Cape Cod 5/ Community Banking Since 1855

2009 Annual Report

A MESSAGE FROM THE PRESIDENT

For The Cape Cod Five Cents Savings Bank, 2009 was a year during which the Bank increased its customer base, produced solid earnings and grew its capital and reserves.

As we entered 2009, three months after the most significant financial crisis most of us have seen in our lifetime, we did not have certainty that we would be able to end the year with such positive results. 2009 posed many challenges to the Bank and the region, including the economy and regulatory changes. Even the weather didn’t cooperate.

In terms of the economy, most of the world was in a deleveraging mode following years of too much debt and flawed lending practices. This readjustment to an environment with less liquidity, more savings and reduced spending continues to evolve. Unfortunately, a period of harsh economic realignment like the one we are experiencing brings with it unemployment, lower real estate prices and lower stock market valuations. The impact is far-reaching, and we believe fundamental economic conditions will remain challenging for some time.

As we managed our way through the post-crisis world, we stuck to the same principles of doing business that have guided us through the last century and a half. We stuck to our core business of providing responsible financial products to our customers and prudently managing the risk profile of the Bank.

Loan delinquency, while higher than we would like, remained low when compared to peers and the Bank continued to be an active lender during 2009. Non performing loans represented 0.85% of total assets and foreclosed property totaled 0.04% at December 31, 2009.

Although the purchase market was modest, the manufactured low rate environment generated a significant spike in refinancing activity. Many Cape Codders were able to secure lower rates and reduce their cost of homeownership, and a larger than ever proportion of them chose the Cape Cod Five as their partner in that refinance. Through the Residential Mortgage area, we closed 3,282 loans totaling $799.6 million, a record for the Bank. Our leading market share of residential mortgage lending in Barnstable County increased to 17.2% as of December 31, 2009, up from 10.4% at the end of the prior year.

On the Commercial Lending side, Commercial and Industrial loans increased $11.3 million, or 11.9%, to $106.8 million for the year ended December 31, 2009 as a result of the Bank’s efforts to support existing customers and gain new relationships. Commercial real estate loans remained essentially flat (down $2.1 million for the year) at $288.5 million due to the lack of lending opportunities in the current economic environment.

In a similar indication of the desire to partner with a trustworthy institution, and as stock market volatility led to investors withdrawing some funds from the market, the Bank’s deposits increased 10.1%. The Bank’s already leading share of Barnstable County FDIC insured deposits increased to 27.1% as existing customers chose to add deposits to their accounts at the Bank and new customers chose the Cape Cod Five.

The number of Wealth Management customers swelled, as customers decided that it was more important than ever to engage a trusted financial advisor in conservatively managing their assets through this difficult time. As the market rebounded from the deep lows early in the year, and assets flowed in from new customers, the Wealth Management area saw growth of 25.2% in assets under management.

With the good performance of our business units, we were able to generate solid earnings, after absorbing significant increases in FDIC insurance premiums. In addition, as we had done in 2008, anticipating the difficulties posed to businesses and individuals by the financial crisis, we used earnings to add significantly to our loan loss reserves. The Bank added a net of $4.7 million to the loan loss reserves, which now stand at 1.32% of total loans. While we hope they will not be needed, our feeling is that current economic conditions continue to warrant maintaining strong reserves.

In addition to being able to add to our reserves, our earnings also increased our capital to $182.4 million as of December 31, 2009. This is an all time high for the Bank.

I want to thank the Board, the management team and all the Cape Cod Five employees for their hard work, ability to adapt to changing circumstances, and constant focus on our customers’ needs.

I hope that you will appreciate the following detailed discussion of the Bank’s financial performance.

As always, we continue to be privileged to serve the Cape Cod community, to partner with it in good economic times and bad, and look forward to facing together the challenges and opportunities that lie ahead.

Dorothy A. Savarese
President & CEO
The Cape Cod Five Cents Savings Bank

MILESTONES FOR 2009:

Community Involvement and Charitable Giving

Initiated financial education program.
Provided over $750 thousand to local organizations through the combined giving of the Bank and The Cape Cod Five Cents Savings Bank Charitable Foundation Trust.

Consumer Lending

Closed 547 Home Equity Loans totaling $36.8 million.
Increased Home Equity Loan outstandings 7.6% to $142.3 million.

Commercial Lending

Booked $57.7 million new commercial commitments which resulted in total commercial outstandings increasing by $9.2 million, or 2.4%.
Increased Commercial and Industrial Loans 11.9% to $106.8 million.
At year end, 90 day delinquency was 0.3% of portfolio.

Residential Mortgage Lending

Closed 3,282 residential mortgage loans totaling $799.6 million, a record production level for the Bank and a 96.6% increase over 2008.
Increased residential mortgage market share in Barnstable County from 10.4% to 17.2%, number one in the market.

Retail Banking

Increased the Bank’s share of the Barnstable County FDIC insured deposits to 27.1%, number one in the market.
Developed EZ Switch program to help customers move their accounts to the Bank.

Wealth Management Services