanding shares of the Company's common
stock, $2.50 par value (the"Common Stock"), was necessary to constitute a quorum
for the transaction of business at the Annual Meeting. There were 8,604,796
shares of Common Stock issued, outstanding and eligible to vote as of March 10,
2000. A total of 7,449,716.46 shares of Common Stock were present in person or
by proxy at the Annual Meeting, constituting a quorum.
At the Annual Meeting, the stockholders elected the following two individuals as
Directors of the Company to serve until the 2003 annual meeting of stockholders,
with the following votes cast:
BROKER NON-VOTES
NOMINEE FOR ABSTENTIONS AND WITHHELD
------- --- ----------- ------------
William R. Enlow 7,321,267.46 128,449 0
Stephen B. Lawson 7,131,092.46 318,624 0
The following additional Directors of the Company continued as Directors after
the Annual Meeting:
John F. Aylmer, George D. Denmark, John Otis Drew, and William C. Snow.
ITEM 5. Other information
Not applicable
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
27 Financial data schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the three month period ended June 30, 2000.
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial data schedule
<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: August 11, 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
