EXHIBIT 2.4
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 JUNE 30, 1997
FDIC INSURANCE CERTIFICATE NO. 26481
FALMOUTH CO-OPERATIVE 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 FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
FALMOUTH CO-OPERATIVE BANK
BALANCE SHEETS
JUNE 30, SEPTEMBER 30,
1997 1996
(unaudited)
------------- -------------
ASSETS
Cash and due from banks $ 4,413,886 $ 1,171,761
Federal funds sold 1,476,107 1,583,437
------------ -----------
Total cash and cash equivalents 5,889,993 2,755,198
Investment securities 34,931,277 45,552,649
Federal Home Loan Bank stock, at cost 405,200 300,900
Loans, net 50,563,289 40,236,846
Premises and equipment 954,574 526,061
Accrued interest receivable 620,550 746,601
Cooperative Central Bank Reserve Fund Deposit 285,680 285,680
Other assets 264,644 112,173
------------ -----------
Total assets $ 93,915,207 $90,516,108
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Demand deposits $ 11,306,883 $ 8,713,244
Savings and NOW deposits 21,177,656 19,660,383
Time deposits 37,643,285 38,065,803
------------ -----------
Total deposits 70,127,824 66,439,430
Deferred income taxes 197,388 49,248
Other liabilities 321,251 123,608
Due to broker 0 1,000,000
Income taxes payable 71,306 156,027
Treasury tax and loan account 23,449 4,170
Employee Stock Ownership Plan loan 763,744 829,208
------------ -----------
Total liabilities 71,504,962 68,601,691
------------ -----------
Stockholders' 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 13,613,347 13,598,174
Retained earnings 9,190,052 8,856,291
Employee Stock Ownership Plan loan (798,718) (829,208)
Net unrealized holding gain on available-for-sale securities 260,089 143,685
------------ -----------
Total stockholders' equity 22,410,245 21,914,417
------------ -----------
Total liabilities and stockholders' equity $ 93,915,207 $90,516,108
============ ===========
FALMOUTH CO-OPERATIVE BANK
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended June 30,
1997 1996
-------- --------
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $ 965,031 $ 748,798
Interest and dividends on investment securities 509,222 692,222
Interest on short-term investments 47,858 46,722
---------- ----------
Total interest and dividend income 1,522,111 1,487,742
---------- ----------
INTEREST EXPENSE:
Interest expense on deposits 682,414 682,873
Interest expense on borrowings
---------- ----------
Total interest expense 682,414 682,874
---------- ----------
Net interest and dividend income 839,697 804,869
Provision for possible loan losses 9,000
---------- ----------
Net interest income after provision for possible
loan losses 839,697 795,869
---------- ----------
OTHER INCOME:
Service charges 14,391 12,555
Other fee income 7,918 7,125
Gain on sale of investment securities, net 13,445 3,190
Other non-interest income 7,252 6,380
---------- ----------
Total other income 43,006 29,250
---------- ----------
OTHER EXPENSE:
Salaries and employee benefits 324,314 335,994
Deposit insurance expense 2,095 500
Other real estate owned expense
Data processing expense 37,184 28,701
Directors' fees 15,865 22,050
Legal and professional fees 42,225 20,385
Other operating expenses 197,016 110,741
---------- ----------
Total other expense 618,699 518,372
---------- ----------
Income before income taxes 264,004 306,747
Income taxes 92,300 132,100
---------- ----------
Net income $ 171,704 $ 174,647
========== ==========
FALMOUTH CO-OPERATIVE BANK
STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended June 30,
1997 1996
-------- --------
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $ 2,728,258 $ 2,181,612
Interest and dividends on investment securities 1,752,089 1,766,828
Interest on short-term investments 98,392 118,824
------------ ------------
Total interest and dividend income 4,578,739 4,067,264
------------ ------------
INTEREST EXPENSE:
Interest expense on deposits 2,042,703 2,110,673
Interest expense on borrowings
------------ ------------
Total interest expense 2,042,703 2,110,673
------------ ------------
Net interest and dividend income 2,536,036 1,956,591
Provision for possible loan losses 27,000
------------ ------------
Net interest income after provision for possible
loan losses 2,536,036 1,929,591
------------ ------------
OTHER INCOME:
Service charges 39,060 37,386
Other fee income 28,219 26,222
Gain on sale of investment securities, net 47,036
Other non-interest income 48,334 36,515
------------ ------------
Total other income 162,649 100,123
------------ ------------
OTHER EXPENSE:
Salaries and employee benefits 986,946 894,676
Deposit insurance expense 4,216 7,166
Other real estate owned expense
Data processing expense 103,117 86,689
Directors' fees 53,645 61,870
Legal and professional fees 159,891 23,862
Loss on sales of investment securities, net 701
Other operating expenses 539,935 317,189
------------ ------------
Total other expense 1,847,750 1,392,153
------------ ------------
Income before income taxes 850,935 637,561
Income taxes 311,400 277,900
------------ ------------
Net income $ 539,535 $ 359,661
============ ============
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 $ $ 8,435,286
Transfer of surplus to
Retained Earnings $ 8,286,070 (8,286,070) 0
Net Income 359,661 359,661
Issuance of 1,454,750 shares of
common stock, par value $0.10
per share (net of issuance costs) 145,475 13,598,174 13,743,649
Acquisition of common stock by ESOP (872,850) (872,850)
Net change in unrealized
holding gain on available
for-sale securities 76,623 76,623
--------- ----------- ----------- ----------- --------- ---------- ------------
Balance, June 30, 1996 $ 145,475 $13,598,174 $ 8,645,731 $(8,286,070) $ 225,539 $ (872,850) $ 21,742,369
========= =========== =========== =========== ========= ========== ============
Balance, September 30, 1996 $ 145,475 $13,598,174 $ 8,856,291 $ 0 $ 143,685 $ (829,208) $ 21,914,417
ESOP compensation expense 15,173 15,173
Repayment of ESOP Plan Loan 30,490 30,490
Dividends declared (205,774) (205,774)
Net income 539,535 539,535
Net change in unrealized
holding gain on
available-
for-sale securities $ 116,404 116,404
--------- ----------- ----------- ----------- --------- ---------- ------------
Balance, June 30, 1997 $ 145,475 $13,613,347 $ 9,190,052 $ 0 $ 260,089 $ (798,718) $ 22,410,245
========= =========== =========== =========== ========= ========== ============
FALMOUTH CO-OPERATIVE BANK
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended June 30,
1997 1996
-------- --------
(in thousands)
------------
Operating Activities:
Net Income $ 540 $ 359
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses -- 27
Net amortization of investment securities 8 49
Amortization of net deferred loan fees (22) 6
(Gain) on sales of investment securities, net (47) 1
Depreciation and amortization 53 14
Disposal of fixed assets 10 --
Increase in other assets (26) (69)
Increase (Decrease) in other liabilities 153 (49)
-------- --------
Net cash provided by operating activities 669 338
-------- --------
Investing activities:
Purchases of available-for-sale securities (9,457) --
Proceeds from maturities of available-for-sale securities 7,451 --
Proceeds from sales of available-for-sale securities 2,434 --
Purchases of held-to-maturity securities (2,000) --
Proceeds from maturities of held-to-maturity securities 11,440 --
Purchase of FHLB stock (104) --
Proceeds from sale of and maturity of investment securities -- 27,068
Purchase of investment securities -- (37,269)
Proceeds from principal repayment on mortgage-
backed investments -- 316
Purchase of unearned ESOP shares -- (873)
Decrease in:
Short-term investments 107 (1,544)
Loans (10,304) (5,259)
Bank premises and equipment (492) (11)
-------- --------
Net cash provided by (used in) investing activities (925) (17,572)
-------- --------
Financing activities:
Dividends Paid (206) --
ESOP compensation expense 25 --
Proceeds from sale of stock -- 13,743
Increase in borrowed funds -- 873
Repayment of borrowed funds (22)
Net increase in deposits, excluding certificate
accounts 4,111 317
FALMOUTH CO-OPERATIVE BANK
STATEMENTS OF CASH FLOWS
continued
(unaudited)
Nine Months Ended June 30,
1997 1996
-------- --------
(in thousands)
------------
Net increase (decrease) in certificates of deposits (422) 282
---------- -----------
Net cash provided by (used in) financing activities 3,498 15,193
---------- -----------
Increase (decrease) in cash and due from banks 3,242 (2,041)
Cash and due from banks, beginning of period 1,172 3,598
---------- -----------
Cash and due from banks, end of period $ 4,414 $ 1,557
========== ===========
Cash paid for:
Interest on deposits $ 2,043 $ 2,106
Income taxes, net $ 340 $ 183
========== ===========
Unrealized gain on securities available for sale,
net of tax $ 116 $ 77
========== ===========
ITEM 1.
FINANCIAL STATEMENT
NOTES TO FINANCIAL STATEMENT
JUNE 30, 1997 AND 1996
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 September 30, 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 and nine months ended June 30, 1997 and 1996, 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 significantly from those
estimates.
FALMOUTH CO-OPERATIVE BANK
ITEM 2.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND SEPTEMBER 30, 1996.
The Bank's total assets increased by $3.4 million or 3.8% to $93.9 million
for the nine months ended June 30, 1997 from $90.5 million at September 30,
1996. Total net loans were $40.2 million or 60.6% of total deposits at September
30, 1996 as compared to $50.6 million or 72.1 % of total deposits at June 30,
1997, representing an increase of $10.3 million. Investment securities held by
the Bank decreased by $10.6 million from $45.6 million at September 30, 1996 to
$34.9 million at June 30, 1997. The proceeds from maturing securities were
allocated to fund the increased volume of loan production, with the balance
redeployed into short-term securities investments. Total deposits at June 30,
1997 were $70.1 million and $66.4 million at September 30, 1996, an increase of
$3.7 million. The deposit increase was primarily the result of the Bank's branch
opening on February 12, 1997. Net worth was $21.9 million at September 30, 1996
as compared to stockholders' equity of $22.4 million at June 30, 1997, an
increase of $496,000 which was the result of earnings from normal operations for
the nine month period less $206,000 in cash dividends paid stockholders during
the last three quarters. Additionally, the net unrealized gain on
available-for-sale securities decreased $27,000, from $143,000 at September 31,
1996 to $116,000 at June 30, 1997. There was an increase of $50,000 from March
31, 1997.
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COMPARISON OF OPERATING RESULTS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996.
Net Income. The Bank's net income for the three months ended June 30, 1997
was $172,000 as compared to $175,000 for the three months ended June 30, 1996.
The $3,000 decrease in net income was primarily the result of an increase in net
interest and dividend income of $35,000, a decrease in the provision for
possible loan losses of $9,000, an increase of $14,000 in other income which was
off set by a combination of an increase in other expenses of $101,000 and a
decrease in taxes of $42,000.
Interest Income. Total interest and dividend income for the three months
ended June 30, 1997 was $1.5 million, an increase of $34,000 as compared the
three months ended June 30, 1996. The increase in interest and dividend income
was due primarily to a $216,000 increase in interest income on loans and a
$183,000 decrease in dividends on investment securities.
Interest Expense. Interest expense for the three months ended June 30, 1997
was $682,000, a decrease of $1,000 as compared to $683,000 for the three months
ended June 30, 1996. The decrease in interest expense was due to lower interest
rates on deposits.
Net Interest Income. Net interest income for the three months ended June
30, 1997 was $840,000 as compared to $805,000 for the three months ended June
30, 1996. The $35,000 increase in net interest income was the result of
increased interest income on loans due to increased loan activity. Additionally,
interest paid on deposits decreased $1,000 as compared to the same period of the
previous year. The net interest margin for the three months ended June 30, 1997
was 3.67 %, a decrease of 12 basis points as compared to the three months ended
June 30, 1996. The annual return on average assets for the three months ended
June 30, 1997 was 75 basis points, an decrease of 4 basis points as compared to
the same period of the prior year. The primary reason for the decrease in the
return on average assets was due to the increase in assets of $3.4 million, most
of which came in the least quarter as a result of the growth contributed by the
new branch.
Provisions for Possible Loan Losses. The provision for possible loan losses
for the three months ended June 30 , 1997 was none as compared to $9,000 for the
three months ended June 30 , 1996. With one problem loan, it was determined that
there was an adequate balance in the general reserve of the allowance for
possible loan losses.
Other Income. Non-interest income or other income for the three months
ended June 30, 1997 was $43,000 as compared to $29,000 for the three months
ended June 30, 1996. This increase was primarily due to $14,000 taken in gains
on the sale of securities.
Operating Expenses. Operating expenses increased from $518,000 for the
three months ended June 30, 1996 to $619,000 for the three months ended June 30,
1997, The increase of $101,000 was primarily due to a $12,000 decrease in
salaries and employee benefits, an $8,000
2
increase in data processing fees, a $6,000 decrease in directors fees, a $22,000
increase in legal and professional fees, and an increase of $86,000 in other
operating expenses, primarily due to the opening of the new branch office
February 12, 1997.
COMPARISON OF OPERATING RESULTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996.
Net Income. The Bank's net income for the nine months ended June 30, 1997
was $540,000 as compared to $360,000 for the nine months ended June 30, 1996.
The $180,000 increase in net income was primarily the result of a $512,000
increase in net interest and dividend income, a $63,000 increase in other income
that was partially offset by a $456,000 increase in other operating expenses and
an increase in the income tax provision of $33,000.
Interest Income. Total interest and dividend income for the nine months
ended June 30, 1997 was $4.6 million, an increase of $511,000 as compared to
$4.1 million for the nine months ended June 30, 1996. The increase in interest
and dividend income was due in part to a greater volume of higher yielding loans
coupled with the decrease in the interest received oil investment securities.
Interest Expense. Interest expense for the nine months ended June 30, 1997
was $2.0 million, as compared to $2.1 million for the nine months ended June 30,
1996. Total deposits were $3.7 million higher for the period ended June 30, 1997
with interest rates slightly lower resulting in an interest expense that
decreased $68,000 from the same period in the previous year.
Net Interest Income. Net interest income for the nine months ended June 30,
1997 was $2.5 million as compared to $2.0 million for the nine months ended June
30 1996. The net interest margin for the nine months ended June 30, 1997 was
3.81%, a increase of 57 basis points as compared to the nine months ended June
30, 1996. The annual return on average assets for the nine months ended June 30,
1997 was 80 basis points, an increase of 21 basis points as compared to the same
period of the prior year. The primary reason for the increase in the return on
average assets was due to the increase in net interest and dividend income.
Provisions for Possible Loan Losses. The provision for possible loan losses
for the nine months ended June 30, 1997 was zero as compared to $27,000 for the
nine months ended June 30, 1996. It was determined that there was an adequate
balance in the general reserve of the allowance for possible loan losses,
Other Income. Non-interest income or other income for the nine months ended
June 30, 1997 was $163,000 as compared to $100,000 for the nine months ended
June 30, 1996. The increase of $63,000 was primarily the result of the gain on
the sale of investment securities of $47,000 taken during the period.
3
Operating Expenses. Operating expense increased from $1.4 million for the
nine months ended June 30, 1996 to $1.8 million for the nine months ended June
30, 1997. The increase of $456,000 was primarily due to an increase in salaries
and employee benefits of $92,000, an increase in data processing fees of
$16,000, an increase in legal and professional fees of $136,000. and an increase
in other operating expenses of $223,000.
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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: August 8, 1997 By: /s/ Santo P. Pasqualucci
---------------- ----------------------------------------
Santo P. Pasqualucci
President and Chief Executive Officer
Date: August 8, 1997 By: /s/ George E. Young, III
---------------- ------------------------------
George E. Young, III
Chief Financial Officer
5