<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended June 30, 2000
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Commission File Number 0-17859
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NEW HAMPSHIRE THRIFT
BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
State of Delaware 02-0430695
(State of Incorporation) (IRS Employer I.D. Number)
9 Main St., PO Box 9, Newport, NH 03773
(Address of principal executive offices) (Zip Code)
603-863-0886
(Registrant's telephone number, including area code)
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.
Yes X No
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The number of shares outstanding of each of the issuer's classes of common
stock, $.01 par value per share, as of August 11, 2000, was 2,052,685
---------
Transitional small business disclosure format:
Yes No X
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NEW HAMPSHIRE THRIFT BANCSHARES, INC.
INDEX TO FORM 10-QSB
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PART I. FINANCIAL INFORMATION Page
Item 1 Financial Statements (unaudited):
Consolidated Statements of Financial Condition -
June 30, 2000 and December 31, 1999 1
Consolidated Statements of Operations -
For the Three Months and Six Months Ended June 30, 2000 and 1999 2
Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 2000 and 1999 3
Notes To Consolidated Financial Statements - 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations - 6
Item 3 Independent Accountants' Review Report 14
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Common 15
Shareholders
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
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Part I, Item 1.
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 2000 and December 31, 1999
(Unaudited)
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<CAPTION>
June 30, December 31,
2000 1999
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ASSETS
Cash and due from banks $ 15,423,404 $ 22,558,929
Federal funds sold 3,000,000 -
--------------- -------------
Cash and cash equivalents 18,423,404 22,558,929
Securities available-for-sale 39,512,367 47,540,736
Securities held-to-maturity 10,007,361 10,006,952
Other investments 2,474,199 2,032,999
Loans held-for-sale - -
Loans receivable, net 369,590,640 346,491,828
Accrued interest receivable 2,580,495 2,450,268
Bank premises and equipment, net 10,320,137 10,028,893
Investments in real estate 508,941 516,533
Real estate owned and property acquired in
settlement of loans 67,158 219,000
Goodwill 13,216,084 13,850,308
Other assets 5,299,717 5,751,884
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Total assets $ 472,000,503 $ 461,448,330
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Checking accounts (non-interest-bearing) $ 18,907,680 $ 21,597,464
Savings and interest-bearing checking accounts 210,141,486 208,831,598
Time deposits 153,153,611 136,209,027
--------------- --------------
Total deposits 382,202,777 366,638,089
Other borrowed funds 5,386,000 12,440,000
Securities sold under agreements to repurchase 8,734,489 14,038,117
Advances from Federal Home Loan Bank 25,000,000 22,000,000
Accrued expenses and other liabilities 6,887,762 2,688,977
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Total liabilities 428,211,028 417,805,183
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Guaranteed preferred beneficial interests
in junior subordinated debentures 16,400,000 16,400,000
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value per share:
2,500,000 shares authorized, no shares
issued or outstanding - -
Common stock, $.01 par value per share:
5,000,000 shares authorized, 2,479,858
shares issued and 2,052,685 shares outstanding
at June 30, 2000, and 5,000,000 shares
authorized, 2,479,858 shares issued and
2,106,685 shares outstanding at December 31, 1999 24,798 24,798
Paid-in capital 17,895,316 17,895,316
Retained earnings 14,859,977 14,044,427
Accumulated other comprehensive income (loss) (2,356,646) (2,271,617)
--------------- --------------
30,423,445 29,692,924
Treasury stock, at cost, 427,173 shares as of
June 30, 2000 and 373,173 shares as of
December 31, 1999 (3,033,970) (2,449,777)
--------------- --------------
Total shareholders' equity 27,389,475 27,243,147
--------------- --------------
Total liabilities and shareho $ 472,000,503 $ 461,448,330
=============== =============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
1
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2000 and 1999
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
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Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
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Interest income
Interest on loans $ 6,957,118 $ 4,767,295 $ 13,676,672 $ 9,381,596
Interest and dividends on investments 1,048,663 883,336 2,143,019 1,802,303
------------ ----------- ------------- -------------
Total interest income 8,005,781 5,650,631 15,819,691 11,183,899
------------ ----------- ------------- -------------
Interest expense
Interest on deposits 3,483,771 2,502,829 6,765,154 5,133,192
Interest on advances and other borrowed money 816,109 108,759 1,553,679 162,753
------------ ----------- ------------- -------------
Total interest expense 4,299,880 2,611,588 8,318,833 5,295,945
------------ ----------- ------------- -------------
Net interest income 3,705,901 3,039,043 7,500,858 5,887,954
Provision for loan losses 30,000 30,000 60,000 60,000
------------ ----------- ------------- -------------
Net interest income after provision for loan losses 3,675,901 3,009,043 7,440,858 5,827,954
------------ ----------- ------------- -------------
Other income
Loan origination and customer service fees 547,945 451,315 1,119,676 858,366
Net gain (loss) on sale of securities (31,412) (12,855) (42,329) 32,554
Gain on sale of property acquired in settlement of loans 512 25,481 512 25,504
Net gain on sale of loans 42,753 100,649 17,986 140,878
Net gain (loss) on sale of property and equipment - - - -
Rental income 112,296 85,065 218,697 170,577
Brokerage service income 29,100 49,875 66,940 85,280
------------ ----------- ------------- -------------
Total other income 701,194 699,530 1,381,482 1,313,159
------------ ----------- ------------- -------------
Other expenses
Salaries and employee benefits 1,713,018 1,224,044 3,401,222 2,425,570
Occupancy expenses 538,983 450,873 1,086,068 920,752
Advertising and promotion 77,929 72,459 147,493 155,542
Depositors' insurance 18,880 34,599 38,951 69,926
Outside services 123,999 141,189 250,357 266,466
Amortization of goodwill 239,935 61,789 485,711 123,578
Other expenses 725,271 436,395 1,288,535 862,398
------------ ----------- ------------- -------------
Total other expenses 3,438,015 2,421,348 6,698,337 4,824,232
------------ ----------- ------------- -------------
Income before provision for income taxes 939,080 1,287,225 2,124,003 2,316,881
Provision for income taxes 260,640 369,961 640,483 689,009
------------ ----------- ------------- -------------
Net income $ 678,440 $ 917,264 $ 1,483,520 $ 1,627,872
============ =========== ============= =============
Comprehensive net income $ 517,062 $ 142,899 $ 1,398,491 $ 303,633
============ =========== ============= =============
Earnings per common share, basic $ 0.31 $ 0.44 $ 0.70 $ 0.77
============ =========== ============= =============
Earnings per common share, assuming dilution $ 0.31 $ 0.43 $ 0.69 $ 0.77
============ =========== ============= =============
Dividends declared per common share $ 0.16 $ 0.16 $ 0.32 $ 0.32
============ =========== ============= =============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
2
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NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,483,520 $ 1,627,872
Depreciation and amortization 438,962 344,502
Amortization of goodwill 393,325 123,578
(Gain) loss from sale of debt securities available-for-sale 42,329 (32,554)
Provision for loan losses and other real estate owned losses 60,000 60,000
Gain on sale of property acquired in settlement of loan (512) (25,504)
(Increase) decrease in accrued interest and other assets 282,093 (1,558,803)
Change in deferred loan origination fees and cost, net 234,552 (203,783)
Increase in accrued expenses and other liabilities 4,198,785 1,799,440
---------------- ----------------
Net cash provided by operating activities 7,133,054 2,134,748
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (722,614) (206,028)
Proceeds from sale of bank premises and equipment - 7,995
Proceeds from sale of debt securities available-for-sale 8,962,665 15,940,595
Purchase of securities available-for-sale (1,977,255) (13,871,073)
Purchase of Federal Home Loan Bank stock (441,200) -
Maturities of securities available for sale 1,000,221 250,000
Net increase in loans to customers (23,505,704) (15,733,000)
Proceeds from sale of other real estate owned 219,512
Adjustment to NLT Goodwill 240,899 -
---------------- ----------------
Net cash used in investing activities (16,223,476) (13,611,511)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 15,564,688 (4,401,241)
Net decrease in repurchase agreements (5,303,628) (3,104,196)
Increase (decrease) in advances from Federal Home Loan Bank
and other borrowings (4,054,000) 12,849,000
Dividends paid (667,970) (673,371)
Payments to acquire treasury stock (584,193) -
---------------- ----------------
Net cash provided by financing activities 4,954,897 4,670,192
---------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,135,525) (6,806,571)
CASH AND CASH EQUIVALENTS, beginning of period 22,558,929 16,284,558
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 18,423,404 $ 9,477,987
=============== ===============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
3
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NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
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June 30, June 30,
2000 1999
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposit accounts $ 6,782,012 $ 5,155,360
Interest on advances and other borrowed money 1,518,265 119,670
----------------- -----------------
Total interest paid $ 8,300,276 $ 5,275,030
================= =================
Income taxes, net $ 557,500 $ 530,400
================= =================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfers from loans to real estate acquired through
foreclosure $ 67,158 $ 17,250
------------------ -----------------
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
4
<PAGE>
HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
Note A - Basis of Presentation
------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and, accordingly, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
management of New Hampshire Thrift Bancshares, Inc., all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
Note B - Accounting Policies
----------------------------
The accounting principles followed by New Hampshire Thrift Bancshares, Inc. and
Subsidiaries and the methods of applying these principles which materially
affect the determination of financial position, results of operations, or
changes in financial position are consistent with those used for the year 1999.
The consolidated financial statements of New Hampshire Thrift Bancshares, Inc.
include its wholly owned subsidiaries, NHTB Capital Trust I and Lake Sunapee
Bank, fsb, and its subsidiaries Lake Sunapee Group, Inc., and Lake Sunapee
Financial Services Corp. All significant intercompany balances have been
eliminated.
Note C - Stock Repurchases
--------------------------
On March 2, 2000, the Board of Directors of the Company authorized a stock
repurchase program under which the Company could repurchase up to 124,000 shares
of its common stock. During the quarter ended March 31, 2000, the Company
repurchased 44,000 shares of its common stock at a cost of approximately
$519,505. During the quarter ended June 30, 2000, the Company purchased 10,000
shares of its common stock at a cost of approximately $126,563, of which $61,875
was settled in July of 2000.
The Company intends to hold the shares repurchased as treasury shares. The
Company may utilize such shares to fund any stock benefit or compensation plan
or for any other purpose of the Board of Directors of the Company deems
advisable in compliance with applicable law.
Note D - Impact of New Accounting Standard
------------------------------------------
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133, as amended by SFAS No. 138,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. In management's opinion, SFAS No. 133 when
adopted will have no material effect on the Company's consolidated financial
statements.
5
<PAGE>
Part I. Item 2.
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
New Hampshire Thrift Bancshares, Inc. (the "Company"), a Delaware
holding company organized on July 5, 1989, is the parent company of Lake Sunapee
Bank, fsb (the "Bank"), a federally chartered savings bank. The Bank is a member
of the Federal Deposit Insurance Corporation ("FDIC") and its deposits are
insured through the Savings Association Insurance Fund ("SAIF"). The Bank is
regulated by the Office of Thrift Supervision ("OTS").
The Company's profitability is derived from its subsidiary, Lake
Sunapee Bank, fsb. The Bank's earnings in turn are generated from the net income
from the yield on its loan and investment portfolios less the cost of its
deposit accounts and borrowings. These core revenues are supplemented by loan
origination fees, retail banking service fees, gains on the sale of investment
securities, and brokerage fees. The Bank passes its earnings to the Company to
the extent allowed by OTS regulations. Current regulations enable the Bank to
pay to the Company the higher of an amount equal to seventy-five percent of the
Bank's prior four quarter earnings or up to fifty percent of excess capital plus
total current year earnings. As of June 30, 2000, the Company had $967,170
available, which it plans to use to continue its annual dividend payout of $0.64
per share and its capital securities interest payments.
Forward-looking Statements
The preceding and following discussion may contain certain
forward-looking statements, which are based on management's current expectations
regarding economic, legislative, and regulatory issues that may impact the
Company's earnings in future periods. Factors that could cause future results to
vary materially from current management expectations include, but are not
limited to: general economic conditions, changes in interest rates, deposit
flows, real estate values, and competition; changes in accounting principles,
policies, or guidelines; changes in legislation or regulation; and other
economic, competitive, governmental, regulatory and technological factors
affecting the Company's operations, pricing, products and services. In
particular, these issues may impact management's estimates used in evaluating
market risk and interest rate risk in it GAP and NPV tables, loan loss
provisions, classification of assets, accounting estimates and other estimates
used throughout this discussion. The Company or the Bank does not undertake to
update any forward-looking statement, whether written or oral, that may be made
from time to time by or on behalf of the Company or the Bank.
Capital Securities
On August 12, 1999, NHTB Capital Trust I (the "Trust"), a Delaware
business trust formed by the Company, completed the sale of $16.4 million of
9.25% Capital Securities (the "Capital Securities"). The Trust also issued
common securities to the Company and used the net proceeds from the offering to
purchase a like amount of 9.25% Junior Subordinated Deferrable Interest
Debentures (the "Debentures') of the Company. The Debentures are the sole assets
of the Trust and are eliminated, along with the related income statement
effects, in the consolidated financial statements. The Company contributed $15.0
million from the sale of the Debentures to the Bank as Tier I Capital to support
the acquisition of three New London Trust, FSB, ("NLT") branches. Total expenses
associated with the offering approximating $900,000 are included in other assets
and are being amortized on a straight-line basis over the life of the
Debentures.
6
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NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The Capital Securities accrue and pay distributions quarterly at an
annual rate of 9.25% of the stated liquidation amount of $10 per Capital
Security. The first distribution was made on September 30, 1999. The Company has
fully and unconditionally guaranteed all of the obligations of the Trust. The
guaranty covers the quarterly distributions and payments on liquidation or
redemption of the Capital Securities, but only to the extent that the Trust has
funds necessary to make these payments.
The Capital Securities are mandatorily redeemable upon the maturing of
the Debentures on September 30, 2029 or upon earlier redemption as provided in
the indenture. The Company has the right to redeem the Debentures, in whole or
in part on or after September 20, 2004 at the liquidation amount plus any
accrued but unpaid interest to the redemption date.
Financial Condition
During the first six months of 2000, total assets increased by
$10,552,173, or 2.29% from $461,448,330 to $472,000,503. Cash and cash
equivalents decreased $4,135,525 from December 31, 1999, as cash held at the end
of the year for potential year 2000 issues, which did not materialize, was
returned to the Federal Reserve Bank.
Total gross loans increased $22,901,533 from $350,117,816 to
$373,019,349, or 6.54%, during the first half of 2000. During this same period,
the Bank originated $66.3 million in loans, had pay-offs of approximately $33.2
million and normal amortization of approximately $11.7 million. Activity from
sold loans resulted in a net decrease of approximately $1.3 million. As interest
rates began to rise in 1999 and continued into 2000, many customers sought
variable rate loan programs rather than fixed rate programs. The Bank elected to
hold many of these variable rate loans in portfolio. As the Bank originates
fixed rate loans, it sells much of this product into the secondary market,
retaining the servicing. Selling fixed rate loans into the secondary market
helps protect the Bank against interest rate risk and provides the Bank with a
consistent fee income stream. The proceeds from the sale of loans are then
available to lend back into the Bank's market area and to purchase investment
securities. At June 30, 2000, the Bank had $153,023,249 in its servicing
portfolio. The Bank expects to continue to sell fixed rate loans into the
secondary market in order to manage interest rate risk. Market risk exposure
during the production cycle is managed through the use of secondary market
forward commitments. At June 30, 2000, adjustable rate mortgages comprised
approximately 77% of the Bank's real estate mortgage loan portfolio. This is
consistent with prior years.
As of June 30, 2000, gross investment securities decreased $7,275,394,
or 11.50% from $63,281,595 to $56,006,201 (at amortized cost). During the first
six months of 2000, the Bank sold approximately $8.9 million of investment
securities to provide liquidity and to fund loan activity. The Bank's net
unrealized loss was $3,700,908 at December 31, 1999 compared to $4,012,274 at
June 30, 2000. This change of $311,366 reflects an increase in interest rates at
the end of the second quarter and the corresponding decrease in investment
security market values.
Real estate owned and property acquired in settlement of loans
decreased by $151,842, or 69.33% to $67,158 from $219,000 at year-end. This
total reflects one property, which is located in Newport, New Hampshire. A
25-acre tract of land in Hillsboro, New Hampshire was sold during the second
quarter of 2000.
7
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NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Deposits increased by $15,564,688, or 4.25% to $382,202,777 at June 30,
2000, from $366,638,089 at December 31, 1999. Non-interest bearing checking
accounts decreased $2,689,784, or 12.45% for the first half of 2000. During this
period, savings and interest-bearing checking accounts increased $1,309,888, or
0.63%. Time deposits also increased $16,944,584, or 12.44%. The Bank offered
three time deposit specials during the first quarter in an effort to retain and
attract new deposits.
Other borrowed funds decreased by $7,054,000 from $12,440,000 at
year-end to $5,386,000 at June 30, 2000. During the first six months of 2000,
the Bank was able to repay a portion of its overnight advance using cash that
had been held for potential year 2000 issues, proceeds from the sale of
investment securities and deposit inflows. A portion was converted into
longer-term Federal Home Loan Bank (FHLB) advances.
Securities sold under agreement to repurchase decreased by $5,303,628,
to $8,734,489 from $14,038,117, as many business customers settled seasonal
transactions during the first quarter of 2000. Repurchase agreements are
collateralized by the Bank's government and agency investment securities.
Long-term advances from the FHLB increased by $3,000,000 from
$22,000,000 at December 31, 1999, to $25,000,000 at June 30, 2000. During the
first six months of 2000, the Bank converted a portion of its overnight advances
into longer-term advances to lengthen maturities and improve its interest rate
sensitivity position.
Accrued expenses and other liabilities increased $4,198,785, to
$6,887,762 at June 30, 2000, from $2,688,977 at December 31, 1999. Secondary
market loan payments held in escrow at June 30, 2000 accounted for the majority
of the increase.
Liquidity and Capital Resources
The Bank is required to maintain a 5% ratio of liquid assets to net
withdrawable funds. At June 30, 2000, the Bank's ratio of 9.12% exceeded
regulatory requirements for long-term liquidity.
The Bank's source of funds comes primarily from net deposit inflows,
loan amortizations, principal pay downs from loans, sold loan proceeds, and
advances from the FHLB. At June 30, 2000, the Bank had approximately
$115,000,000 in additional borrowing capacity from the FHLB.
At June 30, 2000, shareholders' equity totaled $27,389,475, or 5.80% of
total assets, compared to $27,243,147, or 5.90% of total assets at year-end
1999. The Company's Tier I core capital was 6.65% at June 30, 2000 compared to
6.74% at year-end. The increase in shareholders' equity of $146,328 reflects net
income of $1,483,520, the payment of $667,970 in common stock dividends, the
increase of $584,193 in treasury stock and the change of $85,029 in accumulated
other comprehensive loss. The change in other comprehensive loss reflects a rise
in interest rates during the second quarter of 2000 and the corresponding
decline in investment security market values. On March 3, 2000, the Company
announced a stock repurchase program. Repurchases will be made from time to time
at the discretion of management. The stock repurchase program will continue
until the repurchase of 124,000 shares is complete. As of June 30, 2000, 54,000
shares of common stock had been repurchased at a cost of approximately $646,068.
8
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
For the six months ended June 30, 2000, net cash provided by operating
activities was $7,133,054, versus $2,134,748 for the same period in 1999. A net
change in amortization of goodwill, accrued interest and other assets, and
accrued expenses and other liabilities accounted for the majority of the
increase.
Net cash used in investing activities amounted to $16,223,476 for the
six months ended June 30, 2000, compared to $13,611,511 for the same period in
1999 an increase of $2,611,965. Loan activity accounted for the majority of the
increase. Net investment security activity provided cash flows of $7,544,431 in
2000 compared to $2,319,522 in 1999. During the first six months of 2000,
purchases of investment securities were $2,418,455 while sales, calls and
maturities of investment securities totaled $9,962,886. Loans to customers used
cash flows of $23,241,522 for the six months ended June 30, 2000, compared to
$15,733,000 for the same period in 1999.
At June 30, 2000, net cash flows provided by financing activities
amounted to $4,954,897 compared to $4,670,192 for the same period in 1999, a
change of $284,705. A net increase in deposits and repurchase agreements of
$17,766,497 from June 30, 1999 to June 30, 2000 offset by a decrease in advances
from the FHLB and other borrowings of $16,903,000, for the same period,
accounted for majority of the change. Deposits increased $15,564,688 in 2000
compared to a decrease of $4,401,241 in 1999, a change of $19,965,929.
Repurchase agreements decreased $5,303,628 compared to $3,104,196 for the same
period in 1999. FHLB advances and other borrowings decreased $4,054,000 during
the first half of 2000 compared to an increase of $12,849,000 for the same
period last year, a change of $16,903,000. The net change in deposits,
repurchase agreements, FHLB advances and other borrowing amounted to $863,497.
The Bank expects to be able to fund loan demand and other investing
during 2000 by continuing to use funds provided from customer deposits, as well
as the FHLB's advance program. Management is not aware of any trends, events, or
uncertainties that will have or that are reasonably likely to have a material
effect in the Company's liquidity, capital resources or results of operations.
Banks are required to maintain tangible capital, core leverage capital,
and total risk based capital of 1.50%, 4.00%, and 8.00%, respectively. As of
June 30, 2000, the Bank's ratios were 6.65%, 6.65%, and 11.34%, respectively,
well in excess of the regulators' requirements.
Book value per share was $13.34 at June 30, 2000, versus $13.03 per
share at June 30, 1999. The increase in paid-in capital and retained earnings
and the decrease in the number of shares outstanding accounted for the increase
in book value per share.
Interest Rate Sensitivity
The principal objective of the Bank's interest rate management function
is to evaluate the interest rate risk inherent in certain balance sheet accounts
and determine the appropriate level of risk given the Bank's business
strategies, operating environment, capital and liquidity requirements and
performance objectives and to manage the risk consistent with the Board of
Directors' approved guidelines. The Bank's Board of Directors has established an
Asset/Liability Committee ("ALCO") to review its asset/liability policies and
interest rate position monthly. Trends and interest rate positions are reported
to the Board of Directors on a quarterly basis.
9
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Gap analysis is used to examine the extent to which assets and
liabilities are "rate sensitive". An asset or liability is said to be interest
rate sensitive within a specific time-period if it will mature or reprice within
that time. The interest rate sensitivity gap is defined as the difference
between the amount of interest-earning assets maturing or repricing within a
specified period of time and the amount of interest-bearing liabilities maturing
or repricing within the same specified period of time. The strategy of matching
rate sensitive assets with similar liabilities stabilizes profitability during
periods of interest rate fluctuations.
The Bank's one-year gap at June 30, 2000, was -6.06%, compared to the
December 31, 1999 gap of -9.47%. The Bank continues to hold in portfolio
adjustable rate mortgages, which reprice at one, three, and five-year intervals.
The Bank sells certain fixed-rate mortgages into the secondary market in order
to minimize interest rate risk.
The Bank's gap, of approximately negative six percent at June 30, 2000,
means net interest income would increase if interest rates trended downward. The
opposite would occur if interest rates were to rise. Management feels that
maintaining the gap within ten points of the parity line provides adequate
protection against severe interest rate swings. In an effort to maintain the gap
within ten points of the parity, the Bank may utilize the FHLB advance program
to control the repricing of a segment of liabilities.
As another part of its interest rate risk analysis, the Bank uses an
interest rate sensitivity model, which generates estimates of the change in the
Bank's net portfolio value ("NPV") over a range of interest rate scenarios. The
OTS produces the data quarterly using its own model and data submitted by the
Bank.
NPV is the present value of expected cash flows from assets,
liabilities and off-balance sheet contracts. The NPV ratio, under any rate
scenario, is defined as the NPV in that scenario divided by the market value of
assets in the same scenario. Modeling changes require making certain
assumptions, which may or may not reflect the manner in which actual yields and
costs respond to the changes in market interest rates. In this regard, the NPV
model assumes that the composition of the Bank's interest sensitive assets and
liabilities existing at the beginning of a period remain constant over the
period being measured and that a particular change in interest rates is
reflected uniformly across the yield curve. Accordingly, although the NPV
measurements and net interest income models provide an indication of the Bank's
interest rate risk exposure at a particular point in time, such measurements are
not intended to and do not provide a precise forecast of the effect of changes
in market rates on the Bank's net interest income and will likely differ from
actual results.
The following table sets forth the Bank's NPV as of March 31, 2000 (the latest
NPV analysis prepared by the OTS), as calculated by the OTS.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV Assets
in Rates $ Amount $ Change % Change NPV Ratio Change
------------------------ ----------------- ---------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
+300 bp.......... 33,813 -21,530 - 39% 7.69% - 423 bp
+200 bp.......... 41,129 -14,215 - 26% 9.18% - 274 bp
+100 bp.......... 48,372 - 6,971 - 13% 10.60% - 132 bp
0 bp.......... 55,343 -- -- 11.92% --
- 100 bp.......... 61,533 6,190 + 11% 13.05% + 113 bp
- 200 bp.......... 66,270 10,927 + 20% 13.89% + 196 bp
- 300 bp.......... 70,917 15,574 + 28% 14.68% + 276 bp
</TABLE>
10
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Allowance for Loan Losses and Asset Quality
The Bank considers many factors in determining the allowance for loan
losses. These include the risk and size characteristics of loans, the prior
years' loss experience, the levels of delinquencies, the prevailing economic
conditions, the number of foreclosures, unemployment rates, interest rates, and
the value of collateral securing the loans. No changes were made to the Bank's
procedures with respect to maintaining the loan loss allowances as a result of
any regulatory examinations.
Additionally, the Bank's commercial loan officers review the financial
condition of commercial loan customers on a regular basis and perform visual
inspections of facilities and inventories. The Bank also has an internal audit
and compliance program. Results of the audit and compliance programs are
reported directly to the Audit Committee of the Bank's Board of Directors.
The allowance for loan losses at June 30, 2000 was $4,357,836, compared
to $4,320,563 at year-end 1999. As of June 30, 2000, the allowance included
$4,056,663 in general reserves compared to $4,111,059 at year-end 1999. The
total allowance represented 1.17% of total loans at June 30, 2000 versus 1.23%
at year-end 1999. The total allowance for loan losses as a percentage of
non-performing loans was 279.54% at June 30, 2000, compared to 246.85% at
December 31, 1999. During the first six months of 2000, the Bank had net
charge-offs of $22,726 compared to net recoveries of $8,412 for the same period
in 1999.
Loans classified for regulatory purposes as loss, doubtful, substandard
or special mention do not result from trends or uncertainties which the Bank
reasonably expects will materially impact future operating results, liquidity,
or capital resources. As of June 30, 2000, there were no other loans not
included in the table below or discussed where known information about the
possible credit problems of borrowers caused management to have doubts as to the
ability of the borrower to comply with present loan repayment terms and which
may result in disclosure of such loans in the future.
Total classified loans, excluding special mention, as of June 30, 2000
were $5,452,541 compared to $2,988,696 at December 31, 1999. At June 30, 2000,
loans classified as 90 days delinquent were $453,238 compared to $711,149 at
December 31, 1999. At June 30, 2000, non-earning assets were $1,105,342 compared
to $1,039,156 at year-end 1999. Total non-performing assets amounted to
$1,625,738 and $1,969,305, for June 30, 2000 and December 31, 1999,
respectively.
The following table shows the breakdown of non-performing assets and
non-performing assets as a percentage of total assets (dollars in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------------- ----------------------
<S> <C> <C> <C> <C>
90 day delinquent loans (1) $ 453 0.10% $ 711 0.15%
Non-earning assets (2) 1,105 0.23% 1,039 0.22%
Other real estate owned 67 0.01% 219 0.05%
----------------------- ----------------------
Total non-performing assets $ 1,625 0.34% $ 1,969 0.43%
----------------------- ----------------------
Impaired loans $ 1,105 0.23% $ 1,039 0.22%
----------------------- ----------------------
</TABLE>
(1) All loans 90 days or more delinquent are placed on a non-accruing status.
(2) Loans considered to be uncollectible, pending foreclosure, impaired, or in
bankruptcy proceeding, are placed on a non-earning status.
11
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The following table sets forth the allocation of the loan loss valuation
allowance and the percentage of loans in each category to total loans (dollars
in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------------ -----------------------
<S> <C> <C> <C> <C>
Real estate loans -
Conventional $ 1,970 78% $ 1,953 78%
Construction 148 2% 147 2%
Collateral and Consumer 134 11% 133 11%
Commercial and Municipal 1,815 9% 1,800 9%
Impaired Loans 211 - 209 -
Other loans 80 - 79 -
------------------------ -----------------------
Valuation allowance $ 4,358 100% $ 4,321 100%
------------------------ -----------------------
Total valuation allowance as a
percentage of total loans 1.17% 1.23%
--------------- ---------------
</TABLE>
Results of Operations
Net income for the six months ended June 30, 2000, was $1,483,520, or
$0.69 per common share (assuming dilution) compared to $1,627,872, or $0.77 per
common share (assuming dilution) for the same period in 1999. Net income for the
second quarter in 2000 was $678,440, or $0.31 per share (assuming dilution) as
compared to $917,264, or $0.43 per share (assuming dilution) for the same period
in 1999, a decrease of $144,352, or 8.87% and $238,824, or 26.04%, respectively.
Net interest income increased $1,612,904, or 27.39%, for the first six
months of 2000 and $666,858, or 21.94%, for the second quarter. The increase was
primarily due to an increase in loan volume and transaction-type deposit
accounts associated with the acquisition of three NLT branches in October 1999.
Total interest income for the six months ended June 30, 2000 increased
by $4,635,792, or 41.45%, to $15,819,691 from $11,183,899 for the same period in
1999. For the three months ended June 30, 2000, total interest income increased
by $2,355,150, or 41.68%, to $8,005,781 from $5,650,631 for the same period in
1999. Interest on loans increased $4,295,076, or 45.78%, for the first half of
2000 and $2,189,823, or 45.93%, for the quarter ended June 30, 2000. Total
loans held in portfolio increased from $254,964,105 at June 30, 1999 to
$373,019,349 at June 30, 2000, an increase of $118,055,244. The majority of the
increase was attributed to the acquisition of approximately $80 million in loans
from NLT. The remainder was associated with the Bank's increased volume during
the first half of 2000. Interest and dividends on investment securities
increased $340,716 from $1,802,303 for the six months ended June 30, 1999 to
$2,143,019 for the same period in 2000. For the second quarter, interest and
dividends on investment securities increased $165,327 from $883,336 in 1999 to
$1,048,663 for the same period in 2000. A higher overall yield and increased
balances in investment securities accounted for the change.
For the six months ended June 30, 2000 total interest expense increased
by $3,022,888, or 57.08%, to $8,318,833 from $5,295,945 for the same period in
1999. For the three months ended June 30, 2000, total interest expense increased
by $1,688,292, or 64.65%, to $4,299,880 from $2,611,588 for the same period in
1999. For the six months and three months ended June 30, 2000, interest on
deposits increased $1,631,962 and $980,942, respectively. The majority of the
increase was attributed to the acquisition of
12
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
approximately $100 million in deposits from NLT. Interest on advances and other
borrowed money, including the debentures, increased $1,390,926 from $162,753 for
the six months ended June 30 1999 to $1,553,679 for the same period in 2000. For
the second quarter of 2000, interest on advances and other borrowed money,
including the debentures, increased $707,350 from $108,759 for 1999 to $816,109
for 2000. An increase in the outstanding balances of FHLB advances, other
borrowed money and the debenture accounted for the majority of the change. FHLB
advances and other borrowed money amounted to $12,849,000 at the end of the
second quarter in 1999 compared to $30,386,000 for the same period in 2000. The
debenture was issued on August 12, 1999.
Net provision for loan losses totaled $60,000 for the six months ended
June 30, 2000 and 1999. The total allowance for loan losses represented 1.17% of
total loans at June 30, 2000 compared to 1.26% for the same period in 1999. The
allowance for loan losses totaled $4,357,836 at June 30, 2000, compared to
$3,185,480 for the same period in 1999. The allowance acquired from NLT totaled
$1,421,674.
For the six months ended June 30, 2000, total other income increased by
$68,323, or 5.20% from $1,313,159 in 1999 to $1,381,482 for the same period in
2000. For the quarter ended June 30, 2000, total other income increased by
$1,664, or 0.24%, from the same period in 2000. The change was primarily a
result of a $261,310, or 30.44% and $96,630, or 21.41% increase in loan
origination and customer service fees and a $48,120, or 28.21% and $27,231, or
32.01% increase in rental income, respectively. As mentioned above, the Bank
originated $66.3 million of loans during the first half of 2000. Rental income
increased as the Bank acquired rental property as part of the NLT acquisition.
Gains on the sale of loans decreased $122,892 and $57,896, respectively. As
mentioned above, customers are electing to write adjustable rate loans, which
the Bank may hold in portfolio.
Total operating expenses increased $1,874,105, or 38.85% and
$1,016,667, or 41.99% for the six months and the three months ended June 30,
2000, respectively. Additional staffing, occupancy costs and goodwill associated
with the acquisition of three NLT branches accounted for the majority of the
change. In addition, total costs of approximately $130,000 before taxes were
charged to expense during the quarter ended June 30, 2000. The expenses were
related to the Bank's consolidation of its two Andover, New Hampshire offices
and a one-time write-off of two balance sheet accounts.
13
<PAGE>
The Board of Directors
New Hampshire Thrift Bancshares, Inc.
Newport, New Hampshire
Independent Accountants' Report
-------------------------------
We have reviewed the accompanying consolidated statement of financial condition
of New Hampshire Thrift Bancshares, Inc. and Subsidiaries as of June 30, 2000,
the related consolidated statements of operations and cash flows for the six-
month period then ended and the related consolidated statement of operations for
the three-month period then ended. These consolidated financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we no not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
SHATSWELL, MacLEOD & COMPANY, P.C.
August 8, 2000
<PAGE>
Part II.
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
There is no material litigation pending in which the Company or its
subsidiary is a party or which the property of the Company or its
subsidiary is subject.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Common Shareholders
------------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A.) Exhibits:
Exhibit 27: Financial Data Schedules (EDGAR filing only)
B.) Reports on Form 8-K:
None
15
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARIES
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.
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
-------------------------------------
(Registrant)
Date: August 14, 2000 /s/ Stephen W. Ensign
---------------------------- ---------------------
Stephen W. Ensign
Vice Chairman of the Board, President
and Chief Executive Officer
Date: August 14, 2000 /s/ Stephen R. Theroux
---------------------------- ----------------------
Stephen R. Theroux
Executive Vice President and
Chief Operating Officer
Date: August 14, 2000 /s/ Daryl J. Cady
---------------------------- -----------------
Daryl J. Cady
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
16
