<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
EMERALD ISLE BANCORP, INC.
(Exact Name of registrant as specified in its charter)
MASSACHUSETTS 04-3300934
(State of incorporation or organization) (I.R.S. Employer Identification No.)
730 HANCOCK STREET
QUINCY, MASSACHUSETTS 02170
(617) 479-5001
(Address of principal executive offices)
Securities to be registered pursuant to 12(b) of the Act:
Title of each class to Name of each exchange on which
be so registered each class is to be registered
NONE
- ------------------------------ ---------------------------------
- ------------------------------ ---------------------------------
- ------------------------------ ---------------------------------
If this Form relates to the registration of a class of debt securities and
is effective upon filing pursuant to General Instruction A(c)(1), please check
the following box. [ ]
If this Form relates to the registration of a class of debt securities and
is to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A(c)(2), please check the following box. [ ]
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE PER SHARE
(Title of Class)
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
Pursuant to a Plan of Reorganization and Acquisition dated as of
February 15, 1996 (the "Plan of Reorganization") between The Hibernia Savings
Bank, a Massachusetts savings bank in stock form of ownership (the "Bank"), and
Emerald Isle Bancorp, Inc., a newly-formed Massachusetts corporation organized
at the direction of the Bank (the "Company"), the Company will acquire all of
the outstanding common stock of the Bank, par value $1.00 per share, other than
shares held by stockholders exercising dissenters' appraisal rights, if any, in
a share-for-share exchange for the common stock, par value $1.00 per share, of
the Company. The Bank will thereby become a wholly owned subsidiary of the
Company and the Bank's stockholders will become, subject to their dissenters'
appraisal rights, stockholders of the Company. Under the Articles of
Organization of the Company (the "Articles"), the Company is
<PAGE>
authorized to to issue up to 10,000,000 shares of Common Stock, par value $1.00
per share, and up to 5,000,000 shares of preferred stock, par value $1.00 per
share.
STOCK. The Board of Directors of the Company is authorized to issue shares
of stock in series and classes and to fix the voting powers, designations,
preferences, or other rights of the shares of each such series and class and the
qualifications limitations, and restrictions thereon. The issuance of preferred
stock by the Company is subject to the approval of a majority vote of the Board
Directors of the Company. Preferred stock issued by the Company may rank prior
to the Common Stock as to dividend rights, liquidation preferences, or both, may
have full or limited voting rights (including multiple voting rights and voting
as a class), and may be convertible into shares of Common Stock.
VOTING RIGHTS. Stockholders are entitled to one vote per share on all
matters, and a proportionate vote for a fractional share, subject to the rights
of the holders of shares of preferred stock, if and when issued. The Articles
do not provide for cumulative voting in connection with the election of
Directors, and therefore holders of a majority of the Common Stock will be able
to elect all of the Directors standing for election in each year. The Company
may not, directly or indirectly, vote any share of its own stock.
PREEMPTIVE RIGHTS. Holders of Common Stock have no preemptive rights as to
the purchase of any shares issued in the future. Therefore, the Board of
Directors may sell shares of capital stock without first offering them to the
stockholders of the Company.
ACCESSABILITY. Under Massachusetts law, Common Stock is non-assessable.
DIVIDEND RIGHTS. The Company may pay dividends if, as, and when declared
by the Board of Directors. The Company's stockholders are entitled to receive
and share equally in such dividends as may be declared by the Board of Directors
out of funds legally available therefor. Directors who vote to authorize a
dividend payment or repurchase or redemption, which is made when the corporation
is insolvent, renders the corporation insolvent, or is in violation of the
corporation's articles of organization, may be jointly and severally liable for
such improper dividend. Stockholders to whom a corporation makes any such
distribution (except a distribution of stock of the corporation), if the
corporation is, or thereby rendered, insolvent, are liable to the corporation
for the amount of distribution made, or for the amount of such distribution
which exceeds that which could have been made without rendering the corporation
insolvent, but in either event only to the extent of the amount paid or
distributed to them.
It is the policy of the Federal Reserve Board that bank holding companies
pay cash dividends on common stock only out of the past year's net income, and
only if prospective earnings retention is consistent with the organization's
expected future needs. The policy further provides that a bank holding company
should not maintain a level of cash dividends that undermines the bank holding
company's ability to serve as a source of strength to its banks. The Federal
Reserve Board also requires by regulation that a holding company seeking to
purchase or redeem any of its equity securities provide prior notice to the
appropriate regional Federal Reserve Bank, which may disapprove of such proposed
purchase or redemption, if the gross consideration for such purchase or
redemption, when aggregated with the net consideration paid by the holding
company for all such purchases or redemptions during the preceding twelve
months, exceeds 10% of the holding company's net worth, except that such prior
notice requirements do not apply to any holding company that is "well
capitalized" in accordance with Federal Reserve Board regulations, has received
a composite "1" or "2" rating in its most recent examination and is not subject
to any unresolved regulatory issues. Any issuance of preferred stock with a
preference over Common Stock as to dividends may affect the dividend rights of
Common Stock holders.
DIRECTORS
NUMBER AND STAGGERED TERMS. The By-laws of the Company (the "By-laws")
provide that the Board of Directors of the Company may fix the number and
classification of Directors, unless at the time there is an Interested
Stockholder (as defined in the By-laws) in which case a two-thirds vote of the
<PAGE>
Continuing Directors (as defined in the By-laws) is also required. The Board
of Directors of the Company will initially be composed of seven Directors. The
Articles provide for three classes of Directors with one class elected each year
for three year staggered terms, so that ordinarily no more than approximately
one-third of the Directors will stand for election in any one year, and that
there will be no cumulative voting in the election of Directors.
The term "Interested Stockholder" is defined in the By-laws to mean any
person (other than the Company or any officer or director thereof, any employee
benefit plan of the Company, or any subsidiary of the Company) who or which is
the beneficial owner 10% or more of the outstanding voting stock of the Company,
is an affiliate of the Company and at any time within the two-year period
immediately prior to the date in question was the beneficial owner of 10% or
more of the outstanding voting stock of the Company, and certain assignees of
such Interested Stockholder. The term "Continuing Director" is defined in the
By-laws to mean Directors who are not affiliates or associates of any Interested
Stockholder and who were Directors prior to the time that any Interested
Stockholder became an Interested Stockholder, and any successor of a Continuing
Director who is not an affiliate or associate of the Interested Stockholder and
is approved to succeed a Continuing Director by a two-thirds vote of the
Continuing Directors then on the Board of Directors.
REMOVAL. The Articles provide that any Director may be removed with or
without cause by a vote of two-thirds of the Directors then in office, unless a
the time of such action there is an Interested Stockholder, in which case the
affirmative vote of two-thirds of the Continuing Directors shall also be
required.
VACANCIES. The By-laws provide that any vacancy occurring on the Board of
Directors of the Company as a result of resignation, removal or death may be
filled by vote of a majority of the remaining Directors, unless at the time of
the action there is an Interested Stockholder, in which case such vacancy may
only be filled by a vote of two-thirds of the Continuing Directors then in
office. A Director elected to fill such a vacancy shall be elected to serve for
a term of office continuing until the next election of Directors by the
stockholders. Any directorship to be filled by reason of an increase in the
authorized number of Directors may be filled by the Board of Directors for a
term of office continuing until the next election of Directors by the
stockholders. If at the time of such action, there is an Interested
Stockholder, a vote of two-thirds of the Continuing Directors is required
instead.
MEETINGS OF STOCKHOLDERS. The By-laws provide that the annual meeting of
stockholders will be held on the third Monday in April in each year. The By-laws
set forth certain advance notice and informational requirements and time
limitations on any Director nomination or any new business that a stockholder
wishes to propose for consideration at an annual meeting of stockholders. Any
such nomination or new business, to be timely, must be delivered to, or mailed
and received at the principal executive offices of the Company not less than 120
days nor more than 150 days prior to the scheduled annual meeting. The Board of
Directors may reject a stockholder's nomination or proposal if it is not timely
or does not contain sufficient information, or, if the Board of Directors does
not make this determination, the presiding officer may do so. If there is an
Interested Stockholder, the nomination or proposal requires the concurrence of a
majority of the Continuing Directors.
The By-laws provide that special meetings of stockholders may be called by
the Chairman of the Board, if one is elected, the Vice-Chairman, if one is
elected, or by the Board of Directors, unless there is an Interested
Stockholder, in which case any such call shall also require the affirmative vote
of two-thirds of the Continuing Directors then in office, unless otherwise
provided in the Articles or By-laws, and shall be called by the Clerk, or in
case of the death, absence, incapacity or refusal of the Clerk, by any other
officer, upon written application of one or more stockholders who hold at least
forty percent in interest of the capital stock entitled to vote thereat. The
By-laws also provide that only those matters set forth in the call of the
special meeting may considered or acted upon at such special meeting.
<PAGE>
STOCKHOLDER VOTE REQUIRED TO APPROVE CERTAIN TRANSACTIONS. Massachusetts
law provides that certain agreements of merger, or the sale, lease or
exchange of all or substantially all of the assets of a Massachusetts
corporation must be approved by the vote of holders of two-thirds of the
shares of each class of stock and entitled to vote thereon or, if the
articles of organization so provide, the vote of a lesser proportion, but not
less than a majority. Massachusetts law provides that no vote of the
stockholders of a Massachusetts corporation is required, unless its articles
of organization otherwise provide, to approve a merger if (i) the agreement
of merger does not amend in any respect the corporation's articles of
organization, (ii) the number of shares of the surviving corporation's stock
to be issued in the merger does not exceed 15% of the shares of the same
class outstanding prior to the effective date of the merger, and (iii) the
issuance of authorized but unissued stock pursuant to a merger by vote of the
directors has been authorized by the by-laws or a vote of the stockholders.
A Massachusetts corporation owning at least 90% of the outstanding shares of
each class of stock of another corporation may merge such corporation into
itself without a vote of the stockholders.
The Articles provide that a two-thirds vote of the stockholders is required
to authorize (i) a sale, lease, or other disposition of all or substantially all
of the property or assets of the Company, (ii) a merger or consolidation of the
Company with or into any other corporation, or (iii) any reclassification of or
recapitalization involving the Company's Common Stock.
AMENDMENT OF ARTICLES. The Articles provide that any amendment, addition,
alteration, change or repeal of the Articles regarding an increase or reduction
of the capital stock or of any authorized class thereof, certain changes with
respect to the number and par value of any authorized shares or class thereof,
or a change of the corporate name may be made if first approved by the
affirmative vote of two-thirds of the Board of Directors of the Company (unless
at the time of such action there is an Interested Stockholder, in which case the
affirmative vote of two-thirds of the Continuing Directors shall also be
required), and thereafter approved by the affirmative vote of a majority of the
stockholders.
The Articles provide that no other amendment, addition, alteration, change
or repeal of the Articles shall be made unless first approved by the affirmative
vote of two-thirds of the Board of the Directors of the Company, and thereafter
approved by the affirmative vote of at least two-thirds of the stockholders. If
at any time within the sixty day period immediately preceding the meeting at
which the stockholder vote is to be taken there is an Interested Stockholder,
such provision may only be amended, altered, changed or repealed if such action
shall have been approved by not less than two-thirds of the Continuing
Directors.
AMENDMENT OF BY-LAWS. The Articles provide that the Board of Directors may
make, repeal, alter, amend and rescind the By-laws of the Company by the
affirmative vote of at least two-thirds of the Directors, unless at the time of
such action there is an Interested Stockholder, in which case the affirmative
vote of at least two-thirds of the Continuing Directors is also required. The
Articles also provide that the By-laws may be made, repealed, altered, amended,
or rescinded by the stockholders of the Company by the vote of at least two-
thirds of the outstanding shares, considered for this purpose as one class, cast
at a meeting of the stockholders called for that purpose, provided that notice
of such proposed adoption, repeal, alteration, amendment or recission is
included in the notice of such meeting.
ANTI-TAKEOVER PROVISIONS. Certain provisions of the Articles and By-laws
may be deemed to have an "anti-takeover" effect. For example: (i) the Board of
Directors' authority to set the designations, powers, preferences and relative
rights of the authorized but unissued shares of preferred stock could be used in
the event of an attempt by an unsolicited third party to gain control of the
Company to impede such attempt to acquire control; (ii) the three-year staggered
terms for Directors, the Board of Directors' authority to fix the number of
Directors who may serve from time to time, and the notice and informational
requirements pertaining to the nomination by stockholders of candidates for
election to the Board of Directors all may make it more difficult to change a
majority of the Board of Directors; (iii) the requirements that special meetings
of shareholders may be called only by the Chairman of the Board, Vice Chairman,
the Board of Directors or upon application of shareholders holding at least
forty percent of the
<PAGE>
capital stock, and that shareholder proposals must satisfy certain notice and
informational requirements to be considered at an annual meeting may make it
more difficult for shareholders to take action independent of the of Directors;
and (iv) the requirement that action to amend the Articles must generally be
preceded by the approval of the Board of Directors of such proposed amendment
may limit the ability to effect such amendments without the support of the Board
of Directors.
In addition to the various provisions of the Articles and By-laws, certain
of the Massachusetts General Laws may also have the effect of preventing future
acquisitions of the Company. Chapters 110D and 110F of the Massachusetts General
Laws, cover "control share acquisitions" and certain combinations with
interested stockholders, respectively. Chapter 110D provides that any person
who makes a bona-fide offer to acquire, or acquires shares of stock of a
corporation in an amount equal to or greater than one-fifth, one-third, or a
majority of the voting stock of the corporation must obtain the approval of a
majority of shares of all stockholders except the acquiror and the officers and
inside directors of the corporation in order to vote the shares that the
acquiror acquires in crossing the thresholds. A Massachusetts corporation is
permitted to opt out of Chapter 110D. The Articles of the Company contain a
provision opting out of chapter 110D. As a result of the Company's decision to
opt out of the statute, the voting restrictions of Chapter 110D are not
currently applicable to the Company's stockholders. The Board of Directors may
amend the Articles at any time in the future to subject the Company to this
statute prospectively.
Chapter 110F provides that a Massachusetts corporation with more than 200
stockholders may not engage in a "business" combination with an "interested"
stockholder" for a period of three years after the date of the transaction in
which the person becomes and interested stockholder, unless (i) the interested
stockholder obtains the approval of the Board of Directors prior to becoming an
interested stockholder, (ii) the interested stockholder acquires 90% of the
outstanding voting stock of the corporation (excluding shares held by certain
affiliates of the corporation) at the time it becomes an interested stockholder,
or (iii) the business combination is approved by both the Board of Directors and
the holders of 66 2/3% of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder). An "interested
stockholder" is a person who, together with affiliates and associates, owns (or,
in certain cases, at any time within the prior three years did own) 5% or more
of the outstanding voting stock of the corporation. A "business combination"
includes a merger, certain stock or asset sales, and certain other specified
transactions resulting in a financial benefit to the interested stockholder. A
Massachusetts corporation is permitted to opt out of Chapter 110F. The Articles
contain a provision opting out of Chapter 110F. As a result of the Company's
decision to opt out of the statute, the provisions of Chapter 110F are not
currently applicable to the Company's stockholders. The Board of Directors of
the Company may amend the Articles at any time to subject the Company to Chapter
110F prospectively.
<PAGE>
ITEM 2. EXHIBITS.
The following exhibits are filed as a part of this Registration Statement:
Number Description
- ------ -----------
99.1 Articles of Organization of the Registrant
99.2 Bylaws of the Registrant
99.3 Annual Report on F.D.I.C. Form F-2 of The Hibernia Savings
Bank (the "Bank") for the fiscal year ended December 31, 1995
99.4 Notice and Proxy Statement dated March 15, 1996 for the
Annual Meeting of Shareholders of the Bank
99.5 Quarterly Report on F.D.I.C. Form F-4 of the Bank for the
fiscal quarter ended March 31, 1996
99.6 1995 Annual Report to the Bank's Stockholders
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this registration statement to be signed on behalf by the
undersigned, thereunto duly authorized.
EMERALD ISLE BANCORP, INC.
Date: August 9, 1996 By: /s/ Mark A. Osborne
----- ------------------------------------
Mark A. Osborne, President
<PAGE>
Exhibit 99.1
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
ARTICLE I
The exact name of the corporation is:
Emerald Isle Bancorp, Inc.
ARTICLE II
The purpose of the corporation is to engage in the following business
activities:
To acquire, invest in or hold stock in any subsidiary permitted under the
Bank Holding Company Act of 1956 or Chapter 167A of the Massachusetts General
Laws, as such statutes may be amended from time to time, and to engage in any
other permissible activity or enterprise under said statutes or other applicable
law.
To engage generally in any business activity which may be lawfully carried
on by a corporation organized under Chapter 156B of the Massachusetts General
Laws.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON ONE SIDE ONLY OF SEPARATE
8 1/2 x 11 SHEETS OF PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS
TO MORE THAN ONE ARTICLE MAY BE MADE ON A SINGLE SHEET SO LONG AS EACH
ARTICLE REQUIRING EACH ADDITION IS CLEARLY INDICATED.
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue.
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common: 10,000,000 $1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 5,000,000 $1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See Continuation Sheet IV Attached.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
See Continuation Sheet V Attached.
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Continuation Sheet VI attached.
**IF THERE ARE NO PROVISIONS STATE "NONE."
NOTE: THE PRECEDING SIX (6) ARTICLES ARE CONSIDERED TO BE PERMANENT AND MAY ONLY
BE CHANGED BY FILING APPROPRIATE ARTICLES OF AMENDMENT.
<PAGE>
CONTINUATION SHEET IV
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 15,000,000, of which 10,000,000 are to be
shares of common stock, of $1.00 par value per share, and of which 5,000,000 are
to be shares of serial preferred stock, of $1.00 par value per share. The shares
may be issued by the Corporation from time to time as approved by the Board of
Directors of the Corporation without the approval of the stockholders except as
otherwise provided in this Article IV or the rules of a national securities
exchange if applicable. The consideration for the issuance of the shares shall
be paid to or received by the Corporation in full before their issuance and
shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any other
consideration deemed appropriate by the Board of Directors. In the absence of
actual fraud in the transaction, the judgment of the Board of Directors as to
the value of such consideration shall be conclusive. Upon payment of such
consideration, such shares shall be deemed to be fully paid and nonassessable.
In the case of a stock dividend, the part of the surplus of the Corporation
which is transferred to stated capital upon the issuance of shares as a stock
dividend shall be deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. COMMON STOCK. Except as provided in these Articles (or in any
certificate of establishment of series of preferred stock), the holders of the
common stock shall exclusively possess all voting power. Each holder of shares
of common stock shall be entitled to one vote for each share. There shall be no
cumulative voting rights in the election of Directors.
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 sinking fund or 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, but only when and as
declared by the Board of Directors of the Corporation.
<PAGE>
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having preference
over the common stock in any such event the full preferential amounts to which
they are respectively entitled, the holders of the common stock and of any class
or series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of the Corporation to receive the remaining assets
of the Corporation available for distribution, in cash or in kind, in proportion
to their holdings.
Each share of common stock shall have the same relative powers, preferences
and rights as, and shall be identical in all respects with, all the other shares
of common stock of the Corporation.
B. SERIAL PREFERRED STOCK. Subject to any limitations prescribed by law
or these Articles, the Board of Directors of the Corporation is authorized, by
vote from time to time taken, to provide for the issuance of serial preferred
stock in one or more series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each such series, and the qualifications, limitations or restrictions
thereof, including, but not limited, to determination of any of the following:
1. the distinctive serial designation and the number of shares
constituting such series;
2. the dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
3. the voting powers, full or limited, if any, of the shares of such
series;
4. whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions upon which such
shares may be redeemed;
5. the amount or amounts payable upon the shares of such series in
the event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation;
6. whether the shares of such series shall be entitled to the
benefits of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and, if so entitled, the amount of such fund and
the manner of its
<PAGE>
application, including the price or prices at which such shares may be
redeemed or purchased through the application of such fund;
7. whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other series
of the same or any other class or classes of stock of the Corporation and,
if so convertible or exchangeable, the conversion price or prices, or the
rate or rates of exchange, and the adjustments thereof, if any, at which
such conversion or exchange may be made, and any other terms and conditions
of such conversion or exchange;
8. the subscription or purchase price and form of consideration for
which the shares shall be issued; and
9. whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any
other series of serial preferred stock.
Any establishment of a series of preferred stock by the Board of Directors
shall become effective when the Corporation files with the Secretary of State of
the Commonwealth of Massachusetts a certificate of establishment of series of
preferred stock, signed under the penalties of perjury by the President or any
Vice President and by the Clerk, Assistant Clerk, Secretary or Assistant
Secretary of the Corporation, setting forth a copy of the vote of the Board of
Directors establishing and designating the series and fixing and determining the
relative rights and preferences thereof, the date of adoption of such vote and a
certification that such vote was duly adopted by the Board of Directors of the
Corporation.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series.
3
<PAGE>
CONTINUATION SHEET V
ARTICLE V(A)
REGULATION OF CONTROL SHARE ACQUISITIONS
Pursuant to M.G.L. c. 110D, Section 2(d), the Corporation hereby elects
not to be governed by the provisions of Chapter 110D.
ARTICLE V(B)
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
Pursuant M.G.L. c. 110F, Section 2(a), the Corporation hereby elects not
to be governed by the provisions of Chapter 110F.
ARTICLE V(C)
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
The affirmative vote of at least two-thirds of the total votes eligible to
be cast by stockholders, at a meeting expressly called for such purpose, (and,
if any class or series of shares is entitled to vote thereof separately, the
affirmative vote of the holders of at least two-thirds of the outstanding
shares) shall be required in order to authorize any (i) sale, lease, exchange or
other disposition, including without limitation, a mortgage, or any other
security device, of all or substantially all of the property or assets,
including goodwill, of the Corporation, (including without limitation, any
voting securities of a subsidiary), (ii) merger or consolidation of the
Corporation with or into any other corporation or (iii) any reclassification of
the common stock of the Corporation, or any recapitalization involving the
common stock of the Corporation.
4
<PAGE>
CONTINUATION SHEET VI
ARTICLE VI(A)
PRE-EMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any pre-emptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, charters of indebtedness, debentures or other securities
convertible into or exchangeable for stock of any class or series or carrying
any right to purchase stock of any class or series. Any such unissued stock,
bonds, charters of indebtedness, debentures or other securities convertible into
or exchangeable for stock or carrying any right to purchase stock may be issued
pursuant to a vote of the Board of Directors of the Corporation to such persons,
firms, corporations or associations, whether or not holders thereof, and upon
such terms as may be deemed advisable by the Board of Directors in the exercise
of its sole discretion.
ARTICLE VI(B)
REPURCHASE OF SHARES
The Corporation may, from time to time, pursuant to authorization by the
Board of Directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness, or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
Board of Directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by applicable law.
ARTICLE VI(C)
DIRECTORS
The number of Directors of the Corporation shall be such number, not less
than three as shall be provided from time to time, provided that no decrease in
the number of Directors shall have the effect of shortening the term of any
incumbent Director.
The Board of Directors of the Corporation shall be divided into three
classes of Directors as nearly equal in number as possible, with one class to be
elected annually. The initial Directors of the Corporation shall hold office as
follows: the first class of Directors shall hold office initially for a term
expiring at the annual meeting of
5
<PAGE>
stockholders to be held in 1997, the second class of Directors shall hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1998, and the third class of Directors shall hold office initially for a term
expiring at the annual meeting of stockholders to be held in 1999, with the
members of each class to hold office until their respective successors are duly
elected and qualified. At each annual meeting of stockholders of the
Corporation, the successors to the class of Directors whose term expires at the
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election and until their respective successors are elected and qualified. Should
the number of Directors of the Corporation be increased, the additional
directorships shall be allocated among classes as appropriate so that the number
of Directors in each class is as nearly equal as possible.
ARTICLE VI(D)
REMOVAL OF DIRECTORS
Any Director may be removed with or without cause by a vote of two-thirds
of the Directors then in office, unless at the time of such action there is an
Interested Stockholder, in which case the affirmative vote of two-thirds of the
Continuing Directors shall also be required.
ARTICLE VI(E)
LIMITATION OF LIABILITY OF DIRECTORS
No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director notwithstanding any provision of law imposing such liability;
provided, however, that this Article VI(E) shall not eliminate or limit any
liability of a Director (i) for any breach of the Director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or emissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Sections 61 or 62 of Chapter 156B of the Massachusetts General Laws
or (iv) with respect to any transaction from which the Director derived an
improper personal benefit.
No amendment or repeal of this Article VI(E) shall adversely affect the
rights and protection afforded to a Director of this Corporation under this
Article VI(E) for acts or omissions occurring prior to such amendment or repeal.
If the Massachusetts Business Corporation Law is hereafter amended to further
eliminate or limit the personal liability of Directors or to authorize corporate
action to further eliminate or limit such liability, then the liability of the
Directors of this Corporation shall be eliminated or limited to the fullest
extent permitted by Massachusetts Business Corporation Laws as so amended.
6
<PAGE>
ARTICLE VI(F)
ACTING AS PARTNER
The Corporation may be a partner in any business enterprise which it would
have power to conduct by itself.
ARTICLE VI(G)
AMENDMENT OF BY-LAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
repeal, alter, amend and rescind the by-laws of the Corporation by the
affirmative vote of not less than two-thirds of the Directors then in office,
unless at the time of such action, there is an Interested Stockholder, in which
case the affirmative vote of not less than two-thirds of the Continuing
Directors shall also be required. Notwithstanding any other provision of these
Articles or the by-laws of the Corporation (and notwithstanding the fact that
some lesser percentage may be specified by law), the by-laws shall not be made,
repealed, altered, amended, or rescinded by the stockholders of the Corporation
except by the vote of the holders of not less than two-thirds of the outstanding
shares of capital stock of the Corporation (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration, amendment or
rescission is included in the notice of such meeting).
ARTICLE VI(H)
AMENDMENT OF ARTICLES OF ORGANIZATION
Any amendment, addition, alteration, change or repeal of these Articles of
Organization regarding, (i) an increase or reduction of the capital stock or of
any authorized class, (ii) a change of the par value of any authorized shares or
class thereof, (iii) a change of the authorized shares with par value or any
class thereof into any number of shares without par value, or the exchange
thereof pro rata for any number of shares without par value, (iv) a change of
the authorized shares without par value or any class thereof into a greater or
lesser number of shares without par value, or the exchange thereof pro rata for
a greater or lesser number of shares without par value, (v) a change of the
authorized shares with par value or any class thereof into a greater or lesser
number of shares with par value, or the exchange thereof pro rata for a greater
or lesser number of shares with par value, (vi) a change of the authorized
shares without par value or any class thereof into any number of shares with par
value, or the exchange thereof pro rata for any number of shares with par value
or, (vii) a change of the corporate name may be made if first approved by the
affirmative vote of two-thirds of the Board of Directors of the Corporation then
in office (unless at the time of such
7
<PAGE>
action there is an Interested Stockholder, in which case the affirmative vote of
two-thirds of the Continuing Directors shall also be required) and thereafter
approved by the affirmative vote of a majority of the stockholders.
No other amendment, addition, alteration, change or repeal of these
Articles of Organization shall be made unless first approved by the affirmative
vote of two-thirds of the Board of Directors of the Corporation then in office,
and thereafter approved by the affirmative vote of not less than two-thirds of
the total votes eligible to be cast at a duly constituted meeting of
stockholders. Notwithstanding the foregoing, if at any time within the sixty day
period immediately preceding the meeting at which the stockholder vote is to be
taken there is an Interested Stockholder, such provision may only be amended,
altered, changed or repealed if such action shall have been approved by not less
than two-thirds of the Continuing Directors then in office. Unless otherwise
provided by law, any amendment, addition, alteration, change or repeal so acted
upon shall be effective on the date it is filed with the Secretary of State of
the Commonwealth of Massachusetts or on such other date as specified in such
amendment, addition, alteration, change or repeal or as in the Secretary of
State may specify.
As used in these Articles, the phrase "Interested Stockholder" shall have
the meaning as set forth in the by-laws of the Corporation.
8
<PAGE>
ARTICLE VII
The effective date of organization of the corporation shall be the date
approved and filed by the Secretary of the Commonwealth. If a LATER effective
date is desired, specify such date which shall not be more than thirty days
after the date of filing.
ARTICLE VIII
THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation IN MASSACHUSETTS is:
730 Hancock Street, Quincy, Massachusetts 02170
b. The name, residence address and post office address of each Director and
officer of the corporation is as follows:
<TABLE>
<S> <C> <C>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President: Mark A. Osborne 100 Brigantine Circle 100 Brigantine Circle
Norwell, MA 02061 Norwell, MA 02061
Treasurer: Gerard F. Linskey 1299 South River Street 1299 South River Street
Marshfield, MA 02050 Marshfield, MA 02050
Clerk: Douglas C. Purdy 115 Branch Street 115 Branch Street
Scituate, MA 02066 Scituate, MA 02066
</TABLE>
Directors: See Continuation Sheet VIII Attached.
CONTINUATION SHEET VIII
DIRECTORS
<TABLE>
<S> <C> <C>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
Richard P. Quincy 41 Countryside Lane 41 Countryside Lane
Milton, MA 02186 Milton, MA 02186
Douglas C. Purdy 115 Branch Street 115 Branch Street
Scituate, MA 02066 Scituate, MA 02066
Peter L. Maguire 405 North Street 405 North Street
Duxbury, MA 02332 Duxbury, MA 02332
John V. Murphy 651 Main Street 651 Main Street
Hingham, MA 02043 Hingham, MA 02043
Thomas P. Moore, Jr. 68 Abbot Road 68 Abbot Road
Wellesley, MA 02181 Wellesley, MA 02181
Michael T. Putziger 30 King Street 30 King Street
Cohasset, MA 02025 Cohasset, MA 02025
Mark A. Osborne 100 Brigantine Circle 100 Brigantine Circle
Norwell, MA 02061 Norwell, MA 02061
</TABLE>
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of: October
d. The name and business address of the resident agent, if any, of the
corporation is:
ARTICLE IX
By-laws of the corporation have been duly adopted and the president, treasurer,
clerk and Directors whose names are set forth above, have been duly elected.
IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, I/we, whose
signature(s) appear below as incorporator(s) and whose name(s) and business or
residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws, Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this 9th day of January, 1996.
/s/ Mark A. Osborne
- -----------------------------------
Mark A. Osborne
The Hibernia Savings Bank
- -----------------------------------
730 Hancock Street
- -----------------------------------
Quincy, MA 02170
- -----------------------------------
NOTE: IF AN EXISTING CORPORATION IS ACTING AS INCORPORATOR, TYPE IN THE EXACT
NAME OF THE CORPORATION, THE STATE OR OTHER JURISDICTION WHERE IT WAS
INCORPORATED, THE NAME OF THE PERSON SIGNING ON BEHALF OF SAID CORPORATION AND
THE TITLE HE/SHE HOLDS OR OTHER AUTHORITY BY WHICH SUCH ACTION IS TAKEN.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I hereby certify that, upon examination of these Articles of Organization, duly
submitted to me, it appears that the provisions of the General Laws relative to
the organization of corporations have been complied with, and I hereby approve
said articles; and the filing fee in the amount of $15,000.00 having been paid,
said articles are deemed to have been filed with me this 10th day of January
1996.
EFFECTIVE DATE:
----------------------------------------------------------------
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
SECRETARY OF THE COMMONWEALTH
FILING FEE: One tenth of one percent of the total authorized capital stock,
but not less than $200.00. For the purpose of filing, shares of stock with a par
value less than $1.00, or no par stock, shall be deemed to have a par value of
$1.00 per share.
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Anne H. Stossel
- -----------------------------------
Roche, Carens & DeGiacomo
A Professional Corporation
- -----------------------------------
One Post Office Square
- -----------------------------------
Boston, MA 02109
Telephone: (617) 451-9300
--------------------------
<PAGE>
Exhibit 99.2
<PAGE>
BY-LAWS
OF
EMERALD ISLE BANCORP, INC.
ARTICLE I
ARTICLES OF ORGANIZATION
The name of this Corporation is Emerald Isle Bancorp, Inc. The purposes of
the Corporation shall be as set forth in the Articles of Organization. These
by-laws, the powers of the Corporation and its Directors and stockholders, and
all matters concerning the conduct and regulation of the business of the
Corporation, shall be subject to such provisions in regard thereto, if any, as
are set forth in the Articles of Organization
ARTICLE II
DEFINITIONS
"Interested Stockholder" shall mean any person (other than the Corporation
or any officer or Director thereof, any employee benefit plan of the
Corporation, or any Subsidiary of the Corporation) who or which is the
beneficial owner, directly or indirectly, of ten percent or more of the voting
power of the then outstanding shares of voting stock, is an affiliate of the
Corporation and at any time within the two-year period immediately prior to the
date in question was the beneficial owner, directly or indirectly, of ten
percent or more of the then outstanding shares of voting stock, or is an
assignee of or has otherwise succeeded to the beneficial ownership of any shares
of voting stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested Stockholder,
if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933 and such assignment or succession was not
approved by a two-thirds vote of the Continuing Directors.
For the purposes of determining whether a person is an Interested
Stockholder, the number of shares deemed to be outstanding shall include shares
beneficially owned but shall not include any other shares of voting stock which
may be issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options or otherwise.
A person shall be a "beneficial owner" of any shares of voting stock which
such person or any of its Affiliates or Associates, directly or indirectly, has
or shares with
<PAGE>
respect to voting stock (a) the right to acquire or direct acquisition of
(whether such right is exercisable immediately or only after the passage of time
or in the satisfaction of any conditions or both), pursuant to any agreement,
arrangement or understanding or upon the exercise of any conversion rights,
warrants, or options or otherwise; (b) the right to vote, or direct the voting
of, pursuant to any agreement, arrangement or understanding or otherwise; or (c)
the right to dispose of or transfer or direct the disposition or transfer of
pursuant to any agreement, arrangement, understanding or otherwise; or which are
beneficially owned, directly or indirectly, by any other person with which such
person or any of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares of voting stock.
A "person" shall mean an individual, a group acting in concert, a
corporation, a partnership, and association, a joint stock company, a trust, a
business trust, a government or political subdivision, any unincorporated
organization and any similar association or entity.
"Group Acting in Concert" shall mean persons (other than the Corporation or
any officer or Director thereof, any employee benefit plan of the Corporation,
or any Subsidiary of the Corporation) seeking to combine or pool their voting or
other interests in the securities of the Corporation for a common purpose,
pursuant to any contract, understanding, relationship, agreement or any other
arrangement, whether written, oral or otherwise, or any "group of persons" as
defined under Section 13(d) of the Securities Exchange Act of 1934. When
persons act together for any such purpose, their group is deemed to have
acquired their stock.
"Affiliate" or "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
"Continuing Director" means any member of the Board of Directors of
the Corporation who is not an Affiliate or Associate of the Interested
Stockholder and was a member of the Board of Directors prior to the time that
the Interested Stockholder became an Interested Stockholder, and any successor
of a Continuing Director who is not an Affiliate or Associate of the Interested
Stockholder and is approved to succeed a Continuing Director by a two-thirds
vote of the Continuing Directors then on the Board of Directors.
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS.
The annual meeting of stockholders shall be held on the third Monday in
April in each year (or if that be a legal holiday in the place where the meeting
is to be held, on the
2
<PAGE>
next succeeding full business day) at 10:00 a.m. at the main office of the
Corporation in Massachusetts, unless a different hour, date or place within
Massachusetts (or, if permitted by law, elsewhere in the United States) is fixed
by the Chairman of the Board, if one is elected, the Vice Chairman, if one is
elected, or the Board of Directors acting by vote or by written instrument or
instruments signed by them. The purposes for which the annual meeting is to be
held, in addition to those prescribed by law, by the Articles of Organization or
these by-laws, may be specified by the Board of Directors, the Chairman of the
Board, if one is elected, or the Vice Chairman, if one is elected. If no annual
meeting has been held on the date fixed above, a special meeting in lieu thereof
may be held and such special meeting shall have for the purposes of these
by-laws or otherwise all the force and effect of an annual meeting. Any
adjourned session of any meeting of the stockholders shall be held at such place
within Massachusetts (or, if permitted by law, elsewhere within the United
States) as is designated in the vote of adjournment.
SECTION 2. MATTERS TO BE CONSIDERED AT ANNUAL MEETING.
At an annual meeting of stockholders, only such new business shall be
conducted, and only such proposals shall be acted upon as shall have been
brought before the annual meeting (a) by, or at the direction of, the Board of
Directors (unless there is an Interested Stockholder, in which case the
affirmative vote of two-thirds of the Continuing Directors then in office shall
also be required) or (b) by any stockholder of the Corporation who complies with
the notice procedures set forth in this Section 2. For a proposal to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Clerk of the Corporation. To
be timely, a stockholder's notice must be delivered to, or mailed and received
at, the principal executive offices of the Corporation not less than one hundred
twenty days nor more than one hundred and fifty days prior to the scheduled
annual meeting, regardless of any postponements, deferrals or adjournments of
that meeting to a later date. A stockholder's notice to the Clerk shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting the following: (a) a brief description of the proposal desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and any other
stockholders known by such stockholder to be supporting such proposal, (c) the
class and number of shares of the Corporation's capital stock which are
beneficially owned by the stockholder on the date of such stockholder notice and
by any other stockholders known by such stockholder to be supporting such
proposal on the date of such stockholder notice, and (d) any financial interest
of the stockholder in such proposal.
The Board of Directors may reject any stockholder proposal not timely made
in accordance with the terms of this Section 2. If the Board of Directors, or a
designated committee thereof, determines that the information provided in a
stockholder's notice does not satisfy the informational requirements of this
Section 2 in any material respect, then the Board of Directors may reject such
stockholder's proposal. If neither the Board of Directors nor such committee
makes a determination as to the validity of any
3
<PAGE>
stockholder proposal, the presiding officer of the annual meeting shall
determine and declare at the annual meeting whether the stockholder proposal was
made in accordance with the terms of this Section 2. If the Presiding Officer
determines that a stockholder proposal was made in accordance with the terms of
this Section 2, he shall so declare at the annual meeting and ballots shall be
provided for use at the meeting with respect to any such proposal. If the
presiding officer determines that a stockholder proposal was not made in
accordance with the terms of this Section 2, he shall so declare at the annual
meeting and any such proposal shall not be acted upon at the annual meeting. If
there is an Interested Stockholder, any determinations to be made by the Board
of Directors or a designated committee thereof pursuant to the provisions of
this paragraph shall also require the concurrence of two-thirds of the
Continuing Directors then in office.
SECTION 3. SPECIAL MEETINGS.
Special meetings of the stockholders may be called by the Chairman of the
Board, if one is elected, the Vice Chairman, if one is elected, or by the Board
of Directors, unless there is an Interested Stockholder, in which case any such
call shall also require the affirmative vote of two-thirds of the Continuing
Directors then in office, and unless otherwise provided in the Articles of
Organization or by-laws, shall be called by the Clerk, or in case of the death,
absence, incapacity or refusal of the Clerk, by any other officer, upon written
application of one or more stockholders who hold at least forty percent in
interest of the capital stock entitled to vote thereat. Only matters set forth
in the call may be considered or acted upon at the meeting.
SECTION 4. NOTICE OF MEETINGS; ADJOURNMENTS.
A written notice of the place, date and hour of all meetings of
stockholders stating the purposes of the meeting shall be given at least seven
days before the meeting to each stockholder entitled to vote thereat and to each
stockholder who is otherwise entitled by law or by the Articles of Organization
to such notice, by leaving such notice with him or at his residence or usual
place of business, or by mailing it, postage prepaid, and addressed to such
stockholder at his address as it appears in the stock transfer records of the
Corporation. Such notice shall be deemed to be delivered when deposited in the
mail so addressed, with postage prepaid. When any stockholders' meeting is
adjourned for thirty days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. It shall not be necessary to give
any notice of the hour, date, or place of any meeting adjourned for less than
thirty days or of the business to be transacted thereat, other than an
announcement at the meeting at which such adjournment is taken of the hour, date
and place to which the meeting is adjourned. Such notice shall be given by the
Clerk or Assistant Clerk, or, in case of the death, absence, incapacity or
refusal of the Clerk or Assistant Clerk, by any other officer or by a person
designated either by the Clerk or Assistant Clerk, by the person or persons
calling the meeting or by the Board of Directors. Whenever notice of a meeting
is required to be given a stockholder under any provision of law, the Articles
of Organization, or of these by-laws, a written waiver thereof, executed before
or after the meeting by such stockholder or his attorney
4
<PAGE>
thereunto authorized, and filed with the stock transfer records of the meeting,
shall be deemed equivalent to such notice.
SECTION 5. PRESIDING OFFICER
The Chairman of the Board, or in his absence, the Vice Chairman, shall
preside at all stockholder meetings and shall have the power, among other
things, to adjourn such meeting at any time and from time to time subject to
Section 5 of this Article III. If a Chairman of the Board and Vice Chairman are
not elected, the President shall preside at all meetings of stockholders.
SECTION 6. QUORUM.
At any meeting of the stockholders, a quorum shall consist of a majority in
interest of all stock issued and outstanding and entitled to vote at the
meeting, represented in person or by proxy; except that if two or more classes
or series of stock are entitled to vote on any matter as separate classes or
series, then in the case of each such class or series a quorum for that matter
shall consist of a majority in interest of all stock of that class or series
issued and outstanding, represented in person or by proxy; and except when a
larger quorum is required by law, by the Articles of Organization or by these
by-laws. Stock owned directly or indirectly by the Corporation, if any, shall
not be deemed outstanding for this purpose. The Presiding Officer may adjourn
the meeting from time to time, and the meeting may be held as adjourned without
further notice, except as provided in Section 4 of this Article III. At such
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
Presiding Officer may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
SECTION 7. VOTING.
Stockholders entitled to vote shall have one vote for each share of stock
entitled to vote held by them of record according to the books of the
Corporation and a proportionate vote for a fractional share, unless otherwise
provided by law or the Articles of Organization. The Corporation shall not,
directly or indirectly, vote any share of its own stock.
SECTION 8. PROXIES.
Stockholders entitled to vote may vote either in person or by proxy in
writing dated not more than six months before the meeting named therein, which
proxies shall be filed with the Clerk or other person responsible to record the
proceedings of the meeting, or any adjournment thereof, before being voted.
Unless otherwise specifically limited by their terms, such proxies shall entitle
the holders thereof to vote at any adjournment of such meeting but shall not be
valid after the final adjournment of such meeting. A proxy
5
<PAGE>
with respect to stock held in the name of two or more persons shall be valid if
executed by or on behalf of any one of them unless at or prior to exercise of
the proxy the Corporation receives a specific written notice to the contrary
from any one of them. A proxy purporting to be executed by or on behalf of a
stockholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger.
SECTION 9. ACTION AT MEETING.
When a quorum is present at any meeting, any matter before the meeting
shall be decided by vote of the holders of a majority of the shares of stock
voting on such matter, except where a larger vote is required by law, by the
Articles of Organization or by these by-laws. Any election to office shall be
determined by a plurality of the votes cast, except where a larger vote is
required by law, by the Articles of Organization or by these by-laws. No vote
shall be required by a stockholder present or represented at the meeting and
entitled to vote in the election.
SECTION 10. ACTION BY CONSENT.
Any action required or permitted to be taken at any meeting of the
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of stockholders. Such consents shall be
treated for all purposes as a vote at a meeting.
ARTICLE IV
DIRECTORS
SECTION 1. POWERS.
The business of the Corporation shall be managed by a Board of Directors
who shall have and may exercise all the powers of the Corporation except as
otherwise reserved to the stockholders by law, by the Articles of Organization
or by these by-laws. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board until the vacancy is filled.
SECTION 2. COMPOSITION AND TERM.
Pursuant to M.G.L. c. 156B, Section 50A(b)(i), the Corporation hereby
elects not to be governed by the provisions of M.G.L. c. 156B, Section 50A.
The Board of Directors shall be composed of: (a) those persons designated
in the Articles of Organization of the Corporation, such persons to serve as
Directors until the respective expiration dates of their terms as set forth
therein and until their successors are
6
<PAGE>
elected and qualified and (b) as such terms expire, those persons who are
elected as Directors from time to time as provided herein. The Board of
Directors shall consist of not less than three Directors and shall be divided
into three classes, which classes of Directors shall be elected annually by the
stockholders. Subject to the foregoing requirements and applicable law, the
Board of Directors may from time to time fix the number of Directors and their
respective classifications; provided, however, that if at the time of such
action there is an Interested Stockholder, such action shall in addition require
a vote of two-thirds of the Continuing Directors then in office. Except as
otherwise provided in accordance with these by-laws, the members of each class
shall be elected for a term of three years and until their successors are
elected and qualified.
SECTION 3. DIRECTOR NOMINATIONS.
Nominations of candidates for election as Directors at any annual meeting
of stockholders may be made (a) by, or at the direction of, a majority of the
Board of Directors (unless there is an Interested Stockholder, in which case the
affirmative vote of two-thirds of the Continuing Directors shall also be
required) or (b) by any stockholder entitled to vote at such annual meeting.
Only persons nominated in accordance with the procedures set forth in this
Section 3 shall be eligible for election as Directors at an annual meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors (or by the Continuing Directors, if required), shall be made pursuant
to timely notice in writing to the Clerk of the Corporation as set forth in this
Section 3. To be timely, a stockholder's notice shall be delivered to, or
mailed and received, at the principal executive offices of the Corporation not
less than one hundred twenty days nor more than one hundred and fifty days prior
to the date of the scheduled annual meeting, regardless of postponements,
deferrals or adjournments of that meeting to a later date. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a Director and as to the stockholder
giving the notice (i) the name, age, business address and residence address of
such person, (ii) the principal occupation or employment of such person, and
(iii) the class and number of shares of the Corporation's capital stock which
are beneficially owned by such person on the date of such stockholder notice.
At the request of the Board of Directors, any person nominated by, or at the
direction of, the Board of Directors for election as a Director at an annual
meeting shall furnish to the Clerk of the Corporation that information required
to be set forth in the stockholders' notice of nomination which pertains to the
nominee. Any person nominated for election as a Director at an annual meeting
shall furnish to the Clerk of the Corporation a disclosure statement which the
Board of Directors shall prescribe. All nominees for Director in any particular
year shall complete the same disclosure statement.
No person shall be elected as a Director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 3.
Ballots bearing the names of all the persons who have been nominated for
election as Directors at an annual meeting in
7
<PAGE>
accordance with the procedures set forth in this Section 3 shall be provided for
use at the annual meeting.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Section 3. If the Board
of Directors, or a designated committee thereof, determines that the information
provided in a stockholders' notice does not satisfy the informational
requirements of this Section 3 in any material respect, then the Board of
Directors may reject such stockholder's nomination. The Clerk of the
Corporation shall notify a stockholder in writing whether his nomination has
been made in accordance with the time and informational requirements of this
Section 3. Notwithstanding the procedure set forth in this paragraph, if
neither the Board of Directors nor such committee makes a determination as to
the validity of any nominations by a stockholder, the presiding officer of the
annual meeting shall determine and declare at the annual meeting whether a
nomination was made in accordance with the terms of this Section 3. If the
presiding officer determines that a nomination was made in accordance with the
terms of this Section 3, he shall so declare at the annual meeting and ballots
shall be provided for use at the meeting with respect to such nominee. If the
Presiding Officer determines that a nomination was not made in accordance with
the terms of this Section 3, he shall so declare at the annual meeting and such
nomination shall be disregarded. If there is an Interested Stockholder, any
determinations to be made by the Board of Directors or a designated committee
thereof pursuant to the provisions of this paragraph shall also require the
concurrence of two-thirds of the Continuing Directors then in office.
SECTION 4. QUALIFICATION.
Each Director shall have such qualifications as are required by applicable
law. In addition, subsequent to the date on which the Corporation enters into a
Plan of Reorganization and Acquisition with The Hibernia Savings Bank, in order
to qualify as a Director under this Section 4, each Director shall own, in his
own right and free of any lien or encumbrance, common stock having a par value,
or a fair market value on the date the person became a Director, of not less
than $5,000. Any Director who ceases to be the owner of the required number of
shares of stock, or who becomes in any other manner disqualified, shall vacate
his office forthwith. Unless waived by a vote of the Board of Directors, a
Director shall not serve as a Director after reaching the age of seventy years.
SECTION 5. RESIGNATION.
Any Director may resign at any time by written notice to the Chief
Executive Officer. A resignation shall be effective upon receipt, unless the
resignation provides otherwise.
8
<PAGE>
SECTION 6. REMOVAL.
Any Director may be removed from office as provided in the Articles of
Organization.
SECTION 7. VACANCIES.
Any vacancy occurring on the Board of Directors as a result of resignation,
removal or death may be filled by vote of a majority of the remaining Directors,
unless at the time of the action there is an Interested Stockholder, in which
case such vacancy may only be filled by a vote of two-thirds of the Continuing
Directors then in office. A Director elected to fill such a vacancy shall be
elected to serve for a term of office continuing until the next election of
Directors by the stockholders. Any directorship to be filled by reason of an
increase in the authorized number of Directors may be filled by a majority of
the Board of Directors for a term of office continuing until the next election
of Directors by the stockholders. If at the time of such action, there is an
Interested Stockholder, a vote of two-thirds of the Continuing Directors is
required instead.
SECTION 8. COMPENSATION
The members of the Board of Directors and the members of standing or
special committees shall receive such compensation as the Board of Directors may
determine.
SECTION 9. REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held at such times and
places within or without the Commonwealth of Massachusetts as the Board of
Directors may fix from time to time and, when so fixed, no notice thereof need
be given, provided that any Director who is absent when such times and places
are fixed shall be given notice of the fixing of such times and places. The
first meeting of the Board of Directors following the annual meeting of the
stockholders may be held without notice immediately after and at the same place
as the annual meeting of the stockholders or the special meeting held in lieu
thereof. If in any year a meeting of the Board of Directors is not held at such
time and place, any action may be taken at any later meeting of the Board of
Directors with the same force and effect as if held or transacted at such
meeting.
SECTION 10. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by or at the
request of two-thirds of the Directors or the Chairman of the Board, if one is
elected. The person or persons authorized to call special meetings of the Board
of Directors may fix the hour, date, and place for holding a special meeting.
9
<PAGE>
SECTION 11. PRESIDING OFFICER
The Chairman of the Board, or in his absence, the Vice Chairman, shall
preside at all meetings of the Board of Directors. If a Chairman and Vice
Chairman are not elected, the President shall preside at all meetings of the
Board of Directors.
SECTION 12. NOTICE OF MEETINGS.
It shall be reasonable and sufficient notice to a Director to send notice
by mail at least forty-eight hours or by telegram at least twenty-four hours
before the meeting addressed to him at his usual or last known business or
residence address or to give notice to him in person or by telephone at least
twenty-four hours before the meeting. Such notice shall be deemed to be
delivered when hand delivered to such address; read to such Director by
telephone; deposited in mail so addressed, with postage thereon prepaid, if
mailed; or when delivered to the telegraph company if sent by telegram. When
any Board of Directors' meeting, either regular or special, is adjourned for
thirty days or more, notice of the adjourned meeting shall be given as in the
case of an original meeting. It shall not be necessary to give any notice of
the hour, date, or place of any meeting adjourned for less than thirty days, or
of the business to be transacted thereat, other than an announcement at the
meeting at which such adjournment is taken of the hour, date, and place to which
the meeting is adjourned. Notice of a meeting need not be given to any Director
if a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any Director who attends the
meeting without protesting prior thereto or at its commencement the lack of
notice to him. Neither notice of a meeting nor a waiver of a notice need
specify the purposes of the meeting. The attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting, except where a Director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of any meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting.
SECTION 13. QUORUM.
A majority of the number of Directors then in office shall constitute a
quorum for the transaction of business at any meeting of the Board of
Directors. The Presiding Officer may adjourn the meeting from time to time, and
the meeting may be held as adjourned without further notice except as provided
in Section 11 of this Article IV. Any business which might have been transacted
at the meeting as originally noticed may be transacted at such adjourned meeting
at which a quorum is present.
SECTION 14. ACTION AT A MEETING
The act of the majority of the Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors, unless otherwise
prescribed by law, the Articles of Organization or by these by-laws.
10
<PAGE>
SECTION 15. ACTION BY CONSENT.
Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if the number of Directors required to
take a particular action consent to the action in writing and the written
consents are filed with the records of the meetings of the Directors. Such
consent shall be treated for all purposes as a vote of the Directors at a
meeting.
SECTION 16. PRESUMPTION OF ASSENT
A Director of the Corporation who is present at a meeting of the Board of
Directors at which action on any matter regarding the Corporation is taken shall
be presumed to have assented to the action taken unless his dissent or
abstention shall be entered in the minutes of the meeting or unless he shall
file a written dissent to such action with the person acting as the Clerk of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Clerk of the Corporation within five days after the date
a copy of the minutes of the meeting is received. Such right to dissent shall
not apply to a Director who voted in favor of such action.
SECTION 17. COMMITTEES.
The Board of Directors, by vote of a majority of the Directors then in
office, may elect from its number an Executive Committee or other committees and
may delegate thereto some or all of its powers except those which by law, by the
Articles of Organization, or by these by-laws may not be delegated. Except as
the Board of Directors may otherwise determine, any such committee may make
rules for the conduct of its business, but unless otherwise provided by the
Board of Directors or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these by-laws for the Board of
Directors. All members of such committees shall hold such offices at the
pleasure of the Board of Directors. The Board of Directors may abolish any such
committee at any time subject to applicable law. Any committee to which the
Board of Directors delegates any of its powers or duties shall keep records of
its meetings and shall upon request report its action to the Board of Directors.
The Board of Directors shall have power to rescind any action of any committee,
but no rescission shall have retroactive effect. With the approval of the Board
of Directors, the Chief Executive Officer shall select and nominate Committee
members. Any recommendations of such committees appointed by the Chief
Executive Officer shall be submitted to the Board of Directors.
SECTION 18. MANNER OF PARTICIPATION
Members of the Board of Directors or of the committees elected by the Board
pursuant to Section 16 of this Article III may participate in meetings of the
Board by means of conference telephone or similar communications equipment by
which all
11
<PAGE>
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person but shall not constitute attendance for the
purpose of compensation pursuant to Section 8 of this Article III, unless the
Board of Directors by resolution so provides.
ARTICLE V
OFFICERS AND AGENTS
SECTION 1. ENUMERATION.
The officers of the Corporation shall consist of a President, a Treasurer,
a Clerk and such other officers, including, without limitation, a Chairman of
the Board, a Vice Chairman, a Secretary and one or more Vice Presidents or
Assistant Vice Presidents and Assistant Treasurers as the Board of Directors may
determine may be necessary for the management of the Corporation.
SECTION 2. ELECTION.
All officers of the Corporation shall be elected at the beginning of the
fiscal year of the Corporation by the Board of Directors at a meeting duly
called for such purpose.
SECTION 3. QUALIFICATION.
Any two or more offices may be held by the same person. The Chief
Executive Officer shall be a Director. Any officer may be required by the Board
of Directors to give bond for the faithful performance of his duties to the
Corporation in such amount and with such sureties as the Directors may
determine.
SECTION 4. TENURE.
Except as otherwise provided by law, all officers shall hold office until
the first meeting of Directors at the beginning of the fiscal year and until
their respective successors are chosen and qualified, or for such shorter term
as the Board of Directors may fix at the time such officers are chosen. The
Chief Executive Officer may resign at any time by written notice to the Board of
Directors or the Clerk. Any other officer may resign at any time by written
notice to the Chief Executive Officer. Such resignation shall become effective
upon receipt unless the resignation provides otherwise. Election or appointment
of an officer, employee or agent shall not of itself create contract rights.
The Board of Directors may, however, authorize the Corporation to enter into an
employment contract with any officer in accordance with the law, but no such
contract right shall impair the right of the Board of Directors to remove any
officer at any time in accordance with Section 5 of the Article IV.
12
<PAGE>
SECTION 5. REMOVAL.
Except as otherwise provided by law, the Board of Directors may remove the
Chief Executive Officer with cause by the affirmative vote of two-thirds of the
entire number of Directors then in office, and without cause by a vote of
three-fourths of the entire number of Directors; provided, however, that if at
the time of such removal there is an Interested Stockholder, an affirmative
vote of two-thirds of the Continuing Directors then in office shall also be
required to remove the Chief Executive Officer with cause, and an affirmative
vote of three-fourths of the Continuing Directors then in office shall also
be required to remove the Chief Executive Officer without cause. Any such
removal, other than for cause, shall be without prejudice to the contract
rights, if any, of the persons involved. The Chief Executive Officer may
be removed only after reasonable notice and opportunity to be heard by the
Board of Directors. Except as otherwise provided by law, the Chief
Executive Officer may remove any other officer, with or without cause.
SECTION 6. ABSENCE OR DISABILITY.
In the event of the absence or disability of any officer, the Chief
Executive Officer, or, in his absence, a majority of the Board of Directors may
designate another officer to act temporarily in place of an absent or disabled
officer.
SECTION 7. VACANCIES.
Any vacancy in any office may be filled for the unexpired portion of the
term by a majority of the Board of Directors.
SECTION 8. CHIEF EXECUTIVE OFFICER
The President shall be the Chief Executive Officer, unless the Board of
Directors shall elect a Chairman of the Board and designate such Chairman to be
the Chief Executive Officer. The Chief Executive Officer shall, subject to the
direction of the Board of Directors, have general supervision and control of the
Corporation's business.
SECTION 9. CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of stockholders and
at all meetings of the Board of Directors. The Chairman of the Board shall also
have such other powers and shall perform such other duties as the Board of
Directors may from time to time designate. If the Chairman of the Board is not
the Chief Executive Officer, he shall also have such powers and perform such
duties as the Chief Executive Officer may from time to time designate.
13
<PAGE>
SECTION 10. VICE CHAIRMAN
The Vice Chairman shall preside over all meetings at which the Chairman is
absent. The Vice Chairman shall also have such powers and perform such duties
as the Chief Executive Officer may from time to time designate.
SECTION 10. PRESIDENT
The President, if he is the Chief Executive Officer, shall preside at all
meetings of the stockholders. If a Chairman of the Board or Vice Chairman are
not elected, the President shall preside at all meetings of the Board of
Directors. If the President is not the Chief Executive Officer, he shall have
such powers and perform such duties as the Chief Executive Officer may from time
to time designate.
SECTION 11. VICE PRESIDENT AND ASSISTANT VICE PRESIDENTS.
Any Vice President or Assistant Vice President shall have such powers and
shall perform such duties as the Chief Executive Officer may from time to time
designate.
SECTION 12. TREASURER AND ASSISTANT TREASURERS.
Any Treasurer or Assistant Treasurer shall have such powers and perform
such duties as the Chief Executive Officer may from time to time designate.
SECTION 13. CLERK AND ASSISTANT CLERKS.
The Clerk shall keep a record of the meetings of stockholders. In the
event there is no Secretary or he is absent, the Clerk shall keep a record of
the meetings of the Board of Directors. In the absence of the Clerk from any
meeting of stockholders, an Assistant Clerk if one is elected, shall perform the
Clerk's duties. Otherwise a Temporary Clerk designated by the person presiding
at the meeting shall perform the duties of the Clerk.
SECTION 14. SECRETARY AND ASSISTANT SECRETARIES.
The Secretary, if one be elected or appointed, shall keep a record of the
meetings of the Board of Directors. In the absence of the Secretary, any
Assistant Secretary, the Clerk and any Assistant Clerk, a Temporary Secretary
shall be designated by the person presiding at such meeting to perform the
duties of the Secretary.
14
<PAGE>
ARTICLE VI
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate of the capital stock in
form selected by the Board of Directors stating the number and the class and the
designation of the series, if any, of the shares held by him or her. Such
certificate shall be signed by the Chairman of the Board of Directors, the
President or a Vice President and the Treasurer or an Assistant Treasurer. Such
signatures may be facsimiles if the certificate is signed by a transfer agent,
or by a registrar, other than a Director, officer or employee of the
Corporation. In case any officer who has signed or whose facsimile signature
has been placed on such certificate shall have ceased to be such officer before
the certificate is issued, it may be issued by the Corporation with the same
effect as if he or she were such officer at the time of its issuance.
Every certificate for shares of stock subject to any restriction on
transfer pursuant to the Articles of Organization, these by-laws, or any
agreement to which the Corporation is a party shall have the restriction noted
conspicuously on the certificate and shall also set forth on the face or back
either the full text of the restriction or a statement of the existence of such
restriction and a statement that the Corporation will furnish a copy to the
holder of such certificate upon written request and without charge.
Every certificate issued when the Corporation is authorized to issue more
than one class or series of stock shall set forth on its face or back either the
full text of the preferences, voting powers, qualifications and special and
relative rights of the shares of each class and series authorized to be issued
or a statement of the existence of such preferences, powers, qualifications and
rights, and a statement that the Corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.
SECTION 2. TRANSFERS.
Subject to any restrictions on transfer and unless otherwise provided by
the Board of Directors, shares of stock may be transferred on the books of the
Corporation only by surrender to the Corporation or its transfer agent of the
certificate representing such shares properly endorsed or accompanied by a
written assignment of such shares or by a written power of attorney to sell,
assign, or transfer such shares, properly executed, with necessary transfer
stamps affixed, and with such proof that the endorsement, assignment or power of
attorney is genuine and effective as the Corporation or its transfer agent may
reasonably require.
15
<PAGE>
SECTION 3. RECORD HOLDERS
Except as may be otherwise required by law, the Articles of Organization,
or these by-laws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to vote, regardless of any
transfer, pledge or other disposition of such stock, until the shares have been
transferred on the books of the Corporation in accordance with the requirements
of these by-laws. It shall be the duty of each stockholder to notify the
Corporation of his address and any changes thereto.
SECTION 4. SETTING RECORD DATE AND CLOSING TRANSFER RECORDS.
The Board of Directors may fix in advance a time not more than sixty days
before the date of any meeting of the stockholders, the date for the payment of
any dividend or the making of any distribution to stockholders or the last day
on which the consent or dissent of stockholders may be effectively expressed for
any purpose, as the record date for determining the stockholders having the
right to notice and to vote at such meeting and any adjournment thereof, or the
right to receive such dividend or distribution, or the right to give such
consent or dissent. If a record date is set, only stockholders of record on the
date shall have such right notwithstanding any transfer of stock on the books of
the Corporation after the record date. Without fixing such record date, the
Board of Directors may close the transfer books of the Corporation for all or
any part of such sixty-day period.
If no record date is fixed and the transfer books are not closed, then the
record date for determining stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors acts with respect thereto.
SECTION 5. REPLACEMENT OF LOST, MUTILATED, OR DESTROYED CERTIFICATES.
Except as otherwise provided by law, the Board of Directors may determine
the conditions upon which a new certificate of stock may be issued in place of
any certificate alleged to have been lost, mutilated or destroyed. It may, in
its discretion, require the owner of a lost, mutilated or destroyed certificate,
or his legal representative, to give a bond, sufficient in its opinion, with or
without surety, to indemnify the Corporation against any loss or claim which may
arise by reason of the issue of a certificate in place of such lost, mutilated
or destroyed stock certificate.
SECTION 6. ISSUE OF AUTHORIZED UNISSUED CAPITAL STOCK.
Except as provided by law, the Board of Directors shall have the authority
to issue or reserve for issue from time to time the whole or any part of the
capital stock of the
16
<PAGE>
Corporation which may be authorized from time to time, to such persons or
organizations, for such consideration, whether cash, property, services or
expenses and on such terms as the Board of Directors may determine, including,
without limitation, the granting of options, warrants or conversions or other
rights to subscribe to said capital stock. No such stock shall be issued unless
the cash, so far as due, or the property, services or expenses for which it was
authorized to be issued, has been actually received or incurred by, or conveyed
or rendered to, the Corporation, or is in its possession as surplus.
SECTION 7. DIVIDENDS
Subject to applicable law, the Articles of Organization and these by-laws,
the Board of Directors may from time to time declare, and the Corporation may
pay dividends on outstanding shares of its capital stock.
ARTICLE VII
INDEMNIFICATION
SECTION 1. DEFINITIONS.
For purposes of this Article: (a) "Officer" means any person who serves or
has served as Director of the Corporation or in any other office filled by
election or appointment by the stockholders, or the Board of Directors and any
heirs or personal representatives of such person; (b) "Non-Officer Employee"
means any person who serves or has served as an employee of the Corporation, but
who is not or was not an Officer, and any heirs or personal representatives of
such person; (c) "Proceeding" means any action, suit, or proceeding, civil or
criminal, brought or threatened in or before any court, tribunal administrative
or legislative body or agency and any claim which could be the subject of a
Proceeding; and (d) "Expenses" means any liability fixed by a judgment, order,
decree, or award in a Proceeding, any amount reasonably paid in settlement of a
Proceeding, and any professional fees or other disbursements reasonably incurred
in a Proceeding.
SECTION 2. OFFICERS.
Except as provided in Sections 4 of this Article VII, each Officer of the
Corporation shall be indemnified by the Corporation against all Expenses
incurred by such Officer in connection with any Proceedings in which such
Officer is involved as a result of serving or having served (a) as an Officer or
employee of the Corporation; (b) as a Director, officer, or employee of any
wholly-owned subsidiary of the Corporation; or (c) in any capacity with any
other corporation, organization, partnership, joint venture, trust or other
entity at the request or direction of the Corporation.
17
<PAGE>
SECTION 3. NON-OFFICER EMPLOYEES.
Except as provided in Sections 4 of this Article VIII, each Non-Officer
Employee of the Corporation may, in the discretion of the Board of Directors, be
indemnified against any or all Expenses incurred by such Non-Officer Employee in
connection with any Proceeding in which such Non-Officer Employee is involved as
a result of serving or having served (a) as a Non-Officer Employee of the
Corporation; (b) as a Director, officer or employee of any wholly-owned
subsidiary of the Corporation; or (c) in any capacity with any other
organization, partnership, joint venture, trust, or other entity at the request
or direction of the Corporation.
SECTION 4. GOOD FAITH.
No indemnification shall be provided to an Officer or to a Non-Officer
Employee with respect to a matter as to which such person shall have been
adjudicated in any Proceeding not to have acted in good faith in the reasonable
belief that the action of such person was in the best interests of the
Corporation. In the event that a proceeding is compromised or settled so as to
impose any liability or obligation upon an Officer or Non-Officer Employee, no
indemnification shall be provided to said Officer or Non-Officer Employee with
respect to a matter if there be a determination that with respect to such matter
such person did not act in good faith in the reasonable belief that the action
of such person was in the best interests of the Corporation. The determination
shall be made by a majority vote of those Directors who are not involved in such
Proceeding. However, if more than half of the Directors are involved in such
Proceeding, the determination shall be made by a majority vote of a committee of
three disinterested Directors chosen by the disinterested Directors at a regular
or special meeting. If there are fewer than three disinterested Directors, the
determination shall be based upon the opinion of the Corporation's regular
outside counsel.
SECTION 5. PRIOR TO FINAL DISPOSITION.
Unless otherwise provided by the Board of Directors or by the committee
pursuant to the procedure specified in Section 5 of this Article VII, any
indemnification provided for under this Article VII shall include payment by the
Corporation of Expenses incurred in defending a Proceeding in advance of the
final disposition of such Proceeding upon receipt of an undertaking by the
Officer or Non-Officer Employee seeking indemnification to repay such payment if
such Officer or Non-Officer Employee shall be adjudicated or determined to be
not entitled to indemnification under this Article VII.
SECTION 6. INSURANCE.
The Corporation may purchase and maintain insurance to protect itself and
any Officer or Non-Officer Employer against any liability of any character
asserted against or incurred by the Corporation or any such Officer or
Non-Officer Employee, or arising out
18
<PAGE>
of any such status, whether or not the Corporation would have the power to
indemnify such person against such liability by law or under the provisions of
this Article VII.
SECTION 7. OTHER INDEMNIFICATION RIGHTS.
Nothing in this Article VII shall limit any lawful rights to
indemnification existing independently of this Article VII.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 1. AMENDMENT OF BY-LAWS.
These by-laws may be adopted, altered, amended, changed or repealed as
provided in the Articles of Organization.
SECTION 2. FISCAL YEAR
Except as from time to time otherwise determined by the Directors, the
fiscal year of the Corporation shall in each year end on the last day of
October, or on such other date as may be required by law.
SECTION 3. CORPORATE SEAL.
The Board of Directors shall have power to adopt and alter the seal of the
Corporation.
SECTION 4. EXECUTION OF PAPERS.
All deeds, leases, transfers, contracts, bonds, notes, releases, checks,
drafts and other obligations authorized to be executed on behalf of the
Corporation in the ordinary course of its business without Board of Directors'
action may be executed by the Chairman of the Board, if one is elected, the
President, the Treasurer or such other officer as the Directors or the Executive
Committee may authorize.
SECTION 5. VOTING OF SECURITIES.
Except as the Directors may generally or in particular cases otherwise
specify, the Chairman of the Board, if one is elected, the President or the
Treasurer may waive notice of and act on behalf of the Corporation, or appoint
another person or persons to act as proxy or attorney-in-fact for the
Corporation, with or without power of substitution, at any meeting of
stockholders or shareholders of any other organization, any of whose securities
are held by the Corporation.
19
<PAGE>
SECTION 6. ARTICLES OF ORGANIZATION.
All references in these by-laws to the Articles of Organization shall be
deemed to refer to the Articles of Organization of the Corporation, as amended
and in effect from time to time.
SECTION 7. CORPORATE RECORDS.
The original, or attested copies, of the Articles of Organization, by-laws
and records of all meetings of the incorporators and stockholders, and the stock
and transfer records, which shall contain the names of all stockholders and the
record address and the amount of stock held by each, shall be kept in
Massachusetts at the principal office of the Corporation, or at an office of its
transfer agent or of its Clerk or of its Resident Agent. Said copies and
records need not all be kept in the same office. They shall be available at all
reasonable times to the inspection of any stockholder for any proper purpose but
not to secure a list of stockholders for the purpose of selling said list or
copies thereof or of using the same for a purpose other than in the interest of
the applicant, as a stockholder, relative to the affairs of the Corporation.
SECTION 8. EVIDENCE OF AUTHORITY.
A certificate by the Clerk or Secretary or an Assistant or Temporary Clerk
or Secretary as to any matter relative to the Articles of Organization, by-laws,
records of the proceedings of the incorporators, stockholders, Board of
Directors, or any committee of the Board of Directors, or stock and transfer
records or as to any action taken by any person or persons as an officer or
agent of the Corporation, shall as to all persons who rely thereon in good faith
be conclusive evidence of the matters so certified.
SECTION 9. EFFECTIVE DATE.
These by-laws shall become effective on the date of receipt of the last
approval required to permit the Corporation to act in holding company form.
20
<PAGE>
Exhibit 99.3
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
FORM F-2
Annual Report Under Section 13
of the Securities Exchange Act of 1934
For the Fiscal Year Ended: FDIC Certificate No.:
December 31, 1995 22054
THE HIBERNIA SAVINGS BANK
(exact name of Bank as specified in its charter)
Massachusetts 04-1437380
(state or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
731 Hancock Street
Quincy, Massachusetts 02170
(address of principal office) (zip code)
617-479-2265
(Bank's telephone number, including area code)
Securities Registered Pursuant to section 12 (b) of the Act: None
Securities Registered Pursuant to section 12 (g) of the Act:
COMMON STOCK $1.00 PAR VALUE
(title of class)
Indicate by check mark whether the bank (1) has filed all reports required to be
filed by Section 13 of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the bank was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
----
The aggregate market value of the voting stock held by non-affiliates of the
bank was approximately $11,509,068 based upon the closing sale price of the
common stock on the National Association of Securities Dealers Automated
Quotation System on February 29, 1996.
The number of shares outstanding of the Bank's common stock, as of February 29,
1996: 1,553,846.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM
F2 INTO WHICH
DOCUMENT INCORPORATED
- --------------------------------------------------------------------------------
Portions of the registrant's Annual Report
to Stockholders for the Fiscal Year
ended December 31, 1995 Part IV
Portions of the registrant's Proxy Statement
for the Annual Meeting of Stockholders to be
held on April 29, 1996. Part I, II, and III
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
<TABLE>
<CAPTION>
At December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $346,865 $286,429 $249,827 $229,792 $216,575
Loans, net 208,327 163,371 135,661 134,584 144,143
Securities 125,300 111,582 105,735 80,449 56,277
Deposits 282,787 256,340 221,950 205,921 187,102
Borrowings 38,968 9,000 8,530 8,531 16,606
Stockholders' equity 22,825 19,786 17,312 13,954 11,953
Book value per share $14.89 $13.68 $12.92 $10.89 $9.96
<CAPTION>
For the year ended December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Interest and dividend income $23,949 $18,728 $18,157 $18,805 $19,698
Interest expense 13,720 9,498 8,950 10,569 13,779
---------------------------------------------------------------------
Net interest income 10,229 9,230 9,207 8,236 5,919
Add
Noninterest income 579 549 719 364 216
Gain (loss) on sale of loans (52) (1) 20 320 24
Less
Provision for possible loan losses 300 135 2,080 2,270 2,850
Noninterest expenses 6,552 6,209 5,680 4,835 4,695
---------------------------------------------------------------------
Pretax core earnings 3,904 3,434 2,186 1,815 (1,386)
Net gain on sale of securities 91 193 3,952 2,188 768
Gain on sale of loan servicing 764 - - - -
Loss on sale of fixed assets (50) - - - -
Net loss on sale of other real estate
owned (43) (170) (666) (511) (561)
Real estate owned expense 301 387 1,194 1,643 972
Income (loss) before income taxes 4,365 3,070 4,278 1,849 (2,151)
Provision (benefit) for income taxes 1,646 1,002 1,198 265 (673)
----------------------------------------------------------------------
Net income (loss) $2,719 $2,068 $3,080 $1,584 ($1,478)
----------------------------------------------------------------------
----------------------------------------------------------------------
Earnings (loss) per share $1.76 $1.41 $2.14 $1.21 ($1.23)
Weighted average number of common
shares and common equivalents 1,545,297 1,468,758 1,437,092 1,306,610 1,200,000
Dividends declared per share $ 0.22 $ - $ - $ - $ -
</TABLE>
<PAGE>
PART I
Item 1. Business of The Hibernia Savings Bank
The Hibernia Savings Bank ("Hibernia" or the "Bank") is a Massachusetts
chartered stock savings bank founded in 1912. The Bank's main office is located
at 731 Hancock Street, Quincy, Massachusetts, with branch locations at 52
Coddington Street, Quincy, Massachusetts, 51 Commercial Street, Braintree,
Massachusetts, 1150 Washington Street, Weymouth, Massachusetts, 101 Federal
Street, Boston, Massachusetts, 274 Main Street, Hingham, Massachusetts, and 397
Washington Street, Stoughton, Massachusetts. The Bank has Loan Centers at 730
and 731 Hancock Street, Quincy, Massachusetts, and 51 Commercial Street,
Braintree, Massachusetts. The Bank's administrative office, and finance
department are located at 730 Hancock Street, Quincy, Massachusetts. The Bank's
primary market area is the South Shore and, includes the following communities;
Boston, Canton, Stoughton, Randolph, Avon, Holbrook, Hull, Milton, Quincy,
Braintree, Weymouth, Hingham, Norwell, Hanover, Marshfield, Scituate, and
Cohasset .
The Bank is primarily engaged in attracting retail deposits from the general
public and borrowing funds, primarily from the Federal Home Loan Bank, and using
these funds to originate and invest in loans secured by first or second mortgage
loans on residential real estate, to originate or participate in commercial
real estate loans, to make small business loans, and to make investments in
securities. The Bank also originates and services residential mortgage loans
sold into the secondary mortgage market and originates consumer loans for
inclusion in its loan portfolio. At December 31, 1995 assets totaled
$346,865,213, with deposits of $282,787,249 and stockholders' equity of
$22,824,616.
Management believes that providing quality financial services and products in a
personalized manner along with maintaining a community orientation have long
been characteristics of the Bank which have resulted in customer recognition and
loyalty. The Bank seeks to develop multiple relationships with its customers
through an experienced service staff and offers a wide range of financial
products and services to meet the demands of the Bank's existing market area and
target customer base.
<PAGE>
LENDING
The loan portfolio of The Hibernia Savings Bank continues to be the primary
earning asset of the Bank. The Bank, throughout 1995, continued its focus on
originating residential and commercial real estate loans, commercial business
loans and consumer loans for inclusion in the Bank's portfolio, as well as
originating residential real estate loans for sale into the secondary mortgage
market. The Bank believes that providing retail, and commercial lending
services to its community holds great potential as each banking office is
located in an active business district. The Bank's loan portfolio totaled
$210,968,694 before unearned discounts, deferred fees, and reserves at December
31, 1995. This represents an increase of $45,054,736 or 27.2% from
$165,913,958 at December 31, 1994. The loan portfolio represents approximately
60.8% of the Bank's total assets. The loan portfolio consists of 53.3% in
residential first and second mortgage, 37.5% in commercial real estate loans,
8.0% in commercial business loans and 1.2% in consumer loans.
The Bank's present policy is to sell the majority of its fixed rate residential
real estate loan originations into the secondary mortgage market. The Bank
primarily originates various types of adjustable rate loans for inclusion in its
own portfolio although the majority of adjustable rate residential mortgage
loans originated are also eligible for sale in the secondary markets.
RESIDENTIAL FIRST MORTGAGES
The Bank offers various owner occupied residential first mortgage loan products,
including, but not limited to, one, three and five year conforming, non-
conforming and Jumbo adjustable rate mortgage loans and seven, ten, fifteen,
twenty and thirty year fixed rate mortgage loans. In addition the Bank offers
adjustable rate residential mortgage loans and short-term notes on non owner
occupied residential properties. Residential mortgage loans are defined as real
estate loans secured by both owner occupied and non owner occupied mortgages on
one to four family homes and condominiums. During the year ended December 31,
1995, the Bank originated approximately $58.8 million in residential first
mortgage loans of which approximately $12.9 million were sold in the secondary
mortgage market.
At December 31, 1995 the majority of the Bank's residential real estate mortgage
loan portfolio was secured by properties located within Massachusetts or within
contiguous states. Underwriting standards are consistent for all loans. The
underwriting of one to four family owner occupied residential real estate loans
is performed, in most cases, in accordance with the standards prescribed by the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). Underwriting of other residential real estate
mortgage loans is in accordance with the Bank's Loan Policy which is reviewed
and approved annually by the Board of Directors. The Bank's present policy is
to require title insurance to insure the validity of its first mortgage liens.
Escrow accounts are generally required to ensure the timely payment of real
estate taxes. Private mortgage insurance, in almost all cases, is required on
loans in excess of 90% of the appraised value of the property. In addition to
origination charges and closing costs, borrowers generally also pay for the cost
of property appraisals and credit analysis.
Residential mortgage loans are written for an amortization period not to exceed
thirty years. Residential mortgage loans normally remain outstanding for less
than their full term, primarily due to prepayments and property sales.
RESIDENTIAL SECOND MORTGAGES
In addition to residential first mortgage loans, the Bank also makes term
residential second mortgage loans in amounts up to 70% of the appraised value of
the property in excess of the first mortgage balance for terms not to exceed
fifteen years. These loans are written on an adjustable rate basis and reviewed
every one to three years and on a fixed basis up to fifteen years. In
addition, the Bank originates adjustable rate second mortgage loans in the form
of Home Equity Credit Lines for inclusion in its portfolio. Underwriting of
residential second mortgage loans is in accordance with the Bank's Loan Policy
which is reviewed and approved annually by the Board of Directors.
<PAGE>
During the year ended December 31, 1995 the Bank originated approximately $1.9
million of second mortgage loans. As of December 31, 1995, the Bank had $4.2
million of residential second mortgage loans outstanding, which were primarily
Home Equity Credit Lines.
COMMERCIAL REAL ESTATE
The Bank originates both commercial real estate loans and participates with
other banks in securing commercial real estate loans. During the year ended
December 31, 1995 the Bank originated and purchased approximately $27.2 million
of commercial real estate loans. Commercial real estate loans are defined as
multi-family residential properties, retail space, office buildings and certain
types of industrial properties. Commercial real estate mortgage loans are
generally written for an initial note term of three to ten years or on an
adjustable rate basis, amortized up to twenty-five years. Underwriting of
commercial real estate mortgage loans is in accordance with the Bank's Loan
Policy which is reviewed and approved annually by the Board of Directors. As
of December 31, 1995 the Bank had $79.1 million of commercial real estate loans
outstanding.
COMMERCIAL BUSINESS LOANS
The Bank's commercial business loan portfolio at December 31, 1995 totaled $16.9
million. During the year the Bank originated $13.8 million in loans.
Commercial loans are defined as small business loans, loans secured by business
assets, and owner occupied business loans. Commercial loans are generally
written for an initial note term of three to five years on a variable rate
basis. Underwriting of commercial loans is in accordance with the Bank's Loan
Policy which is reviewed and approved annually by the Board of Directors.
CONSUMER LOANS
The Bank's consumer loan portfolio at December 31, 1995 was $2.5 million
before unearned discount and reserves. Consumer loans consist primarily of
personal consumer loans, both secured and unsecured, education loans made under
the Massachusetts Higher Education Assistance Corporation program, Visa and
Master Card, overdraft lines of credit, passbook and stock loans, and home
improvement loans. Consumer loans are written over various terms, but the
average life of a personal loan is approximately two to three years in length.
Consumer loans originated during the year ended December 31, 1995 totaled
approximately $2.0 million.
<PAGE>
THE FOLLOWING TABLE SETS FORTH CERTAIN INFORMATION CONCERNING THE COMPOSITION OF
THE BANK'S LOAN PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31,
1995 % 1994 % 1993 % 1992
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
Residential $109,163 51.74% $83,338 50.23% $91,624 66.86% $99,838
Construction &
Land Development 12,387 5.87% 7,673 4.62% 3,334 2.43% 22
Non-Residential 70,048 33.20% 64,056 38.61% 32,220 23.51% 33,366
------------ ------ ------------ ------ ----------- ------ -----------
TOTAL MORTGAGE LOANS 191,598 90.82% 155,067 93.46% 127,178 92.80% 133,226
------------ ------ ------------ ------ ----------- ------ -----------
Commercial Loans:
Commercial 16,857 7.99% 8,423 5.08% 5,490 4.01%
------------ ------ ------------ ------ ----------- ------
Other Loans:
Lines of Credit 747 .35% 831 .50% 464 .34% 435
Passbook & Collateral 799 .38% 707 .43% 423 .31% 644
Home Improvement 195 .09% 219 .13% 208 .15% 324
Installment 773 .37% 667 0.40% 3,285 2.40% 1,641
------------ ------ ------------ ------ ----------- ------ -----------
TOTAL OTHER LOANS $2,514 1.19% $2,424 1.46% $4,380 3.20% 3,044
------------ ------ ------------ ------ ----------- ------ -----------
TOTAL LOANS 210,969 100.0% 165,914 100.0% 137,048 100.0% 136,270
------------ ------ ------------ ------ ----------- ------ -----------
Less: -
Deferred Fees ($94) ($290) ($118) ($85)
Unearned discount ($6) ($12) (21) (47)
Allowance for possible
loan losses (2,542) (2,241) (2,481) (3,056)
------------ ------------ ----------- ------------
TOTAL LOANS, NET $208,327 $163,371 $134,428 $ 133,082
------------ ------------ ---------- -----------
------------ ------------ ---------- -----------
<CAPTION>
AT DECEMBER 31,
% 1991 %
(Dollars in Thousands)
<S> <C> <C> <C>
Mortgage Loans:
Residential 73.26% $104,523 73.42%
Construction &
Land Development 0.02% 27 0.0%
Non-Residential 24.49% 34,926 24.53%
------ ---------- ------
TOTAL MORTGAGE LOANS 97.77% 139,476 97.97%
------ ----------- -------
Commercial Loans:
Commercial
Other Loans:
Lines of Credit .32% 404 .28%
Passbook & Collateral .47% 530 .37%
Home Improvement .24% 342 .24%
Installment 1.20% 1,620 1.14%
----- ---------- -----
TOTAL OTHER LOANS 2.23% $2,896 2.03%
----- ---------- -----
TOTAL LOANS 100% 142,372 100%
----- ---------- -----
Less:
Deferred Fees ($184)
Unearned discount (49)
Allowance for possible
loan losses (2,701)
----------
TOTAL LOANS, NET $139,438
----------
----------
</TABLE>
<PAGE>
INVESTMENT ACTIVITIES
Investment income is the second largest source of income for the Bank. The
Bank's investment portfolio, including short-term investments, securities held
to maturity, and securities available for sale, totaled $125,300,270 or 36.1% of
total assets at December 31, 1995. This represents an increase of $13,718,345
or 12.3% from December 31, 1994. Income from investments, principal reductions
and maturities, represent a major source of liquidity to fund loans and meet the
short-term cash needs of the Bank.
The Bank's investment portfolio consists primarily of mortgage backed securities
totaling $77,565,687 or 61.9% of the investment portfolio which are held to
maturity. Securities available for sale consist of FHLB Notes, FHLMC Notes and
Common Stock which totaled $40,676,183. In addition, the Bank maintains a
modest position in certificates of deposits and federal funds when there is
available cash. The $77.6 million in mortgage backed securities at December 31,
1995 yielded an average return of 5.44%. Payments of principal and interest
are received monthly on the mortgage backed securities, which provide an ongoing
source of cash. The Bank had approximately $39.9 million in FHLMC and FHLB
bonds and notes which were yielding an average of 7.47%. At December 31, 1995
the market value of the Bank's portfolio was less than book value by $857,000.
<PAGE>
THE FOLLOWING TABLE SETS FORTH CERTAIN INFORMATION REGARDING THE CONTRACTUAL
MATURITIES OF THE BANK'S INVESTMENT PORTFOLIO, EXCLUSIVE OF EQUITIES:
<TABLE>
<CAPTION>
AT DECEMBER 31,
1995 % 1994 % 1993 % 1992
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY
Due in 1 year or less $ - 0% $ - 0% $ - 0% $ -
Due after 1 year
through 5 years - 0% - 0% - 0% 42,999
Due after 5 years - 0% - 0% - 0% 16,516
through 10 years
Due after 10 years 0% 0% - 0% -
Mortgage-backed
securities 77,566 66.01% 100,253 94.41% 84,737 82.52% 11,446
------------ ----------- ----------- ----------
SUB-TOTAL $77,566 66.01% $100,253 94.41% $84,737 82.52% $70,961
AVAILABLE FOR SALE
Due in 1 year or less $ 39,947 33.99% $ 5,931 5.59% $ 17,946 17.48% $ -
Due after 1 year
through 5 years - - - -
Due after 5 years - - - -
through 10 years
Due after 10 years - - - -
Mortgage-backed
securities
--------- -------- ------- -----
SUB-TOTAL $39,947 33.99% $5,931 5.59% $17,946 17.48% $ -
TOTAL $117,513 100.00% $106,184 100.00% $102,683 100.00% $70,961
--------- ------- --------- ------- --------- ------- -------
<CAPTION>
AT DECEMBER 31,
% 1991 %
(Dollars in Thousands)
<S> <C> <C> <C>
HELD TO MATURITY
Due in 1 year or less 0% $ - 0%
Due after 1 year
through 5 years 60.60% 35,503 70.09%
Due after 5 years 23.27% - 0%
through 10 years
Due after 10 years 0% - 0%
Mortgage-backed
securities 16.13% 15,151 29.91%
----------
SUB-TOTAL 100.0% $50,654 100.0%
AVAILABLE FOR SALE
Due in 1 year or less 0% $- 0%
Due after 1 year
through 5 years -
Due after 5 years -
through 10 years
Due after 10 years -
Mortgage-backed
securities
--------
SUB-TOTAL $ - 100.0%
TOTAL 100.00% $50,654 100.0%
------- -------- ------
</TABLE>
<PAGE>
DEPOSITS AND OTHER SOURCES OF FUNDS
Savings deposits continue to represent the major source of the Bank's funds for
lending and other investments. In addition to deposit flows, other sources
include loan amortization and prepayments, loan sales in the secondary market,
sales and maturity of investments, operating revenues, and borrowings. Deposit
flows can vary significantly and are influenced by prevailing interest rates,
economic conditions and pricing by the Bank and its competitors. Borrowings by
the Bank may be used on a short-term basis to cover reductions in normal sources
of funds and may also be used on a longer term basis to support expansion of
specific investment activities. Aggressive price competition for retail deposits
within our local market area dictated, from a cost standpoint, that we utilize
borrowing as an alternative funding resource. At December 31, 1995 total
borrowings amounted to $38,968,000.
SUBSIDIARIES
The Bank at December 31, 1995 has a wholly owned subsidiary known as Kildare
corporation. Kildare holds investments in limited real estate partnerships and
is the sole owner of four subsidiaries, Athlone Corporation, Donegal
Corporation, Mayo Corporation, and Roscommon Corporation. These corporations
were used for Real Estate Management and are currently inactive.
The Bank, at December 31, 1995, also has a wholly owned subsidiary known as
Limerick Securities Corporation. This corporation was formed solely in order to
invest in securities in which the Bank could invest pursuant to Sections 2 and 3
of Chapter 167F of the Massachusetts General laws.
The Bank, at December 31, 1995, also has a wholly owned subsidiary known as
Meath Corporation. This corporation was formed to undertake the construction
and sale of a condominium project in the western part of Massachusetts and is
currently inactive.
EMPLOYEES
As of December 31, 1995 the Bank employed 84 full time and 10 part-time
employees, none of whom were represented by a collective bargaining group.
Management considers Hibernia's relationship with its employees to be excellent.
COMPETITION
The Bank faces extensive competition, both in originating loans and in
attracting deposits, from other savings banks as well as co-operative banks,
commercial banks, savings and loan associations, credit unions, and other
financial service businesses.
Competition for loans comes primarily from other savings banks, co-operative
banks, savings and loan associations, commercial banks, and mortgage banking
companies. The Bank competes for loans principally on the basis of interest
rates and loan fees, types of loans originated, processing time, and the quality
of service provided to borrowers.
<PAGE>
In attracting deposits, the Bank's primary competitors are other thrift
institutions, commercial banks, mutual funds, and credit unions. The Bank's
branches attract deposits from the communities in which they are located. The
Bank's attraction and retention of deposits depends principally on the quality
of its service and its ability to provide investment opportunities that satisfy
the requirements of investors with respect to rate of return, liquidity, risk,
and other factors. The Bank also competes for these deposits by offering
competitive rates, convenient locations, and convenient business hours.
Management believes that providing quality financial services and products in a
personalized manner along with maintaining a community orientation have long
been characteristics of the Bank which have resulted in customer recognition and
loyalty. The Bank seeks to develop multiple relationships with its customers
through an experienced service staff and offers a wide range of financial
products and services to meet the demands of the Bank's existing market area and
target customer base.
RESEARCH AND DEVELOPMENT
The Bank does not maintain a separate research and development department or
budget. A number of employees of the Bank, as part of their job responsibility,
spend varying amounts of time developing new products and new services. The
amount of time spent cannot be measured and as a result no estimate is made.
REGULATION
The Bank operates under Massachusetts General Laws and is subject to
supervision, examination, and regulation by the Commissioner of Banks and the
Federal Deposit Insurance Corporation (the "FDIC"). Deposit accounts at the
Bank are insured by the FDIC up to a total of $100,000. As an insurer of
savings accounts the FDIC issues regulations, conducts examinations, requires
the filing of reports, and generally supervises the operations of institutions
to which it provides deposit insurance (see Item 7 for further discussion). The
approval of the FDIC is required prior to any merger or consolidation, or the
establishment or relocation of an office facility.
All deposit accounts in excess of $100,000 are insured in full by the Deposit
Insurance Fund, a corporation created by an act of the Massachusetts legislature
in 1932. The Bank is also subject to additional regulations by the Federal
Reserve Board ("FRB") with respect to the maintenance of certain nonearning
reserves.
The Bank is also subject to federal and state statutory and regulatory
provisions covering, among other things, security procedures, currency
reporting, insider and affiliated party transactions, management interlocks,
community reinvestment, truth-in-lending, electronic funds transfers, truth-in-
savings, and equal credit opportunity.
Item 2. Properties
The Bank's headquarters is located at 731 Hancock Street, Quincy,
Massachusetts. The Bank has a branch located at 101 Federal St., Boston
Massachusetts, a branch located at 51 Commercial St., Braintree, Massachusetts
an educational training facility in Quincy High School located at 52 Coddington
St., Quincy, Massachusetts a branch located at 1150 Washington St., Weymouth,
Massachusetts, a branch located at 274 Main St, Hingham, Massachusetts, and a
branch located at 397 Washington St., Stoughton, Massachusetts. The Bank has a
location at 730 Hancock Street, Quincy, Massachusetts which houses the
Finance/Administration Department, and Executive Office. The Bank's
headquarters in Quincy, the Boston facility, and Stoughton facility are leased
premises. The Braintree, Weymouth, and Hingham facilities as well as the
building at 730 Hancock are owned by the Bank. The Bank also has three Loan
Centers, one located at 51 Commercial St., Braintree, Massachusetts, 731 Hancock
Street Quincy, Massachusetts and 730 Hancock Street, Quincy, Massachusetts.
<PAGE>
The following table sets forth the location of the Bank's offices, as well as
certain information relating to offices at December 31, 1995.
<TABLE>
<CAPTION>
Current
Year Square Owned/ Term Renewal/
Acquired Feet Leased Expires Options
-------- ------ ------- -------- -------------------------
<S> <C> <C> <C> <C> <C>
Branch
101 Federal St. 1989 2,060 leased 1999 2/five year terms
Boston, MA
Branch
397 Washington St. 1995 2,200 leased 2005 3/five year terms
Stoughton, MA
Branch
Quincy High School
52 Coddington Street. 1993 360 leased 1 year renewable agreement
Quincy, MA
Main Office
731 Hancock St. 1986 10,100 leased 2002 3/five year terms
Quincy, MA
Branch
51 Commercial St. 1979 4,970 owned
Braintree, MA
Branch
1150 Washington St. 1991 1,800 owned
Weymouth, MA
Branch
274 Main St. 1995 2,100 owned
Hingham, MA
730 Hancock St.
Quincy, MA 1994 6,000 owned
</TABLE>
Item 3. Legal Proceedings
The Bank is a defendant in legal actions involving loans. In the opinion of
the Bank's management the resolution of these matters is not expected to have a
material effect on the consolidated financial position of the Bank.
Item 4. Securities Ownership of Certain Beneficial Owners and Management
The response to the item is incorporated herein by reference from the Proxy
Statement under "Outstanding Voting Securities" on page 6.
There are no arrangements known to the Bank, including any pledge by any person
of securities of the Bank, the operation of which may at a subsequent date
result in a change in control of the Bank.
<PAGE>
PART II
Item 5. Market for the Bank's Common Stock and Related Security Holder Matters
The information required by this item is incorporated herein by reference to
page 30 of the Bank's Annual Report to Stockholders for the fiscal year ended
December 31, 1995 (the "1995 Annual Report").
Item 6. Selected Financial Data
The information required by this item is contained in Part I of this Report and
is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is incorporated herein by reference
from pages 6 through 13 of the Bank' s Annual Report to Stockholders for the
fiscal year December 31, 1995 (the "1995 Annual Report").
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference from
pages 14 through 30 of the Bank's Annual Report to Stockholders for the fiscal
year ended December 31, 1995. Schedules of Financial Statements are included in
exhibit 10.
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Bank
Information about the directors of the Bank is incorporated herein by reference
from the Proxy Statement under "Board of Directors" on pages 7 and 8.
PRINCIPAL OFFICERS OF THE BANK
The following table sets forth certain information about officers of the Bank.
NAME AGE POSITION HELD WITH BANK
- ------------------------------------------------------------------------
Mark A. Osborne 46 Chairman of the Board
and Chief Executive Officer
Richard S. Straczynski 49 President and
Chief Operating Officer
Gerard F. Linskey 50 Senior Vice President and
Chief Financial Officer
Dennis P. Myers 48 Senior Vice President and
Senior Lending Officer
Wayne F. Blaisdell 44 Senior Vice President,
Branch Administration and
Operations Officer
The principal occupation and business experience during at least the last five
years for each of the principal officers is as follows:
Mr. Osborne has been with Hibernia since 1971, became its President in 1982 and
Chairman of the Board in 1988. Previously Mr. Osborne held the offices of Vice
President and Treasurer of the Bank.
Mr. Straczynski became President and Chief Operating Officer of Hibernia in
March of 1995. Mr. Straczynski was most recently a regional President of
Citizens Bank of Massachusetts.
Mr. Linskey became a Senior Vice President of Hibernia in January of 1988.
Prior to this he was a Senior Vice President of the Union Warren Savings Bank
from 1982 through 1987.
Mr. Myers joined Hibernia in 1985 as an Assistant Vice President and became a
Senior Vice President in 1993. Previously Mr. Myers was a Mortgage Officer of
the First American Bank for Savings.
Mr. Blaisdell joined Hibernia in 1975 and became its Assistant Vice President in
1980 and Vice President of the Bank in 1982. Mr Blaisdell was promoted to
Senior Vice President in March of 1995.
Item 10. Management Remuneration and Transactions
The information required by this item is incorporated herein by reference from
page 10 of the 1995 Proxy Statement.
<PAGE>
PART IV
Item 11. Exhibits, Financial statement, schedules, and Reports on Form F-3
(a) List of Documents filed as part of this report
(a)(1) The Hibernia Savings Bank's consolidated Financial Statements and
Management's Discussion and Analysis included in the Annual Report are
incorporated herein into Item 7 and Item 8 of this Report by reference. (The
remaining information appearing in the Annual Report is not to be filed as part
of this report except as expressly provided herein.)
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Operations for the years ended December 31, 1995,
1994 and 1993
Consolidated Statement of Changes in Stockholders' Equity for the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows for the years ending December 31,
1995,1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(a)(2) The following Financial Statement schedules are included in Item 8 as
part of this report.
Report of Independent Public Accountants
Schedule V
All other schedules have been omitted because information is not applicable
or is not material or becauseinformation required is included in the
Financial Statements or notes thereto.
(b) No reports on F-3 were filed during the quarter ended December 31, 1995
<PAGE>
(c) Exhibits:
(1) NA
(2) NA
(3) NA
(4) A schedule showing earnings per share is included in Part 1 of this
report.
(5) NA
(6) Annual Report to Stockholders for the year ended December 31, 1995
is furnished for information only and is not to be filed as part of this
report except as otherwise specified.
(7)-(9) NA
(10) Financial Statement Schedules
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 of the Securities Exchange Act of
1934, the Bank has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE HIBERNIA SAVINGS BANK
By /s/ Mark A. Osborne
-----------------------------------
Mark A. Osborne,
Chairman of the Board
and Chief Executive Officer
By /s/ Gerard F. Linskey
-----------------------------------
Gerard F. Linskey
Senior Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
Schedule V
Investments in, Income from Dividends, and equity in Earnings
or Losses of Subsidiaries and Associated Companies
Equity in Proportionate
Underlying Part of
Percent of Net Assets Earnings or
Due in 1 year or less Voting Stock Total at Balance Amount of Loss for the
Name of issurer Owned Investments Sheet Data Dividends Period
At and for the years:
<S> <C> <C> <C> <C> <C>
December,31,1995 100%
KILDARE CORPORATION
Accounts receivable $469 $469 $0
Common stock and
paid-in capital $ 51 $ 51 $0
Accumulated earnings ($63) ($63) $9
---- ---- --
$457 $457 $0 $9
---- ---- -- --
---- ---- -- --
December,31,1994 100%
KILDARE CORPORATION
Accounts receivable $547 $ 547 $0
Common stock and
paid-in capital $ 51 $ 51 $0
Accumulated earnings (72) ($72) ($3)
---- ---- ---
- $526 $526 $0 ($3)
---- ---- -- ---
---- ---- -- ---
December,31,1993 100%
KILDARE CORPORATION
Accounts receivable $544 $544 $0
Common stock and
paid-in capital $ 51 $ 51 $0
Accumulated earnings ($69) ($69) $2
---- ---- --
$526 $526 $0 $2
---- ---- -- --
---- ---- -- --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
Schedule V
Investments in, Income from Dividends, and equity in Earnings continued
or Losses of Subsidiaries and Associated Companies
Equity in Proportionate
Underlying Part of
Percent of Net Assets Earnings or
Due in 1 year or less Voting Stock Total at Balance Amount of Loss for the
Name of issurer Owned Investments Sheet Data Dividends Period
At and for the years:
<S> <C> <C> <C> <C> <C>
December 31,1995 100%
LIMERICK SECURITIES
Accounts receivable $0 $0 $0
Common stock and
paid-in capital $30,000 $30,000 $0
Accumulated earnings $ 5,231 $ 5,231 $1,537
------- ------- ------
$35,231 $35,231 $0 $1,537
------- ------- -- ------
------- ------- -- ------
December 31,1994 100%
LIMERICK SECURITIES
Accounts receivable $0 $0 $0 $0
Common stock and
paid-in capital 20,000 $20,000 $0
Accumulated earnings 3,694 $ 3,694 $973
------- ------- ----
- $23,694 $23,694 $0 $973
------- ------- -- ----
------- ------- -- ----
December 31,1993 100%
LIMERICK SECURITIES
Accounts receivable $0 $0 $0
Common stock and
paid-in capital $20,000 $20,000 $0
Accumulated earnings $ 2,721 $ 2,721 $1,220
------- ------- ------
$22,721 $22,721 $0 $1,220
------- ------- -- ------
------- ------- -- ------
</TABLE>
<PAGE>
Date:
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in capacities and on the dates indicated.
Name Title Date
/s/ Mark A. Osborne
- -------------------------- Chairman of the Board
MARK A. OSBORNE & CEO
/s/ Martha M. Campbell
- -------------------------- Director
MARTHA M. CAMPBELL
/s/ Thomas J. Carens
- -------------------------- Director
THOMAS J. CARENS
/s/ Bernard J. Dwyer
- -------------------------- Director
BERNARD J. DWYER
/s/ William E. Lucey
- -------------------------- Director
WILLIAM E. LUCEY
- -------------------------- Director
PETER L. MAGUIRE
/s/ Thomas P. Moore
- -------------------------- Director
THOMAS P. MOORE
/s/ Richard J. Murney
- -------------------------- Director
RICHARD J. MURNEY
- -------------------------- Director
JOHN V. MURPHY
/s/ William T. Novelline
- -------------------------- Director
WILLIAM T. NOVELLINE
/s/ Paul D. Osborne
- -------------------------- Director
PAUL D. OSBORNE
/s/ Douglas C. Purdy
- -------------------------- Director
DOUGLAS C. PURDY
/s/ Michael T. Putziger
- -------------------------- Director
MICHAEL T. PUTZIGER
- -------------------------- Director
RICHARD P. QUINCY
<PAGE>
Exhibit 99.4
<PAGE>
THE HIBERNIA SAVINGS BANK
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of the Stockholders of The
Hibernia Savings Bank ("the Bank") will be held at the Sheraton Tara Hotel,
37 Forbes Road, Braintree, Massachusetts on Monday, April 29, 1996, at 10:00
A.M. for the following purposes:
1. To elect four Directors to serve on the Board of Directors for a term
of three years or until their successors have been elected and
qualified.
2. To elect a Director to serve on the Board of Directors for a term of
one year or until a successor has been elected and qualified.
3. To consider and vote upon the formation of a holding company for the
Bank by approval of a plan of reorganization and acquisition, dated as
of February 15, 1996 (the "Plan of Reorganization") between the Bank
and Emerald Isle Bancorp, Inc. ("Bancorp"), a newly formed
Massachusetts corporation organized at the direction of the Bank, and
each of the transactions contemplated thereby, pursuant to which the
Bank will become a wholly-owned subsidiary of Bancorp, and each issued
and outstanding share of common stock of the Bank, par value $1.00 per
share (the "common stock"), other than shares held by stockholders, if
any, exercising dissenters' rights, will be converted into and
exchanged for one share of common stock of Bancorp, par value $1.00
per share (the "Reorganization"). A copy of the plan of reorganization
is attached as Exhibit (A) to the accompanying proxy statement.
If the action is approved by the stockholders at the Annual Meeting and
effected by the Bank, any stockholder (1) who files with Bancorp before the
taking of the vote on the approval of such action, written objection to the
proposed action stating that he intends to demand payment for his shares if the
action is taken and (2) whose shares are not voted in favor of such action, has
or may have the right to demand in writing from Bancorp within twenty (20) days
after the date of mailing to him of notice in writing that the corporate action
has become effective, payment for his shares and an appraisal of the value
thereof. Bancorp and any such stockholder shall in such cases have the rights
and duties and shall follow the procedure set forth in Sections 88 to 98,
inclusive, of Chapter 156B of the General Laws of Massachusetts.
4. To elect Douglas C. Purdy to serve as Clerk of the Bank until the next
election, or until a successor is elected and qualified.
5. To approve the selection of the independent accounting firm of Arthur
Andersen LLP as auditors for the fiscal year ending December 31, 1996.
6. To consider and act upon any other matters which may properly come
before the meeting and any and all adjournments thereof.
The close of business on Thursday, February 29, 1996 has been fixed as the
record date for determining the stockholders entitled to notice of and to vote
at the meeting.
This notice and accompanying proxy materials are being mailed to such
stockholders on or about Friday, March 15, 1996.
Whether or not you are able to attend the meeting, please complete and sign
the accompanying proxy and return it promptly in the enclosed envelope.
/s/ Douglas C. Purdy
Douglas C. Purdy, CLERK
730 Hancock Street
Quincy, MA 02170
(617) 479-5001
Quincy, Massachusetts
March 15, 1996
-1-
<PAGE>
THE HIBERNIA SAVINGS BANK
EMERALD ISLE BANCORP, INC.
-----------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Hibernia Savings Bank (the "Bank") for
use at the 1996 Annual Meeting of Stockholders of the Bank (the "Meeting") to be
held at the Sheraton Tara Hotel, 37 Forbes Road, Braintree, Massachusetts on
Monday, April 29, 1996 at 10:00 A.M. and is revocable by written notice to the
Clerk prior to its exercise. Proxies in the accompanying form, properly executed
and received prior to the meeting and not revoked, will be voted. Assistance in
soliciting proxies will be provided by D.F. King & Co., Inc., 77 Water Street,
New York, New York, 10005. The projected cost of such proxy solicitation
assistance is $3,000. The expense of soliciting proxies will be borne by the
Bank. Solicitation will be accomplished by first mailing the proxy materials on
or about March 15, 1996 to stockholders as of the record date and subsequently
by letter and by telephone to stockholders whose proxies have not been received.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE,
SUCH INFORMATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL A SECURITY, OR A SOLICITATION OF
A PROXY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS PROXY STATEMENT
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE HIBERNIA SAVINGS BANK OR EMERALD ISLE BANCORP, INC.
SINCE THE DATE OF THIS PROXY STATEMENT.
THE SHARES OF STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS
AND ARE NOT INSURED BY THE BANK INSURANCE FUND, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE SHARE INSURANCE FUND, THE DEPOSIT INSURANCE FUND OF
MASSACHUSETTS OR ANY OTHER GOVERNMENTAL AGENCY.
The Bank is subject to the informational reporting requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files reports,
proxy statements and other information with the Federal Deposit Insurance
Corporation ("FDIC"). Copies may be obtained at prescribed rates from the
office of the FDIC, 550 Seventeenth Street, N.W., Washington, D.C. 20429, or
at the Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, MA 02106.
Bancorp is applying to have its common stock approved for quotation on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System using the symbol: "EIRE," effective upon consummation
of the Reorganization. Such approval is anticipated although there is no
assurance that such approval will be received.
The principal executive offices of both Emerald Isle Bancorp, Inc. and
The Hibernia Savings Bank are located at 730 Hancock Street, Quincy,
Massachusetts 02170 and their telephone number is (617) 479-5001.
STOCKHOLDERS ARE URGED TO EXECUTE AND RETURN THEIR PROXIES PROMPTLY IN
ORDER TO MINIMIZE THE COST OF SOLICITATION.
THE DATE OF THIS PROXY STATEMENT IS MARCH 15, 1996.
-2-
<PAGE>
- --------------------------------------------------------------------------------
THE HIBERNIA SAVINGS BANK
EMERALD ISLE BANCORP, INC.
PROXY STATEMENT
MARCH 15, 1996
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
Notice of Annual Meeting of Stockholders . . . . . . . . . . . . . . . . 1
Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Summary Information on Proposed Holding Company. . . . . . . . . . . . . 4
Outstanding Voting Securities. . . . . . . . . . . . . . . . . . . . . . 6
Proposals I and II -- Election of Directors . . . . . . . . . . . . . . 7
Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Executive Compensation of Principal Officers . . . . . . . . . . . . . . 10
Option Grants in Last Fiscal Year. . . . . . . . . . . . . . . . . . . . 11
Compensation Committee Report on Executive Compensation. . . . . . . . . 11
Performance Graph. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Proposal III -- Formation of Holding Company . . . . . . . . . . . . . . 14
Description of the Plan of Reorganization . . . . . . . . . . . . . 15
Remuneration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Effect on Stock Options and Other Stock Related Benefit Plans . . . 16
Reasons for the Holding Company Formation . . . . . . . . . . . . . 17
Business of the Bank. . . . . . . . . . . . . . . . . . . . . . . . 17
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 18
Business of Bancorp . . . . . . . . . . . . . . . . . . . . . . . . 18
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 19
Financial Resources of Bancorp. . . . . . . . . . . . . . . . . . . 19
Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Financial Statements and Annual Disclosure Statement. . . . . . . . 20
Conditions of the Reorganization. . . . . . . . . . . . . . . . . . 21
Rights of Dissenting Stockholders . . . . . . . . . . . . . . . . . 22
Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . 23
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . 24
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Comparison of Stockholder Rights. . . . . . . . . . . . . . . . . . 25
Effect on Current Market Value of Outstanding Bank Stock. . . . . . 29
Anti-Takeover Provisions. . . . . . . . . . . . . . . . . . . . . . 29
Legal Investments . . . . . . . . . . . . . . . . . . . . . . . . . 29
Regulation of Bancorp and the Bank. . . . . . . . . . . . . . . . . 29
Proposal IV -- Election of Clerk . . . . . . . . . . . . . . . . . . . . 32
Proposal V -- Selection of Auditors. . . . . . . . . . . . . . . . . . . 32
Stockholder Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . 32
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Exhibit A -- Plan of Reorganization and Acquisition. . . . . . . . . . . 33
Exhibit B -- Articles of Organization. . . . . . . . . . . . . . . . . . 38
Exhibit C -- Dissenters' Appraisal Rights. . . . . . . . . . . . . . . . 46
-3-
<PAGE>
THE HIBERNIA SAVINGS BANK
EMERALD ISLE BANCORP, INC.
730 HANCOCK STREET
QUINCY, MASSACHUSETTS 02170
- --------------------------------------------------------------------------------
SUMMARY INFORMATION
ON
PROPOSED HOLDING COMPANY
- --------------------------------------------------------------------------------
The following summary does not purport to be complete and is qualified in
its entirety by reference to the more detailed information appearing elsewhere
in this Proxy Statement under "Proposal III -- Formation of Holding Company,"
and Exhibits A, B and C attached hereto.
THE HIBERNIA SAVINGS BANK
The Hibernia Savings Bank (the "Bank") is a Massachusetts-chartered
savings bank incorporated in 1912. The Bank provides a wide array of
commercial and consumer banking services and its deposits are insured by the
Federal Deposit Insurance Corporation. In addition, deposits in excess of
Federal Deposit Insurance limits are insured by the Deposit Insurance Fund.
EMERALD ISLE BANCORP, INC.
Emerald Isle Bancorp, Inc. ("Bancorp") is a Massachusetts stock
corporation established in January, 1996 under the provisions of Chapter 156B
of the General Laws of Massachusetts solely for the purpose of becoming a
holding company for the Bank. Bancorp has not engaged in any business since
its incorporation.
THE REORGANIZATION
The formation of a holding company will be accomplished under a Plan of
Reorganization and Acquisition, dated February 15, 1996, pursuant to which
the Bank will become a wholly-owned subsidiary of Bancorp. Under the terms of
the Plan of Reorganization and Acquisition, each outstanding share of Bank
common stock (other than shares held by dissenting stockholders, if any) will
be converted into one share of common stock, par value $1.00 per share, of
Bancorp, and the former holders of Bank common stock will become the holders
of all of the outstanding common stock of Bancorp (the "Reorganization").
Following the Reorganization, it is intended that the Bank will continue its
operation at the same location, with the same management, and subject to all
the rights, obligations and liabilities of the Bank existing immediately
prior to the Reorganization.
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of conditions which must
be met before the Reorganization will be consummated, including: (i) the Plan
of Reorganization shall have been approved by a vote of the holders of
two-thirds of the outstanding Common Stock of the Bank, (ii) the Plan of
Reorganization shall have been approved by the Commissioner of Banks under
Section 26B of Chapter 172 of the General Laws of Massachusetts, (iii) any
approval, consent or waiver required by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") shall have been received and any
waiting period imposed by applicable law shall have expired, (iv) the Bank
and Bancorp shall have received a favorable opinion from the BankOs
independent public accountants, Arthur Andersen LLP, concerning the federal
income tax consequences of the Reorganization, (v) Bancorp Common Stock to be
issued in exchange for Common Stock of the Bank shall have been registered or
qualified for issuance under applicable state securities laws, and (vi) the
Bank and Bancorp shall have obtained all other necessary consents or
approvals required for the formation of the Holding Company. In addition, the
Plan of Reorganization also provides that the Reorganization may be
terminated by the Board of Directors of the Bank or Bancorp if, among other
things, (i) the number of shares of Common Stock owned by dissenting
stockholders makes the Reorganization unwise in the opinion of the Bank and
Bancorp, (ii) any action, suit, proceeding or claim has been instituted, made
or threatened relating to the proposed Reorganization which will make its
consummation inadvisable in the opinion of the Bank or Bancorp, or (iii) for
any other reason the Reorganization is inadvisable in the opinion of the Bank
or Bancorp.
-4-
<PAGE>
RISK
The transactions contemplated by the Reorganization are principally
designed to reorganize the corporate structure of the Bank in order to
conduct the business of the Bank as a wholly-owned subsidiary of a registered
bank holding company. The Reorganization, if consummated, does not represent
any material change in the nature of the business conducted by the Bank.
Stockholders electing to receive Bancorp stock for Bank stock do so without
the ability to analyze the historical financial performance of Bancorp.
Bancorp is a newly formed Massachusetts corporation and has no history of
financial performance. Bancorp's financial condition immediately following
the effective date of the merger contemplated by the Agreement will depend on
the operation and profitability of the Bank at the time of and after the
effective date of the Reorganization. As Bancorp continues to operate in the
future, additional factors may affect its profitability including, among
other things: (i) businesses started or acquired by Bancorp other than the
Bank; (ii) the nature of federal or state laws and regulations applicable to
Bancorp; and (iii) the effect of management.
REASONS FOR THE HOLDING COMPANY REORGANIZATION
The Board of Directors of the Bank believes that a holding company
structure will provide greater flexibility in the operation of the Bank and
in responding to competitive conditions in the banking and financial services
industries. See "Proposal III -- Formation of Holding Company -- Reasons for
the Holding Company Reorganization."
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the Reorganization, holders of the common stock of the
Bank, which is a Massachusetts-chartered savings bank subject to
Massachusetts banking law and the Charter and By-laws of the Bank, will
become stockholders of Bancorp, a Massachusetts corporation. Accordingly,
their rights will be governed by Massachusetts corporation law and the
Articles of Organization and By-laws of Bancorp. Certain differences arise
from this change of governing law, as well as from distinctions between the
Charter and By-laws of the Bank and the Articles of Organization and By-laws
of Bancorp. These differences relate, among other things, to the issuance of
capital stock, the payment of dividends and dissenters' rights. See "Proposal
III -- Formation of Holding Company -- Comparison of Stockholder Rights."
ACCOUNTING TREATMENT
It is anticipated that the Reorganization will be accounted for as a
"pooling of interests" transaction under generally accepted accounting
principles.
TAX CONSEQUENCES
The Bank has received an opinion from its independent public accountants
that, among other things, the Reorganization will be treated as a non-taxable
transaction at the corporate and stockholder levels, except with respect to
shares purchased from dissenting stockholders, if any. Receipt of this
opinion is a condition to the consummation of the Reorganization. This
opinion is not binding on the Internal Revenue Service. Each stockholder
should consult his own tax counsel as to specific federal, state and local
tax consequences of the Reorganization, if any, to such stockholder. See
"Proposal III -- Formation of Holding Company -- Income Tax Consequences."
DISSENTERS' RIGHTS
Stockholders of the Bank will have dissenters' rights in connection with
the Reorganization. Stockholders who exercise dissenters' rights must
carefully follow the required procedures. See "Proposal III -- Formation of
Holding Company -- Rights of Dissenting Stockholders."
VOTE REQUIRED
The affirmative vote of the holders of at least two-thirds of the issued
and outstanding shares of Common Stock eligible to be cast by stockholders of
record at the close of business on the Record Date will be required to
approve the Plan of Reorganization and each of the transactions contemplated
thereby. All officers and Directors as a group own 51.43% of the shares
entitled to vote.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION AND ACQUISITION AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE REORGANIZATION.
-5-
<PAGE>
- --------------------------------------------------------------------------------
OUTSTANDING VOTING SECURITIES
- --------------------------------------------------------------------------------
Only holders of record at the close of business on February 29, 1996 will
be entitled to vote at the meeting. As of that date there were 1,553,846
shares of common stock of the Bank outstanding. These are the only voting
securities of the Bank outstanding. Each share is entitled to one vote on
each matter to be presented to the meeting. To the knowledge of management,
as of February 29, 1996 and based upon 1,553,846 outstanding shares of common
stock, only the stockholders listed below own more than five percent of the
common stock of the Bank:
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
The Hibernia Savings Bank 237,003(1) 15.25%
Employee Stock Ownership Plan
c/o The Pentad Corporation
950 Winter Street, Suite 1400
Waltham, MA 02154
Mark A. Osborne, 212,889(2) 13.70%(3)
Chairman of the Board
and Chief Executive Officer
The Hibernia Savings Bank
730 Hancock Street
Quincy, MA 02170
Michael T. Putziger
Roche, Carens & DeGiacomo
One Post Office Square
Boston, MA 02109 and
Myrna Putziger 171,700(4) 11.05%
Rubin and Rudman
50 Rowes Wharf
Boston, MA 02110
The officers, Directors and nominees for Director own common stock
in the Bank as follows:
All Officers and Directors
as a group(5) 799,153(5) 51.43%
(1) Form F-11A, filed with the FDIC 1/90; Amendment 1 to Form F-11A filed with
the FDIC 2/92; Amendment 2 to Form F-11A filed with the FDIC 2/93;
Amendment 3 to Form F_11A filed with FDIC 2/94; Amendment 4 to Form F-11A
filed with the FDIC 1/95; Amendment 5 to Form F-11A filed with the FDIC
1/96. The ESOP has no power to vote these shares. Allocated shares are
voted as directed by the persons to whom they are allocated; unallocated
shares are voted in the same percentages as the allocated shares.
(2) Form F-11, filed with the FDIC 9/89; Amendment 1 to Form F-11 filed with
the FDIC 1/90; Amendment 2 to Form F-11 filed with the FDIC 2/90; Amendment
3 to Form F-11 filed with the FDIC 4/91; Amendment 4 to Form F-11 filed
with the FDIC 3/92; Amendment 5 to Form F-11 filed with the FDIC 2/93;
Amendment 6 to Form F-11 filed with the FDIC 2/94; Amendment 7 to Form F-11
filed with the FDIC 12/94; Amendment 8 to Form F-11 filed with the FDIC
3/96. Of the shares beneficially owned by Mr. Osborne, Mr. Osborne owns
83,500 in his own name; he presently has a right to acquire 40,500 by
exercise of options granted to him; 51,132 are being held in the ESOP;
9,291 are being held for Mr. Osborne under the Bank's NQERP; 5,500 are
owned jointly with his wife; 13,300 are owned by his wife. Effective 2/92
Mr. Osborne, by power of attorney from his parent, has the right to vote
and dispose of 6,000 shares. In addition, Mr. Osborne presently has the
right to vote 3,666 shares of unallocated stock in the ESOP. Mr. Osborne
specifically disclaims ownership of the shares owned by his wife and mother
and of the unallocated shares of the ESOP. Mr. Osborne currently has sole
power to vote 144,298 shares and shared power to vote 5,500 shares. He has
sole power to dispose of 89,500 shares and shared power to dispose of 5,500
shares.
(3) The Board of Directors voted at its 2/90 meeting to approve the acquisition
by Mr. Osborne of more than 10% of the outstanding common stock of the Bank
in accordance with Article 10 of the Bank's Amended and Restated Charter.
(4) Form F-11, filed with the FDIC 12/90; Amendment 1 to Form F-11 filed with
the FDIC 11/91; Amendment 2 to Form F-11 filed with the FDIC 5/92;
Amendment 3 to Form F-11 filed with the FDIC 2/93, Amendment 4 to Form F-11
filed with the FDIC 2/94; Amendment 5 to Form F-11 filed with the FDIC
11/94; Amendment 6 to Form F-11 filed with the FDIC 1/95.
(5) This amount also includes shares owned in the company's ESOP of 215,877
allocated shares and 15,477 unallocated shares and unexercised incentive
stock options granted to principal officers of 84,350 shares.
-6-
<PAGE>
- --------------------------------------------------------------------------------
PROPOSALS I AND II -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
At the 1996 Annual Meeting, four persons will be elected to serve three
year terms as Directors (Proposal I) and one person will be elected to serve
for a one year term (Proposal II). Unless otherwise specified in the proxy,
it is the intention of the persons named in the proxy to vote the shares
represented by each properly executed proxy for the election of the nominees
listed below.
If any of the nominees shall be unable to serve, discretionary authority
is reserved to vote for a substitute or to reduce the number of Directors to
be elected, or both. The Board of Directors has no reason to believe that any
of the nominees will be unwilling or unable to serve if elected. The
information shown in the following table regarding nominees has been
furnished by each of the nominees. Shares held by or jointly with a spouse,
minor child, or other relative living in the home of such nominee, or by a
trust in which members of the nominee's family have a beneficial interest,
have been treated for purposes of this proxy statement as beneficially owned
by such nominee. However, such nominees disclaim beneficial interest in
shares so held.
<TABLE>
<CAPTION>
CURRENT PROPOSED
TRUSTEE OR SHARES % OF TERM TERM
NAME AND PRINCIPAL AGE AT DIRECTOR OWNED AT COMMON TO TO
OCCUPATION 2/29/96 SINCE 2/29/96 STOCK EXPIRE EXPIRE
THREE YEAR TERM:
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Moore, Jr.(1) 57 1991 32,280(2) 2.08 1996 1999
VICE PRESIDENT
STATE STREET RESEARCH &
MANAGEMENT CO.
Mark A. Osborne(1) 46 1977 212,889(3) 13.70 1996 1999
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
THE HIBERNIA SAVINGS BANK
Paul D. Osborne(4) 45 1986 8,375(5) .54 1996 1999
TREASURER
OSBORNE OFFICE FURNITURE(6)
Douglas C. Purdy 53 1995 400 .03 1996 1999
ATTORNEY-AT-LAW
SERAFINI, PURDY, DINARDO & WELLS(7)
ONE YEAR TERM:
William E. Lucey 47 1996 800 .05 - 1997
CERTIFIED PUBLIC ACCOUNTANT
O'CONNOR & DREW
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS ONE AND TWO.
(1) Director of Kildare Corporation, The Limerick Securities Corporation and
The Meath Corporation, all subsidiaries of the Bank. Mr. Osborne is also
trustee of a testamentary trust which owns 49.9% of Paul D. Osborne Desk
Co., Inc. which does business as Osborne Office Furniture.
(2) Includes 2,700 shares held in trust for children.
(3) Refer to footnote 3 "Outstanding Voting Securities."
(4) Brother of Mark A. Osborne.
(5) Includes 375 shares owned by spouse.
(6) The Bank, during 1995, paid Osborne Office Furniture $68,961 for the
purchase of office equipment.
(7) During 1995, the Bank paid $115,100 to Serafini, Purdy, DiNardo & Wells in
fees, reimbursement of expenses paid on behalf of the Bank and conveyancing
fees paid by borrowers at loan closings.
-7-
<PAGE>
The following is a list of present Directors of the Bank whose terms have not
expired. These Directors, together with those named above, if elected, will
constitute the Board of Directors of the Bank for the coming year or until
their successors are elected and qualified.
<TABLE>
<CAPTION>
CURRENT
TRUSTEE OR SHARES % OF TERM
NAME AND PRINCIPAL AGE AT DIRECTOR OWNED AT COMMON TO
OCCUPATION 2/29/96 SINCE 2/29/96 STOCK EXPIRE
<S> <C> <C> <C> <C> <C>
Martha M. Campbell 52 1986 23,700(1) 1.53 1998
ATTORNEY-AT-LAW
Bernard J. Dwyer 65 1970 5,302(2) .34 1998
ATTORNEY-AT-LAW
Peter L. Maguire(3) 47 1986 18,240 1.17 1998
PRESIDENT
MANAGEMENT INFORMATION SERVICES
Michael T. Putziger(3) 49 1989 171,700(4) 11.05 1998
ATTORNEY-AT-LAW
ROCHE, CARENS & DEGIACOMO(5)
Thomas J. Carens 73 1985 1,143 .07 1997
OF COUNSEL
ROCHE, CARENS & DEGIACOMO(5)
Richard J. Murney 67 1987 1,650(6) .11 1997
CERTIFIED PUBLIC ACCOUNTANT
John V. Murphy(3) 46 1989 9,750 .63 1997
EXECUTIVE VICE PRESIDENT &
CHIEF OPERATING OFFICER
DAVID L. BABSON & CO. INC.
Richard P. Quincy(3) 41 1994 1,500 .10 1997
PRESIDENT
QUINCY & CO.(7)
William T. Novelline 54 1977 5,550(8) .36 1996
PRESIDENT
ABBOT FINANCIAL MANAGEMENT
</TABLE>
(1) Includes 12,450 shares held in mother's estate, of which Ms. Campbell is
the executrix and in which she has a 25% beneficial interest.
(2) Includes 2,700 shares held in trust for children.
(3) Director of Kildare Corporation, The Limerick Securities Corporation and
The Meath Corporation, all subsidiaries of the Bank.
(4) Includes 77,250 shares held jointly with spouse and 31,250 shares held in
IRA and pension trust.
(5) Roche, Carens & DeGiacomo has been retained as counsel to the Bank during
the last eight fiscal years and will be retained in the 1996 fiscal year.
During 1995, the Bank paid $569,985 to Roche, Carens & DeGiacomo in fees,
reimbursement of expenses paid on behalf of the Bank, and conveyancing fees
paid by borrowers at loan closings.
(6) Includes 1,500 shares held jointly with spouse.
(7) The Bank during 1995 paid Quincy & Co. $136,934 for the Bank's general
insurance coverage. Said coverage was obtained at the same rate and on the
same terms and conditions the Bank could have obtained from other insurance
agents.
(8) Includes 300 shares held as trustee of family trust and 3,750 shares held
as trustee of profit sharing plan.
-8-
<PAGE>
- --------------------------------------------------------------------------------
MARKET INFORMATION
- --------------------------------------------------------------------------------
The Bank's common stock is presently traded on the NASDAQ National Market
System under the symbol "HSBK." Bancorp intends to seek approval for the
listing of Bancorp Common Stock in substitution for the Bank's Common Stock
on the NASDAQ National Market System using the symbol "EIRE" subject to
completion of Bancorp formation. The Bank expects that approval for this
substitution will be received prior to consummation of the Reorganization.
Set forth below are the per share high and low closing sale prices of the
Bank's Common Stock as reported on the NASDAQ National Market System and the
cash dividends declared during the periods indicated. Prices listed below
have been adjusted to reflect a 3 for 2 stock split effective February 1,
1995.
CASH DIVIDENDS
FISCAL YEAR 1995 HIGH LOW PAID
December 31, 1995 $18 1/4 $15 3/4 $0.06
September 30, 1995 17 1/8 14 1/2 0.06
June 30, 1995 14 3/4 12 1/2 0.05
March 31, 1995 13 1/2 10 1/8 0.05
CASH DIVIDENDS
FISCAL YEAR 1994 HIGH LOW PAID
December 31, 1994 $11 5/8 $10 $ --
September 30, 1994 12 5/8 11 1/2 --
June 30, 1994 13 1/8 10 3/8 --
March 31, 1994 11 5/8 9 --
The closing sale price of the Common Stock as reported on the NASDAQ
National Market System on February 14, 1996 was $16.00 per share. As of
February 29, 1996, there were approximately 400 holders of record of the
Common Stock, not including persons or entities who hold the stock in nominee
or street name through various brokerage firms.
- --------------------------------------------------------------------------------
COMMITTEES
- --------------------------------------------------------------------------------
The Board of Directors met twelve times in 1995. The Bank has standing
Audit, Executive and Nominating Committees. Directors who are not Officers
of the Bank receive an annual retainer of $2,500.00, payable semi-annually
and are compensated for meetings attended during the year. Compensation is
equal to $300.00 per meeting attended for board and committee members and
$400.00 per meeting attended for the committee clerk or chairman. Total
compensation to all Directors, including attendance at Board and Committee
meetings amounted to $95,400 in 1995.
During 1995 two members of the Board of Directors, Mr. William T.
Novelline and Mr. Thomas P. Moore, Jr. attended fewer than 75 percent of the
Director's meetings. One member of the Executive Committee, Mr. Thomas P.
Moore, Jr. attended fewer than 75 percent of the meetings of that committee
held during 1995.
The Audit Committee presently is chaired by Mr. Richard J. Murney and has
as its members Ms. Martha M. Campbell, Mr. Bernard J. Dwyer and Mr. William
E. Lucey. The Committee met four times in 1995. The Audit Committee reviews
the results of the Bank's independent audit and regulatory examinations,
reviews internal auditing procedures, and the results of internal auditing
programs.
The Executive Committee presently is chaired by Mr. Mark A. Osborne and
has as its members Messrs. Peter L. Maguire, John V. Murphy, Thomas P. Moore,
Jr., Michael T. Putziger and Richard P. Quincy. The Committee met eleven
times in 1995. The Executive Committee approves all investments and lending
activities. In addition, the Executive Committee administers the 1986 Stock
Option Plan, the 1989 Stock Option Plan, the 1995 Premium Incentive Stock
Option Plan, Short Term Incentive Bonus Plan, and determines compensation for
the Principal Officers of the Bank. The Executive Committee is also the
Trustee of the Employee Stock Ownership Plan.
The Nominating Committee presently is chaired by Mr. Mark A. Osborne and
has as its members Messrs. Peter L. Maguire, Thomas P. Moore, Jr., Michael T.
Putziger and Richard P. Quincy. The Committee meets annually to recommend
nominees for Officers and Directors of the Bank to the full Board. The Committee
will consider stockholder nominations, if received along with all background
materials, prior to November 15, 1996, for consideration at the annual meeting
to be held in the second quarter of 1997.
-9-
<PAGE>
Two members of the Board of Directors, Mr. William T. Novelline and Mr.
Charles R. Simpson, Jr. have tendered letters of resignation from the Board
of Directors. Mr. Novelline has been a member of the Board of Directors for
over 25 years and has decided not to stand for re-election when his term
expires April 29, 1996 due to increased business commitments. Mr. Novelline's
resignation is effective as of that date. Mr. Simpson has taken a senior
management position at another federally insured banking institution;
consequently, he is prohibited by statute from continuing to serve as a
member of the Board. Mr. Simpson's resignation was effective January 15, 1996.
During 1995, three members of the Board of Directors, Douglas C. Purdy,
Paul D. Osborne and Martha M. Campbell purchased additional shares of The
Hibernia Savings Bank stock that were not reported on Form F-8, during the
year, as required by the FDIC. All purchases have been properly reported on
Form F-8A filed as of December 31, 1995.
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION OF PRINCIPAL OFFICERS
- --------------------------------------------------------------------------------
The following table sets forth a summary of certain information
concerning the compensation awarded or paid by The Hibernia Savings Bank for
services rendered in all capacities during the last three fiscal years to the
Chairman of the Board and Chief Executive Officer and the top four other
senior officers.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
OTHER LONG-TERM ALL
NAME AND PRINCIPAL ANNUAL COMPENSATION OTHER
POSITION FOR 1995 FISCAL YEAR SALARY BONUS COMPENSATION AWARDS(1) COMPENSATION(2)
<S> <C> <C> <C> <C> <C> <C>
Mark A. Osborne 1995 $225,000 $40,000 $8,353(3) $247,500 $49,748
Chairman of the Board 1994 210,000 50,000 8,701 173,250 64,248
and Chief Executive Officer 1993 198,000 - 7,995 132,500 29,700
Richard S. Straczynski 1995 $108,316 - - $191,750 -
President and Chief 1994 - - - - -
Operating Officer 1993 - - - - -
Gerard F. Linskey 1995 $90,000 $7,000 - - $10,800
Senior Vice President and 1994 90,000 10,000 $2,500(4) $ 49,500 13,500
Chief Financial Officer 1993 86,000 - 2,500 - 12,900
Dennis P. Myers 1995 $90,000 $10,000 - - $10,800
Senior Vice President and 1994 90,000 20,000 - $49,500 13,500
Senior Lending Officer 1993 85,000 - - - 12,750
Wayne F. Blaisdell 1995 $80,000 $5,000 - - $9,600
Senior Vice President and 1994 76,000 10,000 - $9,900 11,400
Branch Administration and 1993 73,000 - - - 10,950
Operations Officer
</TABLE>
(1) Long term compensation awards consist of stock options granted to
officers. The value is computed based on the option price which was the
fair market value of the Bank's stock on the date the options were issued.
(2) Contributions by the Bank to the Employee Stock Ownership Plan, the Non
Qualified Employee Retirement Plan and the Bank's 401(k) plan.
(3) Personal use of Bank automobile and reimbursement of costs associated with
life insurance.
(4) Personal use of Bank automobile.
-10-
<PAGE>
- --------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR(1)
- --------------------------------------------------------------------------------
The following table sets forth certain information with respect to stock
options granted during the Bank's last fiscal year. No stock appreciation rights
(SARs) were granted during such year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUES
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERMS (1)
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OF
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1986 STOCK OPTION PLAN
Richard S. Straczynski 1,500 100% $11.75 3-14-05 $11,084 $28,090
1989 STOCK OPTION PLAN
Richard S. Straczynski 1,500 40% $11.75 3-14-05 $11,084 $28,090
Richard S. Straczynski 2,250 60% $11.75 3-14-05 $16,626 $42,135
1995 STOCK OPTION PLAN
Mark A. Osborne 15,000 40.82% $16.50 12-12-05 $155,651 $394,451
Richard S. Straczynski 14,750 40.14% $13.00 5-10-05 $120,590 $305,600
Robert D. McCarthy 4,000 10.88% $16.50 12-12-05 $41,507 $105,187
Roger L. Meade 1,000 2.72% $16.50 12-12-05 $10,377 $26,296
Edwin J. Beck 1,000 2.72% $16.50 12-12-05 $10,377 $26,296
Michael P. Donohoe 1,000 2.72% $16.50 12-12-05 $10,377 $26,296
</TABLE>
(1) All such options are exercisable twenty-four months after their respective
issue dates at the market price of the Bank stock as of the issue date, and
expire on the tenth anniversary of the date of grant.
(2) These amounts represent assumed rates of appreciation only, are not
discounted for inflation, and are not necessarily indicative of actual
expected growth. Actual gains, if any, on stock option exercises and common
stock holdings are dependent on the future performance of the common stock
and overall stock market conditions. There can be no assurance that the
amounts reflected in this table will be achieved.
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The Executive Committee of The Hibernia Savings Bank acts as the
compensation committee in establishing salaries for the principal officers of
the Bank. The Bank's compensation policies are designed to provide
competitive levels of compensation integrating pay with the Bank's
performance goals, reward above average performance, recognize individual
initiatives and achievements and assist the Bank in attracting and retaining
qualified executives in the competitive market in which the Bank operates.
Executive compensation consists of three components: cash compensation,
including base salary and an annual incentive bonus; long term incentive
compensation in the form of stock options; and executive benefits. The
components are intended to provide incentives to achieve short and long-range
objectives of the Bank and to reward exceptional performance. Performance is
evaluated not only with respect to The Hibernia Savings Bank's earnings but also
with respect to comparable industry performance, the accomplishment of business
objectives and the individual's contribution to The Hibernia Savings Bank's core
earnings and stockholder value. The competitiveness of The Hibernia Savings
Bank's compensation structure is determined by a thorough review of compensation
survey data collected by the Committee. To motivate job performance and to
encourage growth in stockholder value, stock options are granted under The
Hibernia Savings Bank's stock option plans to all executives and other personnel
in order to encourage substantial contributions toward the overall success of
The Hibernia Savings Bank. The Committee believes that this focuses attention on
managing the Bank from the perspective of an owner with an equity stake in the
business. With respect to executive benefits, executive officers receive all
normal employee fringe benefits.
-11-
<PAGE>
In determining the overall compensation package for the Chief Executive
Officer, the Committee considered each of the factors enumerated in the
preceding paragraphs regarding compensation for executive officers of The
Hibernia Savings Bank, as well as the financial performance achieved by the
Bank during the past fiscal year. In addition, The Hibernia Savings Bank
continued at or near the top of the financial industry for such key financial
performance measures as growth in assets, growth in earning assets, growth in
loans outstanding, return on average assets, return on average equity, and
efficiency ratios. Additionally, the Committee reviewed various compensation
packages provided to executive officers of publicly traded financial
institutions. The results of such review showed Mr. Osborne's overall
compensation package to be competitive for chief executive officers of
publicly traded financial institutions of comparable size, complexity of
operation and performance.
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph sets forth the cumulative total stockholders return
(assuming reinvestment of dividends) to The Hibernia Savings Bank's
stockholders during the five year period ended December 31, 1995 as well as
the NASDAQ Combined Composite Index, NASDAQ Combined Bank Index and S&P 500
Index:
Date Date The Hibernia NASDAQ Comb NASDAQ S&P 500
Savings Bank Composite Index Comb Bank Index
Equity Return Return Index Return Return
1/29/91 0% 0% 0% 0%
1/30/91 0% 0% 0% 0%
2/28/91 78% 9% 10% 7%
3/29/91 56% 16% 16% 10%
4/29/91 89% 17% 23% 10%
5/29/91 67% 22% 25% 15%
6/29/91 Jun-91 56% 15% 22% 9%
7/29/91 56% 21% 23% 15%
8/29/91 56% 27% 29% 17%
9/29/91 56% 27% 28% 15%
10/29/91 11% 31% 25% 17%
11/29/91 0% 6% 21% 12%
12/29/91 Dec-91 22% 42% 31% 25%
1/29/92 100% 50% 40% 23%
2/29/92 111% 53% 48% 24%
3/29/92 100% 46% 48% 22%
4/29/92 178% 40% 56% 25%
5/29/92 200% 41% 64% 26%
6/29/92 Jun-92 256% 36% 66% 24%
7/29/92 244% 40% 73% 29%
8/29/92 244% 36% 70% 27%
9/29/92 178% 41% 73% 28%
10/29/92 200% 46% 79% 28%
11/29/92 233% 58% 89% 33%
12/29/92 Dec-92 244% 63% 99% 34%
1/29/93 422% 68% 121% 36%
2/28/93 322% 62% 124% 37%
3/29/93 322% 67% 135% 40%
4/29/93 511% 57% 127% 37%
5/29/93 522% 69% 123% 41%
6/29/93 Jun-93 489% 70% 127% 41%
7/29/93 578% 70% 142% 40%
8/29/93 456% 79% 153% 46%
9/29/93 556% 84% 161% 45%
10/29/93 600% 88% 164% 48%
11/29/93 567% 82% 155% 46%
12/29/93 Dec-93 511% 88% 158% 48%
1/29/94 567% 93% 164% 53%
2/28/94 556% 91% 159% 49%
3/29/94 622% 79% 152% 42%
4/29/94 611% 77% 158% 44%
5/29/94 622% 78% 174% 47%
6/29/94 Jun-94 678% 70% 183% 43%
7/29/94 733% 74% 187% 48%
8/29/94 700% 85% 193% 54%
9/29/94 667% 85% 189% 50%
10/29/94 656% 88% 175% 53%
11/29/94 589% 81% 161% 48%
12/29/94 Dec-94 611% 82% 161% 50%
1/29/95 648% 82% 173% 54%
2/28/95 670% 92% 186% 60%
3/29/95 754% 97% 188% 65%
4/29/95 774% 104% 197% 69%
5/29/95 812% 109% 204% 76%
6/29/95 Jun-95 888% 125% 218% 80%
7/29/95 912% 142% 232% 86%
8/29/95 963% 146% 256% 87%
9/29/95 056% 152% 262% 95%
10/29/95 1110% 150% 258% 94%
11/29/95 1068% 156% 271% 102%
12/29/95 Dec-95 1000% 154% 277% 106%
- --------------------------------------------------------------------------------
BENEFITS
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENTS
The Bank in 1986 entered into an Employment Agreement (the "Agreement")
with Mark A. Osborne, Chairman of the Board and Chief Executive Officer. The
Agreement provides for a five year term and for a continuation of benefits
currently provided by the Bank. This Agreement was amended and approved by a
vote of the Board of Directors at its July 1991 meeting.
The Agreement will be automatically extended for an additional year on
each anniversary of the Agreement, unless prior to such anniversary either
party gives written notice to the other of an election not to extend the
Agreement.
The Agreement provides that the Bank may terminate Mr. Osborne's
employment at any time for "cause" as that term is defined by the Agreement,
without further obligation on the part of the Bank. However, if the Bank were
to terminate Mr. Osborne's employment for any reason other than cause, Mr.
Osborne would be entitled to receive the compensation specified in the
Agreement for the balance of the term of the Agreement. The Bank would not be
entitled to a set-off for compensation received as a result of new employment.
In addition, the Bank entered into a Special Termination Agreement with
Mr. Osborne in 1986. This Agreement was amended and approved by a vote of the
Board of Directors at its July 1991 meeting. This Agreement provides that if
there is a Change in Control of the Bank, and Mr. Osborne's employment is
terminated within three years thereafter, or if Mr. Osborne should terminate
his employment within three years after such a Change in Control because of
demotion, loss of title or office or reduction in compensation, Mr. Osborne
would be entitled to an additional severance benefit in an amount equal to
three times his annual compensation. A Change in Control, as defined in the
Special Termination Agreement, occurs (a) where a person or group of persons
acquires beneficial ownership of 25% or more of the common stock of the Bank
without the approval of two-thirds of the Board of Directors, or (b) where as
a result of a tender offer, exchange offer, business combination or merger,
or sale of assets, a majority of the Board of Directors is comprised of
persons who did not serve on the Board of Directors prior to such tender
offer or other transaction listed above.
-12-
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN
The Board of Directors at its February 1989 meeting voted to establish an
Employee Stock Ownership Plan ("ESOP"), which is one type of qualified stock
bonus plan under Internal Revenue Code Section 401(a). All employees who
complete twelve consecutive months of employment with the Bank are eligible
to participate in the Plan. After thirty six months of consecutive
employment, employees are 100% vested in the plan. An ESOP is designed to
invest primarily in the stock of the employer corporation and may borrow
money to buy such stock. As of February 29, 1996 the Employee Stock Ownership
Plan had acquired 237,003 shares of the Bank's outstanding common stock. The
Executive Committee of the Board of Directors has been designated as Trustee
for the ESOP and the plan is administered by The Pentad Corporation, Waltham,
MA. For the years 1990, 1991, 1992, 1993, 1994 and 1995 the Bank made
contributions to the plan of $170,949, $184,299, 178,233, $195,875, $200,914
and $183,800, respectively.
401(K) PLAN
The Board of Directors at its January 1992 meeting, voted to establish a
Profit Sharing Plan as defined in the Internal Revenue Code Section 401(k).
The 401(k) Plan became effective on February 1, 1992. All employees who
complete twelve consecutive months of employment with the Bank are eligible
to participate in the Plan. Vesting at 100% begins when the employees are
eligible to participate in the plan. The Bank will match employees' voluntary
contributions on a dollar for dollar basis up to 3% of total compensation.
The plan is administered by the Savings Banks Employees Retirement
Association (SBERA). For the years 1992, 1993, 1994 and 1995, the Bank made
contributions to the plan of $40,965, $44,624, $43,394 and $49,444,
respectively.
NON-QUALIFIED EXECUTIVE RETIREMENT PLAN
The Board of Directors at its January 1994 meeting voted to establish a
Non-Qualified Executive Retirement Plan (NQERP) which is an unfunded
non-qualified plan maintained for the purpose of providing deferred
compensation for a select group of management whose retirement benefits in
the Bank's tax qualified retirement plans are restricted by statute. The
amount credited to an executive's account shall be equal to the difference
between what the Bank would have (in the absence of statutory limitations)
contributed minus the actual contribution made for the year. During 1994 and
1995, the Bank made contributions to the plan of $41,748 and $30,944,
respectively.
SHORT TERM INCENTIVE BONUS PLAN
During 1986, the Bank adopted a Short Term Incentive Bonus Plan (the
"Plan") whereby certain employees are eligible to receive a bonus if the Bank
meets or exceeds certain base standards of profitability, and certain
strategic goals are achieved. The structure of the Plan is reviewed on an
annual basis by the Executive Committee of the Bank. There was no incentive
compensation expense recorded for 1990, 1991 or 1992, while for 1993, 1994
and 1995, the Bank recorded expenses of $136,900, $124,125 and $185,504 of
incentive compensation expense, respectively.
1986, 1989 AND 1995 STOCK OPTION PLANS
The Bank currently has three stock option plans designed to furnish an
additional incentive to key employees of the Bank by affording them the
opportunity to become owners of the Bank's common stock. The options
available, granted and exercised under both plans have been adjusted to
reflect a three for two stock split effective February 1, 1995.
During 1995, the Bank received $77,418 from the exercise of 41,200
options.
The total number of shares available under the 1986 Stock Option Plan is
120,000 shares. Options for 120,000 shares have been granted. Of the total
number of options granted under the plan, 7,100 options remain unexercised as
of February 29, 1996. On March 14, 1995, 1,500 new options were granted to
Richard S. Straczynski under the 1986 Stock Option Plan. These options will
be exercisable after 24 months from issue date. They are exercisable at
$11.75 per share, the market price of the Bank's stock as of the issue date.
The total number of shares available under the 1989 Stock Option Plan is
52,500 shares. Options for 52,500 shares have been granted. Of the total
number of options granted under the plan, 40,500 options remained unexercised
as of February 29, 1996. On March 14, 1995, 3,750 new options were granted to
Richard S. Straczynski under the 1989 Stock Option Plan. These options will
be exercisable after 24 months from the issue date. They are exercisable at
$11.75 per share, the market price of the Bank's stock as of the issue date.
-13-
<PAGE>
The 1995 Premium Incentive Stock Option Plan provides for options on an
additional 70,000 shares. Options for 36,750 shares have been granted. Of the
total number of options granted under the plan, 36,750 options remain
unexercised as of February 29, 1996. On May 10, 1995, 14,750 new options were
granted to Richard S. Straczynski under the 1995 plan. These options will be
exercisable after 24 months from the issue date. They are exercisable at
$13.00 per share, the market price of the Bank's stock as of the issue date.
In addition on December 12, 1995, new options were granted to the following
persons under the 1995 Premium Incentive Stock Option Plan: Mark A. Osborne,
15,000 shares; Robert D. McCarthy, 4,000 shares; Edwin J. Beck, 1,000 shares;
Michael P. Donohoe, 1,000 shares and Roger L. Meade, 1,000 shares. The
options will be exercisable after 24 months from the issue date. They are
exercisable at $16.50 per share, the market price of the Bank's stock as of
the issue date.
STOCK PURCHASE PLAN
In 1989, the Board of Directors voted to adopt a Stock Purchase Plan,
which was subsequently approved by the Commissioner of Banks. Shares
available for purchase were limited to 150,000 shares adjusted for a 3 for 2
stock split effective February 1, 1995 of authorized but unissued common
stock. In 1990 the Board of Directors voted to increase the shares available
for purchase to 300,000 shares adjusted for a 3 for 2 stock split effective
February 1, 1995 of authorized but unissued common stock, but not to
authorize the issuance of any shares pursuant to the Plan without further
Board approval. The increase in the number of shares of authorized but
unissued stock was also approved by the Commissioner of Banks.
The two purposes of the Plan are (1) to provide a continuing source of
additional capital for the Bank without the costs normally associated with
that activity, and (2) to provide an additional method for Directors,
officers, employees, and employee benefit plans to acquire a proprietary
interest in the Bank through the purchase of shares of common stock of the
Bank. No participant, except for the Employee Stock Ownership Plan, may
purchase more than 25,000 shares absent the approval of two thirds of the
Board of Directors. The Board of Directors approved the purchase of in excess
of 25,000 shares for Director Michael T. Putziger at its October 21, 1992
meeting. Shares must be purchased for investment only and must be held for at
least one year. The purchase price will be the closing bid price of the
common stock on the business day prior to the purchase.
The Board of Directors authorized the sale of stock through the Stock
Purchase Plan at its April 29, 1992 meeting and as of February 29, 1996,
164,715 additional shares of common stock had been issued under the Plan. All
of the shares were issued at market prices at the time of issuance, raising
additional paid in capital of $1,663,225.
INDEBTEDNESS OF MANAGEMENT
Certain of the Bank's Directors and executive officers and their
associates are customers of the Bank and from time to time have had loans
from the Bank. Such loans were made in the ordinary course of business and on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
persons and did not involve more than the normal risk of collectibility or
present other unfavorable features to the Bank. The total outstanding
indebtedness of Directors and officers was $1,088,274 at December 31, 1995.
- --------------------------------------------------------------------------------
PROPOSAL III -- FORMATION OF HOLDING COMPANY
- --------------------------------------------------------------------------------
The following descriptions are qualified in their entirety by reference
and made subject to the Plan of Reorganization attached hereto as Exhibit A,
the form of Articles of Organization of Emerald Isle Bancorp, Inc. attached
hereto as Exhibit B, and certain provisions of the General Laws of
Massachusetts relating to the rights of dissenting stockholders attached
hereto as Exhibit C.
RECOMMENDATION OF DIRECTORS
The Plan of Reorganization has been unanimously approved by the Board of
Directors of The Hibernia Savings Bank (the "Bank") and Emerald Isle Bancorp,
Inc. ("Bancorp"). THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS
OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK ELIGIBLE TO BE CAST BY
STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON THE RECORD DATE WILL BE
REQUIRED TO APPROVE THE PLAN OF REORGANIZATION AND EACH OF THE TRANSACTIONS
CONTEMPLATED THEREBY. The Board of Directors of the Bank believes that the
Plan of Reorganization is in the best interests of the Bank and its
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE BANK VOTE
FOR APPROVAL OF THE PLAN OF REORGANIZATION AND EACH OF THE TRANSACTIONS
CONTEMPLATED THEREBY.
-14-
<PAGE>
DESCRIPTION OF THE PLAN OF REORGANIZATION
Bancorp has been organized as a Massachusetts corporation at the
direction of the Bank for the purpose of becoming the holding company of the
Bank. Bancorp and the Bank have entered into the Plan of Reorganization,
which provides, subject to the exercise of dissenters' rights, for the
acquisition of all the outstanding shares of Bank Common Stock by Bancorp in
exchange for an equal number of shares of the common stock, par value $1.00
per share, of Bancorp ("Bancorp Common Stock") pursuant to the provisions of
Section 26B of Chapter 172 of the General Laws of Massachusetts.
Under the Plan of Reorganization, Bancorp will become the owner of all
the outstanding shares of the Common Stock of the Bank, and each stockholder
of the Bank who does not exercise dissenters' rights with respect to the Plan
of Reorganization will become the owner of one share of Bancorp Common Stock
for each share of Common Stock of the Bank held immediately prior to the
consummation of the Reorganization. On the effective date of the
Reorganization, each share of Common Stock of the Bank will be automatically
converted into and exchanged for one share of Bancorp Common Stock. The
Reorganization will become effective at 12:01 a.m. on the first business day
following the date on which the Bank and Bancorp advise the Massachusetts
Commissioner of Banks (the "Commissioner") that all conditions precedent have
been satisfied or on such other date as is specified to the Commissioner (the
"Effective Time"). As a condition to the consummation of the Reorganization,
Bancorp and the Bank must receive certain regulatory approvals. See
"-- Regulation of Bancorp and the Bank." Neither Bancorp nor the Bank can
predict with any certainty whether such approvals on terms satisfactory to
Bancorp and the Bank will be obtained, and, if so, the timing of such
approvals. Accordingly, the consummation of the Reorganization may be subject
to a delay, which may, under certain circumstances, be significant. If the
stockholders approve the Plan of Reorganization at the Annual Meeting,
Bancorp and the Bank shall have the right to consummate the Reorganization at
any time thereafter.
The number of shares of Bancorp Common Stock to be issued at the
Effective Time will equal the number of shares of Common Stock of the Bank
issued and outstanding immediately prior thereto, less the number of shares
of Common Stock of the Bank held by dissenting stockholders. Shares of
Bancorp Common Stock that would have been issued had dissenting stockholders
not dissented will remain as authorized but unissued shares of Bancorp Common
Stock. The shares of Bancorp Common Stock that are outstanding prior to the
Effective Time, all of which are presently held by the Bank, will be canceled
as part of the Reorganization.
The outstanding stock certificates of Common Stock of the Bank that,
prior to the Reorganization, represented shares of Common Stock of the Bank,
will thereafter, for all purposes represent an equal number of shares of
Bancorp Common Stock, except for certificates held by dissenting stockholders
and as further described below. After the Effective Time, Bancorp will issue
and deliver to the transfer agent (the "Transfer Agent") for the Bank and
Bancorp certificates representing the number of shares of Bancorp Common
Stock issuable in connection with the Reorganization. Bancorp and the Bank
will notify stockholders by mail at their addresses as shown on the Bank's
records and by publication that they may, or, if required to do so by Bancorp
in its sole discretion, shall, present their certificates to the Transfer
Agent for exchange. Stockholders may exchange their present stock
certificates representing Common Stock of the Bank for new certificates
representing Bancorp Common Stock by surrendering their certificates of the
Bank's Common Stock to the Transfer Agent. They will then receive in exchange
therefor a certificate representing an equal number of shares of Bancorp
Common Stock. Until so exchanged, stockholders' present certificates for the
Bank's Common Stock will, for all purposes, represent an equal number of
shares of Bancorp Common Stock, and the holders of those certificates will
have all the other rights of stockholders of Bancorp. However, Bancorp, at
any time, may, in its sole discretion, withhold any dividends that may be
declared on shares of Bancorp Common Stock until stockholders present their
certificates for the Bank's Common Stock to the Transfer Agent for exchange.
In such case, upon delivery of such certificates or as soon thereafter as
practicable, such person shall be entitled to receive from Bancorp or the
Transfer Agent an amount equal to all accrued dividends (without interest
thereon and less the amount of taxes, if any, which may have been imposed or
paid thereon or which are required by law to be withheld in respect thereof)
on the shares represented thereby.
After consummation of the Reorganization, the Bank, as a subsidiary of
Bancorp, will continue to serve the communities it presently serves from its
existing office locations. The assets, property, rights and powers, debts,
liabilities, obligations and duties of the Bank will not be changed by the
Reorganization, except for the proposed initial transfer, subject to
applicable law and any agreements of the Bank with regulatory agencies, of up
to approximately $100,000.00 from the Bank to Bancorp. See "Regulation of
Bancorp and the Bank." Similarly, the Charter, By-laws and the name of the
Bank will not be affected by consummation of the Reorganization. The Hibernia
Savings Bank 1986 Stock Option Plan, The Hibernia Savings Bank 1989 Stock
Option Plan, and The Hibernia Savings Bank 1995 Premium Incentive Stock
Option Plan will become stock option plans of Bancorp. All other stock
related benefit plans of the Bank will be unchanged by the Reorganization,
except that any plan which refers to the Bank's Common Stock, such as the
Employee Stock Ownership Plan ("ESOP"), will, following the comple-
-15-
<PAGE>
tion of the Reorganization, be deemed to refer instead to Bancorp Common
Stock. The Directors, officers and other employees of the Bank will be
unchanged by the Reorganization. The Directors and officers of Bancorp will
initially consist of the following persons who are also Directors and
officers of the Bank:
---------------------------------------
DIRECTORS: TERM TO EXPIRE:
---------------------------------------
Douglas C. Purdy 1997
Richard P. Quincy 1997
Peter L. Maguire 1998
John V. Murphy 1998
Thomas P. Moore, Jr. 1999
Mark A. Osborne 1999
Michael T. Putziger 1999
For further information regarding Bancorp"s Directors, see Proposals I and
II -- Election of Directors.
---------------------------------------
OFFICERS: OFFICE HELD:
---------------------------------------
Mark A. Osborne President
Gerard F. Linskey Treasurer
Douglas C. Purdy Clerk
REMUNERATION
Since the formation of Bancorp, none of its executive officers or
Directors has received any remuneration from Bancorp. It is expected that
unless and until Bancorp becomes actively involved in additional business, no
separate compensation will be paid to the Directors and officers of Bancorp
in addition to that paid to them by the Bank. However, Bancorp may determine
in the future that such separate compensation is appropriate.
EFFECT ON STOCK OPTIONS AND OTHER STOCK RELATED BENEFIT PLANS
By voting in favor of this Plan of Reorganization, Bancorp shall have
approved adoption of The Hibernia Savings Bank 1986 Stock Option Plan, The
Hibernia Savings Bank 1989 Stock Option Plan, and The Hibernia Savings Bank
1995 Premium Incentive Stock Option Plan as the stock option plans of Bancorp
and shall have agreed to issue Bancorp Common Stock in lieu of Bank Common
Stock pursuant to options currently outstanding under the existing Stock
Option Plans. As of the Effective Time, the Stock Option Plans shall
automatically, by operation of law, be continued as, and become the stock
option plans of Bancorp. Further, at the Effective Time, each option to
purchase shares of Bank Common Stock under the Stock Option Plans outstanding
and unexercised immediately prior to the Effective Time shall automatically
be converted into an identical option, with identical price, terms and
conditions, to purchase an identical number of shares of Bancorp Common Stock
in lieu of shares of Bank Common Stock. Bancorp and the Bank shall make
appropriate amendments to the Stock Option Plans to reflect the adoption of
the Stock Option Plans as the Stock Option Plans of Bancorp, without adverse
effect upon the options outstanding as of the Effective Time under the Stock
Option Plans.
By voting in favor of this Plan of Reorganization, Bancorp shall also
have approved The Hibernia Savings Bank 1989 Stock Purchase Plan and The
Hibernia Savings Bank 1995 Automatic Dividend Reinvestment and Common Stock
Purchase Plan as the stock purchase plans of Bancorp. As of the Effective
Time, the Stock Purchase Plans shall automatically, by operation of law, be
continued as and become the stock purchase plans of Bancorp. Further, at the
Effective Time, all rights to purchase shares of Bank Common Stock under the
existing Stock Purchase Plans shall automatically, by operation of law, be
converted into and shall become identical rights to purchase Bancorp Common
Stock upon identical terms and conditions. The Bank shall make appropriate
amendments to the Stock Purchase Plans, effective as of the Effective Time,
to reflect the substitution of rights to purchase Bank Common Stock for
rights to purchase Bancorp Common Stock.
-16-
<PAGE>
REASONS FOR THE HOLDING COMPANY FORMATION
The Board of Directors of the Bank believes that a holding company
structure will provide flexibility for meeting the future financial needs of
the Bank or other subsidiaries of Bancorp and responding to competitive
conditions in the financial services market. As a bank holding company,
Bancorp will not be subject to the same regulatory restrictions as the Bank,
and will be able to acquire and invest more freely in certain bank and
bank-related activities as well as such other activities as might be
permitted by regulatory authorities. In addition, Bancorp, unlike the Bank,
will not be subject to any regulatory limitations on the amounts which it can
invest in its subsidiaries and other businesses and will not be required to
obtain regulatory approval before issuing shares of its capital stock, except
under certain circumstances. Furthermore, Bancorp, when market conditions so
warrant, can purchase its own Common Stock without adverse federal income tax
consequences, which the Bank, in certain circumstances, may not be able to
do. See "-- Regulation of Bancorp and the Bank." There are no current
agreements or understandings with respect to any investments or the issuance
of any additional shares of capital stock by either the Bank or Bancorp,
except pursuant to options granted under the Stock Option Plans.
A holding company structure will also facilitate the acquisition of other
banks as well as other companies engaged in bank-related activities if and
when opportunities arise. A holding company structure would permit an
acquired entity to operate on a more autonomous basis as a wholly-owned
subsidiary of Bancorp rather than as a division of the Bank. For example, the
acquired institution could retain its own directors, officers, corporate name
and local identity. This more autonomous operation may be decisive in
acquisition negotiations. In addition, the stock of Bancorp may serve as
appropriate consideration in any such acquisition. Although the recent
enactment of federal interstate banking legislation may eventually curtail
the advantages of a holding company structure for acquisitions, the ability
of states to opt out of the interstate branching authorization until June 1,
1997 favors continued use of a holding company structure.
While the Bank is, from time to time, exploring various acquisition
possibilities, there are no current agreements or understandings for the
acquisition of any financial institution or other company and there are no
assurances that any such acquisitions will occur.
It is recognized that some increased costs, including administrative
expenses, will be incurred in the formation and operation of Bancorp.
However, such increased costs are not expected to have a material adverse
effect on the consolidated financial results of Bancorp and the Bank.
BUSINESS OF THE BANK
The Hibernia Savings Bank is a Massachusetts-chartered stock savings bank
founded in 1912. The Bank's headquarters is located at 731 Hancock Street,
Quincy, Massachusetts. In 1986, the Bank converted from mutual to stock form.
The Bank is primarily engaged in attracting retail deposits from the general
public and borrowing funds, primarily from the Federal Home Loan Bank, and
using these funds to originate and invest in loans secured by first or second
mortgage loans on residential real estate, to originate or participate in
commercial real estate loans, to make small business loans, and to make
investments in securities. The Bank also originates and services residential
mortgage loans sold into the secondary mortgage market and originates
consumer loans for inclusion in its loan portfolio.
The Bank, at December 31, 1995, has a wholly-owned subsidiary known as
Kildare Corporation. Kildare holds investments in limited real estate
partnerships and is the sole owner of four subsidiaries, Athlone Corporation,
Donegal Corporation, Mayo Corporation, and Roscommon Corporation, each of
which is currently inactive.
The Bank, at December 31, 1995, also has a wholly-owned subsidiary known
as Limerick Securities Corporation. This corporation was formed solely in
order to invest in securities in which the Bank could invest pursuant to
Sections 2 and 3 of Chapter 167F of the Massachusetts General Laws.
The Bank, at December 31, 1995, also has a wholly-owned subsidiary known
as Meath Corporation. This corporation was formed to undertake the
construction and sale of a condominium project in the western part of
Massachusetts and is currently inactive.
-17-
<PAGE>
PROPERTIES
The Bank has branches located at 731 Hancock Street, Quincy,
Massachusetts, 101 Federal Street, Boston, Massachusetts, 51 Commercial
Street, Braintree, Massachusetts, 52 Coddington Street, Quincy,
Massachusetts, 1150 Washington Street, Weymouth, Massachusetts, 274 Main
Street, Hingham, Massachusetts, and 397 Washington Street, Stoughton,
Massachusetts. The Bank's headquarters in Quincy, and the Boston and
Stoughton facilities are leased premises. The Bank owns the Hingham, Weymouth
and Braintree properties. The Bank also has three Loan Centers located at 730
Hancock Street, Quincy, Massachusetts, 51 Commercial Street, Braintree,
Massachusetts, and 731 Hancock Street, Quincy, Massachusetts. The Bank, in
February of 1994, purchased a building at 730 Hancock Street, Quincy,
Massachusetts which houses the Executive Offices and Commercial Real Estate
Department.
COMPETITION
The Bank faces extensive competition, both in originating loans and in
attracting deposits, from other savings banks as well as co-operative banks,
savings and loan associations, credit unions, and other financial service
businesses. Competition for loans comes primarily from other savings banks,
co-operative banks, savings and loan associations, commercial banks, and
mortgage banking companies. The Bank competes for loans principally on the
basis of interest rates and loan fees, types of loans originated, processing
time, and the quality of service provided to borrowers.
In attracting deposits, the Bank's primary competitors are other thrift
institutions, commercial banks, mutual funds, and credit unions. The Bank's
branches attract deposits from the communities in which they are located. The
Bank's attraction and retention of deposits depend principally on the quality
of its service and its ability to provide investment opportunities that
satisfy the requirements of investors with respect to rate of return,
liquidity, risk, and other factors. The Bank also competes for these deposits
by offering competitive rates, convenient locations, and convenient business
hours.
Management believes that providing quality financial services and
products in a personalized manner along with maintaining a community
orientation have long been characteristics of the Bank which have resulted in
customer recognition and loyalty. The Bank seeks to develop multiple
relationships with its customers through an experienced service staff and
offers a wide range of financial products and services to meet the demands of
the Bank's existing market area and target customer base.
EMPLOYEES
As of December 31, 1995, the Bank employed 94 employees, none of whom was
represented by a collective bargaining group. Management considers the Bank's
relationship with its employees to be excellent.
LEGAL PROCEEDINGS
The Bank is not currently involved in any material legal proceedings.
BUSINESS OF BANCORP
Bancorp is a business corporation organized under the laws of the
Commonwealth of Massachusetts on January 10, 1996. The only office of
Bancorp, and its principal place of business, is located at the
administrative office of the Bank at 730 Hancock Street, Quincy,
Massachusetts 02170, and its telephone number is (617) 479-5001. Bancorp was
organized for the purpose of becoming the holding company of the Bank. Upon
completion of the Reorganization, the Bank will be a wholly-owned subsidiary
of Bancorp, which will thereby become a bank holding company. Each
stockholder of the Bank, upon completion of the Reorganization, will, subject
to dissenters' appraisal rights, become a stockholder of Bancorp without
change in the number of shares owned or in respective ownership percentages.
Bancorp has not yet undertaken any business activities and there are no
operating business activities currently proposed for Bancorp. In the future,
Bancorp may become an operating company or acquire banks or companies engaged
in bank-related activities and may engage in or acquire such other business
or activities as may be permitted by applicable law. Upon consummation of the
Reorganization, Bancorp will own all of the outstanding Common Stock of the
Bank. Bancorp may enter into a management agreement for the purpose of
rendering certain services to the Bank after completion of the
Reorganization. No proposal and no terms of any such agreement, however, have
been considered.
COMPETITION
It is expected that for the immediate future that the primary business of
Bancorp will be the ownership of the Common Stock acquired in the
Reorganization. Therefore, the competitive conditions to be faced by Bancorp
will be the same as those faced by the Bank.
-18-
<PAGE>
EMPLOYEES
At the present time, Bancorp does not intend to employ persons other than
its present management. If Bancorp acquires other business, it may at such
time hire additional employees.
LEGAL PROCEEDINGS
Bancorp has not, since its organization, been a party to any legal
proceedings.
FINANCIAL RESOURCES OF BANCORP
In connection with the Reorganization, the Bank currently intends,
subject to applicable law and any agreements of the Bank with regulatory
agencies, to transfer up to approximately $100,000.00 to Bancorp, which
amount does not exceed the accumulated earnings and profits for tax purposes
of the Bank as of December 31, 1995. See "-- Regulation of Bancorp and the
Bank." The actual amount of funds which may be transferred, however, is
subject to change and may be greater or less than this amount, depending on a
number of factors, including Bancorp's future financial requirements and
applicable regulatory restrictions. In this regard, the Bank may also lend
funds to Bancorp, either as part of or in addition to the transfer of funds
being made in connection with the Reorganization. However, the amount of
capital which will initially be transferred from the Bank to Bancorp may be
reduced to the extent necessary to avoid any taxable income to the Bank.
See "-- Income Tax Consequences."
A transfer of $100,000.00 to Bancorp would reduce the Bank's stockholders'
equity as of December 3l, 1995, to approximately $22,724,616. If such a
transfer to Bancorp had been made on December 31, 1995, the leverage, Tier 1
risk-based, and total risk-based capital ratios of the Bank would have been
approximately 6.55 %, 11.39% and 12.64%, respectively.
Upon consummation of the Reorganization, the currently outstanding shares
of Bancorp, all of which are owned by the Bank, will be canceled.
Any amounts transferred to Bancorp by the Bank may be used by Bancorp for
various corporate purposes, including acquisitions of other banks and
bank-related businesses. At the present time, however, Bancorp has no
agreements or understandings regarding any acquisitions. In addition, such
funds will be available for other general corporate purposes, to the extent
permitted by law, including the payment of dividends to Bancorp's
stockholders and loans to the Bank.
Additional financial resources may be available to Bancorp in the future
through borrowings, debt or equity financings, or dividends from the Bank,
other acquired entities or new businesses. In addition, the Bank may lend
amounts to Bancorp both prior to the consummation of the Reorganization and
thereafter. Such loans may be subject to certain restrictions on transactions
with affiliates of a bank holding company under the Federal Reserve Act.
There can be no assurance, however, as to the amount of additional financial
resources which will be available to Bancorp. In particular, dividends from
the Bank to Bancorp will be subject to tax considerations and regulatory
limitations. See "-- Income Tax Consequences," "Comparison of Stockholder
Rights -- Common Stock -- Dividend Rights."
-19-
<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Bank as of December 31, 1995; (ii) the pro forma consolidated capitalization
of the Bank as of December 31, 1995 after giving effect to the Reorganization
(which reflects the proposed transfer of $100,000.00 from the Bank's retained
earnings to Bancorp); and (iii) the pro forma capitalization of Bancorp on a
consolidated basis after giving effect to the Reorganization. The pro forma
consolidated capitalization of Bancorp as of December 31, 1995 will be the
same as the consolidated capitalization of the Bank as of that date. However,
the pro forma capitalization of the Bank is changed as a result of the
$100,000.00 proposed transfer by the Bank to Bancorp.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
BANK BANK BANCORP
(ACTUAL (PRO FORMA (PRO FORMA
CONSOLIDATED) CONSOLIDATED) CONSOLIDATED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits $282,787,249 $282,787,249 $282,787,249
Securities sold under
agreements to repurchase -- -- --
Federal Home Loan Bank advances 38,968,000 38,968,000 38,968,000
Stockholders' equity:
Serial Preferred stock - $1.00
par value
authorized 1,000,000 shares,
none issued -- -- --
Common stock - $1.00 par value
authorized, 5,000,000 shares
issued and outstanding 1,532,431 1,532,431 1,532,431
Additional paid-in capital 8,824,970 8,824,970 8,824,970
Retained earnings 12,406,361 12,306,361 12,406,361
Net unrealized gain (loss) on
investment securities available
for sale, after tax effects 60,854 60,854 60,854
Total stockholders' equity $22,824,616 $ 22,724,616 $22,824,616
- --------------------------------------------------------------------------------
</TABLE>
FINANCIAL STATEMENTS AND ANNUAL DISCLOSURE STATEMENT
The Bank's 1995 Annual Report to Stockholders, including financial
statements prepared in accordance with generally accepted accounting
principles, has been mailed on or about March 15, 1996 to all stockholders of
record as of the close of business on February 29, 1996 together with this
Proxy Statement.
A copy of the most recent Form F-2 as filed with the Federal Deposit
Insurance Corporation will be furnished without charge to stockholders as of
the record date upon written request to Gerard F. Linskey, Senior Vice
President and Chief Financial Officer, The Hibernia Savings Bank, 730 Hancock
Street, Quincy, Massachusetts 02170.
-20-
<PAGE>
Provided below is a five-year summary of selected financial data of the
Bank. For additional information, see the Bank's 1995 Annual Report to
Stockholders which contains the management's discussion and analysis of
financial condition and results of operations.
<TABLE>
<CAPTION>
At December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands, except per share data)
Balance Sheet Data:
Total assets $346,865 $286,429 $249,827 $229,792 $216,575
Loans, net 208,327 163,371 135,661 134,584 144,143
Securities 125,300 111,584 105,735 80,449 56,277
Deposits 282,787 256,340 221,950 205,921 187,102
Borrowings 38,968 9,000 8,530 8,531 16,606
Stockholders' equity 22,825 19,786 17,312 13,954 11,953
Book value per share $ 14.89 $ 13.68 $ 12.92 $ 10.89 $ 9.96
At December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
Operating Data:
Interest and dividend income $ 23,949 $ 18,728 $ 18,157 $ 18,805 $ 19,698
Interest expense 13,720 9,498 8,950 10,569 13,779
--------- --------- --------- --------- ---------
Net interest income 10,229 9,230 9,207 8,236 5,919
Add
Non-interest income 579 549 719 364 216
Gain (loss) on sale of loans (52) (1) 20 320 24
Less
Provision for possible loan
losses 300 135 2,080 2,270 2,850
Non-interest expenses 6,552 6,209 5,680 4,835 4,695
--------- --------- --------- --------- ---------
Pretax core earnings 3,904 3,434 2,186 1,815 (1,386)
Net gain on sale of securities 91 193 3,952 2,188 768
Gain on sale of loan servicing 764 - - - -
Loss on sale of fixed assets (50) - - - -
Net loss on sale of other real
estate owned (43) (170) (666) (511) (561)
Real estate owned expense 301 387 1,194 1,643 972
--------- --------- --------- --------- ---------
Income (loss) before income
taxes 4,365 3,070 4,278 1,849 (2,151)
Provision (benefit) for income
taxes 1,646 1,002 1,198 265 (673)
--------- --------- --------- --------- ---------
Net income (loss) $ 2,719 $ 2,068 $ 3,080 $ 1,584 $ (1,478)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings (loss) per share
primary $ 1.76 $ 1.41 $ 2.14 $ 1.21 $ (1.23)
Weighted average number of
common shares and common
equivalents 1,545,297 1,468,758 1,437,092 1,306,610 1,200,000
Dividend declared per share $ 0.22 $ - $ - $ - $ -
</TABLE>
CONDITIONS OF THE REORGANIZATION
The Plan of Reorganization provides that it shall not become effective
until all of the following first shall have occurred: (i) the Plan of
Reorganization shall have been approved by a vote of the holders of
two-thirds of the outstanding Common Stock of the Bank, (ii) the Plan of
Reorganization shall have been approved by the Commissioner of Banks under
Section 26B of Chapter 172 of the General Laws of Massachusetts, (iii) any
approval, consent or waiver required by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") shall have been received and any
waiting period imposed by applicable law shall have expired, (iv) the Bank
and Bancorp shall have received a favorable opinion from the Bank's
independent public accountants, Arthur Andersen LLP, concerning the federal
income tax consequences of the Reorganization, (v) Bancorp Common Stock to be
issued in exchange for Common Stock of the Bank shall have been registered or
qualified for issuance under applicable state securities laws, and (vi) the
Bank and Bancorp shall have obtained all other necessary consents or
approvals required for Bancorp formation.
-21-
<PAGE>
The Bank intends to file an application with the Commissioner of Banks to
obtain approval of the Plan of Reorganization under Section 26B of Chapter
172 of the General Laws of Massachusetts after the date of this Proxy
Statement. The Commissioner will not grant his approval until the Plan of
Reorganization has been approved by the Bank's stockholders. Bancorp intends
to file an application or notice as is required to register with the Federal
Reserve Board as a bank holding company under the Bank Holding Company Act of
1956, as amended (the "BHC Act"). Any delays which are encountered in seeking
any of the foregoing regulatory approvals could result in a delay in the
consummation of the Reorganization. See "Regulation of Bancorp and the Bank".
If the Plan of Reorganization is approved by the Bank's stockholders at
the Annual Meeting, the formation of Bancorp's structure is currently
expected to become effective as soon thereafter as the required regulatory
approvals are received. Bank and Bancorp have the right under the terms of
the Plan of Reorganization to abandon the Reorganization if, among other
things, regulatory approvals cannot be obtained or if the conditions or
obligations associated with such regulatory approvals make the Reorganization
inadvisable in the opinion of the Bank or Bancorp.
If the Plan of Reorganization is not approved at the Annual Meeting or
all of the necessary regulatory approvals are not obtained, the Bank will
continue to operate without a holding company structure. All expenses in
connection with the Reorganization will be paid by the Bank whether or not
the Plan of Reorganization is approved by its stockholders or the
Reorganization is consummated.
RIGHTS OF DISSENTING STOCKHOLDERS
Any holder of the Bank's Common Stock (i) who files with the Bank before
the taking of the vote on the approval of the Plan of Reorganization, written
objection to the Plan of Reorganization, stating that he intends to demand
payment for his shares if the Reorganization is consummated, and (ii) whose
shares are not voted in favor of the Plan of Reorganization, has or may have
the right to demand in writing from the Bank, within 20 days after the date
of mailing to him of notice in writing that the Reorganization has become
effective, payment for his shares and an appraisal of the value thereof. The
Bank and any such stockholder shall follow the procedures set forth in
Sections 86 to 98, inclusive, of Chapter 156B of the General Laws of
Massachusetts. A brief summary of those sections of the General Laws of
Massachusetts is set forth below. However, this summary does not purport to
be a complete statement of the procedures to be followed by stockholders
desiring to exercise their rights to dissent from the Reorganization and is
qualified in its entirety by express reference to such sections, which are
included in this Proxy Statement as Exhibit C.
A holder of the Bank's Common Stock intending to exercise his dissenter's
right to receive payment for his shares must file with the Bank, before the
Annual Meeting or at the Annual Meeting but before the vote on the Plan of
Reorganization, written objection to the proposed Plan of Reorganization,
stating that he intends to demand payment for his shares if the
Reorganization is consummated, and must not vote in favor of the
Reorganization at the Annual Meeting. Within 10 days after the Reorganization
becomes effective, the Bank will give written notice of such effectiveness by
registered or certified mail to each holder of Bank Common Stock who filed
such written objection and who did not vote in favor of the Plan of
Reorganization. Such written notice of effectiveness will be addressed to the
stockholder at his last known address as it appears in the stock record books
of the Bank. Within 20 days after the mailing of such notice, any holder of
the Bank's Common Stock to whom the Bank was required to give such notice may
make written demand for payment for his shares from the Bank, and, in such
event, the Bank will be required to pay to him the fair value of his shares
within 30 days after the expiration of the period during which such demand
may be made. If during such 30-day period the Bank and the dissenting
stockholder fail to agree as to the fair value of such shares, the Bank or
such stockholder may have the fair value of the stock of all dissenting
stockholders determined by judicial proceedings by filing a bill in equity in
the Superior Court in Norfolk County, Massachusetts, within four months after
such 30-day period. For the purposes of any such Superior Court
determination, the value of the shares of the Bank is to be determined as of
the day preceding the date of the vote of the stockholders approving the Plan
of Reorganization and shall be exclusive of any element of value arising from
the expectation or accomplishment of the Reorganization. Upon making such
written demand for payment, the dissenting stockholder will not, thereafter,
be entitled to notices of meetings of stockholders, to vote, or to dividends
unless no suit is filed within four months to determine the value of the
stock, and such suit is dismissed as to that stockholder, or the stockholder
withdraws his objection in writing with the written approval of the Bank.
The enforcement by a dissenting stockholder of his right to receive
payment for his Bank Common Stock in the manner provided by Sections 86
through 98 of Chapter 156B of the General Laws of Massachusetts will be his
exclusive remedy, except that a stockholder shall not be excluded from
bringing or maintaining an appropriate proceeding to obtain relief on the
ground that consummation of the Reorganization will be or is illegal or
fraudulent as to him.
-22-
<PAGE>
INCOME TAX CONSEQUENCES
The Bank will not seek a ruling from the Internal Revenue Service
concerning the federal income tax consequences of the proposed holding
company formation, but will instead rely on an opinion of its independent
public accountants, Arthur Andersen LLP. Unlike a private letter ruling from
the Internal Revenue Service, an opinion of the independent public
accountants has no binding effect on the Internal Revenue Service. Based on
such opinion, the material federal tax results of the Reorganization would be
as follows:
1. No gain or loss will be recognized by the stockholders of the Bank
upon the exchange of their Common Stock of the Bank solely for Bancorp Common
Stock.
2. No gain or loss will be recognized by the Bank as a result of the
proposed transaction (except to the extent that, as described below, the Bank
may have taxable income as a result of payments to stockholders who exercise
dissenters' rights and/or the transfer to Bancorp of an amount that exceeds
the current and accumulated earnings and profits of the Bank).
3. No gain or loss will be recognized by Bancorp upon the receipt of
shares of the Bank's Common Stock solely in exchange for Bancorp Common Stock.
4. The holding period of the Bank's Common Stock in the hands of Bancorp
will include the period during which such stock was held by stockholders of
the Bank.
5. The basis of the Bancorp Common Stock to be received by each
stockholder of the Bank will be the same as the basis of the Bank's Common
Stock surrendered in exchange therefor.
6. The holding period of the Bancorp Common Stock to be received by each
stockholder of the Bank will include the holding period of the Bank's Common
Stock surrendered in exchange therefor, provided that the Bank's Common Stock
was held as a capital asset in the hands of such stockholder.
7. The Bank and Bancorp will be considered members of an "affiliated
group," within the meaning of Section 1504(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"); dividend distributions paid by the Bank to
Bancorp will not be included in computing the taxable income of Bancorp.
8. The affiliated group of which the Bank was the common parent
immediately prior to the proposed transaction will remain in existence after
the proposed transaction with Bancorp as the new common parent of the
affiliated group.
9. The basis of the Bank's Common Stock in the hands of Bancorp, as the
new parent company of the affiliated group, will be equal to the net asset
basis of the property of the Bank immediately after the proposed transaction,
adjusted as necessary in accordance with Treas. Reg. Section 1.1502-31(d).
10. Stockholders of the Bank who exercise their dissenters' appraisal
rights and receive cash in exchange for their shares of the Common Stock of
the Bank will recognize taxable income or gain or loss for federal income tax
purposes in connection with the transaction. The amount of that income or
gain or loss and the character of that income or gain or loss (that is,
whether it constitutes ordinary income, short-term capital gain or loss or
long-term capital gain or loss) will turn upon a number of factual
considerations peculiar to the individual stockholder.
If a stockholder exercises his dissenter's appraisal rights with respect
to all of his shares of the Bank's Common Stock, including any shares
constructively owned by him under the rules of Section 318(a) (unless such
constructive ownership is waived under the rules of Section 302(c)(2)), then
the transaction should qualify as a sale or exchange of the stock redeemed
under Section 302(a), rather than a dividend. If the shares of the Bank's
Common Stock qualify as "capital assets" in the hands of such a stockholder
and if the shares have been held for more than one year, then any gain
recognized on the exchange should qualify for long-term capital gain
treatment. If, however, a stockholder fails to exercise dissenters' appraisal
rights as to all shares owned by him, (or is deemed to own constructively
under Section 318(a)) then the transaction might be treated as a dividend to
the stockholder, depending upon whether or not it qualifies as "not
essentially equivalent to a dividend" within the meaning of Section
302(b)(1), or as "a substantially disproportionate redemption" within the
meaning of Section 302(b)(2). If the transaction were treated as a dividend,
then the entire payment could be taxable as ordinary income, depending upon
the circumstances.
ANY STOCKHOLDER OF THE BANK CONSIDERING EXERCISING HIS DISSENTER'S
APPRAISAL RIGHTS WITH RESPECT TO ANY SHARES OF THE BANK'S COMMON STOCK SHOULD
CONSULT HIS PERSONAL INCOME TAX ADVISOR FOR SPECIFIC ADVICE WITH RESPECT TO
THE FEDERAL INCOME TAX CONSEQUENCES OF THAT EXERCISE.
-23-
<PAGE>
The Bank utilizes the reserve method under Section 593 of the Code for
computing its bad debt reserve deduction for federal income tax purposes.
Payments made by the Bank to stockholders who exercise their dissenters'
appraisal rights will result in taxable income to the Bank to the extent that
the payments are deemed made out of the Bank's bad debt reserve. Section
593(e). Any of these payments that are treated as being in exchange for the
shares of such stockholders under Section 302(a) would be deemed to be made
out of the Bank's bad debt reserve to the extent of the sum of the following:
(i) the excess of the reserve for losses on "qualifying real property loans"
over the reserve that would be permitted under the "actual loss experience"
method, and (ii) the supplemental reserve for losses. The amount deemed
withdrawn from the bad debt reserve (and included in the Bank's gross income)
will be equal to the lesser of (x) the sum of (i) and (ii) above, or (y) the
amount which, when reduced by the federal income tax attributable to the
inclusion of such amount in the Bank's gross income, is equal to the amount
payable to dissenting stockholders in exchange for their Common Stock of the
Bank. Hence, depending upon the amount of the Bank's bad debt reserve,
payments to dissenting stockholders could result in federal taxable income to
the Bank in an amount equal to approximately 1.52 times the amount paid to
the dissenting stockholders.
In addition, any dividend distributions by the Bank (including any
distribution made to provide working capital to Bancorp and any payments to
dissenting stockholders that are treated as dividends) that exceed the
current and accumulated earnings and profits of the Bank will result in
taxable income to the Bank to the extent that they are deemed made out of the
Bank's bad debt reserve. Section 593(e)(1). Whether a dividend distribution
to Bancorp (or payments to dissenting stockholders that are treated as
dividends) in excess of the current and accumulated earnings and profits of
the Bank will be deemed made out of the Bank's bad debt reserve and the
amount deemed paid out of the bad debt reserve will be determined under the
rules described above in connection with payments to dissenting stockholders.
The determination of current and accumulated earnings and profits turns
upon the application of a complicated set of tax laws within the Code
generally set forth in Section 312 to a number of factual circumstances
arising over an extended period of years. Because of the inherently factual
issues associated with determining accumulated earnings and profits, Arthur
Andersen LLP, does not intend to confirm the amount of the Bank's earnings
and profits and thus its opinion will not address whether or not the proposed
transfer of funds to Bancorp will exceed the current and accumulated earnings
and profits of Bancorp.
Payments to dissenting stockholders that are treated as made in exchange
for their Common Stock under Section 302 will not reduce the amount that the
Bank can distribute to Bancorp without some portion of the distribution being
treated as made out of the Bank's bad debt reserve, if such payments are made
in the same taxable year as the distribution to Bancorp. Such payments will,
however, reduce the accumulated earnings and profits of the Bank available
for distribution in later years. Under Section 312(n)(7), in such cases the
Bank's accumulated earnings and profits will be reduced by the allocable
portion of the Bank's earnings and profits attributable to the Common Stock
redeemed. On the other hand, payments to dissenting stockholders that are
treated as dividend distributions will reduce the Bank's current and
accumulated earnings and profits in their entirety and, to the extent made in
the same taxable year as a distribution to Bancorp, will reduce the amount
that can be distributed to Bancorp without some portion of the distribution
being treated as made out of the Bank's bad debt reserve.
EACH STOCKHOLDER OF THE BANK SHOULD CONSULT HIS OWN TAX COUNSEL AS TO
SPECIFIC FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE REORGANIZATION, IF
ANY, TO SUCH STOCKHOLDER.
ACCOUNTING TREATMENT
It is anticipated that the Reorganization will be accounted for as a
"pooling of interests" transaction under generally accepted accounting
principles. The Bank's Annual Report to Stockholders, which is being mailed
to stockholders of the Bank together with this Proxy Statement, includes the
consolidated financial statements of the Bank for the fiscal year ended
December 31, 1995.
LEGAL OPINION
The validity of the shares of Bancorp's common stock issuable upon
consummation of the Reorganization will be passed upon by Roche, Carens &
DeGiacomo, A Professional Corporation, Boston, Massachusetts.
-24-
<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
As a result of Bancorp formation, stockholders of the Bank, whose rights
are presently governed by Massachusetts banking law, will become stockholders
of Bancorp, a Massachusetts corporation, and as such, their rights will be
governed by Massachusetts corporate law. Certain differences in the rights of
stockholders arise from this change in governing law. In addition, there are
certain differences between the Charter and By-laws of the Bank and the
Articles of Organization (the "Articles") and By-laws of Bancorp. Certain
differences and similarities of the rights of stockholders of the Bank and
Bancorp are discussed below. The following discussion does not purport to be
a complete statement of such similarities and differences affecting the
rights of stockholders of the Bank but is intended as a summary only. The
form of Articles of Organization of Bancorp attached as Exhibit B to this
Proxy Statement should be reviewed carefully by each stockholder.
CAPITAL STOCK
AUTHORIZED AND ISSUED STOCK. The Bank had, as of the Record Date,
5,000,000 shares of authorized Common Stock of which 1,553,846 shares were
issued and outstanding, and 117,600 shares were reserved for issuance under
the Stock Option Plans. As of such date, the Bank also had 1,000,000 shares
of authorized but unissued preferred stock.
The Articles of Bancorp will provide for 10,000,000 shares of authorized
Bancorp Common Stock and 5,000,000 shares of preferred stock, of which
1,553,846 shares of Bancorp Common Stock are currently issued and
outstanding, all of which are owned by the Bank. After the consummation of
the Reorganization, and subject to the exercise of dissenters' appraisal
rights, the number of issued and outstanding shares, shares reserved for
issuance under the Stock Option Plans, and non-reserved shares of Common
Stock available for future issuance by Bancorp will be the same as the number
of such shares of the Bank immediately prior to the Effective Time. Because
Bancorp has more authorized shares of common stock available for issuance
than the Bank, if in the future, Bancorp authorizes the issuance of
additional shares of Bancorp Common Stock, said issuance may have a greater
dilutive effect on the voting power of stockholders then holding shares of
Bancorp Common Stock than an additional stock issuance by the Bank would have
on the voting power of current holders of Bank Common Stock.
ISSUANCE OF STOCK. Under the provisions of Massachusetts banking law, the
issuance of capital stock by the Bank requires the prior approval of the
Commissioner of Banks. In contrast, Bancorp is authorized to issue shares of
capital stock without obtaining prior approval of the Commissioner of Banks.
Although the issuance of Bancorp Common Stock in connection with the
Reorganization is exempt from registration under the Securities Act, future
issuances of Bancorp Common Stock would be subject to registration under the
Securities Act, unless another exemption were available. See "Regulation of
Bancorp and the Bank--Consequences of the Reorganization Under Federal
Securities Laws". The Bank's Common Stock is exempt from registration under
the Securities Act. There are no current agreements or understandings with
respect to the issuance of any additional shares of Bancorp capital stock.
PRE-EMPTIVE RIGHTS. The stockholders of Bancorp, like the stockholders of
the Bank, will not be entitled to pre-emptive rights with respect to any
shares of capital stock which may be issued.
COMMON STOCK
DIVIDEND RIGHTS. The stockholders of the Bank are entitled to dividends
when and as declared by the Bank's Board of Directors. Under Massachusetts
banking law, Massachusetts stock-form savings banks, such as the Bank, may
pay dividends only out of net profits without impairing their capital stock
and surplus accounts. Such dividend payments are also subject to a number of
additional statutory limitations. Bancorp may pay dividends if, as, and when
declared by its Board of Directors. The holders of Common Stock of Bancorp
will be entitled to receive and share equally in such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
Although Massachusetts does not have a specific statute regulating the
payment of dividends by Massachusetts corporations, the directors of a
corporation are jointly and severally liable to the corporation if a payment
of dividends (i) is made when the corporation is insolvent, (ii) renders the
corporation insolvent, or (iii) violates the corporation's articles of
organization. In both cases, any issuance by the Bank or Bancorp of preferred
stock with a preference over Common Stock as to dividends may affect the
dividend rights of common stockholders.
VOTING RIGHTS. All voting rights in the Bank are currently vested in the
holders of the Bank's issued and outstanding Common Stock. Each share of the
Bank's Common Stock is entitled to one vote on all matters. A stockholder is
not permitted to vote cumulatively in the election of Directors by casting
all of said stockholder's votes for one or more but fewer than all of the
Directors on the slate. Following the formation of Bancorp, all voting rights
in Bancorp will be vested in the holders of Bancorp Common Stock, and each
share of Bancorp Common Stock will be entitled to one vote on all matters. In
both cases, any issuance by the Bank or Bancorp of preferred stock with
voting rights may affect the voting rights of common stockholders.
-25-
<PAGE>
PREFERRED STOCK
Both under the Charter of the Bank and under the Articles of Bancorp, the
respective Boards of Directors (or a committee thereof in the case of
Bancorp) of the Bank and Bancorp are authorized to issue preferred stock in
series (and classes in the case of Bancorp) and to fix the powers,
designations, preferences, or other rights of the shares of each such series
(or class in the case of Bancorp) and the qualifications, limitations, and
restrictions thereof. The issuance of preferred stock by the Bank, unlike the
issuance of preferred stock by Bancorp, would be subject to approval by the
Commissioner of Banks. Preferred stock issued by Bancorp after the
Reorganization may rank prior to the Bancorp Common Stock as to dividend
rights, liquidation preferences, or both, may have full or limited voting
rights (including multiple voting rights and voting rights as a class), and
may be convertible into shares of Bancorp Common Stock. Bancorp has no
present plans or understandings for the issuance of any preferred stock.
DIRECTORS
NUMBER AND STAGGERED TERMS. The By-laws of Bancorp provide that the Board
of Directors shall consist of not less than three Directors. The Board of
Directors of Bancorp will initially be composed of seven Directors. The
Charter and By-laws of the Bank provide that the Board shall consist of not
less than seven nor more than twenty-five Directors. The By-laws of Bancorp
provide that the Board of Directors may fix the number and classification of
Directors, unless at the time there is an Interested Stockholder (as defined
in Bancorp's By-laws) in which case a two-thirds vote of the Continuing
Directors (as defined in Bancorp's By-laws) is also required. The By-laws of
the Bank provide that the Board of Directors may fix the number and
classification of Directors, unless at the time there is an Interested
Stockholder (as defined in the Bank's Charter) in which case a majority vote
of the Continuing Directors (as defined in the Bank's Charter) is also
required. The By-laws of the Bank also authorize the Board of Directors to
elect up to two additional Directors in any year.
Both the Charter of the Bank and the Articles of Bancorp provide for
three classes of Directors with one class elected each year for three-year
staggered terms, so that ordinarily no more than approximately one-third of
the Directors will stand for election in any one year, and that there will be
no cumulative voting in the election of Directors.
REMOVAL OF DIRECTORS. Bancorp's Articles provide that a Director may be
removed with or without cause, by a vote of two-thirds of the Directors then
in office unless at the time of such action there is an Interested
Stockholder, in which case the affirmative vote of two-thirds of the
Continuing Directors shall also be required. The Bank's Charter provides that
a Director may be removed, with or without cause, by vote of eighty percent
of the stockholders or two-thirds of the Directors, unless there is an
Interested Stockholder, in which case a vote of two-thirds of the Continuing
Directors is required.
VACANCIES. The By-laws of Bancorp provide that any vacancy occurring on
the Board of Directors as a result of resignation, removal or death may be
filled by vote of a majority of the remaining Directors, unless at the time
of the action there is an Interested Stockholder, in which case such vacancy
may only be filled by a vote of two-thirds of the Continuing Directors then
in office. A Director elected to fill such a vacancy shall be elected to
serve for a term of office continuing until the next election of Directors by
the stockholders. Any directorship to be filled by reason of an increase in
the authorized number of Directors may be filled by a majority of the Board
of Directors for a term of office continuing until the next election of
Directors by the stockholders. If at the time of such action, there is an
Interested Stockholder, a vote of two-thirds of the Continuing Directors is
required instead.
The By-laws of the Bank provide that any vacancy occurring on the Board
of Directors as a result of resignation, removal or death may be filled by
vote of a majority of the remaining Directors, unless there is an Interested
Stockholder, in which case such vacancy may only be filled by vote of a
majority of the Continuing Directors then in office. A Director elected to
fill such a vacancy shall be elected to serve for a term of office continuing
until the next election of Directors by the stockholders. Any directorship to
be filled by reason of an increase in the authorized number of Directors may
be filled by the Board of Directors for a term of office continuing until the
next election of Directors by the stockholders.
MASSACHUSETTS LAW. Under Section 50A of Massachusetts General Laws
Chapter 156B, a publicly-held Massachusetts corporation which has not opted
out of that statute must have a classified Board of Directors. In general,
Section 50A provides that the Board of Directors of the corporation must be
divided into three classes, each of which would contain approximately
one-third of the total number of the members of the Board of Directors.
Section 50A provides that each class shall serve a staggered term, with
approximately one-third of the total number of Directors being elected each
year. The stockholders may remove a Director from the board prior to the
expiration of his term only for cause, upon the affirmative vote of the
holders of a majority of the shares then entitled to vote in an election of
Directors. Section 50A provides that the number of Directors shall be fixed
by the board, and that any vacancy occurring on the board, including a
vacancy created by an increase in the number of Directors or resulting from
death, resignation, disqualification, removal from office or other cause,
shall be filled for the remainder of the unexpired term exclusively by a
majority vote of the Directors then in office.
-26-
<PAGE>
A Massachusetts corporation is permitted to opt out of Section 50A.
Bancorp's By-laws contain a provision opting out of Section 50A. As a result
of Bancorp's decision to opt out of the statute, the provisions of Section
50A are not currently applicable to Bancorp's stockholders. The Board of
Directors of Bancorp may amend the By-laws at any time to subject Bancorp
shares to this statute prospectively. In addition, as described above,
Bancorp's Articles and By-laws contain provisions similar to Section 50A
regarding a classified Board of Directors, removal of Directors and vacancies.
MEETINGS OF STOCKHOLDERS
The By-laws of Bancorp provide that special meetings of the stockholders
may be called by the Chairman of the Board, if one is elected, the
Vice-Chairman, if one is elected, or by the Board of Directors, unless there
is an Interested Stockholder, in which case any such call shall also require
the affirmative vote of two-thirds of the Continuing Directors then in
office, and unless otherwise provided in the Articles of Organization or
By-laws, shall be called by the Clerk, or in the case of the death, absence,
incapacity or refusal of the Clerk, by any other officer, upon written
application of one or more stockholders who hold at least forty percent in
interest of the capital stock entitled to vote thereat. Only matters set
forth in the call may be considered or acted upon at the meeting.
The Bank's Charter provides that special meetings of the stockholders for
any purpose or purposes may be called at any time only by the Chairman of the
Board, if one is elected, the President or by a majority of two-thirds of the
Directors then in office. Only those matters set forth in the call of the
special meeting may be considered or acted upon at such special meeting,
unless otherwise provided by law.
The Bank's By-laws provide that special meetings of the stockholders for
any purpose or purposes may be called at any time only by the Chairman of the
Board, if one is elected, the President or by the affirmative vote of
two-thirds of the Directors then in office. Only those matters set forth in
the call of the special meeting may be considered or acted upon at such
special meeting, unless otherwise provided by law.
Both the Bank's and Bancorp's By-laws set forth certain advance notice
and informational requirements and time limitations on any Director
nomination or any new business that a stockholder wishes to propose for
consideration at an annual or special meeting of stockholders. Bancorp's
By-laws provide that a stockholder's nomination or proposal must be received
not less than 120 days nor more than 150 days prior to the annual meeting.
The Board of Directors may reject a stockholder's nomination or proposal if
it is not timely or does not contain sufficient information, or, if the Board
does not make this determination, the presiding officer at the meeting shall
do so. If there is an Interested Stockholder, the nomination or proposal
shall also require the concurrence of two-thirds of the Continuing Directors.
The Bank's By-laws provide that a stockholder's nomination must be
received not less than 60 days nor more than 150 days prior to the annual
meeting and that a stockholder's proposal must be received not less than 90
days nor more than 150 days prior to the annual meeting. The Board of
Directors may reject a stockholder's nomination or proposal if it is not
timely or does not contain sufficient information, or, if the Board does not
make this determination, the presiding officer at the meeting shall do so. If
there is an Interested Stockholder, the nomination or proposal shall require
the concurrence of a majority of the Continuing Directors.
STOCKHOLDER VOTE REQUIRED TO APPROVE CERTAIN TRANSACTIONS
Bancorp's Articles contain a provision requiring a two-thirds vote of the
stockholders to authorize (i) a sale, lease, or other disposition of all or
substantially all of the property or assets of Bancorp, (ii) a merger or
consolidation of Bancorp with or into any other corporation, or (iii) any
reclassification of or recapitalization involving Bancorp's common stock. The
Bank's Charter contains a provision requiring approval by 80% of the voting
stock for certain Business Combinations (as defined in the Charter) except
where two-thirds of the Continuing Directors have approved the Business
Combination or where certain procedures and price requirements are met.
MASSACHUSETTS LAW. Chapter 110F of the Massachusetts General Laws,
entitled "Business Combinations with Interested Shareholders" ("Chapter
110F") provides that a Massachusetts corporation with more than 200
stockholders may not engage in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless (i) the interested
stockholder obtains the approval of the Board of Directors prior to becoming
an interested stockholder, (ii) the interested stockholder acquires 90% of
the outstanding voting stock of the corporation (excluding shares held by
certain affiliates of the corporation) at the time it becomes an interested
stockholder, or (iii) the business combination is approved by both the Board
of Directors and the holders of 66 2/3% of the outstanding voting stock of
the corporation (excluding shares held by the interested stockholder). An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or, in certain cases, at any time within the prior three
years did own) 5% or more of the outstanding voting stock of the
corporation. A "business combination" includes a merger, certain stock or
asset sales, and certain other specified transactions resulting in a
financial benefit to the interested stockholder.
-27-
<PAGE>
A Massachusetts corporation is permitted to opt out of Chapter 110F. The
Articles of Bancorp contain a provision opting out of Chapter 110F. As a
result of Bancorp's decision to opt out of the statute, the provisions of
Chapter 110F are not currently applicable to Bancorp's stockholders. The
Board of Directors of Bancorp may amend the By-laws at any time to subject
Bancorp to this statute prospectively.
PROVISIONS RELATING TO EXERCISE OF BUSINESS JUDGMENT BY BOARD OF DIRECTORS
The Charter of the Bank provides that its Board of Directors, when
evaluating any tender, exchange, merger, acquisition or similar offer of
another person, must in connection with the exercise of its judgment in
determining what is in the best interests of the Bank and its stockholders,
give due consideration to all relevant factors including, without limitation,
the social and economic effects of acceptance of such an offer on the Bank's
present and future account holders, borrowers and employees, on the
communities in which the Bank operates or is located, and on the ability of
the Bank to fulfill its objectives under applicable statutes and regulations.
CONTROL SHARE ACQUISITION STATUTE
Massachusetts General Laws Chapter 110D, entitled "Regulation of Control
Share Acquisitions" ("Chapter 110D") provides that any person who makes a
bona-fide offer to acquire, or acquires (the "acquiror") shares of stock of a
corporation in an amount equal to or greater than one-fifth, one-third, or a
majority of the voting stock of the corporation (the "thresholds") must
obtain the approval of a majority of shares of all stockholders except the
acquiror and the officers and inside Directors of the corporation in order to
vote the shares that the acquiror acquires in crossing the thresholds.
A Massachusetts corporation is permitted to opt out of Chapter 110D. The
By-laws of Bancorp contain a provision opting out of Chapter 110D. As a
result of Bancorp's decision to opt out of the statute, the voting
restrictions of Chapter 110D are not currently applicable to Bancorp's
stockholders. The Board of Directors of Bancorp may amend the By-laws at any
time to subject Bancorp to this statute prospectively.
INDEMNIFICATION
The By-laws of the Bank provide that Directors and officers of the Bank
shall, and in the discretion of the Board of Directors, non-officer employees
may, be indemnified by the Bank against expenses arising out of service for,
or on behalf of the Bank. The By-laws of the Bank provide that such
indemnification shall not be provided if it is determined that the action
giving rise to the liability was not taken in good faith in the reasonable
belief that the action was in the best interests of the Bank. The By-laws of
the Bank provide that the indemnification provision in the By-laws does not
limit any other right to indemnification existing independently of the
By-laws. The By-laws of Bancorp contain a similar indemnification provision.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to Directors, officers or persons
controlling Bancorp pursuant to the foregoing provisions, it is the position
of the SEC that such indemnification is against public policy as expressed in
such Act and is therefore unenforceable.
AMENDMENT OF CHARTER AND ARTICLES
The Bank's Charter provides that any amendment thereof must be first
approved by a majority of the Board of Directors, and then approved by at
least two-thirds of the stockholders eligible to vote thereon (but only a
majority of the stockholders in the case of amendments to provisions in the
Bank's Charter relating to the Bank's name, office, powers, authorized
capital stock and liquidation account) except that, to the extent that any
Charter provision requires stockholder approval by more than two-thirds of
the eligible votes, if at any time within the sixty day period immediately
preceding the meeting at which the stockholder vote is to be taken on such
amendment there is an Interested Stockholder, amendment of such provision
shall be only the same vote required by that provision, unless such action is
approved by a majority of the Continuing Directors, in which case only a
two-thirds vote of the eligible votes is required.
Under Massachusetts law, certain amendments to a corporation's articles
of organization require a vote of a majority of the outstanding shares of
each class of stock entitled to vote thereon, while other amendments require
a two-thirds vote. In either case, the articles of organization may provide
for a greater or lesser percentage vote, but not less than a majority.
Bancorp's Articles provide that any amendment, addition, alteration, change
or repeal of the Articles regarding (i) an increase or reduction of the
capital stock or of any authorized class, (ii) a change of the par value of
any authorized shares or class thereof, (iii) a change of the authorized
shares with par value or any class thereof into any number of shares without
par value, or the exchange thereof pro rata for any number of shares without
par value, (iv) a change of the authorized shares without par value or any
class thereof into a greater or lesser number of shares without par value, or
the exchange thereof pro rata for a greater or lesser number of shares
without par value, (v) a change of the authorized shares with par value or
any class thereof into a greater or lesser
-28-
<PAGE>
number of shares with par value, (vi) a change of the authorized shares
without par value or any class thereof into any number of shares with par
value, or the exchange thereof pro rata for any number of shares with par
value, or (vii) a change of the corporate name may be made if first approved
by the affirmative vote of two-thirds of the Board of Directors (unless at
the time of such action there is an Interested Stockholder, in which case the
affirmative vote of two-thirds of the Continuing Directors shall also be
required) and thereafter approved by the affirmative vote of a majority of
the stockholders. No other amendment, alteration, change or repeal of the
Articles shall be made unless first approved by the affirmative vote of
two-thirds of the Board of Directors and thereafter approved by the
affirmative vote of not less than two-thirds of the total votes eligible to
be cast at a duly constituted meeting of stockholders. If, at any time within
the sixty day period immediately preceding the meeting at which the
stockholder vote is to be taken there is an Interested Stockholder, such
provision may only be amended, altered, changed or repealed if such action
shall have been approved by not less than two-thirds of the Continuing
Directors then in office. Massachusetts law requires a class vote under
certain circumstances when an amendment of the articles of organization will
adversely affect the special rights of a class of stock.
AMENDMENT OF BY-LAWS
The Charter of the Bank provides that the By-laws of the Bank may be
adopted or amended by affirmative vote of 80% of the Board of Directors.
Bancorp's Articles provide that Bancorp's By-laws may be adopted or amended
by affirmative vote of two-thirds of the Board of Directors, unless there is
an Interested Stockholder, in which case the affirmative vote of two-thirds
of the Continuing Directors is also required. Bancorp's Articles further
provide that the By-laws may be adopted or amended by the stockholders only
upon vote of two-thirds of the stock entitled to vote, such vote to be cast
at a meeting of stockholders called for the purpose of adopting or amending
the By-laws.
EFFECT ON CURRENT MARKET VALUE OF OUTSTANDING BANK STOCK
Although the Board of Directors does not know of any reason why
implementation of the Plan of Reorganization would cause the market value of
the stock of Bancorp to be different from the market value of the stock of
the Bank immediately prior to consummation of the Reorganization, it is
possible that the public trading market could perceive that the stock of
Bancorp has a different value from the stock of the Bank. It is not known
whether the public trading market will attribute any additional or lesser
value to Bancorp Common Stock than it would attribute to the Bank's Common
Stock. On February 14, 1996, the last trading day prior to the day on which
the Board of Directors adopted a resolution approving the Plan of
Reorganization, the high and low sale prices of the Bank's Common Stock as
quoted on the NASDAQ National Market were $16.00 and $16.00 per share,
respectively.
ANTI-TAKEOVER PROVISIONS
A number of provisions of the Bank's Charter and By-laws deal with matters
of corporate governance and rights of stockholders. Certain of the provisions
discussed above may be deemed to have an "anti-takeover" effect, and may
discourage takeover attempts not first approved by the Directors (including
takeovers which certain stockholders might deem to be in their interests).
For example, the Bank's charter requires the affirmative vote of at least 80%
of the Bank's voting stock in order for the Bank or any Subsidiary to enter
into certain business combinations with Interested Stockholders or their
Affiliates (as defined therein), including, but not limited to, any merger or
consolidation, sale, lease, exchange, mortgage, pledge or other disposition
of assets, the issuance or transfer of securities having an aggregate fair
market value of $100,000 or more, the adoption of any plan or proposal for
the liquidation or dissolution of the Bank or any reclassification of
securities, recapitalization of the Bank or any other transaction which has
the effect of increasing the proportion of the outstanding shares of any
class of equity or convertible securities of the Bank which is directly or
indirectly owned by any Interested Stockholder or its Affiliates. The
super-majority vote detailed above is not required if the business
combination is approved by two-thirds of the Continuing Directors of the Bank
(as defined therein) or if certain detailed fair price and procedure
requirements are met. Bancorp's Articles and By-laws do not contain similar
provisions. The Bank has entered into an agreement with its Chairman which
requires the Bank to make certain payments to the Chairman upon the
termination of his employment under certain circumstances.
LEGAL INVESTMENTS
Under the laws of some jurisdictions, shares of the Bank's Common Stock
may be legal investments for certain institutions and fiduciaries, whereas
shares of Bancorp's Common Stock may not be legal investments for such
investors.
REGULATION OF BANCORP AND THE BANK
The following summaries of statutes and regulations affecting banks and
holding companies do not purport to be complete. Such summaries are qualified
in their entirety by reference to such statutes and regulations.
-29-
<PAGE>
HOLDING COMPANY REGULATION. As a bank holding company, Bancorp would be
subject to regulation and supervision by the Federal Reserve Board under the
BHC Act. The regulations of the Federal Reserve Board restrict or require
prior approval for acquisitions of ownership or control of banks or other
companies, restrict transactions between bank holding companies and their
affiliates, restrict tying arrangements, limit non-banking activities of bank
holding companies and their subsidiaries, require filing of annual and
periodic reports and give the Federal Reserve Board supervisory authority
over various activities of bank holding companies. The Bank is not currently
subject to the regulations or authority of the Federal Reserve Board, except
as certain of such regulations are made applicable to the Bank by law or
regulations of the FDIC.
CERTAIN FEDERAL AND STATE RESTRICTIONS ON ACQUISITION OF STOCK. Any
attempt to acquire control of the Bank, currently, or Bancorp, following
completion of the Reorganization, through the purchase of stock would be
subject to regulation under Massachusetts law, the BHC Act and the federal
Change in Bank Control Act of 1978, as amended (the "CBCA").
With respect to acquisitions of Common Stock of the Bank, Massachusetts
law prohibits any person from acquiring voting stock of a bank that would
result in such person having the power, directly or indirectly, to direct the
management or policies of such bank or to vote 25% or more of such stock
unless such person has provided the Commissioner with 60 days prior notice
and certain information in connection therewith, and the acquisition has not
been disapproved by the Commissioner. An exemption from these requirements is
provided for acquiring persons who have complied with substantially similar
procedures under the federal law provisions outlined below.
The Federal Reserve Board's regulations promulgated under the CBCA
generally require persons who at any time intend to acquire control of a bank
holding company, to provide 60 days prior written notice and certain
financial and other information to the Federal Reserve Board. The 60-day
notice period does not commence until the information is deemed to be
substantially complete. Control for the purpose of the CBCA exists in
situations in which the acquiring party would have voting control of at least
25% of any class of a holding company's voting stock, or the power to direct
management or policies of Bancorp. However, under Federal Reserve Board
regulations, control would be presumed to exist where the acquiring party
would have voting control of at least 10% of any class of Bancorp's voting
securities if (i) Bancorp has a class of voting securities which is
registered under Section 12 of the Exchange Act, or (ii) the acquiring party
would be the largest holder of a class of voting shares of Bancorp. The
statute and underlying regulations authorize the Federal Reserve Board to
disapprove the proposed acquisition on certain specified grounds. The FDIC
has adopted substantially similar regulations under the CBCA which would
apply to the acquisition of control of an FDIC insured bank such as the Bank.
Under the BHC Act, prior approval of the Federal Reserve Board is
generally required for an acquisition of control of a bank by any "company"
defined under the BHCA. Control for purposes of the BHCA would be based on a
25% voting stock test or on the ability of the acquiror otherwise to control
the election of a majority of the Board of Directors of the Bank or Bancorp
or on the ability of the acquiror to exert controlling influence over the
management and policies of the Bank or Bancorp (as set forth in the BHCA). As
part of such acquisition, the acquiring company (unless already so
registered) would be required to register as a bank holding company under the
BHCA.
A bank holding company's business activities are generally limited to
those activities which the Federal Reserve Board determines to be so closely
related to banking or managing or controlling banks as to be a proper
incident thereto. Registration as a bank holding company would generally
require divestiture or other termination of other business activities not
approved for bank holding companies by the Federal Reserve Board under the
foregoing test.
In addition to the aforementioned state and federal laws governing the
acquisition of stock of a bank or a bank holding company, there are various
provisions of Massachusetts law which apply to the acquisition of stock of
business corporations and banks.
BANK REGULATION. As a Massachusetts-chartered, FDIC insured savings bank,
the Bank is subject to regulation and supervision by the Commissioner and the
FDIC. After the Reorganization, the Bank will continue to be subject to such
regulation and supervision.
MASSACHUSETTS LAW. As a Massachusetts-chartered, stock form savings bank,
the Bank now is, and following consummation of the Reorganization will
continue to be, subject to regulation and examination by the Commissioner.
The Massachusetts statutes and regulations govern, among other things,
lending and investment powers, deposit activities, borrowings, maintenance of
surplus and reserve accounts, distribution of earnings, and payment of
dividends. The Bank is also subject to state regulatory provisions covering
such matters as issuance of capital stock, branching, and mergers and
acquisitions. Bancorp has been incorporated as a business corporation under
Massachusetts law. Thus, Bancorp is subject to regulation by the Secretary of
State of Massachusetts and the rights of its stockholders are governed by
Massachusetts corporate law.
-30-
<PAGE>
PROPOSED LEGISLATION. From time to time, various types of federal and
state legislation have been proposed that could result in additional
regulation of, and restrictions on, the business of the Bank or Bancorp. It
cannot be predicted whether any legislation currently being considered will
be adopted or how such legislation or any other legislation that might be
enacted in the future would affect the business of the Bank or Bancorp.
CERTAIN FEDERAL TAX MATTERS. If the Reorganization is consummated,
Bancorp and the Bank intend to file consolidated federal income tax returns,
which would have the effect of eliminating inter-company distributions,
including dividends, in the computation of consolidated taxable income.
Bancorp and the Bank are required to file unconsolidated state income tax
returns.
If the Bank adopts the reserve method under Section 593 of the Code for
computing its bad debt reserve deduction for federal income tax purposes for
its taxable year ending October 31, 1996, even though Bancorp and the Bank
plan to file consolidated federal income tax returns, distributions from the
Bank to Bancorp would have significant adverse tax consequences to the Bank
to the extent that the distributions were deemed to be out of the Bank's bad
debt reserve (to the extent that the amount in the bad debt reserve account
exceeds the amount that would be in such account had the Bank always used the
experience method when making additions to such account), rather than its
current or accumulated earnings and profits. The amount deemed distributed
out of the bad debt reserve (which would be approximately 1.52 times the net
amount actually distributed to Bancorp) would increase the Bank's federal
taxable income and be subject to federal income tax rates of up to 34%.
However, a dividend distribution will be deemed to be out of the bad debt
reserve only if it exceeds the sum of the current and accumulated earnings
and profits of the Bank. Some or all of the Bank's accumulated earnings and
profits for tax purposes are expected to be transferred to Bancorp by the
Bank as part of the Reorganization. The actual amount of the distribution
will be adjusted to the extent necessary to avoid any taxable income to the
Bank. See "--Financial Resources of Bancorp." Bancorp has no present intention
of causing the Bank to pay cash dividends that would result in the Bank being
required to recognize taxable income.
Although it is intended that Bancorp, the Bank and their subsidiaries
will file consolidated federal income tax returns, in general, only the
income of the Bank may be considered in determining the amount the Bank is
permitted to deduct as an addition to its bad debt reserve for federal income
tax purposes. However, if other members of the group of corporations filing
consolidated returns with the Bank incur losses that are "functionally
related" to the Bank's business, such losses will be taken into account for
purposes of determining the Bank's allowable deduction for additions to its
bad debt reserve.
CONSEQUENCES OF THE REORGANIZATION UNDER FEDERAL SECURITIES LAWS. Upon
consummation of the reorganization, the reporting obligations of the Bank
under the Securities and Exchange Act of 1934 (the "Exchange Act"), as
administered by the FDIC, will be replaced with substantially identical
obligations of Bancorp under the Exchange Act, as administered by the
Securities and Exchange Commission ("SEC"). Pursuant to the Exchange Act,
Bancorp will file annual, quarterly and periodic reports with the SEC.
Bancorp will also be subject to the insider trading requirements of Sections
16(a) and 16(b) of the Exchange Act as administered by the SEC.
Upon consummation of the Reorganization, Bancorp intends to file a
Registration Statement on Form S-8 to register the issuance by Bancorp of
shares of Common Stock under the Stock Option Plans.
The issuance of Bancorp Common Stock in connection with the
Reorganization is exempt from registration under the Securities Act of 1933,
as amended (the "Securities Act"), as a result of a new Section 3(a)(12) of
the Securities Act. Section 3(a)(12) exempts securities issued in connection
with the acquisition of a bank by a newly formed holding company from the
registration requirements of the Securities Act. In order to qualify for the
exemption (i) the acquisition must occur solely as part of a reorganization
in which security holders exchange their shares of the bank for shares of a
newly formed holding company with no significant assets other than securities
of the bank and its existing subsidiaries, (ii) the security holders must
receive the same proportional share interests in the holding company as they
held in the bank (except for changes resulting from elimination of fractional
interests and the exercise of dissenters' rights), (iii) the rights and
interests of security holders in the holding company must be substantially
the same as those in the bank prior to the transaction, other than as
required by law, and (iv) the assets and liabilities of the holding company
on a consolidated basis must be substantially the same assets and liabilities
as the bank prior to the transaction.
The exemption under Section 3(a)(12) would not apply to future issuances
of Bancorp Common Stock. Such future issuances would be subject to the
registration requirements of the Securities Act, unless another exemption
under the Securities Act were available. In addition, the Section 3(a)(12)
exemption does not cover the resale of any of Bancorp Common Stock issued in
connection with the Reorganization. Bancorp Common Stock received by persons
who are not affiliates of the Bank or Bancorp may be resold without
registration. Shares received by affiliates of the Bank of Bancorp will be
subject to the resale restrictions of Rule 145 under the Securities Act,
which are substantially the same as the restrictions of Rule 144 discussed
below. The Rule 145 restrictions terminate after two years, if Bancorp
continues to comply with the reporting requirements under the Exchange Act,
but any affiliate of the Bank who becomes an affiliate of Bancorp will
continue to be subject to the restrictions of Rule 144.
-31-
<PAGE>
If Bancorp meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Bank who complies with the
other conditions of Rule 144, including requirements as to the manner of sale
and aggregation of affiliate sales with those of certain other persons, would
be able to sell in the public market without registration, in any three-month
period, a number of shares not to exceed the greater of 1% of the outstanding
shares of Bancorp, or the average weekly volume of trading in such shares
during the preceding four calendar weeks.
Each person who controls, or is a member of a group which controls, or
who is under common control with, the Bank at the time the Plan of
Reorganization is submitted for a vote of the stockholders of the Bank may,
in connection with any distribution after the Reorganization of securities of
Bancorp to be received in the Reorganization, be deemed to be an underwriter
within the meaning of the Securities Act.
- -------------------------------------------------------------------------------
PROPOSAL IV -- ELECTION OF CLERK
- -------------------------------------------------------------------------------
Massachusetts General Laws Ch. 172, Section 14 provides that the Clerk of
the Bank shall be elected by the Stockholders. Shares represented by the
enclosed proxy will be voted to elect Douglas C. Purdy to serve as Clerk of
the Bank until the next election, or until a successor is elected and
qualified, unless otherwise specified in the proxy.
Mr. Purdy is an attorney at Serafini, Purdy, DiNardo and Wells of Quincy,
Massachusetts. He is 53 years old.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
- -------------------------------------------------------------------------------
PROPOSAL V -- SELECTION OF AUDITORS
- -------------------------------------------------------------------------------
The Board of Directors recommends that the stockholders approve the
selection of Arthur Andersen LLP as independent auditors for the Bank to
certify the Annual Report of Condition of the Bank for the year ending
December 31, 1996.
Arthur Andersen LLP was engaged as of June, 1990, and has certified the
Annual Report of Condition of the Bank from December 31, 1990. The Audit
Committee and the Board of Directors approved the engagement of Arthur
Andersen LLP in June of 1990. In 1995, the Bank paid Arthur Andersen $85,550,
of which amount $57,000 was for audit work and $28,550 was for tax return
preparation. Prior to completion of the work, the services to be provided
were approved by, and the possible effect on the independence of the
accountant was considered by, the Audit Committee.
It is expected that a representative of Arthur Andersen LLP will attend
the stockholders meeting; such representative will be afforded the
opportunity to make a statement if he desires to do so and will be available
to respond to appropriate questions. Ms. Campbell and Messrs. Murney, Dwyer
and Lucey are members of the Audit Committee and are also expected to attend
the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
- -------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- -------------------------------------------------------------------------------
The Bank will entertain proposals of stockholders. Stockholder proposals
relating to the April 28, 1997 Annual Meeting must be received by the Bank at
its executive offices on or before December 30, 1996 and should be addressed
to Douglas C. Purdy, Clerk.
- -------------------------------------------------------------------------------
OTHER MATTERS
- -------------------------------------------------------------------------------
As of the date of this statement, management knows of no other matters
which will be presented to the meeting, which are not referred to in the
accompanying notice. However, regarding the other matters, if any, which may
properly come before the meeting and as to matters incident to the conduct of
the meeting, it is the intention of the persons named in the accompanying
form of proxy to vote such proxies in accordance with their judgment.
By order of the Board of Directors
Douglas C. Purdy, CLERK
Quincy, Massachusetts
March 15, 1996
-32-
<PAGE>
EXHIBIT A
PLAN OF REORGANIZATION AND ACQUISITION
THIS PLAN OF REORGANIZATION AND ACQUISITION (the "Plan of
Reorganization"), dated as of February 15, 1996, is made and entered into by
and between The Hibernia Savings Bank, a Massachusetts-chartered savings bank
in stock form (the "Bank"), and Emerald Isle Bancorp, Inc., a Massachusetts
corporation (the "Holding Company"), pursuant to Chapter 172, Section 26B of
the Massachusetts General Laws ("MGL").
The parties hereto desire to enter into a Plan of Reorganization whereby
the corporate structure of the Bank will be reorganized into holding company
form of ownership. The result of such reorganization (the "Reorganization")
will be that, at and after the Effective Time (as defined in Section 2
below), all of the issued and outstanding shares of common stock of the Bank
("Bank Common Stock"), $1.00 par value per share, will be held by the Holding
Company, and the holders of the issued and outstanding shares of common stock
of the Bank, except for those stockholders exercising dissenters' rights in
accordance with Chapter 156B, Sections 86 to 98 of the MGL, will become the
holders of the issued and outstanding shares of common stock of the Holding
Company ("Holding Company Common Stock"), $1.00 par value per share.
The Bank and the Holding Company have agreed that the Holding Company will
acquire all of the issued and outstanding shares of Bank Common Stock in
exchange for shares of Holding Company Common Stock pursuant to Chapter 172,
Section 26B of the MGL and this Plan of Reorganization. The Plan of
Reorganization has been adopted and approved by a vote of two-thirds of the
members of the Board of Directors of the Bank and by a vote of two-thirds of
the members of the Board of Directors of the Holding Company. The officers of
the Bank and of the Holding Company whose respective signatures appear below
have been duly authorized to execute and deliver this Plan of Reorganization.
NOW, THEREFORE, and in consideration of the premises, the Bank and the
Holding Company agree as follows:
SECTION 1 - APPROVAL AND FILING OF PLAN OF REORGANIZATION
1.1 The Plan of Reorganization shall be submitted for approval by the
holders of Bank Common Stock at the Annual Meeting of Stockholders, scheduled
for April 29, 1996, or at a special meeting to be called and held in
accordance with the applicable provisions of law. Notice of such special
meeting shall be published at least once a week for two successive weeks in a
newspaper of general circulation in the County of Norfolk, Commonwealth of
Massachusetts or for such other times and such other publications as may be
required by law or regulation.
1.2 Upon approval of the Plan of Reorganization by the holders of
two-thirds of the outstanding shares of Bank Common Stock as required by law,
the Bank and the Holding Company shall submit the Plan of Reorganization to
the Commissioner of Banks of the Commonwealth of Massachusetts (the
"Commissioner") for his approval and filing in accordance with the provisions
of Chapter 172, Section 26B of the MGL. The Plan of Reorganization shall be
accompanied by such certificates of the respective officers of the Bank and
the Holding Company as may be required by law and a written request from the
Bank that the Plan of Reorganization not be filed by the Commissioner until
such further time as the Commissioner shall have received from the Bank and
the Holding Company the written notice described in Section 2.1.
1.3 If the requisite approval of the Plan of Reorganization is obtained
at the meeting of the holders of Bank Common Stock referred to in Subsection
1.1, thereafter and until the Effective Time, as hereafter defined, the Bank
shall issue certificates for Bank Common Stock, whether upon transfer or
otherwise, only if such certificates bear a legend indicating that the Plan
of Reorganization has been approved and that shares of Bank Common Stock
evidenced by such certificates are subject to acquisition by the Holding
Company pursuant to the Plan of Reorganization.
SECTION 2 - DEFINITION OF EFFECTIVE TIME
2.1 The Plan of Reorganization shall become effective at 12:01 A.M. on
the first business day following the date on which the Bank and the Holding
Company advise the Commissioner in writing (i) that all the conditions
precedent to the Plan of Reorganization becoming effective specified in
Section 5 have been satisfied and (ii) that the Plan of Reorganization has
not been abandoned by the Bank or the Holding Company in accordance with the
provisions of Section 6, or at such other date and time as is specified in
such written notice to the Commissioner. Such time is hereafter called the
"Effective Time."
-33-
<PAGE>
SECTION 3 - ACTIONS AT THE EFFECTIVE TIME
3.1 Each share of Bank Common Stock issued and outstanding immediately
prior to the Effective Time (other than any shares of Bank Common Stock held
by a stockholder who exercises dissenters' rights under applicable provisions
of the MGL, as set forth below) shall, at the Effective Time, automatically
and by operation of law, be converted into one share of Holding Company
Common Stock.
3.2 At the Effective Time, the Holding Company shall, without any further
action on its part or on the part of the holders of Bank Common Stock,
automatically and by operation of law acquire and become the owner for all
purposes of all the then issued and outstanding shares of Bank Common Stock
and shall be entitled to have issued to it by the Bank a certificate or
certificates representing such shares. Thereafter, the Holding Company shall
have full and exclusive power to vote such shares of Bank Common Stock, to
receive dividends thereon and to exercise all rights of an owner thereof.
3.3 At the Effective Time, the holders of the then issued and outstanding
shares of Bank Common Stock (except for any such holder who exercises
dissenters' rights) shall, without any further action on their part or on the
part of the Holding Company, automatically and by operation of law cease to
own such shares and shall instead become owners of one share of Holding
Company Common Stock for each share of Bank Common Stock previously held by
them. Thereafter, such persons shall have full and exclusive power to vote
such shares of Holding Company Common Stock, to receive dividends thereon,
except as otherwise provided herein, and to exercise all rights of an owner
thereof.
3.4 Certificates representing shares of Bank Common Stock that are
outstanding immediately prior to the Effective Time (the "Old Certificates")
shall, at the Effective Time, automatically and by operation of law, cease to
represent shares of Bank Common Stock or any interest therein and each Old
Certificate shall instead represent the ownership by the holder thereof of an
equal number of shares of Holding Company Common Stock.
3.5 At the Effective Time, the holders of Old Certificates shall cease to
be holders of Bank Common Stock and shall have no rights as stockholders of
the Bank other than (i) to receive shares of Holding Company Common Stock
into which the shares of Bank Common Stock evidenced by such Old Certificates
have been converted in accordance with the provisions of Section 3.1 hereof,
and (ii) the rights afforded to the Bank stockholders who chose to exercise
dissenters' rights under applicable provisions of the MGL.
3.6 Notwithstanding any of the foregoing, any Dissenting Stockholder, as
defined in Subsection 8.1, shall have such rights as are provided by
Subsection 8.2 and by the laws of the Commonwealth of Massachusetts.
SECTION 4 - ACTIONS AFTER THE EFFECTIVE TIME
Section 4.1 After the Effective Time, there shall be no transfers on
the stock transfer books of Bank of shares of Bank Common Stock that were
issued and outstanding immediately prior to the Effective Time and converted
into shares of Holding Company Common Stock pursuant to the provisions of
Section 3.1.
As soon as practicable and in any event not more than thirty days after
the Effective Time:
Section 4.2 The Holding Company shall deliver to the transfer agent for
the Bank and the Holding Company (the "Transfer Agent"), as agent for the
then holders of Old Certificates (other than Old Certificates representing
shares of Bank Common Stock as to which dissenters' appraisal rights shall
have been exercised), a certificate or certificates for the aggregate number
of shares of Holding Company Common Stock (the "New Certificates"), to which
said holders shall be entitled. Each such holder may, or if required by the
Holding Company in its sole discretion, shall, surrender his Old Certificate
to the Transfer Agent and receive in exchange therefor a New Certificate for
an equal number of shares of Holding Company Common Stock. Until so
surrendered, each Old Certificate shall be deemed, for all corporate
purposes, to evidence the ownership of the number of shares of Holding
Company Common Stock which the holder thereof would be entitled to receive
upon its surrender, except that the Holding Company may, in its sole
discretion, withhold from the holder of shares represented by such Old
Certificate, distribution of any or all dividends declared by the Holding
Company on such shares until such time as such Old Certificate shall be
surrendered in exchange for one or more New Certificates, at which time
dividends so withheld by the Holding Company with respect to such shares
shall be delivered (without interest thereon and less the amount of taxes, if
any, which may have been imposed or paid thereon or which are required by law
to be withheld in respect thereof), to the stockholder to whom such New
Certificates are issued.
-34-
<PAGE>
4.3 The Holding Company shall publish, in accordance with applicable law,
a notice to the holders of all Old Certificates, specifying the Effective
Time of the Plan of Reorganization and notifying such holders that they may,
or if required to do so by the Holding Company in its sole discretion, shall,
present their Old Certificates to the Transfer Agent for exchange. Such
notice shall likewise be given by mail to such holders at their addresses on
the Bank's records.
SECTION 5 - CONDITIONS PRECEDENT
This Plan of Reorganization and the acquisition provided for herein shall
not become effective unless all of the following first shall have occurred:
5.1 The holders of the outstanding shares of Bank Common Stock, at a
meeting of the stockholders of the Bank, duly called and held, shall have
adopted this Plan of Reorganization by the affirmative vote of stockholders
owning at least two-thirds in amount of the issued and outstanding shares of
Bank Common Stock.
5.2 The Plan of Reorganization shall have been approved by the
Commissioner and a copy of the Plan of Reorganization with his approval
endorsed thereon shall have been filed in his office, all as provided in
Chapter 172, Section 26B of the MGL.
5.3 Any approval, consent, or waiver required by the Board of Governors
of the Federal Reserve System shall have been received and any waiting period
imposed by applicable law shall have expired.
5.4 All approvals from any other state or federal governmental agency
having jurisdiction necessary for the lawful consummation of the
Reorganization as contemplated by this Plan of Reorganization shall have been
obtained, all conditions imposed by such regulatory approvals shall have been
satisfied, and all waiting periods required in connection with any such
approvals shall have expired.
5.5 The Bank shall have received a favorable opinion or opinions from its
independent auditors or legal counsel, satisfactory in form and substance to
the Bank, with respect to the federal and state income tax consequences of
the Plan of Reorganization and the Reorganization contemplated thereby.
5.6 The shares of Holding Company Common Stock to be issued to the
stockholders of the Bank pursuant to this Plan of Reorganization, shall have
been duly registered or qualified for such issuance to the extent required
under all applicable state securities laws.
5.7 The Bank and the Holding Company shall have obtained all other
consents, permissions and approvals and shall have taken all actions required
by law or agreement, or deemed necessary by the Bank or the Holding Company
prior to the consummation of the acquisition provided for in the Plan of
Reorganization and to the Holding Company's having and exercising all rights
of ownership with respect to all of the outstanding shares of Bank Common
Stock acquired by it under this Agreement.
SECTION 6 - ABANDONMENT OF THE PLAN OF REORGANIZATION
6.1 The Plan of Reorganization may be abandoned by either the Bank or the
Holding Company at any time before the Effective Time in the event that:
(a) The number of shares of Bank Common Stock owned by Dissenting
Stockholders, as defined in Subsection 8.1, shall make consummation of the
acquisition contemplated by the Plan of Reorganization inadvisable in the
opinion of the Bank or the Holding Company;
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the Plan of Reorganization which shall make
consummation of the acquisition contemplated by the Plan of Reorganization
inadvisable in the opinion of the Bank or the Holding Company; or
(c) For any other reason consummation of the acquisition contemplated by
the Plan is inadvisable in the opinion of the Bank or the Holding Company.
-35-
<PAGE>
Such abandonment shall be effected by written notice by either the Bank
or the Holding Company to the other of them, and shall be authorized or
approved by the Board of Directors of the party giving such notice. Upon the
giving of such notice, the Plan of Reorganization shall be terminated and
there shall be no liability hereunder or on account of such on the part of
the Bank or the Holding Company or the Directors, officers, employees, agents
or stockholders of either of them. In the event of abandonment of the Plan of
Reorganization, the Bank shall pay the fees and expenses incurred by itself
and the Holding Company in connection with the Plan of Reorganization and
proposed acquisition. If either party hereto gives written notice of
termination to the other party pursuant to this section, the party giving
such written notice shall simultaneously furnish a copy thereof to the
Commissioner.
SECTION 7 - AMENDMENT OF PLAN OF REORGANIZATION
7.1 Any of the terms or conditions of the Plan of Reorganization may be
amended or modified in whole or in part at any time, to the extent permitted
by applicable law, rules, and regulations, by an amendment in writing,
provided that any such amendment or modification is not materially adverse to
the Bank, the Holding Company or their stockholders. In the event that any
governmental agency requests or requires regulatory approval for favorable
ruling, or that in the opinion of counsel to the Bank, such modification is
necessary to obtain such approval or ruling, this Plan of Reorganization may
be modified, at any time before or after adoption thereof by the stockholders
of the Bank, by an instrument in writing, provided that the effect of such
amendment would not be materially adverse to the Bank, the Holding Company or
their stockholders.
SECTION 8 - RIGHTS OF DISSENTING STOCKHOLDERS
8.1 "Dissenting Stockholders" shall mean those holders of Bank Common
Stock who file with the Bank before the taking of the vote on the Plan of
Reorganization, written objection to the Plan of Reorganization, pursuant to
Chapter 156B, Section 86 of the MGL, stating that they intend to demand
payment for their shares of Bank Common Stock if the Plan of Reorganization
is consummated and whose shares are not voted in favor of the Plan of
Reorganization.
8.2 Dissenting Stockholders who comply with the provisions of Chapter
156B, Sections 86 to 98, inclusive, of the MGL and all other applicable
provisions of law shall be entitled to receive from the Bank payment of the
fair value of their shares of Bank Common Stock upon surrender by such
holders of the certificates which previously represented shares of Bank
Common Stock. Certificates so obtained by the Bank, upon payment of the fair
value of such shares as provided by law, shall be canceled. Shares of Holding
Company Common Stock, to which Dissenting Stockholders would have been
entitled had they not dissented, shall be deemed to constitute authorized but
unissued shares of Holding Company Common Stock and may be sold or otherwise
disposed of by the Holding Company at the discretion of, and on such terms as
may be fixed by its Board of Directors.
SECTION 9 - STOCK OPTIONS
9.1 By voting in favor of this Plan of Reorganization, the Holding
Company shall have approved adoption of The Hibernia Savings Bank 1986 Stock
Option Plan, The Hibernia Savings Bank 1989 Stock Option Plan, and The
Hibernia Savings Bank 1995 Premium Incentive Stock Option Plan as the stock
option plans of the Holding Company and shall have agreed to issue Holding
Company Common Stock in lieu of Bank Common Stock pursuant to options
currently outstanding under the existing Stock Option Plans. As of the
Effective Time, the Stock Option Plans shall automatically, by operation of
law, be continued as, and become the stock option plans of the Holding
Company. Further, at the Effective Time, each option to purchase shares of
Bank Common Stock under the Stock Option Plans outstanding and unexercised
immediately prior to the Effective Time shall automatically be converted into
an identical option, with identical price, terms and conditions, to purchase
an identical number of shares of Holding Company Common Stock in lieu of
shares of Bank Common Stock. The Holding Company and the Bank shall make
appropriate amendments to the Stock Option Plans to reflect the adoption of
the Stock Option Plans as the stock option plans of the Holding Company,
without adverse effect upon the options outstanding as of the Effective Time
under the Stock Option Plans.
9.2 By voting in favor of this Plan of Reorganization, the Holding
Company shall also have approved The Hibernia Savings Bank 1989 Stock
Purchase Plan and The Hibernia Savings Bank 1995 Automatic Dividend
Reinvestment and Common Stock Purchase Plan as the stock purchase plans of
the Holding Company. As of the Effective Time, the Stock Purchase Plans shall
automatically, by operation of law, be continued as and become the stock
purchase plans of the Holding Company. Further, at the Effective Time, all
rights to purchase shares of Bank Common Stock under the existing Stock
Purchase Plans shall automatically, by operation of law, be converted into
and shall become identical rights to purchase Holding Company Common Stock
upon identical terms and conditions. The Bank shall make appropriate
amendments to the Stock Purchase Plans, effective as of the Effective Time,
to reflect the substitution of rights to purchase Holding Company Common
Stock for rights to purchase Bank Common Stock.
-36-
<PAGE>
SECTION 10 - GOVERNING LAW
10.1 This Plan of Reorganization shall take effect as a sealed instrument
and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
SECTION 11 - COUNTERPARTS
11.1 This Plan of Reorganization may be executed in several identical
counterparts, each of which when executed by the parties hereto and delivered
shall be an original, but all of which together shall constitute a single
instrument.
SECTION 12 - HEADINGS
12.1 The headings contained in this Plan of Reorganization are for
reference purposes only and shall not be deemed to be part of this Plan of
Reorganization.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of
Reorganization and Acquisition to be executed by their duly authorized
officers as of the date first above written.
THE HIBERNIA SAVINGS BANK
Attest: /s/ Gerard F. Linskey By: /s/ Mark A. Osborne
----------------------- -------------------------
Mark A. Osborne
Chairman of the Board and
Chief Executive Officer
EMERALD ISLE BANCORP, INC.
Attest: /s/ Gerard F. Linskey By: /s/ Mark A. Osborne
----------------------- --------------------------
Mark A. Osborne, President
-37-
<PAGE>
EXHIBIT B
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
ARTICLE I
The exact name of the corporation is:
Emerald Isle Bancorp, Inc.
ARTICLE II
The purpose of the corporation is to engage in the
following business activities:
To acquire, invest in or hold stock in any subsidiary permitted under the
Bank Holding Company Act of 1956 or Chapter 167A of the Massachusetts General
Laws, as such statutes may be amended from time to time, and to engage in any
other permissible activity or enterprise under said statutes or other
applicable law.
To engage generally in any business activity which may be lawfully
carried on by a corporation organized under Chapter 156B of the Massachusetts
General Laws.
ARTICLE III
State the total number of shares and par value, if any, of each class
of stock which the corporation is authorized to issue.
WITHOUT PAR VALUE WITH PAR VALUE
- -------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -------------------------------------------------------------------------------
Common: Common: 10,000,000 $1.00
Preferred: Preferred: 5,000,000 $1.00
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class,
if shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See Continuation Sheet IV attached.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICENT, ADDITIONS SHALL BE SET FORTH ON ONE SIDE ONLY OF SEPARATE 8 1/2
X 11 SHEETS OF PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE
THAN ONE ARTICLE MAY BE MADE ON A SINGLE SHEET SO LONG AS EACH ARTICLE
REQUIRING EACH ADDITION IS CLEARLY INDICATED.
-38-
<PAGE>
CONTINUATION SHEET IV
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 15,000,000, of which 10,000,000 are to
be shares of common stock, of $1.00 par value per share, and of which
5,000,000 are to be shares of serial preferred stock, of $1.00 par value per
share. The shares may be issued by the Corporation from time to time as
approved by the Board of Directors of the Corporation without the approval of
the stockholders except as otherwise provided in this Article IV or the rules
of a national securities exchange if applicable. The consideration for the
issuance of the shares shall be paid to or received by the Corporation in
full before their issuance and shall not be less than the par value per
share. The consideration for the issuance of the shares shall be cash,
services rendered, personal property (tangible or intangible), real property,
leases of real property or any other consideration deemed appropriate by the
Board of Directors. In the absence of actual fraud in the transaction, the
judgment of the Board of Directors as to the value of such consideration
shall be conclusive. Upon payment of such consideration, such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock dividend,
the part of the surplus of the Corporation which is transferred to stated
capital upon the issuance of shares as a stock dividend shall be deemed to be
the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series
(if any) of capital stock, and the qualifications, limitations or
restrictions thereof, are as follows:
A. COMMON STOCK. Except as provided in these Articles (or in any
certificate of establishment of series of preferred stock), the holders of
the common stock shall exclusively possess all voting power. Each holder of
shares of common stock shall be entitled to one vote for each share. There
shall be no cumulative voting rights in the election of Directors.
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 sinking fund or 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, but only when and as declared by the Board of Directors of the
Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having
preference over the common stock in any such event the full preferential
amounts to which they are respectively entitled, the holders of the common
stock and of any class or series of stock entitled to participate therewith,
in whole or in part, as to distribution of assets shall be entitled, after
payment or provision for payment of all debts and liabilities of the
Corporation to receive the remaining assets of the Corporation available for
distribution, in cash or in kind, in proportion to their holdings.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all
the other shares of common stock of the Corporation.
B. SERIAL PREFERRED STOCK. Subject to any limitations prescribed by law
or these Articles, the Board of Directors of the Corporation is authorized,
by vote from time to time taken, to provide for the issuance of serial
preferred stock in one or more series and to fix and state the powers,
designations, preferences and relative, participating, optional or other
special rights of the shares of each such series, and the qualifications,
limitations or restrictions thereof, including, but not limited, to
determination of any of the following:
1. the distinctive serial designation and the number of shares
constituting such series;
2. the dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
3. the voting powers, full or limited, if any, of the shares of such
series;
4. whether the shares of such series shall be redeemable and, if so, the
price or prices at which, and the terms and conditions upon which such shares
may be redeemed;
-39-
<PAGE>
5. the amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation;
6. whether the shares of such series shall be entitled to the benefits
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and, if so entitled, the amount of such fund and the manner
of its application, including the price or prices at which such shares may be
redeemed or purchased through the application of such fund;
7. whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of
such conversion or exchange;
8. the subscription or purchase price and form of consideration for
which the shares shall be issued; and
9. whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any
other series of serial preferred stock.
Any establishment of a series of preferred stock by the Board of
Directors shall become effective when the Corporation files with the
Secretary of State of the Commonwealth of Massachusetts a certificate of
establishment of series of preferred stock, signed under the penalties of
perjury by the President or any Vice President and by the Clerk, Assistant
Clerk, Secretary or Assistant Secretary of the Corporation, setting forth a
copy of the vote of the Board of Directors establishing and designating the
series and fixing and determining the relative rights and preferences
thereof, the date of adoption of such vote and a certification that such vote
was duly adopted by the Board of Directors of the Corporation.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon
the transfer of shares of stock of any class are:
See Continuation Sheet V attached.
CONTINUATION SHEET V
ARTICLE V(A)
REGULATION OF CONTROL SHARE ACQUISITIONS
Pursuant to M.G.L. c. 110D, Section 2(d), the Corporation hereby elects
not to be governed by the provisions of Chapter 110D.
ARTICLE V(B)
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
Pursuant M.G.L. c. 110F, Section 2(a), the Corporation hereby elects not
to be governed by the provisions of Chapter 110F.
ARTICLE V(C)
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
The affirmative vote of at least two-thirds of the total votes eligible
to be cast by stockholders, at a meeting expressly called for such purpose,
(and, if any class or series of shares is entitled to vote thereof
separately, the affirmative vote of the holders of at least two-thirds of the
outstanding shares) shall be required in order to authorize any (i) sale,
lease, exchange or other disposition, including without limitation, a
mortgage, or any other security device, of all or substantially all of the
property or assets, including goodwill, of the Corporation, (including
without limitation, any voting securities of a subsidiary), (ii) merger or
-40-
<PAGE>
consolidation of the Corporation with or into any other corporation or (iii)
any reclassification of the common stock of the Corporation, or any
recapitalization involving the common stock of the Corporation.
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or
for limiting, defining, or regulating the powers of the corporation, or of
its directors or stockholders, or of any class of stockholders:
See Continuation Sheet VI attached.
**IF THERE ARE NO PROVISIONS STATE "NONE".
NOTE: THE PRECEDING SIX (6) ARTICLES ARE CONSIDERED TO BE PERMANENT AND MAY ONLY
BE CHANGED BY FILING APPROPRIATE ARTICLES OF AMENDMENT.
CONTINUATION SHEET VI
ARTICLE VI(A)
PRE-EMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any pre-emptive
right to purchase or subscribe for any unissued stock of any class or series,
or any unissued bonds, charters of indebtedness, debentures or other
securities convertible into or exchangeable for stock of any class or series
or carrying any right to purchase stock of any class or series. Any such
unissued stock, bonds, charters of indebtedness, debentures or other
securities convertible into or exchangeable for stock or carrying any right
to purchase stock may be issued pursuant to a vote of the Board of Directors
of the Corporation to such persons, firms, corporations or associations,
whether or not holders thereof, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of its sole discretion.
ARTICLE VI(B)
REPURCHASE OF SHARES
The Corporation may, from time to time, pursuant to authorization by the
Board of Directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness, or other securities
of the Corporation in such manner, upon such terms, and in such amounts as
the Board of Directors shall determine; subject, however, to such limitations
or restrictions, if any, as are contained in the express terms of any class
of shares of the Corporation outstanding at the time of the purchase or
acquisition in question or as are imposed by applicable law.
ARTICLE VI(C)
DIRECTORS
The number of Directors of the Corporation shall be such number, not less
than three as shall be provided from time to time, provided that no decrease
in the number of Directors shall have the effect of shortening the term of
any incumbent Director.
The Board of Directors of the Corporation shall be divided into three
classes of Directors as nearly equal in number as possible, with one class to
be elected annually. The initial Directors of the Corporation shall hold
office as follows: the first class of Directors shall hold office initially
for a term expiring at the annual meeting of stockholders to be held in 1997,
the second class of Directors shall hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1998, and the third class
of Directors shall hold office initially for a term expiring at the annual
meeting of stockholders to be held in 1999, with the members of each class to
hold office until their respective successors are duly elected and qualified.
At each annual meeting of stockholders of the Corporation, the successors to
the class of Directors whose term expires at the meeting shall be
-41-
<PAGE>
elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election and
until their respective successors are elected and qualified. Should the
number of Directors of the Corporation be increased, the additional
directorships shall be allocated among classes as appropriate so that the
number of Directors in each class is as nearly equal as possible.
ARTICLE VI(D)
REMOVAL OF DIRECTORS
Any Director may be removed with or without cause by a vote of two-thirds
of the Directors then in office, unless at the time of such action there is
an Interested Stockholder, in which case the affirmative vote of two-thirds
of the Continuing Directors shall also be required.
ARTICLE VI(E)
LIMITATION OF LIABILITY OF DIRECTORS
No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director notwithstanding any provision of law imposing such
liability; provided, however, that this Article VI(E) shall not eliminate or
limit any liability of a Director (i) for any breach of the Director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or emissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Sections 61 or 62 of Chapter 156B of the
Massachusetts General Laws or (iv) with respect to any transaction from which
the Director derived an improper personal benefit.
No amendment or repeal of this Article VI(E) shall adversely affect the
rights and protection afforded to a Director of this Corporation under this
Article VI(E) for acts or omissions occurring prior to such amendment or
repeal. If the Massachusetts Business Corporation Law is hereafter amended to
further eliminate or limit the personal liability of Directors or to
authorize corporate action to further eliminate or limit such liability, then
the liability of the Directors of this Corporation shall be eliminated or
limited to the fullest extent permitted by Massachusetts Business Corporation
Laws as so amended.
ARTICLE VI(F)
ACTING AS PARTNER
The Corporation may be a partner in any business enterprise which it
would have power to conduct by itself.
ARTICLE VI(G)
AMENDMENT OF BY-LAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
repeal, alter, amend and rescind the by-laws of the Corporation by the
affirmative vote of not less than two-thirds of the Directors then in office,
unless at the time of such action, there is an Interested Stockholder, in
which case the affirmative vote of not less than two-thirds of the Continuing
Directors shall also be required. Notwithstanding any other provision of
these Articles or the by-laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law), the by-laws shall
not be made, repealed, altered, amended, or rescinded by the stockholders of
the Corporation except by the vote of the holders of not less than two-thirds
of the outstanding shares of capital stock of the Corporation (considered for
this purpose as one class) cast at a meeting of the stockholders called for
that purpose (provided that notice of such proposed adoption, repeal,
alteration, amendment or rescission is included in the notice of such
meeting).
-42-
<PAGE>
ARTICLE VI(H)
AMENDMENT OF ARTICLES OF ORGANIZATION
Any amendment, addition, alteration, change or repeal of these Articles
of Organization regarding, (i) an increase or reduction of the capital stock
or of any authorized class, (ii) a change of the par value of any authorized
shares or class thereof, (iii) a change of the authorized shares with par
value or any class thereof into any number of shares without par value, or
the exchange thereof pro rata for any number of shares without par value,
(iv) a change of the authorized shares without par value or any class thereof
into a greater or lesser number of shares without par value, or the exchange
thereof pro rata for a greater or lesser number of shares without par value,
(v) a change of the authorized shares with par value or any class thereof
into a greater or lesser number of shares with par value, or the exchange
thereof pro rata for a greater or lesser number of shares with par value,
(vi) a change of the authorized shares without par value or any class thereof
into any number of shares with par value, or the exchange thereof pro rata
for any number of shares with par value or, (vii) a change of the corporate
name may be made if first approved by the affirmative vote of two-thirds of
the Board of Directors of the Corporation then in office (unless at the time
of such action there is an Interested Stockholder, in which case the
affirmative vote of two-thirds of the Continuing Directors shall also be
required) and thereafter approved by the affirmative vote of a majority of
the stockholders.
No other amendment, addition, alteration, change or repeal of these
Articles of Organization shall be made unless first approved by the
affirmative vote of two-thirds of the Board of Directors of the Corporation
then in office, and thereafter approved by the affirmative vote of not less
than two-thirds of the total votes eligible to be cast at a duly constituted
meeting of stockholders. Notwithstanding the foregoing, if at any time within
the sixty day period immediately preceding the meeting at which the
stockholder vote is to be taken there is an Interested Stockholder, such
provision may only be amended, altered, changed or repealed if such action
shall have been approved by not less than two-thirds of the Continuing
Directors then in office. Unless otherwise provided by law, any amendment,
addition, alteration, change or repeal so acted upon shall be effective on
the date it is filed with the Secretary of State of the Commonwealth of
Massachusetts or on such other date as specified in such amendment, addition,
alteration, change or repeal or as in the Secretary of State may specify.
As used in these Articles, the phrase "Interested Stockholder" shall have
the meaning as set forth in the by-laws of the Corporation.
ARTICLE VII
The effective date of organization of the corporation shall be the date
approved and filed by the Secretary of the Commonwealth. If a LATER effective
date is desired, specify such date which shall not be more than thirty days
after the date of filing.
ARTICLE VIII
THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the
principal office of the corporation in Massachusetts is:
730 Hancock Street, Quincy, Massachusetts 02170
b. The name, residence address and post office address of each Director
and officer of the corporation is as follows:
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRES POST OFFICE ADDRESS
<S> <C> <C>
President: Mark A. Osborne 100 Brigantine Circle 100 Brigantine Circle
Norwell, MA 02061 Norwell, MA 02061
Treasurer: Gerard F. Linskey 1299 South River Street 1299 South River Street
Marshfield, MA 02050 Marshfield, MA 02050
Clerk: Douglas C. Purdy 115 Branch Street 115 Branch Street
Scituate, MA 02066 Scituate, MA 02066
</TABLE>
Directors: See Continuation Sheet VIII Attached.
-43-
<PAGE>
CONTINUATION SHEET VIII
DIRECTORS
<TABLE>
<CAPTION>
Name Residential Address Post Office Address
- ---- ------------------- --------------------
<S> <C> <C>
Richard P. Quincy 41 Countryside Lane 41 Countryside Lane
Milton, MA 02186 Milton, MA 02186
Douglas C. Purdy 115 Branch Street 115 Branch Street
Scituate, MA 02066 Scituate, MA 02066
Peter L. Maguire 405 North Street 405 North Street
Duxbury, MA 02332 Duxbury, MA 02332
John V. Murphy 651 Main Street 651 Main Street
Hingham, MA 02043 Hingham, MA 02043
Thomas P. Moore, Jr. 68 Abbot Road 68 Abbot Road
Wellesley, MA 02181 Wellesley, MA 02181
Michael T. Putziger 30 King Street 30 King Street
Cohasset, MA 02025 Cohasset, MA 02025
Mark A. Osborne 100 Brigantine Circle 100 Brigantine Circle
Norwell, MA 02061 Norwell, MA 02061
</TABLE>
c. The fiscal year (i.e., tax year) of the corporation shall end on the
last day of the month of October
d. The name and business address of the resident agent, if any, of the
corporation is:
ARTICLE IX
By-laws of the corporation have been duly adopted and the president,
treasurer, clerk and Directors whose names are set forth above, have been
duly elected.
IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, I/we,
whose signature(s) appear below as incorporator(s) and whose name(s) and
business or residential address(es) are clearly typed or printed beneath each
signature do hereby associate with the intention of forming this corporation
under the provisions of General Laws, Chapter 156B and do hereby sign these
Articles of Organization as incorporator(s) this 9th day of January, 1996.
/s/ Mark A. Osborne
The Hibernia Savings Bank
730 Hancock Street
Quincy, MA 02170
NOTE: IF AN EXISTING CORPORATION IS ACTING AS INCORPORATOR, TYPE IN THE EXACT
NAME OF THE CORPORATION, THE STATE OR OTHER JURISDICTION WHERE IT WAS
INCORPORATED, THE NAME OF THE PERSON SIGNING ON BEHALF OF SAID CORPORATION
AND THE TITLE HE/SHE HOLDS OR OTHER AUTHORITY BY WHICH SUCH ACTION IS TAKEN.
-44-
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
I hereby certify that, upon examination of these Articles of
Organization, duly submitted to me, it appears that the provisions of the
General Laws relative to the organization of corporations have been complied
with, and I hereby approve said articles; and the filing fee in the amount of
$15,000.00 having been paid, said articles are deemed to have been filed with
me this 10th day of January 1996.
Effective date: ______________________
/s/ WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
FILING FEE: One tenth of one percent of the total authorized capital
stock, but not less than $200.00. For the purpose of filing, shares of stock
with a par value less than $1.00, or no par stock, shall be deemed to have a
par value of $1.00 per share.
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Anne H. Stossel
Roche, Carens & DeGiacomo
A Professional Corporation
One Post Office Square
Boston, MA 02109
Telephone (617) 451-9300
-45-
<PAGE>
EXHIBIT C
PROVISIONS OF THE GENERAL LAW OF MASSACHUSETTS
RELATING TO RIGHTS OF DISSENTING STOCKHOLDERS
(Sections 86 to 98 of Chapter 156B of the
General Laws of Massachusetts)
SECTION 86. Sections Applicable To Appraisal; Prerequisites. If a
corporation proposes to take a corporate action as to which any section of
this chapter provides that a stockholder who objects to such action shall
have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have
such right unless (1) he files with the corporation before the taking of the
vote of the shareholders on such corporate action, written objection to the
proposed action stating that he intends to demand payment for his shares if
the action is taken and (2) his shares are not voted in favor of the proposed
action.
SECTION 87. Statement Of Rights Of Objecting Stockholder In Notice of
Meeting; Form. The notice of the meeting of stockholders at which the
approval of such proposed action is to be considered shall contain a
statement of the rights of objecting stockholders. The giving of such notice
shall not be deemed to create any rights in any stockholder receiving the
same to demand payment for his stock, and the Directors may authorize the
inclusion in any such notice of a statement of opinion by the management as
to the existence or nonexistence of the right of the stockholders to demand
payment for their stock on account of the proposed corporate action. The
notice may be in such form as the Directors or officers calling the meeting
deem advisable, but the following form of notice shall be sufficient to
comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in writing
from the corporation (or, in the case of a consolidation or merger, the name
of the resulting or surviving corporation shall be inserted), within twenty
days after the date of mailing to him of notice in writing that the corporate
action has become effective, payment for his shares and an appraisal of the
value thereof. Such corporation and any such stockholder shall in such cases
have the rights and duties and shall follow the procedure set forth in
Sections 88 to 98, inclusive, of Chapter 156B of the General Laws of
Massachusetts."
SECTION 88. Notice Of Effectiveness Of Action Objected To. The
corporation taking such action, or in the case of a merger or consolidation
the surviving or resulting corporation, shall, within ten days after the date
on which such corporate action became effective, notify each stockholder who
filed a written objection meeting the requirements of section eighty-six and
whose shares were not voted in favor of the approval of such action, that the
action approved at the meeting of the corporation of which he is a
stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified
mail, addressed to the stockholder at his last known address as it appears in
the records of the corporation.
SECTION 89. Demand For Payment; Time For Payment. If within twenty days
after the date of mailing of a notice under subsection (e) of section
eighty-two, subsection (f) of section eighty-three, or section eighty-eight,
any stockholder to whom the corporation was required to give such notice
shall demand in writing from the corporation taking such action, or in the
case of a consolidation or merger from the resulting or surviving
corporation, payment for his stock, the corporation upon which such demand is
made shall pay to him the fair value of his stock within thirty days after
the expiration of the period during which such demand may be made.
SECTION 90. Demand For Determination of Value; Bill In Equity; Venue. If
during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county
where the corporation in which such objecting stockholder held stock had or
has its principal office in the commonwealth.
SECTION 91. Parties To Suit To Determine Value; Service. If the bill is
filed by the corporation, it shall name as parties respondent all
stockholders who have demanded payment for their shares and with whom the
corporation has not reached agreement as to the value thereof. If the bill is
filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares
and with whom the corporation has not reached agreement as
-46-
<PAGE>
to the value thereof and service of the bill shall be made upon the
corporation by subpoena with a copy of the bill annexed. The corporation
shall file with its answer a duly verified list of all such other
stockholders, and such stockholders shall thereupon be deemed to have been
added as parties to the bill. The corporation shall give notice in such form
and returnable on such date as the court shall order to each stockholder
party to the bill by registered or certified mail, addressed to the last
known address of such stockholder as shown in the records of the corporation,
and the court may order such additional notice by publication or otherwise as
it deems advisable. Each stockholder who makes demand as provided in section
eighty-nine shall be deemed to have consented to the provisions of this
section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any
stockholder making demand shall not invalidate the proceedings as to other
stockholders to whom notice was properly given, and the court may at any time
before the entry of a final decree make supplementary orders of notice.
SECTION 92. Decree Determining Value And Ordering Payment; Valuation
Date. After hearing the court shall enter a decree determining the fair value
of the stock of those stockholders who have become entitled to the valuation
of and payment for their shares, and shall order the corporation to make
payment of such value, together with interest, if any, as hereinafter
provided, to the stockholders entitled thereto upon the transfer by them to
the corporation of the certificates representing such stock if certificated
or, if uncertificated, upon receipt of an instruction transferring such stock
to the corporation. For this purpose, the value of the shares shall be
determined as of the day preceding the date of the vote approving the
proposed corporate action and shall be exclusive of any element of value
arising from the expectation or accomplishment of the proposed corporate
action.
SECTION 93. Reference To Special Master. The court in its discretion may
refer the bill or any question arising thereunder to a special master to hear
the parties, make findings and report the same to the court all in accordance
with the usual practice in suits in equity in the superior court.
SECTION 94. Notation On Stock Certificates Of Pendency Of Bill. On motion
the court may order stockholder parties to the bill to submit their
certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in
its records with respect to any uncertificated shares held by such
stockholder parties, and may on motion dismiss the bill as to any stockholder
who fails to comply with such order.
SECTION 95. Costs; Interest. The costs of the bill, including the
reasonable compensation and expenses of any master appointed by the court,
but exclusive of fees of counsel or of experts retained by any party, shall
be determined by the court and taxed upon the parties to the bill, or any of
them, in such manner as appears to be equitable, except that all costs of
giving notice to stockholders as provided in this chapter shall be paid by
the corporation. Interest shall be paid upon any award from the date of the
vote approving the proposed corporate action, and the court may on
application of any interested party determine the amount of interest to be
paid in the case of any stockholder.
SECTION 96. Dividends And Voting Rights After Demand For Payment. Any
stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled
to the payment of dividends or other distribution on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the date of the vote approving the proposed corporate
action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation,
or in the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to and an
acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
SECTION 97. Status Of Shares Paid For. The shares of the corporation paid
for by the corporation pursuant to the provisions of this chapter shall have
the status of treasury stock, or in the case of a consolidation or merger the
shares or the securities of the resulting or surviving corporation into which
the shares of such objecting stockholder would have been converted had he not
objected to such consolidation or merger shall have the status of treasury
stock or securities.
SECTION 98. Exclusive Remedy; Exception. The enforcement by a stockholder
of his right to receive payment for his shares in the manner provided in this
chapter shall be an exclusive remedy except that this chapter shall not
exclude the right of such stockholder to bring or maintain an appropriate
proceeding to obtain relief on the ground that such corporate action will be
or is illegal or fraudulent as to him.
-47-
<PAGE>
Exhibit 99.5
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
FORM F-4
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED MARCH 31, 1996
22054-0
--------
(FDIC Certificate No.)
04-1437380
----------
(I.R.S. Employer Identification Number)
THE HIBERNIA SAVINGS BANK
--------------------------
(Exact name of Bank as specified in its Charter)
MASSACHUSETTS
--------------
(State of Incorporation)
731 HANCOCK STREET, QUINCY, MA
------------------------------
(Address of Principal Office)
02170
------
(Zip Code)
(617) 479-2265
--------------
(Bank's Telephone Number, including area code)
Indicate by check mark whether the bank (1) has filed all reports required to be
filed by section 13 of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period the bank was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
(1) YES X NO
---- ----
(2) YES X NO
---- ----
At March 31, 1996 there were 1,555,868 shares of common stock outstanding, $1.00
par value.
<PAGE>
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of The Hibernia Savings
Bank and Subsidiaries (Kildare Corporation/The Limerick Securities
Corporation/Meath Corporation) presented herein should be read in
conjunction with the consolidated financial statements of The Hibernia
Savings Bank for the year ended December 31, 1995.
Consolidated financial information as of March 31, 1996 and the
results of operations and the changes in stockholders' equity and cash
flows for the three months ended March 31, 1996 and 1995 are
unaudited, and in the opinion of management reflect all adjustments
(consisting solely of normal recurring accruals) necessary for a fair
presentation of such information. Interim results are not necessarily
indicative of results to be expected for the entire year.
2) COMMITMENTS
At March 31, 1996 the Bank had outstanding commitments to originate
loans amounting to approximately $16,498,676 which are not reflected
in the consolidated balance sheet.
3) EARNINGS PER SHARE
The earnings per share computations for the quarter ended March 31,
1996 are based on 1,555,868 shares outstanding, and for the quarter
ended March 31, 1995 are based on 1,523,524 shares outstanding.
<PAGE>
Material Changes in Financial Conditions
Management's discussion and analysis of the financial conditions and
results of operations for the three month period ended March 31, 1996
with the appropriate comparisons to the same period in 1995 are as
follows:
The Bank's total assets increased to $355,071,229 at March 31, 1996 or
9.5% on an annualized basis from total assets of $346,865,213 at
December 31, 1995 and increased 17.7% from total assets of
$301,654,660 at March 31, 1995. Short term investments, investment
securities and securities held for sale totaled $128,525,591 or 36.2%
of total assets at March 31, 1996 an increase of $3,225,321 from
$125,300,270 or 36.1% of total assets at December 31, 1995 and an
increase of $11,929,853 from $116,595,738 or 38.7% of total assets at
March 31, 1995. Loans, net increased $4,450,174 or 8.5% on an
annualized basis to $212,776,897 or 59.9% of total assets at March 31,
1996 from $208,326,723 or 60.1% of total assets at December 31, 1995
and increased $38,297,359 from $174,479,538 or 57.8% of total assets
at March 31, 1995. The Bank's nonperforming loans totaled $951,660 or
.3% of total assets at March 31, 1996 as compared to $930,766 or .3%
of total assets at December 31, 1995 and $1,709,620 or .57% of total
assets at March 31, 1995. The Bank's loan loss provision for the
first quarter ended March 31, 1996 was $1,020,000 as compared to
$151,666 for the first quarter of 1995. The Bank's charge-offs net of
recoveries for the quarter ended March 31, 1996 were $1,348,707
compared to $157,246 during the first quarter of 1995. The Bank became
aware of an SEC lawsuit against one of its borrowers , Bennett
Funding Group Inc., of which the Bank had three pools of commercial
equipment leasing loans totaling $1,409,950 at March 30, 1996. The
lawsuit charged Bennett Funding had sold investors tens of millions
of dollars of assignments on office equipment that did not exist, or
had already been sold. The Bank took the most conservative position
and charged off these loans against the allowance for loan losses and
booked an extraordinary loan loss provision of $1,000,000. The
allowance for loan losses totaled $2,213,289 at March 31, 1996 as
compared to $2,541,997 at December 31, 1995 and $2,235,706
<PAGE>
at March 31, 1995. The allowance for loan losses represented 232.6%,
366.2% and 223.7% of nonperforming loans at March 31, 1996, December 31,
1995 and March 31, 1995 respectively.
Deposits at March 31, 1996 totaled $289,682,551 as compared to
$282,787,249 at December 31, 1995 an increase of $6,895,302, or 9.8%
on an annualized basis, and increased $24,303,036 or 9.2% from
deposits of $265,379,515 at March 31, 1995. Federal Home Loan Bank
advances increased $1,700,000 to $40,668,000 at March 31, 1996 from
$38,968,000 at December 31, 1995, and increased $26,668,000 from
$14,000,000 at March 31, 1995.
Stockholders Equity increased to $23,108,392 at March 31, 1996 from
$22,824,616 at December 31, 1995 and $20,821,899 at March 31, 1995.
The increase in the first quarter reflects earnings of $121,474 for
the first quarter and the issuance of 23,437 additional shares of
stock through exercising of options, and through the purchase of stock
in the Bank's "Stock Purchase Plan", "Dividend Reinvestment Plan", and
"Optional Cash Payment Plan" for total additional paid-in capital of
$323,480 , and was decreased by the payment of a $.07 dividend on
shares outstanding of $108,371.
<PAGE>
Material Changes in Results of Operations
Net Income for the first quarter ended March 31, 1996 was $121,474 or
$.08 per share as compared to net income in the first quarter ended
March 31, 1995 of $637,722 or $.42 per share.
Interest and dividend income increased 25.6% in the first quarter of
1996 to $6,794,137 from $5,411,401 for the first quarter of 1995. The
increase reflects our growth in earning assets which increased
$50,252,452 or 17.2% at March 31, 1996 from March 31, 1995, and a
slight increase in the yield on average earning assets to 8.0% at
March 31, 1996 from 7.8% at March 31, 1995.
Interest expense increased $1,060,524 or 36.7% to $3,949,872 from
$2,889,348 for the first quarter ended March 31, 1996. This increase
reflects the increased overall cost of funds to 4.87% at March 31,
1996 from 4.46% at March 31, 1995, in conjunction with an increase in
average total deposits by $26,710,000 at an increased cost of 37
basis points, an increase in average borrowings by $30,000,000 at a
decreased cost of 92 basis points.
Other income for the quarter ended March 31, 1996 totaled $228,098
compared to $280,959 for the same quarter in 1995. Security gains for
the first quarter ended March 31, 1996 were $54,201, net losses on the
sale of real estate owned $12,948, gain on the sale of loans of
$10,042, REO income of $11,163 and service charges of $165,640, as
compared to security gains of $133,012, net losses on the sale of real
estate of $10,105, REO income of $35,307 and service charges of
$118,268 for the same period in 1995.
<PAGE>
Operating expenses totaled $1,853,226 for the first quarter ended
March 31, 1996 as compared to $1,671,810 for the same period in 1995,
an increase of $181,416 or 10.8%. This increase reflects the increased
personnel costs of $183,795 required by the opening of two new branch
locations, one in the second quarter and one in the fourth quarter of
1995, as well as a new department for in-house processing of our
checking accounts. Occupancy costs also increased $83,503 reflecting
the two new branches opened in the later half of 1995. These increases
were partially offset by the reduction of the FDIC deposit assessment
to $500 a quarter in 1996 compared to $159,000 for the first quarter
of 1995.
Income Tax
Provision for income taxes for the quarter ended March 31, 1996 was
$77,663 as compared to $341,814 for the same period in 1995.
<PAGE>
THE HIBERNIA SAVINGS BANK
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS:
Total cash and due from banks $3,626,401 $3,213,259
Short term investments 3,275,000 4,860,000
Investment securities 96,632,897 77,565,687
Securities held for sale 28,617,694 42,874,583
Loans, net 212,703,786 208,326,723
Banking premises & equipment, net 6,061,604 5,574,956
Accrued interest receivable 2,344,617 2,128,536
Other real estate owned 0 430,000
Other assets 1,736,119 1,891,469
------------ ------------
Total assets $355,071,229 $346,865,213
------------ ------------
------------ ------------
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
Now & demand deposits $22,263,547 $22,011,361
Money market accounts 35,356,781 33,819,928
Other deposits 44,860,367 46,038,261
Term certificates accounts 187,201,856 180,917,699
------------ ------------
Total deposits 289,682,551 282,787,249
Federal Home Loan Bank advances 40,668,000 38,968,000
Other borrowings 0 0
Mortgagors' escrow payments 1,266,126 1,094,397
Income taxes payable (342,222) 364,444
Other liabilities 688,382 826,507
------------ ------------
Total liabilities 331,962,837 324,040,597
Commitments and contingencies
STOCKHOLDERS' EQUITY
Serial preferred stock, $1.00 par value 1,000,000
shares authorized: none issued 0 0
Common stock, $1.00 par value, 5,000,000 shares
authorized 1,662,090 and 1,532,431 shares
issued and outstanding 1,555,868 1,532,431
Additional paid-in-capital 9,148,450 8,824,970
Undivided profits 12,419,463 12,406,361
Net unrealized loss on marketable equity
securities (15,389) 60,854
Other Reserve 0 0
------------ ------------
Total stockholders' equity 23,108,392 22,824,616
------------ ------------
Total Liabilities & Stockholders'
Equity $355,071,229 $346,865,213
------------ ------------
------------ ------------
</TABLE>
<PAGE>
The Hibernia Savings Bank and Subsidiaries
Consolidated Statement of Income
<TABLE>
<CAPTION>
----------------------------------
Three months ended
March 31, March 31,
1996 1995
----------------------------------
<S> <C> <C>
INTEREST & DIVIDEND INCOME
Interest on loans $4,845,051 $3,828,298
Income & dividends on investment securities 1,913,255 1,514,655
Interest on short-term investments 35,831 68,448
------------ ------------
Total interest & dividend income 6,794,137 5,411,401
INTEREST EXPENSE
Interest on deposits 3,379,976 2,721,124
Interest on borrowed funds 569,896 168,224
------------ ------------
Total interest & dividend expense 3,949,872 2,889,348
------------ ------------
Net interest income 2,844,265 2,522,053
Provision for possible loan losses 1,020,000 151,666
------------ ------------
Net interest income
after loan loss provision 1,824,265 2,370,387
------------ ------------
OTHER INCOME
Gains (losses) securities sales 54,201 133,012
Gains (losses) real estate sale (12,948) (10,105)
Gains (losses) on loan sales net 10,042 0
Gains (losses) on sale of fixed assets 0 4,748
Miscellaneous 176,803 153,304
------------ ------------
Total other income 228,098 280,959
------------ ------------
OPERATING EXPENSES
Salaries & employee benefits 989,681 805,886
Net occupancy & Equipment 318,967 235,463
OREO Expenses 26,711 80,184
Other operating expenses 517,867 550,277
------------ ------------
Total operating expenses 1,853,226 1,671,810
------------ ------------
Income (loss) before income taxes 199,137 979,536
Provision (benefit) for income tax 77,663 341,814
------------ ------------
Net income (loss) $121,474 $637,722
------------ ------------
------------ ------------
Earnings per common share
Primary $0.08 $0.42
Fully diluted $0.08 $0.42
Average number of common shares
Primary 1,571,812 1,522,131
Fully diluted 1,571,812 1,522,131
</TABLE>
<PAGE>
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three months ended March 31, 1996
(Unaudited in thousands)
<TABLE>
<CAPTION>
NET UNREALIZED
ADDITIONAL LOSS ON
COMMON PAID-IN UNDIVIDED MARKETABLE
STOCK CAPITAL PROFITS EQUITY SECURITIES TOTAL
------------ ------------ ----------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $1,532,431 $8,824,970 $12,406,361 $60,854 $22,824,616
Net income 121,474 121,474
Issuance of additonal stock 23,437 323,480 346,917
Increase in net unrealized loss
on securities held for sale (76,244) (76,244)
Cash dividend paid (108,371) ($108,371)
----------- ---------- ----------- --------- -----------
Balance at March 31, 1996 $1,555,868 $9,148,450 $12,419,464 ($15,390) $23,108,392
---------- ---------- ----------- --------- -----------
</TABLE>
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three months ended March 31, 1995
(Unaudited in thousands)
<TABLE>
<CAPTION>
NET UNREALIZED
ADDITIONAL LOSS ON
COMMON PAID-IN UNDIVIDED MARKETABLE
STOCK CAPITAL PROFITS EQUITY SECURITIES TOTAL
--------- ---------- ----------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $964,491 $8,804,519 $10,022,386 ($5,299) $19,786,097
Net income 637,722 637,722
3 for 2 stock split 499,147 (499,147)
Issuance of additonal stock 59,886 408,270 468,156
Increase in net unrealized
loss on securities
held for sale 5,299 5,299
Cash dividend paid (75,375) ($75,375)
---------- ---------- ----------- -------- -----------
Balance at March 31, 1995 $1,523,524 $8,713,642 $10,584,733 $0 $20,821,899
---------- ---------- ----------- -------- -----------
---------- ---------- ----------- -------- -----------
</TABLE>
<PAGE>
The Hibernia Savings Bank and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net Income $121,474 $637,722
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 156,324 132,778
Amortization of bond premium 90,041 136,638
Loan loss provision 1,020,000 151,666
(Gain) on sale of loans, real estate owned,
securities,fixed assets (net) (51,295) (127,655)
Deferred loan fees 27,123 (118,657)
Loans sold 2,590,680 62,125
Loans originated for sale (2,580,638) (965,450)
Increase (decrease) in accrued expenses,
income taxes, and other liabilities (921,033) (314,984)
(Increase) decrease in accrued
interest receivable (216,081) 46,045
(Increase) decrease in other assets 266,648 86,432
---------- ------------
Total adjustments 381,769 (911,062)
---------- ------------
Net cash provided by operating activities 503,243 (273,340)
---------- ------------
Cash flows from investing activities
Loans purchased (3,012,891) (7,994,319)
Loans paid(net) (2,561,517) (3,116,771)
Proceeds of Oreo Sales 494,163 285,000
Short-term investments ( net) 1,585,000 (13,620,000)
Purchases of investment securities (21,961,856)
Proceeds from sales and maturities of
investment securities 2,798,275 2,837,112
Purchase of Securities held for sale (22,750)
Proceeds of Securities Securities held for
sale 14,228,870 5,776,043
Purchases of premises and equipment (642,972) (121,294)
---------- ------------
Net cash used by investing activities (9,095,678) (15,954,229)
---------- ------------
Cash flows from financing activities
Deposits, net 7,067,031 9,228,036
FHL Bank Advances (net) 1,700,000 5,000,000
Proceeds from sale of Common Stock 346,917 468,156
Dividends Paid (108,371) (75,375)
---------- ------------
Net cash provided by financing activities 9,005,577 14,620,817
Net increase (decrease) in cash 413,143 (1,606,752)
Cash and cash equivalents--beginning of year 3,213,259 3,780,957
---------- ------------
Cash and cash equivalents--end of year 3,626,402 2,174,205
---------- ------------
Supplemental disclosures of
cash flow information:
Interest paid $3,754 $2,879
Federal income taxes paid $300 $200
</TABLE>
<PAGE>
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Bank has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
THE HIBERNIA SAVINGS BANK
Date May 14, 1996 /s/ [illegible]
--------------------------------------
Chairman of the Board,
and Chief Executive Officer
Date May 14, 1996 /s/ [illegible]
--------------------------------------
Senior Vice President and
Chief Financial Officer
<PAGE>
Exhibit 99.6
<PAGE>
The
Hibernia
Savings
Bank
Annual Report
1995
<PAGE>
FINANCIAL HIGHLIGHTS
12/31/95 12/31/94
- -------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $346,865,213 $286,428,660
Securities 125,300,270 111,581,925
Allowance for possible loan losses 2,541,997 2,241,286
Loans, net 208,326,723 163,370,536
Deposits 282,787,249 256,339,791
Stockholders' equity 22,824,616 19,786,097
OPERATING DATA
Net interest income $ 10,229,233 $ 9,230,102
Provision for possible loan losses 300,000 135,000
Pretax core earnings 3,904,144 3,433,615
Net income 2,719,235 2,067,626
PER SHARE DATA
Earnings per share $1.76 1.41
Weighted average shares outstanding 1,545,297 1,468,758
Book value per share $14.89 $13.68
Outstanding shares 1,532,431 1,446,737
OTHER DATA
Yield on average earning assets 7.94% 7.31%
Cost of funds 4.55% 3.71%
Net interest margin 3.39% 3.60%
Return on average assets 0.88% 0.78%
Return on average equity 12.42% 10.98%
Leverage capital to assets ratio at year end 6.58% 6.91%
Risk-based capital to assets ratio at year end 12.69% 13.41%
<PAGE>
LETTER TO STOCKHOLDERS
DEAR STOCKHOLDER: It is my distinct pleasure to have this opportunity to
detail for you our continued success during 1995 in improving the financial
performance of your Bank, the increases achieved in the volume of our core
business activities and the geographic expansion of our franchise.
Net income for 1995 totaled $2.72 million, an increase of 31.5% from $2.07
million earned in 1994. Earnings per share for 1995 totaled $1.76, an increase
of 24.8% from earnings per share of $1.41 for 1994. Stockholders' equity
increased by 15.4% from $19.79 million at December 31, 1994 to $22.82 million at
December 31, 1995 and book value per share increased from $13.68 to $14.89.
During the past year our local operating environment was characterized by
strong competition for both quality lending opportunities and retail deposits.
The condition of our local real estate market continued to improve as both real
estate values and the volume of sales increased modestly. Business activity in
our market area continued to expand.
Against this background we achieved substantial growth during the past year
in each of our major business lines. Total assets increased by 21.1% to $346.87
million, earning assets grew by 21.7% to $335.76 million, loans outstanding
increased by 27.5% to $208.33 million and total deposits grew by 10.3% to
$282.79 million. The volume of transactions generated by our core business
activities and the number of customers serviced continued to expand throughout
the year. A combination of factors contributed to the continuing improvement in
our operating results.
Our yield on average earning assets increased during 1995 to 7.9% from 7.3%
in 1994, even though competition for quality lending opportunities during the
past year limited our ability to more aggressively price our loan products and
services. As a result of a restrictive monetary policy adopted by the Federal
Reserve Bank that prevailed throughout the first 9 months of 1995, interest
rates rose and our average cost of funds increased steadily throughout the year
to 4.5% from 3.7% for 1994. Consequently, our net interest margin decreased
modestly during 1995 to 3.4% from 3.6% for 1994. A number of positive
achievements combined to more than offset the decrease in our net interest
margin.
Total earning assets increased by $59.82 million or 21.7% from $275.94
million at year end 1994 to $335.76 million at year end 1995. The increase
achieved during 1995 in earning assets, which was primarily in loans
outstanding, was the most significant positive factor in the 42.2% increase in
pretax earnings for the year. Our ratio of average earning assets to average
total assets improved from 96.8% for 1994 to 97.1% for 1995.
The net result of the foregoing factors was that interest and dividend
income generated from our aggregate investment in loans and securities for 1995
increased by 27.9% or $5.22 million to $23.95 million from $18.73 million for
1994 while total interest expense increased by 44.4% or $4.22 million from $9.50
million in 1994 to $13.72 million for 1995. Consequently, even though our net
interest margin declined slightly by 21 basis points or 5.8%, our net interest
income increased by $1.0 million or 10.8% from $9.23 million for 1994 to $10.23
million for 1995.
Net Income/Loss
[GRAPH]
Earnings (Loss) Per Share
[GRAPH]
Total Assets
[GRAPH]
1
<PAGE>
LETTER TO STOCKHOLDERS
Our loan loss provision for 1995 increased to $300,000 as compared to
$135,000 for 1994. The increase in the loan loss provision for 1995 was
necessary to maintain adequate reserves due to the exceptional growth rate
achieved in loans outstanding. Also during 1995, our collection activities
resulted in net recoveries, as compared to $374,595 in net charge-offs during
1994.
Noninterest income in 1995 rose 125.7% from $570,926 in 1994 to $1.29
million. Gains from the sale of loan servicing rights totaling $763,806 in 1995
accounted for the increase in noninterest income. Net gains on the sale of
securities totaled $90,993 during the year compared to $193,577 in net gains
realized during 1994. Losses on the sale of other real estate owned declined
from $170,177 in 1994 to just $42,872 in 1995.
Noninterest operating expenses rose modestly by $256,427 or 3.9% from $6.60
million for 1994 to $6.85 million for 1995. The increase was primarily a result
of increases in compensation and benefits expense of 11.8% to $3.42 million in
1995 from $3.06 million in 1994. The increase in compensation and benefits
expense is the direct result of the expansion of our staff from 73 employees at
December 31, 1994 to 94 employees at December 31, 1995. Our lending staff was
increased in order to achieve and manage our growth in loans outstanding and
additional branch personnel were required to staff our two new full service
branch offices opened during 1995 in Hingham and Stoughton. Related to the same
factors, we also experienced during 1995 a 14.1% or $124,895 increase in
occupancy and equipment expense from $883,639 for 1994 to $1.01 million. The
operating expense increases for compensation and benefits and for occupancy and
equipment were partially offset by a reduction in expenses related to the
management and disposition of nonperforming assets which totaled $300,796 as
compared to $387,058 for the previous year, a reduction of 22.3%, along with a
substantial decline in our FDIC assessment of $290,279 from $623,431 in 1994 to
$333,152 in 1995. While we believe the effective control of operating expenses
and increased productivity and efficiency are integral factors in the
achievement of increases in future profitability, we also believe that it is
essential that our staffing level be sufficient to ensure that the various
business initiatives and strategies we undertake can be completed efficiently
and successfully.
Net earnings before taxes totaled $4.37 million for 1995, an increase of
42.2% from $3.07 million for 1994. After accruing our tax liability for 1995 of
$1.65 million our Bank earned $2.72 million in net income, an increase of 31.5%
from net income of $2.07 million for 1994.
As previously noted, total assets increased by $60.44 million or 21.1% from
$286.43 million at December 31, 1994 to $346.87 million at December 31, 1995, a
rate of growth well in excess of the industry average.
Our investment in securities increased by $13.72 million or 12.3% from
$111.58 million at December 31, 1994 to $125.30 million. Of our total portfolio
at year end 1995, $77.57 million was invested in short term balloon payment
FHLMC mortgage backed securities which are classified as held to maturity and
$39.94 million in callable U.S. Government Agency notes which are classified as
available for sale
Earning Assets
[GRAPH]
Total Loans, Net
[GRAPH]
Net Interest Income
[GRAPH]
2
<PAGE>
LETTER TO STOCKHOLDERS
and are available to provide liquidity as needed. The balance of our portfolio
is invested in equity securities.
Our continuing business focus on originating residential, commercial real
estate loans and business loans for inclusion in our loan portfolio as our
primary investment vehicle produced very strong results during the past year.
In 1995, we saw a continuation of the trend towards the consolidation of our
local banking industry. The consolidation process has drastically reduced the
number of community based banks within our market area. We view this as a
significant business opportunity for us not only for the coming year, but for
many years to come. We feel that our institution provides a superior level of
personalized service that many customers demand and that our larger regional
competitors are unable to provide. In order to take better advantage of these
business opportunities we introduced new loan products and hired additional
lending staff during 1995.
Throughout 1995 residential mortgage lending was the strongest performing
business line of our Bank. For the year we originated, through our Retail Loan
Department, 483 residential first mortgage loans totaling $60.74 million as
compared to 351 residential loans totaling $33.04 million originated in 1994.
During the year, 126 residential fixed rate mortgage loans totaling $12.92
million were sold into the secondary mortgage market as compared to 66
residential mortgage loans totaling $6.85 million sold during 1994. We were
able to achieve significant growth of $28.90 million or 34.6%, in our
residential mortgage loan portfolio which totaled $83.59 million at December 31,
1994 and $112.49 million at December 31, 1995.
During the past year our Retail Loan Department also originated 384
consumer loans, including Visa credit cards, totaling $2.04 million as compared
to 639 loans totaling $2.71 million originated during 1994. Consumer loans
outstanding totaled $2.51 million at December 31, 1995 as compared to $2.41
million at December 31, 1994.
During 1995, our Commercial Real Estate Loan Department originated 47
commercial real estate loans totaling $27.22 million as compared to 68 loans
totaling $29.20 million originated in 1994. Our focus is investing in
commercial real estate loans secured by multi-family residential properties,
retail space, office buildings and certain types of industrial properties held
for investment purposes. Even though there was a modest decline in the volume
of loans originated during last year from the previous year our commercial real
estate loan outstandings increased by $7.63 million or 10.7% to $79.11 million
at December 31, 1995 from $71.48 million a year earlier.
During the past year our Commercial Loan Department originated 48
commercial and industrial business loans totaling $13.76 million as compared to
26 business loans totaling $5.12 million in 1994. Commercial and industrial
loans outstanding increased during 1995 by $8.44 million or 100.2% to $16.86
million at December 31, 1995 from $8.42 million a year earlier. Our continuing
corporate commitment of additional resources to this department is directed at
accomplishing, over time, a substantial increase in both the volume of our
commercial and industrial business loan originations and in our total commercial
loan portfolio outstandings.
Total Operating Expenses
[GRAPH]
Loan Originations
[GRAPH]
Total Deposits
[GRAPH]
3
<PAGE>
LETTER TO STOCKHOLDERS
During 1995, 962 loans of all types were originated totaling $103.76
million as compared to 1,084 loans totaling $70.07 million in 1994. Total loans
outstanding, net for the year, increased by $44.96 million or 27.5% from $163.37
on December 31, 1994 to $208.33 million on December 31, 1995. The number of
loans in our portfolio increased from 2,427 at December 31, 1994 to 2,686 at
December 31, 1995. We were one of the most active real estate lenders in our
market area during 1995. According to the latest statistical information
available from the Banker & Tradesman, we were the highest volume originator of
purchase money mortgages, and the third highest volume originator overall of
real estate loans, in the Quincy, Braintree and Weymouth area. Our origination
volume of purchase money mortgages was the second highest in our entire market
area which includes the City of Boston and extends south to Marshfield. The
substantial increase in total loans outstanding generated during 1995
represented the achievement of a very important business goal which is a major
factor in the improvement in our core earnings capacity. Our success in
achieving this goal will have a substantial impact on our net earnings for 1996.
Overall asset quality continued to improve during 1995. Nonperforming
assets declined by $746,861 or 44.5% from $1.68 million at December 31, 1994 to
$930,766 as of December 31, 1995 and declined as a percent of assets from 0.6%
to 0.3% as of the same dates. The continuing improvement in our asset quality
resulted in net recoveries in 1995, lower losses on the sale of other real
estate owned and reduced expenses related to the management and disposition of
nonperforming assets.
Deposit growth for the year totaled $26.45 million or 10.3% as deposits
increased from $256.34 million on December 31, 1994 to $282.79 million on
December 31, 1995. The number of deposit accounts open increased by 1,552 or
7.9% from 19,550 accounts as of December 31, 1994 to 21,102 accounts as of
December 31, 1995.
The growth in retail deposits achieved during 1995 was somewhat
disappointing. Retail deposits increased by only $8.48 million or 3.3% from
$254.31 million at December 31, 1994 to $262.79 million at December 31, 1995.
Retail deposit growth was achieved in Money Market Deposit Account balances
which increased by $21.99 million or 185.9% to $33.82 million at December 31,
1995 from $11.83 million at December 31, 1994. NOW Account and Checking Account
balances increased by 19.7% or $3.62 million to $22.01 million from $18.39
million as of the same dates. The increase in NOW, Checking and Money Market
Account balances was offset by a decline in Passbook Savings Account balances of
28.8% or $18.63 million to $46.04 million at December 31, 1995 from $64.67
million at December 31, 1994.
Wholesale deposits increased from $2.03 million to $20.00 million as of the
same dates. We utilized wholesale deposit sources for funding as part of a
business strategy to control our funding costs while at the same time locking in
whenever possible, what represented in our view, a cyclically low cost of
deposits by the issuance of longer term certificates of deposit which
effectively extended the average maturity of our liabilities. As a result,
certificates of deposit of all types increased by $19.48 million or 12.1% from
$161.44 million at
Stockholder's Equity
[GRAPH]
Liverage Capital Ratio
[GRAPH]
Year End Stock Price
[GRAPH]
4
<PAGE>
LETTER TO STOCKHOLDERS
December 31, 1994 to $180.92 million at December 31, 1995.
Borrowings increased during 1995 by $29.97 million or 333.0% from $9.00
million at December 31, 1994 to $38.97 million at December 31, 1995. During
most of 1995, borrowings, particularly Federal Home Loan Bank Advances, were a
more economical means of funding our asset growth than retail deposits.
Aggressive price competition for retail deposits within our local market area
dictated, from a cost perspective, that we utilize borrowings as a funding
resource.
Stockholders' equity increased by $3.03 million or 15.4% from $19.79
million as of year end 1994 to $22.82 million as of year end 1995. The return
on average stockholders' equity for 1995 was 12.42% and our return on average
assets was 0.88% as compared to 10.98% and 0.78%, respectively in 1994. Our
leverage capital ratio declined modestly to 6.6% at December 31, 1995 from 6.9%
at December 31, 1994 and our risk-based capital ratio was 12.7% and 13.4% as of
the same respective dates.
In addition to the positive financial achievements, there were several
other significant business developments that occurred in 1995.
We opened our 6th branch office at 274 Main Street in Hingham on July 17,
1995 and as of December 31, 1995 new deposit accounts with balances totaling
$7.8 million were open. These results are well ahead of our original
projections. On December 21, 1995 we opened our 7th branch office at 397
Washington Street in Stoughton and, as of year end, new deposit accounts with
balances totaling $269,401 had been opened. We believe that the most effective
business strategy available to us to expand both the scope of our business
activities and our franchise is the continued expansion of our branch network.
Accordingly, we plan to open at least one additional full service branch office
during 1996.
One 1995 accomplishment that we are particularly proud of is the
achievement of an "Outstanding" Community Reinvestment Act rating. This
achievement is a result of hard work and the dedication of our entire staff to
the principles of CRA. Further, our "Outstanding" rating is a reflection of our
corporate commitment to meet the financial needs of the communities we serve.
On February 1, 1995, we declared a three for two stock split which we
believe has enhanced the liquidity in the marketplace and value of our common
stock. On the same date, we reinstituted a quarterly cash dividend of $0.05 per
share to our stockholders. Since that time, due to the continuing improvement
in our core earning capacity, two increases in our cash dividend have been
announced bringing our quarterly dividend rate to $0.07 per share. For the
year, dividends paid totaled $0.22 per share.
In addition, we recently adopted an Automatic Dividend Reinvestment & Stock
Purchase Plan that enables each of you as stockholders to purchase additional
shares of common stock directly from your Bank in an economical fashion and
which allows our company to raise incremental capital on a continuing basis to
support the continuing future expansion of our business activities and our
franchise. We wish to encourage all of our stockholders to take advantage of
this opportunity.
From our mutual perspective as stockholders, one of the most important
results achieved during 1995 was a 52.3% increase in the price per share of the
common stock of our Bank, from $10.67, split adjusted, at December 31, 1994 to
$16.25 at December 31, 1995.
The continuing consolidation of our industry has created unprecedented
business opportunities for this institution. To take advantage of those
business opportunities we must continue to aggressively seek to increase our
market share. There are voids in our local marketplace for banking products and
services which we can, and intend to, fill.
Over the past year, our dedicated staff has worked diligently and
successfully to achieve our business goals and improve both the financial and
competitive position of our Bank. I would like to personally thank each and
every member of our staff and our Board of Directors for their efforts over the
past year. I also wish to thank all of our stockholders for their continuing
support and confidence. I am looking forward to sharing our future successes
with you.
Best Regards,
/s/ Mark A. Osborne
Mark A. Osborne
Chairman of the Board & Chief Executive Officer
5
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
At December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $346,865 $286,429 $249,827 $229,792 $216,575
Loans, net 208,327 163,371 135,661 134,584 144,143
Securities 125,300 111,582 105,735 80,449 56,277
Deposits 282,787 256,340 221,950 205,921 187,102
Borrowings 38,968 9,000 8,530 8,531 16,606
Stockholders' equity 22,825 19,786 17,312 13,954 11,953
Book value per share $ 14.89 $ 13.68 $ 12.92 $ 10.89 $ 9.96
<CAPTION>
For the year ended December 31, 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest and dividend income $ 23,949 $ 18,728 $ 18,157 $ 18,805 $ 19,698
Interest expense 13,720 9,498 8,950 10,569 13,779
------- ------- ------- ------- -------
Net interest income 10,229 9,230 9,207 8,236 5,919
Add
Noninterest income 579 549 719 364 216
Gain (loss) on sale of loans (52) (1) 20 320 24
Less
Provision for possible loan losses 300 135 2,080 2,270 2,850
Noninterest expenses 6,552 6,209 5,680 4,835 4,695
------- ------- ------- ------- -------
Pretax core earnings 3,904 3,434 2,186 1,815 (1,386)
Net gain on sale of securities 91 193 3,952 2,188 768
Gain on sale of loan servicing 764 - - - -
Loss on sale of fixed assets (50) - - - -
Net loss on sale of other real estate owned (43) (170) (666) (511) (561)
Real estate owned expense 301 387 1,194 1,643 972
------- ------- ------- ------- -------
Income (loss) before income taxes 4,365 3,070 4,278 1,849 (2,151)
Provision (benefit) for income taxes 1,646 1,002 1,198 265 (673)
------- ------- ------- ------- -------
Net income (loss) $ 2,719 $ 2,068 $ 3,080 $ 1,584 $ (1,478)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Earnings (loss) per share $ 1.76 $ 1.41 $ 2.14 $ 1.21 $ (1.23)
Weighted average number of common shares
and common equivalents 1,545,297 1,468,758 1,437,092 1,306,610 1,200,000
Dividends declared per share $ 0.22 $ - $ - $ - $ -
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the
accompanying consolidated financial statements and notes included within this
Annual Report.
For the first three quarters of 1995, the Federal Reserve Board of
Governors adopted a more restrictive monetary policy. Despite the progressive
tightening of monetary policy throughout the year, both the national and local
economy continued to expand. The condition of the local real estate market
continued to improve as both real estate values and sales volume increased
modestly during the year. Within this economic and operating environment, the
Bank was able to achieve substantial growth in core earnings and in residential
and commercial real estate loans and commercial business loans outstanding
during 1995.
The Bank has retail banking facilities in Boston, Braintree, Quincy,
Weymouth, Hingham and Stoughton and considers its primary market area to be
these six communities and the surrounding cities and towns south of Boston. In
addition, the Bank maintains Loan Centers in Braintree and Quincy. The Bank is
primarily engaged in the lending business with an emphasis on residential and
commercial real estate loans and commercial business loans. The Bank's assets
are funded primarily by attracting retail deposits through its branch network.
The Bank's ultimate success is very dependent on the conditions of both the
local economy and the local real estate market.
ASSET/LIABILITY MANAGEMENT
The overall interest rate sensitivity of the Bank is dependent upon the
Bank's ability to reprice its interest rate sensitive assets and liabilities.
The ability to successfully manage the repricing of assets and liabilities,
significantly helps reduce the interest rate risk in any interest rate
environment. As of December 31, 1995, the Bank is net asset sensitive for the
following one year period, net liability sensitive for the next one to two year
and two to three year periods, net asset sensitive for the three to five year
time horizons, liability sensitive in the five to ten year time horizon and
asset sensitive thereafter. The Bank's management monitors and manages interest
rate risk as an integral part of its overall business strategy.
Certain investments in the Bank's portfolio have call options which in
management's opinion are likely to be exercised. The schedule below reflects
the Bank's Gap position based on the call dates of these investments. All
investments are reported at amortized cost. The Interest Rate Sensitivity Gap
Analysis at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1-180 181-364 1-2 2-3 3-5 5-10 Over 10
Interest Rate Sensitivity Period Days Days Years Years Years Years Years Total
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Fixed rate mortgages $ 83 $ 9 $ 373 $ 126 $ 1,310 $ 3,477 $ 11,774 $ 17,152
Variable rate mortgages 78,967 33,564 25,504 5,737 19,400 3,246 7,526 173,944
Commercial loans 13,734 287 622 409 1,805 - - 16,857
Consumer loans 1,255 323 569 211 35 - 115 2,508
Investments 42,947 15,481 17,352 19,550 7,310 20,360 2,199 125,199
-------- -------- -------- -------- -------- -------- -------- --------
Total earning assets 136,986 49,664 44,420 26,033 29,860 27,083 21,614 335,660
Interest-bearing liabilities:
NOW deposits and money
market accounts 8,961 8,961 17,922 - - 10,097 - 45,941
Passbook and escrow deposits 7,070 7,070 14,140 619 1,201 17,033 - 47,133
Time deposits 64,973 46,870 32,734 19,253 13,479 3,609 - 180,918
Borrowed funds 12,300 4,000 - 15,000 7,668 - - 38,968
-------- -------- -------- -------- -------- -------- -------- --------
Total interest-bearing
liabilities 93,304 66,901 64,796 34,872 22,348 30,739 - 312,960
-------- -------- -------- -------- -------- -------- -------- --------
Interest rate sensitivity gap $ 43,682 $(17,237) $(20,376) $ (8,839) $ 7,512 $ (3,656) $21,614 $ 22,700
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF FINANCIAL CONDITION
Total assets of the Bank increased by $60,436,553 or 21.1% to $346,865,213
at December 31, 1995 from $286,428,660 as of December 31, 1994. The growth in
assets was primarily due to the increase achieved in the Bank's loans
outstanding.
The securities portfolio, which includes securities held to maturity,
securities available for sale and short-term investments, increased by
$13,718,345 or 12.3% and totaled $125,300,270 or 36.1% of total assets at
December 31, 1995 compared to $111,581,925 or 39.0% of total assets at December
31, 1994. The Bank utilizes its securities portfolio as a source of liquidity
to fund loans and meet short-term cash needs. At December 31, 1995 the Bank's
investment portfolio included Federal Home Loan Mortgage Corporation (FHLMC)
Participation Certificates classified as held to maturity. Predominantly, the
FHLMC Participation Certificates owned were short-term with maturities in the
four to six year range. The cash flow received from these obligations of
$18,635,268 during 1995 was used primarily to fund the growth in commercial
business loans and the growth in residential and commercial mortgage loans. The
investment portfolio can, at December 31, 1995, be broken down into three major
components. The first component, securities held to maturity, consists solely
of Federal Home Mortgage Corporation Participation Certificates totaling
$77,565,687 or 61.9% of total securities, all of which mature within six years.
These obligations, although being held to maturity, can be used as collateral
for short-term borrowings if required. The second component consists of
callable FHLB and FHLMC Bonds and Notes and Common Stock, which totaled
$40,676,183 or 32.5% of total securities and which are designated as available
for sale. The third component is short-term investments and FHLB stock,
totaling $7,058,400 or 5.6% of total securities. With the exception of
securities designated as available for sale, the Bank's intention is to hold all
investment securities to maturity, and accordingly, investments are carried at
cost, adjusted for amortization of premiums and accretion of discounts.
Loans continue to be the primary earning asset of the Bank and represent
60.1% of total assets. As of December 31, 1995, 91.9% of total loans
outstanding or $191,503,175 were secured by residential and commercial real
estate, and of this amount, $112,485,567 or 58.7% were secured by residential
properties. During 1995, our efforts to originate residential and commercial
real estate loans and commercial business loans produced substantial growth in
our asset size. In 1995, the Bank originated $87,955,986 in residential and
commercial real estate mortgage loans, of which only $12,915,640 were sold into
the secondary market. In addition, the Bank originated $13,761,138 in business
loans and $2,039,608 in consumer loans. As a result, net loans for 1995
increased by $44,956,187 or 27.5% to $208,326,723 at December 31, 1995 from
$163,370,536 at December 31, 1994.
The provision for possible loan losses was $300,000 in 1995 as compared to
$135,000 in 1994 and $2,080,000 in 1993. The increase in the loan loss
provision for 1995 was necessary to maintain adequate reserves given the 27.5%
growth in loans achieved in 1995. For 1995, the Bank had net recoveries of $711
compared to net charge-offs of $374,595 in 1994 and $2,655,455 in 1993. As of
December 31, 1995, the Bank's allowance for possible loan losses totaled
$2,541,997 as compared to $2,241,286 at December 31, 1994.
Continued uncertainty exists as to the ultimate realization in full of
certain of the Bank's loans due to the current conditions of the Massachusetts
economy. Based upon management's assessment of the quality of loan production,
and the current condition of the Massachusetts economy, management believes that
the allowance for loan losses as of December 31, 1995 is adequate to absorb the
current estimation of future losses in the loan portfolio. However, any
deterioration in future periods could result in the Bank experiencing increased
levels of nonperforming loans and charge-offs, and additional provisions for
loan losses may be required.
Other real estate owned increased by $297,000 or 223.3% to $430,000 at
December 31, 1995 from $133,000 at December 31, 1994. Other real estate owned
consists of assets that were acquired by foreclosure, or assets that were
acquired by the acceptance of a deed in lieu of foreclosure during the year.
Other real estate owned is carried on the Bank's books at the lower of the
preforeclosure loan balance or the fair value less cost to sell.
During 1995, deposits increased by $26,447,458 or 10.3% to $282,787,249 at
December 31, 1995 from $256,339,791 at December 31,
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1994. The growth in deposits during 1995 was primarily in wholesale term
certificates of deposits which increased by $17,972,586. The remainder of our
deposit growth was in retail deposits which increased by $8,474,872 during 1995.
Money market deposits increased by $21,988,890 or 185.9% to $33,819,928 in 1995
from $11,831,038 in 1994. The increase in wholesale term certificates and money
market deposits was partially offset by the decline in passbook savings deposits
which decreased by $18,637,225 or 28.8%.
The Bank uses borrowed funds, primarily advances from the Federal Home Loan
Bank as an alternative funding source for immediate lending or investment
opportunities or as a means of controlling its cost of funds. The Bank pays
down borrowings in accordance with the respective contracted borrowing
agreements and as cash flow warrants.
RESULTS OF OPERATIONS
COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 1995 AND 1994
Net interest margins were negatively impacted by the overall increase in
our cost of funds in 1995 which increased by 84 basis points to 4.55% in 1995
compared to 3.71% in 1994. However, net income was positively impacted by the
increase in the Bank's loan portfolio which increased by $44,956,187 or 27.5%
to $208,326,723 at year end 1995 compared to $163,370,536 in 1994. Total
earning assets increased by $59,817,399 or 21.7% to $335,761,878 at December 31,
1995. As a result, net interest income increased by $999,131 or 10.8% to
$10,229,233 for 1995 compared to $9,230,102 for 1994.
Noninterest income was comprised of fees on checking and savings related
services, gains and losses on sales of securities, loans, loan servicing, fixed
assets, other real estate owned, and miscellaneous other items. Noninterest
income totaled $1,288,714 in 1995 compared to $570,926 in 1994. The net
increase in noninterest income came primarily from gains from the sale of loan
servicing which totaled $763,806 in 1995 as compared to no gains in 1994. We
also experienced an increase in customer service fees to $463,518 in 1995 from
$413,058 in 1994.
Noninterest expenses in 1995 increased by $256,427 or 3.9% to $6,852,498
compared to total noninterest expenses of $6,596,071 in 1994. Much of this
increase can be attributed to the costs associated with the opening of two
additional branches in 1995 and the expansion of our lending staff which was
necessary in order to accommodate the growth in loans outstanding achieved. On
July 17, 1995, we opened a branch at 274 Main Street in Hingham. We opened our
seventh branch on December 21, 1995 at 397 Washington Street, Stoughton.
Consequently, salaries and employee benefits increased by $359,379 or 11.8% to
$3,416,508 in 1995 from $3,057,129 in 1994. Occupancy and equipment expenses
increased by $124,895 or 14.1% to $1,008,534 in 1995 from $883,639 in 1994.
This increase was partially offset by a reduction in OREO expenses which
declined by $86,262 or 22.3% from $387,058 in 1994 and a reduction in FDIC
insurance expense which declined by $290,279 or 46.6% from $623,431 in 1994 to
$333,152 in 1995. In total, noninterest expenses as a percentage of average
assets declined to 2.2% in 1995 from 2.5% in 1994.
The Bank's effective tax rate was 37.7% in 1995, which is less than the
combined federal and state statutory rate, due to rehabilitation and low income
housing credits and various other differences in recognition of income as
allowed under the Internal Revenue Code.
The Bank, in 1995, recorded pretax core earnings of $3,904,144 as compared
to core earnings of $3,433,615 in 1994 and $2,186,435 in 1993. For the year
ended December 31, 1995, the Bank's net income was $2,719,235 or $1.76 per
share, based on 1,545,297 weighted average shares and common stock equivalents
outstanding compared to net income of $2,067,626 or $1.41 per share, based on
1,468,758 weighted average shares and common stock equivalents outstanding for
the year ended December 31, 1994. Finally, as a result of 1995 earnings of
$2,719,235 and the issuance of additional capital stock, the Bank experienced an
increase of $3,038,519 in stockholders' equity to $22,824,616 at December 31,
1995 from $19,786,097 at December 31, 1994. Over this period, the Bank's
leverage capital ratio declined to 6.6% from 6.9% as a result of asset growth.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
The following table sets forth the components of the Bank's average
balances, net interest and fee income, interest rate spread and net interest
margin for the years indicated.
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------------------------------------------------
Interest Average Interest Average Interest Average
------------------------------------------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
- ----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities:
Bonds and obligations $ 10,158 $ 796 7.84% $ 271 $ 21 7.75% $ 45,770 $ 2,744 6.00%
Mortgage-backed securities 93,438 5,088 5.45% 102,492 5,169 5.04% 35,532 1,957 5.51%
Other securities 3,206 228 7.11% 1,812 150 8.28% 2,099 114 5.43%
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total investment securities 106,802 6,112 5.72% 104,575 5,340 5.11% 83,401 4,815 5.77%
Loans 188,479 17,472 9.27% 148,814 13,296 8.93% 136,227 13,137 9.64%
Other interest-bearing deposits 6,126 354 5.78% 2,117 73 3.45% 5,972 170 2.85%
Federal funds sold 207 11 5.31% 621 19 3.06% 1,177 35 2.97%
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total earning assets 301,614 23,949 7.94% 256,127 18,728 7.31% 226,777 18,157 8.01%
Allowance for possible loan
losses (2,341) (2,357) (2,786)
Cash and due from banks 2,586 2,263 2,318
Other assets 8,898 8,490 12,324
-------- -------- --------
Total assets $310,757 $264,523 $238,633
-------- -------- --------
-------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
NOW accounts $ 10,365 $ 155 1.50% $ 9,664 $ 144 1.49% $ 8,877 $ 161 1.81%
Savings accounts 50,210 1,415 2.82% 86,656 2,507 2.89% 101,934 3,307 3.24%
Money market accounts 27,459 1,136 4.14% 5,498 146 2.66% 4,971 132 2.66%
Term certificates 170,020 9,578 5.63% 126,968 6,090 4.80% 92,602 4,484 4.84%
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total deposits 258,054 12,284 4.76% 228,786 8,887 3.88% 208,384 8,084 3.88%
Borrowed funds 22,395 1,436 6.41% 10,168 611 6.01% 8,836 865 9.79%
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total interest-bearing
liabilities 280,449 13,720 4.89% 238,954 9,498 3.97% 217,220 8,949 4.12%
Demand deposit accounts 7,969 6,076 3,547
Other liabilities 439 660 1,567
Stockholders' equity 21,900 18,833 16,299
Total liabilities and
stockholders' equity $310,757 $264,523 $238,633
-------- -------- --------
-------- -------- --------
Net interest income $ 10,229 $ 9,230 $ 9,208
-------- -------- --------
-------- -------- --------
Interest rate spread 3.05% 3.34% 3.89%
Net interest margin 3.39% 3.60% 4.06%
----- ----- -----
----- ----- -----
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RATE/VOLUME ANALYSIS
The following table shows changes in the Bank's net interest income
attributable to the change in interest rates and the change in the volume of
interest-bearing assets and liabilities. Amounts attributed to the change in
rates are based upon the change in rate multiplied by the prior year's volume.
Amounts attributed to the change in volume are based upon the change in volume
multiplied by the prior year's rate. The combined effect of changes in both
volume and rate, which cannot be separately identified, has been allocated
proportionately.
<TABLE>
<CAPTION>
Year Ended December 31, 1995 vs. 1994 1994 vs. 1993
------------------------------ ------------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------ ------------------------------
Volume Rate Total Volume Rate Total
------------------------------ ------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $3,610 $ 566 $4,176 $1,125 $ (966) $ 159
Investments 314 731 1,045 849 (437) 412
------ ------ ------ ------ ------ ------
Total interest income 3,924 1,297 5,221 1,974 (1,403) 571
------ ------ ------ ------ ------ ------
INTEREST EXPENSE:
Deposits 1,265 2,132 3,397 793 15 808
Borrowed funds 759 66 825 79 (338) (259)
------ ------ ------ ------ ------ ------
Total interest expense 2,024 2,198 4,222 872 (323) 549
------ ------ ------ ------ ------ ------
Net interest income $1,900 $ (901) $ 999 $1,102 $(1,080) $ 22
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>
The earnings of the Bank depend primarily upon the difference between
interest and dividend income earned on its loan and investment portfolios and
the interest expense paid on its deposits and borrowings. Total interest income
increased by $5,220,904 or 27.9% from $18,728,097 for the year ended December
31, 1994 to $23,949,001 for the year ended December 31, 1995. Total interest
expense increased by $4,221,773 or 44.4% from $9,497,995 for the year ended
December 31, 1994 to $13,719,768 for the year ended December 31, 1995. For the
year ended December 31, 1995, the Bank's net interest income totaled $10,229,233
representing an increase of $999,131 compared to $9,230,102 for the year ended
December 31, 1994.
The gross yield on average earning assets was 7.9% for 1995 compared to
7.3% in 1994. Interest expense as a percentage of average interest-bearing
liabilities in 1995 was 4.9% compared to 4.0% in 1994. This resulted in a net
interest spread of 3.0% in 1995 and 3.3% in 1994. Interest expense as a
percentage of average earning assets in 1995 was 4.5% compared to 3.7% in 1994.
This resulted in a net interest margin of 3.4% in 1995 and 3.6% in 1994.
COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 1994 AND 1993
Net interest margins were negatively impacted by the overall increase in
interest rates in 1994. However, net income was positively impacted by the
increase in the Bank's loan portfolio resulting in increased net interest
income. In addition, pretax core earnings were positively impacted by the
substantial decline in net charge-offs and the resultant reduction in loan loss
provisions.
For 1994, noninterest income was comprised of fees on checking and savings
related services, gains and losses on sales of securities, loans and other real
estate owned, and miscellaneous other items. Noninterest income totaled
$570,926 in 1994 compared to $4,024,540 in 1993. The net decrease in
noninterest income was a result of the combination of a decline in net gains on
the
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
sale of securities which totaled $193,577 in 1994 as compared to net gains of
$3,952,060 in 1993, losses on sale of loans in the secondary market of $1,395 in
1994 compared to a gain of $20,040 in 1993, and a decrease in customer service
fees to $413,058 in 1994 from $472,441 in 1993.
Noninterest expenses in 1994 decreased by $277,610 or 4.0% to $6,596,071
compared to total noninterest expenses of $6,873,681 in 1993. The decrease was
due primarily to a decline in OREO related expenses as the number of OREO
properties held by the Bank declined. OREO expenses declined by $806,554 or
67.6% from $1,193,612 in 1993 to $387,058 in 1994. This decline was partially
offset by an increase in the number of personnel employed as well as
cost-of-living salary increases which resulted in an increase in salaries and
benefits totaling $397,641. Occupancy expenses increased by $76,808 for 1994,
reflecting the added cost from opening our administrative office at 730 Hancock
Street, Quincy, MA plus the preliminary costs incurred related to the planned
opening of a new branch office at 274 Main Street, Hingham, MA. In total,
noninterest expenses as a percentage of average assets declined to 2.5% in 1994
from 2.9% in 1993.
The Bank's effective tax rate was 32.7 % in 1994, which is less than the
statutory rate, due to a reduction in the Bank's valuation reserve established
for the net deferred tax asset in prior years. Given the strong earnings
performance by the Bank over the past two years, management felt that the net
deferred tax asset would be realizable in the future.
For the year ended December 31, 1994, the Bank's net income was $2,067,626
or $1.41 per share, based on 1,468,758 weighted average shares and common stock
equivalents outstanding compared to net income of $3,080,184 or $2.14 per share,
based on 1,437,092 weighted average shares and common stock equivalents
outstanding for the year ended December 31, 1993. Finally, as a result of 1994
earnings of $2,067,626 and the issuance of additional capital stock, the Bank
experienced an increase of $2,473,961 in stockholders' equity to $19,786,097 at
December 31, 1994 from $17,312,136 at December 31, 1993. The Bank's leverage
capital ratio during this period remained unchanged at 6.9%.
LIQUIDITY AND CAPITAL RESOURCES
The Bank attempts to maximize interest-earning assets while maintaining
sufficient funds on hand to meet loan commitments, cash disbursements and
possible deposit outflows. The Bank obtains funds for investment and other
banking purposes principally from deposits, borrowings, loan repayments and
through sales of loans, loan participations and securities available for sale,
and maturities of investment securities. While loan payments and maturing
investment securities are a relatively stable source of funds, deposit flows are
greatly influenced by general interest rates, economic conditions and
competitive factors. Borrowings may also be used to offset reductions in other
sources of funds such as deposits. The Bank may borrow up to 30% of its total
assets but not more than 20 times its capital stock holdings in the FHLB for any
sound business purpose for which the Bank has legal authority. Borrowings
authorized totaled $43,968,000 at December 31, 1995.
IMPACT OF INFLATION AND CHANGING PRICES
Virtually all of the assets and liabilities of a financial institution,
unlike those of other companies, are monetary in nature. Consequently, changes
in the levels of interest rates have a greater impact on a financial
institution's performance than the effects of general levels of inflation.
Interest rates do not necessarily fluctuate in the same direction or in the same
magnitude as prices of goods and services.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles requiring
the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.
CAPITAL AND REGULATORY MATTERS
The Bank's regulators have classified and defined bank capital into the
following components: (1) Tier I capital, which includes tangible stockholders'
equity for common stock and certain perpetual preferred stock, and (2) Tier II
capital, which includes a portion of the allowance for possible loan losses,
certain qualifying long-term debt and preferred stock which does not qualify for
Tier I capital. In addition, they have implemented risk-based capital
guidelines that require a bank to maintain certain minimum capital as a percent
of such bank's assets and certain off-balance sheet items adjusted for
predefined credit risk factors (risk-adjusted assets). As of December 31, 1995,
the Bank's Tier I and combined Tier I and Tier II capital ratios were 11.4% and
12.7%, respectively.
In addition to the risk-based guidelines discussed above, the Bank's
regulators require that the Bank maintain a minimum leverage ratio (Tier I
capital as a percent of tangible assets) of 4.0%. As of December 31, 1995, the
Bank had a leverage capital ratio of 6.6%.
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF THE HIBERNIA SAVINGS BANK:
We have audited the accompanying consolidated balance sheets of The
Hibernia Savings Bank and subsidiaries (the "Bank") as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Bank'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
The Hibernia Savings Bank and subsidiaries as of December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
January 10, 1996
14
<PAGE>
CONSOLIDATED BALANCE SHEETS
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
December 31, 1995 and 1994 1995 1994
- -------------------------------------------------------------------------------
ASSETS:
Cash and cash equivalents $ 3,213,259 $ 3,780,957
Short-term investments 4,860,000 3,590,000
Securities (Notes 1 and 3):
Held to maturity--market value $76,708,209
and $92,848,514 77,565,687 100,252,866
Available for sale 40,676,183 5,925,359
Federal Home Loan Bank stock 2,198,400 1,813,700
Loans, net of allowance for possible loan
losses of $2,541,997 and $2,241,286 (Note 4) 208,326,723 163,370,536
Banking premises and equipment, net (Note 5) 5,574,956 4,738,238
Accrued interest receivable 2,128,536 1,485,077
Other real estate owned 430,000 133,000
Other assets (Note 8) 1,891,469 1,338,927
------------ ------------
Total assets $346,865,213 $286,428,660
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits (Note 6) $282,787,249 $256,339,791
Federal Home Loan Bank advances (Note 7) 38,968,000 9,000,000
Mortgagors' escrow payments 1,094,397 849,368
Income taxes payable (Note 8) 364,444 156,677
Other liabilities 826,507 296,727
------------ ------------
Total liabilities 324,040,597 266,642,563
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES 9 AND 10)
Stockholders' equity (Notes 2, 11, 12 and 13):
Serial preferred stock, $1.00 par value--
Authorized--1,000,000 shares
Issued--None -- --
Common stock, $1.00 par value--
Authorized--5,000,000 shares
Issued and outstanding--1,532,431 shares
and 1,446,737 shares 1,532,431 1,446,737
Additional paid-in capital 8,824,970 8,322,273
Retained earnings 12,406,361 10,022,386
Less: Unrealized gains (losses) on securities
available for sale, net of tax 60,854 (5,299)
------------ ------------
Total stockholders' equity 22,824,616 19,786,097
------------ ------------
Total liabilities and stockholders'
equity $346,865,213 $286,428,660
------------ ------------
------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
15
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest on loans $17,471,506 $13,295,968 $13,137,156
Interest and dividends on securities 6,112,429 5,339,665 4,814,714
Interest on short-term investments 365,066 92,464 204,928
----------- ----------- -----------
Total interest and dividend income 23,949,001 18,728,097 18,156,798
----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits 12,284,438 8,892,241 8,083,920
Interest on borrowed funds (Note 7) 1,435,330 605,754 865,391
----------- ----------- -----------
Total interest expense 13,719,768 9,497,995 8,949,311
----------- ----------- -----------
Net interest income 10,229,233 9,230,102 9,207,487
Provision for possible loan losses (Note 4) 300,000 135,000 2,080,000
----------- ----------- -----------
Net interest income, after provision for
possible loan losses 9,929,233 9,095,102 7,127,487
----------- ----------- -----------
NONINTEREST INCOME:
Gain on sale of securities, net 90,993 193,577 3,952,060
Gain on sale of loan servicing (Note 4) 763,806 -- --
Loss on sale of fixed assets (49,826) -- --
(Loss) gain on sale of loans, net (52,611) (1,395) 20,040
Loss on sale of other real estate owned (42,872) (170,177) (666,537)
Customer service fees 463,518 413,058 472,441
Other income 115,706 135,863 246,536
----------- ----------- -----------
Total noninterest income 1,288,714 570,926 4,024,540
----------- ----------- -----------
NONINTEREST EXPENSE:
Salaries and employee benefits (Note 12) 3,416,508 3,057,129 2,659,488
Occupancy and equipment expenses (Notes 5 and 9) 1,008,534 883,639 806,831
Data processing expenses 230,624 217,367 176,344
Other real estate owned expenses 300,796 387,058 1,193,612
Other general and administrative expenses 1,896,036 2,050,878 2,037,406
----------- ----------- -----------
Total noninterest expense 6,852,498 6,596,071 6,873,681
----------- ----------- -----------
Income before provision for income taxes 4,365,449 3,069,957 4,278,346
Provision for income taxes (Note 8) 1,646,214 1,002,331 1,198,162
----------- ----------- -----------
Net income $ 2,719,235 $ 2,067,626 $ 3,080,184
----------- ----------- -----------
----------- ----------- -----------
Earnings per share (Note 1) $ 1.76 $ 1.41 $ 2.14
----------- ----------- -----------
----------- ----------- -----------
Weighted average number of common shares (Note 1) 1,545,297 1,468,758 1,437,092
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on
Additional Securities
For the Years Ended Common Paid-in Retained Available
December 31, 1995, 1994 and 1993 Stock Capital Earnings For Sale Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ 1,281,878 $ 7,797,248 $ 4,874,576 $ -- $ 13,953,702
Net income -- -- 3,080,184 -- 3,080,184
Proceeds from issuance of stock
through stock purchase plan (Note 11) 50,475 215,275 -- -- 265,750
Proceeds from exercise of stock
options (Note 13) 7,500 5,000 -- -- 12,500
----------- ---------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1993 1,339,853 8,017,523 7,954,760 -- 17,312,136
Cumulative effect of adopting -- -- --
SFAS No. 115, net of tax (Note 1) 35,387 35,387
Net income -- -- 2,067,626 -- 2,067,626
Proceeds from issuance of stock
through stock purchase plan (Note 11) 30,684 253,950 -- -- 284,634
Proceeds from exercise of
stock options (Note 13) 76,200 50,800 -- -- 127,000
Increase in net unrealized loss on
securities available for sale, net of tax -- -- -- (40,686) (40,686)
----------- ---------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1994 1,446,737 8,322,273 10,022,386 (5,299) 19,786,097
Net income -- -- 2,719,235 -- 2,719,235
Proceeds from issuance of stock
through stock purchase plan (Note 11) 43,240 446,101 -- -- 489,341
Proceeds from issuance of stock through
the dividend reinvestment and optional
cash payment plan (Note 11) 1,254 20,378 -- -- 21,632
Proceeds from exercise of
stock options (Note 13) 41,200 36,218 -- -- 77,418
Dividends paid -- -- (335,260) -- (335,260)
Increase in net unrealized gain on
securities available for sale, net of tax -- -- -- 66,153 66,153
----------- ---------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1995 $1,532,431 $8,824,970 $12,406,361 $ 60,854 $22,824,616
----------- ---------- ----------- ---------- -----------
----------- ---------- ----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE HIBERNIA SAVINGS BANK AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 2,719,235 $ 2,067,626 $ 3,080,184
Adjustments to reconcile net income
to net cash provided by operating activities--
Depreciation and amortization 507,489 430,161 402,207
Amortization of premiums 503,928 1,024,484 749,144
Provision for possible loan losses 300,000 135,000 2,080,000
Gain on sale of assets, net (709,490) (22,005) (3,305,563)
Increase (decrease) in deferred loan fees (196,407) 152,718 32,912
Provision (benefit) for deferred taxes (138,293) (52,154) (432,708)
Proceeds from sale of mortgage loans 15,848,472 6,845,787 46,633,895
Loans originated for resale (15,901,083) (6,847,182) (46,613,855)
(Increase) decrease in accrued interest receivable (643,459) (1,762) 677,290
(Increase) decrease in other assets (814,359) 8,380 1,192,106
Increase (decrease) in accrued expenses and other liabilities 982,578 (731,838) 67,961
----------- ----------- -----------
Total adjustments (260,624) 941,589 2,063,389
----------- ----------- -----------
Net cash provided by operating activities 2,458,611 3,009,215 5,143,573
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans purchased (22,604,223) -- (7,112,301)
Net (increase) decrease in loans (22,451,874) (29,728,001) 696,439
Proceeds from sales of other real estate owned 779,791 1,522,320 6,841,201
Sales (purchases) of short-term investments, net (1,270,000) (1,645,000) 6,505,000
Proceeds from the sale of fixed assets 49,193 -- --
Purchases of securities held to maturity -- (35,734,168) (171,470,238)
Proceeds from maturities of securities held to maturity 12,894,834 18,463,098 145,865,570
Purchases of securities available for sale (76,818,369) (15,932,605) (37,476,996)
Proceeds from sale of securities available for sale 51,168,978 28,165,654 34,493,336
Purchases of premises and equipment (1,443,227) (1,189,520) (212,728)
----------- ----------- -----------
Net cash used in investing activities (59,694,897) (36,078,222) (21,870,717)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deposits, net 26,447,457 34,389,711 16,029,130
FHLB advances, net 29,968,000 470,000 (1,000)
Proceeds from issuance of stock 588,391 411,634 278,250
Dividends paid (335,260) -- --
----------- ----------- -----------
Net cash provided by financing activities 56,668,588 35,271,345 16,306,380
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (567,698) 2,202,338 (420,764)
Cash and cash equivalents, beginning of year 3,780,957 1,578,619 1,999,383
----------- ----------- -----------
Cash and cash equivalents, end of year $ 3,213,259 $ 3,780,957 $ 1,578,619
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 13,721,425 $ 9,500,101 $ 8,943,435
Income taxes paid 1,581,579 2,475,996 156,923
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfer of loans to other real estate owned $ 1,323,945 $ 1,731,400 $ 2,956,666
----------- ----------- -----------
----------- ----------- -----------
Transfer of held to maturity securities to available for sale $ 9,250,187 $ -- $ --
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
The Hibernia Savings Bank and its wholly owned subsidiaries, Kildare
Corporation, Limerick Securities Corporation and Meath Corporation (the Bank).
All significant intercompany balances and transactions have been eliminated in
consolidation.
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, cash items in the process of collection and amounts due from
banks.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of income and expenses during the reporting
periods. Operating results in the future could vary from the amounts derived
from management's estimates and assumptions.
SECURITIES
Securities purchased are classified as held to maturity when it is
management's intent and ability to hold them to maturity. Such securities,
including mortgage and asset-backed securities, are carried at cost, adjusted
for amortization of premium and accretion of discount, as computed by the
effective yield method. Securities not classified as held to maturity are
classified as available for sale and are reported at fair value, with unrealized
gains or losses, net of the estimated tax effects, classified as a separate
component of stockholders' equity. The Bank does not have any securities
classified as trading.
When securities are sold, the adjusted cost of the specific security sold
is used to compute gains or losses on the sale.
LOANS, DISCOUNTS AND RESERVES
Loans, as reported, have been reduced by unadvanced loan proceeds, unearned
discounts, deferred fees and the allowance for possible loan losses.
Interest on loans is not accrued when principal or interest is 90 days or
more past due or, in the opinion of management, the collectibility of the
principal or interest becomes doubtful. At December 31, 1995 and 1994,
nonaccrual loans were $500,766 and $1,544,628, respectively. Had the nonaccrual
loans at December 31, 1995 and 1994 been accruing, interest income would have
been higher by $56,634 and $133,477, respectively. There were no restructured
loans at December 31, 1995.
The Bank adopted SFAS No. 114, Accounting by Creditors for Impairment of a
Loan and SFAS No. 118, Accounting by Creditors for Impairment of a Loan, Income
Recognition and Disclosures, as of January 1, 1995. SFAS No. 114 requires that
certain impaired loans be measured based on the present value of expected future
cash flows discounted at the loan's original effective interest rate. The Bank
defines impaired loans as all loans in nonaccrual status and reviews on a
continuous basis all classified loans in order to identify possible impaired
loans. As a practical expedient, impairment may be measured based on the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance. The Bank had previously measured the allowance for credit losses
using methods similar to those prescribed in SFAS No. 114. As a result of
adopting these statements, no additional allowance for loan losses was required
as of January 1, 1995.
The adequacy of the allowance for possible loan losses is evaluated on a
regular basis by management. Factors considered in evaluating the adequacy of
the allowance include previous loss experience, current economic conditions and
their effect on borrowers, and the performance of individual loans in relation
to contract terms. The provision for possible loan losses charged to operations
is based upon management's judgment of the amount necessary to maintain the
allowance at a level adequate to absorb possible future losses. The allowance
is an estimate, and ultimate losses may vary from current estimates. Loan
losses are charged against the allowance when management believes the
collectibility of principal is unlikely.
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BANKING PREMISES AND EQUIPMENT
Land is carried at original cost. Buildings, leasehold improvements and
equipment are stated at cost, less accumulated depreciation and amortization,
computed primarily on the straight-line basis over the estimated useful lives of
the assets or terms of leases, if shorter. The cost of maintenance and repairs
is charged to operations as incurred.
OTHER REAL ESTATE OWNED
Real estate acquired by foreclosure is initially recorded at the lower of
cost (principal balance of the former mortgage loan plus costs of obtaining
title and possession), or estimated fair value less estimated costs to sell.
During the holding period, foreclosed real estate is periodically appraised, and
the carrying value is adjusted, if necessary, if the estimated fair value is
less than the carrying value.
Expenses and revenues related to holding foreclosed assets are reported in
the results of operations as incurred.
INCOME TAXES
The Bank records income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities
are computed based on the difference between the financial statement and
income tax bases of assets and liabilities using the enacted marginal tax
rate. Deferred income tax expense or credits are based on the changes in
the asset or liability from period to period.
EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of
common shares and common stock equivalents outstanding during the year using the
treasury stock method.
On January 18, 1995, the Board of Directors declared a 3 for 2 stock split
with an effective date of February 1, 1995. Prior years' consolidated financial
statements have been adjusted to reflect the split.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT
RISK
In the normal course of business, to meet the financing needs of its
customers, the Bank is a party to financial instruments with off-balance sheet
risk. As discussed in Note 9, these financial instruments include firm
commitments to grant loans that involve, to varying degrees, elements of credit
and interest rate risk in excess of the amounts recognized in the consolidated
balance sheets. The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
grant loans is represented by the contractual amount of these instruments. The
Bank uses the same credit policies in making such commitments as it does for
on-balance sheet instruments.
Commitments to grant loans are binding agreements to lend to a customer as
long as there is no violation of any condition in the contract. The Bank has
established internal lending limits applicable to a single borrower or a related
group of borrowers to minimize risk and control exposure by obligor, industry,
loan type and other credit concentrations. The Bank has not experienced any
significant losses on open commitments.
RECLASSIFICATIONS
Certain amounts in the prior years' consolidated financial statements have
been reclassified to be consistent with the current year's
presentation.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Bank in estimating
fair values of financial instruments as disclosed herein:
CASH AND CASH EQUIVALENTS - The carrying amounts of cash and short-term
instruments approximate their fair value.
HELD TO MATURITY AND AVAILABLE FOR SALE SECURITIES - Fair values for
securities are based on quoted market prices.
FEDERAL HOME LOAN BANK STOCK - Fair value is equal to carrying value since
the stock is redeemable at cost.
LOANS - For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying values.
Fair values for certain mortgage loans (for example, one-to-four family
residential), credit card loans, and other consumer loans are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair values for commercial real estate and commercial loans are estimated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality.
DEPOSIT LIABILITIES - The fair values disclosed for demand deposits and
variable rate savings accounts are, by definition, equal to the amount payable
on demand at the reporting date (that is, their carrying amounts). Fair values
for fixed rate deposits are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on similar deposits to a
schedule of aggregated expected monthly maturities.
SHORT-TERM BORROWINGS - The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings maturing
within 90 days approximate their fair values. Fair values of other short-term
borrowings are estimated using discounted cash flow analyses based on the Bank's
current incremental borrowing rates for similar types of borrowing arrangements.
LONG-TERM BORROWINGS - The fair values of the Bank's long-term debt are
estimated using discounted cash flow analyses based on the Bank's current
incremental borrowing rates for similar types of borrowing arrangements.
ACCRUED INTEREST - The carrying amounts of accrued interest approximate
their fair values.
OFF-BALANCE SHEET INSTRUMENTS - Fair values for off-balance sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing.
RECENT PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, which is to become effective for fiscal
years beginning after December 15, 1995. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be 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. The statement also requires that certain long-lived assets and
identifiable intangibles to be disposed of be reported at the lower of the
carrying amount or fair value less cost to sell. Management anticipates that
the application of the new statement would not have a significant impact on
the results of operations or financial condition in the year it is adopted.
In May 1995, the FASB issued SFAS No. 122, Accounting for Mortgage
Servicing Rights, which is to become effective for fiscal years beginning after
December 15, 1995. SFAS No. 122 requires that a mortgage banking enterprise
recognize as separate assets, rights to service mortgage loans for others
regardless of the manner in which the servicing rights are acquired. In
addition, capitalized mortgage servicing rights are required to be assessed for
impairment based on the fair value of those rights. Management elected to adopt
the provisions as of October 1, 1995 and retroactively applied the provisions of
this statement to January 1, 1995. The adoption did not have a significant
impact on the Bank's reported results of operations or financial condition.
(2) CAPITAL
Banking regulators have classified and defined bank capital into the
following components: (1) Tier I capital, which includes tangible stockholders'
equity for common stock and certain perpetual preferred stock, and (2) Tier II
capital, which includes a portion of the allowance for possible loan losses,
certain qualifying long-term debt and preferred stock which does not qualify for
Tier I capital. In addition, they have implemented risk-based capital
guidelines that require a bank to maintain certain minimum capital as a percent
of such bank's assets and certain off-balance sheet items adjusted for
predefined credit risk factors (risk-adjusted assets). As of December 31, 1995,
the regulatory minimum Tier I and combined Tier I and II capital ratios are 4.0%
and 8.0%, respectively, of risk-based assets. At December 31, 1995, the Bank's
Tier I and combined Tier I and II risk-based capital ratios were 11.4% and
12.7%, respectively.
In addition to the risk-based guidelines discussed above, the banking
regulators require the Bank maintain a minimum leverage capital ratio (Tier I
capital as a percent of tangible assets) of 4.0%. As of December 31, 1995, the
Bank has a leverage capital ratio of 6.6%.
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) SECURITIES
The amortized cost and estimated market values of securities are as follows:
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
Mortgage-backed securities $77,565,687 $ -- $ 857,478 $76,708,209
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SECURITIES AVAILABLE FOR SALE:
US Treasury and Agency bonds and notes $40,574,759 $ 101,424 $ -- $40,676,183
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
December 31, 1994
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
Mortgage-backed securities $100,252,866 $ -- $7,404,352 $ 92,848,514
------------ ----------- ---------- ------------
------------ ----------- ---------- ------------
SECURITIES AVAILABLE FOR SALE:
Corporate bonds and notes $ 5,930,658 $ -- $ 5,299 $ 5,925,359
------------ ----------- ---------- -----------
------------ ----------- ---------- -----------
</TABLE>
The amortized cost and market value of debt securities at December 31, 1995
and December 31, 1994, by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers have the
right to prepay obligations with or without call or prepayment penalties.
Certain securities classified as available for sale have call provisions. The
call dates on all these securities are within one year, as such they are
classified in the one year or less category in 1995 rather than the contractual
maturity date.
<TABLE>
<CAPTION>
SECURITIES HELD TO MATURITY:
Amortized Estimated Percent
Cost Market Value of Total
December 31, 1995-- ------------------------------------------
<S> <C> <C> <C>
Due in one year or less $ -- $ -- --
Due after one year through five years 56,206,391 55,815,979 72.46%
Due after five years through ten years 21,359,296 20,892,230 27.54%
Due after ten years -- -- --
----------- ----------- -----------
$77,565,687 $76,708,209 100.00%
----------- ----------- -----------
----------- ----------- -----------
<CAPTION>
SECURITIES AVAILABLE FOR SALE:
Amortized Estimated Percent
Cost Market Value of Total
December 31, 1995-- ------------------------------------------
<S> <C> <C> <C>
Due in one year or less $40,574,759 $40,676,183 100.00%
Due after one year through five years -- -- --
Due after five years through ten years -- -- --
Due after ten years -- -- --
----------- ----------- -----------
$40,574,759 $40,676,183 100.00%
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Proceeds from the maturity and sales of investments during 1995, 1994 and
1993 were $64,063,812, $46,628,752 and $180,358,906, respectively. Gross gains
of $363,017, $215,126 and $3,994,808 and gross losses of $272,024, $21,549 and
$42,748, respectively, were realized on the sales.
At December 31, 1995, the Bank had no investments in obligations of states,
counties or municipalities which exceeded 10% of stockholders' equity.
22
<PAGE>
The Bank transferred and sold approximately $9,250,000 of formerly held to
maturity securities which resulted in a corresponding net loss of approximately
$171,000. The transfer was made pursuant to the issuance of "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities" which allowed a one-time reassessment of the
appropriateness of the classification of all securities without calling into
question the Bank's classification of its other securities.
The FASB issued Statement of Financial Accounting Standards No. 119 (SFAS
No. 119), Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments, which is effective for fiscal years ending after December
15, 1994. SFAS No. 119 requires certain disclosures about derivative financial
instruments including futures, forward swap and option contracts and other
financial instruments with similar characteristics. As of December 31, 1995,
the Bank had no financial instruments requiring disclosure under SFAS No. 119.
(4) LOANS
A summary of the balances of loans follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------
<S> <C> <C>
Mortgage loans on real estate
Residential, owner-occupied, one to four family and condos $101,817,810 $ 72,216,952
Residential, nonowner-occupied, one to four family and condos 10,667,757 11,371,794
Multi-family units five or more 34,632,581 34,956,394
Retail/mixed-use properties 30,311,277 26,025,089
Office/industrial space 10,638,889 6,809,092
Other loans 3,528,515 3,687,546
------------ -------------
191,596,829 155,066,867
Less--Deferred fees and income 93,654 290,061
------------ -------------
Total mortgage loans on real estate 191,503,175 154,776,806
------------ -------------
Commercial loans 16,857,492 8,423,229
------------ -------------
Other loans, personal installment 1,767,627 1,592,808
Lines of credit 746,746 831,054
------------ -------------
2,514,373 2,423,862
Less--Unearned discount 6,320 12,075
------------ -------------
Total other loans 2,508,053 2,411,787
------------ -------------
Total loans 210,868,720 165,611,822
Less--Allowance for possible loan losses 2,541,997 2,241,286
------------ -------------
Loans, net $208,326,723 $163,370,536
------------ -------------
------------ -------------
</TABLE>
An analysis of the allowance for possible loan losses follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $2,241,286 $2,480,881 $3,056,336
Provision for possible loan losses 300,000 135,000 2,080,000
Recoveries 340,390 722,440 774,042
---------- ---------- ----------
2,881,676 3,338,321 5,910,378
Loans charged-off (339,679) (1,097,035) (3,429,497)
---------- ---------- ----------
Balance at end of year $2,541,997 $2,241,286 $2,480,881
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
In addition to the loan portfolio noted above, the Bank services
approximately $16,370,067 of loans sold without recourse to investors in the
secondary mortgage market and other financial institutions. During the second
quarter of 1995 the Bank sold its servicing rights on certain residential
mortgage loans with a gross outstanding balance of $69,113,347. From this sale
the Bank received gross proceeds of $898,473. The related pretax gain of
$763,806 is reflected in the current year's consolidated statement of
operations.
The Bank operates primarily in the Greater Boston area, and the performance
of its loan portfolio is dependent, to a large degree, on the condition of the
local real estate market. Uncertainty exists as to the ultimate realization in
full of certain loans, and other real estate owned as a result of current
economic conditions in the New England region. Based on management's assessment
of the condition of the Massachusetts real estate market at year end and
prevailing economic conditions, management believes that the allowance for loan
losses as
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) LOANS (continued)
of December 31, 1995 is adequate to absorb the current estimate of future losses
in the loan portfolio. However, economic deterioration in future periods could
result in the Bank experiencing increased levels of nonperforming assets and
charge-offs, additional provisions for loan losses and reduction in net interest
income.
At December 31, 1995, real estate mortgage loans were pledged to secure
Federal Home Loan Bank advances, as further discussed in Note 7.
As of December 31, 1995, the Bank's impaired loans and related valuation
allowance (which is included in the allowance for loan losses) calculated under
SFAS No. 114 were as follows:
Impaired Valuation
Loans Allowance
-------------------------
Valuation allowance required $ -- $ --
No valuation allowance required 500,766
--------- ---------
Total impaired loans $ 500,766 $ --
--------- ---------
--------- ---------
The recorded investment in impaired loans for which no allowance is needed
is net of $110,608 of previous direct charge-offs and applications of cash
interest payments against the loan balances as of December 31, 1995. The
average recorded investment in impaired loans for the year ended December 31,
1995 was $760,750. Interest payments received on impaired loans are recorded as
interest income unless collection of the remaining recorded investment is
doubtful at which time payments received are recorded as a reduction in
principal.
(5) BANKING PREMISES AND EQUIPMENT
A summary of the cost and accumulated depreciation and amortization of
banking premises and equipment and their estimated useful lives follows:
Estimnated
1995 1994 Useful Lives
-----------------------------------------
Land and building $1,727,200 $1,817,867 25 years
Leasehold improvements 4,170,918 3,409,831 10-25 years
Furniture and equipment 3,433,923 2,760,136 2-10 years
---------- ---------- -----------
9,332,041 7,987,834
Less--Accumulated depreciation
and amortization 3,757,085 3,249,596
---------- ----------
$5,574,956 $4,738,238
---------- ----------
---------- ----------
Total depreciation and amortization for the years ended December 31, 1995,
1994 and 1993 amounted to $507,489, $430,161 and $402,207, respectively.
(6) DEPOSITS
A summary of deposit balances, by type, is as follows:
1995 1994
----------------------------
NOW and demand deposits $ 22,011,361 $ 18,394,371
Money market deposits 33,819,928 11,831,038
Other savings 46,038,261 64,675,486
------------ ------------
Total non-certificate accounts 101,869,550 94,900,895
Term certificate accounts 180,917,699 161,438,896
------------ ------------
Total deposits $282,787,249 $256,339,791
------------ ------------
------------ ------------
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The aggregate amounts of term certificates of deposits of $100,000 or more
at December 31, 1995 and 1994 are $63,802,166 and $24,619,451, respectively.
A summary of term certificate accounts by maturity as of December 31, 1995
and 1994 is as follows:
1995 1994
--------------------------------------------------------
Weighted Weighted
Amount Average Rate Amount Average Rate
--------------------------------------------------------
Within one year $111,842,814 5.68% $104,135,730 5.07%
One to three years 51,986,914 5.85% 41,479,505 5.20%
Over three years 17,087,971 6.67% 15,823,661 5.72%
------------ ----- ------------ -----
$180,917,699 5.83% $161,438,896 5.17%
------------ ----- ------------ -----
------------ ----- ------------ -----
(7) FEDERAL HOME LOAN BANK ADVANCES (FHLB)
Federal Home Loan Bank advances consist of the following at December 31,
1995 and 1994:
Maturity Date Interest Rate 1995 1994
- -------------------------------------------------------------------------------
June 12, 1995 6.46% $ -- $1,200,000
June 21, 1995 6.35% -- 1,500,000
October 3, 1995 6.22% -- 2,000,000
January 2, 1996 5.85% 3,000,000 --
January 16, 1996 6.60% 4,300,000 4,300,000
February 16, 1996 5.80% 5,000,000 --
July 12, 1996 5.73% 4,000,000 --
October 13, 1998 5.90% 5,000,000 --
November 23, 1998 5.76% 10,000,000 --
October 10, 2000 6.09% 7,668,000 --
----------- ----------
Total advances $38,968,000 $9,000,000
----------- ----------
----------- ----------
The interest rates charged on advances maturing in 1995 and 1996 are
primarily fixed but also include floating rate advances indexed to prime. The
FHLB advances are collateralized by a pledge of the Bank's portfolio of
unencumbered securities and mortgages and by a lien on the Bank's holdings of
FHLB stock. The Bank may borrow up to 30% of its total assets but not more than
20 times its capital stock holdings in the FHLB for any sound business purpose
for which the Bank has legal authority. Borrowings authorized totaled
$43,968,000 at December 31, 1995.
(8) INCOME TAXES
Allocation of federal and state income taxes between current and deferred
portions is as follows:
1995 1994 1993
---------------------------------------
Current tax provision--
Federal $1,371,186 $ 822,048 $1,576,009
State 413,321 232,437 54,861
---------- ---------- ----------
1,784,507 1,054,485 1,630,870
---------- ---------- ----------
---------- ---------- ----------
Deferred tax provision (benefit)--
Federal (108,533) (38,446) (436,229)
State (29,760) (13,708) 3,521
---------- ---------- ----------
(138,293) (52,154) (432,708)
---------- ---------- ----------
$1,646,214 $1,002,331 $1,198,162
---------- ---------- ----------
---------- ---------- ----------
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) INCOME TAXES (CONTINUED)
The reasons for the differences between the effective tax rate and the
corporate statutory federal income tax rate are summarized as follows:
1995 1994 1993
----------------------------------
Statutory rate 34.0% 34.0% 34.0%
Increase (decrease) resulting from--
State taxes, net of federal tax benefit 6.0 5.9 0.9
Reduction in valuation allowance -- (7.0) (6.2)
Rehabilitation and low income housing
tax credit (0.9) (1.2) (0.8)
Dividend received deduction (0.4) (0.1) (0.2)
Other (1.0) 1.1 0.3
----- ----- -----
Effective tax rate 37.7% 32.7% 28.0%
----- ----- -----
----- ----- -----
As of December 31, 1995 and 1994, the consolidated balance sheets include
net deferred tax assets of $383,653 and $245,360, respectively. The tax-
affected components of the prepaid income taxes at December 31, 1995 and 1994
are as follows:
1995 1994
----------------------
Loan allowances $182,711 $140,340
Loan fees 8,314 11,714
State taxes, net of federal benefit 83,109 62,868
Other, net 109,519 30,438
-------- --------
Net deferred tax assets $383,653 $245,360
-------- --------
-------- --------
(9) COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Bank presently occupies the premises at 731 Hancock Street, Quincy,
Massachusetts, under a lease expiring in 2002, with three, five-year renewal
options, and the premises at 101 Federal Street, Boston, Massachusetts, under a
lease expiring in 1999, with two, five-year renewal options. In 1995 the Bank
executed a lease on the location of its newest branch office at 397 Washington
Street, Stoughton, Massachusetts which expires in 2005 with three, five-year
renewal options. Future minimum rental commitments under these leases are as
follows:
1996 $ 244,385
1997 248,113
1998 257,423
1999 258,660
2000 258,660
Thereafter 3,490,631
----------
$4,757,872
----------
----------
Net rental expenses for the years ended December 31, 1995, 1994 and 1993
were $211,665, $176,549 and $145,245, respectively.
LOAN AND SECURITY COMMITMENTS
In the normal course of business, there are outstanding commitments that
are not reflected in the accompanying consolidated financial statements. Firm
commitments to grant loans amounted to $15,367,512 and $4,868,000 at
December 31, 1995 and 1994, respectively. Also, amounts committed under
existing lines of credit totaled $4,581,535 at December 31, 1995.
EMPLOYMENT AND TERMINATION AGREEMENTS
The Bank has entered into a five year Employment Agreement with its Chief
Executive Officer providing for specified minimum annual compensation and the
continuation of benefits currently received. The contract is automatically
extended for an additional year on the anniversary date of the contract. In
addition, the Bank has entered into a Special Termination Agreement with its
Chief Executive Officer which provides for a lump-sum severance payment within a
three year period following a change in control, as defined in the agreement.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) LITIGATION
The Bank is a defendant in various legal actions. In the opinion of the
Bank's legal counsel, the resolution of these matters is not expected to have a
material effect on the consolidated financial position or results of operations
of the Bank.
(11) STOCKHOLDERS' EQUITY
The Bank may not declare or pay cash dividends on its shares of common
stock if the effect thereof would cause its stockholders' equity to be reduced
below applicable capital maintenance requirements or if such declaration and
payments would otherwise violate regulatory requirements (see Note 2).
The Bank maintains a Stock Purchase Plan, the purpose of which is to
provide an additional source of capital. Under the terms of the plan, 300,000
shares of authorized common stock are available for purchase of which 93,677
shares remain unissued. The purchase price will be the closing bid price of the
common stock on the business day prior to the purchase. In 1995, 43,240 shares
of common stock were purchased by eligible plan participants under the plan for
total proceeds to the Bank of $489,341.
In 1995, the Bank began an Automatic Dividend Reinvestment and Common Stock
Purchase Plan for the benefit of all eligible stockholders of record on November
1, 1995. The plan permits eligible stockholders to have their dividends
reinvested automatically into additional newly issued shares of common stock of
the Bank as the dividends are paid. In addition, the plan allows optional cash
payments to be made which permits stockholders to purchase additional shares on
a monthly basis. In 1995, 1,254 shares of common stock were purchased by
eligible stockholders under the plan for total proceeds to the Bank of $21,632.
(12) EMPLOYEE BENEFIT PLANS
During 1989, the Board of Directors voted to establish an Employee Stock
Ownership Plan (ESOP), which is a qualified stock bonus plan under Internal
Revenue Code Section 401(a). Employees reaching the age of 21 and having
completed 1,000 hours of service in one consecutive twelve-month period
automatically become participants in the ESOP. Participants become fully vested
upon completion of three years of service. During 1995, 1994 and 1993, the ESOP
purchased 20,948, 20,961 and 39,390 shares, respectively, of the Bank's common
stock at an aggregate purchase price of $241,480, $195,636 and $198,335
respectively, in the open market.
In 1995, 1994 and 1993, the Bank made contributions to the ESOP totaling
$183,800, $200,914 and $195,875, respectively, which are included in salaries
and employee benefits expense. Dividends on unallocated shares of the Bank's
stock held by the ESOP are accumulated within the plan.
The Bank also maintains a Non-Qualified Executive Retirement Plan which is
an unfunded non-qualified plan which provides deferred compensation to a select
group of management whose retirement benefits in the Employer's tax qualified
retirement plans are restricted by statute. During 1995 and 1994 the Bank
expensed $30,944 and $41,748, respectively, related to this plan.
In 1992, the Bank adopted a Profit Sharing Plan as defined in the Internal
Revenue Code Section 401(k). All employees who complete twelve consecutive
months of employment with the Bank are eligible to participate in the plan. In
1995, 1994 and 1993, the Bank matched employees' voluntary contributions on a
dollar-for-dollar basis up to an additional 3% of total compensation. The plan
is administered by the Savings Bank Employees Retirement Association. For the
plan years ended December 31, 1995, 1994 and 1993 the Bank made contributions of
$49,444, $43,394 and $44,624, respectively, to the plan.
The Bank maintains a Short-term Incentive Bonus Plan (the Plan) whereby
certain employees are eligible to receive a bonus if the Bank meets or exceeds
certain base standards of profitability, and certain strategic goals are
achieved. The structure of the Plan is reviewed on an annual basis by the Board
of Directors of the Bank. The Bank expensed $185,504 in 1995, $124,125 in 1994
and $136,900 in 1993 related to this plan.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13) STOCK OPTION PLAN
In 1986, 1989 and 1995, the Board of Directors adopted, and the
stockholders subsequently approved, stock option plans for the benefit of the
Bank's key employees. Under the 1986 Stock Option Plan, 120,000 shares of common
stock have been reserved for issuance pursuant to options granted under the
plan. Under the 1989 Stock Option Plan, 52,500 shares of common stock have been
reserved for issuance pursuant to options granted under the plan. Under the 1995
Premium Incentive Stock Option Plan, 70,000 shares of common stock have been
reserved for issuance pursuant to options granted under the plan. Stock options
may be granted by the Board of Directors under the plan at an exercise price
equal to, or in excess of, the fair market value of a share of common stock of
the Bank on the date the option is granted.
The following is a summary of the 1986 Stock Option Plan, the 1989 Stock
Option Plan and the 1995 Premium Incentive Stock Option Plan activity:
Number
Price Range of Shares
----------------------------
Outstanding at December 31, 1993 $1.67 - $8.83 142,800
Granted 11.00 22,200
Exercised 1.67 (76,200)
Expired 4.00 (1,500)
-------------- -------
Outstanding at December 31, 1994 1.67 - 11.00 87,300
Granted 11.75 - 16.50 42,000
Exercised 1.67 - 4.00 (41,200)
Expired 11.75 (3,750)
-------------- -------
Outstanding at December 31, 1995 $1.67 - $16.50 84,350
-------------- -------
At December 31, 1995, 33,250 shares were available for future grant under
the 1995 Premium Incentive Stock Option Plan. The options granted are
exercisable on the following dates:
Option Options Exercisable
Price Granted Beginning Expiration Date
----------------------------------------------------------
1986 Plan $ 1.67 4,400 January 1994 January 14, 2002
8.83 1,200 September 1995 September 14, 2003
11.75 1,500 March 1997 March 14, 2003
1989 Plan 8.83 16,800 January 1995 January 14, 2003
11.00 19,950 October 1996 October 11, 2004
11.75 3,750 March 1997 March 14, 2005
1995 Plan 13.00 14,750 May 1998 May 10, 2005
16.50 22,000 December 1997 December 12, 2005
(14) RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has granted loans to
officers and directors and their affiliates amounting to $1,088,274 at
December 31, 1995. All such transactions are on substantially the same terms
as those prevailing at the same time for individuals not affiliated with the
Bank and such loans do not involve more than the normal risk of
collectibility. During the year ended December 31, 1995, total principal
additions were $192,900, and total principal payments were $1,195,276. At
December 31, 1994, outstanding loans to officers and directors and their
affiliates amounted to $2,090,650. For 1994, total principal additions were
$594,200, and total principal payments were $178,700.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
--------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and due from banks, interest-bearing
deposits with banks, and federal funds sold $ 3,213,259 $ 3,213,259 $ 3,780,957 $ 3,780,957
Short-term investments 4,860,000 4,860,000 3,590,000 3,590,000
Securities held to maturity 77,565,687 76,708,209 100,252,866 92,848,514
Securities available for sale 40,676,183 40,676,183 5,925,359 5,925,359
Federal Home Loan Bank stock 2,198,400 2,198,400 1,813,700 1,813,700
Loans receivable 208,326,723 207,283,591 163,370,536 163,916,672
Accrued interest receivable 2,128,536 2,128,536 1,485,077 1,485,077
FINANCIAL LIABILITIES:
Deposit liabilities $282,787,249 $283,363,249 $256,339,791 $255,218,324
Federal Home Loan Bank advances 38,968,000 39,327,596 9,000,000 9,000,000
</TABLE>
OFF-BALANCE SHEET ASSETS:
A summary of the notional amounts of the Bank's financial instruments with
off-balance sheet risk at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------------------------------------
Notional Fair Notional Fair
Amount Value Amount Value
--------------------------------------------------------
<S> <C> <C> <C> <C>
Commitments to grant loans $ 15,367,512 $ 15,367,512 $ 4,868,000 $ 4,868,000
Existing lines of credit 4,581,535 4,581,535 4,279,000 4,279,000
</TABLE>
(16) QUARTERLY DATA (UNAUDITED)
Summaries of consolidated operating results on a quarterly basis for the
years ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Fourth Third Second First
1995 Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest and dividend income $6,683,659 $6,073,597 $5,780,344 $5,411,401
Interest expense 3,892,744 3,569,358 3,368,318 2,889,348
---------- ---------- ---------- ----------
Net interest income 2,790,915 2,504,239 2,412,026 2,522,053
Provision for possible loan losses -- 48,334 100,000 151,666
---------- ---------- ---------- ----------
Net interest income after
provision for possible loan losses 2,790,915 2,455,905 2,312,026 2,370,387
Gain (loss) on sale of loans 2,760 (179) (55,192) --
Noninterest income 144,153 122,497 159,270 153,304
Noninterest expense 1,694,394 1,585,292 1,680,390 1,591,626
---------- ---------- ---------- ----------
Core earnings 1,243,434 992,931 735,714 932,065
Net gain (loss) on sale of securities (219,664) 191,395 (13,750) 133,012
Gain on sale of loan servicing -- -- 763,806 --
Net gain (loss) on sale of OREO 87,198 -- (119,965) (10,105)
Gain (loss) on sale of fixed assets (54,574) -- -- 4,748
OREO write-downs and expense 105,325 48,367 66,920 80,184
Provision for income taxes 390,998 427,181 486,221 341,814
---------- ---------- ---------- ----------
Net income $ 560,071 $ 708,778 $ 812,664 $ 637,722
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per common share $ 0.35 $ 0.46 $ 0.53 $ 0.42
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) QUARTERLY DATA (CONTINUED)
<TABLE>
<CAPTION>
Fourth Third Second First
1994 Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest and dividend income $5,084,751 $4,810,976 $4,513,688 $4,318,682
Interest expense 2,669,661 2,451,230 2,207,674 2,169,430
---------- ---------- ---------- ----------
Net interest income 2,415,090 2,359,746 2,306,014 2,149,252
Provision for possible loan losses -- -- -- 135,000
---------- ---------- ---------- ----------
Net interest income after
provision for possible loan losses 2,415,090 2,359,746 2,306,014 2,014,252
Gain (loss) on sale of loans 47 (4,684) (6,244) 9,486
Noninterest income 134,816 124,317 148,264 141,524
Noninterest expense 1,668,651 1,529,366 1,528,572 1,482,424
---------- ---------- ---------- ----------
Core earnings 881,302 950,013 919,462 682,838
Net gain (loss) on sale of securities (18,260) -- 16,605 195,232
Net gain (loss) on sale of OREO 23,635 1,595 (80,998) (114,409)
OREO write-downs and expense 76,529 78,819 75,828 155,882
Provision for income taxes 274,763 256,748 264,942 205,878
---------- ---------- ---------- ----------
Net income $ 535,385 $ 616,041 $ 514,299 $ 401,901
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per common share $ 0.36 $ 0.43 $ 0.35 $ 0.27
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
MARKET PRICES AND STOCK DIVIDENDS
The Hibernia Savings Bank common stock was initially issued and sold in
September 1986 as part of its stock conversion at a split adjusted price of
$7.67 per share. The common stock of the Bank is quoted on the National
Association of Securities Dealers Automated Quotation (NASDAQ) National Market
System under the symbol "HSBK".
The stock price and other trade information appear in the Wall Street
Journal under NASDAQ over-the-counter markets for National Market Issues under
"HiberniaSvg". The following table sets forth high and low daily closing prices
for the common stock of the Bank for the periods indicated.
Sales Price Cash
---------------------- Dividends
Quarter Ended High Low Paid
- -------------------------------------------------------------------------------
December 31, 1995 $18 1/4 $15 3/4 $0.06
September 30, 1995 17 1/8 14 1/2 0.06
June 30, 1995 14 3/4 12 1/2 0.05
March 31, 1995 13 1/2 10 1/8 0.05
- -------------------------------------------------------------------------------
December 31, 1994 $11 5/8 $10 $ --
September 30, 1994 12 5/8 11 1/2 --
June 30, 1994 13 1/8 10 3/8 --
March 31, 1994 11 5/8 9 --
30
<PAGE>
OFFICERS AND DIRECTORS
OFFICERS OF THE BANK
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MARK A. OSBORNE DENNIS P. MYERS THOMASINE F. KENNEDY PATRICIA HANLON
CHAIRMAN OF THE BOARD AND SENIOR VICE PRESIDENT AND COMPTROLLER ASSISTANT VICE PRESIDENT
CHIEF EXECUTIVE OFFICER SENIOR LOAN OFFICER
EDWIN J. BECK, JR. DONALD J. MCLAUGHLIN
RICHARD S. STRACZYNSKI ROBERT D. MCCARTHY ASSISTANT VICE PRESIDENT ASSISTANT VICE PRESIDENT
PRESIDENT AND VICE PRESIDENT
CHIEF OPERATING OFFICER BARRY E. BURDEN ROBERT S. PYER, JR.
ROGER L. MEADE ASSISTANT VICE PRESIDENT ASSISTANT VICE PRESIDENT
WAYNE F. BLAISDELL VICE PRESIDENT
SENIOR VICE PRESIDENT ELIZABETH M. CASEY JANE M. HANLON-COOK
BRANCH ADMINISTRATION & JOSEPH F. RICHARDI ASSISTANT VICE PRESIDENT LOAN OFFICER
OPERATIONS OFFICER VICE PRESIDENT
ARMAND A. FERNANDEZ DOUGLAS C. PURDY
GERARD F. LINSKEY MICHAEL P. DONOHOE ASSISTANT VICE PRESIDENT CLERK OF THE CORPORATION
SENIOR VICE PRESIDENT AND TREASURER
CHIEF FINANCIAL OFFICER
BOARD OF DIRECTORS
MARTHA M. CAMPBELL THOMAS P. MOORE, JR. MARK A. OSBORNE MICHAEL T. PUTZIGER
ATTORNEY-AT-LAW SENIOR VICE PRESIDENT CHAIRMAN OF THE BOARD AND ATTORNEY-AT-LAW
STATE STREET RESEARCH AND CHIEF EXECUTIVE OFFICER ROCHE, CARENS & DEGIACOMO
THOMAS J. CARENS MANAGEMENT COMPANY THE HIBERNIA SAVINGS BANK
OF COUNSEL RICHARD P. QUINCY
ROCHE, CARENS & DEGIACOMO RICHARD J. MURNEY PAUL D. OSBORNE PRESIDENT
CERTIFIED PUBLIC ACCOUNTANT TREASURER QUINCY & CO.
BERNARD J. DWYER OSBORNE OFFICE FURNITURE
ATTORNEY-AT-LAW JOHN V. MURPHY CHARLES R. SIMPSON, JR.
EXECUTIVE VICE PRESIDENT & DOUGLAS C. PURDY FORMER CHAIRMAN AND CEO
PETER L. MAGUIRE CHIEF OPERATING OFFICER ATTORNEY-AT-LAW QUINCY SAVINGS BANK
PRESIDENT DAVID L. BABSON & CO., INC. SERAFINI, PURDY, DINARDO &
MANAGEMENT INFORMATION WELLS
SERVICES WILLIAM T. NOVELLINE
PRESIDENT
ABBOT FINANCIAL MANAGEMENT
</TABLE>
<PAGE>
STOCKHOLDER INFORMATION
<TABLE>
<S> <C> <C> <C>
ADMINISTRATIVE OFFICES LOAN CENTERS FORM F-2 REGISTRATION STOCKHOLDER RELATIONS
The Hibernia Savings Bank 730 Hancock Street AND OTHER REPORTS To receive further informa-
730 Hancock Street Quincy, MA 02170 The Bank has filed an tion about The Hibernia
Quincy, MA 02170 617-479-5001 Annual Report Form F-2 Savings Bank please contact
617-479-5001 with the Federal Deposit
731 Hancock Street Insurance Corporation Gerard F. Linskey
MAIN OFFICE Quincy, MA 02170 (FDIC). Copies of the Form Senior Vice President and
731 Hancock Street 617-479-2265 F-2 without exhibits, our Chief Financial Officer
Quincy, MA 02170 Annual Report and Quarterly The Hibernia Savings Bank
617-479-2265 51 Commercial Street Reports may be obtained 730 Hancock Street
Braintree, MA 02184 without charge upon written Quincy, MA 02170
BRANCH OFFICES 617-356-8246 request to: 617-479-5001
101 Federal Street
Boston, MA 02110 TRANSFER AGENT & REGISTRAR Attention: Gerard F. Linskey ANNUAL MEETING
617-345-0441 Chemical Mellon Senior Vice President and The annual meeting of the
Shareholder Services LLC Chief Financial Officer stockholders of the Bank
51 Commercial Street 85 Challenger Road The Hibernia Savings Bank will be held at 10:00 a.m.
Braintree, MA 02184 Overpeck Centre 730 Hancock Street Monday, April 29, 1996, at
617-848-5560 Ridgefield Park, NJ 07660 Quincy, MA 02170 the Sheraton Tara Hotel,
1-800-288-9541 37 Forbes Road, Braintree,
1150 Washington Street TRADING OF COMMON STOCK Massachusetts.
Weymouth, MA 02189 INDEPENDENT PUBLIC The Hibernia Savings Bank
617-331-0893 ACCOUNTANTS Common Stock is traded
Arthur Andersen LLP over-the-counter on the
274 Main Street One International Place NASDAQ National Market
Hingham, MA 02043 100 Oliver Street System under the symbol
617-740-4830 Boston, MA 02110 HSBK
617-330-4000
397 Washington Street
Stoughton, MA 02072 LEGAL COUNSEL
617-297-3550 Roche, Carens & DeGiacomo
One Post Office Square
Quincy High School Boston, MA 02109
52 Coddington Street 617-451-9300
Quincy, MA 02169
617-472-2404
</TABLE>
<PAGE>
THE HIBERNIA SAVINGS BANK
- ----------------------------------Cead Mile Failte------------------------------
731 Hancock St., Quincy * 101 Federal St., Boston * 51 Commercial St., Braintree
* 274 Main St., Hingham * 1150 Washington St., Weymouth * 397 Washington St.,
Stoughton
Educational Training Facility: Quincy High School, 52 Coddington St., Quincy
Member FDIC/DIF * Equal Housing Lender