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 September 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
104 Pleasant Street
Nantucket, Massachusetts 02554
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(Address of principal executive office) (Zip Code)
(508) 228-0580
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(Issuer's telephone number, including area code)
Not applicable.
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(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 September 30, 1997:
Common Stock $.01 par value 1,841,890
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(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 September 30, 1997 and December 31,
1996
Consolidated Statements of Earnings for the three months and nine
months ended September 30, 1997 and 1996.
Consolidated Statements of Changes in Stockholders' Equity at
September 30, 1997 and December 31, 1996.
Consolidated Statements of Cash Flows for the nine months ended
September 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 Sheets (Unaudited)
(In Thousands, Except Per Share Data) September 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Assets
Cash and due from banks ........................................................ $ 4,938 $ 5,073
Interest bearing deposits in banks ............................................. 44 46
Federal funds sold and interest bearing deposits in banks ...................... 270 4,700
--------- ---------
Total cash and cash equivalents ................................................ 5,252 9,819
Securities held to maturity (market value $14,522 and $14,526) (note 2) ........ 14,561 14,663
Securities available for sale (amortized cost of $7,730 and $8,104) (note 2) ... 7,758 8,082
Loans, net of allowance for loan losses of $2,619 and $2,365 (note 3) .......... 156,363 142,425
Loans held for sale ............................................................ 10,878 8,866
Other real estate owned ........................................................ -- 61
Land, buildings and equipment, net ............................................. 1,432 1,422
Accrued income receivable ...................................................... 1,112 1,093
Net deferred tax asset ......................................................... 346 347
Stock in FHLB-Boston, at cost .................................................. 2,442 2,321
Prepaid expenses and other assets .............................................. 870 832
--------- ---------
Total assets ............................................................ $ 201,014 $ 189,931
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits (Note 4) ............................................................ $ 142,887 $ 135,082
Borrowed funds ............................................................... 34,871 32,335
Accrued expenses ............................................................. 1,420 1,346
Other liabilities ............................................................ 384 1,065
--------- ---------
Total liabilities ....................................................... 179,562 169,828
--------- ---------
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 ............................................................ 8,336 7,017
Unrealized gain (loss) on securities available for sale, net of taxes (note 2) 17 (13)
Less: Treasury stock, at cost (483,604 shares) ............................... (4,397) (4,397)
--------- ---------
Total stockholders' equity .............................................. 21,452 20,103
--------- ---------
Total liabilities and stockholders' equity .............................. $ 201,014 $ 189,931
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Earnings (Unaudited)
(In Thousands, Except Share and Per Share Data) Three Month Ended Nine Month Ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest on loans ..................................... $ 3,641 $ 3,311 $ 10,660 $ 9,504
Interest on securities ................................ 312 337 968 1,016
Dividends ............................................. 42 40 119 117
Federal funds sold and interest bearing deposits ...... 20 29 36 47
-------- -------- -------- --------
Total interest and dividend income ................. 4,015 3,717 11,783 10,684
-------- -------- -------- --------
Interest expense:
Interest on depositors' accounts ...................... 1,164 1,105 3,356 3,081
Interest on borrowed funds ............................ 603 505 1,836 1,596
-------- -------- -------- --------
Total interest expense ............................. 1,767 1,610 5,192 4,677
-------- -------- -------- --------
Net interest and dividend income ......................... 2,248 2,107 6,591 6,007
Provision for loan losses ................................ 38 38 113 38
-------- -------- -------- --------
Net interest and dividend income after
provision for loan losses ............................ 2,210 2,069 6,478 5,969
Non interest income:
Deposit servicing fees ................................ 115 87 313 259
Loan servicing fees ................................... 64 62 195 216
Other fees and income ................................. 81 63 168 188
Net gain (loss) from sale of mortgage loans ........... 12 -- 53 (9)
Net gain (loss) from securities ....................... -- -- (9) --
-------- -------- -------- --------
Total non interest income .......................... 272 212 720 654
-------- -------- -------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Earnings (Unaudited)
(continued)
(In Thousands, Except Share and Per Share Data) Three Month Ended Nine Month Ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Non interest expense:
Salaries and employee benefits ........................ 667 575 1,897 1,668
Building and equipment expenses ....................... 130 129 369 362
Deposit insurance fees ................................ 11 5 32 12
Professional fees ..................................... 50 58 169 226
Other ................................................. 271 256 742 705
-------- -------- -------- --------
Total non interest expense ......................... 1,129 1,023 3,209 2,973
-------- -------- -------- --------
Income before income taxes ............................... 1,353 1,258 3,989 3,650
Provision for income taxes (note 6) ...................... 531 489 1,565 1,418
======== ======== ======== ========
Net Income ............................................... $ 822 $ 769 $ 2,424 $ 2,232
======== ======== ======== ========
Earnings per common share ................................ $ 0.45 $ 0.42 $ 1.32 $ 1.21
======== ======== ======== ========
Weighted number of common shares outstanding ............. 1,842 1,842 1,842 1,842
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
<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 ................. -- -- -- -- 30 30
Cash dividends paid at $.60 per share . -- -- (1,105) -- -- (1,105)
Net income ............................ -- -- 2,424 -- -- 2,424
-------- -------- -------- -------- -------- --------
Balance at September 30, 1997 ......... $ 23 $ 17,473 $ 8,336 $ (4,397) $ 17 $ 21,452
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands) Nine Months Ended
September 30,
-------------------------------
1997 1996
-------- --------
<S> <C> <C>
Net cash flows from operating activities:
Net income ................................................. $ 2,424 $ 2,232
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Net (increase) decrease in accrued income receivable ... (19) 20
Net decrease in accrued expenses ....................... 74 91
Net amortization of securities premiums ................ 62 73
Net (increase) decrease in loans held for sale ......... (1,963) 4,525
Amortization of deferred loan origination fees ......... (172) (196)
Amortization of deferred premiums on loans sold ........ 4 --
Depreciation of building and equipment ................. 180 159
Net increase in prepaid expenses and other assets ...... (38) (65)
Net decrease in other liabilities ...................... (681) (437)
Net increase in deferred income taxes .................. (19) (11)
Net loss on securities and other assets ................ 9 --
Net (gain) loss on sale of mortgage loans .............. (53) 9
Provision for loan losses .............................. 113 38
-------- --------
Net cash (used) provided by operating activities ............... (79) 6,438
-------- --------
Cash flows from investing activities
Purchases of securities held to maturity.................... (4,998) --
Purchases of securities available for sale ................. (2,984) (2,496)
Proceeds from sales of securities available for sale ....... 1,239 --
Proceeds from maturities/calls of securities ............... 6,242 4,430
Principal payments on mortgage-backed securities ........... 907 961
Net increase in loans ...................................... (13,879) (23,160)
Purchases of land, buildings and equipment ................. (190) (367)
Proceeds from the sales of other real estate owned ......... 61 --
Purchase of Federal Home Loan Bank stock ................... (121) --
-------- --------
Net cash used in investing activities .......................... (13,723) (20,632)
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Home Port Bancorp, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(continued)
(In Thousands) Nine Months Ended
September 30,
-------------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits ................................... 7,805 23,665
Federal Home Bank advances ................................. 16,500 11,000
Federal Home Loan Bank repayments .......................... (12,605) (13,199)
Net decrease in short term borrowings ...................... (1,359) (999)
Cash dividends paid ........................................ (1,106) (922)
-------- --------
Net cash provided by financing activities ...................... 9,235 19,545
-------- --------
Net (decrease) increase in cash and cash equivalents ........... (4,567) 5,351
Cash and cash equivalents at beginning of period ............... 9,819 6,636
-------- --------
Cash and cash equivalents at end of period ..................... $ 5,252 $ 11,987
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ............................................... $ 5,170 $ 4,695
Income taxes ........................................... $ 1,610 $ 1,353
Dividends declared ......................................... 1,106 $ 922
Non-cash gains on sales of loans ........................... 47 --
</TABLE>
See accompanying notes to unaudited consolidated financial statements
<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 September 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>
September 30, 1997 December 31, 1996
-------------------- -------------------
Book Market Book Market
Value Value Value Value
------- ------- ------- -------
<S> <C> <C> <C> <C>
United States Government and agency obligations ...... $ 4,499 $ 4,503 $ 2,341 $ 2,326
Mortgage-backed securities ........................... 6,978 6,925 7,486 7,373
State and municipal obligations ...................... 281 281 565 564
Other bonds and notes ................................ 2,803 2,813 4,271 4,263
------- ------- ------- -------
Total securities held to maturity ................. $14,561 $14,522 $14,663 $14,526
======= ======= ======= =======
</TABLE>
Securities available for sale consist of the following:
<TABLE>
<CAPTION>
September 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 $5,195 $5,700 $5,663
Mortgage-backed securities 976 976 -- --
State and municipal obligations 292 293 798 804
Other bonds and notes 250 249 1,494 1,501
Marketable equity securities 1,012 1,045 112 114
------- ------- ------- -------
Total securities available for sale $7,730 $7,758 $8,104 $8,082
====== ====== ====== ======
</TABLE>
Mortgage backed securities available for sale consist of CMO/REMIC bonds.
<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>
September 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Mortgage loans:
Residential
Fixed .................................. $ 21,766 $ 18,407
Adjustable ............................. 65,872 61,316
Residential construction .................... 23,518 21,100
Commercial .................................. 35,508 33,891
Commercial construction ..................... 4,129 5,960
--------- ---------
Total principal balances ............. 150,793 140,674
Less:
Due borrowers on uncompleted loans
Residential ............................ (5,511) (6,743)
Commercial ............................ (1,925) (3,342)
Deferred loan origination fees .............. (495) (517)
--------- ---------
Total mortgage loans ................... 142,862 130,072
Other loans:
Commercial business ......................... 9,904 8,534
Second mortgage ............................ 1,740 1,987
Home equity ................................ 1,917 1,542
Passbook and stock secured ................. 999 960
Consumer ................................... 1,560 1,695
--------- ---------
Total other loans ..................... 16,120 14,718
Less: Allowance for loan losses .................. (2,619) (2,365)
========= =========
Loans, net ............................ $ 156,363 $ 142,425
========= =========
</TABLE>
The Federal Home Loan Bank has a blanket lien covering residential and
commercial 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 nine months ended September 30, 1997, the Bank recognized $53
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>
Nine Months Ended
September 30,
---------------------------
1997 1996
---------------------------
<S> <C> <C>
Balance at beginning of period ......................... $ 2,365 $ 2,249
Provisions ...................................... 113 38
Recoveries ...................................... 163 126
Realized losses charged to allowance ............ (22) (102)
------- -------
Balance at end of period ............................... $ 2,619 $ 2,311
======= =======
</TABLE>
The allowance for loan losses is allocated as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1997 1996
---------------------------
<S> <C> <C>
Residential mortgage loans ............................. $ 527 $ 519
Commercial mortgage loans .............................. 1,317 1,215
Commercial loans ....................................... 225 180
All other loans ........................................ 227 224
Unallocated ............................................ 323 173
------ ------
Total ............................................. $2,619 $2,311
====== ======
</TABLE>
Non-performing loans are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Loans accounted for on a non-accrual basis $ -- $ 10
Accruing loans 90 days past due 252 433
Restructured 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>
September 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Demand (non-interest bearing) .................. $ 14,863 $ 9,955
Savings:
NOW ....................................... 29,218 31,223
Regular and 90-day notice accounts ........ 15,109 13,779
Money market deposit accounts ............. 26,432 22,672
Advance payments from mortgagors .......... 230 131
-------- --------
Total savings ......................... 70,989 67,805
-------- --------
Time certificates of deposit ................... 57,035 57,322
-------- --------
Total deposits ........................ $142,887 $135,082
======== ========
</TABLE>
5. Commitments
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 $12.3 million at September 30, 1997.
6. Income Taxes
The effective rate for the three and nine months ended September 30, 1997 is
39%, which is less than the statutory rate of 42% primarily due to the status of
N.B. Securities, Inc. as a Massachusetts security corporation and a reduction in
the valuation allowance.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Unaudited Interim Information for September 30, 1997
Consolidated Balance Sheets
Total assets of Home Port Bancorp, Inc. (the "Company") increased $11.1 million,
or 5.8%, to $201 million at September 30, 1997 from $189.9 million at December
31, 1996. For the comparable nine month period in 1996 total assets increased
12.7% to $188.6 million from $167.3 million. Major balance sheet categories are
discussed in detail below.
Net loans outstanding (including loans held for sale) were $167.2 million at
September 30, 1997, an increase of $15.9 million, or 10.5%, from the $151.3
million at December 31, 1996. For the comparable period in 1996, net loans
increased by $18.8 million or 14.6%. Loan sales totaled $11.8 million during the
first nine months of 1997 as compared to $18.8 million in the 1996 period. The
dollar volume of loan originations for the first nine months of 1997 was
slightly (5%) lower than the comparable 1996 period. The real estate market in
Nantucket has been very strong in 1997, driven by sales of higher priced
properties. The total dollar volume of real estate sales has increased 25% in
the first 9 months of 1997 as compared to the similar 1996 period; while the
number of sales has declined by 8%. The average sales price has increased to
$454 thousand in 1997 from $366 thousand in 1996.
Total deposits increased by $7.8 million, or 5.8%, to $142.9 million at
September 30, 1997 from $135.1 million at December 31, 1996. The Bank usually
experiences a seasonal increase in deposits during the summer months. For the
comparable nine month period in 1996 deposits increased 20.7% or $23.6 million.
For the first nine months of 1997 average deposits increased 7.2% over the prior
year compared to a 9.6% increase in average deposits for the first nine months
of 1996.
During the first nine months of 1997 borrowed funds, which consist of Federal
Home Loan Bank advances, increased by $2.6 million to $34.9 million from $32.3
million at December 31, 1996. Seasonal growth in deposits during the third
quarter provided the funds to pay down borrowings by $10 million or 22.3% from
their levels at June 30, 1997. During the first six months of 1997 borrowings
were utilized to fund loan growth. For the comparable nine month period in 1996
borrowed funds decreased by $3.2 million to $29.6 million.
Total stockholders' equity increased by $1.3 million to $21.5 million at
September 30, 1997 from $20.1 million at December 31, 1996. This increase is a
result of net income of $2.4 million less cash dividends declared of $1.1
million and a $17 thousand unrealized gain on securities available for sale, net
of taxes.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Unaudited Interim Information for September 30, 1997
Results of Operations
For the quarter ended September 30, 1997, net income totaled $822 thousand, or
$0.45 per share, compared to $769 thousand, or $0.42 per share, for the quarter
ended September 30, 1996. For the nine months ended September 30, 1997 net
income totaled $2.4 million, or $1.32 per share, compared to $2.2 million, or
$1.21 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. Net interest
income increased by $584 thousand, or 9.7% for the nine months ending September
30, 1997, as compared the same period in the prior year. In the third quarter of
1997 net interest income increased by $141 thousand, or 6.7%, over the prior
year period. These increases are attributable to increases in average loans and
deposits offset by a small decrease in the net interest margin. The interest
rate spread and net interest margin were 4.06% and 4.71%, respectively, for the
first nine months of 1997 compared to 4.12% and 4.74% for the comparable period
in 1996.
For the nine months ending September 30, 1997, non-interest expenses increased
by $236 thousand, or 7.9%, compared to the prior year. For the third quarter of
1997 non-interest expenses increased by $106 thousand, or 10.4%, over the prior
year period. These increases were primarily due to increases in personnel costs,
resulting from wage increases, increases in staff and staff training to service
the business growth. Overall, the ratio of non-interest expenses to average
assets decreased to 2.22% in 1997 from 2.28% in 1996. The Bank's efficiency
ratio, which measures non-interest expenses in relation to income, improved to
43.84% for the nine months ended September 30, 1997 from 44.64% for the same
period 1996.
Return on Equity
Return on equity was 15.64% for the nine months ending September 30, 1997
compared to 15.69% for the same period in 1996. The ratio is essentially
unchanged because the increase in earnings was proportional to the increase in
equity base.
Provision for Loan Losses
The allowance for loan losses at September 30, 1997 was $2.6 million or 1.54% of
total loans compared to $2.4 million, or 1.54% of total loans, at December 31,
1996. During the three and nine months ending September 30, 1997 the Bank
recorded provisions for loan losses of $38 thousand and $113 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 recorded recoveries of $163 thousand and
charge-offs of $22 thousand for the nine month period ending September 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.
<PAGE>
Home Port Bancorp, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Unaudited Interim Information for September 30, 1997
Non-performing Loans and Other Real Estate Owned
At September 30, 1997, non-performing loans totaled $252 thousand, consisting
entirely of accruing loans 90 days past due. 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. Substantially all of the non-performing loans consist of first mortgage
loans on residential real estate. As of September 30, 1997, the Bank had no
other real estate owned compared to $61 thousand at December 31, 1996.
At September 30, 1997 management has identified $639 thousand 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.
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 September 30, 1997 and December 31, 1996 the Company's and the Bank's capital
ratios were in excess of regulatory requirements.
<PAGE>
Recent Accounting Developments
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 129, "Disclosure of
Information about Capital Structure", which will be effective for year end 1997
financial statements. The Company's disclosures currently comply with the
provisions of this statement.
In June 1997, the FASB issued SAFS #130, "Reporting Comprehensive Income." SFAS
#130 establishes standards for reporting and displaying comprehensive income,
which is defined as all changes to equity except investments and distributions
to shareholders. Net income is a component of comprehensive income, with all
other components referred to in the aggregate as other comprehensive income.
This statment is effective for 1998 financial statements.
<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.
Not applicable
Item 5. Other Information.
A cash dividend of $.20 per common share was declared on July
29, 1997. The dividend was paid on August 28, 1997 to
shareholders of record as of August 14, 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 September 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: November 7, 1997 By: /s/ William P. Hourihan, Jr.
----------------------------
William P. Hourihan, Vice President
Date: November 7, 1997 By: /s/ John M. Sweeney
-------------------
John M. Sweeney, Treasurer
(chief financial & accounting officer)
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