UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended June 30, 1999 or
( ) Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from
No. 0-23863
(Commission File Number)
PEOPLES FINANCIAL SERVICES CORP.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-2931852
(State of Incorporation) (IRS Employer ID Number)
50 Main Street
Hallstead, PA 18822
(Address of Principal Executive Offices) (Zip Code)
(570) 879-2175
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months or
for such shorter period that the registrant was required to file
such reports, and (2) has been subject to such filing
requirements for the past 90 days. Yes X NO____
Number of shares outstanding as of June 30, 1999
COMMON STOCK ($2 Par Value) 2,171,966
(Title of Class) (Outstanding Shares)
<PAGE>
PEOPLES FINANCIAL SERVICES CORP.
FORM 10-Q
For the Quarter Ended June 30, 1999
Contents
PART I. FINANCIAL INFORMATION. Page No.
Item 1. Financial Statements.
Consolidated Statement of Financial
Condition as of June 30, 1999
(Unaudited) and December 31, 1998. 4
Consolidated Statement of Income
(Unaudited) for the Six and Three
Month Periods Ended June 30,
1999 and 1998. 5
Consolidated Statement of Comprehensive
Income (Unaudited) for the Six and Three
Month Periods Ended June 30,
1999 and 1998. 6
Consolidated Statement of Shareholders'
Equity (Unaudited) for the Six Month
Period Ended June 30, 1999 and 1998. 7
Consolidated Statement of Cash Flows
(Unaudited) for the Six Month Period
Ended June 30, 1999 and 1998. 8
Notes to Consolidated Statements. 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 10
Item 3. Quantitative and Qualitative Disclosure
About Market Risks. 14
PART II. OTHER INFORMATION 15
Item 6. Exhibits and Reports on Form 8-K. 15
<PAGE>
PART I
Item 1
PEOPLES FINANCIAL SERVICES CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
June 30, 1999 and December 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands) June 1999 Dec 1998
<S> <C> <C>
ASSETS:
Cash Due from Banks ................................ 2,531 2,084
Interest Bearing Deposits with Other Banks ......... 4,721 2,725
Federal Funds Sold ................................. 0 0
Securities Available for Sale ...................... 92,642 93,175
Loans .............................................. 142,503 141,283
Less: Unearned Income ............................. -20 -34
Allowance for Loan Loss ............................ -1,707 -1,713
Loans, Net ......................................... 140,776 139,536
Bank Premises and Equipment, Net ................... 3,502 3,523
Accrued Interest Receivable ........................ 1,826 1,781
Other Assets ....................................... 5,165 4,378
TOTAL Assets ....................................... 251,163 247,202
LIABILITIES
Deposits, Non-Interest Bearing ..................... 25,317 24,263
Deposits, Interest Bearing ......................... 189,764 185,618
Total Deposits ..................................... 215,081 209,881
Accrued Interest Payable ........................... 657 703
Borrowed Funds ..................................... 8,286 9,032
Other Liabilities .................................. 504 541
TOTAL Liabilities .................................. 224,528 220,157
SHAREHOLDERS' EQUITY
Common Stock * ..................................... 4,455 4,455
Surplus ............................................ 4,465 4,455
Treasury Stock at Cost ............................. -905 -748
Undivided Profit ................................... 19,523 18,322
Accumulated Other Comprehensive Income ............. -903 561
TOTAL Shareholders' Equity ......................... 26,635 27,045
TOTAL LIABILITIES CAPITAL .......................... 251,163 247,202
<FN>
* Common Stock, par value $2 per share, 12,500,000 shares authorized:
2,171,966 and 2,177,576 shares issued and outstanding at June 30, 1999 and
December 31, 1998 respectively.
</FN>
</TABLE>
See notes to financial statements
<PAGE>
PEOPLES FINANCIAL SERVICES CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands, except per share data) Six Months Ended Three Months Ended
June 30 June 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans ................. 5,861 5,567 2,948 2,806
Interest Investments, Taxable .............. 1,794 1,713 902 829
Tax Exempt ...................... 733 736 359 370
Dividends ....................... 39 24 19 12
Interest on Federal Funds Sold ............. 56 34 46 33
Interest on Deposits of Other Banks ........ 0 26 1 9
TOTAL Interest Income ...................... 8,483 8,100 4,275 4,059
Interest on Deposits ....................... 3,916 3,880 1,964 1,948
Interest on Borrowed Funds ................. 197 142 81 58
Interest Expense ........................... 4,113 4,022 2,045 2,006
Net Interest Income ........................ 4,370 4,078 2,230 2,053
Provision for Loan Losses .................. 120 75 60 37
Net Interest Income,
after Loan Loss Provision .................. 4,250 4,003 2,170 2,016
OTHER INCOME:
Service Charges and Fees ................... 489 489 245 241
Gains on Security Sales .................... 63 33 57 6
Other Operating Income ..................... 73 27 42 5
TOTAL Other Income ......................... 625 549 344 252
OTHER EXPENSES:
Salaries and Benefits ...................... 1,295 1,157 652 544
Occupancy Expenses ......................... 159 157 76 78
Furniture and Equipment Expense ............ 182 210 91 106
FDIC Insurance and Assessments ............. 46 44 23 22
Professional Fees and Outside Services ..... 91 116 51 63
Computer Services and Supplies ............. 161 125 82 63
Taxes, Other Than Payroll and Income ....... 120 110 62 56
Other Operating Expenses ................... 595 565 314 266
Total Non-Interest Expense ................. 2,649 2,484 1,351 1,198
Income Before Income Taxes ................. 2,226 2,068 1,163 1,070
Provision for Income Taxes ................. 478 433 266 228
Net Income ................................. 1,748 1,635 897 832
Net Income Per Share, Basic and Diluted .80 .75
</TABLE>
See notes to financial statements
<PAGE>
PEOPLES FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands)
Six Months Ended Three Months Ended
June 30 June 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Income .............................. 1,748 1,635 897 842
Other Comp Income (loss) before tax
Unrealized holding gains/losses
on securities ........................... -2,282 232 -1,780 72
Less: reclassification Adjustment ....... -63 -27 -69 0
Other Comp Income (loss) before tax...... -2,219 205 -1,711 72
Federal Income Tax expense (benefit)..... 754 70 927 25
Other Comp Income (loss),
Net of tax(benefit) ..................... -1,465 135 -1,130 47
TOTAL Comp income ....................... 283 1,770 -233 889
</TABLE>
See notes to financial statements
<PAGE>
PEOPLES FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands)
Accumulated
Other
Common Undivided Comprehensive Treasury
Stock Surplus Profit Income Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 . 4,455 4,455 15,912 371 -549 24,644
Net Income 1998 for the six
months ended June 30, 1998 . 0 0 1,635 0 0 1,635
Cash Dividends Paid, 1998 .. 0 0 -480 0 0 -480
Treasury Stock Purchase .... 0 0 0 0 -43 -43
Change in unrealized
gain/loss on securities
available for sale,
net of deferred income taxes. 0 0 0 135 0 135
Balance,June 30, 1998 ...... 4,455 4,455 17,067 506 -592 25,891
Balance, December 31, 1998 . 4,455 4,455 18,322 562 -748 27,046
Net Income 1999 for the six 0 0 1,748 0 0 1,748
months ended June 30, 1999
Cash Dividends Paid, 1999 .. 0 0 -547 0 0 0
Treasury Stock Activity .... 0 10 0 0 -157 -694
Change in unrealized
gain/loss on securities
available for sale,
net of deferred income taxes. 0 0 0 -1,465 0 -1,465
Balance, June 30, 1999 ..... 4,455 4,465 19,523 -903 -905 26,635
</TABLE>
See notes to financial statements
<PAGE>
PEOPLES FINANCIAL SERVICES CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands)
Cash Flow 1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income .................................................... 1,748 1,635
Adjustments: ....Depreciation and amoritization ............... 310 350
Provision for Loan Losses .................... 120 75
Gain/Loss on sale of equipment ............... 0 2
Gain/loss on sale of other real estate ....... 27 2
Amortization of securities' premiums and accretion of discounts 132 52
Gains on sales of investment securities, NET .................. -63 -27
Increase in accrued interest receivable ....................... -44 6
Increase/Decrease in other assets ............................. -165 -154
Increase/Decrease in accrues interest payable ................. -46 -4
Increase/Decrease in other liabilities ........................ -37 -12
Net cash provided by operating activities ..................... 1,982 1,925
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of available for sale securities ........... 4,514 3,674
Proceeds from maturities of available for sale securities ..... 6,257 10,228
Purchase of available for sale securities ..................... -19,074 -10,460
Principal payments on mortgage-backed securities .............. 6,548 2,317
Net increase in loans ......................................... -1,597 -7,080
Proceeds from sale of premises and equipment .................. 0 1
Purchase of premises and equipment ............................ -160 -68
Proceeds from sale of other real estate ....................... 213 30
Purchase of intangible assets ................................. 0 0
Net cash used in investing activities ......................... -3,299 -1,358
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid ........................................... -547 -480
Increase in deposits .......................................... 5,200 4,990
Net Increase/Decrease in long-term borrowing .................. 0 0
Net Increase/Decrease in short-term borrowing ................. -746 -4,350
Treasury Stock Activity ....................................... -147 -43
Net cash provided by financing activities ..................... 3,760 117
Net Increase/Decrease in cash/cash equivalents ................ 2,443 684
Cash and cash equivalents, beginning of year .................. 4,809 5,549
Cash and cash equivalents,end of year ......................... 7,252 6,233
SUPPLEMENTAL DISCLOSURES OF CASH PAID
Interest Paid ................................................. 4,159 4,026
Income Taxes Paid ............................................. 478 364
Non-cash investing and financing activities
Transfers from loans to real estate through foreclosure ....... 237 306
Proceeds from sales of foreclosed real estate ................. 0 200
TOTAL Increase/Decrease in unrealized gain/loss on
securities avail for sale ..................................... 2,219 205
</TABLE>
See notes to financial statements
<PAGE>
PEOPLES FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have
been prepared pursuant to rules and regulations of the Securities
and Exchange Commission (SEC) and in compliance with generally
accepted accounting principles. Because this report is based on
an interim period, certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted. The registrant believes that the disclosures made are
adequate to make the information presented a fair representation
of the Corporation's financial status.
In the opinion of management, the accompanying
consolidated financial statements for the six-month period ended
June 30, 1999 and 1998 include all adjustments, consisting of
only normal recurring adjustments, necessary for fair
presentation of the financial condition and the results of
operations for the period. The financial performance reported for
the Corporation for the six-month period ended June 30, 1999, is
not necessarily the result to be expected for the full year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
SFAS No. 133
In June 1998, SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued. This Statement
requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. The accounting for
changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. This
Statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999, and will not be applied
retroactively to financial statements of prior periods.
Management of the Bank is in the process of evaluating the
impact, if any, this Statement will have on the Bank's
consolidated results of operations or financial position when
adopted.
ACCOUNTING FOR MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF
MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE
SFAS No. 134
The Company adopted SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise",
effective January 1, 1999. The Statement amends SFAS 65,
"Accounting for Certain Mortgage Banking Activities". Statement
65, as amended, requires that after the securitization of a
mortgage loan held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed
security as a trading security. This Statement further amends
SFAS 65 to require that after the securitization of mortgage
loans held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage-backed securities or
other retained interest based on its ability and intent to sell
or hold those investments.
This Statement conforms the subsequent accounting for
securities retained after securitization of mortgage loans by a
mortgage banking entity with the subsequent accounting for
securities retained after the securitization of other types of
assets by nonmortgage banking enterprises. This means that such
securities can be classified as held-to-maturity if they conform
to the requirements of SFAS 115. The Statement is effective for
the first fiscal quarter beginning after December 15, 1998. The
adoption of this statement had no impact on the Company's
financial position or results of operation.
3. COMMON STOCK
On September 15, 1998, the Corporation effected a
5-for-2 stock split to shareholders of record on August 15, 1998.
Earnings per share amounts and weighted average shares
outstanding have been restated to give effect to the stock split.
In connection with the stock split, the Corporation amended its
Articles of Incorporation to authorize 12,500,000 shares of $2
par value common stock.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
The following discussion and analysis of the
consolidated financial statements of the Corporation is presented
to provide insight into management's assessment of financial
results. The Corporation's only subsidiary, Peoples National Bank
of Susquehanna County (the "Bank") provides financial services to
individuals and businesses within the Bank's market area made up
of Susquehanna, Wyoming and northern Lackawanna counties in
Pennsylvania, and southern Broome County in New York. The Bank is
a member of the Federal Reserve System and subject to regulation,
supervision and examination by the Office of the Comptroller of
the Currency.
FINANCIAL CONDITION
CASH AND CASH EQUIVALENTS:
At June 30, 1999, cash, federal funds sold and deposits
with other banks totaled $7.252 million; an increase of $1.619
million compared to $5.633 million at June 30, 1998 and an
increase of $2.443 million compared to December 31, 1998.
Management believes the liquidity needs of the
Corporation are satisfied by the current balance of cash and cash
equivalents, readily available access to traditional funding
sources, and the portion of the investment and loan portfolios
that matures within one year. These sources of funds will enable
the Corporation to meet cash obligations as they come due.
Management is also aware of the possible public demand of cash
due to the concerns over the Year 2000 and has taken necessary
steps to address possible extra liquidity needs.
INVESTMENTS:
Investments totaled $92.642 million on June 30, 1999;
increasing $10.072 million as compared to June 30, 1998's total
of $82.570 million and decreasing $533 thousand compared to the
total of $93.175 million held on December 31, 1998.
The total investment portfolio is held as available for
sale. This strategy was implemented in 1995 to provide more
flexibility in using the investment portfolio for liquidity
purposes as well as providing more flexibility in selling when
market opportunities occur.
Management monitors the earnings performance and
effectiveness of the liquidity of the investment portfolio on a
monthly basis through the Asset/Liability Committee ("ALCO")
meetings. The ALCO also reviews and manages interest rate risk
for the Corporation. Through active balance sheet management and
analysis of the investment securities portfolio, the Corporation
maintains sufficient liquidity to satisfy depositor requirements
and various credit needs of its customers.
BORROWINGS:
The Bank utilizes borrowing as a source of funds for its
asset/liability management. Advances are available from the FHLB
provided certain standards related to credit worthiness have been
met. Repurchase and term agreements are also available from FHLB.
Total borrowings at June 30, 1999, were $8.286 million
as compared to $4.925 million on June 30, 1998, showing an
increase of $3.361 million and a decrease of $746 thousand
compared to the December 31, 1998 total of $9.032 million. On
November 16, 1998, the Bank entered into a term borrowing
agreement with FHLB for $5 Million. This accounts for a large
part of the increase over June of 1998.
<PAGE>
LOANS:
The Bank's loan volume has been steady through the first
six months of 1999. Increasing the loan to deposit ratio is a
goal of the Bank, but loan quality is a requisite in this effort.
Management has continued its efforts to create tighter
underwriting standards for both commercial and consumer credit.
The Bank's lending consists primarily of retail lending which
includes single family residential mortgage and other consumer
lending, and also commercial lending primarily to locally owned
small businesses.
On June 30, 1999, net loans totaled $140.776 million as
compared to $132.009 million on June 30, 1998 showing an increase
of $8.767 million in the past year. The loan to deposit ratio was
66.38% on June 30, 1999, as compared to 67.23% on June 30, 1998.
During the second quarter of 1999 net loans declined $ 2.282
million from the prior quarter end total of $143.058 million
which ended the first quarter at $3.42 million over the 1998 year
end total of $139.536 million.
DEPOSITS:
Deposits are attracted from within the Bank's primary
market area through the offering of various deposit instruments
including NOW accounts, money market accounts, savings accounts,
certificates of deposit and IRAs. Total deposits at June 30,
1999, were $215.081 million as compared to $198.582 million at
June 30, 1998. This is an increase in deposits of $16.499 million
or 8.3%. Deposits totaled $209.881 million on December 31, 1998.
Of the $5.2 million growth in 1999, $3.574 million occurred in
the second quarter. Although we are not the highest payer for
deposits in our market, our deposit growth has remained steady.
CAPITAL:
The adequacy of the Corporation's capital is reviewed on
an ongoing basis with reference to the size, composition and
quality of the Corporation's resources and regulatory guidelines.
Management seeks to maintain a level of capital sufficient to
support existing assets and anticipated asset growth, maintain
favorable access to capital markets and preserve high quality
credit ratings. As of June 30, 1999, regulatory capital to total
assets was 9.51% as compared to 9.49% on June 30, 1998.
The Corporation has complied with the standards of
capital adequacy mandated by the banking regulators. The bank
regulators have established "risk-based" capital requirements
designed to measure capital adequacy. Risk-based capital ratios
reflect the relative risks of various assets banks hold in their
portfolios. A weight category of either 0% (lowest risk asset),
20%, 50% or 100% (highest risk assets) is assigned to each asset
on the balance sheet. Capital is being maintained in compliance
with risk-based capital guidelines. The Company's Tier 1 capital
to total risk weighted assets ratio is 16.96% and the total
capital ratio to total risk weighted assets ratio is 18.17%. The
Corporation is deemed to be well-capitalized under regulatory
standards.
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY:
Liquidity measures an organization's ability to meet
cash obligations as they come due. The consolidated statement of
cash flows presented in the accompanying financial statements
included in Part I of this Form 10-Q provide analysis of the
Corporation's cash and cash equivalents. Additionally, management
considers that portion of the loan and investment portfolio that
matures within one year as part of the Corporation's liquid
assets.
The ALCO addresses the liquidity needs of the Bank to
see that sufficient funds are available to meet credit demands
and deposit withdrawals as well as to the placement of available
funds in the investment portfolio. In assessing liquidity
requirements, equal consideration is given to the current
position as well as the future outlook.
The following table sets forth the Bank's interest rate
sensitivity as of June 30, 1999.
INTEREST RATE SENSITIVITY ANALYSIS
June 30, 1999
<TABLE>
<CAPTION>
(in thousands)
Maturity or Repricing In:
3 3-6 6-12 1-5 Over 5
RATE SENSITIVE ASSETS Months Months Months Years Years
<S> <C> <C> <C> <C> <C>
Loans .................... 19,838 10,507 17,667 51,874 42,596
Securities ............... 27,174 3,101 9,602 43,267 14,220
Federal Funds Sold ....... 0 0 0 0 0
Total
Rate Sensitive Assets .... 47,012 13,608 27,269 95,141 56,816
Cummulative
Rate Sensitive Assets .... 47,012 60,620 87,889 183,030 239,846
RATE SENSITIVE LIABILITIES
Interest Bearing Checking 1,646 0 0 0 14,818
Money Market Deposits .... 27,680 1,771 0 0 8,857
Regular Savings .......... 4,537 939 23 1 28,184
CDs and IRAs ............. 18,503 15,822 29,471 35,996 1,514
Short-term Borrowings .... 2,280 0 0 0 0
Long-term Borrowings ..... 0 0 0 5,000 0
Total
Rate Sensitive Liabilities 54,646 18,532 29,494 40,997 53,373
Cummulative Rate Sensitive
Liabilities 54,646 73,178 102,672 143,669 197,042
Period Gap ............... -7,634 -4,924 -2,225 54,144 3,443
Cummulative Gap .......... -7,634 -12,558 -14,783 39,361 42,804
Cummulative RSA to RSL ... 86.03% 82.84% 85.60% 127.40% 121.72%
Cummulative Gap
to Total Assets .......... -3.04% -5.00% -5.89% 15.68% 17.05%
</TABLE>
The following assumptions have been made in the
foregoing model. Non-interest bearing categories are shown to
reprice 10% of balances in the "within 3 months" period (all
repricing within the first month) and the remaining balances in
the last period. NOW accounts and regular Savings accounts also
reprice 10% of balances in the "within 3 months" and the
remaining balances in the last period. Management can change
these rates, but such changes are infrequent and incrementally
small. History has shown a strong core deposit relationship in
these accounts and little or no run-off if rates change in these
products. Repayment for principal on mortgage backed securities
are projected by expected cash flows as evidenced by recent
history. Repayment of principal for loan categories is projected
at expected maturity (amortization) for fixed rate products and
the next repricing date for variable rate products.
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME:
Net interest income increased by $247 thousand or 6.2%
for the six-months and quarter ended June 30, 1999, as compared
to the same periods in 1998. Earning assets increased $19.345
million or 8.8% for June 30, 1999, as compared to June 30, 1998.
INTEREST INCOME:
Interest and fees on loans for the six-months and
quarter ended June 30, 1999, totaled $5.861 million, reflecting
increases of $294 thousand or 5.3% over the comparable periods in
1998. The loan portfolio grew $8.767 million from a total of
$132.009 million in June 1998 to $140.776 million in June 1999 in
comparison.
Interest on investments for the six-months and the
quarter ended June 30, 1999, totaled $2.622 million which
reflects increases of $89 thousand or 3.5% over the comparable
period in 1998. The investment portfolio has increased by $10.072
million over the June 1998 total of $82.570 million.
INTEREST EXPENSE:
Interest expense for the six-months and the quarter
ended June 30, 1999, totaled $4.113 million compared to $4.022
million in 1998, reflecting an increase of $91 thousand or 2.3%
over the comparable periods in 1998.
PROVISION FOR LOAN LOSS:
The provision for loan loss for the second quarter
ending June 30, 1999, increased by $45 thousand from the
corresponding period in 1998.
Second quarter 1999 charge-offs totaled $145,272 while
net charge-offs totaled $125,868 as compared to $ 55,318 and $
37,863 respectively for the same six months period in 1998.
Senior management utilizes detailed analysis of the loan
portfolio monthly to determine loan loss reserve adequacy. The
process considers all "problem loans" including classified,
criticized and monitored loans. Prior loan loss history and
current market trends, both nationally and locally, are taken
into consideration. A watch list of potential problem loans is
maintained and monitored monthly. This list is reviewed by the
Board of Directors on a monthly basis. The Bank has not had nor
presently has any foreign loans. In addition, the Bank does not
have any concentrations of credit. Based upon this analysis,
senior management has concluded that the allowance of loan loss
is adequate.
The Bank's loan volume continues to be strong. One of
the Bank's main goals is to increase the loan to deposit ratio
without jeopardizing loan quality. To reach its goal, management
has continued its efforts to create tighter underwriting
standards for both commercial and consumer credit. The Bank's
lending consists primarily of retail lending which includes
single family residential mortgages and other consumer lending
and commercial lending primarily to locally owned small
businesses.
OTHER OPERATING INCOME:
Other operating income increased $76 thousand when
comparing the first two quarters of 1999 to the first two
quarters of 1998. Service Charge Fee Income is flat for the six
months. Gains and losses on security sales are $46 thousand more
this year when comparing 1998 year to date to 1999 year to date.
OTHER OPERATING EXPENSES:
Non-Interest expense went up by $165 thousand during the
second quarter of 1999 as compared to the second quarter of 1998.
Professional fees and outside services are lower by $25 thousand
for the quarter.
Employee salaries, the largest component of non-interest
expense, increased $138 thousand for the first six months of 1999
as compared to the first six months of 1998. This increase
reflects both salary increases as well as the filling of some new
positions. When comparing just the first quarter to the second
quarter of 1999, salaries only increased $9 thousand in the
second quarter.
INCOME TAX PROVISION:
The income tax provision was $1.478 million and $1.433
million for the six-month periods ended June 30, 1999 and June
30, 1998 respectively.
<PAGE>
YEAR 2000 COMPLIANCE:
The Bank utilizes software and related computer technologies
essential to its operations that can be affected by the Year 2000
issues.
In 1998, the Bank assigned a senior officer and the
compliance committee the responsibility to address the risks of
the critical internal bank systems as well as external and
environmental systems.
A comprehensive plan was developed for assessment,
review, remediation testing, and contingency planning.
The assessment, review and remediation stages involved
creating inventory listings of internal and external sources of
hardware, software, and environmental systems, and then
installing all the necessary updates to put all systems at the
required Year 2000 level or version. The loan portfolio was also
inventoried. Selected borrowers were contacted to assess their
Year 2000 readiness to determine the adequacy of our allowances
for loan losses.
The Bank has participated and continues to participate
in a public awareness campaign through mailings, lobby materials,
survey cards, and calling officer visits.
The testing has been completed and contingency planning
is ongoing.
ANNUAL MEETING
Peoples Financial Services Corp's annual meeting was held on
April 24, 1999, at 10:00 a.m.
The setting was the Montrose Bible Conference with about
175 people in attendance. Following a welcome from Mike Karhnak,
Executive Vice President of PNB, Director Judy Kelly proceeded
through the formalities of the election of directors: Jack Norris
and George Stover, Jr., and the ratification of the selection of
the CPA firm; Prociak and Associates, LLC. Debra Dissinger,
Executive Vice President and Chief Operations Officer spoke on
both Y2K issues and the new technology that will be added to
PNB's quality customer service line.
Next on the agenda was Jack Ord, President and CEO, who
cited some historical facts and reminded shareholders that
Peoples Financial Services Corp. stock has always proved to be a
sound investment. Ord informed shareholders that the first
quarter in 1999, loans are up 11 percent and deposits are up 7.3
percent. He added that PNB will begin to offer annuities, mutual
funds, and insurance products. "This was a missing piece from
being able to provide one-stop financial services to our
customers," Ord said. Ord spoke of another component that should
be functional by the third quarter of 1999 and that is the
Dividend Reinvestment Program.
Following the meeting, shareholders enjoyed a
family-style lunch.
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING INFORMATION
Except for historical information, this Report may be
deemed to contain "forward looking" information. Examples of
forward looking information may include, but are not limited to
(a) projections of or statements regarding future earnings,
interest income, other income, earnings or loss per share, asset
mix and quality, growth prospects, capital structure and other
financial terms, (b) statements of plans and objectives of
management or the Board of Directors, (c) statements of future
economic performance, and (d) statements of assumptions, such as
economic conditions in the market areas served by the Corporation
and the Bank, underlying other statements and statements about
the Corporation and the Bank or their respective businesses. Such
forward looking information can be identified by the use of
forward looking terminology such as "believes," "expects," "may,"
"intends," "will," "should," "anticipates," or the negative of
any of the foregoing or other variations thereon or comparable
terminology, or by discussion of strategy. No assurance can be
given that the future results covered by the forward looking
information will be achieved. Such statements are subject to
risks, uncertainties, and other factors which could cause actual
results to differ materially from future results expressed or
implied by such forward looking information. Important factors
that could impact operating results include, but are not limited
to, (i) the effects of changing economic conditions in both the
market areas served by the Corporation and the Bank and
nationally, (ii) credit risks of commercial, real estate,
consumer and other lending activities, (iii) significant changes
in interest rates, (iv) changes in federal and state banking laws
and regulations which could affect operations, (v) funding costs,
and (vi) other external developments which could materially
affect business and operations.
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risks
The information set forth under the caption "Liquidity
and Interest Sensitivity" under Item 2, Part I is incorporated
herein by reference.
PART II
PEOPLES FINANCIAL SERVICES CORP
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS FOR SECURITY HOLDER VOTE
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
3.2 By-Laws of Peoples Financial Services Corp.
27 Financial Data Schedule
(b) Reports on Form 8K
April 16, 1999
May 5, 1999
(c) Other Events
Press Release of Peoples Financial Services Corp. dated April 16, 1999,
previously submitted as Exhibit 99.1
Press Release of Peoples Financial Services Corp. dated May 5,1999,
previously submitted as Exhibit 99.2
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PEOPLES FINANCIAL SERVICES CORP
By/s/ Debra E. Dissinger
Debra E. Dissinger
Vice President Operations
BY-LAWS
OF
PEOPLES FINANCIAL SERVICES CORP.
ARTICLE 1
CORPORATION OFFICE
Section 1.1. The Corporation shall have and continuously
maintain in Pennsylvania a registered office which may, but need
not, be the same as its place of business and at an address to be
designated from time to time by the Board of Directors.
Section 1.2. The Corporation may also have offices at
such other places as the Board of Directors may from time to time
designate or the business of the Corporation may require.
ARTICLE 2
SHAREHOLDERS' MEETINGS
Section 2.1. All meetings of the shareholders shall be
held at such time and place as may be fixed from time to time by
the Board of Directors.
Section 2.2. The annual meeting of the shareholders
shall be held no later than the thirtieth day of April in each
year, when they shall elect a Board of Directors and transact
such other business as may properly be brought before the
meeting.
Section 2.3. Special meetings of the shareholders may be
called at any time by the Chairman of the Board, the President,
the Executive Vice President, if any, a majority of the Board of
Directors or of its Executive Committee or by shareholders
entitled to cast at least twenty percent (20%) of the votes which
all shareholders are entitled to cast at the particular meeting.
At any time, upon written request of any person or persons who
have duly called a special meeting, it shall be the duty of the
secretary to fix the date of the meeting, to be held not more
than 60 days after the receipt of the request and to give due
notice thereof. If the secretary shall neglect or refuse to fix
the date of the meeting and give notice thereof, the person or
persons calling the meeting may do so.
Section 2.4. Written notice of all meetings, other than
adjourned meetings of shareholders, stating the place, date and
hour, and, in case of special meetings of shareholders, the
purpose thereof, shall be served upon, or mailed, postage
prepaid, or telegraphed, charges prepaid, at least ten days
before such meeting, unless a greater period of notice is
required by statute or by these By-Laws, to each shareholder
entitled to vote thereat at such address as appears on the
transfer books of the Corporation.
ARTICLE 3
QUORUM OF SHAREHOLDERS
Section 3.1. The presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes
which all shareholders are entitled to cast on the particular
matter shall constitute a quorum for purposes of considering such
matter, and unless otherwise provided by statute the acts of such
shareholders at a duly organized meeting shall be the acts of the
shareholders. If, however, any meeting of shareholders cannot be
organized because of lack of a quorum, those present, in person
or by proxy, shall have the power, except as otherwise provided
by statute, to adjourn the meeting to such time and place as they
may determine, without notice other than an announcement at the
meeting, until the requisite number of shareholders for a quorum
shall be present, in person or by proxy, except that in the case
of any meeting called for the election of directors such meeting
may be adjourned only for periods not exceeding 15 days as the
holders, present in person or by proxy, of shares entitled to
cast at least a majority of the votes which all shareholders are
entitled to cast, shall direct, and those who attend the second
of such adjourned meetings, although less than a quorum, shall
nevertheless constitute a quorum for the purpose of electing
directors. At any adjourned meeting at which a quorum shall be
present or so represented, any business may be transacted which
might have been transacted at the original meeting if a quorum
had been present. The shareholders present, in person or by
proxy, at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
ARTICLE 4
VOTING RIGHTS
Section 4.1. Except as may be otherwise provided by
statute or by the Articles of Incorporation, at every
shareholders' meeting, every shareholder entitled to vote thereat
shall have the right to one vote for every share having voting
power standing in his name on the books of the Corporation on the
record dated fixed for the meeting. No share shall be voted at
any meeting if any installment is due and unpaid thereon.
Section 4.2. When a quorum is present at any meeting,
the vote of the holders, present in person or by proxy, of shares
entitled to cast at least a majority of the votes which all
shareholders are entitled to cast, shall decide any question
brought before such meeting except as may be otherwise provided
by statute or by the Articles of Incorporation.
Section 4.3. Upon demand made by a shareholder entitled
to vote at any election for directors before the voting begins,
the election shall be by ballot.
ARTICLE 5
PROXIES
Section 5.1. Every shareholder entitled to vote at a
meeting of shareholders or to express consent or dissent to
corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy. Every proxy
shall be executed in writing by the shareholder or his duly
authorized attorney-in-fact and filed with the Secretary of the
Corporation. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a
proxy shall not be effective until notice thereof has been given
to the Secretary of the Corporation. No unrevoked proxy shall be
valid after 11 months from the date of its execution, unless a
longer time is expressly provided therein, but in no event shall
a proxy, unless coupled with an interest, be voted after three
years from the date of its execution. A proxy shall not be
revoked by the death or incapacity of the maker, unless before
the vote is counted or the authority is exercised, written notice
of such death or incapacity is given to the Secretary of the
Corporation.
ARTICLE 6
RECORD DATE
Section 6.1. The Board of Directors may fix a time, not
more than 90 days prior to the date of any meeting of
shareholders, or the date fixed for the payment of any dividend
or distribution, or the date for the allotment of rights, or the
date when any change or conversion or exchange of shares will be
made or go into effect, as a record date for the determination of
the shareholders entitled to notice of, and to vote at, any such
meeting, or entitled to receive payment of any such dividend or
distribution, or to receive any such allotment of rights, or to
exercise the rights in respect to any such change, conversion or
exchange of shares. In such case, only such shareholders as shall
be shareholders of record on the date so fixed shall be entitled
to notice of, or to vote at, such meeting or to receive payment
of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after any
record date fixed as aforesaid. The Board of Directors may close
the books of the corporation against transfers of shares during
the whole or any part of such period, and in such case written or
printed notice thereof shall be mailed at least ten days before
closing thereof to each shareholder of record at the address
appearing on the records of the Corporation or supplied by him to
the Corporation for the purpose of notice. While the stock
transfer books of the Corporation are closed, no transfer of
shares shall be made thereon. If no record date is fixed by the
Board of Directors for the determination of shareholders entitled
to receive notice of, and vote at, a shareholders' meeting,
transferees of shares which are transferred on the books of the
Corporation within ten days next preceding the date of such
meeting shall not be entitled to notice of or to vote at such
meeting.
ARTICLE 7
VOTING LISTS
Section 7.1. The officer or agent having charge of the
transfer books for shares of the Corporation shall make, at least
five days before each meeting of shareholders, a complete
alphabetical list of the shareholders entitled to vote at the
meeting, with their addresses and the number of shares held by
each, which list shall be kept on file at the registered office
or principal place of business of the Corporation and shall be
subject to inspection by any shareholder during the entire
meeting. The original transfer books for shares of the
Corporation, or a duplicate thereof kept in this Commonwealth,
shall be prima facie evidence as to who are the shareholders
entitled to exercise the rights of a shareholder.
ARTICLE 8
JUDGES OF ELECTION
Section 8.1. In advance of any meeting of shareholders,
the Board of Directors may appoint judges of election, who need
not be shareholders, to act at such meeting or any adjournment
thereof. If judges of election are not so appointed, the Chairman
of any such meeting may, and on the request of any shareholder or
his proxy shall, make such appointment at the meeting. The number
of judges shall be one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the holders of
shares, present in person or by proxy, entitled to cast at least
9 votes which all shareholders are entitled to cast shall
determine whether one or three judges are to be appointed. No
person who is a candidate for office shall act as a judge. The
judges of election shall do all such acts as may be proper to
conduct the election or vote, and such other duties as may be
prescribed by statute, with fairness to all shareholders, and if
requested by the Chairman of the meeting or any shareholder or
his proxy, shall make a written report of any matter determined
by them and execute a certificate of any fact found by them. If
there are three judges of election, the decision, act or
certificate of a majority shall be the decision, act or
certificate of all.
ARTICLE 9
CONSENT OF SHAREHOLDERS IN LIEU OF MEETING
Section 9.1. Any action required to be taken at a
meeting of shareholders, or of a class of shareholders, may be
taken without a meeting, if a consent or consents in writing
setting forth the action so taken shall be signed by all of the
shareholders who would be entitled to vote at a meeting for such
purpose and shall be filed with the Secretary of the Corporation.
ARTICLE 10
DIRECTORS
Section 10.1. Any shareholder who intends to nominate or
to cause to have nominated any candidate for election to the
Board of Directors (other than any candidate proposed by the
Corporation's then existing Board of Directors) shall so notify
the Secretary of the Corporation in writing not less than 60 days
prior to the date of any meeting of shareholders called for the
election of directors. Such notification shall contain the
following information to the extent known by the notifying
shareholder:
(a) the name and address of each proposed nominee;
(b) the age of each proposed nominee;
(c) the principal occupation of each proposed nominee;
(d) the number of shares of the Corporation owned by each proposed
nominee;
(e) the total number of shares, to the knowledge of the notifying
shareholder, which will be voted for each proposed nominee;
(f) the name and residence address of the notifying shareholder; and
(g) the number of shares of the Corporation owned by the notifying
shareholder.
Any nomination for director not made in accordance with
this section shall be disregarded by the chairman of the meeting,
and votes cast for each such nominee shall be disregarded by the
judges of election. In the event that the same person is
nominated by more than one shareholder, if at least one
nomination for such person complies with this Section, the
nomination shall be honored and all votes cast for such nominee
shall be counted.
Section 10.2. The number of directors that shall
constitute the whole Board of Directors shall be not less than
five nor more than twenty-five. The Board of Directors shall be
classified into three classes, each class to be as nearly equal
in number as possible and each class to be elected for a term of
three years. The terms of the respective classes shall expire in
successive years as provided in Section 10.3 hereof. Within the
foregoing limits, the Board of Directors may from time to time
fix the number of directors and their respective classifications.
Section 10.3. At the 1987 annual meeting of shareholders
of the Corporation, the shareholders shall elect nine directors
as follows: three Class I directors to serve until the 1988
annual meeting of shareholders, three Class II directors to serve
until the 1989 annual meeting of shareholders and three Class III
directors to serve until the 1990 annual meeting of shareholders.
Each class shall be elected in a separate election. At each
annual meeting of shareholders thereafter, successors to the
class of directors whose term shall then expire shall be elected
to hold office for a term of three years, so that the term of
office of one class of directors shall expire in each year.
Section 10.4. The Board of Directors may declare vacant
the office of a director if he is declared of unsound mind by an
order of court or convicted of a felony or for any other proper
cause or if, within 30 days after notice of election, he does not
accept such office either in writing or by attending a meeting of
the Board of Directors.
ARTICLE 11
VACANCIES ON BOARD OF DIRECTORS
Article 11.1. Vacancies on the Board of Directors,
including vacancies resulting from an increase in the number of
directors, shall be filled by a majority of the remaining members
of the Board of Directors, though less than a quorum, and each
person so appointed shall be a director until the expiration of
the term of office of the class of directors to which he was
appointed.
ARTICLE 12
POWERS OF BOARD OF DIRECTORS
Section 12.1. The business and affairs of the
Corporation shall be managed by its Board of Directors, which may
exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Articles
of Incorporation or by these By-laws directed or required to be
exercised and done by the shareholders.
Section 12.2. The Board of Directors shall have the
power and authority to appoint an Executive Committee and such
other committees as may be deemed necessary by the Board of
Directors for the efficient operation of the Corporation. The
Executive Committee shall consist of the Chairman of the Board,
if any, the President and not less than two nor more than three
other directors (which other directors shall not be employees of
the Corporation or any of its subsidiaries). The Executive
Committee shall meet at such time as may be fixed by the Board of
Directors, or upon call of the Chairman of the Board or the
President. A majority of members of the Executive Committee shall
constitute a quorum. The Executive Committee shall have and
exercise the authority of the Board of Directors in the intervals
between the meetings of the Board of Directors as far as may be
permitted by law.
ARTICLE 13
MEETINGS OF THE BOARD OF DIRECTORS
Section 13.1. An organization meeting may be held
immediately following the annual shareholders' meeting without
the necessity of notice to the directors to constitute a legally
convened meeting, or the directors may meet at such time and
place as may be fixed by either a notice or waiver of notice or
consent signed by all of such directors.
Section 13.2. Regular meetings of the Board of Directors
shall be held not less often than semi-annually at a time and
place determined by the Board of Directors at the preceding
meeting. One or more directors may participate in any meeting of
the Board of Directors, or of any committee thereof, by means of
a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
one another.
Section 13.3. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President on
one day's notice to each director, either personally or by mail,
telegram or telephone; special meetings shall be called by the
Chairman of the Board or the President in like manner and on like
notice upon the written request of three directors.
Section 13.4. At all meetings of the Board of Directors,
a majority of the directors shall constitute a quorum for the
transaction of business, and the acts of a majority of the
directors present at a meeting in person or by conference
telephone or similar communications equipment at which a quorum
is present in person or by such communications equipment shall be
the acts of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Articles of
Incorporation or by these By-laws. If a quorum shall not be
present in person or by communications equipment at any meeting
of the directors, the directors present may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or as permitted herein.
ARTICLE 14
INFORMAL ACTION BY THE BOARD OF DIRECTORS
Section 14.1. If all the directors shall severally or
collectively consent in writing, including but not limited to
telegrams and radiograms, to any action to be taken by the
Corporation, such action shall be as valid corporate action as
though it had been authorized at a meeting of the Board of
Directors.
ARTICLE 15
COMPENSATION OF DIRECTORS
Section 15.1. Directors, as such, may receive a stated
salary for their services or a fixed sum and expenses for
attendance at regular and special meetings, or any combination of
the foregoing as may be determined from time to time by
resolution of the Board of Directors, and nothing contained
herein shall be construed to preclude any director from serving
the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE 16
OFFICERS
Section 16.1. The officers of the corporation shall be
elected by the Board of Directors at its organization meeting and
shall be a President, a Secretary and a Treasurer. At its option,
the Board of Directors may elect a Chairman of the Board. The
Board of Directors may also elect one or more Vice Presidents and
such other officers and appoint such agents as it shall deem
necessary, who shall hold their offices for such terms, have such
authority and perform such duties as may from time to time be
prescribed by the Board of Directors. Any two or more offices may
be held by the same person.
Section 16.2. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 16.3. The Board of Directors may remove any
officer or agent elected or appointed, at any time and within the
period, if any, for which such person was elected or employed
whenever in the Board of Directors' judgment it is in the best
interests of the Corporation, and all persons shall be elected
and employed subject to the provisions thereof. If the office of
any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors.
ARTICLE 17
THE CHAIRMAN OF THE BOARD
Section 17.1. The Chairman of the Board shall preside at
all meetings of shareholders and directors. He shall supervise
the carrying out of the policies adopted or approved by the Board
of Directors. He shall have general executive powers, as well as
the specific powers conferred by these By-laws. He shall also
have and may exercise such further powers and duties as from time
to time may be conferred upon or assigned to him by the Board of
Directors.
ARTICLE 18
THE PRESIDENT
Section 18.1. The President shall be the chief executive
officer of the Corporation. The President shall (1) have general
and active management of the business of the Corporation, (2) see
that orders and resolutions of the Board of Directors are put
into effect, subject, however, to the right of the Board of
Directors to delegate any specific powers, except such as may be
by statue exclusively conferred on the president, to any other
officer or officers of the Corporation and (3) execute bonds,
mortgages and other contracts requiring a seal under the seal of
the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. In
the absence or incapacity of the Chairman of the Board, the
President shall preside at meetings of the shareholders and
directors. If there is no Chairman of the Board, the President
shall have and exercise all powers conferred by these By-laws or
otherwise on the Chairman of the Board.
ARTICLE 19
THE VICE PRESIDENT
Section 19.1. The Vice President or, if more than one,
the Vice Presidents in the order established by the Board of
Directors shall, in the absence or incapacity of the President,
exercise all powers and perform the duties of the President. The
Vice Presidents, respectively, shall also have such other
authority and perform such other duties as may be provided in
these By-laws or as shall be determined by the Board of Directors
or the President. Any Vice President may, in the discretion of
the Board of Directors, be designated as "executive," "senior,"
or by departmental or functional classification.
ARTICLE 20
THE SECRETARY
Section 20.1. The Secretary shall attend all meetings of
the shareholders and directors and keep accurate records thereof
in one or more minute books kept for that purpose and shall
perform the duties customarily performed by the secretary of a
corporation and such other duties as may be assigned to the
Secretary by the Board of Directors or the President.
ARTICLE 21
THE TREASURER
Section 21.1. The Treasurer shall (1) have the custody
of the corporate funds and securities, (2) keep full and accurate
accounts of receipts and disbursements in books belonging to the
Corporation and (3) perform such other duties as may be assigned
to him by the Board of Directors or the President. He shall give
bond in such sum and with such surety as the Board of Directors
may from time to time direct.
ARTICLE 22
ASSISTANT OFFICERS
Section 22.1. Each assistant officer shall assist in the
performance of the duties of the officer to whom he is assistant
and shall perform such duties in the absence of the officer. He
shall perform such additional duties as the Board of Directors,
the President or the officer to whom he is assistant may from
time to time assign. Such officers may be given such functional
titles as the Board of Directors shall from time to time
determine.
ARTICLE 23
LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION
Section 23.1. To the fullest extent permitted by the
Directors' Liability Act (42 Pa. C.S. ?8361 et seq.) and the
Business Corporation Law of the Commonwealth of Pennsylvania, a
director of the Corporation shall not be personally liable to the
Corporation, its shareholders or others for monetary damages for
any action taken or any failure to take any action unless the
director has breached or failed to perform the duties of his or
her office, as set forth in the Directors' Liability Act, and
such breach or failure constitutes self-dealing, willful
misconduct or recklessness. The provisions of this Article 23
shall not apply with respect to the responsibility or liability
of a director under any criminal statute or the liability of a
director for the payment of taxes pursuant to local, state or
federal law.
Section 23.2. (a) The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative by reason of the fact that such person is or was a
director, officer, employee, or agent of the Corporation, or is
or was serving at the request of the Corporation as a director,
officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses
(including attorneys' fees), amounts paid in settlement,
judgments, and fines actually and reasonably incurred by such
person in connection with such action, suit, or proceeding;
provided, however, that no indemnification shall be made in any
case where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted
willful misconduct or recklessness. (b) Expenses (including
attorneys' fees) incurred in defending a civil or criminal
action, suit, or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit, or
proceeding, upon receipt of an undertaking by or on behalf of the
director, officer, employee, or agent to repay such amount if it
shall be ultimately determined that he or she is not entitled to
be indemnified by the Corporation as authorized in this Article
23. (c) The indemnification and advancement of expenses provided
by this Article 23 shall not be deemed exclusive of any other
right to which persons seeking indemnification and advancement
of expenses may be entitled under any agreement, vote of
shareholders or disinterested directors, or otherwise, both as
to actions in such persons' official capacity and as to their
actions in another capacity while holding office, and shall
continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person. (d) The
Corporation may purchase and maintain insurance on behalf of
any person, may enter into contracts of indemnification with any
person, may create a fund of any nature (which may, but need not be,
under the control of a trustee) for the benefit of any person, and may
otherwise secure in any manner its obligations with respect to
indemnification and advancement of expenses, whether arising
under this Article 23 or otherwise, to or for the benefit of any
person, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions
of this Article 23.
Section 23.3. The limitation of liability provided in
Section 23.1 of this Article 23 and the right to indemnification
provided in Section 23.2 of this Article 23 shall apply to any
action or any failure to take any action occurring on or after
January 27, 1987.
Section 23.4. Notwithstanding anything herein contained
to the contrary, this Article 23 may not be amended or repealed
and a provision inconsistent herewith may not be adopted, except
by the affirmative vote of 80% of the members of the entire Board
of Directors or by the affirmative vote of shareholders of the
Corporation entitled to cast at least 80% of the votes which all
shareholders of the Corporation are then entitled to cast, except
that if the Business Corporation Law or the Directors' Liability
Act is amended or any other statute is enacted so as to decrease
the exposure of directors to liability or to increase the
indemnification rights available to directors, officers or
others, then this Article 23 and any other provision of these
Bylaws inconsistent with such decreased exposure or increased
indemnification rights shall be amended, automatically and
without any further action on the part of shareholders or
directors, to reflect such decreased exposure or to include such
increased indemnification rights, unless such legislation
expressly requires otherwise. Any repeal or modification of this
Article 23 by the shareholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation
on the personal liability of a director of the Corporation or any
right to indemnification from the Corporation with respect to any
action or any failure to take any action occurring prior to the
time of such repeal or modification.
Section 23.5. If, for any reason, any provision of this
Article 23 shall be held invalid, such invalidity shall not
affect any other provision not held so invalid, and each such
other provision shall, to the full extent consistent with law,
continue in full force and effect. If any provision of this
Article 23 shall be held invalid in part, such invalidity shall
in no way affect the remainder of such provision, and the
remainder of such provision, together with all other provisions
of this Article 23 shall, to the full extent consistent with law,
continue in full force and effect.
Section 23.6. Article 23 (as in effect on the day prior
to the day on which this new Article 23 is approved by the
shareholders of the Corporation), and all provisions of the
By-Laws of the Corporation insofar as they are inconsistent with
this Article 23, are hereby repealed.
ARTICLE 24
SHARE CERTIFICATES
Section 24.1. The share certificates of the Corporation
shall be numbered and registered in a share register as they are
issued; shall bear the name of the registered holder, the number
and class of shares represented thereby, the par value of each
share or a statement that such shares are without par value, as
the case may be; shall be signed by the President or a Vice
President and the Secretary or the Treasurer or any other person
properly authorized by the Board of Directors, and shall bear the
corporate seal, which seal may be a facsimile engraved or
printed. Where the certificate is signed by a transfer agent or a
registrar, the signature of any corporate officer on such
certificate may be a facsimile engraved or printed. In case any
officer who has signed, or whose facsimile signature has been
placed upon, any share certificate shall have ceased to be such
officer because of death, resignation or otherwise before the
certificate is issued, it may be issued by the Corporation with
the same effect as if the officer had not ceased to be such at
the date of its issue.
ARTICLE 25
TRANSFER OF SHARES
Section 25.1. Upon surrender to the Corporation of a
share certificate duly endorsed by the person named in the
certificate or by attorney duly appointed in writing and
accompanied where necessary by proper evidence of succession,
assignment or authority to transfer, a new certificate shall be
issued to the person entitled thereto and the old certificate
cancelled and the transfer recorded upon the share register of
the Corporation. No transfer shall be made if it would be
inconsistent with the provisions of Article 8 of the Pennsylvania
Uniform Commercial Code.
ARTICLE 26
LOST CERTIFICATES
Section 26.1. Where a shareholder of the Corporation
alleges the loss, theft or destruction of one or more
certificates for shares of the Corporation and requests the
issuance of a substitute certificate therefor, the Board of
Directors may direct a new certificate of the same tenor and for
the same number of shares to be issued to such person upon such
person's making of an affidavit in form satisfactory to the Board
of Directors setting forth the facts in connection therewith,
provided that prior to the receipt of such request the
Corporation shall not have either registered a transfer of such
certificate or received notice that such certificate has been
acquired by a bona fide purchaser. When authorizing such issue of
a new certificate the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his heirs
or legal representatives, as the case may be, to advertise the
same in such manner as it shall require and/or give the
corporation a bond in such form and with surety or sureties, with
fixed or open penalty, as shall be satisfactory to the Board of
Directors, as indemnity for any liability or expense which it may
incur by reason of the original certificate remaining
outstanding.
ARTICLE 27
DIVIDENDS
Section 27.1. The Board of Directors may, from time to
time, at any duly convened regular or special meeting or by
unanimous consent in writing, declare and pay dividends upon the
outstanding shares of capital stock of the Corporation in cash,
property or shares of the Corporation, as long as any dividend
shall not be in violation of law or the Articles of
Incorporation.
Section 27.2. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board of Directors from time to
time, in their absolute discretion, think proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purposes as the Board of Directors shall believe to be
for the best interests of the Corporation, and the Board of
Directors may reduce or abolish any such reserve in the manner in
which it was created.
ARTICLE 28
FINANCIAL REPORT TO SHAREHOLDERS
Section 28.1. The President and the Board of Directors
shall present at each annual meeting of the shareholders a full
and complete statement of the business and affairs of the
corporation for the preceding year.
ARTICLE 29
INSTRUMENTS
Section 29.1. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or
such other persons as the President or the Board of Directors may
from time to time designate.
Section 29.2. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations,
receipts, discharges, releases, satisfactions, settlements,
petitions, schedules, accounts, affidavits, bonds, undertakings,
proxies and other instruments and documents may be signed,
executed, acknowledged, verified, delivered or accepted,
including those in connection with the fiduciary powers of the
Corporation, on behalf of the Corporation by the President or
other persons as may be designated by him.
ARTICLE 30
FISCAL YEAR
Section 30.1. The fiscal year of the Corporation shall
be the calendar year.
ARTICLE 31
SEAL
Section 31.1. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Pennsylvania." Said seal may be
used by causing it or a facsimile thereof to be impressed or
affixed in any manner reproduced.
ARTICLE 32
NOTICES AND WAIVERS THEREOF
Section 32.1. Whenever, under the provisions of
applicable law or of the Articles of Incorporation or of these
By-laws, written notice is required to be given to any person, it
may be given to such person either personally or by sending a
copy thereof through the mail or by telegram, charges prepaid, to
his address appearing on the books of the Corporation or supplied
by him to the Corporation for the purpose of notice. If the
notice is sent by mail or telegraph, it shall be deemed to have
been given to the person entitled thereto when deposited in the
United States mail or with a telegraph office for transmission to
such person. Such notice shall specify the place, day and hour of
the meeting and, in the case of a special meeting of
shareholders, the general nature of the business to be
transacted.
Section 32.2. Any written notice required to be given to
any person may be waived in writing signed by the person entitled
to such notice whether before or after the time stated therein.
Attendance of any person entitled to notice whether in person or
by proxy, at any meeting shall constitute a waiver of notice of
such meeting, except where any person attends a meeting for the
express purpose of objecting to the transaction of any business
because the meeting was not lawfully called or convened. Where
written notice is required of any meeting, the waiver thereof
must specify the purpose only if it is for a special meeting of
the shareholders.
ARTICLE 33
AMENDMENTS
Section 33.1. These By-laws may be altered, amended or
repealed by (1) the affirmative vote of the shareholders entitled
to cast at least seventy-five percent (75%) of the votes which
all shareholders are then entitled to cast at any regular or
special meeting duly convened after notice to the shareholders of
that purpose or (2) by the affirmative vote of a majority of the
members of the Board of Directors, with the exception of Sections
10.2. and 10.3. of these By-laws which requires the affirmative
vote of seventy-five percent (75%) or more of the members of the
Board of Directors, at any regular or special meeting thereof
duly convened after notice to the directors of that purpose,
subject always to the power of the shareholders to change such
action of the Board of Directors by the affirmative vote of the
shareholders entitled to cast at least seventy-five percent (75%)
of the votes which all shareholders are then entitled to cast.
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