SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2001
Commission File No. 000-25381
CCBT FINANCIAL COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3437708
(State of Incorporation) (I.R.S. Employer Identification No.)
495 Station Avenue, South Yarmouth, Massachusetts 02664
(Address of principal executive office) (Zip Code)
(Registrant's telephone #, incl. area code): 508-394-1300
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. (1) : Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. There were 8,608,048
shares of common stock outstanding as of May 9, 2001.
TABLE OF CONTENTS
Section Description Page No.
- ------- ----------- --------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
March 31, 2001 (Unaudited) and December 31, 2000
Consolidated Statements of Income (Unaudited) 4
Three Months Ended March 31, 2001 and 2000
Consolidated Statements of Cash Flows (Unaudited) 5
Three Months Ended March 31, 2001 and 2000
Consolidated Statements of Comprehensive Income (Unaudited) 6
Three Months Ended March 31, 2001 and 2000
Consolidated Statements of Changes in Stockholders' Equity 6
(Unaudited) Three Months Ended March 31, 2001 and 2000
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 7-16
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED STATEMENTS OF CONDITION
March 31, December 31,
---------------------------------
2001 2000
---- -----
ASSETS (Unaudited)
Cash and due from banks $ 35,756,373 $ 49,371,492
Short term interest-bearing deposits 23,751,264 16,843,538
Securities available for sale at fair value 492,809,319 426,742,801
Federal Home Loan Bank stock, at cost 22,125,400 22,125,400
Federal Reserve Bank stock, at cost 1,180,700 1,180,700
Total loans 879,357,642 848,490,319
Less: Reserve for loan losses (12,141,493) (12,153,944)
--------------- ---------------
Net loans 867,216,149 836,336,375
Loans held for sale 1,257,544 860,840
Premises and equipment 16,980,301 16,633,912
Deferred tax assets 3,204,125 4,512,589
Accrued interest receivable on securities 3,386,218 3,353,580
Principal and interest receivable on loans 4,476,001 4,331,987
Intangibles 9,159,591 9,555,425
Other assets 10,932,573 12,070,707
--------------- ---------------
Total assets $ 1,492,235,558 $ 1,403,919,346
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 954,932,619 $ 973,302,664
Borrowings from the Federal Home Loan Bank 393,471,386 291,286,797
Other short-term borrowings 24,270,439 24,520,157
Current taxes payable 3,290,661 2,267,117
Interest payable on deposits and borrowings 4,847,947 4,206,555
Post retirement benefits payable 2,983,886 2,830,386
Employee profit sharing retirement and bonuses payable 795,821 2,946,642
Other liabilities 3,603,078 3,705,815
--------------- ---------------
Total liabilities 1,388,195,837 1,305,066,133
--------------- ---------------
Minority interest 136,603 124,435
--------------- ---------------
Stockholders' equity
Common stock, $1.00 par value:
Authorized: 12,000,000 shares
Issued: 9,061,064 9,061,064 9,061,064
Surplus 27,494,890 27,494,890
Undivided profits 73,177,294 69,896,759
Treasury stock, at cost (453,016 shares) (7,399,628) (7,399,628)
Accumulated other comprehensive income 1,569,498 (324,307)
--------------- ---------------
Total stockholders' equity 103,903,118 98,728,778
--------------- ---------------
Total liabilities and stockholders' equity $ 1,492,235,558 $ 1,403,919,346
=============== ===============
The accompanying notes are an integral part of these unaudited, consolidated
financial statements.
3
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (continued)
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31,
2001 2000
---- ----
Unaudited
INTEREST INCOME
Interest and fees on loans $ 17,134,782 $ 13,715,616
Interest on short term interest-bearing deposits 189,361 74,487
Taxable interest income on securities 8,089,562 7,663,724
Tax-exempt interest income on securities 236,997 207,958
Dividends on securities 417,942 362,838
---------- ------------
Total interest income 26,068,644 22,024,623
---------- ------------
INTEREST EXPENSE
Interest on deposits 7,773,717 4,863,923
Interest on borrowings from the Federal Home Loan Bank 4,966,384 5,586,152
Interest on other short-term borrowings 277,084 259,125
---------- ------------
Total interest expense 13,017,185 10,709,200
---------- ------------
Net interest income 13,051,459 11,315,423
Provision for loan losses -- --
----------- ------------
Net interest income after provision for loan losses 13,051,459 11,315,423
----------- ------------
NON-INTEREST INCOME
Financial Advisor fees 1,760,363 1,507,595
Deposit account service charges 501,746 488,179
Branch banking fees 717,396 714,072
Electronic banking fees 482,348 388,502
Loan servicing and other loan fees 59,672 55,584
Brokerage fees and commissions 249,120 283,545
Net gain (loss) on sales of securities 460,494 (21,092)
Net gain on sales of loans 141,631 23,057
Insurance commissions 466,648 --
Other income 111,462 140,907
----------- ------------
Total non-interest income 4,950,880 3,580,349
----------- ------------
NON-INTEREST EXPENSE
Salaries 3,945,959 3,157,318
Employee benefits 1,861,198 1,549,054
Building and equipment 1,329,847 1,117,970
Data processing 777,720 689,621
Accounting and legal fees 214,677 204,730
Other outside services 509,188 471,098
Amortization of intangibles 395,833 --
Delivery and communications 524,491 328,675
Directors' fees 85,800 87,500
Marketing and advertising 348,252 203,863
Printing and supplies 137,375 166,171
Insurance 137,470 95,820
All other expenses 408,833 610,814
----------- ------------
Total operating expense 10,676,643 8,682,634
---------- ------------
Minority Interest 12,169 --
----------- ------------
Net income before taxes 7,313,527 6,213,138
Applicable income taxes 2,483,543 2,112,089
------------ ------------
Net income $ 4,829,984 $ 4,101,049
============ ============
Average shares outstanding 8,608,048 8,608,048
============ ============
Basic earnings per share $ 0.56 $ 0.48
Diluted earnings per share $ 0.56 $ 0.48
Cash dividends declared $ 0.18 $ 0.16
The accompanying notes are an integral part of these unaudited, consolidated
financial statements
4
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
------------------------------------
2001 2000
---- ----
(Unaudited)
CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 4,829,984 $ 4,101,049
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses -- --
Depreciation and amortization 1,069,120 539,695
Net accretion of securities (2,569,861) (4,632,731)
Accretion of deferred loan fees (210,665) (102,184)
Net (gain) loss on sale of investment securities (460,494) 21,092
Deferred income tax expense 284,920 975,313
Net gain on sale of loans (141,631) (23,057)
Net change in:
Loans held for sale (396,704) 4,700
Accrued interest receivable (176,652) (953,381)
Accrued expenses and other liabilities (1,458,666) (434,653)
Other, net 2,957,012 4,641,429
------------- -------------
Net cash provided by operating activities 3,726,363 4,137,272
------------- -------------
CASH USED BY INVESTING ACTIVITIES
Net increase in loans (41,269,581) (33,058,138)
Proceeds from sale of loans 10,564,810 3,648,217
Maturities of securities 81,579,045 48,937,255
Purchase of available for sale securities (161,244,214) (62,860,730)
Sales of available for sale securities 19,399,620 28,637,749
Purchases of premises and equipment (1,478,813) (304,653)
------------- -------------
Net cash used by investing activities (92,449,133) (15,000,300)
------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES
Net decrease in deposits (18,370,045) (8,941,544)
Net increase in borrowings from the
Federal Home Loan Bank 102,184,589 31,901,414
Net (decrease) increase in other short-term borrowings (249,718) 3,131,716
Cash dividends paid on common stock (1,549,449) (1,377,287)
------------- -------------
Net cash provided by financing activities 82,015,377 24,714,299
------------- -------------
Net increase (decrease) in cash and cash equivalents (6,707,393) 13,851,271
Cash and cash equivalents at beginning of year 66,215,030 45,622,428
------------- -------------
Cash and cash equivalents at end of period $ 59,507,637 $ 59,473,699
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 12,375,792 $ 10,893,796
Income taxes 1,429,819 583,348
Non-cash transactions:
Additions to property from defaulted loans -- $ 70,000
Loans to finance OREO property -- --
The accompanying notes are an integral part of these unaudited, consolidated
financial statements
5
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (continued)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31,
2001 2000
---- ----
(Unaudited)
Net income $ 4,829,984 $ 4,101,049
----------- -----------
Unrealized holding gains on securities available for sale 3,691,604 893,162
Reclassification of gains on securities realized in income (460,494) 21,092
----------- -----------
Net unrealized gains (losses) 3,231,110 914,254
Related tax effect (1,337,305) (402,469)
----------- -----------
Net other comprehensive income 1,893,805 511,785
----------- -----------
Comprehensive income $ 6,723,789 $ 4,612,834
=========== ===========
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended March 31,
2001 2000
---- ----
(Unaudited)
COMMON STOCK
Balance, beginning of the quarter $ 9,061,064 $ 9,061,064
------------- -------------
Balance, March 31 9,061,064 9,061,064
------------- -------------
SURPLUS
Balance, beginning of the quarter 27,494,890 27,494,890
------------- -------------
Balance, March 31 27,494,890 27,494,890
------------- -------------
UNDIVIDED PROFITS
Balance, beginning of the quarter 69,896,759 58,181,480
Net income 4,829,984 4,101,049
Cash dividends declared (1,549,449) (1,377,287)
------------- -------------
Balance, March 31 73,177,294 60,905,242
------------- -------------
TREASURY STOCK
Balance, beginning of the quarter (7,399,628) (7,399,628)
------------- -------------
Balance, March 31 (7,399,628) (7,399,628)
------------- -------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of the quarter (324,307) (1,688,195)
Net other comprehensive income 1,893,805 511,785
------------- -------------
Balance, March 31 1,569,498 (1,176,410)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY $ 103,903,118 $ 88,885,158
============= =============
The accompanying notes are an integral part of these unaudited, consolidated
financial statements
6
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (continued)
CCBT FINANCIAL COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2001 and 2000 (Unaudited)
Business
CCBT Financial Companies, Inc. ("Company") was incorporated under
the laws of the Commonwealth of Massachusetts on October 8, 1998 under the name
of CCBT Bancorp, Inc. at the direction of the Board of Directors and management
of Cape Cod Bank and Trust Company ("Bank") for the purpose of becoming a bank
holding company for the Bank. On February 11, 1999, Bancorp became the holding
company for the Bank by acquiring 100% of the outstanding shares of the Bank's
common stock in a 1:1 exchange for Bancorp common stock. During 1999, the
Company's name was changed to CCBT Financial Companies, Inc. The Bank's charter
was converted to that of a national bank effective September 1, 1999. Currently,
the Company's business activities are conducted primarily through the Bank.
During the second quarter of 2000, the Company, through its
wholly-owned subsidiary, Cape Cod Bank and Trust Company N.A., acquired 51% of
the stock of Murray & MacDonald Insurance Services, Inc. of Falmouth,
Massachusetts, a full service insurance Agency offering property, casualty,
life, accident and health products to clients on Cape Cod. The Agency has been
in business since 1972 and has license agreements with more than thirty
insurance firms. As part of the transaction, Murray & MacDonald President
Douglas D. MacDonald will continue as President of the Agency, and will direct
all insurance activities for the Bank.
In addition to the acquisition of Murray & MacDonald Insurance
Services, Inc., the Company also completed its acquisition of two branch banking
offices, in Falmouth and Wareham, Massachusetts, from Fleet Bank during the
second quarter of 2000. These branches added approximately $55 million in
deposits at a 15.5% premium, at June 30, 2000.
Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principals for complete
financial statements. Certain amounts have been reclassified in the March 31,
2000 financial statements to conform to the 2001 presentation . In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2001 are not necessarily indicative
of the results that may be expected for the current fiscal year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31,2000.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
This Form 10Q contains certain statements that may be considered
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company's actual results could differ materially from those
projected in the forward-looking statements as a result, among other factors, of
changes in general, national or regional economic conditions, changes in loan
default and charge-off rates, reductions in deposit levels necessitating
increased borrowing to fund loans and investments, changes in interest rates,
changes in the size and nature of the Company's competition, and changes in the
assumptions used in making such forward-looking statements.
7
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The following discussion should be read in conjunction with the
accompanying consolidated financial statements and selected consolidated
financial data included within this report. Given that the Company's principal
activity currently is ownership of the Bank, for ease of reference, the term
"Company" in this item generally will refer to the investments and activities of
the Company and the Bank except where otherwise noted.
CCBT Financial Companies, Inc. is a bank holding company. Its
sole subsidiary, Cape Cod Bank and Trust Company, N.A. is the largest commercial
bank headquartered in Barnstable County. It offers a wide range of commercial
banking services for individuals, businesses, non-profit organizations,
governmental units and fiduciaries. The Bank receives substantially all of its
deposits from and makes substantially all of its loans to individuals and
businesses on Cape Cod, although the Bank has some loans on properties outside
its market area, including some sizable participations in commercial mortgages.
The Bank's core market is comprised of retail, wholesale, and manufacturing
businesses; primary households (including a significant retirement population);
and a growing number of second homeowners. In addition, a substantial non-core
vacation population contributes to seasonal deposit growth.
(The remainder of this page intentionally left blank)
8
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont.)
Net Interest Income, Net Interest Margin
Quarters Ended March 31,
2001 2000
Average Interest Average Average Interest Average
Balance Yield Balance Yield
(Dollar amounts in thousands)
ASSETS
Securities:
Mortgage-backed securities $37,450 $ 700 7.48% $31,745 $ 650 8.18%
CMOs 177,802 3,432 7.72% 214,157 3,774 7.05%
U.S. Government agencies 22,291 358 6.51% 29,528 463 6.38%
State and municipal obligations 22,118 251 5.98% 19,700 208 5.58%
Other securities 246,053 4,193 6.91% 202,135 3,213 6.47%
------- ----- ------- -----
Total securities 505,714 8,934 7.18% 497,265 8,308 6.79%
------- ----- ------- -----
Loans:
Commercial 80,275 1,821 9.20% 81,194 1,900 9.51%
Commercial construction 42,139 925 8.90% 22,954 511 8.96%
Residential construction 49,522 772 6.24% 46,305 711 6.07%
Commercial mortgages 236,536 5,409 9.27% 210,930 4,735 9.03%
Industrial revenue bonds 1,565 32 11.68% 1,125 24 11.93%
Residential mortgages 400,472 7,095 7.09% 298,302 5,046 6.77%
Home equity 37,971 863 9.22% 24,878 570 9.21%
Consumer 8,522 218 10.23% 9,046 219 9.68%
------- ------ -------- ------
Total loans 857,002 17,135 8.06% 694,734 13,716 7.93%
------- ------ ------- ------
Total earning assets 1,362,716 26,069 7.74% 1,191,999 22,024 7.46%
------ ------
Cash and due from banks 36,813 28,590
Non-earning assets 30,964 21,247
---------- ----------
Total assets $1,430,493 $1,241,836
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
NOW accounts $ 132,395 226 0.69% $ 111,151 219 0.79%
Regular savings 143,558 1,028 2.90% 153,622 1,169 3.06%
Money Market accounts 161,410 1,456 3.66% 137,690 1,151 3.36%
Certificates of Deposit of 122,486
$100,000 or more 1,904 6.30% 59,590 831 5.61%
Other time deposits 203,340 3,160 6.30% 118,914 1,494 5.05%
------- ----- ------- -----
Total interest bearing deposits 763,189 7,774 4.13% 580,967 4,864 3.37%
------- ----- ------- -----
Borrowings:
Federal Home Loan Bank 344,518 4,966 5.85% 384,353 5,586 5.85%
Other short-term borrowings 25,930 277 4.33% 20,660 259 5.04%
------ --- ------- -----
Total borrowings 370,448 5,243 5.74% 405,013 5,845 5.80%
------- --------- ------- -----
Total interest-bearing liabilities 1,133,637 13,017 4.66% 985,980 10,709 4.37%
------ ------
Demand deposits 188,873 161,576
Non-interest bearing liabilities 10,267 8,175
Stockholders' equity 97,716 86,105
---------- ----------
Total liabilities & equity $1,430,493 $1,241,836
========== ==========
Net interest income/spread $13,052 3.08% $11,315 3.09%
======= =======
Net interest margin (NII/Avg. Earning Assets) 3.88% 3.82%
9
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont.)
CCBT FINANCIAL COMPANIES, INC.
VOLUME/RATE ANALYSIS
Three Months Ended March 31,2001 vs March 31, 2000
Changes in Income/Expense due to
----------------------------------------------------------------------------------------------
Volume Rate Total
----------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
EARNING ASSETS
Securities:
Mortgage-backed securities $110 $ (60) $ 50
U.S. Government CMOs (662) 320 (342)
U.S. Government agencies (115) 10 (105)
State & municipal obligations 34 9 43
Other securities 724 256 980
---- ---- ----
Total securities 91 535 626
---- ---- ----
Loans:
Commercial (21) (58) (79)
Commercial construction 423 (9) 414
Residential construction 49 12 61
Commercial mortgages 578 96 674
Industrial revenue bonds 13 (5) 8
Residential mortgages 1,745 304 2,049
Home equity 298 (5) 293
Consumer (13) 12 (1)
---- ---- ----
Total loans 3,072 347 3,419
----- ---- ----
Total interest income 3,163 $ 882 $4,045
----- ----- ------
INTEREST BEARING LIABILITIES
Deposits:
NOW accounts $39 $(32) $ 7
Regular savings (74) (67) (141)
Money Market accounts 205 100 305
Certificates of deposit of $100,000 or more 924 149 1,073
Other time deposits 1,182 484 1,666
----- --- -----
Total interest bearing deposits 2,276 $634 2,910
----- ------ -----
Borrowings:
Federal Home Loan Bank (575) (44) (619)
Other short-term borrowings 61 (44) 17
----- ---- ----
Total borrowings 514 $ 88 (602)
----- ---- -----
Total interest bearing liabilities 1,762 546 2,308
----- ---- -----
Net changes due to volume/rate $1,401 $336 $1,737
====== ==== ======
10
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont.)
Source and Use of Funds
When compared to the first quarter of 2000, average interest
bearing deposits were higher by 31.4% or $182.2 million in the first quarter of
2001. Significant growth occurred in time deposits with Certificates of Deposit
greater than $100,000 increasing 105.5% or $62.9 million and Other time deposits
increasing 71.0% or $84.4 million. This growth includes deposits acquired from
Fleet during the second quarter of 2000 as well as the offering of a 7.20% APY
on a one year certificate of deposit during the second and third quarters of
2000. As a result of this aggressive and popular promotion, the cost of funds
was somewhat greater in the first quarter of 2001 at 4.13% compared to 3.37% in
the first quarter of 2000. Non-interest bearing demand deposits increased 16.9%
or $27.3 million in the first quarter of 2001 when compared to the same period
in 2000. On average, securities were marginally lower by $8.4 million or 1.7%
during the first quarter of 2001 when compared to the first quarter of 2000.
This reduction in average balance in the securities portfolio was offset by a
higher average yield of 7.18% in the first quarter of 2001 as compared to 6.79%
in 2000, resulting in earnings of $8,934 thousand in 2001, an increase of $626
thousand or 7.5% over first quarter 2000 results.
When compared to the first three months of 2000, total loans were higher in
2001 by 23.4% or $162.3 million. Loan growth was spearheaded by residential
mortgage lending, up $102.2 million or 34.3% in a very active local market,
along with increased commercial construction and mortgage lending, up nearly $45
million or 19.2%. Additionally, Home Equity loans were up $13.1 million for a
52.6% increase for the first three months of 2001 as compared to 2000.
Additional funds were utilized by management to reduce Federal Home Loan Bank
borrowings, down by 10.4% or $39.8 million in the first quarter of 2001 as
compared to the same quarter of 2000.
Net interest income
Net interest income was $13.1 million for the three months ended
March 31, 2001 as compared to $11.3 million for the same period in 2000 up
15.4%. The spread and net interest margin ratios were 3.08% and 3.88%,
respectively, for the three months ended March 31, 2001 as compared to 3.09% and
3.82%, respectively, for the comparable 2000 period.
Provision for loan losses
No provisions were made to the reserve for loan losses in the
quarters ended March 31, 2001 or 2000. Management believes that, upon continuing
review of loan payment and quality statistics, the current reserve continues to
be adequate to cover losses likely to result from loans in the current
portfolio.
Non-interest Income and Expense
Non-interest income totaled $5.0 million for the three months
ended March 31, 2001, up 38.3% compared to the $3.6 million earned during the
same period in 2000. Net gains on the sale of securities as well as the addition
of revenues from insurance activities contributed significantly to this
increase.
During the first quarter of 2001, non-interest expenses totaled
$10.7 million, greater than the $8.7 million expended during the comparable
period last year by $2.0 million or 23.0%. Salaries and employee benefits rose
$1.1 million or 23.4%. Increased expenses in other categories include
amortization of intangibles resulting from acquisitions and increased building
and equipment expenses attributable to the addition of two branch offices and
the new South Yarmouth headquarters.
11
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont.)
Income taxes
Applicable State and Federal income tax expense of $2.5 million
for the quarter ended March 31, 2001 was 17.6% greater than the $2.1 million
recorded for the same quarter in 2000, a reflection of higher pretax net income.
The combined effective State and Federal tax rate was 34.0% of pretax net income
for each period presented.
Net income
Consolidated net income was $4,829,984 representing earnings per
share of $0.56 for the three months ended March 31, 2001 as compared to
$4,101,049 or $0.48 per share for the comparable three months ended March
31,2000. Annualized returns on average assets and average equity were 1.35% and
19.77%, respectively, for the three months ended March 31, 2001 as compared to
1.32% and 19.32%, respectively, for the three months ended March 31,2000.
COMPARATIVE ANALYSIS OF SELECTED PERIOD-END ASSETS,
LIABILITIES AND CAPITAL
The Company had $1.49 billion consolidated total assets, $954.9
million deposits and $103.9 million stockholders' equity at March 31, 2001. Its
capital to assets ratio was 6.96%, exceeding all regulatory requirements. As
compared to reported balances at December 31, 2000, gross loans increased $30.9
million or 3.6%, deposits decreased $18.4 million or 1.9% and borrowed funds
increased $101.9 million or 32.3%.
Investment Securities
The adjusted cost and estimated market values of investment
securities which the Company classified as available for sale at March 31, 2001
and December 31, 2000 were as follows:
March 31, 2001
--------------------------------------------------
Gross Gross Estimated
Adjusted Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
(Dollar amounts in thousands)
U.S. Government agency CMOs $173,873 $ 2,069 $ 1,871 $174,071
Other U.S. Government agencies 18,673 53 -- 18,726
Other collateralized mortgage obligations 52,986 1,067 478 53,575
State and municipal obligations 20,416 -- -- 20,416
Other debt securities 224,194 2,065 238 226,021
-------- -------- -------- --------
Totals $490,142 $ 5,254 $ 2,587 $492,809
======== ======== ======== ========
December 31, 2000
--------------------------------------------------
Gross Gross Estimated
Adjusted Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
(Dollar amounts in thousands)
U.S. Government agency CMOs $140,472 $ 1,412 $ 2,437 $139,447
Other U.S. Government agencies 22,663 31 200 22,494
Other collateralized mortgage obligations 47,746 526 529 47,743
State and municipal obligations 25,479 3 -- 25,482
Other debt securities 190,946 1,484 853 191,577
-------- -------- -------- --------
Totals $427,306 $ 3,456 $ 4,019 $426,743
======== ======== ======== ========
12
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont.)
Investment securities available for sale increased $66.1 million,
from $426.7 million at December 31, 2000 to $492.8 million at March 31, 2001.
Net gains from security sales were $460 thousand during the quarter ended March
31, 2001 compared to net losses of $21 thousand during the same period in 2000.
Loans
The following is a summary of the Company's outstanding loan balances as of the
dates indicated:
March 31, December 31,
------------- ------------------
2001 2000
---- ----
Mortgage loans on real estate
Residential $ 406,844,324 $ 393,574,418
Commercial 243,010,895 242,535,682
Construction 90,788,594 87,978,360
Equity lines of credit 39,549,432 37,377,120
Other loans
Commercial 89,101,404 76,274,801
Industrial revenue bonds 1,327,833 1,602,973
Consumer 8,735,160 9,146,965
------------- -------------
Total loans 879,357,642 848,490,319
Less: Allowance for loan losses (12,141,493) (12,153,944)
------------- -------------
Total portfolio loans, net $ 867,216,149 $ 836,336,375
============= =============
Loans held for sale $ 1,257,544 $ 860,840
============= =============
As shown in the table above, total loans increased $30.9 million
or 3.6% to $879.4 million at March 31, 2001 as compared to December 31, 2000,
with balanced growth between commercial/commercial real estate and residential
mortgage loans, up $13.3 and $15.4 million, respectively. New residential
mortgage originations of $23.9 million fixed rate and $55.8 million adjustable
rate were achieved in the first quarter 2001. During the same period, the
Company sold $10.4 million residential mortgages, producing net gains of $175.6
thousand.
Non performing assets and loan loss experience
As shown in the following table non-performing assets were $3.5
million or .23% of total assets at March 31, 2001 compared to $3.7 million or
.26% of total assets at December 31, 2000. Accrual of interest income on loans
is discontinued when it is questionable whether the borrower will be able to pay
the principal and interest in full and/or when loan payments are 60 days past
due, or 90 days past due if the loan is fully secured by real estate or other
collateral held by the Bank.
March 31, December 31,
2001 2000
---- ----
(Dollar amounts in thousands)
Nonaccrual loans $2,006 $2,192
Loans past due 90 days or more and still accruing -- --
Property from defaulted loans 1,500 1,500
------ ------
Total non-performing assets $3,506 $3,692
====== ======
Restructured troubled debt performing in accordance
with amended terms, not included above $ 234 $ 237
====== ======
13
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont.)
The following is a summary of the activity in the reserve for loan losses for
the indicated periods:
Three Months Ended March 31,
----------------------------
2001 2000
---- ----
(Dollar amounts in thousands)
Balance, beginning of the period $ 12,154 $ 11,158
Provision for loan losses -- --
Charge-offs (98) (27)
Recoveries on loans previously charged off 85 155
-------- --------
Balance, end of the period $ 12,141 $ 11,286
======== ========
Management believes that, upon review of loan quality and payment
statistics, provisions from current income were unnecessary in the indicated
periods, notwithstanding growth in the loan portfolio. The reserve represented
1.38% of total loans at March 31, 2001, 1.43% at December 31, 2000, and 1.58% at
March 31,2000. Management considers the reserve to be adequate at March 31,
2001, although there can be no assurance that the reserve is adequate or that
additional provisions might be necessary.
The Company had outstanding commitments to originate new
residential and commercial mortgages of $54.9 million at March 31, 2001 and
$57.8 million at December 31, 2000 which are not reflected on the consolidated
statement of financial condition. Additional unadvanced loan funds are
summarized as follows for the indicated periods:
March 31, December 31,
----------------------------------
2001 2000
---- ----
Commercial loans (Dollar amounts in thousands)
Dealer floor plan $ 6,579 $ 9,134
Lines of credit 48,548 46,743
Other 3,331 3,657
Commercial mortgages
Construction 25,759 14,129
Other 11,056 2,896
Residential mortgages
Home equity 47,709 45,733
Consumer loans
Lines of credit 2,953 2,861
-------- --------
Total $145,935 $125,153
======== ========
14
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont.)
Deposits
The following table is a summary of deposits outstanding as of the dates
indicated:
March 31, December 31,
-------------------------------
2001 2000
---- ----
Deposits
Demand $195,253,185 $201,904,120
NOW 138,512,008 139,452,453
Money market 160,990,661 163,793,368
Other savings 142,255,946 143,239,002
Certificates of deposit greater than $100,000 89,544,956 96,159,335
Other time 228,375,863 228,754,386
----------- -----------
Total deposits $954,932,619 $973,302,664
============ ============
Reflecting somewhat the seasonal nature of Cape Cod economy as
discussed in "Liquidity" on page 15 herein, total deposits at March 31, 2001 are
$18.4 million or 1.89% lower than total deposits at December 31, 2000.
Generally, the Company's strategy is to price deposits according to local market
rates, offering higher alternative rates based on increasing amounts deposited.
Interest rates paid are frequently reviewed and are modified to reflect changing
conditions.
Borrowed Funds
Historically, the Company has selectively engaged in short and
long term borrowings from the Federal Home Loan Bank of Boston, and has sold
securities under agreements to repurchase, to fund loans and investments. At
March 31, 2001, borrowed funds totaled $417.7 million, up 32.3% or $101.9
million compared to borrowed funds at December 31,2000. This increase offsets
the seasonal deposit decline described under the section entitled "Deposits"
above and contributes to the support of heretofore described loan growth. Does
not include increase due to investment purchases, which is high % of change.
Stockholders' Equity
The Company's capital to assets ratio was 6.96% at March 31, 2001
compared to 7.03% at December 31, 2000.
The Company (on a consolidated basis) and the Bank are subject to
various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possible additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's and the Bank's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and/or the Bank must meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. Holding companies, such as the Company, are not subject to
prompt corrective action provisions. The capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. Quantitative measures established by regulation
to ensure capital adequacy require the Company and the Bank to maintain minimum
amounts of total and Tier 1 capital (as defined) to average assets (as defined).
The following schedule displays these capital guidelines and the ratios of the
Company and the Bank as of March 31, 2001.
15
PART I FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont.)
Minimum
Regulatory March 31 2001
--------------------
Guidelines Company Bank
----------------------------------
Tier 1 leverage capital 4.00% 6.47% 6.39%
Tier 1 capital to risk-weighted assets 4.00% 9.02% 8.84%
Total capital to risk-weighted assets 8.00% 10.20% 10.01%
The Company's book value at March 31, 2001 was $12.07 per share compared to
$11.47 per share at December 31, 2000.
LIQUIDITY
The Company normally experiences a wide swing in its liquidity each year as a
result of the seasonal nature of the economy in its market area. Liquidity is
usually high in late summer and early fall and the annual low point is usually
in the early spring. The Bank's investment portfolio is of high quality and is
highly marketable although a gain or loss would be realized if the market value
of securities sold were not equal to their adjusted book value at date of sale.
Alternately, the Bank can borrow funds using investment securities as
collateral. The Bank has an available line of credit of $5.0 million from the
Federal Home Loan Bank of Boston. The Bank may borrow from the Federal Reserve
Bank if necessary.
ASSET/LIABILITY MANAGEMENT
Through the Company's Asset/Liability Management Committee ("ALCO"), which is
comprised of senior management and several Directors, the Company monitors the
level and general mix of earning assets and interest bearing liabilities, with
particular attention to those assets and liabilities which are rate-sensitive.
The primary objective of ALCO is to manage interest rate risk in accordance with
policies approved by the Board of Directors regarding acceptable levels of
interest rate risk, liquidity and capital. The committee meets monthly and sets
the rates paid on deposits, approves loan pricing and reviews investment
transactions.
Given the substantial liquidity from cash flow and maturities of the Company's
investment portfolio, the sizable proportion of rate sensitive loans to total
loans, and the large core deposit base, ALCO believes the Company to be
moderately asset-sensitive to changes in interest rates. Nevertheless, the
Company's strategy has included the funding of certain fixed rate loans with
medium term borrowed funds in order to mitigate a margin squeeze should interest
rates rise.
The Cape Cod market is one in which competing financial institutions frequently
offer a wide range of yields for similar deposit products. Within this market,
the Company finds it necessary, from time to time, to offer higher rates than it
would otherwise justify, thereby increasing pressure on net interest income. In
order to offset this pressure somewhat, the Company is strategically focusing on
customer relationship profitability.
16
PART I FINANCIAL INFORMATION
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
For a discussion of the Company's management of market risk
exposure, see "Asset/Liability Management" in Item 2 of Part I of this report
and Item 7A of Part II of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 (the "2000 Annual Report").
For quantitative information about market risk, see Item 7A of
Part II of the Company's 2000 Annual Report.
There have been no material changes in the quantitative and
qualitative disclosures about market risk as of March 31, 2001 from those
presented in the Company's 2000 Annual Report.
PART II OTHER INFORMATION
ITEM 1. Legal proceedings
There are no material legal proceedings to which the Company is a
party or to which any of its property is subject, although the Company is a
party to ordinary routine litigation incidental to its business.
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
Exhibit Description
Change in Control agreements
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Company during the three month period ended
March 31, 2001.
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.
(Registrant): CCBT Financial Companies, Inc.
------------------------------
Date: May 15, 2001
------------
/s/ STEPHEN B. LAWSON, President and Chief Executive Officer
---------------------------------------------------------------
Stephen B. Lawson, President and Chief Executive Officer
/s/ NOAL D. REID, Chief Financial Officer and Treasurer
-----------------------------------------------------------
Noal D. Reid, Chief Financial Officer and Treasurer
18