MID-YEAR MEETING NOVEMBER 7, 2022
CEO’ S & P RESIDENT' S R EMARKS
Overview Cape Cod 5 Mission Financial and Strategic Update External Environment Conclusion
Mid-Year Meeting
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CEO' S & P RESIDENT' S R EMARKS
Overview Cape Cod 5 Mission Financial and Strategic Update External Environment Conclusion
Mid-Year Meeting
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ENRICHING LIVES
Mission
Values
Strategic Goals
Ways of Engagement
Strategic Priorities
Fairness | Mutual Respect | Highest Ethical Standards | Trustworthiness Cross-Cutting Goals Financial Strength
Community Banking
Digital Ecosystem
Trusted Advisor
Responsible Business Practices
Customer Acquisition & Relationship Management
Corporate Leadership & Volunteerism
Employee Development & Talent Acquisition
Employees
Community
Advancement of Financial Know-How
Community Engagement
Diversity, Equity & Inclusion Philanthropy
Enterprise Risk Management
Environmental Stewardship
Mid-Year Meeting
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CEO’ S & P RESIDENT' S R EMARKS
Overview Cape Cod 5 Mission Financial and Strategic Update External Environment Conclusion
Mid-Year Meeting
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KEY FINANCIAL METRICS $50 $ in Millions
$40 $30
1.5%
1.18% 0.76%
0.81%
0.85%
0.74%
$20
1.0% 0.5%
$10 $0
0.8% 0.6% 0.4% 0.2% 0.0%
Sep-18
Sep-19 Net Income
Sep-20 Sep-21 Sep-22 Return on Average Assets
0.0%
Non-Performing Asset Ratio 0.47%
0.47%
0.39%
Total Assets
$10,000 $ in Millions
Net Income and Return on Average Assets
$8,000 $6,000 $4,000 $2,000 $0
Dec-18A Dec-19A Dec-20A Dec-21A Sep-22A On-Balance Sheet
12% 10%
Off Balance Sheet
Tier 1 Leverage Ratio 9.63%
9.74%
10.03%
10.09%
10.05%
8%
0.30%
6%
0.21%
4% 2% 0%
Dec-18A Dec-19A Dec-20A Dec-21A Sep-22A
Dec-18A Dec-19A Dec-20A Dec-21A Sep-22A
Retail Banking
• Elimination of overdraft fees for personal and business customers
• Renovations to East Harwich and Yarmouth Banking Centers
• Introduction of BankOn deposit account
• Expansion within Plymouth with 2 new Banking Centers
• Deposits totaled $4.3 billion as of end of Q3 2022 • #1 deposit market share, with nearly 25% of area FDIC insured deposits
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Residential and Consumer Lending
• Expanded product offerings to include 40-year fixed rate mortgage as an option to make homeownership attainable • Added sewer connection loan program
• Upgraded digital capabilities, implementing a best-in-class digital mortgage application solution • Improved customer experience and reduced the time from application to close
• Residential and consumer volume totaled $1.2 billion for the first 9 months of 2022. • Exceeded same period in 2021 by 5% despite a reduction in total market lending activity Mid-Year Meeting
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Commercial Lending
• Supported customers • Commercial Portfolio at $868 • Implementing a new digital through Paycheck Protection million as of September 30 small business lending Program forgiveness process platform • Over 99% of PPP loans originated by Cape Cod 5 have received full forgiveness
• Forgiveness of PPP loans • This platform will improve the contributed to a 7% decrease efficiency with which small in commercial portfolio from businesses can access bank prior year end financing
Mid-Year Meeting
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Wealth Management Services
• Engaging customers in navigation of equity and bond market volatility
• New business acquisition is on pace to exceed $100 million for the third year in a row
• Wealth Management Services assets $1.67 billion as of 9/30/2022
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Employees
• Cape Cod 5 as an employer of choice
• Education and development programs to help employees grow
• Seek input and ideas from employees and celebrate Cape Cod 5 achievements
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Community
Community Banking
Responsible Business Practices
Corporate Leadership & Volunteerism
Advancement of Financial Know-How
Philanthropy
Mid-Year Meeting
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CEO’ S & P RESIDENT' S R EMARKS
Overview Cape Cod 5 Mission Financial and Strategic Update External Environment Conclusion
Mid-Year Meeting
13
WHERE WE ARE TODAY – ECONOMIC GROWTH 40%
US GDP
30% 20% 10% 0% -10% -20% -30% -40%
Source: St. Louis Fred
2 Quarters of Negative Growth i.e. Technical Recession
WHERE WE ARE TODAY – INFLATION 10.0%
2023 Forecast 4.0%
9.0% 8.0%
8.2%
7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.3% 1.0% 0.0% Dec-20
Mar-21
Source: St. Louis Fred
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
WHERE WE ARE TODAY – INTEREST RATES 2 Year Treasury
5.00%
10 Year Treasury 4.43%
4.50% 4.00% 3.50%
4.13%
3.00% 2.50% 2.00% 1.63% 1.50% 1.00% 0.50%
0.77%
0.00%
Source: St. Louis Fred
YTD Change 2 Year – 3.66% 10 Year – 2.50%
January 2022: 2 Year @ 0.77% 10 Year @ 1.63% April 2022 2 Year @ 2.46% 10 Year @ 2.38% July 2022 2 Year @ 2.83% 10 Year @ 2.88% October 2022 2 Year @ 4.43% 10 Year @ 4.13%
WHERE WE ARE TODAY – EQUITY MARKET 5%
Percentage Change in S&P 500 and DJIA
0% -5%
-10.6%
-10% -19.3%
-15% -20%
Bear-Market Territory
-25% -30% Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 S&P 500 DJIA Source: St. Louis Fred
WHERE WE ARE TODAY – LABOR MARKET Unemployed Individuals vs. Job Openings
Ratio of Openings to Unemployed 1.86 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22
25,000 20,000 15,000 10,000 5,000 (5,000) (10,000) (15,000) (20,000) (25,000)
Unemployed Source: Bureau of Labor Statistics
Openings
Unemployed Minus Openings
HOW WE GOT HERE – POLICY ACTIONS THROUGH COVID FISCAL POLICY Cost of COVID-19 Relief
MONETARY POLICY
Cost $ in Billions
Support for Small Businesses
$968
Economic Stimulus Payments
$867
Expanded Unemployment
$764
Public Health Spending
$657
Tax Incentives
$566
Direct to Governments
$512
Educational Support
$282
Other
$719
Total Spending
$5.3 Trillion
Support Fed Funds Rate Reduced to 0% Elimination of Required Reserve for Banks Quantitative Easing – Purchasing of Bonds Creation of Various Emergency Lending Facilities Direct Lending to Banks Direct Lending to Major Corporations Direct Lending to Non-Profits Direct Lending to State and Municipal Governments
WHERE WE ARE GOING – ECONOMIC GROWTH 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0%
US GDP Actual
Forecast
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023
Source: Oxford Economics
WHERE WE ARE GOING – INTEREST RATES % Change in Fed Funds Rates
6.0%
Projected Cycle
5.0% 4.0%
Current Cycle
2004 1987
1994 1983
3.0%
2015
1999
2.0% 1.0% 0.0%
0
2
4
1983 Source: Federal Reserve
6
8 1987
10 12 14 16 18 20 22 24 26 28 30 32 34 36 Months Since First Rate Increase 1994
1999
2004
2015
Current
WHERE WE ARE GOING – MORTGAGE RATES Average Rate on a 30 Year Fixed Rate Mortgage
Source: Freddie Mac Mortgage Survey
-15% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22
WHERE WE ARE GOING – HOME VALUES Annualized Month over Month Change S&P Case Schiller Index
30%
25%
20%
15%
10% Fastest deceleration since 1987
5%
0%
-5%
-10%
Source: St. Louis Fred
CORPORATOR FEEDBACK – REGIONAL TRENDS REAL ESTATE • Real estate robust but market is adjusting. • The housing situation is beyond the breaking point and I fear our communities lack the political will and capacity to address this crisis. • I continue to see the housing market out of reach for those who are the foundation of our community and are so vital to sustaining our local economy and the our quality of life. • We need to focus on affordable housing and resources that will help attract more year-round residents.
LABOR • Number of vacancies in fire, police and health services is scary. • Staffing for restaurants and hospitality businesses will continue to be a challenge. • Lack of affordable housing has brought staff shortages in many businesses. • Labor market squeeze. • Trends are highly dependent on staffing. Staffing seems to be an ongoing issue.
BUSINESS ENVIRONMENT • Strong metrics. • Increases in payroll and utility costs may cause issues in Fall/Winter. • Strained. We remain in a unique insulated region to some extent, but I sense a softer economy going forward. • Things seem rather strong, despite some uncertainty. The upper levels of the population continue to thrive. • Seems more stabilized, with COVID more under control tourism was busy this summer.
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MACRO TO LOCAL What do the macro-economic environment trends mean to our region?
Labor
Wage Growth
Home Affordability / Availability
Demographics
Business Environment
Cost of Living Mid-Year Meeting
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KEY EXTERNAL FORCES
Economy
Interest Rates
Climate Change
Disintermediation Cyber
Labor
Housing
Disintermediation Cyber
Mid-Year Meeting
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CEO’ S & P RESIDENT' S R EMARKS
Overview Cape Cod 5 Mission Financial and Strategic Update External Environment Conclusion
Mid-Year Meeting
28
MID-YEAR MEETING NOVEMBER 7, 2022