EXHIBIT 2.2
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
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FORM F-4
QUARTERLY REPORT
UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1997
FDIC INSURANCE CERTIFICATE NO. 26481
FALMOUTH CO-OPERATTVE BANK
MASSACHUSETTS
04-1299490
20 DAVIS STRAITS, FALMOUTH, MASSACHUSETTS 02540
(508) 548-3500
INDICATE BY CHECK MARK WHETHER THE BANK (1) HAS FILED ALL REPORTS BY SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR
SUCH SHORTER PERIOD THAT THE BANK WAS REQUIRED TO FILE SUCH REPORTS).
YES [X] NO [ ]
AND (2) HAS BEEN SUBJECT TO SUCH RILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
FALMOUTH CO-OPERATIVE BANK
BALANCE SHEETS
DECEMBER 30, SEPTEMBER 30,
1996 1996
(unaudited)
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ASSETS
Cash and due from banks $ 1,364,052 $ 1,171,761
Federal funds sold 861,989 1,583,437
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Total cash and cash equivalents 2,226,041 2,755,198
Investment securities 40,694,887 45,552,649
Federal Home Loan Bank stock, at cost 300,900 300,900
Loans, net 43,415,470 40,236,846
Premises and equipment 696,875 526,061
Accrued interest receivable 694,632 746,601
Cooperative Central Bank Reserve Fund Deposit 285,680 285,680
Other assets 204,870 112,173
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Total assets $88,519,355 $90,516,108
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Demand deposits $ 8,662,618 $ 8,713,244
Savings and NOW deposits 18,902,738 19,660,383
Time deposits 37,688,456 38,065,803
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Total deposits 65,253,812 66,439,430
Deferred income taxes 177,707 49,248
Other liabilities 109,175 123,608
Due to broker - 1,000,000
Income taxes payable 24,127 156,027
Treasury tax and loan account 3,125 4,170
Employee Stock Ownership Plan loan 829,208 829,208
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Total liabilities 66,397,154 68,601,691
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Stockholder's equity:
Preferred stock, par value $.10 per share,
authorized 500,000 shares; none issued
Common stock, par value $.10 per share,
authorized 2,500,000 shares;
issued and outstanding 1,454,750 shares 145,475 145,475
Paid-in capital 13,601,883 13,598,174
Retained earnings 8,977,473 8,856,291
Surplus
Employee Stock Ownership Plan loan (829,208) (829,208)
Net unrealized holding gain on available-for-sale securities 226,578 143,685
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Total stockholders' equity 22,122,201 21,914,417
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Total liabilities and stockholders' equity $88,519,355 $90,516,108
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FALMOUTH CO-OPERATIVE BANK
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended December 31,
1996 1995
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INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $ 852,345 $ 711,784
Interest and dividends on investment securities 658,087 534,300
Interest on short-term investments 24,311 32,153
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Total interest and dividend income 1,534,743 1,278,237
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INTEREST EXPENSE:
Interest expense on deposits 703,094 705,117
Interest expense on borrowings - -
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Total interest expense 703,094 705,117
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Net interest income 831,649 573,120
Provision for possible loan loss - 9,000
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Net interest income after provision for possible
loan losses 831,649 564,120
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OTHER INCOME:
Service Charges 12,322 12,838
Other fee income 9,115 8,666
Other non-interest income 26,567 23,042
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Total other income 48,004 44,546
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OTHER EXPENSE:
Salaries and employee benefits 315,628 262,509
Deposit insurance expense 500 6,166
Other real estate owned expense - -
Data processing expense 29,764 26,994
Director's fees 13,250 14,450
Legal and professional fees 62,161 3,041
Loss on sales of investment securities, net 1 3,892
Other operating expenses 155,476 140,335
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Total other expense 576,780 457,387
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Income before income taxes 302,873 151,279
Income taxes 113,100 54,400
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Net income 189,773 $ 96,879
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FALMOUTH CO-OPERATIVE BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Net
Unrealized Employee
Holding Stock
Gain on Ownership
Common Paid-in Retained Available-for Plan
Stock Capital Earnings Surplus Sale Securities Loan Total
-------- ----------- ----------- ----------- --------------- ---------- -----------
Balance, September 30, 1995 $ 0 $ 0 $ 0 $ 8,286,070 $ 149,216 $ 0 $ 8,435,286
Net income 96,879 96,879
Net change in unrealized
holding gain on available
for-sale securities 184,951 184,951
-------- ----------- ----------- ----------- --------------- ---------- -----------
Balance, December 31, 1995 $ 0 $ 0 $ 0 $ 8,382,949 $ 334,167 $ 0 $ 8,717,116
======== =========== =========== =========== =============== ========== ===========
Balance, September 31, 1996 $145,475 $13,598,174 $ 8,856,291 $ 0 $ 143,685 $(829,208) $21,914,417
ESOP compensation expense 3,709 3,709
Dividends declared (68,591) (68,591)
Net Income 189,773 189,773
Net change in unrealized
holding gain on available
for-sale securities 82,893 82,893
-------- ----------- ----------- ----------- --------------- ---------- -----------
Balance, December 31, 1996 $145,475 $13,601,883 $ 8,977,473 $ 0 $ 226,578 $(829,208) $22,122,201
======== =========== =========== =========== =============== ========== ===========
FALMOUTH CO-OPERATIVE BANK
STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended December 31,
1996 1995
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(in thousands)
Cash flows from operating activities:
Net Income $ 189,773 $ 97
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Disposal of fixed assets 7,461 -
Provision for possible loan losses - 9
Net (accretion) amortization of investment
securities 12,801 (31)
Amortization of net deferred loan fees 13,739 4
Loss on sales of investment securities, net 1 4
Deferred taxes 128,459
Depreciation 15,673 14
Increase in other assets (40,728) (624)
Decrease in other liabilities (219,836) (162)
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Net cash provided by (used in) operating activities 107,343 (689)
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Cash flows from investing activities:
Purchases of available-for-sale securities (1,279,534) -
Proceeds from sales of available-for-sale securities 499,999 -
Proceeds from maturities of available-for-sale securities 2,720,529 -
Proceeds from maturities of held-to-maturity securities 2,059,317 -
Purchase of Federal Home Loan Bank Stock - -
Proceeds from the sale of and maturity investment
securities - 5,308
Purchases of investment securities (4,258)
Proceeds from principal repayment on mortgage-
backed investments - 57
Net increase in loans (3,192,363) (1,593)
Purchase of premises and equipment (193,948) (6)
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Net cash provided by (used in) investing activities 614,000 (492)
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Cash flows from financing activities:
Proceeds from issuance of common stock 0 -
Costs related to issuance of common stock 0 -
ESOP compensation expense 3,709 -
Dividends paid (68,591) -
Net decrease in deposits, excluding certificate accounts (808,271) (656)
Proceeds from issuance of certificates of deposits, net
of payments for maturities (377,347) 667
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Net cash provided by (used in) financing activities (1,250,500) 11
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Decrease in cash and cash equivalents (529,157) (1,170)
Cash and cash equivalents at beginning of period 2,755,198 3,598
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Cash and cash equivalents at end of period $ 2,226,041 $ 2,428
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FALMOUTH CO-OPERATIVE BANK
STATEMENTS OF CASH FLOWS
continued
(unaudited)
Three months ended December 31,
1996 1995
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(in thousands)
Supplemental disclosures:
Interest paid on deposits $ 703,094 $ 705
Income taxes paid 188,999 72
Unrealized gain on securities available-for-sale,
Net of taxes 226,578 185
ITEM 1.
FINANCIAL STATEMENT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
BASIS OF PRESENTATION
The financial statements of the Falmouth Co-operative Bank (the "Bank")
presented herein should be read in conjunction with the financial statements of
the Bank as of and for the year ended December 31, 1996. In the opinion of
management, the interim financial statements reflect all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation of the three
months ended December 31, 1996 and 1995. Interim results are not necessarily
indicative of results to be expected for the entire year. Management is required
to make estimates and assumptions that affect amounts reported in the financial
statements. Actual results could differ sigrufficantly from those estimates.
ITEM 2.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1996 AND SEPTEMBER 30, 1996.
The Bank's total assets decreased by $2.0 million or 2.2% for the three
months ended December 31, 1996 from $90.5 million in September 30, 1996 to $88.5
million at December 31, 1996. Total assets decreased primarily from seasonal
savings withdrawals. Total net loans were $43.4 million or 66.6% of total
deposits at December 31, 1996 as compared to $40.2 million or 60.6% of total
deposits at September 30, 1996, representing an increase of $3.2 million.
Investment securities were $40.7 million or 46.0% of total assets at December
31, 1996 as compared to $45.6 million or 50.4% of total assets at September 30,
1996. The proceeds from maturing securities were primarily redeployed to fund an
increased volume of loan production, with the balance allocated to fund savings
withdrawals and the remainder placed into short-term securities investments.
Total deposits were $65.3 million at December 31, 1996 as compared to $66.4
million at September 30, 1996. Total deposits decreased by $1.1 million
for the three months ended December 31, 1996, primarily due to seasonal balances
in customer checking accounts. Stockholders' equity was $22.1 million at
December 31, 1996 as compared to $21.9 million at September 30, 1996, an
increase of $200,000 which was primarily the result of net earnings of $190,000,
an increase in the unrealized gain on available-for-sale securities of $83,000,
less the cash dividend of $73,000 paid to shareholders of record on December 2,
1996. Stockholders' equity reported at December 31, 1996 included an unrealized
gain in available-for-sale securities of $227,000, Employee Stock Ownership Plan
Loan of $829,000, Paid-in Capital of $13.6 million and Common Stock, par value
$0. 10 per share, of $145,000. The ratio of stockholders' equity to total assets
was 24.5% at December 31, 1996 and the book value per share of common stock was
$15.21.
COMPARISON OF OPERATING RESULTS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995.
Net Income. The Bank's net income for the three months ended December 31,
1996 was $190,000 as compared to $97,000 for the three months ended December 31,
1996. The $93,000 increase in net income was primarily the result of a $257,000
increase in interest and dividend income which was partly offset by a $120,000
increase in other expenses and a $59,000 increase in income taxes.
Interest Income. Total interest and dividend income for the three months
ended December 31, 1996 was $1,535,000, an increase of $257,000 as compared to
$1,278,000 for the three months ended December 31, 1995. The increase in
interest and dividend income was due primarily to a $140,000 increase in
interest income on loans and a $116,000 increase in interest and dividends on
securities and short-term investments. The increases in interest income on loans
and securities was, for the most part, the result of an increase in the volume
of loans and securities held.
Interest Expense. Interest expense for the three months ended December 31,
1996 was $703,000, a decrease of $2,000 as compared to $705,000 for the three
months ended December 31, 1995. The decrease in interest expense was due
primarily to lower deposit rates paid on certificates of deposit accounts during
the period.
Net Interest Income. Net interest income for the three months ended
December 31, 1996 was $832,000 as compared to $573,000 for the three months
ended December 31, 1995. The $259,000 increase in net interest income was the
result of the increase in interest income on loans and securities that more than
offset the interest expense on deposits. The net interest margin for the three
months ended December 31, 1996 was 3.90%, an increase of .69% as compared to
3.21 % for the three months ended December 31, 1995. The return on average
assets for the three months ended December 31, 1996 was .85%, an increase of
.32% as compared to .53% for the same period of the prior year. The primary
reason for the increase in the return on average assets was the deployment of
proceeds from maturing securities into an
increased volume of residential loan origination during the quarter ended
December 31, 1996.
Provision for Loan Losses. The provision for possible loan losses for the
three months ended December 31, 1996 was zero compared to $9,000 for the three
months ended December 31, 1995. The decrease in the amount of provision for
possible loan losses was in response to the adequate levels of loan loss
reserves maintained by the Bank.
Non-Interest Income. Non-interest income or other income for the three
month ended December 31, 1996 was $48,000 as compared to $45,000 for the three
months ended December 31, 1995. The $3,000 increase was due to modest increases
in income from service charges and other non-interest income.
Operating Expenses. Operating expenses for the three months ended December
31, 1996 were $577,000 as compared to $457,000 for the three months ended
December 31, 1995. The $120,000 increase was primarily due to an increase in
salaries and employee benefits of $53,000, an increase in legal and professional
fees of $59,000 an increase in other operating expenses of $15,000, an increase
in data processing expense of $3,000 and a loss on the sale of investment
securities of $4,000 offset by a decrease in deposit insurance expense of
$5,000.
The Falmouth Co-operative Bank is a Massachusetts chartered stock co-operative
bank offering traditional financial products and services. The Bank conducts its
business through its office located at 20 Davis Straits, Falmouth, Massachusetts
and expects to begin branch operation by February of 1997.
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Bank has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
FALMOUTH CO-OPERATIVE BANK
Date: 2/6/97 By:/s/ Santo P. Pasqualucci
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Santo P. Pasqualucci
President and Chief Executive Officer
Date: 2/6/97 By:/s/ George E.Young,III
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George E.Young,III
Vice President and Treasurer