10-Q 1 form10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001. [ ] 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: (0-26663) IPSWICH BANCSHARES, INC. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Massachusetts 04-3459169 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 23 Market Street, Ipswich, Massachusetts 01938 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (978) 356-7777 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of each class: Name of each exchange on which registered: Common Stock, $0.10 par value NASDAQ National Market 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 requirement for the past 90 days. Yes [ X ] No [ ] Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court. Yes [ ] No [ ] The number of shares outstanding of the Registrant's common stock as of May 3, 2001 was 2,005,602. . IPSWICH BANCSHARES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except per share data)

2 IPSWICH BANCSHARES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollars in thousands, except per share data)

3 IPSWICH BANCSHARES, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Three Months Ended March 31, 2001 and 2000 (Dollars in thousands, except for share data) (unaudited)

4 IPSWICH BANCSHARES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Three Months Ended March 31, 2001 and 2000 (Dollars in thousands) (unaudited)

5 IPSWICH BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 2001 and 2000 Basis of Presentation The consolidated financial statements include the accounts of Ipswich Bancshares, Inc. and its wholly owned subsidiaries, Ipswich Statutory Trust I and, Ipswich Savings Bank (the Bank) and the Bank's subsidiaries, Ipswich Preferred Capital Corporation, Ipswich Securities Corporation and North Shore Financial Services, Inc. (collectively herein referred to as the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. Ipswich Statutory Trust I is a Connecticut Trust established in February 2001. It exists for the exclusive purpose of issuing and selling common securities to the Company and Preferred Securities to unrelated third parties. Ipswich Preferred Capital Corporation (IPCC) was formed in 1999 as a Massachusetts business corporation which elected to be taxed as a real estate investment trust for Federal and Massachusetts tax purposes. IPCC is 99% owned by Ipswich Savings Bank. IPCC holds mortgage loans which were previously originated by the Company. Ipswich Securities Corporation was formed to exclusively transact in securities on its own behalf as a wholly-owned subsidiary of the Bank. North Shore Financial Services, Inc. was incorporated for the purpose of holding direct investments in real estate and foreclosed real estate. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for possible loan losses, the valuation of real estate acquired by foreclosure, and the valuation of originated mortgage servicing rights. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended March 31, 2001 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2001. For further information, refer to the audited consolidated financial statements and footnotes thereto for the fiscal year ended December 31, 2000 included in the Company's Annual Report on Form 10-K. A substantial portion of the Company's loans are secured by real estate in Essex County in Massachusetts. In addition, other real estate owned is located in that market. Accordingly, the ultimate collectibility of a substantial portion of the Company's loan portfolio and the recovery of the carrying amount of other real estate owned are susceptible to changes in market conditions in its geographic area. 1 Earnings Per Share The computation of basic earnings per share is based on the weighted average number of shares of common stock outstanding during each period. The computation of diluted earnings per share is based on the weighted average number of shares of common stock outstanding and dilutive potential common stock equivalents outstanding during each period. Stock option grants are included only in periods when the results are dilutive. Three Months Ended March 31, 2001 Income Shares Per-Share ---- (Numerator) (Denominator) Amount Basic EPS $647 2,050 $0.32 Effect of stock options ---- 32 (.01) ---- ----- ----- Diluted EPS $647 2,082 $0.31 ============================================ 2000 Basic EPS ---- $747 2,525 $0.30 Effect of stock options ---- 24 (.01) ---- ----- ---- Diluted EPS $747 2,549 $0.29 ============================================ Other Comprehensive Income Accumulated other comprehensive income consists solely of unrealized appreciation on investment securities available for sale, net of taxes. 2 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Financial Release contains certain statements that are 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. Although Ipswich Bancshares, Inc. believes that its expectations are based upon reasonable assumptions within the bounds of its knowledge of its business operations, there can be no assurance that actual results will not differ materially from those projected in the forward-looking statements. Certain factors that might cause such difference include, but are not limited to, the factors set forth in the Corporation's filings with the Securities and Exchange Commission, which include, among other factors, changes in general economic conditions, changes in asset quality, changes in interest rates, regulatory issues and changes in the assumptions used in making such forward-looking statements. Certain factors that may cause such differences include, but are not limited to the following: interest rates may increase, unemployment in the Company's market area may increase, property values may decline, and general economic and market conditions in the Company's market area may decline, all of which could adversely affect the ability of borrowers to re-pay loans; general economic and market conditions in the Company's market area may decline, the value of real estate securing payment of loans may decline and the Company's ability to make profitable loans may be impacted; adverse legislation or regulatory requirements may be adopted; and competitive pressure among depository institutions may increase. Any of the above may also result in lower interest income, increased loan losses, additional charge-offs and write-downs and higher operating expenses. The Company disclaims any intent or obligation to update publicly any of the forward-looking statements herein, whether in response to new information, future events or otherwise. GENERAL Ipswich Bancshares, Inc. (the Company) is a Massachusetts corporation whose primary business is serving as the holding company for Ipswich Savings Bank (the Bank). The Company's operating results for the three months ended March 31, 2001 reflect the operations of the Company and its direct and indirect subsidiaries, Ipswich Statutory Trust I, Ipswich Savings Bank, Ipswich Preferred Capital Corporation, Ipswich Securities Corporation and North Shore Financial Services. The Company is primarily in the business of making residential mortgage loans, while attracting deposits from the general public to fund those loans. The Company operates out of its main office located at 23 Market Street, Ipswich, Essex County, Massachusetts, and its seven full-service retail branch offices, located in Beverly, Essex, Marblehead, North Andover, Rowley, Reading and Salem, Massachusetts. The Company operates Automatic Teller Machines at its Main Office and each of its full-service retail branch offices. As a bank holding company, the Company is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve (the Federal Reserve) and the Bank is subject to regulation, supervision and examination by the Federal Deposit Insurance Corporation (the FDIC) and the Massachusetts Commissioner of Banks (the Commissioner). ASSET / LIABILITY MANAGEMENT The Company does not use static GAP analysis to manage its interest rate risk. It believes that simulation modeling more accurately encompasses the impact of changes in interest rates on the earnings of the Company over time. However, the Company prepares a GAP schedule to measure its static position. Assets and liabilities are classified as interest rate sensitive if they have a remaining term to maturity of 0-12 months, or are subject to interest rate adjustment in those time periods. Adjustable rate loans and mortgage backed securities are shown as if the entire balance comes due on the repricing date. Estimates of fixed rate loan amortization prepayments are included with rate sensitive assets. Because regular savings, demand deposits, money market accounts and NOW accounts may be withdrawn at any time and are subject to interest rate adjustments at any time, they are presented based upon assumed maturity structures. As a result of this analysis, the static GAP position in the 0 to 12 months range is a negative $765,000 at March 31, 2001. Interest rate sensitivity statistics are static measures that do not necessarily take into consideration external factors which may affect the sensitivity of assets and liabilities, and consequently can not be used alone to predict the operating results of a financial institution in a changing environment. LIQUIDITY The Company seeks to ensure that sufficient liquidity is available to meet cash requirements while earning a return on liquid assets. The Company uses its liquidity primarily to fund loans and investment commitments, to supplement deposit outflows, to fund its share repurchase program and to meet operating expenses. The primary sources of liquidity are interest and principal 3 amortization from loans, mortgage backed securities and investments, the sales and maturities of investments, loan sales, deposits, and Federal Home Loan Bank of Boston (the FHLBB) advances, which includes a $3.2 million overnight line of credit. The Company also uses longer term borrowing facilities within its total available credit line with the FHLBB. Advances from the FHLBB were $31.5 million at March 31, 2001. During 2001 the primary sources of liquidity were $9.3 million in loan sales, principal amortization from mortgage backed securities of $4.1 million, payoffs and principal amortization from the loan portfolio of $7.0 million and the call of investment securities of $5.5 million. The primary uses of funds were $15.3 million in residential first mortgage loan originations and $5.5 million in investment purchases. CAPITAL RESOURCES Total stockholders' equity at March 31, 2001 was $15.3 million, an increase of $177,000 from $15.1 million at the end of 2000. Included in stockholders' equity at March 31, 2001 is an unrealized gain on marketable securities available for sale, net of taxes, of $549,000, an increase of $76,000 as compared to $473,000 at December 31, 2000. Future interest rate increases could reduce the market value of these securities and reduce stockholders' equity. In the first quarter of fiscal 2001, the Ipswich Statutory Trust I sold $3.5 million of its trust preferred securities to the public and $109,000 of its common securities to the Company. The trust preferred securities are mandatory redeemable upon the maturity of the Junior Subordinated Debentures on February 22, 2031 or upon earlier redemption as provided in the Indenture. The Company has the right to redeem the Junior Subordinated Debentures, in whole or in part on or after February 22, 2011 at a redemption price specified in the Indenture plus any accrued but unpaid interest to the redemption date. The costs will be amortized into operating expense over the life of the securities. The Company owns all of the common securities of the Trust, the only voting security, and as a result, the Trust is a subsidiary of the Company. The Company completed a stock repurchase plan of 10% of the outstanding shares announced October 19, 2000. Through March 31, 2001, the Company had repurchased 488,700 or 19% of the outstanding shares at an average price of $8.99 per share totaling $4.4 million, which is reflected as a decrease to equity. Subsequently, the Company announced a third 10% stock repurchase plan on February 22, 2001. The Federal Reserve's and the FDIC's capital guidelines require the Company and the Bank, respectively, generally to maintain a minimum Tier 1 leverage capital ratio of at least 4% (5% to be classified as "well-capitalized"). At March 31, 2001 Tier 1 leverage capital ratio for the Company was 6.33% compared to 5.04% at December 31, 2000 and 5.14% and 5.21% for the Bank on March 31, 2001 and December 31, 2000, respectively. The Federal Reserve and the FDIC have also imposed risk-based capital requirements on the Company and the Bank, respectively, which give different risk weightings to assets and to off balance sheet assets, such as loan commitments. The Federal Reserve's and the FDIC's risk-based capital guidelines require the Company and the Bank, respectively, to maintain a minimum total risk-based capital ratio of 8% (10% to be classified as "well-capitalized") and a Tier 1 risk-based capital ratio of 4% (6% to be classified as "well-capitalized"). At March 31, 2001, the Company's total and Tier 1 risk-based capital ratios were 12.36% and 11.19% (compared to 10.31% and 9.19% at December 31, 2000). At March 31, 2001, the Bank's total and Tier 1 risk based capital ratios were 10.36% and 9.20% (compared to 10.46% and 9.19% at December 31, 2000). FINANCIAL CONDITION The Company's total assets at March 31, 2001 were $292 million, an increase of $3.9 million from December 31, 2000 assets of $288 million. The increase was largely due to the addition of $11 million in federal funds offset by a $4 million decline in investment securities resulting from cash flow amortization of mortgage-backed securities of $4.1 million. Funding the increase in assets for the first three months of 2001 was the issuance of $3.5 million of trust preferred securities. Federal Funds Sold Interest-bearing deposits and federal funds sold at March 31, 2001 was $10.7, versus $0 at December 31, 2000. The increase in fed funds sold was primarily due to accelerated cash flows from assets as a result of the first quarter decline in market rates. Investment and Mortgage-Backed Securities Total investments and mortgage backed securities available for sale at March 31, 2001 was $31.6 million, a decrease of $2.6 in 2001. The decrease was primarily the result of principal amortization of $3.8 million in adjustable rate mortgage-backed securities, and the call of $2.0 million of callable agency securities offset by the purchase of $2.5 million of fixed rate mortgage-backed securities and $811,000 of equity securities. The unrealized gain on the portfolio of available for sale securities, was $906,000 at March 31, 2001. The increase in value is principally in the portfolio of adjustable rate mortgage-backed securities. 4 Total investments and mortgage-backed securities held to maturity were $28.9 million at March 31, 2001, versus $30.3 million at December 31, 2000. The decline is due to principal amortization on the portfolio of mortgage-backed securities of $295,000, the call of $3.5 million of callable agency securities offset by the purchase of $2.4 million of trust preferred securities. Loans and Loans Held for Sale Loans held for sale increased to $5.3 million at March 31, 2001, versus $5.0 at year-end 2000. The Company's portfolio of mortgages held for sale increased due to the origination of fixed rate loans. The loan portfolio at March 31, 2001 was $202.1 million, a decrease of $1.0 million in comparison to the portfolio at December 31, 2000 of $203.1 million. The decrease resulted from accelerated cash flows from prepayments of loans due to the first quarter decline in market interest rates. CREDIT QUALITY Non-Performing Loans Loans on non-performing status at March 31, 2001 was $228,000, substantially unchanged since year-end. Accrual of interest on loans is discontinued either when a reasonable doubt exists, as to the full timely collection of principal and interest, or when a loan comes contractually past due by ninety (90) days or more, unless the loan is adequately secured and in the process of collection. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current period interest income. Income on such loans is recognized to the extent that cash is received and the ultimate collection of principal and interest is probable. Following collection procedures, the Company generally institutes appropriate actions to foreclose the property. Allowance for Loan Loss The allowance for loan loss at March 31, 2001 was $1.8 million, unchanged since year-end 2000. The entire allowance for loan losses is available to absorb charge-offs in any category of loans. Loan losses are charged against the allowance when management believes that the collectibility of the loan principal is unlikely. The allowance for possible loan losses is established by management to absorb future charge-offs of loans deemed uncollectible. The allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged-off. In evaluating current information and events regarding borrowers ability to repay their obligations, management considers commercial loans over $200,000 to be impaired when it is probable that the Company will be unable to collect all amounts due, according to the contractual terms of the note agreement; other loans are evaluated collectively for impairment. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of collateral, if the loan is collateral-dependent. Impairment losses are included in the allowance for loan losses through a charge to the provision for loan losses. Management believes that the allowance for possible loan losses is adequate as of March 31, 2001. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary. Liabilities Deposits increased by $405,000 in the three months of 2001, to end March 31, 2001 at $237.6 million. Deposits totaled $237.2 million at December 31, 2000. Certificates of deposit decreased by $2.0 million as falling rates made CDs a less attractive investment vehicle for depositors; money market accounts increased by $3.3 million as depositors invested in more liquid deposit types. Federal Home Loan Bank of Boston advances decreased by $608,000 in 2001 to $31.5 million at March 31, 2001. Borrowed funds are typically used to manage the liquidity of the Company and the utilization of borrowings is dependent on cash flows from other assets and liabilities. The Company prepaid $11.5 million of longer term borrowings with a weighted average rate of 6.14% and replaced the borrowings with $11 million at a weighted average rate of 5.03%. The Company incurred a prepayment penalty of approximately $90,000 as a result. The corresponding weighted average life of the borrowings remained essentially unchanged at 1.7 years. Equity Capital Equity capital increased by $177,000 to $15.3 million at March 31, 2001. Equity was principally impacted by earnings for the first three months of the year of $647,000 and an increase in the unrealized gain or loss on investment securities of $76,000, net of taxes. Offsetting these increases were payments of cash dividends to shareholders which totaled $226,000 in 2001. Additionally, the Company repurchased 34,700 shares at a weighted average price of $9.80 or $340,000. The cost of the shares as reflected in the equity capital section of the balance sheet as "Treasury Stock". (See Capital Resources - Item 2) 5 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2000 General The Company reported net income of $647,000 or $.31 per fully diluted share for the first quarter of 2001. This compares with $747,000 or $.29 per fully diluted share for the first quarter of 2000. The first quarter 2001 earnings were impacted by a pre-tax charge of $90,000 resulting from a restructuring of a portion of the Company's borrowing with the Federal Home Loan Bank of Boston. Return on equity for the first quarter of 2001 was 17.02%, versus 17.12% for the same quarter of 2000. The first quarter of 2001 return on assets was .90% versus 1.08% for the same quarter in 2000. Net Interest and Dividend Income Net interest income for the first quarter of 2001 was $2.2 million, versus $2.2 million for the same time frame in 2000. The net interest margin percentage was 3.21% for the first quarter of 2001 versus 3.26% for the same quarter the previous year. Non-interest Income Non-interest income for the first quarter of 2001 was $567,000 versus $428,000 in the first quarter of 2000. Non-interest income was substantially higher in 2001, as a result of higher mortgage banking revenues and retail banking fees. Mortgage banking revenues are principally generated from the sale of fixed rate loans in the secondary market. As a result of the current interest rate environment, the Company is primarily originating fixed rate mortgages for sale in the secondary market. The resulting impact is that mortgage banking revenues for the first quarter of 2001 was $131,000 versus $48,000 for the first quarter of 2000. Retail banking fees for the first quarter of 2001 was $436,000 versus $378,000 for the same quarter in 2000. This 15.3% increase is principally the result of the Company's successful efforts to acquire checking account customers in its market place, which generates fee income. Non-interest Expense Total non-interest expenses were $1.8 million for the first quarter of 2001 versus $1.8 million for the same time frame in 2000. Expenses which exhibited increases included data processing costs which increased $30,000, or 14.0% in the current quarter versus the same quarter in 2000; occupancy and equipment which increased $46,000 or 20.4% and the cost of the Trust Preferred issued February 22, 2001 which totaled $38,000 in the current quarter. Marketing expense decreased by $63,000 to $131,000 in the first quarter of 2001 versus $194,000 in the first quarter of 2000. The Company initiated a substantial marketing program in the first quarter of 2000 to acquire core deposit checking accounts. Income Tax Expense The first quarter of 2001 effective tax rate was 35% versus 12.4% for the first quarter of 2000. Taxes in the first quarter of 2000 was income impacted by a $190,000 reduction in the Company valuation allowance. 6 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's success is dependent upon its ability to manage interest rate risk. Interest rate risk can be defined as the exposure of the Company's net interest income to adverse movements in interest rates. Although the Company manages other risks, as in credit and liquidity risk, in the normal course of its business, management considers interest rate risk to be its most significant market risk and could potentially have the largest material effect on the Company's financial condition and results of operations. Because the Company does not maintain a trading portfolio, it is not exposed to significant market risk from trading activities. The Company's interest rate risk management is the responsibility of the Asset/Liability Management Committee (ALCO). ALCO establishes policies that monitor and coordinate the Company's sources, uses and pricing of funds. The Company seeks to reduce the volatility of its net interest income by managing the relationship of interest-rate sensitive assets to interest-rate sensitive liabilities. In recent years, the focus has been to originate adjustable-rate residential loans for portfolio, which reprice more quickly than fixed-rate residential loans. The Company's adjustable-rate loans are primarily tied to published indices, such as the one-year Constant Maturity Treasury (CMT). The Company utilizes a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on both a rise or fall in interest rates (rate shock) over twelve and twenty-four month periods. The model is based on the actual maturity and repricing characteristics of interest-rate sensitive assets and liabilities. The model incorporates assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities. The assumptions are based on nationally published prepayment speeds on assets and liabilities when interest rates increase or decrease by 200 basis points or greater. The model factors in projections for anticipated activity levels by product lines offered by the Company. The simulation model also takes into account the Company's increased ability to control the rates on deposit products more so than adjustable-rate loans tied to published indices. Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change the interest income and expense streams associated with the Company's financial instruments also change, thereby impacting net interest income (NII), the primary component of the Company's earnings. ALCO utilizes the results of the simulation model and static GAP reports to quantify the estimated exposure of NII to sustained interest rate changes. The following reflects the Company's NII sensitivity analysis over a twelve month period: Rate Change Estimated NII Sensitivity Over Twelve Months ----------- ------------------------------------------------ March 31, 2001 March 31, 2000 -------------------------------------------------- +200bp 0.26% -3.44% -200bp -1.91% -0.51% The preceding sensitivity analysis does not represent the Company's forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including: the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change. Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable-rate assets, the potential effect of changing debt service levels on customers with adjustable-rate loans, depositor early withdrawals and product preference changes, and other internal/external variables. Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates. 7 IPSWICH BANCSHARES, INC. AND SUBSIDIARY PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a. Exhibits b. Reports on Form 8-K None c. Exhibits 2.1 Plan of Reorganization and Acquisition dated as of February 17, 1999 between the Company and Ipswich Savings Bank incorporated by reference to the Company's Form 8-K filed on July 9, 1999. 3.1 Articles of Organization of the Company dated February 12, 1999 and incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 3.2 By-laws of the Company is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 4.1 Specimen stock certificate for the Company's Common Stock is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.1 Lease dated September 15, 2000 for premises located at Routes 133 and 1, Rowley, Massachusetts is incorporated by reference herein from the Company's September 30, 2000 Form 10-Q.. 10.2 Lease dated April 25, 1994 for premises located at 451 Andover Street, North Andover, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.3 Lease dated March 4, 1996 for premises located at 588 Cabot Street, Beverly, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.4 Lease dated July 27, 1997 for premises located at 600 Loring Avenue, Salem, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.5 Lease dated February 27, 1998 for premises located at 89 Pleasant Street, Marblehead, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 8 10.6 Lease dated June 12, 1998 for premises located at 470 Main Street, Reading, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.7* Incentive Compensation Plan for Senior Management and certain other officers dated September 15, 1995 is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.8* Director Recognition and Retirement Plan adopted as of May 18, 1999 is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.9* Merger and Severance Benefits Program dated February 18, 1998 is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.10* Amended and Restated Employment and Severance Agreement dated May 18, 1999 between Ipswich Savings Bank and David L. Grey is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.11* Amended and Restated Employment and Severance Agreement dated May 18, 1999 between Ipswich Savings Bank and Francis Kenney is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.12* Amended and Restated Severance Agreement dated May 18, 1999 between Ipswich Savings Bank and Thomas R. Girard is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.13(a)* Amended and Restated Split Dollar Agreement dated May 18, 1999 among Ipswich Savings Bank, Eastern Bank and David L. Grey is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.13(b)* Amended and Restated Ipswich Irrevocable Insurance Trust dated as of May 18, 1999 by and between Ipswich Savings Bank and Eastern Bank is incorporated by reference herein from the Company's June 30, 1999 Form10-Q. 10.14 Contract with Bank's data processor dated February 14, 1997 is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.15* 1992 Incentive and Non-qualified Stock Option Plan incorporated by reference to the Company's Registration Statement on Form S-8 filed on July 22, 1999. 10.16* 1996 Stock Incentive Plan incorporated by reference to the Company's Registration Statement on Form S-8 filed on July 22, 1999. 10.17* 1998 Stock Incentive Plan incorporated by reference to the Company's Registration Statement on Form S-8 filed on July 22, 1999. 10.18* Deferred Compensation Plan for Directors incorporated by reference to the Company's Form S-8 filed on July 22, 1999. 10.19 Contract dated April 6, 2000 with U.S. Bancorp for ATM processing services incorporated by reference to the Company's March 31, 2000 Form 10-Q. 10.20* Severance Agreement dated August 8, 2000 between Ipswich Savings Bank and Mark E. Foley is incorporated by reference herein from the Company's June 30, 2000 Form 10-Q. 10.21* Split Dollar Agreement dated March 30, 2001 between Ipswich Savings Bank and Francis Kenney. 11. A statement regarding the computation of earnings per share is included in the Notes to Consolidated Financial Statements. 12. Not applicable. * Denotes Management Contract or Compensation Plan. 9 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. IPSWICH BANCSHARES, INC. By: /s/ David L. Grey Date: May 11, 2001 ------------------ David L. Grey President and Chief Executive Officer By: /s/ Francis Kenney Date: May 11, 2001 --- ------------------ Francis Kenney Treasurer (Principal Financial Officer and Principal Accounting Officer) 10

IPSWICH BANCSHARES INC 10-Q