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 period ended June 30, 1998
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-23435
MEDFORD BANCORP, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3384928
------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
29 High Street
Medford, Massachusetts 02155
- ---------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 395-7700
--------------
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 |_|
The number of shares outstanding of Medford Bancorp, Inc.'s common stock, $0.50
par value per share, as of June 30, 1998 was 4,454,714.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets................................ 1
Consolidated Statements of Income ......................... 2-5
Consolidated Statements of Changes in Stockholders' Equity. 6
Consolidated Statements of Cash Flows...................... 7-8
Notes to Consolidated Financial Statements................. 9-10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................... 11-29
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK ............................................... 29
PART II OTHER INFORMATION
ITEM 1 - Legal Proceedings.......................................... 30
ITEM 2 - Changes in Securities and Use of Proceeds.................. 30
ITEM 3 - Defaults Upon Senior Securities............................ 30
ITEM 4 - Submission of Matters to a Vote of Security Holders........ 30
ITEM 5 - Other Information.......................................... 31
ITEM 6 - Exhibits and Reports on Form 8-K........................... 31
SIGNATURES................................................. 32
Exhibit Index.............................................. 32
PART I FINANCIAL INFORMATION
ITEM 1 - Financial Statements
MEDFORD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
-----------------------
(In thousands)
ASSETS
Cash and due from banks $12,508 $13,376
Short-term investments 13,532 2,804
---------- ----------
Cash and cash equivalents 26,040 16,180
---------- ----------
Investment securities available for sale 436,580 402,723
Investment securities held to maturity 57,811 103,823
Restricted equity securities 8,436 6,872
Loans 578,519 577,577
Less allowance for loan losses (6,875) (6,733)
---------- ----------
Loans, net 571,644 570,844
---------- ----------
Banking premises and equipment, net 11,265 10,738
Accrued interest receivable 8,604 9,472
Goodwill and deposit-based intangibles 5,186 5,748
Other assets 9,733 9,172
---------- ----------
TOTAL ASSETS $1,135,299 $1,135,572
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $833,398 $821,706
Short-term borrowings 67,653 95,670
Long-term debt 121,445 110,109
Accrued taxes and expenses 3,366 3,988
Other liabilities 7,939 2,589
---------- ----------
Total liabilities 1,033,801 1,034,062
---------- ----------
Stockholders' equity:
Serial preferred stock, $.50 par value, 5,000,000
shares authorized; none issued; -- --
Common stock, 15,000,000 shares authorized;
$.50 par value, 4,561,298 and 4,541,148 shares
issued, respectively 2,281 2,271
Additional paid-in capital 28,915 28,977
Retained earnings 73,621 68,938
---------- ----------
104,817 100,186
Treasury Stock, at cost (106,584 shares) (4,575) --
Accumulated other comprehensive income 1,256 1,324
---------- ----------
Total stockholders' equity 101,498 101,510
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,135,299 $1,135,572
========== ==========
See accompanying notes to consolidated financial statements.
1
MEDFORD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
June 30,
1998 1997
----------------------
(Dollars in thousands,
except per share data)
Interest and dividend income:
Interest and fees on loans $11,472 $11,512
Interest on debt securities 7,523 6,850
Dividends on equity securities 124 165
Interest on short-term investments 53 59
------- -------
Total interest and dividend income 19,172 18,586
------- -------
Interest expense:
Interest on deposits 7,864 7,744
Interest on short-term borrowings 865 903
Interest on long-term debt 1,799 1,486
------- -------
Total interest expense 10,528 10,133
------- -------
Net interest income 8,644 8,453
Provision for loan losses -- 50
------- -------
Net interest income, after provision
for loan losses 8,644 8,403
------- -------
Other income:
Customer service fees 475 487
Gain on sales of securities, net 396 408
Gain on sale of loans 147 306
Miscellaneous 244 87
------- -------
Total other income 1,262 1,288
------- -------
Operating expenses:
Salaries and employee benefits 2,636 2,529
Occupancy and equipment 532 548
Data Processing 355 369
Professional fees 129 154
Amortization of intangibles 292 302
Advertising and marketing 108 158
Other general and administrative 589 507
------- -------
Total operating expenses 4,641 4,567
------- -------
Income before income taxes 5,265 5,124
Provision for income taxes 2,027 2,032
------- -------
Net income $3,238 $3,092
======= =======
(continued)
See accompanying notes to consolidated financial statements.
2
MEDFORD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
June 30,
1998 1997
----------------------
(Dollars in thousands,
except per share data)
Earnings per share:
Basic $0.72 $0.68
Diluted $0.68 $0.65
Cash dividends declared per share $0.20 $0.18
Weighted average shares outstanding
Basic 4,506,304 4,540,192
Diluted 4,757,439 4,752,688
See accompanying notes to consolidated financial statements.
(Remainder of this page intentionally left blank.)
3
MEDFORD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
June 30,
1998 1997
----------------------
(Dollars in thousands,
except per share data)
Interest and dividend income:
Interest and fees on loans $23,090 $22,801
Interest on debt securities 15,135 13,528
Dividend income 239 320
Interest on short-term investments 98 106
------- -------
Total interest and dividend income 38,562 36,755
------- -------
Interest expense:
Interest on deposits 15,622 15,182
Interest on short-term borrowings 1,982 1,966
Interest on long-term debt 3,509 2,732
------- -------
Total interest expense 21,113 19,880
------- -------
Net interest income 17,449 16,875
Provision for loan losses 75 125
------- -------
Net interest income, after provision for loan losses 17,374 16,750
------- -------
Other income:
Customer service fees 954 987
Gain on sales of securities, net 910 673
Gain on sale of loans 304 306
Miscellaneous 445 323
------- -------
Total other income 2,613 2,289
------- -------
Operating expenses:
Salaries and employee benefits 5,304 5,094
Occupancy and equipment 1,127 1,155
Data Processing 711 699
Professional fees 260 263
Amortization of intangibles 590 606
Advertising and marketing 225 301
Other general and administrative 1,135 1,073
------- -------
Total operating expenses 9,352 9,191
------- -------
Income before income taxes 10,635 9,848
Provision for income taxes 4,150 3,925
------- -------
Net income $6,485 $5,923
======= =======
(continued)
See accompanying notes to consolidated financial statements.
4
MEDFORD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(concluded)
Six Months Ended
June 30,
1998 1997
----------------------
(Dollars in thousands,
except per share data)
Earnings per share:
Basic $1.43 $1.30
Diluted $1.36 $1.25
Cash dividends declared per share $0.40 $0.36
Weighted average shares outstanding
Basic 4,525,641 4,539,364
Diluted 4,779,220 4,754,384
See accompanying notes to consolidated financial statements.
(Remainder of this page intentionally left blank.)
5
MEDFORD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Accumulated
Additional Other
Comprehensive Common Paid In Retained Comprehensive Treasury
Income Stock Capital Earnings Income Stock Total
------ ----- ------- -------- ------ ----- -----
(In thousands)
Balance at December 31, 1997 $2,271 $28,977 $68,938 $1,324 $ -- $101,510
Comprehensive income:
Net income $6,485 -- -- 6,485 -- -- 6,485
Unrealized gain (loss) on available
for-sale securities, net of tax
and reclassification adjustment (68) -- -- -- (68) -- (68)
------
Comprehensive income $6,417
======
Purchase of treasury stock -- -- -- (5,093) (5,093)
Issuance of common stock under
stock option plan and related income
tax benefits 10 (62) -- -- 518 466
Cash dividends declared ($.40 per share) -- -- (1,802) -- -- (1,802)
------ ------- ------- ------ ------- --------
Balance at June 30, 1998 $2,281 $28,915 $73,621 $1,256 $(4,575) $101,498
====== ======= ======= ====== ======= ========
Accumulated
Additional Other
Comprehensive Common Paid In Retained Comprehensive Treasury
Income Stock Capital Earnings Income Stock Total
------ ----- ------- -------- ------ ----- -----
(In thousands)
Balance at December 31, 1996 $2,267 $28,848 $61,634 ($228) $ -- $92,521
Comprehensive income:
Net income $5,923 -- -- 5,923 -- -- 5,923
Unrealized gain (loss) on available
for-sale securities, net of tax
and reclassification adjustment (432) -- -- -- (432) -- (432)
------
Comprehensive income $5,491
======
Issuance of common stock under
stock option plan and related income
tax benefits 4 76 -- -- -- 80
Cash dividends declared ($.36 per share) -- -- (1,634) -- -- (1,634)
------ ------- ------- ----- ---- --------
Balance at June 30, 1997 $2,271 $28,924 $65,923 $(660) $ -- $96,458
====== ======= ======= ===== ==== ========
See accompanying notes to consolidated financial statements.
6
MEDFORD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1998 1997
----------------------
(In thousands)
Cash flows from operating activities:
Net income $6,485 $5,923
Adjustments to reconcile net income to
net cash provided by operating activities:
Provisions for loan losses 75 125
Depreciation and amortization, net 1,108 1,216
Foreclosed real estate (gains), losses and provisions, net -- (22)
Gain on sales of securities, net (910) (673)
Gain on sales of loans (304) (306)
Loss on sale of fixed assets -- 53
Decrease in accrued interest receivable
and other assets 309 159
Increase (decrease) in accrued taxes and expenses
and other liabilities 5,644 (179)
-------- --------
Net cash provided by operating activities 12,407 6,296
-------- --------
Cash flows from investing activities:
Maturities of investment securities available for sale 33,179 33,685
Purchases of investment securities available for sale (166,475) (111,837)
Sales of investment securities available for sale 84,027 18,626
Maturities of investment securities held to maturity 46,053 30,034
Purchases of investment securities held to maturity
and FHLBB stock (1,564) (250)
Principal amortization of mortgage-backed investments
available for sale 16,084 2,901
Proceeds from sale of portfolio loans, net 9,600 11,613
Loans originated and purchased, net of amortization and payoffs (10,093) (16,187)
Purchases of bank premises and equipment, net (1,023) (407)
Sales of, and principal payments received on,
foreclosed real estate -- 425
-------- --------
Net cash provided by (used in) investing activities 9,788 (31,397)
-------- --------
(continued)
See accompanying notes to consolidated financial statements.
7
MEDFORD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(concluded)
Six Months Ended
June 30,
1998 1997
----------------------
(In thousands)
Cash flows from financing activities:
Net increase in deposits 11,692 32,470
Net decrease in borrowings with maturities of three
months or less (28,017) (31,975)
Proceeds from long-term debt 11,336 29,792
Issuance of common stock 292 34
Payments to acquire treasury stock (5,093) --
Cash dividends paid (2,545) (2,268)
------- -------
Net cash (used in) provided by financing activities (12,335) 28,053
------- -------
Net change in cash and cash equivalents 9,860 2,952
Cash and cash equivalents, beginning
of period 16,180 16,429
------- -------
Cash and cash equivalents, end of period $26,040 $19,381
======= =======
See accompanying notes to consolidated financial statements.
8
MEDFORD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Note 1. Basis of Presentation
General:
Certain amounts have been reclassified in the June 30, 1997 financial
statements to conform to the 1998 presentation.
The consolidated interim financial statements of Medford Bancorp, Inc.
(the "Company") and its wholly-owned subsidiary, Medford Savings Bank (the
"Bank"), presented herein are intended to be read in conjunction with the
consolidated financial statements presented in the Company's annual report for
the year ended December 31, 1997.
The consolidated financial information for the three and six months ended
June 30, 1998 and 1997 is unaudited. In the opinion of management, however, the
consolidated financial information reflects all adjustments (consisting solely
of normal recurring accruals) necessary for a fair presentation in accordance
with generally accepted accounting principles. Interim results are not
necessarily indicative of results to be expected for the entire year.
Comprehensive Income:
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income," effective for fiscal years
beginning after December 15, 1997. Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net income.
Certain FASB statements, however, require entities to report specific changes in
assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, as a separate component of the equity section of
the balance sheet. Such items, along with net income, are components of
comprehensive income. SFAS No. 130 requires that all items of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. Additionally, SFAS No. 130 requires
that the accumulated balance of other comprehensive income be displayed
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet. The Company has adopted these disclosure
requirements for 1998 and retroactively for 1997.
9
Earnings per share:
In February 1997, FASB issued SFAS No. 128, "Earnings per Share," which
requires that earnings per share be calculated on a basic and a dilutive basis.
Basic earnings per share represents income available to common stock divided by
the weighted-average number of common shares outstanding during the period.
Diluted earnings per share reflects additional common shares that would have
been outstanding if dilutive potential common shares had been issued, as well as
any adjustment to income that would result from the assumed conversion.
Potential common shares that may be issued by the Company relate solely to
outstanding stock options, and are determined using the treasury stock method.
The assumed conversion of outstanding dilutive stock options would increase
shares outstanding but would not require an adjustment to income as a result of
the conversion. SFAS No. 128 is effective for interim and annual periods ending
after December 15, 1997, and requires the restatement of all prior-period
earnings per share data presented. Accordingly, the Company has restated all
prior period earnings per share data presented herein.
Note 2. Commitments
At June 30, 1998 the Company had outstanding commitments to originate new
residential and commercial real estate mortgage loans totalling approximately
$18.1 million, which are not reflected on the consolidated balance sheet.
Unadvanced funds on equity lines were $24.7 million, unadvanced construction
loan funds were $12.8 million, and unadvanced funds on commercial lines of
credit were $9.0 million at June 30, 1998.
(Remainder of this page intentionally left blank)
10
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
This form 10-Q 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.
Consolidated net income was $3,238,000, representing basic earnings per share of
$0.72 ($0.68 diluted basis) for the three months ended June 30, 1998, compared
to $3,092,000 and $0.68 ($0.65 diluted basis) for the comparable prior year
period. This represents a 5.9% increase in basic earnings per share and an
increase in net income of 4.7%.
Net interest income was $8,644,000 for the quarter ended June 30, 1998, up
$191,000 or 2.3% from the comparable 1997 period, and represented a net interest
margin of 3.23% compared to 3.30% for the comparable 1997 period. Net gain on
sales of securities and loans totalled $543,000 for the 1998 second quarter
compared to $714,000 for the same quarter in 1997.
Total operating expenses were $4,641,000 for the second quarter of 1998, up
$74,000 or 1.6% from the comparable period in 1997. There was no provision for
loan losses for the three month period ended June 30, 1998, as compared to
$50,000 for the same prior year period.
(Remainder of this page intentionally left blank)
11
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
For the second quarter of 1998, the annualized return on assets was 1.16% and
the annualized return on equity was 12.63%, compared to 1.16% and 13.17% for the
comparable period in 1997.
Consolidated net income for the six months ended June 30, 1998 was $6,485,000,
representing basic earnings per share of $1.43 ($1.36 diluted basis) compared to
$5,923,000 and $1.30 ($1.25 diluted basis) for the same prior year period. Basic
earnings per share increased 10.0% while consolidated net income increased 9.5%
for the six month comparative periods. The increase in basic earnings per share
for the six month comparison resulted, in part, from the implementation of our
previously announced stock repurchase program as the number of shares
outstanding has declined by 2% or 86,434 shares since June 30, 1997.
Net interest income totalled $17,449,000 for the six months ended June 30, 1998,
up $574,000 or 3.4% from the comparable 1997 period, and represented a net
interest margin of 3.23% compared to 3.29% for the six months ended June 30,
1997. The net gain on sales of securities and loans totalled $1,214,000 for the
first six months of 1998 compared to $926,000 for the same period in 1997.
Total operating expenses were $9,352,000 for the first six months of 1998, up
$161,000 or 1.8% from the $9,191,000 during the comparable period in 1997. The
provision for loan losses for the six months ended June 30, 1998 was $75,000
compared to $125,000 for the same prior year period.
For the first six months of 1998, the annualized return on assets was 1.17% and
the annualized return on equity was 12.72%, compared to 1.13% and 12.73% for the
comparable period in 1997.
Total non-performing assets were $2,032,000 or 0.18% of total assets at June 30,
1998 compared to $1,774,000 or 0.16% of total assets at December 31, 1997. The
allowance for loan losses at June 30, 1998 was $6,875,000, representing 338% of
non-performing assets and 1.19% of total loans. At December 31, 1997, the
allowance for loan losses was $6,733,000, representing 380% of non-performing
assets and 1.17% of total loans. Other real estate owned remained unchanged from
December 31, 1997 to June 30, 1998 at $48,000.
The Company had total assets of $1.1 billion and deposits of $833.4 million at
June 30, 1998, and its capital ratio was 8.94%, exceeding all regulatory
requirements. As compared to reported balances at December 31, 1997, investment
12
securities at June 30, 1998 decreased $10.6 million or 2.1% to $502.8 million,
total loans increased $942,000 or 0.2% to $578.5 million, deposits increased
$11.7 million or 1.4% to $833.4 million, and borrowings decreased $16.7 million,
or 8.1% to $189.1 million.
A more detailed discussion and analysis of the Company's financial condition and
results of operations follows.
INVESTMENT SECURITIES
Investment securities consist of the following:
June 30, December 31,
1998 1997
---- ----
(In thousands)
Securities available for sale, at fair value $436,580 $402,723
Securities held to maturity, at amortized cost 57,811 103,823
Restricted equity securities:
Federal Home Loan Bank stock 7,322 5,758
Massachusetts Savings Bank Life Insurance stock 1,114 1,114
-------- --------
$502,827 $513,418
======== ========
The amortized cost and fair value of investment securities, excluding restricted
securities, at June 30, 1998 and December 31, 1997 with gross unrealized gains
and losses, follows:
June 30, 1998
-----------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)
Securities Available for Sale
Debt securities:
Corporate bonds $183,784 $1,070 $(128) $184,726
Mortgage - backed 183,481 1,053 (118) 184,416
U.S. Government and
federal agency 65,947 321 (60) 66,208
-------- ------ ----- --------
Total debt securities 433,212 2,444 (306) 435,350
Marketable equity securities 1,305 -- (75) 1,230
-------- ------ ----- --------
Total securities
available for sale $434,517 $2,444 $(381) $436,580
======== ====== ===== ========
Securities Held to Maturity
U.S. Government
and federal agency $54,069 $234 $(13) $54,290
Corporate bonds 3,742 3 -- 3,745
-------- ------ ----- --------
Total securities
held to maturity $57,811 $237 $(13) $58,035
======== ====== ===== ========
13
December 31, 1997
-----------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)
Securities Available for Sale
Debt securities:
Corporate bonds $176,093 $1,102 $(107) $177,088
Mortgage - backed 121,964 641 (158) 122,447
U.S. Government and
federal agency 95,277 482 (232) 95,527
-------- ------ ----- --------
Total debt securities 393,334 2,225 (497) 395,062
Marketable equity securities 7,233 482 (54) 7,661
-------- ------ ----- --------
Total securities
available for sale $400,567 $2,707 $(551) $402,723
======== ====== ===== ========
Securities Held to Maturity
U.S. Government
and federal agency $95,052 $326 $(59) $95,319
Corporate bonds 8,771 12 -- 8,783
-------- ------ ----- --------
Total securities
held to maturity $103,823 $338 $(59) $104,102
======== ====== ===== ========
The amortized cost and fair value of debt securities by contractual maturity at
June 30, 1998 are as follows:
June 30, 1998
-----------------------------------------------
Available for Sale Held to Maturity
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- -------- --------
(In thousands)
Within 1 year $ 39,302 $ 39,288 $ 34,762 $ 34,827
After 1 year through 5 years 207,436 208,601 23,049 23,208
After 5 years through 10 years 2,993 3,045 -- --
-------- -------- -------- --------
249,731 250,934 57,811 58,035
Mortgage - backed securities 183,481 184,416 -- --
-------- -------- -------- --------
$433,212 $435,350 $ 57,811 $ 58,035
======== ======== ======== ========
14
The amortized cost and fair value of debt securities by contractual maturity at
December 31, 1997 are as follows:
December 31, 1997
-----------------------------------------------
Available for Sale Held to Maturity
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- -------- -------
(In thousands)
Within 1 year $ 46,073 $ 46,107 $ 69,689 $ 69,730
After 1 year through 5 years 217,230 218,451 34,134 34,372
After 5 years through 10 years 8,067 8,057 -- --
-------- -------- -------- -------
271,370 272,615 103,823 104,102
Mortgage - backed securities 121,964 122,447 -- --
-------- -------- -------- --------
$393,334 $395,062 $103,823 $104,102
======== ======== ======== ========
Investment securities decreased $10.6 million from $513.4 million at December
31, 1997 to $502.8 million at June 30, 1998. During the first six months of
1998, management continued its program to improve portfolio yield by reducing
U.S. Government securities approximately $70 million as they matured or were
sold and by increasing mortgage-backed securities approximately $62 million.
Holdings of marketable equity securities declined $5.9 million during the six
months just ended to $1.3 million at June 30, 1998, reflecting sales thus far
this year. The net decline in investments was offset by reduced short-term
borrowings as minimal spreads did not justify the interest rate risk. At June
30, 1998, the securities portfolio classified as "available for sale" reflected
a $2.1 million appreciation in market value as a result of fluctuations in
market rates as compared to $2.2 million at December 31, 1997. In accordance
with the Company's asset-liability strategies, investment securities are
generally short-term with maturities of five years or less.
Sales of notes and bonds produced gains of $291,000 during the 1998 second
quarter and $577,000 for the six months ended June 30, 1998 compared to gains of
$121,000 and $239,000 for the second quarter and six months ended June 30, 1997,
respectively. Sales of equities produced gains of $106,000 during the 1998
second quarter and $332,000 year to date June 30, 1998 compared to gains of
$287,000 and $434,000 for the second quarter and six months ended June 30, 1997,
respectively.
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15
LOANS
A summary of the Company's outstanding loan balances as of the dates
indicated are as follows:
June 30, December 31,
1998 1997
---- ----
(In thousands)
Mortgage loans on real estate:
Residential 1-4 family $408,511 $389,593
Commercial 116,327 124,094
Construction 22,319 21,989
Second mortgages 1,273 1,539
Equity lines of credit 21,072 22,146
-------- --------
569,502 559,361
Less: Unadvanced construction
loan funds (12,590) (10,711)
--------- --------
556,912 548,650
-------- --------
Other loans:
Commercial loans 15,259 14,941
Personal loans 2,244 2,432
Education and other 2,941 10,499
-------- --------
20,444 27,872
-------- --------
Add: Premium on loans acquired 240 270
Net deferred fees 923 785
-------- --------
Total loans 578,519 577,577
Less: Allowance for loan losses (6,875) (6,733)
-------- --------
Loans, net $571,644 $570,844
======== ========
While total loans outstanding at June 30, 1998 were essentially flat with the
December 31, 1997 level, total real estate mortgage loans increased $10.1
million during the period, led by the residential 1-4 family category, up $18.9
million. Total new volume in this residential 1-4 family category amounted to
$42.0 million, including substantial refinancings. This new volume was comprised
of $19.3 million fixed rate and $22.7 million adjustable rate mortgages. During
the 1998 second quarter, the Company sold $4.4 million of education loans,
producing a gain of $146,000. This sale, combined with sales of $4.9 million in
the first quarter of 1998, produced gains of $304,000 year to date. With this
second quarter sale, the Company has effectively exited the student loan
business due to profitability concerns. All other loan categories remained
essentially stable during the quarter as new loan originations replaced
amortization and payoffs, and as the Company continues to experience intense
competition for loans within its geographic region.
16
NON-PERFORMING ASSETS
Total non-performing assets were $2.0 million, including $48,000 other real
estate owned, at June 30, 1998, as compared to $1.8 million and $48,000,
respectively, at December 31, 1997. As a percentage of assets, these
non-performing assets equalled 0.18% and 0.16% at June 30, 1998 and December 31,
1997, respectively. It is the Company's general policy to place loans on a
non-accrual basis when such loans become 90 days contractually delinquent or
when the collectability of principal or interest payments becomes doubtful. When
a loan is placed in non-accrual status, its interest income accrual ceases and
all income previously accrued but unpaid is reversed.
In accordance with SFAS No. 114, a loan is considered impaired when, based on
current information and events, it is probable that the borrower will be unable
to meet principal or interest payments as agreed in the original loan contract.
The principal balance of impaired loans at June 30, 1998 was $2.0 million, all
of which was included in the $2.0 million non-performing assets referenced in
the preceding paragraph. The loan loss reserve allocated to these impaired loans
was $171,000 at June 30, 1998.
ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses follows:
Six Months Ended
----------------------------------
June 30, June 30,
1998 1997
------ ------
(In thousands)
Balance at the beginning
of the period $ 6,733 $ 7,231
Provisions 75 125
Recoveries 219 41
Less: Charge-offs (152) (429)
-------- --------
Balance at the end of the period $ 6,875 $ 6,968
======== ========
The allowance for loan losses is established via provisions for loan losses
charged through the statement of income. Assessing the adequacy of the allowance
for loan losses involves substantial uncertainties and is based on management's
evaluation of the amount required to absorb estimated losses inherent in the
loan portfolio after weighing various factors. Among the factors that management
considers are the quality and underlying collateral values of specific loans,
risk characteristics of the loan portfolio generally, the level of
non-performing loans, current economic conditions, and current trends in
delinquency and chargeoffs. Ultimate loan losses may vary significantly from
current estimates.
17
The allowance for loan losses was $6.9 million at June 30, 1998, a reserve
coverage of 347% of non-accrual loans and 1.19% of total loans. At December 31,
1997, the allowance for loan losses was $6.7 million representing 390% of
non-accrual loans and 1.17% of total loans.
Management considers the allowance for loan losses to be adequate at June 30,
1998, although there can be no assurance that the allowance is adequate or that
additional provisions will not be necessary.
DEPOSITS
Total deposits increased $11.7 million from December 31, 1997 levels to $833.4
million at June 30, 1998. This growth, largely achieved in the second quarter of
1998, was derived from increases in core savings and money market accounts while
all other deposit categories experienced more modest change.
Generally, the Company's strategy is to maintain stable deposit rates and to
increase deposit levels through selective core deposit and term deposit
promotions. To retain core deposits, the Company continues to promote its
"ComboPlus" account which combines a statement savings and a demand account.
This "ComboPlus" account has contributed to an increase in both savings and
demand deposits. During the quarter the Company also offered special rates on
certain term deposit products.
The following table indicates the balances in various deposit accounts at the
dates indicated.
June 30, December 31,
1998 1997
---- ----
(In thousands)
Demand accounts $ 48,315 $ 44,196
NOW accounts 57,875 59,368
Savings & money market accounts 337,880 325,340
Term certificates 389,328 392,802
-------- --------
$833,398 $821,706
======== ========
18
BORROWED FUNDS
Historically, the Company has selectively engaged in long-term borrowings to
fund loans and has entered into short-term repurchase agreements to fund
investment securities purchases. With the reductions in the investment portfolio
during the first quarter of 1998, short-term borrowed funds have also decreased
such that borrowed funds totalled $189.1 million at June 30, 1998, down $16.7
million from the $205.8 million reported at December 31, 1997.
STOCKHOLDERS' EQUITY
The Company's capital to assets ratio was 8.94% at both June 30, 1998 and
December 31, 1997.
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 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 and ratios of total
and Tier 1 capital (as defined) to average assets (as defined). As of December
31, 1997, the Company and the Bank met all capital adequacy requirements to be
categorized as well capitalized. No conditions or events occurred during the six
months of 1998 that management believes have changed the Company's or the Bank's
category. Therefore, management believes as of June 30, 1998 that the Company
and the Bank met all capital adequacy requirements to continue to be categorized
as well capitalized.
The Company's book value at June 30, 1998 was $22.78 per share, compared with
$22.35 per share at December 31, 1997.
19
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998 vs QUARTER ENDED JUNE 30, 1997
NET INTEREST INCOME
Interest and dividend income from loans and investments increased $586,000 or
3.2% to $19.2 million for the 1998 second quarter when compared to the same
quarter in 1997. For the 1998 second quarter, average earning assets totalled
$1.07 billion, an increase of $46.2 million, or 4.5%, over the comparable
average for 1997, with $42.2 million of that increase deriving from short and
long-term investment securities and $4.0 million from loans. The annualized
yields on earning assets were 7.15% and 7.24% for the second quarters in 1998
and 1997, respectively. The yield on investment securities was 6.22% for the
second quarter 1998 as compared to 6.25% for the second quarter 1997. The
Company purchased higher yielding mortgage-backed securities to replace matured
and sold U.S. Government securities, thereby maintaining yield in a falling rate
environment. Investments contributed $632,000 of additional interest and
dividend income when comparing the second quarter of 1998 to the second quarter
of 1997. The increase in the average balance on loans was offset by a yield
decline from 8.05% to 7.96% such that actual interest income on loans was
essentially unchanged.
Total interest expense for the three months ended June 30, 1998 was $10.5
million, reflecting an increase of $395,000 or 3.9% over the same period in
1997. This resulted, in part, from a $32.5 million increase in average interest
bearing liabilities over the comparable prior year period. This period-to-period
increase can be attributed to average deposit growth of $12.6 million, and
average borrowed funds growth of $19.9 million. Deposit growth in core savings
and interest bearing transaction accounts at modestly higher rates was offset by
a small decline in higher rate term deposits such that the average cost of
deposits remained level with the 1997 period at 4.04%. Overall, interest expense
on deposits increased $120,000 to $7.9 million. Interest expense on borrowed
funds increased $275,000 while the cost declined 4 basis points to 5.81% in the
second quarter of 1998 compared to the second quarter in 1997. The overall cost
of interest bearing liabilities increased to 4.37% from 4.36% when comparing the
two quarters.
Net interest income increased 2.3% or $191,000 to $8.6 million when comparing
the second quarter in 1998 to the same quarter in 1997, despite a 10 basis point
decline in the interest rate spread and a 7 basis point decline in the net
interest margin. The increase in income is primarily due to increased levels of
earning assets while the basis point declines in spread and margin reflect the
changing mix of earning assets. The yield on earning assets declined 9 basis
points to 7.15% in the second quarter 1998 versus the same quarter in 1997,
while the cost of interest bearing liabilities increased by 1 basis point to
4.37%. This resulted in an interest rate spread and a net interest margin of
2.78% and 3.23%, respectively, for the three months ended June 30, 1998.
20
MEDFORD BANCORP, INC.
INTEREST RATE SPREAD
Three Months Ended
June 30,
--------
1998 1997
---- ----
Weighted average yield earned on:
Short-term investments 5.34% 5.44%
Investment securities 6.22 6.25
Loans 7.96 8.05
---- ----
All earning assets 7.15% 7.24%
----- -----
Weighted average rate paid on:
Deposits 4.04% 4.04%
Borrowed funds 5.81 5.85
---- ----
All interest-bearing liabilities 4.37% 4.36%
----- -----
Weighted average rate spread 2.78% 2.88%
----- -----
Net interest margin 3.23% 3.30%
===== =====
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21
PROVISION FOR LOAN LOSSES
The provision for loan losses represents a charge against current earnings and
an addition to the allowance for loan losses. The provision is determined by
management on the basis of many factors, including the quality of specific
loans, risk characteristics of the loan portfolio generally, the level of
non-performing loans, current economic conditions, trends in delinquency and
charge-offs, and value of the underlying collateral. Management considers the
allowance for loan losses to be adequate at June 30, 1998, although there can be
no assurance that the allowance is adequate or that additional provisions to the
allowance for loan losses will not be necessary.
The Company recorded no provision for loan losses for the second quarter of 1998
compared to $50,000 provided for the second quarter of 1997. Net loan recoveries
for the three months ended June 30, 1998 totalled $89,000 compared to net loan
charge-offs of $24,000 for the same period in 1997.
OTHER INCOME
Other income, such as customer service fees and gains and losses on sales of
assets totalled $1,262,000 in the second quarter of 1998 as compared to
$1,288,000 in the second quarter of 1997. See related discussions under
"Investment Securities" and "Loans" included in "Management's Discussion and
Analysis" in Item 2 of Part I of this report.
OPERATING EXPENSES
Operating expenses were $4.6 million, an increase of $74,000 or 1.6% for the
three months ended June 30, 1998 compared to the same period in 1997. The most
significant increases were in salaries and employee benefits, up $107,000 or
4.2%, while all other operating expenses were $33,000 or 1.6% lower as the
Company continues to manage for operating efficiencies. The Company's annualized
expense ratio, which is the ratio of non-interest expense to average assets, was
1.67% for the three months ended June 30, 1998, as compared to 1.72% for the
1997 comparable period. The Company continues to focus on cost containment with
the intent to be a low cost provider of high quality banking products and
services.
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22
SIX MONTHS ENDED JUNE 30, 1998 vs SIX MONTHS ENDED JUNE 30, 1997
NET INTEREST INCOME
Interest and dividend income from loans and investments increased $1.8 million
or 4.9% to $38.6 million for the first half of 1998 compared to the same period
in 1997. Over the first half of 1998, average earning assets totalled $1.08
billion, an increase of $56.8 million, or 5.6%, over the comparable average for
1997, with $48.7 million of that increase deriving from short and long-term
investment securities and $8.1 million from loans. The yield on earning assets
equalled 7.17% and 7.21% for the six months ended June 30, 1998 and 1997,
respectively. The yield on investment securities was 6.23% for the first half of
1998 and for the same period in 1997. The Company purchased higher yielding
mortgage-backed securities to replace matured and sold U.S. Government
securities, thereby maintaining yield in a falling rate environment. Investments
contributed $1.5 million of additional interest and dividend income when
comparing the first six months of 1998 to the same period in 1997. The increase
in the average balance on loans, partially offset by a 1 basis point yield
decline to 7.98%, caused interest income on loans to increase $289,000 to total
$23.1 million thus far in 1998.
Total interest expense for the six months ended June 30, 1998 was $21.1 million,
reflecting an increase of $1.2 million or 6.2% over the same period in 1997.
This resulted, in part, from a $42.9 million increase in average interest
bearing liabilities over the comparable prior year period. This period-to-period
increase can be attributed to average deposit growth of $15.8 million and
average borrowed funds growth of $27.1 million. Deposit growth occurred in all
major categories of deposit products with total interest expense thereon
increasing $440,000 to $15.6 million. For the first six months of 1998, the
weighted average cost of interest bearing deposits was 4.04% compared to 4.01%
for the comparable 1997 period. Interest expense on borrowed funds increased
$793,000 while the cost remained constant at 5.84%. The overall cost of interest
bearing liabilities increased to 4.39% from 4.33% when comparing the two
periods.
Net interest income increased 3.4% or $574,000 to $17.4 million for the first
half of 1998 relative to the same period in 1997, despite a 10 basis point
decline in the interest rate spread and a 6 basis point decline in the net
interest margin. The increase in interest income is primarily due to increased
levels of earning assets while the basis point declines in interest spread and
margin reflect the changing mix of earning assets and of interest bearing
liabilities. The interest rate spread and net interest margin were 2.78% and
3.23% respectively for the six months ended June 30, 1998.
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23
MEDFORD BANCORP, INC.
INTEREST RATE SPREAD
Six Months Ended
June 30,
--------
1998 1997
---- ----
Weighted average yield earned on:
Short-term investments 5.33% 5.21%
Investment securities 6.23 6.23
Loans 7.98 7.99
---- ----
All earning assets 7.17% 7.21%
----- -----
Weighted average rate paid on:
Deposits 4.04% 4.01%
Borrowed funds 5.84 5.84
---- ----
All interest-bearing liabilities 4.39% 4.33%
----- -----
Weighted average rate spread 2.78% 2.88%
----- -----
Net interest margin 3.23% 3.29%
===== =====
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24
PROVISION FOR LOAN LOSSES
The provision for loan losses represents a charge against current earnings and
an addition to the allowance for loan losses. The provision is determined by
management on the basis of many factors including the quality of specific loans,
risk characteristics of the loan portfolio generally, the level of
non-performing loans, current economic conditions, trends in delinquency and
charge-offs, and value of the underlying collateral. Management considers the
allowance for loan losses to be adequate at June 30, 1998, although there can be
no assurance that the allowance is adequate or that additional provisions to the
allowance for loan losses will not be necessary.
The Company recorded a $75,000 provision for loan losses for the first half of
1998 compared to $125,000 provided for the same period in 1997. Net loan
recoveries for the six months ended June 30, 1998 totalled $67,000 compared to
net charge-offs of $388,000 for the same period in 1997.
OTHER INCOME
Other income, such as customer service fees and gains and losses on sales of
assets, equalled $2.6 million in the first half of 1998 as compared to $2.3
million in the same period in 1997. See related discussions under "Investment
Securities" and "Loans" included in "Management's Discussion and Analysis" in
Item 2 of Part I of this report.
OPERATING EXPENSES
Operating expenses were $9.4 million, an increase of $161,000 or 1.8% for the
six months ended June 30, 1998 compared to the same period in 1997. The most
significant increases were in salaries and employee benefits, up $210,000 or
4.1%, while all other operating expenses were $49,000 or 1.2% lower as the
Company continues to manage for operating efficiencies. The Company's annualized
expense ratio, which is the ratio of non-interest expense to average assets was
1.68% for the six months ended June 30, 1998, as compared to 1.75% for the prior
year comparable period. The Company continues to focus on cost containment with
the intent to be a low cost provider of high quality banking products and
services.
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25
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are customer deposits,
amortization and payoff of existing loan principal, and sales or maturities of
various investment securities. The Company is a voluntary member of the Federal
Home Loan Bank of Boston ("FHLBB"), and as such may take advantage of the
FHLBB's borrowing programs to enhance liquidity and leverage its favorable
capital position. The Company also may draw on lines of credit at the FHLBB and
a large commercial bank, and it may pledge U.S. Government securities to borrow
from certain investment firms and the Mutual Savings Central Fund of
Massachusetts. These various sources of liquidity are used to fund withdrawals,
new loans, and investments.
Management continually seeks to optimize deposit growth while controlling
the Company's cost of funds. Sales oriented programs to attract new depositors
and the cross-selling of various products to its existing customer base are
currently in place, although not to the same extent as the first half of 1997.
Management reviews, on an ongoing basis, possible new products, with particular
attention to products and services which will assist retention of the Company's
base of lower-costing deposits.
Maturities and sales of investment securities provide significant
liquidity to the Company. The Company's policy of purchasing debt instruments
generally maturing within five years reduces market risk in the bond portfolio
while providing significant cash flow. For the six months ended June 30, 1998,
cash flow from maturities and sales of securities was $163.3 million compared to
$82.3 million for the six months ended June 30, 1997. Principal payments
received on mortgage-backed investments during the six months ended June 30,
1998 and 1997 totalled $16.1 million and $2.9 million, respectively. During
periods of high interest rates, maturities in the bond portfolio have provided
significant liquidity at a lower cost than borrowings.
Amortization and pay-offs of the loan portfolio also contribute
significant liquidity to the Company. Traditionally, the amortization and
payoffs have been reinvested into loans. When payoff rates exceed origination
rates, excess liquidity from loan payoffs is shifted into the investment
portfolio.
The Company also uses borrowed funds as a source of liquidity. These
borrowings generally contribute toward funding over-all loan growth. At June 30,
1998 the Company's outstanding borrowings from the FHLBB were $126.4 million, as
compared to $110.1 million at December 31, 1997. The Company also utilizes
repurchase agreements as a source of funding when management deems market
conditions to be conducive to such activities. Repurchase agreements totalled
$60.8 million at June 30, 1998 as compared to $93.6 million at December 31,
1997.
Commitments to originate residential and commercial real estate mortgage
loans at June 30, 1998, excluding unadvanced construction funds of $12.8
million, were $18.1 million. Management believes that adequate liquidity is
available to fund loan commitments utilizing deposits, loan amortization,
maturities of securities, or borrowings.
26
LIQUIDITY AND CAPITAL RESOURCES
(continued)
Purchases of securities during the six months ended June 30, 1998 totalled
$168.0 million consisting of debt instruments generally maturing in less than
five years and equities. This compares with purchases of $112.1 million for the
six months ended June 30, 1997.
Residential and commercial real estate mortgage loan originations for the
six months ended June 30, 1998 totalled $45.9 million, compared with $46.9
million for the six months ended June 30, 1997.
The Company's capital position (total stockholders' equity) was $101.5
million or 8.94% of total assets at June 30, 1998 virtually equal to the $101.5
million or 8.94% of total assets at December 31, 1997. During the first six
months of 1998, the Company purchased 118,584 shares of its common stock in
accordance with its previously announced stock purchase program. The total cost
of $5.1 million has been recorded as Treasury Stock in the Capital section of
the Company's balance sheet. The Company's capital position continues to exceed
all regulatory requirements.
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27
ASSET-LIABILITY MANAGEMENT
Through the Company's Asset-Liability Management Committee ("ALCO"), which
is comprised of certain senior and middle management personnel, the Company
monitors the level and general mix of interest rate-sensitive assets and
liabilities. The primary objective of the Company's ALCO program is to manage
the assets and liabilities of the Company to provide for optimum profitability
and capital at prudent levels of liquidity and interest rate, credit, and market
risk.
It is ALCO's general policy to closely match the maturity or rate
sensitivity of its assets and liabilities. In accordance with this policy,
certain strategies have been implemented to improve the match between interest
rate sensitive assets and liabilities. These strategies include, but are not
limited to: daily monitoring of the Company's changing cash requirements, with
particular concentration on investment in short term securities; originating
adjustable and fixed rate mortgage loans for the Company's own portfolio;
managing the cost and structure of deposits; and generally using matched
borrowings to fund specific purchases of loan packages and large loan
origination. Occasionally, management may choose to deviate from specific
matching of maturities of assets and liabilities, if an attractive opportunity
to enhance yields becomes available.
The Company actively manages its liability portfolio in order to
effectively plan and manage growth and maturities of deposits. Management
recognizes the need for strict attention to all deposits. Accordingly, plans for
growth of all deposit types are reviewed regularly. Programs are in place which
are designed to build multiple relationships with customers and to enhance the
Company's ability to retain deposits at controlled rates of interest, and
management has adopted a policy of reviewing interest rates on an ongoing basis
on all deposit accounts, in order to control deposit growth and interest costs.
In addition to attracting deposits, the Company has selectively borrowed
funds using advances from the FHLBB and, upon occasion, reverse repurchase
agreements. These funds have generally been used to purchase loans typically
having a matched repricing date.
IMPACT OF INFLATION
The consolidated financial statements and related consolidated financial
data presented herein have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
results of operations in terms of historical dollars without considering changes
in the relative purchasing power of money over time due to inflation. The
primary effect of inflation on the operations of the Company is reflected in
increased operating costs. Unlike most industrial companies, virtually all
assets of a financial institution are monetary in nature. As a result, interest
rates have a more significant effect on a financial institution's performance
than the effect of general levels of inflation. Interest rates do not
necessarily move in the same direction or in the same magnitude as the prices of
goods and services.
28
Year 2000 Disclosure
For a discussion of the Company's position regarding Year 2000 issues, see
Item 7 of Part II of the Company's Annual Report on Form 10K for the fiscal year
ended December 31, 1997.
Since December 31, 1997, the Company has continued to address Year 2000
issues, has initiated formal communications to determine the extent to which the
Company may be vulnerable to any failures by its service providers and other
third party vendors to remedy their own Year 2000 issues, and has engaged a
consultant to assist in developing contingency plans.
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, 1997 (the "1997 Annual Report").
For quantitative information about market risk, see Item 7A of Part II of
the Company's 1997 Annual Report.
There have been no material changes in the quantitative and qualitative
disclosures about market risk as of June 30, 1998 from those presented in the
Company's 1997 Annual Report.
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29
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
The Company's annual meeting of stockholders was held on April 28,
1998 (the "Annual Meeting"). The presence, in person or by proxy, of
at least a majority of the total number of issued and outstanding
shares of the Company's common stock, $.50 par value per share (the
"Common Stock"), was necessary to constitute a quorum for the
transaction of business at the 1998 Annual Meeting. There were
4,549,298 shares of Common Stock issued, outstanding and eligible to
vote as of March 2, 1998. A total of 3,876,300.323 shares of Common
Stock were present in person or by proxy at the 1998 Annual Meeting,
constituting a quorum.
At the 1998 Annual Meeting, the stockholders elected the following
three individuals as Directors of the Company to serve until the 2001
annual meeting of stockholders, with the following votes cast:
BROKER NON-VOTES
NOMINEE FOR WITHHELD AND ABSTENTIONS
------- --- -------- ---------------
Paul J. Crowley 3,840,273.413 36,026.91 0
Edward J. Gaffey 3,839,686.644 36,613.659 0
Andrew D. Guthrie, Jr. M.D. 3,841,424.455 34,875.868 0
The following additional Directors of the Company continued as
Directors after the 1998 Annual Meeting: Edward D. Brickley, David
L. Burke, Mary Lou Doherty, Robert A. Havern, III, Arthur H. Meehan,
Eugene R. Murray, and Francis D. Pizzella.
In addition, at the 1998 Annual Meeting, the stockholders approved
the amendment of the Company's Amended Articles of Organization by
the addition of a new Article VI(K) limiting the liability of the
Company's Directors, with the following votes cast:
FOR AGAINST ABSTAIN
--- ------- -------
3,742,959.596 0 0
30
ITEM 5 - Other Information
Not applicable
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated April 30, 1998 (date
of earliest event reported) reporting that, following stockholder
approval, the Company amended its Amended Articles of
Organization by adding a new Article VI(K), which limits the
liability of the Company's Directors.
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31
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.
MEDFORD BANCORP, INC.
Date: August 6, 1998
/s/ Arthur H. Meehan
-----------------------------------------
Arthur H. Meehan
Chairman, President and Chief Executive Officer
Date: August 6, 1998
/s/ Phillip W. Wong
-----------------------------------------
Phillip W. Wong
Executive Vice President, Treasurer and Chief Financial Officer
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
32