EXHIBIT 2.2 FEDERAL DEPOSIT INSURANCE CORPORATION WASHINGTON, D.C. 20429 ------------------------------------- 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) ----------- ------------ ASSETS Cash and due from banks $ 1,364,052 $ 1,171,761 Federal funds sold 861,989 1,583,437 ----------- ----------- 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 ----------- ----------- Total assets $88,519,355 $90,516,108 =========== =========== 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 ----------- ----------- 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 ----------- ----------- Total liabilities 66,397,154 68,601,691 ----------- ----------- 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 ----------- ----------- Total stockholders' equity 22,122,201 21,914,417 ----------- ----------- Total liabilities and stockholders' equity $88,519,355 $90,516,108 =========== =========== FALMOUTH CO-OPERATIVE BANK STATEMENTS OF INCOME (Unaudited) Three Months Ended December 31, 1996 1995 ----------- ----------- 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 ----------- ----------- Total interest and dividend income 1,534,743 1,278,237 ----------- ----------- INTEREST EXPENSE: Interest expense on deposits 703,094 705,117 Interest expense on borrowings - - ----------- ----------- Total interest expense 703,094 705,117 ----------- ----------- Net interest income 831,649 573,120 Provision for possible loan loss - 9,000 ----------- ----------- Net interest income after provision for possible loan losses 831,649 564,120 ----------- ----------- OTHER INCOME: Service Charges 12,322 12,838 Other fee income 9,115 8,666 Other non-interest income 26,567 23,042 ----------- ----------- Total other income 48,004 44,546 ----------- ----------- 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 ----------- ----------- Total other expense 576,780 457,387 ----------- ----------- Income before income taxes 302,873 151,279 Income taxes 113,100 54,400 ----------- ----------- Net income 189,773 $ 96,879 =========== =========== 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 ----------- ------- (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) ----------- ------- Net cash provided by (used in) operating activities 107,343 (689) ----------- ------- 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) ----------- ------- Net cash provided by (used in) investing activities 614,000 (492) ----------- ------- 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 ----------- ------- Net cash provided by (used in) financing activities (1,250,500) 11 ----------- ------- Decrease in cash and cash equivalents (529,157) (1,170) Cash and cash equivalents at beginning of period 2,755,198 3,598 ----------- Cash and cash equivalents at end of period $ 2,226,041 $ 2,428 =========== ======= FALMOUTH CO-OPERATIVE BANK STATEMENTS OF CASH FLOWS continued (unaudited) Three months ended December 31, 1996 1995 ----------- ------- (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 ----------------------- -------------------------------------- Santo P. Pasqualucci President and Chief Executive Officer Date: 2/6/97 By:/s/ George E.Young,III ----------------------- ---------------------------- George E.Young,III Vice President and Treasurer