UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1999
------------------
Commission file number 000-23904
---------
SLADE'S FERRY 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) 3,489,235.643 shares as of September 30, 1999.
- ---------------------------------------------------------------------------
PART I
ITEM 1
Financial Statements
- --------------------
SLADE'S FERRY BANCORP
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 15,348,249 $ 15,686,520
Federal funds sold -0- 14,500,000
Investment securities(1) 19,360,024 20,921,254
Securities available for sale(1) 62,405,670 58,199,292
Federal Home Loan Bank stock 1,013,400 899,900
Loans (net) 231,878,962 213,938,277
Premises and equipment 7,056,972 6,687,271
Other real estate owned 559,095 1,026,095
Accrued interest receivable 2,125,491 1,598,282
Goodwill 2,683,668 2,853,768
Cash surrender value of life insurance 1,625,764 1,613,517
Other assets 4,016,269 2,430,544
---------------------------------
TOTAL ASSETS $348,073,564 $340,354,720
=================================
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits $304,153,815 $303,785,865
Notes payable 775,000 847,990
Advances from Federal Home Loan Bank 4,403,450 4,475,454
Other borrowed funds 1,215,527 42,329
Federal funds purchased 4,000,000 -0-
Other liabilities 2,763,616 1,495,697
---------------------------------
TOTAL LIABILITIES 317,311,408 310,647,335
STOCKHOLDERS' EQUITY:
Common stock 34,893 34,464
Paid in capital 22,827,480 22,285,220
Retained earnings 9,246,585 7,103,642
Accumulated other comprehensive income
(loss) (1,346,802) 284,059
---------------------------------
TOTAL STOCKHOLDERS' EQUITY 30,762,156 29,707,385
---------------------------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $348,073,564 $340,354,720
=================================
- -------------------
<FN>
<F1> Investment securities are to be held to maturity and have a fair market
value of $19,178,750 as if September 30, 1999 and $21,282,941 as of
December 31, 1998.
<F2> Securities classified as Available for Sale are stated at fair value
with any unrealized gains or losses reflected as an adjustment in
Stockholders' Equity.
</FN>
</TABLE>
CONSOLIDATED STATEMENT OF INCOME AND EXPENSE
(UNAUDITED)
9 MONTHS ENDING SEPTEMBER 30,
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $15,280,331 $14,902,281
Interest and dividends on investments 3,577,587 2,850,176
Other interest 220,159 449,620
----------------------------
Total interest and dividend income 19,078,077 18,202,077
----------------------------
INTEREST EXPENSE:
Interest on deposits 7,719,587 7,856,863
Interest on other borrowed funds 293,576 143,330
----------------------------
Total interest expense 8,013,163 8,000,193
----------------------------
Net interest and dividend income 11,064,914 10,201,884
----------------------------
PROVISION FOR LOAN LOSSES 450,000 450,000
Net interest and dividend income
after provision for loan losses 10,614,914 9,751,884
----------------------------
OTHER INCOME:
Service charges on deposit accounts 668,775 653,250
Security gains, net 626,760 382,370
Other income 270,108 228,356
----------------------------
Total other income 1,565,643 1,263,976
----------------------------
OTHER EXPENSE:
Salaries and employee benefits 4,199,391 4,056,344
Occupancy expense 607,922 515,451
Equipment expense 411,880 429,012
Loss (gain) on sale of other real estate owned 28,030 (33,039)
Writedown of other real estate owned 57,024 0
Other expense 2,415,738 1,730,539
----------------------------
Total other expense 7,719,985 6,698,307
----------------------------
Income before income taxes 4,460,572 4,317,553
Income taxes 1,553,433 1,708,504
----------------------------
NET INCOME $ 2,907,139 $ 2,609,049
============================
Basic earnings per share $ 0.84 $ 0.77
============================
Diluted earnings per share $ 0.84 $ 0.77
============================
Average shares outstanding 3,468,387 3,390,719
============================
</TABLE>
CONSOLIDATED STATEMENT OF INCOME AND EXPENSE
(UNAUDITED)
3 MONTHS ENDING SEPTEMBER 30,
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $ 5,508,833 $ 5,150,988
Interest and dividends on investments 1,189,095 1,004,961
Other interest 37,257 113,973
----------------------------
Total interest and dividend income 6,735,185 6,269,922
----------------------------
INTEREST EXPENSE:
Interest on deposits 2,530,682 2,625,112
Interest on other borrowed funds 104,903 59,152
----------------------------
Total interest expense 2,635,585 2,684,264
----------------------------
Net interest and dividend income 4,099,600 3,585,658
----------------------------
PROVISION FOR LOAN LOSSES 150,000 150,000
Net interest and dividend income
after provision for loan losses 3,949,600 3,435,658
----------------------------
OTHER INCOME:
Service charges on deposit accounts 211,969 210,733
Security gains, net 134,571 197,901
Other income 88,618 70,241
----------------------------
Total other income 435,158 478,875
----------------------------
OTHER EXPENSE:
Salaries and employee benefits 1,453,795 1,402,525
Occupancy expense 201,628 170,600
Equipment expense 136,884 137,395
Loss (gain) on sale of other real estate owned 0 (37,275)
Other expense 1,040,893 586,695
----------------------------
Total other expense 2,833,200 2,259,940
----------------------------
Income before income taxes 1,551,558 1,654,593
Income taxes 439,134 654,951
----------------------------
NET INCOME $ 1,112,424 $ 999,642
============================
Basic earnings per share $ 0.32 $ 0.29
============================
Diluted earnings per share $ 0.32 $ 0.29
============================
Average shares outstanding 3,483,198 3,423,922
============================
</TABLE>
SLADE'S FERRY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Reconciliation of net income to net cash used
in operating activities:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,907,139 $ 2,609,049
Adjustments to reconcile net income to net
cash used in operating activities:
Accretion, net of amortization of fair
market value adjustments (6,539) (6,538)
Amortization of goodwill 170,100 170,100
Gain on sale of fixed assets -0- (2,700)
Depreciation and amortization 509,471 494,619
Securities available for sale gains, net (626,760) (382,370)
Provision for loan losses 450,000 450,000
Decrease in taxes payable 296,356 227,314
(Increase) decrease in interest receivable (527,209) (145,205)
Decrease in interest payable (3,047) (15,291)
Increase in accrued expenses 874,982 433,749
Increase in prepaid expenses 147,284 55,581
Accretion of securities, net of amortization (64,482) (102,092)
Accretion of securities available for sale,
net of amortization 50,707 20,557
Loss (gain) on sale of other real estate owned 28,030 (33,039)
Writedown of other real estate owned 57,024 0
Change in unearned income (113,900) 68,822
Increase in other assets (1,010,558) (2,137,818)
Increase in other liabilities 393,973 57,835
------------------------------
Net cash provided by operating activities $ 3,532,571 $ 1,762,573
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (22,903,858) (27,365,464)
Maturities of securities available for sale 11,059,943 16,812,650
Sales of securities available for sale 5,551,676 1,046,930
Proceeds from sales of other real estate owned 599,990 192,412
Proceeds from maturities of investment
securities 7,057,804 7,572,094
Purchases of investment securities (5,432,093) (10,216,931)
Net increase in loans (18,532,203) (3,111,071)
Capital expenditures (879,172) (1,156,443)
Proceeds from sale of fixed assets -0- 2,700
Purchases of Federal Home Loan Bank Stock (113,500) (9,300)
Recoveries of previously charged-off loans 45,924 62,588
Maturities of interest bearing time deposits -0- 106,688
------------------------------
Net cash used in investing activities $(23,545,489) $(16,063,147)
------------------------------
</TABLE>
SLADE'S FERRY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock $ 542,689 $ 469,594
Net increase in demand deposits, NOW, money
market and savings accounts 396,249 1,281,154
Net increase (decrease) in time deposits (28,299) 13,523,013
Net increase (decrease) in short-term borrowing 1,173,198 (884,034)
Increase in federal funds purchased 4,000,000 0
Dividends paid (764,196) (554,919)
Advances (payments) on Federal Home Loan Bank (72,004) 1,311,394
Increase (decrease) in notes payable (72,990) 1,238,406
------------------------------
Net cash provided by financing activities 5,174,647 $ 15,073,214
------------------------------
Net decrease in cash and cash equivalents (14,838,271) 772,640
Cash and cash equivalents at beginning of period 30,186,520 20,323,501
------------------------------
Cash and cash equivalents at end of period $ 15,348,249 $ 21,096,141
==============================
SUPPLEMENTAL DISCLOSURES:
Loans originating from sales of Other Real
Estate Owned $ 237,000 $ 60,800
Interest paid $ 8,016,210 $ 8,015,484
Income taxes paid $ 1,257,077 $ 1,481,190
Loans transferred to Other Real Estate Owned $ 218,045 $ 582,064
</TABLE>
SLADE'S FERRY BANCORP AND SUBSIDIARY, SLADE'S FERRY TRUST COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 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-Q 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 Slade's Ferry Bancorp, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
Note B - Accounting Policies
The accounting principles followed by Slade's Ferry 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 1998.
The consolidated financial statements of Slade's Ferry Bancorp include its
wholly-owned subsidiary, Slade's Ferry Trust Company, and its subsidiaries,
Slade's Ferry Realty Trust, Slade's Ferry Securities Corporation, Slade's
Ferry Loan Company, and Slade's Ferry Preferred Capital Corporation. All
significant intercompany balances have been eliminated.
ITEM 2
Management's Discussion and Analysis
Financial Condition
Assets at September 30, 1999 increased by $7.7 Million to $348.1 Million
from $340.4 Million reported at December 31, 1998. Net loans increased by
$17.9 Million during the last nine months. Funding for the new loans came
primarily from $14.5 Million of excess funds that were categorized as
Federal Funds Sold at year end 1998, and proceeds from maturities and sales
of various investment securities. The Bank also utilized its borrowing
ability with the Federal Home Loan Bank throughout the third quarter on an
as needed basis which resulted in eleven borrowing days for an average
borrowing of $4,955,000 per day. Daily liquidity needs on September 30,
1999 resulted in $4,000,000 of Federal Funds Purchased.
Management attributes loan growth to a favorable economy and an active
business development program. New loans that were recorded during the year
were mostly in the commercial sector, represented by multi-type business
and collateralized by various types of real estate located in the
southeastern area of Massachusetts and in the abutting state of Rhode
Island.
Deposit levels at September 30, 1999 increased slightly to $304.2 Million
from $303.8 Million at December 31, 1998 despite the new account activity
being generated at the two branches opened in early 1999. In mid September
1999, interest rates on various certificate of deposit products were
increased to attract new deposits as well as retain existing accounts.
At September 30, 1999, securities classified as Available for Sale had net
unrealized losses of $1,265,917 as a result of current market conditions
and the recent increase in the prime rate. Besides the utilization of
proceeds obtained through the sale of these securities to meet loan demand,
securities may also be sold from time to time to improve interest rate risk
by reinvesting the proceeds from their sales into higher yielding
investments. Management, through the Asset-Liability Committee (ALCO),
constantly manages interest rate risk to minimize any exposure to rising or
decreasing interest rates. Despite current market conditions, investment
securities, when held to maturity, will mature at par value.
Investment Securities are securities that the Company will hold to maturity
and are carried at amortized cost on the balance sheet, and are summarized
as follows as of September 30, 1999.
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding
(Dollars in Thousands) Cost Basis Gains Losses Fair Value
- ---------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Debt securities issued by the U. S.
Treasury and other U. S. Government
corporations and Agencies $ 7,838 $ 19 $ 14 $ 7,843
Debt securities issued by states of
the United States and political
subdivisions of the states 11,442 17 204 11,255
Mortgage-backed securities 79 1 -0- 80
Other debt securities 1 -0- -0- 1
------------------------------------------------
$19,360 $ 37 $218 $19,179
================================================
</TABLE>
Investments in Available for Sale securities are carried at fair value on
the balance sheet and are summarized as follows as of September 30, 1999.
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding
(Dollars in Thousands) Cost Basis Gains Losses Fair Value
- ---------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Debt securities issued by the U. S.
Treasury and other U. S. Government
corporations and Agencies $42,290 $ 1 $1,379 $40,912
Corporate Bonds 521 -0- 19 502
Marketable Equities 3,955 138 405 3,688
Mortgage-backed securities 17,725 3 424 17,304
Asset-backed securities -0- -0- -0- -0-
--------------------------------------------------
$64,491 $142 $2,227 $62,406
==================================================
</TABLE>
<TABLE>
<S> <C>
Decrease to Stockholders' Equity:
(In Whole Dollars)
Unrealized Net Loss on Available for Sale Securities $2,084,793
Less tax effect 818,876
----------
Net Unrealized Loss on Available for Sale Securities $1,265,917
==========
</TABLE>
INFORMATION WITH RESPECT TO NONACCRUAL AND PAST DUE LOANS
AT SEPTEMBER 30, 1999 AND 1998 AND DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
At September 30 At December 31
- -------------------------------------------------------------------------------------------
(Dollars in Thousands) 1999 1998 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonaccrual Loans $2,322 $3,717 $3,331 $4,597
Loans 90 days or more past due and still
Accruing 171 421 317 147
Real estate acquired by foreclosure
or substantively repossessed 559 582 1,026 159
Percentage of nonaccrual loans to total loans 0.98% 1.62% 1.53% 2.15%
Percentage of nonaccrual loans and real estate
acquired by foreclosure or substantively
repossessed to total assets .83% 1.34% 1.54% 2.00%
Percentage of allowance for loan
losses to nonaccrual loans 172.66% 94.19% 107.15% 80.36%
</TABLE>
The $2.3 Million in nonaccrual loans consists of $1.6 Million of real
estate mortgages and $0.7 Million attributed to commercial loans. Of the
total nonaccrual loans outstanding, there are no loans restructured as of
September 30, 1999.
The Company's nonperforming assets which consist of nonaccrual loans, loans
90 days or more past due and still accruing, and real estate acquired by
foreclosure or substantively repossessed, decreased to $3.1 Million at
September 30, 1999 from $4.7 Million reported on December 31, 1998.
Nonaccrual loans, which is the largest component of nonperforming assets,
were down by $1.0 Million compared to year-end 1998. The decrease was a
combination of loans totaling $1.3 Million that became nonaccrual during
the last nine months offset by deductions totaling $2.3 Million. The
deductions consisted of $.6 Million which represented payments received on
previously classified loans, $.2 Million of loans transferred to Other Real
Estate Owned, and $1.5 Million of loans reclassified as performing loans
and brought back into the accruing status. Included in the $1.5 Million of
reclassified loans is a commercial loan of $1.2 Million, which was
originally structured as a construction loan to finance land development.
Monthly payments on this loan were scheduled for interest only during the
real estate improvement period; however, during this period interest
payments became past due, and in March 1997, the loan was classified as
impaired and placed in nonaccrual status. In August 1999, this loan was
reinstated into the accruing status as a result of consecutive monthly
payments made by the business entity, payment of all contractual past-due
nonaccrued interest totaling $446,686 which has been recognized as interest
income, and improvement to the value of the real estate collateralizing the
loan. Upon completion of the real estate improvements, a new commercial
real estate loan with a 20-year term was written. The loan is now
performing contractually and has a current principal balance of $1,589,635,
a real estate fair market value obtained in April 1999 of $2.5 Million, and
is no longer considered impaired. Loans past due 90 days or more but still
accruing decreased by $140,000 during this nine-month period. These loans
are classified as accruing due to the asset value of collateral pledged in
each loan.
Real estate acquired through foreclosure or substantively repossessed
decreased to $599,095 from $1,026,095 reported at December 31, 1998, and
consists of three parcels of real estate with appraised values totaling
$670,000. The Company is in the process of finalizing sales on several of
these properties and currently has one purchase and sales agreement with a
closing planned by year-end.
The percentage of nonaccrual loans to total loans decreased from 1.53%
reported at year end 1998 to 0.98% at September 30, 1999 primarily due to
the combinations of an increase in total loans and a decrease in the
nonaccrual category.
INFORMATION WITH RESPECT TO NONACCRUAL AND RESTRUCTURED LOANS
AT SEPTEMBER 30, 1999 AND 1998 AND DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
At September 30 At December 31
- -------------------------------------------------------------------------------------------
(Dollars in Thousands) 1999 1998 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonaccrual Loans $2,322 $3,717 $3,331 $4,597
Interest income that would have been
recorded under original terms $ 126 $ 267 $ 318 $ 394
Interest income recorded during the period $ 39 $ 21 $ 37 $ 58
</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 Loan Losses.
Statement of Financial Accounting Standards No. 114 "Accounting by
Creditors for Impairment of a Loan" applies to all loans except large
groups of smaller-balance homogeneous 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. Smaller balance
homogeneous loans are considered by the Company to include consumer
installment loans and credit card loans.
Included in the $2,322,200 in nonaccrual loans are $1,709,248 which the
Company has determined to be impaired, for which $600,031 have a related
allowance for credit losses of $353,872 and $1,109,217 have no related
allowance for credit losses. Management is not aware of any other loans
that pose a potential credit risk or where the loans are current but the
borrowers are experiencing financial difficulty.
There were no other loans classified for regulatory purposes at September
30, 1999 that management reasonably expects will materially impact future
operating results, liquidity or capital resources.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Nine Months Years Ended
At September 30 At December 31
- -----------------------------------------------------------------------------
(Dollars in Thousands) 1999 1998 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1 $3,569 $3,694 $3,694 $3,354
- -----------------------------------------------------------------------------
Charge-offs:
Commercial (35) --- --- (40)
Real estate - construction --- --- --- ---
Real estate - mortgage --- (651) (716) (147)
Installment/consumer (20) (54) (76) (68)
- -----------------------------------------------------------------------------
(55) (705) (792) (255)
- -----------------------------------------------------------------------------
Recoveries:
Commercial 9 6 8 41
Real estate - construction --- --- --- ---
Real estate - mortgage 23 42 43 16
Installment/consumer 14 14 16 38
- -----------------------------------------------------------------------------
46 62 67 95
- -----------------------------------------------------------------------------
Net Charge-offs (9) (643 (725) (160)
- -----------------------------------------------------------------------------
Additions charged to operations 450 450 600 500
- -----------------------------------------------------------------------------
Balance at end of period $4,010 $3,501 $3,569 $3,694
=============================================================================
Ratio of net charge-offs to
average loans outstanding 0.004% 0.300% 0.340% 0.080%
</TABLE>
The Allowance for Loan Losses at September 30, 1999 was $4,009,575,
compared to $3,569,282 at year-end 1998. The Allowance for Loan Losses as
a percentage of outstanding loans increased by 0.06% during the nine month
period to 1.70% from 1.64% reported at year end 1998.
The Bank provided $600,000 in 1998, $500,000 in 1997, and $450,000 as of
September 30, 1999 to the Allowance for Loan Losses. Loans charged off
were $792,000 in 1998, $255,000 in 1997, and $55,000 as of September 30,
1999. Recoveries on loans previously charged off were $67,000 in 1998,
$95,000 in 1997 and $46,000 as of September 30, 1999. Management believes
that the Allowance for Loan Losses of $4,009,575 is adequate to absorb any
losses in the foreseeable future, recognizing the credit risk and the
dependency on economic conditions associated with commercial loans, and the
overall growth of the loan portfolio.
The level of the Allowance for 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
collateralized 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>
September 30, 1999 December 31, 1998 December 31, 1997
- ---------------------------------------------------------------------------------------------------------
Percent of Percent of Percent of
Loans in Loans in Loans in
Each Each Each
Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans
- ---------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial $1,542(1) 20.78% $1,249(1) 20.06% $ 984(1) 17.14%
Real estate - Construction 52 2.95 27 1.73 44 3.12
Real estate - mortgage 2,088(2) 72.94 1,964(2) 75.21 2,311(2) 76.50
Consumer(3) 328(4) 3.33 329(4) 3.00 355(4) 3.24
- ------------------------------------------------------------------------------------------------------
$4,010 100.00% $3,569 100.00% $3,694 100.00%
======================================================================================================
<FN>
<F1> Includes amounts specifically reserved for impaired loans of $276,466
as of September 30, 1999, $128,207 as of December 31, 1998 and
$42,937 as of December 31, 1997 as required by Financial Accounting
Standard No. 114, Accounting for Impairment of Loans.
<F2> Includes amounts specifically reserved for impaired loans of $183,187
as of September 30, 1999, $187,554 as of December 31, 1998 and
$566,220 as of December 31, 1997 as required by Financial Accounting
Standard No. 114, Accounting for Impairment of Loans.
<F3> Includes consumer, obligations of states and political subdivisions
and other.
<F4> Includes amounts specifically reserved for impaired loans of $34,156
as of September 30, 1999, $9,126 as of December 31, 1998, and $14,413
as of December 31, 1997, 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 57.5% of gross loans. Residential real estate
represents 15.4% 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 appraised
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 20.8% of the loan
portfolio.
Consumer loans are generally unsecured credits and represent 3.3% 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
The Company's largest source of earnings is net interest and dividend
income, which is the difference between interest income earned on loans and
investments and interest expense paid on deposits and borrowed funds. Net
interest and dividend income for nine months ending September 30, 1999
increased by $863,030 to $11,064,914 compared to $10,201,884 recorded
during the same period in 1998. Total interest and dividend income
increased by $876,000 due to a larger loan base being serviced, increases
in the investment portfolio during the nine month period ending September
30, 1999 compared to the same period in 1998, and income recognition of
nonperforming loans that were reclassified as accruing loans, including
$446,686 of past due nonaccrued interest. The increase in total interest
and dividend income was offset by a slight increase in total interest
expense of $12,970. This increase was a combination of a decrease in
interest expense on deposit accounts due to lower interest rates paid this
year, in comparison with the same period in the prior year, and an increase
in interest expense on borrowed funds due to an increase in borrowings from
the Federal Home Loan Bank.
The Provision for Loan Losses is a charge against earnings and funds the
Allowance for Loan Losses. It is management's desire to maintain the
allowance for loan losses at a level that management estimates to be
sufficient to absorb future charge-offs of loans designated uncollectible.
The Bank's provision during the nine-month period ending September 30, 1999
was $450,000, the same amount recorded during the first nine months of
1998.
Total Other Income increased by $301,667 to $1,565,643 for the first nine
months of 1999 when compared to $1,263,976 reported during the same period
in 1998. Service charges on deposit accounts increased by $15,525 due to
the growth in the number of accounts being serviced primarily attributed to
the two new branches that were opened in early 1999. The Company realized
$626,760 of net gains on sales of securities, primarily corporate equities,
compared to $382,370 realized in the same period of the previous year.
Corporate equities generally have a greater risk as they are subject to
rapid market conditions and are constantly monitored and evaluated to
determine their suitability for sale or retention. Due to favorable market
conditions, certain selected corporate equities were sold. Management
limits the total amount invested into marketable equities to 5% of the
total investment portfolio to minimize market risk.
Other Income increased by $41,752 mainly as a result of a net increase in
checkbook fees derived by the Bank's printing customers' checks internally
rather than outsourcing to check printing vendors. This new service was
provided to our customers in early 1999.
Total Other Expense for the first nine months in 1999 was up by $1,021,678
to $7,719,985 when compared to $6,698,307 recorded during the same period
in 1998. Salaries and employee benefits, which is the largest component of
Other Expense, had a total increase of $143,047 of which $264,351 is
attributed to general wage increases and increased cost of various benefits
including contributions to a newly established Profit Sharing Plan in 1998.
Offsetting this increase is a FASB 87 adjustment of $121,304 associated
with the employee Defined Benefit Retirement Plan that was suspended as of
December 31, 1998.
Occupancy and Equipment Expenses combined were up by $75,339, primarily due
to depreciation on purchase and renovation of the two new branch facilities
opened in early 1999.
A loss of $28,030 was realized on the sale of properties previously
acquired through foreclosure, whereas during the same period in the prior
year, the Bank realized a gain on sale of other real estate owned of
$33,039.
Also, as of September 30, 1999, the expenses associated with the writedown
of other real estate owned (OREO) to reflect the current fair market values
of properties totaled $57,024. During the same period in the prior year,
there were no writedowns on OREO properties.
The following table sets forth the components of the line item Other
Expense. This table reflects an increase of $454,198 to $1,040,893 from
$586,695 for the three-month period ending September 30, 1999, and an
increase of $685,199 to $2,415,738 from $1,730,539 for the nine-month
period ending September 30, 1999.
<TABLE>
<CAPTION>
Third Quarter Nine Months
- --------------------------------------------------------------------------------------------
Dollars in Thousands 1999 1998 Variance 1999 1998 Variance
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amortization of Goodwill $ 57 $ 57 0 $ 170 $ 170 0
Advertising & Public Relations 92 97 (5) 339 296 43
Stationery & Supplies 76 56 20 232 171 61
Communications 75 71 4 236 222 14
Professional fees &
Other Services 190 88 102 286 225 61
Other Miscellaneous Expenses 551 218 333 1,153 647 506
- ------------------------------------------------------------------------------------------
Other Expense $1,041 $587 $454 $2,416 $1,731 $685
==========================================================================================
</TABLE>
The increase in Advertising and Public Relations for the nine months ending
September 30, 1999 of $43,000 is primarily due to the costs associated with
promoting our two new branch facilities opened in early 1999. Stationery
and Supplies increase is attributable to additional stationery and various
supplies required at the two new branches mentioned above. Also, during
the first quarter of 1999, the Bank began printing customer checks
internally rather than outsourcing to check printing vendors. Costs
associated with printing these checks totaled $35,897 for the nine months
ending September 30, 1999. Communications increased due to increases in
general postage and telephone usage at the new facilities along with the
installation of a new telephone system at the main office. Professional
Fees increased by $61,000 for the nine months ending September 30, 1999,
when compared to the same period in the previous year. This increase is
primarily attributed to professional & legal fees totaling $103,850 paid
for services rendered in connection with the formation of a real estate
investment trust established in the third quarter of 1999 for the purpose
of implementing state tax benefits. Other increases included examination
fees of $8,920 and various other consulting fees of $12,420. These
increases were offset by a decrease of $64,250 resulting from reduced
collection and repossession expenditures.
Other Miscellaneous Expense increased by $506,000 to $1,153,000 when
compared to $647,000, reported during the same nine-month period ending
September 30, 1998. During the third quarter in 1999, the Company recorded
an estimated expense of $300,000 as an accrued liability due to the civil
suit brought against the Bank by a former employee of the National Bank of
Fairhaven for wrongful termination. Other expense variances associated
with Other Miscellaneous Expense include an increase of $136,390 due to
expenditures associated with the maintenance of OREO property, an increase
of $37,200 attributed to an increase in Director's Fees for meetings
attended, and an increase of $32,496 due to costs associated with the two
new branch facilities relating to computers, ACH fees and ATM fees.
Income before income taxes, totaled $4,460,572 at September 30, 1999, up by
$143,019 when compared to $4,317,553 reported on September 30, 1998.
Applicable income taxes decreased by $155,071 to $1,553,433 when compared
to $1,708,504 reported in the previous year. This decrease in taxes is
attributed to certain state tax planning strategies implemented by the Bank
in late June, 1999, associated with the establishment of the Slade's Ferry
Preferred Capital Corporation.
Net Income of $2,907,139 reflects an increase of 11.43% when compared to
earnings of $2,609,049 reported at September 30, 1998. Diluted earnings
per share were $0.84 for nine months ending September 30, 1999 compared to
$0.77 for the same nine-month period in 1998.
The results of operations for the third quarter in 1999 indicates that the
net interest income was up by $513,942 to $3,949,600 from $3,435,658 earned
during the same period in the previous year. This is a result of continued
growth in the loan portfolio, the interest recognition of a reclassified
loan from the nonaccrual status to active status, and the maintenance of
interest expense on deposit accounts. The Provision for Loan Losses
remained the same as incurred during the third quarter in 1998. Total
Other Income decreased by $43,717 primarily due to a decrease of $63,330 in
net security gains from $197,901 in the third quarter of 1998 to $134,571
in the same quarter of 1999. This decrease was partially offset by an
increase of $16,977 in checkbook fees due to the check printing process as
aforementioned.
Total Other Expense increased by $573,260 to $2,833,200 for the three-month
period ending September 30, 1999 compared to $2,259,940 reported for the
third quarter in 1998. Salaries and employee benefits increased by $51,270
due to general wage increases and contributions to the new Profit Sharing
Plan established in 1998. Occupancy and Equipment expense combined
increased by $30,517 primarily due to the depreciation expense on the two
new branch facilities opened in 1999. In the third quarter of 1999, there
were no gains or losses associated with sales of other real estate owned,
compared to a loss of $37,275 in the third quarter of 1998. The Bank did
not incur any expense associated with the writedown of OREO properties in
the third quarter of 1999 or 1998.
The line item Other Expense is detailed in the aforementioned chart.
Variances in Stationery and Supplies and Communications during the third
quarter in 1999 compared to the same period in the previous year were
associated with supplies and telephone lines and usage at the new branch
locations.
Professional fees in the third quarter in 1999 increased by $102,000 when
compared to the same quarter in 1998. This increase was directly
associated with professional and legal fees of $103,850 paid for services
rendered in connection with the formation of the Real Estate Investment
Trust in the third quarter of 1999. Other Miscellaneous Expense increased
by $333,000 of which $300,000 is associated with the estimated expense of
the civil suit brought against the Bank for wrongful termination of a
National Bank of Fairhaven employee.
Income before taxes for the third quarter in 1999 decreased by $103,035 to
$1,551,558 from $1,654,593 reported for the same period in the prior year.
This decrease is primarily attributed to the expenses incurred in the third
quarter in 1999 associated with the formation of the real estate investment
trust and litigation matter as mentioned above.
Applicable taxes decreased by $215,817 to $439,134 when compared to
$654,951 reported in the third quarter in 1998. This decrease in taxes is
attributed to the state tax benefits derived from the formation of the Real
Estate Investment Trust.
The net income for the three-month period ending September 30, 1999 was
$1,112,424, or an increase of 11.28% when compared to $999,642 earned
during the third quarter in 1998. Diluted earnings per share were $0.32
compared to $0.29 per share for the same period in 1998.
Year 2000 Compliance
The approaching Year 2000 presents companies in all industries with a
myriad of challenges including the ongoing operation of their data systems
to check proper interpretation of calendar year digits and resulting
calculations. To meet these challenges, the Company has completed an
assessment of Year 2000 issues, developed a plan to resolve these issues,
and commenced the implementation of changes and testing required to achieve
compliance.
The Company, as of March 31, 1999, completed changes and testing of all
essential systems utilizing both internal and external resources.
Previously identified applications for processing depositors' and
borrowers' accounts, stockholder information, origination and receiving
electronic charges and credits (ACH) items, general ledger processing and
the PC network system, including the teller system, went through a four
phase testing schedule to ensure full compliance to Year 2000 needs. As of
March 31, 1999, all four phases of the testing schedule were completed,
verified, and are satisfactory.
The testing of the Federal Reserve Bank's fedline system, which provides
the Company the ability to perform various operations including originating
and receiving ACH items, performing wire transfers and purchasing
securities, was completed and verified in December, 1998. The ATM
renovation and testing has also been completed.
Key vendors and customers have been identified and contacted to determine
any vulnerability the Company may have due to the failure of these parties
to remedy their own Year 2000 issues. The above mentioned testing has been
performed using the resources of key vendors and the Company's own internal
resources. To the extent that key vendors, customers or other general
suppliers not affiliated with the Company, such as communications and
electric suppliers, are unsuccessful in properly addressing the Year 2000
issue, the Company could possibly be negatively impacted. Although the
Company does not anticipate any system to be non-compliant, should a
problem arise with a key vendor, customer or general supplier, the Company
is finalizing a contingency plan to deal with these issues. It is
impossible at this time to determine the impact this could have on the
Company's operations, liquidity and financial condition.
The total cost of the Year 2000 project is estimated to be approximately
$20,000 to $40,000. These costs are not expected to be material to the
Company's operations, liquidity or financial condition. These estimated
costs are based upon management's best estimates, which have been derived
from numerous assumptions of future events, which include the availability
of certain resources, third party modification plans, and other factors.
However, there is no guarantee that these estimates will hold true and
actual results could differ from those anticipated. To date, the company
has incurred Year 2000 related expenses totaling $25,113 with all phases of
the testing schedule completed. It is anticipated that any further cost
pertaining to Year 2000 will be immaterial.
The Federal Deposit Insurance Corporation (FDIC) has established Year 2000
standards for safety and soundness consistent with the Federal Financial
Institution's Examination Council (FFIEC) guidance papers describing
certain essential steps that each FDIC - supervised financial institution
must take to become Year 2000 ready. There is ongoing regulatory oversight
by the FDIC of all insured financial institutions, including the Company,
concerning Year 2000 compliance.
The Company has completed a Year 2000 (Y2K) study to address the
speculation of depositors withdrawing excess cash to meet their personal
needs for a period of time. Upon completion of a cash analysis and survey,
a projection of cash reserves related to Y2K was determined. Provisions
have been made to obtain and store this additional cash anticipating an
increase in customer cash demand later in 1999 and into the year 2000.
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, consisting of Bristol County, Massachusetts
and several abutting towns in Rhode Island.
The Company also has the ability to borrow funds for liquidity purposes
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 have the need to borrow for liquidity
purposes in 1998. During the first nine months of 1999, the Company
borrowed for fourteen days an average of $4,400,000 Million. Tax payments
made by our customers which are owed to the Federal Reserve Bank Treasury
Tax and Loan account are classified as Short-Term borrowings. The Notes
Payable represents a note due Fleet Bank. The note is attributable to
Fairbank, Inc. and was assumed at the time of the merger. It has a final
maturity in November, 1999. Due to the applicable prepayment fees, it is
advantageous for the Bank to continue with the applicable terms of the
note. There is also a $4,403,450 borrowing from the Federal Home Loan Bank
representing the match funding program that is available to qualified
borrowers.
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 September 30, 1999, the Bank's liquidity ratio stood at 27.7% as
compared to 32.8% at December 31, 1998. 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.
The comparison of cash flows for nine months ending September 30, 1999 and
1998 shows an increase in net cash provided by operating activities of $1.8
Million. This is largely attributable to the decrease in funds used in
other assets which includes $1.6 Million of single premium life insurance
policies purchased in 1998, which provided each member of the Board of
Directors with a supplemental life insurance benefit.
Cash flows from investing activities show a net increase in cash used of
$7.5 Million when compared to 1998. There was a decrease in purchases of
securities of $9.2 Million and in maturities and sales of securities of
$1.8 Million when compared to the same nine months in 1998. Capital
expenditures also decreased by $.3 Million when compared to 1998. These
were offset by an increase in loans of $15.4 Million.
Cash provided by financing activities decreased by $9.9 Million during the
first nine months of 1999 when compared to the same period in 1998. There
was a decrease in cash provided by time deposits of $13.6 Million offset by
an increase in federal funds purchased of $4.0 Million and short-term
borrowings of $2.1 Million. There were also decreases of $.9 Million in
cash provided by demand deposits, NOW, money market and savings accounts,
and $1.4 Million in advances from Federal Home Loan Bank.
Capital
As of September 30, 1999, the Company had total capital of $30,762,156.
This represents an increase of $1,054,771 from $29,707,385 reported on
December 31, 1998. The increase in capital was a combination of several
factors. Additions consisted of nine months earnings of $2,907,139 and
transactions originating through the Dividend Reinvestment Program whereby
15,076.144 shares were issued for cash contributions of $185,245 and
27,745.677 shares were issued for $357,444 in lieu of cash dividend
payments. These additions were offset by dividends paid of $764,197.
Also, affecting capital is the line item Accumulated other comprehensive
income (loss) which reflects net unrealized gains or losses, net of taxes,
on securities classified as Available-for-Sale and the minimum pension
liability adjustment. On December 31, 1998 the Available-for-Sale
portfolio had unrealized gains, net of taxes, of $364,944, and on September
30, 1999, as a result of current market values, the portfolio reflects
unrealized losses, net of taxes, of $1,265,917. There was no change in the
minimum pension liability adjustment of $80,885, net of taxes, recorded
December 31, 1998.
Under the requirements for Risk Based and Leverage Capital of the federal
banking agencies, 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 September 30, 1999 the actual Risk Based Capital of the Bank was
$26,018,000 for Tier 1 Capital, exceeding the minimum requirements of
$10,024,440 by $15,993,560. Total Capital of $29,161,000 exceeded the
minimum requirements of $20,048,880 by $9,112,120 and Leverage Capital of
$26,018,000 exceeded the minimum requirements of $13,717,360 by
$12,300,640. In addition to the "minimum" capital requirements, "well
capitalized" standards have also been established by the Federal Banking
Regulators.
As shown by the table below which illustrates the capital ratios of the
Company and the Bank on September 30, 1999 and at December 31, 1998, the
Company and the Bank met the "well-capitalized" standards as of the dates
indicated.
<TABLE>
<CAPTION>
Well September 30, 1999 December 31, 1998
Capitalized ------------------------------------------
Requirement Bancorp Bank Bancorp Bank
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets) 10% 12.94% 11.64% 12.80% 11.69%
Tier I Capital (to Risk Weighted Assets) 6% 11.69% 10.38% 11.47% 10.36%
Leverage Capital (to Average Assets) 5% 8.51% 7.59% 8.12% 7.38%
</TABLE>
ITEM 3
Quantitative and Qualitative Disclosure of Market Risk
Interest Rate Risk
Volatility in interest rates requires the Company to manage interest rate
risk that arises from the differences in the timing of repricing of assets
and liabilities. The Company considers interest rate risk, the exposure of
earnings to adverse movements in interest rates, to be a significant market
risk as it could potentially have an effect on the Company's financial
condition and results of operation.
The Company's Asset-Liability Management Committee, comprised of the Bank's
Executive Management team, has the responsibility of managing interest rate
risk, and monitoring and adjusting the difference between interest-
sensitive assets and interest-sensitive liabilities ("GAP" position) within
various time periods.
Management's objective is to reduce and control the volatility of its net
interest margin by managing the relationship of interest-earning assets and
interest-bearing liabilities. In order to manage this relationship, the
committee utilizes a GAP report prepared on a monthly basis. The GAP
report indicates the differences or gap between interest-earning assets and
interest-bearing liabilities in various maturity or repricing time periods.
This, in conjunction with certain assumptions, and other related factors,
such as anticipated changes in interest rates and projected cash flows from
loans, investments and deposits, provides management a means of evaluating
interest rate risk.
In addition to the GAP report, the Company also uses an analysis to measure
the exposure of net interest income to changes in interest rates over a
relatively short (i.e., 12 months) time frame. The analysis projects
future interest income and expenses from the Company's earning assets and
interest-bearing liabilities. Depending on the GAP position, the Company's
policy limit on interest rate risk specifies that if interest rates were to
change immediately up or down 200 basis points, estimated net interest
income for the next twelve months should not decline by more than ten
percent.
The following table reflects the Company's estimated exposure as a
percentage of estimated net interest income for the next twelve months,
assuming an immediate change in interest rates:
<TABLE>
<CAPTION>
Estimated Exposure as a
Rate Change Percentage of Net Interest Income
(Basis Points) September 30, 1999
- ------------------------------------------------------------------------
<S> <C>
+200 (0.52%)
-200 (1.81%)
</TABLE>
The model used to monitor earnings-at-risk provides management a
measurement tool to assess the effect of changes in interest rates on the
Company's current and future earnings. The 10% limit established by the
Company provides an internal tolerance level to control interest rate risk
exposure.
PART II
OTHER INFORMATION
ITEM 1
Legal Proceedings
The civil suit brought in Plymouth Superior Court by a former employee of the
acquired National Bank of Fairhaven was adjudicated during the period June 22
through June 29, 1999. Although the parties are still waiting the entry of
judgement, the jury awarded in favor of the plaintiff $145,432 plus interest,
costs and attorney's fees in an amount that is yet to be determined. The
Company is considering filing a motion to overturn the jury decision and, if
necessary, will consider filing an appeal. At present, the Company has
accrued a liability of $300,000.
ITEM 5
Other Information
In late June, the Bank implemented certain state tax planning strategies,
whereby a Real Estate Investment Trust (REIT) was established as a subsidiary
of Slade's Ferry Trust Company. The REIT, which is named the Slade's Ferry
Preferred Capital Corporation, provides the means for the Bank to invest
into the REIT certain designated, bank-owned, real estate mortgage loans,
reducing applicable state tax.
The Bank has received regulatory approval to establish a loan production
office known as the Slade's Ferry Loan Company, located at 188 Airport Road
in Warwick, Rhode Island. The office, which was opened in late September
1999, provides the opportunity to solicit commercial and consumer borrowers
in the Rhode Island area.
ITEM 6
Exhibit and Reports on Form 8-K
(a) Exhibits: See exhibit index
(b) Reports on Form 8-K: None
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- -----------
<C> <S> <C>
3.1 Articles of Incorporation of Slade's Ferry Bancorp as amended (1)
3.2 By-laws of Slade's Ferry Bancorp as amended (2)
10.1 Agreement and Plan of Merger by and between Slade's Ferry
(formerly Weetamoe) Bancorp and Fairbank, Inc. (3)
10.2 Slade's Ferry (formerly Weetamoe) Bancorp 1996 Stock Option Plan
(as amended) (3)
10.3 Noncompetition Agreement between Slade's Ferry Trust Company and
Edward S. Machado (A substantially identical contract exists
with Peter Paskowski) (4)
10.4 Supplemental Executive Retirement Agreement between Slade's
Ferry (formerly Weetamoe) Bancorp and Donald T. Corrigan (5)
10.5 Supplemental Executive Retirement Agreement between Slade's
Ferry (formerly Weetamoe) Bancorp and James D. Carey (2)
10.6 Supplemental Executive Retirement Agreement between Slades
Ferry (formerly Weetamoe) Bancorp and Manuel J. Tavares (2)
10.7 Swansea Mall Lease (4)
10.8 Form of Director Supplemental Retirement Program Director
Agreement, Exhibit I thereto (Slade's Ferry Trust Company
Director Supplemental Retirement Program Plan) and Endorsement
Method Split Dollar Plan Agreement thereunder for Thomas B. Almy.
(Similar forms of agreement entered into between Slade's Ferry
Trust Company and the other directors)* (6)
10.9 Form of Directors' Paid-up Insurance Policy for Thomas B. Almy
(part of the Director Supplemental Retirement Program).
(Similar forms of policy entered into by Company for other
directors). (7)
27 Financial Data Schedule
<FN>
<F1> Incorporated by reference to the Registrant's Registration Statement
on Form SB-2 filed with the Commission on April 14, 1997.
<F2> Incorporated by reference to the Registrant's Form 10-KSB for the
fiscal year ended December 31, 1996
<F3> Incorporated b reference to the Registrant's Form 10-Q for the quarter
ended June 30, 1999.
<F4> Incorporated by reference to the Registrant's Registration Statement
on Form S-4 File No. 33-32131.
<F5> Incorporated by reference to the Registrant's Form 10-KSB for the
fiscal year ended December 31, 1994.
<F6> Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1999.
<F7> Incorporated by reference to the Registrant's Form 10-QSB for the
quarter ended June 30, 1998.
</FN>
</TABLE>
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.
SLADE'S FERRY BANCORP
------------------------------------
(Registrant)
11/10/1999 /s/ Kenneth R. Rezendes
- ---------------------------------------------------------------------------
(Date) (Signature) Kenneth R. Rezendes
President/CEO
11/10/1999 /s/ James D. Carey
- ---------------------------------------------------------------------------
(Date) (Signature) James D. Carey
Executive Vice President
11/10/1999 /s/ Ralph S. Borges
- ---------------------------------------------------------------------------
(Date) (Signature) Ralph S. Borges
Treasurer
Chief Financial Officer
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 15,348,249
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 62,405,670
<INVESTMENTS-CARRYING> 19,360,024
<INVESTMENTS-MARKET> 19,178,750
<LOANS> 231,878,962
<ALLOWANCE> 4,009,575
<TOTAL-ASSETS> 348,073,564
<DEPOSITS> 304,153,815
<SHORT-TERM> 5,215,527
<LIABILITIES-OTHER> 2,763,616
<LONG-TERM> 5,178,450
0
0
<COMMON> 34,893
<OTHER-SE> 30,727,263
<TOTAL-LIABILITIES-AND-EQUITY> 348,073,564
<INTEREST-LOAN> 15,280,331
<INTEREST-INVEST> 3,577,587
<INTEREST-OTHER> 220,159
<INTEREST-TOTAL> 19,078,077
<INTEREST-DEPOSIT> 7,719,587
<INTEREST-EXPENSE> 8,013,163
<INTEREST-INCOME-NET> 11,064,914
<LOAN-LOSSES> 450,000
<SECURITIES-GAINS> 626,760
<EXPENSE-OTHER> 7,719,985
<INCOME-PRETAX> 4,460,572
<INCOME-PRE-EXTRAORDINARY> 4,460,572
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,907,139
<EPS-BASIC> .84
<EPS-DILUTED> .84
<YIELD-ACTUAL> 4.60
<LOANS-NON> 2,322,200
<LOANS-PAST> 170,652
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,569,282
<CHARGE-OFFS> 55,630
<RECOVERIES> 45,924
<ALLOWANCE-CLOSE> 4,009,575
<ALLOWANCE-DOMESTIC> 4,009,575
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
