UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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
Somerset, Massachusetts 02726
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 675-2121
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock of Slade's Ferry Bancorp,
held by nonaffiliates of the registrant as of December 31, 1998 was
approximately $41,718,715. On that date, there were 3,446,413.8 shares of
Slade's Ferry Bancorp Common Stock, $.01 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
ANNUAL REPORT to security holders for fiscal year ended December 31, 1998
incorporated by reference into Parts I and II. Proxy Statement for Annual
Meeting of Stockholders April 12, 1999 incorporated by reference into Part
III.
PART I
ITEM 1
BUSINESS
Description of Business
Business of Slade's Ferry Bancorp
- ---------------------------------
Slade's Ferry Bancorp ("the Company") is a business corporation that
was organized under the laws of the Commonwealth of Massachusetts on June
13, 1989 as Weetamoe Bancorp. The name Weetamoe Bancorp was changed to
Slade's Ferry Bancorp effective January 1, 1997. The office of Slade's Ferry
Bancorp is located at the office of the Bank at 100 Slade's Ferry Avenue,
Somerset, Massachusetts, 02726, and its telephone number is the same as the
Bank's: (508)675-2121.
The Company was organized for the purpose of becoming the holding
company of the Bank. The Company's acquisition of the Bank was completed on
April 1, 1990. The Bank (Slade's Ferry Trust Company) is a wholly-owned
subsidiary of Slade's Ferry Bancorp.
Competition
- -----------
The primary business of Slade's Ferry Bancorp is the ongoing business
of the Bank. The competitive conditions to be faced by Slade's Ferry Bancorp
will be the same as those faced by the Bank. It is likely that, as a holding
company, it may compete with other holding companies engaged in bank-related
activities. Thus, the Company will face competition in undertaking to
acquire other banks, financial institutions or companies engaged in bank-
related activities, and in operating subsequent to any such acquisitions.
While the Company investigates opportunities to acquire other banks or
bank facilities when they occur and may in the future acquire other banks,
financial institutions, or bank facilities, it is not currently engaged in
any such acquisition.
Employees
- ---------
At present there are four employees of the Bank and the Company whose
compensation is paid by the Company. Although the Company has no current
plans to do so, if the Company should acquire other financial institutions
or pursue other lines of business, it may at such time hire additional
employees.
Business of Slade's Ferry Trust Company
- ---------------------------------------
On September 30, 1959, the Slade's Ferry Trust Company opened for
business as a state chartered trust company incorporated under the laws of
the Commonwealth of Massachusetts and as a member of the Federal Deposit
Insurance Corporation (FDIC). The founders were a group of individuals from
Somerset, Swansea, Fall River and Seekonk, Massachusetts who recognized the
need for a local bank committed to personalized services.
During the past three years, assets of the Bank increased by $107
Million of which $49 Million is attributed to overall growth and $58 Million
attributed to the acquisition of the National Bank of Fairhaven, which
occurred in August 1996. The Bank currently has ten banking facilities
extending east from Seekonk, Massachusetts to Fairhaven, Massachusetts. The
Bank also provides limited banking services at the Somerset High School. The
Bank employs 136 full-time employees and 54 part-time employees.
The Bank currently services numerous communities in Southeastern
Massachusetts and contiguous areas of Rhode Island through its ten
facilities in Fall River, Somerset, Swansea, Seekonk, New Bedford and
Fairhaven.
The Bank's major customer base consists of almost 32,000 personal
savings, checking and money market accounts and 8,200 personal certificates
of deposit and individual retirement accounts. Its commercial base consists
of over 3,200 checking, money market, corporate, and certificate of deposit
accounts.
The Bank does not have any major target accounts, nor does it derive a
material portion of its deposits from any single depositor. It is a retail
bank that services the needs of the local communities, and its loans are not
concentrated within any single industry or group of related industries that
would have any possible adverse effect on the business of the Bank. The
Bank's business is not seasonal and its loan demand is well diversified. As
of December 31, 1998, commitments under standby letters of credit aggregate
approximately $2,307,880.
Services
- --------
The Bank engages actively in a broad range of banking activities,
including demand, savings, time deposits, related personal and commercial
checking account services, real estate mortgages, commercial and installment
lending, payroll services, money orders, travelers checks, Visa, Mastercard,
safe deposit rentals, automatic teller machines and cash management
services. The Bank offers a full range of commercial, installment, student,
and real estate loans. The service area of the Bank is approximately 300
square miles, including the southern geographic area of Bristol County,
Massachusetts and extends over to the towns of Tiverton, Warren, Bristol and
Barrington in the state of Rhode Island.
Competition
- -----------
The banking business in the market area served by the Bank is highly
competitive. The Bank actively competes with other banks, financial
institutions, and credit unions, including major banks and bank holding
companies which have numerous offices and affiliates operating over wide
geographic areas. The Bank competes for deposits, loans, and other business
with these institutions.
Many of the major commercial banks, or other affiliates in the service
areas of the Bank, offer services such as international banking, and
investment and trust services which are not offered directly by the Bank.
Supervision and Regulation
Holding Company Regulation
- --------------------------
Under the Federal Bank Holding Company Act ("BHCA"), the prior
approval of the Federal Reserve Board ("FRB") is required before a
corporation may acquire control of a bank. FRB approval must also be
obtained before a bank holding company acquires all or substantially all of
the assets of a bank, or merges or consolidates with another bank holding
company. In considering any applications for approval of an acquisition or
merger, the FRB is required to consider the financial and managerial
resources of the companies and banks concerned, and the convenience and
needs of the communities to be served.
As a registered bank holding company, the Company is required to file
with the FRB annual and periodic reports and such other additional
information as the Board may require. The Company and its subsidiaries are
also subject to continuing regulation, supervision and examinations by the
FRB.
A bank holding company, with certain exceptions, may not acquire more
than 5% of the voting shares of any company that is not a bank and may not
engage, directly or through subsidiaries, in any activity other than
banking, managing or controlling banks, or furnishing services to or
performing services for its subsidiaries, without prior approval of the FRB.
The FRB is authorized to approve the ownership by a bank holding company of
voting shares of any company whose activities the FRB determines to be so
closely related to banking or managing or controlling banks as to be a
proper incident thereof. Under the FRB's current regulations, and subject to
certain restrictions and limitations specified therein, bank holding
companies and their subsidiaries may be permitted by the FRB to engage in
such non-banking activities as: (1) making, acquiring, or servicing loans or
other extensions of credit such as would be made by a mortgage, finance,
credit card, or factoring company; (2) operating an industrial bank or
industrial loan company; (3) performing the functions of a trust company;
(4) acting as an investment or financial advisor; (5) leasing real or
personal property or acting as an agent or broker in leasing such property
or acting as an agent or broker in leasing property in certain situations;
(6) making investments to promote community welfare; (7) providing certain
data processing and transmission services; (8) acting as principal, agent,
or broker with respect to insurance directly related to extensions of credit
by the bank holding company or its subsidiaries, and engaging in certain
other insurance activities subject to specified conditions and limitations;
(9) providing courier services for checks and certain other instrument
exchanges among banks, and for audit and accounting media of a banking or
financial nature; (10) providing management consulting advice under
specified conditions to banks not affiliated with the bank holding company;
(11) issuing and selling retail money orders having a face value of not more
than $1,000 and travelers checks and selling U.S. Savings Bonds; (12)
performing appraisals of real and personal property; (13) arranging
commercial real estate equity financing under certain circumstances; (14)
providing securities brokerage services as agent for the accounts of
customers; (15) underwriting and dealing in certain government obligations
and money market instruments; (16) providing foreign exchange advisory and
transactional services; (17) acting as a futures commission merchant in
specified capacities or providing investment advice as a futures commission
merchant or commodity trading advisor with respect to certain financial
futures contracts and options; (18) providing consumer financial counseling
services; (19) providing tax planning and preparation services; (20)
providing check guaranty services to subscribing merchants; (21) operating a
collection agency; and (22) operating a credit bureau. In addition, a bank
holding company may file an application for FRB approval to engage, directly
or through subsidiaries, in other nonbank activities that the holding
company reasonably believes are so closely related to banking as to be a
proper incident thereto.
In addition, pursuant to the Bank Export Services Act of 1982, a bank
holding company may invest up to 5% of its consolidated capital and surplus
in shares of an export trading company unless such investment is disapproved
by the FRB after notice as provided in that Act.
As a bank holding company, the Company will be required to give the
FRB prior written notice of any purchase or redemption of its outstanding
equity securities if the gross consideration for the purchase or redemption,
when combined with the net consideration paid for all such purchases or
redemptions during the preceding 12 months, is equal to 10% or more of
Bancorp's consolidated net worth. The FRB may disapprove such a purchase or
redemption if it determines that the proposal would violate any law,
regulation, FRB order, directive, or any condition imposed by, or written
agreement with, the FRB.
The status of the Company as a registered bank holding company under
the BHCA does not exempt it from certain federal and state laws and
regulations applicable to corporations generally, including, without
limitation, certain provisions of the federal securities laws.
Under Massachusetts law, Board of Bank Incorporation approval is
required before any company may become a bank holding company by directly or
indirectly owning, controlling or holding the power to vote 25% or more of
the voting stock of two or more banks. Further, such approval is required
prior to a bank holding company's (i) acquiring voting stock of another bank
institution if, as a result of the acquisition, such acquirer would,
directly or indirectly, own or control more than 5% of the voting stock of
such institution, or (ii) engaging in certain other transactions. The
Company is not considered a bank holding company under Massachusetts law
since it does not control two or more banks. The activities of the Company,
however, will be limited under Massachusetts law to activities described
above which would be permissible for a bank holding company registered under
the BHCA. In addition, the acquisition by the Company of 25% or more of the
voting stock or the power to elect a majority of the directors of another
commercial bank, savings bank, cooperative bank, or savings and loan
association would subject the Company to regulation as a bank holding
company under applicable Massachusetts law and would require the approval of
the Massachusetts Board of Bank Incorporation.
Bank Regulation
- ---------------
As a Massachusetts-chartered, FDIC-insured trust company, the Bank is
subject to regulation and supervision by the Commissioner of Banks, the FDIC
and the FRB.
The Massachusetts statutes and regulations govern, among other things,
investment powers, deposit activities, borrowings, maintenance of surplus
and reserve accounts, distribution of earnings, and payment of dividends.
The Bank is also subject to state regulatory provisions covering such
matters as issuance of capital stock, branching, and mergers and
acquisitions.
Deposit accounts at the Bank are insured by the FDIC, generally up to
a maximum of $100,000 per insured depositor. As an insurer of deposits of
certain thrift institutions and commercial banks, the FDIC issues
regulations, conducts examinations, requires the filing of reports, and
generally supervises the operations of institutions to which it provides
deposit insurance. The approval of the FDIC is required prior to any merger
or consolidation with another financial institution, or the establishment or
relocation of an office facility. This supervision is intended primarily for
the protection of depositors.
As an FDIC-insured bank, the Bank is subject to certain FDIC
requirements designed to maintain the safety and soundness of individual
banks and the banking system. The FDIC periodically conducts examinations of
insured institutions and, based upon appraisals, may revalue assets of an
insured institution and require establishment of specific reserves in
amounts equal to the difference between such revaluation and the book value
of the assets. In addition, the FDIC has a regulation which defines and sets
minimum requirements for capital adequacy.
Bank regulators have implemented risk based capital guidelines that
require a bank to maintain certain minimum capital as a percent of such
bank's assets and certain off-balance sheet items adjusted for predefined
credit risk factors (risk adjusted assets). Under the requirements a minimum
level of capital will vary among banks on safety and soundness of operation.
At December 31, 1998 the minimum regulatory capital level of Risk Based
Capital was 4% for Tier 1 Capital, 8% for Total Capital and Leverage Capital
was 4%.
The Company, the Bank, the Slade's Ferry Realty Trust, and the Slade's
Ferry Securities Corporation are "affiliates" within the meaning of the
Federal Reserve Act. Certain provisions of the Federal Reserve Act, made
applicable to the Bank by Section 18(j) of the Federal Deposit Insurance Act
and administered with respect to the Bank by the FDIC, limit the amounts of
and establish collateral requirements with respect to the Bank's loans or
extensions of credit to and investments in affiliates. In addition, related
provisions of the Federal Reserve Act and FRB regulations also administered
with respect to the Bank by the FDIC limit the amounts of and establish
required procedures and credit standards with respect to loans and other
extensions of credit to officers, directors and principal stockholders of
the Bank, of the Company, and of any subsidiaries of the Company, and to
related interests of such persons.
Recent Regulatory Examinations
- ------------------------------
During the most recent regulatory examinations of the Company and the
Bank, encompassing year end 1997 and three months ending March 31, 1998, no
major or consequential violations were found.
Statistical Information
- -----------------------
The following supplementary information required under Guide 3
(Statistical Disclosure by Bank Holding Companies) should be read in
conjunction with the related financial statements and notes thereto, which
are a part of this report.
I. DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table sets forth the Company's average assets,
liabilities, and stockholders' equity, interest income earned and interest
paid, average rates earned and paid, and the net interest margin for the
periods ending December 31, 1998, December 31, 1997, and December 31, 1996.
Averages are daily averages.
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
Average Interest(1) Avg. Int. Average Interest(1) Avg. Int. Average Interest(1) Avg. Int.
(Dollars in Thousands) Balance Inc/Exp Rate Balance Inc/Exp Rate Balance Inc/Exp Rate
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Earning Assets (2)
Commercial Loans $ 42,244 $ 3,953 9.36% $ 36,195 $ 3,466 9.58% $ 23,440 $ 2,191 9.35%
Commercial Real Estate 118,939 11,630 9.78 110,093 10,740 9.76 90,576 9,035 9.98
Residential Real Estate 45,781 3,520 7.69 52,894 4,116 7.78 50,486 3,788 7.50
Consumer Loans 6,767 652 9.63 6,503 659 10.13 6,094 613 10.06
- -----------------------------------------------------------------------------------------------------------------------------
Total Loans 213,731 19,755 9.24 205,685 18,981 9.23 170,596 15,627 9.16
Federal Funds Sold 12,214 630 5.16 11,309 607 5.37 14,994 783 5.22
U.S. Treas/Govt Agencies 54,842 3,366 6.14 49,682 3,099 6.24 43,871 2,715 6.19
States & Political
Subdivisions 9,763 649 6.65 6,948 477 6.87 5,959 400 6.71
Mutual Funds 209 14 6.70 301 15 4.98 241 13 5.39
Marketable Equity Securities 2,761 105 3.80 2,518 120 4.77 1,946 75 3.85
Other Investments 6 0 0.00 126 8 6.35 197 15 7.61
- -----------------------------------------------------------------------------------------------------------------------------
Total Earning Assets 293,526 $24,519 8.35% 276,569 $23,307 8.43% 237,804 $19,628 8.25%
- -----------------------------------------------------------------------------------------------------------------------------
Allowance for Loan Losses (3,602) (3,474) (2,958)
Unearned Income (715) (665) (597)
Cash and Due From Banks 12,186 11,366 9,565
Other Assets 15,376 14,022 9,489
- -----------------------------------------------------------------------------------------------------------------------------
Total Assets $316,771 $297,818 $253,303
=============================================================================================================================
LIABILITIES & STOCKHOLDERS' EQUITY:
Savings $ 43,885 $ 1,075 2.45% $ 42,642 $ 1,067 2.50% $ 40,246 $ 1,006 2.50%
NOW's 38,764 1,196 3.09 37,739 1,202 3.19 28,788 858 2.98
Money Market Accounts 13,777 273 1.98 14,116 281 1.99 13,326 270 2.03
CD's > $100M 22,945 1,266 5.52 23,162 1,256 5.42 18,813 1,104 5.87
Other Time Deposits 119,118 6,700 5.62 109,278 6,460 5.91 97,957 5,754 5.87
Other Borrowings 2,933 201 6.85 2,114 146 6.91 1,374 86 6.26
- -----------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing
Liabilities 241,422 $10,711 4.44% 229,051 $10,412 4.55% 200,504 $ 9,078 4.53%
- -----------------------------------------------------------------------------------------------------------------------------
Demand Deposits 46,217 43,724 33,572
Other Liabilities 1,063 1,847 493
- -----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 288,702 274,622 234,569
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock 34 30 28
Paid-in Capital 21,448 16,899 14,393
Retained Earnings 6,395 6,308 4,486
Net Unrealized (Loss) Gain
on Available-for-Sale
Securities 192 (41) (173)
- -----------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 28,069 23,196 18,734
- -----------------------------------------------------------------------------------------------------------------------------
Total Liabilities &
Stockholders' Equity $316,771 $297,818 $253,303
=============================================================================================================================
Net Interest Income $13,808 $12,895 $10,550
=============================================================================================================================
Net Interest Spread 3.91% 3.88% 3.72%
=============================================================================================================================
Net Yield on Earning Assets 4.70% 4.66% 4.44%
=============================================================================================================================
<FN>
<F1> On a fully taxable equivalent basis based on tax rate of 34%. Interest
income on investments and net interest income includes a fully taxable
equivalent adjustment of $212,000 in 1998, $157,000 in 1997 and
$133,000 in 1996.
<F2> Average balance includes non-accruing loans. The effect of including
such loans is to reduce the average rate earned on the Company's
loans.
</FN>
NET INTEREST INCOME - CHANGES DUE TO VOLUME AND RATE (1)
1998 vs 1997 1997 vs 1996
Increase Increase
(Decrease) (Decrease)
- ----------------------------------------------------------------------------------------------
Total Due to Due to Total Due to Due to
(Dollars in Thousands) Change(2) Volume Rate Change(2) Volume Rate
- ----------------------------------------------------------------------------------------------
Interest Income:
Federal Funds Sold $ 23 $ 48 $ (25) $ (176) $ (195) $ 19
US Treas/Govt Agencies 267 320 (53) 384 361 23
States & Political Subdivisions 172 190 (18) 77 67 10
Mutual Funds (1) (5) 4 2 3 (1)
Marketable Securities (15) 10 (25) 45 24 21
Other Investments (8) (4) (4) (7) (5) (2)
Commercial Loans 487 574 (87) 1,275 1,207 68
Commercial Real Estate 890 864 26 1,705 1,926 (221)
Residential Real Estate (596) (550) (46) 328 184 144
Consumer Loans (7) 26 (33) 46 41 5
- ----------------------------------------------------------------------------------------------
Total Interest Income 1,212 1,473 (261) 3,679 3,613 66
- ----------------------------------------------------------------------------------------------
Interest Expense:
Savings Accounts 8 31 (23) 61 61 -0-
NOW Accounts (6) 32 (38) 344 275 69
Money Market Accounts (8) (7) (1) 11 16 (5)
CD's > 100 M 10 (12) 22 152 246 (94)
Other Time Deposits 240 568 (328) 706 667 39
Other Borrowings 55 56 (1) 60 49 11
- ----------------------------------------------------------------------------------------------
Total Interest Expense 299 668 (369) 1,334 1,314 20
- ----------------------------------------------------------------------------------------------
Net Interest Income $ 913 $ 805 $ 108 $2,345 $2,299 $ 46
==============================================================================================
<FN>
<F1> Changes in interest income and interest expense attributable to
changes in both volume and rate have been allocated equally to changes
due to volume and changes due to rate.
<F2> The change in interest income on investments and net interest income
includes interest on a fully taxable equivalent basis based on a tax
rate of 34%.
</FN>
Interest Rate Risk
- ------------------
The Company considers interest rate risk to be a significant market
risk as it could potentially have an effect on the Company's financial
condition and results of operation. The definition of interest rate risk is
the exposure of the Company's earnings to adverse movements in interest
rates. Volatility in interest rates requires the Company to manage interest
rate risk which arises from the differences in the timing of repricing of
assets and liabilities.
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 evaluating the difference between
interest-sensitive assets and interest-sensitive liabilities within various
time periods.
The Company's objective is to reduce and control the volatility of its
net interest income by managing the relationship of interest-earning assets
and interest-bearing liabilities. In order to manage this relationship, the
Committee utilizes a monthly GAP report. This report for the period ending
December 31, 1998 is set forth below.
The GAP report provides a static analysis of repricing opportunities
of rate-sensitive assets and rate-sensitive liabilities. It is prepared by
categorizing these assets and liabilities into time periods based upon
either their contractual or anticipated maturity or repricing. The analysis
determines the net dollar amount of assets less liabilities that are
repricing in various time frames. This, in conjunction with certain
assumptions and other related factors, such as anticipated changes in
interest rates, projected cash flows from loans, investments and deposits,
provides a means of evaluating interest rate risk. Management also takes
into consideration that certain assets and liabilities react differently to
changes in interest rates.
The interest sensitivity gap is determined by subtracting the amount
of liabilities from the amount of assets that reprice in a particular time
period. When more liabilities than assets reprice or mature within a given
time frame, a liability sensitive position results (negative gap). A
negative gap position would tend to increase net interest income when
interest rates are falling, and decrease net interest income when rates are
rising. Conversely, an asset sensitive position (positive gap) results when
more assets than liabilities reprice within a given period. In this
scenario, net interest income would increase when interest rates rise and
decrease when rates fall.
At December 31, 1998, the GAP report shown below indicates the
Company's interest rate risk to have a reliance on short term liabilities.
This position would have an adverse effect on earnings in a rising rate
environment and a positive effect on earnings in a decreasing rate
environment.
Interest Sensitivity GAP Report
- -------------------------------
Repricing period at December 31, 1998
- -------------------------------------
3 Months 4 Months 1 Year to 2 Year to 5 Years
(Dollars in Thousands) or Less to 1 Year 2 Years 5 Years & Over Total
- -----------------------------------------------------------------------------------------------------
INTEREST-EARNING ASSETS(1)
Loans $ 65,650 $ 73,003 $ 28,328 $ 31,725 $ 16,193 $214,899
Investments 3,636 6,394 6,956 24,875 37,583 79,444
Federal Funds Sold 14,500 --- --- --- --- 14,500
- -----------------------------------------------------------------------------------------------------
Total Interest-Earning Assets $ 83,786 $ 79,397 $ 5,284 $ 56,600 $ 53,776 $308,843
- -----------------------------------------------------------------------------------------------------
Cumulative RSA $ 83,786 $163,183 $198,467 $255,067 $308,843
=====================================================================================================
INTEREST-BEARING LIABILITIES
Regular Savings $ 48,360 --- --- --- --- $ 48,360
NOW Accounts 39,882 --- --- --- --- 39,882
Money Market Accounts 12,437 --- --- --- --- 12,437
Time Deposits $100,000 & Over 9,822 12,440 2,168 1,576 --- 26,006
Other Time Deposits 39,278 60,801 16,668 12,073 --- 128,820
- -----------------------------------------------------------------------------------------------------
Total Deposits 149,779 73,241 18,836 13,649 --- 255,505
Federal Funds Purchased --- --- --- --- --- ---
Other Interest-Bearing
Liabilities 67 920 103 354 3,921 5,365
- -----------------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities $149,846 $ 74,161 $ 18,939 $ 14,003 $ 3,921 $260,870
=====================================================================================================
Cumulative RSL $149,846 $224,007 $242,946 $256,949 $260,870
=====================================================================================================
Gap (66,060) 5,236 16,345 42,597 49,855 47,973
Cumulative Gap (66,060) (60,824) (44,479) (1,882) 47,973
RSA/RSL (.56)% 1.07 % 1.86 % 4.04 % 13.71%
Cumulative RSA/RSL (.56)% (.73)% (.82)% (.99)% 1.18%
<FN>
<F1> Nonaccrual loans amounting to $3.3 Million have been eliminated from
the loan balances.
</FN>
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 time period (i.e. 12 months). This analysis involves
projecting 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, the effect on
estimated net interest income for the next 12 months that would be tolerated
would be not more than a ten percent decrease. The following table reflects
the Company's estimated exposure as a percentage of estimated net interest
income for the next 12 months, assuming an immediate change in interest
rates:
Rate Change Estimated Exposure as a
(Basis Points) Percentage of Net Interest Income
- -------------------------------------------------------------------
+200 1.52%
-200 (4.83%)
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 Company's 10% limit establishes
an internal tolerance level to control the Company's interest rate risk
exposure and is monitored on a quarterly basis.
II. INVESTMENT PORTFOLIO
The following table shows the book value of the major categories of
investment securities Held-to-Maturity for the years indicated:
At December 31,
- ----------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------
US Treasury Securities and
Obligations of US Government
Corporations and Agencies $ 8,810 $ 9,415 $13,193
Obligations of States and
Political Subdivisions 11,997 7,976 6,131
Mortgage-backed securities 114 209 257
Other Debt Securities -0- 1 6
- -----------------------------------------------------------------------
Total $20,921 $17,601 $19,587
=======================================================================
In the following table, the carrying value of Held-to-Maturity
securities maturing within stated periods as of December 31, 1998, is shown
with the weighted average interest yield from securities falling within the
range of maturities:
US Treasury Obligations
& Government of States & Mortgage Other
Corporations Political Backed Debt
(Dollars in Thousands) Agencies Subdivisions(1) Securities(2) Securities Total
- -------------------------------------------------------------------------------------------------
Due in 1 year or less:
Amount $5,365 $ 1,703 $ --- $ --- $ 7,068
Yield 5.27% 5.76% --- --- 5.39%
Due in 1 to 5 years:
Amount $3,195 $ 4,298 $ 114 $ --- $ 7,607
Yield 5.76% 6.74% 6.81% --- 6.33%
Due in 5 to 10 years:
Amount $ 250 $ 5,664 $ --- --- $ 5,914
Yield 7.00% 6.58% --- --- 6.60%
Due after 10 years:
Amount --- $ 332 --- --- $ 332
Yield --- 7.70% --- --- 7.70%
- --------------------------------------------------------------------------------------------------
Amount $8,810 $11,997 $ 114 $ 0 $20,921
==================================================================================================
Yield 5.50% 6.55% 6.81% --- 6.11%
==================================================================================================
<FN>
<F1> Rates of tax exempt securities are shown assuming a 34% tax rate.
<F2> Mortgage-backed securities stated using average life.
</FN>
The following table shows the amortized cost basis of the major
categories of Available-for-Sale securities for the years indicated:
At December 31,
- ------------------------------------------------------------------------
(Dollars in Thousands) 1998 1997 1996
- ------------------------------------------------------------------------
US Treasury Securities and
Obligations of US Government
Corporations and Agencies $44,620 $30,402 $32,793
Mortgage-backed Securities 10,862 7,747 2,469
Asset-backed Securities 222 234 246
Marketable Equity Securities (net) 1,918 1,565 1,775
- -------------------------------------------------------------------------
Total $57,622 $39,948 $37,283
=========================================================================
In the following table, the amortized cost basis of Available-for-Sale
securities (other than equity securities) maturing within stated periods as
of December 31, 1998, is shown with the weighted average interest yield from
securities falling within the range of maturities:
US Treasury
& Government Mortgage Asset-
Corporations Backed Backed
(Dollars in Thousands) Agencies Securities(2) Securities Total
- ------------------------------------------------------------------------------
Due in 1 year or less:
Amount $ 500 $ 2,037 $ --- $ 2,537
Yield 5.69% 6.18% --- 6.08%
Due in 1 to 5 years:
Amount 23,175 6,497 --- 29,672
Yield 5.79% 6.17% --- 5.87%
Due in 5 to 10 years:
Amount 20,945 2,052 222 23,219
Yield 6.09% 6.14% 6.64% 6.10%
Due after 10 years:
Amount 276 --- 276
Yield 6.00% --- 6.00%
- -------------------------------------------------------------------------------
Amount $44,620 $10,862 $ 222 $55,704
===============================================================================
Yield 5.93% 6.16% 6.64% 5.98%
===============================================================================
<FN>
<F1> Mortgage backed securities stated using average life.
</FN>
The following table shows the amortized cost basis and fair value of
the major categories of Held-to-Maturity securities as of December 31, 1998:
Gross
Gross Unrealized
Amortized Unrealized Holding
(Dollars in Thousands) Cost Basis Holding Gains Losses Fair Value
- --------------------------------------------------------------------------------------------------
Debt securities issued by the U.S.
Treasury and other U.S. Government
corporations and agencies $ 8,810 $117 $ 0 $ 8,927
Debt securities issued by states of
the United States and political
subdivisions of the states 11,997 257 13 12,241
Mortgage-backed securities 114 1 0 115
- ------------------------------------------------------------------------------------------------
Total $20,921 $375 $ 13 $21,283
================================================================================================
Investments in Available-for-Sale securities are carried at fair value
on the balance sheet and are summarized as follows as of December 31, 1998.
Gross
Gross Unrealized
Amortized Unrealized Holding
(Dollars in Thousands) Cost Basis Holding Gains Losses Fair Value
- --------------------------------------------------------------------------------------------------
Debt securities issued by the U.S.
Treasury and other U.S. Government
corporations and agencies $44,620 $211 $ 54 $44,777
Marketable Equity 1,918 551 161 2,308
Mortgage-backed securities 10,862 52 23 10,891
Asset-backed securities 222 1 0 223
- ------------------------------------------------------------------------------------------------
Total $57,622 $815 $238 $58,199
================================================================================================
Increase in Stockholder's Equity:
(In Whole Dollars)
Net unrealized gain on Available-for-Sale Securities $577,119
Less tax effect 212,175
--------
$364,944
========
III. LOAN PORTFOLIO
The following table shows the Company's amount of loans by category at
the end of each of the last five years.
At December 31
- ----------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
Commercial, financial and agricultural $ 43,777 $ 36,641 $ 31,244 $ 16,744 $ 17,123
Real estate - construction and land development 3,773 6,678 6,891 6,865 2,290
Real estate - residential 51,220 55,477 59,500 50,472 50,938
Real estate - commercial 112,913 108,008 94,545 70,749 59,625
Consumer 6,477 6,747 6,681 6,149 6,097
Obligations of states and political subdivisions 3 9 16 23 29
Other 67 176 109 85 89
- -----------------------------------------------------------------------------------------------------------
218,230 213,736 198,986 151,087 136,191
Allowance for Loan Losses (3,569) (3,694) (3,354) (2,498) (2,306)
Unamortized adjustment to fair value (32) (42) (54) 0 0
Unearned Income (691) (690) (643) (520) (403)
- -----------------------------------------------------------------------------------------------------------
Net Loans $213,938 $209,310 $194,935 $148,069 $133,482
===========================================================================================================
The following table shows the maturity distributions and interest rate
sensitivity of selected loan categories at December 31, 1998.
Within One One to Five After Five
(Dollars in Thousands) Year Years Years Total
- -----------------------------------------------------------------------------------------------
Commercial, financial, and agricultural $25,070 $12,713 $5,994 $43,777
Real Estate - construction 2 12 3,759 3,773
- ------------------------------------------------------------------------------------------------
Total $25,072 $12,725 $9,753 $47,550
================================================================================================
The following table shows the amounts, included in the table above,
which are due after one year and which have fixed interest rates and
adjustable rates:
Total Due After One Year
- ----------------------------------------------------------------------------------
(Dollars in Thousands) Fixed Rate Adjustable Rate Total
- ----------------------------------------------------------------------------------
Commercial, financial, and agricultural $5,455 $13,252 $18,707
Real Estate - construction 134 3,637 3,771
- -----------------------------------------------------------------------------------
Total $5,589 $16,889 $22,478
===================================================================================
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
December 31
- -----------------------------------------------------------------------------------
(Dollars in Thousands) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
Nonaccrual loans $3,331 $4,597 $4,352 $2,695 $3,238
Loans 90 days or more past due
and still accruing 317 147 112 23 204
Real estate acquired by foreclosure
or substantively repossessed 1,026 159 308 633 888
- ------------------------------------------------------------------------------------
Total nonperforming assets $4,674 $4,903 $4,772 $3,351 $4,330
====================================================================================
Percentage of nonaccrual loans
to total loans 1.53% 2.15% 2.19% 1.78% 2.38%
Percentage of nonaccrual loans,
restructured loans and real estate
acquired by foreclosure
or substantively repossessed to
total assets 1.54% 2.00% 1.88% 1.62% 2.20%
Percentage of Allowance for Loan
Losses to Nonaccrual Loans 107.15% 80.36% 77.07% 92.69% 71.22%
Nonaccrual loans include restructured loans of $0 at December 31,
1998; $263,000 at December 31, 1997; $398,000 at December 31, 1996; $425,000
at December 31, 1995; and $286,000 at December 31, 1994.
Information with respect to nonaccrual and restructured loans for the
past five years ending December 31 is as follows:
December 31
- --------------------------------------------------------------------------------------
(Dollars in Thousands) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------
Nonaccrual loans $3,331 $4,597 $4,352 $2,695 $3,238
Interest income that would have been
recorded under original terms $ 318 $ 394 $ 361 $ 243 $ 242
Interest income recorded during the
period $ 37 $ 58 $ 62 $ 21 $ 19
Nonperforming assets include nonaccrual loans, loans past due 90 days
or more and still accruing, restructured loans not performing in accordance
with amended terms, and other real estate acquired through foreclosure.
Nonperforming assets as a total decreased to $4.7 Million at year end 1998,
from $4.9 Million reported at year end 1997. Nonaccrual loans at December
31, 1998 were down by $1.3 Million to $3.3 Million from $4.6 Million
reported on December 31, 1997. Included in the $3.3 Million of nonaccrual
loans is a $1.3 Million commercial real estate loan that was classified as
nonaccrual in March 1997. The real estate collateralizing this loan was
appraised in December 1997 at $2.7 Million. Due to the excess collateral
value, the Bank does not anticipate any loss on this loan. Loans that became
nonaccrual during the current year, amounted to $1,797,493. Offsetting this
increase were receipts of loan payments of $629,032 and loans of $753,485
that were deemed uncollectible and charged off to the Allowance for Loan
Losses. There was a transfer to Other Real Estate Owned of $1,049,634,
property sold at auction of $156,000 and a transfer to accrual status of
loans totaling $474,457.
The Company places a loan on nonaccrual status when, in the opinion of
management, the collectibility of the principal and interest becomes
doubtful. Generally, when a commercial loan, commercial real estate loan or
a residential real estate loan becomes past due 90 days or more, the Company
discontinues the accrual of interest and reverses previously accrued
interest. The loan remains in the nonaccrual status until the loan is
current and six consecutive months of payments are made, then it is
reclassified as an accruing loan. When it is determined that the
collectibility of the loan no longer exists, it is charged off to the
Allowance for Loan Losses or, if applicable, any real estate that is
collateralizing the loan is acquired through foreclosure, at which time it
is categorized as Other Real Estate Owned. The nonaccrual category is
comprised of $1,035,145 of residential real estate loans, $1,966,307 of
commercial real estate loans, $292,080 of commercial loans and $37,885 of
other types of loans.
Real Estate acquired by foreclosure increased to $1,026,000 at
December 31, 1998 compared to $159,000 reported at year end 1997. This
amount consists of five separate parcels of property. Annual appraisals are
performed on these properties and if the appraised value is less than the
carrying value of the property, the carrying value is written down by a
charge to the Writedown on Other Real Estate Owned expense account. The Bank
currently has one purchase and sales agreement on hand for an early 1999
sale.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
The table below illustrates the changes in the Allowance for Loan
Losses for the periods indicated.
(Dollars in Thousands) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------
Balance at January 1 $3,694 $3,354 $2,498 $2,306 $1,954
- ----------------------------------------------------------------------------------
Charge-offs:
Commercial (0) (40) (144) (184) (22)
Real estate-construction (0) (0) (0) (0) (0)
Real estate-mortgage (716) (147) (136) (79) (246)
Installment/Consumer (76) (68) (159) (134) (93)
- ----------------------------------------------------------------------------------
(792) (255) (439) (397) (361)
- ----------------------------------------------------------------------------------
Recoveries:
Commercial 8 41 332 1 51
Real estate-construction 0 0 0 0 0
Real estate-mortgage 43 16 0 16 2
Installment/Consumer 16 38 107 22 15
- ----------------------------------------------------------------------------------
67 95 439 39 68
- ----------------------------------------------------------------------------------
Net Charge-offs (725) (160) 0 (358) (293)
- ----------------------------------------------------------------------------------
Additions charged to operations 600 500 400 550 645
Allowance attributable to
acquisition 0 0 456 0 0
- ----------------------------------------------------------------------------------
Balance at December 31: $3,569 $3,694 $3,354 $2,498 $2,306
==================================================================================
Allowance for Loan Losses as a
percent of year end loans 1.64% 1.73% 1.69% 1.65% 1.70%
Ratio of net charge-offs to
average loans outstanding 0.34% 0.08% 0.00% 0.25% 0.23%
The Allowance for Loan Losses at year end December 31, 1998 was
$3,569,282; and $3,693,865, $3,354,311, $2,497,774 and $2,305,860, for years
ending 1997, 1996, 1995 and 1994 respectively. The Allowance for Loan Losses
as a percent of year end loans was 1.64% in 1998, 1.73% in 1997, 1.69% in
1996, 1.65% in 1995 and 1.70% in 1994.
The level of the Allowance for Loan Losses is evaluated by management
and encompasses several factors. These factors 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.
Management's assessment of the adequacy of the Allowance for Loan Losses is
reviewed by regulators and by the Company's independent accountants.
The Company's provision for loan losses, which is a deduction from
earnings, in 1998 was $600,000. Prior years' provisions were $500,000,
$400,000, $550,000 and $645,000 for years ending 1997, 1996, 1995 and 1994
respectively. In 1998, the Company realized recoveries of previously
charged-off loans of $67,000. Recoveries recorded in previous years were
$95,000, $439,000, $39,000 and $68,000 in 1997, 1996, 1995 and 1994
respectively.
The amount provided to the Allowance for Loan Losses was deemed
appropriate by management after full consideration of the value of the
assets securing the nonaccrual loans.
This table shows an allocation of the allowance for loan losses as of
the end of each of the last five years.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
December 31, 1998 December 31, 1997 December 31, 1996 December 31, 1995 December 31, 1994
- --------------------------------------------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
Loans in Loans in Loans in Loans in Loans in
Each Each Each Each Each
Category to Category to Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
- --------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Commercial $1,249(1) 20.06% $ 984(1) 17.14% $ 789(1) 15.70% $ 597(1) 11.35% $ 588 12.82%
Real estate
Construction 27 1.73 44 3.12 41 3.46 40 4.55 14 1.68
Real estate
Mortgage 1,964(2) 75.21 2,311(2) 76.50 2,150(2) 77.42 1,581(2) 80.04 1,374 81.03
Consumer(3) 329(4) 3.00 355(4) 3.24 374(4) 3.42 280 4.06 330 4.47
- ----------------------------------------------------------------------------------------------------------------------------
$3,569 100.00% $3,694 100.00% $3,354 100.00% $2,498 100.00% $2,306 100.00%
============================================================================================================================
<FN>
<F1> Includes amounts specifically reserved for impaired loans of $128,207
as of December 31, 1998, of $42,937 as of December 31, 1997, $0.00 as
of December 31, 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 $187,554
as of December 31, 1998, of $566,220 as of December 31, 1997, $838,290
as of December 31, 1996 and $240,500 as of December 31, 1995, 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 $9,126 as
of December 31, 1998, of $14,413 as of December 31, 1997, $0.00 as of
December 31, 1996 and $0.00 as of December 31, 1995 as required by
Financial Accounting Standard No. 114, Accounting for Impairment of
Loans.
</FN>
The loan portfolio's largest segment of loans is commercial real
estate loans, which represent 51.7% of gross loans. Residential real estate,
which is the second largest segment of the loan portfolio, represents 23.5%
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 20.1% of the loan portfolio.
Consumer loans are generally unsecured borrowings and represent 3.0%
of the total loan portfolio. These loans have a higher degree of risk than
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.
Charge-offs in 1998 amounted to $792,000, up by $537,000 when compared
to losses incurred in 1997 of $255,000. The Company had charge-offs of
$439,000 in 1996, $397,000 in 1995 and $361,000 in 1994. The real estate-
mortgage category incurred losses of $716,000 in 1998 compared to $147,000
in 1997, $136,000 in 1996, $79,000 in 1995 and $246,000 in 1994.
V. DEPOSITS
Deposits are obtained from individuals and from small and medium sized
businesses in the local market area. The Bank also attracts deposits from
municipalities and other government agencies. The Bank does not solicit or
accept brokered deposits.
The following table sets forth the average amount and the average rate
paid on deposits for the periods indicated.
1998 1997 1996
- --------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
(Dollars in Thousands) Balance Rate Balance Rate Balance Rate
- --------------------------------------------------------------------------------------------------
Noninterest-bearing Demand Deposits $ 46,217 0.00% $ 43,724 0.00% $ 33,572 0.00%
Interest-bearing Demand Deposits 38,764 3.09 37,739 3.19 28,788 2.98
Savings Deposits 43,885 2.45 42,642 2.50 40,246 2.50
Money Market Deposits 13,777 1.98 14,116 1.99 13,326 2.03
Time Deposits $100,000 or More 22,945 5.52 23,162 5.42 18,813 5.87
Other Time Deposits 119,118 5.62 109,278 5.91 97,957 5.87
- -------------------------------------------------------------------------------------------------
Totals $284,706 3.69% $270,661 3.79% $232,702 3.87%
=================================================================================================
As of December 31, 1998, time certificates of deposit in amounts of
$100,000 or more had the following maturities:
(Dollars in Thousands)
Three months or less $ 9,822
Over three months through six months 6,614
Over six months through twelve months 5,826
Twelve months and over 3,745
-------
$26,007
=======
VI. RETURNS ON EQUITY AND ASSETS
The following table shows consolidated operating and capital ratios of
the Company for each of the last three years:
Year Ended December 31,
---------------------------
1998 1997 1996
---------------------------
Return on Assets 1.06% 0.96% 0.94%
Return on Equity 11.98% 12.27% 12.69%
Dividend Payout Ratio 28.54% 27.57% 27.95%
Equity to Assets Ratio 8.86% 7.79% 7.40%
VII. SHORT TERM BORROWINGS
The following table shows the Company's short-term borrowings at the
end of each of the last three years along with the maximum amount of
borrowings and average amounts outstanding as well as weighted average
interest rates for the last three years.
(Dollars in Thousands) 1998 1997 1996
- -------------------------------------------------------------------
Balance at December 31 $ 42 $1,200 $1,200
Maximum Amount Outstanding
at Any Month's End $1,365 $1,725 $2,141
Average Amount Outstanding
During the Year $ 813 $1,067 $ 987
Weighted Average Interest
Rate During the Year 5.65% 4.91% 5.71%
The Bank has the ability to borrow funds from correspondent banks and
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 1998 and 1997. Tax payments made by our customers, which are
owed to the Federal Reserve Bank Treasury Tax and Loan account, are
classified as borrowed funds. The Company has notes payable of $847,990 due
to Fleet Bank with a final maturity in November 1999. This note was assumed
from Fairbank, Inc. at the time of the acquisition. Because of the term of
the note, including applicable prepayment fees, management determined it
advantageous for the Bank not to pay off the note. There is also $4,475,454
in borrowings from the Federal Home Loan Bank which represent the match
funding program that is available to qualified borrowers.
Accounting for Deferred Income Taxes
The net deferred tax asset at year end 1998 was $1,461,166. The amount
of taxable income required to be generated to fully realize such net
deferred tax asset will be approximately $3.7 Million. The taxable income
earned by the Company in 1998 was $5,579,202.
ITEM 2
PROPERTIES
The main office of the Bank is located at 100 Slade's Ferry Avenue,
Somerset, Massachusetts at the junctions of U.S. Routes 6, 138, and 103. The
Bank has nine additional branches located in Fairhaven, Fall River, New
Bedford, Seekonk, Somerset and Swansea, Massachusetts. As of December 31,
1998, the following Bank properties are owned either directly by the Bank or
through its subsidiary, the Slade's Ferry Realty Trust:
Location Sq. Footage
- --------------------------------------------------------------------------------
Main Office 100 Slade's Ferry Avenue Somerset, MA 37,000
North Somerset 2722 County Street Somerset, MA 3,025
Linden Street 244-253 Linden Street Fall River, MA 1,750
Brayton Avenue 855 Brayton Avenue Fall River, MA 3,325
North Swansea 2388 G.A.R. Highway Swansea, MA 2,960
Seekonk 1400 Fall River Avenue Seekonk, MA 2,300
Fairhaven 75 Huttleston Avenue Fairhaven, MA 13,000
South Main Street 1601 South Main Street Fall River, MA 6,604
Offices listed below are leased properties which indicate the applicable
lease expiration date.
Swansea Mall
(expires 2003) Rt 118 Swansea, MA 2,250
Brayton Avenue
Drive Up Complex
(expires 2000) 16 Stevens St. Fall River, MA 549
Walgreens Drug Store
(expires 2004) 838 Pleasant St. New Bedford, MA 835
The main office building contains approximately 42,000 square feet of
usable space, of which the Bank occupies approximately 37,000 square feet
and the remainder is rented to local businesses as warehouse and office
space. The Bank also has a school banking facility located in the Somerset
High School, Grandview Avenue, Somerset, Massachusetts that consists of 200
square feet which provides basic banking services to students and school
staff. The Seekonk office is an 8,800 square foot building of which the Bank
is utilizing 2,300 square feet and leasing out the remainder.
ITEM 3
LEGAL PROCEEDINGS
The Bank is involved in a civil suit brought in Plymouth Superior
Court by a former employee of the National Bank of Fairhaven, which
primarily alleged a breach of contract. The original demand by the plaintiff
was $550,000 to settle the case which was lowered to $250,000 by the
plaintiff in 1998. Discovery has been completed, and the case is currently
scheduled for trial on April 22, 1999. The Company believes there are
meritorious defenses to the plaintiff's claim, and it intends to vigorously
defend the suit. The Company believes that the suit will not have a material
adverse effect on the Company's financial condition, results of operation or
liquidity, and no reserves have been accrued to cover the potential
liability.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1998, no matters were submitted to a vote of
stockholders of the Company.
PART II
ITEM 5
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Reference is hereby made to Company's Annual Report to Stockholders
for the year ended December 31, 1998, attached as an exhibit hereto. The
information set forth on page 9 of such Annual Report with respect to the
Market for the Registrant's Common Stock and Related Stockholder Matters is
incorporated herein by reference.
ITEM 6
SELECTED FINANCIAL DATA
Reference is hereby made to the Company's Annual Report to
Stockholders for the year ended December 31, 1998, attached as an exhibit
hereto. The information set forth on page 10 of such Annual Report under
this heading is incorporated herein by reference.
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Reference is hereby made to Company's Annual Report to Stockholders
for the year ended December 31, 1998, attached as an exhibit hereto. The
information entitled "Management's Discussion and Analysis" and set forth on
pages 11 through 20 of such Annual Report is incorporated herein by
reference.
ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The most significant market risk factor affecting the financial
condition and operating results of Slade's Ferry Bancorp is interest rate
risk. Refer to this Form 10-K, page 9, under "Interest Rate Risk" for a
discussion of market risk.
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is hereby made to Company's Annual Report to Stockholders
for the year ended December 31, 1998, attached as an exhibit hereto. The
consolidated balance sheets at December 31, 1998 and 1997, and the
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1998
and the related notes with the report of Shatswell, MacLeod and Company,
P.C., independent auditors, which appear on pages 21 through 43 of such
Annual Report to Stockholders, are incorporated herein by reference.
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company had no disagreements with its independent accountants on
accounting and financial disclosure matters.
PART III
ITEM 10
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Reference is hereby made to the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders April 12, 1999. The information set
forth under the heading "Directors and Executive Officers" on pages 10
through 13 and under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" on page 16 of such Proxy Statement is incorporated
herein by reference.
ITEM 11
EXECUTIVE COMPENSATION
Reference is hereby made to the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders April 12, 1999. The information set
forth under this heading on pages 19 through 22 of such Proxy Statement is
incorporated herein by reference.
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is hereby made to the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders April 12, 1999. The information set
forth under this heading on pages 13 through 16 of such Proxy Statement is
incorporated herein by reference.
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is hereby made to the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders April 12, 1999. The information set
forth under this heading on page 25 of such Proxy Statement is incorporated
herein by reference.
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of the Company's Annual
Report to stockholders for the year ended December 31, 1998, attached as an
exhibit hereto.
(1) Consolidated Financial Statements
Page
Report of Independent Auditors 21
Consolidated Balance Sheets 22
Consolidated Statements of Income 23
Consolidated Statements of Changes in
Stockholders' Equity 24
Consolidated Statements of Cash Flows 25
Notes to Consolidated Financial Statements 27
(2) Financial Statement Schedules
All financial statement schedules required by Item 14(a)(2)
have been omitted because they are inapplicable or because
the required information has been included in the Consolidated
Financial Statements or Notes thereto.
(3) Exhibits: see attached Exhibits Index
(b) Reports on Form 8-K: None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on March 31, 1999.
Slade's Ferry Bancorp
By /s/ Kenneth R. Rezendes
Kenneth R. Rezendes, President/
Chief Executive Officer and
Director
In accordance with the requirements of the Exchange Act, this report has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
/s/ Thomas B. Almy 3/31/99 /s/ Ralph S. Borges 3/31/99
Thomas B. Almy Ralph S. Borges
Director Treasurer/Chief Financial Officer/
Chief Accounting Officer
/s/ James D. Carey 3/31/99 /s/ Peter G. Collias 3/31/99
James D. Carey Peter G. Collias
Executive Vice President Director
and Director
/s/ Donald T. Corrigan 3/31/99 /s/ Melvyn A. Holland 3/31/99
Donald T. Corrigan Melvyn A. Holland
Chairman of the Board Director
and Director
/s/ William Q. MacLean Jr. 3/31/99 /s/ Francis A. Macomber 3/31/99
William Q. MacLean Jr. Francis A. Macomber
Director Director
/s/ Majed Mouded, MD 3/31/99 /s/ Shaun O'Hearn Sr. 3/31/99
Majed Mouded, MD Shaun O'Hearn Sr.
Director Director
/s/ Lawrence J. Oliveira, DDS 3/31/99 /s/ Peter Paskowski 3/31/99
Lawrence J. Oliveira, DDS Peter Paskowski
Director Director
/s/ Kenneth R. Rezendes 3/31/99 /s/ William J. Sullivan 3/31/99
Kenneth R. Rezendes William J. Sullivan
President and Chief Executive Director
Officer
/s/ Charles Veloza 3/31/99 /s/ David F. Westgate 3/31/99
Charles Veloza David F. Westgate
Director Director
Exhibit Index
Exhibit
No. Description Page
- ------- ----------- ----
3.1 Articles of Incorporation of Slade's Ferry (1)
Bancorp as amended
3.2 By-laws of Slade's Ferry Bancorp as amended (2)
10.1 Agreement and Plan of Merger by and between (3)
Slade's Ferry (formerly Weetamoe) Bancorp and Fairbank, Inc.
10.2 Slade's Ferry (formerly Weetamoe) Bancorp (3)
1996 Stock Option Plan
10.3 Noncompetition Agreement between Slade's (4)
Ferry Trust Company and Edward S. Machado
(A substantially identical contract exists
with Peter Paskowski)
10.4 Supplemental Executive Retirement Agreement (5)
between Slade's Ferry (formerly Weetamoe)
Bancorp and Donald T. Corrigan
10.5 Supplemental Executive Retirement Agreement (2)
between Slade's Ferry (formerly Weetamoe) Bancorp
and James D. Carey
10.6 Supplemental Executive Retirement Agreement (2)
between Slade's Ferry (formerly Weetamoe) Bancorp
and Manuel J. Tavares
10.7 Swansea Mall Lease (4)
13 Annual report to security-holders for fiscal year ended
December 31, 1998
21 List of subsidiaries of Slade's Ferry Bancorp. (2)
23 Consent of Independent Public Accountants
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 by reference to the Registrant's Form 10-QSB for the
quarter ended March 31, 1996.
<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.
</FN>