SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTER ENDED SEPTEMBER 30, 2000 or |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. COMMISSION FILE NUMBER: 000-25077 SEACOAST FINANCIAL SERVICES CORPORATION --------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Massachusetts 04-1659040 - ------------------------ --------------------------------- (State of Incorporation) (IRS Employer Identification No.) One Compass Place, New Bedford, Massachusetts 02740 - --------------------------------------------- -------------------- (Address of Principal Executive Offices) (Zip Code) (508) 984-6000 ------------------------------- (Registrant's Telephone Number) N/A - ------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year if Changed Since Last Report Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| At November 10, 2000, the Company had 25,155,361 shares of common stock outstanding. SEACOAST FINANCIAL SERVICES CORPORATION INDEX PART 1 - FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at September 30, 2000 and December 31, 1999 1 Consolidated Statements of Income for the three months and nine months ended September 30, 2000 and 1999 2 Consolidated Statements of Changes in Stockholders' Equity for the nine months ended September 30, 2000 and 1999 3 Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 4 Notes to Unaudited Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Liquidity and Capital Resources 14 Item 3. Quantitative and Qualitative Disclosures about Market Risk 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings 16 Item 2. Changes in Securities and Use of Proceeds 16 Item 3. Defaults upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 18 EXHIBIT 27 - Financial Data Schedule SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share amounts) September 30, December 31, 2000 1999 ----------- ----------- ASSETS: Cash and due from banks ........................................................ $ 78,489 $ 60,245 Federal funds sold ............................................................. 2,638 106 ----------- ----------- Total cash and cash equivalents .............................................. 81,127 60,351 Other short-term investments ................................................... 3 231 Investment securities-- Available-for-sale, at fair value ............................................ 232,999 245,583 Held-to-maturity, at amortized cost .......................................... 12,398 12,408 Restricted equity securities ................................................. 18,795 14,936 Loans held-for-sale ............................................................ -- 756 Loans, net (Note 2) ............................................................ 2,009,249 1,730,378 Accrued interest receivable .................................................... 11,721 9,426 Banking premises and equipment, net ............................................ 42,263 26,585 Other real estate owned, net ................................................... 547 552 Net deferred tax asset ......................................................... 12,686 12,527 Other assets ................................................................... 8,736 9,052 ----------- ----------- Total assets ................................................................ $ 2,430,524 $ 2,122,785 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Deposits (Note 3) .............................................................. $ 1,746,962 $ 1,515,622 Short-term borrowings .......................................................... 33,781 40,787 Federal Home Loan Bank advances ................................................ 344,983 271,900 Other borrowings ............................................................... 1,895 1,935 Mortgagors' escrow payments .................................................... 4,358 3,829 Accrued expenses and other liabilities ......................................... 15,193 14,691 ----------- ----------- Total liabilities ........................................................... 2,147,172 1,848,764 ----------- ----------- COMMITMENTS AND CONTINGENCIES Stockholders' equity (Notes 6 and 7): Preferred stock, par value $.01 per share; authorized 10,000,000 shares; none issued ............................................ -- -- Common stock, par value $.01 per share; authorized 100,000,000 shares; 26,758,136 shares issued .............................. 268 268 Additional paid-in capital ................................................... 152,789 152,702 Treasury stock, at cost, 1,602,775 shares in 2000 and 898,500 shares in 1999 .................................................... (15,951) (9,310) Retained earnings ............................................................ 162,145 149,256 Accumulated other comprehensive income (loss) ................................ (909) (2,430) Unearned compensation - ESOP and restricted stock ............................ (14,836) (16,326) Shares held in employee trust ................................................ (154) (139) ----------- ----------- Total stockholders' equity ................................................ 283,352 274,021 ----------- ----------- Total liabilities and stockholders' equity ................................ $ 2,430,524 $ 2,122,785 =========== =========== See accompanying notes to the unaudited consolidated financial statements. 1 SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Three Months Nine Months Ended September 30, Ended September 30, ----------------------- ----------------------- 2000 1999 2000 1999 -------- -------- -------- -------- INTEREST AND DIVIDEND INCOME: Interest on loans ................................................ $ 38,803 $ 30,913 $107,893 $ 88,038 Interest and dividends on investment securities .................. 4,235 4,219 12,704 13,041 Interest on federal funds sold and short-term investments ........ 266 10 300 369 -------- -------- -------- -------- Total interest and dividend income ............................. 43,304 35,142 120,897 101,448 -------- -------- -------- -------- INTEREST EXPENSE: Interest on deposits ............................................. 16,965 13,277 45,667 39,935 Interest on borrowed funds ....................................... 5,979 2,815 16,082 6,491 -------- -------- -------- -------- Total interest expense ......................................... 22,944 16,092 61,749 46,426 -------- -------- -------- -------- Net interest income ............................................ 20,360 19,050 59,148 55,022 PROVISION FOR LOAN LOSSES .............................................. 1,250 650 3,500 1,225 -------- -------- -------- -------- Net interest income after provision for loan losses ............ 19,110 18,400 55,648 53,797 -------- -------- -------- -------- NONINTEREST INCOME: Deposit and other banking fees ................................... 1,631 1,427 4,252 3,877 Loan servicing fees, net ......................................... 158 117 502 441 Card fee income, net ............................................. 393 264 873 552 Other loan fees .................................................. 179 143 602 376 Gain on sales of investment securities, net ...................... -- 7 4 165 Gain on sales of loans, net ...................................... 27 12 28 90 Gain on pension plan termination ................................. -- 1,472 -- 1,472 Other income ..................................................... 540 278 1,147 736 -------- -------- -------- -------- Total noninterest income ...................................... 2,928 3,720 7,408 7,709 -------- -------- -------- -------- NONINTEREST EXPENSE: Salaries and employee benefits ................................... 6,549 5,790 19,705 16,610 Occupancy and equipment expenses ................................. 1,867 1,428 4,714 4,363 Data processing expenses ......................................... 1,309 1,094 3,631 3,339 Marketing expenses ............................................... 892 656 2,131 1,773 Professional services expenses ................................... 491 558 1,407 1,260 Other operating expenses ......................................... 1,652 1,769 4,460 5,606 -------- -------- -------- -------- Total noninterest expense ...................................... 12,760 11,295 36,048 32,951 -------- -------- -------- -------- Income before provision for income taxes ....................... 9,278 10,825 27,008 28,555 PROVISION FOR INCOME TAXES ............................................. 3,183 3,880 9,486 10,188 -------- -------- -------- -------- Net income ..................................................... $ 6,095 $ 6,945 $ 17,522 $ 18,367 ======== ======== ======== ======== Net income per share-diluted (Note 4) .......................... $ 0.26 $ 0.27 $ 0.74 $ 0.72 ======== ======== ======== ======== Weighted average number of outstanding shares (diluted) ........ 23,691 25,356 23,839 25,552 ======== ======== ======== ======== See accompanying notes to the unaudited consolidated financial statements. 2 SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited) (In thousands, except per share amounts) Accumulated Additional Other Common Paid-In Treasury Retained Comprehensive Stock Capital Stock Earnings Income (Loss) --------- --------- --------- --------- ------------- Balance, December 31, 1998 .......................... $ 268 $ 152,936 $ -- $ 127,263 $ 2,337 Grant of restricted stock awards .................... -- 6,370 -- -- -- Repurchase of common stock (Note 6) ................. -- -- (7,369) -- -- Issuance of restricted stock awards ................. -- (6,629) 6,629 -- -- Net income .......................................... -- -- -- 18,367 -- Other comprehensive income--change in unrealized gain on securities available for sale, net of taxes -- -- -- -- (3,537) Comprehensive income ............................. Cash dividends-- $.05 per share ..................... -- -- -- (1,262) -- Amortization of unearned compensation ............... -- 22 -- -- -- --------- --------- --------- --------- --------- Balance, September 30, 1999 ......................... $ 268 $ 152,699 $ (740) $ 144,368 $ (1,200) ========= ========= ========= ========= ========= Balance, December 31, 1999 .......................... $ 268 $ 152,702 $ (9,310) $ 149,256 $ (2,430) Repurchase of common stock (Note 6) ................. -- -- (6,641) -- -- Net income .......................................... -- -- -- 17,522 -- Other comprehensive income-- change in unrealized loss on securities available for sale, net of taxes -- -- -- -- 1,521 Comprehensive income ............................ Cash dividends-- $.19 per share ..................... -- -- -- (4,633) -- Amortization of unearned compensation ............... -- (15) -- -- -- Other ............................................... -- 102 -- -- -- --------- --------- --------- --------- --------- Balance, September 30, 2000 ......................... $ 268 $ 152,789 $ (15,951) $ 162,145 $ (909) ========= ========= ========= ========= ========= Shares Held In Unearned Employee Compensation Trust Total ----------- --------- --------- Balance, December 31, 1998 .......................... $ (11,153) $ (139) $ 271,512 Grant of restricted stock awards .................... (6,370) -- -- Repurchase of common stock (Note 6) ................. -- -- (7,369) Issuance of restricted stock awards ................. -- -- -- Net income .......................................... -- -- 18,367 Other comprehensive income-- change in unrealized gain on securities available for sale, net of taxes -- -- (3,537) --------- Comprehensive income ............................. 14,830 Cash dividends-- $.05 per share ..................... -- -- (1,262) Amortization of unearned compensation ............... 738 -- 760 --------- --------- --------- Balance, September 30, 1999 ......................... $ (16,785) $ (139) $ 278,471 ========= ========= ========= Balance, December 31, 1999 .......................... $ (16,326) $ (139) $ 274,021 Repurchase of common stock (Note 6) ................. -- -- (6,641) Net income .......................................... -- -- 17,522 Other comprehensive income-- change in unrealized loss on securities available for sale, net of taxes -- -- 1,521 --------- Comprehensive income ............................ 19,043 Cash dividends-- $.19 per share ..................... -- -- (4,633) Amortization of unearned compensation ............... 1,490 -- 1,475 Other ............................................... -- (15) 87 --------- --------- --------- Balance, September 30, 2000 ......................... $ (14,836) $ (154) $ 283,352 ========= ========= ========= See accompanying notes to the unaudited consolidated financial statements. 3 SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited) (In thousands) 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ......................................................................... $ 17,522 $ 18,367 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation ....................................................................... 1,956 1,840 Amortization and accretion, net .................................................... 1,968 1,644 Provision for loan losses .......................................................... 3,500 1,225 Gain on pension plan termination ................................................... -- (1,472) Gain on sale of investment securities, net ......................................... (4) (165) (Gain)loss on disposal of banking premises and equipment, net of impairment reserve ............................................................... (252) 195 Other real estate owned income ..................................................... -- (63) Provision (benefit) for deferred taxes ............................................. (776) 483 Origination of loans held-for-sale ................................................. (366) (5,543) Proceeds from sales of loans originated for resale ................................. 1,150 5,633 Gain on sales of loans, net ........................................................ (28) (90) Net increase in accrued interest receivable ........................................ (2,295) (838) Net (increase) decrease in other assets ............................................ (47) 354 Net increase in accrued expenses and other liabilities ............................. 206 459 --------- --------- Net cash provided by operating activities ................................. 22,534 22,029 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Change in short-term investments, net .............................................. 228 30,942 Purchase of securities classified as available-for-sale ............................ (41,547) (47,922) Purchase of securities classified as held-to-maturity .............................. (1,000) (75) Purchase of restricted equity securities ........................................... (3,859) (1,663) Proceeds from sales, calls, paydowns and maturities of securities classified as available-for-sale ...................................... 56,536 98,701 Proceeds from paydowns, maturities and calls of securities classified as held-to-maturity ................................................... 1,000 1,360 Purchases of loans ................................................................. (14,106) (12,589) Net increase in loans .............................................................. (269,024) (271,542) Recoveries of loans previously charged off ......................................... 297 433 Proceeds from sales of other real estate owned ..................................... 467 225 Purchase of premises and equipment ................................................. (17,590) (6,525) Proceeds from sale of banking premises and equipment ............................... 208 -- --------- --------- Net cash used in investing activities ..................................... (288,390) (208,655) --------- --------- 4 SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited) (In thousands) 2000 1999 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in NOW, money market deposit and demand deposit accounts ............................................................ $ 52,053 $ 27,823 Increase in passbook and other savings accounts ................................ 5,374 18,670 Increase (decrease) in term certificates ....................................... 173,913 (13,160) Advances from Federal Home Loan Bank ........................................... 325,000 117,000 Repayments of Federal Home Loan Bank advances .................................. (251,917) (14,468) Increase (decrease) in short-term and other borrowings ......................... (7,046) 17,402 Increase in mortgagors' escrow payments ........................................ 529 893 Repurchase of common stock ..................................................... (6,641) (7,369) Cash dividends ................................................................. (4,633) (1,262) --------- --------- Net cash provided by financing activities ............................. 286,632 145,529 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................................................................... 20,776 (41,097) CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR .......................................................... 60,351 101,419 --------- --------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD .............................................................. $ 81,127 $ 60,322 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid on deposits and borrowed funds ................................... $ 61,566 $ 46,004 Income taxes paid .............................................................. 10,480 9,470 SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: Transfer from loans to other real estate owned ................................. 684 514 Financed sales of other real estate owned ...................................... 222 1,081 See accompanying notes to the unaudited consolidated financial statements. 5 SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 AND 1999 (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited consolidated financial statements of Seacoast Financial Services Corporation ("the Company") and its wholly-owned subsidiaries, Compass Bank for Savings ("Compass" or "the Bank") and Lighthouse Securities Corporation, presented herein should be read in conjunction with the consolidated financial statements of the Company as of and for the year ended December 31, 1999 included as part of its Form 10-K. In the opinion of management, the accompanying unaudited financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation. Management is required to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ significantly from those estimates. Summary of Significant Accounting Policies The Company's significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in its Form 10-K for the year ended December 31, 1999 filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows the same significant accounting policies. (2) LOANS The Bank's loan portfolio consisted of the following: September 30, December 31, 2000 1999 ---------- ---------- (In thousands) Real estate loans: Residential (one-to-four family) ......... $1,017,268 $ 896,479 Commercial ............................... 248,113 223,500 Home equity lines of credit .............. 31,087 26,076 Construction ............................. 87,405 71,735 ---------- ---------- Total real estate loans ............. 1,383,873 1,217,790 ---------- ---------- Commercial loans ............................... 81,890 66,360 ---------- ---------- Consumer loans: Indirect auto loans ...................... 519,813 439,753 Less-unearned discount ................... 8,861 17,370 ---------- ---------- Indirect auto loans, net ............ 510,952 422,383 Other .................................... 51,900 40,673 ---------- ---------- Total consumer loans, net ........... 562,852 463,056 ---------- ---------- Total loans ......................... 2,028,615 1,747,206 Less-Allowance for loan losses ................. 19,366 16,828 ---------- ---------- Total loans, net .................... $2,009,249 $1,730,378 ========== ========== Non-accrual loans amounted to $5,712,000 and $5,734,000 at September 30, 2000 and December 31, 1999, respectively. 6 SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 AND 1999 (3) DEPOSITS A summary of deposit balances is as follows: September 30, December 31, 2000 1999 ---------- ---------- (In thousands) Demand deposit accounts .......................... $ 142,813 $ 101,218 NOW and money market deposit accounts ............ 473,610 463,152 Passbook and other savings accounts .............. 219,691 214,317 ---------- ---------- Total non-certificate accounts ............ 836,114 778,687 ---------- ---------- Term certificates- Term certificates of $100,000 and over ......... 207,465 157,113 Term certificates less than $100,000 ........... 703,383 579,822 ---------- ---------- Total term certificate accounts ........... 910,848 736,935 ---------- ---------- Total deposits ............................ $1,746,962 $1,515,622 ========== ========== (4) EARNINGS PER SHARE Diluted earnings per share for the three months and nine months ended September 30, 1999 and 2000 were computed based on the adjusted weighted average number of shares outstanding during the periods. Unallocated ESOP shares and unvested restricted stock awards are not considered outstanding for purposes of the computation of basic earnings per share. There is only an insignificant difference in the number of shares used in computing basic and diluted earnings per share and, accordingly, such per share amounts do not differ. (5) BUSINESS SEGMENT INFORMATION The community banking business segment consists of commercial and retail banking. This segment is managed as a single strategic unit which derives its revenues from a wide range of banking services, including investing and lending activities and acceptance of demand, savings and time deposits, merchant credit card services as well as servicing loans for investors. There is no major customer, as defined, and the Bank operates within a single geographic area (Southeastern Massachusetts). Non-reportable operating segments of the Company's operations which do not have similar characteristics to the community banking operations and do not meet the quantitative thresholds requiring disclosure, are included in the Other category in the following disclosure of business segments. These non-reportable segments include the Parent Company. 7 SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 AND 1999 (5) BUSINESS SEGMENT INFORMATION (Continued) Reportable segment specific information and reconciliation to consolidated financial information as of September 30, 2000 and 1999 and for the nine month periods then ended are as follows (in thousands): Other Adjustments Community and Banking Other Eliminations Consolidated ----------- --------- ------------ ------------ September 30, 2000 Investment securities...................... $ 260,853 $ 3,339 $ -- $ 264,192 Net loans.................................. 2,009,249 10,646 (10,646) 2,009,249 Total assets............................... 2,426,830 283,673 (279,979) 2,430,524 Total deposits............................. 1,746,962 -- -- 1,746,962 Total borrowings........................... 380,659 -- -- 380,659 Total liabilities.......................... 2,146,850 322 -- 2,147,172 Net interest income........................ 59,049 724 (625) 59,148 Provision for loan losses.................. 3,500 -- -- 3,500 Total noninterest income................... 7,408 -- -- 7,408 Total noninterest expense.................. 35,233 815 -- 36,048 Net income................................. 17,568 17,522 (17,568) 17,522 September 30, 1999 Investment securities...................... $ 257,618 $ 2,300 $ -- $ 259,918 Net loans.................................. 1,671,180 10,961 (10,961) 1,671,180 Total assets............................... 2,045,784 278,980 (276,637) 2,048,127 Total deposits............................. 1,530,548 -- -- 1,530,548 Total borrowings........................... 218,707 -- -- 218,707 Total liabilities.......................... 1,769,147 509 -- 1,769,656 Net interest income........................ 54,958 709 (645) 55,022 Provision for loan losses.................. 1,225 -- -- 1,225 Total noninterest income................... 7,709 -- -- 7,709 Total noninterest expense.................. 32,276 675 -- 32,951 Net income................................. 18,334 18,367 (18,334) 18,367 (6) STOCK REPURCHASE PROGRAMS In July 1999, the Board of Directors authorized the Company to repurchase up to 1,000,000 shares in the open market to meet the anticipated needs of stock awards and stock options issued in connection with the 1999 Stock Incentive Plan. In October 1999 and July 2000, the Board of Directors, with the approval of the Commissioner of Banks, authorized the Company to repurchase in the open market up to an additional 1,231,900 and 1,254,312 shares, respectively. The Board of Directors delegated to the discretion of senior management the authority to determine the timing of the repurchase programs' commencement, the timing of the subsequent repurchases and the prices at which repurchases will be made. As of November 10, 2000, the Company had repurchased 2,162,775 shares of its common stock under these programs at a total cost of $22,580,228, all of which shares had been repurchased as of September 30, 2000. 8 SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 AND 1999 (7) QUARTERLY CASH DIVIDEND On October 23, 2000, the Company announced a quarterly cash dividend of $.07 per share payable on November 17, 2000 to stockholders of record on November 3, 2000. (8) PENDING ACQUISITION On July 20, 2000, the Company entered into a definitive agreement with Home Port Bancorp, Inc. (Home Port) under which the Company would acquire all of the outstanding stock of Home Port for cash of $37 per share resulting in a transaction value of approximately $68.5 million, exclusive of one-time transaction costs. Home Port has agreed to omit the payment of dividends to shareholders for the remainder of 2000. Home Port is the holding company for Nantucket Bank, a three branch savings bank with total assets of approximately $340 million, located on Nantucket Island, Massachusetts. The Company intends to keep Nantucket Bank as a separate operating subsidiary retaining its name and charter. Accordingly, the only cost savings initially expected from the transaction are from the elimination of Home Port as the holding company for Nantucket Bank. In connection with the execution of the definitive agreement, a reciprocal break-up fee of $3.5 million was negotiated. In addition, the Company was granted an option to purchase up to 19.9% of Home Port's outstanding common stock under certain circumstances. The transaction, which will be accounted for under the purchase method of accounting, was approved by Home Port's shareholders on October 20, 2000 and is awaiting regulatory approval. The Company recently learned that it might not be possible to receive final regulatory approval by the end of December, as initially projected, and that such approval might be expected, instead, early in the first quarter of 2001. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual events could differ materially from those anticipated in the forward-looking statements. Important factors that might cause such a difference include, among other things, general economic conditions, particularly the real estate market, in the Company's primary market area, potential increases in the Company's non-performing assets (as well as increases in the allowance for loan losses that might be necessary), concentrations of loans in a particular geographic area or with certain large borrowers, changes in government regulation and supervision, including increased deposit insurance premiums or capital or reserve requirements, changes in interest rates, and increased competition and bank consolidations in the Company's market area. Comparison of Financial Condition at September 30, 2000 and December 31, 1999 Total assets increased by $307.7 million from $2,122.8 million at December 31, 1999 to $2,430.5 million at September 30, 2000. During the nine months ended September 30, 2000, Compass increased its loan portfolio by $281.4 million, or 16.1%, which was funded principally by deposit growth (primarily certificates of deposit) of $231.4 million and, to a lesser extent, additional Federal Home Loan Bank borrowings of $55.4 million. The increase in loans occurred primarily in the residential mortgage, indirect auto and commercial loan portfolios. From December 31, 1999 to September 30, 2000, residential mortgage loans increased by $120.8 million, or 13.5%, indirect auto loans (net of unearned discounts) increased by $88.6 million, or 21.0% and commercial loans (including commercial real estate loans) increased by $40.1 million, or 13.8%. The growth during the nine months ended September 30, 2000 is generally attributable to the favorable economic conditions which prevailed during this period. The Bank has continued to retain all residential mortgage loan originations in its portfolio and has continued to emphasize the origination of indirect auto loans through its network of automobile dealers which has been expanded to include dealers in communities contiguous to the metropolitan Boston area. The increase in commercial loans reflects the Bank's strategy to expand this portion of its loan portfolio. Towards that end, the Bank has added four commercial lenders since November 1999. Total deposits at September 30, 2000 were $1,747.0 million, an increase of $231.4 million, or 15.3%, compared to $1,515.6 million at December 31, 1999 due largely to an increase in certificates of deposit of $173.9 million during the period. This increase was fueled by the introduction and promotion, in February 2000, of a 7-month certificate at 6.30% and, to a lesser extent, the promotion of 9-month and 18-month certificates of deposit during the second quarter. Core deposit account balances increased by $57.4 million, or 7.4% during the nine months ended September 30, 2000. The growth in core deposits during the period was generally attributable to normal seasonal fluctuations and the promotion of a free checking account product partially offset by the shift in funds to higher yielding certificates of deposit. Management believes that the bank consolidation and divestitures currently underway in the Bank's market area as a result of the Fleet/BankBoston merger have contributed to the growth in deposits in 2000 and continue to offer Compass an opportunity to increase its deposits. Total borrowed funds were $380.7 million at September 30, 2000 compared to $314.6 million at December 31, 1999, an increase of $66.1 million, or 21.0%. During the nine months ended September 30, 2000, Compass increased its net borrowings from the Federal Home Loan Bank by $55.4 million in order to partially fund loan growth. Management believes that it will continue to rely on Federal Home Loan Bank borrowings during the remainder of 2000 to partially fund anticipated loan growth and to finance its pending acquisition of Home Port Bancorp, Inc. (Home Port). The increase in stockholders' equity of $9.3 million to $283.4 million at September 30, 2000 resulted from net income of $17.5 million for the nine months ended September 30, 2000 which was partially offset by cash dividends and stock repurchases. During 1999 and 2000, the Company announced three stock repurchase programs, the most recent of which was approved in July 2000, aggregating 3,486,212 shares. As of November 10, 2000, 2,162,775 shares had been repurchased leaving up to 1,323,437 shares for repurchase. The Company has not repurchased any of its stock since June 2000 but expects to recommence purchases of its stock in the near future. 10 Comparison of Operating Results for the Quarters Ended September 30, 2000 and 1999 Net income was $6.1 million, or $.26 per diluted share, for the quarter ended September 30, 2000 compared to net income of $6.9 million, or $.27 per diluted share, for the comparable period in 1999. The 1999 results include a curtailment gain on the pending termination of the Bank's pension plan which, after taxes, amounted to $856,000, or $.03 per share. Exclusive of this non-recurring item, net income for the quarter ended September 30, 2000 was unchanged while earnings per diluted share increased $.02 or 8.3%. The increase in earnings per share despite an unchanged level of net income in 2000 reflects the impact of the Company's stock repurchase program. The 2000 results, as compared to 1999, include an increase of $1.3 million, or 6.9%, in net interest income, an increase of $600,000 in the provision for loan losses, an increase of $680,000, or 30.2%, in non-interest income (exclusive of the non-recurring gain of $1.5 million on termination of the pension plan) and an increase of $1.5 million, or 13.0%, in non-interest expense. The Company's effective tax rate decreased to 34.3% in 2000 from 35.8% in the comparable 1999 period. Interest Income. Interest income for the quarter ended September 30, 2000 was $43.3 million compared to $35.1 million for the quarter ended September 30, 1999, an increase of $8.2 million, or 23.2%. The increase in interest income resulted from growth in average interest-earning assets of $331.2 million, or 17.1%, and an increase in the yield on interest-earning assets of 37 basis points in the 2000 period. The increase in the yield on interest-earning assets, as compared to the same period in the prior year, reflects the series of rate increases initiated by the Federal Reserve Board beginning in June 1999. The principal areas of growth in average balances were related to real estate loans (up $206.9 million, or 17.9%) and indirect auto loans (up $107.2 million, or 27.6%). Most of the real estate loan growth resulted from origination and retention in portfolio of one-to-four family residential real estate loans. The increase in indirect auto loans resulted from the positive economic environment within Compass's local markets and the continued emphasis of this area of lending as previously noted. Interest Expense. Interest expense for the quarter ended September 30, 2000 was $22.9 million compared to $16.1 million for the quarter ended September 30, 1999, an increase of $6.8 million or 42.6%. This increase resulted from a 72 basis point increase in the cost of all funds from 4.00% in 1999 to 4.72% in 2000, and a higher average balance of interest-bearing liabilities (up $332.8 million, or 20.6%). Average interest-bearing deposit balances increased $153.6 million, or 10.9%, during the quarter ended September 30, 2000 compared to the same period in 1999. Interest expense on borrowed funds increased $3.2 million in the quarter ended September 30, 2000 to $6.0 million due to a $179.2 million increase in the average balance of such funds and a 66 basis point increase in the average rate paid on borrowed funds to 6.33% in the 2000 period. The increase in the cost of funds on interest-bearing liabilities, as compared to the same period in the prior year, reflects the series of rate increases initiated by the Federal Reserve Board beginning in June 1999. Provision for Loan Losses. Compass provides for loan losses in order to maintain the allowance for loan losses at a level that management estimates is appropriate to absorb future chargeoffs of loans deemed uncollectible. In determining the appropriate level of the allowance for loan losses, management considers past and anticipated loss experience, evaluations of real estate collateral, current and anticipated economic conditions, volume and type of lending and the levels of nonperforming and other classified loans. The amount of the allowance is based on estimates and ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and provides for loan losses monthly in order to maintain the adequacy of the allowance. Compass provided $1.25 million for loan losses in the quarter ended September 30, 2000 compared to $650,000 in the quarter ended September 30, 1999. The increase of $600,000 in 2000 was primarily attributable to the growth in the loan portfolio as all indicators of credit quality generally continue to be positive. The allowance for loan losses was $19.4 million, or .96% of loans at September 30, 2000 compared with $16.8 million, or .96% of loans, at December 31, 1999. Non-Interest Income. Total non-interest income was $2.9 million for the quarter ended September 30, 2000 compared to $2.2 million (exclusive of the non-recurring gain of $1.5 million on termination of the pension plan) in the same period of 1999, an increase of $680,000 or 30.2%. This growth was principally caused by increases in ATM/Debit card usage, checking account related fees and a non-recurring gain on the disposition of banking premises and equipment of $250,000. 11 Non-Interest Expense. Non-interest expense increased by $1.5 million, or 13.0%, from $11.3 million for the quarter ended September 30, 1999 to $12.8 million for the quarter ended September 30, 2000. Of this increase, $759,000 related to salaries and employee benefits, $439,000 related to occupancy and equipment expenses, $215,000 related to data processing expenses and $236,000 related to marketing expenses. Such increases were partially offset by an aggregate decrease of $184,000 in other categories of non-interest expense. Such decrease was primarily attributable to certain non-recurring items associated with the merger with Sandwich Bank. Of the increase of $759,000 in salaries and employee benefits for the quarter ended September 30, 2000, approximately $400,000 related to increases in the number of employees and annual wage adjustments. In addition, employee-related insurance costs increased $125,000, management incentive plan expense increased $150,000, restricted stock plan expense increased $94,000 and the cost of a new sales incentive program for branch personnel amounted to $50,000. These increases were partially offset by a net savings of $56,000 due to changes made in September 1999 to the Bank's employee retirement plans. Occupancy and equipment expenses increased $439,000, or 30.7% to $1.9 million for the quarter ended September 30, 2000. This increase was primarily due to an increase in depreciation and utility costs of $250,000 attributable to the opening of the new main banking office and corporate offices in July 2000 as well as non-recurring moving costs of $125,000 associated with this relocation. The opening of new branches in Seekonk and Mattapoisett during the third quarter also contributed to this increase. Data processing expenses increased $215,000, or 19.7%, to $1.3 million for the quarter ended September 30, 2000. This increase was substantially driven by volume-related factors such as the number of new loan and deposit accounts and ATM usage. Marketing expenses increased $236,000, or 36.0%, to $892,000 for the quarter ended September 30, 2000. Such increase was attributable to various initiatives promoting the grand opening of the Bank's new main banking office and corporate offices as well as customer acquisition programs targeted at individuals and businesses affected by the branch divestitures required by the Fleet/Bank Boston merger. Income Taxes. The effective tax rate for the quarter ended September 30, 2000 was 34.3% compared to 35.8% in the same period in 1999. This decrease in overall tax rate is primarily due to the greater utilization of non-bank subsidiaries that are taxed at lower rates for state tax purposes and an increase in tax-favored investment income in 2000. Comparison of Operating Results for the Nine Months Ended September 30, 2000 and 1999 Net income was $17.5 million, or $.74 per diluted share, for the nine months ended September 30, 2000 compared to net income of $18.4 million, or $.72 per diluted share, for the comparable period in 1999. The 1999 results include a curtailment gain on the pending termination of the Bank's pension plan which, after taxes, amounted to $856,000, or $.03 per share. Exclusive of this non-recurring item, net income for the nine months ended September 30, 2000 was unchanged, while earnings per diluted share increased by $.05, or 7.2%. The increase in earnings per share despite an unchanged level of net income in 2000 reflects the impact of the Company's stock repurchase program. The 2000 results, as compared to 1999, include an increase of $4.1 million, or 7.4%, in net interest income, an increase of $2.3 million in the provision for loan losses, an increase of $1.2 million, or 18.8%, in non-interest income (exclusive of the non-recurring gain of $1.5 million on termination of the pension plan) and an increase of $3.1 million, or 9.4%, in non-interest expense. The Company's effective tax rate decreased to 35.1% in 2000 from 35.7% in 1999. Interest Income. Interest income for the nine months ended September 30, 2000 was $120.9 million compared to $101.4 million for the nine months ended September 30, 1999, an increase of $19.5 million, or 19.2%. The increase in interest income resulted from growth in average interest-earning assets of $296.6 million, or 15.9%, and an increase in the overall yield on interest-earning assets of 21 basis points in the 2000 period. The increase in the yield on interest-earning assets, as compared to the same period in the prior year, reflects the series of rate increases initiated by the Federal Reserve Board beginning in June 1999. The principal areas of growth in average balances were related to real estate loans (up $205.4 million, or 18.7%) and indirect auto loans (up $105.9 million, or 29.5%). Most of the real estate loan growth resulted from origination and retention in the portfolio of one-to-four family 12 residential real estate loans. The increase in indirect auto loans resulted from the positive economic environment within Compass's local markets and the continued emphasis of this area of lending. Interest Expense. Interest expense for the nine months ended September 30, 2000 was $61.7 million compared to $46.4 million for the nine months ended September 30, 1999, an increase of $15.3 million or 33.0%. This increase resulted from a 44 basis point increase in the cost of all funds from 4.02% in 1999 to 4.46% in 2000, and a higher average balance of interest-bearing liabilities (up $304.5 million, or 19.7%). Average interest-bearing deposit balances increased $102.4 million, or 7.4%, during the nine months ended September 30, 2000 compared to the same period in 1999. Interest expense on borrowed funds increased $9.6 million in the nine months ended September 30, 2000 to $16.1 million due to a $202.1 million increase in the average balance of such funds, and a 36 basis point increase in the average rate paid on borrowed funds to 6.06% in the 2000 period. The increase in the cost of funds on interest-bearing liabilities, as compared to the same period in the prior year, reflects the series of rate increases initiated by the Federal Reserve Board beginning in June 1999. Provision for Loan Losses. Compass provided $3.5 million for loan losses in the nine months ended September 30, 2000 compared to $1.2 million in the comparable prior year period. The increase of $2.3 million in 2000 was primarily attributable to the growth in the loan portfolio as all indicators of credit quality generally continue to be positive. Non-Interest Income. Total non-interest income was $7.4 million for the nine months ended September 30, 2000 compared to $6.2 million (exclusive of the non-recurring gain of $1.5 million on termination of the pension plan) in the same period of 1999, an increase of $1.2 million, or 18.8%. This increase was principally caused by increases in loan fees, ATM/Debit card usage, checking account related fees as well as non-recurring income ($320,000) attributable to both the sale of banking premises and equipment and an insurance settlement. Such increases more than offset a decrease of $223,000 in gains on sales of investment securities and loans. Non-Interest Expense. Non-interest expense increased by $3.1 million, or 9.4%, from $33.0 million for the nine months ended September 30, 1999 to $36.1 million for the nine months ended September 30, 2000. This increase was entirely attributable to a $3.1 million increase to salaries and employee benefits, which totaled $19.7 million for the nine months ended September 30, 2000. All other categories of non-interest expense were unchanged in the aggregate. Of the increase of $3.1 million in salaries and employee benefits for the nine months ended September 30, 2000, approximately $1.5 million was due to increases in the number of employees and annual wage adjustments while $731,000 was attributable to the restricted stock awarded in July 1999. Also, employment taxes increased $221,000, employee-related insurance costs increased $248,000 and the cost of a new sales incentive program for branch personnel amounted to $164,000. In addition, the amount accrued in connection with Compass's management incentive plan increased $500,000 in 2000 principally due to reduced expense in the first quarter of 1999 resulting from the utilization of amounts accrued but not paid during the two month transition period ended December 31, 1998. These increases were partially offset by a net savings of $235,000 due to changes made in September 1999 to the Bank's employee retirement plans. Occupancy and equipment expense increased $351,000, or 8.0%, to $4.7 million for the nine months ended September 30, 2000. This increase was primarily due to an increase in depreciation and utility costs of $200,000 attributable to the opening of the new main banking office and corporate offices as well as non-recurring moving and storage costs of $170,000 associated with this relocation. Data processing expenses increased $292,000, or 8.7%, to $3.6 million for the nine months ended September 30, 2000. This increase was caused by volume-related factors such as the number of new loan and deposit accounts and ATM usage. 13 Marketing expenses increased $358,000, or 20.2%, to $2.1 million for the nine months ended September 30, 2000. Such increase was attributable to various initiatives promoting the grand opening of the Bank's new main banking office and corporate offices during the third quarter as well as customer acquisition programs utilized throughout the year targeted at individuals and businesses affected by the branch divestitures required by the Fleet/Bank Boston merger. Other categories of non-interest expense decreased by $1.0 million in the nine months ended September 30, 2000. This decrease is primarily attributable to certain non-recurring items associated with the merger with Sandwich Bank. Income Taxes. The effective tax rate for the nine months ended September 30, 2000 decreased to 35.1% in 2000 from 35.7% in 1999. The overall tax rate was favorably affected by the greater utilization of non-bank subsidiaries that are taxed at lower rates for state tax purposes and an increase in tax-favored investment income which were partially offset by the non-deductible portion of expense associated with the vesting of restricted stock awards in 2000. Liquidity and Capital Resources Compass's liquidity, represented by cash and cash equivalents and debt securities is a product of its operating, investing and financing activities. The Bank's primary sources of funds are deposits, borrowings, principal and interest payments on outstanding loans and mortgage-backed securities, maturities of investment securities and funds provided from operations. While scheduled payments from the amortization of loans and mortgage related securities and maturing investment securities are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates and, in the case of deposits, other financial instruments available to the public such as mutual funds and annuities. As a voluntary member of the Federal Home Loan Bank of Boston (FHLB), Compass is entitled to borrow an amount up to the value of its qualified collateral that has not been pledged to others. Qualified collateral generally consists of residential first mortgage loans, U.S. Government and Agency securities and funds on deposit at the FHLB. At September 30, 2000, Compass had approximately $436 million in unused borrowing capacity that is contingent upon the purchase of additional FHLB stock. Use of this borrowing capacity may also be impacted by regulatory capital requirements. Liquidity management is both a daily and long-term function of business management. The measure of a bank's liquidity is its ability to meet its cash commitments at all times with available funds, by the conversion of other assets to cash at a reasonable price and by its ability to borrow under existing arrangements. At September 30, 2000, the Company maintained cash and due from banks, short-term investments and debt securities maturing within one year of $101.6 million, or 4.18% of total assets. At September 30, 2000, Compass had commitments to originate loans, unused outstanding lines of credit, standby letters of credit and undisbursed proceeds of loans totaling $203.0 million. Management believes that it will have sufficient funds available to meet its current loan commitments. Certificates of deposit maturing within one year from September 30, 2000 amounted to $715.3 million. Management expects that a significant portion of maturing certificate accounts will be retained at maturity, although the percentage retained may be below historical levels due to increased price competition for these deposits. Compass's Tier 1 capital measured 13.99% of risk-weighted assets at September 30, 2000. Total capital, including the Tier 2 allowance for loan losses, was 15.17% of risk-weighted assets. The leverage ratio was 9.92%. These ratios placed Compass in the "well capitalized" category according to regulatory standards. The Company's Tier 1 capital measured 16.69% of risk-weighted assets at September 30, 2000. Total capital, including the Tier 2 allowance for loan losses, was 17.89% of risk-weighted assets. The leverage ratio was 11.81%. These ratios placed the Company in excess of regulatory standards set forth by the Federal Reserve Board. 14 Item 3. Quantitative and Qualitative Disclosures about Market Risk The chief market risk factor affecting the financial condition and operating results of Compass is interest rate risk. This risk is managed by periodic evaluation of the interest rate risk inherent in certain balance sheet accounts, determination of the level of risk considered appropriate given Compass's capital and liquidity requirements, business strategy, performance objectives and operating environment and maintenance of such risks within guidelines approved by the Board of Directors. Through such management, Compass seeks to reduce the vulnerability of its net earnings to changes in interest rates. Compass's Asset/Liability Committee, comprised of senior management, is responsible for managing interest rate risk and reviewing with the Board of Directors on a quarterly basis its activities and strategies, the effect of those strategies on Compass's and the Company's operating results, Compass's interest rate risk position and the effect changes in interest rates would have on Compass's net interest income. The extent of movement of interest rates is an uncertainty that could have a negative impact on the earnings of the Company. The principal strategies Compass generally uses to manage interest rate risk include (i) emphasizing the origination and retention of adjustable-rate loans, origination of indirect auto loans which have relatively short maturities and origination of loans with maturities at least partly matched with those of the deposits and borrowings funding the loans, (ii) investing in debt securities with relatively short maturities and (iii) classifying a significant portion of its investment portfolio as available for sale so as to provide sufficient flexibility in liquidity management. The Company quantifies its interest rate risk exposure using a sophisticated simulation model. Simulation analysis is used to measure the exposure of net interest income and net income to changes in interest rates over a specified time horizon. Simulation analysis involves projecting future income and expense under various rate scenarios. Compass's internal guidelines on interest rate risk specify that for every 100 basis points immediate shift in interest rates, its estimated net interest income over the next 12 months should decline by less than 5%. In utilizing a 300 basis point increase in rates in its simulation model, the full impact of annual rate caps of 200 basis points common to most adjustable rate mortgage loan products is considered. The rate shocks used assume an instantaneous and parallel change in interest rates. Prepayment speeds for loans are based on published median dealer forecasts for each interest rate scenario. As of September 30, 2000, the Company's estimated exposure as a percentage of estimated net interest income for the next twelve and twenty-four month periods is as follows: Percentage Change in Estimated Net Interest Income Over: 12 months 24 months --------- --------- 300 basis point increase in rates ............... (15.15%) (15.83%) 200 basis point decrease in rates ............... (0.21%) (4.79%) At September 30, 2000, the Company exceeded its internal guidelines for interest rate, risk as set forth above, by an insignificant amount. This represents an improvement from the forecast at June 30, 2000 for the scenarios based on an increase in rates. This improvement occurred as a result of a recent decline in short-term rates. Management believes that it is advantageous to continue to utilize shorter term funding sources in the current rate environment and, along with its professional advisors, will continue to monitor the trend in short-term and long-term interest rates and the related impact which changes in rates may have on net interest income. Based on the scenario above, net income would be adversely affected in both the twelve and twenty-four month periods. For each one percentage point change in net interest income, the effect on net income would be $541,000, assuming a 36% effective tax rate. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company and Compass are not involved in any pending legal proceedings other than matters arising in the ordinary course of business. Management believes that the resolution of these matters will not materially affect their business or the consolidated financial condition, results of operations and liquidity of the Company and Compass. Item 2. Changes in Securities and Use of Proceeds Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to A Vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K a. Exhibits: 3.1 Articles of Organization of Seacoast Financial Services Corporation+++ 3.2 By-Laws of Seacoast Financial Services Corporation+++ 4 Specimen certificate for the common stock of Seacoast Financial Services Corporation++ 10.1* Form of Employment Agreement by and among Seacoast Financial Services Corporation, Compass Bank for Savings and Kevin G. Champagne+ 10.2* Form of Employment Agreement by and among Compass Bank for Savings, Seacoast Financial Services Corporation and certain Officers of Compass Bank for Savings+ 10.3* Form of Change in Control Agreements by and among Seacoast Financial Services Corporation, Compass Bank for Savings, Kevin G. Champagne and certain other Officers of Compass Bank for Savings+ 10.4* Form of Change in Control Agreement by and among Seacoast Financial Services Corporation, Compass Bank for Savings and certain Officers of Compass Bank for Savings+ 10.5* Form of Executive Salary Continuation Agreements made and entered into by and between Compass Bank for Savings and Kevin G. Champagne, Arthur W. Short, John D. Kelleher and Francis S. Mascianica and forms of amendments thereto+ 10.6* Trust Agreement, made as of December 18, 1992, by and between Compass Bank for Savings and Shawmut Bank, N.A.+ 10.7* Compass Bank for Savings January 2000 Incentive Compensation Plan +++++ 10.12* Compass Bank for Savings Executive Deferred Compensation Plan+ 16 10.13* Rabbi Trust for Compass Bank for Savings Executive Deferred Compensation Plan+ 10.16* Sandwich Co-operative Bank 1983 Directors Deferred Income Agreement ++ 10.17* Sandwich Co-operative Bank 1992 Directors Deferred Compensation Plan++ 10.20* Seacoast Financial Services Corporation 1999 Stock Incentive Plan++++ 10.21 Agreement and Plan of Merger by and between Seacoast Financial Services Corporation and Home Port Bancorp, Inc. dated as of July 20, 2000++++++ 10.22 Stock Option Agreement between Home Port Bancorp, Inc. and Seacoast Financial Services Corporation dated as of July 20, 2000++++++ 11 A statement regarding earnings per share is included in Item 1, Note 4, of this report. 27 EDGAR Financial Data Schedule b. Reports on Form 8-K: The Company filed a Current Report on Form 8-K with the SEC on August 3, 2000 in connection with the signing of a definitive agreement to acquire Home Port Bancorp, Inc. - -------------------------------------------- * Management compensatory plan or arrangement. + Incorporated by reference to the Company's Registration Statement on Form S-1 (333-52889), filed with the Securities and Exchange Commission under the Company's prior name, "The 1855 Bancorp", on May 15, 1998. ++ Incorporated by reference to Amendment No. 1 to the Company's Registration Statement on Form S-1 (333-52889), filed with the Securities and Exchange Commission under the Company's prior name, "The 1855 Bancorp", on August 14, 1998. +++ Incorporated by reference to the Company's Registration Statement on Form 8-A filed with the Securities and Exchange Commission on November 18, 1998. ++++ Incorporated by reference to the Company's Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 16, 1999. +++++ Incorporated by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2000. ++++++ Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securites and Exchange Commisssion on August 3, 2000. 17 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. Seacoast Financial Services Corporation --------------------------------------- (Registrant) Date: November 10, 2000 By: /s/ Kevin G. Champagne --------------------------------------- Kevin G. Champagne President and Chief Executive Officer Date: November 10, 2000 By: /s/ Francis S. Mascianica, Jr. --------------------------------------- Francis S. Mascianica, Jr. Treasurer, as Principal Financial and Accounting Officer 18