<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended .....................................December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEES REQUIRED]
For the transaction period from _________ to __________
Commission File Number: 0-28700
First Home Bancorp Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-3423990
- --------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
125 South Broadway
Pennsville, New Jersey 08070
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code:
(609) 678-4400
Securities registered pursuant to Section 12 (b) of the Act:
Not Applicable
Securities registered purusant to Section 12(g) of the Act:
Common Stock (no par value)
-----------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $36,452,000 (1)
Number of shares of Common Stock outstanding as of March 14, 1997 was 2,708,426
shares.
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference:
(1) Portions of the Annual Report to Shareholders for the year ended December
31, 1996 are incorporated into Part I and Part II of this form 10-K.
(2) Portions of the definitive proxy statement for the 1997 Annual Meeting of
Shareholders are incorporated into Part III, Items 10-13 of this Form 10-K.
- ------------------------------------
(1) The aggregate dollar amount of the voting stock set forth equals the number
of shares of Common Stock outstanding, reduced by the number of shares of Common
Stock held by executive officers, directors and shareholders owning in excess of
10% of the registrant's Common Stock multiplied by the closing price for the
Common Stock on the Nasdaq National Market tier of the Nasdaq Stock Market on
March 14, 1997 The information provided shall in no way be construed as an
admission that any person whose holdings are excluded from this figure is an
affiliate of the registrant or that any person whose holdings are included in
this figure is not an affiliate of the registrant and any such admission is
hereby disclaimed. The information provided herein is included solely for record
keeping purposes of the Securities and Exchange Commission.
<PAGE>
PART I
Item 1. Business.
Organization
First Home Bancorp Inc. (the "Company") is a New Jersey corporation and
a unitary savings and loan holding company registered under the Home Owners'
Loan Act, as amended ("HOLA"). The Company is the parent holding company of
First Home Savings Bank, F.S.B. (the "Bank"), a federally chartered savings
bank. The Company was organized in February 1996 for the purpose of acquiring
all of the capital stock of the Bank in connection with the reorganization of
the Bank into the holding company form of ownership. The reorganization was
consummated on May 31, 1996. The Company is registered as a holding company with
the Office of Thrift Supervision ("OTS") and is subject to OTS regulation,
examination, supervision, and reporting requirements.
The Bank conducts business from ten offices in Carneys Point, Elmer,
Gibbstown, Newfield, Pennsauken, Penns Grove, Pennsville and Westmont, New
Jersey, and Stanton and Wilmington, Delaware. The Bank also offers around the
clock banking through "HomeLine," a twenty-four hour telephone banking service,
and various automated teller machines. Organized as a New Jersey building and
loan association in 1928 under the name Penns Grove Building and Loan
Association, the Bank changed its name to First Savings and Loan Association of
Penns Grove in 1956 when it obtained federal insurance of accounts. On April 15,
1987, it converted to the stock form of organization and in June, 1988 changed
its name to First Home Savings Bank, S.L.A. On July 1, 1992, it acquired
Fidelity Mutual Savings and Loan Association of Westmont, New Jersey ("Fidelity
Mutual") through a conversion merger of Fidelity Mutual with and into the Bank.
The acquisition was accounted for as a purchase and resulted in the acquisition
of $79.9 million in assets and liabilities of $79.4 million. On June 25, 1993,
the Bank merged with and into White Eagle Federal Savings Bank ("White Eagle"),
a federally chartered savings bank organized in 1911 operating two offices in
Delaware with approximately $31 million in assets. As a result of the merger
with White Eagle, the Bank became a federally chartered savings bank and changed
its name to First Home Savings Bank, F.S.B. The transaction was accounted for as
a pooling-of-interests. On January 23, 1995, two retail-banking offices were
acquired and deposits of $15.9 million were assumed. The transaction was
accounted for as a purchase transaction.
Substantially all of the Company's consolidated revenues are derived
from the operations of the Bank with the Bank representing substantially all of
the Company's consolidated assets and liabilities at December 31, 1996. At
December 31, 1996, the Company had total assets, deposits and net worth of
approximately $498.4 million, $290.3 million and $32.6 million, respectively.
The Fidelity Mutual acquisition and the acquisition of the two
retail-banking offices were accounted for as purchases. As a result, the assets
and liabilities of Fidelity Mutual and the two retail-banking offices were
recorded at their fair market values on the books of the Bank at the time of the
acquisitions and the historical results of operations prior to the acquisitions
were not adjusted.
The Bank's principal business consists of attracting deposits from the
general public through its offices and investing such deposits, together with
funds from borrowings and operations, primarily in permanent loans (including
construction loans) secured by single-family residential real estate, consumer
loans and, to a lesser extent, loans secured by commercial real estate. At
present, the Bank also maintains a portfolio of mortgage-backed securities
("MBS") and other permissible investments, and, through its service corporation,
engages in the sale of insurance annuities and other activities.
The Company's and Bank's executive offices are located at 125 South
Broadway, Pennsville, N. J. 08070 and their phone number is (609) 678-4400.
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Lending Activities
General
Lending operations include the origination of long-term fixed-rate and
adjustable-rate loans secured by mortgages on residential real estate, consumer
loans and, to a lesser extent, commercial real estate loans.
Loan Portfolio Composition
At December 31, 1996, the net loan portfolio totaled $258.9 million,
representing 51.9% of the Company's total assets. Gross loans amounted to $265.7
million, of which $225.3 million were mortgage loans, comprised of $208.1
million in residential mortgage loans and construction loans and $17.2 million
in commercial real estate loans. In addition, $38.4 million was invested in
consumer loans and $2.0 million in commercial business loans at December 31,
1996.
The following table sets forth the composition of the loan portfolio by
type of loan as of the dates indicated.
<TABLE>
<CAPTION>
At December 31,
1996 1995 1994 1993 1992
--------------- ---------------- -------------- --------------- ---------------
(dollars in thousands)
Amount % Amount % Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential property $201,269 75.7% $203,375 77.4% $190,499 77.2% $161,507 72.8% $137,599 74.2%
Loans held for sale 676 .3 418 .2 288 .1 16,967 7.6 4,833 2.6
Construction 3,824 1.4 3,258 1.2 3,707 1.5 5,449 2.5 4,568 2.5
FHA and VA loans 2,304 .9 2,890 1.1 2,277 .9 2,711 1.2 3,190 1.7
Commercial 17,214 6.5 15,671 6.0 16,398 6.7 14,476 6.5 14,411 7.8
---------- ----- ---------- --- ---------- ----- ---------- ----- ---------- -----
Total real estate loans 225,287 84.8 225,612 85.9 213,169 86.4 201,110 90.6 164,601 88.8
--------- ---- --------- ---- --------- ---- --------- ---- --------- ----
Other commercial loans 1,948 .7 1,233 .5 928 .4 705 .3 724 .4
--------- ---- --------- ---- --------- ---- --------- ---- --------- ----
Consumer loans:
Mobile home loans 6,606 2.5 7,805 3.0 9,705 4.0 475 .2 450 .2
Equity 23,472 8.8 20,307 7.7 17,060 6.9 14,416 6.5 14,294 7.7
Automobile loans 4,631 1.8 4,088 1.6 3,017 1.2 2,933 1.3 3,348 1.8
Savings account loans 1,900 .7 1,712 .6 1,573 .6 1,573 .7 1,491 .8
Other loans 1,847 .7 1,827 .7 1,281 .5 774 .4 558 .3
--------- ---- --------- ---- --------- ---- --------- ---- --------- ----
Total consumer loans 38,456 14.5 35,739 13.6 32,636 13.2 20,171 9.1 20,141 10.8
--------- ---- --------- ---- --------- ---- --------- ---- --------- ----
Total loans receivable 265,691 100.0% 262,584 100.0% 246,733 100.0% 221,986 100.0% 185,466 100.0%
===== ===== ===== ===== =====
Less:
Loans in process (1,222) (1,681) (1,114) (2,065) (1,740)
Net deferred loan fees,
premiums and discounts (1,800) (2,123) (2,136) (1,214) (1,044)
Allowance for credit losses (3,760) (3,563) (3,315) (2,663) (2,063)
---------- --------- --------- --------- ---------
Total loans receivable, net $258,909 $255,217 $240,168 $216,044 $180,619
======== ======== ======== ======== ========
</TABLE>
Contractual Maturities
The following table reflects the scheduled contractual maturities of
the loan portfolio by type of loan at December 31, 1996. Loans with adjustable
or variable rates are included in the period in which they mature. Contractual
maturities of loans do not reflect anticipated repayments of the loan portfolio.
The average life of the loan is generally substantially less than the
contractual life because of early loan repayments, loan prepayments and
due-on-sale clauses in the mortgage contract. The table does not include
non-performing loans, unamortized premiums, discounts and fees.
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<TABLE>
<CAPTION>
Balance at Principal Repayments Contractually Due in Year(s) Ending December 31,
December 31, ------------------------------------------------------------------------
2000 2002 2007 2012 and
1996 1997 1998 1999 2001 2006 2011 Thereafter
---- ---- ---- ---- ---- ---- ---- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential loans
Adjustable rate $ 72,188 $ 4,457 $ 1,694 $ 1,906 $ 4,184 $11,805 $14,363 $33,779
Fixed rate 131,672 8,265 8,696 9,477 19,414 47,040 27,445 11,335
Consumer loans
Adjustable rate 3,993 30 26 27 52 128 126 3,604
Fixed rate 34,158 6,280 5,207 4,325 6,117 8,411 1,685 2,133
Commercial loans
Adjustable rate 9,893 1,760 436 445 885 2,278 2,208 1,881
Fixed rate 8,677 1,715 866 885 1,530 2,416 1,077 188
-------- ------- ------- ------- ------- ------- ------- -------
Total loans $260,581 $22,507 $16,925 $17,065 $32,182 $72,078 $46,904 $52,920
======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
Of the $238.1 million of total loans due after one year, $158.3 million
are fixed rate loans and $79.8 million are adjustable rate loans.
Real Estate Lending
Residential Loans. The primary lending activity is the origination of
conventional loans to enable borrowers to purchase, refinance or construct
single-family homes. Mortgage loans originated are generally long-term loans
that amortize on a monthly basis, with principal and interest payments due each
month. Generally, mortgage loans are written under terms, conditions and
documentation which permit their sale into the secondary market to FHLMC, FNMA
and other investors.
In response to the objective to shorten the period for assets to
reprice, adjustable-rate mortgage loans are originated which reprice every one
or three years. However, to enhance the yield and to remain competitive, loans
are originated at fixed interest rates at terms from five to thirty years fixed
rate. Fixed-rate residential loans granted for terms of thirty years are
generally originated with the intent to sell in the secondary market. These
loans are generally classified as loans held for sale. Generally, after sale the
loans continue to be serviced by the Bank. Adjustable rate residential mortgage
loans amounted to approximately $72.2 million, or 34.7% of the portfolio of
residential mortgage loans at December 31, 1996.
Currently, adjustable-rate residential mortgage loans are offered that
have terms of thirty years and interest rates which adjust (up or down) every
one or three years, with a maximum adjustment of two percentage points per
adjustment period and six percentage points over the life of the loan. The index
used to calculate the interest rate adjustment is the weekly average yield on
U.S. Treasury securities adjusted to a constant maturity of one or three years
as made available in Federal Reserve Bulletin (H15).
Substantially, all fixed-rate residential mortgages include so-called
"due on sale" clauses, which are provisions giving the Bank the right to declare
a loan immediately due and payable in the event, among other things, the
borrower sells or otherwise disposes of the real property. The Bank utilizes the
due on sale clause as a means of accelerating the rate of early repayment of
loans.
The Bank generally limits the maximum loan-to-value ratio on
residential real estate loans to 90%. However, if private mortgage insurance is
obtained, up to 95% of the appraised value of the real estate securing the loan
could be lent.
Generally, title insurance policies are obtained on all real estate
loans. Borrowers must also obtain hazard insurance prior to closing. Borrowers
may be required to advance funds on a monthly basis together with each payment
of principal and interest to an escrow account for the payment of real estate
taxes and hazard insurance premiums.
Construction Loans. On a limited basis, residential construction loans
are granted. These loans are generally made on a non-speculative basis to the
owner occupants of the real estate, have terms of no longer than ten months and
provide for fixed or floating interest rates. All residential construction loans
are either repaid in full or converted to permanent loans when the construction
is completed. On a limited basis, commercial construction loans are also
granted.
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These loans are not actively solicited and are made on a case-by-case basis to
existing customers. At December 31, 1996 construction loans comprised 1.4% of
the total loan portfolio.
Commercial Real Estate Loans. While the focus of lending is on
single-family residential real estate loans, on a limited basis, loans secured
by mortgages on commercial real estate are granted. These loans are not actively
solicited and are made on a case-by-case basis. At December 31, 1996 commercial
real estate loans totaled $17.2 million or 6.5% of the total loan portfolio.
Collateral securing these loans include retail businesses, apartment dwellings
and other commercial type security. The loans are offered for various
maturities, interest rates and fees.
Commercial real estate loans generally involve a greater amount of risk
than residential mortgage loans. Typically such loans involve lending
substantially larger amounts to single borrowers or groups of related borrowers
than residential loans and the repayment experience on the loan generally
depends on the cash flow generated by the property securing the loan. In
determining loan terms, including interest rates and origination fees,
management considers both current market conditions and its analysis of the risk
associated with the particular project. The underwriting policies with respect
to commercial real estate are designed to help assure that a project's estimated
cash flow and applicable guarantees are sufficient to service the debt and that
the collateral provides adequate coverage in the event of a default. Generally,
loan-to-value ratios on commercial real estate do not exceed 80%. All properties
are appraised by independent professional appraisers and are reviewed by an
officer of the Bank.
Consumer Loans
Consumer lending includes lines of credit, equity and home improvement
loans, automobile loans, savings account loans, and other consumer loans
including mobile home loans and secured and unsecured personal loans. Equity
lines of credit require principal payments of $100 per month or 1/180 of the
remaining balance, whichever is greater. Home equity loans generally have terms
of ten years or less while all other consumer loans have terms of five years or
less. The interest rate on equity lines of credit float monthly based on the
prime rate. Other consumer loans carry fixed interest rates that are generally
higher than the rates offered on mortgage loans. At December 31, 1996, the
consumer loan portfolio was $38.5 million, or 14.5% of total loans.
During 1994, $10 million in fixed rate, seasoned consumer loans were
purchased from the Resolution Trust Corporation. The loans had initial terms of
15 and 20 years and are collateralized by mobile homes located in various
states. Collection and other servicing activity is performed by a third party.
The outstanding balance as of December 31, 1996 was $5.8 million.
Commercial Business Loans
On a limited basis, loans for commercial business purposes are granted.
These loans are not actively solicited and are made on a case-by-case basis to
existing customers. At December 31, 1996, commercial business loans totaled $1.9
million and represented .7% of the loan portfolio. The loans are both secured
and unsecured and have various rates and terms. The loans are generally subject
to monthly repricing or are made on a short-term demand basis. Repricing is
based on the prime rate plus a margin.
Loan Origination, Purchase and Sale
Residential real estate loans are generally originated in conformity
with standard underwriting criteria to assure maximum eligibility for possible
resale in the secondary market. Loan originations are developed from a number of
sources. Residential loans in the local market area are generated primarily from
business development officers, advertising, walk-in customers and referrals from
local real estate brokers and existing customers. Consumer loan originations are
currently being generated primarily through the branch network and advertising.
The mortgage loan approval process assesses the borrower's ability to
repay the loan, and the adequacy of the value of the property that will secure
the loan. Residential real estate loans are approved by the Executive Vice
President of Lending Operations (EVP-LO) within certain limits. Loans that
exceed $300,000 are approved by the Bank's Loan Committee. The Loan Committee
consists of four members of the Bank's Board of Directors. Loans that exceed
$500,000 require approval by the Bank's Board of Directors. Major commercial
mortgage loans are reviewed by and require the approval of the Bank's Board of
Directors.
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Consumer loans and commercial business loans are underwritten on the
basis of the borrower's credit history and an analysis of the borrower's ability
to repay the loan and the value of the collateral, if any. Consumer loans up to
$100,000 must be approved by the EVP-LO and the Consumer Loan Manager. Consumer
loans that exceed $100,000 are approved by the Bank's Loan Committee. Commercial
business loans up to $100,000 must be approved by the EVP-LO, Consumer Loan
Manager and President. Commercial business loans in excess of $100,000 and up to
$250,000 are approved by the Bank's Loan Committee.
Loans are also purchased from financial institutions and other third
parties. Generally, the loans are collateralized by single-family residential
properties and are located in various states. The Bank purchased residential
loans totaling $6.1 million, $22.2 million and $23.2 million, during the years
ended December 31, 1996, 1995 and 1994, respectively. In some instances,
collection and other servicing activity is performed by a third party servicer.
To reduce its portfolio of fixed-rate mortgages, provide servicing fee
income and additional cash to continue its lending program, residential loans
are sold for cash directly to FHLMC, FNMA or other investors. The Bank retains
as a servicing fee a portion of the interest paid by the borrower on loans sold.
Servicing responsibilities include loan payment collections and other loan
related servicing duties. At December 31, 1996, approximately $64.9 million in
loans were serviced for others.
The following table indicates mortgage loan origination, purchase,
repayment and sale activity during the periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Total gross loans receivable at beginning of period $262,584 $246,733 $221,986 $185,466 $149,794
Loans originated:
Construction (reported gross) 6,149 5,729 6,989 7,813 5,476
Loans on existing property 31,068 20,473 45,770 58,300 56,445
Commercial loans 5,885 2,588 3,329 3,880 3,066
Consumer and other loans 15,994 14,965 12,390 9,439 10,545
-------- -------- -------- -------- --------
Total loans originated 59,096 43,755 68,478 79,432 75,532
Loans purchased (net) 6,121 22,227 23,239 36,006 5,337
-------- -------- -------- -------- --------
Total loans originated and purchased 65,217 65,982 91,717 115,438 80,869
Loans acquired through acquisition --- --- --- --- 26,835
Loans sold (8,588) (6,132) (18,317) (26,327) (16,067)
Principal repayments (52,101) (43,317) (49,183) (52,952) (55,500)
Other (1,421) (682) 530 361 (465)
-------- -------- -------- -------- --------
Net loan activity 3,107 15,851 24,747 36,520 35,672
-------- -------- -------- -------- --------
Total gross loans receivable at end of period $265,691 $262,584 $246,733 $221,986 $185,466
======== ======== ======== ======== ========
</TABLE>
Geographic Lending Area
The Bank has authority to lend anywhere in the United States. Although
it principally limits loan origination activities to southern New Jersey and the
state of Delaware, it purchases loans which are collateralized by single-family
residential properties located in various states from financial institutions and
other third parties. At December 31, 1996, approximately 74% of mortgage loans
receivable were collateralized by property located in New Jersey and Delaware.
All consumer and commercial business loans are located in the Bank's
immediate market area except the mobile home loans purchased in 1994. The mobile
home loans with outstanding balances totaling $5.8 million at December 31, 1996
are located in various states throughout the U.S.
Loan Origination and Other Fees
Fees are received both for the origination of loans and for making
commitments to originate residential loans and MBS. Fees are also received with
respect to residential mortgage loans that the Bank services, including late
charges, and
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credit life insurance premiums. Loan origination, commitment fees and discounts
vary with the volume and type of loans and commitments made and purchased and
with competitive and economic conditions. Generally, these fees are deferred and
recognized as yield adjustments to the related loans.
In the lending process, loan fees are charged which are calculated as a
percentage of the amount borrowed. The fees received in connection with the
origination of residential real estate loans generally do not exceed 3%. An
additional 1% is charged for providing the financing in connection with the
origination of a construction loan. All loan fees in excess of loan origination
costs are deferred and amortized into income over the estimated life of the
related loans. Net deferred fees, premiums and discounts amounted to $1.8
million, $2.1 million and $2.1 million as of December 31, 1996, 1995 and 1994,
respectively.
Servicing fees relating to residential mortgage loans sold amounted to
$214,000, $231,000, and $194,000, for the years ended December 31, 1996, 1995
and 1994, respectively.
Asset Quality
When a required payment on a loan is more than fifteen days late, a
late charge is assessed. If the late payment is not received within fifteen days
after it is due, the borrower is contacted by mail and payment is requested. In
most cases, the payment is made by the borrower as a result of this contact. If
the delinquency continues, the borrower is contacted. In certain instances, the
Bank may modify the loan or grant a limited moratorium on loan payments to
enable the borrower to reorganize his financial affairs.
If a mortgage loan continues in a delinquent status for ninety days or
more, the Bank generally will initiate appropriate legal action, including
commencing foreclosure proceedings or accepting from the borrower a voluntary
deed in lieu of foreclosure. If a foreclosure action is instituted and the loan
is not reinstated or paid-in-full, the property is sold at a judicial sale at
which, in some instances, the Bank is the buyer. The acquired property is then
listed in the "real estate owned" account until it is sold. Such sales may be
financed with a "loan to facilitate" which usually involves more favorable
borrowing terms than normally permitted by applicable regulations or the Bank's
loan underwriting criteria. The collection process for loans not secured by real
estate may involve seizure and liquidation of collateral, if any.
Generally, loans are placed on a "non-accrual" basis when contractually
past due over ninety days. When a loan is placed on a non-accrual basis, any
accrued and unpaid interest on such loan is reversed and charged against current
income. Loans are restored to accrual status only if the borrower has
demonstrated the ability to make future payments of principal and interest.
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Real estate owned is carried at the lower of cost (carrying value at
the date of acquisition) or estimated fair value less estimated cost to sell.
Subsequent costs directly related to the completion of construction or
improvement of the real estate are capitalized to the extent realizable. Gains
on the sale of real estate are recognized upon disposition of the property to
the extent allowable based on accounting requirements. Losses on such sales are
charged to operations as incurred. Carrying costs, such as maintenance, interest
and taxes are charged to operations as incurred.
Non-performing assets amounted to $4.2 million, $3.4 million and $4.9
million at December 31, 1996, 1995 and 1994, respectively. Non-performing assets
as a percentage of total assets was 0.8%, 0.8% and 1.3% at December 31, 1996,
1995 and 1994, respectively. The increase from 1995 to 1996 was attributable to
an increase in delinquencies on loans serviced by others from $754,000 in 1995
to $1,122,000 in 1996 and an increase in real estate owned from $426,000 in 1995
to $941,220 in 1996. The decrease from 1994 to 1995 was attributable to
decreases in delinquencies on loans serviced by others from $1,074,000 in 1994
to $754,000 in 1995. Of the $1,122,000 in delinquent loans that are serviced by
others, $269,000 have FHA insurance or a VA guaranty. The liquidation of these
assets is dependent upon the economy, demand for real estate and interest rates.
On January 1, 1995, FASB Statement 114, "Accounting by Creditors for
Impairment of a Loan" (FAS 114) was adopted which changed the in-substance
foreclosure rules. In-substance foreclosed loans are now classified as loans and
stated at the lower of cost or fair value. Data for 1992 through 1994 has been
restated to conform with the 1995 and 1996 presentations.
The following table sets forth for the periods indicated certain
information regarding non-performing assets. At December 31, 1995, one past due
loan of more than ninety days with a balance of $109,000 was accruing interest.
The loan was paying in accordance with an agreement with the bankruptcy court.
No loans were past due and accruing interest at the other periods shown.
<TABLE>
<CAPTION>
At December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans
Residential $2,316 $2,308 $3,732 $2,870 $2,532
Commercial 592 352 731 913 1,982
Consumer 305 261 108 81 17
-------- -------- -------- --------- ---------
Total non-accrual loans 3,213 2,921 4,571 3,864 4,531
Real estate owned 941 481 303 551 934
Other repossessed assets 7 6 --- 23 296
---------- ---------- ---------- --------- --------
Total non-performing assets $4,161 $3,408 $4,874 $4,438 $5,761
====== ====== ====== ====== ======
Total non-performing assets as a percent of
total assets 0.8% 0.8% 1.3% 1.3% 1.8%
====== ====== ====== ====== ======
</TABLE>
A committee comprised of the President, EVP-LO, Chief Financial
Officer, Investment Officer, and Treasurer of the Bank monitors the quality of
its assets on a regular basis. Under OTS regulations, all assets are subject to
a classification system that has three categories: (I) Substandard,
(ii)Doubtful, and (iii) Loss. An asset may fall within more than one category
and a portion of the asset may remain unclassified.
Assets classified Substandard are inadequately protected by the current
net worth and paying capacity of the obligor or of the collateral pledged, if
any. Assets so classified have a well-defined weakness or weaknesses. They are
characterized by the distinct possibility that the Company may sustain some loss
if the deficiencies are not corrected.
Assets classified Doubtful have all the weaknesses inherent in those
classified Substandard with the added characteristic that the weaknesses make
collection or liquidation in full, on the basis of currently existing facts,
conditions, and values, highly questionable and improbable.
Assets classified Loss are considered uncollectible and of such little
value that their continuance as assets without establishment of a specific
reserve is not warranted. This classification does not mean that an asset has
absolutely no recovery or salvage value, but, rather, that it is not practical
or desirable to defer writing off a basically worthless asset even though
partial recovery may be effected in the future.
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The regulation also established a special mention category. Assets
included in this category do not currently expose the Bank to a sufficient
degree of risk to warrant classification but do possess credit deficiencies or
potential weaknesses deserving management's close attention. As of December 31,
1996, $2.1 million in residential real estate loans was categorized as special
mention.
The Bank is required to classify its assets on a regular basis. In
addition, in connection with examinations by the OTS, examiners have the
authority to identify problem assets and, if appropriate, classify them. When
assets are classified as Substandard or Doubtful, the Bank is required to
establish prudent general allowances for loan losses. When assets are classified
as Loss, the Bank is required to establish specific allowances for loan losses
in the amount of 100 percent of the portion of the asset classified Loss or
charge off such amount. General loss allowances established to cover possible
losses related to assets classified Substandard or Doubtful may be included in
determining an institution's risk-based capital, while specific valuation
allowances for loan losses do not qualify as risk-based capital. The OTS
District Director of an insured institution has the authority to approve,
disapprove or modify any classifications of assets made pursuant to the
regulation and any amounts of allowances for loan losses established by insured
institutions or required by examiners pursuant to the regulation.
The following table sets forth information regarding assets classified
as Substandard as of December 31 for each of the following years. No assets were
classified as Doubtful and any asset classified as Loss was charged-off.
<TABLE>
<CAPTION>
At December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Real estate owned $ 941 $ 481 $ 303 $ 551 $ 934
Other repossessed assets 7 6 --- 23 296
Commercial real estate loans 592 352 731 913 1,982
Residential mortgage loans 2,316 2,308 3,732 2,870 2,532
Consumer loans 305 261 108 81 17
Securities below investment grade --- --- --- --- 298
------ ------ ------ ------ ------
Total classified assets $4,161 $3,408 $4,874 $4,438 $6,059
====== ====== ====== ====== ======
Ratio of classified assets to total assets 0.8% 0.8% 1.3% 1.3% 1.9%
====== ====== ====== ====== ======
</TABLE>
The following is a description of classified assets:
Real Estate Owned and Other Repossessed Assets. At December 31, 1996,
11 real estate owned properties were classified as Substandard. The properties
are for sale and are either vacant or rented. The other repossessed asset is an
automobile.
Loans. At December 31, 1996, eighty-nine residential, commercial and
consumer loans classified were as Substandard.
Allowance for Credit Losses. Allowances are provided for specific loans
when losses are probable and can be estimated. When this occurs, management
considers the remaining principal balance and estimated net realizable value of
the property collateralizing the loan. Current and future operating and/or sales
conditions are considered. These estimates are susceptible to changes that could
result in further adjustment to results of operations. Recovery of the carrying
value of such loans is dependent to a great extent, on economic, operating and
other conditions that may be beyond management's control.
Allowance for credit losses is established based on the perceived risk
of the loan portfolio. The allowance is reviewed and adjusted quarterly based
upon a number of factors, including asset classifications, economic trends,
industry experience, geographic concentrations, estimated collateral values,
management's assessment of credit risk inherent in the portfolio, historical
loss experience and underwriting practices. If certain real estate markets
weaken, including New Jersey and Delaware, increases in the allowance may be
required in future periods.
8
<PAGE>
The table shown below reflects the changes in the allowance for credit
losses for the years indicated.
<TABLE>
<CAPTION>
Real Estate Mortgage
--------------------
Residential Commercial Other Total
----------- ---------- ----- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $1,375,977 $ 869,000 $ 418,000 $2,662,977
Additions charged to operations 215,680 24,315 310,005 550,000
Recoveries 2,179 105,685 38,420 146,284
Losses charged (496) (15,000) (28,425) (43,921)
--------------- ------------- ------------- -------------
Balance at December 31, 1994 1,593,340 984,000 738,000 3,315,340
Additions charged to operations 50,000 50,000 500,000 600,000
Recoveries 7,169 39,829 180,419 227,417
Losses charged (165,527) --- (414,900) (580,427)
------------ ----------------- ------------ ------------
Balance at December 31, 1995 1,484,982 1,073,829 1,003,519 3,562,330
Additions charged to operations 100,000 75,000 225,000 400,000
Recoveries 21,478 58,820 75,387 155,685
Losses charged (136,401) (12,761) (208,368) (357,530)
------------ ------------- ------------ ------------
Balance at December 31, 1996 $1,470,059 $1,194,888 $1,095,538 $3,760,485
========== ========== ========== ==========
</TABLE>
Net charge-offs from loans and foreclosed real estate as a percentage
of average loans outstanding were as follows for the years indicated.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net charge-offs (recoveries) from loans $201,845 $353,010 $(102,363)
Net charge-offs (recoveries) from foreclosed real estate 90,007 (65,193) 77,356
-------- -------- ----------
Total $291,852 $287,817 $ (25,007)
======== ======== ==========
% of average loans outstanding .11% .12% (.01)%
=== === ====
</TABLE>
The table below summarizes the general valuation allowance for loans by
asset classification and as a percentage of those portfolios for the years
indicated.
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- ------------------------- -----------------------
Percentage of Percentage of Percentage of
Amount Portfolio Amount Portfolio Amount Portfolio
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Residential real estate loans $1,470,059 .71% $1,484,982 .71% $1,593,340 .81%
Commercial real estate loans 1,194,888 6.94 1,073,829 6.85 984,000 6.00
Other loans 1,095,538 2.85 1,003,519 2.71 738,000 2.20
----------- ---- ----------- ---- ------------ ----
Total $3,760,485 1.42% $3,562,330 1.36% $3,315,340 1.34%
========== ==== ========== ==== ========== ====
</TABLE>
For further discussion and summary of loss provisions see "Management's
Discussion and Analysis, Results of Operations -- Allowance and Provision for
Credit Losses" and Note 6 to the Consolidated Financial Statements.
9
<PAGE>
Investment Securities Activities
The Bank is required under federal regulations to maintain a minimum
amount of liquid assets and is also permitted to make other approved security
investments. See "Regulation-Liquidity" and "Management's Discussion and
Analysis of Financial Condition--Liquidity, Cash Flows and Committed
Resources."
On December 31, 1993, Statement No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (FAS 115) issued by the Financial
Accounting Standards Board was adopted. For additional information see Notes 1,
2, 3, and 4 to the Consolidated Financial Statements.
In accordance with FAS 115, investments are classified into three
categories; those held-to-maturity and reported at amortized cost, for which the
Company has the positive intent and ability to hold-to-maturity; those
classified as available-for-sale and reported at fair value with unrealized
gains and losses, net of taxes, reported as a separate component of
shareholders' equity; and those classified as trading securities and reported at
fair value with unrealized gains and losses included in earnings.
The table below sets forth the composition of the investment securities
portfolio at amortized cost for the years indicated.
<TABLE>
<CAPTION>
At December 31,
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Held to maturity:
U.S. Treasury note $ --- $ --- $ 1,000
U.S. Government agencies --- --- 22,000
Corporate notes --- --- 8,936
Tax exempt obligations 2,321 517 721
Federal Home Loan Bank stock 7,376 5,317 4,657
------------ ------------ ----------
Subtotal 9,697 5,834 37,314
------------ ------------ ----------
Held for trading:
Mutual fund 60 57 52
Common stock --- --- 404
------------ ------------ ----------
Subtotal 60 5 456
------------ ------------ ----------
Available-for-sale:
U.S. Government agencies 17,976 19,970 ---
Corporate notes 4,336 6,310 ---
Preferred stock 2,548 2,097 2,097
------------ ------------ ----------
Subtotal 24,860 28,377 2,097
------------ ------------ ----------
Total $34,617 $34,268 $39,867
============ ============ ===========
</TABLE>
The investment securities portfolio at December 31, 1996 categorized by
maturity is as follows:
<TABLE>
<CAPTION>
Amortized Weighted
Cost Average Yield
----------- -------------
(dollars in thousands)
<S> <C> <C>
No maturity $ 9,984 6.59%
Due in one year or less 3,046 5.20%
Due after one year through five years 21,587 6.74%
--------
Total $34,617
=======
</TABLE>
10
<PAGE>
The following table sets forth the purchase, transfer, maturity
activity and repayments at amortized cost of the investment securities during
1996, 1995 and 1994.
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Investment securities at beginning of period $ 34,268 $ 39,867 $ 23,050
Purchases
U.S. Government agencies 9,008 10,965 22,000
Corporate notes --- 2,934 ---
Tax exempt obligations 2,321 517 721
Federal Home Loan Bank stock 2,059 660 706
Mutual fund 3 5 ---
Common stock 9,369 1,812 10,258
Preferred stock 1,500 --- 257
------- ------- -------
Total purchases 24,260 16,893 33,942
------- ------- -------
Sales
Mutual fund --- --- 25
Common stock 9,369 2,216 10,453
------- ------- -------
Total sales 9,369 2,216 10,478
------- ------- -------
Maturities
U.S. Treasury note --- 1,000 ---
U.S. Government agencies 10,979 13,000 ---
Corporate notes 1,997 5,555 4,230
Tax exempt obligations 517 721 1,538
Certificates of deposit --- --- 879
Preferred stock 1,049 --- ---
------- ------- -------
Total maturities 14,542 20,276 6,647
------- ------- -------
Investment securities at end of period $34,617 $34,268 $39,867
======= ======= =======
</TABLE>
Mortgage-Backed Securities Activities
A substantial part of the Bank's business involves investments in MBS.
The Bank invests in MBS to supplement local loan originations as well as to
reduce interest rate risk.
On December 31, 1993, FAS 115 issued by the Financial Accounting
Standards Board was adopted. The MBS portfolio is classified as either
held-to-maturity or available-for-sale. For additional information see Notes 1
and 5 to the Consolidated Financial Statements.
11
<PAGE>
The following table sets forth the composition of the mortgage-backed
securities portfolio at amortized cost by category.
<TABLE>
<CAPTION>
At December 31,
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Held to maturity:
FNMA pass-through certificates $ --- $ --- $ 2,747
FHLMC pass-through certificates --- --- 6,725
GNMA pass-through certificates --- --- 9,321
Non-agency pass-through certificates 6,143 7,320 4,195
REMIC 91,248 60,675 11,529
-------- -------- -------
Subtotal 97,391 67,995 34,517
-------- -------- -------
Available-for-sale:
FNMA pass-through certificates 1,863 2,341 ---
FHLMC pass-through certificates 4,342 5,574 ---
GNMA pass-through certificates 6,070 7,775 ---
REMIC 80,416 63,633 64,900
-------- -------- -------
Subtotal 92,691 79,323 64,900
-------- -------- -------
Total $190,082 $147,318 $99,417
======== ======== =======
</TABLE>
The mortgage-backed securities portfolio at December 31, 1996
categorized by contractual maturity is as follows:
<TABLE>
<CAPTION>
Amortized Weighted
Cost Average Yield
---- -------------
(dollars in thousands)
<S> <C> <C>
Due in one year or less $ 674 6.73%
Due after one year through five years 2,553 7.73%
Due after five year through ten years 2,241 9.85%
Due after ten years 184,614 6.95%
--------
Total $190,082
========
</TABLE>
Actual maturities will differ from contractual maturities due to
prepayments.
The following table sets forth the purchase, transfer, sales activity and
repayments at amortized cost of the MBS during 1996, 1995 and 1994.
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
MBS at beginning of period $147,318 $ 99,417 $ 95,702
Purchases of REMIC 54,590 54,841 25,529
Sales of REMIC (3,612) --- ---
Principal repayments (8,214) (6,940) (21,814)
-------- -------- ---------
MBS at end of period $190,082 $147,318 $ 99,417
======== ======== =========
</TABLE>
12
<PAGE>
Deposit and Borrowing Activities
General
Deposits are the principal source of funds for lending and other
investment purposes. Deposits are generated through the ten retail banking
offices, and to a lesser extent through brokers. In addition to deposits, funds
are derived from loan sales and repayments, borrowings, and from operations.
Loan repayments are a relatively stable source of funds, while deposit inflows
are significantly influenced by general interest rates and market conditions.
The Bank may borrow funds from the FHLB of New York and other sources.
Borrowings may be used on a short term basis to compensate for reductions in
deposits or other sources of funds, as well as on a long-term basis to support
expanded lending activities or other business purposes. Funds can also be
derived from the sale of loans and investment or mortgage-backed securities
available-for-sale.
Deposits
The Bank offers a wide variety of deposit accounts which are designed
to attract both short-term and long-term deposits. These deposits are obtained
primarily from residents of southern New Jersey and Delaware. Brokers are also
utilized to solicit deposits outside the market area. Generally, a fee of
one-quarter percent is paid to brokers for these accounts. The types of accounts
currently offered, include regular passbook and club accounts, interest-bearing
and non-interest-bearing NOW accounts, commercial accounts, money market deposit
accounts, fixed-rate certificate accounts with maturities ranging from three
months to sixty months and negotiated rate Jumbo certificates. Included among
these deposit products are Individual Retirement Accounts.
Retail fixed term, fixed rate certificates are the primary source of
deposits and at December 31, 1996 represented approximately 46.4% of deposits.
At December 31, 1996, the deposit base contained $25.0 million in 12 month,
$23.1 million in 24 month, and $19.9 million in six month, fixed term fixed rate
retail certificates, and represent 18.5%, 17.2%, and 14.8%, respectively, of
total retail certificates. Included in the 24 month certificate total is $21.6
million in Rate Bumper certificates in which the depositor may elect once during
the term of the certificate to increase the rate on his certificate to the
current rate offered on 24 month certificates.
Savings account interest rates are evaluated on an ongoing basis.
Deposit activity and interest rate movements and interest rates paid by
competitors are examined and evaluated weekly.
The following table sets forth information relating to deposit flows
during the periods indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Net increase in deposits before interest credited $12,332 $23,213 $ 6,313
Interest credited 7,790 7,854 5,468
------- ------- -------
Net increase in deposits $20,122 $31,067 $11,781
======= ======= =======
</TABLE>
The substantial increase during the year ended December 31, 1995
includes deposits assumed totaling $15,924,000 related to the acquisition of two
retail-banking offices in January 1995.
13
<PAGE>
The following table sets forth the amount and percentage of total
deposits for each type of deposit offered as of the dates indicated.
<TABLE>
<CAPTION>
At December 31,
1996 1995 1994
-------------------- ------------------------ --------------------
Amount % Amount % Amount %
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Account Type
Savings and club accounts $ 34,541 11.9% $ 40,043 14.8% $ 45,301 19.0%
NOW and commercial accounts 34,072 11.8 33,335 12.4 29,215 12.2
Money market and other accounts 51,407 17.7 41,365 15.3 31,069 13.0
Retail certificates of deposit 134,631 46.41 27,635 47.3 99,928 41.8
Jumbo certificates of deposit 35,268 12.2 27,589 10.2 33,383 14.0
-------- ------ -------- ----- -------- -----
Total deposits $289,919 100.0% $269,967 100.0% $238,896 100.0%
======== ====== ======== ===== ======== =====
</TABLE>
The following table presents by various interest rate categories, the
amount of retail certificate accounts at December 31, 1996 and 1995 and the
amount of retail certificates accounts at December 31, 1996 maturing within one
year, two years, three years and after three years.
<TABLE>
<CAPTION>
Amounts at December 31, 1996 Maturing
-------------------------------------
At December 31, Within Within Within After
--------------- one two three three
1995 1996 year years years years
---- ---- ---- ----- ----- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Retail certificate accounts:
2.001- 4.00% $ 233 $ 78 $ 66 $ -- $ 12 $ --
4.001- 6.00% 98,337 120,642 82,107 27,726 6,353 4,456
6.001- 8.00% 28,853 13,719 5,939 887 2,205 4,688
8.001-10.00% 211 192 179 13 -- --
-------- -------- -------- -------- -------- --------
Total certificate accounts $127,634 $134,631 $ 88,291 $ 28,626 $ 8,570 $ 9,144
======== ======== ======== ======== ======== ========
</TABLE>
The following table presents by various interest rate categories, the
amount of Jumbo certificates at December 31, 1996 and 1995 and the amount of
Jumbo certificate at December 31, 1996 maturing within one year, two years,
three years and after three years.
<TABLE>
<CAPTION>
Amounts at December 31, 1996 Maturing
-------------------------------------
At December 31, Within Within Within After
--------------- one two three three
1995 1996 year years years years
---- ---- ---- ----- ----- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Jumbo certificate accounts:
2.001-4.00% $ 99 $ --- $ --- $ --- $ --- $ ---
4.001-6.00% 23,995 33,783 24,562 7,961 867 393
6.001-8.00% 3,495 1,485 194 398 517 376
-------- --------- ---------- --------- --------- -------
Total certificate accounts $27,589 $35,268 $24,756 $ 8,359 $ 1,384 $ 769
======= ======= ======= ======= ======= =======
</TABLE>
14
<PAGE>
The following table presents certain information concerning deposit
accounts at December 31, 1996, including the weighted average rate of such
accounts and the scheduled quarterly maturities or repricing of the certificate
accounts.
<TABLE>
<CAPTION>
Weighed
% of Average
Total Nominal
Amount Deposits Rates
------ -------- -----
(dollars in thousands)
<S> <C> <C> <C>
Savings and club accounts $ 34,541 11.9% 2.77%
NOW 26,477 9.2 1.54
Money market and other accounts 51,407 17.7 4.05
Non-interest bearing accounts 7,595 2.6 ---
--------- ----- ----
Total 120,020 41.4 2.87
--------- ----- ----
Certificate accounts maturing by quarter:
March 31, 1997 40,743 14.0 5.18
June 30, 1997 37,688 13.0 5.34
September 30, 1997 19,673 6.8 5.49
December 31, 1997 14,943 5.1 5.52
March 31, 1998 12,930 4.5 5.52
June 30, 1998 9,535 3.3 5.53
September 30, 1998 9,116 3.1 5.48
December 31, 1998 5,405 1.9 5.45
March 31, 1999 3,436 1.2 5.58
June 30, 1999 3,003 1.0 5.70
September 30, 1999 1,333 .5 5.47
December 31, 1999 2,181 .8 6.08
Thereafter 9,913 3.4 5.94
--------- ----- ----
Total certificate amounts 169,899 58.6 5.43
--------- ----- ----
Total deposits $289,919 100.0% 4.37%
======== ===== ====
</TABLE>
Borrowings
Borrowings are obtained from the FHLB of New York. The Bank's capital
stock of the FHLB of New York and certain mortgage loans are pledged as
collateral to secure the borrowings. The borrowings also include securities sold
under agreement to repurchase. Securities sold under agreements to repurchase
are obligations collateralized by mortgage-backed securities or other
investments. Eligibility to obtain borrowings are subject to certain standards
related to creditworthiness. Such borrowings are made pursuant to several credit
programs. Each credit program has its own interest rate and range of maturities.
The FHLB of New York prescribes acceptable uses to which the borrowings pursuant
to each program may be put as well as limitations on the size of such
borrowings.
In addition to deposits, the FHLB of New York borrowings are utilized
to fund lending operations. At December 31, 1996, borrowings from the FHLB of
New York amounted to $136.6 million. These borrowings, which mature at various
dates through 2001, bear interest at rates between 5.08% and 7.52%.
15
<PAGE>
The following table sets forth certain information regarding FHLB
borrowings as of the end of and during the periods indicated:
<TABLE>
<CAPTION>
At December 31 Year Ended December 31,
-------------- ----------------------------------
1996 1996 1995 1994
---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Maximum amount of total borrowings outstanding
at any month end and at December 31, 1996 $136,622 $147,509 $105,797 $93,125
Approximate average total borrowings outstanding(1) N/A 120,987 93,038 85,650
Approximate weighted average rate(1) 5.82% 5.54% 5.83% 4.94%
</TABLE>
- -----------------------
(1) Average balances represent the arithmetic average of month-end balances.
Other borrowings consisted of securities sold under agreements to
repurchase obtained through a major securities broker. At December 31, 1996,
$36.5 million in other borrowings was outstanding. The borrowings which mature
at various dates through 1999, bear interest at rates between 5.57% and 5.84%.
The following table sets forth certain information regarding other
borrowings as of the end of and during the periods indicated:
<TABLE>
<CAPTION>
At December 31 Year Ended December 31,
-------------- ----------------------------------
1996 1996 1995 1994
---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Maximum amount of total borrowings outstanding
at any month end and at December 31, 1996 $36,526 $54,967 $44,516 $40,724
Approximate average total borrowings outstanding(1) N/A 43,967 39,318 28,365
Approximate weighted average rate(1) 5.73% 5.78% 6.03% 4.65%
</TABLE>
- --------------------------
(1) Average balances represent the arithmetic average of month-end balances.
Yield Earned, Rates Paid and Certain Ratios
The largest components of the Company's total income and total expense are
interest items. As a result, earnings are primarily dependent upon net interest
income, which is determined by its interest rate spread and the relative amounts
of interest-earning assets and interest-bearing liabilities. The interest rate
spread, the yields earned on interest-earning assets and the rates paid on
interest-bearing liabilities, are affected by economic factors that affect
interest rates, loan demand and deposit flows.
16
<PAGE>
The following table sets forth, for the periods indicated, the weighted
average yields earned on interest-earning assets, the weighted average rates
paid on interest-bearing liabilities and the applicable interest rate spreads.
Average interest-earning assets and average interest-bearing liabilities have
been computed on a monthly basis.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Weighted average yield on loan portfolio 8.44% 8.37% 7.90%
Weighted average yield on mortgage-backed securities 7.24% 7.32% 6.64%
Weighted average yield on investment portfolio 6.81% 6.86% 6.43%
Weighted average yield on all interest-earning assets 7.88% 7.90% 7.41%
Weighted average rate paid on deposits 4.35% 4.27% 3.56%
Weighted average rate paid on borrowings 5.60% 5.89% 4.86%
Weighted average rate paid on all interest-bearing liabilities 4.82% 4.81% 3.99%
Interest rate spread (spread between weighted average rate on
all interest-earning assets and all interest-bearing liabilities) 3.06% 3.09% 3.42%
Net yield on average interest-earning assets 3.26% 3.29% 3.56%
Ratio of interest-earning assets to interest-bearing liabilities 104.36% 104.22% 103.61%
</TABLE>
Competition
The Company encounters competition both in the attraction of deposits
and in the making of real estate and other loans. Direct competition for
deposits comes from other savings and loan associations, savings banks and
commercial banks with offices in Salem, Camden and Gloucester Counties in New
Jersey and New Castle County in Delaware. It also encounters competition for
deposits from money market funds, as well as corporate and government
securities. The principal methods used to attract accounts include other
services offered, the interest rates offered, the convenience of office
locations and advertising. Competition for real estate loans comes principally
from other thrift institutions, commercial banks, and mortgage banking
companies. The Company competes for loans principally through the interest rates
and loan fees it charges and the efficiency and quality of the services it
provides borrowers, real estate brokers, and home builders.
Employees
As of December 31, 1996, the Company had 110 full-time employees and 15
part-time employees. The employees are not represented by a collective
bargaining unit. The Company believes its relationship with its employees to be
satisfactory.
17
<PAGE>
REGULATION
Set forth below is a brief description of certain laws and regulations
which relate to the regulation of the Company and the Bank. The description of
these laws and regulations, as well as the description of laws and regulations
contained elsewhere herein, does not purport to be complete and is qualified in
its entirety by reference to applicable laws and regulations.
First Home Bancorp Inc.
General
The Company is a unitary savings and loan holding company subject to
the provisions of HOLA. As a savings and loan holding company within the meaning
of the HOLA, the Company is subject to OTS regulations, examinations,
supervision and reporting requirements. As a subsidiary of a savings and loan
holding company, the Bank is subject to certain restrictions in its dealings
with the Company and affiliates thereof.
Activities Restrictions.
There are generally no restrictions on the activities of a savings and
loan holding company which holds only one subsidiary savings association.
However, if the Director of the OTS determines that there is reasonable cause to
believe that the continuation by a savings and loan holding company of an
activity constitutes a serious risk to the financial safety, soundness or
stability of its subsidiary savings association, the Director may impose such
restrictions as deemed necessary to address such risk, including limiting (i)
payment of dividends by the savings association; (ii) transactions between the
savings association and its affiliates; and (iii) any activities of the savings
association that might create a serious risk that the liabilities of the holding
company and its affiliates may be imposed on the savings association.
Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding companies, if the savings association subsidiary of
such a holding company fails to meet the qualified thrift lender ("QTL") test,
then such unitary savings and loan holding company also becomes subject to the
restrictions applicable to multiple savings and loan holding companies and,
unless the savings association requalifies as a QTL within one year thereafter,
is required to register as, and become subject to the restrictions applicable
to, a bank holding company. See "- First Home Savings Bank, F.S.B. - Qualified
Thrift Lender Test."
If the Company were to acquire control of another savings association,
other than through merger or other business combination with the Bank, the
Company would thereupon become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve emergency
thrift acquisitions and where each subsidiary savings association meets the QTL
test, as set forth below, the activities of the Company and any of its
subsidiaries (other than the Bank or other subsidiary savings associations)
would thereafter be subject to further restrictions. Among other things, no
multiple savings and loan holding company or subsidiary thereof which is not a
savings association may commence or continue for a limited period of time after
becoming a multiple savings and loan holding company or subsidiary thereof any
business activity, upon prior notice to, and no objection by the OTS, other
than: (i) furnishing or performing management services for a subsidiary savings
association; (ii) conducting an insurance agency or escrow business; (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
savings association; (iv) holding or managing properties used or occupied by a
subsidiary savings association; (v) acting as trustee under deeds of trust; (vi)
those activities authorized by regulation as of March 5, 1987 to be engaged in
by multiple savings and loan holding companies; or (vii) unless the Director of
the OTS by regulation prohibits or limits such activities for savings and loan
holding companies, those activities authorized by the Federal Reserve Board
("FRB") as permissible for bank holding companies. Those activities described in
(vii) above also must be approved by the Director of the OTS prior to being
engaged in by a multiple savings and loan holding company.
Transactions with Related Parties
The Bank's authority to engage in transactions with related parties or
"affiliates" (i.e., any company that controls or is under common control with an
institution) or to make loans to certain insiders, is limited by Sections 23A
and 23B of the Federal Reserve Act ("FRA"). In a holding company context, the
parent holding company of a savings association (such as the Bank) and any
companies which are controlled by such parent holding company are affiliates of
the savings association. Section 23A limits the aggregate amount of transactions
with any individual affiliate to 10% of the capital and
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surplus of the savings institution and also limits the aggregate amount of
transactions with all affiliates to 20% of the savings institution's capital and
surplus. Certain transactions with affiliates are required to be secured by
collateral in an amount and of a type described in Section 23A and the purchase
of low quality assets from affiliates is generally prohibited. Section 23B
provides that certain transactions with affiliates, including loans and asset
purchases, must be on terms and under circumstances, including credit standards,
that are substantially the same or at least as favorable to the institution as
those prevailing at the time for comparable transactions with nonaffiliated
companies. In the absence of comparable transactions, such transactions may only
occur under terms and circumstances, including credit standards, that in good
faith would be offered to or would apply to nonaffiliated companies.
Notwithstanding Sections 23A and 23B, savings associations are prohibited from
lending to any affiliate that is engaged in activities that are not permissible
for bank holding companies under Section 4(c) of the Bank Holding Company Act
("BHC Act"). Further, no savings association may purchase the securities of any
affiliate other than a subsidiary.
The Bank's authority to extend credit to executive officers, directors
and 10% shareholders, as well as entities controlled by such persons, is
currently governed by Sections 22(g) and 22(h) of the FRA and Regulation O
thereunder. Among other things, subject to an exception for extensions of credit
made pursuant to a benefit or compensation program that is widely available to
employees and does not give any preference to any executive officer over other
employees, these regulations require such loans to be made on terms
substantially the same as offered to unaffiliated individuals and to not involve
more than the normal risk of repayment. These regulations place limits on the
amount of loans the Bank may make to such persons based, in part, on the Bank's
capital position, and require certain approval procedures to be followed. The
OTS regulations, with certain minor variances, apply Regulation O to savings
associations.
Restrictions on Acquisitions.
Except under limited circumstances, savings and loan holding companies
are prohibited from acquiring, without prior approval of the Director of the
OTS, (i) control of any other savings association or savings and loan holding
company or substantially all the assets thereof or (ii) more than 5% of the
voting shares of a savings association or holding company thereof which is not a
subsidiary. Except with the prior approval of the Director of the OTS, no
director or officer of a savings and loan holding company or person owning or
controlling by proxy or otherwise more than 25% of such company's stock, may
acquire control of any savings association, other than a subsidiary savings
association, or of any other savings and loan holding company.
The Director of the OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
associations in more than one state if (i) the multiple savings and loan holding
company involved controls a savings association which operated a home or branch
office located in the state of the association to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
association pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act; or (iii) the statutes of the state in which the
association to be acquired is located specifically permit institutions to be
acquired by the state-chartered associations or savings and loan holding
companies located in the state where the acquiring entity is located (or by a
holding company that controls such state-chartered savings associations).
Pursuant to provisions of the Bank Holding Company Act of 1956 the FRB
may approve an application by a bank holding company to acquire control of a
savings association. A bank holding company that controls a savings association
is also permitted to merge or consolidate the assets and liabilities of the
savings association with, or transfer assets and liabilities to, any subsidiary
bank which is a member of the Bank Insurance Fund ("BIF") with the approval of
the appropriate federal banking agency and the FRB. As a result of these
provisions, there have been a number of acquisitions of savings associations by
bank holding companies in recent years.
First Home Savings Bank, F.S.B.
General.
The Bank is subject to extensive regulation, examination and
supervision by the OTS, as its chartering agency, and the Federal Deposit
Insurance Corporation ("FDIC"), as the deposit insurer. The Bank is a member of
the Federal Home Loan Bank ("FHLB") System and its deposit accounts are insured
up to applicable limits by the Savings Association Insurance Fund ("SAIF")
managed by the FDIC. The Bank must file reports with the OTS and the FDIC
concerning its
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activities and financial condition in addition to obtaining regulatory approvals
prior to entering into certain transactions such as mergers with, or
acquisitions of, other financial institutions. There are periodic examinations
by the OTS and the FDIC to test the Bank's compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework of activities in which an institution can engage and is intended
primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such policies, whether by the OTS, the FDIC or the Congress, could
have a material adverse impact on the Bank and its operations.
The activities of savings institutions are governed by the HOLA and, in
certain respects, the Federal Deposit Insurance Act ("FDI Act"). The HOLA and
the FDI Act were amended by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") and the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"). FIRREA was enacted for the purpose of
resolving problem savings institutions, establishing a new thrift insurance
fund, reorganizing the regulatory structure applicable to savings institutions,
and imposing bank-like standards on savings institutions. FDICIA, among other
things, requires that federal banking regulators intervene promptly when a
depository institution experiences financial difficulties, mandates the
establishment of a risk-based deposit insurance assessment system and requires
imposition of numerous additional safety and soundness operational standards and
restric tions. FIRREA and FDICIA both contain provisions affecting numerous
aspects of the operations and regulations of federally-insured savings
associations and empowers the OTS and the FDIC, among other agencies, to
promulgate regulations implementing their provisions.
Office of Thrift Supervision
The OTS is an office in the Department of the Treasury subject to the
general oversight of the Secretary of the Treasury. Except as modified by
FIRREA, the OTS possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.
Federal Deposit Insurance Corporation
The FDIC is an independent federal agency established originally to
insure the deposits, up to prescribed statutory limits, of federally insured
banks and to preserve the safety and soundness of the banking industry. Upon the
enactment of FIRREA, the FDIC also became the insurer, up to the prescribed
limits, of the deposit accounts held at federally insured savings associations
and established two separate insurance funds that it maintains and administers:
the BIF and the SAIF. As such, the FDIC has examination, supervisory, and
enforcement authority over all savings associations. The FDIC is authorized to
conduct examinations of and to require reporting by FDIC-insured institutions.
It also may prohibit any FDIC-insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious risk to the FDIC.
The FDIC also has the authority to initiate enforcement actions against savings
associations, after giving the OTS an opportunity to take such action.
Federal Home Loan Bank System
The FHLB System, consisting of twelve FHLBs, now is under the
jurisdiction of the Federal Housing Finance Board ("FHFB"). The designated
duties of the FHFB are to: supervise the FHLBs; ensure that the FHLBs carry out
their housing finance mission; ensure that the FHLBs remain adequately
capitalized and able to raise funds in the capital market; and ensure that the
FHLBs operate in a safe and sound manner.
The Bank is a member of the FHLB of New York. The Bank is required to
acquire and hold shares of capital stock in the FHLB of New York in an amount
equal to the greater of 1.0% of the aggregate outstanding principal amount of
home mortgage loans, home purchase contracts and similar obligations at the
beginning of each year or 5% of its borrowings from the FHLB. The Bank is in
compliance with this requirement with an investment in the stock of the FHLB of
New York of $7.4 million at December 31, 1996.
Each FHLB serves as a central credit facility for its member
institutions within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It makes
funds available
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to members in accordance with policies and procedures established by the FHLB
and the Board of Directors of the FHLB. These policies and procedures are
subject to the regulation and oversight of the FHFB. All borrowings from the
FHLB are required to be fully secured by sufficient collateral as determined by
the FHLB. At December 31, 1996, the Bank had $136.6 million in borrowings from
the FHLB of New York.
Insurance of Deposit Accounts
The Bank is a member of the SAIF, which is administered by the FDIC.
Savings deposits are insured up to $100,000 per insured member (as defined by
law and regulation) by the FDIC and such insurance is backed by the full faith
and credit of the United States Government. As insurer, the FDIC imposes deposit
insurance premiums. Under the FDI Act insurance of deposits may be terminated by
the FDIC upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC or the OTS.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums, based upon their level of
capital and supervisory evaluation. Under this system, institutions classified
as well capitalized (i.e., a tier 1 leverage ratio of at least 5%, tier 1
risk-based ratio of at least 6% ("Tier 1 risk-based capital") and total
risk-based ratio of at least 10%) and considered healthy pay the lowest premium,
while institutions that are less than adequately capitalized (i.e., tier 1
leverage and risk-based ratios of less than 4% or total risk-based ratio of less
than 8%) and considered of substantial supervisory concern pay the highest
premium. Risk classification of all insured institutions will be made by the
FDIC for each semi-annual assessment period.
The FDIC's assessments must be designed to maintain the SAIF's reserve
ratio at the designated reserve ratio of 1.25% of estimated SAIF insured
deposits or, if the SAIF's reserve ratio is below that level, to increase the
reserve ratio to the designated reserve ratio. The FDIC may not collect more for
the SAIF than is needed to fulfill its goal. Through the end of 1998, the
assessment rate for a SAIF member may not be less than the assessment rate for a
BIF member that poses a comparable risk to the deposit insurance fund.
In setting semiannual assessments for the BIF and SAIF the FDIC must
consider the following factors: (1) the fund's expected operating expenses; (2)
the funds case resolution expenditures and income; (3) the effect of assessments
on the earnings and capital of fund members; and (4) any other factors that the
FDIC deems appropriate.
Under an assessment schedule that was in effect through September 30,
1996, SAIF rates, including the assessment rate imposed by the Financing
Corporation ("FICO") to service the interest on its bond obligations, ranged
from 23 basis points for institutions in the best assessment risk classification
to 31 basis points for institutions in the lease favorable one. Since the BIF's
reserve ratio reached its designated reserve ratio on June 30, 1995, the
assessment rates for the BIF were revised effective in the third quarter of 1995
to provide a range of rates from 0 basis points to 27 basis points. As a result,
BIF insured institutions generally paid lower premiums than SAIF insured
institutions.
On September 30, 1996, the Deposit Insurance Funds Act of 1996 was
enacted (the "Funds Act"). This legislation required the FDIC to impose a
one-time special assessment on SAIF assessable deposits to raise the SAIF's
reserve ratio to the designated reserve ratio as of October 1, 1996. In response
to the requirements of the Funds Act, the FDIC imposed a one-time special
assessment equal to 65.7 basis points for all SAIF-assessable deposits as of
March 31, 1995. The Bank's one-time special assessment, which was collected on
November 17, 1996, amounted to $1.6 million. Net of related tax benefits, the
one-time special assessment amounted to $1.0 million.
As a result of the one-time special assessment, the FDIC on December
11, 1996 adopted new assessment schedules for the SAIF which lowered the
assessment rates then in effect. The new schedules provide for a base assessment
schedule for the SAIF with rates ranging from 4 to 31 basis points, and an
adjusted assessment schedule that reduces these rates by 4 basis points. In
general, as a result of the adoption of these schedules, SAIF rates range from 0
to 27 basis points as of October 1, 1996. These schedules, unlike the schedules
they replace, do not include rates for the FICO assessment as a result of the
Funds Act which required that the FICO assessment be separated from the SAIF
assessment effective January 1, 1997. The Bank's rate, which had been 23 basis
points, has been reduced to 0 basis points under the SAIF new assessment
schedules. However, the Bank's assessment rate under the separate FICO
assessment schedule is 6.48 basis points.
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Prompt Corrective Regulatory Action.
Under the OTS prompt corrective action regulations, the OTS is required
to take certain supervisory actions against undercapitalized institutions, the
severity of which depends upon which of the following five capital categories
applies to the institution. Generally, an institution is deemed to be "well
capitalized" if it has a total risk-based capital ratio (total capital to
risk-weighted assets) of 10% or greater, a Tier 1 risk-based capital ratio (core
capital to risk weighted assets) of 6% or greater, and a leverage capital ratio
(core capital to adjusted total assets) of 5% or greater, and is not subject to
a regulatory order, agreement or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater and generally a
leverage capital ratio of 4% or greater. An institution is deemed to be
"undercapitalized" if it has a total risk-based capital ratio that is less than
8%, has a Tier 1 risk-based capital ratio of less than 4% or generally has a
leverage capital ratio of less than 4%. A "significantly undercapitalized"
institution is one that has a total risk based capital ratio that is less than
6%, a Tier 1 risk based capital ratio that is less than 3%, or a leverage ratio
that is less than 3%. An institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%. In addition, the
OTS is authorized effectively to downgrade an institution to a lower capital
category than the institution's capital ratios would otherwise indicate, based
upon safety and soundness considerations (such as when the institution has
received a less than satisfactory examination rating in the categories of
capital, asset quality, management, earnings or liquidity ("CAMEL")).
Subject to a narrow exception, the OTS is required to appoint a
receiver or conservator for an institution that is critically undercapitalized.
The regulation also provides that a capital restoration plan must be filed with
the OTS within 45 days of the date an association receives notice that it is
"undercapitalized," In addition, numerous mandatory supervisory actions become
immediately applicable to the institution, including, but not limited to,
restrictions in growth, investment activities, capital distributions, and
affiliate transactions. The OTS could also take any one of a number of
discretionary supervisory actions, including the issuance of a capital directive
and the replacement of senior executive officers and directors.
Branching by Federally Chartered Associations
Federally chartered savings associations are permitted to branch
nationwide to the extent allowed by federal statute. This authority permits
associations to establish interstate networks and to geographically diversify
lines of business. OTS authority preempts any state law purporting to regulate
branching by federal savings associations.
The limitations that remain are statutory. An association may not
establish or operate a branch outside the state in which the association has its
home office if such branch would violate section 5(r) of the HOLA. This section
permits a federal savings association to branch outside its home state if (i)
the association meets the domestic building and loan test of Internal Revenue
Code section 7701(a)(19) or the asset composition test of subparagraph (c) of
that section or qualifies as a qualified thrift lender, and (ii) all branches in
each state branch outside of its home state also satisfies the domestic building
and loan test.
The limitations do not apply if (i) the branch results from a
supervisory acquisition under section 13(k) of the FDI Act; (ii) the branch was
authorized for the federal savings association prior to October 15, 1982; (iii)
the law of the state where the branch is to be located would permit
establishment of the branch if the association was a savings association or
savings bank chartered by the state in which its home office is located; or (iv)
the branch was operated lawfully as a branch under the state law prior to the
association's conversion to a federal charter.
The OTS will approve an application for branching only if the overall
policies, condition and operation of the applicant afford no basis for
supervisory objection and the proposed branch opens within 12 months of
approval. In addition, the institution must have a satisfactory record under the
Community Reinvestment Act ("CRA").
Capital Requirements
Federally insured savings associations, such as the Bank, are required
to maintain a minimum level of regulatory capital. The OTS has established
capital standards including a leverage ratio (or core capital) requirement, a
tangible capital requirement and a risk-based capital requirement. A savings
association must meet all of these standards in order to be in compliance with
its regulatory capital requirements. These requirements are required to be
generally as stringent as the
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comparable capital requirements for national banks. The OTS is also authorized
to impose capital requirements in excess of these standards on individual
savings associations on a case-by-case basis.
The leverage ratio standard requires that savings associations maintain
"core capital" of at least 3.0% of adjusted total assets (generally, an
institution's total assets calculated in accordance with generally accepted
accounting principles ("GAAP"), subject to certain adjustments). Core capital is
defined to include common shareholders' equity (including retained earnings),
certain non-cumulative perpetual preferred stock and any related surplus,
minority interests in equity accounts of consolidated subsidiaries and
"qualifying supervisory goodwill" less intangibles other than certain qualifying
intangible assets and mortgage servicing rights.
The capital regulations require tangible capital equal to at least 1.5%
of adjusted total assets. Tangible capital generally includes common
shareholders' equity and retained income, noncumulative perpetual preferred
stock and related income and minority interests in the equity accounts of fully
consolidated subsidiaries. Intangible assets must be deducted from tangible
capital and mortgage servicing rights (both originated and purchased) may be
included in a savings association's tangible capital up to certain limits.
In addition to requiring compliance with the leverage ratio and
tangible capital standards, the OTS capital regula tions also require that
savings associations satisfy a risk-based capital standard. This standard
assigns each asset held by an institution to one of four risk categories, based
on the amount of credit risk associated with a particular class of assets. The
categories range from 0% for assets backed by the full faith and credit of the
United States, or that pose no credit risk to the insured institution, to 100%
for delinquent or repossessed assets. The book value of assets in each category
is multiplied by the weighing factor (from 0% to 100%) assigned to that
category. These products are then totaled to arrive at total risk-weighted
assets. Off-balance sheet items are included in risk-weighted assets by
converting them to an approximate balance sheet "credit equivalent amount" based
on a conversion schedule. These credit equivalent amounts are then assigned to
risk categories in the same manner as balance sheet assets and are included in
risk-weighted assets. The regulations require that an insured institution attain
and maintain risk-based capital (core capital plus supplementary capital) equal
to no less than 8.0% of risk-weighted assets. Supplementary capital consists of
certain permanent and maturing capital instruments that do not qualify as core
capital and general valuation loan and lease allowances up to a maximum of 1.25%
of risk-weighted assets. Supplementary capital may be used to satisfy the risked
based requirement only to the extent of core capital. The OTS is also authorized
to require a savings association to maintain an additional amount of total
capital to account for concentration of credit risk and the risk of
nontraditional activities. At December 31, 1996, the Bank had no capital
investments that qualified as supplementary capital and had $2.6 million of
general valuation allowances which were included in risk-based capital, the
maximum allowable under the regulations.
Certain exclusions from capital and assets are required to be made for
the purpose of calculating risk-based capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments.
The OTS regulations establish special capitalization requirements for
savings associations that own service corporations and other subsidiaries,
including subsidiary savings associations. According to these regulations
certain subsidiaries are consolidated for capital purposes and others are
excluded from assets and capital. In determining compliance with the capital
requirements, all subsidiaries engaged solely in activities permissible for
national banks, engaged solely in mortgage-banking activities, or engaged in
certain other activities solely as agent for its customers are "includable"
subsidiaries that are consolidated for capital purposes in proportion to the
association's level of ownership, including the assets of includable
subsidiaries in which the association has a minority interest that is not
consolidated for purposes of GAAP. For excludable subsidiaries the debt and
equity investments in such subsidiaries are deducted from assets and capital.
The FDIC has adopted a rule which provides that any insured depository
institution, including a savings association, with a tangible capital ratio
(which in general reflects those capital components recognized by the OTS for
its capital standard) to total assets of less than 2% will be deemed to be
operating in an unsafe or unsound condition unless the depository institution
has entered into and is in compliance with a written agreement with its primary
federal regulator to increase its capital to acceptable levels and as to which
the FDIC is a party. Depository institutions with a core capital ratio of at
least 2% may still be considered by the FDIC, under appropriate circumstances,
to be in an unsafe and unsound condition.
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The Bank is in full compliance with its capital requirements. The
following table reflects at December 31, 1996 the Bank's capital requirements,
the Bank's actual capital and the amount of capital maintained by the Bank in
excess of its requirements. For a reconciliation of the Bank's regulatory
capital to the Bank's capital as reported under generally accepted accounting
principles see Note 16 to the Company's Consolidated Financial Statements.
<TABLE>
<CAPTION>
CORE CAPITAL TANGIBLE CAPITAL RISK-BASED CAPITAL
--------------------------- -------------------------- --------------------------
% OF % OF % OF
ADJUSTED ADJUSTED RISK
TOTAL TOTAL WEIGHTED
ASSETS AMOUNT ASSETS AMOUNT ASSETS AMOUNT
------ ------ ------ ------ ------ ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Required Capital....... 3.00% $14,938 1.50% $7,469 8.00% $16,452
Actual Capital......... 6.45% 32,129 6.45% 32,129 16.84% 34,625
---- ------ ---- ------ ----- ------
Excess Capital......... 3.45% $17,191 4.95% $24,660 8.84% $18,173
==== ======= ==== ======= ==== =======
</TABLE>
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against associations that fail to meet current
or future capital requirements. The OTS must prohibit the asset growth of
associations not meeting their capital standards, except for certain limited
growth in low-risk assets up to net interest credited, and must issue a capital
directive against such associations. The OTS may grant to associations
exemptions from the various sanctions or penalties for failure to meet their
capital requirements (other than appointment of a conservator or receiver and
the mandatory growth restrictions) through the association's submission of and
compliance with an approved capital plan. The capital plan must indicate, among
other things, how the association will increase capital so as to achieve
compliance with capital standards. While a plan is being reviewed for approval,
an association may not grow beyond interest credited or pay dividends without
approval and is subject to other limitations. If the plan is not approved, the
association will be prohibited from increasing its assets or making any loans
and investments without OTS approval and must comply with other restrictions
imposed by the OTS. If the plan is approved, the association may be required to
enter into an operating agreement with the OTS that may provide, among other
things, that if specific targets within the plan are not met or the association
takes any action that does not comport with the accepted plan, certain activi
ties will be significantly restricted, a consent to merge agreement will be
executed, or management and the board of directors must resign upon request.
Any savings association that fails any of the capital requirements is
subject to possible enforcement actions by the OTS or the FDIC. Such actions
could include a capital directive, a cease and desist order, civil money
penalties and the establishment of restrictions on the association's operations.
The OTS capital regulation provides that the OTS, through enforcement
proceedings or otherwise, could require one or more of the following corrective
actions: (i) increasing the amount of the association's regulatory capital to a
specified level or levels; (ii) convening a meeting or meetings with the OTS'
supervision staff for the purpose of meeting the capital requirements; (iii)
reducing the rate of interest that may be paid on savings accounts; (iv)
limiting the receipt of deposits to those made to existing accounts; (v) ceasing
or limiting the issuance of new accounts of any or all classes or categories,
except in exchange for existing accounts; (vi) ceasing or limiting lending or
the making of a particular type or category of loan; (vii) ceasing or limiting
the purchase of loans or the making of specified other investments; (viii)
limiting operational expenditures to specified levels; (ix) increasing liquid
assets and maintaining such increased liquidity at specified levels; or (x)
taking such other action or actions as the Director of the OTS may deem
necessary or appropriate for the safety and soundness of the savings association
or depositors or investors in the savings association. The OTS also could impose
harsher measures, such as the appointment of a receiver or conservator or a
forced merger into another institution. The grounds for appointment of a
conservator or receiver include substantially insufficient capital and losses or
likely losses that will deplete substantially all capital with no reasonable
prospect for replenishment of capital without federal assistance. The OTS and
FDIC may also require such association to raise additional capital through the
issuance of common stock or other capital instruments.
Limitations on Dividends and Other Capital Distributions
OTS regulations imposes limitations on the ability of savings
associations to pay dividends or make other distributions of capital. Such
distributions include cash dividends, payments by an institution to repurchase
or otherwise
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acquire its shares, payments to shareholders of another institution in a
cash-out merger and other distributions charged against capital. The regulation
establishes a three-tiered system of regulation, with the greatest flexibility
being afforded to well-capitalized institutions. The regulation provides the OTS
with the authority to prohibit capital distributions otherwise permitted by this
rule if such distribution would constitute an unsafe or unsound practice.
An association that before and after the proposed distribution meets or
exceeds its fully phased-in capital requirement and that has not been advised by
the OTS that it is in need of more than normal supervision, is a Tier 1
association ("Tier 1 Association"). An association that before and after the
proposed distribution meets or exceeds its minimum regulatory capital
requirement, but not its fully phased-in capital requirement, is a Tier 2
association ("Tier 2 Association"). An association having capital that is less
than its minimum regulatory capital requirement is a Tier 3 association ("Tier 3
Association").
A Tier 1 Association can, upon 30 days notice to the OTS, make capital
distributions during a calendar year up to 100% of its net income to date during
the calendar year plus 50% of its "surplus capital ratio" at the beginning of
the calendar year. The "surplus capital ratio" is the percentage by which the
association's ratio of total capital to assets exceeds the ratio of its capital
requirement to assets. Any additional amount of capital distributions will
require prior regulatory approval.
A Tier 2 Association can make a capital distribution, upon 30 days
notice to the OTS, only in accordance with the following schedule: (i) if the
association's current capital satisfies the 8% risk-based capital standard it
may make distributions up to 75% of net income over the most recent four
quarters.
A Tier 3 Association is not authorized under the regulation to make any
capital distributions unless it receives prior regulatory approval; or in the
case of an association operating in compliance with an approved capital plan,
the distribution is consistent with such approved capital plan.
Under the OTS prompt corrective action regulations, an association is
prohibited from making any capital distribution if, after the distribution, the
association would have (i) a total risk-based capital ratio of less than 8.0%;
(ii) a Tier 1 risk-based capital ratio of less than 4.0%; or (iii) a leverage
ratio of less than 4.0%. See "Prompt Corrective Action Regulation."
The OTS has proposed regulations that would revise the current capital
distribution restrictions. The proposal eliminates the current tiered structure
and the safe-harbor percentage limitations. Under the proposal a savings
association may make a capital distribution without notice to the OTS (unless it
is a subsidiary of a holding company) provided that it has a CAMEL 1 or 2
rating, is not in troubled condition (as defined by regulation) and would remain
adequately capitalized (as defined in the OTS prompt corrective action
regulations) following the proposed distribution. Savings associations that
would remain adequately capitalized following the proposed distribution but do
not meet the other noted requirements must notify the OTS 30 days prior to
declaring a capital distribution. The OTS stated it will generally regard as
permissible that amount of capital distributions that do not exceed 50% of the
institution's excess regulatory capital plus net income to date during the
calendar year. A savings association may not make a capital distribution without
prior approval of the OTS and the FDIC if it is undercapitalized before, or as a
result of, such a distribution. As under the current rule, the OTS may object to
a capital distribution if it would constitute an unsafe or unsound practice.
Because the Bank is a subsidiary of the Company, the proposed regulations would
require the Bank to provide notice to the OTS of its intent to make a capital
distribution. The Bank does not believe that the proposal will adversely affect
its ability to make capital distributions if it is adopted substantially as
proposed. No assurance can be given as to whether or in what form the
regulations may be adopted.
Liquidity Requirements
Under OTS regulations, a savings association is required to maintain an
average daily balance of liquid assets (cash, certain time deposits and savings
accounts, bankers acceptances, and specified United States government, state or
federal agency obligations and certain other investments) equal to a monthly
average of not less than a specified percentage of its net withdrawable accounts
plus borrowings payable in one year or less. This liquidity requirement, which
is currently 5.0%, may be changed from time to time by the OTS to any amount
within the range of 4.0% to 10.0% depending upon economic conditions and the
savings flow of savings associations. OTS regulations also require each savings
institution to maintain an average daily balance of short-term liquid assets at
a specified percentage (currently 1.0%) of the total of its net withdrawable
savings accounts and borrowings payable in one year or less. Monetary penalties
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may be imposed for failure to meet liquidity requirements. The liquidity ratio
of the Bank at December 31, 1996 was 7.1%.
Qualified Thrift Lender Test
The HOLA requires savings associations to meet a QTL test. Under the
QTL test set forth in the HOLA, a savings association is required to maintain a
minimum of 65% of its "portfolio assets" (as defined in the statute) in certain
investments ("Qualified Thrift Investments") on a monthly average basis in nine
out of every 12 months. Qualified Thrift Investments generally consist of (i)
loans that were made to purchase, refinance, construct, improve or repair
domestic residential or manufactured housing, (ii) home equity loans, (iii)
securities backed by or representing an interest in mortgages on domestic
residential or manufactured housing, (iv) obligations issued by the federal
deposit insurance agencies and (v) shares of stock issued by the federal deposit
insurance agencies and (v) shares of stock issued by any FHLB. Subject to a 20%
of assets limitation, Qualified Thrift Investments also include consumer loans,
investments in certain subsidiaries, loans for the purchase or construction of
schools, churches, nursing homes and hospitals, 200% of investments in loans for
low-to-moderate income housing and certain other community-oriented investments,
and shares of stock issued by FHLMC or FNMA. Under Section 2303 of the Economic
Growth and Regulatory Paperwork Reduction Act of 1996, a savings association can
comply with the QTL test by either meeting the QTL test set forth in the HOLA
and implementing regulations or qualifying as a domestic building and loan
association as defined in Section 7701(a)(19) of the Internal Revenue Code of
1986, as amended ("Code").
A savings association that fails the QTL test must either become a bank
(other than a savings bank) or become subject to the following restrictions on
its operations: (i) the savings association may not engage in any new activity
or make any new investment, directly or indirectly, unless such activity or
investment is permissible for a national bank; (ii) the branching powers of the
institution shall be restricted to those of a national bank; (iii) the
institution shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the institution shall be subject to the rules regarding
payment of dividends by a national bank. In addition, beginning three years
after the savings association failed the QTL test, the savings association would
be prohibited from engaging in any activity not permissible for a national bank
and would have to repay any outstanding advances from an FHLB as promptly as
possible.
At December 31, 1996, approximately 96.7% of the Bank's assets were
invested in Qualified Thrift Investments and, therefore, the Bank met the QTL
test.
Loans to One Borrower
OTS regulations provide that the total loans and extensions of credit
by a savings association to a single borrower outstanding at one time and not
fully secured by marketable collateral having a market value at least equal to
the amount of the loan or extension of credit may not exceed 15% of unimpaired
capital and surplus. As a separate and additional limitation to the foregoing,
the total loans and extensions of credit by a savings association to one
borrower outstanding at one time and fully secured by marketable collateral
having a market value at least equal to the funds outstanding may not exceed 10%
of unimpaired capital and surplus. An exception to the general loans-to-one
borrower limitation exists for loans made by a savings association for the
development of domestic residential housing units. Such loans may not exceed the
lesser of $30 million, or 30% of the savings association's unimpaired capital
and surplus, but may be made only if: (i) the purchase price of each dwelling
unit financed with the loan proceeds is not greater than $500,000; (ii) the
savings association is in compliance with its capital requirements; (iii) the
OTS permits, by order, the higher lending limit permitted by this provision;
(iv) loans made under this exception to all borrowers do not, in the aggregate,
exceed 150% of the association's unimpaired capital; and (v) such loans comply
with the applicable loan-to-value requirements.
OTS regulations provide that investments in the commercial paper and
corporate debt securities of the same issuer will be treated as loans and will
be subject to the general limitation on loans to one borrower; however, the
regulations also provide that, notwithstanding the general limitation, a savings
association may invest up to 10% of its unimpaired capital and unimpaired
surplus in one issuer's commercial paper, if rated in the highest category by at
least two nationally recognized rating services. This investment authority is in
addition to any loans that the savings association may make to the same issuer.
The OTS may prescribe more stringent limits on loans to one borrower if
deemed appropriate to protect the safety and soundness of the savings
association. The OTS regulations also provide that a savings association's loans
to
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one borrower to finance the sale of real property acquired in satisfaction of
debts previously contracted for in good faith shall not, when aggregated with
all other loans to that borrower, exceed the general loans-to-one borrower
limitations.
At December 31, 1996, the Bank's limit on loans to one borrower was
$4.9 million. At December 31, 1996, the Bank's largest aggregate amount of loans
to one borrower was $1.9 million.
Brokered Deposits
Under FDIC regulations, well-capitalized savings institutions that are
not treated as troubled by the OTS are not subject to limitations on brokered
deposits. Adequately capitalized savings institutions are able to accept, renew
or roll over brokered deposits only: (i) with a waiver from the FDIC; and (ii)
subject to the limitation that they do not pay an effective yield on any such
deposit which exceeds by more than (a) 75 basis points the effective yield paid
on deposits of comparable size and maturity in such institution's normal market
area for deposits accepted in its normal market area; or (b) 120 basis points
for retail deposits and 130 basis points for wholesale deposits, respectively,
of the current yield on comparable maturity U.S. treasury obligations for
deposits accepted outside the institution's normal market area. Undercapitalized
institutions are not permitted to accept brokered deposits and may not solicit
deposits by offering an effective yield that exceeds by more than 75 basis
points the prevailing effective yields on insured deposits of comparable
maturity in the institution's normal market area or in the market area in which
such deposits are being solicited.
OTS Assessments
Savings associations are required by OTS regulations to pay assessments
to the OTS to fund the operations of the OTS. The general assessments, paid on a
semi-annual basis, is computed upon the savings association's assets including
consolidated subsidiaries as reported on its most recent quarterly thrift
financial report. The assessments paid by the Bank for the year ended December
31, 1996 was $106,116.
Appraisal Policy Regulations
The OTS has adopted real estate appraisal regulations to comply with
Title XI of FIRREA which requires that the various federal banking regulators
adopt regulations providing, at a minimum, that real estate appraisals utilized
in connection with real estate related financial transactions in which a
financial institution engages be performed in accordance with the appraisal
standards promulgated by the Appraisal Standards Board of the Appraisal
Foundation and that such appraisals be in writing. The regulations, as amended,
require that an appraisal using state certified or licensed appraisers, as
appropriate, be made for all real estate related financial transactions entered
into on or after August 9, 1990 except those transactions in which (i) the
transaction value is less than or equal to $250,000; (ii) a lien is placed on
real property solely through an abundance of caution; (iii) the transaction
involves a lease that is not the economic equivalent of a purchase or sale; (iv)
there is a transaction resulting from a maturing extension of credit under
certain circumstances; or (v) there is the sale of pools or real property
interests under certain circumstances. A real estate related financial
transaction means any transaction involving the sale, lease, purchase,
investment in or exchange of real property, including interests in property, or
the financing thereof, or the refinancing of real property or interests in
property as security for a loan or investment, including mortgage
backed-securities. The regulations provide that a state certified appraiser must
be used for all real estate related transactions having a transaction value of
$250,000 or more, except those involving appraisals of 1-to-4 family residential
properties (excluding from such exception, however, complex 1-to-4 family
residential property appraisals). The regulations define a "complex" appraisal
as one in which the property to be appraised, market conditions or form of
ownership are atypical. The regulations provide a presumption that appraisals
will be non-complex unless the savings association has readily available
information that a given appraisal will be complex. All other appraisals may be
performed either by a state certified appraiser or a state licensed appraiser.
The regulations require that all appraisals, among other things, (i)
conform to the Uniform Standards of Professional Appraisal Practice adopted by
the Appraisal Standards Board of the Appraisal Foundation; (ii) be based on the
definition of market value set forth in the regulations; (iii) be written and
contain sufficient information and analysis to support the institution's
decision to engage in the transaction; and (iv) analyze and report appropriate
deductions and discounts for proposed construction or renovation, partially
leased buildings, non-market lease terms, and tract developments with unsold
units.
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Activities of Savings Associations and Their Subsidiaries
FIRREA and FDIC regulations provide that, when a savings association
establishes or acquires a subsidiary or elects to conduct any new activity
through a subsidiary that the association controls, the savings association
shall notify the FDIC and the OTS thirty days in advance and provide the
information each agency may, by regulation, require. Savings associations also
must conduct the activities of subsidiaries in accordance with regulations and
orders of the OTS.
The OTS may determine that the continuation by a savings association of
its ownership or control of, or its relationship to, the subsidiary constitutes
a serious risk to the safety, soundness, or stability of the association, or is
inconsistent with sound banking practices or with the purposes of the FDI Act.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF. If so, it may require that no SAIF member engage in
that activity directly.
Standards for Safety and Soundness
The OTS, along with the other federal banking agencies, adopted safety
and soundness guidelines relating to (i) internal controls and information
systems, (ii) internal audit systems; (iii) loan documentation; (iv) credit
underwriting; (v) interest rate exposure; (vi) asset growth; and (vii)
compensation, fees and benefits for executive officers, directors, employees and
principal shareholders. The operational, managerial and compensation standards
set out in the safety and soundness guidelines are used by the federal banking
agencies to identify and address problems at institutions before capital becomes
impaired. If an insured depository institution is notified that it fails to meet
any of the standards set forth in the guidelines, it will be required to submit
to the appropriate federal banking agency a compliance plan specifying the steps
that will be taken to cure the deficiency. If an institution fails to submit an
acceptable compliance plan or fails to implement the compliance plan, the
appropriate federal banking agency will require the institution to correct the
deficiency and until corrected may impose restrictions on the institution
including any of the restrictions applicable under the prompt corrective action
regulations.
The OTS and the other federal banking agencies adopted final
regulations which prescribe standards for extensions of credit (i) secured by
real estate or (ii) made for the purpose of financing the construction of
improvements on real estate. The OTS regulation requires each savings
association to establish and maintain written internal real estate lending
standards consistent with safe and sound banking practices and appropriate to
the size of the institution and the nature and scope of its real estate lending
activities. The standards also must be consistent with OTS guidelines, which
include loan-to-value ratios for the different types of real estate loans.
Institutions also are permitted to make a limited amount of loans that do not
conform to the loan-to-value limitations so long as such exceptions are reviewed
and justified appropriately. The guidelines also list a number of lending
situations in which exceptions to the loan-to-value standards are justified.
Enforcement.
Under the FDI Act, the OTS has primary enforcement responsibility over
savings institutions and has the authority to bring enforcement action against
all "institution-affiliated parties," including shareholders, and any attorneys,
appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured institution. Civil
penalties cover a wide range of violations and actions and range up to $25,000
per day unless a finding of reckless disregard is made, in which case penalties
may be as high as $1 million per day. Criminal penalties for most financial
institution crimes include fines of up to $1 million and imprisonment for up to
30 years. Possible enforcement action ranges from the imposition of a capital
plan and capital directive to receivership, conservatorship or the termination
of deposit insurance. Under the FDI Act, the FDIC has the authority to recommend
to the Director of OTS that enforcement action be taken with respect to a
particular savings institution. If action is not taken by the Director of OTS,
the FDIC has authority to take such action under certain circumstances.
Community Reinvestment Act
Under the CRA, as implemented by OTS regulations, a savings institution
has a continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The CRA does not establish specific lending
requirements or programs for
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financial institutions nor does it limit an institution's discretion to develop
the types of products and services that it believes are best suited to its
particular community, consistent with the CRA. The CRA requires the OTS, in
connection with its examination of a savings institution, to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution. The CRA also requires all institutions to make public disclosure of
their CRA ratings. The Bank received a "Satisfactory" CRA rating in its most
recent examination.
Certain Restrictions on Acquisitions
Federal law provides that no company, "directly or indirectly or acting
in concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. Any company that
acquires such control becomes a "savings and loan holding company" subject to
registration, examination and regulation by the OTS as a savings and loan
holding company. In addition, federal law also provides that no "person," acting
directly or indirectly or through or in concert with one or more other persons,
other than a company, may acquire "control" of a savings association unless at
least 60 days prior written notice has been given to the OTS and the OTS has not
objected to the proposed acquisition.
Under OTS regulations "control" involves a 25% voting stock test,
control in any manner of the election of a majority of the institution's
directors, or a determination by the OTS that the acquiror has the power to
direct, or directly or indirectly to exercise a controlling influence over, the
management or policies of the institution. Acquisition of more than 10% of an
institution's voting stock, if the acquiror also is subject to any one of eight
"control factors," constitutes a rebuttable determination of control under the
regulations. The determination of control may be rebutted by submission to the
OTS, prior to the acquisition of stock or the occurrence of any other
circumstances giving rise to such determination, of a statement setting forth
facts and circumstances which would support a finding that no control
relationship will exist and containing certain undertakings. The regulations
provide that persons or companies which acquire beneficial ownership exceeding
10% or more of any class of an insured institution's stock after the effective
date of the regulations must file with the OTS a certification that the holder
is not in control of such institution, is not subject to a rebuttable
determination of control and will take no action which would result in a
determination or rebuttable determination of control without prior notice to or
approval of the OTS, as applicable.
Federal Reserve System
The Federal Reserve Board requires all depository institutions to
maintain non-interest bearing reserves at specified levels against their
transaction accounts (primarily NOW and regular checking accounts). At December
31, 1996, the Bank was in compliance with these reserve requirements. The
balances maintained to meet the reserve require ments imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements imposed by the OTS.
Savings associations have the authority to borrow from the Federal
Reserve Bank "discount window," but Federal Reserve Board regulations require an
association to exhaust other reasonable alternative sources of funds before
borrowing from the Federal Reserve. The Bank did not have any discount window
borrowings as of December 31, 1996.
TAXATION
Federal Taxation
For federal income tax purposes the Company files its income tax
returns on the basis of a calendar year. The Company uses the accrual method of
accounting to report its respective income and expenses.
The Company is subject to those rules of federal income taxation
generally applicable to corporations. For tax periods ending before January 1,
1996, however, the Bank, which met certain definitional tests under the Internal
Revenue Code of 1986, as amended (the "Code") primarily relating to its assets
and the nature of its business was permitted to establish a reserve for bad
debts and to make annual additions thereto. The Bank was generally able to
deduct such additions, within specified formulae limits, in arriving at its
taxable income. These rules were repealed pursuant to the Small Business Job
Protection Act of 1996 (the "Act"), which was passed by the Congress of the
United States on August 2, 1996, and which is effective with respect to bad debt
reserves of thrift institutions for all taxable years beginning after
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December 31, 1995. Specifically, the Act: (a) eliminated use of the "percentage
of income method" (generally, a percentage of specially computed taxable income
which is then used to compute the bad debt reserve deduction) for determining
bad debt reserves, and (b) restricted use of the "experience method" (under
which the bad debt reserve deduction is generally based on a formula tied to
actual debt charge-offs over a period of years) to saving institutions that do
not constitute "large banks" ("Large Banks") under Section 585 of the Code. For
these purposes, Large Banks may generally be defined as institutions which have,
in conjunction with their affiliated institutions (including members of the same
federal consolidated income tax group), average total assets for a particular
tax year in excess of $500,000,000. Institutions which are treated as Large
Banks are now limited to use of the "specific charge-off method" of accounting
for bad debt tax deductions.
The Act also generally requires savings institutions to recapture as
taxable income the amount of their "applicable excess reserves" (as defined
below) ratably over the six year period beginning with their first taxable year
beginning after 1995 (the "Six Year Period"). For these purposes, the applicable
excess reserves of a savings institution is generally equal to the excess of (i)
the balance of its bad debt reserves as of the close of its last taxable year
beginning prior to January 1, 1996, over (ii) the balance of its bad debt
reserves as of the close of its last taxable year beginning before January 1,
1988. In the case of certain institutions ("Small Banks") which do not
constitute Large Banks (as defined above), the amount of applicable excess
reserves is generally equal to the excess of (a) the amount described in clause
(i) of the immediately preceding sentence, over (b) the greater of (x) the
amount described in clause (ii) of the immediately preceding sentence or (y) the
amount of the savings institution's bad debt reserves as of the close of its
last taxable year beginning prior to January 1, 1996 calculated as if such
institution had consistently used the experience method.
Based on the foregoing, savings institutions are generally not required
to recapture into income their bad debt reserves attributable to pre-1988 tax
periods under the Act. Savings institutions which constitute Small Banks,
however, are generally required to recapture into income their reserves for
post-1987 tax periods only to the extent that such banks have historically
utilized the percentage of income method and not the experience method for
purposes of computing their bad debt reserves. Conversely, savings institutions
which constitute Large Banks are generally required to recapture into income
their reserves for post-1987 tax periods, regardless of whether such banks have
utilized the percentage of income method or the experience method for purposes
of computing their bad debt reserves.
The Bank has historically computed its bad debt deductions with respect
to qualifying real property loans under the experience method or the percentage
of taxable income method depending on the method which yielded the greatest tax
benefit. The Company's bad debt reserve for tax purposes was approximately $4.2
million at December 31, 1996. For the years ended December 31, 1995 and 1994,
the Bank computed its bad debt deduction with respect to qualifying real
property loans under the percentage of taxable income method. The Bank has
estimated that its total additional federal income tax liability over the Six
Year Period due to the bad debt reserve recapture required under the Act would
be approximately $343,000. Since the Bank provides tax expense for financial
reporting purposes, the elimination of the percentage of taxable income method
will not impact the results of operations. The Bank may, however, be able to
defer the commencement of the Six Year Period for up to an additional two year
period (i.e., through the close of its last taxable year beginning prior to
January 1, 1998) to the extent that it satisfies certain "residential loan
requirements" within such period (generally, to the extent that the principal
amount of residential loans made by the Bank in each of the two tax years
beginning after December 31, 1995 is not less than the average principal amount
of its residential loan originations for the six most recent tax years beginning
prior to January 1, 1996).
To the extent that the Bank makes a "non-dividend distribution" (as
defined below), all or a portion of such distribution may generally be
considered to be attributable to income which was appropriated to the pre-1988
bad debt reserves (or supplemental loan loss reserves) and deducted for federal
income tax purposes; in that event, such distribution to shareholders, including
redemptions or distributions in dissolution or liquidation, may generally not be
made without payment of federal income taxes at the then current income tax rate
by the institution on the amount of income deemed removed from the reserves for
such distribution. Under applicable Code provisions, the amount that would be
deemed removed from such reserves upon such distribution to stockholders and,
therefore, subject to corporate level taxation at the normal corporate tax rate,
would be the amount which, after a reduction for taxes on such amount, is equal
to the amount actually distributed to shareholders. Assuming a 35% tax rate, the
amount deemed removed would be the lesser of (1) approximately 154% of the
amount actually distributed or (2) the total amount of the reserves.
For federal income tax purposes, a distribution made by a corporation
is taxed as a dividend to the extent that the distribution is paid out of the
corporation's current or accumulated earnings and profits. To the extent that
the amount of such distribution exceeds current or accumulated earnings and
profits ("non-dividend distributions"), such excess is
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deemed for federal income tax purposes to be, as to any shareholder, first a
non-taxable return of capital reducing such shareholder's tax basis in his stock
by an amount equal to the distribution received and, to the extent such
non-dividend distributions exceed the shareholder's tax basis, such
distributions are treated as taxable income that constitutes capital gains if
the stock is held by the shareholder as a capital asset.
The maximum rate of regular corporate federal income tax applicable to
the Company is currently 34% (or 35% for taxable income in excess of $10
million). In addition to their regular federal income tax liability,
corporations are also subject to an alternative minimum tax similar to the
alternative minimum tax applicable to individuals. The corporate alternative
minimum tax rate is 20%. Corporations are subject to this alternative minimum
tax to the extent it exceeds their regular tax liability. The tax is applied to
"alternative minimum taxable income" which includes interest on certain
tax-exempt bonds and 75% of "adjusted current earnings" over alternative minimum
taxable income (computed without this item). The first $40,000 of alternative
minimum taxable income is exempt from the tax. Such exemption amount, however,
is reduced (but not below zero) by 25% of the amount by which a corporation's
alternative minimum taxable income exceeds $150,000.
Generally, when a corporation is subject to the alternative minimum
tax, it may carry forward (but not back) the amount of this tax indefinitely as
a credit against future liability for the regular income tax, but not the
alternative minimum tax. The alternative minimum tax credit is not allowable for
any minimum tax attributable to tax preference items which constitute permanent
exclusions of income (for example, tax-exempt interest) rather than deferral of
income.
State Taxation
The Company is subject to taxes which generally apply to New Jersey
domestic taxable corporations. Such corporations are generally subject to tax at
an amount equal to the greater of $200 or 9% of net income allocated to New
Jersey.
The Bank is taxed under the New Jersey Savings Institution Tax Act.
This Act exempts the Bank from all other New Jersey Corporate Franchise Taxes,
and from all local taxation of, upon or measured by tangible personal property
imposed by political subdivisions. The Savings Institution Tax is an excise tax
upon the privilege of doing business in the State of New Jersey at the rate of
3% per annum on net income. The Bank is also subject to a franchise tax in the
State of Delaware with regard to its branch operations in that State. This
Delaware franchise tax is asserted against the taxable income of Delaware
branches of federally chartered savings banks (such as the Bank) which are
headquartered in another State, and is computed based on tax rates which vary
from 8.7% (for taxable income of $20 million or less) to 1.7% (for taxable
income over $650 million).
Item 2. Properties.
The Company owns seven retail banking offices, its Administrative
office and its lending operations office. Three retail banking offices and the
accounting department office are leased. The leases expire by the year 2002.
Lease payments were $106,433 in 1996 and $104,049 in 1995. The Company's net
investment in branch offices, premises, equipment and leaseholds was $3.0
million at December 31, 1996.
Item 3. Legal Proceedings.
The Company is involved in litigation arising in the normal course of
business. In management's opinion, the resolution of all pending litigation will
not have a material adverse affect on the Company's financial condition or
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The Company's Common Stock is traded on the Nasdaq National Market tier
of the Nasdaq Stock Market under the symbol "FSPG." The following table sets
forth the high and low closing sales price for the Common Stock for each quarter
in the two year period ended December 31, 1996 as adjusted to reflect stock
splits. The table also reflects the cash dividends paid with respect to each
quarter as adjusted for stock splits.
For the Quarter Ended High Low Dividends
- --------------------- ---- --- ---------
March 31, 1995 $10.88 $10.13 $.09
June 30, 1995 11.06 10.31 .09
September 30, 1995 12.94 10.50 .09
December 31, 1995 14.25 12.75 .09
March 31, 1996 14.06 13.13 .09
June 30, 1996 14.06 13.31 .09
September 30, 1996 14.06 13.31 .09
December 31, 1996 14.63 13.50 .10
It is the current policy of the Company to pay a regular quarterly cash
dividend of $0.10 per share. Dividends, if and when paid, will be subject to
determination and declaration by the Board of Directors, which will take into
account the Company's financial condition, results of operations, tax
considerations, industry standards, economic conditions and other factors,
including the regulatory restrictions discussed below.
Funds for the payment of cash dividends by the Company on its Common
Stock are obtained solely from dividends paid to the Company by the Bank.
Accordingly, restrictions on the Bank's ability to pay cash dividends directly
affect the payment of cash dividends by the Company. OTS regulations limit the
Bank's ability to pay cash dividends on its capital stock. Under these
regulations, the Bank is not permitted to declare or pay a cash dividend on or
repurchase any of the Common Stock if the effect thereof would be to cause the
Bank's regulatory capital to be reduced below the Bank's regulatory capital
requirements or the amount of the Bank's liquidation account. At December 31,
1996, the Bank's regulatory capital exceeded its regulatory capital requirements
by approximately $17.2 million. For a discussion of OTS regulations affecting
the Bank's ability to declare and pay dividends see the discussion in Item 1
under the caption "Regulation - First Home Savings Bank, FSB - Limitations on
Dividends and Other Capital Distributions."
Item 6. Selected Financial Data.
The information set forth on page 3 of the Company's 1996 Annual Report
to Stockholders is incorporated herein by reference thereto.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
The information contained under the caption "Management's Discussion
and Analysis" beginning on page 5 of the Company's 1996 Annual Report to
Stockholders is incorporated herein by reference thereto.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements, the notes thereto, and the
opinion of independent certified public accountants thereon, appearing on pages
14 through 43 of the Company's Annual Report to Stockholders are incorporated
herein by reference thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this Item is incorporated by reference to
the Company's definitive proxy statement dated March 28, 1997.
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference to
the Company's definitive proxy statement dated March 28, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this Item incorporated by reference to the
Company's definitive proxy statement dated March 28, 1997.
Item 13. Certain Relationships and Related Transactions.
The information required by this Item is incorporated by reference to
the Company's definitive proxy statement dated March 28, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1) The following consolidated financial statements of the Company
and the opinion of independent certified public accountants
thereof:
Consolidated Statements of Financial Condition at December 31,
1996 and 1995
Consolidated Statements of Income for the Years Ended December
31, 1996, 1995 and 1994.
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995, and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
2) Other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
and Office of Thrift Supervision are not required under the
related instructions or are inapplicable and therefore have been
omitted.
3) The following exhibits:
Exhibit #
- ---------
3.1 Certificate of Incorporation.
3.2 Bylaws.
10.1(1) Employee Stock Compensation Program.
10.2(1) 1996 Employee Stock Option Plan.
33
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10.3(1) 1994 Stock Option Plan for Non-Employee Directors.
10.4(1) Employment Agreement between First Home Savings Bank, F.S.B. and Stephen
D. Miller, as amended.
10.5(1) Employment Agreement between First Home Savings Bank, F.S.B. and
Robert A. DiValerio, as amended.
10.6(1) Employment Agreement between First Home Savings Bank, F.S.B. and Duff P.
O'Connor, as amended.
10.7(1) Employment Agreement between First Home Savings Bank, F.S.B. and Stephen
R. Selverian, as amended.
13 1996 Annual Report to Shareholders.
21 Subsidiaries of the Company.
27 Financial Data Schedule.
- ----------
(1) Executive Compensation Plans and Arrangements.
(b) No reports on Form 8-K have been filed during the last quarter of
the period covered by this report.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIRST HOME BANCORP, INC.
DATE: March 28, 1997 By:/s/Stephen D. Miller
---------------------------
Stephen D. Miller, President
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/Stephen D. Miller President and Chairman March 28, 1997
- ---------------------------------- Of the Board
Stephen D. Miller
/s/Robert A. DiValerio Senior Executive Vice President March 28, 1997
- --------------------------------- (Principal Financial Officer and
Robert A. DiValerio Principal Accounting Officer)
- --------------------------------- Director March , 1997
Willard F. Cheeseman
/s/Adam J. Gagliardi, Jr. Director March 28, 1997
- ---------------------------------
Adam J. Gagliardi, Jr.
/s/ Eugene J. Martell Director March 28, 1997
- ----------------------------------
Eugene J. Martell
/s/Frederick M. Palfrey Director March 28, 1997
- ----------------------------------
Frederick M. Palfrey
/s/W. Kenneth Porch Director March 28, 1997
- ----------------------------------
W. Kenneth Porch
/s/Stephen R. Selverian Executive Vice March 28, 1997
- --------------------------------- President and Director
Stephen R. Selverian
/s/ Rodger D. Shay Director March 28, 1997
- ---------------------------------
Rodger D. Shay
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit # Page
- --------- ----
3.1 Certificate of Incorporation.
3.2 Bylaws.
10.1(1) Employee Stock Compensation Program.
10.2(1) 1996 Employee Stock Option Plan.
10.3(1) 1994 Stock Option Plan for Non-Employee Directors.
10.4(1) Employment Agreement between First Home Savings Bank, F.S.B.
and Stephen D. Miller, as amended.
10.5(1) Employment Agreement between First Home Savings Bank, F.S.B.
and Robert A. DiValerio, as amended.
10.6(1) Employment Agreement between First Home Savings Bank, F.S.B.
and Duff P. O'Connor, as amended.
10.7(1) Employment Agreement between First Home Savings Bank, F.S.B.
and Stephen R. Selverian, as amended.
13 1996 Annual Report to Shareholders.
21 Subsidiaries of the Company.
27 Financial Data Schedule.
- ----------
(1) Executive Compensation Plans and Arrangements.
<PAGE>
CERTIFICATE OF INCORPORATION
of
FIRST HOME BANCORP INC.
1. Name. The name of the Corporation is FIRST HOME BANCORP Inc.
2. Registered Agent. The registered agent of the Corporation is Stephen
D. Miller.
3. Registered Office. The registered office of the Corporation is 125
South Broadway, Pennsville, New Jersey 08070.
4. Purpose. The purpose for which the Corporation is organized is to
engage in any activity for which corporations may be organized under N.J.S.A.
14A:1-1 et. seq.
5. Capital Stock. The aggregate number of shares which the Corporation
has the authority to issue is 11,000,000 shares, of which 10,000,000 shares
shall be common stock and 1,000,000 shares shall be preferred stock. The
designation, relative rights, preferences, and limitations of the shares of each
class of capital stock, itemized by class shall be as follows:
A. Common Stock. Each share of common stock shall be entitled
to one vote on all matters submitted to a vote of shareholders except as the
right to exercise such vote may be limited by the provisions of this Certificate
of Incorporation.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund, or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, the assets and funds of the
Corporation available for distribution to shareholders, and remaining after the
payment to holders of preferred stock of the amounts (if any) to which they are
entitled, shall be divided and paid to the holders of the common stock according
to their respective shares.
B. Preferred Stock. Preferred. The Corporation's board of
directors (hereafter called "Board of Directors" or "Board") is authorized to
adopt at any time, or from time to time, amendments to the Certificate of
Incorporation with respect to any unissued and/or treasury shares of preferred
stock, and thereby to fix or change the division of shares of the preferred
stock into classes and/or into series within any class or classes, and to fix or
change the determination of the voting rights, designations, preferences,
limitations, special rights and relative rights of the shares of any class or
series. The authority of the Board with respect to each class or series of
preferred stock shall include, but not be limited to, determination of the
following:
(i) The number of shares constituting that class or
series and the distinctive designation of that class or series;
<PAGE>
(ii) The dividend rate on the shares of that class or
series, whether dividends shall be cumulative, and, if so, from which date or
dates;
(iii) Whether that class or series shall have voting
rights, in addition to any voting rights provided by law, and, if so, the terms
of such voting rights;
(iv) Whether that class or series shall have conversion
privileges and, if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(v) Whether or not shares of that class or series shall
be redeemable and whether or not the Corporation or the holder (or both) may
exercise the redemption right, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions;
(vi) The rights of the shares of that class or series in
the event of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation; and
(vii) Any other relative rights, preferences and
imitations of that class or series as may be permitted or required by law.
6. Business Combinations. As used in this Section 6, the following
terms shall have the following meanings:
A. "Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified Person.
B. "Associate," when used to indicate a relationship with any
Person, means:
(i) any corporation or organization of which that Person
is an officer or partner or is, directly or indirectly, the beneficial owner of
10% or more of any class of voting stock,
(ii) any trust or other estate in which that Person has
a ten percent or greater beneficial interest or as to which that Person serves
as trustee or in a similar fiduciary capacity, or
(iii) any relative or spouse of that Person, or any
relative of that spouse, who has the same home as that Person.
C. "Beneficial owner," when used with respect to any stock,
means a Person:
(i) that, individually or with or through any of its
affiliates or associates, beneficially owns that stock, directly or indirectly;
(ii) that, individually or with or through any of its
affiliates or associates, directly or indirectly
2
<PAGE>
(a) has the right to acquire that stock (whether that
right is exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding (whether or not in writing), or upon
the exercise of conversion rights, exchange rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial
Owner of stock tendered pursuant to a tender or exchange offer made by that
Person or any of that Person's affiliates or associates until that tendered
stock is accepted for purchase or exchange; or
(b) has the right to vote that stock pursuant to any
agreement, arrangement or understanding (whether or not in writing); provided,
however, that a Person shall not be deemed the beneficial owner of any stock
under this subparagraph if the agreement, arrangement or understanding to vote
that stock (1) arises solely from a revocable proxy or consent given in response
to a proxy or consent solicitation made in accordance with the applicable rules
and regulations under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and (2) is not then reportable on a Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) that has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring,
holding, voting (except voting pursuant to a revocable proxy or consent as
described in subparagraph (b) of paragraph (ii) of this subsection, or disposing
of that stock with any other Person that beneficially owns, or whose Affiliates
or Associates beneficially own, directly or indirectly, that stock.
D. "Business Combination" means:
(i) any merger or consolidation of the Corporation with
or into any Person;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of transactions)
of all or any substantial part of the assets of the Corporation to any Person;
(iii) the liquidation, spinoff, splitoff or splitup of
the Corporation or any subsidiary thereof; or
(iv) any transaction similar to, or having similar
effect as, any of the foregoing transactions.
E. "Independent Majority of Shareholders" means a majority of
the votes entitled to be cast generally for the election of directors by all
shareholders other than an Interested Shareholder.
F. "Interested Shareholder" means any Person that is the
Beneficial Owner, directly or indirectly, of 10% or more of the voting power of
the outstanding voting stock of the Corporation.
G. "Person" means any person, partnership, corporation, group
or other entity (other than the Corporation, any subsidiary of the Corporation
or a trustee holding stock for the benefit of employees of the Corporation or
its subsidiaries, or any one of them, pursuant to one or more employee benefit
plans or arrangements). When two or more Persons act as a Partnership, limited
partnership, syndicate, association or other group for the purpose of acquiring,
holding or disposing of shares of stock, such partnership, syndicate,
association or group shall be deemed a "Person."
3
<PAGE>
H. "Whole Board of Directors" means the total number of
directors which the Corporation would have if there were no vacancies.
Except as otherwise expressly provided in this Section 6, the
Corporation shall not become party to any Business Combination unless at a
meeting of the Corporation's shareholders the Business Combination is approved
by (a) the affirmative vote of shareholders entitled to cast at least 80% of the
votes which all shareholders of the Corporation are entitled to cast generally
in the election of directors, considered for the purpose of this Section 6 as
one class; and (b) if the Business Combination is with an Interested
Shareholder, the affirmative vote of an Independent Majority of Shareholders.
Such affirmative votes shall be in addition to any shareholder vote which would
be required without reference to this Section 6 and shall be required
notwithstanding the fact that no vote of shareholders may be required or that
some lesser percentage may be specified by law or otherwise.
The provisions of this Section 6 shall not apply to any Business
Combination approved by 66-2/3% of the members of the Whole Board of Directors
of the Corporation at a meeting duly called and held.
7. Number of Directors. The Board of Directors shall consist of not
less than five nor more than 25 directors. The number of directors to be
elected, subject to the foregoing limits, shall be determined from time to time
by the Board of Directors.
8. Classification of Directors. The Board of Directors shall be divided
into three classes, as nearly as equal in number as possible, known as Class A,
consisting of not more than eight directors, Class B, consisting of no more than
eight directors,and Class C, consisting of not more than nine directors. The
initial directors of Class A shall serve until the first annual meeting of
shareholders. At the first annual meeting of shareholders, the directors of
Class A shall be elected for a term of three years and, after expiration of such
term, shall thereafter be elected every three years for three year terms. The
initial directors of Class B shall be elected to serve until the second annual
meeting of shareholders. At the second annual meeting of the shareholders, the
directors of Class B shall be elected for a term of three years and, after the
expiration of such term shall thereafter be elected every three years for three
year terms. The initial directors of Class C shall serve until the third annual
meeting of shareholders. At the third annual meeting of shareholders, the
directors of Class C shall be elected for a term of three years and, after the
expiration of such term, shall thereafter be elected every three years for three
year terms. Each Director shall serve until his successor shall have been
elected and shall qualify, even though his term of office as herein provided has
otherwise expired, except in the event of his earlier death, resignation,
removal or disqualification. This Article 7, or any portion thereof, may be
changed by a by-law amendment which is adopted by all of the then members of
Board of Directors.
9. Removal of Directors.
(a) Removal by Shareholders
The entire Board of Directors, or a class of the Board, if the
Board is classified with respect to the power to elect directors, or any
individual director, may be removed from office by the shareholders only for
cause (as defined herein) and only with the vote of shareholders entitled to
cast at least seventy-five percent (75%), or such higher percentage as may be
required by law, of the votes which all shareholders would be entitled to cast
at any annual election of directors or of such class of directors. The term
'cause', as used herein, shall refer only to one of the following events: (1)
conviction of the director of a felony;
4
<PAGE>
(2) declaration by order of court that the director is of unsound mind; or (3)
gross abuse of trust committed in bad faith.
(b) Removal by Board of Directors
The Board of Directors may, without shareholder approval,
declare vacant the office of any director for any proper cause (whether or not
similar to those listed in subparagraph (a) above) including, but not limited
to, conflict of interest or other breach of fiduciary duty, default on a loan,
or unacceptability of the director to bank regulatory authorities as a director
of a bank subsidiary of the Corporation.
10. Limitation on Liability. No director or officer of the Corporation
shall be personally liable to the Corporation or its shareholders for damages
for breach of any duty owed to the Corporation or its shareholders, except that
no director or officer of the Corporation shall be relieved from liability for
any breach of duty based upon an act or omission (a) in breach of such Person's
duty of loyalty to the Corporation or its shareholders, (b) not in good faith or
involving a knowing violation of law or (c) resulting in receipt by such Person
of an improper personal benefit. As used in this section, an act or omission in
breach of a Person's duty of loyalty means an act or omission which that Person
knows or believes to be contrary to the best interests of the Corporation or its
shareholders in connection with a matter in which he has a material conflict of
interest.
11. Amendment to By-Laws.
Any amendment to the Bylaws of the Corporation which is
proposed by shareholders, and which has not previously received the approval of
the Board of Directors, shall require for adoption the affirmative vote of the
holders of at least eighty percent (80%) of the votes which all shareholders are
entitled to cast thereon, in addition to any other approval which is required by
law, this Certificate of Incorporation, the Bylaws of the Corporation or
otherwise.
12. Amendment of Certificate. No amendment, addition, alteration, or
repeal of this Certificate of Incorporation shall be made unless approved by the
shareholders by the affirmative vote of 80% of the total votes eligible to be
cast at a legal meeting provided, however, the affirmative vote of the holders
of a majority of the shares of Common Stock shall be required if the Board of
Directors has approved the proposed amendment by resolution adopted before the
shareholders are solicited to vote on the amendment.
13. Initial Board of Directors. The initial Board of Directors of the
Corporation shall consist of 8 Directors:
NAME ADDRESS
Willard F. Cheeseman 125 South Broadway
Pennsville, NJ 08070
Adam J. Gagliardi, Jr. 125 South Broadway
Pennsville, NJ 08070
5
<PAGE>
Eugene J. Martell 125 South Broadway
Pennsville, NJ 08070
Stephen D. Miller 125 South Broadway
Pennsville, NJ 08070
Frederick M. Palfrey 125 South Broadway
Pennsville, NJ 08070
W. Kenneth Porch 125 South Broadway
Pennsville, NJ 08070
Stephen R. Selverian 125 South Broadway
Pennsville, NJ 08070
Rodger D. Shay 125 South Broadway
Pennsville, NJ 08070
14. Incorporation. The name and address of the incorporator is:
NAME ADDRESS
Stephen D. Miller 125 South Broadway
Pennsville, NJ 08070
IN WITNESS WHEREOF, the Incorporator, being over eighteen years of age,
has signed this Certificate of Incorporation this 21st day of February, 1996.
Stephen D. Miller, Incorporator
6
<PAGE>
BYLAWS
OF
FIRST HOME BANCORP INC.
The Bylaws are adopted by the Corporation and are supplemental
to the New Jersey Business Corporation Act as the same shall
from time to time be in effect.
ARTICLE I. NAME.
Section 101. Name. The name of the Corporation is First Home Bancorp
Inc.
Section 102. State of Incorporation. The Corporation has been
incorporated under the laws of the State of New Jersey.
ARTICLE II. REGISTERED AND PRINCIPAL OFFICES.
Section 201. Registered Office, Registered Agent. The registered office
of the Corporation in the State of New Jersey shall be at 125 South Broadway,
Pennsville, New Jersey 08070 and the Corporation's registered agent at such
address shall be Stephen D.
Miller.
Section 202. Offices. The principal office of the Corporation and any
other offices of the Corporation shall be located at such place(s), within or
without the State of New Jersey, as the Board of Directors may from time to time
determine or as the business of the Corporation may require.
ARTICLE III. SHAREHOLDERS AND DIRECTORS.
Section 301. Place of Shareholders' Meetings. All meetings of the
shareholders shall be held at such place or places, within or without the State
of New Jersey, as shall be fixed by the Board of Directors from time to time.
Section 302. Annual Shareholders' Meeting. The annual meeting of the
shareholders, for the election of directors and the transaction of such other
business as may properly be brought before such meeting, shall be held at such
place and such time, within or without the State of New Jersey, that the Board
of Directors may fix.
Section 303. Special Shareholders' Meetings. Special meetings of the
shareholders may be called by the Secretary upon the request of the Chairman of
the Board, the President,
<PAGE>
the Board of Directors, or by shareholders entitled to cast at least 20% of the
votes which all shareholders are entitled to cast at the particular meeting.
Section 304. Nominating Committee. The Corporation shall have a
Nominating Committee consisting of three (3) persons who are directors of the
Corporation. The Nominating Committee shall make nominations for directors to be
elected by the shareholders of the Corporation as provided in the remainder of
this Section. Except in the case of a nominee substituted as a result of the
death or other incapacity of a management nominee, the Nominating Committee
shall deliver to the Secretary a written nomination for each directorship to be
filled at each annual meeting of the shareholders at least thirty (30) days in
advance of the date of that meeting. Provided the Nominating Committee makes
such nominations, no nominations for directors except those made by the
Nominating Committee shall be voted upon at the annual meeting unless other
nominations by shareholders are made in accordance with the procedures set forth
in this Section 304. Ballots bearing the names of all the persons nominated for
election as directors at an annual meeting in accordance with the procedures set
forth in this Section 304 by the Nominating Committee and by shareholders shall
be provided for use at the annual meeting. However, except in the case of a
management nominee substituted as a result of the death, incapacity,
disqualification or other inability to serve of a management nominee, if the
Nominating Committee shall fail or refuse to nominate a slate of directors at
least thirty (30) days prior to the date of the annual meeting, nominations for
directors may be made at the annual meeting by any shareholder entitled to vote
and shall be voted upon. No person shall be elected as a director of the
Corporation unless nominated in accordance with the terms set forth in this
Section 304.
Nominations of individuals for election to the Board of
Directors of the Corporation at an annual meeting of shareholders may be made by
any shareholder of the Corporation entitled to vote for the election of
directors at that meeting who complies with the procedures set forth in this
Section 304. Such nominations, other than those made by the Nominating
Committee, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 304. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the date of each annual meeting. Such
shareholder's notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a director (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
Corporation stock which are beneficially owned by such person on the date of
such shareholder notice, and (iv) any other information relating to such person
that is required to be disclosed in solicitations of proxies with respect to
nominees for election as directors, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended; and (b) as to the shareholder
giving the notice (i) the name and address, as they appear on the Corporation's
books, of such shareholder and any other shareholders known by such shareholder
to be supporting such nominees and (ii) the class and number of shares of
Corporation stock which are beneficially owned by such shareholder on
2
<PAGE>
the date of such shareholder notice and by any other shareholders known by such
shareholder to be supporting such nominees on the date of such shareholder
notice.
The Board of Directors may reject any nomination by a
shareholder not made in accordance with the terms of this Section 304.
Alternatively, if the Board of Directors fails to consider the validity of any
nominations by a shareholder, the presiding officer of the annual meeting shall,
if the facts warrant, determine and declare at the annual meeting that a
nomination was not made in accordance with the terms of this Section 304, and,
if he should so determine, he shall so declare at the annual meeting and the
defective nomination shall be disregarded.
Section 305. New Business. At an annual meeting of shareholders only
such new business shall be conducted, and only such proposals shall be acted
upon, as shall have been properly brought before the meeting. For any new
business proposed by management to be properly brought before the annual
meeting, such new business shall be approved by the board of directors, either
directly or through its approval of proxy solicitation materials related
thereto, and shall be stated in writing and filed with the secretary of the
Corporation at least 20 days before the date of the annual meeting, and all
business so stated, proposed and filed shall be considered at the annual
meeting. Any shareholder may make any other proposal at the annual meeting and
the same may be discussed and considered, but unless properly brought before the
meeting such proposal shall not be acted upon at the meeting. For a proposal to
be properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the secretary of the
Corporation. To be timely, a shareholder's notice must be delivered to or
received at the principal executive offices of the Corporation, not less than 20
days prior to the meeting; provided, however, that in the event that less than
30 days' notice of the date of the meeting is given to shareholders (which
notice shall be accompanied by a proxy or information statement when describes
each matter proposed by the board of directors to be acted upon at the meeting),
notice by the shareholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
date of the annual meeting was mailed. A shareholder's notice to the secretary
shall set forth as to each matter the shareholder proposes to bring before the
annual meeting (a) a brief description of the proposal desired to be brought
before the annual meeting, (b) the name and address of the shareholder proposing
such business, and (c) the class and number of shares of the Corporation which
are owned of record by the shareholder. Notwithstanding anything in the bylaws
to the contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 305.
Section 306. Resignations of Directors. Any director may resign at any
time. Such resignation shall be in writing, but the acceptance thereof shall not
be necessary to make it effective.
3
<PAGE>
Section 307. Compensation of Directors. Directors shall be entitled to
compensation for services they render, as determined by resolution of the Board
of Directors. Any director may serve the Corporation in another capacity and be
entitled to such compensation therefor as may be determined by the Board of
Directors.
Section 308. Annual Meeting of Directors. An annual meeting of the
Board of Directors shall be held in each calendar year immediately following the
annual meeting of shareholders.
Section 309. Meetings of Directors. Meetings of the Board of Directors
may be called by the President or by a majority of the directors. Any such
meeting may be held within or without the State of New Jersey.
Section 310. Notice of Directors' Meetings. Whenever notice of a
meeting of the Board of Directors shall be required, it shall be in writing.
Unless otherwise required by law or these Bylaws, neither the business to be
transacted at, nor the purpose of, any regular meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
Section 311. Committees. In the absence or disqualification of any
member of any committee or committees established by the Board of Directors, the
member or members thereof present at any meeting of such committee or
committees, and not disqualified from voting, whether or not they constitute a
quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member.
Section 312. Absentee Participation in Meetings. One or more directors
may participate in a meeting of the Board of Directors, or of a committee of the
Board, by means of a conference telephone or similar communications equipment,
by means of which all persons participating in the meeting can hear each other.
Section 313. Designation of Presiding and Recording Officers. The
directors or shareholders, at any meeting of directors or shareholders, as the
case may be, shall have the right to designate any person, whether or not an
officer, director or shareholder, to preside over, or record the proceedings of,
such meeting.
Section 314. Vacancies. Subject to the rights of the holders of any
series of the Corporation's Preferred Stock then outstanding, vacancies in the
Board of Directors, including vacancies resulting from an increase in the number
of directors, shall be filled by the affirmative vote of at least the majority
of the remaining members of the Board of Directors, even thought less than a
quorum, and each person so elected shall be a director until his successor is
elected by the shareholders. Each director so elected shall hold office for the
unexpired term to which he has been elected, and thereafter, until his or her
successor shall
4
<PAGE>
have been duly elected and qualified, except in the event of his or her earlier
resignation, removal or disqualification.
ARTICLE IV. OFFICERS.
Section 401. The Officers. The Corporation shall have a President, a
Secretary and a Treasurer, and may have a Chairman of the Board, one or more
Vice Presidents, one or more Assistant Secretaries, and one or more Assistant
Treasurers. Any two or more offices may be held by the same person.
Section 402. Election and Term of Officers. The President, Secretary,
and Treasurer of the Corporation shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. All other officers shall be appointed by the
President at the time, in the manner, and for such term as the President from
time to time shall determine. Each officer shall hold office until his or her
successor shall have been duly elected and shall have qualified, or until he or
she shall resign or shall have been removed.
Section 403. Compensation. Unless otherwise provided by the Board of
Directors, the compensation of officers and assistant officers of the
Corporation shall be fixed by the President, except that the compensation of the
President shall be fixed by the Board of Directors.
Section 404. President. The President shall be the chief executive
officer of the Corporation, and, subject to the control of the Board of
Directors and such limitations as may be provided by the Board of Directors,
shall in general supervise and control all of the business and affairs of the
Corporation. Unless a designation to the contrary shall be made at a meeting,
the President shall, when present, preside at all meetings of the shareholders
and of the Board of Directors. As authorized by the Board of Directors, he or
she shall execute and seal, or cause to be sealed, all instruments requiring
such execution, except to the extent that signing and execution thereof shall
have been expressly delegated by the Board of Directors to some other officer or
agent of the Corporation. Upon request of the Board of Directors, he or she
shall report to the Board all matters which the interest of the Corporation may
require to be brought to their notice.
Section 405. Vice President, Secretary, Treasurer, and Assistant
Officers. The Vice President or Vice Presidents, in the order of their
seniority, unless otherwise determined by the Board of Directors, and in the
absence or disability of the President, shall perform the duties and exercise
the powers of the President.
The Vice President or Vice Presidents, the Secretary, the
Treasurer, the Assistant Secretary or Secretaries, and the Assistant Treasurer
or Treasurers, shall act under
5
<PAGE>
the direction of the President, and shall perform all such duties as may be
prescribed by the President or the Board of Directors.
ARTICLE V. INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER
PERSONS.
Section 501. The Corporation shall, to the fullest extent now or
hereafter permitted by the New Jersey Business Corporation Act, as amended from
time to time, indemnify any director or officer of the Corporation. The right to
indemnification conferred by this Section 501 shall include the right to be paid
by the Corporation for expenses incurred in defending any action, suit or
proceeding in advance of its final disposition, subject to the receipt by the
Corporation of such undertakings as might be required of an indemnitee by the
New Jersey Business Corporation Act.
Section 502. The Board of Directors by resolution adopted in each
specific instance may similarly indemnify any person other than a director or
officer of the Corporation for liabilities incurred by him in connection with
services rendered by him at the request of the Corporation or any of its
subsidiaries.
Section 503. The provisions of this Section 503 shall be applicable to
all actions, suits or proceedings commenced after its adoption, whether such
arise out of acts or omissions which occurred prior to or subsequent to such
adoption and shall continue as to a person who has ceased to be a director or
officer or to render services at the request of the Corporation and shall inure
to the benefit of the heirs, executors and administrators of such a person. The
rights of indemnification provided for herein shall be deemed contract rights
enforceable by such person seeking indemnification and shall not be deemed the
exclusive rights to which any director, officer, employee or agent of the
Corporation may be entitled under the certificate of incorporation, an
agreement, vote of stockholders, or otherwise.
Section 504. In any action by an indemnitee to enforce a right to
indemnification hereunder or by the Corporation to recover advances made
hereunder, the burden of proving that the indemnitee is not entitled to be
indemnified shall be on the Corporation. In such an action, neither the failure
of the Corporation (including its Board, independent legal counsel or
stockholders) to have made a determination that indemnification is proper, nor a
determination by the Corporation that indemnification is improper, shall create
a presumption that the indemnitee is not entitled to be indemnified or, in the
case of such an action brought by the indemnitee, be a defense thereto. If
successful in whole or in part in such an action, an indemnitee shall be
entitled to be paid also the expense (including reasonable attorneys fees) of
prosecuting or defending same.
Section 505. Any repeal or modification of this Article V by the
directors or stockholders of the Corporation shall not adversely affect any
right or protection of a director or officer of the Corporation existing at the
time of such repeal or modification.
6
<PAGE>
ARTICLE VI. SHARES OF CAPITAL STOCK.
Section 601. Signatures of Share Certificates. Each share certificate
shall be signed by the Chairman of the Board, President or a Vice President, and
by the Secretary or Treasurer, or an Assistant Secretary or an Assistant
Treasurer.
Section 602. Lost or Destroyed Certificates. Any person claiming a
share certificate to be lost, destroyed or wrongfully taken shall receive a
replacement certificate if said shareholder shall have: (a) requested such
replacement certificate before the Corporation has notice that the shares have
been acquired by a bona fide purchaser; (b) filed with the Corporation an
indemnity bond deemed sufficient by the Board of Directors; and (c) satisfied
any other reasonable requirements fixed by the Board of Directors.
Section 603. Transfer of Shares. All transfers of shares of the
Corporation shall be made upon the books of the Corporation upon surrender to
the transfer agent of the Corporation of a certificate or certificates for
shares, duly endorsed by the person named in the certificate or an attorney,
lawfully constituted in writing, or accompanied by proper evidence of
succession, assignment or authority to transfer. Thereupon, it shall be the duty
of the Corporation to request the issuance of a new certificate to the person
entitled thereto, cancel the old certificates and record the transaction upon
its books.
ARTICLE VII. BOOKS AND RECORDS.
Section 701. Books and Records. The Corporation shall keep books and
records of account and minutes of the proceedings of shareholders, Board of
Directors, and committees, if any. Such books, records and minutes may be kept
outside the State of New Jersey.
ARTICLE VIII. AMENDMENTS.
Section 801. Amendment by Shareholders or Board of Directors. These
Bylaws may be amended or repealed by a majority vote of the members of the Board
of Directors, or if any amendment to the Bylaws is proposed by shareholders, and
has not previously received the approval of the Board of Directors, such
amendment shall require the affirmative vote of the holders of at least eight
percent (80%) of the votes which all shareholders are entitled to cast thereon,
in addition to any other approval which is required by law, this Certificate of
Incorporation, these Bylaws or otherwise.
Section 802. Recording Amendments. The text of all amendments to these
Bylaws shall be attached to the Bylaws with a notation of the date of each such
amendment and a notation of whether such amendment was adopted by the
shareholders or the Board of Directors.
7
<PAGE>
ARTICLE IX. ADOPTION OF BYLAWS AND RECORD OF AMENDMENT THERETO.
Section 901. Adoption and Effective Date. These Bylaws have been
adopted as the Bylaws of the Corporation this 21st day of February, 1996, and
shall be effective as of such date.
Section 902. Amendments to Bylaws.
Section Amended Date Amended Adopted By
8
<PAGE>
FIRST SAVINGS AND LOAN ASSOCIATION
OF PENNS GROVE
EMPLOYEE STOCK COMPENSATION PROGRAM
1. Purpose of Program:
The purpose of the First Savings and Loan Association
of Penns Grove Employee Stock Compensation Program (the "Program") contained
herein is to provide additional incentive to full-time officers and key
employees of First Savings and Loan Association of Penns Grove (the
"Association") and each present or future Association subsidiary corporation by
encouraging them to invest in shares of Association stock, and thereby to
acquire a proprietary interest in the business of the Association and each
present or future Association subsidiary corporation and an increased personal
interest in its continued success and progress, to the mutual benefit of
employees and shareholders.
2. Aggregate Number of Shares:
[ ] shares of Association Common Stock (par value $1.00 per
share) shall be the aggregate number of shares which may be issued under this
Program. Notwithstanding the foregoing, in the event of any change in the
outstanding shares of Association Common Stock by reason of a stock dividend,
stock split, combination of shares, recapitalization, merger, consolidation,
transfer of assets, reorganization, conversion, or what the Compensation
Committee, hereinafter referred to, deems in its sole discretion to be similar
circumstances, the aggregate number and kind of shares which may be issued under
this Program shall be appropriately adjusted in a manner determined in the sole
discretion of the Compensation Committee. Reacquired shares of Association
Common Stock as well as unissued shares may be used for the purpose of this
Program. Shares of Association Common Stock subject to options which have
terminated unexercised, either in whole or in part, shall be available for
future options granted under this Program.
3. Class of Employees Eligible to Receive Options:
All full-time officers and key employees of the Association and of any
present or future Association subsidiary corporation who are employed on a
full-time basis are eligible to receive an option or options under this Program.
The officers and key employees who shall, in fact, receive an option or options
shall be selected by the Compensation Committee hereinafter referred to, in its
sole discretion, except as otherwise specified in Section 4 hereof.
<PAGE>
4. Administration of Program:
(a) This Program shall be administered by a Compensation Committee
(the "Committee" or "Compensation Committee") appointed by the Association Board
of Directors. The Committee shall consist of a minimum of three and a maximum of
seven members of the Association Board of Directors, each of whom shall be a
"disinterested person" as defined in Rule 16b-3(d)(3) under the Securities
Exchange Act of 1934, as amended, of the Securities and Exchange Commission
(hereinafter called "SEC") or any future corresponding rule. The Committee
shall, in addition to its other authority and subject to the provisions of this
Program, have authority in its sole discretion to determine who are the officers
and key employees of the Association and each present and future Association
subsidiary corporation eligible to receive options under this Program, which
officers and key employees shall in fact be granted an option or options,
whether the option shall be an incentive stock option or a non-qualified stock
option, the number of shares to be subject to each of the options, the time or
times at which the options shall be granted, the rate of option exercisability,
and, subject to Section 5 hereof, the price at which each of the options is
exercisable and the duration of the option.
(b) The Committee shall adopt such rules for the conduct of its
business and administration of this Program as it considers desirable. A
majority of the members of the Committee shall constitute a quorum for all
purposes. The vote or written consent of a majority of the members of the
Committee on a particular matter shall constitute the act of the Committee on
such matter. The Committee shall have the exclusive right to construe the
Program and the options issued pursuant to it, correct defects, supply omissions
and reconcile inconsistencies to the extent necessary to effectuate the Program
and the options issued pursuant to it, and such action shall be final, binding
and conclusive upon all parties concerned. No member of the Committee or the
Board of Directors shall be liable for any act or omission (whether or not
negligent) taken or omitted in good faith, or for the exercise of an authority
or discretion granted in connection with this Program to the Committee or the
Board of Directors, or for the acts or omissions of any other members of the
Committee or the Board of Directors. Subject to the numerical limitations on
Committee membership set forth in Section 4(a) hereof, the Board of Directors
may at any time appoint additional members of the Committee and may at any time
remove any member of the Committee with or without cause. Vacancies in the
Committee, however caused, may be filled by the Board of Directors if it so
desires.
5. Incentive Stock Options and Nonqualified Stock Options:
(a) Options issued pursuant to this Program may be either incentive
stock options granted pursuant to Section 5(b) hereof or nonqualified stock
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<PAGE>
options granted pursuant to Section 5(c) hereof, as determined by the Committee.
An "incentive stock option" is an option which satisfies all of the requirements
of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations thereunder, and a nonqualified stock option is an option
which does not satisfy all of those requirements. The Committee may grant both
an incentive stock option and a nonqualified stock option to the same person, or
more than one of each type of option to the same person. The option price for
both incentive stock options and nonqualified stock options issued under this
Program shall equal at least the fair market value of the Association Common
Stock as of the date of the grant of the option, such fair market value being
determined by the Committee in accordance with its interpretation of the
requirements of Section 422A of the Code and the regulations thereunder.
(b) Incentive stock options issued pursuant to this Program shall be
issued substantially in the form set forth in Appendix I hereof, which form is
hereby incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Incentive stock
options shall expire ten years after the date they are granted, unless
terminated earlier under the option terms. With respect to incentive stock
options granted hereunder prior to January 1, 1987, notwithstanding other
provisions hereof, the aggregate fair market value (determined as of the time an
incentive stock option is granted) of the stock for which any employee may be
granted incentive stock options in any calendar year (under all incentive stock
option plans of the Association and its parent and subsidiary corporations)
shall not exceed $100,000 plus any unused limit carryover to such year.
Notwithstanding the above, with respect to options granted after December 31,
1986, the aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
all incentive stock option plans of the optionee's employer corporation and its
parent and subsidiary corporations) shall not exceed $100,000. The unused limit
carryover available in any calendar year to any employee shall be determined in
accordance with Section 422A(c)(4) of the Code and the regulation thereunder. At
the time of granting an incentive stock option hereunder, the Committee may, in
its discretion, modify or amend any of the option terms contained in Appendix I
for any particular optionee, provided that the option as modified or amended
continues to be an incentive stock option. Each of the options granted pursuant
to this Section 5(b) is intended, if possible, to be an "incentive stock option"
as that term is defined in Section 422A of the Code and the regulations
thereunder. In the event this Program or any option granted pursuant to this
Section 5(b) is any way inconsistent with the applicable legal requirements of
the Code or the regulations thereunder for an incentive stock option, this
Program and such option shall be deemed automatically amended as of the date
hereof to conform to such legal requirements, if such conformity may be achieved
by amendment.
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<PAGE>
(c) Nonqualified stock options issued pursuant to this Program shall
be issued substantially in the form set forth in Appendix II hereof, which form
is hereby incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Nonqualified stock
options shall expire ten years and ten days after the date they are granted,
unless terminated earlier under the option terms. At the time of granting a
nonqualified stock option hereunder, the Committee may, in its discretion,
modify or amend any of the option terms contained in Appendix II for any
particular optionee, provided that the option as modified or amended does not
expire more than ten years and ten days from the date of its grant and the
option price is not less than the fair market value of the Association Common
Stock as of the date of such grant.
(d) Neither the Association nor any present or future Association
affiliated or subsidiary corporation, nor their officers, directors,
shareholders, stock option plan committees, employees or agents shall have any
liability to any optionee in the event an option granted pursuant to Section
5(b) hereof does not qualify as an "incentive stock option" as that term is used
in Section 422A of the Code and the regulations thereunder, or in the event any
optionee does not obtain the tax benefits of such an incentive stock option, or
in the event any option granted pursuant to Section 5(c) hereof is an "incentive
stock option".
6. Modification, Amendment, Suspension and Termination:
Options shall not be granted pursuant to this Program after the
expiration of ten years from and after the date of the adoption of the Program
by the Association Board of Directors. The Board of Directors reserves the right
at any time, and from time to time, to modify or amend this Program in any way,
or to suspend or terminate it, effective as of such date, which date may be
either before or after the taking of such action, as may be specified by the
Board of Directors; provided, however, that such action shall not affect options
granted under the Program prior to the actual date on which such action
occurred. If a modification or amendment of this Program is required by the Code
or the regulations thereunder to be approved by the shareholders of the
Association in order to permit the granting of "incentive stock options" (as
that term is defined in Section 422A of the Code and regulations thereunder)
pursuant to the modified or amended Program, such modification or amendment
shall also be approved by the shareholders of the Association in such manner as
is prescribed by the Code and the regulations thereunder. If the Board of
Directors voluntarily submits a proposed modification, amendment, suspension or
termination for shareholder approval, such submission shall not require any
future modifications, amendments (whether or not relating to the same provision
or subject matter), suspensions or terminations to be similarly submitted for
shareholder approval.
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<PAGE>
7. Effectiveness of Program:
This Program shall become effective on the date of its adoption by
the Association Board of Directors subject, however, to approval by the
shareholders of the Association in such manner as is prescribed by the Code and
the regulations thereunder. Options may be granted under this Program prior to
obtaining such approval, provided such options shall not be exercisable until
such approval is obtained.
8. General Conditions:
(a) Nothing contained in this Program or any option granted pursuant
to this Program shall confer upon any employee the right to continue in the
employ of the Association or any present or future Association affiliated and
subsidiary corporation or interfere in any way with the rights of the
Association and any Association affiliated or subsidiary corporation to
terminate his employment in any way.
(b) Corporate action constituting an offer of stock for sale to any
employee under the terms of the options to be granted hereunder shall be deemed
completed as of the date when the Committee authorizes the grant of the option
to the employee, regardless of when the option is actually delivered to the
employee or acknowledged or agreed to by him.
(c) The term "subsidiary corporation" as used throughout this
Program, and the options granted pursuant to this Program, shall (except as
otherwise provided in the option form) have the meaning that is ascribed to that
term when contained in Section 422A(b) of the Code, and the Association shall be
deemed to be the grantor corporation for purposes of applying such meaning.
(d) References in this Program to the Code shall be deemed to also
refer to the corresponding provisions of any future United States revenue law.
(e) The use of the masculine pronoun shall include the feminine
gender whenever appropriate.
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<PAGE>
INCENTIVE STOCK OPTION
TO:
----------------------------------------------------------------------------
NAME
----------------------------------------------------------------------------
ADDRESS
DATE:
----------------------------
You are hereby granted an option, effective as of the date hereof, to
purchase shares of Common Stock (par value $1.00 per share) of First
Savings and Loan Association of Penns Grove (the "Association") at a price of
$ per share pursuant to the Association's Employee Stock Compensation
Program (the "Program") adopted by the Association's Board of Directors
effective . Your option price is intended to equal at least the
fair market value of the Association's Common Stock as of the date hereof.
Your option may first be exercised on and after one year from the date
of its grant, but not before that time. On and after one year and prior to two
years from the date of its grant, your option may be exercised for up to 25% of
the total number of shares then subject to the option. On and after two years
and prior to three years from the date of its grant, your option may be
exercised for up to 50% of the total number of shares then subject to the option
minus the number of shares previously purchased by exercise of the option (as
adjusted for stock dividends, stock splits, combinations of shares,
recapitalizations and what the Compensation Committee deems in its sole
discretion to be similar circumstances). On or after three years and prior to
four years from the date of its grant, your option may be exercised for up to
75% of the total number of shares then subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for stock
dividends, stock splits, combinations of shares, recapitalizations and what the
Compensation Committee deems in its sole discretion to be similar
circumstances). On and after four years and prior to ten years from the date of
its grant, your option may be exercised for up to 100% of the total number of
shares then subject to the option minus the number of shares previously
purchased by exercise of the option (as adjusted for stock dividends, stock
splits, combinations of shares, recapitalizations and what the Compensation
Committee deems in its sole discretion to be similar circumstances). No
fractional shares shall be issued or delivered. This option shall terminate and
is not exercisable after the expiration of ten years from the date of its grant,
except in accordance with the provisions hereof.
Appendix I
<PAGE>
In the event of a "change of control" (as hereinafter defined) of the
Association, your option may, from and after the date of the change of control,
and notwithstanding the foregoing paragraph, be exercised for up to 100% of the
total number of shares then subject to the option minus the number of shares
previously purchased upon exercise of the option (as adjusted for stock
dividends, stock splits, combinations of shares, recapitalizations and what the
Compensation Committee deems in its sole discretion to be similar
circumstances). A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
(1) A change within a twelve month period in a majority of the members
of the Board of Directors of the Association;
(2) A change within a twelve month period in the holders of more than
50% of the outstanding voting stock of the Association; or
(3) Any other event deemed to constitute a "change in control" by the
Compensation Committee.
You may exercise your option by giving written notice to the Secretary
of the Association on forms supplied by the Association at the Association's
then principal executive office, accompanied by payment of the option price for
the total number of shares you specify that you wish to purchase. The payment
may be in any of the following forms: (i) cash, which may be evidenced by a
check; (ii) certificates representing shares of Common Stock of the Association
which will be valued by the Secretary of the Association at the mean average
between the closing "Bid" and "Asked" prices for the Association's Common Stock
quoted in the over-the-counter market on the last previous trading day,
accompanied by an assignment of the stock to the Association; or (iii) any
combination of cash and shares of the Association's Common Stock valued as
provided in clause (ii). Any assignment of stock shall be in a form and
substance satisfactory to the Secretary of the Association, including guarantees
of signature(s) where he deems such guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by the
Association or an Association subsidiary corporation is terminated other than by
reason of disability as defined in Section 105(d)(4) of the Internal Revenue
Code of 1986, as amended to the date hereof (the "Code"), or death (but in no
event later than ten years from the date this option is granted), whether such
termination be voluntary or not. After the date your employment is terminated,
as aforesaid, you may exercise this option only for the number of shares which
you had a right to purchase and did not purchase on the date your employment
terminated. If you are employed by an Association subsidiary corporation, your
employment shall be deemed to have terminated on the date your employer ceases
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<PAGE>
to be an Association subsidiary corporation, unless you are on that date
transferred to the Association or another Association subsidiary corporation.
Your employment shall not be deemed to have terminated if you are transferred
from the Association to an Association subsidiary corporation, or vice versa, or
from one Association subsidiary corporation to another Association subsidiary
corporation.
If you die while employed by the Association or an Association
subsidiary corporation, your executor or administrator may, at any time within
one year after the date of your death (but in no event later than ten years from
the date this option is granted), exercise the option as to any shares which you
had a right to purchase and did not purchase during your lifetime. If your
employment by the Association or an Association subsidiary corporation is
terminated by reason of your becoming disabled (within the meaning of Section
105(d)(4) of the Code), you or your legal guardian or custodian may at anytime
within one year after the date of such termination (but in no event later than
ten years from the date this option is granted), exercise the option as to any
shares which you had a right to purchase and did not purchase prior to such
termination. Your executor, administrator, guardian or custodian must present
proof of his authority satisfactory to the Association prior to being allowed to
exercise this option.
In the event of any change in the outstanding shares of the Association
Common Stock by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Compensation Committee deems in its sole discretion to be
similar circumstances, the number and kind of shares subject to this option and
the option price for such shares shall be appropriately adjusted in a manner to
be determined in the sole discretion of the Compensation Committee.
This option is not transferable, except in the event of disability or
death as provided above. During your lifetime, this option is exercisable only
by you. Until the option price has been paid in full pursuant to due exercise of
this option and the purchased shares are delivered to you, you do not have any
rights as a stockholder of the Association. The Association reserves the right
not to deliver to you the shares purchased by virtue of the exercise of this
option during any period of time in which the Association deems, in its sole
discretion, that such delivery may not be consummated without violating a
federal, state, local or securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
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<PAGE>
(1) Until the Program pursuant to which this option is granted is
approved by the shareholders of the Association in the manner prescribed by the
Code and the regulations thereunder;
(2) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Association may deem necessary or desirable;
(3) During any period of time in which the Association deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Association to be legally obligated to
issue or sell more shares than the Association is legally entitled to issue or
sell; or
(4) During any period of time while there is outstanding (within the
meaning of Section 422A(c)(7) of the Code) any incentive stock option which was
granted to you, before the granting of this option, to purchase stock in your
employer corporation or in a corporation which (at the time of the granting of
this option) is a parent or subsidiary corporation of your employer corporation,
or a predecessor corporation of any of such corporations. Notwithstanding the
above, with respect to incentive stock options granted after December 31, 1986,
the preceding sentence shall not apply. The words and terms contained in this
subparagraph (4) are intended to have the same meaning as is ascribed by the
Code or the regulations thereunder to any identical or equivalent words or terms
contained in Section 422A(b) (7) of the Code.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
A. The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock of the Association to be issued hereunder for his own
respective account for investment purposes only, and not with a view to, or in
connection with, any resale or other distribution of any of such shares, except
as hereafter permitted. The optionee further agrees that he will not at any time
make any offer, sale, transfer, pledge or other disposition of such Common
Stock to be issued hereunder without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel for the Association to the effect that
the proposed transaction will be exempt from such registration. The optionee
agrees that, as a condition precedent to the Association's obligation to permit
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<PAGE>
the exercise of this option, the optionee shall execute such instruments,
representations, acknowledgments and agreements as the Association may, in its
sole discretion, deem advisable to avoid any violation of federal, state, local
or securities exchange rule, regulation or law.
B. The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under applicable state securities laws. The shares have been
acquired for investment and may not be offered, sold,
transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of
1933, as amended, and under any applicable state securities
laws or an opinion of counsel for the Association that the
proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
securities laws or upon receipt of an opinion of counsel for the Association
that said registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two preceding paragraphs is to prevent violations of the
Securities Act of 1933, as amended, and any applicable state securities laws.
It is the intention of the Association and you that this option shall
(if possible) be an "incentive stock option" as that term is used in Section
422A of the Code and the regulations thereunder. In the event this option is in
any way inconsistent with the legal requirements of the Code or the regulations
thereunder for an "incentive stock option", this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
This option shall be subject to the terms of the Program in effect on
the date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Program in effect on the date of this
option, the terms of the Program shall govern. This option constitutes the
entire understanding between the Association and you with respect to the subject
matter hereof and no amendment, modification or be binding upon waiver
-5-
<PAGE>
of this option, in whole or in part, shall the Association unless in writing and
signed by the President of the Association. This option and the performances of
the parties hereunder shall be construed in accordance with and governed by the
laws of the State of New Jersey.
Please sign the copy of this option and return it to Association's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
FIRST SAVINGS AND LOAN ASSOCIATION
OF PENNS GROVE
By:
--------------------------------
I hereby acknowledge receipt of a copy of the foregoing stock option
and, having read it hereby signify my understanding of, and my agreement with,
its terms and conditions.
(SEAL)
- ------------------------------------- ------------------------------------
(SIGNATURE) (DATE)
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<PAGE>
NONQUALIFIED STOCK OPTION
TO:
----------------------------------------------------------------------------
NAME
----------------------------------------------------------------------------
ADDRESS
DATE:
-----------------------------
You are hereby granted an option, effective as of the date hereof, to
purchase shares of Common Stock (par value $1.00 per share) of First
Savings and Loan Association of Penns Grove (the "Association") at a price of
$ per share pursuant to the Association's Employee Stock Compensation
Program (the "Program") adopted by the Association's Board of Directors
effective . Your option price is intended to equal at least the
fair market value of the Association's Common Stock as of the date hereof.
Your option may first be exercised on and after one year from the date
of its grant, but not before that time. On and after one year and prior to two
years from the date of its grant, your option may be exercised for up to 25% of
the total number of shares then subject to the option. On and after two years
and prior to three years from the date of its grant, your option may be
exercised for up to 50% of the total number of shares then subject to the option
minus the number of shares previously purchased by exercise of the option (as
adjusted for stock dividends, stock splits, combinations of shares,
recapitalizations and what the Compensation Committee deems in its sole
discretion to be similar circumstances). On or after three years and prior to
four years from the date of its grant, your option may be exercised for up to
75% of the total number of shares then subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for stock
dividends, stock splits, combinations of shares, recapitalizations and what the
Compensation Committee deems in its sole discretion to be similar
circumstances). On and after four years and prior to ten years and ten days from
the date of its grant, your option may be exercised for up to 100% of the total
number of shares then subject to the option minus the number of shares
previously purchased by exercise of the option (as adjusted for stock dividends,
stock splits, combinations of shares, recapitalizations and what the
Compensation Committee deems in its sole discretion to be similar
Appendix II
<PAGE>
circumstances). No fractional shares shall be issued or delivered. This option
shall terminate and is not exercisable after the expiration of ten years and ten
days from the date of its grant, except in accordance with the provisions
hereof.
In the event of a "change of control" (as hereinafter defined) of the
Association, your option may, from and after the date of the change of control,
and notwithstanding the foregoing paragraph, be exercised for up to 100% of the
total number of shares then subject to the option minus the number of shares
previously purchased upon exercise of the option (as adjusted for stock
dividends, stock splits, combinations of shares, recapitalizations and what the
Compensation Committee deems in its sole discretion to be similar
circumstances). A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
(1) A change within a twelve month period in a majority of the members
of the Board of Directors of the Association;
(2) A change within a twelve month period in the holders of more than
50% of the outstanding voting stock of the Association; or
(3) Any other event deemed to constitute a "change in control" by the
Compensation Committee.
You may exercise your option by giving written notice to the Secretary
of the Association on forms supplied by the Association at the Association's
then principal executive office, accompanied by payment of the option price for
the total number of shares you specify that you wish to purchase. The payment
may be in any of the following forms: (i) cash, which may be evidenced by a
check; (ii) certificates representing shares of Common Stock of the Association
which will be valued by the Secretary of the Association at the mean average
between the closing "Bid" and "Asked" prices for the Association's Common Stock
quoted in the over-the-counter market on the last previous trading day,
accompanied by an assignment of the stock to the Association; or (iii) any
combination of cash and shares of the Association's Common Stock valued as
provided in clause (ii). Any assignment of stock shall be in a form and
substance satisfactory to the Secretary of the Association, including guarantees
of signatures) where he deems such guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by the
Association or an Association subsidiary corporation is terminated other than by
reason of disability as defined in Section 105(d)(4) of the Internal Revenue
Code of 1986, as amended to the date hereof (the "Code"), or death (but in no
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<PAGE>
event later than ten years and ten days from the date this option is granted),
whether such termination be voluntary or not. After the date your employment is
terminated, as aforesaid, you may exercise this option only for the number of
shares which you had a right to purchase and did not purchase on the date your
employment terminated. If you are employed by an Association subsidiary
corporation, your employment shall be deemed to have terminated on the date your
employer ceases to be an Association subsidiary corporation, unless you are on
that date transferred to the Association or another Association subsidiary
corporation. Your employment shall not be deemed to have terminated if you are
transferred from the Association to an Association subsidiary corporation, or
vice versa, or from one Association subsidiary corporation to another
Association subsidiary corporation.
If you die while employed by the Association or an Association
subsidiary corporation, your executor or administrator may, at any time within
one year after the date of your death (but in no event later than ten years and
ten days from the date this option is granted), exercise the option as to any
shares which you had a right to purchase and did not purchase during your
lifetime. If your employment by the Association or an Association subsidiary
corporation is terminated by reason of your becoming disabled (within the
meaning of Section 105(d)(4) of the Code), you or your legal guardian or
custodian may at anytime within one year after the date of such termination (but
in no event later than ten years and ten days from the date this option is
granted), exercise the option as to any shares which you had a right to purchase
and did not purchase prior to such termination. Your executor, administrator,
guardian or custodian must present proof of his authority satisfactory to the
Association prior to being allowed to exercise this option.
In the event of any change in the outstanding shares of the Association
Common Stock by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Compensation Committee deems in its sole discretion to be
similar circumstances, the number and kind of shares subject to this option and
the option price for such shares shall be appropriately adjusted in a manner to
be determined in the sole discretion of the Compensation Committee.
This option is not transferable, except in the event of disability or
death as provided above, and except that this option may be transferred to your
spouse and lineal descendants. During your lifetime, this option is exercisable
only by you or your permitted transferees. Until the option price has been
paid in full pursuant to due exercise of this option and the purchased shares
are delivered to you, you do not have any rights as a stockholder of the
Association. The Association reserves the right not to deliver to you the shares
purchased by virtue of the exercise of this option during any period of time in
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which the Association deems, in its sole discretion, that such delivery may not
be consummated without violating a federal, state, local or securities exchange
rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(1) Until the Program pursuant to which this option is granted is
approved by the shareholders of the Association;
(2) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Association may deem necessary or desirable;
(3) During any period of time in which the Association deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Association to be legally obligated to
issue or sell more shares than the Association is legally entitled to issue or
sell.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
A. The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock of the Association to be issued hereunder for his own
respective account for investment purposes only, and not with a view to, or in
connection with, any, resale or other distribution of any of such shares, except
as hereafter permitted. The optionee further agrees that he will not at any time
make any offer, sale, transfer, pledge or other disposition of such Common Stock
to be issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel for the Association to the effect that the
proposed transaction will be exempt from such registration. The optionee agrees
that, as a condition precedent to the Association's obligation to permit the
exercise of this option, the optionee shall execute such instruments,
representations, acknowledgments and agreements as the Association may, in its
sole discretion, deem advisable to avoid any violation of federal, state, local
or securities exchange rule, regulation or law.
B. The certificates for Common Stock to be issued to to the optionee
hereunder shall bear the following legend:
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<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under applicable state securities laws. The shares have been
acquired for investment and may not be offered, sold,
transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of
1933, as amended, and under any applicable state securities
laws or an opinion of counsel for the Association that the
proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
securities laws or upon receipt of an opinion of counsel for the Association
that said registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two preceding paragraphs is to prevent violations of the
Securities Act of 1933, as amended, and any applicable state securities laws.
It is the intention of the Association and you that this option shall
not be an "incentive stock option" as that term is used in Section 422A of the
Code and the regulations thereunder.
This option shall be subject to the terms of the Program in effect on
the date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Program in effect on the date of this
option, the terms of the Program shall govern. This option constitutes the
entire understanding between the Association and you with respect to the subject
matter hereof and no amendment, modification or waiver of this option, in whole
or in part, shall be binding upon the Association unless in writing and signed
by the President of the Association. This option and the performances of the
parties hereunder shall be construed in accordance with and governed by the laws
of the State of New Jersey.
Please sign the copy of this option and return it to the Association's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
FIRST SAVINGS AND LOAN
ASSOCIATION OF PENNS GROVE
By:
----------------------------
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I hereby acknowledge receipt of a copy of the foregoing stock option
and, having read it hereby signify my understanding of, and my agreement with,
its terms and conditions.
(SEAL)
- ------------------------------------- -----------------------------------
(SIGNATURE) (DATE)
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FIRST HOME BANCORP, INC.
1996 EMPLOYEE STOCK OPTION PLAN
1. Purpose of Plan
The purpose of the 1996 Employee Stock Option Plan (the
"Plan") is to provide additional incentive to officers and other key employees
of First Home Bancorp, Inc. ("Bank") and each present or future parent or
subsidiary corporation by encouraging them to invest in shares of common stock,
par value $1.00 per share ("Common Stock"), of Bank and thereby acquire a
proprietary interest in Bank and an increased personal interest in Bank's
continued success and progress, to the mutual benefit of officers, employees and
shareholders.
2. Aggregate Number of Shares
250,000 shares of Bank Common Stock shall be the aggregate
number of shares which may be issued under this Plan. Notwithstanding the
foregoing, in the event of any change in the outstanding shares of the Common
Stock of Bank by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Executive Compensation Committee (defined in Section
4(a)), deems in its sole discretion to be similar circumstances, the aggregate
number and kind of shares which may be issued under this Plan shall be
appropriately adjusted in a manner determined in the sole discretion of the
Executive Compensation Committee. Reacquired shares of Bank Common Stock, as
well as unissued shares, may be used for the purpose of this Plan. Shares of
Bank Common Stock subject to options which have terminated unexercised, either
in whole or in part, shall be available for future options granted under this
Plan.
3. Class of Persons Eligible to Receive Options
All officers and key employees of Bank and of any present or
future Bank parent or subsidiary corporation are eligible to receive an option
or options under this Plan. The individuals who shall, in fact, receive an
option or options shall be selected by the Executive Compensation Committee, in
its sole discretion, except as otherwise specified in Section 4 hereof. During
the term of this Plan, no optionee under this Plan shall be entitled to be
granted options to purchase shares of the Company's Common Stock in excess of
the 150,000 shares (as adjustable pursuant to Section 2).
4. Administration of Plan
(a) This Plan shall be administered by the Option Committee
("Committee") appointed by Bank's Board of Directors. The Committee shall
consist of a minimum of two members of the Board of Directors, each of whom
shall be a "disinterested person" within the meaning of Rule 16b-3(c)(2)(i)
under the Securities Exchange Act of 1934, as amended, of the Securities and
Exchange Commission (the "SEC") or any future corresponding rule. The Committee,
in addition to its other authority and subject to the provisions of this Plan,
shall determine which individuals shall be granted an option or options, whether
the option shall be an Incentive Stock Option or a Non-Qualified Stock Option
(as such terms are defined in Section 5(a)), the number of shares to be subject
to each of the options, the time or times at which the options shall be granted,
the rate of
<PAGE>
option exercisability, and, subject to Section 5 hereof, the price at which each
of the options is exercisable and the duration of the option.
(b) The Committee shall adopt such rules for the conduct of
its business and administration of this Plan as it considers desirable. A
majority of the members of the Committee shall constitute a quorum for all
purposes. The vote or written consent of a majority of the members of the
Committee on a particular matter shall constitute the act of the Committee on
such matter. The Committee shall have the right to construe the Plan and the
options issued pursuant to it, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Committee or the Board of Directors
shall be liable for any act or omission (whether or not negligent) taken or
omitted in good faith, or for the exercise of any authority or discretion
granted in connection with the Plan to the Committee or the Board of Directors,
or for the acts or omissions of any other members of the Committee or the Board
of Directors. Subject to the numerical limitations on Committee membership set
forth in Section 4(a) hereof, the Board of Directors may at any time appoint
additional members of the Committee and may at any time remove any member of the
Committee with or without cause. Vacancies in the Committee, however caused, may
be filled by the Board of Directors, if it so desires.
5. Incentive Stock Options and Non-Qualified Stock Options
(a) Options issued pursuant to this Plan may be either
Incentive Stock Options granted pursuant to Section 5(b) hereof or Non-Qualified
Stock Options granted pursuant to Section 5(c) hereof, as determined by the
Committee. An "Incentive Stock Option" is an option which satisfies all of the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and the regulations thereunder, and a "Non-Qualified Stock Option"
is an option which either does not satisfy all of those requirements or the
terms of the option provide that it will not be treated as an Incentive Stock
Option. The Committee may grant both an Incentive Stock Option and a
Non-Qualified Stock Option to the same person, or more than one of each type of
option to the same person. The option price for Incentive Stock Options issued
under this Plan shall be equal at least to the fair market value (as defined
below) of Bank's Common Stock on the date of the grant of the option as
determined by the Committee in accordance with its interpretation of the
requirements of Section 422 of the Code and the regulations thereunder. The
option price for Non-Qualified Stock Options issued under this Plan may, in the
sole discretion of the Committee, be less than the fair market value of the
Common Stock on the date of the grant of the option. If an Incentive Stock
Option is granted to an individual who, at the time the option is granted, owns
stock possessing more than 10 percent of the total combined voting power of all
shares of stock of Bank or any parent or subsidiary corporation of Bank (a "10%
Shareholder"), the option price shall not be less than 110 percent of the fair
market value of Bank's Common Stock on the date of grant of the option. The fair
market value of Bank's Common Stock on any particular date shall mean the last
reported sale price of a share of Bank's Common Stock on any stock exchange on
which such stock is then listed or admitted to trading, or on the NASDAQ
National Market System or Small Cap NASDAQ, on such date, or if no sale took
place on such day, the last such date on which a sale took place, or if the
Common Stock is not then quoted on the NASDAQ National Market System or Small
Cap NASDAQ, or listed or admitted to trading on any stock exchange, the average
of the bid and asked prices in the over-the-counter market on such date, or if
none of the foregoing, a price determined by the Committee.
(b) Subject to the authority of the Committee set forth in
Section 4(a) hereof, Incentive Stock Options issued pursuant to this Plan shall
be issued substantially in the form set forth in Appendix I hereof, which form
is hereby incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Incentive Stock
Options shall not be exercisable after the expiration of ten years
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<PAGE>
(five years in the case of 10% Shareholders) from the date such options are
granted, unless terminated earlier under the terms of the option. At the time of
the grant of an Incentive Stock Option hereunder, the Committee may, in its
discretion, modify or amend any of the option terms contained in Appendix I for
any particular optionee, provided that the option as modified or amended
satisfies the requirements of Section 422 of the Code and the regulations
thereunder. Each of the options granted pursuant to this Section 5(b) is
intended, if possible, to be an "Incentive Stock Option" as that term is defined
in Section 422 of the Code and the regulations thereunder. In the event this
Plan or any option granted pursuant to this Section 5(b) is in any way
inconsistent with the applicable legal requirements of the Code or the
regulations thereunder for an Incentive Stock Option, this Plan and such option
shall be deemed automatically amended as of the date hereof to conform to such
legal requirements, if such conformity may be achieved by amendment.
(c) Subject to the authority of the Committee set forth in
Section 4(a) hereof, Non-Qualified Stock Options issued pursuant to this Plan
shall be issued substantially in the form set forth in Appendix II hereof, which
form is hereby incorporated by reference and made a part hereof, and shall
contain substantially the terms and conditions set forth therein. Non-Qualified
Stock Options shall expire ten years and 30 days after the date they are
granted, unless terminated earlier under the option terms. At the time of
granting a Non-Qualified Stock Option hereunder, the Committee may, in its
discretion, modify or amend any of the option terms contained in Appendix II for
any particular optionee.
(d) Neither Bank nor any of its current or future parent,
subsidiaries or affiliates, nor their officers, directors, shareholders, stock
option plan committees, employees or agents shall have any liability to any
optionee in the event: (i) an option granted pursuant to Section 5(b) hereof
does not qualify as an "Incentive Stock Option" as that term is used in Section
422 of the Code and the regulations thereunder; (ii) any optionee does not
obtain the tax treatment pertaining to an Incentive Stock Option; or (iii) any
option granted pursuant to Section 5(c) hereof is an "Incentive Stock Option."
6. Amendment, Supplement Suspension and Termination
Options shall not be granted pursuant to this Plan after the
expiration of ten years from the date the Plan is adopted by the Board of
Directors of Bank. The Board of Directors reserves the right at any time, and
from time to time, to amend or supplement this Plan in any way, or to suspend or
terminate it, effective as of such date, which date may be either before or
after the taking of such action, as may be specified by the Board of Directors;
provided, however, that such action shall not affect options granted under the
Plan prior to the actual date on which such action occurred. If an amendment or
supplement of this Plan is required by the Code or the regulations thereunder to
be approved by the shareholders of Bank in order to permit the granting of
"Incentive Stock Options" (as that term is defined in Section 422 of the Code
and regulations thereunder) pursuant to the amended or supplemental Plan, such
amendment or supplement shall also be approved by the shareholders of Bank in
such manner as is prescribed by the Code and the regulations thereunder. If the
Board of Directors voluntarily submits a proposed amendment, supplement,
suspension or termination for shareholder approval, such submission shall not
require any future amendments, supplements, suspensions or terminations (whether
or not relating to the same provision or subject matter) to be similarly
submitted for shareholder approval.
7. Effectiveness of Plan
This Plan shall become effective on the date of its adoption
by Bank's Board of Directors, subject however to approval by the holders of Bank
Common Stock in the manner as prescribed in the Code and the regulations
thereunder. Options may be granted under this Plan prior to obtaining
shareholder approval, provided such options shall not be exercisable before such
shareholder approval is obtained.
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<PAGE>
8. General Conditions
(a) Nothing contained in this Plan or any option granted
pursuant to this Plan shall confer upon any employee the right to continue in
the employ of Bank or any present or future parent, affiliated or subsidiary
corporation or interfere in any way with the rights of Bank or any present or
future parent, affiliated or subsidiary corporation to terminate his employment
in any way.
(b) Corporate action constituting an offer of stock for sale
to any employee under the terms of the options to be granted hereunder shall be
deemed complete as of the date when the Committee authorizes the grant of the
option to the employee, regardless of when the option is actually delivered to
the employee or acknowledged or agreed to by him.
(c) The terms "parent corporation" and "subsidiary
corporation" as used throughout this Plan, and the options granted pursuant to
this Plan, shall (except as otherwise provided in the option form) have the
respective meanings ascribed to such terms when contained in Section 422(b) of
the Code and the regulations thereunder, and Bank shall be deemed to be the
grantor corporation for purposes of applying such meanings.
(d) References in this Plan to the Code shall be deemed to
also refer to the corresponding provisions of any future United States revenue
law.
(e) The use of the masculine pronoun shall include the
feminine gender whenever appropriate.
4
<PAGE>
APPENDIX I
INCENTIVE STOCK OPTION
To: Name
Address
Date of Grant:
You are hereby granted an option, effective as of the date hereof, to
purchase ______ shares of Common Stock, par value $1.00 per share, ("Common
Stock") of FIRST HOME BANCORP, INC. ("Bank") at a price of _____ per share
pursuant to the First Home Bancorp, Inc. 1996 Employee Stock Option Plan (the
"Plan") adopted by the Bank Board of Directors effective February 21, 1996. Your
option price is intended to equal at least the fair market value of Bank Common
Stock as of the date hereof; provided, however, that if, at the time this option
is granted, you own stock possessing more than 10% of the total combined voting
power of all shares of stock of Bank or any parent or subsidiary corporation of
Bank (a "10% Shareholder"), your option price is intended to be at least 110% of
the fair market value of Bank Common Stock as of the date hereof.
Your option may first be exercised on and after three years after the
date of grant of this option. On and after three years and prior to ten years
from the date of its grant, your option may be exercised for up to 100% of the
total number of shares then subject to the option minus the number of shares
previously purchased by exercise of the option (as adjusted for any changes in
the outstanding Bank Common Stock by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Option Committee deems in its
sole discretion to be similar circumstances). No fractional shares shall be
issued or delivered.
This option shall terminate and is not exercisable after the expiration
of ten years from the date of its grant (five years from the date of grant if,
at the time of the grant, you are a 10% Shareholder) (the "Scheduled Termination
Date"), except as hereafter provided.
In the event of a "change of control" (as hereafter defined) of Bank,
your option may, from and after the date of the change of control, and
notwithstanding the second paragraph of this option, be exercised for up to 100%
of the total number of shares then subject to the option minus the number of
shares previously purchased upon exercise of the option (as adjusted for any
changes in the outstanding Bank Common Stock by reason of a stock dividend,
stock split, combination of shares, recapitalization, merger, consolidation,
transfer of assets, reorganization, conversion or what the Option Committee
deems in its sole discretion to be similar circumstances). A "change of control"
shall be deemed to have occurred upon the happening of any of the following
events:
5
<PAGE>
1. A change within a twelve-month period in a majority of the members
of the board of directors of Bank;
2. A change within a twelve-month period in the holders of more than
50% of the outstanding voting stock of Bank; or
3. Any other event deemed to constitute a "change in control" by the
Board of Directors.
You may exercise your option by giving written notice to the Secretary
of Bank on forms supplied by Bank at its then principal executive office,
accompanied by payment of the option price for the total number of shares you
specify that you wish to purchase. The payment may be in any of the following
forms: (a) cash, which may be evidenced by a check; (b) (unless prohibited by
the Compensation Committee) certificates representing shares of Common Stock of
Bank, which will be valued by the Secretary of Bank at the fair market value per
share of Bank Common Stock (as determined in accordance with the Plan) on the
last trading day immediately preceding the date of delivery of such certificates
to Bank, accompanied by an assignment of the stock to Bank; or (c) (unless
prohibited by the Compensation Committee) any combination of cash and Common
Stock of Bank valued as provided in clause (b). Any assignment of stock shall be
in a form and substance satisfactory to the Secretary of Bank, including
guarantees of signature(s) and payment of all transfer taxes if the Secretary
deems such guarantees necessary or desirable or determines that such taxes are
due and payable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by Bank or an
Bank parent or subsidiary corporation is terminated, whether such termination is
voluntary or not, other than by reason of disability as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, or death, in which case your option will terminate one
year from the date of termination of employment due to disability or death (but
in no event later than the Scheduled Termination Date). Notwithstanding the
foregoing, if your employment by the Bank or a Bank parent or subsidiary
corporation is terminated as a result of your retirement at or after age 62 and
you have been employed for at least ten years, your option will, to the extent
not previously exercised by you, terminate the earlier of (i) five years after
termination of your employment, or (i) the Scheduled Termination Date. After the
date your employment is terminated, as aforesaid, you may exercise this option
only for the number of shares which you had a right to purchase and did not
purchase on the date your employment terminated; provided, however, if your
employment terminates by reason of your death or disability, you may exercise
the option for all shares then subject to the option whether or not such shares
are fully exercisable. If you are employed by an Bank subsidiary corporation,
your employment shall be deemed to have terminated on the date your employer
ceases to be an Bank subsidiary corporation, unless you are on that date
transferred to Bank or another Bank subsidiary corporation. Your employment
shall not be deemed to have terminated if you are transferred from Bank to an
Bank subsidiary corporation, or vice versa, or from one Bank subsidiary
corporation to another Bank subsidiary corporation.
Anything in this option to the contrary notwithstanding, your option
will terminate immediately if your employment is terminated for cause (as
determined by Bank in its sole and absolute discretion). Your employment shall
be deemed to have been terminated for cause if you are terminated due to, among
other reasons, (i) your willful misconduct or gross negligence, (ii) your
material breach of any agreement with Bank or (iii) your failure to render
satisfactory services to Bank.
If you die while employed by Bank or an Bank parent or subsidiary
corporation, your legatee(s), distributee(s), executor(s) or administrator(s),
as the case may be, may, at any time within one year after the date of your
death (but in no event later than the Scheduled Termination Date), exercise the
option as to any shares
6
<PAGE>
which you had a right to purchase and did not purchase during your lifetime. If
your employment with Bank or an Bank parent or subsidiary corporation is
terminated by reason of your becoming disabled (within the meaning of Section
22(e)(3) of the Code and the regulations thereunder), you or your legal guardian
or custodian may at any time within one year after the date of such termination
(but in no event later than the Scheduled Termination Date), exercise the option
as to any shares which you had a right to purchase and did not purchase prior to
such termination. Your legatee, distributee, executor, administrator, guardian
or custodian must present proof of his authority satisfactory to Bank prior to
being allowed to exercise this option.
In the event of any change in the outstanding shares of the Common
Stock of Bank by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Option Committee deems in its sole discretion to be
similar circumstances, the number and kind of shares subject to this option and
the option price of such shares shall be appropriately adjusted in a manner to
be determined in the sole discretion of the Option Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of Bank. Bank reserves the right not to
deliver to you the shares purchased by virtue of the exercise of this option
during any period of time in which Bank deems, in its sole discretion, that such
delivery would violate a federal, state, local or securities exchange rule,
regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of Bank in the manner prescribed by the Code and
the regulations thereunder;
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state and local regulatory bodies or
agencies and securities exchanges as Bank may deem necessary or desirable; or
(c) During any period of time in which Bank deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause Bank to be legally obligated to issue or
sell more shares than Bank is legally entitled to issue or sell.
The following two paragraphs shall be applicable if, on the
date of exercise of this option, the Common Stock to be purchased pursuant to
such exercise has not been registered under the Securities Act of 1933, as
amended, and under applicable state securities laws, and shall continue to be
applicable for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to Bank
7
<PAGE>
to the effect that the proposed transaction will be exempt from such
registration. The optionee shall execute such instruments, representations,
acknowledgments and agreements as Bank may, in its sole discretion, deem
advisable to avoid any violation of federal, state, local or securities exchange
rule, regulation or law.
(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to Bank that the
proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to Bank that said
registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
It is the intention of Bank and you that this option shall, if
possible, be an "Incentive Stock Option" as that term is used in Section 422 of
the Code and the regulations thereunder. In the event this option is in any way
inconsistent with the legal requirements of the Code or the regulations
thereunder for an "Incentive Stock Option," this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between Bank and you with respect to the subject matter hereof and
no amendment, modification or waiver of this option, in whole or in part, shall
be binding upon Bank unless in writing and signed by the President of Bank. This
option and the performances of the parties hereunder shall be construed in
accordance with and governed by the laws of the State of New Jersey.
Please sign the copy of this option and return it to Bank's Secretary,
thereby indicating your understanding of and agreement with its terms and
conditions.
FIRST HOME BANCORP, INC.
By:
8
<PAGE>
I hereby acknowledge receipt of a copy of the foregoing stock option
and, having read it, hereby signify my understanding of, and my agreement with,
its terms and conditions.
(Signature) (Date)
9
<PAGE>
APPENDIX II
NON-QUALIFIED STOCK OPTION
To:
Name
Address
Date of Grant:
You are hereby granted an option, effective as of the date hereof, to
purchase ______ shares of Common Stock, par value $1.00 per share ("Common
Stock"), of FIRST HOME BANCORP, INC. ("Bank") at a price of _____ per share
pursuant to the Bank 1994 Employee Stock Option Plan (the "Plan") adopted by the
Bank Board of Directors effective February 21, 1996.
Your option may first be exercised on and after three years after the
date of grant of this option. On and after three years and prior to ten years
from the date of its grant, your option may be exercised for up to 100% of the
total number of shares then subject to the option minus the number of shares
previously purchased by exercise of the option (as adjusted for any changes in
the outstanding Bank Common Stock by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Option Committee deems in its
sole discretion to be similar circumstances). No fractional shares shall be
issued or delivered.
This option shall terminate and is not exercisable after the expiration
of ten years from the date of its grant (the "Scheduled Termination Date"),
except as hereafter provided.
In the event of a "change of control" (as hereafter defined) of Bank,
your option may, from and after the date of the change of control, and
notwithstanding the second paragraph of this option, be exercised for up to 100%
of the total number of shares then subject to the option minus the number of
shares previously purchased upon exercise of the option (as adjusted for any
changes in the outstanding Bank Common Stock by reason of a stock dividend,
stock split, combination of shares, recapitalization, merger, consolidation,
transfer of assets, reorganization, conversion or what the Option Committee
deems in its sole discretion to be similar circumstances).
A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
1. A change within a twelve-month period in a majority of the
members of the board of directors of Bank;
2. A change within a twelve-month period in the holders of
more than 50% of the outstanding voting stock of Bank; or
3. Any other event deemed to constitute a "change in control"
by the Board of Directors.
10
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You may exercise your option by giving written notice to the Secretary
of Bank on forms supplied by Bank at its then principal executive office,
accompanied by payment of the option price for the total number of shares you
specify that you wish to purchase. The payment may be in any of the following
forms: (a) cash, which may be evidenced by a check; (b) (unless prohibited by
the Compensation Committee) certificates representing shares of Common Stock of
Bank, which will be valued by the Secretary of Bank at the fair market value per
share of Bank's Common Stock (as determined in accordance with the Plan) on the
last trading day immediately preceding the date of delivery of such certificates
to Bank, accompanied by an assignment of the stock to Bank; or (c) unless
prohibited by the Compensation Committee) any combination of cash and Common
Stock of Bank valued as provided in clause (b). Any assignment of stock shall be
in a form and substance satisfactory to the Secretary of Bank, including
guarantees of signature(s) and payment of all transfer taxes if the Secretary
deems such guarantees necessary or desirable or determines that such taxes are
due and payable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by Bank or an
Bank parent or subsidiary corporation is terminated, whether such termination is
voluntary or not, other than by reason of disability as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, or death, in which case your option will terminate one
year from the date of termination of employment due to disability or death (but
in no event later than the Scheduled Termination Date). Notwithstanding the
foregoing, if your employment by the Bank or a Bank parent or subsidiary
corporation is terminated as a result of your retirement at or after age 62 and
you have been employed for at least ten years, your option will, to the extent
not previously exercised by you, terminate the earlier of (i) five years after
termination of your employment, or (i) the Scheduled Termination Date. After the
date your employment is terminated, as aforesaid, you may exercise this option
only for the number of shares which you had a right to purchase and did not
purchase on the date your employment terminated; provided, however, if your
employment terminates by reason of your death or disability, you may exercise
the option for all shares then subject to the option whether or not such shares
are fully exercisable. If you are employed by an Bank subsidiary corporation,
your employment shall be deemed to have terminated on the date your employer
ceases to be an Bank subsidiary corporation, unless you are on that date
transferred to Bank or another Bank subsidiary corporation. Your employment
shall not be deemed to have terminated if you are transferred from Bank to an
Bank subsidiary corporation, or vice versa, or from one Bank subsidiary
corporation to another Bank subsidiary corporation.
Anything in this option to the contrary notwithstanding, your option
will terminate immediately if your employment is terminated for cause (as
determined by Bank in its sole and absolute discretion). Your employment shall
be deemed to have been terminated for cause if you are terminated due to, among
other reasons, (i) your willful misconduct or gross negligence, (ii) your
material breach of any agreement with Bank or (iii) your failure to render
satisfactory services to Bank.
If you die while employed by Bank or an Bank parent or subsidiary
corporation, your legatee(s), distributee(s), executor(s) or administrator(s),
as the case may be, may, at any time within one year after the date of your
death (but in no event later than the Scheduled Termination Date), exercise the
option as to any shares which you had a right to purchase and did not purchase
during your lifetime. If your employment with Bank or an Bank parent or
subsidiary corporation is terminated by reason of your becoming disabled (within
the meaning of Section 22(e)(3) of the Code and the regulations thereunder), you
or your legal guardian or custodian may at any time within one year after the
date of such termination (but in no event later than the Scheduled Termination
Date), exercise the option as to any shares which you had a right to purchase
and did not purchase prior to such termination. Your legatee, distributee,
executor, administrator, guardian or custodian must present proof of his
authority satisfactory to Bank prior to being allowed to exercise this option.
11
<PAGE>
In the event of any change in the outstanding shares of the Common
Stock of Bank by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Option Committee deems in its sole discretion to be
similar circumstances, the number and kind of shares subject to this option and
the option price of such shares shall be appropriately adjusted in a manner to
be determined in the sole discretion of the Option Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of Bank. Bank reserves the right not to
deliver to you the shares purchased by virtue of the exercise of this option
during any period of time in which Bank deems, in its sole discretion, that such
would violate a federal, state, local or securities exchange rule, regulation or
law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of Bank in the manner prescribed by the Code and
the regulations thereunder;
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state and local regulatory bodies or
agencies and securities exchanges as Bank may deem necessary or desirable; or
(c) During any period of time in which Bank deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause Bank to be legally obligated to issue or
sell more shares than Bank is legally entitled to issue or sell.
The following two paragraphs shall be applicable if, on the
date of exercise of this option, the Common Stock to be purchased pursuant to
such exercise has not been registered under the Securities Act of 1933, as
amended, and under applicable state securities laws, and shall continue to be
applicable for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to Bank to the effect that the proposed
transaction will be exempt from such registration. The optionee shall execute
such instruments, representations, acknowledgments and agreements as Bank may,
in its sole discretion, deem advisable to avoid any violation of federal, state,
local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
12
<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to Bank that the
proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to Bank that said
registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
It is the intention of Bank and you that this option shall not be an
"Incentive Stock Option" as that term is used in Section 422 of the Code and the
regulations thereunder.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between Bank and you with respect to the subject matter hereof and
no amendment, modification or waiver of this option, in whole or in part, shall
be binding upon Bank unless in writing and signed by the President of Bank. This
option and the performances of the parties hereunder shall be construed in
accordance with and governed by the laws of the State of New Jersey.
Please sign the copy of this option and return it to Bank's Secretary,
thereby indicating your understanding of and agreement with its terms and
conditions.
FIRST HOME BANCORP, INC.
By:
I hereby acknowledge receipt of a copy of the foregoing stock option and, having
read it, hereby signify my understanding of, and my agreement with, its terms
and conditions.
(Signature) (Date)
13
<PAGE>
FIRST HOME BANCORP, INC.
1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose of Plan:
The purpose of the 1994 Stock Option Plan for Non-Employee
Directors (the "Plan") contained herein is to enhance the ability of First Home
Bancorp, Inc. (the "Bancorp") and its current and future subsidiaries
(collectively the "Companies") to attract, retain and motivate members of their
respective Board of Directors and to provide additional incentive to members of
their respective Boards of Directors by encouraging them to invest in shares of
the Bancorp's common stock and thereby acquire a proprietary interest in the
Bancorp and an increased personal interest in the Bancorp's continued success
and progress, to the mutual benefit of directors, employees and shareholders.
2. Aggregate Number of Shares:
70,000 shares of the Bancorp's common stock, no par value per
share ("Common Stock"), shall be the aggregate number of shares which may be
issued under this Plan. Notwithstanding the foregoing, in the event of any
change in the capitalization of the Bancorp, such as by stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation, transfer
of assets, reorganization, conversion or what the Board of Directors of the
Bancorp deems, in its sole discretion, to be similar circumstances, the
aggregate number and kind of shares which may be issued under this Plan, as well
as the number and kind of shares which may be purchased pursuant to any option
granted pursuant to paragraph 3 hereof, shall be adjusted in a manner determined
in the sole discretion of the Board of Directors of the Bancorp. Reacquired
shares of the Bancorp's Common Stock, as well as unissued shares, may be used
for the purpose of this Plan. Common Stock of the Bancorp subject to options
which have terminated unexercised, either in whole or in part, shall be
available for future options granted under this Plan.
3. Participation:
Each person who is not an employee of the Bancorp or any
Bancorp subsidiary corporation at any annual or special meeting of shareholders
of the Bancorp or any Bancorp subsidiary corporation at which directors are
elected who will continue as a director after the date of such meeting or who is
elected or reelected a director of the Bancorp or any Bancorp subsidiary
corporation at such meeting of shareholders of the Bancorp or any Bancorp
subsidiary corporation, as of the date of each such annual or special meeting of
shareholders, shall automatically be granted an option to purchase 1,000 shares
of the Bancorp's Common Stock; provided, however, that (i) no non-employee
director of the Bancorp or any Bancorp subsidiary corporation shall receive an
option or options to purchase more than 1,000 shares of Common Stock in any
calendar year regardless of the number of Boards of Directors of the Companies
on which he serves as a director or to which he is elected or reelected, and
(ii) the maximum number of shares as to which options may be granted to any
non-employee director under this Plan shall be 10,000 shares. The continuation
as a director after, or the election or reelection as a director at, an annual
or special meeting of shareholders shall constitute the grant of the option to
each non-employee director, and the date of such annual or special meeting of
shareholders shall be the date of the grant of the option.
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4. Administration of Plan:
This Plan shall be administered by the Board of Directors of
the Bancorp. The Board of Directors of the Bancorp shall adopt such rules for
the conduct of its business and administration of this Plan as it considers
desirable. A majority of the members of the Board of Directors of the Bancorp
shall constitute a quorum for all purposes. The vote or written consent of a
majority of the members of the Board of Directors of the Bancorp on a particular
matter shall constitute the act of the Board of Directors of the Bancorp on such
matter. The Board of Directors of the Bancorp shall have the exclusive right to
construe the Plan and the options issued pursuant to it, to correct defects and
omissions and to reconcile inconsistencies to the extent necessary to effectuate
the purpose of this Plan and the options issued pursuant to it, and such action
shall be final, binding and conclusive upon all parties concerned. No member of
the Board of Directors of the Bancorp shall be liable for any act or omission
(whether or not negligent) taken or omitted in good faith, or for the exercise
of any authority or discretion granted in connection with the Plan to the Board
of Directors, or for the acts or omissions of any other members of the Board of
Directors.
5. Non-Qualified Stock Options, Option Price and Term:
(a) Options issued pursuant to this Plan shall be
non-qualified stock options. A non-qualified stock option is an option which
does not satisfy the requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). The option price for the non-qualified stock
options issued under this Plan shall be equal to the fair market value of the
Bancorp's Common Stock on the date of the grant of the option.
(b) The "fair market value" of the Bancorp's Common Stock on
the date of the grant of the option shall mean the last reported sale price of a
share of the Bancorp's Common Stock on the NASDAQ National Market System, as
reported by NASDAQ, or on any stock exchange on which such stock is then listed
or admitted to trading, on such date, or if no sale took place on such day, the
last such date on which a sale took place, or if the Common Stock is not then
quoted on the NASDAQ National Market System or listed or admitted to trading on
any stock exchange, the average of the high bid and asked prices in the
over-the-counter market on such date, as reported by the National Quotation
Bureau, or if there are no bid and asked prices available on such date, the
average of the high bid and asked prices available on the closest preceding date
to such date, or if no bid and asked prices are available for the ninety trading
days preceding such date then a price determined by the Board of Directors on
the basis of such information as it considers best reflects market value.
(c) Options issued pursuant to this Plan shall be issued
substantially in the form set forth in Appendix I hereof and shall contain
substantially the terms and conditions set forth therein. Options shall expire
ten years after the date they are granted, unless terminated earlier as provided
herein.
6. Modification, Amendment, Suspension and Termination:
Options shall not be granted pursuant to this Plan after the
expiration of ten years from and after the date this Plan is approved by the
shareholders of the Bancorp. The Board of Directors of the Bancorp reserves the
right at any time, and from time to time, to modify or amend this Plan in any
way, or to suspend or terminate it, effective as of such date, which date may be
either before or after the taking of such action, as may be specified by the
Board of Directors of the Bancorp; provided, however, that such action shall not
affect options granted under the Plan prior to the actual date on which such
action
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<PAGE>
occurred. Notwithstanding the foregoing, the Plan provisions specified in Rule
16(b) - 3(c)(2)(ii)A under the Securities Exchange Act of 1934, as amended, or
any future corresponding rule may not be modified or amended more than once over
six months, except as permitted by Rule 16(b) - 3(c)(2)(ii)B. If the Board of
Directors voluntarily submits a proposed modification, amendment, suspension or
termination for shareholder approval, such submission shall not require any
future modifications, amendments (whether or not relating to the same provision
or subject matter), suspensions or terminations to be similarly submitted for
shareholder approval.
7. Effectiveness of Plan:
The Plan shall become effective on the date of its adoption by
First Home Savings Bank, F.S.B.'s Board of Directors, subject however to
approval by the holders of the First Home Savings Bank, F.S.B.'s Common Stock in
the manner described in Rule 16 (b) - 3(b) under the Securities Exchange Act of
1934, as amended, or any future corresponding rule.
8. General Conditions:
(a) Nothing contained in this Plan or any option granted
pursuant to this Plan shall confer upon any director the right to continue as a
director of any of the Companies or interfere in any way with the rights of the
Companies to terminate him as a director.
(b) Corporate action constituting an offer of stock for sale
to any director under the terms of the options to be granted hereunder shall be
deemed complete as of the date of the annual or special meeting of shareholders
at which directors of the Bancorp or Bank subsidiary corporation are elected or
reelected regardless of when the option is actually delivered to the director or
acknowledged or agreed to by him.
(c) The term "subsidiary corporation" as used throughout this
Plan shall mean a corporation in which the Bancorp owns, directly or indirectly,
shares of stock representing fifty percent or more of the outstanding voting
power of all classes of stock of such corporation at the time of the granting of
an option under this Plan.
(d) The use of the masculine pronoun shall include the
feminine gender whenever appropriate.
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<PAGE>
APPENDIX I
NON-QUALIFIED STOCK OPTION
To:
Name
Address
Date of Grant:
You are hereby granted an option, effective as of the date hereof, to
purchase _____ shares of common stock, no par value per share ("Common Stock"),
of First Home Bancorp, Inc. (the "Bancorp") at a price of $ per share pursuant
to the Bancorp's 1994 Stock Option Plan for Non-Employee Directors (the "Plan").
Your option may first be exercised on and after the earlier to occur of
(i) three years from the date of its grant or (ii) a "change in control" of the
Bancorp, as hereinafter defined, but not before that time. On and after the
earlier to occur of (i) three years from the date your option is granted or (ii)
a "change in control" of the Bancorp, and prior to ten years from the date of
its grant, your option may be exercised in whole, or from time to time in part,
for up to the total whole number of shares then subject to the option minus the
number of shares previously purchased by exercise of the option (as
appropriately adjusted as provided herein). No fractional shares shall be issued
or delivered. This option shall terminate and is not exercisable after the
expiration of ten years from the date of its grant, except if terminated earlier
as hereafter provided.
For purposes of your option, a "change in control" of the Bancorp shall
have been deemed to conclusively occur when any of the following events shall
have occurred without your prior written consent:
(1) a change in at least five members of the Bancorp's Board
of Directors or the addition of five or more new members to the
Bancorp's Board of Directors or any combination of the foregoing,
within any two calendar year period, unless such change or addition
occurs with the affirmative vote in writing of you in your capacity as
a director or a shareholder; or
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<PAGE>
(2) a person or group acting in concert as described in
Section 13(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") proposes to hold or acquire beneficial ownership
within the meaning of Rule 13(d)(3) promulgated under the Exchange Act
of a number of voting shares of the Bancorp which constitutes either
(i) more than fifty percent of the shares which voted in the election
of directors of the Bancorp at the shareholders' meeting immediately
preceding such determination or (ii) more than thirty percent of the
Bancorp's outstanding voting shares. The term "proposes to hold or
acquire" shall mean when a person or group acting in concert has (A)
the right to acquire or merge (whether such right is exercisable
immediately or only after the passage of time or upon the receipt of
such regulatory approvals as is required by applicable law) pursuant to
an agreement, arrangement or understanding (whether or not in writing)
or upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise; (B) commenced a tender or exchange offer with
respect to the voting shares of the Bancorp or securities convertible
or exchangeable into voting shares of the Bancorp; or (C) the right to
vote pursuant to any agreement, arrangement or understanding (whether
or not in writing); provided, however, that such person or group acting
in concert, shall not be deemed to have acquired such shares if the
agreement, arrangement or understanding to vote such securities arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and is not also
then reportable on Schedule 13D under the Exchange Act or any
comparable or successor report.
You may exercise your option by giving written notice to the Secretary
of the Bancorp on forms supplied by the Bancorp at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (i) cash; (ii) certificates representing Common Stock of the
Bancorp which will be valued by the Secretary of the Bancorp at the fair market
value of a share of the Bancorp's Common Stock (as determined in accordance with
the Plan) on the last trading day immediately preceding the delivery of such
certificates to the Bancorp accompanied by an assignment of the stock to the
Bancorp; or (iii) any combination of cash and Common Stock of the Bancorp valued
as provided in clause (ii). Any assignment of stock shall be in form and
substance satisfactory to the Secretary of the Bancorp, including guarantees of
signature(s) if he deems such guarantees necessary or desirable and payment of
all transfer taxes.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which you cease to be a director of the
Bancorp or a subsidiary corporation for any reason, including death, disability,
resignation or removal (whether for cause or otherwise), but in no event later
than ten years from the date this option is granted. After the date you cease to
be a director, you may exercise this option only for the number of shares which
you had a right to purchase and did not purchase on the date you ceased to be a
director. If you are a director of a Bancorp subsidiary corporation, your
directorship shall be deemed to have terminated on the date such company ceases
to be a Bancorp subsidiary corporation, unless you are also a director of the
Bancorp or another Bancorp subsidiary corporation, or on that date became a
director of the Bancorp or another Bancorp subsidiary corporation. Your
directorship shall not be deemed to have terminated if you cease being a
director of the Bancorp or a Bancorp subsidiary corporation but are or
concurrently therewith become a director of the Bancorp or another Bancorp
subsidiary corporation.
This option is not transferable by you otherwise than by will or the
laws of descent and distribution
-5-
<PAGE>
and is exercisable, during your lifetime, only by you. If you die while a
director of the Bancorp or a Bancorp subsidiary corporation, your legatee(s),
distributee(s), executor or administrator, as the case may be, may, at any time
within three months after the date of your death (but in no event later than ten
years from the date this option is granted), exercise the option as to any
shares which you had a right to purchase and did not purchase during your
lifetime. If your directorship with the Bancorp or a Bancorp subsidiary
corporation is terminated by reason of your becoming disabled, you or your legal
guardian or custodian may, at any time within three months after the date of
such termination (but in no event later than ten years from the date this option
is granted), exercise the option as to any shares which you had a right to
purchase and did not purchase prior to such termination. Your executor,
administrator, guardian or custodian must present proof of his authority
satisfactory to the Bancorp prior to being allowed to exercise this option.
In the event of any change in the outstanding shares of the Common
Stock of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Board of Directors deems in its sole
discretion to be similar circumstances, the number and kind of shares subject to
this option and the option price of such shares shall be appropriately adjusted
in a manner to be determined in the sole discretion of the Board of Directors.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Bancorp. The Bancorp reserves the
right not to deliver to you the shares purchased by virtue of exercise of this
option during any period of time in which the Bancorp deems, in its sole
discretion, that such delivery may not be consummated without violating a
federal, state, local or securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(1) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Bancorp may deem necessary or desirable.
(2) During any period of time in which the Bancorp deems that the
exercisability of this option, the offer to sell the shares to the optionee
hereunder, or the sale thereof, may violate a federal, state, local or
securities exchange rule, regulation or law, or may cause the Bancorp to be
legally obligated to issue or sell more shares than the Bancorp is legally
entitled to issue or sell.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between the Bancorp and you with respect to the subject matter
hereof and no amendment, modification or waiver of this option, in whole or in
part, shall be binding upon the Bancorp unless in writing and signed by the
Chief Executive Officer of the Bancorp. This option and the performances of the
parties hereunder shall be construed in accordance with and governed by the laws
of the State of New Jersey.
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Please sign the copy of this option and return it to the Bancorp's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
FIRST HOME BANCORP
By:
----------------------------------
Name:
Title:
I hereby acknowledge receipt of a copy of the foregoing stock option
and, having read it hereby signify my understanding of, and my agreement with,
its terms and conditions.
(Signature) (Date)
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<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of the 15th day of April, 1987 by and
between First Savings and Loan Association of Penns Grove, a savings and loan
association incorporated under the laws of the United States (the
"Association"), and Stephen D. Miller (the "Executive").
WITNESSETH:
WHEREAS, the Executive is employed with the Association on a full time
basis;
WHEREAS, the Association is converting to a state chartered stock
savings and loan association and desires to assure that the Executive remains in
its employ after such conversion; and
WHEREAS, the Association is willing to employ the Executive and the
Executive is willing to accept employment on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Employment
The Association hereby employs the Executive, and the Executive
hereby accepts such employment and agrees to remain in the employ of the
Association, for the period stated in paragraph 3 below and upon the other terms
and conditions herein provided.
<PAGE>
2. Position and Duties
During the Employment Period (as defined in Section 3(a)), the
Executive agrees to serve as President of the Association and shall perform such
managerial duties and responsibilities for the Association as the Board of
Directors of the Association or any superior officer may direct in accordance
with the by-laws of the Association, which duties and responsibilities shall be
of substantially the same character as or equivalent character to those required
by Executive's position on the Effective Date (as defined in Section 3(a)).
Throughout the Employment Period, and except for illness, vacation periods and
leaves of absence granted by the Association (if any), the Executive shall
devote all his business time, attention, skill and efforts to the faithful
performance of his duties hereunder, and, subject to Section 7(g)(1), accept
such office or offices to which he may be elected by the Board of Directors of
the Association.
3. Term
(a) Period of Employment
The period of the Executive's employment under this Agreement
shall commence as of the date of the conversion of the Association from a mutual
to stock form (the "Effective Date") and shall, unless sooner terminated by the
death of the Executive, mutual agreement or pursuant to Section 7, continue
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for a period of five (5) years therefrom, (such period being herein referred to
as the "Employment Period"), provided, however, subject to Section 3(b), and if
the Employment Period has not been terminated by the death of the Executive, by
mutual agreement or pursuant to Section 7, that on each December 31 during the
Employment Period, the Employment Period shall be extended for one year, so that
at all times the Employment Period on each January 1 during the term of this
Agreement shall be an unexpired period of five years. The last day of the
Employment Period, as from time to time extended, and without regard to any
early termination pursuant to Section 7, is hereinafter referred to as the
"Expiration Date."
(b) Termination of Automatic Extension
The Executive or Association may elect to terminate the automatic
extension of the Employment Period set forth in subsection 3(a) by giving
written notice of such election. Any notice given hereunder shall be effective
in the year in which the notice is given, if given between January 1 and June 30
of any calendar year, and in the year following the year in which the notice is
given, if given between July 1 and December 31 of any calendar year. Upon
effectiveness of any notice given hereunder, Executive's employment under this
Agreement shall terminate on the Expiration Date (as last extended) or such
earlier date as may be determined pursuant to Section 7.
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<PAGE>
4. Compensation
(a) Salary and Incentive Compensation
For all services rendered by the Executive in any capacity during
the Employment Period under this Agreement, the Executive shall be paid as
compensation (i) an annual salary of $68,500, or such higher salary as may be
negotiated from time to time by the Association and the Executive plus (ii) such
incentive compensation or bonus as may be awarded to the Executive from time to
time by the Board of Directors. Such salary shall be payable in 52 equal weekly
installments and any such incentive compensation or bonus shall be payable in
the manner and at the time specified by the Board of Directors.
(b) Reimbursement of Expenses
The Association shall pay or reimburse the Executive, in
accordance with the Association's policies and requirements, for all reasonable
travel and other expenses incurred by the Executive in performing his
obligations under this Agreement. The Executive shall be provided, at his
option, with an automobile expense allowance, or the use of a recent model
automobile which will be owned by the Association as may be mutually agreed upon
by the Executive and the Association. All reasonable business related expenses
associated therewith shall be borne by the Association.
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5. Participation in Incentive Compensation and Benefit Plans
In addition to the payments provided under this Agreement, the
Executive (or his beneficiary) may be, or may become, entitled to benefits under
any executive or contingent compensation plan, stock option, restricted stock or
stock purchase plan, retirement income or pension plan, supplemental or excess
benefit plan, group hospitalization, health care, or sick leave plan, life or
other insurance or death benefit plan, travel and accident insurance, vacation
plan, or other present or future group employee benefit plan or program of the
Association for which Executive employees of the Association generally are
eligible, and the Executive shall be eligible to receive, with respect to the
Employment Period, all benefits and emoluments for which he is eligible under
any such benefit plan or program of the Association in accordance with the
provisions and requirements of any such plan or program.
6. Vacation and Sick Leave
Executive shall be entitled to be compensated for annual vacation,
personal and sick leave in accordance with established Association policy.
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<PAGE>
7. Termination or Suspension of Employment
(a) Termination without Cause
Notwithstanding anything to the contrary contained in this
Agreement, subject to Executive receiving the compensation set forth in
subsection (i) of this Section 7, the Association's Board of Directors may
terminate the Executive's employment under this Agreement at any time.
Termination of Executive's employment under this subsection shall be deemed a
breach of this Agreement by the Association.
(b) Termination with Cause
The Association's Board of Directors may terminate the
Executive's employment under this Agreement at any time for cause. The Executive
shall have no right to receive compensation or other benefits for any period
after termination for cause. The term "for cause" shall include the Executive's
personal dishonesty, incompetency, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provision of this Agreement. If the Association's Board of Directors determines
that Executive's employment under this Agreement shall be terminated for cause,
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<PAGE>
then the Board shall forthwith provide Executive with a written notice of said
determination. The notice shall contain a detailed statement of the facts which
constitute the particulars of the cause for termination. As used herein, the
term incompetency shall mean the determination by a court that the Executive is
unable to manage his own affairs by reason of insanity, imbecility or feeble
mindedness.
(c) Suspension Pursuant to Notice
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice served by
the Federal Home Loan Bank Board ("FHLBB") or the Federal Savings and Loan
Insurance Corporation ("FSLIC") under Section 5(d)(4)(C) or Section 5(d)(5)(A)
of the Home Owners' Loan Act (12 U.S.C. 1464(d)(4)(C) and (5)(d)(A)) or under
Section 407(g)(3) or Section 407(h) of the National Housing Act (12 U.S.C. 1730
(g)(3) and (h)), the Association's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Association may in its
discretion (i) pay the Executive all or part of the compensation withheld while
the Association's obligations under this Agreement were suspended and (ii)
reinstate (in whole or in part) any of the Association's obligations under this
Agreement which were suspended.
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<PAGE>
(d) Termination Pursuant to Order
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order of the
FHLBB or FSLIC issued under Section 5(d)(4)(D) or Section 5(d)(5)(A) of
the Home Owners' Loan Act (12 U.S.C. 1464(d)(4)(D) and (d)(5)(A)) or under
Section 407(g)(3) or Section 407(h) of the National Housing Act (12 U.S.C.
1730(g)(3) and (h)), all obligations of the Association under this Agreement
shall terminate as of the effective date of the order, but vested rights of the
Association and Executive shall not be affected.
(e) Termination Upon Default Under National Housing Act
If the Association is in default (as defined in Section 401(d) of
the National Housing Act), all obligations under this Agreement shall terminate
as of the date of default, but this subsection shall not affect any vested
rights of the Association and Executive.
(f) Termination by FSLIC and FHLBB
All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the institution, (i) by FSLIC at the time FSLIC enters
into an agreement to provide assistance to or on behalf of the Association
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<PAGE>
under the authority contained in Section 406(f) of the National Housing Act; or
(ii) by the FHLBB at the time the FHLBB or its Principal Supervisory Agent (as
defined in 12 C.F.R. Section 561.35) approves a supervisory merger to resolve
problems related to operation of the Association or when the Association is
determined by the FHLBB to be in an unsafe and unsound condition. Any rights of
the Association or Executive that have already vested, however, shall not be
affected by such action.
(g) Termination by Executive for Good Reason
The Executive shall be entitled to terminate his employment
hereunder for good reason. Any termination of employment hereunder under any of
the following circumstances shall be for good reason, the occurrence of any of
which shall be deemed a breach of this Agreement by the Association:
(1) without the express written consent of the Executive, the
Executive is assigned any duties inconsistent with his positions, duties,
responsibilities and status with the Association as in effect on the Effective
Date, or his titles is in effect on the Effective Date are changed or the
Executive is removed or not re-elected to any of such positions, except in
connection with the termination of the Executive's employment pursuant to
subsections (b),(c),(d),(e) or (f) of Section 7 of this Agreement, or as a
result of his substantial disability or death;
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<PAGE>
(2) the salary of the Executive set forth in Section 4, as the same
hereafter may be increased from time to time, is reduced;
(3) the Association fails to continue for the Executive any benefit
or compensation plan providing the Executive with substantially similar benefits
to those plans in which the Executive is participating at the Effective Date or
in which the Executive hereafter may participate; or
(4) the Association shall fail to observe or perform any convenant
or agreement in this Agreement to be observed or performed by the Association;
(5) a change in control (as defined below) of the Association
occurs.
For the purposes of this Agreement, a "change in control of the
Association" shall mean a change in control whether by stock transfer, sale of
assets, merger, consolidation or otherwise; provided that, without limitation,
such a change of control shall be deemed to have occurred if (1) any person (as
such term is used in 12 C.F.R. Section 563.18-2(b)(1)), other than those persons
in control of Association on the date hereof, acquires the power, directly or
indirectly, to direct the management or policies of the Association or to vote
25% or more of any class of voting securities of the Association; or (2) within
any period of three consecutive years during the term of this Agreement,
individuals who at the beginning of such period constitute the Board of
Directors of the Association cease for any reason to constitute at least a
majority thereof.
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<PAGE>
(h) Termination by Executive Other Than for Good Cause
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no event be
less than 6 months) to the Association on or after the date that the Executive
first becomes eligible to receive benefits under the Association's defined
benefit pension plan in which case benefits shall be payable to the Executive in
accordance with the provisions of such pension plan and all rights of the
Executive under this Agreement shall cease.
(i) Remedies for Termination
Upon termination of the Executive's employment under this Agreement
pursuant to subsections (a) or (g) of this Section 7, the Executive shall
receive until the Expiration Date:
(1) 200% of the salary set forth in Section 4, as the same may have
been increased from time to time, payment of which shall be at the time provided
for in this Agreement as if the Executive's employment under this Agreement has
not terminated.
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<PAGE>
(2) annually, an amount equal to the average of the three highest
annual incentive compensation payments made to Executive by the Association
prior to the termination pursuant to subsection (a) or the event given Executive
the right to terminate his employment under subsection (g); and
(3) medical care, pension and similar benefits, at no cost to
Executive, substantially comparable to those furnished to Executive by the
Association immediately prior to termination of employment hereunder.
(4) upon termination without Cause or termination for "good reason"
following a "change in control", the Association shall determine the aggregate
present value (pursuant to Section 1274(b)(2) of the Internal Revenue Code) of
all amounts payable hereunder, and of all other amounts payable to the Executive
upon or by reason of his termination which are determined in good faith by the
Association to be "parachute payments", (as defined in Section 280G(b)(2) of the
Code and the regulations promulgated thereunder) made pursuant to agreements or
plans which are subject to Section 280G. The Association's determination of
present value and of other amounts constituting "parachute payments" is binding;
provided that if Executive obtains an opinion of counsel satisfactory to the
Association or an Internal Revenue Service ruling to the effect that the method
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<PAGE>
of determining present value was improper or that specified payments did not
constitute "parachute payments", calculations will be made in accordance with
such opinion or ruling. In the event that aggregate present value of all
benefits under this Agreement and other "parachute payments" is equal to or in
excess of 300% of the Executive's "base amount" as defined in Section
280G(b)(3)(A) and regulations thereunder, the Executive waives the right to
"parachute payments" sufficient to reduce the present value of all such payments
below 300% of the "base amount." The Executive shall have the right to designate
those benefits which shall be waived or reduced in order to comply with this
provision, but failing designation by the Executive, the Association may
designate those benefits which must be waived or reduced.
(5) If it is established pursuant to a final determination of a
court of competent jurisdiction or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Executive and the Association in applying
the terms of this Section 7, the aggregate "parachute payments" paid to or for
the Executive's benefit are in an amount that would result in any portion of
such "parachute payments" not being deductible by the Association or an
Affiliate by reason of Section 280G of the Code, then the Executive shall have
an obligation to pay the Association upon demand an amount equal to the sum of
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<PAGE>
(i) the excess of the aggregate "parachute payments", paid to or for the
Executive's benefit without any portion of such "parachute payments" not being
deductible by reason of Section 280G of the Code and (ii) interest on the amount
set forth in clause (i) above at the applicable federal rate (as defined in
Section 1274(d) of the Code) from the date of the Executive's receipt of such
excess until the date of such payment.
Any payment made by Association under this Section shall be deemed
to constitute liquidated damages and not a penalty for the Association's breach
of this Agreement. Executive shall not be required to mitigate his damages
hereunder by seeking employment or otherwise.
(j) Disability Termination
In the event that the Executive is totally disabled prior to the
Expiration Date of this Agreement, the Association shall have the right to
terminate Executive's employment on ten (10) days written notice to Executive,
provided the Association shall pay the Executive a disability benefit which is
equal to the salary provided in Section 4, as the same may have been increased
from time to time, received by Executive at the commencement of the
Executive's total disability, reduced by the sum of (i) the amount of any
benefits to which the Executive may be entitled with respect to the same period
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<PAGE>
under any disability plan or pension plan, including related supplemental and
excess benefit plans or agreements, of the Association and (ii) the disability
benefits payable under any government regulated plan including workers'
compensation benefits. Payment of such disability benefit shall commence with
the week coincident with the termination of Executive's employment under this
Agreement and shall continue until the earlier of the Expiration Date or the
Executive's death. During any period the Executive shall be entitled to receive
disability payments from the Association, to the extent that he is physically
and mentally able to do so, he shall furnish information and assistance to the
Association, and, in addition, upon reasonable request in writing from time to
he shall make himself available to the Association to undertake reasonable
assignments with the dignity, importance, and scope of his prior position and
his physical and mental health. As used in this Agreement, the term "total
disability" shall mean the complete inability of the Executive to perform all of
his duties under this Agreement as determined by an independent physician
selected with the approval of the Board of Directors and the Executive.
8. Withholding of Taxes
The Association may withhold from any payments under this Agreement
all applicable taxes, as shall be required pursuant to any law or governmental
regulation or ruling.
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9. Prior Agreements
This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof, supersedes all
prior and contemporaneous agreements and understandings and any prior employment
agreement between the Association and the Executive.
10. Consolidation or Merger
Nothing in this Agreement shall preclude the Association from
consolidating or merging into or with, or transferring all or substantially all
of its assets to, any Person which assumes this Agreement and all obligations of
the Association hereunder. Upon such a consolidation, merger or transfer of
assets and assumption, the term, "Association" shall refer to such other Person
and this Agreement shall continue in full force and effect.
11. General Provisions
(a) Non-Assignability
Neither this Agreement nor any right or interest hereunder
shall be assignable by the Executive without the Association's prior written
consent; provided, however, that nothing in this subparagraph 11(a) shall
preclude the executors, administrators, or other legal representatives of the
estate of the Executive from assigning any rights hereunder to the Person or
Persons entitled thereto under the Executive's will or, in case of intestacy, to
the Person or Persons entitled thereto under the laws of intestacy applicable to
the Executive's estate.
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<PAGE>
(b) No Attachment
Except as otherwise required by law, no right to receive payments
under this Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
(c) Binding Agreement
This Agreement shall be binding upon and inure to the benefit of
the Executive and the Association, the Executive's heirs, executors and assigns
and the Association's successors and assigns.
(d) "Person" Defined
"Person" as used herein means a natural person, joint venture,
corporation, sole proprietorship, trust, estate, partnership, cooperative,
association, organization, government or governmental entity, or other entity.
12. Legal Expenses
The Association shall pay to the Executive all reasonable legal fees
and expenses incurred by the Executive in seeking to obtain or enforce any right
or benefit provided by this Agreement.
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13. Amendment
No amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing.
14. Severability
If for any reason any provision of this Agreement shall be held
invalid, such invalidity shall not affect any other provision of this Agreement
not held so invalid, and all other such provisions shall to the full extent
consistent with law continue in full force and effect. If any such provision
shall be held invalid in part, such invalidity shall in no way affect the rest
of such provision not held so invalid, and the rest of such provision, together
with all other provisions of this Agreement, shall likewise to the full extent
consistent with law continue in full force and effect.
15. Headings
The headings are included solely for convenience of reference and
shall not control the meaning or interpretation of any of the provisions of this
Agreement.
16. Interpretation
If any provision of this Agreement shall be the subject of a dispute
between the Association and the Executive and a court or arbitrator to which
such dispute has been brought shall be unable to resolve which of two reasonable
interpretations of such provision is the proper interpretation thereof, then the
interpretation most favorable to the Executive shall control.
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17. Governing Law
This Agreement has been executed and delivered in the State of New
Jersey and its validity, interpretation, performance and enforcement shall be
governed by and construed in accordance with the laws thereof applicable to
contracts executed and to be wholly performed in New Jersey.
18. Consent to Jurisdiction
Executive and the Association irrevocable consent to the exclusive
jurisdiction of the Courts of Salem County, New Jersey and/or the United States
District Court for the District of New Jersey in any action or proceeding
pursuant to this Agreement and agree to service of process in accordance with
Section 17 herein.
19. Notices
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid, to the following addresses or to such other address as either
party may designate by like notice:
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A. If to Executive, to:
Stephen D. Miller
RD2 Box 125
Woodstown, NJ 08098
B. If to Association, to:
First Savings and Loan Association
of Penns Grove
125 South Broadway
Pennsville, NJ 08070
C. In all cases, copies to:
Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attn: Barry H. Genkin, Esquire
D.
and to such other or additional Person or Persons as either party shall have
designated to the other party in writing by like notice.
20. Reimbursement of Expenses
In the event the Association or any party other than the Executive
asserts that this Agreement, in whole or in part, is unenforceable or invalid,
than the Association shall reimburse Executive for any costs and expenses
including, without limitation, legal fees, incurred by Executive in enforcing
this Agreement or defending its validity.
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IN WITNESS WHEREOF, the Association has caused this Agreement to be
executed and its seal to be affixed hereto by its officers thereunto duly
authorized, and the Executive has signed and sealed this Agreement, all as of
the day and year first above written.
ATTEST: FIRST SAVINGS AND LOAN ASSOCIATION
OF PENNS GROVE
/s/ Joyce A. Hunt By: /s/ Sol L. Davidow,
- -------------------------- ----------------------------------
Secretary Sol L. Davidow,
Chairman of the Board
WITNESS:
/s/ Elizabeth F. Homen /s/ Stephen D. Miller
- ------------------------- -------------------------------------
Stephen D. Miller
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AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated 27th day of March 1992, by and between First Home
Savings Bank, S.L.A., a savings and loan association incorporated under laws of
New Jersey (the "Bank"), and Stephen D. Miller (the "Executive").
W I T N E S S E T H:
WHEREAS, the Bank and Executive have entered into an Employment
Agreement made effective as of the 15th day of April, 1987 (the "Employment
Agreement"); and
WHEREAS, the Bank and Executive desire to amend certain of the terms of
the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. The first sentence of Section 3(a) of the Employment Agreement shall
be amended to read in its entirety as follows:
"The period of the Executive's employment under this Agreement shall
commence as of the date of the conversion of the Association from a
mutual to stock form (the "Effective Date") and shall, unless sooner
terminated by the death of the Executive, mutual agreement or pursuant
to Section 7, continue for a period of five (5) years therefrom, (such
period being herein referred to as the "Employment Period"), provided,
however, subject to Section 3(b), and if the Employment Period has not
been terminated by the death of the Executive, by mutual agreement or
pursuant to Section 7, that on each December 31 during the Employment
Period, the Employment Period shall be extended for one year, so that
at all times the Employment Period on each January 1 during the year of
this Agreement shall be an unexpired period of five years, provided,
however, that such extension shall not go into effect unless and until
it has been reviewed and approved by the Board of Directors."
2. Section 7(c) is amended to read in its entirety as follows:
(c) Suspension Pursuant to Notice
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(e)(3) and (g)(1)), the Association's
obligations under this Agreement shall be suspended as of the date of
service unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Association may in its discretion (i) pay the
Executive all or part of the compensation withheld while the Bank's
obligations under this Agreement were suspended and (ii) reinstate (in
whole or in part) any of the Association's obligations under this
Agreement which were suspended.
<PAGE>
3. Section 7(d) is amended to read in its entirety as follows:
(d) Termination Pursuant to Order
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(e)(4) or (g)(1)), all obligations of the
Association under this Agreement shall terminate as of the effective
date of the order, but vested rights of the Association and Executive
shall not be affected.
4. Section 7(e) is amended to read in its entirety as follows:
(e) Termination Upon Default
If the Association is in default (as defined in Section 3(X)(1)
of the Federal Deposit Insurance Act), all obligations under this
Agreement shall terminate as of the date of default, but this
subsection shall not affect any vested rights of the Association and
Executive.
5. Section 7(f) is amended to read in its entirety as follows:
(f) Termination by Office of Thrift Supervision
All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is
necessary for the continued operation of the Association, (i) by the
Director of the Office of Thrift Supervision or his or her designee at
the time the Federal Deposit Insurance Corporation or the Resolution
Trust Corporation enters into an agreement to provide assistance to or
on behalf of the Association under the authority contained in Section
13(c) of the Federal Deposit Insurance Act; or (ii) by the Director of
the Office of Thrift Supervision or his or her designee, at the time
such Director or designee approves a supervisory merger to resolve
problems related to operation of the Association or when the
Association is determined by such Director to be in an unsafe and
unsound condition. Any rights of the Association or Executive that have
already vested, however, shall not be affected by such action.
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<PAGE>
6. Section 7(h) is amended to read in its entirety as follows:
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no
event be less than 6 months) to the Association on or after the date
that the Executive first becomes eligible to receive retirement
benefits under the Association's Employee Stock Ownership Plan in which
case benefits shall be payable to the Executive in accordance with the
provisions of such plan, and all rights of the Executive under this
Agreement shall cease.
7. Section 7 of the Employment Agreement is amended by adding at the
end thereof a new Section (k) which shall read in its entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment (whether
pursuant to the terms of this Agreement or pursuant to any other policy
or arrangement) which would cause Executive to receive an amount which
exceeds three times the Executive's annual salary for the year in which
Executive's employment is terminated.
8. Section 12 of the Employment Agreement is amended to read in its
entirety as follows:
"If the Executive obtains a judgment which enforces a right or
benefit under this Agreement, the Association shall pay to the
Executive all reasonable legal fees and expenses incurred by the
Executive in seeking to obtain or enforce such right or benefit."
9. The Employment Agreement is amended by deleting Section 20 in its
entirety.
10. The Employment Agreement, as amended by this Amendment, shall
remain in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, the Association has caused this Amendment to be
executed and its seal to be affixed hereto by its officers thereunto duly
authorized, and the Executive has signed and sealed this Agreement, all as of
the day and year first above written.
FIRST HOME SAVINGS BANK, S.L.A.
By: /s/ Sol L. Davidow
------------------------------------
/s/ Stephen D. Miller
------------------------------------
Stephen D. Miller
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<PAGE>
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated this 25th day of January, 1993, by and between
First Home Savings Bank, S.L.A., a savings and loan association incorporated
under laws of New Jersey (the "Bank"), and Stephen D. Miller (the "Executive").
W I T N E S S E T H:
WHEREAS, the Bank and Executive have entered into an Employment
Agreement made effective as of the 15th day of April, 1987 (the "Employment
Agreement"); and
WHEREAS, the Employment Agreement was amended on March 27, 1992; and
WHEREAS, the Bank and Executive desire to make further amendments to
certain of the terms of the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. The first sentence of Section 3(a) of the Employment Agreement shall
be amended to read in its entirety as follows:
"The period of the Executive's employment under this Agreement shall
commence as of the date of the conversion of the Association from a
mutual to stock form (the "Effective Date") and shall, unless sooner
terminated by the death of the Executive,, mutual agreement or pursuant
to Section 7, continue for a period of three (3) years therefrom, (such
period being herein referred to as the "Employment Period"), provided,
however, subject to Section 3(b), and if the Employment Period has not
been terminated by the death of the Executive, by mutual agreement or
pursuant to Section 7, that on each December 31 during the Employment
Period, the Employment Period shall be extended for one year, so that
at all times the Employment Period on each January 1 during the year of
this Agreement shall be an unexpired period of three years, provided,
however, that such extension shall not go into effect unless and until
it has been reviewed and approved by the Board of Directors."
2. Section 7(c) is amended to read in its entirety as follows:
(c) Suspension Pursuant to Notice
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(e)(3) and (g)(1)), the Association's
obligations
<PAGE>
under this Agreement shall be suspended as of the date of service
unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Association may in its discretion (i) pay the
Executive all or part of the compensation withheld while the Bank's
obligations under this Agreement were suspended and (ii) reinstate (in
whole or in part) any of the Association's obligations under this
Agreement which were suspended.
3. Section 7(d) is amended to read in its entirety as follows:
(d) Termination Pursuant to Order
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(a)(4) or (g)(1)), all obligations of the
Association under this Agreement shall terminate as of the effective
date of the order, but vested rights of the Association and Executive
shall not be affected.
4. Section 7(e) is amended to read in its entirety as follows:
(e) Termination Upon Default
If the Association is in default (as defined in Section 3(X)(1)
of the Federal Deposit Insurance Act), all obligations under this
Agreement shall terminate as of the date of default, but this
subsection shall not affect any vested rights of the Association and
Executive.
5. Section 7(f) is amended to read in its entirety as follows:
(f) Termination by Office of Thrift Supervision
All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is
necessary for the continued operation of the Association, (i) by the
Director of the Office of Thrift Supervision or his or her designee at
the time the Federal Deposit Insurance Corporation or the Resolution
Trust Corporation enters into an agreement to provide assistance to or
on behalf of the Association under the authority contained in Section
13(c) of the Federal Deposit Insurance Act; or (ii) by the Director of
the Office of Thrift Supervision or his or her designee, at the time
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<PAGE>
such Director or designee approves a supervisory merger to resolve
problems related to operation of the Association or when the
Association is determined by such Director to be in an unsafe and
unsound condition. Any rights of the Association or Executive that have
already vested, however, shall not be affected by such action.
6. Section 7(h) is amended to read in its entirety as follows:
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no
event be less than 6 months) to the Association on or after the date
that the Executive first becomes eligible to receive retirement
benefits under the Association's Employee Stock Ownership Plan in which
case benefits shall be payable to the Executive in accordance with the
provisions of such plan, and all rights of the Executive under this
Agreement shall cease.
7. Section 7(i)(1) is amended to read in its entirety as follows:
100% of the salary set forth in Section 4, as the same may have been
increased from time to time, payment of which shall be at the time
provided for in this agreement as if the Executive's employment under
this agreement has not terminated.
8. Section 7 of the Employment Agreement is amended by adding at the
end thereof a new Section (k) which shall read in its entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment (whether
pursuant to the terms of this Agreement or pursuant to any other policy
or arrangement) which would cause Executive to receive an amount which
exceeds three times the Executive's annual salary for the year in which
Executive's employment is terminated.
9. Section 12 of the Employment Agreement is amended to read in its
entirety as follows:
"If the Executive obtains a judgment which enforces a right or
benefit under this Agreement, the Association shall pay to the
Executive all reasonable legal fees and expenses incurred by the
Executive in seeking to obtain or enforce such right or benefit."
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<PAGE>
10. The Employment Agreement is amended by deleting Section 20 in its
entirety.
11. The Employment Agreement, as amended by this Amendment, shall remain
in full force and effect.
IN WITNESS THEREOF, the Association has caused this Amendment to be
executed and its seal to be affixed hereto by its officers thereinto duly
authorized, and the Executive has signed and sealed this Agreement, all as of
the day and year first above written.
FIRST ROME SAVINGS BANK, S.L.A.
By: /s/ Sol L. Davidow
-------------------------------------
Sol L. Davidow,
Chairman of the Board
/s/ Stephen D. Miller
-------------------------------------
Stephen D. Miller
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<PAGE>
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated this 5th day of January, 1994, by and between
First Home Savings Bank, F.S.B., a savings and loan association incorporated
under laws of the United States (the "Bank"), and Stephen D. Miller (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Bank, as the successor in interest by merger with First
Home Savings Bank, S.L.A. (formerly known as First Savings and Loan Association
of Penns Grove), and Executive have entered into an Employment Agreement made
effective as of the 15th day of April, 1987 (the "Employment Agreement"); and
WHEREAS, the Employment Agreement was amended on March 27, 1992 and
January 25, 1993; and
WHEREAS, the Bank and Executive desire to make further amendments to
certain of the terms of the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. All references in the Employment Agreement, as amended, to "Bank" or
"Association" shall be deemed to refer to First Home Savings Bank, F.S.B.
2. Section 7(k) of the Employment Agreement is amended to read in its
entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment (whether
pursuant to the terms of this Agreement or pursuant to any other policy
or arrangement) which would cause Executive to receive an amount which
exceeds three times the Executive's Average Annual Compensation (as
hereinafter defined). "Average Annual Compensation" means the average
of all Compensation (as hereinafter defined) paid to Executive by Bank
during each of the five full taxable years (i.e. January 1 to December
31) preceding the year in which Executive's employment is terminated.
"Compensation" shall mean "Compensation" as defined in RB 27a,
"Executive Compensation and Employment Contracts", dated March 5, 1993,
promulgated by the Office of Thrift Supervision.
3. The Employment Agreement, as amended, and as amended by this
Amendment, shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Amendment to be executed
and its seal to be affixed hereto by its officers thereunto duly authorized, and
the Executive has signed and sealed this Agreement, all as of the day and year
first above written.
FIRST HOME SAVINGS BANK, F.S.B.
By: /s/ Sol L. Davidow
------------------------------------
Sol L. Davidow,
Chairman of the Board
/s/ Stephen D. Miller
------------------------------------
Stephen D. Miller
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<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of the 15th day of April, 1987 by and
between First Savings and Loan Association of Penns Grove, a savings and loan
association incorporated under the laws of the United States (the
"Association"), and Robert A. DiValerio (the "Executive").
WITNESSETH:
WHEREAS, the Executive is employed with the Association on a full time
basis;
WHEREAS, the Association is converting to a state chartered stock
savings and loan association and desires to assure that the Executive remains in
its employ after such conversion; and
WHEREAS, the Association is willing to employ the Executive and the
Executive is willing to accept employment on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Employment
The Association hereby employs the Executive, and the Executive
hereby accepts such employment and agrees to remain in the employ of the
Association, for the period stated in paragraph 3 below and upon the other terms
and conditions herein provided.
<PAGE>
2. Position and Duties
During the Employment Period (as defined in Section 3(a)), the
Executive agrees to serve as Executive Vice President, Treasurer of the
Association and shall perform such managerial duties and responsibilities for
the Association as the Board of Directors of the Association or any superior
officer may direct in accordance with the by-laws of the Association, which
duties and responsibilities shall be of substantially the same character as or
equivalent character to those required by Executive's position on the Effective
Date (as defined in Section 3(a)). Throughout the Employment Period, and except
for illness, vacation periods and leaves of absence granted by the Association
(if any), the Executive shall devote all his business time, attention, skill and
efforts to the faithful performance of his duties hereunder, and, subject to
Section 7(g)(1), accept such office or offices to which he may be elected by the
Board of Directors of the Association.
3. Term
(a) Period of Employment
The period of the Executive's employment under this Agreement
shall commence as of the date of the conversion of the Association from a mutual
to stock form (the "Effective Date") and shall, unless sooner terminated by the
death of the Executive, mutual agreement or pursuant to Section 7, continue
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<PAGE>
for a period of one (1) year therefrom, (such period being herein referred to as
the "Employment Period"), provided, however, subject to Section 3(b), and if the
Employment Period has not been terminated by the death of the Executive, by
mutual agreement or pursuant to Section 7, that on each December 31 during the
Employment Period, the Employment Period shall be extended for one year, so
that at all times the Employment Period on each January 1 during the term of
this Agreement shall be an unexpired period of one (1) year. The last day of the
Employment Period, as from time to time extended, and without regard to any
early termination pursuant to Section 7, is hereinafter referred to as the
"Expiration Date."
(b) Termination of Automatic Extension
The Executive or Association may elect to terminate the
automatic extension of the Employment Period set forth in subsection 3(a) by
giving written notice of such election. Any notice given hereunder shall be
effective in the year in which the notice is given, if given between January 1
and June 30 of any calendar year, and in the year following the year in which
the notice is given, if given between July 1 and December 31 of any calendar
year. Upon effectiveness of any notice given hereunder, Executive's employment
under this Agreement shall terminate on the Expir-
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<PAGE>
ation Date (as last extended) or such earlier date as may be determined pursuant
to Section 7.
4. Compensation
(a) Salary and Incentive Compensation
For all services rendered by the Executive in any capacity
during the Employment Period under this Agreement, the Executive shall be paid
as compensation (i) an annual salary of $57,000, or such higher salary as may be
negotiated from time to time by the Association and the Executive plus (ii) such
incentive compensation or bonus as may be awarded to the Executive from time to
time by the Board of Directors. Such salary shall be payable in 52 equal weekly
installments and any such incentive compensation or bonus shall be payable in
the manner and at the time specified by the Board of Directors.
(b) Reimbursement of Expenses
The Association shall pay or reimburse the Executive, in
accordance with the Association's policies and requirements, for all reasonable
travel and other expenses incurred by the Executive in performing his
obligations under this Agreement. The Executive shall be provided, at his
option, with an automobile expense allowance, or the use of a recent model
automobile which will be owned by the Association, as may be mutually agreed
upon by the Executive and the
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<PAGE>
Association. All reasonable business related expenses associated therewith shall
be borne by the Association.
5. Participation in Incentive Compensation and Benefit Plans
In addition to the payments provided under this Agreement, the
Executive (or his beneficiary) may be, or may become, entitled to benefits under
any executive or contingent compensation plan, stock option, restricted stock or
stock purchase plan, retirement income or pension plan, supplemental or excess
benefit plan, group hospitalization, health care, or sick leave plan, life or
other insurance or death benefit plan, travel and accident insurance, vacation
plan, or other present or future group employee benefit plan or program of the
Association for which Executive employees of the Association generally are
eligible, and the Executive shall be eligible to receive, with respect to the
Employment Period, all benefits and emoluments for which he is eligible under
any such benefit plan or program of the Association in accordance with the
provisions and requirements of any such plan or program.
6. Vacation and Sick Leave
Executive shall be entitled to be compensated for annual vacation,
personal and sick leave in accordance with established Association policy.
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<PAGE>
7. Termination or Suspension of Employment
(a) Termination without Cause
Notwithstanding anything to the contrary contained in this
Agreement, subject to Executive receiving the compensation set forth in
subsection (i) of this Section 7, the Association's Board of Directors may
terminate the Executive's employment under this Agreement at any time.
Termination of Executive's employment under this subsection shall be deemed a
breach of this Agreement by the Association.
(b) Termination with Cause
The Association's Board of Directors may terminate the
Executive's employment under this Agreement at any time for cause. The Executive
shall have no right to receive compensation or other benefits for any period
after termination for cause. The term "for cause" shall include the Executive's
personal dishonesty, incompetency, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provision of this Agreement. If the Association's Board of Directors determines
that Executive's employment under this Agreement shall be terminated for cause,
then the Board shall forthwith provide Exe-
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<PAGE>
cutive with a written notice of said determination. The notice shall contain a
detailed statement of the facts which constitute the particulars of the cause
for termination. As used herein, the term incompetency shall mean the
determination by a court that the Executive is unable to manage his own affairs
by reason of insanity, imbecility or feeble mindedness.
(c) Suspension Pursuant to Notice
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice served by
the Federal Home Loan Bank Board ("FHLBB") or the Federal Savings and Loan
Insurance Corporation ("FSLIC") under Section 5(d)(4)(C) or Section 5(d)(5)(A)
of the Home Owners' Loan Act (12 U.S.C. 1464(d)(4)(C) and (5)(d)(A)) or under
Section 407(g)(3) or Section 407(h) of the National Housing Act (12 U.S.C. 1730
(g)(3) and (h)), the Association's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Association may in its
discretion (i) pay the Executive all or part of the compensation withheld while
the Association's obligations under this Agreement were suspended and (ii)
reinstate (in whole or in part) any of the Association's obligations under this
Agreement which were suspended.
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<PAGE>
(d) Termination Pursuant to Order
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order of the
FHLBB or FSLIC issued under Section 5 (d) (4) (D) or Section 5 (d) (5) (A) of
the Home Owners' Loan Act (12 U.S.C. 1464(d)(4)(D) and (d)(5)(A)) or under
Section 407 (g) (3) or Section 407 (h) of the National Housing Act (12 U.S.C.
1730 (g) (3) and (h)) , all obligations of the Association under this Agreement
shall terminate as of the effective date of the order, but vested rights of the
Association and Executive shall not be affected.
(e) Termination Upon Default Under National Housing Act
If the Association is in default (as defined in Section 401(d) of
the National Housing Act), all obligations under this Agreement shall terminate
as of the date of default, but this subsection shall not affect any vested
rights of the Association and Executive.
(f) Termination by FSLIC and FHLBB
All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is necessary for
the continued operation of the institution, (i) by FSLIC at the time FSLIC
enters into an agreement to provide assistance to or on behalf of the
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<PAGE>
Association under the authority contained in Section 406(f) of the National
Housing Act; or (ii) by the FHLBB at the time the FHLBB or its Principal
Supervisory Agent (as defined in 12 C.F.R. Section 561.35) approves a
supervisory merger to resolve problems related to operation of the Association
or when the Association is determined by the FHLBB to be in an unsafe and
unsound condition. Any rights of the Association or Executive that have already
vested, however, shall not be affected by such action.
(g) Termination by Executive for Good Reason
The Executive shall be entitled to terminate his employment
hereunder for good reason. Any termination of employment hereunder under any of
the following circumstances shall be for good reason, the occurrence of any of
which shall be deemed a breach of this Agreement by the Association:
(1) without the express written consent of the Executive, the
Executive is assigned any duties inconsistent with his positions, duties,
responsibilities and status with the Association as in effect on the Effective
Date, or his titles as in effect on the Effective Date are changed or the
Executive is removed or not re-elected to any of such positions, except in
connection with the termination of the Executive's employment pursuant to
subsections (b), (c), (d), (e) or (f) of Section 7 of this Agreement, or as a
result of his substantial disability or death;
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<PAGE>
(2) the salary of the Executive set forth in Section 4, as the
same hereafter may be increased from time to time, is reduced;
(3) the Association fails to continue for the Executive any
benefit or compensation plan providing the Executive with substantially similar
benefits to those plans in which the Executive is participating at the
Effective Date or in which the Executive hereafter may participate; or
(4) the Association shall fail to observe or perform any
convenant or agreement in this Agreement to be observed or performed by the
Association;
(5) a change in control (as defined below) of the Association
occurs.
For the purposes of this Agreement, a "change in control of the
Association" shall mean a change in control whether by stock transfer, sale of
assets, merger, consolidation or otherwise; provided that, without limitation,
such a change of control shall be deemed to have occurred if (1) any person
(as such term is used in 12 C.F.R. Section 563.18-2(b)(1)), other than those
persons in control of Association on the date hereof, acquires the power,
directly or indirectly, to direct the management or policies of the Association
or to vote 25% or more of any class of voting securities of the Association; or
(2) within any period of three consecutive years during the
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<PAGE>
term of this Agreement, individuals who at the beginning of such period
constitute the Board of Directors of the Association cease for any reason to
constitute at least a majority thereof.
(h) Termination by Executive Other Than for Good Cause
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no event be
less than 6 months) to the Association on or after the date that the Executive
first becomes eligible to receive benefits under the Association's defined
benefit pension plan in which case benefits shall be payable to the Executive
in accordance with the provisions of such pension plan and all rights of the
Executive under this Agreement shall cease. Notwithstanding anything contained
herein to the contrary, the Executive may terminate this Agreement by notice
(which shall in no event be less than 2 months) to the Association.
(i) Remedies for Termination
Upon termination of the Executive's employment under this
Agreement pursuant to subsections (a) or (g) of this Section 7, the Executive
shall receive until the Expiration Date:
(1) 200% of the salary set forth in Section 4, as the same may
have been increased from time to time, payment
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<PAGE>
of which shall be at the time provided for in this Agreement as if the
Executive's employment under this Agreement has not terminated.
(2) annually, an amount equal to the average of the three highest
annual incentive compensation payments made to Executive by the Association
prior to the termination pursuant to subsection (a) or the event given Executive
the right to terminate his employment under subsection (g); and
(3) medical care, pension and similar benefits, at no cost to
Executive, substantially comparable to those furnished to Executive by the
Association immediately prior to termination of employment hereunder.
(4) upon termination without Cause or termination for "good
reason" following a "change in control", the Association shall determine the
aggregate present value (pursuant to Section 1274(b)(2) of the Internal Revenue
Code) of all amounts payable hereunder, and of all other amounts payable to the
Executive upon or by reason of his termination which are determined in good
faith by the Association to be "parachute payments", (as defined in
Section 280G(b)(2) of the Code and the regulations promulgated thereunder) made
pursuant to agreements or plans which are subject to Section 280G. The
Association's determination of present value and of other amounts constituting
"parachute payments" is binding; provided that if Executive obtains an opinion
of counsel satisfactory to the
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<PAGE>
Association or an Internal Revenue Service ruling to the effect that the method
of determining present value was improper or that specified payments did not
constitute "parachute payments", calculations will be made in accordance with
such opinion or ruling. In the event that aggregate present value of all
benefits under this Agreement and other "parachute payments" is equal to or in
excess of 300% of the Executive's "base amount" as defined in Section
280G(b)(3)(A) and regulations thereunder, the Executive waives the right to
"parachute payments" sufficient to reduce the present value of all such payments
below 300% of the "base amount." The Executive shall have the right to designate
those benefits which shall be waived or reduced in order to comply with this
provision, but failing designation by the Executive, the Association may
designate those benefits which must be waived or reduced.
(5) If it is established pursuant to a final determination of a
court of competent jurisdiction or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Executive and the Association in applying
the terms of this Section 7, the aggregate "parachute payments" paid to or for
the Executive's benefit are in an amount that would result in any portion of
such "parachute payments" not being deductible by the Association or an
Affiliate by reason of Section 280G of the Code, then the Executive shall have
an obligation to pay the Association upon demand an
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<PAGE>
amount equal to the sum of (i) the excess of the aggregate "parachute payments"
paid to or for the Executive's benefit without any portion of such "parachute
payments" not being deductible by reason of Section 280G of the Code and (ii)
interest on the amount set forth in clause (i) above at the applicable federal
rate (as defined in Section 1274(d) of the Code) from the date of the
Executive's receipt of such excess until the date of such payment.
Any payment made by Association under this Section shall be deemed to
constitute liquidated damages and not a penalty for the Association's breach of
this Agreement. Executive shall not be required to mitigate his damages
hereunder by seeking employment or otherwise.
(j) Disability Termination
In the event that the Executive is totally disabled prior to the
Expiration Date of this Agreement, the Association shall have the right to
terminate Executive's employment on ten (10) days written notice to Executive,
provided the Association shall pay the Executive a disability benefit which is
equal to the salary provided in Section 4, as the same may have been increased
from time to time, received by Executive at the commencement of the Executive's
total disability, reduced by the sum of (i) the amount of any benefits to which
the Executive may be entitled with respect to the same period under any
disability plan or pension plan,
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<PAGE>
including related supplemental and excess benefit plans or agreements, of the
Association and (ii) the disability benefits payable under any government
regulated plan including workers' compensation benefits. Payment of such
disability benefit shall commence with the week coincident with the termination
of Executive's employment under this Agreement and shall continue until the
earlier of the Expiration Date or the Executive's death. During any period the
Executive shall be entitled to receive disability payments from the Association,
to the extent that he is physically and mentally able to do so, he shall furnish
information and assistance to the Association, and, in addition, upon
reasonable request in writing from time to he shall make himself available to
the Association to undertake reasonable assignments with the dignity,
importance, and scope of his prior position and his physical and mental health.
As used in this Agreement, the term "total disability" shall mean the complete
inability of the Executive to perform all of his duties under this Agreement as
determined by an independent physician selected with the approval of the Board
of Directors and the Executive.
8. Withholding of Taxes
The Association may withhold from any payments under this
Agreement all applicable taxes, as shall be required pursuant to any law or
governmental regulation or ruling.
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<PAGE>
9. Prior Agreements
This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof, supersedes all
prior and contemporaneous agreements and understandings and any prior employment
agreement between the Association and the Executive.
10. Consolidation or Merger
Nothing in this Agreement shall preclude the Association from
consolidating or merging into or with, or transferring all or substantially all
of its assets to, any Person which assumes this Agreement and all obligations of
the Association hereunder. Upon such a consolidation, merger or transfer of
assets and assumption, the term, "Association" shall refer to such other Person
and this Agreement shall continue in full force and effect.
11. General Provisions
(a) Non-Assignability
Neither this Agreement nor any right or interest hereunder
shall be assignable by the Executive without the Association's prior written
consent; provided, howevever, that nothing in this subparagraph 11(a) shall
preclude the executors, administrators, or other legal representatives of the
estate of the Executive from assigning any rights hereunder to the Person or
Persons entitled thereto under the Executive's
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<PAGE>
will or, in case of intestacy, to the Person or Persons entitled thereto under
the laws of intestacy applicable to the Executive's estate.
(b) No Attachment
Except as otherwise required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to
execution, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
(c) Binding Agreement
This Agreement shall be binding upon and inure to the benefit
of the Executive and the Association, the Executive's heirs, executors and
assigns and the Association's successors and assigns.
(d) "Person" Defined
"Person" as used herein means a natural person, joint venture,
corporation, sole proprietorship, trust, estate, partnership, cooperative,
association, organization, government or governmental entity, or other entity.
12. Legal Expenses
The Association shall pay to the Executive all reasonable legal
fees and expenses incurred by the Executive
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in seeking to obtain or enforce any right or benefit provided by this Agreement.
13. Amendment
No amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing.
14. Severability
If for any reason any provision of this Agreement shall be held
invalid, such invalidity shall not affect any other provision of this Agreement
not held so invalid, and all other such provisions shall to the full extent
consistent with law continue in full force and effect. If any such provision
shall be held invalid in part, such invalidity shall in no way affect the rest
of such provision not held so invalid, and the rest of such provision, together
with all other provisions of this Agreement, shall likewise to the full extent
consistent with law continue in full force and effect.
15. Headings
The headings are included solely for convenience of reference and
shall not control the meaning or interpretation of any of the provisions of this
Agreement.
16. Interpretation
If any provision of this Agreement shall be the subject of a
dispute between the Association and the Executive and a court or arbitrator to
which such dispute has been
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<PAGE>
brought shall be unable to resolve which of two reasonable interpretations of
such provision is the proper interpretation thereof, then the interpretation
most favorable to the Executive shall control.
17. Governing Law
This Agreement has been executed and delivered in the State of
New Jersey and its validity, interpretation, performance and enforcement shall
be governed by and construed in accordance with the laws thereof applicable to
contracts executed and to be wholly performed in New Jersey.
18. Consent to Jurisdiction
Executive and the Association irrevocable consent to the exclusive
jurisdiction of the Courts of Salem County, New Jersey and/or the United States
District Court for the District of New Jersey in any action or proceeding
pursuant to this Agreement and agree to service of process in accordance with
Section 17 herein.
19. Notices
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid, to the following addresses or to such other address as either
party may designate by like notice:
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<PAGE>
A. If to Executive, to:
Robert A. DiValerio
105 South Carol Boulevard
Upper Darby, PA 19082
B. If to Association, to:
First Savings and Loan Association
of Penns Grove
125 South Broadway
Pennsville, NJ 08070
C. In all cases, copies to:
Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attn: Barry H. Genkin, Esquire
D.
and to such other or additional Person or Persons as either party shall have
designated to the other party in writing by like notice.
20. Reimbursement of Expenses
In the event the Association or any party other than the Executive
asserts that this Agreement, in whole or in part, is unenforceable or invalid,
than the Association shall reimburse Executive for any costs and expenses
including, without limitation, legal fees, incurred by Executive in enforcing
this Agreement or defending its validity.
IN WITNESS WHEREOF, the Association has caused this Agreement to
be executed and its seal to be affixed hereto by
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<PAGE>
its officers thereunto duly authorized, and the Executive has signed and sealed
this Agreement, all as of the day and year first above written.
ATTEST: FIRST SAVINGS AND LOAN ASSOCIATION
OF PENNS GROVE
/s/ Joyce A. Hunt /s/ Stephen D. Miller
__________________________________ By: ______________________________
Secretary Stephen D. Miller,
President
WITNESS:
/s/ Elizabeth F. Homen /s/ Robert A. DiValerio
__________________________________ ______________________________
Robert A. DiValerio
-21-
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated 27th day of March, 1992, by and between First
Home Savings Bank, S.L.A., a savings and loan association incorporated under
laws of New Jersey (the "Bank"), and Robert A. DiValerio (the "Executive").
W I T N E S S E T H:
WHEREAS, the Bank and Executive have entered into an Employment
Agreement made effective as of the 15th day of April, 1987 (the "Employment
Agreement"); and
WHEREAS, the Bank and Executive desire to amend certain of the terms of
the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. The first sentence of Section 3(a) of the Employment Agreement shall
be amended to read in its entirety as follows:
"The period of the Executive's employment under this Agreement shall
commence as of the date of the conversion of the Association from a
mutual to stock form (the "Effective Date") and shall, unless sooner
terminated by the death of the Executive, mutual agreement or pursuant
to Section 7, continue for a period of three (3) years therefrom, (such
period being herein referred to as the "Employment Period"), provided,
however, subject to Section 3(b), and if the Employment Period has not
been terminated by the death of the Executive, by mutual agreement or
pursuant to Section 7, that on each December 31 during the Employment
Period, the Employment Period shall be extended for one year, so that
at all times the Employment Period on each January 1 during the year of
this Agreement shall be an unexpired period of three years, provided,
however, that such extension shall not go into effect unless and until
it has been reviewed and approved by the Board of Directors."
2. Section 7(c) is amended to read in its entirety as follows:
"(c) Suspension Pursuant to Notice
If Executive is suspended and/or temporarily
prohibited from participating in the conduct of the Association's
affairs by a notice served under Section 8(e)(3) or (g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) and
(g)(1)), the Association's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the
Association may in its discre-
<PAGE>
tion (i) pay the Executive all or part of the compensation withheld
while the Bank's obligations under this Agreement were suspended and
(ii) reinstate (in whole or in part) any of the Association's
obligations under this Agreement which were suspended.
3. Section 7(d) is amended to read in its entirety as follows:
(d) Termination Pursuant to Order
If the Executive is removed and/or permanently
prohibited from participating in the conduct of the Association's
affairs by an order issued under Section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(4) or (g)(1)),
all obligations of the Association under this Agreement shall terminate
as of the effective date of the order, but vested rights of the
Association and Executive shall not be affected.
4. Section 7(e) is amended to read in its entirety as follows:
(e) Termination Upon Default
If the Association is in default (as defined in
Section 3(X)(1) of the Federal Deposit Insurance Act), all obligations
under this Agreement shall terminate as of the date of default, but
this subsection shall not affect any vested rights of the Association
and Executive.
5. Section 7(f) is amended to read in its entirety as follows:
(f) Termination by Office of Thrift Supervision
All obligations under this Agreement shall be
terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Association,
(i) by the Director of the Office of Thrift Supervision or his or her
designee at the time the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide
assistance to or on behalf of the Association under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act; or
(ii) by the Director of the Office of Thrift Supervision or his or her
designee, at the time such Director or designee approves a supervisory
merger to resolve problems related to operation of the Association or
when the Association is determined by such Director to be in an unsafe
-2-
<PAGE>
and unsound condition. Any rights of the Association or Executive that
have already vested, however, shall not be affected by such action.
6. Section 7(h) is amended to read in its entirety as follows:
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no
event be less than 6 months) to the Association on or after the date
that the Executive first becomes eligible to receive retirement
benefits under the Association's Employee Stock Ownership Plan in which
case benefits shall be payable to the Executive in accordance with the
provisions of such plan, and all rights of the Executive under this
Agreement shall cease.
7. Section 7 of the Employment Agreement is amended by adding at the
end thereof a new Section (k) which shall read in its entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment (whether
pursuant to the terms of this Agreement or pursuant to any other policy
or arrangement) which would cause Executive to receive an amount which
exceeds three times the Executive's annual salary for the year in which
Executive's employment is terminated.
8. Section 12 of the Employment Agreement is amended to read in its
entirety as follows:
"If the Executive obtains a judgment which enforces a right or
benefit under this Agreement, the Association shall pay to the
Executive all reasonable legal fees and expenses incurred by the
Executive in seeking to obtain or enforce such right or benefit."
9. The Employment Agreement is amended by deleting Section 20 in its
entirety.
10. The Employment Agreement, as amended by this Amendment, shall
remain in full force and effect.
IN WITNESS WHEREOF, the Association has caused this Amendment to be
executed and its seal to be affixed hereto by its officers thereunto duly
authorized, and the Executive has signed
-3-
<PAGE>
and sealed this Agreement, all as of the day and year first above written.
FIRST HOME SAVINGS BANK, S.L.A.
Stephen W. Miller, Pres.
By:___________________________
/s/ Robert A. DiValerio
___________________________
Robert A. DiValerio
-4-
<PAGE>
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated this 25th day of January, 1993, by and between
First Home Savings Bank, S.L.A., a savings and loan association incorporated
under laws of New Jersey (the "Bank"), and Robert A. DiValerio (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Bank and Executive have entered into an Employment
Agreement made effective as of the 15th day of April 1987 (the "Employment
Agreement"); and
WHEREAS, the Employment Agreement was amended on March 27, 1992; and
WHEREAS, the Bank and Executive desire to make further amendments to
certain of the terms of the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. The first sentence of Section 3(a) of the Employment Agreement shall
be amended to read in its entirety as follows:
"The period of the Executive's employment under this Agreement shall
commence as of the date of the conversion of the Association from a
mutual to stock form (the "Effective Date") and shall, unless sooner
terminated by the death of the Executive, mutual agreement or pursuant
to Section 7, continue for a period of three (3) years therefrom,
(such period being herein referred to as the "Employment Period"),
provided, however, subject to Section 3(b), and if the Employment
Period has not been terminated by the death of the Executive, by
mutual agreement or pursuant to Section 7, that on each December 31
during the Employment Period, the Employment Period shall be extended
for one year, so that at all times the Employment Period on each
January 1 during the year of this Agreement shall be an unexpired
period of three years, provided, however, that such extension shall
not go into affect unless and until it has been reviewed and approved
by the Board of Directors."
2. Section 7(c) is amended to read in its entirety as follows:
"(c) Suspension Pursuant to Notice
If Executive in suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(e)(3) and (g)(1)), the Association's
obligations under
<PAGE>
this Agreement shall be suspended as of the date of service unless
stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Association may in its discretion (i) pay the Executive
all or part of the compensation withheld while the Bank's obligations
under this Agreement were suspended and (ii) reinstate (in whole or in
part) any of the Association's obligations under this Agreement which
were suspended.
3. Section 7(d) is amended to read in its entirety as follows:
(d) Termination Pursuant to Order
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. Section 1818(e)(4) or (g)(1)), all obligations
of the Association under this Agreement shall terminate as of the
effective date of the order, but vested rights of the Association and
Executive shall not be affected.
4. Section 7(e) is amended to read in its entirety an follows:
(e) Termination Upon Default
If the Association is in default (as defined in Section 3(X)(1)
of the Federal Deposit Insurance Act), all obligations under this
Agreement shall terminate as of the date of default, but this
subsection shall not affect any vested rights of the Association and
Executive.
5. Section 7(f) is amended to read in its entirety as follows:
(f) Termination by Office of Thrift Supervision
All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is
necessary for the continued operation of the Association, (i) by the
Director of the Office of Thrift Supervision or his or her designee at
the time the Federal Deposit Insurance Corporation or the Resolution
Trust Corporation enters into an agreement to provide assistance to or
on behalf of the Association under the authority contained in Section
13(c) of the Federal Deposit Insurance Act; or (ii) by the Director of
the Office of Thrift Supervision or his or her designee, at the time
such Director or
-2-
<PAGE>
designee approves a supervisory merger to resolve problems related to
operation of the Association or when the Association is determined by
such Director to be in an unsafe and unsound condition. Any rights of
the Association or Executive that have already vested, however, shall
not be affected by such action.
6. Section 7(h) is amended to read in its entirety as follows:
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no
event be less than 6 months) to the Association on or after the date
that the Executive first becomes eligible to receive retirement
benefits under the Association's Employee Stock Ownership Plan in which
case benefits shall be payable to the Executive in accordance with the
provisions of such plan, and all rights of the Executive under this
Agreement shall cease.
7. Section 7(i)(1) is amended to read in its entirety as follows:
100% of the salary set forth in Section 4, as the same may have been
increased from time to time, payment of which shall be at the time
provided for in this agreement as if the Executive's employment under
this agreement has not terminated.
8. Section 7 of the Employment Agreement is amended by adding at the
end thereof a new Section (k) which shall read in its entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment
(whether pursuant to the terms of this Agreement or pursuant to any
other policy or arrangement) which would cause Executive to receive an
amount which exceeds three times the Executive's annual salary for the
year in which Executive's employment is terminated.
9. Section 12 of the Employment Agreement is amended to read in its
entirety as follows:
"If the Executive obtains a judgment which enforces a right or
benefit under this Agreement, the Association shall pay to the
Executive all reasonable
-3-
<PAGE>
legal fees and expenses incurred by the Executive in seeking to obtain
or enforce such right or benefit."
10. The Employment Agreement is amended by deleting Section 20 in its
entirety.
11. The Employment Agreement, as amended by this Amendment, shall
remain in full force and effect.
IN WITNESS WHEREOF, the Association has caused this Amendment to be
executed and its seal to be affixed hereto by its officers thereunto duly
authorized, and the Executive has signed and sealed this Agreement, all as of
the day and year first above written.
FIRST HOME SAVINGS BANK, S.L.A.
/s/ Sol L. Davidow
BY:____________________________
Sol L. Davidow, Chairman of
the Board
/s/ Robert A. DiValerio
____________________________
Robert A. DiValerio
-4-
<PAGE>
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated this 5th day of January, 1994, by and between
First Home Savings Bank, F.S.B., a savings and loan association incorporated
under laws of the United States (the "Bank"), and Robert A. DiValerio (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Bank, as the successor in interest by merger with First
Home Savings Bank, S.L.A. (formerly known as First Savings and Loan Association
of Penns Grove), and Executive have entered into an Employment Agreement made
effective as of the 15th day of April, 1987 (the "Employment Agreement"); and
WHEREAS, the Employment Agreement was amended on March 27, 1992 and
January 25, 1993; and
WHEREAS, the Bank and Executive desire to make further amendments to
certain of the terms of the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. All references in the Employment Agreement, as amended, to "Bank" or
"Association" shall be deemed to refer to First Home Savings Bank, F.S.B.
2. Section 7(k) of the Employment Agreement is amended to read in its
entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment
(whether pursuant to the terms of this Agreement or pursuant to any
other policy or arrangement) which would cause Executive to receive an
amount which exceeds three times the Executive's Average Annual
Compensation (as hereinafter defined). "Average Annual Compensation"
means the average of all Compensation (as hereinafter defined) paid to
Executive by Bank during each of the five full taxable years (i.e.
January 1 to December 31) preceding the year in which Executive's
employment is terminated. "Compensation" shall mean "Compensation" as
defined in RB 27a, "Executive Compensation and Employment Contracts",
dated March 5, 1993, promulgated by the Office of Thrift Supervision.
3. The Employment Agreement, as amended, and as amended by this
Amendment, shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Amendment to be executed
and its seal to be affixed hereto by its officers thereunto duly authorized, and
the Executive has signed and sealed this Agreement, all as of the day and year
first above written.
FIRST HOME SAVINGS BANK, F.S.B.
/s/ Sol L. Davidow
By:____________________________
Sol L. Davidow, Chairman of
the Board
/s/ Robert A. DiValerio
___________________________
Robert A. DiValerio
-2-
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of the 15th day of April, 1987 by and
between First Savings and Loan Association of Penns Grove, a savings and loan
association incorporated under the laws of the United States (the
"Association"), and Duff P. O'Connor (the "Executive").
WITNESSETH:
WHEREAS, the Executive is employed with the Association on a full time
basis;
WHEREAS, the Association is converting to a state chartered stock
savings and loan association and desires to assure that the Executive remains in
its employ after such conversion; and
WHEREAS, the Association is willing to employ the Executive and the
Executive is willing to accept employment on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Employment
The Association hereby employs the Executive, and the Executive hereby
accepts such employment and agrees to remain in the employ of the Association,
for the period stated in paragraph 3 below and upon the other terms and
conditions herein provided.
<PAGE>
2. Position and Duties
During the Employment Period (as defined in Section 3(a)), the
Executive agrees to serve as Senior Vice President, Lending Operations of the
Association and shall perform such managerial duties and responsibilities for
the Association as the Board of Directors of the Association or any superior
officer may direct in accordance with the by-laws of the Association, which
duties and responsibilities shall be of substantially the same character as or
equivalent character to those required by Executive's position on the Effective
Date (as defined in Section 3(a)). Throughout the Employment Period, and except
for illness, vacation periods and leaves of absence granted by the Association
(if any), the Executive shall devote all his business time, attention, skill and
efforts to the faithful performance of his duties hereunder, and, subject to
Section 7(g)(1), accept such office or offices to which he may be elected by the
Board of Directors of the Association.
3. Term
(a) Period of Employment
The period of the Executive's employment under this Agreement
shall commence as of the date of the conversion of the Association from a mutual
to stock form (the "Effective Date") and shall, unless sooner terminated by the
death of the Executive, mutual agreement or pursuant to Section 7, continue for
-2-
<PAGE>
a period of one (1) year therefrom, (such period being herein referred to as the
"Employment Period"), provided, however, subject to Section 3(b), and if the
Employment Period has not been terminated by the death of the Executive, by
mutual agreement or pursuant to Section 7, that on each December 31 during the
Employment Period, the Employment Period shall be extended for one year, so that
at all times the Employment Period on each January 1 during the term of this
Agreement shall be an unexpired period of one (1) year. The last day of the
Employment Period, as from time to time extended, and without regard to any
early termination pursuant to Section 7, is hereinafter referred to as the
"Expiration Date."
(b) Termination of Automatic Extension
The Executive or Association may elect to terminate the automatic
extension of the Employment Period set forth in subsection 3(a) by giving
written notice of such election. Any notice given hereunder shall be effective
in the year in which the notice is given, if given between January 1 and June 30
of any calendar year, and in the year following the year in which the notice is
given, if given between July 1 and December 31 of any calendar year. Upon
effectiveness of any notice given hereunder, Executive's employment under this
Agreement shall terminate on the Expiration Date (as last extended) or such
earlier date as may be determined pursuant to Section 7.
-3-
<PAGE>
4. Compensation
(a) Salary and Incentive Compensation
For all services rendered by the Executive in any capacity
during the Employment Period under this Agreement, the Executive shall be paid
as compensation (i) an annual salary of $48,000, or such higher salary as may be
negotiated from time to time by the Association and the Executive plus (ii) such
incentive compensation or bonus as may be awarded to the Executive from time to
time by the Board of Directors. Such salary shall be payable in 52 equal weekly
installments and any such incentive compensation or bonus shall be payable in
the manner and at the time specified by the Board of Directors.
(b) Reimbursement of Expenses
The Association shall pay or reimburse the Executive, in
accordance with the Association's policies and requirements, for all reasonable
travel and other expenses incurred by the Executive in performing his
obligations under this Agreement. The Executive shall be provided, at his
option, with an automobile expense allowance, or the use of a recent model
automobile which will be owned by the Association, as may be mutually agreed
upon by the Executive and the Association. All reasonable business related
expenses associated therewith shall be borne by the Association.
-4-
<PAGE>
5. Participation in Incentive Compensation and Benefit Plans
In addition to the payments provided under this Agreement, the
Executive (or his beneficiary) may be, or may become, entitled to benefits under
any executive or contingent compensation plan, stock option, restricted stock or
stock purchase plan, retirement income or pension plan, supplemental or excess
benefit plan, group hospitalization, health care, or sick leave plan, life or
other insurance or death benefit plan, travel and accident insurance, vacation
plan, or other present or future group employee benefit plan or program of the
Association for which Executive employees of the Association generally are
eligible, and the Executive shall be eligible to receive, with respect to the
Employment Period, all benefits and emoluments for which he is eligible under
any such benefit plan or program of the Association in accordance with the
provisions and requirements of any such plan or program.
6. Vacation and Sick Leave
Executive shall be entitled to be compensated for annual vacation,
personal and sick leave in accordance with established Association policy.
-5-
<PAGE>
7. Termination or Suspension of Employment
(a) Termination without Cause
Notwithstanding anything to the contrary contained in this
Agreement, subject to Executive receiving the compensation set forth in
subsection (i) of this Section 7, the Association's Board of Directors may
terminate the Executive's employment under this Agreement at any time.
Termination of Executive's employment under this subsection shall be deemed a
breach of this Agreement by the Association.
(b) Termination with Cause
The Association's Board of Directors may terminate the
Executive's employment under this Agreement at any time for cause. The Executive
shall have no right to receive compensation or other benefits for any period
after termination for cause. The term "for cause" shall include the Executive's
personal dishonesty, incompetency, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provision of this Agreement. If the Association's Board of Directors determines
that Executive's employment under this Agreement shall be terminated for cause,
-6-
<PAGE>
then the Board shall forthwith provide Executive with a written notice of said
determination. The notice shall contain a detailed statement of the facts which
constitute the particulars of the cause for termination. As used herein, the
term incompetency shall mean the determination by a court that the Executive is
unable to manage his own affairs by reason of insanity, imbecility or feeble
mindedness.
(c) Suspension Pursuant to Notice
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice served by
the Federal Home Loan Bank Board ("FHLBB") or the Federal Savings and Loan
Insurance Corporation ("FSLIC") under Section 5(d)(4)(C) or Section 5(d)(5)(A)
of the Home Owners' Loan Act (12 U.S.C. 1464(d)(4)(C) and (5)(d)(A)) or under
Section 407(g)(3) or Section 407(h) of the National Housing Act (12 U.S.C. 1730
(g)(3) and (h), the Association's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Association may in its
discretion (i) pay the Executive all or part of the compensation withheld while
the Association's obligations under this Agreement were suspended and (ii)
reinstate (in whole or in part) any of the Association's obligations under this
Agreement which were suspended.
-7-
<PAGE>
(d) Termination Pursuant to Order
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order of the
FHLBB or FSLIC issued under Section 5(d)(4)(D) or Section 5(d)(5)(A) of the Home
Owners' Loan Act (12 U.S.C. 1464(d)(4)(D) and (d)(5)(A)) or under Section
407(g)(3) or Section 407(h) of the National Housing Act (12 U.S.C. 1730(g)(3)
and (h)), all obligations of the Association under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
Association and Executive shall not be affected.
(e) Termination Upon Default Under National Housing Act
If the Association is in default (as defined in Section 401(d) of
the National Housing Act), all obligations under this Agreement shall terminate
as of the date of default, but this subsection shall not affect any vested
rights of the Association and Executive.
(f) Termination by FSLIC and FHLBB
All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is necessary for
the continued operation of the institution, (i) by FSLIC at the time FSLIC
enters into an agreement to provide assistance to or on behalf of the
-8-
<PAGE>
Association under the authority contained in Section 406 (f) of the National
Housing Act; or (ii) by the FHLBB at the time the FHLBB or its Principal
Supervisory Agent (as defined in 12 C.F.R. Section 561.35) approves a
supervisory merger to resolve problems related to operation of the Association
or when the Association is determined by the FHLBB to be in an unsafe and
unsound condition. Any rights of the Association or Executive that have already
vested, however, shall not be affected by such action.
(g) Termination by Executive for Good Reason
The Executive shall be entitled to terminate his employment
hereunder for good reason. Any termination of employment hereunder under any of
the following circumstances shall be for good reason, the occurrence of any of
which shall be deemed a breach of this Agreement by the Association:
(1) without the express written consent of the Executive, the
Executive is assigned any duties inconsistent with his positions, duties,
responsibilities and status with the Association as in effect on the Effective
Date, or his titles as in effect on the Effective Date are changed or the
Executive is removed or not re-elected to any of such positions, except in
connection with the termination of the Executive's employment pursuant to
subsections (b),(c), (d),(e) or (f) of Section 7 of this Agreement, or as a
result of his substantial disability or death;
-9-
<PAGE>
(2) the salary of the Executive set forth in Section 4, as the
same hereafter may be increased from time to time, is reduced;
(3) the Association fails to continue for the Executive any
benefit or compensation plan providing the Executive with substantially similar
benefits to those plans in which the Executive is participating at the Effective
Date or in which the Executive hereafter may participate; or
(4) the Association shall fail to observe or perform any
convenant or agreement in this Agreement to be observed or performed by the
Association;
(5) a change in control (as defined below) of the Association
occurs.
For the purposes of this Agreement, a "change in control of the
Association" shall mean a change in control whether by stock transfer, sale of
assets, merger, consolidation or otherwise; provided that, without limitation,
such a change of control shall be deemed to have occurred if (1) any person (as
such term is used in 12 C.F.R. Section 5563.18-2(b)(1)), other than those
persons in control of Association on the date hereof, acquires the power,
directly or indirectly, to direct the management or policies of the Association
or to vote 25% or more of any class of voting securities of the Association; or
(2) within
-10-
<PAGE>
any period of three consecutive years during the term of this Agreement,
individuals who at the beginning of such period constitute the Board of
Directors of the Association cease for any reason to constitute at least a
majority thereof.
(h) Termination by Executive Other Than for Good Cause
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no event be
less than 6 months) to the Association on or after the date that the Executive
first becomes eligible to receive benefits under the Association's defined
benefit pension plan in which case benefits shall be payable to the Executive in
accordance with the provisions of such pension plan and all rights of the
Executive under this Agreement shall cease.
(i) Remedies for Termination
Upon termination of the Executive's employment under this
Agreement pursuant to subsections (a) or (g) of this Section 7, the Executive
shall receive until the Expiration Date:
(1) 200% of the salary set forth in Section 4, as the same may
have been increased from time to time, payment of which shall be at the time
provided for in this Agreement as if the Executive's employment under this
Agreement has not terminated.
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<PAGE>
(2) annually, an amount equal to the average of the three highest
annual incentive compensation payments made to Executive by the Association
prior to the termination pursuant to subsection (a) or the event given Executive
the right to terminate his employment under subsection (g); and
(3) medical care, pension and similar benefits, at no cost to
Executive, substantially comparable to those furnished to Executive by the
Association immediately prior to termination of employment hereunder.
(4) upon termination without Cause or termination for "good
reason" following a "change in control", the Association shall determine the
aggregate present value (pursuant to Section 1274(b)(2) of the Internal Revenue
Code) of all amounts payable hereunder, and of all other amounts payable to the
Executive upon or by reason of his termination which are determined in good
faith by the Association to be "parachute payments", (as defined in Section
280G(b)(2) of the Code and the regulations promulgated thereunder) made pursuant
to agreements or plans which are subject to Section 280G. The Association's
determination of present value and of other amounts constituting "parachute
payments" is binding; provided that if Executive obtains an opinion of counsel
satisfactory to the Association or an Internal Revenue Service ruling to the
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effect that the method of determining present value was improper or that
specified payments did not constitute "parachute payments", calculations will be
made in accordance with such opinion or ruling. In the event that aggregate
present value of all benefits under this Agreement and other "parachute
payments" is equal to or in excess of 300% of the Executive's "base amount" as
defined in Section 280G(b)(3)(A) and regulations thereunder, the Executive
waives the right to "parachute payments" sufficient to reduce the present value
of all such payments below 300% of the "base amount". The Executive shall have
the right to designate those benefits which shall be waived or reduced in order
to comply with this provision, but failing designation by the Executive, the
Association may designate those benefits which must be waived or reduced.
(5) If it is established pursuant to a final determination of a
court of competent jurisdiction or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Executive and the Association in applying
the terms of this Section 7, the aggregate "parachute payments" paid to or for
the Executive's benefit are in an amount that would result in any portion of
such "parachute payments" not being deductible by the Association or an
Affiliate by reason of Section 280G of the Code, then the Executive shall have
an obligation to pay the Association upon demand an amount equal to the sum of
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<PAGE>
(i) the excess of the aggregate "parachute payments" paid to or for the
Executive's benefit without any portion of such "parachute payments" not being
deductible by reason of Section 280G of the Code and (ii) interest on the amount
set forth in clause (i) above at the applicable federal rate (as defined in
Section 1274(d) of the Code) from the date of the Executive's receipt of such
excess until the date of such payment.
Any payment made by Association under this Section shall be deemed to
constitute liquidated damages and not a penalty for the Association's breach of
this Agreement. Executive shall not be required to mitigate his damages
hereunder by seeking employment or otherwise.
(j) Disability Termination
In the event that the Executive is totally disabled prior to the
Expiration Date of this Agreement, the Association shall have the right to
terminate Executive's employment on ten (10) days written notice to Executive,
provided the Association shall pay the Executive a disability benefit which is
equal to the salary provided in Section 4, as the same may have been increased
from time to time, received by Executive at the commencement of the Executive's
total disability, reduced by the sum of (i) the amount of any benefits to which
the Executive may be entitled with respect to the same period under any
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<PAGE>
disability plan or pension plan, including related supplemental and excess
benefit plans or agreements, of the Association and (ii) the disability benefits
payable under any government regulated plan including workers' compensation
benefits. Payment of such disability benefit shall commence with the week
coincident with the termination of Executive's employment under this Agreement
and shall continue until the earlier of the Expiration Date or the Executive's
death. During any period the Executive shall be entitled to receive disability
payments from the Association, to the extent that he is physically and mentally
able to do so, he shall furnish information and assistance to the Association,
and, in addition, upon reasonable request in writing from time to he shall make
himself available to the Association to undertake reasonable assignments with
the dignity, importance, and scope of his prior position and his physical and
mental health. As used in this Agreement, the term "total disability" shall mean
the complete inability of the Executive to perform all of his duties under this
Agreement as determined by an independent physician selected with the approval
of the Board of Directors and the Executive.
8. Withholding of Taxes
The Association may withhold from any payments under this Agreement
all applicable taxes, as shall be required pursuant to any law or governmental
regulation or ruling.
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<PAGE>
9. Prior Agreements
This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof, supersedes all
prior and contemporaneous agreements and understandings and any prior employment
agreement between the Association and the Executive.
10. Consolidation or Merger
Nothing in this Agreement shall preclude the Association from
consolidating or merging into or with, or transferring all or substantially all
of its assets to, any Person which assumes this Agreement and all obligations of
the Association hereunder. Upon such a consolidation, merger or transfer of
assets and assumption, the term, "Association" shall refer to such other Person
and this Agreement shall continue in full force and effect.
11. General Provisions
(a) Non-Assignability
Neither this Agreement nor any right or interest hereunder shall
be assignable by the Executive without the Association's prior written consent;
provided, however, that nothing in this subparagraph 11(a) shall preclude the
executors, administrators, or other legal representatives of the estate of the
Executive from assigning any rights hereunder to the Person or
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<PAGE>
Persons entitled thereto under the Executive's will or, in case of intestacy, to
the Person or Persons entitled thereto under the laws of intestacy applicable
to the Executive's estate.
(b) No Attachment
Except as otherwise required by law, no right to receive payments
under this Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
(c) Binding Agreement
This Agreement shall be binding upon and inure to the benefit of
the Executive and the Association, the Executive's heirs, executors and assigns
and the Association's successors and assigns.
(d) "Person" Defined
"Person" as used herein means a natural person, joint venture,
corporation, sole proprietorship, trust, estate, partnership, cooperative,
association, organization, government or governmental entity, or other entity.
12. Legal Expenses
The Association shall pay to the Executive all reasonable legal fees
and expenses incurred by the Executive in seeking to obtain or enforce any right
or benefit provided by this Agreement.
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<PAGE>
13. Amendment
No amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing.
14. Severability
If for any reason any provision of this Agreement shall be held
invalid, such invalidity shall not affect any other provision of this Agreement
not held so invalid, and all other such provisions shall to the full extent
consistent with law continue in full force and effect. If any such provision
shall be held invalid in part, such invalidity shall in no way affect the rest
of such provision not held so invalid, and the rest of such provision, together
with all other provisions of this Agreement, shall likewise to the full extent
consistent with law continue in full force and effect.
15. Headings
The headings are included solely for convenience of reference and
shall not control the meaning or interpretation of any of the provisions of this
Agreement.
16. Interpretation
If any provision of this Agreement shall be the subject of a dispute
between the Association and the Executive and a court or arbitrator to which
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<PAGE>
such dispute has been brought shall be unable to resolve which of two reasonable
interpretations of such provision is the proper interpretation thereof, then the
interpretation most favorable to the Executive shall control.
17. Governing Law
This Agreement has been executed and delivered in the State of New
Jersey and its validity, interpretation, performance and enforcement shall be
governed by and construed in accordance with the laws thereof applicable to
contracts executed and to be wholly performed in New Jersey.
18. Consent to Jurisdiction
Executive and the Association irrevocable consent to the exclusive
jurisdiction of the Courts of Salem County, New Jersey and/or the United States
District Court for the District of New Jersey in any action or proceeding
pursuant to this Agreement and agree to service of process in accordance with
Section 17 herein.
19. Notices
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid, to the following addresses or to such other address as either
party may designate by like notice:
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<PAGE>
A. If to Executive, to:
Duff P. O'Connor
Cedar Crest Drive
Carneys Point, NJ 08069
B. If to Association, to:
First Savings and Loan Association
of Penns Grove
125 South Broadway
Pennsville, NJ 08070
C. In all cases, copies to:
Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attn: Barry H. Genkin, Esquire
D.
and to such other or additional Person or Persons as either party shall have
designated to the other party in writing by like notice.
20. Reimbursement of Expenses
In the event the Association or any party other than the Executive
asserts that this Agreement, in whole or in part, is unenforceable or invalid,
than the Association shall reimburse Executive for any costs and expenses
including, without limitation, legal fees, incurred by Executive in enforcing
this Agreement or defending its validity.
IN WITNESS WHEREOF, the Association has caused this Agreement to be
executed and its seal to be affixed hereto by
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<PAGE>
its officers thereunto duly authorized, and the Executive has signed and sealed
this Agreement, all as of the day and year first above written.
ATTEST: FIRST SAVINGS AND LOAN ASSOCIATION
OF PENNS GROVE
/s/ Joyce A. Hunt By: /s/ Stephen D. Miller
- ----------------------- ------------------------------------
Secretary Stephen D. Miller,
President
WITNESS:
/s/ Elizabeth J. Homen /s/ Duff P. O'Connor
- ---------------------- -------------------------------------
Elizabeth J. Homen Duff P. O'Connor
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<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated 27th day of March, 1992, by and between First
Home Savings Bank, S.L.A., a savings and loan association incorporated under
laws of New Jersey (the "Bank"), and Duff P. O'Connor (the "Executive").
W I T N E S S E T H:
WHEREAS, the Bank and Executive have entered into an Employment
Agreement made effective as of the 15th day of April, 1987 (the "Employment
Agreement"); and
WHEREAS, the Bank and Executive desire to amend certain of the terms of
the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. The first sentence of Section 3(a) of the Employment Agreement shall
be amended to read in its entirety as follows:
"The period of the Executive's employment under this Agreement shall
commence as of the date of the conversion of the Association from a
mutual to stock form (the "Effective Date") and shall, unless sooner
terminated by the death of the Executive, mutual agreement or pursuant
to Section 7, continue for a period of three (3) years therefrom, (such
period being herein referred to as the "Employment Period"), provided,
however, subject to Section 3(b), and if the Employment Period has not
been terminated by the death of the Executive, by mutual agreement or
pursuant to Section 7, that on each December 31 during the Employment
Period, the Employment Period shall be extended for one year, so that
at all times the Employment Period on each January 1 during the year of
this Agreement shall be an unexpired period of three years, provided,
however, that such extension shall not go into effect unless and until
it has been reviewed and approved by the Board of Directors."
2. Section 7(c) is amended to read in its entirety as follows:
(c) Suspension Pursuant to Notice
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(e)(3) and (g)(1)), the Association's
obligations under this Agreement shall be suspended as of the date of
service unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Association may in its discretion (i) pay the
Executive all or part of the compensation withheld while the Bank's
obligations under this Agreement were suspended and (ii) reinstate (in
whole or in part) any of the Association's obligations under this
Agreement which were suspended.
<PAGE>
3. Section 7(d) is amended to read in its entirety as follows:
(d) Termination Pursuant to Order
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(e)(4) or (g)(1)), all obligations of the
Association under this Agreement shall terminate as of the effective
date of the order, but vested rights of the Association and Executive
shall not be affected.
4. Section 7(e) is amended to read in its entirety as follows:
(e) Termination Upon Default
If the Association is in default (as defined in Section 3(X)(1)
of the Federal Deposit Insurance Act), all obligations under this
Agreement shall terminate as of the date of default, but this
subsection shall not affect any vested rights of the Association and
Executive.
5. Section 7(f) is amended to read in its entirety as follows:
(f) Termination by Office of Thrift Supervision
All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is
necessary for the continued operation of the Association, (i) by the
Director of the Office of Thrift Supervision or his or her designee at
the time the Federal Deposit Insurance Corporation or the Resolution
Trust Corporation enters into an agreement to provide assistance to or
on behalf of the Association under the authority contained in Section
13(c) of the Federal Deposit Insurance Act; or (ii) by the Director of
the Office of Thrift Supervision or his or her designee, at the time
such Director or designee approves a supervisory merger to resolve
problems related to operation of the Association or when the
Association is determined by such Director to be in an unsafe and and
unsound condition. Any rights of the Association or Executive that have
already vested, however, shall not be affected by such action.
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<PAGE>
6. Section 7(h) is amended to read in its entirety as follows:
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no
event be less than 6 months) to the Association on or after the date
that the Executive first becomes eligible to receive retirement
benefits under the Association's Employee Stock Ownership Plan in which
case benefits shall be payable to the Executive in accordance with the
provisions of such plan, and all rights of the Executive under this
Agreement shall cease.
7. Section 7 of the Employment Agreement is amended by adding at the
end thereof a new Section (k) which shall read in its entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary
contained in this Section, Executive shall not receive and does hereby
waive the right to receive any amount upon his termination of
employment (whether pursuant to the terms of this Agreement or pursuant
to any other policy or arrangement) which would cause Executive to
receive an amount which exceeds three times the Executive's annual
salary for the year in which Executive's employment is terminated.
8. Section 12 of the Employment Agreement is amended to read in its
entirety as follows:
"If the Executive obtains a judgment which enforces a right or
benefit under this Agreement, the Association shall pay to the
Executive all reasonable legal fees and expenses incurred by the
Executive in seeking to obtain or enforce such right or benefit."
9. The Employment Agreement is amended by deleting Section 20 in its
entirety.
10. The Employment Agreement, as amended by this Amendment, shall
remain in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, the Association has caused this Amendment to be
executed and its seal to be affixed hereto by its officers thereunto duly
authorized, and the Executive has signed and sealed this Agreement, all as of
the day and year first above written.
FIRST HOME SAVINGS BANK, S.L.A.
By: /s/ Stephen D. Miller Pres.
------------------------------------
/s/ Duff P. O'Connor
------------------------------------
Duff P. O'Connor
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<PAGE>
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated this 25th day of January, 1993, by and between
First Home Savings Bank, S.L.A., a savings and loan association incorporated
under laws of New Jersey (the "Bank"), and Duff P. O'Connor (the "Executive").
W I T N E S S E T H:
WHEREAS, the Bank and Executive have entered into an Employment
Agreement made effective as of the 15th day of April, 1987 (the "Employment
Agreement"); and
WHEREAS, the Employment Agreement was amended on March 27, 1992; and
WHEREAS, the Bank and Executive desire to make further amendments to
certain of the terns of the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. The first sentence of Section 3(a) of the Employment Agreement shall
be amended to read in its entirety as follows:
"The period of the Executive's employment under this Agreement shall
commence as of the date of the conversion of the Association from a
mutual to stock form (the "Effective Date") and shall, unless sooner
terminated by the death of the Executive, mutual agreement or pursuant
to Section 7, continue for a period of three (3) years therefrom,
(such period being herein referred to as the "Employment Period"),
provided, however, subject to Section 3(b), and if the Employment
Period has not been terminated by the death of the Executive, by mutual
agreement or pursuant to Section 7, that on each December 31 during the
Employment Period, the Employment Period shall be extended for one
year, so that at all times the Employment Period on each January 1
during the year of this Agreement shall be an unexpired period of three
years, provided, however, that such extension shall not go into affect
unless and until it has been reviewed and approved by the Board of
Directors."
2. Section 7(c) is amended to read in its entirety as follows:
(c) Suspension Pursuant to Notice
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(e)(3) and (g)(1)), the Association's
obligations
<PAGE>
under this Agreement shall be suspended as of the date of service
unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Association may in its discretion (i) pay the
Executive all or part of the compensation withheld while the Bank's
obligations under this Agreement were suspended and (ii) reinstate (in
whole or in part) any of the Association's obligations under this
Agreement which were suspended.
3. Section 7(d) is amended to read in its entirety as follows:
(d) Termination Pursuant to Order
If the Executive in removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1818(e)(4) or (g)(1)), all obligations of the
Association under this Agreement shall terminate as of the effective
date of the order, but vested rights of the Association and Executive
shall not be affected.
4. Section 7(e) is amended to read in its entirety as follows:
(e) Termination Upon Default
If the Association is in default (as defined in Section 3(X)(1)
of the Federal Deposit Insurance Act), all obligations under this
Agreement shall terminate an of the date of default, but this
subsection shall not affect any vested rights of the Association and
Executive.
5. Section 7(f) is amended to read in its entirety as follows:
(f) Termination by Office of Thrift Supervision
All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is
necessary for the continued operation of the Association, (i) by the
Director of the Office of Thrift Supervision or his or her designee at
the time the Federal Deposit Insurance Corporation or the Resolution
Trust Corporation enters into an agreement to provide assistance to or
on behalf of the Association under the authority contained in Section
13(c) of the Federal Deposit Insurance Act; or (ii) by the Director of
the office of Thrift Supervision or his or her designee, at the time
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<PAGE>
such Director or designee approves a supervisory merger to resolve
problems related to operation of the Association or when the
Association is determined by such Director to be in an unsafe and
unsound condition. Any rights of the Association or Executive that have
already vested, however, shall not be affected by such action.
6. Section 7(h) is amended to read in its entirety as follows:
Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no
event be less than 6 months) to the Association on or after the date
that the Executive first becomes eligible to receive retirement
benefits under the Association's Employee Stock Ownership Plan in which
case benefits shall be payable to the Executive in accordance with the
provisions of such plan, and all rights of the Executive under this
Agreement shall cease.
7. Section 7(i)(1) is amended to read in its entirety as follows:
100% of the salary set forth in Section 4 as the same may have been
increased from time to time, payment of which shall be at the time
provided for in this agreement as if the Executive's employment under
this agreement has not terminated.
8. Section 7 of the Employment Agreement is amended by adding at the
and thereof a new Section (k) which shall read in its entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment (whether
pursuant to the terms of this Agreement or pursuant to any other policy
or arrangement) which would cause Executive to receive an amount which
exceeds three times the Executive's annual salary for the year in which
Executive's employment is terminated.
9. Section 12 of the Employment Agreement is amended to read in its
entirety as follows:
"If the Executive obtains a judgment which enforces a right or
benefit under this Agreement, the Association shall pay to the
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<PAGE>
Executive all reasonable legal fees and expenses incurred by the
Executive in seeking to obtain or enforce such right or benefit."
10. The Employment Agreement is amended by deleting Section 20 in its
entirety.
11. The Employment, Agreement, as amended by this Amendment, shall
remain in full force and effect.
IN WITNESS WHEREOF, the Association has caused this Amendment to be
executed and its seal to be affixed hereto by its officers therunto duly
authorized, and the Executive has signed and sealed this Agreement, all as of
the day and year first above written.
FIRST HOME SAVINGS BANK, S.L.A.
By: /s/ Sol L. Davidow
------------------------------------
Sol L. Davidow, Chairman of the
Board
/s/ Duff F. O'Connor
------------------------------------
Duff F. O'Connor
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<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Amendment to be executed
and its seal to be affixed hereto by its officers thereunto duly authorized, and
the Executive has signed and sealed this Agreement, all as of the day and year
first above written.
FIRST HOME SAVINGS BANK, F.S.B.
By: /s/ Sol L. Davidow
----------------------------------
Sol L. Davidow, Chairman of the
Board
/s/ Duff P. O'Connor
----------------------------------
Duff P. O'Connor
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<PAGE>
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated this 5th day of January, 1994, by and between
First Home Savings Bank, F.S.B., a savings and loan association incorporated
under laws of the United States (the "Bank"), and Duff P. O'Connor (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Bank, as the successor in interest by merger with First
Home Savings Bank, S.L.A. (formerly known as First Savings and Loan Association
of Penns Grove), and Executive have entered into an Employment Agreement made
effective as of the 15th day of April, 1987 (the "Employment Agreement"); and
WHEREAS, the Employment Agreement was amended on March 27, 1992 and
January 25, 1993; and
WHEREAS, the Bank and Executive desire to make further amendments to
certain of the terms of the Employment Agreement.
NOW, THEREFORE, the parties hereto, intended to be legally bound
hereby, agree as follows:
1. All references in the Employment Agreement, as amended, to "Bank" or
"Association" shall be deemed to refer to First Home Savings Bank, F.S.B.
2. Section 7(k) of the Employment Agreement is amended to read in its
entirety as follows:
(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment (whether
pursuant to the terms of this Agreement or pursuant to any other policy
or arrangement) which would cause Executive to receive an amount which
exceeds three times the Executive's Average Annual Compensation (as
hereinafter defined). "Average Annual Compensation" means the average
of all Compensation (as hereinafter defined) paid to Executive by Bank
during each of the five full taxable years (i.e. January 1 to December
31) preceding the year in which Executive's employment is terminated.
"Compensation" shall mean "Compensation" as defined in RB 27a,
"Executive Compensation and Employment Contracts", dated March 5, 1993,
promulgated by the Office of Thrift Supervision.
3. The Employment Agreement, as amended, and as amended by this
Amendment, shall remain in full force and effect.
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of the 1st day of July, 1992 by and
between First Home Savings Bank, S.L.A., a savings and loan association
incorporated under the laws of New Jersey (the "Bank"), and Stephen R.
Selverian (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Executive has for many years been employed as President of
Fidelity Mutual Savings and Loan Association ("Fidelity Mutual"); and
WHEREAS, pursuant to the terms of a certain Agreement of Conversion
Merger, Fidelity Mutual converted from a mutual savings and loan association to
a capital stock savings and loan association and, simultaneously therewith, was
merged with and into the Bank, and
WHEREAS, the Bank desires that the Executive become an employee of the
Bank; and
WHEREAS, the Executive is willing to become an employee of the Bank on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Employment
The Bank hereby employs the Executive, and the Executive hereby
accepts such employment and agrees to remain in the employ of the Bank, for the
period stated in paragraph 3 below and upon the other terms and conditions
herein provided.
2. Position and Duties
During the Employment Period (as defined in Section 3(a)), the
Executive agrees to serve as an Executive Vice President of the Bank and shall
perform such managerial duties and responsibilities for the Bank as the Board of
Directors of the Bank or any superior officer may direct in accordance with the
bylaws of the Bank. Throughout the Employment Period, and except for illness,
vacation periods and leaves of absence granted by the Bank (if any), the
Executive shall devote all his business time, attention, skill and efforts to
the faithful performance of his duties hereunder, and, subject to Section
7(g)(1), accept such office or offices to which he may be elected by the Board
of Directors of the Bank. Subject to the obligations and responsibilities of the
Board of Directors under applicable law, at the first annual meeting of
shareholders of the Bank after the Effective Date (as hereinafter defined) the
Bank shall recommend to its shareholders that the Executive be elected to serve
on the Board of Directors.
<PAGE>
3. Term
The period of the Executive's employment under this Agreement shall
commence as of the date of the merger of Fidelity Mutual with and into the Bank
(the "Effective Date") and shall, unless sooner terminated by the death of the
Executive, mutual agreement or pursuant to Section 7, continue for a period of
one (1) year therefrom, (such period being herein referred to as the "Employment
Period"). The last day of the Employment Period, and without regard to any early
termination pursuant to Section 7, is hereinafter referred to as the "Expiration
Date."
4. Compensation
a. Salary and Incentive Compensation
For all services rendered by the Executive in any capacity
during the Employment Period under this Agreement, the Executive shall be paid
as compensation (i) an annual salary of $85,600, plus (ii) such incentive
compensation or bonus as may be awarded to the Executive from time to time by
the Board of Directors. Such salary shall be payable in 52 equal weekly
installments and any such incentive compensation or bonus shall be payable in
the manner and at the time specified by the Board of Directors.
b. Reimbursement of Expenses
The Bank shall pay or reimburse the Executive, in accordance
with the Bank's policies and requirements, for all reasonable travel and other
expenses incurred by the Executive in performing his obligations under this
Agreement. The Executive shall be provided, at his option, with an automobile
expense allowance, or the use of a recent model automobile which will be owned
by the Bank, as may be mutually agreed upon by the Executive and the Bank. All
reasonable business related expenses associated therewith shall be borne by the
Bank.
5. Participation in Incentive Compensation and Benefit Plans
In addition to the payments provided under this Agreement, the
Executive (or his beneficiary) may be, or may become, entitled to benefits under
any executive or contingent compensation plan, stock option', restricted stock
or stock purchase plan, retirement income or pension plan, supplemental or
excess benefit plan, group hospitalization, health care, or sick leave plan,
life or other insurance or death benefit plan, travel and
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<PAGE>
accident insurance, vacation plan, or other present or future group employee
benefit plan or program of the Bank for which executive employees of the Bank
generally are eligible, and the Executive shall be eligible to receive, with
respect to the Employment Period, all benefits and emoluments for which he is
eligible under any such benefit plan or program of the Bank in accordance with
the provisions and requirements of any such plan or program.
6. Vacation and Sick Leave
Executive shall be entitled to be compensated for annual vacation,
personal and sick leave in accordance with established Bank policy.
7. Termination or Suspension of Employment
a. Termination without Cause
Notwithstanding anything to the contrary contained in this
Agreement, subject to the Executive receiving the compensation set forth in
subsection (i) of this Section 7, the Bank's Board of Directors may terminate
the Executive's employment under this Agreement at any time. Termination of
Executive's employment under this subsection shall be deemed a breach of this
Agreement by the Bank.
b. Termination with Cause
The Bank's Board of Directors may terminate the Executive's
employment under this Agreement at any time for cause. The Executive shall have
no right to receive compensation or other benefits for any period after
termination for cause. The term "for cause" shall include the Executive's
personal dishonesty, incompetency, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provision of this Agreement. If the Bank's Board of Directors determines that
Executive's employment under this Agreement shall be terminated for cause, then
the Board shall forthwith provide Executive with a written notice of said
determination. The notice shall contain a detailed statement of the facts which
constitute the particulars of the cause for termination. As used herein, the
term incompetency shall mean the determination by a court that the Executive is
unable to manage his own affairs by reason of insanity, imbecility or feeble
mindedness.
-3-
<PAGE>
c. Suspension Pursuant to Notice
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1818(e)(3) and (g)(1)), the Bank's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Bank may in its discretion (i) pay
the Executive all or part of the compensation withheld while the Bank's
obligations under this Agreement were suspended and (ii) reinstate (in whole or
in part) any of the Bank's obligations under this Agreement which were
suspended.
d. Termination Pursuant to Order
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights of the Bank
and Executive shall not be affected.
e. Termination Upon Default Under National Housing Act
If the Bank is in default (as defined in Section 3(X)(1) of the
Federal Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, but this subsection shall not affect any
vested rights of the Bank and Executive.
f. Termination by Office of Thrift Supervision
All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is necessary for
the continued operation of the Bank, (i) by the Director of the Office of Thrift
Supervision or his or her designee at the time the Federal Deposit Insurance
Corporation or the Resolution Trust Corporation enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act; or (ii) by the Director of
the Office of Thrift Supervision or his or her designee, at the time such
Director or designee approves a supervisory-merger to resolve problems related
to operation of the Bank or when the Bank is determined by such Director to be
in an unsafe and unsound condition. Any rights of the Bank or Executive that
have already vested, however, shall not be affected by such action.
-4-
<PAGE>
g. Terminated by Executive for Good Reason
The Executive shall be entitled to terminate his employment
hereunder for good reason. Any termination of employment hereunder under any of
the following circumstances shall be for good reason, the occurrence of any of
which shall be deemed a breach of this Agreement by the Bank:
(1) without the express written consent of the Executive, the
Executive is assigned any duties inconsistent with his positions,
duties, responsibilities and status with the Bank as in effect on the
Effective Date, or his titles as in effect on the Effective Date, are
changed or the Executive is removed or not re-elected to any of such
positions, except in connection with the termination of the Executive's
employment pursuant to subsections b., c., d., e. or f. of Section 7 of
this Agreement, as a result of his substantial disability or death, or
as a result of Executive not being re-elected to serve on the Board of
Directors of Bank;
(2) the salary of the Executive set forth in Section 4 is
reduced, except if such salary is reduced at the request, direction or
order of the Office of Thrift Supervision, the Federal Deposit
Insurance Corporation, the New Jersey Department of Banking or any
other governmental agency;
(3) the Bank fails to continue for the Executive any benefit or
compensation plan providing the Executive with substantially similar
benefits to those plans in which the Executive is participating at the
Effective Date or in which the Executive hereafter may participate; or
(4) the Bank shall fail to observe or perform any covenant or
agreement in this Agreement to be observed or performed by the Bank;
(5) a change in control (as defined below) of the Bank occurs.
For the purposes of this Agreement, a "change in control of the
Bank" shall mean a change in control whether by stock transfer, sale of assets,
merger, consolidation or otherwise; provided that, without limitation such a
change of control shall be deemed to have occurred if (i) any person other than
those persons in control of the Bank on the date hereof, acquires the power,
directly or indirectly, to direct the management or policies of the Bank or to
vote 25% or more of any class of voting securities of the Bank; or (ii) within
any period of three
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<PAGE>
consecutive years during the term of this Agreement, individuals who at the
beginning of such period constitute the Board of Directors of the Bank cease for
any reason to constitute at least a majority thereof.
h. (Intentionally Omitted]
i. Remedies for Termination
(1) Upon termination of the Executive's employment under this
Agreement pursuant to subsections a. or g. of this Section 7, the
Executive shall receive until the Expiration Date:
(a) 200% of the salary set forth in Section 4, payment of
which shall be at the time provided for in this Agreement as if the
Executive's employment under this Agreement has not terminated.
(b) annually, an amount equal to the average of the three
highest annual incentive compensation payments made to Executive by the
Bank prior to the termination pursuant to subsection a. or the event
given Executive the right to terminate his employment under subsection
g.; and
(c) medical care, pension and similar benefits, at no cost to
Executive, substantially comparable to those furnished to Executive by
the Bank immediately prior to termination of employment hereunder.
(d) upon termination without Cause or termination for "good
reason" following a "change in control," the Bank shall determine the
aggregate present value (pursuant to ss.1274(b)(2) of the Internal
Revenue Code) of all amounts payable hereunder, and of all of other
amounts payable to the Executive upon or by reason of his termination
which are determined in good faith by the Bank to be "parachute
payments," (as defined in ss.280G(b)(2) of the Code and the regulations
promulgated thereunder) made pursuant to agreements or plans which are
subject to Section 280G. The Bank's determination of present value and
of other amounts constituting "parachute payments" is binding; provided
that if Executive obtains an opinion of counsel satisfactory to the
Bank or an Internal Revenue Service ruling to the effect that the
method of determining present value was improper or that specified
payments did not constitute "parachute payments," calculations will be
made in accordance with such opinion or filing. In the event that
aggregate present value of all benefits under this Agreement and other
"parachute payments" is equal to or in excess of
-6-
<PAGE>
300% of the Executive's "base amount" as defined in Section
280G(b)(3)(A) and regulations thereunder, the Executive waives the
right to "parachute payments" sufficient to reduce the present value of
all such payments below 300% of the "base amount." The Executive shall
have the right to designate those benefits which shall be waived or
reduced in order to comply with this provision, but failing designation
by the Executive, the Bank may designate those benefits which must be
waived or reduced. If it is established pursuant to a final
determination of a court of competent jurisdiction or an Internal
Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Bank in applying the terms of this Section 7, the
aggregate "parachute payments" paid to or for the Executive's benefit
are in an amount that would result in any portion of such "parachute
payments" paid to or for the Executive's benefit not being deductible
by the Bank or an Affiliate by reason of Section 280G of the Code, then
the Executive shall have an obligation to pay the Bank upon demand an
amount equal to the sum of (i) the excess of the aggregate "parachute
payments" paid to or for the Executive's benefit without any portion of
such "parachute payments" not being deductible by reason of Section
280G of the Code and (ii) interest on the amount set forth in clause
(i) above at the applicable federal rate (as defined in Section 1274(d)
of the Code) from the date of the Executive's receipt of such excess
until the date of such payment.
(2) Any payment made by Bank under this Section shall be deemed
to constitute liquidated damages and not a penalty for the Bank's
breach of this Agreement. Executive shall not be required to mitigate
his damages hereunder by seeking employment or otherwise.
(3) Notwithstanding anything to the contrary contained in this
Section, Executive shall not receive and does hereby waive the right to
receive any amount upon his termination of employment (whether pursuant
to the terms of this Agreement or pursuant to any other policy or
arrangement) which would cause Executive to receive an amount which
exceeds three times the Executive's annualized salary for the year in
which Executive's employment is terminated.
j. Disability Termination
In the event that the Executive is totally disabled prior to the
Expiration Date of this Agreement, the Bank shall have the right to terminate
Executive's employment on ten (10) days written notice to Executive, provided
the Bank shall pay the Executive a disability benefit which is equal to the
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<PAGE>
salary provided in Section 4, received by Executive at the commencement of the
Executive's total disability, reduced by the sum of (i) the amount of any
benefits to which the Executive may be entitled with respect to the same period
under any disability plan or pension plan, including related supplemental and
excess benefit plans or agreements, of the Bank and (ii) the disability benefits
payable under any government regulated plan including workers' compensation
benefits. Payment of such disability benefit shall commence with the week
coincident with the termination of Executive's employment under this Agreement
and shall continue until the earlier of the Expiration date or the Executive's
death. During any period the Executive shall be entitled to receive disability
payments from the Bank, to the extent that he is physically and mentally able to
do so, he shall furnish information and assistance to the Bank, and, in
addition, upon reasonable request in writing from time to time he shall make
himself available to the Bank to undertake reasonable assignments with the
dignity, importance, and scope of his prior position and his physical and mental
health. As used in this Agreement, the term "total disability" shall mean the
complete inability of the Executive to perform all of his duties under this
Agreement as determined by an independent physician selected with the approval
of the Board of Directors and the Executive.
8. Withholding of Taxes
The Bank may withhold from any payments under this Agreement all
applicable taxes, as shall be required pursuant to any law or governmental
regulation or ruling.
9. Prior Agreements
This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof, supersedes all
prior and contemporaneous agreements and understandings and any prior employment
agreement between the Bank and the Executive.
10. Consolidation or Merger
Nothing in this Agreement shall preclude the Bank from
consolidating or merging into or with or transferring all or substantially all
of its assets to, any Person which assumes this Agreement and all obligations of
the Bank hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the term, "Bank" shall refer to such other Person and this Agreement
shall continue in full force and effect.
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<PAGE>
11. General Provisions
a. Non-Assignability
Neither this Agreement nor any right or interest hereunder shall
be assignable by the Executive without the Bank's prior written consent;
provided, however, that nothing in this subparagraph 11a. shall preclude the
executors, administrators, or other legal representatives of the estate of the
Executive from assigning any rights hereunder to the Person or Persons entitled
thereto under the Executive's will or, in case of intestacy, to the Person or
Persons entitled thereto under the laws of intestacy applicable to the
Executive's estate.
b. No Attachment
Except as otherwise required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to
execution, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
c. Binding Agreement
This Agreement shall be binding upon and inure to the benefit of
the Executive and the Bank, the Executive's heirs, executors and assigns and the
Bank's successors and assigns.
d. "Person" Defined
"Person" as used herein means a natural person, joint venture,
corporation, sole proprietorship, trust, estate, partnership, cooperative,
association, organization, government or governmental entity, or other entity.
12. Legal Expenses
If the Executive obtains a judgment which enforces a right or
benefit under this Agreement, the Bank shall pay to the Executive all reasonable
legal fees and expenses incurred by the Executive in seeking to obtain or
enforce such right or benefit.
13. Amendment
No amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing.
-9-
<PAGE>
14. Severability
If for any reason any provision of this Agreement shall be held
invalid, such invalidity shall not affect any other provision of this Agreement
not held so invalid, and all other such provisions shall to the full extent
consistent with law continue to in full force and effect. If any such provision
shall be held invalid in part, such invalidity shall in no way affect the rest
of such provision not held so invalid, and the rest of such provision, together
with all other provisions of this Agreement, shall likewise to the full extent
consistent with law continue in full force and effect.
15. Headings
The headings are included solely for convenience of reference and
shall not control the meaning or interpretation of any of the provisions of this
Agreement.
16. Interpretation
If any provision of this Agreement shall be the subject of a
dispute between the Bank and the Executive and a court or arbitrator to which
such dispute has been brought shall be unable to resolve which of two reasonable
interpretations of such provision is the proper interpretation thereof, then the
interpretation most favorable to the Executive shall control.
17. Governing Law
This Agreement has been executed and delivered in the State of New
Jersey and its validity, interpretation, performance and enforcement shall be
governed by and construed in accordance with the laws thereof applicable to
contracts executed and to be wholly performed in New Jersey.
18. Consent to Jurisdictions
Executive and the Bank irrevocably consent to the exclusive
jurisdiction of the Courts of Salem County, New Jersey and/or the United States
District Court for the District of New Jersey in any action or proceeding
pursuant to this Agreement and agree to service of process in accordance with
Section 19 herein.
19. Notices
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid, to
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<PAGE>
the following addresses or to such other address as either party may designate
by like notice:
A. If to Executive, to:
Stephen R. Selverian
One Oak Terrace
Merchantville, NJ 08109
B. If to Bank, to:
FIRST HOME SAVINGS BANK, S.L.A.
125 South Broadway
Pennsville, NJ 08070
C. In all cases, copies to:
Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attn: Barry H. Genkin, Esquire
and to such other or additional Person or Persons as either party shall have
designated to the other party in writing by like notice.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed
and its seal to be affixed hereto by its officers thereunto duly authorized, and
the Executive has signed and sealed this Agreement, all as of the day and year
first above written.
ATTEST: FIRST HOME SAVINGS BANK, S.L.A.
/s/ Joyce A. Hunt By: /s/ Stephen D. Miller
- ---------------------------- ----------------------------
Secretary Stephen D. Miller, President
WITNESS:
/s/ /s/ Stephen R. Selverian
- ---------------------------- ------------------------
Stephen R. Selverian
-11-
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, dated this 6th day of January, 1994, by and between
First Home Savings Bank, F.S.B., a savings and loan association incorporated
under laws of the United States (the "Bank"), and Stephen R. Selverian (the
"Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Bank, as the successor in interest by merger with First
Home Savings Bank, S.L.A., and Executive have entered into an Employment
Agreement made effective as of the 1st day of July, 1992 (the "Employment
Agreement"); and
WHEREAS, the Bank and Executive desire to make amendments to certain of
the terms of the Employment Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. All references in the Employment Agreement to "Bank" or
"Association" shall be deemed to refer to First Home Savings Bank, F.S.B.
2. Section 3 of the Employment Agreement shall be amended and restated
to read in its entirety as follows:
(a) Period of Employment
The period of the Executive's employment under this Agreement
shall commence as of the date of the merger of Fidelity Mutual Savings
and Loan Association ("Fidelity Mutual") with and into the Bank (the
"Effective Date") and shall, unless sooner terminated by the death of
the Executive, mutual agreement or pursuant to Section 7, continue for
a period of three (3) years therefrom, (such period being herein
referred to as the "Employment Period"), provided, however, subject to
Section 3(b), and if the Employment Period has not been terminated by
the death of the Executive, by mutual agreement or pursuant to Section
7, that on each December 31 during the Employment Period, the
Employment Period shall be extended for one year, so that at all times
the Employment Period on each January 1 during the term of this
Agreement shall be an unexpired period of three years, provided,
however, that such extension shall not go into effect unless and until
it has been reviewed and approved by the Board of Directors. The last
day of the Employment Period, as from time to time extended, and
without regard to any early termination pursuant to Section 7, is
hereinafter referred to as the "Expiration Date."
<PAGE>
(b) Termination of Automatic Extension
The Executive or Bank may elect to terminate the automatic
extension of the Employment Period set forth in subsection 3(a) by
giving written notice of such election. Any notice given hereunder
shall be effective in the year in which the notice is given, if given
between January 1 and June 30 of any calendar year, and in the year
following the year in which the notice is given, if given between July
1 and December 31 of any calendar year. Upon effectiveness of any
notice given hereunder, Executive's employment under this Agreement
shall terminate on the Expiration Date (as last extended) or such
earlier date as may be determined pursuant to Section 7."
3. Section 7(h) of the Employment Agreement is amended to read in its
entirety as follows:
"(h) Notwithstanding anything contained herein to the contrary, the
Executive may terminate this Agreement by notice (which shall in no
event be less than 6 months) to the Bank on or after the date that the
Executive first becomes eligible to receive retirement benefits under
the Bank's Employee Stock Ownership Plan in which case benefits shall
be payable to the Executive in accordance with the provisions of such
plan, and all rights of the Executive under this Agreement shall cease.
4. Section 7(i)(1)(a) is amended to read in its entirety as follows:
"(a) 100% of the salary set forth in Section 4, as the same may have
been increased from time to time, payment of which shall be at the time
provided for in this Agreement as if the Executive's employment under
this Agreement has not terminated."
5. Section 7(k) of the Employment Agreement is amended to read in its
entirety as follows:
"(k) Limitation. Notwithstanding anything to the contrary contained
in this Section, Executive shall not receive and does hereby waive the
right to receive any amount upon his termination of employment (whether
pursuant to the terms of this Agreement or pursuant to any other policy
or arrangement) which would cause Executive to receive an amount which
exceeds three times the Executive's Average Annual Compensation (as
hereinafter defined). "Average Annual Compensation" means the average
of all Compensation (as hereinafter
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<PAGE>
defined) paid to Executive by Bank and/or Fidelity Mutual during each
of the five full taxable years (i.e. January 1 to December 31)
preceding the year in which Executive's employment is terminated.
"Compensation" shall mean "Compensation" as defined in RB 27a,
"Executive Compensation and Employment Contracts", dated March 5, 1993,
promulgated by the Office of Thrift Supervision."
6. The Employment Agreement, as amended by this Amendment, shall remain
in full force and effect.
IN WITNESS WHEREOF, the Bank has caused this Amendment to be executed
and its seal to be affixed hereto by its officers thereunto duly authorized, and
the Executive has signed and sealed this Agreement, all as of the day and year
first above written.
FIRST HOME SAVINGS BANK, F.S.B.
By: /s/ Sol L. Davidow
-------------------------------
Sol L. Davidow, Chairman of the
Board
/s/ Stephen R. Selverian
--------------------------------
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<PAGE>
First Home Bancorp Inc.
Corporate Profile
- --------------------------------------------------------------------------------
First Home Bancorp Inc. (the Company) is a New Jersey corporation and a
unitary savings and loan holding company registered under the Home Owners' Loan
Act, as amended. The Company is the parent holding company of First Home Savings
Bank, F.S.B. (the Bank), a federally chartered savings bank. The Company was
organized for the purpose of acquiring all of the capital stock of the Bank in
connection with the reorganization of the Bank into the holding company form of
ownership. Each outstanding share of common stock of the Bank was converted into
one share of common stock of the Company. The reorganization was consummated on
May 31, 1996.
The Bank operates eight offices in southern New Jersey and two offices
in New Castle County, Delaware. The Bank was chartered in 1911 for the purpose
of attracting retail savings deposits to provide mortgage funds for the
community. The Bank is a full service bank offering a broad range of financial
products and services to depositors and borrowers.
The Company's common stock is traded on the Nasdaq National Market tier
of the Nasdaq Stock Market under the trading symbol "FSPG." The newspaper
abbreviation is FstHomeBcp.
CONTENTS
Report to Shareholders 1
Market and Selected Quarterly Information 2
Five Year Consolidated Financial Summary 3
Management's Discussion and Analysis 5
Consolidated Statements of Financial Condition 14
Consolidated Statements of Income 15
Consolidated Statements of Shareholders' Equity 16
Consolidated Statements of Cash Flows 17
Notes to Consolidated Financial Statements 19
Report of Independent Public Accountants 43
Corporate Information 44
<PAGE>
First Home Bancorp Inc.
Report to Shareholders
- --------------------------------------------------------------------------------
The savings and loan industry experienced a number of changes in 1996,
the long-term effect of which could be viewed as positive. In 1996 the industry
contributed almost six billion dollars to fully fund the Savings Association
Insurance Fund (SAIF). The industry also received a measure of relief with
respect to the onerous tax requirement which may cause certain thrifts to
recapture all or a portion of their bad debt reserves in the event of a charter
change. These changes generally level the competitive playing field among
thrifts and other insured financial institutions and should allow many financial
institutions increased flexibility to choose the charter through which they wish
to operate.
The short-term effect of the SAIF recapitalization payment was a direct
charge to current earnings. The Company's charge amounted to approximately $1.6
million. Despite this one-time charge, the Company recorded outstanding earnings
for 1996 of $4.29 million, or $1.57 per share, which included a recovery of a
$732,000 valuation allowance on a deferred tax asset. Overall for 1996 the
Company achieved a 13.77% return on shareholders' equity. By comparison,
publicly-traded thrifts as a whole achieved a median return on equity of 5.19%.
Excluding the effects of non-recurring items, earnings for 1996 would have been
$1.67 per share compared to $1.55 per share for the prior year.
The Company ended 1996 with assets of $498.4 million, an increase of
$45 million over the prior year. As a result of this 10% increase in assets, net
interest income increased $1.57 million or over 11.5%. Despite the $45 million
asset growth, the ratio of general and administrative expenses to average assets
increased a modest four basis points to 1.83%, still considerably lower than
most in the industry.
The Company continues to meet the challenge to improve the delivery of
products and services to its growing list of customers. In 1996 the Company
initiated "Homeline," a telephone banking service. "Homeline" allows direct
access to accounts for funds transfer, account balance information and
individual check reconciliation. This product is currently handling
approximately 8,500 phone calls and processing about 17,000 transactions a
month. In addition to "Homeline," the Company added business development
officers to supplement the mortgage, consumer, commercial loan and new product
sales activity. Marketing efforts were stepped up with emphasis on name
recognition and market share. On a scheduled basis, retail offices are being
upgraded and reconfigured to provide a more attractive and improved banking
environment. As a result of the Company's increased marketing effort, loan
originations increased 35.1% in 1996 compared to the prior year. Additionally
approximately 1,800 new consumer and commercial checking accounts were opened
during the year.
On January 7, 1997, the Company declared a four-for-three stock split
to holders on January 22, 1997. The cash dividend on the split shares was set at
$.10 per share, an increase in the payout of 11.11%. This makes the fourth stock
split and the seventh time dividends have been increased since the Bank went
public in 1987. As a result of the stock splits, investors who purchased 100
shares of stock on the initial offering date of April 15, 1987 at the offering
price of $9.00 currently own 316 shares of stock at a cost of $2.85 per share.
The Board of Directors and Management recognize the need to continually
address the strategic direction of the Company in order to provide the best
products and services to our customers and our communities while at the same
time delivering strong earnings to our shareholders. As always, we will strive
to maintain a high level of earnings and create the greatest value for you our
shareholders.
Sincerely,
Stephen D. Miller
Chairman, President and
Chief Executive Officer
1
<PAGE>
First Home Bancorp Inc.
Market and Selected Quarterly Information
- --------------------------------------------------------------------------------
Market and Selected Quarterly Information (unaudited)
The Company's common stock trades on the Nasdaq National Market tier of
the Nasdaq Stock Market under the symbol: "FSPG."
The following table sets forth, for the periods indicated, unaudited
quarterly results of operations, high and low sales prices per share of the
Company's common stock on the Nasdaq National Market tier of the Nasdaq Stock
Market and dividends per share. The sales price data was obtained from Nasdaq
monthly statistical reports. The earnings per share, dividends per share and
quarterly sales price data have been adjusted for stock splits.
The amount of cash dividends that the Company may declare and pay are
subject to certain regulatory restrictions. See Note 20 of the accompanying
consolidated financial statements.
As of March 14, 1997, the Company's outstanding common stock was held
of record by approximately 1,015 shareholders. This estimate does not include an
indeterminate number of shareholders whose shares are held by brokers in "street
name."
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------------------------------------------------------------------------
(In thousands,
except per share data 1996 1995 1996 1995 1996 1995 1996 1995
and quarterly sales prices)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $8,833 $7,508 $9,029 $8,023 $9,195 $8,370 $9,393 $8,588
Net interest income 3,732 3,335 3,774 3,365 3,797 3,376 3,783 3,441
Net income 1,165 1,433 1,110 1,142 864 1,027 1,146 1,109
Per share data:
Net income .43 .53 .41 .42 .31 .38 .42 .41
Dividends declared .09 .09 .09 .09 .09 .09 .10 .09
Quarterly sales prices:
High 14.06 10.88 14.06 11.06 14.06 12.94 14.63 14.25
Low 13.13 10.13 13.31 10.31 13.31 10.50 13.50 12.75
</TABLE>
2
<PAGE>
First Home Bancorp Inc.
Five Year Consolidated Financial Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except per share data) At or for the year ended December 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION INFORMATION
- -------------------------------------------------------------------------------------------------------------------
Total assets (1) $498,399 $453,039 $388,621 $351,600 $315,211
Loans receivable 258,909 255,217 240,168 216,044 180,619
Mortgage-backed securities 188,607 146,760 94,333 95,979 88,369
Investment securities 27,356 29,304 35,019 19,170 27,436
Deposits 290,298 270,176 239,108 227,327 233,446
FHLB and other borrowed funds 173,148 150,126 123,633 98,331 59,866
Total shareholders' equity (2) 32,645 30,103 23,075 23,097 18,840
Book value per share (3) 12.05 11.12 8.58 8.86 7.27
- -------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT INFORMATION
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total interest income $36,450 $32,489 $26,775 $24,570 $21,695
Total interest expense 21,364 18,972 13,901 12,152 11,864
------- ------- ------- ------- -------
Net interest income 15,086 13,517 12,874 12,418 9,831
Provision for credit losses 400 600 550 700 717
------- ------- ------- ------- -------
Net interest income after provision
for credit losses 14,686 12,917 12,324 11,718 9,114
Other income 1,387 2,307 1,240 1,784 984
SAIF recapitalization assessment 1,564 --- --- --- ---
Other expenses 9,189 7,853 6,866 7,020 6,021
------- ------- ------- ------- -------
Income before income taxes 5,320 7,371 6,698 6,482 4,077
Income taxes 1,035 2,660 2,495 2,426 1,599
------- ------- ------- ------- -------
Net income before cumulative effect of
a change in accounting principle 4,285 4,711 4,203 4,056 2,478
Cumulative effect of a change in
accounting principle --- --- --- 543 ---
------- ------- ------- ------- -------
Net income $ 4,285 $ 4,711 $ 4,203 $ 4,599 $ 2,478
======= ======= ======= ======= =======
Earnings per share:
Income before cumulative effect of
a change in accounting principle $ 1.57 $ 1.74 $ 1.56 $ 1.56 $ .95
Cumulative effect of a change in
accounting principle --- --- --- .21 ---
------- ------- ------- ------- -------
Primary net income per share (3) $ 1.57 $ 1.74 $ 1.56 $ 1.77 $ .95
======= ======= ======= ======= =======
Dividends per share (3) $ .37 $ .36 $ .32 $ .24 $ .17
======= ======= ======= ======= =======
</TABLE>
3
<PAGE>
First Home Bancorp Inc.
Five Year Consolidated Financial Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At or for the year ended December 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
SELECTED OTHER DATA (4)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Return on average assets before cumulative
effect of a change in accounting principle .90% 1.11% 1.12% 1.23% .95%
Return on average assets after cumulative
effect of a change in accounting principle .90% 1.11% 1.12% 1.40% .95%
Return on average equity before cumulative
effect of a change in accounting principle 13.77% 17.52% 17.79% 19.05% 13.91%
Return on average equity after cumulative
effect of a change in accounting principle 13.77% 17.52% 17.79% 21.60% 13.91%
Dividend payout ratio 23.57% 20.69% 20.35% 13.63% 18.08%
Average shareholders' equity to average assets 6.52% 6.34% 6.31% 6.47% 6.85%
Capital ratios:
GAAP 6.43% 6.64% 5.94% 6.56% 5.98%
Tangible and core (2) 6.45% 6.47% 6.69% 6.49% 5.94%
Risk-based (2) 16.84% 15.68% 15.65% 14.92% 13.72%
Average interest rate spread 3.06% 3.09% 3.42% 3.80% 3.84%
Net yield on average interest-earning assets 3.26% 3.29% 3.56% 3.94% 3.99%
Ratio of average interest-earning assets
to average interest-bearing liabilities 104.36% 104.22% 103.61% 103.58% 103.02%
General and administrative expense
to average assets 1.83% 1.79% 1.75% 1.94% 2.09%
Asset quality ratios:
Non-performing loans to total loans 1.22% 1.13% 1.64% 1.07% 1.23%
Non-performing assets to total assets .83% .75% 1.25% 1.26% 1.83%
Allowance for possible credit losses to
non-performing loans 117.04% 121.94% 84.30% 114.09% 93.94%
Allowance for possible credit losses to
non-performing assets 90.38% 104.52% 68.02% 60.01% 35.81%
Full service banking offices at end of period 10 10 8 8 6
- --------------------------------------------
</TABLE>
(1) On January 23, 1995, two retail-banking offices located in Elmer and
Newfield, New Jersey were acquired and, in connection therewith, assumed
deposits of $15.9 million. On June 25, 1993, White Eagle Federal Savings
Bank was acquired in a merger transaction accounted for as a
pooling-of-interests. On July 1, 1992, approximately $80 million in assets
and liabilities of Fidelity Mutual were acquired in a transaction
accounted for as a purchase.
(2) The Bank exceeds all required regulatory capital requirements. For
additional information see Note 16 of the Company's accompanying
consolidated financial statements.
(3) The Company's book value, earnings per share and dividends per share have
been adjusted to give effect to four-for-three stock splits effected in
January 1992, February 1993, February 1994 and February 1997.
(4) Based on monthly data when averages are indicated.
4
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
OVERVIEW
Two significant events occurred during 1996. The first was the
formation of the holding company which could increase the Company's ability to
expand in the future. The second was the resolution of the disparity between the
federal insurance premiums paid by Bank Insurance Fund (BIF) insured and SAIF
insured financial institutions. While payment of the special assessment to fully
capitalize the SAIF fund had a negative affect on earnings, the Company should
benefit from future reduced federal insurance premiums.
The growth in net interest income continued with an increase to $15.1
million in 1996 from $13.5 million in 1995. Increases in interest earning assets
offset the decline in the Company's net interest rate spread to 3.06% in 1996
from 3.09% in 1995.
Net income before taxes, excluding non-recurring items of $1.6 million
in 1996 attributable to the SAIF recapitalization assessment and $807,000 in
1995 attributable to a $672,000 recovery from an insurance carrier and $135,000
in interest on a tax refund, increased to $6.9 million in 1996 from $6.6 million
in 1995.
GENERAL
The Company is the sole shareholder of the Bank and the Bank represents
substantially all of the Company's consolidated assets and liabilities at
December 31, 1996. Substantially all of the Company's consolidated revenues are
derived from the operations of the Bank. The Bank's business is that of a
financial intermediary and consists primarily of attracting deposits from the
general public and using such deposits, together with borrowings and other
funds, to make mortgage and other loans. The Bank provides consumer banking
services in eight retail banking offices in New Jersey and two retail banking
offices in Delaware. The Bank is subject to significant competition from other
financial institutions, and is also subject to regulation and examination by the
Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation
(FDIC).
The Company's earnings are primarily dependent upon net interest
income. Net interest income is obtained from interest earned on loans and
investments less interest paid on deposits and borrowings. In addition to net
interest income, the Company derives other income from loan servicing fees, fees
related to deposit services, and other banking related fees and charges. Major
expenses, in addition to interest expense, consist primarily of salaries and
employee benefits, occupancy and equipment expenses, provision for credit
losses, deposit insurance premiums, and other operating expenses. Earnings are
also affected by gains and losses related to mortgage-banking activity and
investments held for trading. Funds for lending and investment are obtained from
deposit gathering at branch locations, investment and loan repayments, proceeds
from loan sales, borrowings, and cash flows from operations.
Net interest income is affected by interest rate movements, general
economic conditions, and the competition for funds and loans. Lending activities
are influenced by a number of factors including the overall level of interest
rates, the market demand for housing, conditions in the construction industry
and the availability of funds. Availability of funds is affected by loan
repayments, loan sales, borrowing capacity and deposit gathering ability.
The year 1996 was volatile in terms of interest rates. During the first
quarter of the year, interest rates increased sharply in the three year to
thirty year sector of the treasury yield curve. These rates continued to climb
during the second quarter of 1996. In the third quarter interest rates
stabilized and finally during the fourth quarter those rates declined slightly.
The yield on interest-earning assets decreased slightly to 7.88% for the year
ended December 31, 1996 from 7.90% for the year ended December 31, 1995. The
cost of interest-bearing liabilities increased minimally to 4.82% for the year
ended December 31, 1996 from 4.81% for the year ended December 31, 1995.
5
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
The following table sets forth for the periods indicated, information
regarding: (1) the yield on interest-earning assets and cost of interest-bearing
liabilities as of December 31, 1996; (2) the average balance of interest-earning
assets and the resultant interest income and average yields; (3) the total
dollar amount of interest-bearing liabilities (which include $7.6 million, $7.0
million, and $5.2 million of non-interest bearing deposits at December 31, 1996,
1995 and 1994, respectively) and the resultant interest expense and average
costs; (4) the net interest income; (5) interest rate spread; (6) the net yield
earned on weighted average interest-earning assets; and (7) the ratio of average
interest-earning assets to average interest-bearing liabilities. Average
balances are calculated on a month-end basis for each of the years indicated.
The table is not presented on a tax equivalent basis because the Company's
investment in tax-free obligations is insignificant.
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
--------------------------- ------------------------- ----------------------------
(dollars in thousands)
As of Average Average Average
Dec. 31, Average Yield/ Average Yield/ Average Yield/
1996 Balance Interest Rate Balance Interest Rate Balance Interest Rate
---- ------- -------- ---- ------- -------- ---- ------- -------- ----
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (1) 8.37% $257,161 $21,712 8.44% $244,900 $20,490 8.37% $227,611 $17,985 7.90%
Mortgage-backed securities 7.31 171,937 12,448 7.24 128,805 9,435 7.32 94,251 6,257 6.64
Other (2) 6.58 33,628 2,290 6.81 37,393 2,564 6.86 39,369 2,533 6.43
` ---- -------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-earning assets 7.83 462,726 36,450 7.88 411,098 32,489 7.90 361,231 26,775 7.41
` ---- -------- ------- ---- -------- ------- ---- -------- ------- ----
Non interest-earning assets 14,326 12,995 13,409
-------- -------- --------
Total assets $477,052 $424,093 $374,640
======== ======== ========
Interest-bearing liabilities:
Deposits 4.37 $278,420 12,121 4.35 $262,095 11,179 4.27 $234,626 8,355 3.56
Borrowings 5.80 164,955 9,243 5.60 132,360 7,793 5.89 114,015 5,546 4.86
` ---- -------- ------- ---- -------- ------- ---- -------- ------- ----
Total int.-bearing liabilities 4.90 443,375 21,364 4.82 394,455 18,972 4.81 348,641 13,901 3.99
` ---- -------- ------- ---- -------- ------- ---- -------- ------- ----
Non interest-bearing liabilities 2,557 2,743 2,370
-------- -------- --------
Total liabilities 445,932 397,198 351,011
-------- -------- --------
Shareholders' equity 31,120 26,895 23,629
-------- -------- --------
Total liabilities and
shareholders' equity $477,052 $424,093 $374,640
======== ======== ========
Net interest income $ 15,086 $ 13,517 $ 12,874
======== ======== ========
Interest rate spread 2.93% 3.06% 3.09% 3.42%
==== ==== ==== ====
Net yield on weighted average
interest-earning assets 3.26% 3.29% 3.56%
===== ==== ====
Ratio of average interest-earning
assets to average interest-bearing
liabilities 104.36% 104.22% 103.61%
====== ====== ======
- ------------------------------------
</TABLE>
(1) Amount is net of deferred loan origination costs, loans in process, net
unearned discount on loans purchased and allowance for credit losses and
includes non-performing loans.
(2) Consists of interest-earning deposits, short-term funds, investment
securities and Federal Home Loan Bank stock.
RATE/VOLUME ANALYSIS
Net interest income can also be analyzed in terms of the impact of
changing rates and changing volume. The following table describes the extent to
which changes in interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities affected interest income and interest
expense during the periods
6
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
indicated. Information is provided on changes in each category attributable to
(i) changes due to volume (changes in volume multiplied by prior rate), (ii)
changes due to rates (changes in rates multiplied by prior volume) and (iii) net
change. The net change attributable to the combined impact of volume and rate
has been allocated proportionately to the change due to volume and the change
due to rate.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 vs. 1995 1995 vs. 1994
------------- -------------
(in thousands)
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
Interest income:
<S> <C> <C> <C> <C> <C> <C>
Loan portfolio $1,033 $ 189 $1,222 $1,405 $ 1,100 $2,505
Mortgage-backed securities 3,125 (112) 3,013 2,478 700 3,178
Other (1) (256) (18) (274) (132) 163 31
------ ----- ------ ------ ------- ------
Total interest-earning assets 3,902 59 3,961 3,751 1,963 5,714
------ ----- ------ ------ ------- ------
Interest expense:
Deposits 707 235 942 1,045 1,779 2,824
Borrowings 1,841 (391) 1,450 970 1,277 2,247
------ ----- ------ ------ ------- ------
Total interest-bearing liabilities 2,548 (156) 2,392 2,015 3,056 5,071
------ ----- ------ ------ ------- ------
Net change in net interest income $1,354 $ 215 $1,569 $1,736 $(1,093) $ 643
====== ===== ====== ====== ======= ======
- --------------------------------------------
</TABLE>
(1) Consists of interest-earning deposits, short-term funds, investment
securities and Federal Home Loan Bank stock.
INTEREST RATE RISK MANAGEMENT
The Company has a program to control its interest rate risk. The
strategy includes an emphasis on originating adjustable rate mortgage (ARM)
loans, the purchase of adjustable rate and short-term mortgage-backed securities
(MBS) and the origination of short-term consumer loans. The Board of Directors
has instructed management to maintain interest rate risk within prescribed
limits. An internal asset/liability modeling system monitors the effect on
income of changing market interest rates.
The difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period (gap) is also
monitored. A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities. When
interest rate sensitive liabilities exceed interest rate sensitive assets, the
gap is considered negative. However, because all interest rates and yields do
not adjust at the same velocity, the gap is only a general indicator of interest
rate sensitivity.
During a period of rising interest rates, a negative gap tends to
adversely affect net interest income while a positive gap tends to increase net
interest income. During a period of declining interest rates, a negative gap
tends to increase net interest income while a positive gap tends to adversely
affect net interest income.
The Company's net interest income tends to increase in periods of
declining interest rates because its interest-bearing liabilities generally
reprice faster than its interest-earning assets. The Company's net interest
income tends to decrease in periods of rising interest rates. Therefore, rising
interest rates, particularly when combined with a flattening yield curve, could
have a significant negative impact on net interest income in future periods.
7
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
The following table summarizes the amount of interest-earning assets
and interest-bearing liabilities outstanding as of December 31, 1996, which are
anticipated to mature, prepay or reprice in each of the time periods shown.
Adjustable and floating rate assets are included in the period in which interest
rates are next scheduled to adjust rather than in the period in which they are
due. Loans and MBS are included in the periods in which they are anticipated to
be repaid. If available, estimated prepayment speeds were obtained from external
sources. Otherwise, they were estimated by management based on the experience of
the portfolio. Non-performing loans have been excluded from interest-earning
assets. Money market demand accounts (MMDA) and other accounts, NOW and savings
accounts which are subject to immediate withdrawal and repricing are classified
at decay rates based upon assumptions provided by the OTS.
<TABLE>
<CAPTION>
Twelve
Months 1-3 3-5 5-10 10-20 Over 20
or less Years Years Years Years Years Total
------- ----- ----- ----- ----- ----- -----
(dollars in thousands)
Interest-earning assets:
Residential mortgage loans
<S> <C> <C> <C> <C> <C> <C> <C>
Adjustable rate $ 53,499 $ 18,296 $ 393 $ --- $ --- $ --- $ 72,188
Fixed rate 24,886 37,153 25,513 32,013 11,852 255 131,672
Mortgage-backed securities
Adjustable rate 94,745 --- --- --- --- --- 94,745
Fixed rate 15,970 25,105 17,691 24,425 13,192 1,177 97,560
Consumer and commercial loans
Adjustable rate 10,866 2,676 344 --- --- --- 13,886
Fixed rate 18,223 15,664 5,598 3,026 324 --- 42,835
Loans held for sale 676 --- --- --- --- --- 676
Investment securities 4,348 4,000 17,000 605 --- 9,923 35,876
Investment securities held for trading 60 --- --- --- --- --- 60
-------- -------- -------- ------- ------- ------- --------
Total 223,273 102,894 66,539 60,069 25,368 11,355 489,498
-------- -------- -------- ------- ------- ------- --------
Interest-bearing liabilities:
Deposits
Savings accounts 4,836 7,735 5,721 8,605 5,952 1,692 34,541
NOW and non-interest
bearing demand accounts 5,792 8,799 6,061 8,134 4,466 820 34,072
MMDA and other accounts 15,936 18,583 8,848 6,783 1,227 31 51,408
Certificates of deposit 113,048 46,939 9,912 --- --- --- 169,899
Borrowings 110,588 55,703 6,857 --- --- --- 173,148
-------- -------- -------- ------- ------- ------- --------
Total 250,200 137,759 37,399 23,522 11,645 2,543 463,068
-------- -------- -------- ------- ------- ------- --------
Excess int.-earning assets (liabilities) $(26,927) $(34,865) $ 29,140 $36,547 $13,723 $ 8,812 $ 26,430
======== ======== ======== ======= ======= ======= ========
Cumulative excess interest-earning
assets (liabilities) $(26,927) $(61,792) $(32,652) $ 3,895 $17,618 $26,430
======== ======== ======== ======= ======= =======
Ratio of GAP during the period
to total assets (5.40)% (7.00)% 5.85% 7.33% 2.75% 1.77%
===== ===== ==== ==== ===== ====
Ratio of cumulative GAP
to total assets (5.40)% (12.40)% (6.55)% 0.78% 3.53% 5.30%
===== ====== ===== ==== ==== ====
</TABLE>
8
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The Company's net income for the year ended December 31, 1996 was $4.3
million compared to $4.7 million for 1995 and $4.2 million for 1994. The
following discussion describes and explains the significant components and
changes in the Company's results of operations for the three years ended
December 31, 1996.
Interest Income
Interest income for the years ended December 31, 1996, 1995, and 1994
was $36.4 million, $32.5 million, and $26.8 million, respectively. The $3.9
million increase in interest income from 1995 to 1996 was due to a $51.6 million
increase in average interest-earning assets. This increase in average
interest-earning assets was offset by a decrease in the yield on
interest-earning assets from 7.90% for the year ended December 31, 1995 to 7.88%
for the year ended December 31, 1996. The $5.7 million increase in interest
income from 1994 to 1995 was due to a $49.9 million increase in average
interest-earning assets. The increase during 1995 was also attributable to an
increase in the yield on interest-earning assets from 7.41% for the year ended
December 31, 1994 to 7.90% for the year ended December 31, 1995. The increase in
interest-earning assets during both years was primarily attributable to the
purchase of MBS. MBS increased an average of $43.1 million and $34.6 million,
respectively, during 1996 and 1995.
Interest Expense
Interest expense for the years ended December 31, 1996, 1995 and 1994
was $21.4 million, $19.0 million and $13.9 million, respectively. The increase
in interest expense from 1995 to 1996 was primarily attributable to an increase
of $48.9 million in average interest-bearing liabilities. An increase in
borrowings of $32.6 million and an increase in deposits of $16.3 million account
for the increase in average interest-bearing liabilities. The rise in the cost
of funds of .01% from 4.81% to 4.82% from 1995 to 1996 did not have a
significant impact on interest expense. The increase in interest expense from
1994 to 1995 was primarily attributable to an increase of $45.8 million in
average interest-bearing liabilities. An increase in borrowings of $18.3 million
and an increase in deposits of $27.5 million, of which $15.9 million was
acquired in the purchase of two retail-banking offices, account for the increase
in average interest-bearing liabilities. These increases along with an increase
in the cost of funds of .82%, to 4.81% from 3.99%, accounted for the $5.1
million increase in interest expense.
Net Interest Income
Net interest income increased $1.6 million, or 11.6% in 1996 and
$643,000, or 5.0% in 1995 over the respective prior years. The increase in 1996
was primarily attributable to the increase in volume of interest-earning assets
and interest-bearing liabilities at a positive spread. Net interest income was
also increased due to the decline in the cost of borrowings. The Company's
borrowed money is generally short-term and the decrease in short-term interest
rates during 1996 reduced the cost of borrowed money.
During 1995 the increase in net interest income was attributable to the
increase in volume of interest earning assets and interest-bearing liabilities
at a positive spread. However, the Company's positive spread was reduced by the
impact of a flattening yield curve. While short-term interest rates increased,
long-term interest rates declined. The combined impact of these changing
interest rates increased the Company's cost of interest-bearing liabilities to a
greater extent than the increased yield on interest-earning assets.
Allowance and Provision for Credit Losses
The provision for credit losses amounted to $400,000, $600,000 and
$550,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The
provision for credit losses was provided after considering the status of
non-performing loans, adverse situations that may affect a borrower's ability to
repay, the value of
9
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
collateral securing the loans, net charge-offs, industry standards and other
considerations that effect the perceived risk in the loan portfolio. Commercial
loans, which generally have a greater credit risk, comprised $19.2 million, or
7.3%, of the total loan portfolio at December 31, 1996 compared to $16.9
million, or 6.5%, of the total loan portfolio at December 31, 1995.
Non-performing loans, net of amounts charged-off, were $3.2 million, or 1.2%,
and $2.9 million, or 1.1%, of the total loan portfolio at December 31, 1996 and
1995, respectively. The allowance for credit losses totaled $3.8 million, or
1.4%, and $3.6 million, also 1.4%, of total loans at December 31, 1996 and 1995,
respectively. In management's opinion, based on its review of the current
quality of the loan portfolio, general economic conditions and historical
experience, the allowance for credit losses is adequate to cover future credit
losses. See the Company's accompanying consolidated financial statements Note 1
- - Summary of significant accounting policies - Allowance for credit losses.
Other Income
Other income decreased by $920,000 during 1996 and increased by $1.1
million during 1995. The decrease in 1996 was attributable to non-recurring
income received in 1995 of: (i) $672,000 from the recovery of an insurance claim
and (ii) $135,000 in interest on a tax refund, and losses on the sale of loans
of $84,000 during 1996 (a decrease of $212,000 from the $128,000 profit on sale
of loans in 1995). These decreases were partially offset by increases in gains
from trading activity of $70,000 and gains from the sale of mortgage-backed
securities of $25,000.
The increase in 1995 was attributable to the non recurring income
discussed above, and gains on the sale of loans of $128,000 (an increase of
$772,000 from the $644,000 loss on sale of loans in 1994) and gains from trading
activity of $152,000 during 1995 (an increase of $290,000 from the $138,000 loss
in 1994).
Operating Expenses
In 1996 operating expenses, excluding the Savings Association Insurance
Fund (SAIF) recapitalization assessment of $1.6 million, increased by $1.3
million, or 17.0%, from 1995, primarily as a result of operating and marketing
costs related to the ten retail-banking offices. During 1996, the Company
focused on increasing market awareness of the Bank and the services offered to
customers by increasing the marketing budget, installing more automated teller
machines and introducing "Homeline," a 24 hour telephone banking service.
Salaries and employee benefits, other operating expense, net real estate
operations expense and occupancy and equipment expense increased $568,000,
$414,000, $211,000 and $173,000, respectively, from those of the prior year.
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
DIFA), which required the recapitalization of the SAIF, became law. Accordingly,
all depository institutions with SAIF insured deposits were charged a one-time
special assessment on their SAIF-assessable deposits as of March 31, 1995 at the
rate of 65.7 basis points. The Bank's portion of the special assessment was $1.6
million.
In 1995, operating expenses increased by $987,000, or 14.4%, from 1994,
primarily as a result of the acquisition of two retail-banking offices in
January 1995. The deposit premium related to the acquisition is being amortized
over the estimated life of the customer base. Included in operating expense
during 1995 is the amortization of $257,000 of the initial deposit premium of
$1.1 million. Salaries and employee benefits, other operating expense and
occupancy and equipment expense increased $522,000, $281,000, and $175,000,
respectively, from those of the prior year. Those increases were offset by a
decrease in net real estate operations expense of $314,000.
Income Taxes
In 1996, the Company expensed $1.8 million in combined federal and
state income taxes on pre-tax income of $5.3 million compared to $2.7 million of
tax expense in 1995 on pre-tax income of $7.4 million. Tax expense decreased by
$893,000, or 33.6%, as pre-tax income decreased by $2.1 million, or 27.8%. The
Company's
10
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
effective income tax rate decreased to 33.2% for the year ended December 31,
1996 from 36.1% for the year ended December 31, 1995.
In 1995, the Company expensed $2.7 million in combined federal and
state income taxes on pre-tax income of $7.4 million compared to $2.5 million of
tax expense in 1994 on pre-tax income of $6.7 million. Tax expense increased
$165,000, or 6.6%, as pre-tax income increased by $673,000, or 10.0%. The
Company's effective income tax rate decreased to 36.1% for the year ended
December 31, 1995 from 37.2% for the year ended December 31, 1994.
A recovery of a valuation allowance related to deferred income taxes
was recognized in the amount of $732,000 during the year ended December 31,
1996. The recovery was recognized after considering the impact of a change in
the Internal Revenue Code and the estimated timing of temporary differences
related to deferred loan fees for tax purposes.
FINANCIAL CONDITION
Total assets increased to $498.4 million at December 31, 1996 from
$453.0 million at December 31, 1995, an increase of 10.0%. This increase
primarily reflects the increase in MBS held-to-maturity, MBS available-for-sale
and loans receivable. MBS held-to-maturity increased to $97.4 million at
December 31, 1996 from $68.0 million at December 31, 1995, an increase of $29.4
million, or 43.2%. MBS available-for-sale increased to $91.2 million at December
31, 1996 from $78.8 million at December 31, 1995, an increase of $12.4 million,
or 15.7%. Loans receivable increased to $258.2 million at December 31, 1996 from
$254.8 million at December 31, 1995, an increase of $3.4 million, or 1.3%.
Total liabilities increased to $465.8 million at December 31, 1996 from
$422.9 million at December 31, 1995, an increase of 10.1%. The increase in
liabilities of $42.9 million was primarily attributable to increases in FHLB
borrowings of $30.8 million and deposits of $20.1 million, offset by a decrease
in other borrowed funds of $7.8 million.
Shareholders' equity increased to $32.6 million at December 31, 1996
from $30.1 million at December 31, 1995. This increase was primarily the result
of net income of $4.3 million, less an increase in unrealized losses on
securities available-for-sale of $739,000 (see Notes 1, 4 and 5 of the
accompanying consolidated financial statements), and the payment of cash
dividends of $1.0 million. At December 31, 1996, the Bank exceeded its core,
tangible and risk-weighted assets capital requirements by $17.2 million, $24.7
million and $18.2 million, respectively. For additional information regarding
the Bank's regulatory capital requirements, see Note 16 of the accompanying
consolidated financial statements.
LIQUIDITY, CASH FLOWS AND COMMITTED RESOURCES
Liquidity consists of cash on hand and in banks, interest-earning
deposits and certain investment securities. The Bank is required under
applicable OTS regulations to maintain specified levels of "liquid" investments.
At December 31, 1996 and December 31, 1995 the minimum level of liquidity
required was 5.0% of net withdrawable savings deposits plus short-term
borrowings. The Bank's regulatory liquidity ratio was 7.1% and 6.3% at December
31, 1996 and December 31, 1995, respectively. Management believes that liquidity
is being maintained at adequate levels.
The Company's primary source of cash is its financing activity. Funds
obtained from financing activities include borrowings and net deposit inflows.
Net borrowings totaled $23.0 million and net deposit inflows totaled $20.1
million during 1996. During the year ended December 31, 1995, the Company
increased net borrowings by $26.5 million while net deposit inflows totaled
$15.1 million.
11
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
The Company's primary investment activity is lending. Loans originated
or purchased for the portfolio totaled $56.4 million, $59.7 million and $80.9
million during the years ended December 31, 1996, 1995 and 1994, respectively.
MBS are also a significant investment activity. MBS purchases totaled $55.5
million, $54.8 million and $26.5 million for the years ended December 31, 1996,
1995 and 1994, respectively. Cash flows from investing activities were provided
by repayments on existing loans which totaled $52.5 million, $44.2 million and
$49.2 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
At December 31, 1996, the Company had outstanding commitments,
including undisbursed loans in process, to originate or purchase loans totaling
$18.4 million. Commitments to originate and purchase mortgage loans included
$9.5 million in fixed rate mortgage loans. Thirty-year fixed rate mortgage loans
originated by the Company are classified as loans held-for-sale. The Company
enters forward agreements to sell these loans in the secondary market at the
time of commitment. Twenty-year and fifteen-year fixed rate mortgage loans are
currently retained by the Company as investments. All commitments are
anticipated to fund within one year. It is anticipated that funding for these
commitments will be obtained from normal cash flows. The Company has $113.0
million in certificate accounts which are scheduled to mature during the year
ending December 31, 1997. It is anticipated that a substantial portion of these
maturing deposits will remain in the Company.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles which
require the presentation of financial condition and measurement of operating
results in terms of historical dollars, disregarding inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on a financial
institution's performance than the effects of inflation. Interest rates do not
necessarily move in the same direction, or with the same magnitude, as the
prices of goods and services, since such prices are affected by inflation.
Inflation can have a more direct impact on certain categories of
operating expenses such as salaries and wages, employee benefits, occupancy
costs and other operating expenses. These expenses fluctuate with changes in
general price levels.
Because primary assets include substantial fixed rate, fixed term loans
and ARM loans which generally reprice annually, changes in interest rates in the
economy have a gradual impact on the yield on assets. Primary liabilities
include savings deposits which are short term in nature and therefore adjust
with changes in the economy. In general, periods of high inflation are
accompanied by high interest rates. When interest rates move up rapidly, the
cost of funds increases rapidly while the yield on interest-earning assets
increases slowly, resulting in a negative impact on net income. Conversely,
during periods of low inflation, lower and more moderate interest rates are
normally present, which results in a lower cost of funds and a more favorable
impact on net income.
FINANCIAL INSTITUTION LEGISLATION
The DIFA resolved the premium disparity between BIF insured and SAIF
insured financial institutions. The legislation provided for a one-time
assessment to recapitalize the SAIF. The assessment was equal to 65.7 basis
points per $100 of all SAIF assessable deposits held by an institution as of
March 31, 1995 (with certain exceptions). The assessment was effective on
September 30, 1996 and paid on November 27, 1996. The assessment brought the
SAIF's reserve ratio to a level comparable to the BIF reserve ratio of 1.25% of
insured deposits. The special assessment paid by the Bank was $1,564,323 before
a tax benefit of approximately $563,000. Effective 1997, the annual insurance
premium payable by the Bank was reduced from $.23 per $100 of deposits to $.0648
per $100 of deposits, a level competitive premium to deposit insurance payable
by BIF insured institutions.
12
<PAGE>
First Home Bancorp Inc.
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
In August 1996 the Small Business Job Protection Act (the Act) was
signed into law. The Act repealed the percentage of taxable income method of
accounting for bad debts for thrift institutions for years beginning after
December 31, 1995 and requires the recapture of bad debt reserves accumulated
since 1988. The amount recaptured must be taken into income ratably over a six
year period beginning with the 1996 tax year. If certain lending requirements
are met, a two year delay in the recognition of the recapture is possible. Since
the Bank is currently providing deferred income taxes for these reserves, the
change will increase the Bank's tax payments but will not have a material effect
on earnings. For additional information regarding the impact of this
legislation, see Note 15 of the accompanying consolidated financial statements.
13
<PAGE>
First Home Bancorp Inc.
Consolidated Statements of Financial Condition
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
ASSETS
<S> <C> <C>
Cash and amounts due from depository institutions $ 5,133,348 $ 7,015,388
Interest-earning deposits and short-term funds 1,302,081 1,642,052
Investment securities held-to-maturity (market value - 1996 $2,320,716;
1995 $517,000) 2,320,716 517,000
Investment securities held for trading at market value 60,396 57,019
Investment securities available-for-sale at market value 24,975,035 28,729,522
Mortgage-backed securities held-to-maturity (market value - 1996 $98,417,517;
1995 $69,588,486) 97,390,749 67,994,547
Mortgage-backed securities available-for-sale at market value 91,216,261 78,765,677
Loans receivable - net 258,233,455 254,798,690
Loans held for sale at market value 675,700 418,305
Accrued interest receivable 3,013,169 2,903,279
Real estate owned and other repossessed assets 947,722 486,763
Federal Home Loan Bank stock-at cost 7,375,500 5,317,000
Office properties and equipment 2,998,856 2,586,321
Deposit premium (accumulated amortization - 1996 $515,139; 1995 $257,283) 630,776 888,632
Net deferred income taxes 1,347,430 542,473
Prepaid expenses and other assets 777,368 376,057
------------ ------------
TOTAL ASSETS $498,398,562 $453,038,725
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $290,297,687 $270,175,738
Borrowings from the Federal Home Loan Bank 136,622,300 105,797,300
Other borrowed funds 36,526,000 44,329,000
Advances by borrowers for taxes and insurance 445,159 393,140
Accrued interest payable 587,875 555,101
Excess of fair value over cost 66,137 315,089
Accounts payable and accrued expenses 1,208,642 1,370,629
------------ ------------
Total liabilities 465,753,800 422,935,997
------------ ------------
Commitments and contingencies (Note 19)
Shareholders' equity:
Preferred stock - no par value; 1,000,000 shares authorized;
none issued --- ---
Common stock - no par value; 10,000,000 shares authorized;
issued and outstanding, 1996, 2,708,426 shares; 1995, 2,706,679
shares --- ---
Paid-in capital in excess of par 8,922,941 8,918,639
Retained earnings - partially restricted 24,592,225 21,315,342
Unrealized loss on securities available-for-sale, net (870,404) (131,253)
------------ ------------
Total shareholders' equity 32,644,762 30,102,728
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $498,398,562 $453,038,725
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
14
<PAGE>
First Home Bancorp Inc.
Consolidated Statements of Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
INTEREST INCOME:
<S> <C> <C> <C>
Interest and fees on loans $21,711,657 $20,490,217 $17,985,212
Interest on mortgage-backed securities 12,447,643 9,434,965 6,256,570
Other interest income and dividends 2,290,284 2,563,980 2,533,107
----------- ----------- -----------
Total interest income 36,449,584 32,489,162 26,774,889
INTEREST EXPENSE:
Interest on deposits 12,120,820 11,179,153 8,354,550
Interest on borrowed money 9,242,806 7,793,121 5,546,177
----------- ----------- -----------
Total interest expense 21,363,626 18,972,274 13,900,727
----------- ----------- -----------
NET INTEREST INCOME 15,085,958 13,516,888 12,874,162
PROVISION FOR CREDIT LOSSES 400,000 600,000 550,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 14,685,958 12,916,888 12,324,162
----------- ----------- -----------
OTHER INCOME:
Service charges and other fees 571,557 504,671 379,821
Loan servicing fees 213,953 230,776 194,266
Profit (loss) on sale or valuation of:
Loans held for sale (83,749) 128,109 (644,271)
Investment securities held for trading 222,848 152,470 (137,989)
Mortgage-backed securities available-for-sale 24,726 --- ---
Accretion of excess of fair value over cost 248,952 248,952 248,952
Other income 188,916 1,041,787 1,198,918
----------- ----------- -----------
Total other income 1,387,203 2,306,765 1,239,697
----------- ----------- -----------
OPERATING EXPENSES:
General and administrative expenses:
Salaries and employee benefits 4,228,433 3,660,208 3,138,514
Occupancy and equipment 1,296,093 1,123,387 948,534
Federal insurance premiums 543,570 574,362 508,845
Other operating expenses 2,645,173 2,230,803 1,949,439
----------- ----------- -----------
Total general and administrative expenses 8,713,269 7,588,760 6,545,332
SAIF recapitalization assessment 1,564,323 --- ---
Amortization of deposit premium 257,856 257,283 ---
Real estate operations - net 217,293 6,698 320,874
----------- ----------- -----------
Total operating expenses 10,752,741 7,852,741 6,866,206
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 5,320,420 7,370,912 6,697,653
----------- ----------- -----------
INCOME TAX EXPENSE:
Current 1,424,185 2,709,530 2,048,337
Deferred 343,018 (49,530) 446,213
----------- ----------- -----------
Total current and deferred income taxes 1,767,203 2,660,000 2,494,550
Recovery of deferred tax valuation allowance (732,203) --- ---
----------- ----------- -----------
Total income taxes 1,035,000 2,660,000 2,494,550
----------- ----------- -----------
NET INCOME $ 4,285,420 $ 4,710,912 $ 4,203,103
=========== =========== ===========
Earnings per share data:
Primary net income per share $ 1.57 $ 1.74 $ 1.56
Fully diluted net income per share $ 1.57 $ 1.73 $ 1.56
Average number of shares outstanding - primary 2,724,147 2,710,849 2,701,388
Average number of shares outstanding - fully diluted 2,725,512 2,723,608 2,701,388
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
15
<PAGE>
First Home Bancorp Inc.
Consolidated Statements of Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Paid-in Unrealized
Capital Gain
in (Loss) Total
Excess Retained on Shareholders'
of Par Earnings Securities Equity
------ -------- ---------- ------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $8,636,852 $14,236,871 $ 223,698 $23,097,421
Stock issued upon exercise of
stock options 235,442 --- --- 235,442
Cash in lieu of fractional shares --- (5,381) --- (5,381)
Dividends $.32 per share --- (855,520) --- (855,520)
Unrealized loss on securities, net --- --- (3,600,427) (3,600,427)
Net income --- 4,203,103 --- 4,203,103
---------- ----------- --------- -----------
Balance at December 31, 1994 8,872,294 17,579,073 (3,376,729) 23,074,638
Stock issued upon exercise of
stock options 46,345 --- --- 46,345
Dividends $.36 per share --- (974,643) --- (974,643)
Unrealized gain on securities, net --- --- 3,245,476 3,245,476
Net income --- 4,710,912 --- 4,710,912
---------- ----------- --------- -----------
Balance at December 31, 1995 8,918,639 21,315,342 (131,253) 30,102,728
Stock issued upon exercise of
stock options 4,302 --- --- 4,302
Cash in lieu of fractional shares --- (6,869) --- (6,869)
Dividends $.37 per share --- (1,001,668) --- (1,001,668)
Unrealized loss on securities, net --- --- (739,151) (739,151)
Net income --- 4,285,420 --- 4,285,420
---------- ----------- --------- -----------
Balance at December 31, 1996 $8,922,941 $24,592,225 $(870,404) $32,644,762
========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE>
First Home Bancorp Inc.
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income $4,285,420 $4,710,912 $4,203,103
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 400,000 600,000 550,000
Depreciation 360,317 299,248 250,047
Accretion of excess fair value over cost (248,952) (248,952) (248,952)
Amortization of fair market premiums 50,517 186,488 332,801
Amortization of deposit premiums 257,856 257,283 ---
Net (gains) losses on investment securities held for trading (222,848) (152,470) 137,989
Purchase of investment securities held for trading (9,372,271) (1,817,033) (10,258,147)
Proceeds from sale of investment securities held for trading 9,591,742 2,368,734 10,339,806
Gains from sale of mortgage-backed securities available-for-sale (24,726) --- ---
Loans originated for sale (8,845,461) (6,262,211) (11,441,117)
Proceeds from loans sold 8,504,317 6,260,190 17,673,113
Net loss (gain) on sale of loans 83,749 (128,109) 644,271
Increase in accrued interest receivable (109,890) (402,567) (241,114)
Increase in accrued interest payable 32,774 106,154 156,662
(Increase) decrease in deferred income taxes (389,185) (49,530) 446,213
Net other (563,298) 167,884 3,761,712
---------- ---------- ----------
Net cash provided by operating activities 3,790,061 5,896,021 16,306,387
---------- ---------- ----------
INVESTMENT ACTIVITIES:
Proceeds from maturities of investment securities 14,560,833 20,274,738 6,571,609
Proceeds from sale of mortgage-backed securities available-for-sale 3,636,950 --- ---
Purchase of:
Investment securities (12,847,004) (14,415,676) (22,931,583)
Mortgage-backed securities (55,491,075) (54,841,094) (26,493,169)
Repayments on mortgage-backed securities 9,085,346 6,799,895 22,482,619
Net decrease in real estate projects --- --- 22,734
Purchase of FHLB stock (2,058,500) (660,300) (705,600)
Purchase of property and equipment (772,852) (285,149) (228,082)
(Increase) decrease in real estate owned (460,959) 454,233 1,062,490
Principal collected on longer term loans 52,514,984 44,201,081 49,183,319
Loans originated or acquired (56,371,528) (59,707,846) (80,854,174)
Cash obtained from acquisition of branches --- 14,511,820 ---
---------- ---------- ----------
Net cash used by investing activities (48,203,805) (43,668,298) (51,889,837)
---------- ---------- ----------
</TABLE>
17
<PAGE>
First Home Bancorp Inc.
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
FINANCING ACTIVITIES:
Net increase (decrease) in:
<S> <C> <C> <C>
Demand deposits, NOW accounts, and savings accounts 5,276,517 1,050,726 (2,092,729)
Certificates of deposit 14,845,432 14,093,061 13,943,306
Net (decrease) increase in other borrowings (7,803,000) 7,999,950 17,081,550
Proceeds from FHLB borrowings 41,625,000 29,413,850 30,711,750
Repayment of FHLB borrowings (10,800,000) (10,900,000) (22,450,000)
Cash dividends and cash in lieu of fractional shares (1,008,537) (974,643) (860,901)
Proceeds from exercise of common stock options 4,302 46,345 235,442
Net increase (decrease) in advances from borrowers for taxes
and insurance 52,019 (83,235) (137,825)
---------- ---------- ----------
Net cash provided by financing activities 42,191,733 40,646,054 36,430,593
---------- ---------- ----------
(DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (2,222,011) 2,873,777 847,143
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 8,657,440 5,783,663 4,936,520
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $6,435,429 $8,657,440 $5,783,663
========== ========== ==========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
During 1995, investments and mortgage backed-securities with a book value of
$32,019,901 were transferred from held to maturity to available-for-sale. See
Note 1 - Summary of significant accounting policies - investment policy.
During 1994, $9,802,761 of loans held for sale were transferred to loans
receivable. See Note 7 - Loans held for sale.
The Company issued 677,284 shares of Common Stock no par value on February 14,
1997, to effect a four-for-three stock split declared effective December 31,
1996.
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
First Home Bancorp Inc. (the Company) follows accounting and reporting
practices, in accordance with generally accepted accounting principles
(GAAP), normally adhered to by financial institutions. The more
significant accounting policies are summarized below.
Principles of Consolidation - The consolidated financial statements
include the accounts of First Home Bancorp Inc., its wholly-owned
subsidiary, First Home Savings Bank, F.S.B. (the Bank) and the Bank's
wholly owned subsidiaries. The Company's business is conducted
primarily through the Bank. Intercompany accounts and transactions have
been eliminated in consolidation. Certain reclassifications have been
made to prior years' financial statements to conform to the
classifications used in 1996.
Nature of Operations - The Bank conducts business through ten
full-service offices located in Camden, Gloucester, and Salem Counties,
in New Jersey, and New Castle County in Delaware. The Bank was
chartered in 1911 for the purpose of attracting retail savings deposits
to provide mortgage funds for the community. Today, while home lending
is still the cornerstone of activities, the Bank is a full service bank
offering a broad range of products and services to borrowers and
depositors.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from the estimates.
Cash and Cash Equivalents - Cash and cash equivalents include cash on
hand and in banks and interest-earning deposits.
Investment Policy - In accordance with Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (FAS 115),
investments are classified into three categories; those
held-to-maturity and reported at amortized cost, for which the Company
has the positive intent and ability to hold-to-maturity; those
classified as available-for-sale and reported at fair value with
unrealized gains and losses, net of tax, reported as a separate
component of shareholders' equity; and those classified as trading
securities and reported at fair value with unrealized gains and losses
included in earnings.
In December 1995, investments were reclassified with a book value of
$32,019,901 and a fair value of $32,888,612 from held-to-maturity to
available-for-sale. This reclassification was allowable under Financial
Accounting Standards Board (FASB) guidance which permitted institutions
to make a one-time reassessment of the appropriateness of investment
security classifications. As a result of this reclassification, the net
unrealized loss on securities recorded as a component of shareholders'
equity decreased approximately $555,975, net of tax.
Realized security gains and losses are computed using the specific
identification method and are recorded on a trade date basis.
The investment in Federal Home Loan Bank stock is carried at cost.
Loans Held for Sale - Loans held for sale are carried at the lower of
aggregate cost (remaining principal net of unearned premiums and
discounts) or market.
Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments - During 1996, the Company was a party to
financial instruments with off-balance-sheet risk in the normal course
of business to reduce its exposure to fluctuations in interest rates
(hedging). The off-balance-sheet financial
19
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
instruments were forward commitments. During 1995, the Company did not
engage in these activities. Those instruments involved, to varying
degrees, elements of credit, interest rate, or liquidity risk in excess
of the amounts recognized in the balance sheets. The contract amounts
of those instruments represent the extent of the Company's risk in
these financial instruments.
Credit risk is controlled by conducting transactions with major
investment firms and by setting policies for transaction volume
limitations and periodic monitoring. Each dealer was carefully
evaluated on the basis of its financial strength, reputation and
expertise. Unless noted otherwise, the Company does not require
collateral or other securities to support derivative financial
instruments with credit risk.
A forward contract is a legal agreement between two parties to purchase
or sell a specific quantity of a financial instrument, at a specified
price, with delivery and settlement at a specified future date. Because
forward contracts lack the liquidity and protection provided by
regulated exchanges, there is a heightened risk of default by the
counterparties. There were no open forward commitments for future
delivery at December 31, 1996 and 1995.
During 1996, forward contracts were purchased to hedge the loans held
for sale portfolio and outstanding fixed rate mortgage loan
commitments. During 1996, losses of $48,750 were recognized and
included in the actual loss on loans sold. No activity occurred during
1995 with regard to forward contracts.
Mortgage-Backed Securities - Mortgage-Backed Securities (MBS) including
real estate mortgage investment conduits (REMICS) classified as
held-to-maturity are carried at cost and are adjusted for amortization
of premiums and accretion of discounts over the term of the securities
using a method which approximates the interest method. Temporary
changes in the market value of the securities are not recognized since
it is management's intention to hold these MBS to maturity. In
management's opinion, it has the ability to hold these securities to
maturity. MBS classified as available-for-sale, in accordance with FAS
115, are reported at fair value, with unrealized gains and losses, net
of tax, reported as a separate component of shareholders' equity.
Allowance for Credit Losses - An allowance for credit losses is
maintained at a level that management considers adequate to provide for
losses based upon an evaluation of known and inherent risks attendant
with the loan portfolio. Management's evaluation is based on regular
review of the loan portfolio and considers such factors as payment
history, adverse situations which may affect a borrower's ability to
repay, collateral adequacy and current economic conditions. Actual
losses may vary from current estimates. These estimates are reviewed
periodically and, as adjustments become necessary, they are recorded in
the period in which they become known.
Allowance for Uncollected Interest -Interest is not recognized on loans
deemed to be uncollectible. Generally, this includes loans that are
more than three months delinquent. Such interest, if collected, is
credited to income in the period of recovery. The allowance for
uncollected interest is netted against accrued interest receivable for
financial reporting purposes.
Unearned Premiums and Discounts - Unearned premiums and discounts on
assets purchased or acquired are amortized over the estimated life
using a method which approximates the effective interest method.
Loan Fees and Origination Costs - Loan origination fees and related
direct loan origination costs are deferred and recognized over the life
of the loan as an adjustment to yield. The amount of net loan
origination fees recognized as a yield adjustment is reflected as
interest income in the consolidated statements of income. The
unamortized balance of net loan origination fees is reflected in the
consolidated statements of financial condition as part of loans
receivable-net.
20
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Mortgage Servicing Rights - The cost of mortgage servicing rights is
amortized over the period of estimated net servicing revenues.
Impairment of mortgage servicing rights is assessed based on the fair
value of those rights. Fair values are estimated using prepayment
assumptions based on current market interest rates. For purposes of
measuring impairment, the rights are stratified based on the interest
rates of the underlying loans. The amount of impairment recognized is
the amount by which the capitalized mortgage servicing rights for a
stratum exceed their fair value.
Real Estate Owned - Real estate acquired in settlement of loans is
carried at the lower of cost or estimated fair value less estimated
costs to sell. Subsequent costs directly related to the completion of
construction or improvement of the real estate are capitalized to the
extent realizable. Gains on the sale of real estate are recognized upon
disposition of the property and losses are charged to operations as
incurred. Carrying costs, such as maintenance, interest, and taxes, are
charged to operations as incurred. Rental income is recognized as a
reduction of operating costs.
Office Properties and Equipment - Office buildings and equipment are
recorded at cost less accumulated depreciation and amortization.
Depreciation is computed using the straight-line method based on the
estimated useful life of the related asset. The cost of leasehold
improvements is amortized over the estimated life of the improvement or
the term of the lease, whichever is shorter. The asset cost and
accumulated depreciation or amortization for property retirements and
disposals are eliminated from the respective accounts, and any
resultant gain or loss is included in net income as incurred. The cost
of maintenance and repairs is charged to operating expense, as
incurred. The cost of major additions and improvements is capitalized.
Deposit Premium - The premium resulting from the valuation of core
deposits acquired in the purchase of branch offices is amortized over
the estimated remaining life of the existing customer deposit base
acquired using a method which approximates the effective interest
method. The estimated life at the time of purchase was ten years.
Amortization periods are monitored to determine if events and
circumstances require such periods to be reduced.
Income Taxes - The Company files a consolidated federal income tax
return and separate state tax returns. In accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(FAS 109), deferred income tax expense or benefit is determined by
recognizing deferred tax assets and liabilities for the estimated
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The realization of deferred tax assets is
assessed and a valuation allowance provided, when necessary, for that
portion of the asset which is not likely to be realized. Management
believes, based upon current facts, that more likely than not there
will be sufficient taxable income in future years to realize any
deferred tax assets. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in earnings in the period that
includes the enactment date.
Securities Sold Under Agreements to Repurchase - The Bank enters into
sales of securities under agreements to repurchase (reverse repurchase
agreements). Reverse repurchase agreements are treated as borrowings.
Excess of Fair Value Over Cost - The excess of the fair value over cost
of net assets acquired after adjustment of non-current assets resulted
from the conversion merger of Fidelity Mutual Savings & Loan
Association in July 1992. The excess of fair value over cost is
amortized over the economic life of the related long term
interest-earning assets estimated to be approximately six years.
21
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Interest Rate Risk - The Company is principally engaged in the business
of attracting deposits from the general public and using these
deposits, together with borrowings and other funds, to make loans
secured by real estate, to purchase mortgage-backed and other
investment securities and, to a lesser extent, to make consumer loans.
The potential for interest rate risk exists as a result of the shorter
duration of the Company's interest-sensitive liabilities compared to
the generally longer duration of interest-sensitive assets. In a rising
interest rate environment, liabilities will reprice faster than assets
thereby reducing the market value of long-term assets and reducing net
interest income. For this reason, management regularly monitors the
maturity structure of the Company's assets and liabilities in order to
measure its level of interest rate risk and plan for future volatility.
Business Combination and Acquisitions - On May 31, 1996, the Bank
completed a reorganization into a holding company form of ownership,
and the Bank became a wholly-owned subsidiary of First Home Bancorp
Inc. (the newly formed holding company). The shareholders of the Bank
exchanged their shares of the Bank for the same number of shares of
First Home Bancorp Inc.
The consolidated financial statements of the holding company remain the
same as those prior to the reorganization, since the merger was
essentially accounted for in a manner similar to that in
pooling-of-interests. As of the effective date of the reorganization,
the assets, liabilities and shareholders' equity of the Bank were
reflected on the Company's consolidated balance sheet at their
historical values. Also, the consolidated statement of operations of
the Company subsequent to the reorganization reflect the consolidated
operations of the Bank as if the reorganization had taken place prior
to the periods covered by such financial statements. At December 31,
1996, substantially all of the holding company's assets are invested in
capital stock of the Bank (see Note 23).
On January 23, 1995, certain assets were purchased and deposit
liabilities were assumed pursuant to an agreement entered into on
September 21, 1994 to purchase two retail banking offices. The deposit
liabilities assumed amounted to $15,924,000 and the net assets
received, consisting primarily of cash, amounted to $14,766,000. The
fair value of liabilities assumed exceeded the fair value of tangible
assets acquired by $1,146,000, and was allocated to deposit premium.
Earnings and Dividends Per Share - On January 7, 1997 the Board of
Directors declared a four-for-three stock split effective December 31,
1996, which was effected in the form of a stock dividend and
distributed on February 14, 1997, to holders of record on January 22,
1997. Accordingly, earnings per share (EPS) and dividends per share
have been restated to reflect the increased number of shares
outstanding in each prior period.
Recently Issued or Proposed Accounting Standards - The FASB issued
Statement No. 114, "Accounting by Creditors for Impairment of a Loan"
(FAS 114) in May 1993, and FAS 118 "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures" (FAS 118),
in October 1994. These statements require creditors to measure certain
impaired loans based on the present value of expected future cash flows
discounted at the loan's effective interest rate or at the loan's
observable market price or the fair value of the collateral if the loan
is collateral dependent. The in-substance foreclosure rules also
changed in that "in-substance foreclosures" are classified as loans and
stated at the lower of cost or fair value, as defined. These statements
are effective for fiscal years beginning after December 15, 1994, and
accordingly, the Company adopted the statements as of January 1, 1995.
The effect of adopting the statements was not significant.
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (FAS 121). This statement requires that long-lived assets
and certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
In performing the review for recoverability, the entity should estimate
the future cash flows expected to
22
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
result from the use of the asset and its eventual disposition. If the
sum of the expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Measurement of an impairment loss for
long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of the asset. This
statement is effective for financial statements for fiscal years
beginning after December 15, 1995, and accordingly, the Company adopted
the statement January 1, 1996. The effect of adopting the statement was
not significant.
In May 1995, the FASB issued Statement No. 122 "Accounting for Mortgage
Servicing Rights," (FAS 122), this statement requires that the Company
recognize rights to service mortgage loans for others as separate
assets regardless of how those servicing rights are acquired. An
institution that acquires mortgage servicing rights through either the
purchase or origination of mortgage loans and sells those loans with
servicing rights retained should allocate a portion of the cost of the
loans to mortgage servicing rights. FAS 122 requires that
securitizations of mortgage loans be accounted for as sales of mortgage
loans and acquisitions of MBS. Additionally, FAS 122 requires that
capitalized mortgage servicing rights be assessed for impairment, based
on the fair value of those rights. FAS 122 is required to be applied
prospectively for fiscal years beginning after December 15, 1995 to
transactions in which an entity acquires mortgage servicing rights and
to impairment evaluations of all capitalized mortgage servicing rights.
Retroactive application is prohibited. The Company adopted the
statement January 1, 1996. The effect of the adoption did not have a
material effect on consolidated financial position or results of
operations.
In October 1995, FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation" (FAS 123). This statement requires certain
disclosures about stock-based employee compensation arrangements,
defines a fair value based method of accounting for an employee stock
option or similar equity instruments, and encourages all entities to
adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to
measure compensation cost for stock-based compensation plans using the
intrinsic value method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). Entities electing to remain with the accounting in
APB 25 must make pro forma disclosures of net income and earnings per
share as if the fair value based method of accounting defined in FAS
123 had been applied. Under the fair value based method, compensation
cost is measured at the grant date based on the value of the award and
is recognized over the service period, which is usually the vesting
period. Under the intrinsic value based method, compensation cost is
the excess, if any, of the quoted market price of the stock at the
grant date, or other measurement date, over the amount an employee must
pay to acquire the stock. FAS 123 is effective for fiscal years
beginning after December 15, 1995. Under FAS 123, the Company has
elected to disclose on a pro forma basis the fair value method of
accounting for stock-based compensation. Pro forma disclosures required
for entities that elect to continue to measure compensation cost using
APB 25 must include the effects of all awards granted in fiscal years
that began after December 15, 1994. The Company adopted the statement
on January 1, 1996 and will continue accounting for stock-based
compensation under APB 25. See footnote 18 for pro forma disclosures
required by FAS 123.
In June 1996, the FASB issued Statement No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" (FAS 125). The Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Those standards are based upon
consistent application of a financial components approach that focuses
on control. The Statement also defines accounting treatment for
servicing assets and other retained interests in the assets that are
transferred. FAS 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after
December 31, 1996 and is to be applied prospectively. FAS No. 127 was
also issued in 1996 and amended FAS No. 125 by deferring for one year
the effective date for certain provisions of FAS No. 125. The Company
intends to adopt FAS No. 125, as amended, on January 1, 1997, and FAS
No. 127 on January 1, 1998. The adoption of these Statements is not
expected to have a material effect on the Company's financial condition
or results of operations.
23
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Disclosures about Fair Value of Financial Instruments - The following
disclosure of the estimated fair value of financial instruments is made
in accordance with the requirements of FAS 107, "Disclosures about Fair
Value of Financial Instruments." The estimated fair value amounts have
been determined by the Bank using available market information and
appropriate valuation methodologies. However, considerable judgment is
required to interpret market data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amount the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on estimated fair value
amounts.
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(in thousands)
Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 6,435 $ 6,435 $ 8,657 $ 8,657
Investment securities held-to-maturity 2,321 2,321 517 517
Investment securities held for trading 60 60 57 57
Investment securities available-for-sale 24,975 24,975 28,730 28,730
Mortgage-backed securities held-to-maturity 97,391 98,418 67,995 69,588
Mortgage-backed securities available-for-sale 91,216 91,216 78,766 78,766
Loans receivable, net 258,781 262,724 255,440 260,605
Loans held for sale 676 676 418 418
Liabilities:
Demand deposits 120,020 120,077 114,743 114,870
Time deposits 169,899 170,269 155,224 156,583
Borrowings from the Federal Home Loan Bank 136,622 136,159 105,797 106,644
Other borrowed funds 36,526 36,655 44,329 44,329
</TABLE>
Cash and cash equivalents - For cash and cash equivalents, the carrying
amount is a reasonable estimate of fair value.
Investment securities held-to-maturity, held for trading and
available-for-sale - For investment securities held-to-maturity, held
for trading and available-for-sale, estimated fair values are based on
quoted market prices or dealer quotes. If a quoted market price or
dealer quote is not available, fair value is estimated using quoted
market prices for substantially similar investments.
Mortgage-backed securities held-to-maturity and available-for-sale -
Estimated fair value for MBS issued by governmental sponsored agencies
is based on quoted market prices. The fair value of MBS issued by
non-governmental sponsored agencies is estimated based on similar
securities with quoted market prices and adjusted for any differences
in credit ratings or maturities.
Loans receivable - For certain homogeneous categories of loans, such as
residential mortgage loans and other consumer loans, fair value is
estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics and
guarantees. The fair values of other types of loans are estimated using
the quoted market prices for securities backed by similar loans,
adjusted for differences in loan characteristics. The fair value of
other types of loans are estimated by discounting the future cash flows
using the current rates at which similar loans would be made to
borrowers with similar credit ratings and remaining maturities.
Non-performing loans of $3,213,053 and $2,921,459 at December 31, 1996
and 1995, and allowance for credit losses of $3,760,485 and $3,562,330
are not included in the carrying amount or estimated fair value at
December 31, 1996 and 1995, respectively.
24
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Demand deposits and time deposits - The fair value of demand deposits,
savings accounts, and certain money market deposits is the amount
payable on demand at the reporting date. The fair value of fixed
maturity certificates of deposit is estimated using interest rates
currently offered for deposits of similar remaining maturities.
Borrowings from the Federal Home Loan Bank and other borrowed funds -
Interest rates currently available to the Company for debt with similar
terms and remaining maturities are used to estimate the fair value of
existing debt.
2. INVESTMENT SECURITIES HELD-TO-MATURITY
Investment securities held-to-maturity at December 31, 1996 and 1995
consisted of tax exempt obligations due in less than one year.
3. INVESTMENT SECURITIES HELD FOR TRADING
Investment securities held for trading at December 31, 1996 and 1995
consisted of an investment in a mutual fund.
The Company buys and sells debt and equity securities that are
classified as trading securities. At each reporting period, the Company
adjusts the value of these securities to market value. Net gains of
$222,848 and $152,470 were recorded in 1996 and 1995, respectively. Net
losses in the amount of $137,989 were recorded in 1994.
4. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
Investment securities available-for-sale at December 31, 1996 and 1995
consisted of the following:
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government Agencies
Due after one year through five years $17,975,954 $ 72,448 $(16,515) $18,031,887
Due after five years through ten years --- --- --- ---
Corporate Notes
Due in one year or less 724,718 1,754 --- 726,472
Due after one year through five years 2,972,203 36,946 --- 3,009,149
Due after five years through ten years 639,207 11,345 --- 650,552
Preferred stock 2,547,723 9,252 --- 2,556,975
----------- -------- -------- -----------
Total $24,859,805 $131,745 $(16,515) $24,975,035
=========== ======== ======== ===========
</TABLE>
25
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government Agencies
Due after one year through five years $10,991,273 $132,055 $(15,000) $11,108,328
Due after five years through ten years 8,978,750 39,129 (11,400) 9,006,479
Corporate Notes
Due in one year or less 1,996,543 19,719 --- 2,016,262
Due after one year through five years 3,668,388 103,305 --- 3,771,693
Due after five years through ten years 645,621 33,639 --- 679,260
Preferred stock 2,096,775 50,725 --- 2,147,500
----------- -------- -------- -----------
Total $28,377,350 $378,572 $(26,400) $28,729,522
=========== ======== ======== ===========
</TABLE>
U.S. Government Agencies consist of $2,000,000 and $11,000,000 of
step-up securities with periodic interest rate adjustments and call
dates as well as $15,975,954 and $8,970,023 of callable agency notes at
December 31, 1996 and 1995, respectively.
No investment securities available-for-sale were sold under agreement
to repurchase at December 31, 1996. U.S. Government Agencies with
amortized costs of $8,978,750 and market values of $9,006,479 were sold
under agreement to repurchase at December 31, 1995.
There were no sales of investment securities available-for-sale during
1996, 1995 and 1994.
5. MORTGAGE-BACKED SECURITIES
A summary of mortgage-backed securities at December 31, 1996 and 1995
consisted of the following:
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Mortgage-Backed Securities
Available-for-Sale
FNMA pass-through certificates $ 1,862,589 $ 34,577 $ (2,302) $ 1,894,864
FHLMC pass-through certificates 4,342,140 236,560 (167) 4,578,533
GNMA pass-through certificates 6,070,394 389,659 --- 6,460,053
Real estate mortgage investment
conduit obligations 80,416,374 277,492 (2,411,055) 78,282,811
----------- ---------- ----------- -----------
Total mortgage-backed securities
available-for-sale $92,691,497 $938,288 $(2,413,524) $91,216,261
=========== ========== =========== ===========
Mortgage-Backed Securities
Held to Maturity
Non-agency pass through certificates $ 6,143,017 $ 47,852 $ (6,699) $ 6,184,170
Real estate mortgage investment
conduit obligations 91,247,732 1,202,415 (216,800) 92,233,347
----------- ---------- ----------- -----------
Total mortgage-backed securities
held to maturity $97,390,749 $1,250,267 $ (223,499) $98,417,517
=========== ========== =========== ===========
</TABLE>
26
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1995
Gross Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Mortgage-Backed Securities
Available-for-Sale
FNMA pass-through certificates $ 2,340,880 $ 38,472 $ --- $ 2,379,352
FHLMC pass-through certificates 5,573,652 332,827 (373) 5,906,106
GNMA pass-through certificates 7,775,011 378,043 --- 8,153,054
Real estate mortgage investment
conduit obligations 63,633,391 236,559 (1,542,785) 62,327,165
----------- -------- ----------- -----------
Total mortgage-backed securities
available-for-sale $79,322,934 $ 985,901 $(1,543,158) $78,765,677
=========== ========== =========== ===========
Mortgage-Backed Securities
Held to Maturity
Non-agency pass through certificates $ 7,319,434 $ 79,947 $ (47,265) $ 7,352,116
Real estate mortgage investment
conduit obligations 60,675,113 1,651,045 (89,788) 62,236,370
----------- --------- ----------- ----------
Total mortgage-backed securities
held to maturity $67,994,547 $1,730,992 $ (137,053) $69,588,486
=========== ========== =========== ===========
</TABLE>
Mortgage-backed securities with amortized costs of $66,690,201 and
$36,860,813 and market values of approximately $66,990,150 and
$36,863,793 were pledged as collateral for securities sold under
agreements to repurchase at December 31, 1996 and 1995, respectively.
The Company had FHLMC pass-through certificates with amortized costs of
$800,247 and $873,162 and market values of $846,129 and $933,214
pledged for the Treasury, Tax, and Loan Account and the Discount Window
at the Federal Reserve Bank of Philadelphia at December 31, 1996 and
1995, respectively.
Gains of $24,726 were recognized in 1996 from the sales of MBS
available-for-sale. There were no sales of MBS during 1995 and 1994.
Expected maturities of MBS will differ from contractual maturities
because borrowers have the right to call or prepay obligations with or
without call or prepayment penalties.
27
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
6. LOANS RECEIVABLE
Loans receivable at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Residential mortgage loans on existing property $203,573,974 $206,264,708
Residential construction mortgage loans 3,823,763 3,258,284
Commercial real estate loans 17,213,802 15,670,880
Commercial business loans 1,948,398 1,232,999
Consumer loans:
Home equity loans 19,479,002 16,631,949
Mobile home loans 6,605,623 7,804,508
Equity lines of credit 3,992,872 3,674,874
Automobile loans 4,630,703 4,087,717
Other loans 3,747,576 3,538,614
------------ ------------
Total 265,015,713 262,164,533
Undisbursed portion of loans in process (1,222,037) (1,680,884)
Deferred loan fees, discounts and premiums (net) (1,799,736) (2,122,629)
Allowance for credit losses (3,760,485) (3,562,330)
------------ ------------
Total $258,233,455 $254,798,690
============ ============
</TABLE>
The Company originates or purchases both adjustable and fixed interest
rate loans. At December 31, 1996 the composition of loans (excluding
non-performing loans, deferred loan fees, discounts, premiums, and
allowance for credit losses), by maturity or repricing was as follows:
<TABLE>
<CAPTION>
Fixed Adjustable
Rate Rate
-------- ----------
(in thousands)
<S> <C> <C>
1 month - 1 year $ 3,980 $60,387
1 - 3 years 5,886 24,420
3 - 5 years 12,956 1,266
5 - 10 years 33,935 ---
10 - 20 years 103,708 ---
over 20 years 14,043 ---
-------- -------
Total $174,508 $86,073
======== =======
</TABLE>
Adjustable rate loans have interest rate adjustment limitations and are
generally indexed to the 1-year or 3-year U.S.Treasury interest rate.
Market factors affect the correlation of the interest rate adjustment
to the interest rates the Company pays on short-term deposits which
have primarily been used to fund these loans.
At December 31, 1996 and 1995, the Company was servicing loans for
others amounting to $64,900,000, and $63,400,000, respectively.
Servicing loans for others generally consists of collecting mortgage
payments, disbursing payments to investors and processing foreclosures.
Loan servicing income is recorded upon receipt and includes servicing
fees from investors and certain charges collected from borrowers, such
as late payment fees. Mortgage servicing rights of $73,117 were
capitalized in 1996. Amortization of mortgage servicing rights was
$3,656 in 1996.
Loans to executive officers and directors at December 31, 1996 and 1995
were $832,093 and $669,504, respectively. Additional loans and
repayments for the year ended December 31, 1996 were $235,471 and
$72,882, respectively.
28
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
At December 31, 1996 approximately 61% and 13% of mortgage loans
receivable were collateralized by property located in New Jersey and
Delaware, respectively.
The following schedule summarizes the changes in the allowance for
credit losses:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Beginning balance $3,562,330 $3,315,340 $2,662,977
Provision for credit losses 400,000 600,000 550,000
Charge-offs (357,530) (580,427) (43,921)
Recoveries 155,685 227,417 146,284
---------- ---------- ----------
Total $3,760,485 $3,562,330 $3,315,340
========== ========== ==========
</TABLE>
Non-accrual loans at December 31, 1996 and 1995, net of charge-offs,
were $3,213,053 and $2,921,459, respectively. The reserve for
delinquent interest on loans totaled $261,123 and $269,869 at December
31, 1996 and 1995, respectively, and is netted against accrued interest
receivable.
At December 31, 1996 and 1995, the recorded investment in loans that
are considered to be impaired as defined by FAS 114 totaled $333,613,
and $286,446 (of which $159,610 and $219,954 were included in
non-accrual loans), respectively. All impaired loans have no allowances
for credit losses as a result of $114,831 and $164,000 in charge-offs
during 1996 and 1995, respectively. The average recorded investment in
impaired loans were $273,919 and $148,719 during the years ended
December 31, 1996 and 1995, respectively. Payments received on impaired
loans that are not classified non-accrual are recognized as income on
the cash basis. For the years ended December 31, 1996 and 1995, the
Company recognized interest income of $23,682 and $13,109 on impaired
loans.
7. LOANS HELD FOR SALE
Loans held for sale at December 31, 1996 and 1995 amounted to $675,700
and $418,305, respectively. Loans held for sale consist of 30 year
fixed-rate residential mortgage loans which qualify for sale in the
secondary market. These loans are recorded at the lower of cost or
market value determined on an aggregate basis.
At December 31, 1996 the Company had $1,043,200 in forward loan sale
contracts to an agency. No forward loan sales were outstanding at
December 31, 1995. Loans held-for-sale and settled and loan
applications in various stages of the underwriting process as of
December 31, 1996 will be used to satisfy these forward loan sales.
During 1994, $7,047,141 in 20 year fixed rate residential loans and
$2,755,620 in 30 year fixed rate residential loans were transferred
from loans held for sale to loans receivable at the then current market
values. Losses in the amount of $193,768 are included in the statement
of income as though the loans were actually sold in 1994.
Net losses of $83,749 and $644,271 on the sale of loans held for sale
were recorded in 1996 and 1994, respectively. Net gains of $128,109
were recorded in 1995.
29
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
8. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at December 31, 1996 and 1995 consisted of
the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Loans $1,565,647 $1,607,790
Mortgage-backed securities 986,454 790,402
Investment securities 461,068 505,087
---------- ----------
Total $3,013,169 $2,903,279
========== ==========
</TABLE>
9. REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
Real estate owned and other repossessed assets at December 31, 1996 and
1995 consisted of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Real estate owned $941,222 $480,763
Other repossessed assets 6,500 6,000
-------- --------
Total $947,722 $486,763
======== ========
</TABLE>
10. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized by major classifications
as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Land, buildings and improvements $3,689,265 $3,435,768
Furniture and equipment 1,437,197 969,719
---------- ----------
Total 5,126,462 4,405,487
Less accumulated depreciation (2,127,606) (1,819,166)
---------- ----------
Total $2,998,856 $2,586,321
========== ==========
</TABLE>
The Company leases three branch offices and other office space. The
leases of these facilities are accounted for as operating leases. Total
rental expense was $106,433, $104,049 and $64,944 for the years ended
December 31, 1996, 1995 and 1994, respectively.
Minimum rental commitments under the operating leases are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 $ 83,808
1998 52,708
1999 29,241
2000 27,108
2001 27,108
2002 and beyond 6,777
--------
Total $226,750
========
</TABLE>
30
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. DEPOSITS
Deposits at December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
Weighted Weighted
Average Average
Interest Interest
Amount Rate Amount Rate
------ ---- ------ ----
<S> <C> <C> <C> <C>
NOW accounts $26,477,271 1.54% $ 26,292,766 2.02%
Non-interest bearing accounts 7,594,466 --- 7,042,519 ---
Money market and other accounts 51,407,656 4.05 41,364,855 4.10
Savings and club accounts 34,541,096 2.77 40,043,245 2.77
----------- ---- ------------- ----
Subtotal 120,020,489 2.87 114,743,385 2.91
----------- ---- ------------- ----
Certificates by maturity:
6 months or less 78,431,089 5.26 58,010,512 5.30
6 months to 1 year 34,616,074 5.50 44,724,687 5.51
1 to 2 years 36,985,319 5.51 26,548,551 5.69
2 to 3 years 9,953,736 5.71 14,325,846 5.48
Over 3 years 9,912,572 5.94 11,614,071 6.09
----------- ---- ------------- ----
Total certificates 169,898,790 5.43 155,223,667 5.50
----------- ---- ------------- ----
Subtotal 289,919,279 4.37% 269,967,052 4.40%
==== ====
Accrued interest payable 378,408 208,686
------------ ------------
Total $290,297,687 $270,175,738
============ ============
</TABLE>
Jumbo Certificates of Deposits are accounts in excess of $95,000 that
are solicited directly or through brokers in the national market. At
December 31, 1996 and 1995 the Company had $35,267,599 and $27,589,266,
respectively, in Jumbo Certificates of Deposit of which $14,714,990 and
$15,733,969, respectively, were brokered deposits.
At December 31, 1996 and 1995, mortgage loans and MBS aggregating
$1,616,821 and $813,776, respectively, were pledged for public fund
deposits as required by the New Jersey Department of Banking's
Governmental Unit Deposit Protection Act.
REMICS with amortized costs of $498,229 and $688,213 and market values
of $492,313 and $682,941 were pledged for savings deposits at December
31, 1996 and 1995, respectively.
Following is a summary of interest expense by type of account:
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NOW $ 407,851 $ 517,561 $ 478,614
Money market and other 1,858,601 1,359,524 962,891
Savings and club 1,032,328 1,174,685 1,330,618
Certificate 8,822,040 8,127,383 5,582,427
----------- ----------- ----------
Total $12,120,820 $11,179,153 $8,354,550
=========== =========== ==========
</TABLE>
Interest paid on deposits for the years ended December 31, 1996, 1995
and 1994 was $11,951,098, $11,182,881 and $8,286,644, respectively.
31
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
12. BORROWINGS FROM FEDERAL HOME LOAN BANK
Borrowings from the Federal Home Loan Bank at December 31, 1996 and
1995 consisted of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
Weighted Weighted
Average Average
Interest Interest
Amount Rate Amount Rate
------ ---- ------ ----
Maturing during:
<S> <C> <C> <C> <C>
1996 $ --- ---% $ 52,500,000 (1)5.73%
1997 94,061,750 (1)5.69 28,399,150 5.84
1998 19,828,180 5.99 15,265,780 5.87
1999 15,875,000 6.03 3,625,000 6.77
2000 6,257,370 6.58 6,007,370 6.56
2001 600,000 7.12 --- ---
------------ ---- ------------ ----
Total $136,622,300 5.82% $105,797,300 5.86%
============ ==== ============ ====
</TABLE>
- ------------------------------------
(1) Borrowing rates on the line of credit are presented based on a 31
day average rate.
The Bank has a line of credit at the Federal Home Loan Bank for
$47,157,230 of which $38,428,000 was outstanding at December 31, 1996.
The interest rate adjusts daily based on the Federal Funds rate.
Borrowings from the Federal Home Loan Bank include loans that adjust
quarterly based on the London Interbank Offered Rate (LIBOR).
Adjustable borrowings totaled $10,000,000 at December 31, 1996, and at
December 31, 1995.
Borrowings from the Federal Home Loan Bank at December 31, 1996 also
include securities sold under agreements to repurchase of $27,297,000.
These agreements are due within 30 days and have an interest rate of
5.61%. Securities sold under agreement to repurchase were
collateralized by mortgage-backed securities with amortized costs of
$28,935,254 and market values of approximately $28,816,102. There were
no securities sold under agreements to repurchase with the Federal Home
Loan Bank as of December 31, 1995.
Borrowings from the Federal Home Loan Bank averaged $120,987,383 and
$93,037,610 and the maximum outstanding at any month-end was
$147,509,300 and $105,797,300 during the years ended December 31, 1996
and 1995, respectively.
Borrowings from the Federal Home Loan Bank are collateralized by
Federal Home Loan Bank stock and substantially all first mortgage
loans.
Interest expense on borrowings from Federal Home Loan Bank was as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal Home Loan Bank borrowings $6,702,751 $5,443,740 $4,269,188
Amortization of fair market premium --- (20,670) (41,340)
---------- ---------- ----------
Total $6,702,751 $5,423,070 $4,227,848
========== ========== ==========
</TABLE>
32
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Interest paid on borrowings from Federal Home Loan Bank for the years
ended December 31, 1996, 1995 and 1994 was $6,622,854 , $5,420,238 and
$4,290,920, respectively.
13. OTHER BORROWED FUNDS
Other borrowed funds at December 31, 1996 and 1995 consisted of the
following securities sold under agreements to repurchase.
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
Weighted Weighted
Average Average
Interest Interest
Amount Rate Amount Rate
------ ---- ------ ----
<S> <C> <C> <C> <C>
Maturing during:
1996 $ --- ---% $44,329,000 6.00%
1997 16,526,000 5.60 --- ---
1998 --- --- --- ---
1999 20,000,000 5.84 --- ---
----------- ---- ----------- ----
1996 $36,526,000 5.73% $44,329,000 6.00%
=========== ==== =========== ====
</TABLE>
These agreements are treated as borrowings. Securities sold under
agreement to repurchase were collateralized by MBS and U.S. Government
agency securities with amortized costs of $37,754,947 and $45,839,563
and market values of approximately $38,174,048 and $45,870,272 at
December 31, 1996 and 1995, respectively. The MBS and U.S. Government
agency securities underlying the agreements were delivered to, and are
held by the dealers who arranged the transactions. Securities sold
under agreements to repurchase averaged $43,966,833 and $39,317,783 and
the maximum amount outstanding at any month-end was $54,967,000 and
$44,516,000 during the years ended December 31, 1996 and 1995,
respectively.
Interest expense on other borrowed funds for the years ended December
31, 1996, 1995 and 1994 was $2,540,055, $2,370,051 and $1,318,329,
respectively.
Interest paid on other borrowed funds for the years ended December 31,
1996, 1995 and 1994 was $2,587,178, $2,287,399 and $1,139,935,
respectively.
14. SAIF RECAPITALIZATION ASSESSMENT
On September 30, 1996, the Deposit Insurance Funds Act of 1996, which
includes the recapitalization of the Savings Association Insurance Fund
(SAIF), became law. Accordingly, all depository institutions with SAIF
insured deposits were charged a one-time special assessment on their
SAIF-assessable deposits as of March 31, 1995 at the rate of 65.7 basis
points, paid on November 27, 1996. The Bank's assessment was
$1,564,323. SAIF will reduce the insurance premium from $.23 per $100
of deposits to $.0648 per $100 of deposits starting in 1997.
15. INCOME TAXES
The Bank was previously permitted under the Internal Revenue Code (the
Code) to deduct an annual addition to the reserve for bad debts in
determining taxable income, subject to certain limitations.
The Bank's deduction was based upon the percentage of taxable income
method as defined by the Code. The bad debt deduction allowable under
this method equaled 8% of taxable income determined without
33
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
regard to that deduction and with certain adjustments. This addition
differed from the bad debt experience used for financial accounting
purposes.
In August 1996, The Small Business Job Protection Act (the Act) was
signed into law. The Act repealed the percentage of taxable income
method of accounting for bad debts for thrift institutions effective
for years beginning after December 31, 1995. The Act provides that bad
debt reserves accumulated prior to 1988 be exempt from recapture. Bad
debt reserves accumulated after 1987 ("applicable excess reserves") are
subject to recapture. The Act requires the Bank as of January 1, 1996
to change its method of computing reserves for bad debts to the
experience method. The bad debt deduction allowable under this method
is available to financial institutions with assets less than $500
million. Generally, this method will allow the Bank to deduct an annual
addition to the reserve for bad debts equal to the increase in the
balance of the Bank's reserve for bad debts at the end of the year to
an amount equal to the percentage of total loans at the end of the
year, computed using the ratio of the previous six years net chargeoffs
divided by the sum of the previous six years total outstanding loans at
year end. If a financial institution's assets exceed $500 million, it
will be permitted to deduct only actual bad debts as they occur.
The Act requires that a thrift institution subject to the change in its
method of computing reserves for bad debts treat such change as a
change in a method of accounting determined solely with respect to the
"applicable excess reserves" of the institution. The amount of the
applicable excess reserves will be taken into account ratably over a
six-taxable year period, beginning with the first taxable year after
December 31, 1995. The timing of this recapture may be delayed for a
two-year period provided certain residential loan origination
requirements are met. The amount of applicable excess reserves subject
to recapture totaled approximately $952,000 and the related tax
liability included in the Bank's net deferred taxes totaled $342,743 at
December 31, 1995. For financial reporting purposes, the Bank will not
incur any additional tax expenses. At December 31, 1996, under FAS 109,
deferred taxes were provided on the difference between the book reserve
at December 31, 1995 and the applicable excess reserve in the amount
equal to the Bank's increase in the tax reserve from December 31, 1987
to December 31, 1995. Retained earnings includes approximately
$3,229,000 representing bad debt deductions for which no deferred
income taxes have been provided at December 31, 1996 and 1995. Under
the Code, this amount may become taxable if dissolution, liquidation or
certain other distributions occur. However, under FAS 109, the Bank is
not required to provide deferred taxes for reserves established prior
to December 1987.The following are the major sources of temporary
differences and their deferred tax effect at December 31, 1996 and
1995:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
Deferred Tax Assets:
<S> <C> <C>
Credit loss reserve $1,353,775 $1,282,439
Unrealized loss on securities available-for-sale 489,602 73,830
Deposit premium 131,592 65,120
Acquisition costs --- 32,435
Deferred loan fees --- 122,378
---------- ----------
Total deferred tax assets 1,974,969 1,576,202
---------- ----------
Deferred Tax Liabilities:
Deferred loan fees 141,954 ---
Unrealized loss on loans held for sale 89,402 20,151
Depreciation 53,065 26,887
Excess reserves subject to recapture 342,743 356,232
Purchase accounting adjustments 375 13,388
---------- ----------
Total deferred tax liabilities 627,539 416,658
---------- ----------
Net deferred tax asset 1,347,430 1,159,544
Valuation allowance --- (617,071)
---------- ----------
Net deferred tax asset after valuation allowance $1,347,430 $ 542,473
========== ==========
</TABLE>
34
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Company's effective tax rate differs from the statutory federal
income tax rate for the following reasons:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
Percentage Percentage Percentage
of Pretax of Pretax of Pretax
Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate $1,808,943 34.0% $2,506,110 34.0% $2,277,202 34.0%
Increase (decrease) in
taxes resulting from:
Accretion of excess of
fair value over cost (84,644) (1.6) (84,644) (1.2) (84,660) (1.3)
Increase in valuation
allowance for
deferred tax asset 115,132 2.2 129,404 1.8 194,132 2.9
Tax-free interest (13,781) (.3) (9,515) (.1) (10,806) (.2)
State income tax, net
of federal benefit 86,790 1.6 151,140 2.0 133,650 2.0
Other, net (145,237) (2.7) (32,495) (.4) (14,968) (.2)
---------- ---- ---------- ---- ---------- ----
Total current and
deferred income taxes $1,767,203 33.2% $2,660,000 36.1% $2,494,550 37.2%
========== ==== ========== ==== ========== ====
</TABLE>
Deferred federal income tax expense (benefit) consisted of the
following tax effects of temporary differences:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Accelerated depreciation $ 26,178 $ 14,400 $ 10,327
Deferred loan fees 264,332 42,319 137,858
Acquisition costs 32,435 38,160 54,111
Bad debt (13,489) 149,952 92,880
Loan loss reserve (net) 43,796 40,487 (30,674)
Loans held for sale 69,251 (246,963) 267,114
Deposit premium (66,472) (65,120) ---
Other, net (13,013) (22,765) (85,403)
-------- -------- --------
Total $343,018 $(49,530) $446,213
======== ======== ========
</TABLE>
The Company made income tax payments of $1,711,880, $2,538,696 and
$2,107,181 during the years ended December 31, 1996, 1995 and 1994,
respectively.
A recovery of a valuation allowance related to deferred income taxes
was recognized in the amount of $732,203 during the quarter ended
September 30, 1996. The recovery was recognized after considering the
impact of a recent change in the Code related to the bad debt deduction
and the estimated timing of temporary differences related to deferred
loan fees for tax purposes.
16. REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. The Office of Thrift
Supervision (OTS) sets forth capital standards applicable to all
thrifts. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on
the Bank's
35
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of tangible and core capital (as defined in
the regulations) to adjusted assets (as defined), and of Tier I and
total capital (as defined) to risk-weighted assets (as defined). As of
December 31, 1996, management believes that the Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the OTS
categorized the Bank as "well capitalized" under the regulatory
framework for prompt corrective action. To be categorized as "well
capitalized" the Bank must maintain minimum tangible, core and
risk-based ratios. There are no conditions or events since that
notification that management believes have changed the institution's
category.
The Bank's regulatory capital amounts differ from those presented under
GAAP. The following is a reconciliation of GAAP capital to regulatory
capital at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Regulatory Capital
Core, Tangible
and Tier 1 Risk-Based Total Risk-Based
--------------------- ----------------
(in thousands)
At December 31, 1996
<S> <C> <C>
GAAP capital $32,029 $32,029
Deposit premium (631) (631)
Investment in subsidiary (145) (145)
Unrealized losses on certain available for sale securities 876 876
Equity investment --- (75)
Allowance for credit losses --- 2,571
------- -------
Regulatory capital $32,129 $34,625
======= =======
At December 31, 1995
GAAP capital $30,103 $30,103
Deposit premium (889) (889)
Investment in subsidiary (156) (156)
Unrealized losses on certain available for sale securities 164 164
Equity investment --- (75)
Allowance for credit losses --- 2,525
------- -------
Regulatory capital $29,222 $31,672
======= =======
</TABLE>
36
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The table below presents the Bank's actual and regulatory required
capital amounts for core, tangible, tier 1 risk-based and total
risk-based capital for the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Required to be
Required for Well Capitalized
Capital Adequacy Under Prompt
Actual Purposes Corrective Action
-------------------- ---------------------- --------------------
Amount Percentage Amount Percentage Amount Percentage
-------------------- ---------------------- --------------------
(dollars in thousands)
At December 31, 1996:
<S> <C> <C> <C> <C> <C> <C>
Core (Leverage) $32,129 6.45% $14,938 3.0% $24,897 5.0%
Tangible 32,129 6.45 7,469 1.5 N/A N/A
Tier I risk-based 32,129 15.62 8,226 4.0 12,339 6.0
Total risk-based 34,625 16.84 16,452 8.0 20,565 10.0
At December 31, 1995:
Core (Leverage) 29,222 6.47% 13,556 3.0% 22,593 5.0%
Tangible 29,222 6.47 6,778 1.5 N/A N/A
Tier I risk-based 29,222 14.47 8,080 4.0 12,120 6.0
Total risk-based 31,672 15.68 16,159 8.0 20,199 10.0
</TABLE>
17. EMPLOYEE STOCK OWNERSHIP PLANS
A non-leveraged Employee Stock Ownership Plan (Plan) is provided for
eligible employees. The Plan contains provisions which allow employees
to enter into salary reduction arrangements intended to qualify under
Section 401(k) of the Code. The number of allocated shares in the Plan
was 183,681 and 166,351 at December 31, 1996 and 1995, respectively.
The allocation includes shares purchased by plan participants funded by
their own self-directed contributions.
The Board of Directors approved matching contributions to the Plan with
respect to those employees who elected salary reduction contributions.
In addition, a discretionary profit sharing contribution may be
approved by the Board of Directors. The total Plan contribution,
including the discretionary profit sharing contribution, totaled
$270,880, $216,000 and $150,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
18. STOCK OPTIONS
The Shareholders approved the adoption by the Board of Directors of an
Employee Stock Compensation Program and Stock Option Plan for
Non-Employee Directors (the Programs). Pursuant to the Programs, stock
options may be granted which qualify as incentive stock options as well
as stock options that do not qualify as incentive options under the
Code. Non-employee directors, full-time officers, and key employees are
eligible to receive options under the Programs. There are 417,700
shares of Common Stock available for issuance under the Programs after
the four-for-three stock split declared by the Board of Directors on
January 7, 1997.
A summary of the Company's Programs at December 31, 1996, 1995 and 1994
and changes during the years then ended is presented in the table
below.
37
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- --------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price Shares Ex. Price
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 81,441 $10.54 74,424 $ 8.08 127,321 $ 4.20
Granted 41,029 14.52 26,385 12.59 29,780 10.13
Exercised (1,509) 2.85 (16,271) 2.85 (82,677) 2.85
Forfeiture 0 --- (3,097) 9.28 0 ---
------- ------ ------ ------ ------ ------
Ending balance 120,961 $11.99 81,441 $10.54 74,424 $ 8.08
======= ====== ====== ====== ====== ======
Exercisable at end of year 0 1,509 17,780
======= ====== ======
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged
from $9.28 to $14.63. The weighted average remaining contractual life
of those options was 8.55 years.
For years beginning January 1, 1995, pro forma information regarding
net income and earnings per share is required by FAS 123. The
Black-Scholes option pricing model was used to estimate the fair value
of options granted during 1996 and 1995. The Black-Scholes model does
not consider vesting and transfer restrictions. The model requires
input of highly subjective assumptions including the expected stock
price volatility. Because input assumptions can materiality affect the
fair value estimate, in management's opinion the model does not
necessarily provide a reliable single measure of the fair value of its
employee stock options. The following table sets forth for the periods
indicated information regarding (1) risk-free interest rates; (2)
dividend yields; (3) volatility factors of the expected market price of
the common stock; (4) weighted-average expected lives of the options;
and (5) the weighted-average fair value of options granted.
Fair value information:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Risk-free interest rates 6.28% 5.92%
Dividend yields 2.55% 2.67%
Volatility 23.86% 24.84%
Expected life in years 7.5 7.5
Fair value of options granted $4.40 $3.71
</TABLE>
In accordance with APB 25 under the intrinsic value based method, the
Company is required to recognize compensation expense for the excess of
the quoted market price of the stock at the grant date over the amount
an employee or non-employee director must pay to acquire the stock.
Since all stock options are granted at market, no compensation expense
was recognized at the grant date.
Since the Company has elected to remain with the accounting in APB 25,
disclosures of net income and earnings per share are required as if the
fair value based method of accounting defined in FAS 123 had been
applied. All options granted to date have 10 year terms and vest and
become fully exercisable three years after the grant date. For the
purpose of pro forma disclosure, the estimated fair value of the
options are amortized to expense over the options' vesting period.
Compensation expense related to options granted prior to amortization
totaled $180,272 and $97,727 for the years ended December 31, 1996 and
1995, respectively. Since all options vest over a three year period,
compensation expense of $40,987 and $6,978 are reflected in the pro
forma adjustments. Additionally, since stock options granted to outside
directors do not qualify as incentive stock options under the Code,
they have been tax effected in the pro forma presentation.
38
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Company's net income, primary EPS and fully diluted EPS as reported
and on a pro forma basis for the years indicated were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995
---- ----
<S> <C> <C> <C>
Net Income As Reported $4,285,420 $4,710,912
Pro Forma $4,250,811 $4,706,447
Primary EPS As Reported $1.57 $1.74
Pro Forma $1.56 $1.73
Fully Diluted EPS As Reported $1.57 $1.73
Pro Forma $1.56 $1.73
</TABLE>
Because the FAS 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation expense may not be representative of that to be expected
in future years.
19. COMMITMENTS AND CONTINGENCIES
The Company is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and letters of credit which involve, in varying degrees,
elements of credit and interest rate risk that are not recognized in
the consolidated statements of financial condition.
Exposure to credit loss in the event of nonperformance by the other
party to the financial instruments for commitments to extend credit is
represented by the contractual amount of those instruments. The Company
uses the same credit policies in making commitments as it does for on
balance-sheet instruments.
Commitments outstanding at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Fixed rate mortgage loans (current market rates
6.625% to 8.125% at December 31, 1996) $ 2,310,300 $1,686,700
Adjustable rate mortgage loans 1,106,820 ---
Purchase of fixed rate mortgage loans 7,189,033 ---
Unused lines of credit 5,420,592 4,618,605
Letters of credit 573,766 1,176,358
Consumer loans 564,258 207,794
Loans in process 1,222,037 1,680,884
----------- ----------
Total $18,386,806 $9,370,341
=========== ==========
</TABLE>
At December 31, 1996, all commitments are expected to be funded within
one year.
20. RESTRICTIONS ON RETAINED EARNINGS
The Bank is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. At December 31,
1996, approximately $12,042,000 of retained earnings were available for
dividend declaration without prior regulatory approval.
39
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
21. RELATED PARTIES
The Company effected securities transactions through companies which
are controlled by a member of the Board of Directors. The Director is
the president and managing partner of these companies which are
broker-dealers of securities. The transactions consist of purchases
from and sales to these broker-dealers of mortgage-backed securities
and other investment securities in the ordinary course of business. The
aggregate amount of securities purchased from these broker-dealers
during 1996, 1995 and 1994 were approximately $22 million, $23 million
and $47 million, respectively. Total securities transactions for 1996,
1995 and 1994 were $91 million, $73 million and $93 million,
respectively. The aggregate amount of securities sold to these
broker-dealers during 1996 was $1.6 million. The aggregate amount of
securities sold during 1996 was $13 million. There were no accounts
payable/receivable to or from these companies at December 31, 1996 and
1995. During 1994, the Bank entered into reverse repurchase agreements
with these broker-dealers in the amount of $32 million. Offers to
purchase from or sell to other unaffiliated broker-dealers are
solicited at the time of the purchase or sale to ensure that the terms
of these securities transactions are comparable to the terms that could
be obtained from other unaffiliated broker-dealers.
22. LITIGATION AND SETTLEMENTS
The Company is involved in litigation arising in the normal course of
business. In management's opinion, the resolution of all pending
litigation will not have a material adverse effect on its financial
position, liquidity or results of operations. In March 1995, the Bank
received $672,000 in settlement of an insurance claim and in December
1994 received $880,000 in settlement of litigation in regards to the
Fidelity Mutual acquisition. Each amount is included in other income in
the consolidated statements of income for the respective year.
23. PARENT COMPANY FINANCIAL INFORMATION
First Home Bancorp Inc. is a holding company organized under New Jersey
law. It was organized by the Bank for the purpose of acquiring all of
the capital stock of the Bank in connection with the reorganization of
the Bank to the holding company form. The Company was formed on
February 22, 1996 and the reorganization was consummated on May 31,
1996.
40
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Condensed financial statements of First Home Bancorp Inc. are as
follows:
CONDENSED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, 1996
ASSETS
<S> <C>
Cash and amounts due from depository institutions $ 16,019
Interest-earning deposits 483,928
Investment in subsidiary bank 32,029,276
Prepaid expenses and other assets 393,963
-----------
TOTAL ASSETS $32,923,186
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 278,424
-----------
TOTAL LIABILITIES 278,424
Shareholders' equity:
Common stock - no par value ---
Paid in capital excess of par 8,922,941
Retained earnings 24,592,225
Unrealized loss on securities available for sale, net (870,404)
-----------
Total shareholders' equity 32,644,762
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $32,923,186
===========
</TABLE>
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Period from February 22, 1996
through December 31, 1996
<S> <C>
Interest income and dividends $ 8,928
Dividend from subsidiary bank 1,300,000
Equity in undistributed earnings of subsidiary bank 3,009,178
-----------
Total income 4,318,106
Other operating expenses 41,236
-----------
Net income before taxes 4,276,870
Income tax benefit 8,550
-----------
Net income $ 4,285,420
===========
</TABLE>
41
<PAGE>
First Home Bancorp Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period from February 22, 1996
through December 31, 1996
OPERATING ACTIVITIES:
<S> <C>
Net income $ 4,285,420
Equity in undistributed earnings of subsidiary bank (3,009,178)
Net other (115,539)
-----------
Net cash used in operating activities 1,160,703
-----------
INVESTING ACTIVITIES:
Investment in subsidiary stock (100)
-----------
Net cash provided by investing activities (100)
-----------
FINANCING ACTIVITIES:
Cash dividends and cash in lieu of fractional shares (764,958)
Company formation 100,000
Proceeds from exercise of common stock options 4,302
-----------
Net cash used in financing activities (660,656)
-----------
INCREASE IN CASH AND CASH EQUIVALENTS 499,947
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0
-----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 499,947
===========
</TABLE>
42
<PAGE>
First Home Bancorp Inc.
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
First Home Bancorp Inc.:
We have audited the accompanying consolidated statements of financial condition
of First Home Bancorp Inc. and subsidiaries (the "Company") as of December 31,
1996 and 1995, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
Home Bancorp Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Philadelphia, Pa.
February 10, 1997
43
<PAGE>
First Home Bancorp Inc.
Corporate Information
- --------------------------------------------------------------------------------
ANNUAL MEETING
The annual meeting of First Home Bancorp Inc. will be held on April 25, 1997 at
10:30 a.m. at the Holiday Inn, Exit 10, I-295 at Pureland Industrial Complex,
Bridgeport, New Jersey.
STOCK LISTING
The Company's common stock is traded on the Nasdaq National Market tier of the
Nasdaq Stock Market under the symbol: "FSPG". Trading information on the
Company's common stock can be located in the financial section of most major
newspapers.
ANNUAL REPORT ON FORM 10-K AND OTHER
INVESTOR INFORMATION
The Company will furnish upon written request at no charge to any shareholder a
copy of the Annual Report on Form 10-K for the year ended December 31, 1996 and
the exhibits thereto required to be filed with the Securities Exchange
Commission under the Securities Exchange Act of 1934 by writing to:
Robert A. DiValerio
First Home Bancorp Inc.
P.O. Box 189
Pennsville, NJ 08070
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, N.J. 07660
1-800-851-9677
ACCOUNTANTS
Arthur Andersen LLP
1601 Market Street
Philadelphia, PA 19103
SECURITIES COUNSEL
Blank Rome Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
GENERAL COUNSEL
Warren W. Homan
317 Shell Road
Penns Grove, NJ 08069
ADMINISTRATIVE CENTER
- ---------------------
125 S. Broadway
Pennsville, NJ 08070
(609) 678-4400
LOAN CENTER
- -----------
5 Ferry Road
Pennsville, NJ 08070
(609) 678-5100
NEW JERSEY OFFICES
- ------------------
CARNEYS POINT
221 Shell Road
Carneys Point, NJ 08069
(609) 299-9200
ELMER
Main Street and Harding Highway
Elmer, NJ 08318
(609) 358-8121
GIBBSTOWN
401 Harmony Road
Gibbstown, NJ 08027
(609) 423-8822
NEWFIELD
12 Northwest Blvd.
Newfield, NJ 08344
(609) 697-4770
PENNSAUKEN
5714 Westfield Avenue
Pennsauken, NJ 08110
(609) 665-2240
PENNS GROVE
157 West Main Street
Penns Grove, NJ 08069
(609) 299-1766
PENNSVILLE
125 South Broadway
Pennsville, NJ 08070
(609) 678-3133
WESTMONT
302 Haddon Avenue
Westmont, NJ 08108
(609) 858-1800
DELAWARE OFFICES
- ----------------
STANTON
First State Plaza
1608 W. Newport Pike
Stanton, DE 19804
(302) 998-6858
WILMINGTON
600 S. Harrison Street
Wilmington, DE 19805
(302) 654-6224
44
<PAGE>
First Home Bancorp Inc.
Directors and Officers
- --------------------------------------------------------------------------------
First Home Bancorp Inc.
Board of Directors
Willard F. Cheeseman
Adam J. Gagliardi, Jr.
Eugene J. Martell
Stephen D. Miller
Frederick M. Palfrey
W. Kenneth Porch
Stephen R. Selverian
Rodger D. Shay
OFFICERS
Stephen D. Miller
President, Chief Executive Officer
and Chairman of the Board
Robert A. DiValerio
Senior Executive Vice President,
Chief Financial Officer and Secretary
Duff P. O'Connor
Executive Vice President
Stephen R. Selverian
Executive Vice President
FIRST HOME SAVINGS BANK, F.S.B.
EXECUTIVE OFFICERS
Stephen D. Miller
President, Chief Executive Officer
and Chairman of the Board
Robert A. DiValerio
Senior Executive Vice President,
Chief Operating Officer
Chief Financial Officer and Secretary
Duff P. O'Connor
Executive Vice President
Loan and Deposit Operations
Stephen R. Selverian
Executive Vice President
Retail Banking
OFFICERS AND MANAGERS
Victoria A. Buckley
Manager, Stanton Office
Shawn S. Burkhardt
Manager, Consumer Lending
Dorothy H. Buzby
Assistant Vice President
Branch Operations Officer
Kimberly A. Cruz
Manager, Newfield Office
Anthony DeCicco
Assistant Vice President
Business Development Officer
Peter H. Dietrich
Vice President
Investment Officer
Joseph Fiorentino, III
Vice President
Mortgage Manager
Angela Goldberg
Assistant Vice President
Business Development Officer
Doris K. Grant
Manager, Human Resources
Emily D. Hewitt
Manager, Penns Grove Office
<PAGE>
Elizabeth F. Homan
Assistant Secretary
Administrative Assistant
Tara M. Hornblower-Williams
Manager, Carneys Point Office
William T. Kennan
Vice President/Marketing
Kenneth H. Kline
Manager, Westmont Office
Gloria Y. Kneller
Manager, Gibbstown Office
Barbara A. Lacy
Manager, Pennsauken Office
Brenda K. Mehaffey
Manager, Elmer Office
Thomas N. McDermott
Vice President/Treasurer
Wayne D. Pelura
Assistant Vice President
Business Development Officer
Jack E. Rothkopf
Controller
Carolyn L. Rutkowski
Manager, Wilmington Office
Leah C. Smith
Manager, Pennsville Office
Renee C. Smith
Assistant Controller
Pat J. Storione
Assistant Vice President
Business Development Officer
Roland A. Turmol, Jr.
Vice President
Senior Administration Officer
Kathleen A. Warwick
Assistant Vice President
Data Processing Manager
Lorraine A. Williams
Assistant Vice President
Compliance/Security Officer
<PAGE>
EXHIBIT 21
SUBSIDIIARIES OF THE REGISTRANT
Jurisdiciton or
Name Incorporation or Organization
---- -----------------------------
First Home Savings Bank, F.S.B. United States
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
statements of consolidated financial condition as of December 31, 1996 and the
Consolidated Statements of Income for th twelve months ended December 31, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001009195
<NAME> FIRST HOME BANCORP, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 5,133,348
<INT-BEARING-DEPOSITS> 1,302,081
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 60,396
<INVESTMENTS-HELD-FOR-SALE> 116,191,269
<INVESTMENTS-CARRYING> 99,711,465
<INVESTMENTS-MARKET> 100,738,233
<LOANS> 258,909,155
<ALLOWANCE> 3,760,485
<TOTAL-ASSETS> 498,398,562
<DEPOSITS> 290,297,687
<SHORT-TERM> 110,587,750
<LIABILITIES-OTHER> 2,307,813
<LONG-TERM> 62,560,550
0
0
<COMMON> 0
<OTHER-SE> 32,644,762
<TOTAL-LIABILITIES-AND-EQUITY> 498,398,562
<INTEREST-LOAN> 21,711,657
<INTEREST-INVEST> 14,737,927
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 36,449,584
<INTEREST-DEPOSIT> 12,120,820
<INTEREST-EXPENSE> 21,363,626
<INTEREST-INCOME-NET> 15,085,958
<LOAN-LOSSES> 400,000
<SECURITIES-GAINS> 247,574
<EXPENSE-OTHER> 10,752,741
<INCOME-PRETAX> 5,320,420
<INCOME-PRE-EXTRAORDINARY> 5,320,420
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,285,420
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.57
<YIELD-ACTUAL> 7.88
<LOANS-NON> 3,213,053
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,562,330
<CHARGE-OFFS> 357,530
<RECOVERIES> 155,685
<ALLOWANCE-CLOSE> 3,760,485
<ALLOWANCE-DOMESTIC> 3,760,485
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
