SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[ X ] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 for the transition period from to .
Commission file number 0-17099
HOME PORT BANCORP, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Delaware 04-3016821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
104 Pleasant Street
Nantucket, Massachusetts 02554
(Address of principal executive office) (Zip Code)
(508) 228-0580
(Issuer's telephone number, including area code)
Not applicable.
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months ( or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares outstanding of each of the registrant's classes of
common stock as of June 30, 1997:
Common Stock $.01 par value 1,841,890
(Title of Class) (Shares Outstanding)
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [ X ]
<PAGE>
Home Port Bancorp, Inc.
INDEX
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets at June 30, 1997 and December 31, 1996
Consolidated Statements of Earnings for the three months and six
momths ended June 30, 1997 and 1996.
Consolidated Statements of Changes in Stockholders' Equity
for the six months ending June 30, 1997
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition
and Results of Operation
PART II - OTHER INFORMATION
Signatures
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Balance Sheet (Unaudited)
(In Thousands, Except Per Share Data) June 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Assets
Cash and due from banks ........................................................ $ 6,856 $ 5,073
Interest bearing deposits in banks ............................................. 39 46
Federal funds sold ............................................................. 1,295 4,700
--------- ---------
Total cash and cash equivalents ........................................... 8,190 9,819
Securities held to maturity (market value $14,706 and $14,526) (note 2) ........ 14,746 14,663
Securities available for sale (amortized cost of $7,855 and $8,104) (note 2) ... 7,852 8,082
Loans, net of allowance for loan losses of $2,555 and $2,365 (note 3)........... 154,689 142,425
Loans held for sale ............................................................ 6,935 8,866
Other real estate owned ........................................................ 61
--------- ----------
Land, buildings and equipment, net ............................................. 1,444 1,422
Accrued income receivable ...................................................... 1,162 1,093
Net deferred tax asset ......................................................... 348 347
Stock in FHLB-Boston, at cost .................................................. 2,441 2,321
Prepaid expenses and other assets .............................................. 941 832
--------- ---------
Total assets ............................................................ $ 198,748 $ 189,931
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits (Note 4) ............................................................ $ 131,137 $ 135,082
Borrowed funds ............................................................... 44,910 32,335
Accrued expenses ............................................................. 1,044 1,346
Other liabilities ............................................................ 677 1,065
--------- ---------
Total liabilities ....................................................... 177,768 169,828
--------- ---------
Commitments and contingencies (notes 3 and 5)
Stockholders' equity
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued
-- --
Common stock, $.01 par value, 10,000,000 shares authorized, 2,325,494
shares issued ............................................................. 23 23
Additional paid-in capital ................................................... 17,473 17,473
Retained earnings ............................................................ 7,882 7,017
Unrealized loss on securities available for sale, net of taxes (note 2) (1) (13)
Less: Treasury stock, at cost (483,604 shares) ............................... (4,397) (4,397)
--------- ---------
Total stockholders' equity .............................................. 20,980 20,103
--------- ---------
Total liabilities and stockholders' equity .............................. $ 198,748 $ 189,931
========= =========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Earnings (Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Month Ended Six Month Ended
June 30, June 30,
--------------------- --------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest on loans .............................. $ 3,600 $ 3,216 $ 7,018 $ 6,193
Interest on securities ......................... 334 327 656 679
Dividends ...................................... 41 39 78 77
Federal funds sold and interest bearing deposits 4 6 16 18
------- ------- ------- -------
Total interest and dividend income .......... 3,979 3,588 7,768 6,967
------- ------- ------- -------
Interest expense:
Interest on depositors' accounts ............... 1,099 992 2,193 1,976
Interest on borrowed funds ..................... 681 575 1,233 1,091
------- ------- ------- -------
Total interest expense ...................... 1,780 1,567 3,426 3,067
------- ------- ------- -------
Net interest and dividend income .................. 2,199 2,021 4,342 3,900
Provision for loan losses ......................... 37 -- 75 --
------- ------- ------- -------
Net interest and dividend income after
provision for loan losses ..................... 2,162 2,021 4,267 3,900
Non interest income:
Deposit servicing fees ......................... 108 95 199 173
Loan servicing fees ............................ 65 71 131 153
Other fees and income .......................... 39 64 87 125
Net gain (loss) from sale of mortgage loans .... 27 (3) 41 (9)
Net gain (loss) from securities ................ (13) -- (9) --
------- ------- ------- -------
Total non interest income ................... 226 227 449 442
------- ------- ------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Earnings (Unaudited)
(In Thousands, Except Share and Per Share Data) (continued)
Three Month Ended Six Month Ended
June 30, June 30,
--------------------- --------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Non interest expense:
Salaries and employee benefits ................. 606 553 1,211 1,076
Building and equipment expenses ................ 114 128 239 233
Deposit insurance fees ......................... 11 4 21 7
Professional fees .............................. 54 90 120 168
Other .......................................... 256 234 490 466
------- ------- ------- -------
Total non interest expense .................. 1,041 1,009 2,081 1,950
------- ------- ------- -------
Income before income taxes ........................ 1,347 1,239 2,635 2,392
Provision for income taxes (note 6) ............... 527 482 1,033 929
======= ======= ======= =======
Net Income ........................................ $ 820 $ 757 $ 1,602 $ 1,463
======= ======= ======= =======
Earnings per common share ......................... $ 0.45 $ 0.41 $ 0.87 $ 0.79
======= ======= ======= =======
Weighted number of common shares outstanding ...... 1,842 1,842 1,842 1,842
======= ======= ======= =======
See accompanying notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(In Thousands) Net
Unrealized
Gain
(Loss) on
Additional Securities Total
Common Paid-in Retained Treasury Available Stockholders'
Stock Capital Earnings Stock For Sale Equity
----- ------- -------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 .......... $ 23 $ 17,473 $ 5,271 $ (4,397) $ 9 $ 18,379
Change in unrealized loss on securities
available for sale ............... -- -- -- -- (22) (22)
Cash dividends paid at $.70 per share . -- -- (1,289) -- -- (1,289)
Net income ............................ -- -- 3,035 -- -- 3,035
-------- -------- -------- -------- -------- --------
Balance at December 31, 1996 .......... 23 17,473 7,017 (4,397) (13) 20,103
Change in unrealized loss on securities
available for sale ................. -- -- -- -- 12 12
Cash dividends paid at $.40 per share . -- -- (737) -- -- (737)
Net income ............................ -- -- 1,602 -- -- 1,602
-------- -------- -------- -------- -------- --------
Balance at June 30, 1997 .............. $ 23 $ 17,473 $ 7,882 $ (4,397) $ (1) $ 20,980
======== ======== ======== ======== ======== ========
See accompanying notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands) Six Months Ended
June 30,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Net cash flows from operating activities:
Net income ...................................................................... $ 1,602 $ 1,463
Adjustments to reconcile net income to net cash provided by operating activities:
Net increase in accrued income receivable ................................... (69) (70)
Net (increase) decrease in accrued expenses ................................. (302) 160
Net amortization of securities premiums ..................................... 34 55
Net decrease in loans held for sale ......................................... 2,006 5,123
Amortization of deferred loan origination fees .............................. (121) (141)
Amortization of deferred premiums on loans sold ............................. (34)
Depreciation of building and equipment ...................................... 118 100
Net increase in prepaid expenses and other assets ........................... (109) (20)
Net decrease in other liabilities ........................................... (388) (308)
Net (increase) decrease in deferred income taxes ............................ (9) 19
Net loss on securities and other assets ..................................... 9
Net (gain) loss on sale of mortgage loans ................................... (41) 9
Provision for loan losses ................................................... 75
-------- --------
Net cash provided by operating activities ........................................... 2,771 6,390
-------- --------
Cash flows from investing activities
Purchases of securities held to maturity ........................................ (3,398) --
Purchases of securities available for sale ...................................... (2,002) (1,496)
Proceeds from sales of securities available for sale ............................ 1.239 --
Proceeds from maturities/calls of securities .................................... 3,722 3,325
Principal payments on mortgage-backed securities ................................ 563 562
Net increase in loans ........................................................... (12,218) (19,978)
Purchases of land, buildings and equipment ...................................... (140) (263)
Proceeds from the sales of other real estate owned .............................. 61 --
Purchase of Federal Home Loan Bank stock ........................................ (120) --
-------- --------
Net cash used in investing activities ............................................... (12,293) (17,850)
-------- --------
Cash flows from financing activities:
Net (decrease) increase in deposits ............................................. (3,945) 3,861
Federal Home Bank advances ...................................................... 11,500 10,000
Federal Home Loan Bank repayments ............................................... (7,205) (12,901)
Net increase in short term borrowings ........................................... 8,280 11,528
Cash dividends paid ............................................................. (737) (552)
-------- --------
Net cash provided by financing activities ........................................... 7,893 11,936
-------- --------
Net (decrease) increase in cash and cash equivalents ................................ (1,629) 476
Cash and cash equivalents at beginning of period .................................... 9,819 6,636
-------- --------
Cash and cash equivalents at end of period .......................................... $ 8,190 $ 7,112
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(continued)
(In Thousands) Six Months Ended
June 30,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest .................................................................... 3,374 3,041
Income taxes ................................................................ 1,410 701
Dividends declared .............................................................. 736 552
Non-cash gains on sales of loans ................................................ 34 --
See accompanying notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
1. Consolidated Financial Statements
The unaudited consolidated financial statements of Home Port Bancorp, Inc. ("The
Company") and its wholly owned subsidiaries, Nantucket Bank ("the Bank") and
N.B. Securities, Inc. ("a Massachusetts Securities Corporation") have been
prepared in accordance with regulations of the Securities and Exchange
Commission. Certain information, required by generally accepted accounting
principles, has been condensed or omitted pursuant to such rules and
regulations. Inter-company accounts and transactions have been eliminated.
The financial statements for the periods ended June 30, 1997 and 1996 are
unaudited, but include normal recurring adjustments which management considers
necessary for a fair presentation of results. Interim results are not
necessarily indicative of the results to be expected for the entire year. It is
recommended that these statements be read in conjunction with the audited
financial statements for the year end December 31, 1996.
2. Securities (in thousands)
Securities held to maturity consist of the following:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------------- --------------------
Book Market Book Market
Value Value Value Value
------- ------- ------- -------
<S> <C> <C> <C> <C>
United States Government and agency obligations $ 3,498 $ 3,491 $ 2,341 $ 2,326
Mortgage-backed securities .................... 7,334 7,310 7,486 7,373
State and municipal obligations ............... 382 382 565 564
Other bonds and notes ......................... 3,532 3,523 4,271 4,263
------- ------- ------- -------
Total securities held to maturity .......... $14,746 $14,706 $14,663 $14,526
======= ======= ======= =======
</TABLE>
Securities available for sale consist of the following:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------------- --------------------
Book Market Book Market
Value Value Value Value
------- ------- ------- -------
<S> <C> <C> <C> <C>
United States Government and agency obligations $5,200 $5,172 $5,700 $5,663
State and municipal obligations 793 796 798 804
Other bonds and notes 750 748 1,494 1,501
Marketable equity securities 1,112 1,136 112 114
------ ------ ------ ------
Total securities available for sale $7,855 $7,852 $8,104 $8,082
====== ======= ====== ======
</TABLE>
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
3. Loans, Net (in thousands)
The composition of the balances of loans is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Mortgage loans:
Residential
Fixed .............................. $ 20,085 $ 18,407
Adjustable ......................... 63,909 61,316
Residential construction ................ 23,239 21,100
Commercial .............................. 33,384 33,891
Commercial construction ................. 6,339 5,960
--------- ---------
Total principal balances ......... 146,956 140,674
Less:
Due borrowers on uncompleted loans
Residential ........................ (5,640) (6,743)
Commercial ........................ (3,144) (3,342)
Deferred loan origination fees .......... (520) (517)
--------- ---------
Total mortgage loans ............... 137,652 130,072
Other loans:
Commercial business ..................... 13,606 8,534
Second mortgage ........................ 1,812 1,987
Home equity ............................ 1,528 1,542
Passbook and stock secured ............. 1,034 960
Consumer ............................... 1,612 1,695
--------- ---------
Total other loans ................. 19,592 14,718
Less: Allowance for loan losses .............. (2,555) (2,365)
========= =========
Loans, net ........................ $ 154,689 $ 142,425
========= =========
</TABLE>
The Federal Home Loan Bank has a blanket lien covering residential mortgage
loans as collateral for the Bank's borrowing from the FHLB.
Effective January 1, 1997 the Bank adopted Statement of Financial Accounting
Standards ("SFAS") No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities". The Statement provides accounting
and reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. Those standards are based on an approach that
focuses on control, whereby after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinquished. With adoption of this statement
during the six months ended June 30, 1997, the Bank recognized $41 thousand in
deferred gains related to the sale of participation interests in mortgage loans
where the Bank retained servicing rights.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
A summary of the transactions in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1997 1996
------- -------
<S> <C> <C>
Balance at beginning of period ................... $ 2,365 $ 2,249
Provisions ................................ 75
------- -------
Recoveries ................................ 121 115
Realized losses charged to allowance ...... (6) (102)
------- -------
Balance at end of period ......................... $ 2,555 $ 2,262
======= =======
</TABLE>
The allowance for loan losses is allocated as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1997 1996
------- -------
<S> <C> <C>
Residential mortgage loans ................... $ 526 $ 518
Commercial real estate loans ................. 1,313 1,212
Commercial loans ............................. 201 174
All other loans .............................. 230 223
Unallocated .................................. 285 135
------ ------
Total ................................... $2,555 $2,262
====== ======
</TABLE>
Non-performing loans are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Loans accounted for on a non-accrual basis $ - $ 10
Accruing loans 90 days past due 159 433
Impaired loans - -
</TABLE>
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
4. Deposits (in thousands)
A summary of deposit balances, by type, is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Demand (non-interest bearing) .................. $ 11,322 $ 9,955
Savings:
NOW ....................................... 27,086 31,223
Regular and 90-day notice accounts ........ 13,425 13,779
Money market deposit accounts ............. 23,176 22,672
Advance payments from mortgagors .......... 214 131
-------- --------
Total savings ......................... 63,901 67,805
-------- --------
Time certificates of deposit ................... 55,914 57,322
-------- --------
Total deposits ........................ $131,137 $135,082
======== ========
</TABLE>
5. Commitments (in thousands)
In the normal course of business, there are outstanding commitments that are not
reflected in the balance sheet. Firm commitments to originate mortgage and
commercial loans were $8.6 million at June 30, 1997.
6. Income Taxes
The effective rate for the three and six months ended June 30, 1997 is 39%,
which is less than the statutory rate of 42% primarily due to a reduction in the
valuation allowance and the status of N.B. Securities, Inc. as a Massachusetts
security corporation.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Unaudited Interim Information for June 30, 1997
Consolidated Balance Sheet
Total assets of Home Port Bancorp, Inc. (the "Company") increased $8.8 million,
or 4.6%, to $198.7 million at June 30, 1997 from $189.9 million at December 31,
1996. For the comparable six month period in 1996 total assets increased 7.9% to
$180.5 million from $167.3 million. Major balance sheet categories are discussed
in detail below.
Net loans outstanding (including loans held for sale) were $161.6 million at
June 30, 1997, an increase of $10.3 million, or 6.8%, from the $151.3 million at
December 31, 1996. During the comparable six month period in 1996, loans
increased $15.0 million or 11.6%. Loan sales totaled $10.5 million during the
first six months of 1997 as compared to $15.6 million in the 1996 period.
Total deposits decreased by $3.9 million, or 2.9%, to $131.1 million at June 30,
1997 from $135.1 million at December 31, 1996. For the comparable six month
period in 1996 deposits increased 3.4% or $3.9 million. Average deposits,
however, for the first six months of 1997 increased 13.1% over the prior year.
This compares to a 9.3% increase in average deposits for the first six months of
1996.
Borrowed funds, consisting of Federal Home Loan Bank advances, totaled $44.9
million at June 30, 1997, an increase of $12.5 million from $32.3 million at
December 31, 1996. These borrowings were utilized to fund loan growth during
seasonal period of deposit outflows. Management anticipates that deposit growth
during the third quarter will provide funds to enable these borrowings to be
reduced. For the comparable six month period in 1996 borrowed funds increased by
$8.6 million to $41.5 million.
Total stockholders' equity increased by $877 thousand to $21.0 million at June
30, 1997 from $20.1 million at December 31, 1996. This increase reflects net
income of $1.6 million less cash dividends declared of $736 thousand and a $1
thousand unrealized loss on securities available for sale.
Results of Operations
For the quarter ended June 30, 1997, net income totaled $820 thousand, or $0.45
per share, compared to $757 thousand, or $0.41 per share, for the quarter ended
June 30, 1996. For the six months ended June 30, 1997 net income totaled $1.6
million, or $0.87 per share, compared to $1.5 million, or $0.79 per share, for
the comparable 1996 period.
The increase in net income for both the quarterly and year to date results is
attributable to an increase in net interest and dividend income. Before the
provision for loan losses, net interest income increased by $178 thousand, or
8.8%, in the second quarter of 1997 as compared to the same period in the prior
year. For the six months ending June 30, 1997, net interest income increased by
$442 thousand, or 11.3%, as compared to the prior year. The increase in net
interest income was due to the growth in average loans and deposits. The
interest rate spread and net interest margin were 4.08% and 4.71%, respectively,
for the first six months of 1997 compared to 4.11% and 4.72% for the comparable
period in 1996.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Unaudited Interim Information for June 30, 1997
Offsetting the increased net interest income were increases in the provision for
loan losses and non-interest expense. Loan loss provisions of $37 thousand and
$75 thousand, respectively, were recorded for the three and six month periods
ended June 30, 1997. No provisions were made in the comparable 1996 periods.
Non-interest expenses increased by $32 thousand, or 3.2%, compared to the second
quarter of 1996 and increased $131 thousand, or 6.7%, compared to the six month
period 1996. Both period increases in non-interest expense are due to increases
in salaries and employee benefits. The Bank's efficiency ratio, which measures
non-interest expenses in relation to income, has improved to 43.35% for the six
months ended June 30, 1997 from 44.91% for the same period 1996.
Return on Equity
Return on equity has increased to an annualized rate of 15.68% for the six
months ending June 30, 1997 from 15.61% for the same period in 1996. This
improvement is due to higher earnings offset by a higher capital base.
Provision for Loan Losses
The allowance for loan losses at June 30, 1997 was $2.5 million or 1.56% of
total loans compared to $2.4 million, or 1.54% of total loans, at December 31,
1996. During the three and six months ending June 30, 1997 the Bank recorded
provisions for loan losses of $37 thousand and $75 thousand, respectively. These
provisions reflect management's strategy, initiated in the third quarter of
1996, to provide additional reserves in relation to the growing loan portfolio.
The Bank also had recoveries of $121 thousand and charge-offs of $6 thousand
during the six month period ending June 30, 1997. The Bank believes its current
level of loan loss reserves to be adequate. Any unforeseen future economic
problems, however, could lead to the Bank experiencing additional delinquencies
which may require additional provisions for loan losses.
Non-performing Loans and Other Real Estate Owned
The Bank's non-performing loans totaled $159 thousand at June 30, 1997,
consisting of two accruing loans 90 days past due, both of which are first
mortgage loans on residential real estate. Non-performing loans at December 31,
1996 totaled $443 thousand, including $433 thousand past due accruing loans and
$10 thousand of non-accruing loans. None of these loans were to affiliated
persons.. As of June 30, 1997, the Bank had no other real estate owned compared
to $61 thousand at December 31, 1996.
At June 30, 1997 management has identified $1.1 million of loans that, while
currently performing, may pose potential problems due to some doubts about the
ability of the borrowers to comply with all of their present loan repayment
terms. The resolution of these loans is not yet known. The Bank believes that
its allowance for loan losses is adequate to absorb any losses that may result
from these loans.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Unaudited Interim Information for June 30, 1997
Income Taxes
The Company and its subsidiaries, on a consolidated basis are subject to Federal
income tax. The Company is also subject to a Delaware franchise tax and a
Massachusetts tax as a security corporation. The Bank and it's subsidiary are
subject to a Massachusetts income tax. For interim unaudited financial
statements, management calculated the provision for taxes using an estimated
combined Federal and state tax rate of 40% and made an adjustment decreasing the
deferred tax valuation reserve. The expected tax rate is reviewed and adjusted
as necessary on a quarterly basis.
Liquidity and Capital Resources
Substantially all of the Company's funds are generated through its banking
subsidiary, Nantucket Bank. The Bank's sources are customer deposits,
amortization and payoffs of loans, advances from the Federal Home Loan Bank of
Boston, sale of loans in the secondary market, maturities and sales of
securities and positive cash flows generated from operations. As a member of the
Depositors' Insurance Fund, the Bank also has a right to borrow from the
Depositors Insurance Fund for short-term cash needs by pledging certain assets,
although it has never exercised this right. The Bank's liquidity management
program is designed to assure that sufficient funds are available to meet it's
daily needs.
The Bank believes its capital resources, including deposits, scheduled loan
repayments, revenue generated from the sales of loans and securities, unused
borrowing capacity at the Federal Home Loan Bank of Boston, and revenue from
other sources will be adequate to meet its funding commitments.
At June 30, 1997 and December 31, 1996 the Company's and the Bank's capital
ratios were in excess of regulatory requirements.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are not involved in any
pending legal proceedings other than those involved in the
ordinary course of their businesses. Management believes that
the resolution of these matters will not materially affect
their businesses or the consolidated financial condition of
the Company and its subsidiary.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders a. The
annual meeting of shareholders was held on May 16, 1997.
b. Set forth below is a brief description of each matter voted
upon at the meeting, including the number of votes cast for,
against, or withheld, as well as the number abstentions and
including a separate tabulation with respect to each nominee
fort office:
(i) Election of directors:
William P. Hourihan, Jr.: 1,706,425 votes for, 2,121
votes withheld.
Karl L. Meyer: 1,706,486 votes for, 2,060 votes
withheld.
(ii) Ratification of KPMG Peat Marwick LLP as independent
auditors for fiscal year 1997: 1,697,039 votes for, 9,932
votes against, 1,575 abstentions
Item 5. Other Information.
A cash dividend of $.20 per common share was declared on April
30, 1997. The dividend was paid on May 29, 1997 to
shareholders of record as of May 15, 1997.
Declaration of dividends by the Board of Directors depends on
a number of factors, including capital requirements,
regulatory limitations, the Company's operating results and
financial condition and general economic conditions.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits -- None
b. Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 1997.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Signatures
In accordance with the requirements of the Securities Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Home Port Bancorp, Inc.
-----------------------
(Registrant)
Date: August 8, 1997 By: /s/ William P. Hourihan, Jr.
--------------------------------
William P. Hourihan, Vice President
Date: August 8, 1997 By: /s/ John M. Sweeney
-----------------------
John M. Sweeney, Treasurer
(chief financial & accounting officer)
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