About Us

2009 Annual Report

A MESSAGE FROM THE TREASURER

High unemployment, a wobbly housing market and concerns regarding large fiscal budget deficits caused local and national economic activity to slow and Cape Cod Five faced yet another year of financial turbulence. Despite these chaotic times, we are pleased that our financial results for 2009 culminated in solid earnings, improved reserve for loan loss levels, strong liquidity and a continued well capitalized position.

The Bank’s earnings strength allowed it to record net income of $8.2 million for the year-ended December 31, 2009 for an annualized return on average assets of 44 basis points. This was achieved in a year where the provision for loan losses and the FDIC insurance assessments increased $4.0 million or 124.8% and $2.7 million or 376.6%, respectively. With these headwinds, the Bank’s net income of $8.2 million was 8.7% below the $9.0 million in net income reported for last year.

Year-over-year, net interest income grew $2.1 million driven by strong earning asset growth. Increases in net gain on sale of mortgage loans and Trust and Asset Management income of $6.7 million and $0.6 million, respectively, primarily accounted for the $7.2 million or 58.7% growth in non-interest income. These positive factors in 2009 were offset by the increases in provision for loan losses and non-interest expenses of $4.0 million and $6.1 million, respectively. In the face of an uncertain housing market, weak business activity and higher net chargeoffs, the Bank recorded a provision for loan losses of $7.3 million and improved its reserve for loan loss coverage to 1.32%. The increase in non-interest expense was due principally to increased salaries and benefits and FDIC insurance expenses of $3.2 million and $2.7 million, respectively. These combined factors resulted in a net income level of $8.2 million for 2009 as compared with the $9.0 million recorded for 2008.

The Bank’s total assets at December 31, 2009 were $1.92 billion, an increase of $137.1 million or 7.7% as compared to December 31, 2008. Deposits grew to $1.66 billion at December 31, 2009, a solid increase of $152.6 million or 10.1% from December 31, 2008. Retention of net income coupled with the changes in accumulated other comprehensive income in 2009, increased the Bank’s capital 4.5% to $182.4 million at December 31, 2009 and Tier 1 capital to average-weighted assets ratio stood at 9.4%. All of the Bank’s capital adequacy ratios meet the highest regulatory definition of well capitalized. The Bank remained committed to helping homeowners on the Cape and completed a record year of residential loan activity closing $799.6 million in loans in the year ended December 31, 2009, for both its portfolio and the secondary market, a 96.6% increase in volume over 2008. The Bank’s gross loan and loans held for sale portfolio of $1.36 billion, however, contracted 1.3% compared to December 31, 2008 caused by the $46.0 million or 5.6% decline in the residential portfolio due to the sale of historically low fixed rate loans into the secondary market. This decrease was only partially offset by growth in home equity loans (up 7.6%) and modest growth in commercial loan volume (up 2.1%). Strong deposit growth coupled with the modest contraction of the loan portfolio led to the significant growth of $181.4 million or 69.3% in investment securities. The $443.2 million of investments at December 31, 2009 is a short duration, high quality portfolio with an unrecognized net gain of $3.3 million providing significant liquidity to the Bank.

The Trust and Asset Management department held $631.6 million in assets as of December 31, 2009, a 25.2% increase compared to December 31, 2008, reflective of an increase in new account activity as well as asset appreciation resulting from the equity markets recovery.

Faced with another year of financial adversity, Cape Cod Five benefited from its prudent financial management and its diversity of business lines to achieve a solid level of earnings while continuing to strengthen its balance sheet. A nascent recovery bounded by high unemployment and historic fiscal deficits will make for uncertain economic conditions in 2010 but we believe Cape Cod Five will remain poised to support and serve our customers and communities for the future. Our financial statements offer additional detail and insight on the 2009 performance.

Phillip W. Wong
Executive Vice President, Chief Financial Officer & Treasurer
The Cape Cod Five Cents Savings Bank