The savings bank
Ye ar end repor t
december 31, 2007
To Our Customers and Communities:
Over the past 34 years, there has always been something
very consistent and comforting about banking at Savings Bank of
Walpole: First, the Bank has never wavered from its mission to be
a locally-based, independent mutual bank; and second, whenever
you visited the Bank, you found Don Tisdale here. Both of these
facts may seem mundane in and of themselves, but when you look
at them in the context of the events that transpired in those three
plus decades, they are anything but ordinary.
After eleven years working as a loan officer and commercial
lender for Savings Bank of Walpole, Don was promoted to presi-
dent in 1984. In the early eighties, there were several community
banks here in the southwestern corner of New Hampshire and
southeastern Vermont. Over the past twenty-plus years, the vast
majority of these banks have disappeared. For one reason or
another, the boards and presidents of those banks chose to take
a different path than we ultimately did. Were these choices an
option for Savings Bank of Walpole? Absolutely. Were there easi-
er, more profitable routes for us to take? You bet. But Don decided
that our customers, employees and communities were better served
by choosing to uphold the 133-year-old mission of our Bank, and
he worked tirelessly to ensure that our customers had a great place
to bank and our employees had a great place to work. Needless
to say, he was successful on both fronts.
Carrying on Don’s legacy of delivering exceptional service
and offering products designed in the best interest of our customers
will be a tremendous challenge. I am both grateful and humbled
by the opportunity to take on this challenge and I deeply ap-
preciate the confidence that Don and the Board of Trustees have
displayed in me. Today, a few titles have changed at the Bank,
but our commitment to our customers, our employees and our
communities remains the same. We will remain a mutually owned
bank where customers will make us their first choice for their bank-
ing needs, our employees will find us to be the best place to work
and our communities will continue to think of us as one of the best
corporate citizens in town.
In 2007, headlines about the financial services industry went
from discussing banks’ unfavorable yield curves on the back pages
of business journals to trumpeting a full-blown banking crisis on
the evening news. Economists are currently placing odds on the
likelihood of a recession and the large money center banks are
resorting to capital infusions from foreign investors to offset huge
losses in their loan and investment portfolios. There’s a whole lot
of finger pointing going on as to who is to blame for current
economic conditions, but we know there are cycles in the econo-
my—and what goes up must come down. We’ve come through
a long period of economic expansion and we’re likely to see
some contraction, which, although painful to some, is quite
normal. The expansion was most likely prolonged by a low interest
rate environment coupled with the loosening of credit terms leading
to the subprime mortgage crisis. The Federal Reserve Board is trying
to use monetary policy to keep the economy growing and our
government leaders have resorted to an economic stimulus package
to keep things on track. Politicians are touting their own plans to
solve our current economic dilemma. Time will tell whether their
plans will be successful or not.
How the current banking crisis affects Savings Bank of Walpole
remains a question. I believe that the impact on your bank will be
relatively minor, as we did not participate in the subprime market
and have no direct loan exposure to these products. The larg-
est threat to the Bank is on the legislative front, where Congress
is working on a number of bills designed to address the current
mortgage problems facing the country. Not allowing the capital
markets to work through their current problems and intervening with
legislative mandates will likely result in a long list of unintended
consequences on banks to carry out such mandates.
As we reflect on 2007 in the wake of the negative banking
headlines, we find ourselves in very good shape financially. Our
earnings increased, our capital level increased, our number of
customers increased, and our investment in technology increased.
We saw—and continue to see—the positive effect that our strategy
of slow, steady, profitable growth has had on our bottom line. We
know that creating products and services that are in the best interest
of our customers will help us continue to grow our loyal customer
base and increase the franchise value of Savings Bank of Walpole
for years to come. We continue to educate current and potential
customers with a strong marketing campaign designed to differentiate
us from the competition and position Savings Bank of Walpole as
the area’s most respected community bank…the savings bank of
the whole community…the savings bank of you.
Most importantly, we continue to attract and retain some of the
finest regional talent in the banking business. It is gratifying to me
to know that our employees wholeheartedly support our objectives
of providing the highest quality of service possible in whatever
function they perform for the Bank. We ask a lot of our employees,
but they never disappoint us. Our customers are the true
beneficiaries of their commitment and dedication.
I welcome your feedback. If there is something you think
we can be doing better, I want to hear from you. I am always
available to listen to your ideas. Please stop by our Walpole
or Keene office and ask for me. As anyone who knows me
can attest, I would love to talk with you anytime about the
value of community banking.
Gregg R. Tewksbury
President & CEO
Savings Bank of Walpole
2007 Financial Highlights
Net income was $938,335 in 2007, an increase of $321,149,
or 52.0%, from 2006.
In 2007, interest and dividend income increased $973,479, or
7.5%, to $13,892,022. Interest expense, which is mainly interest
on deposits, increased $701,161, or 13.5%, to $5,903,228.
As a result of the greater increase in interest income over interest
expense, net interest income increased $272,318, or 3.5%, to
The spread between the Bank’s yield on loans and investments
and its cost of funds was 3.26%, down from 3.28% in 2006 and
3.58% in 2005. The Bank’s net yield on earning assets, or net
interest margin, was 3.51%, up from 3.49% in 2006 but down
from 3.73% in 2005. In 2007, the Bank’s net interest income
grew, even though the bank’s net interest margin declined slightly
because of higher volumes of business. In 2006, the Bank’s net
interest income declined because the decline in net interest margin
more than offset the positive effect of higher volumes of business.
During 2007, there was a provision for loan losses of $103,000
taken against income. This was a decrease of $217,000, or
67.8%, from the amount taken in 2006. Net interest income after
the provision for loan losses was $7,885,794 in 2007, which
was an increase of $489,318, or 6.6%, over the prior year.
The allowance for loan losses increased $67,225, or 4.1%, to
$1,728,772, or .93% of total loans at year-end 2007. As a
percentage of non-accrual loans, the allowance for loan losses
was 120.3% at year-end 2007 compared to 95.5% at year-end
2006. Non-performing assets composed of non-accrual loans,
troubled debt restructurings, and other real estate owned were
0.59% and .71% of assets at year-end 2007 and 2006 respectively.
Total non-interest income increased $617,744, or 41.2%, to
$2,119,054 in 2007. Financial services commissions increased
$260,465, or 78.3%, in 2007 after increasing $17,829, or
5.7%, in 2006 and $267,065, or 557.6%, in 2005. There
was no income from security gains recorded in 2007. This was
an increase of $88,942 due to a loss of that amount in 2006.
Customer service fees increased $62,588, or 13.9%, in 2007.
Net gain on the sale of loans increased $38,081, or 64.7%.
Income from the Bank’s Debit card program/ATM network
increased $52,297, or 12.1%, due to increasing volumes of
debit card activity. For the year, the Bank recorded income of
$220,626 from Charter Holding’s operations, which was an
increase of $62,800, or 39.8%, over 2006.
Total non-interest expense increased $670,357, or 8.3%, to
$8,703,990 in 2007 after increasing $172,910, or 2.2%, in
2006. Salaries and employee benefits increased $508,802, or
10.1%, in 2007 after increasing $187,127, or 3.8%, in 2006
and $932,681, or 23.7%, in 2005. While the increase in 2006
resulted from increases in salaries and the growth of the Bank, the
larger increases in 2007 and 2005 were mainly associated with
on-going costs in transitioning the Bank to a new management
team and increases in commission payments.
Total assets were $242,145,747 on December 31, 2007, which
was $3,538,677, or 1.4%, less than year-end 2006. Deposits
were $218,924,141, a decrease of $5,023,621, or 2.2% in
2007 after an increase of $15,581,178, or 7.5%, in 2006.
This can be compared with a decrease of 1.6% in 2005 and
increases of 10.1% in 2004, 9.8% in 2003, 10.0% in 2002,
and 13.2% in 2001. Recent years have been difficult ones for
deposit growth especially for NOW, checking, and savings
balances. After keeping interest rates at historic lows during
the early years of the decade, which stimulated the growth
of low-cost, non-maturity deposits, the Federal Reserve started
moving rates higher in the second half of 2004. By 2006, as
rate increases continued, the impact of a tighter monetary policy
forced banks to compete for depositor funds with escalating CD
rates, while depositors moved funds from savings accounts to CDs
and redeployed excess transaction account balances into interest
earning accounts and other investments. As a result, in 2006, in
order to fund strong loan growth, the Bank competed aggressively
with a number of special rate CD offerings. As those CDs matured
in 2007, lower funding requirements and some improvement in
non-maturity deposits allowed the Bank to roll off the most interest-
sensitive of those CDs, which resulted in a decline in deposits.
Net loans were $183,179,015, which was an increase of
$892,823, or .5%, compared with increases of $16,848,782,
or 10.2%, in 2006. The following comment has been carried
in management’s discussion for a number of years: “The Federal
Reserve ignited a residential refinancing boom by keeping short-
term interest rates at historic lows in the period 2002 through mid
2004. From mid 2004 through mid 2006, though the Federal
Reserve increased short-term rates rapidly with a succession of
seventeen .25% moves, mortgage and other longer-term interest
rates either fell or increased modestly. This kept activity high in
the residential mortgage market where refinancing activity was
followed by a strong purchase mortgage market as relatively low
mortgage rates supported increasing prices and both low rates
and price increases spurred speculative buying.” Last year the
comment was added that, “The excesses created by this
combination were evident by the latter part of 2006 as the
residential real estate market cooled and credit problems began
to appear in some markets and for some mortgage products.”
Relative to 2007, the full impact and magnitude of the crisis
that has been building became evident in the first nationwide
decline in housing prices since the Depression and in skyrocketing
delinquencies and foreclosures of residential real estate. Through
2007, these events had no discernable impact on the residential
mortgage portfolio of the Bank other than a decline in the volume
of activity. Though competition for commercial credits remained
strong during the year, increases in commercial real estate and
commercial loans continued to reflect the recognition of the Bank
as a small business lender in its market area. Increases in the
prime rate over recent years slowed the growth of home equity
lines of credit, while the outright decline in property values have
reduced the ability of consumers to meet their borrowing needs
by taking additional cash out of the equity in their homes.
Capital at year-end was $21,035,683, an increase of
$1,270,015, or 6.4%, over year-end 2006. The bank’s capital
to asset ratio at year-end 2007 was 8.69%, compared with
8.05%, at the prior year-end.
Consolidated Statements of Income
December 31 December 31
Interest and Dividend Income:
Loans, including fees $ 12,029,403 $ 11,097,276
Taxable 1,309,781 1,473,227
Non-taxable 59,246 44,031
Federal funds sold 493,592 304,009
Total Interest and
Dividend Income 13,892,022 12,918,543
Deposits 5,884,845 5,184,599
Other liabilities 18,383 17,468
Total Interest Expense 5,903,228 5,202,067
Net Interest and Dividend Income 7,988,794 7,716,476
Provision for loan losses 103,000 320,000
Net interest income, after
the provision for loan losses 7,885,794 7,396,476
Customer service fees 514,526 451,938
Net gain (loss) on sales and calls
of available for sale securities (88,942)
Net gain on sales of loans 96,954 58,873
Income of affiliate 220,626 157,826
Financial services commissions 593,259 332,794
Other 693,689 588,821
Total Non-Interest Income 2,119,054 1,501,310
employee benefits 5,566,279 5,057,477
Occupancy and equipment 981,669 1,005,475
Deposit insurance expense 26,149 26,562
Advertising and marketing 223,200 232,588
Postage 166,331 158,787
Debit card/ATM network 318,821 279,326
Other general and
administrative 1,421,541 1,273,418
Total Non-Interest Expenses 8,703,990 8,033,633
Income before income taxes 1,300,858 864,153
Provision for income taxes 362,523 246,967
Net Income $ 938,335 $ 617,186
Return on average assets 0.39% 0.26%
Equity to assets 8.69% 8.05%
Average yield on earning assets 6.11% 5.85%
Average cost of interest
bearing liabilities 2.85% 2.57%
Interest rate spread 3.26% 3.28%
Net interest margin (1) 3.51% 3.49%
(1) Net interest margin is total interest income and dividends less total interest
expense divided by average interest earning assets.
Consolidated Balance Sheets
December 31 December 31
Cash and due from banks $ 6,159,802 $ 6,162,988
Federal funds sold 10,981,000 13,935,000
Total Cash and Cash Equivalents 17,140,802 20,097,988
Securities available for sale 30,967,424 31,545,919
Loans held for sale — 362,000
Loans, net of allowance for loan
losses of $1,728,772 in 2007
and $1,661,547 in 2006 183,179,015 182,286,192
Premises and equipment, net 5,267,781 5,539,273
Accrued interest receivable 1,004,423 1,041,378
Equity investment in affiliate 3,148,413 3,136,780
Dividend receivable from affiliate — 189,029
Deferred tax asset 1,032,869 1,070,417
Other assets 405,020 415,448
Total Assets $ 242,145,747 $ 245,684,424
Liabilities and Capital
Deposits $ 218,924,141 $223,947,762
Other liabilities 2,185,923 1,970,994
Total Liabilities 221,110,064 225,918,756
Guaranty fund 7,000,000 7,000,000
Undivided profits 14,129,845 13,191,510
comprehensive loss (94,162) (425,842)
Total Capital 21,035,683 19,765,668
Total Liabilities and Capital $ 242,145,747 $245,684,424
Szmit, Frederick A., Chairman of the Board
Tewksbury, Gregg R., President & CEO
Dunbar, Bradley P.
Galloway, Jerome S.
McBeth, Sylvia M.
Potter, Edward R.
Rust, Lynn C.
Ryder, Steven J.
Shaw, Dr. Charles P.
Tisdale, Donald J.
Executive and Administration
Tewksbury, Gregg R., President & CEO
Richardson, Tamara W., Assistant Vice President &
Human Resources Officer
Wilson, Richard A., Senior Vice President & CFO
Robbins, Linda W., Vice President & Treasurer
Guild, Matthew W., Vice President & CIO
Morrison, Matthew D., Vice President & Senior Lender
Croteau, Scott L., Vice President
Emerson, Barry W., Vice President
Lehr, Amy L., Vice President
Martin, Dawn M., Credit Officer
Hayward, Michelle A., Mortgage Originator
Pearson, Julie A., Vice President
Hurd, Margaret E., Assistant Vice President
Flower, Tracy S., Compliance Administration Officer
Curtis, Martha A., Vice President
Reney, Wallace A., Assistant Vice President
Nichols, Geraldine A., Assistant Treasurer
Smith, Valerie J., Branch Manager & Bank Officer
Hanks, Katherine M., Branch Manager & Bank Officer
Howard, Michelle E., Branch Manager & Bank Officer
*Infinex Financial Group located at Savings Bank of Walpole
Migneault, Jeffrey R., Vice President
Charter Trust Company
Franklin, Kim E., Wealth Advisor
127 Washington Street, Keene
Bates, Thomas S. McBeth, Sylvia M.
Batty, Jill I. McMahon, Esq., Lewis A.
Bradeen, Sarah A. Miller, Robert F.
Bridge, Jr., George L. Neal, James H.
Buck, Dr. Ralph N. Norman, Jennie L.
Burr, Dr. I. Tucker O’Meara, William R.
Colony, III, John J. Perry, Robert S.
Curtis, Martha A. Plifka, Jr., Stanley S.
Daniels, Randall Potter, Bruce
Davis, Philip J. Potter, Edward R.
Dunbar, Bradley P. Putnam, George E.
Dunbar, Jayson B. Putnam, Mark A.
Duncan, Dayton R. Reardon, Jr., Edward F.
Fennessy, Marion N. Robbins, Linda W.
Finn, Joanne Rogers, Thomas T.
Fitz-Simon, James E. Rust, Lynn, C.
Fletcher, William S. Ryder, Steven J.
Furlone, Robert K. Shaw, Dr. Charles P.
Galloway, Jerome S. Snide, P. Michael
Green, Joseph J. Swift, Neil R.
Hicks, Dianne O. Szmit, Frederick A.
Hicks, Randall P. Tewksbury, Gregg R.
Houghton, Donald C. Tisdale, Donald J.
Howard, Susan L. Trask, Paul S.
Hubbard, John A. Tyson, William C.
Jacobs, Ruth F. Walier, Joseph C.
Johnson, David B. Westover, David A.
Kimball, Robert I. Whittemore, Peter T.
Kinyon, Esq., Gary J. Wichland, David P.
Koson, Peter D. Wilson, Richard A.
Lacey, Linda A. Zimmerman, Esq., John J.
Macri, Jr., Gregory J.
Securities offered through Infinex Investments, Inc. Member FINRA/SIPC
*Non-deposit investment products, including insurance are:
• not insured by the FDIC or any other agency or instrumentality
of the federal government;
• not deposits or other obligations of, or guaranteed by, the bank
or any affiliate of the bank;
• subject to investment risk, including possible loss of principal
Locations & Business Hours
68 Ames Plaza Lane
Walpole, NH 03608 (603) 756-4771
Banking Lobby, Mortgage Lending, Consumer Lending
Drive-Up Banking, Safe Deposit, and Executive Offices
Monday—Wednesday 8:30 am–5:00 pm
Thursday and Friday 8:30 am–6:00 pm
Saturday 8:00 am–Noon
Monday—Wednesday 8:00 am–5:00 pm
Thursday and Friday 8:00 am–6:00 pm
Saturday 8:00 am–Noon
11 Westminster Street
Walpole, NH 03608 (603) 756-4771
Banking Lobby and Safe Deposit
Monday—Friday 8:00 am–2:00 pm
84 Marlboro Street
Keene, NH 03431 (603) 352-1822
Banking Lobby, Commercial Lending, Mortgage
Lending, Consumer Lending, Drive-Up Banking,
Safe Deposit, and Financial Services*
Monday—Friday 8:30 am–5:00 pm
Monday—Friday 8:00 am–5:00 pm
400 West Street
Keene, NH 03431 (603) 355-1881
Banking Lobby, Consumer Lending and Drive-Up Banking
Monday–Thursday 8:30 am–5:00 pm
Friday 8:30 am–6:00 pm
Saturday 8:00 am–2:00 pm
Monday–Thursday 7:30 am–5:00 pm
Friday 7:30 am–6:00 pm
Saturday 8:00 am–2:00 pm
24-Hour ATM service is available at each location.
ATM service also available at Cheshire Medical Center.
Internet Banking Services at www.walpolebank.com
The savings bank
Equal Housing Lender Member FDIC