<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ To ___________
Commission file number 0-25047
RFS BANCORP, INC.
(Exact name of registrant as specified in its charter)
UNITED STATES 04-3449818
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
310 BROADWAY
REVERE, MASSACHUSETTS 02151
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 284-7777
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 / /
As of Febuary 11, 2000, there were 933,523 shares of the registrant's common
stock were outstanding.
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements:
Consolidated Balance Sheets - December 31, 1999 and
September 30, 1999 ......................................................1
Consolidated Statements of Income - Three Months Ended
December 31, 1999 and 1998 ..............................................2
Consolidated Statements of Changes in Stockholders' Equity-Three
Months Ended December 31, 1999 and 1998 .................................3
Consolidated Statements of Cash Flows - Three Months Ended
December 31, 1999 and 1998 ..............................................4
Notes to Unaudited Consolidated Financial Statements -
December 31, 1999 .......................................................5
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operation ...................................................11
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K ........................................23
SIGNATURES ..............................................................24
</TABLE>
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, 1999 September 30, 1999
----------------- ------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks ................................. $ 3,598 $ 2,498
Federal funds sold ...................................... 4,478 931
--------- ---------
Total cash and cash equivalents .................. 8,076 3,429
Securities available for sale, at fair value ............ 5,342 5,631
Securities held to maturity, at amortized cost .......... 27,999 26,074
Federal Home Loan Bank stock, at cost ................... 1,517 1,517
Loans, net of allowance for loan losses of $660 and $624, 73,364 72,461
respectively
Bank premises and equipment, net ........................ 2,235 2,128
Accrued interest receivable ............................. 682 640
Other assets ............................................ 324 284
--------- ---------
Total assets .......................................... $ 119,539 $ 112,164
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits ................................................ $ 79,030 $ 74,807
Federal Home Loan Bank borrowings ....................... 27,236 27,036
Due to broker ........................................... 3,000 --
Accrued expenses and other liabilities .................. 127 301
--------- ---------
Total liabilities ..................................... 109,393 102,144
--------- ---------
Stockholders' equity:
Common stock $.01 par value, 5,000,000 shares ......... 9 9
authorized, 933,523 shares issued and 915,973
shares outstanding
Additional paid-in capital ............................ 3,742 3,736
Retained earnings ..................................... 6,538 6,357
Unearned shares, stock-based incentive plan (17,550 ... (168) (168)
shares, at cost)
Accumulated other comprehensive income ................ 341 437
Unallocated ESOP shares ............................... (316) (351)
--------- ---------
Total stockholders' equity ............................ 10,146 10,020
--------- ---------
Total liabilities and stockholders' equity ............ $ 119,539 $ 112,164
========= =========
</TABLE>
1
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
December 31, 1999 December 31, 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans ........................................ $1,467 $1,042
Interest and dividends on securities .............................. 499 512
Other interest .................................................... 53 63
------ ------
Total interest and dividend income .............................. 2,019 1,617
------ ------
Interest expense:
Deposits .......................................................... 626 605
Federal Home Loan Bank borrowings ................................. 391 256
------ ------
Total interest expense .......................................... 1,017 861
------ ------
Net interest and dividend income ....................................... 1,002 756
Provision for loan losses .............................................. 36 22
------ ------
Net interest and dividend income, after provision for loan losses ...... 966 734
------ ------
Other income:
Loan servicing fees ............................................... 16 27
Deposit account fees .............................................. 67 36
Gain on sales of mortgage loans, net .............................. 3 1
Other income ...................................................... 44 47
------ ------
Total other income ............................................. 130 111
------ ------
Operating expenses:
Salaries and employees benefits ................................... 431 352
Occupancy and equipment expenses .................................. 124 102
Professional services ............................................. 74 95
Data processing expenses .......................................... 65 51
Other expenses .................................................... 125 141
------ ------
Total operating expenses ....................................... 819 741
------ ------
Income before income taxes ............................................. 277 104
Provision for income taxes ............................................. 96 38
------ ------
Net income ............................................................. $ 181 $ 66
====== ======
Basic earnings per share (annualized) $ 0.80 N/A
Diluted earnings per share (annualized) $ 0.80 N/A
Weighted average shares outstanding:
Basic 902,431 N/A
Diluted 908,502 N/A
</TABLE>
2
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
UNEARNED SHARES, ACCUMULATED
ADDITIONAL STOCK-BASED OTHER
COMMON PAID-IN RETAINED INCENTIVE PLAN, COMPREHENSIVE
STOCK CAPITAL EARNINGS 17,550 SHARES INCOME
----- ---------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1999 .......... $ 9 $ 3,736 $ 6,357 $ (168) $ 437
Comprehensive income:
Net income ........................... -- -- 181 -- --
Change in unrealized holding gain
on securities available for sale
net of taxes ........................ -- -- -- -- (96)
Comprehensive income .............
Unearned compensation payment ........ -- -- -- -- --
Recognition and retention plan ....... -- 6 -- -- --
-------- -------- -------- -------- --------
Balance at December 31, 1999 ........... $ 9 $ 3,742 $ 6,538 $ (168) $ 341
======== ======== ======== ======== ========
Balance at September 30, 1998 .......... $ -- $ -- $ 5,971 $ -- $ 513
Comprehensive income:
Net income ........................... -- -- 66 -- --
Change in unrealized holding gain
on securities available for sale, net
of taxes ............................ -- -- -- -- 157
Comprehensive income .............
Net proceeds from common
stock issued pursuant to IPO ......... 9 3,749 -- -- --
Common stock acquired by ESOP .......... -- -- -- -- --
-------- -------- -------- -------- --------
Balance at December 31, 1998 ........... $ 9 $ 3,749 $ 6,037 $ -- $ 670
======== ======== ======== ======== ========
<CAPTION>
TOTAL
UNALLOCATED ESOP STOCKHOLDERS'
SHARES EQUITY
---------------- -------------
<S> <C> <C>
Balance at September 30, 1999 .......... $ (351) $ 10,020
Comprehensive income:
Net income ........................... -- --
Change in unrealized holding gain
on securities available for sale
net of taxes ........................ -- --
Comprehensive income ............. 85
Unearned compensation payment ........ 35 35
Recognition and retention plan ....... -- 6
-------- --------
Balance at December 31, 1999 ........... $ (316) $ 10,146
======== ========
Balance at September 30, 1998 .......... $ -- $ 6,484
Comprehensive income:
Net income ........................... -- --
Change in unrealized holding gain
on securities available for sale, net
of taxes ............................ -- --
Comprehensive income ............. 223
Net proceeds from common
stock issued pursuant to IPO ......... -- 3,758
Common stock acquired by ESOP .......... (351) (351)
-------- --------
Balance at December 31, 1998 ........... $ (351) $ 10,114
======== ========
</TABLE>
3
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, 1999 December 31, 1998
----------------- -----------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 181 $ 66
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses ..................................... 36 22
(Gain) loss on sale of mortgage loans ......................... 2 (2)
Amortization, net of accretion, of securities ................. 10 21
Depreciation .................................................. 57 51
Recognition and retention plan ................................ 6 --
Unearned compensation payment ................................. 35 --
(Increase) in interest receivable ............................. (42) (102)
(Increase) decrease in other assets .......................... (40) 146
Increase (decrease) in accrued expenses and other ............. (104) 15
liabilities
Change in deferred loan origination fees, net ................. (3) (22)
-------- --------
Net cash provided by operating activities ..................... 138 195
-------- --------
Cash flows from investing activities:
Purchase of Federal Home Loan Bank Stock ...................... -- --
Purchases of held-to-maturity securities ...................... -- (4,022)
Purchase of available-for-sale securities ..................... -- --
Proceeds from held-to-maturity securities ..................... 1,188 2,297
Net increase in loans, net .................................... (1,376) (7,660)
Proceeds from sale of loans ................................... 438 1,714
Purchases of banking premises and equipment ................... (164) (584)
-------- --------
Net cash provided by (used in) investing activities ........... 86 (8,255)
-------- --------
Cash flows from financing activities:
Net increase in deposits ...................................... 4,207 4,371
Proceeds from Federal Home Loan Bank of Boston ................ 11,500 --
advances
Repayment of advances from Federal Home Loan .................. (11,300) (281)
Bank of Boston
Net increase in mortgagors' escrow accounts ................... 16 29
Net proceeds from common stock issued pursuant to
initial public offering ..................................... -- 3,758
Payments to acquire common stock for ESOP ..................... -- (351)
-------- --------
Net cash provided by financing activities ..................... 4,423 7,526
-------- --------
Net change in cash and cash equivalents ....................... 4,647 (534)
Cash and cash equivalents at beginning of period .............. 3,429 7,930
-------- --------
Cash and cash equivalents at end of period .................... $ 8,076 $ 7,396
======== ========
Supplemental cash flow information:
Interest paid on deposits .................................. $ 626 $ 604
Interest paid on Federal Home Loan Bank of Boston borrowings $ 391 $ 256
Income taxes paid .......................................... $ 55 $ 5
</TABLE>
4
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1) BASIS OF PRESENTATION AND CONSOLIDATION
The unaudited consolidated interim financial statements of RFS Bancorp, Inc. and
subsidiary ("RFS Bancorp" or the "Company") presented herein should be read in
conjunction with the consolidated financial statements for the year ended
September 30, 1999, included in the Annual Report on Form 10-KSB of RFS Bancorp,
Inc., the holding company for Revere Federal Savings Bank (the "Bank"). The
operating results for the period ended December 31, 1999 are those of the
Company and Bank. The Company had not issued any stock and had not conducted any
business until December 18, 1998 when RFS Bancorp became the Bank's holding
company in connection with the Bank's reorganization from the mutual savings
association to a federal mutual holding company structure. Operating results
prior to December 18, 1998 include only the Bank and not the Company.
The unaudited consolidated interim financial statements herein have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for completed
financial statements.
In the opinion of management, the consolidated financial statements 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 AND CONTINGENCIES
At December 31, 1999, the Bank had outstanding commitments to originate loans
amounting to approximately $2.5 million, unused construction advances amounting
to approximately $1.1 million and unused lines of credit amounting to
approximately $1.3 million for commercial loans and $4.0 million for home equity
loans. Also at December 31, 1999, the Bank had outstanding commitments to
purchase investment securities amounting to $3.0 million.
3) STOCK CONVERSION
The Bank is a federally chartered stock savings bank founded in 1901. The Bank
converted from a federal mutual savings association into a mutual holding
company form of organization on December 18, 1998 and issued 100% of its capital
stock to the Company. RFS Bancorp was organized at the direction of the Board of
Directors of the Bank. The Company issued 933,523 shares of which 47%
5
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
of these shares, or 438,756 shares, were sold to the Bank's depositors and
employee benefit plans and 53% of these shares, or 494,767 shares, were issued
to Revere, MHC, a federal mutual holding company (the "MHC"). Net proceeds of
the offering were approximately $3.7 million. On December 18, 1998, the Company
loaned approximately $351,000 to the Company's Employee Stock Ownership Plan to
fund its purchase of 35,100 shares of common stock of the Company.
4) EARNINGS PER SHARE
Earnings per share for the three months ended December 31, 1999 were $0.80 and
$0.80, respectively, on a basic and diluted basis.
Basic earnings per share represents income available to common stock divided
by the weighted-average number of common shares outstanding during the
period. In calculating basic earnings per share, the number of shares of
common stock outstanding is reduced by the number of shares held by the
Company's Employee Stock Ownership Plan (the "ESOP") that have not been
allocated or are not committed for release to participants' individual
accounts. Diluted earnings per share reflects additional common shares that
would have been outstanding if dilutive potential common shares had been
issued, as well as any adjustment to income that would result from the
assumed conversion. Potential common shares that may be issued by the Company
related solely to outstanding stock options and unearned RRP shares and are
determined using the treasury stock method.
5) RECENT ACCOUNTING PRONOUNCEMENT
On June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
effective for fiscal years beginning after December 15, 1997. Accounting
principles generally require that recognized revenue, expenses, gains and losses
be included in net income. Certain FASB statements, however, require entities to
report specific changes in assets and liabilities, such as unrealized gains and
losses on available-for-sale securities, as a separate component of the equity
section of the consolidated balance sheet. Such items, along with net income,
are components of comprehensive income. SFAS No. 130 requires that all items of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Additionally, SFAS No. 130
requires that the accumulated balance of other comprehensive income be displayed
separately from retained earnings and additional paid-in capital in the equity
section of the consolidated balance sheet. The Company adopted these disclosure
requirements in the quarter ending December 31, 1998.
6
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
6) INVESTMENT SECURITIES
Debt and equity securities have been classified in the consolidated
balance sheets according to management's intent. The carrying amount of
securities and their approximate fair values are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SEPTEMBER 30, 1999
--------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ----- --------- -----
(In Thousands)
<S> <C> <C> <C> <C>
Securities Available for Sale:
Mortgage-backed securities . $ 4,730 $ 4,492 $ 4,853 $ 4,692
Marketable equity securities 24 850 24 939
------- ------- ------- -------
Total ............ $ 4,754 $ 5,342 $ 4,877 $ 5,631
======= ======= ======= =======
Securities held to maturity:
U.S. Government & federal
agency Obligations ........ $ 7,000 $ 6,635 $ 4,000 $ 3,733
Mortgage-backed securities . 18,115 17,645 18,818 18,550
Asset-backed securities .... 2,884 2,859 3,256 3,231
------- ------- ------- -------
Total ............ $27,999 $27,139 $26,074 $25,514
======= ======= ======= =======
</TABLE>
7
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
7) LOANS
The following table presents selected data relating to the composition of the
Company's loan portfolio by type of loan on the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SEPTEMBER 30, 1999
------------------------- -------------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Residential mortgage loans ....... $46,668 63.0% $47,172 64.5%
Commercial real estate loans ..... 14,088 19.0 13,258 18.1
Construction and land loans ...... 2,751 3.7 2,192 3.0
Commercial loans ................. 5,968 8.1 5,932 8.1
Consumer loans ................... 982 1.3 971 1.3
Home equity loans ................ 3,654 4.9 3,650 5.0
------- ----- ------- -----
Total loans .................. 74,111 100.0% 73,175 100.0%
===== =====
Loans held for sale .............. -- --
Less :
Deferred loan origination fees ... 87 90
Allowance for loan losses ........ 660 624
------- ------
Total loans, net $73,364 $72,461
======= =======
</TABLE>
8
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
8) ALLOWANCE FOR LOAN LOSSES
The following table analyzes activity in the Company's allowance for loan losses
for the periods indicated.
<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
(Dollars in Thousands)
<S> <C> <C>
Average loans, net ..................................... $73,799 $50,459
======= =======
Period-end gross loans ................................. $74,111 $53,102
======= =======
Allowance for loan losses at beginning of period ....... $ 624 $ 528
Provision for loan losses .............................. 36 22
Plus recoveries ........................................ -- --
Loans charged-off ...................................... -- 2
------- -------
Allowance for loan losses at end of period ............. $ 660 $ 548
======= =======
Non-performing loans ................................... $ 33 $ 171
======= =======
Ratios:
Allowance for loan losses to period-end gross loans .89% 1.03%
Allowance for loan losses to non-performing loans . 2,000.0% 320.5%
</TABLE>
9
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
9) DEPOSITS AND BORROWED FUNDS
The following tables set forth the various types of deposit accounts at the
Company and the balances in these accounts as well as the borrowings of the
Company at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SEPTEMBER 30, 1999
-------------------------- -------------------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Deposits:
Savings accounts ............ $18,071 22.9% $17,598 23.5%
NOW checking ................ 7,768 9.8 6,703 9.0
Demand deposits ............. 8,928 11.3 6,877 9.2
Money market accounts ....... 2,610 3.3 2,665 3.6
Certificates of deposit ..... 41,653 52.7 40,964 54.7
------- --------- ------- ---------
Total deposits ......... $79,030 100.0% $74,807 100.0%
======= ========= ======= =========
Borrowed funds:
Advances from Federal .......
Home Loan Bank of Boston .... $27,236 $ 27,036
Other borrowed funds ........ -- --
------- ---------
Total borrowed funds ... $27,236 $ 27,036
======= =========
</TABLE>
10
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
GENERAL
Revere Federal Savings Bank (the "Bank") completed its conversion from a
federal mutual savings association to a stock institution and was simultaneously
acquired by RFS Bancorp, Inc. (the "Company") on December 18, 1998 upon the
consummation of the Bank's reorganization to the mutual holding company form of
organization and stock offering (the "Reorganization"). The following discussion
compares the financial condition of the Company and the Bank, at December 31,
1999 to September 30, 1999, and the results of operations for the three months
ended December 31, 1999, compared to the same period in 1998. This discussion
and analysis should be read in conjunction with the consolidated financial
statements and related notes thereto included within this report.
The Company and the Bank may from time to time make written or oral
"forward-looking statements." These forward-looking statements may be contained
in this quarterly filing with the Securities and Exchange Commission (the
"SEC"), the Annual Report to Shareholders, other filings with the SEC, and in
other communications by the Company and the Bank, which are made in good faith
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The words "may,""could," "should,""would," "believe,"
"anticipate," "estimate," "expect," "intend," "plan" and similar expressions are
intended to identify forward-looking statements.
Forward-looking statements include statements with respect to the Company's
beliefs, plans, objectives, goals, expectations, anticipations, estimates and
intentions, that are subject to significant risks and uncertainties. The
following factors, many of which are subject to change based on various other
factors beyond the Company's control, and other factors discussed in this Form
10-QSB, as well as other factors identified in the Company's filings with the
SEC and those presented elsewhere by management from time to time, could cause
its financial performance to differ materially from the plans, objectives,
expectations, estimates and intentions expressed in such forward-looking
statements:
- the strength of the United States economy in general and the strength
of the local economies in which the Company and the Bank conduct
operations;
- the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Federal Reserve
Board;
- inflation, interest rate, market and monetary fluctuations;
- the timely development of and acceptance of new products and services
and the perceived overall value of these products and services by
users, including the features, pricing and quality compared to
competitors' products and services;
- the willingness of users to substitute competitors' products and
services for the
11
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
Company's and the Bank's products and services;
- the Company's and the Bank's success in gaining regulatory approval of
their products and services, when required;
- the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance);
- the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance);
- the impact of technological changes;
- acquisitions;
- changes in consumer spending and saving habits; and
- the Company's and the Bank's success at managing the risks involved in
their business.
This list of important factors is not exclusive. The Company or the Bank
does not undertake to update any forward-looking statement, whether written or
oral, that may be made from time to time by or on behalf of the Company or the
Bank.
Results of operations are primarily dependent upon net interest and
dividend income. Net interest income is the difference between income earned on
the Company's loan and investment portfolio and the Company's funds which
consists of interest paid on deposits and borrowings. Operating results are also
affected by the provision for loan losses, securities sales activities and
service charges on deposit accounts as well as other fees. The Company's
operating expenses consist of salaries and employee benefits, occupancy and
equipment expenses, professional fees as well as marketing and other expenses.
Results of operations are also significantly affected by general economic and
competitive conditions, particularly changes in interest rates and government
and regulatory policies.
12
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
MARKET RISK ANALYSIS
QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Like other institutions, the
Company's most significant form of market risk is interest rate risk. The
Company is subject to interest rate risk to the degree that the Company's
interest-bearing liabilities, primarily deposits with short and medium-term
maturities, mature or reprice at different rates than the Company's
interest-earning assets. The Company believes it is critical to manage the
relationship between interest rates and the effect on the Company's net
portfolio value ("NPV"). This approach calculates the difference between the
present value of expected cash flows from assets and the present value of
expected cash flows from liabilities, as well as cash flows from off-balance
sheet contracts. The Company manages assets and liabilities within the context
of the marketplace, regulatory limitations and within limits established by the
Company's Board of Directors on the amount of change in NPV which is acceptable
given certain interest rate changes.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If the Company's
assets mature or reprice more quickly or to a greater extent than the Company's
liabilities, the Company's net portfolio value and net interest income would
tend to increase during periods of rising interest rates but decrease during
periods of falling interest rates. Conversely, if the Company's assets mature or
reprice more slowly or to a lesser extent than the Company's liabilities, the
Company's net portfolio value and net interest income would tend to decrease
during periods of rising interest rates but increase during periods of falling
interest rates. The Company's policy has been to mitigate the interest rate risk
inherent in the historical savings institution business of originating long-term
loans funded by short-term deposits by pursuing certain strategies designed to
decrease the vulnerability of the Company's earnings to material and prolonged
changes in interest rates. In this regard, the Company's attempts to minimize
interest rate risk by, among other things, emphasizing the origination and
retention of adjustable-rate loans and loans with shorter maturities and the
sale of long-term one-to-four family fixed-rate loans in the secondary market.
AVERAGE BALANCES, INTEREST, YIELDS AND RATES
The following tables set forth certain information relating to the
Company's average balance sheet and reflect the interest earned on assets and
interest cost of liabilities for the periods indicated and the average yields
earned and rates paid for the periods indicated. Such yields and costs are
derived by dividing income or expense by the average monthly balances of assets
and liabilities, respectively, for the periods presented. Average balances are
derived from daily balances. Loans on nonaccrual status are included in the
average balances of loans shown in the tables. The investment securities in the
following tables are presented at amortized cost.
13
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1999 THREE MONTHS ENDED DECEMBER 31, 1998
-------------------------------------- ------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Total loans, net .......................... $ 73,799 $ 1,467 7.95% $ 50,459 $ 1,042 8.26%
Investments ............................... 30,089 499 6.63% 30,207 512 6.78%
Other earning assets ...................... 4,182 53 5.07% 5,084 63 4.96%
-------- -------- -------- --------
Total interest-earning assets ............. 108,070 2,019 7.47% 85,750 1,617 7.54%
-------- --------
Cash and due from banks ................... 1,821 625
Other assets .............................. 6,309 4,661
-------- --------
Total assets .............................. $116,200 $ 91,036
======== ========
INTEREST-BEARING LIABILITIES:
Passbook & Statement Savings .............. $ 17,931 67 1.49% $ 16,808 57 1.36%
NOW's and MMA's ........................... 9,803 35 1.43% 7,450 27 1.45%
Certificate of deposits ................... 41,582 524 5.04% 38,076 521 5.47%
-------- -------- -------- --------
Total interest-bearing deposits ........... 69,316 626 3.61% 62,334 605 3.88%
Federal Home Loan Bank of Boston borrowings 27,178 391 5.75% 18,106 256 5.66%
-------- -------- -------- --------
Total interest-bearing liabilities ........ 96,494 1,017 4.22% 80,440 861 4.28%
-------- --------
Demand deposit accounts ................... 8,771 3,672
Other liabilities ......................... 826 849
-------- --------
Total liabilities ......................... 106,091 84,961
Stockholders' equity ...................... 10,109 6,075
-------- --------
Total liabilities and stockholders' equity $116,200 $ 91,036
======== ========
Net interest income ....................... $ 1,002 $ 756
======== ========
Interest rate spread ...................... 3.25% 3.26%
Net interest margin ....................... 3.71% 3.53%
Interest-earning asset/interest-bearing
liabilities.............................. 112.00% 106.60%
</TABLE>
14
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
RATE/VOLUME ANALYSIS
The following tables set forth certain information regarding changes in
interest income and interest expense of the Company for the periods indicated.
For each category of interest-earning asset and interest-bearing liability,
information is provided on changes attributable to: (i) changes in volume
(changes in volume multiplied by old rate); (ii) changes in rates (change in
rate multiplied by old volume). Changes in rate-volume (changes in rate
multiplied by the changes in volume) are allocated between changes in rate and
changes in volume.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
1999 VS. 1998
INCREASE (DECREASE)
-------------------------------
DUE TO
------------------
RATE VOLUME TOTAL
---- ------ -----
(In Thousands)
<S> <C> <C> <C>
Interest and dividend income:
Loans, net .................. $ (48) $ 473 $ 425
Investments ................. (11) (2) (13)
Other earning assets ........ 1 (11) (10)
----- ----- -----
Total ....................... (58) 460 402
----- ----- -----
Interest expense:
Deposits .................... (44) 65 21
Borrowed funds .............. 5 130 135
----- ----- -----
Total ....................... (39) 195 156
----- ----- -----
Change in net interest income $ (19) $ 265 $ 246
===== ===== =====
</TABLE>
15
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
COMPARISON OF FINANCIAL CONDITIONS AT DECEMBER 31, 1999 AND SEPTEMBER 30, 1999
Total assets increased by $7.4 million or 6.6% to $119.5 million at
December 31, 1999 from $112.2 million at September 30, 1999. The net increase in
total assets is primarily attributable to a $903,000 increase in net loans, an
increase in cash and cash equivalents of $4.6 million and an increase of $1.6
million in investment securities. Total net loans increased by $903,000 or 1.2%
to $73.4 million at December 31, 1999 as compared to $72.5 million at September
30, 1999, due to the Company's continued emphasis on small business lending and
a favorable interest rate environment. Investment securities held by the Company
increased by $1.6 million or 5.2% to $33.3 million at December 31, 1999 from
$31.7 million at September 30, 1999. This increase is primarily due to the
purchase of $3.0 million in agency bonds offset by scheduled principal paydowns
of mortgage-backed and asset-backed securities.
Total liabilities increased by $7.2 million or 7.1% at December 31, 1999
from $109.4 million to $102.1 million at September 30, 1999. This increase
primarily resulted from a $4.2 million or 5.6% increase in total deposits to
$79.0 million at December 31, 1999 from $74.8 million at September 30, 1999.
The increase in total deposits was primarily the result of a rise in deposits
at the Chelsea branch office as well as general deposit growth. We also
experienced a slight increase in Federal Home Loan Bank of Boston borrowings
of $200,000 to $27.2 million at December 31, 1999 from $27.0 million at
September 31, 1999. Offsetting the above increases in liabilities for the
period were decreases in accrued expenses and other liabilities of $174,000.
COMPARISON OF THE OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
AND 1998.
GENERAL. Results of operations are primarily dependent upon net interest and
dividend income. Net interest income is the difference between income earned on
the Company's loan and investment portfolio and the Company's funds which
consists of interest paid on deposits and borrowings. Operating results are also
affected by the provision for loan losses, securities sales activities and
service charges on deposit accounts as well as other fees. The Company's
operating expenses consist of salaries and employee benefits, occupancy and
equipment expenses, professional fees as well as marketing and other expenses.
Results of operations are also significantly affected by general economic and
competitive conditions, particularly changes in interest rates and government
and regulatory policies.
16
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
NET INCOME. Net income for the three months ended December 31, 1999 was $181,000
as compared to $66,000 for the three months ended December 31, 1998. This
$115,000 or 174.2% increase in net income during the period was the result of an
increase of $402,000 in interest and dividend income, an increase of $19,000 in
other income, offset by a increase of $156,000 in interest expense, an increase
of $78,000 in operating expenses, an increase of $14,000 in the provision for
loan losses and an increase in the provision for income taxes of $58,000. The
Company's continued expansion of its lending activities accounted for the
increase in interest income, while its operating expenses increased due to
increased staffing and non-recurring start-up expenses associated with the
Bank's branch office in Chelsea, Massachusetts. Other increases were
incurred in the areas of equipment, data processing and advertising services,
primarily related to the expansion of the Company's product lines and additional
services, including PC banking and debit cards, and the opening of the Chelsea
branch. Annual operating expenses are also expected to increase in future
periods due to the increased cost of operating an additional branch location, an
expansion of the main office and as a stock institution, including the adoption
of additional stock based employee benefit plans. The return on average assets
for the three months ended December 31, 1999 was .62% compared to .29% for the
three months ended December 31, 1998.
NET INTEREST AND DIVIDEND INCOME. Net interest and dividend income for the three
months ended December 31, 1999 increased $246,000 or 32.5% to $1.0 million from
$756,000 for the three months ended December 31, 1998. The increase is
attributed to a combination of a $402,000 increase in interest and dividend
income attributable primarily to continued loan growth and a $156,000 increase
in interest expense on deposits and borrowed funds due to ordinary deposit
growth and additional borrowings to fund asset growth.
The average yield on interest-earning assets decreased 7 basis points to
7.47% for the three months ended December 31, 1999 from 7.54 % for the three
months ended December 31, 1998, while the average cost of interest-bearing
liabilities decreased by 6 basis points to 4.22% for the three months ended
December 31, 1999 from 4.28% for the three months ended December 31, 1998.
Interest rate spread decreased to 3.25% for the three months ended December
31, 1999 from 3.26% for the three months ended December 31, 1998 and the net
interest margin improved from 3.52% to 3.71% during this period.
INTEREST AND DIVIDEND INCOME. Total interest and dividend income increased by
$402,000 or 24.9% to $2.0 million for the three months ended December 31, 1999
from $1.6 million for the three months ended December 31, 1998. The increase in
interest and dividend income was a result of a greater mix
17
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
of higher yielding commercial and commercial real estate loans, partially offset
by a decline in the average balance of investment securities and lower yields on
investment securities.
The average balance of net loans for the three months ended December 31,
1999 was $73.8 million compared to $50.5 million for the three months ended
December 31, 1998. The average yield on net loans was 7.95% for the three months
ended December 31, 1999 compared to 8.26% for the three months ended December
31, 1998, reflecting a general decline in interest rates. The average balance of
investment securities for the three months ended December 31, 1999 was $30.1
million compared to $30.2 million for the three months ended December 31, 1998.
The average yield on investment securities was 6.63% for the three months ended
December 31, 1999 compared to 6.78% for the three months ended December 31,
1998.
INTEREST EXPENSE. Interest expense increased by $156,000 or 18.1 % to $1.0
million for the three months ended December 31, 1999 from $861,000 for the three
months ended December 31, 1998. Interest expense increased primarily as a result
of an increase in interest rates paid on Federal Home Loan Bank of Boston
borrowings and deposit accounts. Average interest-bearing deposits increased by
$7.0 million or 11.2% to $69.3 million for the three months ended December 31,
1999. Deposit balances have increased as a result of offering free checking
products, certificate of deposit products with competitive rates and new
deposits attributable to the Chelsea branch. Accordingly, interest expense
on deposits increased $21,000 or 3.5% to $626,000 for the three months ended
December 31, 1999 compared to $605,000 for the three months ended December 31,
1998. Interest expense on advances from the Federal Home Loan Bank of Boston
increased $135,000 or 52.7% to $391,000 for the three months ended December 31,
1999 from $256,000 for the three months ended December 31, 1998. This increase
is attributable to an increase in the rates paid on such advances and an
increase in the level of Federal Home Loan Bank of Boston advances during the
periods.
PROVISION FOR LOAN LOSSES. The allowance for loan losses is maintained through
the provision for loan losses which is a charge to operations. The provision
reflects management's assessment of potential losses and is based on a review of
the risk characteristics as well as the growth of the loan portfolio. The Bank
considers many factors in determining the level of the provision for loan
losses. Collateral value on a loan by loan basis, trends of loan delinquencies,
risk classification identified in the Bank's regular review of individual loans,
and economic conditions are major factors in establishing the provision. At
December 31, 1999, the balance of the allowance for loan losses was $660,000 or
.89% of total loans as compared to $624,000 or .85% of total loans at September
30, 1999. As the Bank continues to expand its small business lending, additional
increases to the provision are expected.
18
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
NONINTEREST INCOME. Total noninterest income increased by $19,000 or 17.1% to
$130,000 for the three months ended December 31, 1999 from $111,000 for the
three months ended December 31, 1998. The increase was primarily the result of
increased fees on transactional deposit accounts. The Company anticipates
increases to noninterest income as it continues to expand the volume of its
deposit relationships. It is also the Company's goal to increase its level of
noninterest income by expanding its delivery systems to include PC banking,
debit cards and additional ATMs and by continually considering additional
sources of revenue. In this regard, the Company is offering various investment
products through a relationship with a third-party broker-dealer.
NONINTEREST EXPENSE. Noninterest expense increased by $78,000 or 10.5% to
$819,000 for the three months ended December 31, 1999 from $741,000 for the
three months ended December 31, 1998. The increase resulted primarily from
planned expenditures in human and technological resources, including increased
staffing and non-recurring start up expenses associated with the opening of the
Chelsea branch. Salaries and employee benefits, the largest component of
noninterest expense was $431,000 for the three months ended December 31, 1999 as
compared to $352,000 for the three months ended December 31, 1998, an increase
of $79,000 or 22.4%. This increase was primarily associated with an increase of
full time employees to staff the Bank's branch in Chelsea, commercial
lending and operations departments. Occupancy and equipment expense increased by
$22,000 or 21.6% to $124,000 for the three months ended December 31, 1999 as
compared to $102,000 for the three months ended December 31, 1998, with the
increase primarily related to additional space utilized for certain
administrative functions and the opening of the Bank's Chelsea branch.
Other increases were incurred in the areas of equipment, data processing and
advertising services, primarily related to the expansion of the Company's
product lines and additional services, including PC banking and debit cards, and
the opening of the Chelsea branch. Annual operating expenses are also expected
to increase in future periods due to the increased cost of operating an
additional branch location and as a public company, including the adoption of
additional stock based employee benefit plans.
INCOME TAXES. The net provision for income taxes amounted to $96,000 for the
three months ended December 31, 1999 as compared to $38,000 for the three months
ended December 31, 1998, resulting in effective tax rates of 34.7% and 36.5%,
respectively. The effective tax rate reflects the Company's utilization of a
securities investment subsidiary to substantially reduce state income taxes.
19
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, proceeds from the
principal and interest payments on loans, debt and equity securities, and to a
lesser extent, borrowings and proceeds from the sale of fixed rate mortgage
loans to the secondary market. While maturities and scheduled amortization of
loans and securities are predictable sources of funds, deposit outflows,
mortgage prepayments, mortgage loan sales, and borrowings are greatly influenced
by general interest rates, economic conditions and competition.
The Company is required to maintain adequate levels of liquid assets. This
guideline, which may be varied depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term borrowings. The
Company has historically maintained a level of liquid assets in excess of
regulatory requirements. The Company's liquidity ratio at December 31, 1999 was
9.48%.
Liquidity management is both a daily and long-term function of management.
If the Company requires funds beyond its ability to generate them internally,
the Company believes it could borrow additional funds from the Federal Home Loan
Bank of Boston. At December 31, 1999, the Company had borrowings of $27.2
million.
At December 31, 1999, the Company had $2.5 million in outstanding
commitments to originate loans and $3.0 million in outstanding commitments to
purchase investment securities. The Company anticipates that it will have
sufficient funds available to meet its current loan origination and investments
commitments. Certificates of deposit which are scheduled to mature in one year
or less totaled $31.1 million at December 31, 1999. Based on historical
experience, management believes that a significant portion of such deposits will
remain with the Bank.
The Company expects to incur additional costs associated with the addition
to the main office, costs associated with the potential installations of
off-site ATMs, a data-processing conversion and additional renovation costs.
Management anticipates that it will have sufficient funds available to meet its
planned capital expenditures throughout 2000.
At December 31, 1999, the Company and the Bank exceeded all of their
regulatory capital requirements.
20
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
YEAR 2000
Based on a review of the Bank's and the Company's business since January 1,
2000, the Company has not experienced any material effects of the year 2000
problem. Although the Company has not been informed of any material risks
associated with the year 2000 problem from third parties, there can be no
assurance that the Company will not be impacted in the future. The Company will
continuously monitor its business applications and maintain contact with its
third party vendors and key business partners to resolve any year 2000 problems
that may arise in the future.
Monitoring and managing the Year 2000 project has resulted in direct and
indirect costs to the Company and the Bank. Total direct costs associated with
the Year 2000 problem incurred to date are approximately $60,000. The Company
does not believe that any further costs will have a material effect on results
of operations. Both direct and indirect costs of addressing the Year 2000
problem have been changed to earnings as incurred.
IMPACT OF THE GRAMM-LEACH-BLILEY ACT
On November 12, 1999, President Clinton signed the Gramm-Leach Bliley
Act (the "Act"), which among other things, establishes a comprehensive framework
to permit affiliations among commercial banks, insurance companies and
securities firms. Generally, the Act (i) repeals the historical restrictions and
eliminates many federal and state law barriers to affiliations among banks and
securities firms, insurance companies and other financial service providers,
(ii) provides a uniform framework for the activities of banks, savings
institutions and their holding companies, (iii) broadens the activities that may
be conducted by subsidiaries of national banks and state banks, (iv) provides an
enhanced framework for protecting the privacy of information gathered by
financial institutions regarding their customers and consumers, (v) adopts a
number of provisions related to the capitalization, membership, corporate
governance and other measures designed to modernize the Federal Home Loan Bank
System, (vi) requires public disclosure of certain agreements relating to funds
expended in connection with an institution's compliance with the Community
Retirement Act, (vii) addresses a variety of other legal and regulatory issues
affecting both day-to-day operations and long-term activities of financial
institutions, including the functional regulation of bank securities and
insurance activities.
21
<PAGE>
The Act also restricts the powers of new unitary savings and loan
association holding companies. Unitary savings and loan holding companies that
are "grandfathered," I.E., unitary savings and loan holding companies in
existence or with applications filed with the OTS on or before May 4, 1999, such
as the Company, retain their authority under the prior law. All other unitary
savings and loan holding companies are limited to financially related activities
permissible for bank holding companies, as defined under the Act. The Act also
prohibits non-financial companies from acquiring grandfathered unitary savings
and loan association holding companies.
The Act also requires financial institutions to disclose, on ATM
machines, any non-customer fees and to disclose to their customers upon the
issuance of an ATM card any fees that may be imposed by the institutions on ATM
users. For older ATMs, financial institutions will have until December 31, 2004
to provide such notices.
The OTS has recently proposed regulations implementing the privacy
protection provisions of the Act. The proposed regulations would require each
financial institution to adopt procedures to protect customers' and
consumers' "nonpublic personal information" by November 13, 2000. We would be
required to disclose our privacy policy, including identifying with whom we
share "nonpublic personal information," to customers at the time of
establishing the customer relationship and annually thereafter. In addition,
we would be required to provide our customers with the ability to "opt-out"
of having us share their personal information with unaffiliated third
parties. We are in the process of developing a privacy protection policy and
intend to review and amend that policy once completed, if necessary, for
compliance with the regulations when they are adopted in final form. The Act
also provides for the ability of each state to enact legislation that is more
protective of consumers' personal information.
We do not believe that the Act will have a material adverse affect upon
our operations in the near term. However, to the extent the Act permits banks,
securities firms and insurance companies to affiliate, the financial services
industry may experience further consolidation. This could result in a growing
number of larger financial institutions that offer a wider variety of financial
services than we currently offer and that can aggressively compete in the
markets we currently serve.
22
<PAGE>
RFS BANCORP, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
DECEMBER 31, 1999
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.4 Amended and Restated Executive Employment Agreement Between
Judith E. Tenaglia and Revere Federal Savings bank
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RFS BANCORP, INC.
Date: By: /s/ James J. McCarthy
----------------------------- ----------------------------------
James J. McCarthy
President and Chief Executive Officer
Date: By: /s/ Anthony J. Patti
----------------------------- ----------------------------------
Anthony J. Patti
Executive Vice President and
Chief Financial Officer (principal
accounting officer)
24
<PAGE>
Exhibit 10.4
REVERE FEDERAL SAVINGS BANK
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is made and
entered into as of December 18, 1999, by and between REVERE FEDERAL SAVINGS
BANK, a savings association organized and operating under the federal laws of
the United States and having an office at 310 Broadway, Revere, Massachusetts
02151 ("Bank") and JUDITH E. TENAGLIA, an individual residing at 54 Norman Road,
Melrose, Massachusetts 02176 ("Executive").
W I T N E S S E T H :
WHEREAS, the Bank entered into an employment agreement with the Executive
as of December 18, 1998 (the "Prior Agreement") in connection with the
transaction by which the Bank reorganized from a federally chartered mutual
savings bank to a federally chartered stock savings bank and became a
wholly-owned subsidiary of RFS Bancorp, Inc. ("RFS Bancorp"), a mid-tier stock
holding company, which is majority owned by Revere Bancorp, M.H.C., a mutual
holding company; and
WHEREAS, the Bank and the Executive desire to amend and restate the Prior
Agreement as of December 18, 1999 (the "Effective Date") to extend the
Employment Period thereunder;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions hereinafter set forth, the Bank and the Executive hereby agree as
follows:
SECTION 1. EMPLOYMENT.
The Bank agrees to continue to employ the Executive, and the Executive
hereby agrees to such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this section 2
("Employment Period"). The Employment Period shall be for an initial term of
three years beginning on the Effective Date of this Agreement. Prior to the
first anniversary of the Effective Date of this Agreement and prior to each
anniversary date thereafter (each, an "Anniversary Date"), the Board of
Directors of the Bank ("Board") shall review the terms of this Agreement and the
Executive's performance of services
<PAGE>
hereunder and may, in the absence of objection from the Executive, approve an
extension of the Employment Period. In such event, the Employment Period shall
be extended to the third anniversary of the relevant Anniversary Date. In no
event, however, shall any such extension take effect at a time when the
Executive could elect to resign pursuant to section 9(a)(i) or 11 and claim
severance benefits under section 9(b).
(b) For all purposes of this Agreement, the term "Remaining Unexpired
Employment Period" as of any date shall mean the period beginning on such date
and ending on the Anniversary Date on which the Employment Period (as extended
pursuant to section 2(a) of this Agreement) is then scheduled to expire.
(c) Nothing in this Agreement shall be deemed to prohibit the Bank from
terminating the Executive's employment at any time during the Employment Period
with or without notice for any reason; PROVIDED, HOWEVER, that the relative
rights and obligations of the Bank and the Executive in the event of any such
termination shall be determined under this Agreement.
SECTION 3. DUTIES.
Executive shall serve as an executive officer of the Bank and shall report
directly to the President and Chief Executive Officer ("CEO") and the Executive
Vice President and Chief Financial Offier ("CFO") of the Bank. In this capacity,
the Executive shall have such power, authority and responsibility and shall
perform such duties as may be assigned to her from time to time by the CEO, the
CFO or at their direction. Executive shall devote her full business time and
attention (other than during weekends, holidays, approved vacation periods, and
periods of illness or approved leaves of absence) to the business and affairs of
the Bank and shall use her best efforts to advance the interests of the Bank.
SECTION 4. CASH COMPENSATION.
In consideration for the services to be rendered by the Executive
hereunder, the Bank shall pay to her a salary at an initial annual rate of sixty
thousand dollars ($60,000), payable in approximately equal installments in
accordance with the Bank's customary payroll practices for senior officers. The
Board of Directors ("Board") shall review the Executive's annual rate of salary
at such times during the Employment Period as it deems appropriate, but not less
frequently than once every twelve months, and may, in its discretion, approve an
increase in the Executive's annual rate of salary. In addition to salary, the
Executive may receive other cash compensation from the Bank for services
hereunder, including but not limited to, an annual cash bonus, at such times, in
such amounts and on such terms and conditions as the Board may determine from
time to time.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
During the Employment Period, the Executive shall be treated as an employee
of the Bank and shall be entitled to participate in and receive benefits under
any and all qualified or non-qualified retirement, pension, savings,
profit-sharing or stock bonus plans, any and all group life, health (including
hospitalization, medical and major medical), dental, accident and long-term dis
ability insurance plans, and any other employee benefit and compensation plans
(including, but not limited
-Page 2 of 15-
<PAGE>
to, any incentive compensation plans or programs, stock option and appreciation
rights plans and restricted stock plans) as may from time to time be maintained
by, or cover employees of, the Bank or RFS Bancorp, in accordance with the terms
and conditions of such employee benefit plans and programs and compensation
plans and programs and consistent with the Bank's customary practices. Nothing
paid to the Executive under any such plan or arrangement will be deemed to be in
lieu of other compensation to which the Executive is entitled under this
Agreement.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period and for a period of six (6) years
thereafter, the Bank shall cause the Executive to be covered by and named as an
insured under any policy or contract of insurance obtained by it to insure its
directors and officers against personal liability for acts or omissions in
connection with service as an officer or director of the Bank or service in
other capacities at the request of the Bank. The coverage provided to Executive
pursuant to this section 6 shall be of the same scope and on the same terms and
conditions as the coverage (if any) provided to other officers or directors of
the Bank.
(b) For as long as the Bank is subject to regulation by the Office of
Thrift Supervision ("OTS"), the Bank shall indemnify the Executive in accordance
with 12 Code of Federal Regulations ("C.F.R") Section 545.121. From and after
the earliest date on which the Bank is not subject to regulation by the OTS, to
the maximum extent permitted under applicable law, during the Employment Period
and for a period of six (6) years thereafter, the Bank shall indemnify Executive
against and hold her harmless from any costs, liabilities, losses and exposures
to the fullest extent and on the most favorable terms and conditions that
similar indemnification is offered to any director or officer of the Bank or any
subsidiary or affiliate thereof. This section 6(b) shall not be applicable where
section 18 is applicable.
SECTION 7. OUTSIDE ACTIVITIES.
Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as she may disclose to and as
may be approved by the Board (which approval shall not be unreasonably
withheld); PROVIDED, HOWEVER, that such service shall not materially interfere
with the performance of her duties under this Agreement. The Executive may also
engage in personal business and investment activities which do not materially
interfere, and are not inconsistent with, the performance of her duties and
responsibilities hereunder; AND, PROVIDED, FURTHER, HOWEVER, that such
activities are not prohibited under 12 C.F.R. Section 571.7 or 571.9 or any code
of conduct or investment or securities trading policy established by the Bank
and generally applicable to all similarly situated executives (including,
without limitation, any applicable conflict of interest policy adopted by the
Board as contemplated by 12 C.F.R. Section 571.7). Executive may also serve as
an officer or director of the RFS Bancorp or Revere Bancorp, M.H.C. upon such
terms and conditions as the Bank and the RFS Bancorp or Revere Bancorp, M.H.C.
may mutually agree upon, and such service shall not be deemed to materially
interfere with the Executive's performance of her duties hereunder or otherwise
result in a material breach of this Agreement. The Executive shall not receive
compensation from the Bank for service as an officer or director of either RFS
Bancorp or Revere Bancorp, M.H.C.
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<PAGE>
SECTION 8. WORKING FACILITIES AND EXPENSES.
Executive's principal place of employment shall be at the Bank's executive
offices at the address first above written, or at such other location within
Suffolk County at which the Bank shall maintain its principal executive offices,
or at such other location as the Bank and the Executive may mutually agree upon.
The Bank shall provide the Executive at her principal place of employ ment with
working facilities, including secretarial and other support services, that are
commensurate with her responsibilities to the Bank and necessary or appropriate
for the performance of her assigned duties under this Agreement. The Bank shall
reimburse Executive for her ordinary and necessary business expenses, including,
without limitation, all expenses associated with her business use of an
automobile, fees for memberships in such clubs and organizations as the
Executive and the Bank shall mutually agree are necessary and appropriate for
business purposes, and her travel and entertainment expenses incurred in
connection with the performance of her duties under this Agree ment, in each
case upon presentation to the Bank of an itemized account of such expenses in
such form as the Bank may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
(a) Executive shall be entitled to the severance benefits described in
section 9(b) herein in the event that her employment with the Bank terminates
during the Employment Period under any of the following circumstances:
(i) Executive's voluntary resignation from employment with the Bank
within ninety (90) days following:
(A) the failure of the Board to appoint or re-appoint or elect
or re-elect Executive to the position stated in section 3 of this
Agreement (or a more senior office of the Bank);
(B) in the event that the Executive is a member of the Board,
the failure of the stockholders of the Bank to elect or re-elect
Executive to the Board or the failure of the Board (or the nominating
committee thereof) to nominate the Executive for such election or
re-election;
(C) the expiration of a thirty (30) day period following the
date on which the Executive gives written notice to the Bank of its
material failure, whether by amendment of the Bank's Organization
Certificate or By-Laws, action of the Board or the Bank's
stockholders or otherwise, to vest in Executive the functions,
duties, or responsibilities prescribed in section 3 of this
Agreement, unless, during such thirty (30) day period, such failure
is cured in a manner determined by Executive, in her discretion, to
be satisfactory; or
(D) the expiration of a thirty (30) day period following the
date on which Executive gives written notice to the Bank of its
material breach of any term, condition or covenant contained in this
Agreement (including, without limitation any reduction of Executive's
rate of base salary in effect from time to time and any change
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<PAGE>
in the terms and conditions of any compensation or benefit program in
which Executive participates which, either individually or together
with other changes, has a material adverse effect on the aggregate
value of her total compensation package), unless, during such thirty
(30) day period, such failure is cured in a manner determined by
Executive, in her discretion, to be satisfactory; or
(ii) subject to the provisions of section 10, the termination of
Executive's employment with the Bank for any other reason not described in
section 9(a) other than a termination of the Executive's employment for
"cause;"
then, the Bank shall provide the benefits and pay to Executive the amounts
described in section 9(b).
(b) Upon the termination of Executive's employment with the Bank under
circumstances described in section 9(a) of this Agreement, the Bank shall pay
and provide to Executive (or, in the event of her death, to her estate):
(i) the portion, if any, of the compensation (including, without
limitation, all items which constitute wages under applicable law and the
payment of which is not otherwise provided for under this section 9(b))
earned by the Executive through the date of the termination of her
employment with the Bank which remains unpaid as of such date, such payment
to be made at the time and in the manner prescribed by law applicable to
the payment of wages but in no event later than thirty (30) days after the
Executive's termination of employment;
(ii) the benefits, if any, to which she is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Bank's officers and
employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long-term disability
insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for
Executive, for the Remaining Unexpired Employment Period, coverage
equivalent to the coverage to which she would have been entitled under such
plans (as in effect on the date of her termination of employment, or, if
her termination of employment occurs after a Change of Control, on the date
of such Change of Control, whichever benefits are greater), if she had
continued work ing for the Company during the Remaining Unexpired
Employment Period at the highest annual rate of compensation achieved
during that portion of the Employment Period which is prior to Executive's
termination of employment with the Bank; and
(iv) within thirty (30) days following her termination of employment
with the Bank, a lump sum payment, in an amount equal to the present value
of the salary that Executive would have earned if she had continued working
for the Bank during the Remaining Unexpired Employment Period at the
highest annual rate of salary achieved during that portion of the
Employment Period which is prior to Executive's termination of employment
with the Bank, where such present value is to be determined using a
discount
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<PAGE>
rate equal to the applicable short-term federal rate prescribed under
section 1274(d) of the Internal Revenue Code of 1986 ("Code"), compounded
using the compounding period corresponding to the Bank's regular payroll
periods for its officers, such lump sum to be paid in lieu of all other
payments of salary provided for under this Agreement in respect of the
period following any such termination.
The Bank and the Executive each hereby stipulate that the damages which may
be incurred by Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to Executive's efforts, if any, to
mitigate damages. The Bank and the Executive further agree that the Bank may
condition the payments and benefits (if any) due under sections 9(b)(iii) and
(iv) on the receipt of Executive's resignation from any and all positions which
she holds as an officer, director or committee member with respect to the Bank,
RFS Bancorp, Revere Bancorp, M.H.C., or any subsidiary or affiliate of any of
them.
SECTION 10. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.
In the event that the Executive's employment with the Bank shall terminate
during the Employment Period on account of:
(a) the discharge of the Executive for "cause," which, for purposes of this
Agreement shall mean personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease and desist order, or
any material breach of this Agreement, in each case as measured against
standards generally prevailing at the relevant time in the savings and community
banking industry.
(b) Executive's voluntary resignation from employment with the Company for
reasons other than those specified in section 9(a)(i);
(c) Executive's death; or
(d) a determination that Executive is eligible for long-term disability
benefits under the Bank's long-term disability insurance program or, if there is
no such program, under the federal Social Security Act;
then, the Bank shall have no further obligations under this Agreement, other
than the payment to Executive (or, in the event of her death, to her estate) of
the portion, if any, of the salary earned by the Executive through the date of
her termination of employment with the Bank which remains unpaid as of such date
and the provision of such other benefits, if any, to which she is entitled as a
former employee under the employee benefit plans and programs and compensation
plans and programs maintained by, or covering employees of, the Bank.
(e) For purposes of section 10(a), no act or failure to act, on the part of
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by Executive in bad faith or
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<PAGE>
without reasonable belief that Executive's action or omission was in the best
interests of the Bank and its affiliates. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the written advice of counsel for the Bank shall be conclusively presumed to be
done, or omitted to be done, by Executive in good faith and in the best
interests of the Bank. The cessation of employment of Executive shall not be
deemed to be for "cause" within the meaning of section 10(a) unless and until
there shall have been delivered to Executive a copy of a resolution duly adopted
by the affirmative vote of three-fourths of the non-employee members of the
Board at a meeting of the Board called and held for such purpose, finding that,
in the good faith opinion of the Board, Executive is guilty of the conduct
described in section 10(a) above, and specifying the particulars thereof in
detail.
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
(a) A Change of Control of the Bank ("Change of Control") shall be deemed
to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Bank of a transaction that
would result in the reorganization, merger or consolidation of the Bank,
respectively, with one or more other persons, other than a transaction
following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended "Exchange Act") in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the outstanding
equity ownership interests in the Bank; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of the Bank;
(ii) the acquisition of all or substantially all of the assets of the
Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 25% or more of the outstanding securities of the
Bank entitled to vote generally in the election of directors by any person
or by any persons acting in concert, or approval by the stockholders of the
Bank of any transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Bank, or approval
by the stockholders of the Bank of a plan for such liquidation or
dissolution; or
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<PAGE>
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of the Bank do not belong
to any of the following groups:
(A) individuals who were members of the Board of the Bank on the
date of this Agreement; or
(B) individuals who first became members of the Board of the
Bank after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Bank by affirmative vote of three-quarters of the members of
such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of the Bank to serve
as a member of the Board of the Bank, but only if nominated for
election by affir mative vote of three-quarters of the members
of the Board, or of a nominating committee thereof, in office at
the time of such first nomination;
PROVIDED, HOWEVER, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Bank;
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or
any affiliate or subsidiary of either of them, by the Company, the Bank, or any
affiliate or subsidiary of either of them, or by any employee benefit plan
maintained by any of them. For purposes of this section 11(a), the term "person"
shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.
(b) In the event of a Change of Control, Executive shall be entitled to the
payments and benefits contemplated by section 9(b) in the event of her
termination employment with the Bank under any of the circumstances described in
section 9(a) of this Agreement or under any of the following circumstances:
(i) resignation, voluntary or otherwise, by the Executive at any time
during the Employment Period and within ninety (90) days following her
demotion, loss of title, office or significant authority or responsibility,
or following any reduction in any element of her package of compensation
and benefits;
(ii) resignation, voluntary or otherwise, by the Executive at any
time during the Employment Period and within ninety (90) days following any
relocation of her principal place of employment or any change in working
conditions at such principal place of
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<PAGE>
employment which is embarrassing, derogatory or otherwise materially
adverse to the Executive;
(iii) resignation, voluntary or otherwise, by the Executive at any
time during the Employment Period following the failure of any successor to
the Bank in the Change of Control to include the Executive in any
compensation or benefit program maintained by it or covering any of its
executive officers, unless the Executive is already covered by a
substantially similar plan of the Bank which is at least as favorable to
her; or
(iv) resignation, voluntary or otherwise, for any reason whatsoever
following the expiration of a transition period of thirty days beginning on
the effective date of the Change of Control (or such longer period, not to
exceed ninety (90) days beginning on the effective date of the Change of
Control, as the Bank or its successor may reasonably request) to facilitate
a transfer of management responsibilities.
SECTION 12. COVENANT NOT TO COMPETE.
In the event of her termination of employment with the Bank prior to the
expiration of the Employment Period, for a period of one (1) year following the
date of her termination of em ployment with the Bank (or, if less, for the
Remaining Unexpired Employment Period), the Executive shall not, without the
written consent of the Bank, become an officer, employee, consultant, director
or trustee of any competitor (as herein defined) if in this capacity she would
be working for the competitor within a town contiguous to where the headquarters
of the Bank are located on the date of the Executive's termination of
employment. For this purpose, a "competitor" is any savings association, savings
and loan association, savings and loan holding company, bank or bank holding
company, or any direct or indirect subsidiary or affiliate of any such entity.
This section 12 shall not apply if the Executive's employment is terminated
without cause or due to death or voluntary resignation as described in section
9(a). If the Executive's employment shall be terminated on account of disability
as provided in section 10(d) of this Agreement, this section 12 shall not apply
if (a) the Executive first offers, by written notice, to accept a similar
position with, or perform similar services for, the Bank on substantially the
same terms and conditions proposed by the competitor and (b) the Bank declines
to accept such offer within ten (10) days after such notice is given.
SECTION 13. CONFIDENTIALITY.
Unless she obtains the prior written consent of the Bank, the Executive
shall keep confidential and shall refrain from using for the benefit of himself,
or any person or entity other than the Bank or any entity which is a subsidiary
of the Bank or of which the Bank is a subsidiary, any material document or
information obtained from the Bank, or from its parent or subsidiaries, in the
course of her employment with any of them concerning their properties,
operations or business (unless such document or information is readily
ascertainable from public or published information or trade sources or has
otherwise been made available to the public through no fault of her own) until
the same ceases to be material (or becomes so ascertainable or available);
PROVIDED, HOWEVER, that nothing in this section 13 shall prevent Executive, with
or without the Bank's consent, from participating in or disclosing documents or
information in connection with any judicial or
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<PAGE>
administrative investigation, inquiry or proceeding to the extent that such
participation or disclosure is required under applicable law.
SECTION 14. SOLICITATION.
Executive hereby covenants and agrees that, for a period of one (1) year
following her termination of employment with the Bank, she shall not, without
the written consent of the Bank, either directly or indirectly:
(a) solicit, offer employment to, or take any other action intended, or
that a reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or employee of the Bank or any affiliate, as of
the date of this Agreement, of either of them, to terminate her or her
employment and accept employment or become affiliated with, or provide services
for compensation in any capacity whatsoever to, any savings association,
cooperative bank, credit union, savings and loan association, savings and loan
holding company, bank, bank holding company, or other institution engaged in the
business of accepting deposits and making loans, having its principal place of
business in a town contiguous to where the headquarters of the Bank are located,
as of the date of this Agreement;
(b) provide any information, advice or recommendation with respect to any
such officer or employee of any savings association, cooperative bank, credit
union, savings and loan association, savings and loan holding company, bank,
bank holding company, or other institution engaged in the business of accepting
deposits and making loans, having its principal place of business in a town
contiguous to where the headquarters of the Bank are located, as of the date of
this Agreement, that is intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any officer or
employee of the Bank or any affiliate, as of the date of this Agreement, of
either of them, to terminate her employment and accept employment or become
affiliated with, or provide services for compensation in any capacity whatsoever
to, any savings association, cooperative bank, credit union, savings and loan
association, savings and loan holding company, bank, bank holding company, or
other institution engaged in the business of accepting deposits and making
loans, having its principal place of business in a town contiguous to where the
headquarters of the Bank are located, as of the date of this Agreement; or
(c) solicit, provide any information, advice or recommendation or take any
other action intended, or that a reasonable person acting in like circumstances
would expect, to have the effect of causing any customer of the Bank to
terminate an existing business or commercial relationship with the Bank.
SECTION 15. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of Executive's employment during the term of this Agreement
or thereafter, whether by the Bank or by Executive, shall have no effect on the
rights and obligations of the parties hereto under the Bank's qualified or
non-qualified retirement, pension, savings, thrift, profit-sharing or stock
bonus plans, group life, health (including hospitalization, medical and major
medical), dental, accident and long-term disability insurance plans or such
other employee benefit
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plans or programs, or compensation plans or programs, as may be maintained by,
or cover employees of, the Bank from time to time.
SECTION 16. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon Executive,
her legal representatives and testate or intestate distributees, and the Bank
and its successors and assigns, in cluding any successor by merger or
consolidation or a statutory receiver or any other person or firm or corporation
to which all or substantially all of the assets and business of the Bank may be
sold or otherwise transferred. Failure of the Bank to obtain from any successor
its express written assumption of the Bank's obligations hereunder at least
sixty (60) days in advance of the scheduled effective date of any such
succession shall be deemed a material breach of this Agreement unless cured
within ten (10) days after notice hereof by the Executive to the Bank.
SECTION 17. NOTICES.
Any communication required or permitted to be given under this Agreement,
including any notice, direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally, or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to Executive:
Ms. Judith E. Tenaglia
54 Norman Road
Melrose, MA 02176
If to the Bank:
Revere Federal Savings Bank
310 Broadway
Revere, Massachusetts 02151
Attention: BOARD OF DIRECTORS -- NON-EMPLOYEE DIRECTORS
WITH A COPY TO:
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W., Ste. 800
Washington, D.C. 20006
Attention: RICHARD A. SCHABERG, ESQ.
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SECTION 18. INDEMNIFICATION FOR ATTORNEYS' FEES.
The Bank shall indemnify, hold harmless and defend Executive against
reasonable costs, including legal fees, incurred by her in connection with or
arising out of any action, suit or proceeding in which she may be involved, as a
result of her efforts, in good faith, to defend or enforce the terms of this
Agreement; PROVIDED, HOWEVER, that Executive shall have substantially prevailed
on the merits pursuant to a judgment, decree or order of a court of competent
jurisdiction or of an arbitrator in an arbitration proceeding. The determination
whether the Executive shall have substantially prevailed on the merits and is
therefore entitled to such indemnification, shall be made by the court or
arbitrator, as applicable. In the event of a settlement pursuant to a settlement
agreement, any indemnification payment under this section 18 shall be made only
after a determination by the members of the Board (other than the Executive and
any other member of the Board to which the Executive is related by blood or
marriage) that the Executive has acted in good faith and that such
indemnification payment is in the best interests of the Bank.
SECTION 19. SEVERABILITY.
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 20. WAIVER.
Failure to insist upon strict compliance with any of the terms, covenants
or conditions hereof shall not be deemed a waiver of such term, covenant, or
condition. A waiver of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against whom its enforcement is
sought. Any waiver or relinquishment of any right or power hereunder at any one
or more times shall not be deemed a waiver or relinquishment of such right or
power at any other time or times.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.
SECTION 22. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts entered into and to be performed entirely
within the Commonwealth of Massachusetts.
SECTION 23. HEADINGS AND CONSTRUCTION.
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The headings of sections in this Agreement are for convenience of reference
only and are not intended to qualify the meaning of any section. Any reference
to a section number shall refer to a section of this Agreement, unless otherwise
stated.
SECTION 24. ENTIRE AGREEMENT; MODIFICATIONS.
This instrument contains the entire agreement of the parties relating to
the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or rep resentations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
SECTION 25. REQUIRED REGULATORY PROVISIONS.
The following provisions are included for the purposes of complying with
various laws, rules and regulations applicable to the Bank:
(a) Notwithstanding anything herein contained to the contrary, in no event
shall the aggregate amount of compensation payable to the Executive under
section 9(b) hereof (exclusive of amounts described in section 9(b)(i) or (ii))
exceed the three times the Executive's average annual compensation (within the
meaning of OTS Regulatory Bulletin 27a or any successor thereto) for the last
five consecutive calendar years to end prior to her termination of employment
with the Bank (or for her entire period of employment with the Bank if less than
five calendar years). The compensation payable to the Executive hereunder shall
be further reduced (but not below zero) if such reduction would avoid the
assessment of excise taxes on excess parachute payments (within the meaning of
section 280G of the Code).
(b) Notwithstanding anything herein contained to the contrary, any payments
to the Executive by the Bank, whether pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with section 18(k) of the
Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. Section 1828(k), and any
regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to the contrary, if the
Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank pursuant to a notice
served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section
1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement shall be
suspended as of the date of service of such notice, unless stayed by appropriate
proceedings. If the charges in such notice are dismissed, the Bank, in its
discretion, may (i) pay to the Executive all or part of the compensation
withheld while the Bank's obligations hereunder were suspended and (ii)
reinstate, in whole or in part, any of the obligations which were suspended.
(d) Notwithstanding anything herein contained to the contrary, if the
Executive is removed and/or permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under section 8(e)(4) or
8(g)(1) of the FDI Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all prospective
obligations of the Bank under this Agreement shall terminate as of the effective
date of the order, but vested rights and obligations of the Bank and the
Executive shall not be affected.
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(e) Notwithstanding anything herein contained to the contrary, if the Bank
is in default (within the meaning of section 3(x)(1) of the FDI Act, 12 U.S.C.
Section 1813(x)(1), all prospective obligations of the Bank under this Agreement
shall terminate as of the date of default, but vested rights and obligations of
the Bank and the Executive shall not be affected.
(f) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Bank hereunder shall be terminated, except to the
extent that a continuation of this Agreement is necessary for the continued
operation of the Bank: (i) by the Director of the OTS or his designee or the
Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into
an agreement to provide assistance to or on behalf of the Bank under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C. Section 1823(c);
(ii) by the Director of the OTS or his designee at the time such Director or
designee approves a supervisory merger to resolve problems related to the
operation of the Bank or when the Bank is determined by such Director to be in
an unsafe or unsound condition. The vested rights and obligations of the parties
shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
SECTION 26. EFFECTIVE DATE.
This Agreement shall become effective (the "Effective Date") upon the later
of the following two dates: (a) the effective date of the Bank's conversion from
a federally chartered mutual savings bank to a stock form savings bank pursuant
to the Plan of Reorganization or (b) the date the OTS advises the Bank in
writing that it either approves or has no objection to the terms and conditions
of this Agreement. The Bank and the Executive each hereby acknowledge and agree
that the terms of this Agreement shall have no force or effect prior to such
Effective Date.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
Executive has hereunto set her hand, all as of the day and year first above
written.
---------------------------------------
JUDITH E. TENAGLIA
ATTEST: REVERE FEDERAL SAVINGS BANK
By
------------------------------------
Secretary By
------------------------------------
NAME:
TITLE:
[Seal]
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<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF SUFFOLK )
On this ________ day of ____________________, 2000, before me
personally came JUDITH E. TENAGLIA, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly sworn,
did depose and say that she resides at the address set forth in said instrument,
and that she signed her name to the foregoing instrument.
------------------------------------
Notary Public
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF SUFFOLK )
On this ________ day of ____________________, 2000, before me
personally came _____________________________, to me known, who, being by me
duly sworn, did depose and say that she resides at
________________________________________________, that she is a member of the
Board of Directors of REVERE FEDERAL SAVINGS BANK, the savings bank described in
and which executed the foregoing instrument; that she knows the seal of said
bank; that the seal affixed to said instrument is such seal; that it was so
affixed by order of the Board of Directors of said bank; and that she signed her
name thereto by like order.
------------------------------------
Notary Public
-Page 15 of 15-
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