UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1996
-------------
Commission file number 33-47248
-------------
WEETAMOE BANCORP
(Exact name of registrant as specified in its charter)
Massachusetts 04-3061936
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Slade's Ferry Avenue 02726
Somerset, Massachusetts (Zip Code)
(Address of principal executive offices)
(508) 675-2121
(Registrant's telephone number, including area code)
Check 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 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common stock ($.01 par value) 2,762,651.151 shares as of June 30, 1996.
- -----------------------------------------------------------------------
Traditional Small Business Disclosure Format:
Yes [X] No [ ]
PART I
ITEM 1
Financial Statements
- --------------------
WEETAMOE BANCORP
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 8,101,808 $ 9,039,970
Federal funds sold 13,000,000 9,500,000
Investment securities 18,839,576 21,835,682
Securities available for sale 28,159,522 36,730,660
Federal Home Loan Bank Stock 495,400 290,700
Loans (net) 155,072,051 148,069,415
Premises and equipment 3,595,884 3,700,054
Other real estate owned 350,000 633,467
Accrued interest receivable 1,599,306 1,820,323
Other assets 2,732,353 1,801,383
---------------------------------
TOTAL ASSETS $231,945,900 $233,421,654
=================================
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits $210,980,336 $214,220,689
Short term borrowings 1,558,299 741,773
Other liabilities 1,073,667 632,467
---------------------------------
TOTAL LIABILITIES $213,612,302 $215,594,929
STOCKHOLDERS' EQUITY:
Common stock 27,627 26,172
Paid in capital 14,388,643 13,136,923
Retained earnings 4,355,170 4,630,608
Net unrealized gain (loss) on investments
in available for sale securities (437,842) 33,022
---------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 18,333,598 $ 17,826,725
---------------------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $231,945,900 $233,421,654
=================================
</TABLE>
CONSOLIDATED STATEMENT OF INCOME AND EXPENSE
(UNAUDITED)
6 MONTHS ENDING JUNE 30,
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $6,975,018 $6,135,820
Interest and dividends on investments 1,531,425 1,411,188
Other interest 366,030 236,442
--------------------------
Total interest and dividend income 8,872,473 7,783,450
--------------------------
INTEREST EXPENSE:
Interest on deposits 4,227,961 3,341,598
Interest on other borrowed funds 23,752 33,527
--------------------------
Total interest expense 4,251,713 3,375,125
--------------------------
Net interest and dividend income 4,620,760 4,408,325
--------------------------
PROVISION FOR LOAN LOSSES 300,000 300,000
Net interest and dividend income
after provision for loan losses 4,320,760 4,108,325
--------------------------
OTHER INCOME:
Service charges on deposit accounts 414,952 376,175
Security gains (losses) net 92,560 (15,129)
Other income 134,004 124,765
--------------------------
Total other income 641,516 485,811
--------------------------
OTHER EXPENSE:
Salaries and employee benefits 1,977,462 1,973,701
Occupancy expense 254,015 234,158
Equipment expense 208,767 203,647
Gain on sale of other real estate owned (657) (192)
Write down of other real estate owned 30,000 14,578
Other expense 767,471 895,097
--------------------------
Total other expense 3,237,058 3,320,989
--------------------------
Income before income taxes 1,725,218 1,273,147
Income taxes 650,664 485,276
--------------------------
NET INCOME $1,074,554 $ 787,871
==========================
Earnings per share $ 0.39 $ 0.29
==========================
Average shares outstanding(1) 2,757,051 2,727,778
==========================
<FN>
- -------------------
<F1> Adjusted for 5% stock dividend issued in 1996.
</FN>
</TABLE>
CONSOLIDATED STATEMENT OF INCOME AND EXPENSE
(UNAUDITED)
3 MONTHS ENDING JUNE 30,
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $3,508,225 $3,127,836
Interest and dividends on investments 710,291 736,664
Other interest 204,493 197,293
--------------------------
Total interest and dividend income 4,423,009 4,061,793
--------------------------
INTEREST EXPENSE:
Interest on deposits 2,085,588 1,893,122
Interest on other borrowed funds 10,609 10,881
--------------------------
Total interest expense 2,096,197 1,904,003
--------------------------
Net interest and dividend income 2,326,812 2,157,790
--------------------------
PROVISION FOR LOAN LOSSES 150,000 150,000
Net interest and dividend income
after provision for loan losses 2,176,812 2,007,790
--------------------------
OTHER INCOME:
Service charges on deposit accounts 212,407 187,259
Security gains (losses) net 41,765 14,274
Other income 65,176 59,943
--------------------------
Total other income 319,348 261,476
--------------------------
OTHER EXPENSE:
Salaries and employee benefits 1,003,715 996,227
Occupancy expense 118,789 116,684
Equipment expense 104,074 100,451
Gain on sale of other real estate owned 0 (192)
Write down of other real estate owned 0 0
Other expense 403,772 453,210
--------------------------
Total other expense 1,630,350 1,666,380
--------------------------
Income before income taxes 865,810 602,886
Income taxes 327,016 230,724
--------------------------
NET INCOME $ 538,794 $ 372,162
==========================
Earnings per share $ 0.20 $ 0.14
==========================
Average shares outstanding(1) 2,760,878 2,729,873
==========================
<FN>
- -------------------
<F1> Adjusted for 5% stock dividend issued in 1996.
</FN>
</TABLE>
WEETAMOE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Interest and dividends received $ 8,757,676 $ 7,574,600
Service charges and other income received 548,956 500,940
Interest paid (4,267,089) (3,358,678)
Cash paid to suppliers and employees (2,984,539) (3,217,250)
Income taxes paid (851,105) (516,153)
---------------------------
Net cash provided by (used in) operating activities 1,203,899 983,459
---------------------------
Cash flows from investing activities:
Maturities of securities available for sale 8,415,982 472,610
Proceeds from sales of securities available for sale 651,693 1,304,478
Purchases of securities available for sale (1,019,636) (3,801,242)
Proceeds from sale of other real estate owned 254,124 67,192
Proceeds from sale of fixed assets 0 0
Purchases of Federal Home Loan Bank Stock (204,700) 0
Proceeds from maturities of investment securities 10,285,528 3,905,497
Purchases of investment securities (7,203,019) (10,868,920)
Net (increase) decrease in loans (7,299,615) (7,759,743)
Capital expenditures (97,675) (87,627)
Recoveries of previously charged-off loans 80,185 11,938
Increase (decrease) in other liabilities (451,514) (166,375)
(Increase) decrease in federal funds sold (3,500,000) (7,000,000)
(Increase) decrease in other assets 467,230 406,607
---------------------------
Net cash provided by (used in) investing activities 378,583 (23,515,585)
---------------------------
Cash flows from financing activities:
Proceeds from issuance of stock 127,227 98,159
Net increase (decrease) in demand deposits, NOW,
money market and savings accounts (1,466,440) (7,966,511)
Net increase (decrease) in time deposits (1,773,913) 32,041,077
Net increase (decrease) in short-term borrowings 816,526 306,512
Dividends paid (224,044) (198,102)
---------------------------
Net cash provided by (used in) financing activities (2,520,644) 24,281,135
---------------------------
Net decrease in cash and cash equivalents (938,162) 1,749,009
Cash and cash equivalents at beginning of period 9,039,970 7,438,167
---------------------------
Cash and cash equivalents at end of period $ 8,101,808 $ 9,187,176
===========================
</TABLE>
WEETAMOE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1996 and 1995
(Unaudited)
(Continued)
Reconciliation of net income to net cash used in operating activities:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net income $1,074,554 $ 787,871
-------------------------
Adjustments to reconcile net income to net cash
used in operating activities:
Amortization of organization cost 0 3,440
Gain on sale of fixed asset 0 0
Depreciation and amortization 201,845 209,020
Provision for loan losses 300,000 300,000
Increase (decrease) in taxes payable (200,441) (30,877)
(Increase) decrease in interest receivable 221,017 (206,733)
Increase (decrease) in interest payable (15,376) 16,447
Increase (decrease) in accrued expenses 45,624 5,848
Increase in prepaid expenses (24,293) (128,955)
Accretion of securities, net of amortization (86,402) (11,493)
Accretion of securities available for sale, net
of amortization (166,206) (19,329)
(Gain) loss on sale of other real estate owned (657) (192)
Writedown of other real estate owned 30,000 14,578
(Gain) loss on sale of securities available for
sale, net (92,560) 15,129
Change in unearned income (83,206) 28,705
-------------------------
Total adjustments $ 129,345 $ 195,588
-------------------------
Net cash used in operating activities $1,203,899 $ 983,459
=========================
Non-cash investing activities:
Transfers to other real estate owned $ 0 $1,298,104
=========================
Origination of loans for the sale of other real
estate owned $ 110,000 $ 60,000
=========================
</TABLE>
WEETAMOE BANCORP AND SUBSIDIARY, SLADE'S FERRY TRUST COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1996
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 10QSB 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 Weetamoe Bancorp, 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, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996.
Note B - Accounting Policies
- ----------------------------
The accounting principles followed by Weetamoe Bancorp and subsidiary 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 at year end 1995.
The consolidated financial statements of Weetamoe Bancorp include its
wholly-owned subsidiary, Slade's Ferry Trust Company, and its
subsidiaries, the Slade's Ferry Realty Trust and the Slade's Ferry
Securities Corporation. All significant intercompany balances have been
eliminated.
ITEM 2
Management's Discussion and Analysis
- ------------------------------------
Financial Condition
- -------------------
A significant increase occurred in the loan portfolio during the six month
period ending June 30, 1996. Total loans grew by 4.7% or $7.1 Million to
$158.2 Million from $151.1 Million reported on December 31, 1995. The
growth in loans is attributable to a diligent business development program
with emphasis placed upon meeting and servicing the needs of the small
business community. Funding for the new additional loans was provided by
the proceeds of securities that had matured from the investment portfolio.
The combined investment portfolio which consists of Investment Securities
and Securities Available for Sale was $47.0 Million on June 30, 1996, down
$11.6 Million from $58.6 Million at December 31, 1995.
Assets were down slightly to $231.9 Million from $233.4 Million at year
end 1995. The decrease in assets is associated with a decrease in
deposits. Deposits at June 30, 1996 were down by $3.2 Million to $211.0
Million from $214.2 Million reported on December 31, 1995. This decrease
occurred primarily in the money market and certificate of deposit
categories as depositors sought higher yields from other investment
products. Rates paid on deposits are determined by management as set
forth in the Asset-Liability Policy. The process encompasses assessment
of interest rate risk, liquidity and the desired level of deposits that
the bank wishes to maintain. The Bank's paying rates are competitive with
other financial institutions, and the loan to deposit ratio is at 75%,
which is suitable to meet future loan commitments.
On May 15, 1996, a merger agreement was entered into by Weetamoe Bancorp
and its subsidiary, Slade's Ferry Trust Company, to acquire the assets and
assume the liabilities of Fairbank, Inc. and its wholly owned subsidiary,
the National Bank of Fairhaven. The National Bank of Fairhaven is located
in Fairhaven, Massachusetts with total assets of approximately $65 Million
and has two banking offices. The main office is in Fairhaven with a
branch bank in New Bedford.
The agreement provides for a purchase price of $8,558,800 to be paid in a
cash only transaction by Slade's Ferry Trust Company without any issuance
of Weetamoe Bancorp stock. As a result of the transaction, the National
Bank of Fairhaven's two banking offices will become branches of Slade's
Ferry Trust Company, which would be the surviving bank.
All necessary filings have been submitted for regulatory approval. The
acquisition is expected to be completed by September 1996, and would
result in combined assets of approximately $300 Million.
Cash outlay for the acquisition is to be provided by available liquidity
that is currently invested in the Federal Funds category and short term
investments.
Nonaccrual Loans at June 30, 1996 were $2,819,305, up slightly by $124,192
from $2,695,113 reported at December 31, 1995. Loans that have become
nonaccrual during the first six months of 1996 amounted to $442,712.
Offsetting the increase in nonaccrual loans were receipts of loan payments
of $193,921, and loans of $124,599 that were deemed uncollectible and were
charged off to the Allowance for Possible Loan Losses.
Loans past due 90 days or more but still accruing were $82,094 at June 30,
1996, and $23,128 at December 31, 1995. The Company continues to accrue
on these loans due to the value of the assets collateralizing such loans.
INFORMATION WITH RESPECT TO NONACCRUAL AND PAST DUE LOANS
AT JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
(Dollars in Thousands)
At June 31 At December 31
---------------- ----------------
1996 1995 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Nonaccrual Loans $2,819 $3,173 $2,695 $3,238
Loans 90 days or more past due and still accruing 82 1,069 23 204
Real estate acquired by foreclosure or substantively
repossessed 350 1,771 633 888
Percentage of nonaccrual loans to total loans 1.78% 2.22% 1.78% 2.38%
Percentage of nonaccrual loans and real estate acquired
by foreclosure or substantively repossessed to total
assets 1.37% 2.24% 1.42% 2.13%
Percentage of allowance for possible loan losses to
nonaccrual loans .96% .76% .93% .71%
</TABLE>
The $2.8 Million in nonaccrual loans consists of $2.4 Million of real
estate mortgages and $.4 Million attributed to commercial loans. Of the
total nonaccrual loans outstanding, $277,588 are restructured at June 30,
1996.
INFORMATION WITH RESPECT TO NONACCRUAL AND RESTRUCTURED LOANS
AT JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
(Dollars in Thousands)
At June 30 At December 31
---------------- ----------------
1996 1995 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Nonaccrual Loans $2,819 $3,173 $2,695 $3,238
Interest income that would have been
recorded under original terms 118 126 243 242
Interest income recorded during the period 15 4 21 19
</TABLE>
The Company stops accruing interest on a loan once it becomes past due 90
days or more unless there is adequate collateral and the financial
condition of the borrower is sufficient. When a loan is placed on a
nonaccrual status, all previously accrued but unpaid interest is reversed
and charged against current income. Interest is thereafter recognized
only when payments are received and the loan becomes current.
Loans in the nonaccrual category will remain until the possibility of
collection no longer exists, the loan is paid off or becomes current.
When a loan is determined to be uncollectible, it is then charged off
against the Allowance for Possible Loan Losses.
Statement of Financial Accounting Standards No. 114 "Accounting by
Creditors for Impairment of a Loan" was adopted by the Company as of
January 1, 1995. Statement 114 applies to all loans except large groups
of smaller-balance homogenous loans that are collectively evaluated for
impairment, loans measured at fair value or at a lower of cost or fair
value, leases, and debt securities as defined in Statement 115. Statement
114 requires that impaired loans be valued at the present value of
expected future cash flows discounted at the loan's effective interest
rate or as a practical expedient, at the loan's observable market value of
the collateral if the loan is collateral dependent.
Included in the $2,819,305 of nonaccrual loans are $1,870,200 which the
Company has determined to be impaired, of which $1,605,000 have a related
allowance for credit losses of $425,762 and $265,200 have no related
allowance for credit losses.
The Company has $800,000 of potential problem loans for which payments are
presently current. However, the borrowers are experiencing financial
difficulty. These loans are subject to management's attention and their
classification is reviewed quarterly.
ANALYSIS OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
(Dollars in Thousands)
Three Months Years Ended
At June 30 At December 31
----------------- -----------------
1996 1995 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at January 1 $2,498 $2,306 $2,306 $1,954
Charge Offs:
Commercial 30 125 184 22
Real Estate - Construction --- --- --- ---
Real Estate - Mortgage --- --- 79 246
Installment/Consumer 142 95 134 93
---------------------------------------
172 220 397 361
Recoveries:
Commercial 21 6 1 51
Real Estate - Construction --- --- --- ---
Real Estate - Mortgage 22 --- 16 2
Installment/Consumer 37 6 22 15
---------------------------------------
80 12 39 68
---------------------------------------
Net Charge Offs 92 208 358 293
---------------------------------------
Additions Charged to Operations 300 300 550 645
Balance at End of Period $2,706 $2,398 $2,498 $2,306
=======================================
Ratio of Net Charge Offs to
Average Loans Outstanding 0.06% 0.15% 0.25% 0.23%
</TABLE>
The Allowance for Possible Loan Losses at June 30, 1996 was $2,706,318,
compared to $2,497,774 at year end 1995. The Allowance for Possible Loan
Losses as a percent of outstanding loans was 1.71% at June 30, 1996, and
1.65% at December 31, 1995.
The Bank provided $550,000 in 1995, $645,000 in 1994, and $300,000 as of
June 30, 1996 to the Allowance for Possible Loan Losses. Loans charged
off were $396,639 in 1995, $361,811 in 1994, and $171,641 as of June 30,
1996. Recoveries on loans previously charged off were $39,553 in 1995,
$68,808 in 1994, and $80,185 as of June 30, 1996. Management believes
that the Allowance for Loan Losses of $2,706,318 is adequate to absorb any
losses in the foreseeable future, due to the Bank's strong collateral
position and the current asset quality.
The percentages of the Allowance for Possible Loan Losses to nonaccrual
loans improved to .96% at June 30, 1996 from .93% and .71% reported at
years ending 1995 and 1994, respectively. The average ratio of peer group
banks with assets of $100-$300 Million for years 1995 and 1994 were 3.59%
and 3.45% respectively.
The level of the Allowance for Possible Loan Losses is evaluated by
management and encompasses several factors, which include but are not
limited to, recent trends in the nonperforming loans, the adequacy of the
assets which collateralize the nonperforming loans, current economic
conditions in the market area, and various other external and internal
factors.
This table shows an allocation of the allowance for loan losses as of the
end of each of the periods indicated.
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995 December 31, 1994
----------------------- ----------------------- --------------------
Percent of Percent of Percent of
Loans in Loans in Loans in
Each Each Each
Category Category Category
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
--------- ---------- --------- ---------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial $ 964(1) 13.40% $ 597(1) 11.35% $ 588 12.82%
Real estate - Construction 47 5.20% 40 4.55% 14 1.68%
Real estate - mortgage 1,464(2) 78.43% 1,581(2) 80.04% 1,374 81.03%
Consumer 231 2.97% 280 4.06% 330 4.47%
-----------------------------------------------------------------------
$2,706 100.00% $2,498 100.00% $2,306 100.00%
=======================================================================
<FN>
- -------------------
<F1> Includes amounts specifically reserved for impaired loans of
$232,762 as of June 30, 1996 and $214,542 as of December 31, 1995 as
required by Financial Accounting Standard No. 114, Accounting for
Impairment of Loans.
<F2> Includes amounts specifically reserved for impaired loans of
$193,000 as of June 30, 1996 and $240,500 as of December 31, 1995 as
required by Financial Accounting Standard No. 114, Accounting for
Impairment of Loans.
</FN>
</TABLE>
The loan portfolio's largest segment of loans is commercial real estate
loans, which represent 48.51% of gross loans. Residential real estate,
which is the second largest segment of the loan portfolio, represents
29.92% of gross loans. The Company requires a loan to value ratio of 80%
in both commercial and residential mortgages. These mortgages are secured
by real properties which have a readily ascertainable value.
Generally, commercial real estate loans have a higher degree of credit
risk than residential real estate loans because they depend primarily on
the success of the business. When granting these loans, the Company
evaluates the financial statements of the borrower(s), the location of the
real estate, the quality of management, and general economic and
competitive conditions. When granting a residential mortgage, the Company
reviews the borrower(s) repayment history on past debts, and assesses the
borrower(s) ability to meet existing obligations and payments on the
proposed loans.
Commercial loans consist of loans predominantly collateralized by
inventory, furniture and fixtures, and accounts receivable. In assessing
the collateral for this type of loan, management applies a 40% liquidation
value to inventories, 25% to furniture, fixtures and equipment; and 60% to
accounts receivable. Commercial loans represent 13.40% of the loan
portfolio.
Consumer loans are generally unsecured credits and represent 2.97% of the
total loan portfolio. These loans have a higher degree of risk then
residential mortgage loans. The underlying collateral of a secured
consumer loan tends to depreciate in value. Consumer loans are typically
made based on the borrower's ability to repay the loan through continued
financial stability. The Company endeavors to minimize risk by reviewing
the borrower's repayment history on past debts, and assessing the
borrower's ability to meet existing obligations on the proposed loans.
The allocation of the Allowance for Loan Losses is based on management's
judgement of potential losses in the respective portfolios. While
management has allocated reserves to various portfolio segments, the
Allowance is general in nature and is available for the portfolio in its
entirety.
Results of Operations
- ---------------------
Net interest income increased by $212,435 to $4,620,760 on June 30, 1996
when compared to $4,408,325 earned during the same period in the previous
year. Interest earned was up by $1,089,023 during the six month period
primarily due to a larger loan base, when compared to the same period in
the prior year. Interest on loans generally produces higher yields than
other earning assets. This increase in interest income was offset by an
increase in interest expense of $876,588, which is attributable to a
larger deposit base that existed during the current six month period when
compared to the same period in the previous year.
The provision for loan losses is a charge against earnings, which in turn
funds the Allowance for Possible Loan Losses. The Company's provision for
the six months ending June 30, 1996 was $300,000. During the same period
in the prior year, the provision was also $300,000.
Other income was up by $155,705 to $641,516 on June 30, 1996 when compared
to $485,811 earned in the same period of the previous year. Service
charges on deposit accounts increased by $38,777, which is attributed to a
larger customer base. Gains realized on sale of securities for the three
months amounted to $92,560 compared to a loss of $15,129 realized for the
same period in the prior year. Other miscellaneous income reflected an
increase of $9,239 due to normal business operations.
Total Other Expense decreased by $83,931 to $3,237,058 reported during the
first quarter of 1996, compared to $3,320,989 reported for the same period
in 1995. The largest decrease occurred in the Other Expense category,
which declined by $127,626 due to the significant reduction of F.D.I.C.
deposit insurance premiums of $191,923. This savings was offset by an
increase in legal fees of $15,000, examination fees of $13,400, collection
and repossession expense of $9,400, expenses attributed to Other Real
Estate Owned of $5,000 and other various miscellaneous expenses of
$21,497.
Income before income taxes for the first six months in 1996 was
$1,725,218, an increase of $452,071, compared to $1,273,147 recorded for
the same period in the prior year. Applicable taxes for the six month
period ending June 30, 1996 were $650,664, up by $165,388 when compared to
$485,276 expensed in the prior year. This resulted in net earnings of
$1,074,554 or $0.39 per share for the first six months in 1996. Net
earnings for the same period in 1995 were $787,871 or $0.29 per share.
The results of operation for the second quarter in 1996 indicate that the
net interest income was up by $169,022 to $2,326,812 from $2,157,790
earned during the second quarter in 1995. The Provision for Loan Losses
during the period remained at $150,000, the same provision booked for the
second quarter in the prior year.
Other income was up by $57,872, of which $25,148 is associated with
service charges, $27,491 associated with gains on sale of securities, and
$5,233 attributed to miscellaneous income.
Total Other Expense for the three month period ending June 30, 1996
decreased by $36,030 of which $96,212 is associated with a reduction in
the F.D.I.C. deposit insurance premium offset by various other expenses
totaling $60,182.
Pretax earnings for the quarter ending June 30, 1996 were $865,810, up by
$262,924 when compared to the same period in 1995. Taxes were $327,016
and $230,724 for the second quarter in 1996 and 1995, respectively.
Net income for the three month period ending June 30, 1996 was $538,794 or
$.20 per share, up by $166,632 or $.06 per share, when compared to
$372,162 or $.14 per share earned in the same period in 1995.
Liquidity
- ---------
The Company's principal sources of funds are customer deposits, loan
amortization, loan payoffs, and the maturities of investment securities.
Through these sources, funds are provided for customer withdrawals from
their deposit accounts, loan originations, draw-downs on loan commitments,
acquisition of investment securities and other normal business activities.
Investors' capital also provides a source of funding.
The largest source of funds is provided by depositors. The largest
component of the Company's deposit base is reflected in the Time Deposit
category. The Company does not participate in brokered deposits.
Deposits are obtained from consumers and commercial customers within the
Bank's community reinvestment area, being Bristol County, Massachusetts
and several abutting towns in Rhode Island.
The Company also has the ability to borrow funds from correspondent banks,
the Federal Home Loan Bank, as well as the Federal Reserve Bank of Boston
by pledging various investment securities as collateral. The Company did
not borrow during the first six months of the current year. During the
first quarter of 1995, the Company borrowed for 25 days with an average
borrowing of $2.0 Million. There were no other borrowings during 1995.
However, tax payments made by our customers which are owed to the Federal
Reserve Bank Treasury Tax and Loan account are classified as borrowed
funds.
Excess available funds are invested on a daily basis as Federal Funds Sold
and can be withdrawn daily. The Bank attempts through its cash management
strategies to maintain a minimum level of Federal Funds Sold to further
enhance its liquidity.
Liquidity represents the ability of the Bank to meet its funding
requirements. In assessing the appropriate level of liquidity, the Bank
considers deposit levels, lending requirements, and investment maturities
in light of prevailing economic conditions. Through this assessment, the
Bank manages its liquidity level to optimize earnings and respond to
fluctuations in customer borrowing needs.
At June 30, 1996, the Bank's liquidity ratio stood at 32.5% as compared to
36.0% at December 31, 1995. The liquidity ratio is determined by dividing
the Bank's short term assets (cash and due from banks, interest bearing
deposits due from other banks, securities, and federal funds sold) by the
Bank's total deposits. Management believes the Bank's liquidity to be
adequate to meet the current and presently foreseeable needs of the Bank,
including the cash required for the merger transaction.
The comparison of cash flows for the six month period ending June 30, 1996
and 1995 indicates that cash flows, as a result of operating activities,
increased by $220,440 during the current period compared to the same
period in the previous year. There was an increase in interest and
dividends income of $1,183,076, an increase in service charges and other
income of $48,016, and decreases in cash paid to suppliers and employees
of $232,711. These were offset by an increase in interest paid of
$908,411 and income taxes paid of $334,952.
Cash provided by investing activities during the six month period ending
June 30, 1996 indicates that there was a net inflow of cash of $378,583,
which is primarily due to the maturities and sales of securities totaling
$19.3 Million, offset by outgoing cash of $19.0 Million attributed to new
investments acquired, increase in loans, and increase in Federal Funds
Sold.
During the same period in the prior year, there was a net outflow of cash
of $23.5 Million, which was a combination of incoming cash of $5.7 Million
due to maturities and sales of securities offset by outgoing cash of
purchase of securities, increases in loans and Federal Funds Sold,
totaling $29.5 Million. The remaining cash provided by investing
activities of $.3 Million is attributed to the sale of Other Real Estate
Owned and the change in Other Liabilities and Other Assets.
Cash flows attributed to financing activities indicate a net outflow of
$2.5 Million, of which $3.2 Million is associated with a decrease in
deposits offset by an increase in short-term borrowings of $.8 Million and
a net decrease of $.1 Million in Stockholders Equity due to dividends paid
out and the dividend reinvestment program.
Cash provided by financing activities was $24.3 Million during the same
period in the previous year. This was primarily due to an influx of time
deposit funds of $32.0 Million offset by a decrease of $8.0 Million in
demand, NOW, money market accounts and savings accounts.
Capital
- -------
As of June 30, 1996, the Company had total capital of $18,333,598. This
represents an increase of $506,873 from $17,826,725 reported on December
31, 1995. The increase in capital was a combination of several factors.
Additions consisted of six months earnings of $1,074,554, transactions
originating through the Dividend Reinvestment Program whereby 2,821.442
shares were issued for cash contributions of $23,750 and 12,175.535 shares
were issued for $103,477 in lieu of cash dividend payments. These
additions were offset by dividends paid of $220,684 and cash dividends
paid in lieu of fractional shares of $3,360 as a result of the 5% stock
dividend issued in January of 1996.
Also affecting capital is the adjustment that reflects net unrealized
gains or losses, net of taxes, on securities classified as Available-for-
Sale. On December 31, 1995 the Available-for-Sale portfolio had
unrealized gains, net of taxes, of $33,022, and on June 30, 1996, as a
result of current market values, the portfolio reflects unrealized losses,
net of taxes, of $470,864 which is an adjustment to capital.
Paid in Capital increased by $1,251,720 of which $1,124,643 was a transfer
from retained earnings representing a 5.0% stock dividend paid on January
1, 1996 and $127,077 attributed to transactions resulting from cash
contributions and reinvestment of cash dividends associated with the
Dividend Reinvestment Program.
Federal Banking regulators have adopted Risk Based and Leverage Capital
requirements, which were phased in and fully implemented on December 31,
1992. Under the requirements, a minimum level of capital will vary among
banks based on safety and soundness of operations.
Risk Based Capital ratios are calculated with reference to risk-weighted
assets, which include both on and off balance sheet exposure. At December
31, 1995, the minimum regulatory capital level for Risk Based Capital was
4.0% for Tier 1 capital, 8.0% for total capital, and 4.0% for Leverage
Capital (Tier 1 as a percentage of total assets).
At June 30, 1996 the actual Risk Based Capital of the Bank was $18,680,000
for Tier 1 Capital, exceeding the minimum requirements of $6,342,280 by
$12,337,720. Total Capital of $20,671,000 exceeded the minimum
requirements of $12,684,560 by $7,986,440 and Leverage Capital of
$18,680,000 exceeded the minimum requirements of $9,261,760 by $9,418,240.
ITEM 4
Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------
None.
ITEM 5
Other Matters
- -------------
A civil suit has been filed in the Superior Court of Massachusetts,
Plymouth County, Brockton Division on June 18, 1996 by Mr. Gary P. Fealy
of Mattapoisette, Massachusetts, a former employee of the National Bank of
Fairhaven. The suit names various officers and directors of the National
Bank of Fairhaven, Slade's Ferry Trust Company, and the law firm of Day,
Berry and Howard of Hartford, Connecticut as defendants.
The complaint alleges that because of the impending acquisition of the
National Bank of Fairhaven by Slade's Ferry Trust Co., Mr. Fealy was
involuntarily terminated from his employment at the National Bank of
Fairhaven resulting in a violation of an employee contract previously
entered into by Mr. Fealy and the National Bank of Fairhaven. Mr. Fealy
seeks monetary damages of $563,000.
ITEM 6
Exhibits and Reports on Form 8-K
- --------------------------------
None.
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 duly authorized.
WEETAMOE BANCORP
--------------------------------------
(Registrant)
July 30, 1996 /s/ Kenneth R. Rezendes
- ------------------- --------------------------------------
(Date) (Signature) Kenneth R. Rezendes
President
July 30, 1996 /s/ James D. Carey
- ------------------- --------------------------------------
(Date) (Signature) James D. Carey
Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,101,808
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,159,522
<INVESTMENTS-CARRYING> 18,839,576
<INVESTMENTS-MARKET> 18,351,709
<LOANS> 157,517,134
<ALLOWANCE> 2,706,318
<TOTAL-ASSETS> 231,945,900
<DEPOSITS> 210,980,336
<SHORT-TERM> 1,558,299
<LIABILITIES-OTHER> 1,073,667
<LONG-TERM> 0
0
0
<COMMON> 27,627
<OTHER-SE> 18,305,971
<TOTAL-LIABILITIES-AND-EQUITY> 231,945,900
<INTEREST-LOAN> 6,975,018
<INTEREST-INVEST> 1,531,425
<INTEREST-OTHER> 366,030
<INTEREST-TOTAL> 8,872,473
<INTEREST-DEPOSIT> 4,227,961
<INTEREST-EXPENSE> 23,752
<INTEREST-INCOME-NET> 4,620,760
<LOAN-LOSSES> 300,000
<SECURITIES-GAINS> 92,560
<EXPENSE-OTHER> 3,237,058
<INCOME-PRETAX> 1,725,218
<INCOME-PRE-EXTRAORDINARY> 1,725,218
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,074,554
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
<YIELD-ACTUAL> 1.94
<LOANS-NON> 2,819,305
<LOANS-PAST> 82,094
<LOANS-TROUBLED> 277,588
<LOANS-PROBLEM> 800,000
<ALLOWANCE-OPEN> 2,497,774
<CHARGE-OFFS> 171,641
<RECOVERIES> 80,185
<ALLOWANCE-CLOSE> 2,706,318
<ALLOWANCE-DOMESTIC> 2,706,318
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
