Exhibit 99.1
Earnings
Release
FALMOUTH BANCORP, INC.
For further information contact:
Santo P. Pasqualucci
President & CEO
(508) 548-3500
FOR IMMEDIATE RELEASE
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November 7, 2003
FALMOUTH BANCORP, INC. REPORTS RESULTS FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 2003
Falmouth, Massachusetts, November 7, 2003, - Falmouth Bancorp, Inc.
(AMEX: FCB) (the "Company"), a Delaware corporation, the holding company
for Falmouth Co-operative Bank (the "Bank"), announced today the Company's
results of operations for the twelve months ended September 30, 2003. For
the twelve months ended September 30, 2003, the Company reported net income
of $594,000 as compared to $1.5 million for the twelve months ended
September 30, 2002. The decrease was primarily due to tax legislation
enacted by the Commonwealth of Massachusetts in March of 2003, effective
retroactively to 1999, eliminating the 95% income tax dividend exclusion on
dividends the Bank received from its real estate investment trust
subsidiary. Additionally, the Company realized losses of $450,000 in its
investment securities portfolio. Management chose to divest itself of
certain investment securities for tax and other considerations. The
Company's basic earnings per share, after an extraordinary item, decreased
to $0.68 at September 30, 2003 from $1.73 at September 30, 2002, a decrease
of 61%. Diluted earnings per share decreased to $0.64 from $1.64, a
decrease of 61% for the same period.
The Company had average shares outstanding of 880,828 at September
30, 2003, as compared to 860,865 average shares outstanding at September
30, 2002 At September 30, 2003, the Company had repurchased a total of
541,023 shares, or 37.2% of its common stock, leaving 913,727 shares issued
and outstanding.
The Company's total assets were $166.1 million at September 30, 2003,
as compared to $154.5 million at September 30, 2002, an increase of $11.6
million or 7.5%. Total deposits were $145.5 million at September 30, 2003,
as compared to $131.7 million at September 30, 2002, an increase of $13.8
million, or 10.48%. This increase was due, in part, to consumers seeking
safer havens with insured deposits as a result of the downturn in the stock
markets. Total net loans were $83.3 million or 57.3% of total deposits at
September 30, 2003, as compared to $95.0 million or 72.1% of total deposits
at September 30, 2002, representing a decrease of $11.7 million for the
period. This decrease is due, in part, to low mortgage rates and to the
active local real estate market driving single-family re-financing at lower
yields. This resulted in the Bank selling more of its lower rate loans in
the secondary market. During the year, the Bank sold $63.7 million in
residential mortgages and $1.1 million in commercial
mortgages, all with servicing retained. Investment securities were $70.6
million or 42.5% of total assets at September 30, 2003, as compared to
$47.7 million or 30.8% of total assets at September 30, 2002. As
investment securities matured, funds were reinvested in short-term
investment grade securities.
Net Income. The Company's net income for the twelve months ended
September 30, 2003, was $594,000 as compared to $1.5 million for the twelve
months ended September 30, 2002. The decrease in net income of $922,000
was primarily due to a decrease in interest expense of $972,000, an
increase in other expenses of $630,000, offset by a decrease in interest
and dividend income of $2.0 million, an increase in other income of
$738,000 and a decrease in income taxes of $61,000. The annualized return
on average assets (ROA) for the 12 months ended September 30, 2003 was
0.37%, a decrease of 63 basis points, as compared to 1.00% for the prior
year. Interest and dividend income decreased, primarily, as the result of
an increase in residential loans re-written at lower rates during the year,
accompanied with lower yields on investment securities. The decrease in
interest expense was primarily due to the general reduction in interest on
deposits.
Net Interest and Dividend Income. Net interest and dividend income
for the twelve-months ended September 30, 2003 was $4.3 million, as
compared to $5.3 million for the 12 months ended September 30, 2002. The
decrease of $1.0 million was the result of a $2.0 million decrease in
interest and dividend income, offset by a $1.0 million decrease in interest
expense. The net interest margin for the twelve months ended September 30,
2003 was 2.84%, a decrease of 84 basis points, as compared to 3.68% for the
twelve months ended September 30, 2001. The decrease in net interest
margin was primarily the result of the decrease in interest income due to
the lower general level of interest rates.
Interest and Dividend Income. Total interest and dividend income for
the twelve months ended September 30, 2003 was $6.7 million, a decrease of
$2 million as compared to $8.7 million for the twelve months ended
September 30, 2002. The decrease in interest and dividend income was due
to a $2 million decrease in interest income on loans, and a $17,000
decrease in other interest, offset by a $221,000 increase in interest and
dividends on securities and short-term investments. The decrease in
interest income on loans was primarily the result of increased refinancing
volume at lower rates. The increase in interest and dividends on
securities was the result of utilizing cash flow from the refinancing of
loans to increase the volume in short-term securities.
Interest Expense. Interest expense for the twelve months ended
September 30, 2003 was $2.4 million, a decrease of $1 million, as compared
to $3.4 million for the twelve months ended September 30, 2002. The
decrease in interest expense was due to the general decrease in interest
rates as well as a decrease in Federal Home Loan Bank borrowings during the
period.
Provision for Loan Loss Expense. The allowance for loan loss account
was reduced by $180,000 for the twelve months ended September 30, 2003; no
provision was made to the allowance for loan loss account for the twelve
months ended September 30, 2002. The provision for loan losses was the
result of the Bank's decline in total loans due to the selling of
residential mortgages, which is commensurate with loan loss risk. The
allowance for loan losses at September 30, 2003 was $761,000, as compared
to $939,000 at September 30, 2002, for a decrease of 19%. On September 30,
2003 the Bank had no loans 60 or more days delinquent and no small
commercial loans overdue. The Bank's allowance for loan losses to total
loans ratio was 0.91% at September 30, 2003.
Non-interest Income. Non-interest income or other income for the
twelve months ended September 30, 2003 was $1.2 million as compared to
$502,000 for the twelve months ended September 30, 2002. The $740,000
increase was due to a decrease in net security losses of
$131,000, an increase of $18,000 in service charge income, a $85,000
increase in loan servicing fees a $12,000 increase in other income, and an
increase of $494,000 in gains on mortgages sold. Lower market values made
it necessary to write down several of the Bank's equity securities holdings
during the year. The Bank continued a moderate-term strategic objective of
selling off packages of the lowest rate residential loans, service
retained, for market gains.
Non-Interest Expense. Non-interest expense, or other expense, for
the twelve months ended September 30, 2003 was $4.0 million as compared to
$3.4 million in 2002. A $630,000 increase was primarily due to the
combination of an increase in salaries and employee benefits of $251,000,
an increase in occupancy expense of $10,000, an increase in data processing
fees of $31,000, an increase in Directors' fees of $16,000, an increase in
deposit insurance expense of 2,000 an increase in other operating expenses
of $361,000, off-set in part by a decrease in equipment expense of $8,000,
and a decrease in legal and professional fees of $33,000. The increase in
data processing expense was partially due to the modernization of our
teller operating equipment and software as well as the implementation of a
bank wide area network interconnecting the main office and branches.
Extraordinary Item. The extraordinary expense item is the result of
Massachusetts tax legislation concerning the 95% tax dividend exclusion of
dividends received by the Bank from its real estate investment trust
subsidiary. The tax legislation expressly disallows the deduction for
dividends received from a real estate investment trust subsidiary. As a
result of the enactment of the legislation, the Company ceased recording
the tax benefits associated with the dividend received deduction and an
extraordinary item of $572,000 (net of income tax benefits of $300,000) was
recorded in March 2003. On June 20, 2003, the Bank and its subsidiary real
estate investment trust entered into an agreement with Massachusetts
concerning the dividends received deduction claimed by the Bank. Under the
agreement, the Bank paid $250,970 to the Department of Revenue which will
abate the balance of all assessments and all tax and interest otherwise
remaining due under the assessments. During the quarter ended June 30,
2003, the Bank recorded a credit to extraordinary expense of $295,000, net
of tax effects. The Bank's real estate investment trust subsidiary has
been dissolved.
Falmouth Bancorp, Inc. is a publicly owned bank holding company and the
parent corporation of Falmouth Co-operative Bank, a Massachusetts chartered
stock co-operative bank offering traditional financial products and
services. The Bank conducts business through its main office located at 20
Davis Straits, Falmouth, Massachusetts 02540, and its two branch locations
in North and East Falmouth. The telephone number is (508) 548-3500.
FALMOUTH BANCORP, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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September 30, 2003 (unaudited) and 2002
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<s> <c> <c>
ASSETS 2003 2002
- ------ ------------ ------------
Cash, due from banks and interest bearing deposits $ 3,335,059 $ 2,916,804
Federal funds sold 4,037,306 4,505,780
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Total cash and cash equivalents 7,372,365 7,422,584
Investments in available-for-sale securities (at
fair value) 37,179,799 18,712,954
Investments in held-to-maturity securities (fair
values of $32,556,554 as of September 30, 2003
and $28,034,474 as of September 30, 2002) 32,549,241 28,060,267
Federal Home Loan Bank stock, at cost 878,000 878,000
Loans, net of allowance for loan losses
of $760,552 as of September 30, 2003
and $939,173 as of September 30, 2002 83,319,478 95,009,955
Premises and equipment 1,911,894 1,792,016
Accrued interest receivable 1,333,910 1,114,924
Cooperative Central Bank Reserve Fund Deposit 395,395 395,395
Other assets 1,178,108 1,134,907
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Total assets $166,118,190 $154,521,002
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Noninterest-bearing $ 20,425,557 $ 17,552,180
Interest-bearing 125,109,413 114,164,879
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Total deposits 145,534,970 131,717,059
Securities sold under agreements to repurchase - 471,872
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Federal Home Loan Bank advances 2,582,885 5,178,175
Other liabilities 256,956 761,663
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Total liabilities 148,374,811 138,128,769
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Minority preferred stockholders' equity in a
subsidiary company of Falmouth Co-Operative Bank - 53,500
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Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 500,000 shares; none issued
Common stock, par value $.01 per share;
authorized 2,500,000 shares; issued 1,454,750 shares 14,547 14,547
Paid-in capital 14,093,713 13,981,543
Retained earnings 13,858,343 13,735,221
Unallocated Employee Stock Ownership Plan shares (213,114) (301,299)
Treasury stock (541,023 shares as of September 30, 2003 and
553,971 shares as of September 30, 2002) (9,578,649) (9,807,890)
Unearned compensation (340,994) (477,088)
Accumulated other comprehensive loss (90,467) (806,301)
------------ ------------
Total stockholders' equity 17,743,379 16,338,733
------------ ------------
Total liabilities and stockholders' equity $166,118,190 $154,521,002
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FALMOUTH BANCORP, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Years Ended September 30, 2003, 2002 and 2001
---------------------------------------------
2003 2002 2001
---------- ---------- ---------
(unaudited)
<s> <c> <c> <c>
Interest and dividend income:
Interest and fees on loans $5,299,009 $7,465,526 $8,455,351
Interest and dividends on securities:
Taxable 1,240,007 1,012,470 864,333
Dividends on marketable equity securities 75,980 81,525 105,146
Dividends on Cooperative Bank Investment
and Liquidity Funds - 551 30,063
Other interest 114,942 131,995 190,265
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Total interest and dividend income 6,729,938 8,692,067 9,645,158
---------- ---------- ----------
Interest expense:
Interest on deposits 2,188,626 3,093,465 4,120,397
---------- ---------- ----------
Interest on securities sold under agreements
to repurchase 11,179 5,269 36,313
Interest on Federal Home Loan Bank advances 218,686 290,944 361,049
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Total interest expense 2,418,491 3,389,678 4,517,759
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Net interest and dividend income 4,311,447 5,302,389 5,127,399
(Benefit) provision for loan losses (179,868) - 190,000
---------- ---------- ----------
Net interest and dividend income after (benefit)
provision for loan losses 4,491,315 5,302,389 4,937,399
---------- ---------- ----------
Other income:
Service charges on deposit accounts 198,772 181,205 151,963
Gains (losses) on investment securities, net (450,700) (581,151) 167,957
Net gains on sales of loans 1,043,733 550,488 92,427
Loan servicing fees 147,383 62,542 17,952
Other income 300,911 288,610 266,031
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Total other income 1,240,099 501,694 696,330
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Other expense:
Salaries and employee benefits 1,957,968 1,706,956 1,746,736
Occupancy expense 170,115 159,970 192,589
Equipment expense 186,663 195,214 181,129
Data processing expense 427,442 395,818 325,127
Directors' fees 87,165 71,350 54,850
Legal and professional fees 163,971 197,018 226,479
Deposit insurance expense 22,500 21,175 20,821
Other expense 1,015,333 653,552 676,964
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Total other expense 4,031,157 3,401,053 3,424,695
---------- ---------- ----------
Income before income taxes 1,700,257 2,403,030 2,209,034
Income taxes 829,066 886,845 779,273
---------- ---------- ----------
Net Income, before extraordinary item 871,191 1,516,185 1,429,761
Extraordinary item, net of tax effects (276,959) - -
---------- ---------- ----------
Net Income, after extraordinary item $ 594,232 $1,516,185 $1,429,761
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FALMOUTH BANCORP, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Years Ended September 30, 2003, 2002 and 2001
---------------------------------------------
(Continued)
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2003 2002 2001
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(unaudited)
<s> <c> <c>
Earnings per common share, before
extraordinary item $ 1.00 $1.73 $1.48
Loss per common share on
extraordinary item (0.32) - -
------ ----- -----
Earnings per common share after
extraordinary items $ 0.68 $1.73 $1.48
====== ===== =====
Earnings per common share, before
extraordinary item, assuming dilution $ 0.94 $1.64 $1.45
Loss per common share on extraordinary item,
Assuming dilution (0.30) - -
------ ----- -----
Earnings per common share, after extraordinary item
assuming dilution $ 0.64 $1.64 $1.45
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